EXHIBIT 99.3
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma condensed combined financial statements
give effect to the proposed acquisition by Benchmark of all the outstanding
capital stock of AVEX and Holdings, the related borrowings under a credit
facility (the Facility) and borrowings under a capital markets transaction
announced by Benchmark on August 2, 1999. (the Notes). The AVEX acquisition is
subject to customary conditions including approval from various governmental
agencies.
The AVEX acquisition will be accounted for under the purchase method of
accounting. The assets acquired and liabilities assumed will be recorded at
their fair values. The unaudited pro forma condensed combined financial
statements are based on the historical financial statements of Benchmark and
AVEX and the estimates and assumptions set forth below and in the notes to the
unaudited pro forma condensed combined financial statements. The unaudited pro
forma condensed balance sheet as of June 30, 1999 is presented as if the AVEX
acquisition had occurred on that date. The unaudited pro forma condensed
combined statements of operations for the year ended December 31, 1998, and the
six month period ended June 30, 1999, assume that the AVEX acquisition occurred
at the beginning of the earliest period presented.
The unaudited pro forma condensed combined financial statements should be
read in conjunction with the historical financial statements of Benchmark and
AVEX. The unaudited pro forma condensed combined financial statements do not
purport to represent what Benchmark's financial position or results of
operations would actually have been if the AVEX acquisition had been consummated
on the indicated dates, nor are they necessarily indicative of Benchmark's
financial position or results of operations for any future period. The results
of operations for the six months ended June 30, 1999, are not necessarily
indicative of the results to be expected for the entire year or any other
interim period.
The pro forma adjustments are based on preliminary assumptions and
estimates made by Benchmark management. The information necessary to account for
the AVEX acquisition in accordance with generally accepted accounting principles
is incomplete at this time. Accordingly, the unaudited pro forma condensed
combined financial statements assume that the recorded amounts of AVEX's assets
and liabilities approximate their fair values. The actual allocation of the
consideration paid for AVEX may differ from that reflected in the unaudited pro
forma condensed combined financial statements after a more extensive review of
the fair values of the assets acquired and liabilities assumed has been
completed. Accordingly, the allocation of the purchase price and the resultant
amortization of the excess purchase price, which are based on preliminary
estimates, may differ from the final purchase price allocation and amortization
periods.
THE AVEX ACQUISITION
The Stock Purchase Agreement provides that Benchmark will acquire AVEX for
a total purchase price of $255 million in cash and one million shares of
Benchmark Common Stock. In addition, the final purchase price is subject to an
adjustment for working capital changes, of which an estimate is reflected in the
pro forma adjustments.
Financing for the AVEX acquisition is expected to be provided through the
Facility and the Notes.
AVEX incurred a net loss of $9.7 million during the first six months of
1999 and $84.2 million during 1998. AVEX has taken a number of actions intended
to reduce its fixed and other costs and reverse this trend, including the
closure of two facilities in areas having relatively high labor costs and the
redeployment of the capital assets used in those facilities to plants in areas
having lower labor costs, resulting in improved manufacturing utilization; the
rationalization of its sales organization and the elimination of approximately
916 employee and contractor positions; and the redefinition of AVEX's customer
strategy to focus on fewer, more strategic accounts, with a reduction in the
total number of customers.
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As a result of some of the foregoing actions, AVEX recorded charges to
operations in 1998 totaling $33.4 million, including restructuring charges of
$15.7 million and the write down of various assets of $17.7 million.
Approximately $7.4 million of the restructuring charge relates to the severance
and related cost associated with the elimination of approximately 916 contractor
and employee positions. AVEX also closed its San Jose, California manufacturing
facility and discontinued a design center. As a result, the restructuring charge
also included a $6.0 million write down to fair value of certain equipment and
leasehold improvements, $2.0 million related to the write off of certain prepaid
assets. The write down of various assets totaling $17.7 million, which included
adjustments to inventory, accounts receivable and other assets, is included in
cost of sales and selling, general and administrative expenses. In the
preparation of the unaudited pro forma condensed combined financial statements,
the $7.8 million of charges related to the closing of the San Jose, California
facility have been excluded as a pro forma adjustment. These charges relate to a
facility not a part of AVEX at the time Benchmark expects to close the AVEX
acquisition. The remaining charges of $25.6 million have been included in the
Unaudited Pro Forma Condensed Combined Financial Statements.
