UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_______________

FORM 10‑Q

_______________

X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, ~~2017~~2018

__ 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: 1‑10560

BENCHMARK ELECTRONICS, INC.

(Exact name of registrant as specified in its charter)

	Texas	74‑2211011
	(State or other jurisdiction	(I.R.S. Employer
	of incorporation or organization)	Identification No.)
4141 N. Scottsdale Road ~~Ste. 300~~		85251
Scottsdale, Arizona		(Zip Code)
(Address of principal executive offices)

~~(480) 372-4365~~(623) 300-7000

(Registrant’s telephone number, including area code)

~~3000 Technology Drive, Angleton, Texas 77515~~

~~(Former name, former address and former fiscal year, if changed since last report)~~

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. Yes [Ö] No [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [Ö] No [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b–2 of the Exchange Act.

Large accelerated filer [Ö]	Accelerated filer [ ]
Non-accelerated filer [ ] (Do not check if a smaller reporting company)	Smaller reporting company [ ]
Emerging growth company [ ]

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b–2 of the Act). Yes [ ] No [Ö]

As of August 7,6, ~~2017~~2018, there were ~~49,924,169~~46,585,922 shares of Common Stock of Benchmark Electronics, Inc., par value $0.10 per share, outstanding.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

BENCHMARK ELECTRONICS, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(unaudited)

						June 30,	December 31,						June 30,		December 31,
(in thousands, except par value)	(in thousands, except par value)					2017		2016	(in thousands, except par value)					2018		2017
						(unaudited)									(as adjusted)
Assets	Assets								Assets
									Current assets:
	Current assets:									Cash and cash equivalents			$	595,639	$	742,546
		Cash and cash equivalents			$	749,311	$	681,433		Accounts receivable, net of allowance for doubtful accounts of $105
		Accounts receivable, net of allowance for doubtful accounts of $4,535									and $105, respectively			444,953		436,560
			and $2,838, respectively			391,830		440,692		Contract assets				148,231		146,496
		Inventories				416,030		381,334		Inventories				318,986		268,917
		Prepaid expenses and other assets				39,177		28,057		Prepaid expenses and other assets				35,277		36,018
		Income taxes receivable				1,296		146		Income taxes receivable				—		120
				Total current assets		1,597,644		1,531,662				Total current assets		1,543,086		1,630,657
	Property, plant and equipment, net of accumulated depreciation of								Property, plant and equipment, net of accumulated depreciation of
				$416,263 and $406,375, respectively		172,080		166,148				$445,939 and $432,043, respectively		203,872		186,473
	Goodwill					191,616		191,616	Goodwill					192,116		191,616
	Deferred income taxes					4,366		6,572	Deferred income taxes					4,034		4,034
	Other, net					98,734		102,670	Other, net					94,077		96,524
					$	2,064,440	$	1,998,668					$	2,037,185	$	2,109,304

Liabilities and Shareholders’ Equity	Liabilities and Shareholders’ Equity								Liabilities and Shareholders’ Equity
	Current liabilities:								Current liabilities:
		Current installments of long-term debt and capital lease obligations			$	15,333	$	12,396		Current installments of long-term debt and capital lease obligations			$	21,219	$	18,274
		Accounts payable				343,241		326,249		Accounts payable				383,606		362,701
		Income taxes payable				3,864		3,534		Income taxes payable				20,803		11,663
		Accrued liabilities				83,684		70,202		Accrued liabilities				75,368		85,679
				Total current liabilities		446,122		412,381				Total current liabilities		500,996		478,317
	Long-term debt and capital lease obligations, less current installments					202,122		211,252	Long-term debt and capital lease obligations, less current installments					181,777		193,406
	Other long-term liabilities					10,359		9,570	Other long-term liabilities					90,262		89,749
	Shareholders’ equity:								Deferred income taxes					20,005		8,694
		Preferred stock, $0.10 par value; 5,000 shares authorized, none issued				—		—	Shareholders’ equity:
		Common stock, $0.10 par value; 145,000 shares authorized; issued								Preferred stock, $0.10 par value; 5,000 shares authorized, none issued				—		—
			and outstanding – 49,845 and 49,330, respectively			4,985		4,933		Common stock, $0.10 par value; 145,000 shares authorized; issued
		Additional paid-in capital				637,796		626,306			and outstanding – 47,334 and 49,143, respectively			4,733		4,914
		Retained earnings				773,943		748,402		Additional paid-in capital				607,984		634,192
		Accumulated other comprehensive loss				(10,887)		(14,176)		Retained earnings				639,779		708,181
				Total shareholders’ equity		1,405,837		1,365,465		Accumulated other comprehensive loss				(8,351)		(8,149)
		Commitments and contingencies										Total shareholders’ equity		1,244,145		1,339,138
					$	2,064,440	$	1,998,668		Commitments and contingencies
													$	2,037,185	$	2,109,304

See accompanying notes to condensed consolidated financial statements.

BENCHMARK ELECTRONICS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Income (Loss)

(unaudited)

		Three Months Ended				Six Months Ended					Three Months Ended				Six Months Ended
		June 30,				June 30,					June 30,				June 30,
(in thousands, except per share data)	(in thousands, except per share data)		2017		2016		2017		2016	(in thousands, except per share data)		2018		2017		2018		2017
													(as adjusted)				(as adjusted)
Sales	Sales	$	616,904	$	579,342	$	1,183,405	$	1,128,567	Sales	$	660,591	$	619,611	$	1,268,727	$	1,177,514
Cost of sales	Cost of sales		558,317		526,488		1,075,758		1,025,396	Cost of sales		606,292		560,127		1,156,110		1,070,498
	Gross profit		58,587		52,854		107,647		103,171	Gross profit		54,299		59,484		112,617		107,016
Selling, general and administrative expenses	Selling, general and administrative expenses		32,335		28,540		64,986		56,997	Selling, general and administrative expenses		35,825		32,335		71,575		64,986
Amortization of intangible assets	Amortization of intangible assets		2,481		2,972		4,962		5,775	Amortization of intangible assets		2,367		2,481		4,733		4,962
Restructuring charges and other costs	Restructuring charges and other costs		1,544		3,602		3,055		6,391	Restructuring charges and other costs		1,758		1,544		3,993		3,055
	Income from operations		22,227		17,740		34,644		34,008	Income from operations		14,349		23,124		32,316		34,013
Interest expense	Interest expense		(2,312)		(2,299)		(4,537)		(4,633)	Interest expense		(2,293)		(2,312)		(4,721)		(4,537)
Interest income	Interest income		1,213		329		2,287		593	Interest income		1,645		1,213		3,578		2,287
Other income (expense)			(830)		71		(911)		(152)
Other expense										Other expense		(355)		(830)		(312)		(911)
	Income before income taxes		20,298		15,841		31,483		29,816	Income before income taxes		13,346		21,195		30,861		30,852
Income tax expense	Income tax expense		3,122		3,156		4,620		6,079	Income tax expense		2,403		3,121		43,559		4,223
	Net income	$	17,176	$	12,685	$	26,863	$	23,737	Net income (loss)	$	10,943	$	18,074	$	(12,698)	$	26,629

Earnings per share:
Earnings (loss) per share:										Earnings (loss) per share:
	Basic	$	0.35	$	0.26	$	0.54	$	0.48	Basic	$	0.23	$	0.36	$	(0.26)	$	0.54
	Diluted	$	0.34	$	0.26	$	0.54	$	0.47	Diluted	$	0.23	$	0.36	$	(0.26)	$	0.53

Weighted-average number of shares outstanding:	Weighted-average number of shares outstanding:									Weighted-average number of shares outstanding:
	Basic		49,766		49,323		49,640		49,586	Basic		47,451		49,766		47,981		49,640
	Diluted		50,239		49,667		50,209		50,042	Diluted		47,631		50,239		47,981		50,209

See accompanying notes to condensed consolidated financial statements.

BENCHMARK ELECTRONICS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income (Loss)

(unaudited)

			Three Months Ended				Six Months Ended						Three Months Ended				Six Months Ended
			June 30,				June 30,						June 30,				June 30,
(in thousands)	(in thousands)			2017		2016		2017		2016	(in thousands)			2018		2017		2018			2017
															(as adjusted)				(as adjusted)
Net income			$	17,176	$	12,685	$	26,863	$	23,737
Net income (loss)											Net income (loss)		$	10,943	$	18,074	$	(12,698)		$	26,629
Other comprehensive income (loss):	Other comprehensive income (loss):										Other comprehensive income (loss):
	Foreign currency translation adjustments			2,513		(832)		3,121		516	Foreign currency translation adjustments			(2,652)		2,513		(1,320)			3,121
	Unrealized gain on investments, net of tax			12		22		16		16	Unrealized gain on investments, net of tax			41		12		41			16
	Unrealized gain (loss) on derivative, net of tax			(200)		(667)		165		(2,899)	Unrealized gain (loss) on derivative, net of tax			244		(200)		1,077			165
	Other			-		-		(13)		-	Other			—		—		—			(13)
Other comprehensive income (loss)	Other comprehensive income (loss)			2,325		(1,477)		3,289		(2,367)	Other comprehensive income (loss)			(2,367)		2,325		(202)			3,289
		Comprehensive income	$	19,501	$	11,208	$	30,152	$	21,370		Comprehensive income (loss)	$	8,576	$	20,399	$	(12,900)		$	29,918

See accompanying notes to condensed consolidated financial statements.

BENCHMARK ELECTRONICS, INC. AND SUBSIDIARIES

Condensed Consolidated Statement of Shareholders’ Equity

(unaudited)

								Accumulated									Accumulated
			Common Stock		Additional			Other	Total			Common Stock		Additional			Other	Total
		Shares		Par	Paid-in	Retained	Comprehensive		Shareholders’		Shares		Par	Paid-in	Retained	Comprehensive		Shareholders’
(in thousands)	(in thousands)	Outstanding		Value	Capital	Earnings		Loss	Equity	(in thousands)	Outstanding		Value	Capital	Earnings		Loss	Equity

Balances, December 31, 2016			49,330	$ 4,933	$ 626,306	$ 748,402		$ (14,176)	$ 1,365,465
Balances, December 31, 2017 (as adjusted)										Balances, December 31, 2017 (as adjusted)		49,143	$ 4,914	$ 634,192	$ 708,181		$ (8,149)	$ 1,339,138
Stock-based compensation expense	Stock-based compensation expense		-	-	4,505	-		-	4,505	Stock-based compensation expense		—	—	5,405	—		—	5,405
Shares repurchased and retired	Shares repurchased and retired		(61)	(6)	(672)	(1,322)		-	(2,000)	Shares repurchased and retired		(2,174)	(217)	(34,183)	(41,468)		—	(75,868)
Stock options exercised	Stock options exercised		411	41	8,053	-		-	8,094	Stock options exercised		182	18	3,359	—		—	3,377
Vesting of restricted stock units	Vesting of restricted stock units		177	18	(18)	-		-	-	Vesting of restricted stock units		209	21	(21)	—		—	—
Shares withheld for taxes	Shares withheld for taxes		(12)	(1)	(378)	-		-	(379)	Shares withheld for taxes		(26)	(3)	(768)	—		—	(771)
Net income			-	-	-	26,863		-	26,863
Other comprehensive income			-	-	-	-		3,289	3,289
Balances, June 30, 2017			49,845	$ 4,985	$ 637,796	$ 773,943		$ (10,887)	$ 1,405,837
Dividends declared										Dividends declared		—	—	—	(14,236)		—	(14,236)
Net loss										Net loss		—	—	—	(12,698)		—	(12,698)
Other comprehensive loss										Other comprehensive loss		—	—	—	—		(202)	(202)
Balances, June 30, 2018										Balances, June 30, 2018		47,334	$ 4,733	$ 607,984	$ 639,779		$ (8,351)	$ 1,244,145

See accompanying notes to condensed consolidated financial statements.

BENCHMARK ELECTRONICS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(unaudited)

					Six Months Ended								Six Months Ended
					June 30,								June 30,
(in thousands)	(in thousands)					2017		2016	(in thousands)					2018		2017
															(as adjusted)

Cash flows from operating activities:	Cash flows from operating activities:								Cash flows from operating activities:
	Net income				$	26,863	$	23,737	Net income (loss)				$	(12,698)	$	26,629
	Adjustments to reconcile net income to net cash provided by								Adjustments to reconcile net income (loss) to net cash provided by
		operating activities:								(used in) operating activities:
			Depreciation			18,414		21,160			Depreciation			19,373		18,414
			Amortization			5,903		6,740			Amortization			5,710		5,903
			Deferred income taxes			2,103		2,649			Deferred income taxes			10,936		1,360
			Gain on the sale of property, plant and equipment			(167)		(136)			Gain on the sale of property, plant and equipment			(116)		(167)
			Asset impairments			-		121			Asset impairments			96		—
			Stock-based compensation expense			4,505		3,981			Stock-based compensation expense			5,405		4,505
			Excess tax benefits from stock-based compensation			-		(122)	Changes in operating assets and liabilities, net of effects from
	Changes in operating assets and liabilities, net of effects from									business acquisition:
		business acquisition:									Accounts receivable			(8,980)		49,394
			Accounts receivable			49,394		57,044			Contract assets			(1,735)		3,466
			Inventories			(34,218)		37,034			Inventories			(52,063)		(39,478)
			Prepaid expenses and other assets			(9,658)		(5,864)			Prepaid expenses and other assets			1,966		(7,233)
			Accounts payable			16,675		23,084			Accounts payable			23,103		16,675
			Accrued liabilities			13,388		(10,036)			Accrued liabilities			(16,025)		13,388
			Income taxes			(673)		(1,258)			Income taxes			8,846		(327)
				Net cash provided by operations		92,529		158,134				Net cash provided by (used in) operations		(16,182)		92,529
Cash flows from investing activities:	Cash flows from investing activities:								Cash flows from investing activities:
	Proceeds from sales of investments at par					250		200	Proceeds from sales of investments at par					522		250
	Additions to property, plant and equipment					(24,039)		(15,149)	Additions to property, plant and equipment					(36,708)		(24,039)
	Proceeds from the sale of property, plant and equipment					235		188	Proceeds from the sale of property, plant and equipment					137		235
	Additions to purchased software					(2,340)		(1,054)	Additions to purchased software					(1,655)		(2,340)
	Other					(105)		(83)	Business acquisition, net of cash acquired					(2,731)		—
				Net cash used in investing activities		(25,999)		(15,898)	Other					(129)		(105)
												Net cash used in investing activities		(40,564)		(25,999)
Cash flows from financing activities:	Cash flows from financing activities:								Cash flows from financing activities:
	Proceeds from stock options exercised					8,094		823	Proceeds from stock options exercised					3,377		8,094
	Employee taxes paid for shares withheld					(379)		(536)	Employee taxes paid for shares withheld					(771)		(379)
	Excess tax benefits from stock-based compensation					-		122	Dividends paid					(7,136)		—
	Principal payments on long-term debt and capital lease obligations					(6,185)		(6,149)	Borrowings under credit agreement					50,000		—
	Share repurchases					(2,000)		(29,315)	Principal payments on long-term debt and capital lease obligations					(59,121)		(6,185)
	Debt issuance costs					(433)		-	Share repurchases					(65,868)		(2,000)
				Net cash used in financing activities		(903)		(35,055)	Equity forward contract related to accelerated share repurchase					(10,000)		—
Effect of exchange rate changes						2,251		72
Net increase in cash and cash equivalents						67,878		107,253
	Cash and cash equivalents at beginning of year					681,433		465,995	Debt issuance costs					—		(433)
	Cash and cash equivalents at end of period				$	749,311	$	573,248				Net cash used in financing activities		(89,519)		(903)
Effect of exchange rate changes									Effect of exchange rate changes					(642)		2,251
Net increase (decrease) in cash and cash equivalents									Net increase (decrease) in cash and cash equivalents					(146,907)		67,878
									Cash and cash equivalents at beginning of year					742,546		681,433
									Cash and cash equivalents at end of period				$	595,639	$	749,311

See accompanying notes to condensed consolidated financial statements.

