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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM 10-K
(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, 2000
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 77515
Angleton, Texas (Zip Code)
(Address of Principal Executive Offices)
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: None
---------------
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. [X]
As of March 29, 2001, the number of outstanding shares of Common Stock was
19,601,953. 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 $364.7 million.
Documents Incorporated by Reference:
(1) Portions of the Company's Annual Report to Shareholders for the fiscal year
ended December 31, 2000 (Part II Items 5-8 and Part IV Item 14(a)(1)).
(2) Portions of the Company's Proxy Statement for the 2001 Annual Meeting of
Shareholders (Part III, Items 10-13).
TABLE OF CONTENTS
Page
PART I
ITEM 1. Business .................................................. 1
ITEM 2. Properties ................................................ 8
ITEM 3. Legal Proceedings ......................................... 9
ITEM 4. Submission of Matters to a Vote of Security Holders ....... 9
PART II
ITEM 5. Market for Registrant's Common Equity and Related
Shareholder Matters ..................................... 9
ITEM 6. Selected Financial Data ................................... 9
ITEM 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations ........... 10
Item 7A. Quantitative and Qualitative Disclosures
About Market Risk ....................................... 10
ITEM 8. Financial Statements and Supplementary Data ............... 10
ITEM 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure ..................... 10
PART III
ITEM 10. Directors and Executive Officers of the Registrant ........ 10
ITEM 11. Executive Compensation .................................... 10
ITEM 12. Security Ownership of Certain Beneficial Owners
and Management .......................................... 10
ITEM 13. Certain Relationships and Related Transactions ............ 10
PART IV
ITEM 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K ..................................... 11
ii
PART I
Item 1. Business
Background
Benchmark Electronics, Inc., formerly named Electronics, Inc., began
operations in 1979 and was incorporated under Texas law in 1981 as a wholly
owned subsidiary of Intermedics, Inc., 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., a corporation formed
by Donald E. Nigbor, Steven A. Barton and Cary T. Fu, three of our executive
officers. In 1988, Electronic Investors Corp. was merged into Benchmark, and in
1990 we completed the initial public offering of our common stock.
General
We are in the business of manufacturing electronics and provide our
services to original equipment manufacturers of telecommunication equipment,
computers and related products for business enterprises,
video/audio/entertainment products, industrial control equipment, testing and
instrumentation products, personal computers and medical devices. The services
that we provide are commonly referred to as electronics manufacturing services.
We offer our customers comprehensive and integrated design and manufacturing
services, from initial product design to volume production and direct order
fulfillment. We provide specialized engineering services including product
design, printed circuit board layout, prototyping and test development. We
believe that we have developed strengths in the manufacturing process for large,
complex, high-density printed circuit boards as well as the ability to
manufacture high and low volume products in lower cost regions such as Latin
America and Southeast Asia. As our customers expand internationally, they
increasingly require their electronics manufacturing services partners to have
strategic regional locations and global procurement capabilities. We believe
that our global manufacturing presence of 16 facilities in six countries
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 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 printed circuit boards, perform
post-production testing and provide our customers 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. Additionally, 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 utilize components
supplied by the customer to provide assembly and post-production testing
services. We currently operate, on approximately 1.8 million square feet, a
total of 57 surface mount production lines at our domestic facilities in
Alabama, Minnesota, New Hampshire, Massachusetts, Oregon, Tennessee, Texas and
Virginia; and 30 surface mount production lines at our international facilities
in Brazil, Ireland, Mexico, Scotland, and Singapore. Surface mount production
lines are assembly lines where electrical components are soldered directly onto
printed circuit boards.
