Annual Report 2000 Your Global Outsourcing Solution: Benchmark Electronics
Financial Highlights
Benchmark Electronics, Inc. and Subsidiaries
Year ended December 31,
(in thousands, except per share data) 2000 1999 1998 1997 1996
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Sales $ 1,704,924 $877,839 $524,065 $325,229 $201,296
Income from operations 53,395 28,623 30,720 25,112 15,391
Net income 19,901 11,974 16,372 15,090 8,864
Earnings per common share (diluted) 1.06 0.80 1.35 1.26 0.96
Working capital 347,318 177,926 86,265 87,879 72,586
Total assets 991,221 760,838 241,896 190,322 168,174
Total debt 261,069 221,995 54,311 30,485 30,724
Shareholders' equity $ 411,945 $281,935 $138,001 $120,872 $104,999
Weighted average common and
equivalent shares outstanding 18,718 15,010 12,098 12,004 9,218
The Company at a Glance
Benchmark Electronics, Inc. is in the business of manufacturing electronics and
providing services to original equipment manufacturers (OEMs) of
telecommunication equipment, computers and related products for business
enterprises, video/audio/entertainment products, industrial control equipment,
testing and instrumentation products, personal computers and medical devices.
The services that we provide are commonly referred to as electronics
manufacturing services (EMS). We offer our customers comprehensive and
integrated design and manufacturing services, from initial product design to
volume production and direct order fulfillment. We provide specialized
engineering services including product design, printed circuit board layout,
prototyping and test development.
Table of Contents
The Company at a Glance 1
Financial Highlights 1
President's Letter 2
Provide More Value Added Services 5
Financial Table of Contents 8
Management's Discussion and Analysis 9
Consolidated Financial Statements 19
Notes to Consolidated Financial Statements 23
Independent Auditors' Report 38
Management's Report 38
Quarterly Financial Data 39
Market for the Registrant's Common Equity
and Related Shareholder Matters 39
Selected Financial Data 40
Corporate and Shareholder Data Inside back cover
President's Letter
Dear Shareholder:
It is my pleasure to report to you on the financial and operational results for
Benchmark for the year ended December 31, 2000.
(Charts: Sales, Income, EPS)
This year was a challenging and rewarding year for Benchmark. Following
the disappointing results for the last half of 1999, the year 2000 challenges
and opportunities we faced provided a catalyst for us. This catalyst ignited and
renewed Benchmark management with the level of commitment and team spirit
required to execute our strategy and deliver results that I am proud to share
with you in this report. The solid fundamentals and sound strategy we adopted
early on in our organizational development
formed the foundation for our continued growth. We recognized then and recognize
now that we are a service organization, not a products company. We continue to
refine and update our business model, partnering with and listening to our
customers to identify and meet their needs in this rapidly growing, dynamic
industry. As a service firm, our growth comes from meeting or exceeding
expectations in our relationships with customers, investors, suppliers and the
Benchmark team.
We invest heavily in these relationships and our return on that investment
is the growth we have experienced in sales, income and earnings per share.
The fiscal year 2000 was very successful for Benchmark. Once again,
Benchmark posted annual record sales of $1.7 billion, and record earnings of
$19.9 million. That latter number represents diluted earnings per share for the
year of $1.06. Our backlog at year-end reached a record-setting $1.6 billion.
Our industry has sound fundamentals and is growing at a compound average growth
rate of 25%*. Our sales totals for 2000 compared with 1999 produced our 94%*
growth, a rate that is almost four times our industry's average.
(Chart: Compound Average Growth Rate Comparison)
Year 2000 Highlights
During 2000, our sales growth stemmed more from expanding our relationships with
existing customers rather than from acquisitions. We leveraged and strengthened
the expertise we have in design capabilities, volume production, systems
integration and logistics. This expertise provided the basis for strong sales
performance during the year 2000, and we expect it to be the basis for our
continued future growth. Specifically, in the systems integration area we have
established new capacity in Singapore and Huntsville, which supports the needs
of our customers in the complex systems integration area.
Also, during 2000 our industry encountered difficulties in the component
market place, with constraints in almost every commodity at some time during the
year. Our team performed well in supporting our customers through this demanding
time.
In August of 2000 we completed an equity offering of approximately 3
million shares, the proceeds from which supported our growth and positioned us
well to continue that growth into the future.
(Photo: Management team)
Importantly, during this year we saw our management team reach the level
of maturity, the feeling of pride, and the spirit of teamwork and cohesion which
are critical to an organization's healthy growth. We look forward to another
dynamic year in 2001.
Sincerely yours,
Donald E. Nigbor
March 23, 2001
(Photo: Donald E. Nigbor, President and CEO)
Provide More Value Added Services
During 2000 Benchmark significantly expanded the systems integration, or SI,
focus of our Strategic Business Plan.
(Chart: Market Segments)
Traditionally we had strong capabilities in systems integration, inherited
from our acquisition of the Dublin facility. These SI services include
"box-build" capabilities such as configuration management, sheetmetal and
plastic enclosure assembly, final testing, and burn-in. Many of our customers
had not previously considered outsourcing their box build and systems
integration services; however, the level of complexity and types of systems our
team was experienced in supporting provided those customers with the confidence
to expand their relationships with Benchmark.
(Photos of Dublin facility: 1- The Dublin, Ireland location, our first expansion
outside the U.S., has been enlarged to meet customer requirements for SI
services. 2/3-This cornerstone facility provides local, regional and
international customers with comprehensive integration services.)
As a result, last year we began to see an increase in our customers'
requirements for large systems integration --server level and desktop units--an
ever more important component of our systems integration business.
(Map of western hemisphere facility locations: +systems integration facility,
o printed circuit board facility: U.S.A.: o Angleton, Texas o Beaverton, Oregon
o Winona, Minnesota o Hudson, New Hampshire +o Huntsville, Alabama o Pulaski,
Tennessee o Manassas, Virginia o Mansfield, Massachusetts o Guadalajara, Mexico,
o Campinas, Brazil)
(Photos of Huntsville, Ala. facility: 1- Added in 2000, the Huntsville, Alabama
systems integration facility has 144,000 square feet and serves customers in the
U.S. 2/3-The Huntsville SI facility supports the needs of our U.S. customers in
the complex systems integration area.)
We are completing an aggressive facility expansion program to provide
additional value added services to customers in the systems integration area.
During 2000 we opened new facilities and expanded existing operations in a
number of global locations. This expansion of our SI capabilities reflects the
continuing implementation of the Benchmark philosophy of total customer service.
Benchmark's focus on systems integration extends and enhances our strong
engineering services and our mainstream business of printed circuit board
assembly and testing.
(Map of Eastern Hemisphere facility locations: +Dublin, Ireland o Cork, Ireland
o East Kilbride, Scotland +o Republic of Singapore)
The ability to satisfy customer expectations for "Design Thru Delivery"
and "One Stop Shopping" on a global basis makes Benchmark a top-tier electronic
manufacturing services provider and sets our company apart from its competition
as we enter a new year and a new millenium.
(Photos of Singapore facility: 1- Our newest SI facility in Singapore serves the
Asian market and enhances our ability to service customers worldwide. 2- Systems
integration services include "box-build" capabilities.)
Financial Report:
Annual Report 2000 Benchmark Electronics
Management's Discussion and Analysis 9
Consolidated Financial Statements 19
Notes to Consolidated Financial Statements 23
Independent Auditors' Report 38
Management's Report 38
Quarterly Financial Data 39
Market for the Registrant's Common Equity
and Related Shareholder Matters 39
Selected Financial Data 40
Corporate and Shareholder Data Inside back cover
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, and the discussion of Market Risks below, contains
certain forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended and Section 21E of the Securities Exchange
Act of 1934, as amended. These forward-looking statements are identified as any
statement that does not relate strictly to historical or current facts. They use
words such as "anticipate," "believe," "intend," "plan," "projection,"
"forecast," "strategy," "position," "continue," "estimate," "expect," "may,"
"will," or the negative of those terms or other variations of them or by
comparable terminology. In particular, statements, express or implied,
concerning future operating results or the ability to generate sales, income or
cash flow are forward-looking statements. Forward-looking statements are not
guarantees of performance. They involve risks, uncertainties and assumptions.
The future results of our operations may differ materially from those expressed
in these forward-looking statements. Many of the factors that will determine
these results are
beyond our ability to control or predict. Specific factors which could cause
actual results to differ from those in the forward-looking statements, include:
* availability and cost of customer specified components;
* loss of one or more of our major customers;
* absence of long-term sales contracts with our customers;
* our substantial indebtedness;
* a decline in the condition of the capital markets or a substantial rise in
interest rates;
* our dependence on the industries we serve;
* competition from other providers of electronics manufacturing services;
* inability to maintain technical and manufacturing process expertise;
* risks associated with international operations;
* our dependence on certain key executives;
* resolution of pending legal proceedings;
* integration of the operations of acquired companies;
* effects of domestic and foreign environmental laws;
* fluctuations in our quarterly results of operations; and
* volatility of the price of our common stock.
You should not put undue reliance on any forward-looking statements. Should one
or more of these risks or uncertainties materialize, or should underlying
assumptions prove incorrect, actual outcomes may vary materially from those
indicated.
Recent Acquisitions and Disposition
On October 2, 2000, we acquired substantially all of the assets and properties,
net of assumed liabilities, of the MSI Division of Outreach Technologies, Inc.
This operation in Manassas, Virginia was acquired for $3.5 million, as adjusted.
The transaction was accounted for under the purchase method of accounting, and,
accordingly, the results of operations of the Manassas division since October 2,
2000 have been included in our financial statements. The acquisition resulted in
goodwill of approximately $0.4 million that is being amortized on a
straight-line basis over 15 years.
On September 15, 2000, we closed the previously announced sale of our
Swedish operations for $19.6 million. The Swedish operations accounted for 3.7%
and 3.0% of our sales and 14.4% and 16.0% of our operating income for the years
ended December 31, 2000 and 1999, respectively.
On August 24, 1999, we acquired AVEX Electronics, Inc. As consideration
for the acquisition, we paid $265.3 million in cash at closing, subject to
certain adjustments, including a working capital adjustment, and issued one
million shares of our common stock. The working capital adjustment was settled
in the second quarter of 2000 and $35.3 million was paid to the seller. The
transaction was accounted for under the purchase method of accounting, and,
accordingly, the results of operations of AVEX since August 24, 1999 have been
included in our financial statements. The acquisition resulted in goodwill of
approximately $139.5 million, which is being amortized on a straight line basis
over 15 years. The amortization of goodwill, which is a noncash charge,
negatively impacts our net income. In order to finance the AVEX acquisition, we
(i) obtained a term loan from a syndicate of commercial banks in the amount of
$100 million, (ii) obtained a new revolving credit facility permitting draws of
up to $125 million, subject to a borrowing base calculation, and borrowed $46
million under such facility and (iii) issued $80.2 million in convertible
subordinated debt. In connection with the AVEX acquisition, we borrowed $30
million under the new revolving credit facility to refinance our prior senior
indebtedness. Disputes have arisen between us and the seller relating to the
AVEX acquisition resulting in legal proceedings between the parties over the
transaction. See "Litigation and Other Contingencies."
On March 1, 1999, we acquired certain assets from Stratus, a wholly-owned
subsidiary of Ascend Communications, Inc. for approximately $42.3 million in
cash, as adjusted. The acquisition price was allocated $6.1 million to equipment
and other assets and $36.2 million to inventories. Stratus provided systems
integration services for large and sophisticated fault-tolerant mainframe
computers. In connection with the transaction, we entered into a three-year
supply agreement to provide these system integration
services to Ascend and Stratus Holdings Limited and we hired approximately 260
employees.
On February 23, 1998, we acquired Lockheed Commercial Electronics Company
for $70.0 million in cash and we paid $0.7 million in acquisition costs.