BENCHMARK ELECTRONICS, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(amounts in thousands, except per share data, unless otherwise noted)

(unaudited)

Note 1 – Basis of Presentation

Benchmark Electronics, Inc. (the Company) is a Texas corporation that provides worldwide engineering services, integrated technology solutions and manufacturing services (both electronic manufacturing services (EMS)~~, engineering and design services,~~ and precision ~~machining services. The Company provides services~~technology manufacturing services) to original equipment manufacturers (OEMs) in the following industries: industrial controls, aerospace and defense (A&D), telecommunications, computers and related products for business enterprises, medical devices, and test and instrumentation. The Company has manufacturing operations located in the United States and Mexico (the Americas), Asia and Europe.

The unaudited condensed consolidated financial statements included herein have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the SEC). The financial statements reflect all normal and recurring adjustments necessary in the opinion of management for a fair presentation of the financial position, results of operations and cash flows for the interim periods presented. The results of operations for the periods presented are not necessarily indicative of the results to be expected for the full year. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the financial statements and notes included in the Company’s annual report on Form 10‑K for the year ended December 31, ~~2016~~2017 (the ~~2016~~2017 10-K).

Management has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these financial statements in accordance with generally accepted accounting principles in the United States (U.S. GAAP). Actual results could differ from those estimates and assumptions.

~~Effective January 1,~~Note 2 – New Accounting Pronouncements

Adopted in 2018

In May 2017, the ~~Company adopted~~Financial Accounting Standards Board (FASB) issued a new accounting ~~standard~~standards update that ~~simplifies several aspects~~provides guidance about which changes to the terms or conditions of ~~the accounting for employee~~a share-based payment ~~transactions, including~~award require an entity to apply modification accounting. The Company adopted the new guidance effective January 1, 2018. The impact of adoption on the Company's consolidated financial statements is dependent on future changes to stock-based compensation awards.

In August 2016, the FASB issued a new accounting ~~for income taxes, forfeitures,~~standards update, which seeks to reduce the existing diversity in how certain cash receipts and ~~statutory withholding requirements, as well as classification~~cash payments are presented and classified in the ~~Condensed Consolidated Statements~~statement of Cash Flows. As required by this standard, excess tax benefits recognized on stock-based compensation expense are reflected in the accompanying Condensed Consolidated Income Statement as a component of the provision for income taxes on a prospective basis (See Note 8). As a result of including the income tax effects from excess tax benefits in income tax expense, the effects of the excess tax benefits are no longer included in the calculation of diluted shares outstanding, resulting in an increase in the number of diluted shares outstanding.cash flows. The Company adopted this ~~change in~~new update effective January 1, 2018. The adoption of this guidance had no impact on the ~~method~~consolidated financial statements of ~~calculating diluted shares outstanding on~~the Company.

In May 2014, the FASB issued a ~~prospective basis. Additionally, excess tax benefits or deficiencies recognized on stock-based compensation expense are classified~~new standard (commonly referred to as ~~an operating activity in~~ASC 606), which changed the ~~accompanying Condensed Consolidated Statements of Cash Flows. The Company has applied this provision prospectively. Additionally,~~way the Company ~~is now required to present~~recognizes revenue and significantly expanded the ~~cost of shares withheld from the employee to satisfy the employees’ income tax liability as a financing activity on the statement of cash flows rather than as an operating cash flow.~~disclosure requirements for revenue arrangements. The Company adopted ~~this change retrospectively.~~ASC 606 with a date of the initial application of January 1, 2018. As a result, the Company has changed its accounting policy for revenue recognition as detailed below.

The Company applied ASC 606 using the six months ended June 30, 2016, net cash provided by operations increased by $0.5 million with a corresponding offset to net cash used in financing activities. The standard also allows for the option to account for forfeitures as they occur when determining the amount of compensation cost to be recognized, rather than estimating expected forfeitures over the course of a vesting period.full retrospective transition method. The Company elected ~~to account for forfeitures as they occur. The net cumulative effect to~~ the ~~Company from~~ASC 606 practical expedient and does not disclose the ~~adoption~~information about remaining performance obligations that have original expected durations of ~~this accounting standard update was an increase~~one year or less. Amounts prior to ~~paid-in capital of $0.2 million and a reduction to retained earnings of $0.2 million as of~~ January 1, ~~2017.~~2018 that have been adjusted in accordance with ASC 606 as described herein are noted “as adjusted”.

~~Certain reclassifications of prior period amounts have been made to conform to the current period presentation. During the quarter ended September 30, 2016,~~Previously, the Company ~~concluded that it was appropriate~~recognized revenue from the sale of manufactured products built to customer

~~to classify amounts relating~~specifications and excess inventory when title and risk of ownership passed, the price to the buyer was fixed or determinable and recoverability was reasonably assured, which was generally when the goods were shipped. Under ASC 606, the Company recognizes revenue as the customer takes control of the products. Under the majority of the Company’s manufacturing contracts with customers, the customer controls all of the work-in-progress as products are being built. Revenues under these contracts are recognized progressively based on the cost-to-cost method. Accordingly, the Company will recognize revenue under these contracts earlier than under the previous accounting rules. Under other manufacturing contracts, the customer does not take control of the product until it is completed. Under these contracts, the Company continues to recognize revenue upon transfer of control of product to the customer. Revenue from design, development and engineering services also continues to be recognized over time as the services are performed.

The Company’s performance obligations generally have an expected duration of one year or less. The Company applies the practical expedients and does not disclose information about remaining performance obligations that have original expected durations of one year or less or any significant financing components in the contracts.

The Company recognizes the incremental costs, if any, of obtaining contracts as an expense when incurred since the amortization period of ~~intangible~~the assets ~~separately. Previously,~~that the Company otherwise would have recognized is one year less.

The following tables summarize the impacts of ASC 606 adoption on the Company’s 2017 consolidated financial statements.

Condensed Consolidated Balance Sheet
December 31, 2017

		Impact of changes in accounting policies
		As previously
(in thousands)			reported	Adjustments			As adjusted
	Contract assets	$	—	$	146,496	$	146,496
	Inventories		397,181		(128,264)		268,917
	Prepaid expenses and other assets		42,263		(6,245)		36,018
	Total assets	$	2,097,317	$	11,987	$	2,109,304

	Income taxes payable	$	11,662	$	1	$	11,663
	Deferred income taxes		7,027		1,667		8,694
	Total liabilities		768,498		1,668		770,166
	Retained earnings		697,862		10,319		708,181
	Total shareholders’ equity		1,328,819		10,319		1,339,138
	Total liabilities and shareholders’ equity	$	2,097,317	$	11,987	$	2,109,304

Condensed Consolidated Statement of Income
Three Months Ended June 30, 2017

		Impact of changes in accounting policies
		As previously
(in thousands, except per share data)			reported	Adjustments			As adjusted

Sales		$	616,904	$	2,707	$	619,611
Cost of sales		$	558,317	$	1,810	$	560,127
Income tax expense		$	3,122	$	(1)	$	3,121
Net income		$	17,176	$	898	$	18,074

Earnings per share:
	Basic	$	0.35	$	0.01	$	0.36
	Diluted	$	0.34	$	0.02	$	0.36

Weighted-average number of shares outstanding:
	Basic		49,766		49,766		49,766
	Diluted		50,239		50,239		50,239

Condensed Consolidated Statement of Income
Six Months Ended June 30, 2017

		Impact of changes in accounting policies
		As previously
(in thousands, except per share data)			reported	Adjustments			As adjusted

Sales		$	1,183,405	$	(5,891)	$	1,177,514
Cost of sales		$	1,075,758	$	(5,260)	$	1,070,498
Income tax expense		$	4,620	$	(397)	$	4,223
Net income		$	26,863	$	(234)	$	26,629

Earnings per share:
	Basic	$	0.54	$	—	$	0.54
	Diluted	$	0.54	$	(0.01)	$	0.53

Weighted-average number of shares outstanding:
	Basic		49,640		49,640		49,640
	Diluted		50,209		50,209		50,209

Condensed Consolidated Statement of Cashflows
Six Months Ended June 30, 2017

					Impact of changes in accounting policies
					As previously
(in thousands)						reported	Adjustments			As adjusted

	Net income				$	26,863	$	(234)	$	26,629
	Adjustments to reconcile net income to net cash provided
		by operating activities:
			Depreciation			18,414		—		18,414
			Amortization			5,903		—		5,903
			Deferred income taxes			2,103		(743)		1,360
			Gain on the sale of property, plant and equipment			(167)		—		(167)
			Stock-based compensation expense			4,505		—		4,505
	Changes in operating assets and liabilities:
			Accounts receivable			49,394		—		49,394
			Contract assets			—		3,466		3,466
			Inventories			(34,218)		(5,260)		(39,478)
			Prepaid expenses and other assets			(9,658)		2,425		(7,233)
			Accounts payable			16,675		—		16,675
			Accrued liabilities			13,388		—		13,388
			Income taxes			(673)		346		(327)
				Net cash provided by operations		92,529		—		92,529

				Net cash used in investing activities		(25,999)		—		(25,999)

				Net cash used in financing activities		(903)		—		(903)
	Effect of exchange rate changes					2,251		—		2,251
	Net increase in cash and cash equivalents					67,878		—		67,878
	Cash and cash equivalents at beginning of year					681,433		—		681,433
	Cash and cash equivalents at end of period				$	749,311	$	—	$	749,311

Not Yet Adopted

In February 2018, the FASB issued new accounting guidance that allows the reclassification of certain tax effects from accumulated other comprehensive income to retained earnings. This guidance is effective January 1, 2019, with early adoption permitted. The Company is evaluating whether it will adopt this new guidance along with any impacts on the Company’s financial position, results of operations and cash flows, none of which are expected to be material.

In June 2016, the FASB issued a new accounting standards update, which replaces the current incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. This update is effective for annual reporting periods beginning after December 15, 2019. The Company does not expect the implementation of this update to have a material impact on its consolidated financial position, results of operations or cash flows and will adopt this update effective January 1, 2020.

In February 2016, the FASB issued a new accounting standards update changing the accounting for leases, including a requirement to record all leases on the consolidated balance sheets as assets (right-of-use) and liabilities (for reasonably certain lease payments). This update is effective for fiscal years beginning after December 15, 2018. The Company will adopt this update effective January 1, 2019, which will impact its

consolidated balance sheet. Originally, entities were required to adopt this update using a modified retrospective approach, which required prior periods to be presented under this new standard with various practical expedients allowed. However, in July 2018, the FASB issued additional guidance which allows entities the option of recognizing the cumulative effect of applying the new standard as an adjustment to the opening balance of retained earnings in the year of adoption (January 1, 2019). The Company is currently evaluating the impact this standard will have on its consolidated financial statements and which transition approach will be used upon adoption.

The Company has determined that other recently issued accounting standards will either have no material impact on its consolidated financial position, results of operations or cash flows, or will not apply to its operations.

Note 3 – Revenue

The Company’s revenues are generated primarily from the sale of manufactured products built to customer specifications. The Company also generates revenue from design, development and engineering services, in addition to the sale of excess inventory.

Revenue is measured based on a consideration specified in a contract with a customer. The Company recognizes revenue when it satisfies a performance obligation by transferring control over a manufactured product to a customer. The Company’s contracts with customers are short-term in nature. Customers are generally billed when the product is shipped or as services are performed. Under the majority of the Company’s manufacturing contracts with customers, the customer controls all of the work-in-progress as products are being built. Revenues under these contracts are recognized progressively based on the cost-to-cost method. For other manufacturing contracts, the customer does not take control of the product until it is completed. Under these contracts, the Company recognizes revenue upon transfer of control of product to the customer. Revenue from design, development and engineering services is recognized over time as the services are performed. The Company assumes no significant obligations after shipment as it typically warrants workmanship only. Therefore, the warranty provisions are generally not significant.

If the Company had ~~reported these amounts under~~recorded revenue, but not issued an invoice, a contract asset is recognized. The contract asset is transferred to accounts receivable when the ~~captions “cost~~entitlement to payment becomes unconditional.

Taxes assessed by governmental authorities that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by the Company from a customer, are excluded from revenue.

Shipping and handling costs associated with outbound freight after control over a product has transferred to a customer are accounted for as fulfillment costs and are included in cost of ~~sales”~~sales.

Disaggregation of revenue

In the following tables, revenue is disaggregated by market sector. The tables also include a reconciliation of the disaggregated revenue with the reportable operating segments.


			Reportable Operating Segments
			Three Months Ended June 30, 2018
(in thousands)			Americas		Asia		Europe		Total
Market Sector:
	Industrials	$	45,138	$	55,919	$	16,711	$	117,768
	A&D		94,066		1,518		6,924		102,508
	Medical		59,383		34,101		3,564		97,048
	Test and instrumentation		47,333		41,552		17,185		106,070
	Computing		141,417		17,528		1,692		160,637
	Telecommunication		39,461		36,907		192		76,560
	External revenue		426,798		187,525		46,268		660,591
	Elimination of intersegment sales		7,480		10,103		87		17,670
	Segment revenue	$	434,278	$	197,628	$	46,355	$	678,261

			Six Months Ended June 30, 2018
			Americas		Asia		Europe		Total
Market Sector:
	Industrials	$	97,867	$	109,576	$	34,885	$	242,328
	A&D		182,480		2,648		15,247		200,375
	Medical		114,375		72,364		7,596		194,335
	Test and instrumentation		93,202		80,785		34,297		208,284
	Computing		227,638		32,428		4,109		264,175
	Telecommunication		83,355		74,992		883		159,230
	External revenue		798,917		372,793		97,017		1,268,727
	Elimination of intersegment sales		14,146		19,957		134		34,237
	Segment revenue	$	813,063	$	392,750	$	97,151	$	1,302,964


			Reportable Operating Segments
			Three Months Ended June 30, 2017 (as adjusted)
(in thousands)			Americas		Asia		Europe		Total
Market Sector:
	Industrials	$	56,053	$	52,094	$	16,607	$	124,754
	A&D		93,047		917		6,116		100,080
	Medical		48,139		33,822		4,874		86,835
	Test and instrumentation		37,766		38,655		12,395		88,816
	Computing		116,547		23,166		2,518		142,231
	Telecommunication		45,239		31,222		434		76,895
	External revenue		396,791		179,876		42,944		619,611
	Elimination of intersegment sales		8,643		14,604		66		23,313
	Segment revenue	$	405,434	$	194,480	$	43,010	$	642,924

			Six Months Ended June 30, 2017 (as adjusted)
			Americas		Asia		Europe		Total
Market Sector:
	Industrials	$	110,150	$	97,885	$	33,905	$	241,940
	A&D		186,456		1,049		12,475		199,980
	Medical		95,740		66,299		9,721		171,760
	Test and instrumentation		70,420		73,349		20,797		164,566
	Computing		194,360		42,732		5,398		242,490
	Telecommunication		93,153		62,386		1,239		156,778
	External revenue		750,279		343,700		83,535		1,177,514
	Elimination of intersegment sales		16,475		30,084		119		46,678
	Segment revenue	$	766,754	$	373,784	$	83,654	$	1,224,192

For the six months ended June 30, 2018 and ~~“selling, general~~2017, 95.3% and ~~administrative expenses”. These reclassifications had no effect on previously reported net income.~~95.6%, respectively, of the Company’s revenue was recognized as products and services are transferred over time.

