SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): AUGUST 24, 1999
BENCHMARK ELECTRONICS, INC.
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(Exact name of registrant as specified in its charter)
TEXAS 1-10560 74-2211011
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
3000 TECHNOLOGY DRIVE, ANGLETON, TEXAS 77515
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (409) 849-6550
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ITEM 2 ACQUISITION OR DISPOSITION OF ASSETS.
On August 24, 1999, Benchmark Electronics, Inc. (the "Company" or
"Benchmark") completed its previously announced acquisition (the "Acquisition")
from J. M. Huber Corporation (the "Seller") of all of the outstanding capital
stock of (a) AVEX Electronics, Inc., an Alabama corporation and a wholly owned
subsidiary of the Seller ("AVEX"), and (b) Kilbride Holdings B.V., a Netherlands
corporation ("Holdings"), a wholly owned subsidiary of Seller. AVEX and Holdings
together constitute the operating and holding companies through which AVEX has
conducted its global contract manufacturing business. AVEX and Holdings have
manufacturing plants or design centers in the United States in Huntsville,
Alabama and Pulaski, Tennessee, and elsewhere in Campinas, Brazil, Csongrad,
Hungary, Guadalajara, Mexico, Cork, Ireland, East Kilbride, Scotland, Singapore,
and Katrineholm, Sweden.
In consideration of the capital stock of AVEX and Holdings, Benchmark paid
$254,455,000 in cash (subject to a post-closing working capital adjustment) and
issued one million shares of its common stock, $.10 par value ("Common Stock"),
to the Seller. Benchmark and the Seller have agreed for federal income tax
purposes to allocate the purchase price pursuant to treasury Section
1.338(h)(10)-1(f).
The stock purchase agreement between Benchmark and Seller contains certain
representations, warranties, covenants (including noncompetition and
nonsolicitation provisions applicable to the Seller) and conditions and certain
indemnification provisions. The agreement provides that the representations,
warranties and indemnification obligations of the Seller survive for certain
periods and terminate thereafter.
Benchmark and the Seller have entered into a Registration Rights
Agreement, which provides for the registration under the securities laws of
resales of the shares of Common Stock issued to the Seller at closing. The
Registration Rights Agreement requires Benchmark (i) to file with the Securities
and Exchange Commission (the "Commission") within 90 days after closing, or a
reasonable time-period thereafter, a shelf registration statement covering
resales of the Common Stock received by the Seller, (ii) to use its best efforts
to cause such shelf registration statement to become effective within 120 days
of closing and (iii) to maintain such shelf registration statement for a period
of two years thereafter.
To finance a portion of the cash consideration for the Acquisition,
refinance existing senior debt and provide for future working capital needs,
Benchmark on August 24, 1999 entered into a new Credit Agreement with Chase Bank
of Texas, National Association (the "Agent"), as administrative agent for a
syndicate of financial institutions. The Credit Agreement provides for (a) a
$125 million revolving credit facility (the "Revolving Credit Facility"), and
(b) a $100 million term loan (the "Term Loan" and, together with the Revolving
Credit Facility, the "Facility") to be used for the Acquisition.
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Each of the Revolving Credit Facility and the Term Loan matures, and the
outstanding principal amount is due, on September 30, 2004. Amounts outstanding
under the Revolving Credit Facility may not exceed the lesser of $125 million
and the borrowing base, which consists of (a) 75% of eligible accounts
receivable of Benchmark and its domestic divisions, plus (b) 45% of the value of
eligible inventory of Benchmark and its domestic divisions, plus (c) 50% of the
eligible fixed assets of Benchmark and its domestic divisions, plus (d) until
October, 2001, an amount equal to the lesser of (i) $40,000,000 and (ii) the sum
of (A) 65% of the net book value of the accounts receivable of certain of
Benchmark's foreign subsidiaries (other than Unrestricted Subsidiaries), (B) 35%
of the net book value of the inventory of certain of Benchmark's foreign
subsidiaries (other than Unrestricted Subsidiaries), and (C) 40% of the net book
value of the fixed assets of certain of Benchmark's foreign subsidiaries (other
than Unrestricted Subsidiaries). However, the amount attributable to the net
book value of the accounts receivable, inventory and fixed assets of Benchmark's
foreign subsidiaries may not represent more than 20% of the borrowing base in
the aggregate. The Revolving Credit Facility also may be used for letters of
credit of up to $20 million.