Lockheed Commercial Electronics, situated in Hudson, New Hampshire, was one of
New England's largest electronics manufacturing services companies, providing a
broad range of services including printed circuit board (PCB) 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
Lockheed Commercial Electronics since February 23, 1998 have been included in
our financial statements. The acquisition resulted in goodwill of approximately
$29.5 million, which is being amortized on a straight line basis over 15 years.
The inclusion in our accounts of the operations of AVEX, the systems
integration facility in Ireland and Lockheed Commercial Electronics are
responsible for a substantial portion of the variations in the results of our
operations (including components thereof) from period to period. The effects of
these on our reported financial condition, liquidity and results of operations
should be considered when reading the financial information contained herein.
The acquisition of AVEX resulted in a significant expansion of our
operations. Accordingly, the potential effect of the AVEX acquisition on our
future financial condition, liquidity and results of operations should be
considered when reading the historical financial information and related
discussions set forth in the following section.
Results of Operations
The following table presents the percentage relationship that certain items in
our Consolidated Statements of Income bear to sales for the periods indicated.
The financial information and the discussion below should be read in conjunction
with the Consolidated Financial Statements and Notes thereto.
Percentage of Sales
Year ended December 31,
2000 1999 1998
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Sales 100.0% 100.0% 100.0%
Cost of sales 92.7 92.3 90.1
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Gross profit 7.3 7.7 9.9
Selling, general and
administrative expenses 3.4 3.7 3.4
Amortization of goodwill .8 .7 .6
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Income from operations 3.1 3.3 5.9
Other income (expense) (1.4) (1.0) (.7)
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Income before income taxes
and extraordinary item 1.7 2.3 5.2
Income tax expense .5 .8 2.0
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Income before extraordinary
item 1.2 1.5 3.2
Extraordinary item - loss on
extinguishment of debt,
net of tax -- .1 --
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Net Income 1.2% 1.4% 3.2%
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Year Ended December 31, 2000 Compared With Year Ended December 31, 1999
Sales in 2000 increased $827.1 million, or 94.2%, over 1999 sales. Of this total
increase in sales approximately 67.3% was attributable to the acquisition of
AVEX, approximately 2.8% was attributable to the operation of the systems
integration facility in Huntsville, approximately 1.1% was attributable to the
operation of the systems integration facility in Dublin, Ireland, approximately
0.4% was attributable to the acquisition of the Manassas operation, and
approximately 28.4% resulted from ramping up of new
programs and increase in sales volume from both existing and new customers.
We have 16 manufacturing facilities in the Americas, Europe and Asia to
serve our customers. We are operated and managed geographically. Prior to the
acquisitions in 1999, all of our operations were in the Americas region. Our
facilities in the Americas provided 84.1% and 80.9% of net sales, respectively,
during 2000 and 1999. Our Americas region includes facilities in Angleton,
Texas, Beaverton, Oregon, Campinas, Brazil, Guadalajara, Mexico, Hudson, New
Hampshire, Huntsville, Alabama, Manassas, Virginia, Mansfield, Massachusetts,
Pulaski, Tennessee and Winona, Minnesota. There are two facilities in
Huntsville, Alabama - a systems integration facility opened during 2000 and the
PCB facility acquired from AVEX in 1999. Our facilities in Europe provided 13.8%
and 17.6% of net sales, respectively, during 2000 and 1999. Our Europe region
includes facilities in Cork, Ireland, Dublin, Ireland and East Kilbride,
Scotland. Our facilities in Asia provided 2.1% and 1.5% of our net sales,
respectively, during 2000 and 1999. There are two facilities in Singapore - a
systems integration facility opened at the end of 2000 and the PCB facility
acquired from AVEX in 1999.
Americas
Of the Americas sales growth of approximately $723.0 million in fiscal 2000,
approximately 70.5% was due to the acquisition of AVEX, approximately 3.2% was
attributable to the operation of the systems integration facility in Huntsville,
Alabama, approximately 0.5% was attributable to the acquisition of the Manassas,
Virginia facility and approximately 25.8% resulted from demand increases from
existing and new customers.
Europe
Of the sales growth in Europe of approximately $80.8 million in fiscal 2000,
approximately 29.6% was due to the acquisition of AVEX, approximately 11.6% was
due to the systems integration facility revenues in Dublin, Ireland and
approximately 58.8% resulted from demand increases from existing and new
customers. The 1999 Dublin, Ireland revenues were positively impacted by
significant backlog fulfillment during that period resulting from a period of
customer transition. Dublin's sales during the remainder of 1999 and 2000 have
returned to normalized run rates.
In connection with the AVEX acquisition, we acquired operations in Sweden.
On September 15, 2000, we closed the previously announced sale of our Swedish
operations for $19.6 million. The Swedish operations accounted for 3.7% and 3.0%
of our sales and 14.4% and 16.0% of our operating income for the years ended
December 31, 2000 and 1999, respectively. On a pro forma basis, after giving
effect to the disposition of the Swedish operations as if it had occurred on
January 1, 2000, our income before income taxes and extraordinary item for the
year ended December 31, 2000 would have been $21.7 million. On a pro forma
basis, after giving effect to the AVEX acquisition, the Swedish operations
accounted for 3.0% of our 1999 sales and 96.7% of our 1999 operating income.
Asia
Our Singapore sales growth in fiscal 2000 was approximately $23.3 million
generated from the acquired AVEX facility. The new Singapore SI facility began
sales contribution in January 2001.
We continue to expand the diversification of our customer base between
countries, market segments and product lines within market segments.
As a result of our international sales and facilities, our operations are
subject to the risks of doing business abroad. These dynamics have not had a
material adverse effect on our results of operations through December 31, 2000.
However, we cannot assure that there will not be an adverse impact in the
future. See "Market Risks" for factors pertaining to our international sales and
fluctuations in the exchange rates of foreign currency for further discussion of
potential adverse effects in operating results associated with the risks of
doing business abroad.
A substantial percentage of our sales have been to a small number of
customers, and the loss of a major customer, if not
replaced, would adversely affect us. During 2000, our three largest customers
accounted for approximately 34.2% of our sales, and our largest customer
accounted for approximately 15.9% of sales. Our future sales are dependent on
the success of our customers, some of which operate in businesses associated
with rapid technological change and consequent product obsolescence.
Developments adverse to our major customers or their products, or the failure of
a major customer to pay for components or services, could have an adverse effect
on us.
After giving effect to the AVEX acquisition, we would have derived 46% of
our pro forma combined sales in fiscal year 1999 from our international
operations. During 2000, 20.1% of our sales were from our international
operations. The decrease in the percentage of international sales on an actual
basis for 2000 as compared to the pro forma basis for 1999 reflects the sale of
the Swedish operations and the loss of two of AVEX's customers. The loss of one
of these customers, as well as the deterioration in other customer
relationships, including the major customer of the former Swedish operations,
are the subject of litigation between Huber and us.
We had a record year-end backlog of approximately $1.6 billion at December
31, 2000, as compared to the 1999 year-end backlog of $1.0 billion. Although we
expect to fill substantially all of our backlog during 2001, at December 31,
2000 we do not have long-term agreements with all of our 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 our current customers will
continue to utilize our services. Because of these factors, backlog is not a
meaningful indicator of future financial results.
Gross profit increased $56.6 million, or 83.8%, over 1999. Gross profit as
a percentage of sales decreased from 7.7% for 1999 to 7.3% for 2000 primarily
due to lower gross margins at AVEX than at our other operations. The increase in
gross profit was due primarily to higher sales volumes attributable to the AVEX
acquisition, the operations of the new systems integration facilities in Dublin,
Ireland and Huntsville, Alabama and a shift in mix to customer programs with
higher gross margins. The decrease in gross profit as a percentage of sales
during 2000 was attributable primarily to the inclusion of AVEX in the results
of operations during 2000 for the full year, whereas during 1999, the AVEX
operations were included beginning on August 24, 1999, the date of acquisition.
Historically, the AVEX operations have had lower gross margin levels.
Additionally, other factors impacting our gross margin for 2000 include the
level of start-up costs and inefficiencies associated with new programs, product
mix, overall improved capacity utilization of surface mount and other equipment,
and pricing within the electronics industry. The combined effect of these
factors, which are continually changing and are interrelated, make it
impracticable to determine with precision the separate effect of each factor. We
expect that a number of high volume programs serving customers in price
sensitive markets will remain subject to competitive restraints on the margin
that may be realized from these programs and that these restraints will exert
downward pressure on our margins in the near future. For the foreseeable future,
Benchmark's gross margin is expected to depend primarily on facility
utilization, product mix, start-up of new programs, pricing within the
electronics industry, and the integration costs of acquisitions. The gross
margins at each facility and for Benchmark as a whole may continue to fluctuate.
Increases in start-up costs associated with new programs and competitive pricing
within the electronics industry could impact our gross margin.
Selling, general and administrative expenses for 2000 increased $25.4
million, or 78.2% from 1999 to $57.8 million in 2000. The increase in selling,
general and administrative expenses for 2000 is primarily the result of the
acquisition of AVEX. For the period beginning January 1 and ending August 24,
1999, prior to our acquisition of AVEX, AVEX recorded $33.3 million of selling,
general and administrative expenses. Additionally, the increase reflects the
investment in personnel and the incurrence of related corporate and
administrative expenses necessary to support the increased size and complexity
of our business. We anticipate selling, general and administrative expenses will
continue to increase in absolute dollars in the future as we continue to develop
the infrastructure necessary to support our current and prospective business.
The charges to operations for bad debt allowance and inventory
obsolescence were $0.9 million and $3.7 million in 2000, respectively, as
compared to $0.3 million and $1.9 million in 1999, respectively.
Goodwill is amortized on a straight-line basis over an estimated life of
15 years. The amortization of goodwill for the years ended December 31, 2000 and
1999 was $12.8 million and $6.4 million, respectively. The increase was due to
the acquisition of
AVEX on August 24, 1999.
Interest expense was approximately $24.4 million and $9.7 million,
respectively, in 2000 and 1999. The increase was due to the additional debt
incurred in connection with the acquisition of AVEX on August 24, 1999.
Interest income was approximately $0.8 million in 2000 compared to $0.6
million in 1999.
Income tax expense of $8.5 million represented an effective tax rate of
30.0% for the year ended December 31, 2000, compared with an effective tax rate
of 34.5% for the year ended December 31, 1999. The decrease is due primarily to
lower foreign tax rates applicable to a portion of pretax income in 2000 and a
2.4% benefit related to prior years' amended U.S. tax returns filed in 2000,
partially offset by nondeductible amortization of goodwill.
We reported net income of approximately $19.9 million, or diluted earnings
of $1.06 per share, for 2000 compared with net income of approximately $12.0
million, or diluted earnings of $0.80 per share for 1999. The approximately $7.9
million net increase in net income during 2000 was a result of the combined
effects of the acquisition of AVEX, the $1.3 million (net of income tax benefit
of $0.7 million) extraordinary loss on extinguishment of debt in 1999 and the
increase in interest expense.
Year Ended December 31, 1999 Compared With Year Ended December 31, 1998
Sales in 1999 increased $353.8 million, or 67.5%, over 1998 sales. Of this total
increase in sales approximately 54% was attributable to the acquisition of AVEX,
approximately 28% was attributable to the operation of the systems integration
facility in Dublin, Ireland, and approximately 18% resulted from ramping up of
new programs and increase in sales volume from both existing and new customers.
Americas
Of the Americas sales growth of approximately $186.3 million in fiscal 1999,
approximately 83% was due to the acquisition of the AVEX facilities in Campinas,
Brazil; Guadalajara, Mexico; Huntsville, Alabama; and Pulaski, Tennessee and
approximately 17% was attributable to demand increases from existing and new
customers.
Europe
Our locations in Europe were the result of acquisitions during 1999. We acquired
AVEX on August 24, 1999 and acquired certain assets from Stratus, in Dublin,
Ireland on March 1, 1999. The addition of these sites resulted in the increase
in net sales of approximately $154.2 million and operating income of
approximately $12.0 million for 1999 in Europe.
