Press Release
For More Information, Call:
| DONALD F. ADAM | |
| CHIEF FINANCIAL OFFICER | January 5, 2009 |
| (979) 849-6550 |
BENCHMARK ELECTRONICS REPORTS RESULTS FOR THE
QUARTER AND YEAR ENDED DECEMBER 31, 2008
ANGLETON, TX, FEBRUARY 5, 2009 – Benchmark Electronics, Inc. (NYSE: BHE), a leading contract manufacturing provider, announced sales of $582 million for the quarter ended December 31, 2008, compared to $735 million for the same quarter in the prior year. The Company reported a fourth quarter 2008 net loss of $204 million, or $3.13 per diluted share. In the comparable period of 2007, net income was $21 million, or $0.29 per diluted share.
During the fourth quarter of 2008, the Company recorded a non-cash goodwill impairment charge of $247 million ($219 million, net of tax). The Company’s annual goodwill impairment analysis indicated there was an impairment of goodwill in two of its reporting segments, the Americas and Europe, primarily due to a decline in the Company’s market capitalization and recent market turmoil. The impairment charge did not result in any cash expenditures and did not affect the Company’s cash position, cash flows from operating activities or availability under its credit facility.
Excluding goodwill impairment and restructuring charges, the Company would have reported net income of $17 million, or $0.27 per diluted share, in the fourth quarter of 2008. Excluding restructuring charges and integration costs, the Company would have reported net income of $24 million, or $0.33 per diluted share, in the fourth quarter of 2007.
Sales for the year ended December 31, 2008 were $2.6 billion, compared to $2.9 billion in 2007. The net loss for the year ended December 31, 2008 was $136 million, or $2.02 per diluted share. In the prior year, net income was $93 million, or $1.27 per diluted share.
Excluding goodwill impairment, restructuring charges and a discrete tax benefit related to a previously closed facility, the Company would have reported net income of $82 million, or $1.22 per diluted share, in 2008. Excluding restructuring charges, integration costs and a discrete tax benefit related to a previously closed facility, the Company would have reported net income of $94 million, or $1.29 per diluted share, in 2007.
“The deterioration in end markets which began earlier in the year accelerated in the fourth quarter,” said Cary T. Fu, the Company’s Chief Executive Officer. “While 2009 will present significant challenges and uncertainties, we are confident that our customer centric business model, our focus on cost controls and our strong cash position will keep us in an excellent competitive position to manage through this downturn and subsequently benefit from its recovery.”
Fourth Quarter 2008 Financial Highlights
| · | Operating margin, excluding goodwill impairment and restructuring charges for the fourth quarter was 3.1%. |
| · | Cash flows provided by operating activities for the fourth quarter were approximately $39 million and for the year were approximately $164 million. |
| · | Cash and long-term investments totaled $408 million at December 31, 2008. Long-term investments consist of $48 million of auction rate securities. |
| · | Accounts receivable was $422 million at December 31, 2008; calculated days sales outstanding were 65 days. |
| · | Inventory was $343 million at December 31, 2008; inventory turns were 6.3 times. |
| · | Repurchases of common shares for the fourth quarter totaled $7 million or 0.6 million shares. |
First Quarter 2009 Outlook
Sales for the first quarter of 2009 are expected to range from $525 million to $570 million. Diluted earnings per share for the first quarter, excluding restructuring charges, are expected to be between $0.16 and $0.26.
Non-GAAP Financial Measures
This press release includes financial measures for earnings and earnings per share that exclude certain items and therefore are not in accordance with generally accepted accounting principles (GAAP). A detailed reconciliation between the GAAP results and results excluding special items (non-GAAP) is included at the end of this press release. By disclosing this non-GAAP information, management intends to provide investors with additional information to further analyze the company’s performance and underlying trends. Management utilizes a measure of net income (loss) and earnings (loss) per share on a non-GAAP basis that excludes certain items to better assess operating performance and to help investors compare our results with our previous guidance.
The non-GAAP information included in this press release is not necessarily comparable to non-GAAP information of other companies. Non-GAAP information should not be viewed as a substitute for, or superior to, net income (loss) or other data prepared in accordance with GAAP as measures of our profitability or liquidity. Users of this financial information should consider the types of events and transactions for which adjustments have been made.
