EXHIBIT 13
New Business Horizons
Benchmark Electronics
1998 Annual Report
Financial Highlights
Benchmark Electronics, Inc. and Subsidiaries
YEAR ENDED DECEMBER 31,
----------------------------------------------------
(In thousands, except per-share data) 1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
Sales ..................................... $524,065 325,229 201,296 97,353 98,168
Income from operations .................... $ 30,720 25,112 15,391 9,250 8,778
Net income ................................ $ 16,372 15,090 8,864 6,148 5,769
Earnings per common share (diluted) ....... $ 1.35 1.26 0.96 0.75 0.71
Working capital ........................... $ 86,265 87,879 72,586 37,285 30,890
Total assets .............................. $241,896 190,322 168,174 57,037 48,333
Long-term debt ............................ $ 46,111 30,330 30,485 -- --
Shareholders' equity ...................... $138,001 120,872 104,999 46,624 40,131
Weighted average common and
equivalent shares outstanding (diluted) 12,098 12,004 9,218 8,213 8,176
The Company at a Glance
Benchmark Electronics, Inc. provides contract manufacturing and design
services to original equipment manufacturers (OEMs) in the electronics industry,
including manufacturers of medical devices, communications equipment, industrial
and business computers, and testing and industrial instruments. The company
specializes in assembling high quality, technologically complex printed circuit
boards with computer-automated equipment using surface mount and pin-thru-hole
interconnection technology for customers requiring low-to-medium volume
assembly. The company frequently works with customers from product design stages
through ongoing production and provides manufacturing services for successive
product generations.
About the Cover
With a solid U.S. presence, Benchmark expanded its manufacturing
capabilities to Dublin, Ireland.
Table of Contents
The Company at a Glance .................................. 1
Financial Highlights ..................................... 1
President's Letter ....................................... 2
New Business Horizons .................................... 6
Management's Discussion and Analysis ..................... 9
Consolidated Financial Statements......................... 15
Notes to Consolidated Financial Statements ............... 19
Independent Auditors' Report ............................. 29
Management's Report ...................................... 29
Quarterly Financial Data ................................. 30
Market for the Registrant's Common Equity
and Related Shareholder Matters ........................ 30
Selected Financial Data .................................. 31
Corporate and Shareholder Data ........................... 32
President's letter
Dear Shareholder
It is once again my pleasure to report record-breaking financial results for
Benchmark Electronics, Inc.
Charts of Sales, Income, Diluted EPS with cutline "Benchmark achieved
record-breaking financial results for calendar year 1998."
Our continued growth, coupled with the acquisition of Lockheed Commercial
Electronics Company, generated record sales during 1998: $524,065,077. That's 61
percent greater than our 1997 sales.
This remarkable revenue growth is even more impressive when measured against
the electronic contract manufacturing industry's average. Once again, our sales
grew at more than twice the rate of our average competitor's, according to data
compiled by the Institute for Interconnecting and Packaging Electronic Circuits
(IPC). Compounded since 1994, in fact, our growth rate far surpasses that of our
industry as a whole.
Shareholders will be pleased to learn that Benchmark's net income also
reached a record high of $16,372,470; that represents diluted earnings per share
(EPS) of $1.35.
The company's outstanding level of performance is reflected in our year-end
record high backlog of business on the firm's order books, which reached
$317,000,000 as of December 31, 1998.
Chart of Compound Average Growth Rate Comparison with cutline "Benchmark's
compound sales revenue growth more than doubled that of the IPC average for
1994-1998."
Benchmark's newly-acquired division, the former Lockheed Commercial
Electronics Company, reflected the same sort of dramatic improvements in sales
and profits which marked the company as a whole. This new operation has been
renamed Benchmark Electronics, Inc.--Hudson Division. Details on this new
operation are given in the body of this Annual Report, below, but you should
know that the new Hudson Division made a significant contribution to our
company's record financial results in 1998.
The formation of a company-wide enterprise resource planning (ERP)
organization, mentioned in my Shareholder's Letter of 1998, is well under way.
The evaluation and selection team chose a well-regarded ERP operation software
package, and its implementation has begun, with installation and training in
progress. Company-wide use is planned for the end of this current business year.
The ERP system affords us the capability of streamlining many of the
departmental functions of our company, such as purchasing and inventory
management. That makes us more competitive in the immediate future; and in the
long term, it provides the powerful and flexible Management Information Systems
(MIS) capabilities we need to effect the global site expansions we plan.
In a related move, we made significant progress toward planned compliance
with Year 2000 (Y2K) requirements, working not only with our own internal
departments and divisions but with customers and suppliers to put in place a
master plan. Because so many of our customers look to us to provide them with
"just in time" inventory supply, we are committed to full Y2K
compliance--internally, and with those customers and our own suppliers.
Finally, I can declare that our ongoing search for significant growth
opportunities continues. Last year, we began discussions with Ascend
Communications, Inc., regarding the acquisition of certain assets of their
System Integration Facility in Dublin, Ireland. We formally announced this
strategic move in January of 1999. The new operation, and its vital importance
to our company's long-term goals, is discussed in more detail later in this
report. In summary, though, this European facility and the business it brings
with it can be expected to provide the foundation for our expansion into "New
Business Horizons" in the European continent.
Let me close this letter, then, on behalf of the entire Benchmark management
group and our domestic employees, by extending a warm welcome to our new team in
Ireland.
Sincerely,
Donald E. Nigbor
President and Chief Executive Officer
March 17, 1999
Photo of Don Nigbor with cutline "Donald E. Nigbor President and CEO"
New Business Horizons
During 1998, Benchmark pursued its strategic plan for development. We
focused on broadening our customer service capabilities, building upon the prior
acquisitions of EMD Technologies, Inc., in the Midwest, and more recently,
Lockheed Commercial Electronics Company, in New England.
By the end of the year, we had successfully integrated the newly-acquired
Lockheed facility, now operating as Benchmark's Hudson Division. We were
fortunate to retain the excellent management group, staff, and well-trained
employee base at this operation, which provide us the resources we need for
future regional growth.
One of our most significant achievements in the development of customer
service capabilities this past year was the establishment of product
introduction centers at each of our facilities. These centers specialize in
pre-manufacturing services, such as printed circuit board (PCB) layout, together
with component engineering review, product design (including design for
manufacturability), design for testing, and test development. Concentration on
these areas increases our manufacturing capabilities, allowing us to better
serve our customers while cutting our costs.
Photo of Dublin facility with cutline "The Dublin facility is an ideal
platform from which to launch our European expansion."
It was that same focus on broadening customer service capability which led
us to establish a Dublin, Ireland, greenfield operation as a cornerstone toward
projected global expansion.
Our long-standing European customer, Stratus Computers, Inc., was acquired
by Ascend Communications, Inc., a top-tier firm in the high growth segment of
the telecommunications industry, last summer. We opened negotiations with
Ascend, and in early 1999 were able to announce the acquisition of certain
assets of the Stratus manufacturing facility in Dublin.
Chart of Market Segments with cutline "Benchmark's 1998 sales by market
segment." Under Stratus, the plant operated as a systems integration facility
for large and very sophisticated fault-tolerant mainframe computers. We will
continue to operate this new Benchmark division, with the bulk of its present
staff and with additional personnel transferred there, under a multi-year
exclusive service contract with Stratus, as a key supplier to Ascend.
This transaction supports the planned expansion of our manufacturing
capabilities, and enhances long-term customer relations. It represents our
company's growth philosophy, focused on key opportunities congruent with
Benchmark's strategic plans. Benchmark requires that any acquisition provide a
combination of experienced management teams, customer growth opportunities, and
geographic presence in high technology regions. Many opportunities do not meet
these criteria; each of our acquired divisions does and will.
While experiencing rapid expansion over the past five years, Benchmark
maintained a conservative approach to growth, building on our solid management
infrastructure to support our developing organization. Benchmark enhances the
local capabilities of each of our divisions with information sharing via our
wide area network, and our intranet is another vital part of interplant
communications. These tools are used to maximize our local engineering and
materials expertise and leverage our extensive knowledge base.
A key element of our expansion strategy is to provide each of our customers
with the comprehensive local services they require. For our global customers, as
well as our regional and local ones, we can furnish every element from design
engineering through order fulfillment.
Map: Global Expansion with cutline "Our growth strategy of selective
acquisitions expands our capabilities and meet the needs of our target markets."
Now, with a solid U.S. presence and a cornerstone facility in Ireland, our
focus will be on expanding our future operations throughout Europe and into
Asia. In so doing, we will continue our successful strategy of selective
acquisitions of OEM assets which provide opportunities to expand our customer
service capabilities, to meet the future needs of our target markets.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
The following Management's Discussion and Analysis of Financial Condition and
Results of Operations should be read in conjunction with the "Selected Financial
Data" and the Consolidated Financial Statements of the Company and the notes
thereto appearing elsewhere herein. This Annual Report contains certain
forward-looking statements regarding future financial condition and results of
operations and the Company's business operations. The words "expect,"
"estimate," "anticipate," "predict," and similar expressions are intended to
identify forward-looking statements. Such statements involve risks,
uncertainties and assumptions. The important factors that could cause actual
results to differ materially from the forward looking statements include,
without limitation, the integration of the operations of Lockheed Commercial
Electronics Company and the assets in Ireland purchased from Stratus Computers;
changes in customer concentration; the absence of long term sales contracts;
dependence on the growth of the medical device, communications equipment,
industrial and business computer, testing instrumentation and industrial
controls industries; availability of customer specified components; dependence
on certain key executives; and competition from other providers of contract
manufacturing services. Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect, actual outcomes
may very materially from those indicated.