Asia
Our facility in Singapore was an AVEX facility. This acquired facility gave rise
to the net sales of approximately $13.3 million and operating income of
approximately $0.8 million for Asia in 1999.
A substantial percentage of our sales have been to a small number of
customers, and the loss of a major customer, if not replaced, would adversely
affect us. During 1999, our three largest customers accounted for approximately
39.2% of our sales, and our largest customer accounted for approximately 17.5%
of sales.
AVEX's largest customer in 1998 substantially reduced its purchases from
AVEX during 1999 as a result of changed circumstances affecting this customer's
products, and another large customer underwent a period of organizational change
and reduced its purchases as a result.
The Company had a then record year-end backlog of approximately $1.0
billion at December 31, 1999, as compared to the 1998 year-end backlog of $317.0
million. We believe the portion of the backlog at December 31, 1999 attributable
to former AVEX operations was approximately $470.0 million.
Gross profit increased $15.8 million, or 30.6%, over 1998. Gross profit as
a percentage of sales decreased from 9.9% for 1998 to 7.7% for 1999 primarily
due to lower gross margins at AVEX than at our other operations. The increase in
gross profit was due
primarily to higher sales attributable to the AVEX acquisition, as well as the
operation of the new systems integration facility in Ireland and to a shift in
mix to customer programs with higher gross margins. The decrease in gross profit
as a percentage of sales during 1999 was due primarily to the higher costs and
lower than expected contribution of AVEX, as well as the slower ramping up of
new projects of Benchmark and AVEX during the last six months of 1999, which
resulted in significant underabsorption of costs.
Selling, general and administrative expenses for 1999 increased $14.8
million, or 83.7%, from 1998 to $32.5 million in 1999. The increase in selling,
general and administrative expenses for 1999 is primarily the result of the
acquisition of AVEX. Additionally, the increase in selling, general and
administrative expenses reflects the investment in the business infrastructure
such as personnel and other related corporate and administrative expenses to
support the increased size and complexity of our business.
The charges to operations for bad debt allowance and inventory
obsolescence were $0.3 million and $1.9 million in 1999, respectively, as
compared to $0 and $0.6 million in 1998, respectively.
The amortization of goodwill for the years ended December 31, 1999 and
1998 was $6.4 million and $3.3 million, respectively. Interest expense incurred,
including the debt incurred in connection with the recent acquisitions, was
approximately $9.7 million and $4.4 million, respectively, in 1999 and 1998. The
increased amortization and interest expense in 1999 resulted from the additional
goodwill and debt incurred in connection with the acquisition of AVEX during
1999.
Interest income was approximately $0.6 million in 1999 compared to $0.5
million in 1998.
Income tax expense (including $0.7 million of benefit allocated to the
extraordinary item) of $6.3 million represented an effective tax rate of 34.5%
for the year ended December 31, 1999, compared with an effective tax rate of
39.1% for the year ended December 31, 1998. The decrease is due primarily to
lower foreign tax rates applicable to a portion of pretax income in 1999,
partially offset by nondeductible amortization of goodwill.
In connection with the financing of the acquisition of AVEX, we prepaid
our 8.02% Senior Note due 2006. An extraordinary loss of $1.3 million (net of
income tax benefit of $0.7 million) was incurred as a result of the early
extinguishment of this indebtedness.
We reported net income of approximately $12.0 million, or diluted earnings
of $0.80 per share, for 1999 compared with net income of approximately $16.4
million, or diluted earnings of $1.35 per share for 1998. The approximately $4.4
million decrease in net income during 1999 was a result of the combined effects
of the acquisition of AVEX, the slower ramping up of new projects which resulted
in significant underabsorption of costs, the extraordinary loss on
extinguishment of debt and the increase in interest expense.
Liquidity and Capital Resources
We have financed our growth and operations through funds generated from
operations, proceeds from the sale of our securities and funds borrowed under
our credit facilities.
Cash provided by (used in) operating activities was $(47.0) million, $69.9
million and $56.9 million in 2000, 1999 and 1998, respectively. In 2000,
significant increases in accounts receivable and inventories, net of effects
from the acquisition of the Manassas facility, were partially offset by
increases in accounts payable, depreciation and amortization. Our accounts
receivables and inventories at December 31, 2000 increased $81.3 million and
$132.4 million, respectively, over their levels at December 31, 1999, reflecting
our increased sales and backlog during 2000. In 1999, significant decreases in
accounts receivable, net of effects from the acquisition of AVEX, increases in
accounts payable, and increases in depreciation and amortization were partially
offset by increases in inventories and decreases in accrued liabilities, net of
effects from the acquisition of AVEX. Our inventories increased from $53.7
million at December 31, 1998 to $214.6 million at December 31, 1999, reflecting
the acquisitions of AVEX and certain assets from Stratus during 1999 and
increased sales and backlog during this period. In 1998, substantial decreases
in inventory and accounts receivable, net of effects from the acquisition of
Lockheed Commercial Electronics, and increases in net income, depreciation and
amortization were offset by decreases in accounts payable. Our inventories
decreased from $61.1 million at
December 31, 1997 to $53.7 million at December 31, 1998. We expect increases in
inventories to support the anticipated growth in sales. We continue and are
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 us.
Cash used in investing activities was $85.5 million, $333.8 million and
$78.7 million, respectively, for the years ended December 31, 2000, 1999 and
1998. Pursuant to the terms of the purchase agreement in connection with the
AVEX acquisition, the working capital adjustment was settled in the second
quarter of 2000 and $35.3 million was paid to Huber. The final working capital
adjustment was $2.0 million greater than the current liability we had recorded
at December 31, 1999 as an estimate of the working capital adjustment. We
recorded the $2.0 million as an increase in goodwill during the quarter ended
June 30, 2000. On October 2, 2000, we acquired substantially all of the assets
and properties, net of assumed liabilities, of the Manassas facility for $3.5
million in cash. On August 24, 1999, we completed the AVEX acquisition with
$265.3 million paid in cash at closing. On March 1, 1999, we completed the
purchase of inventories and equipment from Stratus for $42.3 million in cash. On
February 23, 1998, we completed our acquisition of Lockheed Commercial
Electronics for approximately $70.7 million in cash. See Note 2 of Notes to
Consolidated Financial Statements. Capital expenditures of $48.0 million during
2000 were primarily concentrated in test and manufacturing production equipment.
Capital expenditures of $23.8 million during 1999 consisted primarily of test
and computer equipment. Capital expenditures of $12.2 million during 1998
consisted primarily of test and manufacturing production equipment and computer
equipment to support our implementation of a new Enterprise Resource Planning
(ERP) system. During 2000, 1999 and 1998, we invested $0.6 million, $2.5 million
and $7.4 million, respectively, on the new ERP software system. We 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
Lockheed Commercial Electronics.
Cash provided by financing activities was $147.1 million, $249.8 million
and $23.9 million, respectively, for the years ended December 31, 2000, 1999 and
1998. On August 14, 2000, we completed the public offering of 3,162,500 shares
of our common stock for net proceeds of $113.3 million. We used such proceeds to
temporarily repay indebtedness outstanding under our revolving credit facility.
During 2000, we increased borrowings outstanding under our revolving line of
credit by $52.0 million (net) and made principal payments on other long-term
debt totaling $19.7 million. In August 1999 in connection with the AVEX
acquisition, we borrowed $100 million under the term loan, $76 million under the
revolving credit facility and issued $80.2 million principal amount of 6%
Convertible Subordinated Notes. In connection with the purchase of the assets
from Stratus on March 1, 1999, we borrowed $25 million. In June 1999, we
completed a public offering of 3,525,000 shares of its common stock and used a
portion of the net proceeds of $93.7 million to repay borrowings under our bank
credit facilities. Principal payments on long-term debt and debt issuance costs
totaled $58.4 million and $6.4 million, respectively, during 1999. 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.
Principal on the term loan is payable in quarterly installments of $4.5
million, $5 million and $5.5 million during 2001, 2002 and 2003, respectively.
The final three installments of $7 million are due on the last day of March,
June and September 2004.
We have a $175 million revolving line of credit facility with a commercial
bank. We are entitled to borrow under the revolving credit facility up to the
lesser of $175 million or the sum of 75% of our eligible accounts receivable,
45% of our eligible inventories and 50% of our eligible fixed assets. Interest
on the revolving credit facility is payable quarterly, at our option, at either
the bank's Eurodollar rate plus 1.25% to 3.00% or its prime rate plus 0.00% to
1.75%, based upon our debt ratio as specified in the agreement. A commitment fee
of 0.375% to 0.500% per annum on the unused portion of the revolving credit
facility is payable quarterly in arrears. The revolving credit facility matures
on September 30, 2004. As of December 31, 2000, we had $93.5 million outstanding
under the revolving credit facility, bearing interest at 11.0%, $4.9 million
outstanding letters of credit and $76.6 million was available for future
borrowings.
The term loan and the revolving credit facility are secured by our
domestic inventory and accounts receivable, 100% of the stock of our domestic
subsidiaries, and 65% of the voting capital stock of each direct foreign
subsidiary and substantially all of our and our domestic subsidiaries' other
tangible and intangible assets. The term loan and revolving credit facility
contains customary
financial covenants and restricts our ability to incur additional debt, pay
dividends, sell assets, and to merge or consolidate with other persons, without
the consent of the bank.
We have outstanding $80.2 million principal amount of 6% Convertible
Subordinated Notes. The indenture relating to the notes contains affirmative and
negative covenants, including covenants restricting our ability to merge or
engage in certain other extraordinary corporate transactions unless certain
conditions are satisfied. Upon the occurrence of a change of control of our
company (as defined in the indenture relating to the notes), each holder of
notes will have the right to require us to repurchase all or part of the
holder's notes at 100% of the face amount thereof, plus accrued and unpaid
interest. The notes are convertible into shares of our common stock at an
initial conversion price of $40.20 per share at the option of the holder at any
time prior to maturity, unless previously redeemed or repurchased.
Our operations, and the operations of businesses we acquire, are subject
to certain foreign, federal, state and local regulatory requirements relating to
environmental, waste management, health and safety matters. We believe we
operate in substantial compliance with all applicable requirements and we seek
to ensure that newly acquired businesses comply or will comply substantially
with applicable requirements. To date the costs of compliance and workplace and
environmental remediation have not been material to us. However, material costs
and liabilities may arise from these requirements or from new, modified or more
stringent requirements in the future. In addition, past, current and future
operations may give rise to claims of exposure by employees or the public, or to
other claims or liabilities relating to environmental, waste management or
health and safety concerns.
We may require additional capital to finance further enhancements to or
acquisitions or expansions of our manufacturing capacity. Management believes
that the level of working capital will continue to grow at a rate generally
consistent with the growth of our operations. Management continually evaluates
potential strategic acquisitions and investments, but at the present time, we
have no understandings, commitments or agreements with respect to any such
acquisition or investment. Although no assurance can be given that future
financing will be available on terms acceptable to us, we 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 our existing debt agreements.
Our acquisitions in 1999 have significantly increased our leverage ratio
and decreased our interest coverage ratio. At December 31, 2000, our debt to
total capitalization ratio was 39%, as compared to 44% at December 31, 1999 and
11% at June 30, 1999, the last fiscal quarter end prior to the AVEX acquisition.
The level of indebtedness, among other things, could make it difficult for us to
obtain any necessary financing in the future for other acquisitions, working
capital, capital expenditures, debt service requirements and other expenses;
limit our flexibility in planning for, or reacting to changes in, our business;
and make us more vulnerable in the event of an economic downturn in our
business.
Management believes our existing cash balances, funds generated from
operations and available funds under our revolving credit facility will be
sufficient to permit us to meet our liquidity requirements for the next 9-12
months. In order for us to achieve our planned growth or to obtain large volume
customer orders, we expect that we will need to obtain additional financing
during the next 12-24 months.
