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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
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(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, 1996
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)
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TEXAS 74-2211011
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
3000 TECHNOLOGY DRIVE 77515
ANGLETON, TEXAS (Zip Code)
(Address of principal executive offices)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
(409) 849-6550
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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 American Stock
$0.10 per share Exchange, Inc.
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE
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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 25, 1997, the number of outstanding shares of Common Stock was
5,742,384. 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 American Stock Exchange on such date, was approximately $135.3 million.
DOCUMENTS INCORPORATED BY REFERENCE:
(1) Portions of the Company's Annual Report to Shareholders for the fiscal year
ended December 31, 1996 (Part II Items 5-8 and Part IV Item 14(a)(1)).
(2) Portions of the Company's Proxy Statement for the 1997 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 a Vote of Security Holders... 8
PART II
ITEM 5. Market for Registrant's Common Equity and Related
Shareholder Matters................................. 8
ITEM 6. Selected Financial Data............................... 8
ITEM 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.................. 8
ITEM 8. Financial Statements and Supplementary Data........... 8
ITEM 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure.............. 8
PART III
ITEM 10. Directors and Executive Officers of the Registrant.... 8
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-K9
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PART I
ITEM 1. BUSINESS
GENERAL
Benchmark Electronics, Inc. (the "Company") provides contract electronics
manufacturing and design services to original equipment manufacturers ("OEMs")
in select industries, including medical devices, communications equipment,
industrial and business computers, testing instrumentation and industrial
controls. The Company specializes in manufacturing high quality, technologically
complex printed circuit board assemblies with computer-automated equipment using
surface mount and pin-through-hole interconnection technologies for customers
requiring low to medium volume production runs. The Company frequently works
with customers from product design and prototype stages through ongoing
production and, in some cases, final assembly of the customers' products and
provides manufacturing services for successive product generations. As a result,
the Company believes that it is often an integral part of its customers'
operations.
Substantially all of the Company's manufacturing services are provided on
a turnkey basis, whereby the Company purchases customer-specified components
from its extensive network of suppliers, assembles the components on finished
printed circuit boards, performs post-production testing and provides the
customer with production process and testing documentation. The Company offers
its customers flexible, "just-in-time" delivery programs allowing product
shipments to be closely coordinated with the customers' inventory requirements.
In certain instances, the Company completes the assembly of its customers'
products at the Company's facilities by integrating printed circuit board
assemblies into other elements of the customers' products. The Company also
provides manufacturing services on a consignment basis, whereby the Company,
utilizing components provided by the customer, provides only assembly and
post-production testing services. The Company operates a total of 29 surface
mount production lines at its facilities in Angleton, Texas, Beaverton, Oregon
and Winona, Minnesota.
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.
ACQUISITION OF EMD
On July 30, 1996, the Company completed its acquisition (the
"Acquisition") of EMD Technologies, Inc. ("EMD"), an independent provider of
contract manufacturing and product design services for OEMs in industries
comparable to those targeted by the Company. EMD's manufacturing services focus
on manufacturing complex printed circuit board assemblies, operating 15 surface
mount production lines at its Winona, Minnesota facilities. EMD's product design
services include the complete design and development of electronic products and
mechanical packages, from conceptual design of circuit boards to configuring
subsystems and enclosures.
The addition of EMD's manufacturing facility in Minnesota provided the
Company with access to markets in the Midwest and the Northeast, without any
overlap of customers. For this reason, the Acquisition has broadened
substantially the Company's customer base. The Company believes that the
Acquisition has allowed it to pursue larger contracts with its customers because
it provided the Company with additional production capacity and a broader base
of technical resources. As a result, the Company expects to be able to undertake
larger product programs without becoming dependent upon one industry or
customer. The Company also has begun to offer EMD's product design services to a
wide range of the Company's customers, combining the design engineering strength
of EMD with the
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component procurement and customer service strengths of the Company and the
manufacturing expertise of both entities.