The Revolving Credit Facility and the Term Loan are secured by the (a)
pledge of all of the capital stock of Benchmark's domestic subsidiaries, (b)
pledge of 65% of the capital stock of Benchmark's foreign subsidiaries, (c)
pledge of all of the accounts receivable, inventory and fixed assets of
Benchmark and its domestic subsidiaries, and (iv) mortgages on Benchmark's
facilities located in Angleton, Texas, Huntsville, Alabama, Pulaski, Tennessee
and Winona, Minnesota.
The Term Loan must be repaid in twenty consecutive quarterly installments
beginning December 31, 1999, with a quarterly installment of $3,000,000.
Thereafter, quarterly installments of $4,000,000, $4,500,000, $5,000,000, and
$5,500,000 are due during the years 2000, 2001, 2002 and 2003, respectively. The
final three installments of $7,000,000 each are due on the last day of March,
June and September 2004, respectively.
Interest on the Revolving Credit Facility and the Term Loan accrues, at
Benchmark's option, at either the Bank's Eurodollar rate plus from 1.25% to 2.5%
per annum or the Base Rate, which is the higher of the Bank's prime rate and the
federal funds rate, plus from 0% to 1.0% per annum. The margin on the Eurodollar
rate fluctuates with Benchmark's ratio of debt to earnings before interest,
taxes, depreciation and amortization ("EBITDA"). Benchmark is required to pay a
commitment fee of .37% or .50% (depending on Benchmark's ratio of debt to
EBITDA) per annum on the unused portion of the Revolving Credit Facility.
The Credit Agreement includes customary affirmative and negative
covenants, including financial covenants requiring Benchmark to maintain a
minimum tangible net worth, minimum current, fixed charge coverage and interest
coverage ratios and a maximum debt to EBITDA ratio. The Credit Agreement also
restricts Benchmark's ability to incur additional indebtedness and to pay
dividends.
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The balance of the cash portion of the purchase price was provided from
cash on hand and from the gross proceeds of the sale by the Company in a capital
markets transaction of $80.2 million in aggregate principal amount of its 6%
Convertible Subordinated Notes due 2006 (the "Notes"). The Notes were issued
pursuant to an Indenture dated August 13, 1999 with Harris Trust Company of New
York, as trustee. Interest on the Notes is payable semiannually on February 15
and August 15 of each year, commencing February 15, 2000. The Notes, which are
not subject to a sinking fund or mandatory redemption provision, mature on
August 15, 2006. The Notes are convertible at the option of the holder into
Common Stock commencing 90 days after the issuance date at a conversion price of
$40.20, subject to adjustment in certain events specified in the Indenture.
Benchmark has the option to convert the Notes into shares of Common Stock at the
conversion price then in effect if, on or after August 19, 2002, the closing
price of the Common Stock on the New York Stock Exchange ("NYSE") has equaled or
exceeded 150% of the conversion price for at least 20 out of 30 consecutive
trading days on the NYSE.