Market Risks
We have exposure to interest rate risk under our variable rate revolving credit
and term loan facilities. These facilities are based on the spread over the
bank's Eurodollar rate or its prime rate. Inflation and changing prices have not
significantly affected our operating results or the markets in which we perform
services.
We currently have an interest rate swap transaction agreement for a
notional amount of $40.5 million under which we pay a fixed rate of interest of
6.63%, plus 1.25% to 3.00% based upon our debt ratio as specified in the debt
agreement, hedging against the variable interest rates charged by the term loan.
The interest rate swap expires in the year 2003. The receive rate under the swap
is based on LIBOR.
The following tables present principal cash flows and related interest
rates by year of maturity for debt obligations. The variable interest rate for
future years assumes the same rate as of each year end.
Fair Value at
Expected Year of Maturity ($ in '000's) December 31,
Debt 2001 2002 2003 2004 Thereafter Total 2000
- --------------------------------------------------------------------------------------------------------------------------
Convertible subordinated notes -- -- -- -- $80,200 $80,200 $70,408
Fixed interest rate 6.00% 6.00% 6.00% 6.00% 6.00%
Variable rate term loan $18,000 $20,000 $22,000 $21,000 -- $81,000 $81,000
Average interest rate 9.47% 9.47% 9.47% 9.47% --
Variable rate revolving credit facility -- -- -- $93,500 -- $93,500 $93,500
Average interest rate 11.00% 11.00% 11.00% 11.00% --
Interest Rate Derivative Financial Instruments Related to Debt
Interest rate swap
Pay fixed/receive variable $9,000 $10,000 $21,500 -- -- $40,500 $(667)
Average pay rate 9.38% 9.38% 9.38% -- --
Average receive rate 9.19% 9.19% 9.19% -- --
Fair Value at
Expected Year of Maturity ($ in '000's) December 31,
Debt 2000 2001 2002 2003 2004 Thereafter Total 1999
- ----------------------------------------------------------------------------------------------------------------------------
Convertible subordinated notes -- -- -- -- -- $80,200 $80,200 $62,255
Fixed interest rate 6.00% 6.00% 6.00% 6.00% 6.00% 6.00% 6.00%
Variable rate term loan $16,000 $18,000 $20,000 $22,000 $21,000 -- $97,000 $97,000
Average interest rate 8.72% 8.72% 8.72% 8.72% 8.72% -- 8.72%
Variable rate revolving
credit facility -- -- -- -- $41,500 -- $41,500 $41,500
Average interest rate 9.27% 9.27% 9.27% 9.27% 9.27% -- 9.27%
Our international sales are a growing portion of our net sales; we are
exposed to risks associated with operating internationally, including the
following:
o Foreign currency exchange risk;
o Import and export duties, taxes and regulatory changes;
o Inflationary economics or currencies;
o Economic and political instability.
We do not use derivative financial instruments for speculative purposes.
Our policy is to maintain a hedged position for certain significant transaction
exposures. These exposures are primarily, but not limited to, vendor payments
and inter-company balances in currencies other than the functional currency of
the operating entity. Our international operations in some instances operate in
a natural hedge because both operating expenses and a portion of sales are
denominated in local currency. During 2000, we had one foreign currency hedging
contract in place to support expansion of the Dublin, Ireland facility. This
contract expired in December 2000.
Litigation and Other Contingencies
On October 18, 1999, we announced that our third quarter 1999 earnings
announcement would be delayed and subsequently, on October 22, we announced our
earnings for the third quarter 1999 were below the level of the same periods
during 1998 and were
below expectations. Several class action lawsuits were filed in federal district
court in Houston, Texas against Benchmark and two of its officers and directors
alleging violations of the federal securities laws. These lawsuits were
consolidated in February 2000. The lawsuits seek to recover unspecified damages.
We deny the allegations in the lawsuits, however, and further deny that such
allegations provide a basis for recovery of damages as we believe that we have
made all required disclosures on a timely basis. Management is vigorously
defending against these actions.
Benchmark filed suit against J.M. Huber Corporation (Seller) in the United
States District Court for the Southern District of Texas for breach of contract,
fraud and negligent misrepresentation on December 14, 1999 and is seeking an
unspecified amount of damages in connection with the contract between Benchmark
and Seller pursuant to which Benchmark acquired all of the stock of AVEX and
Kilbride Holdings B.V. On January 5, 2000, Seller filed suit in the United
States District Court for the Southern District of New York alleging that
Benchmark failed to comply with certain obligations under the contract requiring
Benchmark to register shares of its common stock issued to Seller as partial
consideration for the acquisition. Seller's suit has been consolidated with
Benchmark's suit in the United States District Court for the Southern District
of Texas. Benchmark intends to vigorously pursue its claims against Seller and
defend against Seller's allegations.
During the second quarter of 2000, Benchmark, along with numerous other
companies, was named as a defendant in a lawsuit brought by the Lemelson
Medical, Education & Research Foundation (the Foundation). The lawsuit alleges
that Benchmark has infringed certain of the Foundation's patents relating to
machine vision and bar code technology utilized in machines Benchmark has
purchased. On November 11, 2000, Benchmark filed an Answer, Affirmative
Defenses, and a Motion to Stay based upon Declaratory Judgement Actions filed by
Cognex and Symbol, manufacturers of the equipment at issue. We continue to
explore any indemnity or similar rights Benchmark may have against manufacturers
of the machines or other third parties. Management intends to vigorously defend
against such claim and pursue all rights it has against third parties.
Benchmark is also involved in various other 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
Benchmark's consolidated financial position or results of operations.
Consolidated Balance Sheets
Benchmark Electronics, Inc. and Subsidiaries
December 31,
(in thousands) 2000 l999
- --------------------------------------------------------------------------------------------------------
Assets
Current assets:
Cash and cash equivalents $ 23,541 $ 9,437
Accounts receivable, net 277,620 197,239
Income taxes receivable -- 3,351
Inventories 346,463 214,554
Prepaid expenses and other assets 18,412 15,499
Deferred tax asset 3,135 2,334
- --------------------------------------------------------------------------------------------------------
Total current assets 669,171 442,414
Property, plant and equipment 202,404 175,774
Accumulated depreciation (66,016) (53,766)
- --------------------------------------------------------------------------------------------------------
Net property, plant and equipment 136,388 122,008
Goodwill, net 166,514 178,207
Other, net 19,148 18,209
- --------------------------------------------------------------------------------------------------------
$ 991,221 $ 760,838
- --------------------------------------------------------------------------------------------------------
Liabilities and Shareholders' Equity
Current liabilities:
Current installments of other long-term debt $ 20,275 $ 19,184
Accounts payable 268,358 215,971
Income taxes payable 1,911 --
Accrued liabilities 31,309 29,333
- --------------------------------------------------------------------------------------------------------
Total current liabilities 321,853 264,488
- --------------------------------------------------------------------------------------------------------
Revolving line of credit 93,500 41,500
Convertible subordinated notes 80,200 80,200
Other long-term debt, excluding current installments 67,094 81,111
Other long-term liability 6,957 5,939
Deferred tax liability 9,672 5,665
Shareholders' equity:
Preferred shares, $.10 par value; 5,000 shares authorized, none issued -- --
Common shares, $.10 par value; 30,000 shares authorized: issued
19,643 and 16,289, respectively; outstanding 19,594
and 16,240, respectively 1,959 1,624
Additional paid-in capital 317,849 200,980
Retained earnings 98,675 78,774
Accumulated other comprehensive income (loss) (6,418) 677
Less treasury shares, at cost, 49 shares (120) (120)
- --------------------------------------------------------------------------------------------------------
Total shareholders' equity 411,945 281,935
Commitments and contingencies
- --------------------------------------------------------------------------------------------------------
$ 991,221 $ 760,838
- --------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
Consolidated Statements of Income
Benchmark Electronics, Inc. and Subsidiaries
Year ended December 31,
(in thousands, except per share data) 2000 1999 1998
- --------------------------------------------------------------------------------------------------------
Sales $ 1,704,924 $877,839 $524,065
Cost of sales 1,580,817 810,309 472,354
- --------------------------------------------------------------------------------------------------------
Gross profit 124,107 67,530 51,711
Selling, general and administrative expenses 57,871 32,477 17,680
Amortization of goodwill 12,841 6,430 3,311
- --------------------------------------------------------------------------------------------------------
Income from operations 53,395 28,623 30,720
Interest expense (24,396) (9,696) (4,394)
Interest income 770 605 479
Other income (expense) (1,339) 744 85
- --------------------------------------------------------------------------------------------------------
Income before income taxes and extraordinary item 28,430 20,276 26,890
Income tax expense 8,529 7,005 10,518
- --------------------------------------------------------------------------------------------------------
Income before extraordinary item 19,901 13,271 16,372
Extraordinary item - loss on extinguishment of debt, net of tax -- (1,297) --
- --------------------------------------------------------------------------------------------------------
Net income $ 19,901 $ 11,974 $ 16,372
- --------------------------------------------------------------------------------------------------------
Earnings per share:
Basic:
Income before extraordinary item $1.13 $0.94 $1.41
Extraordinary item -- (0.09) --
- --------------------------------------------------------------------------------------------------------
Earnings per share $1.13 $0.85 $1.41
- --------------------------------------------------------------------------------------------------------
Diluted:
Income before extraordinary item $1.06 $0.88 $1.35
Extraordinary item -- (0.08) --
- --------------------------------------------------------------------------------------------------------
Earnings per share $1.06 $0.80 $1.35
- --------------------------------------------------------------------------------------------------------
Weighted average number of shares outstanding:
Basic 17,578 14,081 11,594
Diluted 18,718 15,010 12,098
- --------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
Consolidated Statements of Shareholders' Equity and Comprehensive Income
Benchmark Electronics, Inc. and Subsidiaries
Accumulated
Additional other Total
Common paid-in Retained comprehensive Treasury shareholders'
(in thousands) Shares shares capital earnings income (loss) shares equity
- ----------------------------------------------------------------------------------------------------------------------------------
Balances, December 31, 1997 11,574 $1,157 $ 69,407 $50,428 -- $ (120) $120,872
Stock options exercised 54 5 488 -- -- -- 493
Federal tax benefit of
stock options exercised 264 -- -- -- 264
Net income (a) -- -- -- 16,372 -- -- 16,372
- ----------------------------------------------------------------------------------------------------------------------------------
Balances, December 31, 1998 11,628 1,162 70,159 66,800 -- (120) 138,001
Common shares issued in
public offering net of expenses 3,525 353 93,338 -- -- -- 93,691
Stock options exercised 65 7 797 -- -- -- 804
Federal tax benefit of
stock options exercised -- -- 322 -- -- -- 322
Common shares issued under
Employee Stock Purchase Plan 22 2 452 -- -- -- 454
Acquisition of Avex
Electronics, Inc. 1,000 100 35,912 -- -- -- 36,012
Net income -- -- -- 11,974 -- -- 11,974
Foreign currency translation adjustments -- -- -- -- 677 -- 677
--------
Comprehensive income -- -- -- -- -- -- 12,651
- ----------------------------------------------------------------------------------------------------------------------------------
Balances, December 31, 1999 16,240 1,624 200,980 78,774 677 (120) 281,935
Common shares issued in
public offering net of expenses 3,163 316 112,971 -- -- -- 113,287
Stock options exercised 127 13 1,734 -- -- -- 1,747
Federal tax benefit of
stock options exercised -- -- 921 -- -- -- 921
Common shares issued under
Employee Stock Purchase Plan 64 6 1,210 -- -- -- 1,216
Federal tax benefit of
Employee Stock Purchase Plan -- -- 33 -- -- -- 33
Net income -- -- -- 19,901 -- -- 19,901
Foreign currency translation adjustments -- -- -- -- (7,095) -- (7,095)
--------
Comprehensive income -- -- -- -- -- -- 12,806
- ----------------------------------------------------------------------------------------------------------------------------------
Balances, December 31, 2000 19,594 $1,959 $317,849 $98,675 $(6,418) $ (120) $411,945
- ----------------------------------------------------------------------------------------------------------------------------------
(a) Net income and comprehensive income are the same for 1998.