Forward-Looking Statements
This news release contains certain forward-looking statements within the scope of the Securities Act of 1933 and the Securities Exchange Act of 1934. The words “expect,” “estimate,” “anticipate,” “predict,” and similar expressions, and the negatives of such expressions, are intended to identify forward-looking statements. Our forward-looking statements may be deemed to include, among other things, the statement that “while 2009 will present significant challenges and uncertainties, we are confident that our customer centric business model, our focus on cost controls and our strong cash position will keep us in an excellent competitive position to manage through this downturn and subsequently benefit from its recovery” and our sales and diluted earnings per share, excluding restructuring charges, guidance for the first quarter of 2009, as well as other statements, express or implied, concerning: future operating results or the ability to generate sales, income or cash flow; and Benchmark’s business and growth strategies, including expected internal growth and performance goals. Although Benchmark believes that these statements are based upon reasonable assumptions, such statements involve risks, uncertainties and assumptions, including but not limited to industry and economic conditions, and customer actions.
All forward-looking statements included in this release are based upon information available to Benchmark as of the date of the release, and Benchmark assumes no obligation to update any such forward-looking statements. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual outcomes may vary materially from those indicated. Persons are advised to consult further disclosures on related subjects in Benchmark’s Form 10-K for the year ended December 31, 2007, in its other filings with the Securities and Exchange Commission and in its press releases.
Additional Information
Benchmark Electronics, Inc. provides electronics manufacturing, design and engineering services to original equipment manufacturers of computers and related products for business enterprises, medical devices, industrial control equipment, testing and instrumentation products, and telecommunication equipment. Benchmark’s global operations include 20 facilities in ten countries. Benchmark’s Common Shares trade on the New York Stock Exchange under the symbol BHE.
A conference call hosted by Benchmark management will be held today at 10:00 am (Central time) to discuss the financial results of the Company and its future outlook. This call will be broadcast via the Internet and may be accessed by logging on to our website at www.bench.com.
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Benchmark Electronics, Inc. and Subsidiaries
Reconciliation of GAAP to Non-GAAP Financial Results
(Amounts in Thousands, Except Per Share Data)
(UNAUDITED)
Three Months Ended December 31, | Year Ended December 31, | |||||||||||||||
| 2008 | 2007 | 2008 | 2007 | |||||||||||||
| Income (loss) from operations (GAAP) | $ | (231,924 | ) | $ | 21,326 | $ | (166,480 | ) | $ | 90,299 | ||||||
| Goodwill impairment | 247,482 | — | 247,482 | — | ||||||||||||
| Restructuring charges and integration costs | 2,527 | 4,580 | 2,780 | 11,581 | ||||||||||||
| Non-GAAP income from operations | $ | 18,085 | $ | 25,906 | $ | 83,782 | $ | 101,880 | ||||||||
| Net income (loss) (GAAP) | $ | (203,738 | ) | $ | 20,629 | $ | (135,632 | ) | $ | 92,356 | ||||||
| Goodwill impairment, net of tax | 218,904 | — | 218,904 | — | ||||||||||||
| Restructuring charges and integration costs, net of tax | 2,266 | 3,080 | 2,494 | 8,291 | ||||||||||||
| Income tax benefit | — | — | (3,440 | ) | (6,481 | ) | ||||||||||
| Non-GAAP net income | $ | 17,432 | $ | 23,709 | $ | 82,326 | $ | 94,166 | ||||||||
| Numerator for basic earnings (loss) per share - net income (loss) (GAAP) | $ | (203,738 | ) | $ | 20,629 | $ | (135,632 | ) | $ | 92,356 | ||||||
| Interest expense on convertible debt, net of tax | — | — | — | 147 | ||||||||||||
| Numerator for diluted earnings (loss) per share (GAAP) | $ | (203,738 | ) | $ | 20,629 | $ | (135,632 | ) | $ | 92,503 | ||||||
| Diluted Earnings (loss) per share (GAAP) | $ | (3.13 | ) | $ | 0.29 | $ | (2.02 | ) | $ | 1.27 | ||||||
| Numerator for basic earnings per share - net income (Non-GAAP) | $ | 17,432 | $ | 23,709 | $ | 82,326 | $ | 94,166 | ||||||||