The Unaudited Pro Forma Condensed Combined Financial Statements reflect
savings that will be realized from the elimination of certain redundant
executive headquarter costs and the termination of intercompany services
previously provided by the Seller to AVEX under an intercompany agreement,
offset by the costs Benchmark will incur to replace the services provided by
Seller. No adjustments have been made to reflect other identified actions that
could result in potential cost savings but which cannot be quantified at this
time.
2
BENCHMARK ELECTRONICS, INC.
PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF JUNE 30, 1999
(UNAUDITED)
HISTORICAL PRO FORMA
----------------------- ---------------------------
BENCHMARK AVEX ADJUSTMENTS COMBINED
---------- ---------- ------------ ----------
(IN THOUSANDS)
ASSETS
Current assets:
Cash and cash equivalents.......... $ 44,863 $ 11,552 $(44,863)a $ --
(11,552)b
Accounts receivable, net........... 87,932 135,599 -- 223,531
Income taxes receivable............ 581 -- -- 581
Inventories........................ 90,437 115,941 -- 206,378
Prepaid expenses and other
assets.......................... 4,723 11,563 -- 16,286
Deferred tax asset................. 2,515 -- -- 2,515
---------- ---------- ------------ ----------
Total current assets....... 231,051 274,655 (56,415) 449,291
Net property, plant and equipment.... 53,084 77,258 -- 130,342
Goodwill, net........................ 47,087 -- -- 47,087
Excess purchase price to be
allocated.......................... -- -- 127,821b 127,821
Other assets......................... 9,513 4,605 7,750a 21,868
---------- ---------- ------------ ----------
$340,735 $ 356,518 $ 79,156 $776,409
========== ========== ============ ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
(DEFICIT)
Current liabilities:
Current portion of long-term
debt............................ $ 19 $ -- $ 8,000a $ 8,019
Notes payable...................... -- 29,599 (29,599)b --
Accounts payable................... 53,392 126,010 -- 179,402
Accrued liabilities................ 9,378 34,645 -- 44,023
Income taxes payable............... -- 1,106 -- 1,106
Notes payable to parent............ -- 226,899 (226,899)b --
---------- ---------- ------------ ----------
Total current
liabilities.............. 62,789 418,259 (248,498) 232,550
Revolving lines of credit............ -- -- 28,471a 28,471
Long-term debt, less current
portion............................ 30,111 -- 67,000a 97,111
Convertible debt..................... -- -- 125,000a 125,000
Deferred tax liability............... 4,697 26 -- 4,723
Other long term liability............ -- 9,443 -- 9,443
Due to parent........................ -- 1,919 (1,919)b --
---------- ---------- ------------ ----------
Total liabilities.......... 97,597 429,647 (29,946) 497,298
Shareholders' equity (deficit):
Common shares...................... 1,520 1 100a 1,620
(1)b
Additional paid-in capital......... 164,296 41,662 35,873a 200,169
(41,662)b
Retained earnings.................. 77,442 (111,566) 111,566b 77,442
Accumulated other comprehensive
loss............................ -- (3,226) 3,226b --
Less treasury shares, at cost...... (120) -- -- (120)
---------- ---------- ------------ ----------
Total shareholders' equity
(deficit)................ 243,138 (73,129) 109,102 279,111
---------- ---------- ------------ ----------
$340,735 $ 356,518 $ 79,156 $776,409
========== ========== ============ ==========
See accompanying notes to unaudited pro forma condensed combined financial
statements.
