-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MrO+lx4n+QkYchRdCI/6oaMhq1JEAaBVR5/vwSQ+NSyHSdeT+PPGOjjAmBDY4A4+ nRpR2Ka6zkwBlA9MGDTSCg== 0000087744-97-000004.txt : 19970221 0000087744-97-000004.hdr.sgml : 19970221 ACCESSION NUMBER: 0000087744-97-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19961229 FILED AS OF DATE: 19970211 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SCI SYSTEMS INC CENTRAL INDEX KEY: 0000087744 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC COMPONENTS & ACCESSORIES [3670] IRS NUMBER: 630583436 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-02251 FILM NUMBER: 97523536 BUSINESS ADDRESS: STREET 1: 2101 W CLINTON AVE STREET 2: C/O SCI SYSTEMS (ALABAMA) INC CITY: HUNTSVILLE STATE: AL ZIP: 35805 BUSINESS PHONE: 3029980592 MAIL ADDRESS: STREET 1: P.O. BOX 1000 CITY: HUNTSVILLE STATE: AL ZIP: 35807 FORMER COMPANY: FORMER CONFORMED NAME: SPACE CRAFT INC DATE OF NAME CHANGE: 19720517 10-Q 1 FORM 10-Q FOR SCI SYSTEMS UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ----------------------------------------------- FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 29, 1996 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______________ to ______________ Commission file Number 0-2251 SCI SYSTEMS, INC. (Exact name of registrant as specified in its charter) Delaware 63-0583436 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) c/o SCI Systems (Alabama), Inc. 2101 West Clinton Avenue Huntsville, Alabama 35805 (Address of principal executive offices) (Zip Code) ---------------------------------------------- (302) 998-0592 (Registrant's telephone number, including area code) ---------------------------------------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [X] Yes [ ] No Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common Stock, $.10 par value - 29,794,320 shares Outstanding at February 6, 1997 PART I. FINANCIAL INFORMATION Item 1. Financial Statements. SCI Systems, Inc. Condensed Consolidated Balance Sheets December 29, June 30, 1996 1996 (In thousands of dollars) (Unaudited) (*) - -------------------------------------------------------------------------------- Assets Current Assets Cash and cash equivalents $ 341,725 $ 46,493 Accounts receivable 500,312 372,058 Inventories 523,092 554,090 Refundable and deferred federal and foreign income taxes 16,827 16,480 Other current assets 7,200 15,244 -------------------------------- Total Current Assets 1,389,156 1,004,365 Property, Plant, and Equipment (Less accumulated depreciation of $318,697 at December 29, 1996, and $284,745 at June 30, 1996) 274,100 264,054 Other Noncurrent Assets 14,988 14,776 -------------------------------- Total Assets $1,678,244 $1,283,195 ================================ * Derived from audited financial statements, but does not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. See notes to condensed consolidated financial statements. SCI Systems, Inc. Condensed Consolidated Balance Sheets December 29, June 30, 1996 1996 (In thousands of dollars) (Unaudited) (*) - -------------------------------------------------------------------------------- Liabilities and Shareholders' Equity Current Liabilities Accounts payable and accrued expenses $ 626,575 $ 400,682 Accrued payroll and related expenses 24,716 26,845 Federal, foreign and state income taxes 28,744 22,223 Current maturities of long-term debt 3,410 4,965 -------------------------------- Total Current Liabilities 683,445 454,715 Deferred Income Taxes 5,302 5,313 Noncurrent Pension Liability 4,533 4,533 Deferred Compensation 10,057 7,600 Long-term Debt - Note C Industrial revenue bonds 21,297 21,310 Long-term notes 139,192 35,846 Convertible subordinated notes 281,863 281,617 -------------------------------- Total Long-term Debt 442,352 338,773 Shareholders' Equity Preferred stock, 500,000 shares authorized but unissued -0- -0- Common stock, $.10 par value: authorized 100,000,000; issued 29,773,895 shares at December 29, 1996, and 29,621,895 shares at June 30,1996 2,977 2,962 Capital in excess of par value 172,037 168,139 Retained earnings 362,806 308,150 Currency translation adjustment (4,924) (6,649) Treasury stock of 29,683 shares, at cost (341) (341) -------------------------------- Total Shareholders' Equity 532,555 472,261 -------------------------------- Total Liabilities and Shareholders' Equity $1,678,244 $1,283,195 ================================ * Derived from audited financial statements, but does not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. See notes to condensed consolidated financial statements SCI Systems, Inc. Condensed Consolidated Statements of Income (Unaudited) Quarter Ended: December 29, December 24, (In thousands of dollars except per share data) 1996 1995 - -------------------------------------------------------------------------------- Net sales $1,481,837 $1,203,506 Costs and expenses 1,428,419 1,161,121 -------------------------------- Operating Income 53,418 42,385 Other income (expense): Interest expense (7,708) (5,917) Other income, net 4,090 772 -------------------------------- Income before Income Taxes 49,800 37,240 Income taxes - Note B 20,169 15,082 -------------------------------- Net Income $ 29,631 $ 22,158 ================================ Earnings per share - Note A: Primary $.97 $.74 Fully diluted $.88 $.74 Weighted average number of shares used in computation: Primary 30,442,494 30,121,293 Fully diluted 36,339,930 30,121,293 See notes to condensed consolidated financial statements. SCI Systems, Inc. Condensed Consolidated Statements of Income (Unaudited) Six Months Ended: December 29, December 24, (In thousands of dollars except per share data) 1996 1995 - -------------------------------------------------------------------------------- Net sales $2,901,842 $2,080,129 Costs and expenses 2,800,935 2,007,933 -------------------------------- Operating Income 100,907 72,196 Other income (expense): Interest expense (14,501) (10,615) Other income, net 5,452 1,074 -------------------------------- Income before Income Taxes 91,858 62,655 Income taxes - Note B 37,202 25,375 -------------------------------- Net Income $ 54,656 $ 37,280 ================================ Earnings per share - Note A: Primary $1.80 $1.24 Fully diluted $1.63 $1.24 Weighted average number of shares used in computation: Primary 30,362,975 30,135,192 Fully diluted 36,310,548 30,135,192 See notes to condensed consolidated financial statements. SCI Systems, Inc. Condensed Consolidated Statements Of Cash Flows (Unaudited) Six Months Ended: December 29, December 24, (In thousands of dollars) 1996 1995 - -------------------------------------------------------------------------------- Operating Activities Net income $ 54,656 $ 37,280 Adjustments to reconcile net income to cash used for operations: Depreciation and amortization 37,098 29,084 Changes in current assets and liabilities: Accounts receivable (126,232) 16,432 Inventories 32,705 (277,957) Other current assets 7,862 (9,977) Accounts payable and accrued expenses 220,745 156,951 Income taxes 8,377 3,387 Other non cash items - net (957) (1,494) ------------------------------ Net Cash Provided by(Used for)Operating Activities 234,254 (46,294) ------------------------------ Investing Activities Purchase of property, plant, and equipment (44,378) (47,606) Proceeds from sale of property, plant, and equipment 128 228 Decrease in noncurrent assets 1,841 1,741 ------------------------------ Net Cash Used for Investing Activities (42,409) (45,637) ------------------------------ Financing Activities Net increase in commercial paper and other short-term notes -0- 71,615 Payments on long-term debt (57,055) (4,653,517) Proceeds from long-term debt 157,611 4,669,520 Issuance of common stock 2,053 2,037 ------------------------------ Net Cash Provided by Financing Activities 102,609 89,655 ------------------------------ Effect of exchange rate changes on cash 778 1,111 ------------------------------ Net increase (decrease) in cash and cash equivalents 295,232 (1,165) Cash and cash equivalents at beginning of period 46,493 10,277 ------------------------------ Cash and Cash Equivalents at End of Period $341,725 $9,112 ============================== Cash equivalents consist of short-term deposits and liquid marketable securities which are stated at cost that approximates market value. See notes to condensed consolidated financial statements. Notes to Condensed Consolidated Financial Statements December 29, 1996 (Unaudited) Note A - Basis of Presentation The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries after elimination of significant intercompany accounts and transactions. The financial statements have been prepared in accordance with instructions to Form 10-Q and do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. Independent auditors have not examined the statements (and all other information in this report), but in the opinion of the Company all adjustments, which consist of normal recurring accruals necessary for a fair presentation of the results for the period, have been made. The results of operations for the period ended December 29, 1996 are not necessarily indicative of the results of operations for the year ending June 30, 1997. For further information, refer to the consolidated financial statements and footnotes included in the Company's annual report on Form 10-K for the year ended June 30, 1996. Primary earnings per share are based on the weighted average number of common stock and dilutive common stock equivalents outstanding during each period. Common stock equivalents consist of stock options whose exercise price is less than the stipulated market price using the Treasury-stock method for both primary and fully diluted earnings per share. Fully diluted computations, when applicable, assume the dilutive conversion of the Company's outstanding convertible subordinated notes, after adding back their after-tax interest expense. Note B - Income Taxes U.S. income taxes are not provided on certain undistributed earnings of foreign subsidiaries aggregating approximately $44 million at December 29, 1996, which are considered permanently invested. Otherwise, approximately $9 million of cumulative deferred income taxes would have been provided. Income tax provision for fiscal year 1997 differs from the U.S. statutory income tax rate primarily due to state income taxes. Note C - Changes in Amount Outstanding of Securities or Indebtedness Outstanding borrowings at December 29, 