Acquisition
On February 23, 1998, the Company acquired Lockheed Commercial Electronics
Company (LCEC) for $70 million in cash and the Company paid $0.7 million in
acquisition costs. LCEC, situated in Hudson, New Hampshire, is one of New
England's largest electronics manufacturing services companies, providing a
broad range of services including printed circuit board assembly and test,
system assembly and test, prototyping, depot repair, materials procurement, and
engineering support services. The transaction was accounted for under the
purchase method of accounting, and, accordingly, the results of operations of
LCEC since February 23, 1998 have been included in the accompanying consolidated
statements of income. The acquisition resulted in goodwill of approximately
$29.5 million, which is being amortized on a straight line basis over 15 years.
The effects of this acquisition should be considered when comparing the
Company's financial performance during 1998 and 1997. See Note 2 of Notes to
Consolidated Financial Statements.
In connection with the acquisition of LCEC, the Company obtained $40
million through borrowings under a five-year term
loan (the Term Loan) with a commercial bank. See Note 5 of Notes to Consolidated
Financial Statements and "Liquidity and Capital Resources."
Results of Operations
The following table presents the percentage relationship that certain items in
the Company's Consolidated Statements of Income bear to sales for the periods
indicated.
Percentage of Sales
Year ended December 31,
1998 1997 1996
------ ------ ------
Sales ......................................... 100.0% 100.0% 100.0%
Cost of sales ................................. 90.1 87.8 88.4
------ ------ ------
Gross profit ............................. 9.9 12.2 11.6
Selling, general and administrative expenses .. 3.4 3.9 3.6
Amortization of goodwill ...................... .6 .5 .3
------ ------ ------
Income from operations ................... 5.9 7.8 7.7
------ ------ ------
Other income (expense) ........................ (.7) (.5) (.5)
------ ------ ------
Income before income taxes ............... 5.2 7.4 7.2
Income tax expense ............................ 2.0 2.7 2.8
------ ------ ------
Net Income ............................... 3.2% 4.6% 4.4%
------ ------ ------
Year Ended December 31, 1998 Compared With Year Ended December 31, 1997
Sales in 1998 increased $198.8 million, or 61.1% over 1997 sales. The net
increase in sales resulted primarily from increased sales volume from the
acquisition of LCEC on February 23, 1998, existing customers, and the addition
of new customers, which was offset by reduced sales to a major customer during a
period of organizational change.
A substantial percentage of the Company's sales have been to a small
number of customers, and the loss of a major customer, if not replaced, would
adversely affect the Company. During 1998, the Company's three largest customers
accounted for approximately 53% of the Company's sales, and the Company's
largest customer accounted for approximately 28% of sales. The Company's future
sales are dependent on the success of its customers, some of which operate in
businesses associated with rapid technological change and consequent product
obsolescence. Developments adverse to the Company's major customers or their
products, or the failure of a major customer to pay for components or services,
could have an adverse effect on the Company.
The Company had a record year-end backlog of $317 million at December
31, 1998, as compared to the 1997 year-end backlog of $302 million. Although the
Company expects to fill substantially all of this backlog in 1999, at December
31, 1998, the Company had no long-term agreements with its customers and
customer orders can be canceled, changed or delayed by customers. The timely
replacement of canceled, changed or delayed orders with orders from new
customers cannot be assured, nor can there be any assurance that any of the
Company's current customers will continue to utilize the Company's services.
Gross profit increased $12.1 million, or 30.6% over 1997. Gross profit
as a percentage of sales decreased from 12.2% for 1997 to 9.9% for 1998. The
increase in gross profit was due primarily to higher sales volumes and normal
changes in product mix and customer mix. The Company's gross profit reflects a
number of factors, including product mix, the level of start up costs and
efficiencies associated with new programs, capacity utilization of surface mount
and other equipment, and pricing within the electronics industry. All of these
factors are continually changing and are interrelated, making it impracticable
to determine separately the effect of each factor. The decrease in gross profit
as a percentage of sales during 1998 was due primarily to a less profitable
customer mix, and a reduced capacity utilization, at the LCEC facility.
Selling, general and administrative expenses increased $4.9 million, or
37.9%, from 1997 to $17.7 million in 1998. In order to satisfy the increased
level of business activity and to continue the development and improvement of
the systems and processes necessary to accommodate future growth, the Company
has continued to add personnel. The increase in selling, general and
administrative expenses reflects these additional personnel and related
departmental expense, as well as the additional administrative expenses
resulting from the inclusion of LCEC for ten months of 1998. The Company
anticipates selling, general and administrative expenses will continue to
increase in nominal terms as the Company continues to build the internal
management and support systems necessary to support higher revenue levels.
The amortization of goodwill for the years ended December 31, 1998 and
1997 was $3.3 million and $1.7 million, respectively. Interest expense incurred
by the Company on the debt incurred in connection with the acquisitions of LCEC
in 1998 and EMD Technologies, Inc. (EMD) in 1996 was approximately $4.4 million
and $2.5 million, respectively, in 1998 and 1997. The
increased amortization and interest expense in 1998 resulted from the additional
goodwill and debt incurred in connection with the acquisition of LCEC during
1998.
Interest income was approximately $0.5 million in 1998 compared to $1.2
million in 1997. The decrease was due to the use of a portion of the Company's
cash and interest bearing marketable securities to fund the acquisition of LCEC.
Income tax expense of $10.5 million represented an effective tax rate of
39.1% for the year ended December 31, 1998, compared with an effective tax rate
of 37% for the year ended December 31, 1997. The increase is due primarily to
the increase in nondeductible amortization of goodwill.
The Company reported net income of approximately $16.4 million, or
diluted earnings of $1.35 per share, for 1998 compared with net income of
approximately $15.1 million, or diluted earnings of $1.26 per share for 1997.
The approximately $1.3 million increase in net income during 1998 was a result
of the combined effects of the acquisition of LCEC and the overall increase in
revenues resulting from the factors discussed above.
Year Ended December 31, 1997 Compared With Year Ended December 31, 1996
Sales in 1997 increased $123.9 million, or 61.6% over 1996 sales. The increase
in sales resulted primarily from increased sales volume from existing customers,
the addition of new customers and the acquisition of EMD on July 30, 1996.
A substantial percentage of the Company's sales have been to a small
number of customers, and the loss of a major customer, if not replaced, would
adversely affect the Company. During 1997, the Company's three largest customers
accounted for approximately 55.8% of the Company's sales, and the Company's
largest customer accounted for approximately 37% of sales.
The Company had a then record year-end backlog of $302 million at
December 31, 1997, as compared to the 1996 year-end backlog of $230 million.
Gross profit increased $16.3 million, or 69.8% over 1996. Gross profit
as a percentage of sales increased from 11.6% for 1996 to 12.2% for 1997. The
increase in gross profit was due primarily to higher sales volumes and normal
changes in product mix and customer mix. The Company's gross profit reflects a
number of factors, including product mix, the level of start up costs and
efficiencies associated with new programs, capacity utilization of surface mount
and other equipment, and pricing within the electronics industry. All of these
factors are continually changing and are interrelated, making it impracticable
to determine separately the effect of each factor. The increase in gross profit
as a percentage of sales during 1997 was due primarily to the product mix and
the initiation of new programs during 1996.
Selling, general and administrative expenses increased $5.6 million, or
77.3%, from 1996 to $12.8 million. In order to satisfy the increased level of
business activity and to continue the development and improvement of the systems
and processes necessary to accommodate future growth, the Company has continued
to add personnel. The increase in selling, general and administrative expenses
reflects these additional personnel and related departmental expense, as well as
the additional administrative expenses resulting from the inclusion of EMD in
the full year of 1997.
The amortization of goodwill associated with the acquisition of EMD for
the year ended December 31, 1997 and 1996 was $1.7 million and $0.7 million,
respectively. Interest expense incurred by the Company on the debt incurred in
connection with the acquisition of EMD was approximately $2.5 million and $1.4
million, respectively, in 1997 and 1996. The increased amortization and interest
expense in 1997 reflected the effect of including EMD's operations for a full
year.
Interest income was approximately $1.2 million in 1997 compared to $0.4
million in 1996. The increase was due to the investment by the Company of
available cash in interest bearing marketable securities and cash equivalents.
Income tax expense of $8.9 million represented an effective tax rate of
37% for the year ended December 31, 1997, compared with an effective tax rate of
38.8% for the year ended December 31, 1996. The decrease was due to the benefit
from the use of a foreign sales corporation and non-taxable interest earned on
municipal investments partially offset by nondeductible amortization of
goodwill.
The Company reported net income of approximately $15.1 million, or
diluted earnings of $1.26 per share, for 1997 compared with net income of
approximately $8.9 million, or diluted earnings of $0.96 per share for 1996. The
approximately $6.2 million increase in net income during 1997 was a result of
the combined effects of the acquisition of EMD and the overall increase in
income from operations resulting from the factors discussed above.