The Acquisition was accomplished by means of the merger of EMD with and
into a wholly owned subsidiary of the Company, with the former shareholders of
EMD receiving from the Company approximately $30.4 million in cash and 674,964
shares of Common Stock and the Company paying $2.2 million in acquisition costs.
The Company is operating the business of EMD as a wholly owned subsidiary of the
Company and has not made major modifications to the manner in which EMD was
operated prior to the Acquisition. The Company believes, however, that
opportunities exist to consolidate certain overhead functions, reduce
duplicative expenditures and implement, on a combined basis, certain other cost
saving measures. The Company is in the process of developing a combined
procurement plan pursuant to which component and other purchases would be
negotiated on a Company-wide basis with a view to realizing cost savings
associated with the increased purchasing power of the combined entities. The
Company is currently transitioning to reduce EMD's reliance on distributors as
sources of components in favor of the Company's more cost-effective practice of
purchasing materials directly from component manufacturers. In addition, the
Company has expanded the EMD sales force to more aggressively market the
combined entities' services and products in EMD's historical markets. The
Company will also link its three locations with a wide-area computer network to
enhance management reporting and operational control.
THE CONTRACT ELECTRONICS MANUFACTURING INDUSTRY
The basis for the development of the contract manufacturing industry in
recent years has been the increasing reliance by OEMs on contract manufacturing
specialists such as the Company for the manufacture of printed circuit board
assemblies. As a result of outsourcing manufacturing services, the contract
manufacturing industry in the United States grew at a compound annual rate of
20% from 1990 through 1996, according to the Institute for Interconnecting and
Packaging Electronic Circuits ("IPC"). The IPC estimated the size of the United
States contract manufacturing industry for 1996 in terms of sales to be $13.5
billion. The Company expects the trend toward outsourcing to continue and to
result in continued growth in the contract manufacturing industry. A 1995 IPC
study forecast that the contract manufacturing industry would grow at an
approximate compound annual rate of 20% through 2000 as OEMs continue to
outsource their manufacturing requirements and look to contract manufacturers to
provide additional services. Some of the advantages OEMs receive as a result of
outsourcing are:
ACCELERATION OF TIME TO MARKET. Rapid technological advances in the
Company's targeted industries require OEMs to make their products
available to their customers quickly to remain competitive. Delays in
bringing a new product to market can result in obsolescence of the product
before it becomes available. Contract manufacturers who specialize in
printed circuit board assembly are often able to provide manufacturing
services in a more timely manner than OEMs, thus allowing OEMs to reduce
the time to market for their products.
REDUCTION OF PRODUCTION COSTS. Contract manufacturers generally are
able to manufacture printed circuit board assemblies at a lower cost than
OEMs because of the efficiencies associated with specialization and
greater production volumes. Additionally, the purchasing power of contract
manufacturers allows OEMs to save on costs of procurement of components.
OEMs also benefit from the inventory management services provided by
contract manufacturers in connection with turnkey manufacturing services.
ACCESS TO ADVANCED TECHNOLOGY. Using contract manufacturers affords
OEMs access to advanced technology in printed circuit board assembly
equipment and techniques that OEMs may consider too costly for in-house
investment. The increasing use of surface mount interconnection
technology, which requires significant investments in computer-automated
equipment and the expertise to operate such equipment, is an example. Many
OEMs have been unwilling to make such investments, relying instead on
contract manufacturers for surface mount assembly. More recent
technological advancements that contract manufacturers are now able to
offer to OEMs include ball grid array and chip on board assembly
processes.
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IMPROVED MANUFACTURING QUALITY. Because it is the focus of their
operations, contract manufacturers are consistently able to provide
contract manufacturing services of a higher quality than OEMs can provide
in-house. Printed circuit board assembly and other services provided by
contract manufacturers are typically a small part of the broader
operations of the OEMs.
OPPORTUNITY TO FOCUS RESOURCES. By outsourcing printed circuit board
assembly and other manufacturing services, OEMs are able to focus their
resources on their primary activities, such as research and development of
new products and marketing.
