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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________________
FORM 10-K
FOR ANNUAL AND TRANSITION REPORT PURSUANT TO SECTIONS 13
OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ___________ TO ____________.
COMMISSION FILE NUMBER 1-10560
BENCHMARK ELECTRONICS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
______________________
TEXAS 74-2211011
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
3000 TECHNOLOGY DRIVE
ANGLETON, TEXAS 77515
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
(979) 849-6550
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
- --------------------------------------- ----------------------------
Common Stock, par value $0.10 per share New York Stock Exchange, Inc.
Preferred Stock Purchase Rights New York Stock Exchange, Inc.
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
______________________
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ].
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in PART III of this Form 10-K or any amendment to this
Form 10-K. [ ]
As of March 28, 1999, the number of outstanding shares of Common Stock was
16,272,226. As of such date, the aggregate market value of the shares of Common
Stock held by non-affiliates, based on the closing price of the Common Stock on
the New York Stock Exchange on such date, was approximately $570.5 million.
DOCUMENTS INCORPORATED BY REFERENCE:
(1) Portions of the Company's Annual Report to Shareholders for the fiscal year
ended December 31, 1999 (Part II Items 5-8 and Part IV Item 14(a)(1)).
(2) Portions of the Company's Proxy Statement for the 2000 Annual Meeting of
Shareholders (Part III, Items 10-13).
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TABLE OF CONTENTS
PAGE
----
PART I
Item 1. Business....................................................... 1
Item 2. Properties..................................................... 7
Item 3. Legal Proceedings.............................................. 8
Item 4. Submission of Matters to Vote of Security Holders.............. 8
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters.......................................... 8
Item 6. Selected Financial Data........................................ 8
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.......................... 8
Item 7A. Quantitative and Qualitative Disclosures About
Market Risk.................................................. 9
Item 8. Financial Statements and Supplementary Data.................... 9
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.......................... 9
PART III
Item 10. Directors and Executive Officers of the Registrant............. 9
Item 11. Executive Compensation......................................... 9
Item 12. Security Ownership of Certain Beneficial Owners and
Management................................................... 9
Item 13. Certain Relationships and Related Transactions................. 9
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K.................................................. 9
i
PART I
ITEM 1. BUSINESS
GENERAL
Benchmark Electronics, Inc. (the "Company") is a leading provider of
electronics manufacturing services (EMS) to original equipment manufacturers
("OEMs") in the telecommunication, enterprise computer and peripherals,
high-end video/audio/entertainment, industrial control, testing and
instrumentation, computer and medical markets. We have 14 facilities in 8
countries. We offer OEMs a turnkey EMS solution, from initial product design to
volume production and direct order fulfillment. We provide advanced engineering
services including product design, printed circuit board (PCB) layout,
quick-turn prototyping and test development. We believe that we have developed
strengths in the manufacturing process for large, complex, high-density
assemblies as well as having the ability to manufacture high and low volume
products in lower cost regions such as Latin America, Eastern Europe and
Southeast Asia. As OEM's expand internationally, they are increasingly requiring
their EMS partners to have strategic regional locations and global procurement
abilities. We believe a global manufacturing solution increases our ability to
be responsive to our customers' needs by providing accelerated time-to-market
and time-to-volume production of high quality products. These enhanced
capabilities should enable us to build stronger strategic relationships with our
customers and to become a more integral part of their operations.
Substantially all of our manufacturing services are provided on a turnkey
basis, whereby we purchase customer-specified components from our suppliers,
assemble the components on finished PCBs, perform post-production testing and
provide our customer with production process and testing documentation. We offer
our customers flexible, "just-in-time" delivery programs allowing product
shipments to be closely coordinated with our customers' inventory requirements.
In certain instances, we complete the assembly of our customers' products at our
facilities by integrating printed circuit board assemblies into other elements
of our customers' products. We also provide manufacturing services on a
consignment basis, whereby we, utilizing components provided by the customer,
provide only assembly and post-production testing services. We currently operate
a total of 49 surface mount production lines at our domestic facilities in
Angleton, Texas; Beaverton, Oregon; Hudson, New Hampshire; Huntsville, Alabama;
Pulaski, Tennessee; and Winona, Minnesota; and 32 surface mount production lines
at our international facilities in Cork and Dublin, Ireland; Campinas, Brazil;
Csongrad, Hungary; Guadalajara, Mexico; Singapore; East Kilbride, Scotland; and
Katrineholm, Sweden.