After February 15, 2001 and prior to August 19, 2002, the Notes may be
redeemed at the option of the Company at a redemption price equal to 104.286% of
the principal amount thereof, plus accrued and unpaid interest to the redemption
date, if the closing price of the Common Stock shall have equaled or exceeded
150% of the conversion price then in effect for at least 20 out of 30
consecutive trading days on the NYSE. In addition, the Notes may be redeemed at
the option of the Company at any time on and after August 19, 2002 at the
following redemption prices (expressed as percentages of the principal amount),
plus accrued and unpaid interest to the redemption date:
REDEMPTION REDEMPTION
YEAR PRICE YEAR PRICE
---- ---------- ---- ----------
2002 103.429% 2004 101.714%
2003 102.571% 2005 100.867%
Upon the occurrence of a Change of Control (as defined in the Indenture)
or a Termination of Trading (as defined in the Indenture), each holder of Notes
will have the right to require the Company to repurchase all or part of the
holder's Notes at a price equal to 100% of the principal amount thereof, plus
accrued and unpaid interest. A Change of Control will be deemed to have occurred
when: (i) any person or group becomes the beneficial owner of shares
representing more than 50% of the combined voting power of the then outstanding
securities entitled to vote generally in the election of directors (the "Voting
Stock"); (ii) the Company consolidates with or merges into any other
corporation, or another corporation merges into the Company, and the outstanding
Common Stock of the Company is reclassified into or exchanged for any other
property or security, unless the stockholders of the Company immediately before
such transaction own, directly or indirectly immediately following such
transaction, at least a majority of the combined voting power of the then
outstanding voting securities entitled to vote generally in elections of
directors of the corporation resulting from such transaction in substantially
the same respective proportions as their
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ownership of the Voting Stock immediately prior to such transaction; (iii) the
Company (or the Company and its subsidiaries, taken as a whole) sells, assigns,
conveys, leases or transfers all or substantially all of the assets of the
Company (or of the Company and its subsidiaries, taken as a whole) other than to
one or more wholly owned subsidiaries of the Company; or (iv) any time the
Continuing Directors (as defined in the Indenture) do not constitute a majority
of the board of directors of the Company (or, if applicable, a successor
corporation to the Company). A Termination of Trading will be deemed to have
occurred if the Common Stock (or other common stock into which the Notes are
then convertible) is neither listed for trading on the NYSE or another national
securities exchange, nor approved for trading on the Nasdaq National Market or
other established automated over-the-counter trading market in the United
States. A "Continuing Director" is defined in the Indenture to mean, as of the
date of determination, any member of the Board of Directors of the Company who
was a member of the Board of Directors on the date of the Indenture or was
nominated for election or elected to the Board of Directors with the approval of
a majority of the Continuing Directors who were members of such Board of
Directors at the time of such nomination or election.
The Notes are general unsecured obligations of the Company and are
subordinated in right of payment to all existing and future Senior Debt (as
defined in the Indenture) of the Company and rank pari passu in right of payment
with all other existing and future debt and other liabilities of the Company
that are not subordinated by their express terms to the Notes. As defined in the
Indenture, the term "Senior Debt" means the principal of, premium (if any) and
interest on, and other amounts due in respect of indebtedness of the Company,
whether outstanding on the date of the Indenture or thereafter created
(including the Facility), incurred, assumed or guaranteed by the Company
(including all deferrals, renewals, extensions, refinancings and refundings of,
or amendments, modifications or supplements to, any of the foregoing), unless,
in the instrument creating or evidencing such indebtedness or pursuant to which
such indebtedness is outstanding, it is expressly provided that such
indebtedness is not senior in right of payment to the Notes. However, Senior
Debt does not include (i) amounts owned by the Company for compensation to
employees, or for goods services or materials purchased in the ordinary course
of business, (ii) indebtedness of the Company or a subsidiary other than such
indebtedness that would be subject to a prior claim by the lenders under the
Facility, or (iii) any liability for federal, state, local or other taxes owed
or owing by the Company. As of June 30, 1999 and after giving effect to the
Acquisition, the Company would have had $176.8 million of debt that would have
constituted Senior Debt.