Liquidity and Capital Resources
The Company has financed its growth and operations through funds generated from
operations, proceeds from the sale of its common stock and funds borrowed under
its credit facilities.
Cash provided by operating activities was $56.9 million, $19.3 million
and $12.3 million in 1998, 1997 and 1996, respectively. In 1998, substantial
decreases in inventory and accounts receivable, net of effects from the
acquisition of LCEC, and increases in net income, depreciation and amortization
were partially offset by increases in accounts payable. The Company's
inventories have decreased from $61.1 million at December 31, 1997 to $53.7
million at December 31, 1998, reflecting improved
customer forecasting and the Company's emphasis on supply chain management. In
1997, substantial increases in inventory were partially offset by net income,
depreciation and amortization, and increases in accounts payable. The Company's
inventories increased from $48.1 million at December 31, 1996 to $61.1 million
at December 31, 1997, reflecting the Company's increased sales and backlog
during this period. In 1996, substantial increases in accounts receivable were
offset by net income, depreciation and amortization, and increases in accounts
payable and accrued liabilities and decreases in inventory, net of effects from
the acquisition of EMD. The Company's accounts receivable and inventories
increased from $20.2 million and $23.0 million, respectively, at December 31
1995 to $39.2 million and $48.1 million, respectively at December 31, 1996,
reflecting the Company's increased sales during this period. The Company expects
increases in inventories to support the anticipated growth in sales. The Company
continued and is continuing the practice of purchasing components only after
customer orders 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. In certain instances,
suppliers may allocate available quantities to the Company. The Company has not
experienced significant supply constraints in the past year nor does it expect
to in the near future.
Cash used in investing activities was $78.7 million, $12.4 million and
$49.0 million, respectively, for the years ended December 31, 1998, 1997 and
1996. On February 23, 1998, the Company completed its acquisition of LCEC for
approximately $70.7 million in cash. See Note 2 of Notes to Consolidated
Financial Statements. Capital expenditures of $12.2 million during 1998
consisted primarily of test and manufacturing production equipment and computer
equipment to support the Company's implementation of the new ERP system. During
1998, the Company invested $7.4 million on the new ERP software system. Capital
expenditures of $10.4 million during 1997 were primarily concentrated in surface
mount assembly, test and manufacturing production equipment. The Company
completed the planned expansion of its production capacity at the Angleton plant
during 1996, after which the Company had 12 surface mount assembly lines in
operation at the Angleton plant. Capital expenditures of $8.7 million during
1996 were primarily concentrated in the expansion of the Angleton facility and
surface mount assembly equipment associated with this expansion. On July 30,
1996, the Company completed its acquisition of EMD for approximately $30.8
million in cash. See Note 2 of Notes to Consolidated Financial Statements. The
Company used $11.4 million of proceeds from the sale of interest bearing
marketable securities during 1998, for the purpose of paying a portion of the
purchase price of LCEC. During 1997 and 1996, the Company invested $2.3 million
and $9.5 million, respectively of available cash in interest bearing marketable
securities.
Cash provided by financing activities was $23.9 million, $0.4 million
and $47.7 million, respectively, for the years ended December 31, 1998, 1997 and
1996. During 1998, cash provided by financing activities consisted primarily of
$40.0 million of proceeds from the issuance of long-term debt offset by $16.2
million of principal payments on long-term debt. During 1997, cash provided by
financing activities consisted primarily of $0.7 million of proceeds from stock
options exercised, offset by $0.2 million of principal payments on long-term
debt. During 1996, cash provided by financing activities consisted primarily of
$30 million of proceeds from the issuance of long-term debt, $28.5 million of
net proceeds from the public offering of common shares, offset by $10.9 million
of principal payments on long-term debt.
On March 1, 1999, the Company acquired certain assets from Stratus
Computer Ireland (Stratus), a wholly-owned subsidiary of Ascend Communications,
Inc. (Ascend), for approximately $48 million, subject to adjustment. Under the
terms of the agreement, Ascend will outsource the manufacture of certain of its
systems to the Company for at least three years and the Company hired
approximately 260 employees. In conjunction with the purchase of the Stratus
assets, the Company increased its revolving line of credit to $65 million and
borrowed $25 million. The Company is entitled to borrow under the line of credit
up to the lesser of $65 million or the sum of 75% of its eligible accounts
receivable and 25% of its eligible inventories. As of December 31, 1998, the
Company had no outstanding debt under its line of credit.
The Company's operations are subject to certain federal, state and local
regulatory requirements relating to environmental, waste management, health and
safety matters. Some risk of costs and liabilities related to these matters is
inherent in the Company's business as with many similar businesses. Management
believes that the Company's business is operated in substantial compliance with
applicable environmental, waste management, health and safety regulations.
The Company may require additional capital to finance further
enhancements to or acquisitions or expansions of its manufacturing capacity.
Management believes that the level of working capital will continue to grow at a
rate generally consistent with the growth of the Company's operations. Although
no assurance can be given that future financing will be available on terms
acceptable to the Company, the Company may seek additional funds from time to
time through public or private debt or equity offerings or through bank
borrowings to the extent permitted by its existing debt agreements. Management
believes that the existing cash balances, funds generated from operations, and
borrowings under Company's credit facility will be sufficient to permit the
Company to meet its liquidity requirements in 1999 and for the foreseeable
future.
The Company does not hold or issue derivative financial instruments in
the normal course of business. Inflation and changing prices have not
significantly affected the Company's operating results or the markets in which
the Company performs services during recent years.
Year 2000 Issues
The Company recognizes that it must ensure that its products and operations will
not be adversely impacted by Year 2000 software failures which can arise in
date-sensitive software applications which utilize a field of two digits rather
than four to define a specific year. Absent corrective actions, date-sensitive
software may recognize a date using "00" as the year 1900 rather than the year
2000. This could result in system failures or miscalculations causing
disruptions to various activities and operations.
Many of the Company's business and operating systems are currently Year
2000 compliant, and the Company initiated a review of those systems during 1997
to address those systems that are not currently Year 2000 compliant. Areas
addressed included major third-party suppliers of components of the Company's
products as well as full reviews of the Company's manufacturing equipment,
telephone and voice mail systems, security systems and other office support
systems. The Company has also initiated formal communications with significant
suppliers and customers to determine the extent to which the Company is
vulnerable to those third parties' failure to remediate their own Year 2000
issues. Based on its inquiries to date, the Company believes satisfactory
progress is being made by its significant suppliers and customers on Year 2000
issues. No significant information technology initiatives have been deferred by
the Company as a result of its Year 2000 project.
In addition, the Company has selected Baan U.S.A., Inc. to provide an
Enterprise Resource Planning System, which will be Year 2000 compliant, to
improve processes and to increase efficiencies. The new Enterprise Resource
Planning System implementation is scheduled for completion at all locations by
November 1999. All necessary Year 2000 upgrades of major systems, including
those supplied by vendors, have been identified and conversion strategies
developed and are under deployment.
The estimated total cost to address the Company's Year 2000 issues,
including the cost associated with the new Enterprise Resource Planning System,
is approximately $13.5 million. Costs incurred and expected to be incurred
consist primarily of the cost of Company personnel involved in updating
applications and operating systems and the costs of software updates and patches
(many of which are provided free of charge from the vendors). The estimated
total cost associated with the purchase and implementation of the new Enterprise
Resource Planning System is approximately $13 million. The costs of this
software will be capitalized and amortized over the estimated useful life of the
software, and costs associated with the preliminary project stage and
post-implementation stage has been and will be expensed as incurred. The year
2000 component of this system can not be readily segregated from the total cost
of the company-wide Enterprise Resource Planning System implementation. The
total amount expended on Year 2000 issues and the new Enterprise Resource
Planning System through December 31, 1998, is approximately $9 million, of which
$8.8 million related to the new Enterprise Resource Planning System
implementation and approximately $200,000 related to the cost of identifying and
communicating with third parties and installing software patches. The costs of
the Year 2000 process and the timetable on which the Company believes it will
complete any Year 2000 modifications are based on management's best estimates,
which are derived utilizing a number of assumptions of future events, including
the availability of certain resources and other factors. However, there can be
no guarantee that these estimates will be achieved and actual results could
differ materially from those anticipated. Specific factors that might cause such
material differences include, but are not limited to, the availability and cost
of personnel trained in this area, the ability to locate and correct all
relevant computer codes and similar uncertainties. In addition, there can be no
assurance that the systems of other companies on which the Company's systems
rely will be converted on a timely basis or that such failure by another company
to convert would not have an adverse effect on the Company's systems.
There is considerable uncertainty inherent in assessing the Company's
vulnerability to Year 2000 problems, arising in part from the uncertainty of the
Year 2000 readiness of the Company's suppliers and customers. It is possible
that the failure to correct a material Year 2000 problem could result in an
interruption in, or a failure of, certain normal business operations, and that
such failures could materially and adversely affect the Company's results of
operations, liquidity and financial condition. Based on the information
available to it, and subject to the effect of the general uncertainty on the
Company's ability to make a definitive determination, the Company does not
believe it has any material exposure to significant business interruption as a
result of the Year 2000 problem, or that the cost of remedial actions will have
a material adverse effect on its business, financial condition or result of
operations.