The Company, formerly named Electronics, Inc., began operations in 1979 and
was incorporated under Texas law in 1981 as a wholly owned subsidiary of
Intermedics, Inc. ("Intermedics"), a medical implant manufacturer based in
Angleton, Texas. In 1986, Intermedics sold 90% of the outstanding shares of
common stock of the Company to Electronic Investors Corp. ("EIC"), a
corporation formed by Donald E. Nigbor, Steven A. Barton and Cary T. Fu, the
Company's three executive officers. In 1988, EIC was merged into the Company,
and in 1990 the Company completed the initial public offering of its common
stock.
RECENT ACQUISITIONS
Since July 1996, we have completed four acquisitions. These acquisitions
have broadened our service offerings, diversified our customer base with leading
OEMs and expanded our geographic presence. These acquisitions were:
o AVEX ELECTRONICS, INC.AND RELATED COMPANIES. On August 24, 1999, we
completed the acquisition of AVEX, one of the largest privately-held
contract manufacturers. This acquisition provided us a global presence
with 14 facilities in 8 countries and a sales base of approximately
$1.5 billion on a pro forma basis for 1999. With this acquisition, we
became the sixth largest publicly held EMS provider in the world based
on 1998 pro forma sales. This acquisition expanded our customer base
to approximately 90 OEMs in a broader range of end user markets.
1
o STRATUS COMPUTER IRELAND. On March 1, 1999, we acquired certain assets
from Stratus, and in connection with the transaction entered into a
three-year supply agreement to provide system integration services to
Ascend and Stratus Holdings Limited. The acquired assets increased our
ability to provide a broad range of services to the European market
and enhanced our systems integration and box build engineering
capabilities.
o LOCKHEED COMMERCIAL ELECTRONICS COMPANY. In February 1998, we acquired
Lockheed Commercial Electronics Company. This acquisition provided us
with manufacturing capacity in the northeastern United States and 19
additional customers. Now operated as our Hudson, New Hampshire
division, the facility provides a broad range of services including
PCB assembly and test, system assembly and test, prototyping, depot
repair, materials procurement, and engineering and design support
services.
o EMD TECHNOLOGIES, INC. In July 1996, we acquired EMD Technologies,
Inc., an independent provider of electronics manufacturing and product
design services. Now operated as our Winona, Minnesota division, this
facility provides a complete range of enhanced product design and
subsystem and enclosure configuration. In addition to design services,
this acquisition provided us with manufacturing capabilities in the
midwestern United States and 19 additional customers.
We believe our primary competitive advantages are our design,
manufacturing, testing and supply chain management capabilities. We offer our
customers complete and flexible manufacturing solutions that provide accelerated
time-to-market, time-to-volume production, and reduced production costs. As a
result of working closely with our customers and responding promptly to their
needs, we have become an integral part of their operations. In addition, our
workforce is led by a management team that founded the Company and has an
average of 18 years of industry experience.
BUSINESS STRATEGY
Our goal is to be the EMS outsourcing provider of choice to leading OEMs in
the high growth segments of the electronics industry. To meet this goal, we have
implemented the following strategies:
o MAINTAIN AND DEVELOP CLOSE, LONG-TERM RELATIONSHIPS WITH CUSTOMERS.
Our core strategy is to maintain and establish long-term relationships
with leading OEMs in expanding industries by becoming an integral part
of our customers' manufacturing operations. To this end, we work
closely with our customers throughout the design, manufacturing and
distribution process, and we offer flexible and responsive services.
We believe we develop stronger customer relationships by relying on
our local management teams that respond to frequently changing
customer design specifications and production requirements.
o FOCUS ON PRODUCTS IN HIGH GROWTH SECTORS. EMS providers produce
products for a wide range of OEMs in different industries. The product
scope ranges from easy to assemble, low-cost high-volume products
targeted for the consumer market to complicated state-of-the-art,
mission critical electronic hardware. Similarly, OEM customers range
from consumer-oriented companies that compete primarily on price and
redesign their products every year to high-end telecommunications and
enterprise computer manufacturers that compete on technology and
quality. We currently offer state-of-the-art products for industry
leaders who require advanced engineering design and production
services as well as offering high volume manufacturing capabilities to
our customer base. Our ability to offer both of these services enables
us to expand our business relationships.
o DELIVER COMPLETE HIGH AND LOW VOLUME MANUFACTURING SOLUTIONS GLOBALLY.
We believe OEMs increasingly require a wide range of advanced
engineering and manufacturing services in order to reduce their costs
and accelerate their time-to-market and time-to-volume production.
Building on our integrated engineering and manufacturing capabilities,
we offer services from initial product design and test to final
product assembly and distribution to the OEMs' customers. With the
AVEX acquisition, we also offer our customers high volume production
in low cost regions of the world, such as Brazil, Hungary and Mexico.
These full service capabilities allow us to offer customers the
flexibility to move quickly from design and initial introduction to
production and distribution.