1996 under the Company's Revolving Credit, Commercial Paper facility, and other long-term debt agreements increased approximately $102 million from the June 30, 1996 balance. The increase primarily resulted from the issuance in July 1996 of $100 million of senior notes, payable in six annual installments of $16.7 million beginning in July 2001 and bearing a 7.59% interest rate. At December 29, 1996 the Company had $50 million outstanding under its asset securitization agreements, compared with $190 million at June 30, 1996. The Company can sell up to $250 million of certain accounts receivable with limited recourse under the agreements. Total unused credit facilities available to the Company at December 29, 1996, including availability under asset securitization agreements, approximated $662 million. That amount combined with cash balances, provides available liquidity of a billion dollars. Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition From time to time, the Company may publish forward-looking statements relating to such matters as anticipated financial performance, business prospects, technological developments, new products, and similar matters. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements. In compliance with such safe harbor terms, the Company notes that a variety of factors could cause the Company's actual results and experience to differ materially from anticipated results or other expectations expressed in the Company's forward-looking statements or from past performances. Risks and uncertainties that may affect operations, performance, development and results of the Company's business include pricing and production cost variations; and other factors, including component price fluctuation, noted in Item 1. of the Company's Annual Report on Form 10-K for the year ended June 30, 1996. Results of Operations Quarterly revenue and net income again reached record highs in fiscal year 1997's second quarter. Sales for the second quarter were $1.48 billion compared to $1.20 billion in the same period a year earlier, a 23.1 percent increase. Net income increased 33.7 percent to $29.6 million from $22.2 million in fiscal year 1996's second quarter. The Company believes that seasonal trends indicate fiscal year 1997's third quarter sales will likely be lower than the second quarter sales. Sales for the first six months of fiscal year 1997 increased 39.5 percent to $2.9 billion from $2.1 billion for the prior fiscal year's first six months. Net income increased 46.6 percent to $54.7 million compared with $37.3 million a year earlier. Sales increased because of increased volume, especially in finished product assembly, which accounted for over one half of the Company's sales in the first six months. The average selling prices of many of the Company's products declined in the second quarter as electronic components experienced substantial unit cost reductions. Consolidated operating margins were higher in the second quarter than a year earlier as a result of improved foreign operations. Domestic operating margins decreased slightly from the prior fiscal year's period because of a higher finished product mix. Sales generated by the Company's foreign operations accounted for 24 percent of total sales for the first six months of fiscal year 1997 compared with 33 percent for all of fiscal year 1996. Return on average shareholders' equity increased to 23.0 percent for the second quarter from 21.3 percent a year earlier. For the first six months of fiscal year 1997, return on equity increased to 21.8 percent from 19.2 percent for the same period last fiscal year. The improvements mainly resulted from greater asset turnover ratio for noncash assets. Second quarter interest expense, net of interest income, declined to .31 percent of sales from .48 percent in the second quarter of fiscal 1996. For the first six months of fiscal year 1997 net interest expense represented .36 percent of sales compared with .50 percent in fiscal year 1996. The increased dollar amount in interest expense is mainly attributable to higher total borrowing levels in support of higher revenue. The higher interest income in fiscal year 1997 is attributable to investing larger available cash generated by operations because of greater asset turnover. In fiscal year 1996 the Company used cash from operations to fund the 68 percent sales growth experienced in the first six months. Finished product assembly, which inherently yields higher asset turnover to offset lower operating margins, contributed significantly to higher noncash asset turnover. The ratio of aggregate ending debt and amounts outstanding under asset securitization agreements, net of cash, to the first six months' annualized sales declined to .027 in fiscal year 1997 from .085 for the same period a year earlier. Because of the greater cash generated by operations, a lower borrowings level in relationship to sales resulted. The estimated effective income tax rate differs from the U.S. statutory rate primarily due to the effects of state income taxes and is currently estimated to approximate that of fiscal 1996. Capital Resources and Liquidity The Company's working capital increased to $705 million at December 29, 1996 from $550 