The Indenture requires that the Company comply with certain covenants,
including filing with the Commission and furnishing to the trustee all quarterly
and annual reports required to be filed with the Commission, maintaining its
corporate existence, paying all taxes (except those contested in good faith by
appropriate proceedings and for which adequate reserves have been established in
accordance with generally accepted accounting principles), and taking the
necessary steps so as not to become an "investment company" within the meaning
of the Investment Company Act of 1940, as amended. In addition, the Indenture
provides that the Company will not consolidate
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or merge with or into any person, continue in a new jurisdiction or sell,
assign, transfer, lease convey, or otherwise dispose of all or substantially all
of its properties or assets unless: (i) the Company is the surviving
corporation; (ii) the corporation which survives the consolidation or merger
assumes all of the obligations of the Company pursuant to a supplemental
indenture; (iii) the Company or the surviving company delivers to the trustee an
opinion of counsel to the effect that the holders of securities will not
recognize a gain or loss for U.S. Federal income tax purposes as a result of the
transaction; (iv) the sale, assignment, transfer, lease, conveyance or other
disposition of all or substantially all of the Company's properties or assets is
as an entirety to one corporation, which will assume all of the obligations of
the Company pursuant to a supplemental indenture; (v) immediately after such
transaction no default or event of default exists; and (vi) the Company or the
surviving corporation shall have delivered to the trustee an officers'
certificate and an opinion of counsel, each stating that the transaction and the
supplemental indenture, if required, comply with the Indenture and that all
conditions precedent in the Indenture have been satisfied.
Pursuant to a Registration Agreement, the Company has agreed for the
benefit of the holders of the Notes and Common Stock to be issued upon
conversion thereof that (i) it will, at its cost, within 90 days after the first
date on which any Notes are issued (the "Notes Closing Date"), file a shelf
registration statement with the Commission with respect to resales of the Notes
and the Common Stock issuable upon conversion thereof, (ii) it will use its best
efforts to cause such shelf registration statement to be declared effective
under the Securities Act within 150 days after the Notes Closing Date and (iii)
it will keep the shelf registration statement continuously effective under the
Securities Act until the earliest of (a) the second anniversary of the Notes
Closing Date, (b) the date on which the Notes or the Common Stock issuable upon
conversion thereof may be sold by non-affiliates of the Company pursuant to
paragraph (k) of Rule 144 (or any successor provision) promulgated by the
Commission under the Securities Act and (c) the date as of which all the Notes
or the Common Stock issuable upon conversion thereof have been sold pursuant to
the shelf registration statement.
If the shelf registration statement (i) is not filed with the Commission
on or prior to 90 days, or has not been declared effective by the Commission
within 150 days, after the Notes Closing Date, or (ii) is filed and declared
effective but shall thereafter cease to be effective (without being succeed
immediately by a replacement shelf registration statement filed and declared
effective) or usable for the offer and sale of Transfer Restricted Securities
(as defined in the Registration Agreement) for a period of time (including any
Suspension Period, as defined in the Registration Agreement) which shall exceed
60 days in the aggregate in any 12-month period during the period beginning on
the Notes Closing Date and ending on or prior to the second anniversary of the
Notes Closing Date, the Company will pay liquidated damages to each holder of
Transfer Restricted Securities which has complied with its obligations under the
Registration Agreement. The amount of Liquidated Damages payable during any
period in which a Registration Default (as defined in the Registration
Agreement) shall have occurred and be continuing is that amount which is equal
to one-quarter of one percent (25 basis points) per annum per $1,000 principal
amount of Notes or $2.50 per annum
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per 24.875622 shares of Common Stock (subject to adjustment in the event of a
stock split, stock recombination, stock dividend and the like) constituting
Transfer Restricted Securities for the first 90 days during which a Registration
Default has occurred and is continuing and 50 basis points per annum per $1,000
principal amount of Notes or $5.00 per annum per 24.875622 shares of Common
Stock (subject to adjustment as set forth above) constituting Transfer
Restricted Securities for any additional days during which such Registration
Default has occurred and is continuing. Following the cure of a Registration
Default, liquidated damages will cease to accrue with respect to such
Registration Default.