2
o LEVERAGE ADVANCED TECHNOLOGICAL CAPABILITIES. Our traditional
strengths in the manufacturing processes for large, complex
high-density assemblies enable us to offer customers advanced design,
technology and manufacturing solutions for their primary products. We
provide this engineering expertise through our design capabilities in
each of our facilities, and in our design centers located in Winona,
Minnesota, Huntsville, Alabama and Cork, Ireland. We believe our
capabilities help our customers improve product performance and reduce
costs.
o CONTINUE OUR GLOBAL EXPANSION. A strategically positioned facilities
network can simplify and shorten an OEM's supply chain and reduce the
time it takes to bring product to market. We are committed to pursuing
geographic expansion in order to support our global customers with
cost-effective and timely delivery of quality products and services
worldwide. Our AVEX acquisition significantly expanded our service
scope to provide a global manufacturing solution to our customers at
14 facilities located in Brazil, Hungary, Ireland, Mexico, Scotland,
Singapore, Sweden and the United States.
o SELECTIVELY PURSUE STRATEGIC ACQUISITIONS. We have completed four
acquisitions since July 1996 and will continue to selectively seek
acquisition opportunities. Our acquisitions have enhanced our business
in the following ways:
o Expanded geographic presence;
o Enhanced customer growth opportunities;
o Developed strategic relationships;
o Broadened service offerings;
o Diversified into new market sectors; and
o Added experienced management teams.
We believe that growth by selective acquisitions is critical for achieving
the scale, flexibility and breadth of customer services required to remain
competitive in the EMS industry.
ELECTRONICS MANUFACTURING SERVICES INDUSTRY
Many OEMs in the electronics industry are increasingly using electronics
manufacturing service providers in their business and manufacturing strategies
and are seeking to outsource a broad range of manufacturing and related
engineering services. Outsourcing allows OEMs to take advantage of the
manufacturing expertise and capital investments of EMS providers, thereby
enabling OEMs to concentrate on what they believe to be their core strengths,
such as product development, marketing and sales. OEMs utilize electronics
manufacturing service providers to enhance their competitive position by:
o Reducing capital investment requirements and fixed overhead costs;
o Accessing advanced manufacturing and design capabilities;
o Reducing production costs;
o Accelerating time-to-market and time-to-volume production;
o Improving inventory management and purchasing power; and
o Accessing worldwide manufacturing capabilities.
Industry sources estimate that the overall market for EMS will have grown at a
compound annual rate of 25% from 1996 to 2002. In addition, according to
industry sources the EMS industry's revenues accounted for approximately 16% of
the cost of goods sold in the electronics industry in 1998. By 2001, industry
sources estimate that this percentage will increase to 26%.
SERVICES PROVIDED BY THE COMPANY
ENGINEERING. Our approach is to coordinate and integrate our design,
prototype and other engineering capabilities. Through this approach, we provide
a broad range of engineering services and, in some cases,
3
dedicated production lines for prototypes. These services strengthen our
relationships with manufacturing customers and attract new customers requiring
advanced engineering services.
To assist customers with initial design, we offer CAE and CAD-based design,
engineering for manufacturability, circuit board layout and test development. We
also coordinate industrial design and tooling for product manufacturing. After
product design, we offer quickturn prototyping. During this process, we assist
with the transition to volume production. By participating in product design and
prototype development, we can reduce manufacturing costs and accelerate the
time-to-volume production.
MATERIALS PROCUREMENT AND MANAGEMENT. Materials procurement and management
consists of the planning, purchasing, expediting and warehousing of components
and materials. Our inventory management and volume procurement capabilities
contribute to cost reductions and reduce total cycle time. Our materials
strategy is focused on leveraging our procurement volume corporate wide while
providing local execution for maximum flexibility at the division level. In
addition, our Ireland facility has developed material processes required to
support high-end computer system integration operations.
ASSEMBLY AND MANUFACTURING. Our assembly and manufacturing operations
include PCB and subsystem assembly, box build and systems integration. A
substantial portion of our sales are derived from the manufacture and assembly
of complete products. We employ various inventory management techniques such as
just-in-time, ship-to-stock and autoreplenish programs. As OEMs seek to provide
greater functionality in smaller products, they increasingly require more
sophisticated manufacturing technologies and processes. Our investment in
advanced manufacturing equipment and our experience in innovative packaging and
interconnect technologies (such as chip scale packaging and ball grid array)
enable us to offer a variety of advanced manufacturing solutions.
TESTING. We offer computer-aided testing of assembled PCBs, subsystems and
systems, which contributes significantly to our ability to deliver high-quality
products on a consistent basis. We work with our customers to develop
product-specific test strategies. Our test capabilities include manufacturing
defect analysis, in-circuit tests and functional tests. We either custom design
test equipment and software ourselves or use test equipment and software
provided by our customers. In addition, we provide environmental stress tests of
board or system assemblies.