Since the beginning of 1996, we have completed five acquisitions that have
broadened our service offerings, diversified our customer base with leading
original equipment manufacturers and expanded our geographic presence. Our
October 2000 acquisition of the assets of the MSI Division of Outreach
Technologies, Inc. provided us with additional manufacturing capacity in the
northeastern United States. Our August 1999 acquisition of AVEX Electronics,
Inc. and Kilbride Holdings B.V. provided us with a global presence and enabled
us to increase our scale of operations and expand our customer base
significantly. We have also acquired EMD Technologies, Inc., Lockheed Commercial
Electronics Company, and certain assets from Stratus Computer Ireland, which
improved our engineering capabilities, increased our manufacturing capacity and
expanded our international presence. In addition to these
1
acquisitions, the opening of a new facility in Mansfield, Massachusetts during
2000 provided additional manufacturing capacity in the northeastern United
States and the opening of new systems integration facilities in Huntsville,
Alabama and Singapore expanded our systems integration capabilities.
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 19 years of industry experience.
Business Strategy
Our goal is to be the electronics manufacturing services outsourcing
provider of choice to leading original equipment manufacturers 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 original equipment manufacturers 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 High-End Products in High Growth Sectors. Electronics
manufacturing services providers produce products for a wide range of
original equipment manufacturers in different high growth industries,
such as consumer electronics, Internet-focused businesses and
telecommunications equipment. 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, original equipment manufacturers' customers range
from consumer-oriented companies that compete primarily on price and
redesign their products every year to manufacturers of high-end
telecommunications equipment and computer and related products for
business enterprises that compete on technology and quality. We
currently offer state-of-the-art products for industry leaders who
require specialized 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 original equipment manufacturers are increasingly requiring
from electronics manufacturing services providers a wide range of
specialized 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 original equipment
manufacturers' customers. With the AVEX acquisition, we also offer our
customers high volume production in low cost regions of the world,
such as Brazil 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 assembling large, complex
high-density printed circuit boards 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 original equipment manufacturer'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 16 facilities located in
Brazil, Ireland, Mexico, Scotland, Singapore and the United States.
o Selectively Pursue Strategic Acquisitions. We have completed five
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 electronics manufacturing services industry.
Acquisitions
Since July 1996, we have completed five acquisitions. These acquisitions
have broadened our service offerings, diversified our customer base with leading
original equipment manufacturers and expanded our geographic presence. These
acquisitions were:
o MSI Division. On October 2, 2000, we acquired substantially all of the
assets and properties, net of assumed liabilities, of the MSI Division of
Outreach Technologies, Inc. Now operated as our Manassas, Virginia
division, this facility provided additional manufacturing capacity in the
northeastern United States.
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 eight countries at the time of the acquisition 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 electronics
manufacturing services provider in the world based on 1998 pro forma sales.
This acquisition expanded our customer base to approximately 90 original
equipment manufacturers in a broader range of end user markets.
3
o Stratus Computer Ireland. On March 1, 1999, we acquired various assets from
Stratus Computer Ireland, 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 capabilities and our box build engineering
capabilities, which is the process of building the finished product from
subassemblies. The process may also involve loading software and optional
configuration.
0 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:
o assembly and testing of printed circuit boards;
o systems assembly and testing;
o prototyping, which is building initial quantities of a new product to
test and refine the design;
o depot repair, which is the method of repairing equipment in which the
customer ships a damaged product to a central location for repair, as
opposed to field repair;
o materials procurement; and
o 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 configurations for
subsystems and enclosures. In addition to design services, this acquisition
provided us with manufacturing capabilities in the midwestern United States
and 19 additional customers.
Electronics Manufacturing Services Industry
Many original equipment manufacturers 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 original
equipment manufacturers to take advantage of the manufacturing expertise of, and
capital investments by, electronics manufacturing service providers. This
enables original equipment manufacturers to concentrate on what they believe to
be their core strengths, such as product development, marketing and sales.
Original equipment manufacturers 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.
Services We Provide
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, dedicated production
lines for prototypes. These services strengthen our relationships with
manufacturing customers and attract new customers requiring specialized
engineering services.
4
To assist customers with initial design, we offer computer assisted
engineering, computer assisted 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, which means a rapid process of 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 cycle from product introduction to large-scale 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 Dublin, Ireland facility has developed material processes required
to support high-end computer system integration operations.
