EXHIBIT 99.1
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
The following unaudited pro forma condensed combined statement of
operations gives effect to the acquisition by Benchmark of all the outstanding
capital stock of AVEX Electronics, Inc. and its subsidiaries and certain
affiliates ("AVEX") as if it occurred as of January 1, 1998.
The AVEX acquisition was accounted for under the purchase method of
accounting. The unaudited pro forma condensed combined statement of operations
is based on the historical financial statements of Benchmark and AVEX and the
estimates and assumptions in the notes to the unaudited pro forma condensed
combined statement of operations. The unaudited pro forma condensed combined
statement of operations for the year ended December 31, 1998 has been previously
filed on a Current Report on Form 8-K dated August 24, 1999 and filed on
September 8, 1999 (the "Current Report"). No pro forma balance sheet at
September 30, 1999 has been provided as the AVEX acquisition is included in
Benchmark's historical balance sheet at September 30, 1999.
The unaudited pro forma condensed combined statement of operations should
be read in conjunction with the historical financial statements of Benchmark and
AVEX and "Management's Discussion and Analysis of Financial Conditions and
Results of Operations" of Benchmark. The unaudited pro forma condensed combined
statement of operations does not purport to represent what Benchmark's results
of operations would actually have been if the AVEX acquisition had been
consummated on the indicated date, nor are they necessarily indicative of
Benchmark's results of operations for any future period. The results of
operations for the nine months ended September 30, 1999, are not necessarily
indicative of the results to be expected for the entire year or any other
interim period.
Pursuant to the terms of the purchase agreement in connection with the
acquisition of AVEX on August 24, 1999, the Company was required to agree upon a
closing working capital adjustment with the Seller by November 22, 1999. The
Company was unable to reach an agreement with the Seller prior to the November
22, 1999 deadline and has entered into several agreements extending this
deadline. At the present time, the parties still have not reached an agreement
and have hired an independent accounting firm to serve as arbitrator to resolve
the dispute and to calculate the final closing working capital adjustment.
Management is unable to predict when the arbitrator will be releasing its
findings but estimates that the net closing working capital adjustment will be
in the range of $20 to $40 million. Management has made its best estimate of the
ultimate resolution of this arbitration proceeding. However, the final working
capital settlement could have a significant effect on the final purchase price
and the allocation of the purchase price.
Reference should be made to the unaudited pro forma condensed combined
financial statements filed on the Current Report for additional information
regarding the estimates and assumptions inherent in the preparation of this
statement.
BENCHMARK ELECTRONICS, INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(UNAUDITED)
HISTORICAL PRO FORMA
--------------------------- ---------------------------------------
BENCHMARK AVEX (A) ADJUSTMENTS COMBINED
---------- ---------- ---------- ----------
(in thousands, except per share data)
Sales ............................................ $539,037 $640,174 $1,179,211
Cost of sales .................................... 493,729 630,682 (2,218) d 1,122,193
--------------------------- ---------------------------------------
Gross profit ................................ 45,308 9,492 2,218 57,018
Selling, general & administrative expenses ....... 19,269 31,095 (5,456) b 45,308
400 d
--
Amortization of goodwill ......................... 3,449 -- 5,869 c 9,318
--------------------------- ---------------------------------------
Income (loss) from operations ............... 22,590 (21,603) 1,405 2,392
Interest and other income - net .................. 1,066 108 (300) e 874
Interest expense ................................. (4,940) (13,941) 13,941 f (16,574)
(882) g
(10,752) h
--------------------------- ---------------------------------------
Income (loss) before taxes and
extraordinary item ......................... 18,716 (35,436) 3,412 (13,308)
Income taxes ..................................... 6,738 960 1,194 i (4,658)
(13,550) j
--------------------------- ---------------------------------------
Income (loss) before extraordinary item .... 11,978 (36,396) 15,768 (8,650)
Income (loss) before extraordinary item
per common share - Basic ........................ $ 0.90 $ (0.58)
Income (loss) before extraordinary item
per common share - Diluted ...................... $ 0.83 $ (0.58)
Weighted average common shares outstanding:
Basic ........................................ 13,360 1,649 k 15,009
Diluted ...................................... 14,448 561 k 15,009
See accompanying notes to unaudited pro forma condensed combined statement of
operations.
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED STATEMENT OF OPERATIONS
Adjustments have been made to the unaudited pro forma condensed combined
statement of operations to reflect the following:
(a) Includes the historical results of operations of AVEX for the period to
August 24, 1999 the consummation date of the acquisition.
(b) To eliminate the historical costs related to (i) certain redundant
executive headquarter costs (ii) the termination of intercompany services
previously provided by the J.M Huber Corporation (the "Seller") to AVEX
under an intercompany arrangement that included fees based on the estimated
utilization of Seller's resources; (iii) AVEX's domestic defined benefit
pension plan, which plan and the obligations thereunder are not being
continued by Benchmark; offset by (iv) the costs that Benchmark will incur
to replace the Seller's intercompany services arrangement. A summary of
such adjustments follows (in thousands):
FOR THE PERIOD ENDED
--------------------
SEPTEMBER 30, 1999
--------------------
Redundant executive headquarter costs ............................. $ (2,948)
Historical intercompany service fee ............................... (2,384)
Historical cost of pension plan not continued ..................... (791)
Benchmark replacement of intercompany services arrangement ........ 667
--------------------
Total ......................................................... $ (5,456)
====================
(c) To record amortization of goodwill over an estimated useful life of 15
years.
(d) To eliminate adjustments to the 1998 write down of certain assets related
to AVEX's San Jose, California facility, which were not acquired by
Benchmark, included in AVEX's historical financial statements.
(e) To reduce interest income related to cash balances utilized in funding a
portion of the AVEX acquisition.
(f) To eliminate intercompany interest expense with the Seller and interest on
AVEX notes payable not assumed under the Stock Purchase Agreement.
(g) To record amortization of debt issuance costs over the life of the
applicable debt instruments.
(h) To record interest expense at 7.75%, 7.75% and 6.0% on the amounts
outstanding under the Revolving Credit Facility, Term Loan, and the Notes,
respectively, based on current interest rates. A change in the interest
rate of 1/8 of a percent would result in a change in annual interest
expense related to the amounts outstanding under the Revolving Credit
Facility and Term Loan of approximately $220,000.
(i) To record income tax adjustments related to the above pro forma
adjustments.
(j) To adjust AVEX historical income tax expense as if AVEX was included in the
consolidated federal income tax return of Benchmark. In the historical
combined financial statements of AVEX, federal income taxes were provided
as if AVEX filed a separate income tax return.
(k) The following information reconciles the number of shares used to compute
historical and pro forma earnings (loss) per common share (in thousands):
FOR THE PERIOD ENDED
--------------------
SEPTEMBER 30, 1999
--------------------
BASIC DILUTED
-------- ---------
Benchmark historical ...................................... 13,360 14,448
Common shares issued in AVEX acquisition on pro forma basis
as of January 1, 1999 .................................. 861 861
Common shares issued in public offering on pro forma basis
as of January 1, 1999 .................................. 788 788
Elimination of Benchmark stock options -- antidilutive
on a pro forma basis in 1999 ............................. -- (1,088)
-------- ---------
15,009 15,009
======== =========
The effect of the if-converted method for the Notes is antidilutive and 2.0
million of potential common shares have not been considered in computing
diluted loss per common share.