The steps taken by the Company to address the Year 2000 issues are
expected to reduce significantly the Company's level of uncertainty about the
Year 2000 problem and, in particular, about the Year 2000 compliance and
readiness of its material third party suppliers and customers. The Company
believes that, with the implementation of the Enterprise Resource Planning
System and completion of identifying and communicating with third parties as
scheduled, the possibility of significant interruptions of normal operations
should be reduced.
Accordingly, and as the program is on schedule to be completed during
the fall of 1999, the Company has not formulated a worse case scenario in the
event its Year 2000 project is not completed in a timely manner. The Company has
a contingency plan in place in the event all scheduled implementations are not
completed by the end of 1999. All necessary Year 2000 upgrades of major systems
and software patches, including those supplied by vendors, have been identified
and conversion strategies are under deployment.
Consolidated Balance Sheets
Benchmark Electronics, Inc. and Subsidiaries
December 31,
------------------------------
1998 l997
------------- -------------
Assets
Current assets:
Cash and cash equivalents ................................................ $ 23,076,582 $ 21,029,347
Accounts receivable, net ................................................. 57,178,757 39,772,435
Income taxes receivable ...................................................... 1,120,343 313,594
Inventories .............................................................. 53,718,247 61,133,963
Prepaid expenses and other assets ........................................ 1,896,888 1,545,110
Deferred tax asset ....................................................... 2,488,328 1,359,205
------------- -------------
Total current assets .............................................. 139,479,145 125,153,654
Property, plant and equipment ................................................ 80,826,164 54,061,241
Accumulated depreciation ..................................................... (35,264,179) (23,245,264)
------------- -------------
Net property, plant and equipment ................................. 45,561,985 30,815,977
Goodwill, net ................................................................ 48,906,481 22,680,551
Marketable securities ........................................................ -- 11,430,757
Other ........................................................................ 7,948,086 240,859
------------- -------------
$ 241,895,697 $ 190,321,798
------------- -------------
Liabilities and Shareholders' Equity Current liabilities:
Current installments of long-term debt ................................... $ 8,199,910 $ 155,505
Accounts payable ......................................................... 37,046,161 31,694,123
Accrued liabilities ...................................................... 7,968,412 5,424,939
------------- -------------
Total current liabilities ......................................... 53,214,483 37,274,567
Long-term debt, excluding current installments ............................... 46,110,646 30,329,828
Deferred tax liability ....................................................... 4,569,654 1,845,846
Shareholders' equity:
Preferred shares, $.10 par value; 5,000,000 shares authorized, none issued -- --
Common shares, $.10 par value; 30,000,000 shares authorized: issued
11,676,967 and 11,623,252, respectively; outstanding 11,627,483
and 11,573,768, respectively ......................................... 1,162,748 1,157,376
Additional paid-in capital ............................................... 70,159,115 69,407,600
Retained earnings ........................................................ 66,800,001 50,427,531
Less treasury shares, at cost, 49,484 shares ............................. (120,950) (120,950)
------------- -------------
Total shareholders' equity ........................................ 138,000,914 120,871,557
Commitments and contingencies
------------- -------------
$ 241,895,697 $ 190,321,798
------------- -------------
See accompanying notes to consolidated financial statements.
Consolidated Statements of Income
Benchmark Electronics, Inc. and Subsidiaries
Year ended December 31,
-----------------------------------------------
1998 1997 1996
------------- ------------- -------------
Sales ........................................ $ 524,065,077 $ 325,229,015 $ 201,296,320
Cost of sales ................................ 472,354,251 285,630,163 177,981,328
------------- ------------- -------------
Gross profit ......................... 51,710,826 39,598,852 23,314,992
Selling, general and administrative expenses . 17,680,338 12,817,317 7,227,833
Amortization of goodwill ..................... 3,310,661 1,669,740 695,722
------------- ------------- -------------
Income from operations ............... 30,719,827 25,111,795 15,391,437
Interest expense ............................. (4,393,528) (2,472,183) (1,441,834)
Interest income .............................. 479,075 1,162,958 442,384
Other income ................................. 84,663 149,276 90,880
------------- ------------- -------------
Income before income taxes ........... 26,890,037 23,951,846 14,482,867
Income tax expense ........................... 10,517,567 8,862,183 5,619,352
------------- ------------- -------------
Net income ........................... $ 16,372,470 $ 15,089,663 $ 8,863,515
------------- ------------- -------------
Earnings per share:
Basic .................................... $ 1.41 $ 1.31 $ 0.99
Diluted .................................. $ 1.35 $ 1.26 $ 0.96
------------- ------------- -------------
Weighted average number of shares outstanding:
Basic .................................... 11,594,271 11,508,407 8,976,192
Diluted .................................. 12,098,349 12,003,741 9,217,801
------------- ------------- -------------
See accompanying notes to consolidated financial statements.
Consolidated Statements of Shareholders' Equity
Benchmark Electronics, Inc. and Subsidiaries
Additional Total
Common paid-in Retained Treasury shareholders'
Shares shares capital earnings shares equity
------------- ------------- ------------- ------------- ------------- -------------
Balances, December 31, 1995 .... 8,042,800 $ 804,280 $ 19,466,385 $ 26,474,353 $ (120,950) $ 46,624,068
Common shares issued in public
offering, net of expenses ... 2,033,000 203,300 28,287,841 -- -- 28,491,141
Stock options exercised ........ 51,340 5,134 402,310 -- -- 407,444
Federal tax benefit of stock
options exercised ........... -- -- 88,536 -- -- 88,536
Acquisition of
EMD Technologies, Inc. ..... 1,349,928 134,992 20,375,814 -- -- 20,510,806
Net income ..................... -- -- -- 8,863,515 -- 8,863,515
Effect of difference between
fair value and cost of shares
released from collateral .... -- -- 13,904 -- -- 13,904
------------- ------------- ------------- ------------- ------------- -------------
Balances, December 31, 1996 .... 11,477,068 1,147,706 68,634,790 35,337,868 (120,950) 104,999,414
Stock options exercised ........ 96,700 9,670 669,927 -- -- 679,597
Federal tax benefit of stock
options exercised .......... -- -- 154,820 -- -- 154,820
Net income ..................... -- -- -- 15,089,663 -- 15,089,663
Other .......................... -- -- (51,937) -- -- (51,937)
------------- ------------- ------------- ------------- ------------- -------------
Balances, December 31, 1997 .... 11,573,768 1,157,376 69,407,600 50,427,531 (120,950) 120,871,557
Stock options exercised ........ 53,715 5,372 487,870 -- -- 493,242
Federal tax benefit of
stock options exercised .... -- -- 263,645 -- -- 263,645
Net income ..................... -- -- -- 16,372,470 -- 16,372,470
------------- ------------- ------------- ------------- ------------- -------------
Balances, December 31, 1998 .... 11,627,483 $ 1,162,748 $ 70,159,115 $ 66,800,001 $ (120,950) $ 138,000,914
------------- ------------- ------------- ------------- ------------- -------------
See accompanying notes to consolidated financial statements.
Consolidated Statements of Cash Flows
Benchmark Electronics, Inc. and Subsidiaries
Year ended December 31,
--------------------------------------------
1998 1997 1996
------------ ------------ ------------
Cash flows from operating activities:
Net income .................................................... $ 16,372,470 $ 15,089,663 $ 8,863,515
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization ............................. 13,306,975 10,150,586 5,723,922
Amortization of premiums on marketable securities ......... 46,026 342,193 25,940
Deferred income taxes ..................................... 2,305,482 (314,801) 408,346
Federal tax benefit of stock options exercised ............ 263,645 154,820 88,536
Amortization of goodwill .................................. 3,310,661 1,669,740 695,722
Gain on the sale of property, plant and equipment ......... (3,696) (86,973) (42,878)
ESOP shares contribution .................................. -- -- 13,904
Changes in operating assets and liabilities, net of effects
from acquisitions of businesses:
Accounts receivable .................................... 7,403,982 (589,806) (10,119,586)
Income taxes receivable ................................ (806,749) 74,270 994,179
Inventories ............................................ 30,930,316 (13,033,625) 3,131,340
Prepaid expenses and other assets ...................... (353,729) (729,367) (124,259)
Accounts payable ....................................... (15,369,675) 7,341,651 1,782,239
Accrued liabilities .................................... (552,417) (779,596) 895,208
------------ ------------ ------------
Net cash provided by operations ..................... 56,853,291 19,288,755 12,336,128
Cash flows from investing activities:
Additions to property, plant and equipment .................... (12,204,071) (10,352,112) (8,684,400)
Additions to capitalized software ............................. (7,383,410) -- --
Proceeds from the sale of property, plant and equipment ....... 182,810 168,912 75,281
Acquisitions, net of cash acquired ............................ (70,679,312) -- (30,833,300)
Proceeds from the sale of marketable securities ............... 11,384,731 -- --
Purchase of marketable securities ............................. -- (2,264,716) (9,534,174)
------------ ------------ ------------
Net cash used in investing activities .................. (78,699,252) (12,447,916) (48,976,593)
Cash flows from financing activities:
Net proceeds from public offering of common shares ............ -- (51,937) 28,491,141
Proceeds from issuance of long-term debt ...................... 40,000,000 -- 30,000,000
Principal payments on long-term debt .......................... (16,174,777) (239,165) (10,928,329)
Debt issuance costs ........................................... (425,269) -- (315,114)
Proceeds from stock options exercised ......................... 493,242 679,597 407,444
------------ ------------ ------------
Net cash provided by financing activities .............. 23,893,196 388,495 47,655,142
Net increase in cash and cash equivalents ......................... 2,047,235 7,229,334 11,014,677
Cash and cash equivalents at beginning of year .................... 21,029,347 13,800,013 2,785,336
Cash and cash equivalents at end of year .......................... $ 23,076,582 $ 21,029,347 $ 13,800,013
------------ ------------ ------------
Supplemental disclosures of cash flow information:
Income taxes paid ............................................. $ 8,755,264 $ 8,491,894 $ 4,171,224
------------ ------------ ------------
Interest paid ................................................. $ 4,264,706 $ 2,537,089 $ 369,021
------------ ------------ ------------
See accompanying notes to consolidated financial statements.