Assembly and Manufacturing. Our manufacturing and assembly operations
include printed circuit boards and subsystem assembly, box build and systems
integration, the process of integrating sub-systems and downloading software
before producing a fully configured product. We purchase the printed circuit
boards used in our assembly operations from third parties. A substantial portion
of our sales is 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, which are programs designed to ensure timely,
convenient and efficient delivery of assembled products to our customers. As
original equipment manufacturers 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 enable
us to offer a variety of advanced manufacturing solutions. These packaging and
interconnect technologies include:
o chip scale packaging, the part of semiconductor manufacturing in which
the semiconductor die is bonded and sealed into a ceramic or plastic
package which physically protects the semiconductor device; and
o ball grid array, a method of attaching components to a printed circuit
board through balls of solder that are arranged in a grid pattern.
Testing. We offer computer-aided testing of assembled printed circuit
boards, 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 to test the circuitry of
the board 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 assemblies of boards or
systems.
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 2000, our
two largest customers, EMC and Sun Microsystems, each represented in excess of
10% of total sales and, in the aggregate, represented 25.9% of total sales.
6
The following table sets forth the percentages of the Company's sales by
industry for 2000, 1999 and 1998.
2000 1999 1998
---- ---- ----
Computers & related products for
business enterprises .............. 36% 30% 44%
Telecommunication equipment ........... 34 39 31
Video/Audio/Entertainment products .... 10 6 --
Industrial control equipment .......... 8 9 9
Testing & instrumentation products .... 7 4 5
Medical devices ....................... 5 6 11
Personal computers .................... -- 6 --
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 utilize
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. In recent months, component shortages have become more prevalent
in our industry and, as a result, suppliers of such components are filling only
portions of orders from customers such as us. We expect this trend to continue
from time to time in the future.
Backlog
Our backlog was approximately $1.6 billion at December 31, 2000, compared
to $1 billion at December 31, 1999. Although we expect to fill substantially all
of our December 31, 2000 backlog during 2001, at December 31, 2000 we did not
have long-term agreements with all of our customers, and customer orders can be
canceled, changed or delayed by customers. The timely replacement of canceled,
changed or delayed orders with orders from new customers cannot be assured, nor
can there be any assurance that any of our current customers will continue to
utilize our services. Because of these factors, backlog is not a meaningful
indicator of future financial results.
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. Our 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.
6
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. We
believe we operate 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, 2000, we employed 6,158 people, of whom 4,652 were
engaged in manufacturing and operations, 929 in materials control and
procurement, 99 in design and development, 122 in marketing and sales, and 356
in administration. Although a majority of our workforce is non-union, employees
in our facilities in Brazil and Mexico are unionized, and work councils have
been established at our facilities in Cork, Ireland, and Scotland. The Company
has not experienced a strike or similar work stoppage and its relations with its
employees are satisfactory.
Segments and International Operations
Benchmark has 16 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 and geographical information. Prior to the acquisitions in 1999, all of
our operations were in the Americas region. We currently operate outside the
United States in Brazil, Ireland, Mexico, Scotland, and Singapore. In 2000,
approximately 20.1% 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.