See accompanying notes to consolidated financial statements.
Consolidated Statements of Cash Flows
Benchmark Electronics, Inc. and Subsidiaries
Year ended December 31,
(in thousands) 2000 1999 1998
- --------------------------------------------------------------------------------------------------------------------------
Cash flows from operating activities:
Net income $ 19,901 $ 11,974 $ 16,372
Adjustments to reconcile net income
to net cash provided by (used in) operating activities:
Depreciation and amortization 39,841 24,637 13,307
Amortization of premiums on marketable securities -- -- 46
Deferred income taxes 3,206 841 2,305
Federal tax benefit of stock options exercised 921 322 264
Federal tax benefit of employee stock purchase plan 33 -- --
Tax benefit of acquired net operating loss carryforwards 360 -- --
Amortization of goodwill 12,841 6,430 3,311
Gain on the sale of property, plant and equipment (24) (455) (4)
Extraordinary loss on extinguishment of debt -- 1,297 --
Changes in operating assets and liabilities, net of effects
from acquisitions of businesses:
Accounts receivable (81,290) 10,745 7,404
Income taxes receivable 5,262 (1,533) (806)
Inventories (132,425) (10,681) 30,930
Prepaid expenses and other assets (5,494) 734 (354)
Accounts payable 86,430 38,490 (15,370)
Accrued liabilities 3,399 (12,932) (552)
- --------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operations (47,039) 69,869 56,853
Cash flows from investing activities:
Additions to property, plant and equipment (47,984) (23,871) (12,204)
Additions to capitalized software (645) (2,485) (7,383)
Proceeds from the sale of property, plant and equipment 1,777 1,467 183
Acquisitions, net of cash acquired (38,685) (308,877) (70,679)
Proceeds from the sale of marketable securities -- -- 11,385
- --------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (85,537) (333,766) (78,698)
Cash flows from financing activities:
Net proceeds from public offering of common shares 113,287 93,691 --
Proceeds from issuance of long-term debt 52,000 221,700 40,000
Principal payments on long-term debt (19,731) (58,473) (16,175)
Repayment premium on extinguishment of debt -- (1,995) --
Debt issuance costs (1,383) (6,390) (425)
Proceeds from employee stock purchase plan 1,216 454 --
Proceeds from stock options exercised 1,747 804 493
- --------------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 147,136 249,791 23,893
- --------------------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes (456) 466 --
- --------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 14,104 (13,640) 2,048
- --------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at beginning of year 9,437 23,077 21,029
- --------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 23,541 $ 9,437 $ 23,077
- --------------------------------------------------------------------------------------------------------------------------
Year ended December 31,
(in thousands) 2000 1999 1998
- --------------------------------------------------------------------------------------------------------------------------
Supplemental disclosures of cash flow information:
- --------------------------------------------------------------------------------------------------------------------------
Income taxes paid (refunded) $ (809) $ 8,195 $ 8,755
- --------------------------------------------------------------------------------------------------------------------------
Interest paid $ 22,277 $ 8,604 $ 4,265
- --------------------------------------------------------------------------------------------------------------------------
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 in the business
of manufacturing electronics and provides services to original equipment
manufacturers (OEMs) of telecommunication equipment, computers and related
products for business enterprises, video/audio/entertainment products,
industrial control equipment, testing and instrumentation products, personal
computers and medical devices. The Company has manufacturing operations located
in the Americas, Europe and Asia.
(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) Inventories
Inventories include material, labor and overhead and are stated at the lower of
cost (principally first-in, first-out method) or market.
(e) 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.
(f) 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, 2000 and 1999 was $24.9 million and $12.1 million, respectively.
Other assets consist primarily of prepaid pension costs, 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 2000, 1999 and 1998, $0.6 million, $2.5 million and $7.4
million of software costs were capitalized in connection with the new ERP system
implementation. The accumulated amortization of deferred financing costs at
December 31, 2000 and 1999 was $2.1 million and $0.8 million, respectively.
(g) Impairment
In assessing and measuring the impairment of long-lived assets, the Company
applies the provisions of Statement of Financial Accounting Standards (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. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net cash flows expected
to be generated by the asset. If the long-lived asset or identifiable intangible
being tested for impairment was acquired in a purchase business combination, the
goodwill that arose in that transaction is included in the asset grouping in
determining whether an impairment has occurred. If some but not all of the
assets acquired in that transaction are being tested, goodwill is allocated to
the assets being tested for impairment based on the relative fair values of the
long-lived assets and identifiable intangibles acquired at the acquisition date.
If such assets are considered to be impaired, the impairment to be recognized is
measured by the amount by which the carrying amount of the assets exceeds the
fair value of the assets. Additionally, where an impairment loss is recognized
for long-lived assets and identifiable intangibles where goodwill has been
allocated to the asset grouping, as described immediately above, the carrying
amount of the allocated goodwill is impaired (eliminated) before reducing the
carrying amounts of impaired long-lived assets. Assets to be disposed of are
reported at the lower of the carrying amount or fair value less costs to sell.
With respect to the carrying amounts of goodwill remaining after the
testing for impairment of long-lived assets and identifiable intangibles,
including enterprise level goodwill not subject to impairment testing under SFAS
No. 121, the Company assesses such carrying value for impairment whenever events
or changes in circumstances indicate that the carrying amount of such goodwill
may not be recoverable. The Company assesses the recoverability of this goodwill
by determining whether the amortization of goodwill over its remaining life can
be recovered through undiscounted future operating cash flows of the acquired
business. The amount of goodwill impairment, if any, is measured based on
projected discounted operating cash flows compared to the carrying value of such
goodwill.
With respect to capitalized software costs, the Company assesses the carrying
value for impairment whenever events or changes in circumstances indicate that
the carrying amount of this long-lived asset may not be recoverable.
Recoverability of capitalized software costs is measured by a comparison of
excess future cash flows (i.e., cash flows in excess of carrying amounts of
other long-lived assets, identifiable intangibles and goodwill) at a
consolidated level. The measurement of impairment, if any, is based on the
excess of the carrying value of the capitalized software costs over the
discounted excess cash flows.
(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 1.1
million, 0.9 million, and 0.5 million in 2000, 1999 and 1998, respectively, were
used in the calculation of diluted earnings per share. Options to purchase
24,000, 0.3 million and 3,000 shares of common stock in 2000, 1999 and 1998,
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. The effect of the if-converted method for the 6% Convertible
Subordinated Notes (the Notes) is antidilutive and the weighted average portion
of the 2.0 million of potential common shares has not been considered in
computing diluted earnings per share in 2000 and 1999.
(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) Employee Stock Plans
The Company applies the intrinsic value-based method of accounting prescribed by
Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued
to Employees," and related interpretations, in accounting for its stock option
plan and its Employee Stock Purchase Plan. As such, compensation expense would
be recorded on the date of grant only if the current market price of the
underlying stock exceeded the exercise price. SFAS No. 123, "Accounting for
Stock-Based Compensation," established accounting and disclosure requirements
using a fair value-based method of accounting for stock-based employee
compensation plans. As allowed by SFAS No. 123, the Company has elected to
continue to apply the intrinsic value-based method of accounting described
above, and has adopted the disclosure requirements of SFAS No. 123.
(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 Company's financial instruments consist of cash equivalents, accounts
receivable, accrued liabilities, accounts payable, interest rate swaps and
long-term debt. The Company believes that, with the exception of the 6.5%
Convertible Subordinated Notes and the interest rate swaps, the carrying value
of these instruments approximate their fair value. See Note 12 and Recently
Enacted Accounting Pronouncements below.
(n) Foreign Currency
For foreign subsidiaries using the local currency as their functional currency,
assets and liabilities are translated at exchange rates in effect at the balance
sheet date and income and expenses are translated at average exchange rates. The
effects of these translation adjustments are reported in other comprehensive
income (loss). Exchange gains and losses arising from transactions denominated
in
a currency other than the functional currency of the entity involved are
included in other income (expense) and totaled approximately $(1.3) million and
$(1.5) million in 2000 and 1999, respectively.
(o) Derivative Financial Instruments
The Company enters into interest rate swap agreements to reduce its exposure to
market risks from changing interest rates. For interest rate swaps, the
differential to be paid or received is accrued and recognized in interest
expense and may change as market interest rates change. If a swap is terminated
prior to its maturity, the gain or loss is recognized over the remaining
original life of the swap if the item hedged remains outstanding, or
immediately, if the item hedged does not remain outstanding. If the swap is not
terminated prior to maturity, but the underlying hedged item is no longer
outstanding, the interest rate swap is marked to market and any unrealized gain
or loss is recognized immediately.
(p) Recently Enacted Accounting Pronouncements
Effective January 1, 2001, the Company adopted SFAS No. 133, "Accounting for
Derivative Instruments and Certain Hedging Activities" and SFAS No. 138,
"Accounting for Certain Derivative Instruments and Certain Hedging Activities,
an Amendment of SFAS 133." These statements establish accounting and reporting
standards requiring that derivative instruments, including certain derivative
instruments embedded in other contracts, be recorded on the balance sheet at
fair value as either assets or liabilities. The accounting for changes in the
fair value of a derivative instrument depends on the intended use and
designation of the derivative at its inception. Special accounting for
qualifying hedges allows a derivative's gains and losses to offset related
results of the hedged item in the statements of operations, and requires the
Company to formally document, designate and assess the effectiveness of the
hedge transaction to receive hedge accounting. For derivatives designated as
cash-flow hedges, changes in fair-value, to the extent the hedge is effective,
are recognized in other comprehensive income until the hedged item is recognized
in earnings. Overall hedge effectiveness is measured at least quarterly. Any
changes in the fair value of the derivative instrument resulting from hedge
ineffectiveness, as defined by SFAS No. 133 and measured based on the cumulative
changes in the fair value of the derivative instrument and the cumulative
changes in the estimated future cash flows of the hedged item, are recognized
immediately in earnings. The Company has designated its swap agreement as a cash
flow hedge.
Adoption of SFAS No. 133 at January 1, 2001 resulted in recognition of
approximately $0.7 million of derivative liabilities on the Company's balance
sheet and $0.7 million of hedging losses included in accumulated other
comprehensive income as the cumulative effect of a change in accounting
principle. Amounts were determined as of January 1, 2001 based on market quotes
of the Company's interest rate swap agreement.
(q) Reclassifications
Certain reclassifications of prior period amounts have been made to conform to
the current presentation.
Note 2 - Acquisitions and Dispositions
On October 2, 2000, the Company acquired substantially all of the assets and
properties, net of assumed liabilities, of the MSI Division of Outreach
Technologies, Inc. This operation in Manassas, Virginia was acquired for $3.5
million, as adjusted. The transaction was accounted for under the purchase
method of accounting, and, accordingly, the results of operations of the
Manassas division since October 2, 2000 have been included in the accompanying
consolidated statements of income. The acquisition resulted in goodwill of
approximately $0.4 million that is being amortized on a straight-line basis over
15 years. The acquisition was allocated $1.9 million to inventories, $2.1
million to accounts receivable, $0.1 million to prepaid expenses and other
current assets, $0.8 million to equipment, $1.1 million to accounts payable,
$0.3 million to accrued liabilities, $0.4 million to other long-term debt and
$0.4 million to goodwill.
On September 15, 2000, the Company closed the previously announced sale of
its Swedish operations for $19.6 million, as adjusted. The Swedish operations
accounted for 3.7% and 3.0% of the Company's sales and 14.4% and 16.0% of its
operating income for the years ended December 31, 2000 and 1999, respectively.