Notes to Consolidated Financial Statements
Note 1 -- Summary of Significant Accounting Policies
(a) Business
Benchmark Electronics, Inc. (the Company) is a Texas corporation which provides
contract manufacturing and design services to original equipment manufacturers
(OEMs) in select industries, including medical devices, communications
equipment, industrial and business computers, testing instruments, and
industrial controls.
(b) Principles of Consolidation The consolidated financial statements
include the financial statements of Benchmark Electronics, Inc. and its wholly
owned subsidiaries. All significant intercompany balances and transactions have
been eliminated in consolidation.
(c) Cash and Cash Equivalents The Company considers all highly liquid debt
instruments with an original maturity of three months or less to be cash
equivalents.
(d) Marketable Securities Management determines the appropriate
classification of its investments in debt and equity securities at the time of
purchase and reevaluates such determination at each balance sheet date. Debt
securities for which the Company does not have the intent or ability to hold to
maturity are classified as available for sale. Securities available for sale are
carried at fair value, with the unrealized gains and losses, net of tax,
reported in shareholders' equity as other comprehensive income. Held-to-maturity
securities are recorded at amortized cost, adjusted for the amortization or
accretion of premiums or discounts to maturity.
Such amortization and interest are included in interest income. Realized
gains and losses from the sale of available for sale securities are included in
other income or expense and are determined on a specific identification method.
At December 31, 1997, the Company's investments in marketable securities
consisted of Texas state guaranteed obligation bonds with an amortized cost of
$4,831,833, fair value of $4,851,000 and unrealized gain of $19,167; Lynnwood,
Washington guaranteed obligation bonds with an amortized cost of $4,359,096,
fair value of $4,362,000 and unrealized gain of $2,904; Austin, Texas guaranteed
obligation bonds with an amortized cost of $1,213,257, fair value of $1,212,000,
and unrealized loss of $1,257; and Maryland state guaranteed obligation bonds
with an amortized cost of $1,026,571, fair value of $1,032,000, and unrealized
gain of $5,429. These investments were sold during 1998 in connection with the
purchase of Lockheed Commercial Electronics Company (LCEC).
(e) Inventories
Inventories include material, labor and overhead and are stated at the lower of
cost (first-in, first-out) or market.
(f) Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation is calculated on
the straight-line method over the useful lives of the assets, which range from
three to thirty years. 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.
In assessing and measuring impairment of long-lived assets, the Company
applies the provisions of Statement of Financial Accounting Standard (SFAS) No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of". This Statement requires that long-lived assets and
certain identifiable intangibles be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable.
(g) Goodwill and Other Assets
Goodwill, which represents the excess of purchase price over fair value of net
assets acquired, is amortized on a straight-line basis over the period of
expected benefit of 15 years. The accumulated amortization of goodwill at
December 31, 1998 and 1997 was $5,676,123 and $2,365,462, respectively. The
carrying value of goodwill will be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of the acquired
assets may not be recoverable. If the sum of the estimated future cash flows
(undiscounted) expected to result from the use and eventual disposition of an
asset is less than the carrying amount of the asset, an impairment loss is
recognized. Measurement of an impairment loss is based on the fair value of the
asset. Other assets consists of capitalized software costs, which are amortized
over the estimated useful life of the related software and deferred financing
costs, which are amortized over the life of the related debt. During 1998,
$7,383,410 of software costs was capitalized in connection with the new ERP
system implementation. The accumulated amortization of deferred financing costs
at December 31, 1998 and 1997 was $207,311 and $85,521, respectively.
(h) 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 options to purchase common stock. Incremental shares of
504,078, 495,334, and 241,609 in 1998, 1997 and 1996, respectively, were used in
the calculation of diluted earnings per share. Options to purchase 3,000 and
124,000 shares of common stock in 1998 and 1997, respectively, were not included
in the computation of diluted earnings per share because the option exercise
price was greater than the average market price of the common stock.
(i) Revenue Recognition
Revenues are recognized at the time the circuit boards are shipped to the
customer, for both turnkey and consignment method sales. Under the consignment
method, OEMs provide the Company with the electronic components to be assembled,
and the Company recognizes revenue only on the labor used to assemble the
product.
(j) Income Taxes
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.
(k) Stock Option Plans
On January 1, 1996, the Company adopted the provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation", which permits entities to recognize
as expense over the vesting period the fair value of all stock-based awards on
the date of grant. Alternately, SFAS No. 123 also allows entities to continue to
apply the provisions of Accounting Principles Board (APB) Opinion No. 25
"Accounting for Stock Issued to Employees", and provide pro forma net income and
pro forma earnings per share disclosures for employee stock option grants made
in 1995 and future years as if the fair-value-based method defined in SFAS No.
123 had been applied. The Company has elected to continue to apply the
provisions of APB Opinion No. 25 and provide the pro forma disclosure provisions
of SFAS No. 123. Under APB Opinion No. 25, compensation expense is recorded on
the date of grant only if the current market price of the underlying stock
exceeds the exercise price.
(l) Use of Estimates
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.
(m) Fair Values of Financial Instruments
The fair values of the Company's cash equivalents, accounts receivable, accrued
liabilities, and accounts payable approximated their carrying values due to the
short-term maturities of these instruments. The estimated fair value of
long-term debt approximates its carrying value based on the Company's current
incremental borrowing rates for similar types of borrowing agreements.
(n) Comprehensive Income
On January 1, 1998, the Company adopted SFAS No. 130, "Reporting Comprehensive
Income". SFAS No. 130 establishes standards for reporting and presentation of
comprehensive income and its components in a full set of financial statements.
The Company currently does not have any items that require additional
presentation of other comprehensive income. Accordingly, adoption of SFAS No.
130 did not affect the Company's consolidated financial statements.
(o) Business Segments
On January 1, 1998, the Company adopted SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information." The Company currently
operates in a single business segment. Accordingly, adoption of SFAS No. 131 did
not affect the Company's consolidated financial statements.
(p) Capitalized Software Costs
On January 1, 1998, the Company adopted the American Institute of Certified
Public Accountants (AICPA) statement of Position (SOP) 98-1, "Accounting for the
Costs of Computer Software Developed or Obtained for Internal Use" on a
prospective basis. SOP 98-1 establishes criteria for capitalizing certain costs
related to internal-use software. The adoption of SOP 98-1 did not have a
material impact on the Company's financial position, results of operations or
liquidity.
(q) Recently Enacted Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS No
133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No.
133 establishes methods of accounting for derivative financial instruments and
hedging activities related to those instruments as well as other hedging
activities. The Company expects that the adoption of SFAS No. 133 will have no
material impact on its financial position, results of operations or liquidity.
In April 1998, the AICPA issued SOP 98-5, "Reporting on the Costs of
Start-up Activities." SOP 98-5 requires that all start-up costs related to new
operations must be expensed as incurred. In addition, all start-up costs that
were capitalized in the past must be expensed when SOP 98-5 is adopted. The
Company expects that the adoption of SOP 98-5 will have no material impact on
its financial position, results of operations or cash flows. The Company will be
required to implement SOP 98-5 in 1999.
Note 2 -- Acquisitions
On February 23, 1998, the Company completed the acquisition of LCEC for
$70,679,312 in cash. LCEC, situated in Hudson, New Hampshire, provides a broad
range of services including printed circuit board assembly and test, system
assembly and test, prototyping, depot repair, materials procurement, and
engineering support services. The transaction was accounted for under the
purchase method of accounting, and accordingly, the results of operations of
LCEC since February 23, 1998 have been included in the consolidated statements
of income. The acquisition resulted in goodwill of $29,536,591 that is being
amortized on a straight-line basis over 15 years.
The net purchase price was allocated as follows:
Working capital, other than cash ......................... $ 30,574,621
Property, plant and equipment ............................ 15,904,987
Goodwill ................................................. 29,536,591
Other liabilities ........................................ (3,095,890)
Deferred income taxes .................................... (2,240,997)
------------
Purchase price, net of cash received .................. $ 70,679,312
------------
The following unaudited summary pro forma condensed financial information
reflects the acquisition of LCEC as if the acquisition had occurred on January
1, 1997 for purposes of the consolidated statements of income. The summary pro
forma information is not necessarily representative of what the Company's
results of operations would have been had the acquisition in fact occurred on
January 1, 1997 and is not intended to project the Company's results of
operations for any future period or date. (in thousands, except per share data)
1998 1997
-------- --------
Net sales ............................................ $548,335 607,439
Gross Profit ......................................... 50,091 52,069
Income from operations ............................... 27,004 25,615
Net income ........................................... 13,796 12,453
Earnings per share:
Basic .............................................. $ 1.19 1.08
Diluted ............................................ $ 1.14 1.04
Weighted average number of shares outstanding:
Basic .............................................. 11,594 11,508
Diluted ............................................ 12,098 12,003
On July 30, 1996, the Company completed its acquisition of EMD Technologies,
Inc. (EMD). This business, headquartered in Winona, Minnesota, was acquired for
1,349,928 shares of common stock, $30,447,033 in cash, and the Company paid
$2,208,136 in acquisition costs. The transaction was accounted for under the
purchase method of accounting, and accordingly, the results of operations of EMD
since July 30, 1996 have been included in the consolidated statements of income.