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BENCHMARK ELECTRONICS, INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(UNAUDITED)
HISTORICAL PRO FORMA
---------------------- --------------------------
BENCHMARK AVEX ADJUSTMENTS COMBINED
--------- ---------- ----------- ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Sales................................ $524,065 $ 841,045 -- $ 1,365,110
Cost of sales........................ 472,354 857,407 -- 1,329,761
--------- ---------- ----------- ------------
Gross profit.................... 51,711 (16,362) -- 35,349
Selling, general & administrative
expenses........................... 17,680 44,365 (4,955)c 57,090
Amortization of goodwill and excess
purchase price to be allocated..... 3,311 -- 8,521 d 11,832
Restructuring charges................ 15,687 (7,805)e 7,882
--------- ---------- ----------- ------------
Income (loss) from operations........ 30,720 (76,414) 4,239 (41,455)
Interest and other income............ 563 (116) 447
Interest expense..................... (4,393) (11,012) 11,012 g (18,935)
(1,371)h
(13,171)i
--------- ---------- ----------- ------------
Income (loss) before taxes........... 26,890 (87,542) 709 (59,943)
Income taxes......................... 10,517 (3,348) 241 j (20,381)
(27,791)k
--------- ---------- ----------- ------------
Net income (loss)............... $ 16,373 $ (84,194) $ 28,259 $ (39,562)
========= ========== =========== ============
Earnings (loss) per common
share -- Basic..................... $ 1.41 $ (3.14)
Earnings (loss) per common
share -- Diluted................... $ 1.35 $ (3.14)
Weighted average number of shares
outstanding -- Basic............... 11,594 1,000 l 12,594
Weighted average number of shares
outstanding -- Diluted............. 12,098 496 l 12,594
See accompanying notes to unaudited pro forma condensed combined financial
statements.
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BENCHMARK ELECTRONICS, INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(UNAUDITED)
HISTORICAL PRO FORMA
------------------------- -----------------------
BENCHMARK AVEX ADJUSTMENTS COMBINED
------------ ---------- ----------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Sales................................... $309,167 $ 505,916 -- $815,083
Cost of sales........................... 277,623 485,659 -- 763,282
------------ ---------- ----------- --------
Gross profit....................... 31,544 20,257 -- 51,801
Selling, general & administrative
expenses.............................. 10,628 17,610 (2,319)c 26,319
400 e
Amortization of goodwill and excess
purchase price to be allocated........ 1,819 -- 4,261 d 6,080
------------ ---------- ----------- --------
Income from operations............. 19,097 2,647 (2,342) 19,402
Interest and other income
(expense) -- net...................... (50) 262 (153)f 59
Interest expense........................ (2,315) (11,553) 11,553 g (9,583)
(686)h
(6,582)i
------------ ---------- ----------- --------
Income (loss) before taxes.............. 16,732 (8,644) 1,790 9,878
Income taxes............................ 6,090 1,091 698 j 3,852
(4,027)k
------------ ---------- ----------- --------
Net income (loss).................. $ 10,642 $ (9,735) $ 5,119 $ 6,026
============ ========== =========== ========
Earnings per common share -- Basic...... $ 0.87 $ 0.46
Earnings per common share -- Diluted.... $ 0.80 $ 0.42
Weighted average number of shares
outstanding -- Basic.................. 12,209 1,000 l 13,209
Weighted average number of shares
outstanding -- Diluted................ 13,256 1,000 l 14,256
See accompanying notes to unaudited pro forma condensed combined financial
statements.
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NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS
Adjustments have been made to the unaudited pro forma condensed combined
financial statements to reflect the following:
(a) The Stock Purchase Agreement provides that Benchmark will acquire AVEX for
a total purchase price of $255 million in cash and one million shares of
Benchmark Common Stock. In addition, the final purchase price is subject
to an adjustment for working capital changes, of which an estimate is
reflected in the pro forma adjustments.