Other factors in the contract manufacturing industry may have a positive
impact on established contract manufacturers such as the Company. The increasing
cost of automated equipment used in the industry, the working capital
requirements relating to inventory and the additional services that contract
manufacturers are providing make it more difficult for smaller manufacturers and
start-up companies to compete with the services that are provided by larger,
well-capitalized companies. Furthermore, the Company believes that these factors
are driving consolidation in the industry and may provide opportunities for
growth through acquisition.
BUSINESS STRATEGY
The Company's business strategy is to provide high quality contract
electronics manufacturing services to OEMs in targeted industries. The Company
seeks to provide services that reduce OEM costs and time to market and increase
OEM product quality. The Company's strategy to achieve these objectives includes
the following key elements:
ESTABLISH AND MAINTAIN LONG-TERM RELATIONSHIPS. The Company pursues
opportunities to provide turnkey manufacturing services whereby the
Company becomes an integral part of its customers' manufacturing
operations. The Company seeks to work closely with its customers in all
phases of design and production. By aggressively marketing its services to
its targeted customers and involving design, marketing and senior
management personnel in the pursuit and maintenance of customer
relationships, the Company attempts to establish itself as the sole or
primary source for its customers' manufacturing requirements. The Company
believes that working to develop close, long-term relationships builds
customer loyalty that is difficult for competitors to overcome.
TARGET AND MAINTAIN BALANCE AMONG SELECT OEM INDUSTRIES AND
CUSTOMERS. The Company targets industries and customers that have strict
quality control standards for their products and that have
service-intensive manufacturing requirements. The Company focuses on
complex assemblies in low to medium volumes for commercial and industrial
customers. The Company has not been, and does not intend to become, a
manufacturer of high volume printed circuit board assemblies for personal
computers or consumer-oriented products, which typically have relatively
low margins. The Company targets customers in the medical devices,
communications equipment, industrial and business computers, testing
instrumentation and industrial controls industries and seeks to maintain a
balance of customers among these industries and within each industry. By
balancing its operations among industries and customers, the Company seeks
to avoid becoming dependent on any one industry or customer. In addition,
the Company believes that the industries and customers that it targets
produce products that generally have longer life cycles, more stable
demand and less price pressure as compared to consumer-oriented products.
PROVIDE COMPREHENSIVE DESIGN AND MANUFACTURING SERVICES. The Company
believes that OEMs increasingly expect a broad range of services from
contract manufacturers and that attracting and retaining customers depends
on the Company's ability to provide such services. The Company provides
its customers with services ranging from initial product design and
development and prototype production to the manufacture of printed circuit
board assemblies, post-production testing and final assembly of customers'
products. In support of this strategy, the Company made significant
capital investments during 1996 to expand its
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production capacity, adding two surface mount production lines at its
Angleton, Texas facility. In addition, the Acquisition added significant
design engineering capabilities and 15 surface mount production lines.
SUCCESSFULLY INTEGRATE EMD. The Company believes that the
Acquisition has provided opportunities to enhance the Company's operations
and pursue additional operating efficiencies. These opportunities include
taking advantage of the benefits of a combined component procurement
program, broader customer base, geographic expansion, the ability to
pursue larger contracts and the capability to provide high quality design
engineering services to current and potential customers.
PURSUE OPPORTUNITIES FOR GROWTH. The Company is committed to
pursuing opportunities to grow its operations through acquiring additional
facilities or businesses or achieving operating efficiencies in the
Company's existing operations.
MAINTAIN FLEXIBILITY. The Company believes that many of its
customers are leaders in their respective industries, and, as a result,
routinely re-engineer their products to incorporate new and more
competitive product features. Accordingly, the Company has organized its
manufacturing operations into flexible work centers, as opposed to
dedicated production lines, which allow the Company to incorporate complex
design specifications and to respond rapidly to design changes.
SERVICES PROVIDED BY THE COMPANY
The Company provides turnkey manufacturing services, including the
purchase of customer-specified components from its extensive network of
component suppliers, assembly of the components onto printed circuit boards and
performance of post-production testing. In certain instances, the Company
completes the assembly of its customers' products at the Company's facilities by
integrating printed circuit boards into other elements of the customers'
products.