On August 24, 1999, the Company completed the acquisition of all of the
outstanding capital stock of AVEX from J.M. Huber Corporation (the Seller). AVEX
had 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, Singapore, East Kilbride, Scotland,
and Katrineholm, Sweden. In consideration for the capital stock of AVEX, the
Company paid $265.3 million in cash at closing, subject to certain adjustments,
including a working capital adjustment, and issued one million shares of the
Company's
common stock to the Seller. The working capital adjustment was settled in the
second quarter of 2000 and $35.3 million was paid to the Seller. In addition,
the Company paid $5.2 million in acquisition costs. In order to finance the AVEX
acquisition, the Company (i) obtained a term loan from a syndicate of commercial
banks in the amount of $100 million, (ii) obtained a new revolving credit
facility permitting draws of up to $125 million, subject to a borrowing base
calculation, and borrowed $46 million under such facility and (iii) issued $80.2
million in Notes. In connection with the AVEX acquisition, the Company borrowed
$30 million under the new revolving credit facility to refinance existing debt
pursuant to the Company's prior senior note indebtedness. The AVEX acquisition
was accounted for using the purchase method of accounting. The acquisition
resulted in goodwill of approximately $139.5 million that is being amortized on
a straight-line basis over 15 years.
The net purchase price paid in the AVEX acquisition has been allocated as
follows:
(in thousands) 1999
- --------------------------------------------------------------------------------
Working capital, other than cash $135,311
Property, plant and equipment 71,295
Goodwill 139,517
Other assets 4,152
Other liabilities (5,629)
Deferred income taxes (1,229)
Long-term debt (4,457)
- --------------------------------------------------------------------------------
Purchase price, net of cash received $338,960
- --------------------------------------------------------------------------------
Net cash portion of purchase price $302,948
Common stock issued 36,012
- --------------------------------------------------------------------------------
Purchase price, net of cash received $338,960
- --------------------------------------------------------------------------------
On March 1, 1999, the Company acquired certain equipment and inventories
from Stratus Computer Ireland (Stratus), a wholly owned subsidiary of Ascend
Communications, Inc. (Ascend) for approximately $42.3 million in cash as
adjusted. The acquisition price was allocated $6.1 million to equipment and
other assets, and $36.2 million to inventories. Stratus provided systems
integration services for large and sophisticated fault-tolerant mainframe
computers. In connection with the transaction, the Company entered into a
three-year supply agreement to provide these system integration services to
Ascend and Stratus Holdings Limited and the Company hired approximately 260
employees.
On February 23, 1998, the Company completed its acquisition of Lockheed
Commercial Electronics Company (LCEC) for $70.7 million 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
accompanying consolidated statements of income. The acquisition resulted in
goodwill of approximately $29.5 million that is being amortized on a
straight-line basis over 15 years.
The net purchase price paid in the LCEC transaction was allocated as
follows:
(in thousands) 1998
- --------------------------------------------------------------------------------
Working capital, other than cash $30,575
Property, plant and equipment 15,905
Goodwill 29,536
Other liabilities (3,096)
Deferred income taxes (2,241)
- --------------------------------------------------------------------------------
Purchase price, net of cash received $70,679
- --------------------------------------------------------------------------------
The following unaudited pro forma condensed consolidated financial
information reflects the acquisitions of AVEX as if it had occurred on January 1
of each year, and the acquisition of LCEC as if it had occurred on January 1,
1998. The summary pro forma information is not necessarily representative of
what the Company's results of operations would have been had the acquisitions of
AVEX and LCEC in fact occurred on those dates, and is not intended to project
the Company's results of operations for any future period or date.
(in thousands, except per share data) 1999 1998
- --------------------------------------------------------------------------------
Net sales $1,518,013 1,389,380
Gross profit 75,510 33,729
Income (loss) from operations 4,054 (45,951)
Income (loss) before
extraordinary item (12,255) (46,262)
Extraordinary item - loss on
extinguishment of debt (1,297) --
Net loss (13,552) (46,262)
Earnings (loss) per share:
Basic and diluted:
Income (loss) before
extraordinary item $(0.80) (3.31)
Extraordinary item (0.08) --
- --------------------------------------------------------------------------------
Net income (loss) $(0.88) (3.31)
- --------------------------------------------------------------------------------
Weighted average number of
shares outstanding:
Basic 15,387 13,990
Diluted 15,387 13,990
Note 3 - Inventories
Inventory costs are summarized as follows:
December 31,
(in thousands) 2000 1999
- --------------------------------------------------------------------------------
Raw materials $273,758 191,952
Work in process 64,727 27,658
Finished goods 16,204 14,944
Obsolescence reserve (8,226) (20,000)
- --------------------------------------------------------------------------------
$346,463 214,554
- --------------------------------------------------------------------------------
Note 4 - Property, Plant and Equipment
Property, plant and equipment consists of the following:
December 31,
(in thousands) 2000 1999
- --------------------------------------------------------------------------------
Land $ 2,709 2,911
Buildings 23,317 24,776
Machinery and equipment 155,637 132,868
Furniture and fixtures 11,302 11,041
Vehicles 377 286
Leasehold improvements 9,062 3,394
Construction in progress -- 498
- --------------------------------------------------------------------------------
$202,404 175,774
- --------------------------------------------------------------------------------
Note 5 - Borrowing Facilities
Other long-term debt consists of the following:
December 31,
(in thousands) 2000 1999
- --------------------------------------------------------------------------------
Term loan $81,000 97,000
Capital lease obligations 6,250 --
Other 119 3,295
- --------------------------------------------------------------------------------
Total other long-term debt 87,369 100,295
Less current installments 20,275 19,184
- --------------------------------------------------------------------------------
Other long-term debt $67,094 81,111
- --------------------------------------------------------------------------------
In order to finance the acquisition of AVEX, the Company obtained $100
million through borrowings under a five-year term loan (the Term Loan) through a
syndicate of commercial banks. Principal on the Term Loan is payable in
quarterly installments in annual amounts of $18 million in 2001, $20 million in
2002, $22 million in 2003 and $21 million in 2004. The Term Loan bears interest,
at the Company's option, at either the bank's Eurodollar rate plus 1.25% to
3.00% or its prime rate plus 0.00% to 1.75%, based upon the Company's debt ratio
as specified in the agreement and interest is payable quarterly. As of December
31, 2000, the Company had $81 million outstanding under the Term Loan, bearing
interest at rates ranging from 9.38% to 9.52%.
In connection with the financing of the acquisition of AVEX, the Company
prepaid its outstanding 8.02% Senior Note (the Senior Note) due 2006. An
extraordinary loss of $1.3 million (net of income tax benefit of $0.7 million)
was incurred as a result of the early extinguishment of the Senior Note.
The Company has a $175 million revolving line of credit facility (the
Revolving Credit Facility) with a commercial bank. The Company is entitled to
borrow under the Revolving Credit Facility up to the lesser of $175 million or
the sum of 75% of its eligible accounts receivable, 45% of its eligible
inventories and 50% of its eligible fixed assets. Interest on the Revolving
Credit Facility is payable quarterly, at the Company's option, at either the
bank's Eurodollar rate plus 1.25% to 3.00% or its prime rate plus 0.00% to
1.75%, based upon the Company's debt ratio as specified in the agreement. A
commitment fee of 0.375% to 0.500% per annum on the unused portion of the
Revolving Credit Facility is pay-able quarterly in arrears. The Revolving Credit
Facility matures on September 30, 2004. As of December 31, 2000, the Company had
$93.5 million outstanding under the Revolving Credit Facility, bearing interest
at 11.0%, $4.9 million outstanding letters of credit and $76.6 million was
available for future borrowings.
The Term Loan and the Revolving Credit Facility (collectively the
Facility) are secured by the Company's U.S. domestic inventory and accounts
receivable, 100% of the stock of the Company's U.S. domestic subsidiaries, and
65% of the voting capital stock of each direct foreign subsidiary and
substantially all of the other tangible and intangible assets of the Company and
its U.S. domestic subsidiaries. The Facility contains customary financial
covenants and restricts the ability of the Company to incur additional debt, pay
dividends, sell assets, and to merge or consolidate with other persons, without
the consent of the bank.
In August 1999, the Company issued $80.2 million principal amount of 6%
Convertible Subordinated Notes due August 15, 2006 (the Notes). The indenture
relating to the Notes contains affirmative and negative covenants, including
covenants restricting the Company's ability to merge or engage in certain other
extraordinary corporate transactions unless certain conditions are satisfied.
Upon the occurrence of a change of control of the Company (as defined in the
indenture relating to the Notes), each holder of Notes will have the right to
require the Company to repurchase all or part of the holder's notes at 100% of
the face amount thereof, plus accrued and unpaid interest.
The Notes are convertible, unless previously redeemed or repurchased, at
the option of the holder at any time prior to maturity, into shares of the
Company's common stock at an initial conversion price of $40.20 per share,
subject to adjustment in certain events. The Notes are convertible into a total
of 1,995,000 shares of the Company's common stock. Interest is payable February
15 and August 15 each year.
The aggregate maturities of long-term debt for each of the five years
subsequent to December 31, 2000 are as follows: 2001, $20.3 million; 2002, $22.2
million; 2003, $23.8 million; and 2004, $114.5 million.
The Company currently has an interest rate swap transaction agreement for
a notional amount of $40.5 million under which it pays a fixed rate of interest
of 6.63%, plus 1.25% to 3.00% based upon its debt ratio as specified in the debt
agreement, hedging against the variable interest rates charged by the term loan.
The receive rate under the swap is based on LIBOR. The interest rate
swap expires in the year 2003.
Note 6 - Commitments
The Company leases certain manufacturing equipment, office equipment, vehicles
and office, warehouse and manufacturing facilities under operating leases. Some
of the leases provide for escalation of the lease payments as maintenance costs
and taxes increase. The leases expire at various times through 2020. Leases for
office space and manufacturing facilities generally contain renewal options.
Rental expense for each of the years in the three-year period ended December 31,
2000 was $11.7 million, $3.9 million and $2.5 million, 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 ten years, expiring through August
2006 with annual renewals thereafter. Total rent expense associated with these
leases was $0.8 million for each of the years ended December 31, 2000, 1999 and
1998.
In connection with the acquisition of AVEX, the Company assumed prepaid
operating leases of manufacturing equipment with initial terms of three years
that expire through 2001. The lease expense associated with these leases for the
periods ended December 31, 2000 and 1999 was $2.4 million and $1.5 million,
respectively.
Aggregate annual rental payments on future operating lease commitments are
as follows:
December 31, (in thousands)
- --------------------------------------------------------------------------------
2001 $9,126
2002 7,694
2003 6,026
2004 3,780
2005 2,954
Thereafter 16,075
- --------------------------------------------------------------------------------
Total $45,655
The Company enters into contractual commitments to deliver products and
services in the ordinary course of business. The Company believes that all such
contractual commitments will be met or renegotiated such that no material
adverse financial impact on the Company's financial position, results of
operations or liquidity will result from these commitments.
Note 7 - Common Stock and Stock Option Plans
During 2000 and 1999, the Company issued 3.2 million and 3.5 million shares of
common stock, respectively, in public offerings for net proceeds of $113.3
million and $93.7 million, respectively.
In 1990, the Company adopted and its shareholders approved a Stock Option
Plan (the 1990 Plan) for the benefit of its employees, including executive
officers. The 1990 Plan authorized the Company, upon recommendation of the
compensation committee of the Board of Directors, to grant options to purchase a
total of 3.2 million shares of the Company's common stock to key employees of
the Company. The 1990 Plan expired in May 2000, and no additional grants may be
made under that plan.
The 1990 Plan provided 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 non qualified 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.
