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8-K - FORM 8-K - BENCHMARK ELECTRONICS INCform8k.htm
EX-99.3 - EXHIBIT 99.3 - BENCHMARK ELECTRONICS INCex99_3.htm
EX-99.1 - EXHIBIT 99.1 - BENCHMARK ELECTRONICS INCex99_1.htm

 

 

Exhibit 99.2

FOR IMMEDIATE RELEASE

 

BENCHMARK ELECTRONICS REPORTS THIRD QUARTER RESULTS

 

·          Significant increase in operating margin

·          Strong operating cash flow of $78 million

·          Returned $18 million to shareholders through share repurchases

·          Announced agreement to acquire Secure Technology

 

ANGLETON, TX, October 22, 2015 – Benchmark Electronics, Inc. (NYSE: BHE) today announced financial results for the third quarter ended September 30, 2015.

 

 

 

 

Three Months Ended

 

 

 

 

Sep 30,

 

 

Jun 30,

 

 

Sep 30,

 

 

 

2015

 

 

2015

 

 

2014

 

Net sales (in millions)

 

$630

 

 

$664

 

 

$731

 

Net income (in millions)

 

$21

 

 

$21

 

 

$17

 

Net income – non-GAAP (in millions)

 

$21

 

 

$22

 

 

$23

 

Diluted EPS

 

$0.40

 

 

$0.40

 

 

$0.31

 

Diluted EPS – non-GAAP

 

$0.41

 

 

$0.42

 

 

$0.43

 

Operating margin (%)

 

4.1%

 

 

3.9%

 

 

3.0%

 

Operating margin – non-GAAP (%)

 

4.3%

 

 

4.2%

 

 

4.0%

 

 

“In the third quarter, we were pleased to deliver a 30 basis point year-over-year and a 10 basis point quarter-over-quarter improvement in our non-GAAP operating margin as a result of continued focus on portfolio mix, lean and operational excellence initiatives, and working capital management,” said Gayla Delly, Benchmark’s President and Chief Executive Officer. “Benchmark’s solid profitability results, evidenced by our 4.3% non-GAAP operating margin, were achieved despite lower-than-expected revenues. Notwithstanding our excellent operational achievements, headwinds in the industries we serve challenged our top line. Greater-than-expected demand from Computing customers partially offset end-market demand weakness in the Industrial, Test & Instrumentation and Telecom sectors. Medical revenues were pushed into the fourth quarter due to the timing of program qualifications.”

 

“We expect our third quarter new program bookings to result in annualized revenue of $110 - $130 million when fully launched within the next 12-18 months. Bookings aligned again this quarter with our focus on early engineering engagement and long-term manufacturing solutions for customers in both higher growth and traditional markets.”

 

Ms. Delly concluded, “Benchmark remains committed to creating shareholder value through a balanced approach to capital allocation, which consists of supporting our business, investing in strategic growth initiatives and continuing share repurchases. We returned $18 million to shareholders through share repurchases during the third quarter, and $71 million over the last

 


 

12 months. We also have a strong balance sheet and were excited to announce this morning our planned acquisition of Secure Technology. We remain confident that we are taking the right steps to drive growth and enhance value for our shareholders and our customers.”

 

Third Quarter 2015 Financial Highlights

·         Cash flows from operating activities were $78 million

·         Cash and cash equivalents were $462 million at September 30, 2015

·         Accounts receivable were $467 million at September 30, 2015, and calculated days sales outstanding were 67 days compared to 68 days at June 30, 2015

·         Inventories were $422 million at September 30, 2015; inventory turns were 5.5 times for both the second and third quarters

 

The cash conversion cycle improved by one day from the previous quarter — which was four days less than forecasted due to lower than expected revenues. Benchmark continues to execute on improvement initiatives in receivables, payables and inventory, and the Company expects to make further progress in the coming quarters.

 

Third Quarter 2015 Industry Sector Update

The following table sets forth revenue by industry sector for the referenced quarters.