| Interest expense on convertible debt, net of tax | — | — | — | 147 | ||||||||||||
| Numerator for diluted earnings per share (Non-GAAP) | $ | 17,432 | $ | 23,709 | $ | 82,326 | $ | 94,313 | ||||||||
| Diluted earnings per share (Non-GAAP) | $ | 0.27 | $ | 0.33 | $ | 1.22 | $ | 1.29 | ||||||||
| Weighted average shares used in calculating earnings (loss) per share: | ||||||||||||||||
| Diluted - GAAP | 65,173 | 71,555 | 67,060 | 72,829 | ||||||||||||
| Diluted - Non-GAAP | 65,406 | 71,555 | 67,528 | 72,829 | ||||||||||||
Benchmark Electronics, Inc. and Subsidiaries
Consolidated Statements of Income (Loss)
(Amounts in Thousands, Except Per Share Data)
(UNAUDITED)
Three Months Ended December 31, | Year Ended December 31, | |||||||||||||||
| 2008 | 2007 | 2008 | 2007 | |||||||||||||
| Net sales | $ | 581,770 | $ | 734,547 | $ | 2,590,167 | $ | 2,915,919 | ||||||||
| Cost of sales | 540,989 | 683,490 | 2,414,231 | 2,717,425 | ||||||||||||
| Gross profit | 40,781 | 51,057 | 175,936 | 198,494 | ||||||||||||
| Selling, general and administrative expenses | 22,254 | 24,704 | 90,372 | 94,826 | ||||||||||||
| Amortization of intangibles | 442 | 447 | 1,782 | 1,788 | ||||||||||||
| Goodwill impairment | 247,482 | — | 247,482 | — | ||||||||||||
| Restructuring charges and integration costs | 2,527 | 4,580 | 2,780 | 11,581 | ||||||||||||
| Income (loss) from operations | (231,924 | ) | 21,326 | (166,480 | ) | 90,299 | ||||||||||
| Other income (expense): | ||||||||||||||||
| Interest income | 1,766 | 3,662 | 8,675 | 11,217 | ||||||||||||
| Interest expense | (353 | ) | (397 | ) | (1,455 | ) | (2,183 | ) | ||||||||
| Other income (expense) | 224 | (885 | ) | 1,772 | 693 | |||||||||||
| Total other income, net | 1,637 | 2,380 | 8,992 | 9,727 | ||||||||||||
| Income (loss) before income taxes | (230,287 | ) | 23,706 | (157,488 | ) | 100,026 | ||||||||||
| Income tax benefit (expense) | 26,549 | (3,077 | ) | 21,856 | (7,670 | ) | ||||||||||
| Net income (loss) | $ | (203,738 | ) | $ | 20,629 | $ | (135,632 | ) | $ | 92,356 | ||||||
| Numerator for basic earnings (loss) per share - net income (loss) | $ | (203,738 | ) | $ | 20,629 | $ | (135,632 | ) | $ | 92,356 | ||||||
| Interest expense on convertible debt, net of tax | — | — | — | 147 | ||||||||||||
| Numerator for diluted earnings (loss) per share | $ | (203,738 | ) | $ | 20,629 | $ | (135,632 | ) | $ | 92,503 | ||||||
| Denominator for basic earnings per share - weighted average number of common shares outstanding during the period | 65,173 | 71,309 | 67,060 | 72,061 | ||||||||||||
| Incremental common shares attributable to restricted shares and the exercise of outstanding equity instruments | — | 246 | — | 768 | ||||||||||||
| Denominator for diluted earnings (loss) per share | 65,173 | 71,555 | 67,060 | 72,829 | ||||||||||||
| Earnings (loss) per share: | ||||||||||||||||
| Basic | $ | (3.13 | ) | $ | 0.29 | $ | (2.02 | ) | $ | 1.28 | ||||||
| Diluted | $ | (3.13 | ) | $ | 0.29 | $ | (2.02 | ) | $ | 1.27 | ||||||
The results for the three months and year ended December 31, 2007, as well as the year ended December 31, 2008, reflect an immaterial correction of the Company’s prior period financial statements related to stock-based compensation expense.
Benchmark Electronics, Inc. and Subsidiaries
Condensed Consolidated Balance Sheet
December 31, 2008
(Amounts in Thousands)
(UNAUDITED)
| Assets | ||||
| Current assets: | ||||
| Cash and cash-equivalents | $ | 359,694 | ||
| Accounts receivable, net | 422,058 | |||
| Inventories, net | 343,163 | |||
| Other current assets | 39,466 | |||
| Total current assets | 1,164,381 | |||
| Long-term investments | 48,162 | |||
| Non-current deferred tax asset | 21,487 | |||
| Property, plant and equipment, net | 142,844 | |||
| Other assets, net | 24,398 | |||
| Goodwill, net | 37,912 | |||
| Total assets | $ | 1,439,184 | ||
| Liabilities and Shareholders’ Equity | ||||
| Current liabilities: | ||||
| Current installments of capital lease obligations | $ | 256 | ||
| Accounts payable | 288,045 | |||
| Accrued liabilities | 54,219 | |||
| Total current liabilities | 342,520 | |||
| Capital lease obligations, less current installments | 11,683 | |||
| Other long-term liabilities | 29,252 | |||
| Shareholders’ equity | 1,055,729 | |||
| Total liabilities and shareholders’ equity | $ | 1,439,184 | ||