Total consideration (in thousands)
Purchase price:
Cash.................................... $ 255,000
1,000,000 shares of Benchmark common
stock (valued at $35.97 per share).... 35,973
Change in working capital............... 7,484
----------
Total consideration..................... 298,457
Plus:
Transaction and financing costs......... 10,850
----------
Total acquisition and financing
costs............................. $ 309,307
==========
Source of funds (in thousands)
Cash on hand............................ $ 44,863
Debt.................................... 228,471
Equity.................................. 35,973
----------
Total.............................. $ 309,307
==========
Debt financing (in thousands)
Term Loan A............................. $ 75,000
Revolving Credit Facility............... 28,471
Notes................................... 125,000
----------
Total.............................. $ 228,471
==========
(b) The excess of the total purchase price over the estimated fair value of
the net assets acquired is the excess purchase price to be allocated. The
calculation of excess purchase price to be allocated is based on the
following assumptions and calculation (in thousands):
Total consideration..................... $ 298,457
Transaction costs....................... 3,100
----------
Total purchase price.................... 301,557
AVEX net book deficit at June 30,
1999.................................. 73,129
AVEX cash and cash equivalents not
acquired.............................. 11,552
AVEX due to parent not assumed.......... (228,818)
AVEX notes payable not assumed.......... (29,599)
----------
Excess purchase price to be allocated... $ 127,821
==========
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(c) To eliminate the historical costs related to (i) certain redundant
executive headquarter costs (ii) the termination of intercompany services
previously provided by the Seller to AVEX under an intercompany
arrangement that included fees based on the estimated utilization of
Seller's resources; (iii) AVEX's domestic defined benefit pension plan,
which plan and the obligations thereunder are not being continued by
Benchmark; offset by (iv) the costs that Benchmark will incur to replace
the Seller's intercompany services arrangement. A summary of such
adjustments follows (in thousands):
FOR THE PERIOD ENDED
--------------------------
DECEMBER 31, JUNE 30,
1998 1999
------------ --------
Redundant executive headquarter
costs......................... $ (455) $ (228)
Historical intercompany service
fee........................... (4,400) (1,800)
Historical cost of pension plan
not continued................. (1,100) (791)
Benchmark replacement of
intercompany services
arrangement................... 1,000 500
------------ --------
Total...................... $ (4,955) $ (2,319)
============ ========
(d) To record amortization of excess purchase price to be allocated over an
estimated useful life of 15 years.
(e) To eliminate the 1998 write down of certain assets related to AVEX's San
Jose, California facility which are not being acquired by Benchmark, as
described above. In 1999, to eliminate a reduction to the aforementioned
write down included in AVEX's historical financial statements.
(f) To reduce interest income related to cash balances utilized in funding a
portion of the AVEX acquisition.
(g) To eliminate intercompany interest expense with the Seller and interest on
AVEX notes payable not assumed under the Stock Purchase Agreement.
(h) To record amortization of debt issuance costs over the life of the
applicable debt instruments.
(i) To record interest expense at a blended interest rate of 5.76% on the
amounts outstanding under the Revolving Credit Facility, Term Loan A, and
the Notes, based on current interest rates. A change in the interest rate
of 1/8 of a percent would result in a change in annual interest expense
related to the amounts outstanding under the Revolving Credit Facility,
Term Loan A, and the Notes of approximately $286,000.
(j) To record income tax adjustments related to the above pro forma
adjustments.
(k) To adjust AVEX historical income tax expense or benefit as if AVEX was
included in the consolidated federal income tax return of Benchmark. In
the historical combined financial statements of AVEX, federal income taxes
were provided as if AVEX filed a separate income tax return.
(l) The following information reconciles the number of shares used to compute
historical and pro forma earnings (loss) per common share (in thousands):
FOR THE PERIOD ENDED
----------------------------------------
DECEMBER 31, JUNE 30,
1998 1999
------------------ ------------------
BASIC DILUTED BASIC DILUTED
------ -------- ------ --------
Benchmark historical................. 11,594 12,098 12,209 13,256
Common shares to be issued in AVEX
acquisition........................ 1,000 1,000 1,000 1,000
Elimination of Benchmark stock
options -- antidilutive
on a pro forma basis in 1998....... -- (504) -- --
------ -------- ------ --------
12,594 12,594 13,209 14,256
====== ======== ====== ========
For both 1998 and 1999, the effect of the if-converted method for the Notes
is antidilutive and 2.5 million of potential common shares have not been
considered in computing diluted earnings per common share.
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