On February 16, 2000 the Board of Directors of the Company adopted and
subsequently its shareholders approved the Benchmark Electronics, Inc. 2000
Stock Awards Plan (the 2000 Plan). The 2000 Plan authorizes the Company, upon
recommendation of the compensation committee of the Board of Directors, to grant
a variety of types of awards, including stock options, restricted stock awards,
stock appreciation rights, performance awards, and phantom stock awards, or any
combination thereof, to key employees of the Company. The maximum number of
shares of common stock that may be subject to outstanding awards determined
immediately after the grant of any award, and the maximum number of shares which
may be issued under the 2000 Plan pursuant to all awards, may not exceed 2.0
million shares (subject to antidilutive adjustment).
The 2000 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 non qualified stock options.
Incentive stock options may only be granted to employees of the Company or its
subsidiaries. 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
exercise price of any incentive stock option granted to 10% shareholders
(employees who possess more than 10% of the total combined voting power of all
classes of shares of the Company) must be at least 110% of the fair market value
of the common stock at the time such option is granted. The stock options will
terminate 5 years after the grant date for 10% shareholders and 10 years after
the date of grant for all other optionees. Options granted under the 2000 Plan
vest over 4 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, as amended, 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 6,000 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 2000, 1999 and
1998, pursuant to the Plan, 24,000, 12,000 and 12,000 options, respectively,
were granted to Directors to purchase shares of common stock at an exercise
price of $36.88, $32.13 and $21.38 per share, respectively.
In April, 1999, the Board of Directors adopted the Benchmark Electronics,
Inc. Employee Stock Purchase Plan (the Purchase Plan). Under the Purchase Plan,
employees meeting specific employment qualifications are eligible to participate
and can purchase shares semi-annually through payroll deductions at the lower of
85% of the fair market value of the stock at the commencement or end of the
offering period. The Purchase Plan permits eligible employees to purchase common
stock through payroll deductions for up to the lesser of 17% of qualified
compensation or $25,000. As of December 31, 2000, 413,654 shares remain
available for issuance under the Purchase Plan. The weighted-average fair value
of the purchase rights granted during 2000 and 1999 was $7.93 and $7.22,
respectively.
The following table summarizes the activities relating to the Company's
stock option plans:
Weighted
Average
Number of Exercise
(options in thousands) Options Price
- --------------------------------------------------------------------------------
Balance at December 31, 1997 1,590 $14.11
Granted 653 $20.99
Exercised (54) $9.18
Canceled (80) $17.94
- --------------------------------------------------------------------------------
Balance at December 31, 1998 2,109 $16.22
Granted 715 $31.01
Exercised (65) $12.20
Canceled (146) $24.09
- --------------------------------------------------------------------------------
Balance at December 31, 1999 2,613 $19.93
Granted 471 $24.47
Exercised (127) $13.79
Canceled (214) $27.29
- --------------------------------------------------------------------------------
Balance at December 31, 2000 2,743 $20.44
- --------------------------------------------------------------------------------
The following table summarizes information concerning currently
outstanding and exercisable options:
(options in thousands)
Options Outstanding Options Exercisable
Weighted
Average Weighted Weighted
Range of Outstanding Average Average
Exercise Number Contractual Exercise Number Exercise
Prices Outstanding Life (years) Price Exercisable Price
- --------------------------------------------------------------------------------
$4.38-$10 150 2.18 $7.43 150 $7.43
$10-$15 709 4.98 $13.13 565 $12.84
$15-$20 734 7.36 $17.57 191 $16.49
$20-$25 325 7.06 $22.12 75 $22.03
$25-$30 277 7.53 $28.31 60 $26.50
$30-$35 524 8.39 $32.12 12 $32.13
$35-$40 24 8.33 $36.88 24 $36.88
-- --
2,743 1,077
----- -----
At December 31, 2000, the range of exercise prices and weighted average
remaining contractual life of outstanding options was $4.38 - $36.88 and 6.79
years, respectively.
At December 31, 2000, 1999 and 1998, the number of options exercisable was
1.1 million, 0.8 million and 0.6 million, respectively, and the weighted average
exercise price of those options was $14.89, $12.86 and $11.51, 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 $15.0 million,
or $0.80 per share diluted during 2000, $7.9 million, or $0.53 per share diluted
during 1999, and $13.9 million, or $1.15 per share diluted during 1998. The
weighted average fair value of the options granted during 2000, 1999, and 1998
is estimated as $6.65, $9.06 and $6.41, 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 50% for 2000, 50% for 1999 and 30%
for 1998, risk-free interest rate of 6.12% to 6.72% in 2000, 4.46% to 5.83% in
1999, and 4.33% to 5.86% in 1998, assumed annual forfeiture rate of 20% for
2000, 16% for 1999 and 5% for 1998, and an expected life of 4 years for all
years.
Note 8 - Income Taxes
Income tax expense (benefit) based on income before income taxes and
extraordinary item consists of:
Year ended December 31,
(in thousands) 2000 1999 1998
- --------------------------------------------------------------------------------
Current:
U.S. Federal $(1,480) 1,855 7,012
State and local 178 908 937
Foreign 5,311 2,260 --
- --------------------------------------------------------------------------------
4,009 5,023 7,949
Deferred:
U.S. Federal 2,332 1,146 2,305
State and local 269 -- --
Foreign 605 (305) --
- --------------------------------------------------------------------------------
3,206 841 2,305
Charges in lieu of taxes:
Attributable to employee
stock plans 954 322 264
Attributable to acquired
net operating loss
carryforwards 360 819 --
- --------------------------------------------------------------------------------
1,314 1,141 264
- --------------------------------------------------------------------------------
$8,529 7,005 10,518
- --------------------------------------------------------------------------------
Total income tax expense for 1999 is $6.3 million including the $0.7
million benefit allocated to the extraordinary loss.
Income tax expense differed from the amounts computed by applying the U.S.
federal statutory income tax rate to income before income tax and extraordinary
item as a result of the following:
Year ended December 31,
(in thousands) 2000 1999 1998
- --------------------------------------------------------------------------------
Tax at statutory rate $9,950 7,097 9,412
State taxes,
net of federal benefit 467 590 609
Tax exempt interest -- (208) (165)
Tax benefit from use of
foreign sales corporation (1,386) (341) (350)
Effect of foreign operations (2,554) (1,616) 132
Amortization of goodwill 2,032 1,481 1,123
Other 20 2 (243)
- --------------------------------------------------------------------------------
Total income tax expense $8,529 7,005 10,518
- --------------------------------------------------------------------------------
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities are presented
below:
December 31,
(in thousands) 2000 1999
- --------------------------------------------------------------------------------
Deferred tax assets:
Carrying values of inventories $1,607 946
Accrued liabilities deductible
for tax purposes on a cash basis 1,528 1,388
Net operating loss carryforwards 5,710 5,079
- --------------------------------------------------------------------------------
8,845 7,413
Less valuation allowance (5,710) (5,079)
- --------------------------------------------------------------------------------
Net deferred tax assets 3,135 2,334
Deferred tax liabilities:
Plant and equipment, due to
differences in depreciation (7,557) (5,548)
Other (2,115) (117)
- --------------------------------------------------------------------------------
Gross deferred tax liability (9,672) (5,665)
- --------------------------------------------------------------------------------
Net deferred tax liability $(6,537) (3,331)
- --------------------------------------------------------------------------------
The valuation allowance for deferred tax assets as of January 1, 1999 was
zero. The net change in the total valuation allowance for the years ended
December 31, 2000 and 1999 was an increase of $0.1 million and $5.1 million,
respectively. In assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some portion or all of the
deferred tax assets will not be realized. The ultimate realization of deferred
tax assets is dependent upon the generation of future taxable income during the
periods in which those temporary differences become deductible. Management
considers the scheduled reversal of deferred tax liabilities, projected future
taxable income, and tax planning strategies in making this assessment. Based
upon the level of historical taxable income and projections for future taxable
income over the periods which the deferred tax assets are deductible, management
believes it is more likely than not the Company will realize the benefits of
these deductible differences, net of the existing valuation allowances at
December 31, 2000. At December 31, 2000, the Company had operating loss
carryforwards of approximately $15.7 million and $4.8 million in Singapore and
Brazil, respectively, with indefinite carryforward periods. The utilization of
these net operating loss carryforwards is limited to the future operations of
the Company in the tax jurisdictions in which such carryforwards arose. Tax
benefits of approximately $5.7 million that are realized in the future from the
utilization of these carryforwards will be reported as a reduction of goodwill.
Worldwide income before income taxes and extraordinary item consisted of
the following:
Year ended December 31,
(in thousands) 2000 1999 1998
- --------------------------------------------------------------------------------
United States $ 1,656 10,294 27,336
Foreign 26,774 9,982 (446)
- --------------------------------------------------------------------------------
$28,430 20,276 26,890
- --------------------------------------------------------------------------------
Cumulative undistributed earnings of the foreign subsidiaries amounted to
$40.3 million as of December 31, 2000. The Company considers earnings from its
foreign subsidiaries to be indefinitely reinvested and, accordingly, no
provision for U.S. federal and state income taxes has been made for these
earnings. Upon distribution of foreign subsidiary earnings in the form of
dividends or otherwise, such distributed earnings would be reportable for U.S.
income tax purposes (subject to adjustment for foreign tax credits). The
Company's manufacturing operations in Ireland are subject to a 10% tax rate
through December 2010. Thereafter, the applicable statutory tax rate will be
12.5%. As a result of these reduced rates, income tax expense for the years
ended December 31, 2000 and 1999 is approximately $1.2 million (approximately
$0.06 per share diluted) and $1.0 million (approximately $0.07 per share
diluted), respectively, lower than the amount computed by applying the statutory
tax rates (24% in 2000 and 28% in 1999).
Note 9 - Major Customers
The Company's customers operate in industries that are, to a varying extent,
subject to rapid technological change, vigorous competition and short product
life cycles. 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) 2000 1999 1998
- --------------------------------------------------------------------------------
Customer A $270,901 143,173 148,674
Customer B 171,178 153,694 58,424
Customer C 140,597 46,776 --
Customer D 118,224 27,135 --
Note 10 - Segment and Geographic Information
The Company has 16 manufacturing facilities in the Americas, Europe, and Asia
regions to serve its customers. The Company is operated and managed
geographically. The Company's management evaluates performance and allocates the
Company's resources on a geographic basis. Intersegment sales, primarily
constituting sales from the Americas to Europe, are generally recorded at prices
that approximate arm's length transactions. Operating segments' measure of
profitability is based on income from operations (prior to amortization of
goodwill and unallocated corporate expenses). Certain corporate expenses,
including items such as insurance and software licensing costs, are allocated to
these operating segments and are included for performance evaluation.
Amortization expense associated with capitalized software costs is allocated to
these operating segments, but the related assets are not allocated. Amortization
expense associated with goodwill is not allocated to the results of operations
in analyzing segments, but the related balances are allocated to the segments.
The accounting policies for the reportable operating segments are the same as
for the Company taken as a whole. Beginning in 1999, the Company had three
reportable operating segments: the Americas, Europe, and Asia. Prior to the
acquisitions in 1999, all of the Company's operations were in the Americas
region.
Information about operating segments was as follows:
December 31,
(in thousands) 2000 1999
- --------------------------------------------------------------------------------
Net sales:
Americas $1,631,317 724,963
Europe 304,002 219,393
Asia 38,793 14,393
Elimination of intersegment sales (269,188) (80,910)
- --------------------------------------------------------------------------------
$1,704,924 877,839
- --------------------------------------------------------------------------------
Depreciation and amortization:
Americas $ 31,496 19,222
Europe 7,617 5,180
Asia 728 235
Corporate - goodwill 12,841 6,430
- --------------------------------------------------------------------------------
$ 52,682 31,067
- --------------------------------------------------------------------------------
Income from operations:
Americas $ 51,580 26,140
Europe 19,085 11,040
Asia 3,138 826
Corporate and intersegment
eliminations (20,408) (9,383)
- --------------------------------------------------------------------------------
$ 53,395 28,623
- --------------------------------------------------------------------------------
Capital expenditures:
Americas $ 42,179 20,364
Europe 5,175 3,347
Asia 630 160
- --------------------------------------------------------------------------------
$ 47,984 23,871
- --------------------------------------------------------------------------------
Total assets:
Americas $ 812,882 572,904
Europe 143,265 146,004
Asia 16,537 20,026
Corporate 18,537 21,904
- --------------------------------------------------------------------------------
$ 991,221 760,838
- --------------------------------------------------------------------------------
Corporate assets consist primarily of capitalized software costs and debt
financing costs.