 

 

 

Sep 30,

 

Jun 30,

 

Sep 30,

 

 

 

2015

 

2015

 

2014

 

Industrial Controls

31

%

30

%

30

%

Telecommunications

24

 

27

 

32

 

Computing

22

 

20

 

21

 

Medical

14

 

14

 

10

 

Test Instrumentation

9

 

9

 

7

 

 

 

100

%

100

%

100

%

 

 

 

 

 

 

 

 

 

Our performance varied by sector in the third quarter, resulting in lower-than-expected revenues across the Company’s primary end-markets. Telecommunications revenue declines were greater than expected, while customer revenues in Computing were better than expected. Strength in Computing and new program introductions in Industrial Controls and Test & Instrumentation did not offset the headwinds associated with slower capital spending in the Company’s end-markets. Additionally, slower-than-expected new product qualifications impacted revenues in Medical.

 

Third Quarter 2015 Bookings Update

·         New program bookings in the third quarter were $110 to $130 million

·         16 engineering awards supporting early engagement opportunities

·         21 manufacturing wins across all market sectors

 

 

 


 

Margin Improvement Initiatives

Benchmark continues to diversify its portfolio into higher-margin business sectors and pursue lean and operational excellence initiatives. The programs drove higher operating margins, and the Company expects further benefits to accrue over time. Benchmark remains committed to achieving its goal of a non-GAAP 4.5% operating margin.

 

Capital Allocation

·         Third quarter 2015 common share repurchases totaled $18 million or 0.8 million shares

·         Amount remaining on current share repurchase program is $51 million

·         Over the past three years, more than 50% of free cash flow has been returned to shareholders through share repurchases

 

In addition to ongoing share repurchases, Benchmark spent $8 million in the third quarter and has spent $33 million year-to-date on capital expenditures related to improving operations and expanding capabilities for customers. For the full year, capital expenditures excluding acquisitions are expected to range from $40-$50 million.

 

Fourth Quarter 2015 Outlook

·         Revenue between $620-$640 million

·         Diluted earnings per share between $0.39-$0.43 (excluding restructuring charges)

 

Secure Technology Acquisition

Benchmark also announced today that is has entered into a definitive agreement to acquire Secure Communication Systems, Inc. and its subsidiaries (“Secure Technology”), a leading engineered products and solutions provider to industrial, defense and aerospace customers, for approximately $230 million in cash, on a debt-free, cash-free basis subject to a working capital adjustment.

 

Third Quarter 2015 Results Conference Call Details

A conference call hosted by Benchmark management will be held today at 10:00 am CT (11:00 am ET) to discuss the Company’s financial results and outlook, as well as the Secure Technology acquisition. This call will be broadcast via the internet and may be accessed by logging on to the Company’s website at www.bench.com.

 

About Benchmark Electronics, Inc.

Benchmark provides integrated manufacturing, design and engineering services to original equipment manufacturers of industrial control equipment (including equipment for the aerospace and defense industries), telecommunication equipment, computers and related products for business enterprises, medical devices, and test and instrumentation products. Benchmark’s global operations include facilities in seven countries, and its common shares trade on the New York Stock Exchange under the symbol BHE.

 

 

 


 

For More Information, Please Contact:

Lisa K. Weeks, VP of Strategy & Investor Relations

979-849-6550 (ext. 1361) or lisa.weeks@bench.com

 

Non-GAAP Financial Measures

This press release includes financial measures for earnings and earnings per share that exclude certain items and therefore do not follow U.S. generally accepted accounting principles (GAAP). A detailed reconciliation between the GAAP results and results excluding special items (non-GAAP) is included at the end of this press release. Management discloses non-GAAP information to provide investors with additional information to analyze the Company’s performance and underlying trends. Management uses non-GAAP measures of net income and earnings per share that exclude certain items in order to better assess operating performance and help investors compare results with our previous guidance. Our non-GAAP information is not necessarily comparable to non-GAAP information used by other companies. Non-GAAP information should not be viewed as a substitute for, or superior to, net income or other data prepared in accordance with GAAP as measures of our profitability or liquidity. Users of this financial information should consider the types of events and transactions for which adjustments have been made.