DISTRIBUTION. We offer our customers flexible, just-in-time delivery
programs allowing product shipments to be closely coordinated with customers'
inventory requirements. Increasingly, we ship products directly into customers'
distribution channels or directly to the end-user. We believe that this service
can provide our customers with a more comprehensive solution and enable them to
be more responsive to market demands.
MARKETING AND CUSTOMERS
We market our services through a direct sales force and independent
marketing representatives. In addition, our divisional and executive management
teams are an integral part of our sales and marketing teams. During 1999, our
two largest customers, Lucent and EMC, each represented in excess of 10% of
total sales and, in the aggregate, represented 34% of total sales.
The following table sets forth the percentages of the Company's sales by
industry for 1999, 1998 and 1997.
1999 1998 1997
----- ----- -----
Telecommunication............................ 39% 31% 21%
Enterprise Computer & Peripherals............ 30 44 39
Industrial Controls.......................... 9 9 12
Medical...................................... 6 11 17
High-end Video/Audio/Entertainment........... 6 -- --
Computer..................................... 6 -- --
Testing & Instrumentation.................... 4 5 11
4
SUPPLIERS
We maintain a network of suppliers of components and other materials used
in assembling printed circuit boards. We procure components only when a purchase
order or forecast is received from a customer and occasionally utilizes
components or other materials for which a supplier is the single source of
supply. Although we experience component shortages and longer lead times of
various components from time to time, we have generally been able to reduce the
impact of the component shortages by working with customers to reschedule
deliveries, by working with suppliers to provide the needed components using
just-in-time inventory programs, or by purchasing components at somewhat higher
prices from distributors, rather than directly from manufacturers. These
procedures reduce, but do not eliminate, our inventory risk. In addition, by
developing long-term relationships with suppliers, we have been better able to
minimize the effects of component shortages than manufacturers without such
relationships. Because of the continued increase in demand for surface mount
components, we anticipate shortages and longer lead times for certain components
to occur from time to time.
BACKLOG
The Company's backlog was approximately $1 billion at December 31, 1999,
compared to $317 million at December 31, 1998. The December 31, 1999 figure
includes backlog amounts for the recently acquired AVEX operations. Although the
Company's expects to fill substantially all of its backlog in 2000, at December
31, 1999 the Company does not have long-term agreements will all of its
customers and customer orders can be canceled, changed or delayed by customers.
The timely replacement of canceled, changed or delayed orders with orders from
new customers cannot be assured, nor can there be any assurance that any of the
Company's current customers will continue to utilize the Company's services.
Because of these factors, backlog is not a meaningful indicator of future
financial results.
COMPETITION
The electronics manufacturing services we provide are available from many
independent sources as well as in-house manufacturing capabilities of current
and potential customers. The Company's competitors include Celestica, Inc.,
Flextronics International Ltd., Jabil Circuit, Inc., SCI Systems, Inc. and
Solectron Corporation, who may be more established in the industry and have
substantially greater financial, manufacturing or marketing resources than we
do. We believe that the principal competitive factors in our targeted markets
are product quality, flexibility and timeliness in responding to design and
schedule changes, reliability in meeting product delivery schedules, pricing,
technological sophistication and geographic location.
GOVERNMENTAL REGULATION
Our operations, and the operations of businesses that we acquire, are
subject to certain foreign, federal, state and local regulatory requirements
relating to environmental, waste management, and health and safety matters. The
Company believes it operates in substantial compliance with all applicable
requirements. However, material costs and liabilities may arise from these
requirements or from new, modified or more stringent requirements. 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 periodically generate and temporarily handle limited amounts of
materials that are considered hazardous waste under applicable law. We contract
for the off-site disposal of these materials and have implemented a waste
management program to address related regulatory issues.
EMPLOYEES
As of December 31, 1999, we employed 5,856 people, of whom 4,580 were
engaged in manufacturing and operations, 614 in materials control and
procurement, 119 in design and development, 79 in marketing and sales, and 464
in administration. Although a majority of our workforce is non-union, employees
in our
5
facilities in Brazil, Mexico and Sweden are unionized, and work councils have
been established at our facilities in Cork, Ireland, Scotland and Sweden.