We make "forward-looking statements" within the "safe harbor" provision of
the Private Securities Litigation Reform Act of 1955 throughout this Current
Report on Form 8-k. You can identify these statements by forward-looking words
such as "may," "intend," "will," "expect," "anticipate," "believe," "estimate,"
"should," "strategy," "position," "plan" and "continue" or the negatives of
those words or other variations on them or by comparable terminology. We have
based these statements on our current expectations about future events. Although
we believe that our expectations reflected in or suggested by our
forward-looking statements are reasonable, we cannot assure you that these
expectations will be achieved. Our actual results may differ materially from
what we currently expect. Important factors which could cause our actual results
to differ materially from the forward-looking statements in this report include,
without limitation, the completion of the pending acquisition of AVEX and, if
completed, the termination by one of AVEX's largest customers of its turnkey
manufacturing agreement with AVEX as a result of our purchase of AVEX, the
integration of the operations of AVEX and the incurrence of operating losses at
AVEX after its acquisition by us; the loss of a major customer; changes in
customer concentration; the absence of long-term sales contracts; dependence on
the growth of the enterprise computer, telecommunications, medical device,
industrial control, and testing and instrumentation and, upon completion of the
AVEX acquisition, the networking/servers and high-end video/audio/entertainment,
industries; risks associated with our international operations; availability of
customer specified components; dependence on certain key executives;
environmental laws; Year 2000 problems; fluctuations in quarterly results; stock
price volatility; and competition from other providers of electronics
manufacturing services. Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect, actual outcomes
may vary materially from those indicated.
You should read this report (including the information incorporated by
reference into this report) completely and with the understanding that our
actual future results may be materially different from what we expect. We may
not update these forward-looking statements, even though our situation will
change in the future. All forward-looking statements attributable to us are
expressly qualified by these cautionary statements.
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ITEM 7 FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of businesses acquired.
Audited combined financial statements of AVEX Electronics, Inc., its
subsidiaries and certain related companies (all ultimately wholly
owned by J. M. Huber Corporation) as of December 31, 1998 and 1997
and for each of the years in the three year period ended December
31, 1998, (Incorporated by reference to Exhibit 99.1 to the Form 8-K
of Benchmark Electronics, Inc. dated August 2, 1999.)
Unaudited combined financial statements of AVEX Electronics, Inc.,
its subsidiaries and certain related companies (all ultimately
wholly owned by J. M. Huber Corporation) as of June 30, 1999 and
1997 and for each of the six-month periods ended June 30, 1999 and
1998. (Incorporated by reference to Exhibit 99.2 to the Form 8-K of
Benchmark Electronics, Inc. dated August 2, 1999.)
(b) Pro Forma Financial Statements of Benchmark.
Unaudited pro forma condensed combined financial statements of
Benchmark Electronics, Inc. as of and for the six-month period ended
June 30, 1999 and for the year ended December 31, 1998, which give
effect to the acquisition of AVEX by Benchmark under the purchase
method of accounting.
(c) Exhibits.
The following materials are filed as exhibits to this Current Report
on Form 8-K.
EXHIBIT
NUMBER DESCRIPTION
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2 Amended and Restated Stock Purchase Agreement
dated as of August 12, 1998 by and between
Benchmark Electronics, Inc. and J. M. Huber
Corporation.
99.1 Credit Agreement dated as of August 24, 1999
by and among Benchmark Electronics, Inc.,
the lenders party
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thereto and Chase Bank of Texas, National
Association, as administrative agent.
99.2 Registration Rights Agreement dated as of August 24,
1999 by and between Benchmark Electronics, Inc. and
J. M. Huber Corporation.
99.3 Indenture dated as of August 13, 1999 by and between
Benchmark Electronics, Inc. and Harris Trust
Company of New York, as trustee.
99.4 Registration Agreement dated as of August 9, 1999 by
and among Benchmark Electronics, Inc., Salomon
Smith Barney Inc. and Chase Securities Inc.
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S I G N A T U R E
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
BENCHMARK ELECTRONICS, INC.
Dated: September 8, 1999 By: /S/ DONALD E. NIGBOR
Donald E. Nigbor
President
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ITEM 7(b)
PRO FORMA FINANCIAL STATEMENTS OF BENCHMARK
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
completed by Benchmark on August 13, 1999 (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.