The Company provides design-for-manufacturability engineering services for
products it manufactures, and the Acquisition significantly expanded the
Company's capabilities in this area. With respect to product design, the Company
provides the complete design and development of new electronic products and
mechanical packages, as well as the redesign, surface mount conversion and
printed circuit board layout of existing products. The Company also provides
test process design capabilities that include the design and development of test
fixtures and procedures and software for both in-circuit tests and functional
tests of circuit boards, components and products.
The Company's component procurement services for turnkey projects consist
of planning, purchasing, expediting, inspecting, warehousing and financing the
components required to manufacture printed circuit board assemblies. OEMs
increasingly have required manufacturers to purchase all or some components
directly from component manufacturers or distributors and to warehouse and
finance the components. See "-- Suppliers."
In its manufacturing services, the Company offers both surface mount and
pin-through-hole interconnection technologies. Surface mount technology is a
computer-automated process that allows the placement of a higher density of
components directly on both sides of a printed circuit board. The surface mount
process is a more recent advancement over the mature pin-through-hole
technology, which normally permits electronic components to be attached to only
one side of a printed circuit board by inserting the components into holes
drilled through the board. The surface mount process allows OEMs to use advanced
circuitry while permitting the placement of a greater number of components on a
printed circuit board without having to increase the size of the board. By
allowing increasingly complex circuits to be packaged with the components placed
in closer proximity to each other, surface mount technology greatly enhances
circuit processing speed and thus board and system performance. The surface
mount process allows a reduction in the number of printed circuit boards
required per system and allows the use of more fully automated production
processes. The Company performs pin-through-hole assembly both manually and with
computer-automated component insertion and soldering equipment. Although surface
mount technology is the leading interconnection technology, the Company intends
to continue providing pin-through-hole assembly services for its
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customers. Pin-through-hole technology is of continuing viability because most
printed circuit boards assembled using surface mount technology require some
pin-through-hole assembly. In addition, the Company believes that by continuing
to provide pin-through-hole assembly services, the Company appeals to current
and prospective customers that have not shifted, or do not wish to change, their
manufacturing process to utilize surface mount technology.
Because the Company may be the sole source or a major source of printed
circuit board assemblies for a customer, frequent communication between the
Company and the customer is necessary to ensure that the Company's manufacturing
services meet the customer's specifications. Accordingly, the Company maintains
a customer service department whose personnel work closely with the customer
throughout the manufacturing process. The Company's engineering and
manufacturing personnel coordinate the implementation of new and reengineered
products with the customer, thereby providing the customer with feedback on such
issues as the overall ease of manufacture of the printed circuit board assembly
and anticipated production lead times.
Component procurement begins after component specifications are verified
and approved sources are confirmed with the customer. Concurrently, the
Company's technical personnel establish complete documentation files on
components and the appropriate set-up, assembly and testing procedures. The
Company's personnel monitor all stages of the manufacturing process in order to
provide flexible and rapid responses to the customer's requirements, including
changes in design, order size and delivery schedules. In addition, the Company
utilizes an automated materials planning system which allows the customer to
monitor the status of an order on a real-time basis.
The Company also provides testing services for completed printed circuit
board assemblies in connection with the manufacturing process. In-circuit tests
verify that the components have been inserted properly and meet certain
functional standards and that the electrical circuits have been completed
properly. These tests are performed on industry standard testing equipment using
proprietary software developed either by the customer or test consultants on a
contractual basis. In-circuit tests normally are performed on all printed
circuit board assemblies for turnkey projects. In addition, using specialized
testing equipment designed and provided by the customer, the Company performs
customized functional tests designed to ensure that the printed circuit board
assembly will perform its intended functions. Because defective components
normally fail after a relatively short period of use, customers occasionally
request that certain printed circuit board assemblies be subjected by the
Company to controlled environmental stresses, typically thermal or electrical
stresses. These procedures accelerate the effects of operational use without
affecting the useful life of the component.