INTERNATIONAL OPERATIONS
Benchmark has 14 manufacturing facilities in the Americas, Europe, and Asia
regions to serve its customers. Benchmark is operated and managed geographically
and management evaluates performance and allocates Benchmark's resources on a
geographic basis. See Note 10 of Notes to Consolidated Financial Statements for
segment information. Prior to the acquisition in 1999, all of our operations
were in the Americas region. In 1999, approximately 19% of our sales were from
operations outside of the United States. As a result of continuous customer
demand overseas, we expect foreign sales to increase. Our foreign sales and
operations are subject to risk of doing business abroad, including fluctuations
in the value of currency, export duties, import controls and trade barriers,
including stoppages, longer payment cycles, greater difficulty in accounts
receivable collection, burdens of complying with wide variety of foreign laws
and, in certain parts of the world, political instability. While, to date, these
factors have not adversely materially affected Benchmark's results of
operations, we cannot assure that there will not be an adverse impact in the
future.
YEAR 2000 ISSUES
The "year 2000 problem" arose because of the potential software failures
that could arise in date-sensitive software applications utilizing a field of
two-digits rather than four to define a specific year. Absent corrective
actions, date-sensitive software could recognize a date using "00" as the year
1900 rather than the year 2000.
The Company initiated a review of its business and operating systems during
1997 to address those systems that were not year 2000 compliant, and also worked
with its customers and vendors to remediate year 2000 issues. As of December 31,
1999, the Company has spent approximately $700,000 in addressing year 2000
issues.
The Company suffered no significant failures in any system or product upon
the date change from December 31, 1999 to January 1, 2000. Management of the
Company is not aware of any vendor used by the Company for data processing or
related services that experienced a material failure of its product or service
due to year 2000 problems. Although many of the critical dates related to
potential year 2000 problems have passed, some experts predict that year 2000
related failures could occur throughout the year. The Company will continue to
monitor this issue in the ordinary course of business for delayed effects or
future problems.
6
ITEM 2. PROPERTIES
Benchmark currently has 14 facilities worldwide.
[INSERT WORLD MAP WITH LOCATIONS]
The following chart summarizes the facilities owned or leased by Benchmark
and its subsidiaries:
LOCATION SQ.FT. FUNCTION OWNERSHIP
- -------------------------- --------- ----------------------------- ---------
Angleton, TX............. 109,000 Executive, manufacturing, and Owned
procurement
Beaverton, OR............ 52,000 Manufacturing Leased
Campinas, Brazil......... 40,000 Manufacturing Leased
Csongrad, Hungary........ 40,000 Manufacturing Leased
Cork, Ireland............ 28,000 Manufacturing and design Owned
Dublin, Ireland.......... 74,000 Manufacturing and procurement Leased
East Kilbride, Scotland.. 90,000 Manufacturing and procurement Owned
Guadalajara, Mexico...... 230,000 Manufacturing Leased
Hudson, NH............... 200,000 Manufacturing and procurement Leased
Huntsville, AL........... 276,000 Manufacturing, design and and Owned
Katrineholm, Sweden...... 60,000 procurement Leased
Manufacturing
Pulaski, TN.............. 112,500 Manufacturing Owned
Singapore................ 59,000 Manufacturing and procurement Leased
Winona, MN............... 201,000 Manufacturing and procurement Leased, Owned
---------
Total 1,571,500
=========
7
ITEM 3. LEGAL PROCEEDINGS
On October 18, 1999, we announced that our third quarter earnings
announcement would be delayed and subsequently, on October 22, we announced our
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 Benchmark and two of its
officers and directors alleging violations of the federal securities laws. 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. We intend to vigorously defend against these actions.
Pursuant to the terms of the Amended and Restated Stock Purchase Agreement
dated August 12, 1999 whereby Benchmark acquired all of the stock of AVEX and
Kilbride Holdings B.V from J.M. Huber Corporation ("Seller"), Benchmark was
required to agree upon a closing working capital adjustment with the Seller by
November 22, 1999. We were unable to reach an agreement with the Seller prior to
the November 22, 1999 deadline and entered into several agreements extending
this deadline. At the present time, the parties still have not reached an
agreement and have hired an independent accounting firm to serve as arbitrator
to resolve the dispute and to calculate the final closing working capital
adjustment. Management is unable to predict when the arbitrator will be
releasing its findings but estimates that the net closing working capital
adjustment will be in the range of $20 to $40 million. Management has made its
best estimate of the ultimate resolution of this arbitration proceeding.
However, the final working capital adjustment could have a significant effect on
the final purchase price and the allocation of the purchase price.
Benchmark 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 contract. 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. Management intends to vigorously pursue its claims
against Seller and defend against Seller's allegations.
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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of 1999.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
The information on page 35 of the Company's Annual Report to Stockholders
for the fiscal year ended December 31, 1999 (the "1999 Annual Report") is
incorporated herein by reference in response to this item.