7
Item 2. Properties
Benchmark currently has 16 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, Texas 109,000 Executive, manufacturing, and procurement Owned
Beaverton, Oregon 77,000 Manufacturing Leased
Campinas, Brazil 40,000 Manufacturing Leased
Cork, Ireland 24,000 Manufacturing and design Owned
Dublin, Ireland 149,000 Manufacturing and procurement Leased
East Kilbride, Scotland 80,000 Manufacturing and procurement Owned
Guadalajara, Mexico 150,000 Manufacturing Leased
Hudson, New Hampshire 262,000 Manufacturing and procurement Leased
Huntsville, Alabama 276,000 Manufacturing, design and procurement Owned
Huntsville, Alabama (SI) 144,000 Manufacturing and design Leased
Manassas, Virginia 44,000 Manufacturing and procurement Leased
Mansfield, Massachusetts 44,000 Manufacturing Leased
Pulaski, Tennessee 113,000 Manufacturing Owned
Singapore 37,000 Manufacturing and procurement Leased
Singapore (SI) 36,000 Manufacturing and procurement Leased
Winona, Minnesota 208,000 Manufacturing, design and procurement Leased, Owned
-------
Total 1,793,000
=========
8
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
earning 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. These
lawsuits were consolidated in February 2000. The lawsuit seeks to recover
unspecified damages. We deny the allegations in the lawsuits, however, and
further deny that such allegations provide a basis for recovery of damages as we
believe that we have made all required disclosures on a timely basis. Management
is vigorously defending against these actions. At the present time, we are
unable to reasonably estimate the possible loss, if any, associated with these
matters.
Benchmark filed suit against J. M. Huber Corporation ("Seller") in the
United States District Court for the Southern District of Texas for breach of
contract, fraud and negligent misrepresentation on December 14, 1999 and is
seeking an unspecified amount of damages in connection with the Amended and
Restated Stock Purchase Agreement dated August 12, 1999 between the parties
whereby Benchmark acquired all of the stock of AVEX and Kilbride Holdings B.V.
from Seller. On January 5, 2000, Seller filed suit in the United States District
Court for the Southern District of New York alleging that Benchmark failed to
comply with certain obligations under the contract requiring Benchmark to
register shares of its common stock issued to Seller as partial consideration
for the acquisition. Seller's suit has been consolidated with Benchmark's suit
in the United States District Court for the Southern District of Texas.
Benchmark intends to vigorously pursue its claims against Seller and defend
against Seller's allegations. At the present time, we are unable to reasonably
estimate the possible loss, if any, associated with these matters.
During the second quarter of 2000, Benchmark, along with numerous other
companies, was named as a defendant in a lawsuit brought by the Lemelson
Medical, Education & Research Foundation (the Foundation). The lawsuit alleges
that Benchmark has infringed certain of the Foundation's patents relating to
machine vision and bar code technology utilized in machines Benchmark has
purchased. On November 11, 2000, we filed an Answer, Affirmative Defenses, and a
Motion to Stay based upon Declaratory Judgment Actions filed by Cognex and
Symbol, manufacturers of the equipment at issue. We continue to explore any
indemnity or similar rights Benchmark may have against manufacturers of the
machines or other third parties. Management intends to vigorously defend against
such claim and pursue all rights it has against third parties. At the present
time, we are unable to reasonably estimate the possible loss, if any, associated
with these matters.
Benchmark is also involved in various other legal actions arising in
the ordinary course of business. In the opinion of management, the ultimate
disposition of these matters will not have a material adverse effect on
Benchmark's consolidated financial position or results of operations.
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 2000.
PART II
Item 5. Market for Registrant's Common Equity and Related Shareholder Matters
The information on page 39 of the Company's Annual Report to
Stockholders for the fiscal year ended December 31, 2000 (the "2000 Annual
Report") is incorporated herein by reference in response to this item.
9
Item 6. Selected Financial Data
The information on page 40 of the 2000 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 18 of the 2000 Annual Report is
incorporated herein by reference in response to this item.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
The information on pages 17 through 18 of the 2000 Annual Report is
incorporated herein by reference in response to this item.
Item 8. Financial Statements and Supplementary Data
The information on pages 19 through 39 of the 2000 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
Not applicable.
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 2001 Annual Meeting of Shareholders (the "2001
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 2001 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 2001 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 2001
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.