The Company also offers its customers flexible, just-in-time delivery
programs allowing product shipments to be closely coordinated with the
customers' inventory requirements. Several of the Company's larger customers
utilize a just-in-time inventory management system. The Company believes that
the attractiveness of just-in-time inventory management will lead other
customers to implement such systems and, accordingly, anticipates that a greater
percentage of the Company's business will be performed on this basis in the
future.
In establishing a turnkey relationship with a manufacturer, OEMs must
incur expense in qualifying the contract manufacturer and in some cases its
sources of component supply, refining product design and manufacturing
processes, and developing mutually compatible information and reporting systems.
The Company believes that once this relationship is established, OEMs typically
experience significant difficulty in expeditiously reassigning turnkey projects
to another manufacturer and, as a result, seek sources of turnkey manufacturing
services that they perceive will be able to meet their production requirements
over a long period of time and successive product generations. Accordingly, the
Company believes that its increasing turnkey business has resulted in greater
stability in its customer base.
MARKETING AND CUSTOMERS
To better implement its service-intensive business strategy, the Company
markets its services to existing and potential customers through its direct
sales force, independent marketing representatives and its executive officers.
The Company's sales force consists of seven in-house salesmen and two
independent marketing representatives, through
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which the Company is aggressively marketing the enhanced services capabilities
resulting from the Acquisition. Four of the seven in-house salesmen are based at
the Winona, Minnesota facility, with two based at the Angleton, Texas facility
and one based at the Beaverton, Oregon facility.
The Company seeks to serve a sufficiently large number of customers to
minimize dependence on any one customer or industry. This strategy was enhanced
by the Acquisition, as there was no customer overlap between the Company and
EMD. Although historically a substantial percentage of the Company's sales have
been to a small number of customers, by successfully undertaking the transition
to serving a much larger and more diversified customer base, the Company has
been able to reduce its dependence on certain significant customers and lessen
the impact of a substantial reduction in business from one such customer.
Nevertheless, during 1996, the Company's three largest customers accounted for
approximately 16%, 14% and 11%, respectively, of the Company's sales. Although
the loss of a major customer could have an adverse effect on the Company, the
Company does not believe that any such effect would be material unless the
Company were unable to replace such customer's business.
The Company targets customers in five industries and seeks to maintain a
balance in its sales to those industries. The following table sets forth the
percentages of the Company's sales to each of the five industries for 1994, 1995
and 1996.
1994 1995 1996
---- ---- ----
Medical Devices .................. 18% 14% 18%
Telecommunications ............... 8 18 26
Computer Systems ................. 51 29 25
Tests and Instrumentation ........ 7 22 15
Industrial Controls .............. 13 17 16
Other ............................ 3 -- --
SUPPLIERS
The Company maintains an extensive network of suppliers of components and
other materials used in assembling printed circuit boards. The Company procures
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 the Company experiences component
shortages and longer lead times of various components from time to time, the
Company has 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, the
Company's inventory risk. In addition, by developing long-term relationships
with suppliers, the Company has 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, the Company
anticipates continued component shortages with respect to certain components and
longer lead times for various components from time to time.
As part of the integration of EMD, the Company is in the process of
developing a combined procurement plan pursuant to which component and other
purchases would be negotiated on a Company-wide basis with a view to realizing
savings associated with the increased purchasing power of the combined entities.
The Company is currently transitioning to reduce EMD's reliance on distributors
as sources of components in favor of the Company's more cost-effective practice
of purchasing materials directly from component manufacturers.
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BACKLOG
The Company's backlog was approximately $230 million at December 31, 1996,
compared to $117 million at December 31, 1995 and $60 million at December 31,
1993. Backlog consists of customer orders that are expected to be filled within
twelve months. Because orders generally may be rescheduled or cancelled by the
payment of cancellation charges and because the Company's customers update their
orders at different intervals and provide orders to be filled over different
periods, the Company's backlog does not provide an accurate measure of the
timing or amount of future sales.