The acquisition resulted in goodwill of $25,046,013, which is being amortized on
a straight line basis over 15 years.
The net purchase price was allocated as follows:
Working capital, other than cash ......................... $ 10,638,671
Property, plant and equipment ............................ 17,598,785
Other assets ............................................. 12,379
Goodwill ................................................. 25,046,013
Other liabilities ........................................ (1,951,742)
------------
Purchase price, net of cash received .................. $ 51,344,106
------------
Net cash portion of purchase price ....................... $ 30,833,300
Common stock issued ...................................... 20,510,806
------------
Purchase price, net of cash received ..................... $ 51,344,106
------------
Note 3 -- Inventories
Inventory costs are summarized as follows:
December 31,
---------------------------------
1998 1997
----------- -----------
Raw materials ...................... $39,230,450 41,837,205
Work in process .................... 14,487,797 19,296,758
----------- -----------
$53,718,247 61,133,963
----------- -----------
Note 4 -- Property, Plant and Equipment Property, plant and equipment consists
of the following:
December 31,
-------------------------------
1998 1997
----------- -----------
Land ................................... $ 391,969 391,969
Buildings .............................. 8,441,221 8,417,497
Machinery and equipment ................ 64,189,215 38,025,436
Furniture and fixtures ................. 6,856,395 6,480,183
Vehicles ............................... 14,383 14,383
Leasehold improvements ................. 750,111 731,773
Construction in progress ............... 182,870 --
----------- -----------
$80,826,164 54,061,241
----------- -----------
Note 5 -- Borrowing Facilities Long-term debt consists of the following:
December 31,
1998 1997
----------- -----------
Senior note ............................ $30,000,000 30,000,000
Term loan .............................. 24,000,000 --
Other .................................. 310,556 485,333
----------- -----------
Total long-term debt ................ 54,310,556 30,485,333
Less current installments .............. 8,199,910 155,505
----------- -----------
Long-term debt ......................... $46,110,646 30,329,828
----------- -----------
In order to finance a portion of the cash consideration for the acquisition
of EMD, the Company issued a $30 million, 8.02% Senior Note due 2006 ("Senior
Note") to Northwestern Mutual Life Insurance Company. The Senior Note is
unsecured and guaranteed by each of the Company's United States subsidiaries.
Principal on the Senior Note is payable in annual installments of $5.0 million
beginning July 31, 2001 with a final installment on the unpaid principal amount
due July 31, 2006. Interest on the Senior Note is payable semi-annually on
January 31st and July 31st.
The purchase agreement relating to the Senior Note (the "Purchase
Agreement") includes customary affirmative and negative covenants and restricts
the ability of the Company to incur additional debt and to pay dividends. Upon
any prepayment of all or a portion of the Senior Note, the Company is obligated
to pay the holder a premium on the amount prepaid. The Purchase Agreement
contains a provision that in the event of a change of control (defined generally
to mean the acquisition by a person or group (as defined in the Securities
Exchange Act of 1934, as amended, and the rules and regulations thereunder) of
beneficial ownership of more than 50% of the total voting power of the
outstanding voting stock of the Company), the Company must offer to repurchase
the Senior Note at par plus any prepayment penalty.
In connection with the acquisition of LCEC on February 23, 1998, the
Company obtained $40 million through borrowings under a five-year term loan (the
Term Loan) with a commercial bank. Principal on the Term Loan is payable in
quarterly installments of $2.0 million beginning June 30, 1998 with a final
installment of the unpaid principal amount due March 31, 2003. The Term Loan
bears interest, at the Company's option, at either the bank's Eurodollar rate
plus .625% to 1.375% or its prime rate, and interest is payable quarterly. The
margin on the Eurodollar rate fluctuates with the Company's ratio of debt to
earnings before interest, taxes, depreciation and amortization (EBITDA). The
Term Loan includes customary affirmative and negative covenants and restricts
the Company's ability to incur additional indebtedness and to pay dividends. As
of December 31, 1998, the Company had $24 million outstanding under the Term
Loan bearing interest at rates ranging from 5.8125% to 6.0625%.
The aggregate maturities of long-term debt for each of the five years
subsequent to December 31, 1998 are as follows: 1999, $8,199,910; 2000,
$8,019,693; 2001, $13,020,699; 2002, $5,021,756; 2003, $5,022,867 and thereafter
$15,025,631.
The Company has a $25 million revolving line of credit with a commercial
bank. The Company is entitled to borrow under the line of credit up to the
lesser of $25 million or the sum of 75% of its eligible accounts receivable and
25% of its eligible inventories. Interest on the line of credit is payable
quarterly, at the Company's option, at either the bank's Eurodollar rate plus
.625% to 1.375%
or its prime rate. A commitment fee of 0.25% per annum on the unused portion of
the line of credit is payable quarterly in arrears. The line of credit agreement
contains certain financial covenants and restricts the ability of the Company to
incur additional debt without the consent of the bank and to pay dividends. The
line of credit matures on March 31, 2003. As of December 31, 1998 and 1997, the
Company had no borrowings outstanding under this line of credit.
Note 6 -- Commitments
The Company has several noncancelable operating leases for office space,
manufacturing facilities and manufacturing equipment that expire through 2006.
Rental expense for each of the years in the three-year period ended December 31,
1998 was $2,493,146, $1,354,607 and $921,526, respectively.
The Company leases manufacturing and office facilities in Minnesota from a
partnership whose partners include stockholders and a director of the Company.
These operating leases have initial terms of eight to ten years, expiring
through December 2006 with annual renewals thereafter. Total rent expense
associated with these leases for the years ended December 31, 1998, 1997 and
1996 was $828,900, $828,900 and $413,784, respectively.
Aggregate annual rental payments on future lease commitments at December
31, 1998 were as follows:
1999 ........................... $ 2,043,007
2000 ........................... 1,651,734
2001 ........................... 1,613,734
2002 ........................... 1,463,734
2003 ........................... 1,152,123
Thereafter ....................... 2,150,425
-----------
$10,074,757
-----------
Note 7 -- Common Stock and Stock Option Plans
During 1996, the Company issued 2,033,000 shares of common stock in a public
offering for net proceeds of $28,491,141.
The Company's stock option plan authorizes the Company, upon recommendation
of the compensation committee of the Board of Directors, to grant options to
purchase a total of 3,200,000 shares of the Company's common stock to key
employees of the Company.
The stock option plan provides for the discretionary granting by the
Company of "incentive stock options" within the meaning of Section 422A of the
Internal Revenue Code of 1986, as amended, as well as nonqualified stock
options. The exercise price of any incentive stock option must not be less than
the fair market value of the common stock on the date of grant. The stock
options will terminate no later than 10 years after the date of grant. Although
options may vest in increments over time, they historically have become 20%
vested two years after the options are granted and 100% vested after 5 years.
In December of 1994, the Board of Directors of the Company adopted the
Benchmark Electronics, Inc., 1994 Stock Option Plan for Non-Employee Directors
(the "Plan") for the benefit of members of the Board of Directors of the Company
or its Affiliates who are not employees of the Company or its Affiliates (as
defined in the Plan). The aggregate number of shares of Common Stock for which
options may be granted under the Plan is 200,000.
Under the terms of the Plan, each member of the Board of Directors of the
Company or its Affiliates who was not an employee of the Company or any of its
Affiliates on the date of the grant (a "Non-Employee Director") will receive a
grant of an option to purchase 3,000 shares of the Company's Common Stock upon
the date of his election or re-election to the Board of Directors. Additionally,
any Non-Employee Director who was a director on the date the Board of Directors
adopted the Plan received (a) an option to purchase 6,000 shares of Common Stock
for the fiscal year in which the Plan was adopted by the Board of Directors and
(b) an option to purchase shares of Common Stock in amount equal to (i) 6,000,
multiplied by (ii) the number of consecutive fiscal years (immediately preceding
the fiscal year during which the Plan was adopted) that the individual served as
a director of the Company, provided that the number under clause (ii) shall not
exceed three (3). During 1998, 1997 and 1996, pursuant to the Plan, 12,000,
24,000 and 30,000 options, respectively, were granted to Directors to purchase
shares of Common Stock at an exercise price of $21.38, $16.32 and $14.69 per
share, respectively.