10
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 report thereon, the
notes thereto and supplementary data commencing at page 19 of the 2000 Annual
Report, which financial statements, report, 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, 2000 and 1999
Consolidated Statements of Income for the years ended December 31,
2000, 1999 and 1998
Consolidated Statements of Shareholders' Equity and Comprehensive
Income for the years ended December 31, 2000, 1999 and 1998
Consolidated Statements of Cash Flows for the years ended December 31,
2000, 1999 and 1998 Notes to Consolidated Financial Statements
2. Financial Statement Schedule
Benchmark Electronics, Inc.
Schedule II - Valuation Accounts
(in thousands)
Additions
Balance at ------------------------------------- Balance at
Beginning Charges to Other End of
of Period Operations Additions Deductions Period
--------------------------------------------------------------
Year ended December 31, 2000
Allowance for doubtful accounts(1)(2) $ 7,705 921 64 4,414 4,276
Inventory obsolescence reserve(2)(3) $20,000 3,748 140 15,662 8,226
Year ended December 31, 1999
Allowance for doubtful accounts(1)(4) $ 100 273 7,332 -- 7,705
Inventory obsolescence reserve(4) $ 3,510 1,911 14,579 -- 20,000
Year ended December 31, 1998
Allowance for doubtful accounts(1) $ 156 -- -- 56 100
Inventory obsolescence reserve(3)(5) $ 1,751 583 3,100 1,924 3,510
(1) Deductions in the allowance for doubtful accounts represent write-offs, net
of recoveries, of amounts determined to be uncollectible.
(2) Other addition relates to the acquisition of MSI.
(3) Deductions in the inventory obsolescence reserve represent disposals of
inventory determined to be obsolete.
(4) Other addition relates to the acquisition of AVEX.
(5) Other addition relates to the acquisition of LCEC.
11
Independent Auditors' Report on Schedule
The Board of Directors and Shareholders
Benchmark Electronics, Inc.:
Under date of February 7, 2001, we reported on the consolidated balance sheets
of Benchmark Electronics, Inc. and subsidiaries as of December 31, 2000 and
1999, and the related consolidated statements of income, shareholders' equity
and comprehensive income, and cash flows for each of the years in the three-year
period ended December 31, 2000, as incorporated by reference in this annual
report on form 10-K for the year 2000. In connection with the audits of the
aforementioned consolidated financial statements, we also have audited the
related consolidated financial statement schedule included in Item 14(a)2. This
financial statement schedule is the responsibility of the Company's management.
Our responsibility is to express an opinion on this financial statement schedule
based on our audits.
In our opinion, such financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth therein.
KPMG LLP
Houston, Texas
February 7, 2001
12
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).
2.6 -- Asset Purchase Agreement by and between Benchmark Electronics AB
and Flextronics International Sweden AB (incorporated by
reference herein to Exhibit 2 to the Company's Current Report on
Form 8-K/A dated July 31, 2000).
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).
13
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).
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* -- First Amendment to Lucent Technologies Network Systems do Brasil
S.A. dated June 14, 2000 by and between Benchmark Electronics
Ltda and Lucent Technologies Network Systems do Brasil S.A.
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
(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, 1999).
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)).
14
10.9 -- Benchmark Electronics, Inc. 2000 Stock Awards Plan (incorporated
herein by reference to Exhibit 4.8 to the Company's Registration
Statement on Form S-8 (Registration Number 333-54186)).
10.10 -- Form of incentive stock option agreement for use under the 2000
Stock Awards Plan (incorporated herein by reference to Exhibit
4.8 to the Company's Registration Statement on Form S-8
(Registration Number 333-54186)).
10.11 -- First Amendment to the Benchmark Electronics, Inc. Employee Stock
Purchase Plan (incorporated herein by reference to Exhibit 10.1
to the Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 2000).
10.12* -- Lease Agreement dated June 1, 2000 between Industrial Properties
of the South and the Company.
10.13 -- Lease Agreement dated February 29, 2000 between Millikan
Properties, LLC and the Company (incorporated herein by reference
to Exhibit 10.12 to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1999).
10.14 -- 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).
10.15 -- 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).