The following enterprise-wide information is provided in accordance with
SFAS No.131. Geographic net sales information reflects the destination of the
product shipped. Long-lived assets information is based on the physical location
of the asset.
December 31,
(in thousands) 2000 1999
- -------------------------------------------------------------------------------
Net sales derived from:
Printed circuit boards $1,548,218 756,552
Systems integration and
box build 156,706 121,287
- -------------------------------------------------------------------------------
$1,704,924 877,839
- -------------------------------------------------------------------------------
Geographic net sales:
United States $1,301,823 659,134
Europe 292,692 168,193
Asia and other 110,409 50,512
- -------------------------------------------------------------------------------
$1,704,924 877,839
- -------------------------------------------------------------------------------
Long-lived assets:
United States $ 108,415 93,805
Europe 18,539 24,538
Asia and other 28,582 21,874
- -------------------------------------------------------------------------------
$ 155,536 140,217
- -------------------------------------------------------------------------------
Note 11 - Employee Benefit Plans
The Company has defined contribution plans qualified under Section 401(k) of the
Internal Revenue Code for the benefit of its U.S. employees. The plans cover all
U.S. employees with at least one year of service. Under the provisions of the
plans, the Company will match a portion of each participant's contribution. The
Company may also make discretionary contributions to the plans. During 2000,
1999 and 1998 the Company made contributions to the plans of approximately $2.2
million, $1.7 million and $0.4 million, respectively.
The Company has incentive bonus plans for the benefit of its employees,
including executive officers. These incentive bonus plans replaced the Company's
Incentive Bonus Plan, which was adopted in 1992. The total amount of cash bonus
awards to be made under these incentive bonus plans for any period depends
primarily on the Company's earnings before income tax for that period.
For any plan period, the Company's earnings before income tax must meet or
exceed, or in combination with other factors satisfy, levels targeted by the
Company, or the Company's division or subsidiary, in its business plan, as
established at the beginning of each plan period, for any bonus awards to be
made. The Compensation Committee of the Company's Board of Directors has the
authority to determine the total amount of bonus awards, if any, to be made to
the Company's corporate 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 $4.1 million in 2000 and $1.4
million in 1998 in conjunction with these incentive bonus plans. No bonus
amounts were accrued or expensed in 1999.
Note 12 - Financial Instruments
The carrying values and estimated fair values of financial instruments,
including derivative financial instruments were as follows:
December 31, 2000 December 31, 1999
- -----------------------------------------------------------------------------------------------
Carrying Fair Carrying Fair
(in thousands) Amount Value Amount Value
- -----------------------------------------------------------------------------------------------
Liabilities:
Other long-term debt, excluding current installments $67,094 67,551 81,111 81,111
Revolving credit facility 93,500 93,500 41,500 41,500
Convertible subordinated notes 80,200 70,408 80,200 62,255
Derivative and off-balance-sheet instruments:
Interest rate swap -- (667) -- --
The Company used market quotes to estimate the fair value of its financial
instruments. The carrying amounts of cash equivalents, accounts receivable,
accrued liabilities, accounts payable and current installments of other
long-term debt approximate fair value.
Note 13 - Concentrations of Business Risk
Substantially all of the Company's sales are derived from EMS in which the
Company purchases components specified by its customers. 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 14 - Contingencies
On October 18, 1999, the Company announced that its third quarter earnings
announcement would be delayed and subsequently, on October 22, the Company
announced its earnings for the third quarter were below the level of the same
periods during 1998 and were below expectations. Several class action lawsuits
were filed in federal district court in Houston, Texas against the Company and
two of its officers and directors alleging violations of the federal securities
laws. These lawsuits were consolidated in February 2000. The lawsuits seek to
recover unspecified damages. The Company denies the allegations in the lawsuits,
however, and further denies that such allegations provide a basis for recovery
of damages as the Company believes that it has made all required disclosures on
a timely basis. Management is vigorously defending against these actions. At the
present time, the Company is unable to reasonably estimate the possible loss, if
any, associated with these matters.
The Company filed suit against Seller in the United States District Court
for the Southern District of Texas for breach of contract, fraud and negligent
misrepresentation on December 14, 1999 and is seeking an unspecified amount of
damages in connection with the Amended and Restated Stock Purchase Agreement
dated August 12, 1999 between the parties whereby the Company acquired all of
the stock of AVEX from Seller. On January 5, 2000, Seller filed suit in the
United States District Court for the Southern District of New York alleging that
the Company failed to comply with certain obligations under the contract
requiring the Company to register shares of its common stock issued to Seller as
partial consideration for the acquisition. Seller's suit has been consolidated
with the Company's suit in the United States District Court for the Southern
District of Texas. The Company intends to vigorously pursue its claims against
Seller and defend against Seller's allegations. At the present time, the Company
is unable to reasonably estimate the possible loss, if any, associated with
these matters.
During the second quarter of 2000, the Company, along with numerous other
companies, was named as a defendant in a lawsuit brought by the Lemelson
Medical, Education & Research Foundation (the Foundation). The lawsuit alleges
that the Company has infringed certain of the Foundation's patents relating to
machine vision and bar code technology utilized in machines the Company has
purchased. On November 11, 2000, the Company filed an Answer, Affirmative
Defenses, and a Motion to Stay based upon Declaratory Judgment Actions filed by
Cognex and Symbol, manufacturers of the equipment at issue. The Company
continues to explore any indemnity or similar rights the Company may have
against manufacturers of the machines or other third parties. The Company
intends to vigorously defend against such claim and pursue all rights it has
against third parties. At the present time, the
Company is unable to reasonably estimate the possible loss, if any, associated
with these matters.
The Company is also involved in various other 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 or results of operations.
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, 2000 and 1999, and the
related consolidated statements of income, shareholders' equity and
comprehensive income, and cash flows for each of the years in the three-year
period ended December 31, 2000. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. 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, 2000 and 1999, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 2000, in conformity with accounting
principles generally accepted in the United States of America.
KPMG LLP
Houston, Texas
February 7, 2001
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 pre-pared
in accordance with accounting principles generally accepted in the United States
of America 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 safe-guarded 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 in the United States of America.
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 2000, 1999 and
1998. 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.
2000 Quarter
(in thousands, except per share data) 1st 2nd 3rd 4th
- ----------------------------------------------------------------------------------------------------------------
Sales $349,155 406,572 459,940 489,658
Gross profit 23,646 29,704 33,900 36,857
Net income 1,977 3,605 6,236 8,081
Earnings per common share:
Basic 0.12 0.22 0.34 0.41
Diluted 0.12 0.21 0.32 0.40
1999 Quarter
1st 2nd 3rd 4th
- ----------------------------------------------------------------------------------------------------------------
Sales $146,546 162,621 229,870 338,802
Gross profit 14,690 16,854 13,764 22,222
Income before extraordinary item 5,037 5,605 1,336 1,293
Extraordinary item- loss on extinguishment of debt -- -- (1,297) --
Net income 5,037 5,605 39 1,293
Earnings per common share:
Basic 0.43 0.44 0.00 0.08
Diluted 0.40 0.41 0.00 0.08
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 0.32 0.32 0.36 0.41
Diluted 0.31 0.32 0.35 0.38
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.
Quarter
1st 2nd 3rd 4th
- ----------------------------------------------------------------------------------------------------------------
1999
High $38.8750 35.9375 43.8125 37.8750
Low $26.8750 27.1250 31.3125 12.0000
2000
High $39.3125 42.5000 64.1875 54.5000
Low $17.8125 31.6250 36.5625 19.6875
2001 (through March 23, 2001)
High $34.4500
Low $18.5625
The last reported sale price of Common Stock on March 23, 2001, as
reported by the New York Stock Exchange, was $23.25. There were approximately
118 record holders of Common Stock as of March 23, 2001.
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) 2000 1999 1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
Selected Statements of Income Data (1)
Sales $ 1,704,924 $877,839 $524,065 $325,229 $201,296
Cost of sales 1,580,817 810,309 472,354 285,630 177,981
- ------------------------------------------------------------------------------------------------------------------------------------
Gross profit 124,107 67,530 51,711 39,599 23,315
Selling, general and administrative expenses 57,871 32,477 17,680 12,817 7,228
Amortization of goodwill 12,841 6,430 3,311 1,670 696
- ------------------------------------------------------------------------------------------------------------------------------------
Income from operations 53,395 28,623 30,720 25,112 15,391
Interest expense (24,396) (9,696) (4,394) (2,472) (1,442)
Interest income 770 605 479 1,163 442
Other income (1,339) 744 85 149 92
Income tax expense (8,529) (7,005) (10,518) (8,862) (5,619)
- ------------------------------------------------------------------------------------------------------------------------------------
Income before extraordinary item 19,901 13,271 16,372 15,090 8,864
Extraordinary item - loss on extinguishment of debt -- (1,297) -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net Income $ 19,901 $ 11,974 $ 16,372 $ 15,090 $ 8,864
- ------------------------------------------------------------------------------------------------------------------------------------
Earnings per share (2)
Basic:
Income before extraordinary item $1.13 $0.94 $1.41 $1.31 $0.99
Extraordinary item -- (0.09) -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Earnings per share (2) $1.13 $0.85 $1.41 $1.31 $0.99
- ------------------------------------------------------------------------------------------------------------------------------------
Diluted:
Income before extraordinary item $1.06 $0.88 $1.35 $1.26 $0.96
Extraordinary item -- (0.08) -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Earnings per share (2) $1.06 $0.80 $1.35 $1.26 $0.96
- ------------------------------------------------------------------------------------------------------------------------------------
Weighted average number of shares outstanding
Basic 17,578 14,081 11,594 11,508 8,976
Diluted 18,718 15,010 12,098 12,004 9,218
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of earnings to fixed charges 2.00x 2.74x 6.03x 9.03x 9.16x
December 31,
(in thousands) 2000 1999 1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
Selected Balance Sheet Data
Working capital $ 347,318 $177,926 $ 86,265 $ 87,879 $ 72,586
Total assets 991,221 760,838 241,896 190,322 168,174
Total debt 261,069 221,995 54,311 30,485 30,724
Shareholders' equity $ 411,945 $281,935 $138,001 $120,872 $104,999
(1) See Note 2 of Notes to Consolidated Financial Statements for discussion of
acquisitions and disposition.
(2) 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 (1)
Vice President Finance
and Treasurer
Christopher Nawrocki
Vice President
Strategic Development
Legal Counsel
Bracewell & Patterson, L.L.P.
Houston, Texas
Independent Auditors
KPMG LLP
Houston, Texas
Directors
David H. Arnold (3)(4)
Retired - Former President
EMD Associates, Inc.
Winona, Minnesota
(Acquired by BHE, 1996)
John C. Custer (3)(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)
Independent Consultant
Houston, Texas
(Investment banking)
Peter G. Dorflinger (3) (4)
President
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:
Computershare Investor Services, LLC
2 North LaSalle Street
Chicago, IL 60602
312/588-4283.
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, 2000, filed with the
Securities and Exchange Commission, without charge upon written request to:
Gayla J. Delly
Vice President Finance
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 15, 2001, at the
Hyatt Regency Houston
1200 Louisiana Street
Houston, Texas.
This annual report is printed on recycled paper.
(Logo)
3000 Technology Drive, Angleton, Texas 77515, (979) 849,6550, www.bench.com