 

Forward-Looking Statements

This press release contains certain forward-looking statements within the scope of the Securities Act of 1933 and the Securities Exchange Act of 1934. The words “expect,” “estimate,” “anticipate,” “predict,” “goals” and similar terms, and the negatives thereof, often identify forward-looking statements, which are not limited to historical facts. Our forward-looking statements include, among other things, the statement “[w]e expect our third quarter new program bookings to result in annualized revenue of $110 - $130 million when fully launched within the next 12-18 months”, and projections relating to full year capital expenditures, projections of fourth quarter revenues and diluted earnings per share, the planned acquisition of Secure Technology and other statements, express or implied, concerning: future operating results or the ability to generate sales, income or cash flow; and Benchmark’s business and growth strategies, including expected internal growth and performance goals. Although Benchmark believes these statements are based upon reasonable assumptions, they involve risks and uncertainties relating to our operations, markets and business environment generally. If one or more of these risks or uncertainties materialize, or underlying assumptions prove incorrect, actual outcomes may vary materially from those indicated.

 

All forward-looking statements included in this release are based upon information available to Benchmark as of the date hereof, and the Company assumes no obligation to update them. Readers are advised to consult further disclosures on related subjects, particularly in Item 1A, “Risk Factors” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2014, in its other filings with the Securities and Exchange Commission and in its press releases.

###

 


 

Benchmark Electronics, Inc. and Subsidiaries

 

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of GAAP to Non-GAAP Financial Results

(Amounts in Thousands, Except Per Share Data)

(UNAUDITED)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

Sep 30,

 

Jun 30,

 

Sep 30,

 

 

September 30,

 

 

 

2015

 

2015

 

2014

 

 

2015

 

2014

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from operations (GAAP)

$

26,148

$

26,208

$

21,915

 

$

71,064

$

71,491

Restructuring charges and integration costs

 

1,095

 

1,588

 

2,160

 

 

7,553

 

6,176

Thailand flood-related items, net of insurance

 

-

 

-

 

-

 

 

-

 

(1,571)

Customer bankruptcy

 

-

 

-

 

5,029

 

 

-

 

5,029

Non-GAAP income from operations

$

27,243

$

27,796

$

29,104

 

$

78,617

$

81,125

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (GAAP)

$

20,565

$

21,210

$

16,906

 

$

55,980

$

57,903

Restructuring charges and integration costs,

 

 

 

 

 

 

 

 

 

 

 

   net of tax

 

618

 

772

 

1,504

 

 

5,054

 

4,146

Thailand flood-related items, net of insurance

 

 

 

 

 

 

 

 

 

 

 

   and tax

 

-

 

-

 

-

 

 

-

 

(1,263)

Customer bankruptcy, net of tax

 

-

 

-

 

4,831

 

 

-

 

4,831

Non-GAAP net income

$

21,183

$

21,982

$

23,241

 

$

61,034

$

65,617

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share: (GAAP)

 

 

 

 

 

 

 

 

 

 

 

 

Basic

$

0.40

$

0.41

$

0.32

 

$

1.08

$

1.08

 

Diluted

$

0.40

$

0.40

$

0.31

 

$

1.07

$

1.06

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share: (Non-GAAP)

 

 

 

 

 

 

 

 

 

 

 

 

Basic

$

0.41

$

0.42

$

0.43

 

$

1.18

$

1.22

 

Diluted

$

0.41

$

0.42

$

0.43

 

$

1.16

$

1.21

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average number of shares used in

 

 

 

 

 

 

 

 

 

 

   calculating earnings per share:

 

 

 

 

 

 

 

 

 

 

 

Basic

 

51,192

 

52,180

 

53,660

 

 

51,940

 

53,712

 

