Summary Of Significant Accounting Policies (Policy) | 12 Months Ended |
Dec. 31, 2014 |
Accounting Policies [Abstract] | |
Principles of Consolidation | (b) Principles of Consolidation |
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The consolidated financial statements include the financial statements of Benchmark Electronics, Inc. and its wholly owned and majority owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. |
Cash And Cash Equivalents | (c) Cash and Cash Equivalents |
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The Company considers all highly liquid debt instruments with an original maturity at the date of purchase of three months or less to be cash equivalents. Cash equivalents of $314.1 million and $247.0 million at December 31, 2014 and 2013, respectively, consist primarily of money-market funds and time deposits with an initial term of less than three months. |
Allowance For Doubtful Accounts | (d) Allowance for Doubtful Accounts |
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Accounts receivable are recorded net of allowances for amounts not expected to be collected. In estimating the allowance, management considers a specific customer's financial condition, payment history, and various information or disclosures by the customer or other publicly available information. Accounts receivable are charged off against the allowance after all reasonable efforts to collect the full amount (including litigation, where appropriate) have been exhausted. During 2014, the Company recorded a $2.7 million charge for provisions to accounts receivable associated with the bankruptcy filing of a former customer, GT Advance Technologies, on October 6, 2014. |
Investments | (e) Investments |
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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. |
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As of December 31, 2014, $1.1 million (par value) of long-term investments were recorded at fair value. The long-term investments consist of auction rate securities classified as available-for-sale. These securities are classified as long-term investments and the contractual maturity of these securities is over ten years. |
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These long-term investments were valued using Level 3 inputs as of December 31, 2014 since the assets were subject to valuation using significant unobservable inputs. The Company estimated the fair value of each security with the assistance of an independent valuation firm using a discounted cash flow model to calculate the present value of projected cash flows based on a number of inputs and assumptions including the security structure and terms, the current market conditions and the related impact on the expected weighted-average life, interest rate estimates and default risk of the securities. |
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As of December 31, 2014, the Company has recorded an unrealized loss of $0.1 million on the long-term investments based upon this valuation. This unrealized loss reduced the fair value of the Company's auction rate securities as of December 31, 2014 to $1.0 million. These investments have been in an unrealized loss position for greater than 12 months. During 2014, 2013 and 2012, the Company recorded unrealized gains of $1.4 million, $0.4 million and $1.5 million, respectively, on its long-term investments. The Company has determined that there was no credit loss associated with its auction rate securities as of December 31, 2014 as shown by the cash flows expected to be received over the remaining life of the securities. |
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The following table provides a reconciliation of the beginning and ending balance of the Company's auction rate securities classified as long-term investments measured at fair value using significant unobservable inputs (Level 3 inputs): |
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(in thousands) | | 2014 | | 2013 | | | | |
Balance as of January 1 | $ | 9,921 | $ | 10,324 | | | | |
Net unrealized gains included in other comprehensive income | | 1,369 | | 418 | | | | |
Sales of investments at par value | | -10,282 | | -821 | | | | |
Balance as of December 31 | $ | 1,008 | $ | 9,921 | | | | |
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Unrealized losses still held as of December 31 | $ | 64 | $ | 1,433 | | | | |
The cumulative unrealized loss is included as a component of accumulated other comprehensive loss within shareholders' equity in the accompanying consolidated balance sheet. As of December 31, 2014, there were no long-term investments measured at fair value using Level 1 or Level 2 inputs. All income generated from these investments is recorded as interest income. |
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Inventories | (f) Inventories |
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Inventories include material, labor and overhead and are stated at the lower of cost (principally first-in, first-out method) or market. |
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Property, Plant And Equipment | (g) Property, Plant and Equipment |
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Property, plant and equipment are stated at cost. Depreciation is calculated on the straight-line method over the useful lives of the assets – 5 to 40 years for buildings and building improvements, 2 to 10 years for machinery and equipment, 2 to 10 years for furniture and fixtures and 2 to 5 years for vehicles. Leasehold improvements are amortized on the straight-line method over the shorter of the useful life of the improvement or the remainder of the lease term. |
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Goodwill And Other Intangible Assets | (h) Goodwill and Other Intangible Assets |
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Goodwill represents the excess of purchase price over fair value of net assets acquired. Goodwill and intangible assets acquired in a business combination and determined to have an indefinite useful life are not amortized, but instead assessed for impairment at least annually. Intangible assets with estimable useful lives are amortized over their respective estimated useful lives to their estimated residual values. |