10.16 -- CE Facility Lease dated February 23, 1998 by and between the
Company and Lockheed Martin Corporation Plan (incorporated herein
by reference to Exhibit 10.15 to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1999).
10.17 -- 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 (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, 1999).
10.18 -- First Amendment to CE Facility Lease dated February 21, 2000 by
and between the Company and Lockheed Martin Corporation
(incorporated herein by reference to Exhibit 10.17 to the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1999).
10.19 -- 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 (incorporated
herein by reference to Exhibit 10.18 to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1999).
10.20 -- 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.
(incorporated herein by reference to Exhibit 10.19 to the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1999).
15
10.21 -- 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. (incorporated herein by reference to
Exhibit 10.20 to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1999).
10.22* -- Lease Renewal Amendment dated September 29, 2000 by and between
the Company and General Electric Capital Corporation.
10.23 -- 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).
10.24* -- Lease Agreement dated March 9, 2001 by and between BEI
Electronics Ireland Limited and Canada Life Assurance (Ireland)
Limited.
10.25* -- Amended and Restated Credit Agreement dated as of June 23, 2000
by and among the Company, the Borrowing Subsidiaries, the lenders
party thereto, Fleet National Bank, as documentation agent,
Credit Suisse First Boston, as syndication agent, Bank of
America, N.A., Bank One NA and Sun Trust Bank as co-agents, and
Chase Bank of Texas, National Association, as administrative
agent, collateral agent and issuing bank.
10.26 -- 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).
10.27 -- 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).
10.28* -- Lease Agreement dated September 15, 2000 by and between Benchmark
Electronics Corp. and Nancy E. Thompson, Trustee of Goat Hollow
Realty Trust.
10.29* -- Lease Agreement dated June 15, 1998 by and between AVEX
Electronics do Brasil Ltda and Lucent Technologies Network
Systems do Brasil S.A.
12* -- Statement regarding Computation of Ratios.
13* -- Benchmark Electronics, Inc. Annual Report to Shareholders for the
fiscal year ended December 31, 2000.
21* -- Subsidiaries of Benchmark Electronics, Inc.
23* -- Consent of Independent Auditors concerning incorporation by
reference in the Company's Registration Statements on Form S-8
(Registration No. 33-61660, No. 333-26805, No. 333-28997, No.
333-54186, No. 333-66889, and No. 333-76207) and on Form S-3
(Registration No. 333-90723 and No. 333-90887).
16
(b) The following Current Reports on Form 8-K were filed by the Company during
the quarter ended December 31, 2000 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 February 8,
2000.
The Company's Current Report on Form 8-K dated and filed on April 7, 2000.
The Company's Current Report on Form 8-K dated and filed on June 2, 2000.
The Company's Current Report on Form 8-K dated and filed on July 13, 2000.
The Company's Current Report on Form 8-K dated and filed on July 27, 2000.
The Company's Current Report on Form 8-K/A dated and filed on July 31,
2000.
The Company's Current Report on Form 8-K dated and filed on October 26,
2000.
The Company's Current Report on Form 8-K dated and filed on November 17,
2000.
The Company's Current Report on Form 8-K dated November 29, 2000 and filed
on November 30, 2000.
17
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, 2001
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
/s/ John C. Custer Board of Directors March 30, 2001
- -------------------------------- -------------------------
John C. Custer
Director and President
/s/ Donald E. Nigbor (principal executive officer) March 30, 2001
- -------------------------------- -------------------------
Donald E. Nigbor
Director and Executive
- -------------------------------- Vice President -------------------------
Stephen A. Barton
/s/ Cary T. Fu Director and Executive March 30, 2001
- -------------------------------- Vice President (principal financial -------------------------
Cary T. Fu and accounting officer)
Director
- -------------------------------- -------------------------
Peter G. Dorflinger
Director
- -------------------------------- -------------------------
Gerald W. Bodzy
/s/ David H. Arnold Director March 30, 2001
- -------------------------------- -------------------------
David H. Arnold
18