The following table summarizes the activities relating to the Company's
stock option plans:
WEIGHTED
NUMBER OF AVERAGE
SHARES EXERCISE PRICE
---------- -------------
Balance at December 31, 1995 ................ 801,200 $ 9.85
Granted .................................. 653,000 $ 14.43
Exercised ................................ (51,340) $ 8.13
Canceled ................................. (45,200) $ 13.80
---------- -------------
Balance at December 31, 19961, .............. 357,660 $ 12.00
Granted .................................. 426,000 $ 19.27
Exercised ................................ (96,700) $ 7.03
Canceled ................................. (96,800) $ 15.95
---------- -------------
Balance at December 31, 1997 ................ 1,590,160 $ 14.11
Granted .................................. 653,000 $ 20.99
Exercised ................................ (53,715) $ 9.18
Canceled ................................. (80,000) $ 17.94
---------- -------------
Balance at December 31, 1998 ................ 2,109,445 $ 16.22
---------- -------------
The following table summarizes information concerning currently outstanding
and exercisable options:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------ -----------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
RANGE OF OUTSTANDING AVERAGE AVERAGE
EXERCISE NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
PRICES OUTSTANDING LIFE PRICE EXERCISABLE PRICE
- ---------------- ----------- ----------- -------- ----------- --------
$4.38-$10 ...... 170,200 4.16 $ 7.37 170,200 $ 7.37
$10-$15 ........ 887,245 6.71 $ 13.18 424,785 $ 12.49
$15-$20 ........ 532,000 8.41 $ 17.40 39,200 $ 15.88
$20-$25 ........ 393,000 8.94 $ 21.99 12,000 $ 21.35
$25-$30 ........ 127,000 8.52 $ 26.50 -- --
----------- ----------- -------- ----------- --------
2,109,445 646,185
----------- ----------- -------- ----------- --------
At December 31, 1998, the range of exercise prices and weighted average
remaining contractual life of outstanding options was $4.38 - $26.88 and 7.74
years, respectively.
At December 31, 1998, 1997 and 1996, the number of options exercisable was
646,185, 492,920 and 500,340, respectively, and the weighted average exercise
price of those options was $11.51, $10.30 and $9.20, respectively.
The Company applies APB Opinion No. 25 in accounting for its stock option
plans and, accordingly, no compensation cost has been recognized for its stock
options in the financial statements. Had the Company determined compensation
cost based on the fair value at the grant date for its stock options under SFAS
No. 123, the Company's net income would have been approximately $13,916,901, or
$1.15 per share diluted during 1998, $13,396,245, or $1.11 per share diluted
during 1997, and $7,851,515, or $0.85 per share diluted during 1996. Pro forma
net income reflects only options granted since 1995. The weighted average fair
value of the options granted during 1998, 1997, and 1996 is estimated as $6.41,
$8.55 and $5.23, respectively, on the date of grant using the Black-Scholes
option-pricing model with the following assumptions: no dividend yield for all
years, volatility of 30% for all years, risk-free interest rate of 4.33% to
5.86% in 1998, 5.46% to 6.57% in 1997 and 5.31% to 6.57% in 1996, assumed annual
forfeiture rate of 5% for all years, and an expected life of 4 years in 1998 and
5 years in 1997 and 1996.
Note 8 -- Income Taxes Income tax expense (benefit) consists of:
Year ended December 31,
--------------------------------------------
1998 1997 1996
----------- ----------- -----------
Federal - current ............. $ 7,275,581 8,178,203 4,322,471
State - current ............... 936,504 998,781 888,535
Federal/State - deferred ...... 2,305,482 (314,801) 408,346
----------- ----------- -----------
$10,517,567 8,862,183 5,619,352
----------- ----------- -----------
Income tax expense differed from the amounts computed by applying the U.S.
federal statutory income tax rate to pretax income as a result of the following:
Year ended December 31,
--------------------------------------------
1998 1997 1996
------------ ------------ ------------
Tax at statutory rate ............. $ 9,411,513 8,383,146 4,924,175
State taxes, net of federal benefit 608,728 649,208 586,433
Tax exempt interest ............... (165,288) (386,658) (49,882)
Tax benefit from use of
foreign sales corporation ...... (349,727) (393,839) (139,218)
Effect of foreign operations ...... 132,364 -- --
Amortization of goodwill .......... 1,122,751 562,413 236,545
Other ............................. (242,774) 47,913 61,299
------------ ------------ ------------
Total income tax expense .......... $ 10,517,567 8,862,183 5,619,352
------------ ------------ ------------
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December 31,
1998 and 1997 are presented below:
1998 1997
----------- -----------
Deferred tax assets:
Carrying values of inventories ............ $ 1,358,217 710,124
Accrued liabilities deductible
for tax purposes on a cash basis ....... 1,130,111 649,081
----------- -----------
2,488,328 1,359,205
Less valuation allowance ..................... -- --
----------- -----------
Net deferred tax assets ................. $ 2,488,328 1,359,205
----------- -----------
Deferred tax liabilities:
Plant and equipment, due to
differences in depreciation ............ $(4,442,867) (1,797,228)
Other ........................................ (126,787) (48,618)
----------- -----------
Gross deferred tax liability ................. (4,569,654) (1,845,846)
-----------
Net deferred tax liability .............. $(2,081,326) (486,641)
----------- -----------
Note 9 -- Major Customers
The Company's customers operate in businesses associated with rapid
technological change and consequent product obsolescence. Developments adverse
to the electronics industry, the Company's customers or their products could
impact the Company's overall credit risk.
The Company extends credit based on evaluation of its customers' financial
condition and generally does not require collateral or other security from its
customers and would incur an accounting loss equal to the carrying value of the
accounts receivable if its customer failed to perform according to the terms of
the credit arrangement.
Sales to major customers were as follows for the indicated periods:
YEAR ENDED DECEMBER 31,
------------------------------------------
(IN THOUSANDS) 1998 1997 1996
-------- -------- --------
Customer A .................. $148,674 -- --
Customer B .................. 70,908 42,983 28,638
Customer C .................. 58,424 120,500 33,680
Customer D .................. 19,033 13,381 8,938
Customer E .................. 18,919 -- --
In 1998, the Company had export sales of approximately $87 million to
Europe, $2 million to Canada, $92,000 to Asia, and $8,000 to Australia from the
Company's United States operations. In 1997 and 1996, the Company had export
sales of approximately $86 million and $29 million, respectively, to Europe from
the Company's United States operations.
Note 10 -- Employee Benefit Plans
The Company has a defined contribution plan qualified under Section 401(k) of
the Internal Revenue Code for the benefit of its employees. The Plan covers all
employees with at least one year of service. The Company has agreed to
contribute an amount equal to 50% of each participant's contributions to the
extent such participant's contribution does not exceed 4% of their compensation
for the year and 1% of each participant's compensation. A participant's
contribution may not exceed 20% of annual compensation, or the maximum amount
allowed as determined by the Internal Revenue Code. The Company may also make
discretionary contributions to the plan. During 1998, 1997 and 1996 the Company
made contributions to the plan of approximately $1,098,000, $689,000 and
$430,000, respectively.
Effective May 6, 1992, the Company adopted an Incentive Bonus Plan ("Bonus
Plan") for the benefit of its employees, including executive officers. The Bonus
Plan replaced the Company's Incentive Bonus Plan which was adopted in 1990. The
Bonus Plan is administered by the Compensation Committee. The total amount of
cash bonus awards to be made under the Bonus Plan for any plan year depends
primarily on the Company's sales and net income for such year.
For any plan year, the Company's sales and net income must meet or exceed,
or in combination with other factors satisfy, levels targeted by the Company in
its business plan, as established at the beginning of each fiscal year, for any
bonus awards to be made. Aggregate bonus awards to all participants under the
Bonus Plan may not exceed 7% of the Company's net income. The Compensation
Committee has the authority to determine the total amount of bonus awards, if
any, to be made to the eligible employees for any plan year based on its
evaluation of the Company's financial condition and results of operations, the
Company's business and prospects, and such other criteria as it may determine to
be relevant or appropriate. The Company expensed $1,434,000 in 1998, $738,000 in
1997 and $320,000 in 1996 in conjunction with the bonus plans.
Note 11 -- Concentrations of Business Risk
The Company uses numerous suppliers of electronic components and other materials
for its operations. Some components used by the Company have been subject to
industry-wide shortages, and suppliers have been forced to allocate available
quantities among their customers. The Company's inability to obtain any needed
components during periods of allocation could cause delays in manufacturing and
could adversely affect results of operations.
Note 12 -- 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, results of operations or liquidity.
Note 13-- Event Subsequent to Date of Auditors' Report (unaudited)
On March 1, 1999, the Company acquired certain assets from Stratus Computer
Ireland (Ireland), a wholly-owned subsidiary of Ascend Communications, Inc.
(Ascend) for approximately $48 million, subject to adjustment. In connection
with the transaction, the Company entered into a three-year supply agreement to
provide system integration services to Ascend and Stratus Holding Limited and
the Company hired 260 employees. In conjunction with the purchase of the Stratus
assets, the Company increased its revolving line of credit to $65 million and
borrowed $25 million.
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Benchmark Electronics, Inc.:
We have audited the accompanying consolidated balance sheets of Benchmark
Electronics, Inc. and subsidiaries as of December 31, 1998 and 1997, and the
related consolidated statements of income, shareholders' equity, and cash flows
for each of the years in the three-year period ended December 31, 1998. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Benchmark
Electronics, Inc. and subsidiaries as of December 31, 1998 and 1997, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1998, in conformity with generally accepted
accounting principles.