Note 24 – Stock-Based Compensation

The Company’s 2010 Omnibus Incentive Compensation Plan (the 2010 Plan) authorizes the Company, upon approval of the Compensation Committee of the Board of Directors, to grant a variety of awards, including stock options, restricted shares and restricted stock units (both time-based and performance-based) and other forms of equity awards, or any combination thereof, to any director, officer, employee or consultant (including any prospective director, officer, employee or consultant) of the Company. Stock options (which have not been awarded since 2015) are granted to employees with an exercise price equal to the market price of the Company’s common ~~shares~~stock on the date of grant, generally vest over a four-year period from the date of grant and have a term of ~~ten~~10 years. Time-based restricted stock units granted to employees generally vest over a four-year period from the date of grant, subject to the continued employment of the employee by the Company. Performance-based restricted stock ~~unit awards~~units generally vest over a three-year performance cycle, which includes the year of the grant, and are based upon the Company’s achievement of specified performance metrics. Awards under the 2010 Plan to non-employee directors have been in the form of restricted stock units, which vest in equal quarterly installments over a one-year period, starting on the grant date.

As of June 30, ~~2017~~2018, ~~3.2~~2.7 million additional shares of common ~~shares~~stock were available for issuance under the Company’s 2010 Plan.

All share-based payments to employees, including grants of employee stock options, are recognized in the financial statements based on their grant date fair values. The total compensation cost recognized for stock-based awards was $2.5 million and $5.4 million for the three and six months ended June 30, 2018, respectively, and $2.3 million and $4.5 million for the three and six months ended June 30, 2017, ~~respectively, and $1.9 million and $4.0 million for the three and six months ended June 30, 2016,~~ respectively. The total income tax benefit recognized in the condensed income statements for stock-based awards was $0.6 million and $1.3 million for the three and six months ended June 30, 2018, respectively, and $0.9 million and $1.6 million for the three and six months ended June 30, 2017, ~~respectively, and $0.7 million and $1.5 million~~respectively. The compensation expense for stock-based awards is recognized over the ~~three and six months ended June 30, 2016, respectively.~~vesting period of the awards using the straight-line method. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model. Awards of ~~restricted shares,~~ restricted stock units and performance-based restricted stock units are valued at the closing market price of the Company’s common ~~shares~~stock on the date of grant. For performance-based restricted stock units, compensation expense is based on the probability that the performance goals will be achieved, which is monitored by management throughout the requisite service period. When it becomes probable, based on the Company’s expectation of performance during the

measurement period, that more or less than the previous estimate of the awarded shares will vest, an adjustment to stock-based compensation expense is recognized as a change in accounting estimate.

As of June 30, ~~2017,~~2018, the unrecognized compensation cost and remaining weighted-average amortization related to stock-based awards were as follows:

Performance-

based

Time-based

based

Restricted

Stock

(in thousands)

Options

Units

Units⁽¹⁾

(in thousands, except remaining period data)

Options

Units

Units⁽¹⁾

Unrecognized compensation cost

$ 1,223

$ 13,673

$ 5,195

$ 185

$ 17,183

$ 4,732

Remaining weighted-average

amortization period

1.1 years

2.6 years

1.8 years

0.7 years

2.6 years

1.6 years

⁽¹⁾ Based on the probable achievement of the performance goals identified in each award.

~~The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model. No options were granted during the six months ended June 30, 2017 and 2016.~~

The total cash received by the Company as a result of stock option exercises for the six months ended June 30, ~~2017~~2018 and ~~2016~~2017 was approximately ~~$8.1~~$3.4 million and ~~$0.8~~$8.1 million, respectively. The actual tax benefit realized as a result of stock option exercises and the vesting of other share-based awards during the six months ended June 30, 2018 and 2017 ~~and 2016~~ was ~~$3.8~~$1.9 million and ~~$1.6~~$3.8 million, respectively. For the six months ended June 30, ~~2017~~2018 and ~~2016,~~2017, the total intrinsic value of stock options exercised was ~~$5.2~~$2.2 million and ~~$0.3~~$5.2 million, respectively.

The Company awarded performance-based restricted stock units to employees during the six months ended June 30, ~~2017~~2018 and ~~2016.~~2017. The number of performance-based restricted stock units that ~~may~~will ultimately be earned will not be determined until the end of the corresponding performance periods, and may vary from as low as zero to as high as 2.5 times the target number depending on the level of achievement of certain performance goals. The level of achievement of these goals is based upon the ~~audited~~ financial results of the Company for the last full calendar year within the performance period. The performance goals consist of certain levels of achievement using the following financial metrics: revenue growth, operating margin expansion, and return on invested capital. If the performance goals are not met based on the Company’s financial results, the applicable performance-based restricted stock units will not vest and will be forfeited. Shares subject to forfeited performance-based restricted stock units will be available for issuance under the Company’s 2010 Plan.

The following table summarizes activities relating to the Company’s stock options:

Weighted-

Weighted-

Average

Average

Remaining

Aggregate

Number of

Exercise

Contractual

Intrinsic
(in thousands, except per share data)

Options

Price

Term (Years)

Value
Outstanding as of December 31, 2016

1,197

$19.51

Exercised

(411)

19.71

Forfeited or expired

(11)

19.99

Outstanding as of June 30, 2017

775

$19.40

5.35

$ 10,004
Exercisable as of June 30, 2017

619

$18.46

3.64

$ 8,559

			Weighted-
		Weighted-	Average	Aggregate
	Number of	Average	Remaining	Intrinsic
	Options	Exercise	Contractual	Value
	(in thousands)	Price	Term (Years)	(in thousands)
Outstanding as of December 31, 2017	596	$19.72
Exercised	(182)	18.57
Forfeited or expired	(20)	22.97
Outstanding as of June 30, 2018	394	$20.10	4.74	$ 3,568
Exercisable as of June 30, 2018	358	$19.79	3.73	$ 3,350

The aggregate intrinsic value in the table above is before income taxes and is calculated as the difference between the exercise price of the underlying options and the Company’s closing stock price as of the last

business day of the period ended June 30, ~~2017~~2018 for options that had exercise prices that were below the closing price.

The following table summarizes the activities related to the Company’s time-based restricted stock units:

		Weighted-		Weighted-
		Average	Number of	Average
	Number of	Grant Date	Units	Grant Date
(in thousands, except per share data)	Units	Fair Value
Non-vested awards outstanding as of December 31, 2016	525	$22.57
			(in thousands)	Fair Value
Non-vested units outstanding as of December 31, 2017			593	$27.47
Granted	264	31.50	385	29.67
Vested	(177)	21.01	(209)	26.51
Forfeited	(29)	23.39	(70)	27.02
Non-vested awards outstanding as of June 30, 2017	583	$27.05
Non-vested units outstanding as of June 30, 2018			699	$29.01

The following table summarizes the activities related to the Company’s performance-based restricted stock units:

Weighted-

Average

Number of

Grant Date
(in thousands, except per share data)

Units

Fair Value
Non-vested units outstanding as of December 31, 2016

227

$21.43
Granted ⁽¹⁾

144

31.40
Forfeited or expired

(50)

18.69
Non-vested units outstanding as of June 30, 2017

321

$26.35

		Weighted-
	Number of	Average
	Units	Grant Date
	(in thousands)	Fair Value
Non-vested units outstanding as of December 31, 2017	346	$26.88
Granted ⁽¹⁾	109	29.92
Forfeited	(145)	23.97
Non-vested units outstanding as of June 30, 2018	310	$29.31

⁽¹⁾Represents target number of units that can vest based on the achievement of the performance goals.

Note 35 – Earnings Per Share

Basic earnings per share is computed using the weighted-average number of shares outstanding. Diluted earnings per share is computed using the weighted-average number of shares outstanding adjusted for the incremental shares attributed to outstanding stock equivalents. Stock equivalents include common ~~shares~~stock issuable upon the exercise of stock options and other equity instruments, and are computed using the treasury stock method. Under the treasury stock method, the exercise price of a share and the amount of compensation cost, if any, for future service that the Company has not yet recognized are assumed to be used to repurchase shares in the current period.

The following table sets forth the calculation of basic and diluted earnings per share:


		Three Months Ended				Six Months Ended					Three Months Ended				Six Months Ended
		June 30,				June 30,					June 30,				June 30,
(in thousands, except per share data)	(in thousands, except per share data)		2017		2016		2017		2016	(in thousands, except per share data)		2018		2017		2018		2017
Net income		$	17,176	$	12,685	$	26,863	$	23,737
													(as adjusted)				(as adjusted)
Net income (loss)										Net income (loss)	$	10,943	$	18,074	$	(12,698)	$	26,629

Denominator for basic earnings per share -	Denominator for basic earnings per share -									Denominator for basic earnings per share -
	weighted-average number of common									weighted-average number of common
	shares outstanding during the period		49,766		49,323		49,640		49,586	shares outstanding during the period		47,451		49,766		47,981		49,640
Incremental common shares attributable to	Incremental common shares attributable to									Incremental common shares attributable to
	exercise of dilutive options		318		287		341		289	exercise of dilutive options		116		318		—		341
Incremental common shares attributable	Incremental common shares attributable									Incremental common shares attributable
	to outstanding restricted stock units		155		57		228		167	to outstanding restricted stock units		64		155		—		228
Denominator for diluted earnings per share	Denominator for diluted earnings per share		50,239		49,667		50,209		50,042	Denominator for diluted earnings per share		47,631		50,239		47,981		50,209

Basic earnings per share		$	0.35	$	0.26	$	0.54	$	0.48
Diluted earnings per share		$	0.34	$	0.26	$	0.54	$	0.47
Basic earnings (loss) per share										Basic earnings (loss) per share	$	0.23	$	0.36	$	(0.26)	$	0.54
Diluted earnings (loss) per share										Diluted earnings (loss) per share	$	0.23	$	0.36	$	(0.26)	$	0.53

Note 46 – Goodwill and Other Intangible Assets

Goodwill allocated to the Company’s reportable segments was as follows:

(in thousands)		Americas		Asia		Total		Americas		Asia		Total
Goodwill as of December 31, 2016 and June 30, 2017	$	153,514	$	38,102	$	191,616

Goodwill as of December 31, 2017							$	153,514	$	38,102	$	191,616
Acquisition								500		—		500
Goodwill as of June 30, 2018							$	154,014	$	38,102	$	192,116

Management does not expect additional adjustments, if any, resulting from changes to the purchase price allocation, to have a material effect on the Company’s financial position or results of operations.

Other assets consist primarily of acquired identifiable intangible assets and capitalized purchased software costs. Intangible assets as of June 30, ~~2017~~2018 and December 31, ~~2016~~2017 were as follows:

		As of June 30, 2017						As of June 30, 2018
		Gross				Net		Gross				Net
		Carrying	Accumulated			Carrying		Carrying	Accumulated			Carrying
(in thousands)		Amount	Amortization			Amount		Amount	Amortization			Amount
Customer relationships	$	100,144	$	(31,145)	$	68,999	$	100,170	$	(37,513)	$	62,657
Purchased software costs		33,936		(29,038)		4,898		36,806		(29,974)		6,832
Technology licenses		26,800		(15,968)		10,832		28,800		(19,438)		9,362
Trade names and trademarks		7,800		-		7,800		7,800		—		7,800
Other		868		(249)		619		868		(273)		595
Total	$	169,548	$	(76,400)	$	93,148	$	174,444	$	(87,198)	$	87,246

		As of December 31, 2016						As of December 31, 2017
		Gross				Net		Gross				Net
		Carrying	Accumulated			Carrying		Carrying	Accumulated			Carrying
(in thousands)		Amount	Amortization			Amount		Amount	Amortization			Amount
Customer relationships	$	100,053	$	(27,883)	$	72,170	$	100,200	$	(34,372)	$	65,828
Purchased software costs		31,582		(28,508)		3,074		35,328		(29,612)		5,716
Technology licenses		26,800		(14,189)		12,611		28,800		(17,887)		10,913
Trade names and trademarks		7,800		-		7,800		7,800		—		7,800
Other		868		(237)		631		868		(261)		607
Total	$	167,103	$	(70,817)	$	96,286	$	172,996	$	(82,132)	$	90,864

The estimated future amortization expense of acquired intangible assets for each of the next five years is as follows (in thousands):

Year ending December 31,		Amount		Amount
2017 (remaining six months)	$	5,640
2018		10,245
2018 (remaining six months)			$	5,336
2019		10,084		11,311
2020		9,316		10,499
2021		6,389		7,312
2022				7,242

~~has $197.4~~On July 20, 2018, the Company entered into a $650 million credit agreement (the New Credit Agreement) by and among the Company, certain of its subsidiaries, the lenders party thereto and Bank of America, N.A., as Administrative Agent, Swingline Lender and a L/C Issuer. The New Credit Agreement replaced the Credit Agreement. The New Credit Agreement is comprised of a five-year $500 million revolving credit facility (the New Revolving Credit Facility) and a five-year $150 million term loan facility (the New Term Loan Facility), both with a maturity date of July 20, 2023. A portion of the New Term Loan Facility proceeds were used to (i) refinance all indebtedness and terminate all commitments under the Credit Agreement discussed above and (ii) pay the fees, costs and expenses associated with the foregoing and the negotiation, execution and delivery of the New Credit Agreement.

The New Revolving Credit Facility is available for ~~future borrowings~~general corporate purposes. The New Credit Agreement includes an accordion feature pursuant to which the Company is permitted to add one or more incremental term loan and/or increase commitments under the ~~revolving credit facility.~~New Revolving Credit Facility in an aggregate amount not exceeding $275 million, subject to the satisfaction of certain conditions.