million at June 30, 1996, primarily as a result of higher cash balances. December 29, 1996's ratio of current assets to current liabilities (current ratio) was 2.0 compared with 2.2 at June 30, 1996. The Company believes that unused credit lines and cash (aggregating $1 billion at December 29, 1996) are sufficient to finance intermediate term growth. Fiscal year 1997's capital expenditures are currently estimated to approximate $100 million, $20 million more than estimated depreciation. The dollar amount of order backlog at December 29, 1996 believed by the Company to be firm was $2.76 billion (in spite of both marked reduction in component lead times and substantial reduction in component prices), as compared with $2.43 billion a year earlier and $2.80 billion a quarter earlier. PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders. At the Company's annual meeting of shareholders held on October 25, 1996, the following individuals were elected as Class III Directors: Votes in Favor Votes Withheld G. Robert Tod 25,961,869 57,897 A. Eugene Sapp, Jr. 25,959,497 60,269 The other matters voted on at the meeting were: Votes in Favor Votes Against Abstentions Senior Executive Annual Incentive Plan 25,311,422 223,287 485,057 Selection of Ernst & Young LLP as the Company's independent auditors for the fiscal year ending June 30, 1997 25,699,799 38,681 281,286 Broker nonvotes for the October 25, 1996 meeting amounted to 329,810. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits (1) Exhibit 11 - Computation of primary and fully diluted earnings per share. (2) Exhibit 27 - Financial Data Schedule (b) Reports The Company filed no reports on Form 8-K during the period of September 30, 1996 to December 29, 1996. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. SCI Systems, Inc. (Registrant) Date: February 10, 1997 By: /s/ Olin B. King Olin B. King Chairman of the Board and Chief Executive Officer (Principal Executive Officer and Principal Financial and Accounting Officer) EX-11 2 COMPUTATION OF EPS SCI Systems, Inc Exhibit 11 - Computation of Primary and Fully Diluted Earnings Per Share (In thousands of dollars except for number of shares and per share amounts) Quarter Ended: Six Months Ended: December 29, December 24, December 29, December 24, 1996 1995 1996 1995 -------------------------------------------------- Primary Earnings Per Share Net income $29,631 $22,158 $54,656 $37,280 Add back after-tax interest for debentures converted during period N/A N/A N/A 218 -------------------------------------------------- Adjusted net income used in primary computation $29,631 $22,158 $54,656 $37,498 ================================================== Weighted average number of shares outstanding during period 29,734,760 29,469,208 29,677,219 29,411,513 Applicable number of shares for common stock equivalents (stock options) outstanding for period using Treasury-stock method based on average market price for period 707,734 652,085 685,756 723,679 -------------------------------------------------- Weighted average number of shares used in computation 30,442,494 30,121,293 30,362,975 30,135,192 ================================================== Primary earnings per share $.97 $.74 $1.80 $1.24 ================================================== Fully Diluted Earnings Per Share Net income $29,631 $22,158 $54,656 $37,280 Add back after-tax interest for debentures converted during period N/A N/A N/A 218 Add back after-tax interest expense for outstanding convertible subordinated notes 2,238 N/A 4,476 N/A -------------------------------------------------- Adjusted net income used in fully diluted computation $31,869 $22,158 $59,132 $37,498 ================================================== Weighted average number of shares outstanding during period 29,734,760 29,469,208 29,677,219 29,411,513 Applicable number of shares for common stock equivalents (stock options)outstanding for period using Treasury-stock method based on the higher of average market price or ending market price 707,734 732,980 735,893 729,059 Number of shares to be issued if outstanding convertible subordinated notes were converted 5,897,436 N/A 5,897,436 N/A -------------------------------------------------- Weighted number of shares used in computation 36,339,930 30,202,188 36,310,548 30,140,572 ================================================== Fully diluted earnings per share $.88 $.73 $1.63 $1.24 ================================================== The additional dilution of common stock equivalents was less than three percent in the second quarter and first six months of fiscal year 1996; consequently, fully diluted earnings per share were not presented on the income statements for those periods. EX-27 3 FDS
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM DECEMBER 29, 1996's BALANCE SHEET AND THE INCOME STATEMENT FOR THE SIX MONTHS THEN ENDED, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH STATEMENTS 1,000 6-MOS JUN-30-1997 JUL-1-1996 DEC-29-1996 341,725 0 511,512 11,200 523,092 1,389,156 592,797 318,697 1,678,244 683,445 442,352 0 0 2,977 529,578 1,678,244 2,901,842 2,901,842 2,800,935 2,800,935 (5,452) 0 14,501 91,858 37,202 54,656 0 0 0 54,656 1.80 1.63
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