1
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.......................... -- -- 121,726b 121,726
Other assets......................... 9,513 4,605 7,000a 21,118
---------- ---------- ------------ ----------
$340,735 $ 356,518 $ 72,311 $769,564
========== ========== ============ ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
(DEFICIT)
Current liabilities:
Current portion of long-term
debt............................ $ 19 $ -- $ 8,420a $ 8,439
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 (248,078) 232,970
Revolving lines of credit............ -- -- 21,626a 21,626
Long-term debt, less current
portion............................ 30,111 -- 116,580a 146,691
Convertible debt..................... -- -- 75,000a 75,000
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 (36,791) 490,453
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 $ 72,311 $769,564
========== ========== ============ ==========
See accompanying notes to unaudited pro forma condensed combined financial
statements.
3
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 -- 8,115 d 11,426
Restructuring charges................ 15,687 (7,805)e 7,882
--------- ---------- ----------- ------------
Income (loss) from operations........ 30,720 (76,414) 4,645 (41,049)
Interest and other income............ 563 (116) 447
Interest expense..................... (4,393) (11,012) 11,012 g (21,800)
(1,293)h
(16,114)i
--------- ---------- ----------- ------------
Income (loss) before taxes........... 26,890 (87,542) (1,750) (62,402)
Income taxes......................... 10,517 (3,348) (595)j (21,217)
(27,791)k
--------- ---------- ----------- ------------
Net income (loss)............... $ 16,373 $ (84,194) $ 26,636 $ (41,185)
========= ========== =========== ============
Earnings (loss) per common
share -- Basic..................... $ 1.41 $ (3.27)
Earnings (loss) per common
share -- Diluted................... $ 1.35 $ (3.27)
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.
4
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 -- 4,058 d 5,877
------------ ---------- ----------- --------
Income from operations............. 19,097 2,647 (2,139) 19,605
Interest and other income
(expense) -- net...................... (50) 262 (153)f 59
Interest expense........................ (2,315) (11,553) 11,553 g (11,018)
(646)h
(8,057)i
------------ ---------- ----------- --------
Income (loss) before taxes.............. 16,732 (8,644) 558 8,646
Income taxes............................ 6,090 1,091 218 j 3,372
(4,027)k
------------ ---------- ----------- --------
Net income (loss).................. $ 10,642 $ (9,735) $ 4,367 $ 5,274
============ ========== =========== ========
Earnings per common share -- Basic...... $ 0.87 $ 0.40
Earnings per common share -- Diluted.... $ 0.80 $ 0.37
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.
5
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............... 1,389
----------
Total consideration..................... 292,362
Plus:
Transaction and financing costs......... 10,100
----------
Total acquisition and financing
costs............................. $ 302,462
==========
Source of funds (in thousands)
Cash on hand............................ $ 44,863
Debt.................................... 221,626
Equity.................................. 35,973
----------
Total.............................. $ 302,462
==========
Debt financing (in thousands)
Term Loan A............................. $ 100,000
Revolving Credit Facility............... 46,626
Notes................................... 75,000
----------
Total.............................. $ 221,626
==========
(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..................... $ 292,362
Transaction costs....................... 3,100
----------
Total purchase price.................... 295,462
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... $ 121,726
==========
6
(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 7.75%, 7.75% and 6.0% on the amounts
outstanding under the Revolving Credit Facility, Term Loan A and the
Notes, respectively, based on current interest rates. A change in the
interest rate of 1/8 of a percent would result in a change in annual
interest expense related to the amounts outstanding under the Revolving
Credit Facility and Term Loan A of approximately $183,000.
(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.
7
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
------- -----------
2 Amended and Restated Stock Purchase Agreement dated as
of August 12, 1998 by and between Benchmark Electronics,
Inc. and J. M. Huber Corporation.
99.1 Credit Agreement dated as of August 24, 1999 by and
among Benchmark Electronics, Inc., the lenders party
thereto and Chase Bank of Texas, National Association,
as administrative agent.
99.2 Registration Rights Agreement dated as of August 24,
1999 by and between Benchmark Electronics, Inc. and J.
M. Huber Corporation.
99.3 Indenture dated as of August 13, 1999 by and between
Benchmark Electronics, Inc. and Harris Trust Company of
New York, as trustee.
99.4 Registration Agreement dated as of August 9, 1999 by and
among Benchmark Electronics, Inc., Salomon Smith Barney
Inc. and Chase Securities Inc.
-11-