ITEM 6. SELECTED FINANCIAL DATA
The information on page 36 of the 1999 Annual Report is incorporated herein
by reference in response to this item.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information on pages 9 through 16 of the 1999 Annual Report is
incorporated herein by reference in response to this item.
8
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information on pages 15 through 16 of the 1999 Annual Report is
incorporated herein by reference in response to this item.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information on pages 17 through 35 of the 1999 Annual Report is
incorporated herein by reference in response to this item.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information under the captions "Election of Directors," "Executive
Officers" and "Section 16(a) Beneficial Ownership Reporting Compliance" in
the Company's Proxy Statement for the 2000 Annual Meeting of Shareholders (the
"2000 Proxy Statement"), to be filed not later than 120 days after the close
of the Company's fiscal year, is incorporated herein by reference in response to
this item.
ITEM 11. EXECUTIVE COMPENSATION
The information under the caption "Executive Compensation and Other
Matters" in the 2000 Proxy Statement, to be filed not later than 120 days after
the close of the Company's fiscal year, is incorporated herein by reference in
response to this item.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information under the caption "Common Stock Ownership of Certain
Beneficial Owners and Management" in the 2000 Proxy Statement, to be filed not
later than 120 days after the close of the Company's fiscal year, is
incorporated herein by reference in response to this item.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information under the caption "Certain Transactions" in the 2000
Proxy Statement, to be filed not later than 120 days after the close of the
Company's fiscal year, is incorporated herein by reference in response to this
item.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Financial Statements, Financial Statement Schedules, and Exhibits
1. FINANCIAL STATEMENTS OF THE COMPANY
Reference is made to the Financial Statements, the reports thereon, the
notes thereto and supplementary data commencing at page 17 of the 1999 Annual
Report, which financial statements, reports, notes and data are incorporated
herein by reference in response to this item. Set forth below is a list of such
Financial Statements:
Consolidated Financial Statements of the Company
Independent Auditors' Report
Consolidated Balance Sheets as of December 31, 1999 and 1998
Consolidated Statements of Income for the years ended December 31, 1999,
1998 and 1997
Consolidated Statements of Shareholders' Equity and Comprehensive Income
for the years ended December 31, 1999, 1998 and 1997
9
Consolidated Statements of Cash Flows for the years ended December 31,
1999, 1998 and 1997
Notes to Consolidated Financial Statements
2. FINANCIAL STATEMENT SCHEDULES
All schedules for which provision is made in Regulation S-X of the
Securities and Exchange Commission are not required under the related
instructions, the information is included in the Consolidated Financial
Statements and notes thereto, or are inapplicable and, therefore, have been
omitted.
3. EXHIBITS
Each exhibit marked with an asterisk is filed with this Annual Report on
Form 10-K.
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
2.1 -- Purchase Agreement dated as of January 22, 1998 by and between
the Company and Lockheed Martin Corporation (incorporated
herein by reference to Exhibit 2 to the Company's Current
Report on Form 8-K dated February 23, 1998).
2.2 -- Agreement and Plan of Merger dated as of March 27, 1996 by and
among the Company, Electronics Acquisition, Inc., EMD
Technologies, Inc., David H. Arnold and Daniel M. Rukavina
(incorporated herein by reference to Exhibit 2 to the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995).
2.3 -- Amendment No. 1 to Agreement and Plan of Merger dated as of
April 5, 1996 by and among the Company, Electronics
Acquisition, Inc., EMD Technologies, Inc., David H. Arnold and
Daniel M. Rukavina (incorporated herein by reference to
Exhibit 2.2 to the Company's Registration Statement on
Form S-4 (Registration No. 333-4230)).
2.4 -- Purchase and Sale Agreement by and among Stratus Computer
Ireland, Ascend Communications Inc., BEI Electronics Ireland
Limited and the Company dated January 22, 1999 (incorporated
by reference herein to Exhibit 2.1 to the Company's Current
Report on Form 8-K dated January 22, 1999).
2.5 -- Amended and Restated Stock Purchase Agreement dated as of
August 12, 1999 by and between the Company and J. M. Huber
Corporation (incorporated by reference herein to Exhibit 2 to
the Company's Current Report on Form 8-K dated August 24, 1999
and filed on September 8, 1999).
3.1 -- Restated Articles of Incorporation of the Company
(incorporated herein by reference to Exhibit 3.1 to the
Company's Registration Statement on Form S-1
(Registration No. 33-46316) (the "Registration Statement")).
3.2 -- Amended and Restated Bylaws of the Company (incorporated
herein by reference to Exhibit 3.2 to the Company's Annual
Report on Form 10-K for the fiscal year ended
December 31,1998).