KPMG LLP
Houston, Texas
January 22, 1999
Management's Report
The management of Benchmark Electronics, Inc. has prepared and is
responsible for the consolidated financial statements and related financial data
contained in this report. The consolidated financial statements were prepared in
accordance with generally accepted accounting principles and necessarily include
certain amounts based upon management's best estimates and judgments. The
financial information contained elsewhere in this annual report is consistent
with that in the consolidated financial statements.
The Company maintains internal accounting control systems that are adequate
to prepare financial records and to provide reasonable assurance that the assets
are safeguarded from loss or unauthorized use. We believe these systems are
effective, and the cost of the systems does not exceed the benefits obtained.
The Audit Committee, composed exclusively of outside directors, has
reviewed all financial data included in this report. The committee meets
periodically with the Company's management and independent public accountants on
financial reporting matters. The independent public accountants have complete
access to the Audit Committee and may meet with the committee, without
management present, to discuss their audit results and opinions on the quality
of financial reporting.
The role of independent public accountants is to render a professional,
independent opinion on management's financial statements to the extent required
by generally accepted auditing standards. Benchmark's responsibility is to
conduct its affairs according to the highest standards of personal and corporate
conduct.
Donald E. Nigbor Cary T. Fu
President & Chief Executive Officer Executive Vice President
Corporate Information
Quarterly Financial Data (unaudited)
The following table sets forth certain unaudited quarterly information with
respect to the Company's results of operations for the years 1998, 1997 and
1996. Earnings per share are computed independently for each of the quarters
presented. Therefore, the sum of the quarterly earnings per share may not equal
the total earnings per share amounts for the fiscal year.
(In thousands, except per share data)
1998 Quarter
--------------------------------------------
1st 2nd 3rd 4th
-------- -------- -------- --------
Sales .......................... $108,046 132,636 139,645 143,738
Gross profit ................... 10,905 12,681 13,545 14,580
Net income ..................... 3,742 3,735 4,182 4,713
Earnings per common share:
Basic ....................... .32 .32 .36 .41
Diluted ..................... .31 .32 .35 .38
1997 Quarter
--------------------------------------------
1st 2nd 3rd 4th
-------- -------- -------- --------
Sales .......................... $ 75,724 78,156 83,183 88,166
Gross profit ................... 9,242 9,466 10,157 10,734
Net income ..................... 3,291 3,557 4,013 4,229
Earnings per common share:
Basic ....................... .29 .31 .35 .37
Diluted ..................... .28 .30 .33 .35
1996 Quarter
--------------------------------------------
1st 2nd 3rd 4th
-------- -------- -------- --------
Sales .......................... $ 30,383 33,500 62,304 75,109
Gross profit ................... 3,825 4,484 6,550 8,456
Net income ..................... 1,839 2,025 2,365 2,635
Earnings per common share:
Basic ....................... .23 .25 .26 .24
Diluted ..................... .22 .24 .26 .24
Market for the Registrant's Common Equity and Related Shareholder Matters
The Company's Common Stock is listed on the New York Stock Exchange under the
symbol "BHE." The following table shows the high and low sales prices for the
Common Stock as reported on the New York Stock Exchange for the fiscal quarters
(or portions thereof) indicated, as adjusted for the July 1997 stock split.
1 2 3 4
-------- -------- ------- --------
1997
High ................................ $16 5/16 20 1/4 28 3/16 29 15/16
Low ................................. $14 1/4 13 3/16 20 22
1998
High ................................ $28 1/4 24 15/16 25 1/2 37 1/2
Low ................................. $21 1/8 18 1/2 17 5/8 17 7/8
1999 (through March 19, 1999)
High ................................ $38 1/2 -- -- --
Low ................................. $28 1/8 -- -- --
The last reported sale price of Common Stock on March 19, 1999, as reported
by the New York Stock Exchange, was $28 3/4. There were approximately 100 record
holders of Common Stock as of March 19, 1999.
The Company has not paid any cash dividends on the Common Stock in the past
and anticipates that, for the foreseeable future, it will retain any earnings
available for dividends for use in its business.
Selected Financial Data
Benchmark Electronics, Inc. and Subsidiaries
Year ended December 31,
-------------------------------------------------------------
(In thousands, except per-share data) 1998 1997 1996 1995 1994
--------- --------- --------- --------- ---------
Selected Statements of Income Data
Sales ...................................... $ 524,065 $ 325,229 $ 201,296 $ 97,353 $ 98,168
Cost of sales .............................. 472,354 285,630 177,981 85,113 86,236
--------- --------- --------- --------- ---------
Gross profit .......................... 51,711 39,599 23,315 12,240 11,932
Selling, general and administrative expenses 17,680 12,817 7,228 2,990 3,154
Amortization of goodwill ................... 3,311 1,670 696 -- --
---------
Income from operations ................ 30,720 25,112 15,391 9,250 8,778
Interest expense ........................... (4,394) (2,472) (1,442) -- --
Interest income ............................ 479 1,163 442 268 252
Other income (expense) ..................... 85 149 92 13 11
Income tax expense ......................... (10,518) (8,862) (5,619) (3,383) (3,272)
--------- --------- --------- --------- ---------
Net income ............................ $ 16,372 $ 15,090 $8,864 $ 6,148 $ 5,769
--------- --------- --------- --------- ---------
Basic earnings per common share (1)
Earnings per common share (1) ......... $ 1.41 $ 1.31 $ 0.99 $ 0.77 $ 0.72
--------- --------- --------- --------- ---------
Weighted average number of
shares outstanding .................. 11,594 11,508 8,976 8,031 7,998
--------- --------- --------- --------- ---------
Diluted earnings per common share (1)
Earnings per common share (1) ......... $ 1.35 $ 1.26 $ 0.96 $ 0.75 $ 0.71
--------- --------- --------- --------- ---------
Weighted average number of
shares outstanding .................. 12,098 12,004 9,218 8,213 8,176
--------- --------- --------- --------- ---------
December 31,
----------------------------------------------------
(In thousands) 1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
Selected Balance Sheet Data
Working capital ........... $ 86,265 $ 87,879 $ 72,586 $ 37,285 $ 30,890
Total assets .............. 241,896 190,322 168,174 57,037 48,333
Long-term debt ............ 46,111 30,330 30,485 -- --
Shareholders' equity ...... $138,001 $120,872 $104,999 $ 46,624 $ 40,131
(1) See Note 1 of Notes to Consolidated Financial Statements for the basis of
computing earnings per common share.
Corporate and Shareholder Data
Officers
Donald E. Nigbor (1)
President and Chief Executive Officer
Steven A. Barton (2)
Executive Vice President
Cary T. Fu (1)
Executive Vice President
Lenora A. Gurton
Secretary
Gayla J. Delly
Treasurer
Christopher Nawrocki
Vice President;
President of Benchmark Electronics, Inc. -Winona Division
General Counsel
Bracewell & Patterson, L.L.P.
Houston, Texas
Independent Auditors
KPMG LLP
Houston, Texas
Directors
David H. Arnold
President and Chairman of the Board
DCM Tech, Inc.
Winona, Minnesota
(Machine Tool Manufacturing)
John C. Custer (4)
Retired - Former Chairman of the Board
Mason & Hanger-Silas Mason Co., Inc.
Lexington, Kentucky
(Technical services contracting and engineering firm)
Steven A. Barton
Executive Vice President
Benchmark Electronics, Inc.
Gerald W. Bodzy (3)
Senior Vice President and Managing Director
Stephens Inc.
Houston, Texas
(Investment banking)
Peter G. Dorflinger (3) (4)
President and Chief Operating Officer
GlasTech, Inc.
Austin, Texas
(Dental products manufacturer)
Cary T. Fu
Executive Vice President
Benchmark Electronics, Inc.
Donald E. Nigbor
President and Chief Executive Officer
Benchmark Electronics, Inc.
(1) Executive Officer
(2) Part-time since June 1993
(3) Member of Audit Committee
(4) Member of Compensation Committee
Notices
Stock Transfer Agent and Registrar
Communications concerning stock transfer requirements, lost certificates or
changes of address should be directed to:
Harris Trust and Savings Bank
c/o Harris Trust Company of New York
88 Pine Street, 19th floor
New York, NY 10005 800/926-1269.
Stock Trading
The common stock of Benchmark Electronics, Inc. trades on the New York Stock
Exchange under the symbol BHE.
SEC Form 10-K
Benchmark will provide a copy of the company's Annual Report on Form 10-K
(without exhibits) for the fiscal year ended December 31, 1998, filed with the
Securities and Exchange Commission, without charge upon written request to:
Gayla J. Delly
Treasurer
Benchmark Electronics, Inc.
3000 Technology Drive
Angleton, TX 77515
Financial Mailing List
Shareholders whose stock is held in trust or by a brokerage firm may receive
timely financial mailings directly from Benchmark by writing to Ms. Gayla J.
Delly at the above address.
Annual Meeting
Shareholders are invited to attend the Benchmark Electronics, Inc. annual
meeting, which will be held at 10:00 a.m. on Tuesday, May 11, 1999, at the
Doubletree Hotel at Allen Center, 400 Dallas Street, Houston, Texas.
This annual report is printed on recycled paper.
Back Cover:
Benchmark logo
3000 Technology Drive
Angleton, Texas 77515
(409) 849-6550
www.bench.com