The New Credit Agreement contains certain financial covenants as to interest coverage and debt leverage, and certain customary affirmative and negative covenants, including restrictions on our ability to incur additional debt and liens, pay dividends, repurchase shares, sell assets and merge or consolidate with other persons.

The Company’s Thailand subsidiary has a multi-purpose credit facility with Kasikornbank Public Company Limited (the Thai Credit Facility) that provides for 350 million Thai baht (approximately $10.6 million) working capital availability. The Thai Credit Facility is secured by land and buildings in Thailand owned by the Company’s Thailand subsidiary. Availability of funds under the Thai Credit Facility is reviewed annually and is currently accessible through October ~~2017.~~2018. As of both June 30, ~~2017~~2018 and ~~2016,~~December 31, 2017, there were no working capital borrowings outstanding under the facility.

Note 8 – Contract Assets

As of June 30, 2018 and December 31, 2017, the Company had $148.2 million and $146.5 million in contract receivables from contracts with customers. The contract receivables primarily relate to the Company’s right to consideration for work completed but not billed at the reporting date. The contract receivables are transferred to accounts receivable when the rights become unconditional.

Significant changes in the contract asset balance during the period are as follows:

Note 6 – Inventories
Inventory costs are summarized as follows:

June 30,

December 31,
(in thousands)

2017

2016
Raw materials
$
270,826

$
233,111
Work in process

112,054

113,496
Finished goods

33,150

34,727

$
416,030

$
381,334

	Six Months Ended
	June 30,
(in thousands)		2018		2017
Transferred to receivables from contract assets recognized at
the beginning of the period	$	(290,599)	$	(305,850)
Contract assets recognized, net of reclassification to accounts receivable		292,334		302,384
Net change	$	1,735	$	(3,466)

Note 9 – Inventories
Inventory costs are summarized as follows:
	June 30,		December 31,
(in thousands)		2018		2017
			(as adjusted)
Raw materials	$	310,972	$	258,228
Work in process		7,071		8,600
Finished goods		943		2,089
	$	318,986	$	268,917

Note 710 – Accounts Receivable Sale Program

InAs of June 30, 2018, in connection with a trade accounts receivable sale program with an unaffiliated financial institution, the Company may elect to sell, at a discount, on an ongoing basis, up to a maximum of $40.0 million, of specific accounts receivable at any one time. The program was executed on March 29, 2017, is an uncommitted facility and is scheduled to expire in one year with options to automatically extend the agreement, although any party may elect to terminate the agreement upon 60 days prior notice.

During the three months ended June 30, 2018 & 2017, the Company sold $40.0 million of accounts receivable under this program, and in exchange, the Company received cash proceeds of $39.9 million, net of the discount. During the six months ended June 30, 2018 and 2017, the Company sold $80.0 million and $65.0 million, respectively, of accounts receivable under this program, and in exchange, the Company received cash proceeds of $79.8 million and $64.9 million, respectively, net of the discount. The loss on the sale resulting from the discount ~~during the three and six months ended June 30, 2017 was not material, and~~ was recorded to other expense within the Condensed Consolidated Statements of Income.

On July 20, 2018, the Company amended the terms of the trade accounts receivable sale program to, among other things, increase the maximum amount of specific accounts receivable that the Company may elect to sell, at any one time, from $40 million to $80 million.

Note 11 – Income Taxes
Income tax expense consists of the following:
	Six Months Ended
	June 30,
(in thousands)		2018		2017
			(as adjusted)
Federal – current	$	(81)	$	(678)
Foreign – current		24,992		3,379
State – current		7,712		162
Deferred		10,936		1,360
	$	43,559	$	4,223

The U.S. Tax Cuts and Jobs Act (U.S. Tax Reform), which was signed into law on December 22, 2017, significantly changed U.S. tax law by, among other things, lowering corporate income tax rates, implementing a territorial tax system and imposing a transition tax on deemed repatriated earnings of foreign subsidiaries. The U.S. Tax Reform reduced the U.S. corporate income tax rate from a maximum of 35% to a flat 21% rate, effective January 1, 2018.

To minimize tax base erosion with a territorial tax system, the U.S. Tax Reform enacted a new global intangible low-taxed income (GILTI) provision. Under the GILTI provision, certain foreign subsidiary earnings in excess of an allowable return on the foreign subsidiary’s depreciable tangible assets are included in U.S. taxable income offset by a limited deemed paid foreign tax credit. The Company is subject

1219

Note 8 – Income Taxes
Income tax expense consists of the following:

Six Months Ended

June 30,
(in thousands)

2017

2016
Federal – current
$
(1,024)

$
9
Foreign – current

3,379

3,186
State – current

162

235
Deferred

2,103

2,649

$
4,620

$
6,079

to the GILTI provisions due to its operations in foreign jurisdictions.

As of December 31, 2017, the Company had approximately $928 million in cumulative undistributed foreign earnings outside the U.S. Substantially all of these undistributed earnings are subject to the U.S. mandatory repatriation tax and are eligible to be repatriated to the U.S. without additional U.S. tax under the U.S. Tax Reform. The Company has historically asserted its intention to indefinitely reinvest undistributed foreign earnings. The Company no longer considers these earnings to be indefinitely reinvested in its foreign subsidiaries. As a result of this change in assertion for undistributed earnings prior to December 31, 2017, the Company recorded $30.7 million of deferred tax expense for foreign withholding tax from Asia and $9.4 million of deferred U.S. state income tax expense in the first three months of 2018. During the six months ended June 30, 2018, the Company repatriated $522.0 million of foreign earnings to the U.S. For future undistributed earnings earned after December 31, 2017, the Company intends to indefinitely reinvest certain future undistributed foreign earnings from certain jurisdictions, and repatriate future earnings from other specific jurisdictions as part of its foreign cash management strategy around the world.

~~Income~~Excluding the impact of these items, income tax expense differs from the amount computed by applying the U.S. federal statutory income tax rate to income before income tax primarily due to the mix of taxable income by taxing jurisdiction, the impact of tax incentives and tax holidays in foreign locations, ~~and~~ state income taxes (net of federal benefit)~~. The decrease in income tax expense during 2017 is primarily the result of a tax incentive in China~~ and the ~~recognition of excess~~U.S. tax benefits in the U.S. attributable to the adoption of an accounting standard effective January 1, 2017. See Note 1. Under this standard, the excess tax benefits or deficiencies resulting from the exercise or vesting of awards are included in income tax expense in the reporting period in which they occur. Therefore, the tax effect of stock option exercises and RSU vesting is not spread over the entire year through the use of the annual effective tax rate, but instead is recorded entirely in the period in which the tax deduction arose. Accordingly, the Company recorded the income tax benefit as a discrete item for the six months ended June 30, 2017. The Company’s effective tax rate could fluctuate significantly on a quarterly basis due to the tax effects of stock-based compensation.

The Company considers earnings from foreign subsidiaries to be indefinitely reinvested and, accordingly, no provision for U.S. federal and state income taxes has been made for these earnings. Upon distribution of foreign subsidiary earnings in the form of dividends or otherwise, such distributed earnings would be subject to U.S. income taxes and foreign withholding taxes, reduced by any applicable foreign tax credits. Determination of the amount of any unrecognized deferred tax liability on these undistributed earnings is not practicable.under GILTI.

The Company has been granted certain tax incentives, including tax holidays, for its subsidiaries in China, Malaysia and Thailand that will expire at various dates, unless extended or otherwise renegotiated, through 2018 in China, 2021 in Malaysia and 2028 in Thailand, and are subject to certain conditions with which the Company expects to comply. The net impact of these tax incentives was to lower income tax expense for the six months ended June 30, ~~2017~~2018 and ~~2016~~2017 by approximately ~~$4.2~~$6.6 million (approximately ~~0.08~~$0.14 per diluted share) and ~~$2.0~~$4.2 million (approximately ~~$0.04~~$0.08 per diluted share), respectively, as follows:

	Six Months Ended				Six Months Ended
	June 30,				June 30,
(in thousands)		2017		2016		2018		2017
China	$	471	$	-	$	969	$	471
Malaysia		1,773		707		2,551		1,773
Thailand		1,926		1,337		3,070		1,926
	$	4,170	$	2,044	$	6,590	$	4,170

potential interest on unrecognized tax benefits included in the reserve as of June 30, ~~2017,~~2018, was ~~$17.0~~$47.0 thousand. There was no reserve for potential penalties. During the ~~three~~six months ended June 30, ~~2017, we recorded an additional $0.9~~2018, the Company released $0.5 million of ~~additional accruals~~uncertain tax benefits from a U.S. Internal Revenue Service (IRS) audit related to the ~~open~~Secure Communication Systems, Inc. acquisition. During the first quarter of 2018, the IRS indicated that this examination of years 2013 to 2015 was closed. In addition, the IRS also notified the Company that the examination of the Company’s consolidated U.S. income tax return filings for ~~a subsidiary in Thailand for the years 2004 to 2005. We received a denial of our appeal to the local~~2014 was also closed with no additional tax ~~authorities for this open examination and have recorded an accrual for the remaining unrecognized tax benefit related to this examination.~~costs.

The Company and its subsidiaries in Brazil, China, Ireland, Luxembourg, Malaysia, Mexico, the Netherlands, Romania, Singapore, Thailand and the United States remain open to examination by the various local taxing authorities, in total or in part, for fiscal years 2011 to ~~2016.~~

~~The Company is currently under examination by the U.S. Internal Revenue Service for 2014. In addition, Secure Communication Systems, Inc. and its subsidiaries (the Secure Group), companies that~~2017. Currently, the Company acquired on November 11, 2015, are under a U.S. income tax audit for calendar years 2013, 2014 and through November 11, 2015. This audit is for the period of time prior to the acquisition of the Secure Group by the Company, and any resulting tax liabilities are the responsibility of the seller. The Company

does not ~~expect to incur~~have any ~~income~~ongoing tax ~~costs with respect to this audit.~~examinations by any jurisdiction. During the course of such tax examinations, disputes may occur as to matters of fact or law. Also, in most tax jurisdictions, the passage of time without examination will result in the expiration of applicable statutes of limitations thereby precluding examination of the tax period(s) for which such statute of limitation has expired. The Company believes that it has adequately provided for its tax liabilities.

Note 912 – Segment and Geographic Information

The Company currently has manufacturing facilities in the Americas, Asia and Europe to serve its customers. The Company is operated and managed geographically, and management evaluates performance and allocates the Company’s resources on a geographic basis. Intersegment sales are generally recorded at prices that approximate arm’s length transactions. Operating segments’ measure of profitability is based on income from operations. The accounting policies for the reportable operating segments are the same as for the Company taken as a whole. The Company has three reportable operating segments: Americas, Asia and Europe. Information about operating segments is as follows:

		Three Months Ended				Six Months Ended					Three Months Ended				Six Months Ended
		June 30,				June 30,					June 30,				June 30,
(in thousands)	(in thousands)		2017		2016		2017		2016	(in thousands)		2018		2017		2018		2017
													(as adjusted)				(as adjusted)
Net sales:	Net sales:									Net sales:
	Americas	$	405,602	$	395,354	$	780,161	$	748,168	Americas	$	434,278	$	405,434	$	813,063	$	766,754
	Asia		191,207		162,825		366,098		336,195	Asia		197,628		194,480		392,750		373,784
	Europe		43,408		40,505		83,824		82,520	Europe		46,355		43,010		97,151		83,654
	Elimination of intersegment sales		(23,313)		(19,342)		(46,678)		(38,316)	Elimination of intersegment sales		(17,670)		(23,313)		(34,237)		(46,678)
		$	616,904	$	579,342	$	1,183,405	$	1,128,567		$	660,591	$	619,611	$	1,268,727	$	1,177,514

Depreciation and amortization:	Depreciation and amortization:									Depreciation and amortization:
	Americas	$	5,415	$	5,842	$	10,920	$	11,608	Americas	$	5,816	$	5,415	$	11,425	$	10,920
	Asia		2,973		4,129		6,139		8,249	Asia		2,871		2,973		5,693		6,139
	Europe		679		692		1,336		1,396	Europe		900		679		1,784		1,336
	Corporate		2,977		3,330		5,922		6,647	Corporate		3,112		2,977		6,181		5,922
		$	12,044	$	13,993	$	24,317	$	27,900		$	12,699	$	12,044	$	25,083	$	24,317

Income from operations:	Income from operations:									Income from operations:
	Americas	$	18,611	$	21,434	$	33,807	$	39,479	Americas	$	15,522	$	19,157	$	32,259	$	31,777
	Asia		20,044		11,665		32,365		22,557	Asia		16,829		20,457		34,478		33,837
	Europe		2,571		2,536		4,952		5,488	Europe		2,200		2,509		5,195		4,879
	Corporate and intersegment eliminations		(18,999)		(17,895)		(36,480)		(33,516)	Corporate and intersegment eliminations		(20,202)		(18,999)		(39,616)		(36,480)
		$	22,227	$	17,740	$	34,644	$	34,008		$	14,349	$	23,124	$	32,316	$	34,013
Other income (expense):										Other income (expense):
										Interest expense		(2,293)		(2,312)		(4,721)		(4,537)
										Interest income		1,645		1,213		3,578		2,287
										Other expense		(355)		(830)		(312)		(911)
										Income before income taxes	$	13,346	$	21,195	$	30,861	$	30,852

Capital expenditures:	Capital expenditures:									Capital expenditures:
	Americas	$	5,770	$	5,387	$	9,036	$	9,596	Americas	$	12,545	$	5,770	$	25,394	$	9,036
	Asia		8,714		1,464		11,124		4,573	Asia		2,937		8,714		8,650		11,124
	Europe		2,466		491		3,380		672	Europe		630		2,466		1,652		3,380
	Corporate		1,851		1,024		2,839		1,362	Corporate		1,374		1,851		2,667		2,839
		$	18,801	$	8,366	$	26,379	$	16,203		$	17,486	$	18,801	$	38,363	$	26,379

						June 30,		December 31,
							2017		2016
Total assets:
	Americas					$	910,825	$	864,388
	Asia						678,513		634,838
	Europe						407,716		393,443
	Corporate and other						67,386		105,999
						$	2,064,440	$	1,998,668

			June 30,	December 31,
(in thousands)			2018		2017
				(as adjusted)
Total assets:
	Americas	$	845,315	$	812,187
	Asia		537,064		674,783
	Europe		147,875		470,786
	Corporate and other		506,931		151,548
		$	2,037,185	$	2,109,304

Geographic net sales information reflects the destination of the product shipped. Long-lived assets information is based upon the physical location of the asset.