Impairment Of Long-Lived Assets And Goodwill | (i) Impairment of Long-Lived Assets and Goodwill |
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Long-lived assets, such as property, plant, and equipment, and purchased intangibles subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is evaluated by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the estimated fair value of the asset. Assets to be disposed of would be separately disclosed and reported at the lower of the carrying amount or estimated fair value less costs to sell, and are no longer depreciated. The assets and liabilities of a disposed group classified as held for sale would be disclosed separately in the appropriate asset and liability sections of the balance sheet. |
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Goodwill is tested for impairment on an annual basis, at a minimum, and whenever events and changes in circumstances suggest that the carrying amount may be impaired. Circumstances that may lead to the impairment of goodwill include unforeseen decreases in future performance or industry demand or the restructuring of our operations as a result of a change in our business strategy. A qualitative assessment is allowed to determine if goodwill is potentially impaired. Based on this qualitative assessment, if the Company determines that it is more likely than not that the reporting unit's fair value is less than its carrying value, then it performs a two-step goodwill impairment test, otherwise no further analysis is required. In connection with its annual goodwill impairment assessments as of December 31, 2014, 2013 and 2012, the Company concluded that goodwill was not impaired. |
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Earnings Per Share | (j) Earnings Per Share |
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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 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, the amount of compensation cost, if any, for future service that the Company has not yet recognized, and the amount of estimated tax benefits that would be recorded in paid-in-capital, if any, when the option is exercised or the share vests are assumed to be used to repurchase shares in the current period. |
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The following table sets forth the calculation of basic and diluted earnings per share. |
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| | | Year Ended December 31, | |
(in thousands, except per share data) | | 2014 | | 2013 | | 2012 | |
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Net income | $ | 82,442 | $ | 111,159 | $ | 56,607 | |
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Denominator for basic earnings per share – weighted- | | | | | | | |
| average number of common shares outstanding | | | | | | | |
| during the period | | 53,538 | | 54,213 | | 56,320 | |
Incremental common shares attributable to exercise of | | | | | | | |
| dilutive options | | 450 | | 324 | | 150 | |
Incremental common shares attributable to outstanding | | | | | | | |
| restricted shares and restricted stock units | | 234 | | 242 | | 164 | |
Denominator for diluted earnings per share | | 54,222 | | 54,779 | | 56,634 | |
Basic earnings per share | $ | 1.54 | $ | 2.05 | $ | 1.01 | |
Diluted earnings per share | $ | 1.52 | $ | 2.03 | $ | 1 | |
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Options to purchase 0.7 million, 1.2 million and 3.7 million common shares in 2014, 2013 and 2012, respectively, were not included in the computation of diluted earnings per share because their effect would have been anti-dilutive. |
Revenue Recognition | (k) Revenue Recognition |
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Revenue from the sale of manufactured products built to customer specifications and excess inventory is recognized when title and risk of ownership have passed, the price to the buyer is fixed or determinable and recoverability is reasonably assured, which generally is when the goods are shipped. Revenue from design, development and engineering services is recognized when the services are performed and collectibility is reasonably certain. Such services provided under fixed price contracts are accounted for using the percentage-of-completion method. The Company assumes no significant obligations after shipment as it typically warrants workmanship only. Therefore, the warranty provisions are generally not significant. |
Income Taxes | (l) Income Taxes |
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Income taxes are accounted for under the asset and liability method. Deferred income taxes are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the enactment date. The Company records a valuation allowance to reduce its deferred tax assets to the amounts that are more likely than not to be realized. The Company has considered the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in assessing the need for the valuation allowance. |
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Stock-Based Compensation | (m) Stock-Based Compensation |
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All share-based payments to employees, including grants of employee stock options, are recognized in the financial statements based on their fair values. The total compensation cost recognized for stock-based awards was $6.4 million, $7.1 million and $6.3 million for 2014, 2013 and 2012, respectively. The total income tax benefit recognized in the income statement for stock-based awards was $2.6 million, $2.6 million and $2.1 million for 2014, 2013 and 2012, respectively. The compensation expense for stock-based awards includes an estimate for forfeitures and is recognized over the vesting period of the awards using the straight-line method. Cash flows from the tax benefits resulting from tax deductions in excess of the compensation cost recognized for stock-based awards (excess tax benefits) are classified as cash flows from financing activities. 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 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. If 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 will be recognized as a change in accounting estimate. |