3.3 -- Amendment to Amended and Restated Articles of Incorporation of
the Company adopted by the shareholders of the Company on
May 20, 1997 (incorporated herein by reference to Exhibit 3.3
to the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1998)
3.4 -- Statement of Resolution Establishing Series A Cumulative
Junior Participating Preferred Stock of Benchmark
Electronics, Inc. (incorporated by reference to Exhibit B of
the Rights Agreement dated December 11, 1998 between the
Company and Harris Trust Savings Bank, as Rights Agent,
included as Exhibit 1 to the Company's Form 8A12B filed
December 11, 1998).
4.1 -- Restated Articles of Incorporation of the Company
(incorporated herein by reference to Exhibit 3.1 to the
Registration Statement).
4.2 -- Amended and Restated Bylaws of the Company (incorporated
herein by reference to Exhibit 3.2 to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31,
1998).
10
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
4.3 -- Amendment to the Restated Articles of Incorporation of the
Company adopted by the shareholders of the Company on
May 20, 1997 (incorporated herein by reference to Exhibit 3.3
to the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1998).
4.4 -- Specimen form of certificate evidencing the Common Stock
(incorporated herein by reference to Exhibit 4.3 to the
Registration Statement).
4.5 -- Rights Agreement dated December 11, 1998 between the Company
and Harris Trust Savings Bank, as Rights Agent, together with
the following exhibits thereto: Exhibit A -- Form of Statement
of Resolution Establishing Series A Cumulative Junior
Participating Preferred Stock of Benchmark Electronics, Inc.;
Exhibit B -- Form of Right Certificate; and
Exhibit C -- Summary of Rights to Purchase Preferred Stock of
Benchmark Electronics, Inc. (incorporated by reference to
Exhibit 1 to the Company's Form 8A12B filed
December 11, 1998).
4.6 -- Summary of Rights to Purchase Preferred Stock of the Company
(incorporated by reference to Exhibit 3 to the Company's Form
8A12B/A filed December 22, 1998).
4.7 -- Indenture dated as of August 13, 1999 by and between the
Company and Harris Trust Company of New York, as trustee
(incorporated by reference from Exhibit 99.3 to Benchmark's
Form 8-K dated August 24, 1999 and filed on
September 8, 1999).
10.1 -- Form of Indemnity Agreement between the Company and each of
its directors and officers (incorporated herein by reference
to Exhibit 10.11 to the Registration Statement).
10.2 -- Benchmark Electronics, Inc. Stock Option Plan dated
May 11, 1990 (incorporated herein by reference to
Exhibit 10.12 to the Registration Statement).
10.3 -- Form of Benchmark Electronics, Inc. Incentive Stock Option
Agreement between the Company and the optionee
(incorporated herein by reference to Exhibit 10.13 to the
Registration Statement).
10.4 -- Form of Benchmark Electronics, Inc. Nonqualified Stock Option
Agreement between the Company and the optionee (incorporated
herein by reference to Exhibit 10.14 to the Registration
Statement).
10.5 -- Benchmark Electronics, Inc. 1992 Incentive Bonus Plan
(incorporated herein by reference to Exhibit 10.7 to the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1988).
10.6 -- Benchmark Electronics, Inc. 1994 Stock Option Plan for
Non-Employee Directors (incorporated herein by reference to
Exhibit 10.21 to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1994).
10.7* -- Benchmark Electronics, Inc. 401(k) Employee Savings Plan.
10.8 -- Benchmark Electronics, Inc. Employee Stock Purchase Plan
(incorporated by reference to Exhibit 99.1 to the Company's
Registration Statement on Form S-8 (Registration
Number 333-76207)).
10.9 -- Registration Rights Agreement dated March 30, 1992 between
Mason & Hanger Corporation and the Company (incorporated
herein by reference to Exhibit 10.17 to the Registration
Statement).
10.10 -- Amended and Restated Credit Agreement dated as of
February 6, 1999 by and between the Company and Chase Bank of
Texas, N.A. (incorporated herein by reference to Exhibit 10.1
to the Company's Current Report on Form 8-K dated
March 1, 1999).
10.11 -- Lease Agreement dated February 1, 1997 between Tektronix, Inc.
and the Company (incorporated herein by reference to
Exhibit 10.5 to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1998).
10.12* -- Lease Agreement dated February 29, 2000 between Millikan
Properties, LLC and the Company.
11
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
10.13 -- Lease Agreement dated July 30, 1996 by and among
David H. Arnold, Muriel M. Arnold, Daniel M. Rukavina,
Patricia A. Rukavina and EMD Associates, Inc., as amended by
Amendment to Lease dated July 30, 1996 (incorporated herein by
reference to Exhibit 10.10 to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1996).