		Three Months Ended				Six Months Ended					Three Months Ended				Six Months Ended
		June 30,				June 30,					June 30,				June 30,
(in thousands)	(in thousands)		2017		2016		2017		2016	(in thousands)		2018		2017		2018		2017
													(as adjusted)				(as adjusted)
Geographic net sales:	Geographic net sales:									Geographic net sales:
										United States	$	449,598	$	415,383	$	841,565	$	784,100
	United States	$	413,568	$	412,203	$	787,967	$	797,191	Singapore		67,214		64,939		127,134		119,015
	Asia		115,782		82,257		210,857		153,719	Other Asia		48,700		51,351		95,771		90,907
	Europe		71,385		57,583		147,462		122,527	Europe		73,040		71,698		153,581		146,620
	Other Foreign		16,169		27,299		37,119		55,130	Other Foreign		22,039		16,240		50,676		36,872
		$	616,904	$	579,342	$	1,183,405	$	1,128,567		$	660,591	$	619,611	$	1,268,727	$	1,177,514

							June 30,		December 31,						June 30,			December 31,
							2017		2016							2018		2017
Long-lived assets:	Long-lived assets:									Long-lived assets:
	United States					$	164,691	$	167,367	United States					$	182,125	$	167,858
	Asia						72,641		67,998	Asia						79,040		77,750
	Europe						10,750		8,415	Europe						10,580		11,042
	Other						22,218		24,290	Other						26,154		25,830
						$	270,300	$	268,070						$	297,899	$	282,480

Note 1013 – Supplemental Cash Flow and Non-Cash Information
The following information concerns supplemental disclosures of cash payments.

Three Months Ended

Six Months Ended

June 30,

June 30,
(in thousands)

~~2017~~
~~2016~~2018

2017

~~2016~~2018
2017
Income taxes paid, net
$
22,336
$
1,709

$
~~2,703~~23,752

$
2,525
Interest paid

$2,062
~~4,820~~
~~Interest paid~~

2,082

~~2,113~~4,318

4,296
~~4,182~~

Non-cash investing activity:

Additions to property, plant and equipment

in accounts payable

$
~~2,074~~5,960

$
~~1,291~~2,074

Note 1114 – Contingencies
The Company is involved in various legal actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the Company’s consolidated financial position or results of operations.
The Company previously reported charges incurred in 2014 for the write-down of inventory and provisions to accounts receivable associated with the October 2014 bankruptcy filing of GT Advanced Technologies (GTAT). The Company noted then that its actual loss could differ from the amounts originally recorded. In October 2016, the Company learned that the trustee in the GTAT bankruptcy proceedings filed adversary actions against three of the Company’s subsidiaries to recover payments aggregating approximately $4.4 million, which were received by the subsidiaries during the 90 days preceding GTAT’s bankruptcy filing,
16
on the premise that such payments were made during the preference period and therefore may be avoidable as preferential or constructively fraudulent, among other theories. The Company has agreed to resolve the matter for an immaterial amount.
~~Note 12 – Impact of Recently Enacted Accounting Standards~~
In May 2017, the Financial Accounting Standards Board (FASB) issued a new accounting standards update that provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. This update is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2017, with early adoption permitted. The Company is evaluating the impact of the adoption of this guidance on its consolidated financial statements and related disclosures but does not expect it to have a material impact. The Company plans to adopt the new guidance effective January 1, 2018.
In August 2016, the FASB issued a new accounting standards update, which seeks to reduce the existing diversity in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. This update is effective for fiscal years and interim periods beginning after December 15, 2017, with early adoption permitted. The Company is currently evaluating the impact that the adoption of this update will have on its consolidated financial statements.
In June 2016, the FASB issued a new accounting standards update, which replaces the current incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. This update is effective for annual reporting periods beginning after December 15, 2019. The Company does not expect the implementation of this update to have a material impact on its consolidated financial position, results of operations or cash flows.
In February 2016, the FASB issued a new accounting standards update changing the accounting for leases and including a requirement to record all leases on the consolidated balance sheets as assets and liabilities. This update is effective for fiscal years beginning after December 15, 2018. The Company will adopt this update effective January 1, 2019, which will impact its consolidated balance sheet. The Company is currently evaluating the impact this standard will have on its consolidated financial statements.
In May 2014, the FASB issued a new standard that will supersede most of the existing revenue recognition requirements in current U.S. GAAP. The new standard will require companies to recognize revenue in an amount reflecting the consideration to which they expect to be entitled in exchange for transferring goods or services to a customer. It will also require significantly expanded disclosures, and will be effective for the Company January 1, 2018. The new standard will permit the use of either the retrospective or cumulative effect transition method. Under the new standard, the Company anticipates that a majority of its sales from manufacturing activities will change to an over-time model; currently the Company accounts for these under a point-in-time recognition model. Based on its analysis to date, the Company expects to adopt the new guidance under the retrospective approach. The Company has reviewed its significant customer contracts and is in the process of quantifying the potential effects the new standard will have on its consolidated financial statements and is working on the design and implementation of the related internal controls. The Company believes it is likely to have a material impact on the timing of revenue recognition and on the Company’s balance sheet, primarily related to a reduction in finished goods and work in process inventories and a corresponding increase in contract assets for unbilled receivables.
The Company has determined that no other recently issued accounting standards will have a material impact on its consolidated financial position, results of operations or cash flows, or will not apply to its operations.
17

Note 1315 – Restructuring Charges
The Company has undertaken initiatives to restructure its business operations to improve utilization and realize cost savings. These initiatives have included changing the number and location of production facilities, largely to align capacity and infrastructure with current and anticipated customer demand. This alignment includes transferring programs from higher cost geographies to lower cost geographies. The process of restructuring entails moving production between facilities, reducing staff levels, realigning our business processes, reorganizing our management and other activities.

The Company recognized restructuring charges during 2018 and 2017 ~~and 2016~~ primarily related to ~~the closure of facilities~~facility transition and closures in the Americas, capacity reduction and reductions in workforce in certain facilities across various regions.
The following table summarizes the ~~2017~~2018 activity in the accrued restructuring balances related to the restructuring activities initiated prior to June 30, ~~2017:~~2018:

Balance as of

Foreign

Balance as of

Balance as of

Foreign

Balance as of

December 31,

Restructuring

Cash

Exchange

June 30,

December 31,

Restructuring

Cash

Non-Cash

Exchange

June 30,
(in thousands)
(in thousands)

2016

Charges

Payment

Adjustments

2017
(in thousands)

2017

Charges

Payment

Activity

Adjustments

2018
2018 Restructuring:
2018 Restructuring:

Severance

$
—

$
974

$
(974)
$
—

$
—

$
—

Other exit costs

—

691

(385)

—

—

306

—

1,665

(1,359)

—

—

306
2017 Restructuring:
2017 Restructuring:

2017 Restructuring:

Severance

$
-

$
655

$
(642)

$
-

$
13

Leased facilities and equipment

-

105

(105)

-

-
Severance

47

3

(50)

—

—

—

Other exit costs

-

241

(23)

-

218
Leased facilities and equipment

—

96

(96)

—

—

—

-

1,001

(770)

-

231
Other exit costs

198

270

(309)

—

(23)

136

245

369

(455)

—

(23)

136
2016 Restructuring:
2016 Restructuring:

2016 Restructuring:

Severance

738

40

(439)

-

339
Severance

29

(1)

(3)

—

—

25

Other exit costs

545

854

(1,333)

2

68
Other exit costs

16

208

(128)

(96)

—

—

1,283

894

(1,772)

2

407

45

207

(131)

(96)

—

25

Total
Total

$
1,283

$
1,895

$
(2,542)

$
2

$
638
Total

$
290

$
2,241

$
(1,945)
$
(96)

$
(23)

$
467
23

Note 1416 – Fair Value
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. A three-tier fair value hierarchy of inputs is employed to determine fair value measurements.
·         Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets and liabilities.
·         Level 2 inputs are observable prices that are not quoted on active exchanges, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.
·         Level 3 inputs are unobservable inputs employed for measuring the fair value of assets or liabilities.
This hierarchy requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value.

The Company’s financial instruments include cash equivalents, accounts and other receivables, accounts payable, accrued liabilities and long-term debt and capital lease obligations. The Company believes that the carrying values of these instruments approximate fair value. As of June 30, ~~2017,~~2018, the Company’s long-term investments and derivative instruments were recorded at fair value using Level 3 inputs. The Company uses
18
derivative instruments to manage the variability of foreign currency obligations and interest rates. The Company does not enter into derivatives for speculative purposes.

The forward currency exchange contracts in place as of June 30, ~~2017~~2018 have not been designated as accounting hedges and, therefore, changes in fair value are recorded within the Condensed Consolidated Statements of Income.

The Company has an interest rate swap agreement, which had a notional amount of ~~$159.6~~$148.8 million and ~~$163.9~~$155.3 million as of June 30, ~~2017~~2018 and December 31, ~~2016,~~2017, respectively, to hedge a portion of its interest rate exposure on outstanding borrowings under the Credit Agreement. Under this interest rate swap agreement, the Company receives variable rate interest payments based on the one-month LIBOR rate and pays fixed rate interest payments. The fixed interest rate for the contract is 1.4935%. The effect of this swap is to convert a portion of the floating rate interest expense to fixed interest rate expense. Based on the terms of the interest rate swap contract and the underlying borrowings outstanding under the Credit Agreement, the interest rate contract was determined to be effective, and thus qualifies and has been designated as a cash flow hedge. As such, changes in the fair value of the interest rate swap are recorded in other comprehensive income on the accompanying Condensed Consolidated Balance Sheets until earnings are affected by the variability of cash flows. The fair value of the interest rate swap was a ~~$0.7~~$3.4 million asset as of June 30, ~~2017~~2018 and a ~~$0.5~~$2.0 million asset as of December 31, ~~2016.~~2017. During the six months ended June 30, ~~2017,~~2018, the Company recorded unrealized gain of ~~$0.3~~$1.4 million ($~~0.2~~1.1 million net of tax) on the swap in other comprehensive income. See Note ~~15.~~17.
24
Note 1517 – Accumulated Other Comprehensive Loss
The changes in accumulated other comprehensive loss by component were as follows:

Foreign

Unrealized

Foreign

Unrealized

currency

Derivative

gain (loss) on

currency

Derivative

loss on

translation

instruments,

investments,

translation

instruments,

investments,

(in thousands)
(in thousands)

adjustments

net of tax

net of tax

Other

Total
(in thousands)

adjustments

net of tax

net of tax

Other

Total
Balances, December 31, 2016

$
(14,544)

$
286

$
(74)

$
156

$
(14,176)
Balances, December 31, 2017
Balances, December 31, 2017

$
(9,567)

$
1,478

$
(41)

$
(19)

$
(8,149)

Other comprehensive gain (loss)

Other comprehensive gain before reclassifications

3,121

165

16

(13)

3,289
    before reclassifications

(1,320)

1,077

41

—

(202)
Net current period other comprehensive gain (loss)
Net current period other comprehensive gain (loss)

3,121

165

16

(13)

3,289
Net current period other comprehensive gain (loss)

(1,320)

1,077

41

—

(202)
Balances, June 30, 2017

$
(11,423)

$
451

$
(58)

$
143

$
(10,887)
Balances, June 30, 2018
Balances, June 30, 2018

$
(10,887)

$
2,555

$
—

$
(19)

$
(8,351)

See Note 1416 for further explanation of the change in derivative instruments that is recorded to Accumulated Other Comprehensive ~~Loss~~Loss.
Note 18 – .Shareholders’ Equity
Dividends
The Company began declaring and paying quarterly dividends during the first quarter of 2018. For the six months ended June 30, 2018, cash dividends paid totaled $7.1 million. On June 8, 2018, the Company declared a quarterly cash dividend of $0.15 per share of the Company’s common stock to shareholders of record as of June 29, 2018. The dividend of $7.1 million was paid on July 12, 2018. The Board of Directors currently intends to continue paying quarterly dividends. However, the Company’s future dividend policy is subject to the Company’s compliance with applicable law, and depending on, among other things, the Company’s results of operations, financial condition, level of indebtedness, capital requirements, contractual restrictions, restrictions in the Company’s debt agreements, and other factors that the Board of Directors may deem relevant. Dividend payments are not mandatory or guaranteed; there can be no assurance that the Company will continue to pay a dividend in the future.
Share Repurchase Authorization
On March 6, 2018, the Board of Directors approved an expanded stock repurchase authorization granting the Company authority to repurchase up to $250 million in common stock in addition to the $100.0 million approved on December 7, 2015. As of June 30, 2018, the Company had $237.6 million remaining under the stock repurchase authorization.
During the first quarter of 2018, the Company entered into an accelerated stock repurchase agreement (ASR) with a third party to repurchase an aggregate of $50.0 million of the Company’s common stock and received an initial delivery of 1.3 million shares of common stock. On July 18, 2018, the Company completed the ASR program and received delivery of the remaining shares totaling 0.4 million shares.
19

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This quarterly report (this Report) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended ~~(the Exchange~~(Exchange Act). These forward-looking statements are identified as any statement that does not relate strictly to historical or current facts and may include words such as “anticipate,” “believe,” “intend,” “plan,” “projection,” “forecast,” “strategy,” “position,” “continue,” “estimate,” “expect,” “may,” “will,” or the negative or other variations thereof. In particular, statements, ~~whether~~ express or implied, concerning future operating results or the ability to generate sales, income or cash flow are ~~forward-looking~~forward-
25
looking statements. Undue reliance should not be placed on any forward-looking statements. Forward-looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions that are beyond our ability to control or predict, including those discussed in Part I, Item 1A of the ~~2016~~2017 10-K and any added under Part II, Item 1A of this Report. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual outcomes, including the future results of our operations, may vary materially from those indicated. The following discussion should be read in conjunction with the Condensed Consolidated Financial Statements and accompanying notes, and the ~~2016~~2017 10-K.