COMPETITION
The contract manufacturing services provided by the Company are available
from many independent sources as well as in-house manufacturing capabilities of
current and potential customers. The Company's competitors include Solectron
Corporation, SCI Systems, Inc., The DII Group, Inc., Avex Electronics, Inc.,
Jabil Circuit, Inc. and Plexus Corp., some of which are more established in the
industry and have substantially greater financial, manufacturing or marketing
resources than the Company. The Company believes that the principal competitive
factors in its 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. The Company believes that it competes favorably with respect to these
factors.
GOVERNMENTAL REGULATION
The Company's operations are subject to certain federal, state and local
regulatory requirements relating to environmental, waste management, health and
safety matters, and there can be no assurance that material costs and
liabilities will not be incurred or that past or future operations will not
result in exposure to injury or claims of injury by employees or the public.
Although some risk of costs and liabilities related to these matters is inherent
in the Company's business, as with many similar businesses, the Company believes
that its business is operated in substantial compliance with applicable
regulations. However, new, modified or more stringent requirements or
enforcement policies could be adopted, which could adversely affect the Company.
The Company periodically generates and temporarily handles limited amounts
of materials that are considered hazardous waste under applicable law. The
Company contracts for the off-site disposal of these materials and has
implemented a waste management program to address related regulatory issues.
EMPLOYEES
As of December 31, 1996, the Company had 1,445 employees, of whom 1,059
were engaged in manufacturing and operations, 197 in materials control and
procurement, 67 in design and development, 11 in marketing and sales, and 111 in
administration. None of the Company's employees is subject to a collective
bargaining agreement. Management believes that the Company's relationship with
its employees is satisfactory.
EXPORT SALES
In 1996, the Company had export sales of approximately $29 million to
Europe from the Company's United States operations. There were no export sales
in 1995 or 1994.
ITEM 2. PROPERTIES
The Company's executive offices and one of its manufacturing facilities
are located in an approximately 109,000 square foot facility on 18.9 acres of
land owned by the Company in Angleton, Texas, where the Company has
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12 surface mount manufacturing lines. The Company also leases an approximately
52,000 square foot facility in Beaverton, Oregon, where the Company has two
surface mount production lines. With the Acquisition, the Company added
facilities in Winona, Minnesota comprising four leased buildings with total
square footage of approximately 142,000 and an additional 64,000 square foot
building that the Company now owns. For the primary leased facilities in Winona,
the Company has long-term leases with three-year purchase options. The Winona
facilities include manufacturing facilities with 15 surface mount production
lines and warehouse facilities. The Company's Angleton and Beaverton facilities
are certified under ISO-9002, and the Winona facilities are certified under
ISO-9001. The Company believes that its properties are and will be sufficient to
conduct the Company's operations for the foreseeable future.
ITEM 3. LEGAL PROCEEDINGS
The Company is not currently a party to any material litigation.
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 1996.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
The information on page 30 of the Company's Annual Report to Stockholders
for the fiscal year ended December 31, 1996 (the "1996 Annual Report") is
incorporated herein by reference in response to this item.
ITEM 6. SELECTED FINANCIAL DATA
The information on page 31 of the 1996 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 to 14 of the 1996 Annual Report is incorporated
herein by reference in response to this item.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information on pages 15 to 29 of the 1996 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 1997 Annual Meeting of Shareholders (the "1997
Proxy Statement") is incorporated herein by reference in response to this item.
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ITEM 11. EXECUTIVE COMPENSATION
The information under the caption "Executive Compensation and Other
Matters" in the 1997 Proxy Statement 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 1997 Proxy Statement 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 1997 Proxy
Statement 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 15 of the 1996 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, 1996 and 1995
Consolidated Statements of Income for the years ended December 31, 1996,
1995 and 1994
Consolidated Statements of Shareholders' Equity for the years ended
December 31, 1996, 1995 and 1994
Consolidated Statements of Cash Flows for the years ended
December 31, 1996, 1995 and 1994
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 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 -- 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).