Diluted

 

51,588

 

52,671

 

54,265

 

 

52,448

 

54,387

 


 

Benchmark Electronics, Inc. and Subsidiaries

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated Statements of Income

 

(Amounts in Thousands, Except Per Share Data)

 

(UNAUDITED)

 

 

 

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

 

September 30,

 

 

September 30,

 

 

 

2015

 

2014

 

 

2015

 

2014

 

Sales

$

630,191

$

731,302

 

$

1,915,154

$

2,087,514

 

Cost of sales

 

575,907

 

676,008

 

 

1,753,375

 

1,923,346

 

 

Gross profit

 

54,284

 

55,294

 

 

161,779

 

164,168

 

Selling, general and administrative expenses

 

27,040

 

31,219

 

 

83,162

 

88,072

 

Restructuring charges and integration costs

 

1,096

 

2,160

 

 

7,553

 

6,176

 

Thailand flood-related items, net of insurance

 

-

 

-

 

 

-

 

(1,571)

 

 

Income from operations

 

26,148

 

21,915

 

 

71,064

 

71,491

 

Interest expense

 

(495)

 

(494)

 

 

(1,427)

 

(1,443)

 

Interest income

 

246

 

535

 

 

971

 

1,718

 

Other expense, net (1)

 

(1,121)

 

(1,359)

 

 

(1,582)

 

(1,517)

 

 

Income before income taxes (1)

 

24,778

 

20,597

 

 

69,026

 

70,249

 

Income tax expense (1)

 

4,213

 

3,691

 

 

13,046

 

12,346

 

 

Net income (1)

$

20,565

$

16,906

 

$

55,980

$

57,903

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

Basic (1)

$

0.40

$

0.32

 

$

1.08

$

1.08

 

 

Diluted (1)

$

0.40

$

0.31

 

$

1.07

$

1.06

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average number of shares used in calculating

 

 

 

 

 

 

 

 

 

   earnings per share:

 

 

 

 

 

 

 

 

 

 

Basic

 

51,192

 

53,660

 

 

51,940

 

53,712

 

 

Diluted

 

51,588

 

54,265

 

 

52,448

 

54,387

 

 

(1)              Amounts for the three and nine months ended September 30, 2014 are as-adjusted due to the correction of an immaterial error.

 


 

Benchmark Electronics, Inc. and Subsidiaries

 

 

 

 

 

 

 

 

 

Condensed Consolidated Balance Sheets

(in thousands)

 

 

 

 

 

 

September 30,

 

December 31,

 

 

 

 

 

 

2015

 

2014

 

 

 

 

 

 

(unaudited)

 

 

Assets

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

$

462,094

$

427,376

 

 

Accounts receivable, net

 

467,241

 

520,389

 

 

Inventories

 

421,532

 

401,261

 

 

Other current assets (1)

 

41,294

 

38,092

 

 

 

 

Total current assets (1)

 

1,392,161

 

1,387,118

 

Long-term investments

 

935

 

1,008

 

Property, plant and equipment, net

 

181,187

 

190,180

 

Goodwill and other, net

 

92,821

 

99,148

 

 

 

 

Total assets (1)

$

1,667,104

$

1,677,454

 

 

 

 

 

 

 

 

 

Liabilities and Shareholders’ Equity

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Current installments of capital lease obligations

$

751

$

676

 

 

Accounts payable

 

272,274

 

289,786

 

 

Accrued liabilities (1)

 

68,134

 

68,616

 

 

 

 

Total current liabilities (1)

 

341,159

 

359,078

 

Capital lease obligations, less current installments

 

8,270

 

8,845

 

Other long-term liabilities

 

19,372

 

19,906

 

Shareholders’ equity (1)

 

1,298,303

 

1,289,625

 

 

 

 

Total liabilities and shareholders’ equity (1)

$

1,667,104

$

1,677,454

 

(1)              Amounts as of December 31, 2014 are as-adjusted due to the correction of an immaterial error.