OVERVIEW
We are a worldwide provider of engineering services, integrated ~~electronics~~technology solutions and manufacturing services ~~(EMS), engineering and design services,~~(both EMS and precision technology manufacturing machining ~~services.~~ services) for more complex products. In this Report, references to Benchmark, the Company or use of the words “we”, “our” and “us” include Benchmark’s subsidiaries unless otherwise noted.
We provide our services to ~~original~~OEMs of industrial equipment, ~~manufacturers (OEMs)~~products used in the ~~following industries: industrial controls, aerospace and defense (A&D), telecommunications,~~A&D industries, telecommunication equipment, computers and related products for business enterprises, medical devices, and test and ~~instrumentation.~~instrumentation products. Our services include comprehensive and integrated design and manufacturing services and solutions—from initial product concept to volume production, including direct order fulfillment and aftermarket services. ~~In this Report, references to Benchmark or the Company or use of the words “we”, “our” and “us” include the subsidiaries of Benchmark unless otherwise noted.~~

Our primary goal is to drive revenue growth at the right balance of mix and profitability as we continue transitioning our portfolio to the higher-value markets of A&D, Industrials, Medical and Test & Instrumentation. These higher-value markets offer greater outsourcing opportunities, longer lifecycle products and extended manufacturing contracts with customers who have greater outsourcing needs and require higher value-added and engineering-led solutions than customers in our traditional markets. We remain focusedcustomer engagement focuses on key initiatives critical to our success, including the optimization of our global network; the implementation of our market-sector sales organization; and the expansion of our engineering solutions capabilities.
~~Our operations comprise~~ three principal areas:
·• ~~Manufacturing and assembly operations~~Engineering Services, which ~~includes~~include design for manufacturability, manufacturing process and test development, concurrent and sustaining engineering, turnkey product design and regulatory services. Our engineering services may be for systems, sub-systems, printed circuit boards and assemblies, and components. We provide these services across all the industries we serve, but focus primarily in regulated industries such as medical, complex industrials, aerospace and defense, and next generation telecommunications.
• Technology Solutions, which involve developing a library of building blocks or reference designs primarily in defense solutions, surveillance systems, radio frequency and high-speed design, and front-end Internet-of-things data collection systems. We often merge these technology solutions with engineering services in support of manufacturing services. Our reference designs can be utilized across a variety of industries but we have significant capabilities for the aerospace and defense markets.
• Manufacturing Services, which include printed circuit board assemblies (PCBAs) and subsystem assembly, box build and systems integration. Systems integration is often building a finished assembly that includes PCBAs, complex subsystem assemblies, mechatronics, displays, optics, and other components. These final products may be configured to order and delivered directly to the ~~end customer~~end-customer across all the industries we serve.
·~~Precision~~ Manufacturing services also includes precision technology manufacturing~~, which complements our electronic manufacturing expertise by providing further vertical integration~~ comprised of ~~critical mechanical components. These capabilities include~~ precision machining, advanced metal joining, assembly and functional testing primarily for customers in the test & instrumentation market (which includes semiconductor capital equipment) as well as the medical and aerospace and defense markets.
·~~Specialized engineering services and solutions~~~~, which includes new product concept development, design for systems, sub-systems, and components, printed circuit board layout, prototyping,~~
20
automation and test development. We provide these services across all the industries we serve, but lead with engineering to manufacturing solutions primarily in regulated industries such as medical, complex industrials, aerospace and defense.

Our core strength lies in our ability to provide concept-to-production solutions in support of our customers. Our global manufacturing presence increases our ability to respond to our customers’ needs by providing accelerated time-to-market and time-to-volume production of high-quality products – especially for complex products with lower volume and higher mix in regulated markets. These capabilities enable us to build strong strategic relationships with our customers and to become an integral part of their ~~operations.~~business.
26
We believe our primary competitive advantages are our engineering services (including product design), technology solutions, and manufacturing services (including electronics and precision technology capabilities) provided by highly skilled personnel. We continue to invest in our business to expand our skills and service offerings from direct customer inputs. We have a closed-loop feedback system in place to respond to customer ideas to enhance our future flexible design and manufacturing solutions in support of the full life cycle of their products. These solutions provide accelerated time-to-market, faster time-to-volume production, and reduced product development costs. Working closely with our customers and responding promptly to their needs, we become an integral part of their process to bring products to market faster and more economically.
In addition, we believe that a strong focus on human capital through the talent we hire and retain is critical to maintaining our competitiveness. We are driving a customer-centric organization with a high degree of accountability and ownership to develop processes necessary to exceed customer expectations and deliver financial performance aligned to our goals. Through our employee feedback process, we solicit and act upon information to improve our company and better support our customers and business processes in the future. We have taken steps to attract the best leaders and are accelerating our efforts to mentor and develop key leaders for the future.

Our customers often face challenges in designing supply chains, planning demand, procuring materials and managing their inventories efficiently due to fluctuations in their customer demand, product design changes, short product life cycles and component price fluctuations.
We ~~seek to~~ employ enterprise resource planning (ERP) systems and lean manufacturing principles to manage the procurement and manufacturing processes in an efficient and cost-effective manner so that, where possible, components arrive on a just-in-time, as-and-when-needed basis. WeBecause we are a significant purchaser of electronic components and other raw materials, ~~and can~~we are able to capitalize on the economies of scale associated with our relationships with suppliers to negotiate price discounts, obtain components and other raw materials that are in short supply, and return excess components. Our agility and expertise in supply chain management and our relationships with suppliers across the supply chain ~~help~~ enable us to help reduce our customers’ cost of goods sold and inventory exposure.

We recognize revenue from the sale of manufactured products built to customer ~~specifications~~specifications. We also generate revenue from design, development and ~~excess inventory when title and risk of ownership have passed, the price~~engineering services, in addition to the ~~buyer~~sale of excess inventory.
Revenue is ~~fixed or determinable and recoverability is reasonably assured, which~~measured based on a consideration specified in a contract with a customer. We recognize revenue when we have satisfied a performance obligation by transferring control over a manufactured product to a customer. Our contracts with customers are short-term in nature. Customers are generally isbilled when the ~~goods~~product is shipped or as services are ~~shipped.~~performed. Under the majority of our manufacturing contracts with customers, the customer controls all of the work-in-progress as products are being built. Revenues under these contracts are recognized progressively based on the cost-to-cost method. For other manufacturing contracts, the customer does not take control of the product until it is completed. Under these contracts, we recognize revenue upon transfer of control of product to the customer. Revenue from design, development and engineering services is recognized ~~when~~over time as the services are ~~performed and collectibility is reasonably certain. Such services provided under fixed price contracts are generally accounted for using the percentage-of-completion method.~~performed. We ~~generally~~ assume no significant obligations after shipment as we typically warrant workmanship ~~only; accordingly, our~~only. Therefore, the warranty provisions are generally not significant.
27

~~2017~~Second Quarter 2018 Highlights
Sales for the three months ended June 30, ~~2017~~2018 increased 6%7% to ~~$616.9~~$660.6 million compared to ~~$579.3~~$619.6 million ~~for 2016.~~during the comparable 2017 period. During the second quarter of ~~2017,~~2018, sales to customers in our various industry sectors fluctuated from the comparable ~~2016~~2017 period as follows:

·~~Industrials decreased by 14%,~~
·         ~~A&D increased by 16%,~~
·~~Computing increased by 29%,~~
·~~Medical~~Industrials decreased by 6%,
·         ~~Telecommunications decreased~~A&D increased by 2%,
·Medical increased by 12%, ~~and~~
·         Test & Instrumentation increased by ~~47%.~~19%,
·Computing increased by 13%, and
·Telecommunications was consistent with prior year.

The overall revenue increase was driven primarily by ~~strong~~demand increases in the Computing sector for legacy storage and data security customers, Test & Instrumentation growth in our precision manufacturing machining operations serving the semi-capital equipment market ~~A&D~~and Medical growth ~~primarily~~ from ~~defense programs,~~higher demand and ~~Computing strength~~program ramps from ~~existing storage customers~~new and ~~new security~~existing customers.

Our sales depend on the success of our customers, some of which operate in businesses associated with rapid technological change and consequent product obsolescence. Developments adverse to our major customers or their products, or the failure of a major customer to pay for components or services, can adversely affect us. A substantial percentage of our sales is made to a small number of customers, and the
21
loss of a major customer, if not replaced, would adversely affect us. Sales to our 10 largest customers represented 45% ~~and 43%~~ of our sales in both the six months ended June 30, ~~2017~~2018 and ~~2016~~2017~~, respectively.~~.
During the six months ended June 30, 2017, we incurred a $4.4 million charge for the write-down of inventory and a provision to accounts receivable associated with the insolvency of a customer. These charges increased cost of sales by $2.7 million and SG&A by $1.7 million.

We experience fluctuations in gross profit from period to period. Different programs contribute different gross profits depending on factors such as the ~~types~~type of services involved, location of production, size of the program, complexity of the product and level of material costs associated with the various products. Moreover, new programs can contribute relatively less to our gross profit in their early stages when manufacturing volumes are usually lower, resulting in inefficiencies and unabsorbed manufacturing overhead costs. In addition, a number of our new and higher-volume programs remain subject to competitive constraints that can exert downward pressure on our margins. During periods of low production volume, we generally have idle capacity and reduced gross profit.

We have undertaken initiatives to restructure our business operations with the intention of improving utilization and reducing costs. During the first six months of ~~2017,~~2018, we recognized ~~$1.9~~$2.2 million of restructuring charges, primarily related to the closure of facilities in the Americas and reductions in workforce in certain facilities ~~across various regions.~~primarily in the Americas. In addition, we incurred ~~$1.2~~$1.8 million in costs related to the ~~relocating~~transition of our corporate headquarters to Arizona.
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RESULTS OF OPERATIONS
The following table presents the percentage relationship that certain items in our Condensed Consolidated Statements of Income bear to sales for the periods indicated. The financial information and the discussion below should be read in conjunction with the Condensed Consolidated Financial Statements and Notes thereto in Part I, Item 1 of this Report.

Three Months Ended
Six Months Ended

Three Months Ended
Six Months Ended

June 30,
June 30,

June 30,
June 30,

2018

2017

2018

2017

2017

2016

2017

2016

(as adjusted)

(as adjusted)
Sales
Sales

100.0
%
100.0
%
100.0
%
100.0
%
Sales

100.0
%
100.0
%
100.0
%
100.0
%
Cost of sales
Cost of sales

90.5

90.9

90.9

90.9

Cost of sales

91.8

90.4

91.1

90.9

Gross profit

9.5

9.1

9.1

9.1

Gross profit

8.2

9.6

8.9

9.1

Selling, general and administrative expenses
Selling, general and administrative expenses

5.2

4.9

5.5

5.0

Selling, general and administrative expenses

5.4

5.2

5.6

5.5

Amortization of intangible assets
Amortization of intangible assets

0.4

0.5

0.4

0.5

Amortization of intangible assets

0.4

0.4

0.4

0.4

Restructuring charges and other costs
Restructuring charges and other costs

0.3

0.6

0.3

0.6

Restructuring charges and other costs

0.3

0.2

0.3

0.3

Income from operations

3.6

3.1

2.9

3.0

Income from operations

2.2

3.7

2.5

2.9

Other income (expense), net

(0.3)

0.3

(0.3)

(0.4)

Other expenses, net
Other expenses, net

(0.2)

(0.3)

(0.1)

(0.3)

Income before income taxes

3.3

2.7

2.7

2.6

Income before income taxes

2.0

3.4

2.4

2.6

Income tax expense
Income tax expense

0.5

0.5

0.4

0.5

Income tax expense

0.4

0.5

3.4

0.3

Net income

2.8
%
2.2
%
2.3
%
2.1
%
Net income (loss)

1.7
%
2.9
%
(1.0)
%
2.3
%

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Sales
Sales for the second quarter of ~~2017~~2018 were ~~$616.9~~$660.6 million, a 6%7% increase from sales of ~~$579.3~~$619.6 million for the same quarter in ~~2016~~2017. Sales for the first six months of ~~2017~~2018 were ~~$1.2~~$1.3 billion, ~~a 5%~~an 8% increase from sales of ~~$1.1~~$1.2 billion for the same period in ~~2016~~2017. The following table sets forth, for the periods indicated, the percentages of our sales by industry sector.

Three Months Ended
Six Months Ended

Three Months Ended
Six Months Ended

June 30,
June 30,

June 30,
June 30,

2017

2016

2017

2016

2018

2017

2018

2017

Higher-Value Markets

Higher-Value Markets

(as adjusted)

(as adjusted)
Industrials
Industrials

20
%
25
%
20
%
25
%
Industrials

18
%
20
%
19
%
20
%
A&D
A&D

16

15

17

16

A&D

15

16

16

17

Medical
Medical

14

16

15

15

Medical

15

14

15

15

Test & Instrumentation
Test & Instrumentation

15

10

14

10

Test & Instrumentation

16

15

16

14

65

66

66

66

64

65

66

66

Traditional Markets

Traditional Markets

Computing
Computing

23

19

21

18

Computing

24

23

21

21

Telecommunications
Telecommunications

12

15

13

16

Telecommunications

12

12

13

13

35

34

34

34

36

35

34

34

Total

100
%
100
%
100
%
100
%
Total

100
%
100
%
100
%
100
%

Industrials. Second quarter sales decreased ~~14%~~6% to ~~$123.9~~$117.8 million from ~~$144.6~~$124.8 million in ~~2016, and decreased 14% to $242.1 million~~2017 primarily as a result of weaker demand from existing customers. Sales during the first six months of ~~2017 from $282.6~~2018 were $242.3 million compared to $241.9 million in the same period of ~~2016 primarily as a result of softness across several of our top customers.~~2017.
29

Aerospace and Defense. Second quarter sales increased ~~16%~~2% to ~~$100.2~~$102.5 million from ~~$86.0~~$100.1 million in ~~2016~~2017~~, and increased 15% to $204.1 million~~. Sales during the first six months of ~~2017 primarily due~~2018 were $200.4 million compared to ~~increased demand from our defense customers~~$200.0 million in the same period of 2017.

Medical. Second quarter sales ~~decreased 6%~~increased 12% to ~~$86.3~~$97.0 million from ~~$91.9~~$86.8 million in ~~2016,~~2017, and ~~decreased~~increased 13% to ~~$172.4~~$194.3 million during the first six months of ~~2017~~2018 from ~~$174.4~~$171.8 million in the same period of ~~2016~~2017 from higher demand and program ramps from new and existing ~~due to the insolvency of a customer as noted above and reduced demand from some of our other~~ customers.

Test & Instrumentation. Second quarter sales increased ~~47%~~19% to ~~$88.3~~$106.1 million from ~~$60.0~~$88.8 million in ~~2016~~2017 and increased ~~45%~~27% to ~~$164.5~~$208.3 million during the first six months of ~~2017~~2018 from ~~$113.4~~$164.5 million in the same period of ~~2016~~2017. The increase reflected strong ~~growth~~demand in our precision manufacturing machining operations serving the semi-capital equipment market.

Computing. Second quarter sales increased ~~29%~~13% to ~~$141.9~~$160.6 million from ~~$109.6~~$142.2 million in ~~2016~~2017, and increased ~~21%~~9% to ~~$242.8~~$264.2 million during the first six months of ~~2017~~2018 from ~~$201.1~~$242.5 million in the same period of ~~2016.~~2017. The increase is primarily due to increased ~~strength~~demand from our legacy storage ~~customers~~ and ~~new~~data security customers.

Telecommunications. Second quarter sales ~~decreased 12% to $76.3~~were $76.6 million ~~from $87.2~~and $76.9 million in ~~2016,~~2018 and ~~decreased 13%~~2017, respectively, and increased 2% to ~~$157.5~~$159.2 million during the first six months of ~~2017~~2018 from ~~$180.2~~$156.8 million in the same period of ~~2016.~~ 2017~~The decrease related primarily to a maturing and non-recurring program at a former top customer and reduced demand from some customers.~~.

Our international operations are subject to the risks of doing business abroad. See Part I, Item 1A of our
23
~~2016~~2017 10-K for factors pertaining to our international sales and fluctuations in the exchange rates of foreign currency and for further discussion of potential adverse effects in operating results associated with the risks of doing business abroad. During the first six months of both 2018 and 2017, ~~and 2016,~~ 46% ~~and 48%, respectively,~~ of our sales were from our international operations.