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2.2 -- 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)).
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 by
reference to Exhibit 3.2 to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1992 ("1992 Form
10-K")).
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 1992 Form 10-K).
4.3 -- Specimen form of certificate evidencing the Common Stock
(incorporated herein by reference to Exhibit 4.3 to the
Registration Statement).
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 -- Lease Agreement dated October 12, 1990, between Tektronics, Inc.
and the Company, as amended by Lease Amendment No. 1 dated as of
August 19, 1991, Lease Amendment No. 2 dated January 31, 1992,
Lease Amendment No. 3 dated January 11, 1993, Lease Amendment No.
4 dated May 19, 1993 and Lease Amendment No. 5 dated September
13, 1993 (incorporated herein by reference to Exhibit 10.16 to
the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1993).
10.6 -- 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).
10.7 -- Benchmark Electronics, Inc. 1992 Incentive Bonus Plan
(incorporated herein by reference to Exhibit 10.20 to the 1992
Form 10-K).
10.8 -- 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).
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10.9 -- Credit Agreement dated as of July 30, 1996 by and between the
Company and Texas Commerce Bank National Association
(incorporated herein by reference to Exhibit 99.2 to the
Company's Current Report on Form 8-K dated July 30, 1996).
10.10* -- 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.
10.11* -- 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.
13* -- Benchmark Electronics, Inc. Annual Report to Shareholders for the
fiscal year ended December 31, 1996.
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).
27* -- Financial Data Schedule.
(b) Reports on Form 8-K
The Company did not file any Current Reports on Form 8-K during the fourth
quarter of 1996.
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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 26, 1997
Pursuant to the requirements of the Securities Exchange 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.
NAME POSITION DATE
_______________________ Chairman of the _____________________
John C. Custer Board of Directors
/S/ DONALD E. NIGBOR Director and President MARCH 26, 1997
Donald E. Nigbor (principal executive officer)
_______________________ Director and Executive _____________________
Steven A. Barton Vice President
/S/ CARY T. FU Director and Executive MARCH 26, 1997
Cary T. Fu Vice President (principal
financial and accounting officer)
/S/ PETER G. DORFLINGER Director MARCH 26, 1997
Peter G. Dorflinger
/S/ GERALD W. BODZY Director MARCH 26, 1997
Gerald W. Bodzy
_______________________ Director ____________________
David H. Arnold
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EXHIBIT INDEX
Each exhibit marked with an asterisk is filed with this Annual Report on
Form 10-K.
EXHIBIT
NUMBER DESCRIPTION
2.1 -- 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).
2.2 -- 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)).
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 by
reference to Exhibit 3.2 to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1992 ("1992 Form
10-K")).
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 1992 Form 10-K).
4.3 -- Specimen form of certificate evidencing the Common Stock
(incorporated herein by reference to Exhibit 4.3 to the
Registration Statement).
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 -- Lease Agreement dated October 12, 1990, between Tektronics, Inc.
and the Company, as amended by Lease Amendment No. 1 dated as of
August 19, 1991, Lease Amendment No. 2 dated January 31, 1992,
Lease Amendment No. 3 dated January 11, 1993, Lease Amendment No.
4 dated May 19, 1993 and Lease Amendment No. 5 dated September
13, 1993 (incorporated herein by reference to Exhibit 10.16 to
the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1993).
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10.6 -- 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).
10.7 -- Benchmark Electronics, Inc. 1992 Incentive Bonus Plan
(incorporated herein by reference to Exhibit 10.20 to the 1992
Form 10-K).
10.8 -- 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).
10.9 -- Credit Agreement dated as of July 30, 1996 by and between the
Company and Texas Commerce Bank National Association
(incorporated herein by reference to Exhibit 99.2 to the
Company's Current Report on Form 8-K dated July 30, 1996).
10.10* -- 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.
10.11* -- 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.
13* -- Benchmark Electronics, Inc. Annual Report to Shareholders for the
fiscal year ended December 31, 1996.
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).
27* -- Financial Data Schedule.
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