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As of December 31, 2014, the unrecognized compensation cost and remaining weighted-average amortization related to stock-based awards were as follows: |
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| | | | | | Restricted | | Restricted |
| | Stock | | Restricted | | Stock | | Stock |
(in thousands) | | Options | | Shares | | Units | | Units(1) |
Unrecognized compensation cost | $ | 4,380 | $ | 817 | $ | 5,996 | $ | 1,742 |
Remaining weighted-average | | | | | | | | |
amortization period | | 1.6 years | | 0.8 years | | 2.5 years | | 2.2 years |
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(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. The weighted-average assumptions used to value the options granted during 2014, 2013 and 2012 were as follows: |
| | | Year Ended December 31, | |
(in thousands) | | 2014 | | 2013 | | 2012 | |
| Options granted | | 378 | | 348 | | 432 | |
| Expected term of options | | 7.0 years | | 7.4 years | | 6.3 years | |
| Expected volatility | | 39% | | 42% | | 42% | |
| Risk-free interest rate | | 2.08% | | 1.40% | | 1.31% | |
| Dividend yield | | zero | | zero | | zero | |
The expected term of the options represents the estimated period of time until exercise and is based on historical experience, giving consideration to the contractual terms, vesting schedules and expectations of future plan participant behavior. Separate groups of plan participants that have similar historical exercise behavior are considered separately for valuation purposes. Expected stock price volatility is based on the historical volatility of the Company's common shares. The risk-free interest rate is based on the U.S. Treasury zero-coupon rates in effect at the time of grant with an equivalent remaining term. The dividend yield reflects that the Company has not paid any cash dividends since inception and does not anticipate paying cash dividends in the foreseeable future. |
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The weighted-average fair value per option granted during 2014, 2013 and 2012 was $9.91, $7.87 and $6.83, respectively. The total cash received as a result of stock option exercises in 2014, 2013 and 2012 was approximately $18.9 million, $11.2 million and $4.7 million, respectively. The tax benefit realized as a result of stock option exercises and the vesting of other share-based awards during 2014, 2013 and 2012 was $2.9 million, $2.2 million and $1.3 million, respectively. For 2014, 2013 and 2012, the total intrinsic value of stock options exercised was $3.7 million, $3.2 million and $1.4 million, respectively. |
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The Company awarded performance-based restricted stock units to employees during 2014, 2013 and 2012. The number of performance-based restricted stock units that 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 three 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 income 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 Omnibus Incentive Compensation Plan (the 2010 Plan). |
Use Of Estimates | (n) Use of Estimates |
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Management of the Company 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. Actual results could differ from those estimates. |
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Fair Values Of Financial Instruments | (o) Fair Values of Financial Instruments |
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The Company's financial instruments consist of cash equivalents, accounts receivable, accrued liabilities, accounts payable and capital lease obligations. The Company believes that the carrying values of these instruments approximate their fair value. As of December 31, 2014, the Company's long-term investments are recorded at fair value. See Note 11. |
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Foreign Currency | (p) Foreign Currency |
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For foreign subsidiaries using the local currency as their functional currency, assets and liabilities are translated at exchange rates in effect at the balance sheet date and income and expenses are translated at average exchange rates. The effects of these translation adjustments are reported in other comprehensive income. Exchange losses arising from transactions denominated in a currency other than the functional currency of the entity involved are included in other expense and totaled approximately $1.3 million, $0.9 million and $1.2 million in 2014, 2013 and 2012, respectively. |
Recently Enacted Accounting Principles | (q) Recently Enacted Accounting Principles |
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In May 2014, the Financial Accounting Standards Board (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. The new standard will also require significantly expanded disclosures regarding the qualitative and quantitative information of the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The new standard will be effective for reporting periods beginning after December 15, 2016, and will permit the use of either the retrospective or cumulative effect transition method, with early application not permitted. The Company will adopt the new standard effective January 1, 2017, and is currently evaluating the impact the pronouncement will have on its consolidated financial statements and related disclosures and has not yet selected a transition method. As the new standard will supersede all existing revenue guidance affecting the Company under U.S. GAAP, it could impact revenue and cost recognition on contracts across all its business segments, in addition to its business processes and information technology systems. As a result, the Company's evaluation of the effect of the new standard will likely extend over several future periods. |
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The Company has determined that all other recently issued accounting standards will not have a material impact on its consolidated financial position, results of operations and cash flows, or do not apply to its operations. |
Reclassifications | (r) Reclassifications |
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Certain reclassifications of prior period amounts have been made to conform to the current year presentation. |