Gross Profit
Gross profit ~~increased 11%~~decreased 9% to ~~$58.6~~$54.3 million for the three months ended June 30, ~~2017~~2018 from ~~$52.9~~$59.5 million in the same quarter of ~~2016,~~2017, and increased 4%5% to ~~$107.6~~$112.6 million for the six months ended June 30, ~~2017~~2018 from ~~$103.2~~$107.0 million in the same period of ~~2016.~~2017. For the six months ended June 30, 2017, we incurred a $2.7 million net charge for the write-down of inventory associated with the insolvency of a customer. Including the inventory charge in the first quarter of 2017 and the partial ~~recovery~~recoveries in the second quarter of 2017 and the first and second quarters of 2018, gross profit as a percentage of sales was ~~9.5%~~8.2% and 8.9%, respectively, for the three and six months ended June 30, 2018 and 9.6% and 9.1%, respectively, for the three and six months ended June 30, 2017. Excluding ~~this inventory charge,~~these items, gross profit as a percentage of sales ~~increased~~decreased to ~~9.4%~~8.2% and ~~9.3%~~8.8%, respectively, for the three and six months ended June 30, ~~2017~~2018 from ~~9.1%~~9.5% and ~~9.1%~~9.3%, respectively, in the same periods of ~~2016~~2017 primarily due to ~~higher~~lower-margin Computing sector sales, ~~benefits~~and the impacts from ~~our increased higher-value market revenue base, capacity alignment~~Medical transitions, investments in engineering and ~~operational excellence initiatives.~~solutions and new program ramp costs.

Selling, General and Administrative Expenses
SG&A increased by ~~13%~~11% to ~~$32.3~~$35.8 million in the second quarter of ~~2017~~2018 compared to ~~$28.5~~$32.3 million in ~~2016,~~2017, and increased by ~~14%~~10% to ~~$65.0~~$71.6 million in the first six months of ~~2017~~2018 compared to ~~$57.0~~$65.0 million in ~~2016. The increase was primarily a result~~2017. During the first quarter of ~~increased variable compensation , investments in our sales and marketing organization and~~2017, we had a $1.7 million charge for a provision to accounts receivable associated with the insolvency of a customer. Including this provision to accounts receivable, SG&A ~~as a percentage~~increased to 5.4% of sales ~~increased to 5.2%~~ for the second quarter of 2018 from 5.2% in 2017, ~~from 4.9% in 2016. SG&A, as a percentage~~and increased to 5.6% of sales ~~increased to 5.5%~~ for the first six months of ~~2017~~2018 from ~~5.0%~~5.5% in ~~2016.~~2017. Excluding this provision to accounts receivable, SG&A ~~as a percentage~~increased to 5.4% of sales ~~increased to 5.2%~~ for the second quarter of 2018 from 5.2% in 2017, ~~from 4.9% in 2016. SG&A, as a percentage~~and increased to 5.6% of sales ~~increased to 5.3%~~
30
for the first six months of ~~2017~~2018 from ~~5.0%~~5.4% in ~~2016~~2017, primarily due to increased stock-based and variable compensation and the investment in our sales and marketing ~~organization offset by savings from previous restructuring activities.~~
~~Amortization of Intangible Assets~~organization.
Amortization of intangible assets decreased to $5.0 million in 2017 from $5.8 million in 2016 due primarily to certain customer relationship intangible assets that became fully amortized as of December 31, 2016.

Restructuring Charges and Other Costs
During ~~2017,~~the first six months of 2018, we recognized ~~$3.1~~$2.2 million of restructuring charges, primarily related to facility transition and ~~other~~closures in the Americas and reductions in workforce in certain facilities primarily in the Americas. In addition, during the first six months of 2018 we incurred $1.8 million in costs related to the transition of our corporate headquarters to Arizona. We expect to incur additional restructuring charges of approximately $1.0 million to $1.5 million in the third quarter of 2018. In the first six months of 2017, we recognized $1.9 million of restructuring charges, primarily related to reductions in workforce in certain facilities across various regions, and ~~costs associated with the move of our corporate headquarters. We expect to incur an additional $1.5 to $2.0~~$1.2 million in the remaining quarters of 2017 on capacity alignment efforts in the Americas. In 2016, we recognized $6.4 million of restructuring charges and other costs, primarily related to the closure of certain facilities in the Americas and costs associated with a proxy contest relating to our 2016 annual meeting of shareholders.transition costs. See Note 1315 to the Condensed Consolidated Financial Statements in Part I, Item 1 of this Report.

Interest Income
Interest income increased to $3.6 million during the first six months of 2018 from $2.3 million induring the comparable 2017 ~~from $0.6 million in 2016~~period due to investment of higher levels of available cash in interest bearing cash equivalents at higher interest rates.
Income Tax Expense
Income tax expense of ~~$4.6~~$43.6 million represented an effective tax rate of ~~14.7%~~141.1% for ~~2017,~~the first six months of 2018, compared with ~~$6.1~~$4.2 million for ~~2016,~~the comparable 2017 period, which represented an effective tax rate of ~~20.4%~~13.7%. ~~The decrease~~During the first quarter of 2018, we changed our historical repatriation strategy. We have historically asserted our intention to indefinitely reinvest undistributed foreign earnings. We no longer consider these earnings to be indefinitely reinvested in ~~the effective rate~~
24
~~for 2017 is primarily~~our foreign subsidiaries. As a result of this change in assertion for undistributed earnings prior to December 31, 2017, we recorded a ~~$1.2~~$30.7 million ~~discrete~~ tax ~~benefit~~expense for ~~stock based compensation~~foreign withholding tax from Asia and $9.4 million for U.S. state income tax expense in ~~2017.~~the first quarter of 2018. In the second quarter of 2018 we recorded $0.4 million of additional U.S. tax for the distributions from our foreign subsidiaries. In addition, during 2018 we released $0.5 million of uncertain tax benefits from a U.S. Internal Revenue Service (IRS) audit related to the Secure Communication Systems, Inc. acquisition. During the first quarter of 2018, the IRS indicated that this examination of years 2013 to 2015 was closed. Excluding ~~this~~these tax ~~item,~~items, the effective tax rate in the first six months of 2018 would have been ~~18.5%~~14.1%.

We have been granted certain tax incentives, including tax holidays, for our subsidiaries in China, Malaysia and Thailand that will expire at various dates, unless extended or otherwise renegotiated, through 2018 in China, 2021 in Malaysia, and 2028 in Thailand. See Note 811 to the Condensed Consolidated Financial Statements in Item 1 of this ~~report.~~Report.

Net Income (Loss)
We reported a net ~~income~~loss of ~~$26.9~~$12.7 million, or $0.26 per diluted ~~earnings per~~ share, ~~of $0.54~~ for the first six months ~~2017,~~of 2018, compared with net income of ~~$23.7~~$26.6 million, or $0.53 per diluted ~~earnings per~~ share, ~~of $0.47~~ for ~~2016.~~the same period in 2017. The net ~~increase~~decrease of ~~$3.1~~$39.3 million from ~~2016~~2017 was ~~due~~primarily the result of the tax expense related to the ~~factors~~change in our historical repatriation strategy discussed above.

LIQUIDITY AND CAPITAL RESOURCES
We have historically financed our organic growth and operations through funds generated from ~~operations. In connection with the Secure Acquisition in 2015, we borrowed $230.0 million~~operations and occasional borrowings under ~~the Term Loan facility to finance the purchase price of the acquisition.~~our revolving credit facility. Cash and cash equivalents totaled ~~$749.3~~$595.6 million at June 30, ~~2017~~2018 and ~~$681.4~~$742.5 million at December 31, ~~2016,~~2017, of which ~~$92.0~~$177.2 million and ~~$55.2~~$673.4 million, was available in the U.S. at June 30, 2017 and December 31, 2016, respectively. Substantially all of the amounts held outside of the U.S. are intended to be permanently reinvested in foreign operations. Under current tax laws and regulations, if cash and cash equivalentsrespectively, were held outside the U.S. ~~were to be distributed~~in various foreign subsidiaries. During the six months ended June 30, 2018, we repatriated $522.0 million of foreign earnings to the U.S. ~~in the form of dividends or otherwise, we would be subject to additional U.S. income taxes and foreign withholding taxes, reduced by any applicable foreign tax credits.~~

31
Cash ~~provided by~~used in operating activities during the first six months was ~~$92.5~~$16.2 million for ~~2017~~2018 and consisted primarily of ~~$26.9~~$12.7 million of net ~~income~~loss adjusted for ~~$24.3~~$25.1 million of depreciation and amortization and $10.9 million in deferred income taxes, a ~~$49.4~~$9.0 million ~~decrease~~increase in accounts receivable, a ~~$34.2~~$52.1 million increase in inventories and a ~~$16.7 million~~$23.1 increase in accounts ~~payable over 2016.~~payable. The ~~decrease~~deferred income taxes are a result of the change in ~~accounts receivable was~~assertion related to undistributed foreign earnings. The increase in inventories is primarily ~~driven by~~related to raw materials in support of the ~~sale~~ramp of ~~$40.0 million of accounts receivable under an accounts receivable sales program implemented on March 29, 2017.~~new programs into production. Working capital was ~~$1.2~~$1.0 billion at June 30, ~~2017~~2018 and ~~$1.1~~$1.2 billion at December 31, ~~2016.~~2017.

We purchase components only after customer orders or forecasts are received, which mitigates, but does not eliminate, the risk of loss on inventories. Supplies of electronic components and other materials used in operations are subject to industry-wide ~~shortages.~~shortages, which may increase the timing of when we can begin the manufacturing processes. In certain instances, suppliers may allocate available quantities to us. If shortages of these components and other material supplies used in operations occur, vendors may not ship the quantities we need for production, and we may be forced to delay shipments, which can increase backorders and impact cash flows.

Cash used in investing activities during the first six months was ~~$26.0~~$40.6 million for ~~2017,~~2018, primarily due to purchases of additional property, plant and equipment totaling ~~$24.0~~$36.7 million. The purchases of property, plant and equipment were primarily for machinery and equipment in the Americas and Asia.

Cash used in financing activities during the first six months was ~~$0.9~~$89.5 million for ~~2017.~~2018. Share repurchases totaled ~~$2.0~~$65.9 million, equity forward contract payment totaled $10.0 million, net principal payments on long-term debt totaled ~~$6.2~~$9.1 million, dividends totaled $7.1 million, and we received ~~$8.1~~$3.4 million from the exercise of stock options.

~~Under the terms~~As of ~~our $430.0~~June 30, 2018, we had $198.4 million ~~Credit Agreement,~~ in ~~addition to~~borrowings outstanding under the Term Loan facility, $2.8 million in letters of credit outstanding under the Revolving Credit Facility and $197.2 million was available for future borrowing under the Revolving Credit Facility. See Note 7 to the Condensed Consolidated Financial Statements included in Part I, Item 1 of this Report for more information regarding the terms of the Credit Agreement.
On July 20, 2018, we ~~have~~entered into a ~~$200.0~~$650 million ~~five-year revolving~~ credit ~~facility~~agreement to be used for general corporate purposes that replaced the existing Credit Agreement. The New Credit Agreement is comprised of a five-year $500 million revolving credit facility and a five-year $150 million term loan facility, both with a maturity date of ~~November 12, 2020.~~ July 20, 2023. A portion of the New Term Loan Facility proceeds were used to (i) refinance all indebtedness and terminate all commitments under the Credit Agreement discussed above and (ii) pay the fees, costs and expenses associated with the foregoing and the negotiation, execution and delivery of the New Credit Agreement.
The New Credit Agreement includes an accordion feature pursuant to which ~~total~~one or more incremental term loan and/or increase commitments under the ~~facility~~New Revolving Credit Facility may be increased by an additional ~~$150.0~~$275 million, subject to the satisfaction of certain conditions.
The New Term Loan Facility is subject to quarterly amortization of principal (in equal installments) equal to 1.25% of the initial aggregate term loan advances to be payable quarterly commencing June 30, 2019 until the maturity of the New Term Loan Facility.
Interest on outstanding borrowings under the New Credit Agreement (other than swingline loans) accrues, at our option, at (a) the London Interbank Offered Rate (LIBOR) plus approximately 1.00% to 2.00% per annum as specified in the New Credit Agreement or (b) for U.S. Dollar denominated loans, the base rate
2532

(which is the highest of (i) the federal funds rate plus 0.50%, (ii) the Bank of America, N.A. prime rate and (iii) the one month LIBOR adjusted daily plus 1.00%) plus 0% to 1.0% as specified in the New Credit Agreement. Swingline loans will bear interest at the base rate plus 0% to 1.0% as specified in the New Credit Agreement.
The New Credit Agreement is generally secured by a pledge of (a) all the capital stock of our domestic subsidiaries and 65% of the capital stock of our directly owned foreign subsidiaries, (b) all of our and our subsidiaries present and future personal property and assets (including, but not limited to, accounts receivable, contract assets, inventory, intellectual property and fixed assets), in each case, subject to customary exceptions and limitations, and (c) all proceeds and products of the property and assets described in clauses (a) and (b) above.
The New Credit Agreement contains certain ~~conditions.~~ financial covenants as to interest coverage and debt leverage, and certain customary affirmative and negative covenants, including restrictions on our ability to incur additional debt and liens, pay dividends, repurchase shares, sell assets and merge or consolidate with other persons.
As of ~~June 30, 2017~~August 6, 2018, we had ~~$212.8~~$150 million in borrowings outstanding under the New Term Loan ~~facility~~Facility and ~~$2.6~~$2.8 million in letters of credit outstanding under the ~~revolving credit facility. $197.4~~New Revolving Credit Facility. $497.2 million remains available for future borrowings under the ~~revolving credit facility.~~New Revolving Credit Facility. See Note 57 to the Condensed Consolidated Financial Statements included in Item 1 of this Report for more information regarding the terms of the New Credit Agreement.
During the next 12 months, we believe our capital expenditures will approximate $50 to $60 million, principally for machinery and equipment as well as expansion investments to support our ongoing business around the globe.

Our operations, and the operations of businesses we acquire, are subject to certain foreign, federal, state and local regulatory requirements relating to environmental, waste management, health and safety matters. We believe we operate in substantial compliance with all applicable requirements and we seek to ensure that newly acquired businesses comply or will comply substantially with applicable requirements. To date, the costs of compliance and workplace and environmental remediation have not been material to us. However, material costs and liabilities may arise from these requirements or from new, modified or more stringent requirements in the future. In addition, our past, current and future operations, and the operations of businesses we have or may acquire, may give rise to claims of exposure by employees or the public, or to other claims or liabilities relating to environmental, waste management or health and safety concerns.