10.14 -- Lease Agreement dated December 15, 1992 by and among
David H. Arnold, Muriel M. Arnold, Daniel M. Rukavina,
Patricia A. Rukavina and EMD Associates, Inc., as amended by
Amendment to Lease dated January 1, 1994, Amendment to Lease
dated December 15, 1995, and Amendment to Lease dated
July 30, 1996 (incorporated herein by reference to
Exhibit 10.11 to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1996).
10.15* -- CE Facility Lease dated February 23, 1998 by and between the
Company and Lockheed Martin Corporation.
10.16* -- Sander's Sublease dated February 23, 1998 by and between the
Company and Sanders, a Lockheed Martin Company and a division
of Lockheed Martin Corporation.
10.17* -- First Amendment to CE Facility Lease dated February 21, 2000
by and between the Company and Lockheed Martin Corporation.
10.18* -- First Amendment to Sanders Sublease dated February 24, 2000
by and between the Company and Sanders, a Lockheed Martin
Company and a division of Lockheed Martin Corporation
10.19* -- Lease Agreement dated February 22, 1999 by and between
Serto, S.A. de C.V. and AVEX Electronics de
Mexico, S.R.L. de C.V.
10.20* -- Sublease Agreement dated February 22, 1999 by and between
Operadora Farmaceutica, S.A. de C.V. and AVEX Electronics de
Mexico, S.R.L. de C.V.
10.21 -- Note Purchase Agreement dated as of July 30, 1996 by and
between the Company and Northwestern Mutual Life Insurance
Company (incorporated by reference to Exhibit 99.1 to the
Company's Current Report on Form 8-K dated July 30, 1996).
10.22 -- Guarantee dated September 10, 1998 by the Company in favor of
Kilmore Developments Limited (incorporated herein by reference
to Exhibit 10.14 to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1998).
10.23 -- Credit Agreement dated as of August 24, 1999 by and among the
Company, the lenders party thereto and Chase Bank of Texas,
National Association, as administrative agent (incorporated by
reference from Exhibit 99.1 to Benchmark Electronics, Inc.'s
Form 8-K dated August 24, 1999 and filed on
September 8, 1999).
10.24 -- Registration Rights Agreement dated as of August 24, 1999 by
and between the Company and J. M. Huber Corporation
(incorporated by reference from Exhibit 99.2 to Benchmark
Electronics, Inc.'s Form 8-K dated August 24, 1999
and filed on September 8, 1999).
10.25 -- Registration Agreement dated as of August 9, 1999 by and among
the Company, Salomon Smith Barney Inc. and
Chase Securities Inc. (incorporated by reference from
Exhibit 99.4 to Benchmark Electronics, Inc.'s Form 8-K dated
August 24, 1999 and filed on September 8, 1999).
12* -- Statement regarding Computation of Ratios.
13* -- Benchmark Electronics, Inc. Annual Report to Shareholders for
the fiscal year ended December 31, 1999.
21* -- Subsidiaries of Benchmark Electronics, Inc.
23* -- Consent of Independent Auditors concerning incorporation by
reference in the Company's Registration Statement on Form S-8
(Registration No. 33-61660, No. 333-26805, No. 333-28997,
No. 333-66889 and No. 333-76207).
27.1* -- Financial Data Schedule.
99.1* -- Unaudited Pro Forma Condensed Combined Statement of
Operations.
12
(b) The following Current Reports on Form 8-K were filed by the Company
during the quarter ended December 31, 1999 or during the period from December
31, 1999 to the date of this Form 10-K:
The Company's Current Report on Form 8-K dated and filed on
November 23, 1999.
The Company's Current Report on Form 8-K dated and filed on
December 15, 1999.
The Company's Current Report on Form 8-K dated and filed on
February 8, 2000.
13
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
BENCHMARK ELECTRONICS, INC.
By /s/ DONALD E. NIGBOR
Donald E. Nigbor
President
Date: March 30, 2000
Pursuant to the requirements of the Securities Act of 1934, this report has
been signed below by the following persons on behalf of the Registrant and in
the capacities indicated and on the dates indicated.
SIGNATURE POSITION DATE
----------- ------------------------------ --------------
/s/ JOHN C. CUSTER Chairman of the Board of March 30, 2000
JOHN C. CUSTER Directors
/s/ DONALD E. NIGBOR Director and President March 30, 2000
DONALD E. NIGBOR (principal executive officer)
STEPHEN A. BARTON Director and Executive Vice
President
/s/ CARY T. FU Director and Executive Vice March 30, 2000
CARY T. FU President (principal financial
and accounting officer)
PETER G. DORFLINGER Director
/s/ GERALD W. BODZY Director March 30, 2000
GERALD W. BODZY
DAVID H. ARNOLD Director
14