As of June 30, 2017, we had cash and cash equivalents totaling $749.3 million and had $197.4 million available for borrowings under the Credit Agreement. During the next 12 months, we believe our capital expenditures will approximate $50 to $55 million, principally for machinery and equipment as well as expansion investments to support our ongoing business around the globe.
~~In December 2015,~~On March 6, 2018, our Board of Directors approved an expanded stock repurchase program granting us the authority to repurchase of up to $250 million in common stock in addition to the $100.0 million ~~of our outstanding common shares.~~approved on December 7, 2015. As of June 30, ~~2017,~~2018, we had ~~$90.8~~$237.6 million remaining under the share repurchase ~~program~~authorization to purchase additional shares. We are under no commitment or obligation to repurchase any particular amount of common ~~shares.~~stock. Management believes that our existing cash balances and funds generated from operations will be sufficient to permit us to meet our liquidity requirements over the next 12 months. Management further believes that our ongoing cash flows from operations and any borrowings we may incur under our revolving credit facility will enable us to meet operating cash requirements in future years. If we consummated significant acquisitions in the future, our capital needs would increase and could possibly result in our need to increase available borrowings under our New Credit Agreement or access public or private debt and equity markets. There can be no assurance, however, that we would be successful in raising additional debt or equity on acceptable terms.
33

CONTRACTUAL OBLIGATIONS

We have certain contractual obligations for operating and capital leases that were summarized in a table of Contractual Obligations in our ~~2016~~2017 10-K. There have been no material changes to our contractual obligations, outside of the ordinary course of our business, since December 31, ~~2016.~~2017.

OFF-BALANCE SHEET ARRANGEMENTS

As of June 30, ~~2017,~~2018, we did not have any significant off-balance sheet arrangements. See Note 1416 to the Condensed Consolidated Financial Statements.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES AND RECENTLY ENACTED ACCOUNTING PRINCIPLES
Management’s discussion and analysis is based upon our condensed consolidated financial statements, which have been prepared in accordance with U.S. GAAP. Our significant accounting policies are summarized in Note 1 to the Consolidated Financial Statements included in our ~~2016~~2017 10-K. ~~See~~Also, see Note 122 to the Condensed Consolidated Financial Statements above for a discussion of recently enacted accounting principles.
26
Item 3 – Quantitative and Qualitative Disclosures About Market Risk

Our international sales comprise a significant portion of our net sales. We are exposed to risks associated with operating internationally, including:

•      Foreign currency exchange risk;
•      Import and export duties, taxes and regulatory changes;
•      Inflationary economies or currencies; and
•      Economic and political instability.

Additionally, some of our operations are in developing countries. Certain events, including natural disasters, can impact the infrastructure of a developing country more severely than they would impact the infrastructure of a developed country. A developing country can also take longer to recover from such events, which could lead to delays in our ability to resume full operations.

We transact business in various foreign countries and are subject to foreign currency fluctuation risks. We use natural hedging and forward contracts to economically hedge transactional exposure primarily associated with trade accounts receivable, other receivables and trade accounts payable that are denominated in a currency other than the functional currency of the respective operating entity. We do not use derivative financial instruments for speculative purposes. The forward contracts in place as of June 30, ~~2017~~2018 have not been designated as accounting hedges and, therefore, changes in fair value are recorded within our Consolidated Statements of Income.

Our sales are substantially denominated in U.S. dollars. Our foreign currency cash flows are generated in certain European and Asian countries and Mexico.

We are also exposed to market risk for changes in interest rates on our financial instruments, a portion of which relates to our invested cash balances. We do not use derivative financial instruments in our investing activities. We place cash and cash equivalents and investments with various major financial institutions. We protect our invested principal funds by limiting default risk, market risk and reinvestment risk. We
34
mitigate default risk by generally investing in investment-grade securities.

We are also exposed to interest rate risk on borrowings under our Credit Agreement. As of June 30, ~~2017~~2018, we had ~~$212.8~~$198.4 million outstanding on the floating rate Term Loan facility, and we have an interest rate swap agreement with a notional amount of ~~$159.6~~$148.8 million. Under this swap agreement, we receive variable rate interest payments and pay fixed rate interest payments. The effect of this swap is to convert a portion of our floating rate interest expense to fixed interest rate expense. The interest rate swap is designated as a cash flow hedge. For additional information, see Note 16 to the Condensed Consolidated Financial Statements in Item 1 of this Report.
27
Item 4 – Controls and Procedures
As of the end of the period covered by this Report, the Company’s management (with the participation of our Chief Executive Officer (CEO) and Chief Financial Officer (CFO)) conducted an evaluation pursuant to Rule 13a-15 under the Exchange Act, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based on this evaluation, the CEO and CFO concluded that as of the end of the period covered by this Report such disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by the Company in reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and include controls and procedures designed to ensure that information required to be disclosed by the Company in such reports is accumulated and communicated to our management, including the ~~Company’s~~ CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.

There has been no change in our internal control over financial reporting that occurred during the last fiscal quarter covered by this Report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Our management, including our CEO and CFO, does not expect that our disclosure controls and internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple errors or mistakes. Additionally, controls can be circumvented by individuals’ acts, by collusion of two or more people, or by management overriding the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, a control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
2835

PART II—OTHER INFORMATION

Item 1.          Legal Proceedings
We are involved in various legal actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on our consolidated financial position or results of operations.
In October 2016, we learned that the trustee in the GTAT bankruptcy proceedings filed adversary actions against three of subsidiaries in connection with the GTAT bankruptcy proceedings. Please see the description included above in Note 11 to the Notes to the Condensed Consolidated Financial Statements, which is incorporated by reference into this Item 1 of Part II.

Item 1A.        Risk Factors
There are no material changes to the risk factors set forth in Part I, Item 1A of our ~~2016~~2017 10-K.

Item 2.           Unregistered Sales of Equity Securities and Use of Proceeds
(c) The following table provides information for the quarter ended June 30, ~~2017~~2018 about the Company’s repurchases of its equity securities registered pursuant to Section 12 of the Exchange Act, at a total cost of ~~$1.0~~$7.5 million:
ISSUER PURCHASES OF EQUITY SECURITIES
ISSUER PURCHASES OF EQUITY SECURITIES
ISSUER PURCHASES OF EQUITY SECURITIES

(d) Maximum

(d) Maximum

(c) Total

Number (or

(c) Total

Number (or

Number of

Approximate

Number of

Approximate

Shares

Dollar Value)

Shares

Dollar Value)

(or Units)

of Shares

(or Units)

of Shares

Purchased as

(or Units) that

Purchased as

(or Units) that

(a) Total

Part of

May Yet Be

(a) Total

Part of

May Yet Be

Number of

Publicly

Purchased

Number of

Publicly

Purchased

Shares (or

(b) Average

Announced

Under the

Shares (or

(b) Average

Announced

Under the

Units)

Price Paid per Share

Plans or

Plans or

Units)

Price Paid per Share

Plans or

Plans or
Period
Period

Purchased⁽¹⁾

(or Unit)⁽²⁾

Programs

Programs⁽³⁾
Period

Purchased⁽¹⁾

(or Unit)⁽²⁾

Programs

Programs⁽³⁾
June 1 to 30, 2017

29,495

$33.88

29,495

$90.8 million
April 1 to 30, 2018
April 1 to 30, 2018

68,717

$29.60

68,717

$243.0 million
May 1 to 31, 2018
May 1 to 31, 2018

104,496

$27.15

104,496

$240.2 million
June 1 to 30, 2018
June 1 to 30, 2018

89,710

$29.10

89,710

$237.6 million
Total
Total

29,495

$33.88

29,495

Total

262,923

$28.46

262,923

⁽¹⁾ All ~~share~~stock repurchases were made on the open market.
⁽²⁾Average price paid per share is calculated on a settlement basis and excludes commission.
⁽³⁾~~In December 2015,~~On March 6, 2018, the Board of Directors approved an expanded stock repurchase authorization granting the Company authority to repurchase of up to ~~$100~~$250 million in common stock in addition to the $100.0 million approved on December 7, 2015. As of June 30, 2018, the ~~Company’s outstanding common shares. Share~~Company had $237.6 million remaining under the stock repurchase authorization. Stock purchases may be made in the open market, in privately negotiated transactions or block transactions, at the discretion of the Company’s management and as market conditions warrant. Purchases are funded from available cash and may be commenced, suspended or discontinued at any time without prior notice. Shares of stock repurchased under the program are retired.
During the first quarter of 2018, the Company entered into an accelerated stock repurchase agreement (ASR) with a third party to purchase shares of its common stock for a payment of $50.0 million and received an initial delivery of 1.3 million shares of common stock. See Note 18 to the Condensed Consolidated Financial Statements in Item 1 of this report. On July 18, 2018, the Company completed the ASR program and received delivery of the remaining shares totaling 0.4 million shares. The remaining shares received in connection with the ASR agreement will be reflected in the share repurchase table in the third quarter.
2936

Item 6.           Exhibits
Exhibit

Number
Description of Exhibit
~~3.1~~
Restated Certificate of Formation of the Company dated May 17, 2016 (incorporated by reference to Exhibit 3.1 to the Company's report on Form 8-K filed with the SEC on May 17, 2016) (the 8-K) (Commission file number 1-10560)
~~3.2~~
~~Amended and Restated Bylaws of the Company dated May 11, 2016 (incorporated by reference to Exhibit 3.2 to the 8-K)~~
~~4.1~~
Specimen form of certificate evidencing the Common Shares (incorporated by reference to Exhibit 4.1 to the Company's quarterly report on Form 10-Q filed with the SEC on November 7, 2014) (Commission file number 1-10560)
10.1*
~~Agreement between the Company and Jon King, dated as of May 15, 2017.~~
31.1*
~~Section 302 Certification of Chief Executive Officer~~
31.2*
~~Section 302 Certification of Chief Financial Officer~~
32.1*
~~Section 1350 Certification of Chief Executive Officer~~
32.2*
~~Section 1350 Certification of Chief Financial Officer~~
~~101.INS~~⁽¹⁾
~~XBRL Instance Document~~
~~101.SCH~~⁽¹⁾
~~XBRL Taxonomy Extension Schema Document~~
~~101.CAL~~⁽¹⁾
~~XBRL Taxonomy Extension Calculation Linkbase Document~~
~~101.LAB~~⁽¹⁾
~~XBRL Taxonomy Extension Label Linkbase Document~~
~~101.PRE~~⁽¹⁾
~~XBRL Taxonomy Extension Presentation Linkbase Document~~
~~101.DEF~~⁽¹⁾
~~XBRL Taxonomy Extension Definition Linkbase Document~~

3.1                      Restated Certificate of Formation dated May 17, 2016 (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K dated May 17, 2016) (the 8-K) (Commission file number 1-10560)
*   Filed herewith.
3.2                      Amended and Restated Bylaws of the Company dated May 11, 2016 (incorporated by reference to Exhibit 3.2 to the 8-K)
4.1                      Specimen form of certificate evidencing the Common Shares (incorporated by reference to Exhibit 4.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2014) (Commission file number 1-10560)
10.1                    Credit Agreement, dated July 20, 2018, by and among Benchmark Electronics, Inc., certain of its subsidiaries, the lenders party thereto and Bank of America, N.A., as Administrative Agent, Swingline Lender and a L/C Issuer (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K dated July 20, 2018 (Commission file number 1-10560))
31.1 ⁽¹⁾Section 302 Certification of Chief Executive Officer
31.2 ⁽¹⁾Section 302 Certification of Chief Financial Officer
32.1 ⁽¹⁾Section 1350 Certification of Chief Executive Officer
32.2 ⁽¹⁾Section 1350 Certification of Chief Financial Officer
101.INS ⁽²⁾XBRL Instance Document
101.SCH ⁽²⁾XBRL Taxonomy Extension Schema Document
101.CAL ⁽²⁾XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB ⁽²⁾XBRL Taxonomy Extension Label Linkbase Document
101.PRE ⁽²⁾XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF ⁽²⁾XBRL Taxonomy Extension Definition Linkbase Document
⁽¹⁾Filed herewith.
⁽²⁾ XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, is deemed not ~~deemed~~ filed for purposes of Section 18 of the Securities Exchange Act of 1934 and otherwise is not subject to liability under these sections.
3037

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 on August 8, ~~2017~~2018.

BENCHMARK ELECTRONICS, INC.

(Registrant)

By: /s/ Paul J. Tufano

Paul J. Tufano

President and Chief Executive Officer

(Principal Executive Officer)

By: /s/ ~~Donald F. Adam~~Roop K. Lakkaraju

~~Donald F. Adam~~Roop K. Lakkaraju

Chief Financial Officer

(Principal Financial Officer)

3138
~~EXHIBIT INDEX~~
~~Exhibit~~
~~Number~~
~~Description of Exhibit~~
~~3.1~~
Restated Certificate of Formation of the Company dated May 17, 2016 (incorporated by reference to Exhibit 3.1 to the Company's report on Form 8-K filed with the SEC on May 17, 2016) (the 8-K) (Commission file number 1-10560)
~~3.2~~
~~Amended and Restated Bylaws of the Company dated May 11, 2016 (incorporated by reference to Exhibit 3.2 to the 8-K)~~
~~4.1~~
Specimen form of certificate evidencing the Common Shares (incorporated by reference to Exhibit 4.1 to the Company's quarterly report on Form 10-Q filed with the SEC on November 7, 2014) (Commission file number 1-10560)
10.1*
~~Agreement between the Company and Jon King, dated as of May 15, 2017.~~
31.1*
~~Section 302 Certification of Chief Executive Officer~~
31.2*
~~Section 302 Certification of Chief Financial Officer~~
32.1*
~~Section 1350 Certification of Chief Executive Officer~~
32.2*
~~Section 1350 Certification of Chief Financial Officer~~
~~101.INS(1)~~
~~XBRL Instance Document~~
~~101.SCH(1)~~
~~XBRL Taxonomy Extension Schema Document~~
~~101.CAL(1)~~
~~XBRL Taxonomy Extension Calculation Linkbase Document~~
~~101.LAB(1)~~
~~XBRL Taxonomy Extension Label Linkbase Document~~
~~101.PRE(1)~~
~~XBRL Taxonomy Extension Presentation Linkbase Document~~
~~101.DEF(1)~~
~~XBRL Taxonomy Extension Definition Linkbase Document~~
*   Filed herewith.
⁽¹⁾ XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, is not deemed filed for purposes of section 18 of the Exchange Act, and otherwise is not subject to liability under these sections.
32

		Page

PART I—FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)	1
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Income (Loss)	2
	Condensed Consolidated Statements of Comprehensive Income (Loss)	3
	Condensed Consolidated Statement of Shareholders’ Equity	4
	Condensed Consolidated Statements of Cash Flows	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and	2025
	Results of Operations
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2734
Item 4.	Controls and Procedures	2835

PART II—OTHER INFORMATION

Item 1.	Legal Proceedings	2936
Item 1A.	Risk Factors	2936
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2936
Item 6.	Exhibits	3037

SIGNATURES		3138

Note 6 – Inventories
Inventory costs are summarized as follows:
		June 30,	December 31,
(in thousands)		2017		2016
Raw materials	$	270,826	$	233,111
Work in process		112,054		113,496
Finished goods		33,150		34,727
	$	416,030	$	381,334

Note 8 – Income Taxes
Income tax expense consists of the following:
	Six Months Ended
	June 30,
(in thousands)		2017		2016
Federal – current	$	(1,024)	$	9
Foreign – current		3,379		3,186
State – current		162		235
Deferred		2,103		2,649
	$	4,620	$	6,079