SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997 COMMISSION FILE
NUMBER: 1-10560
BENCHMARK ELECTRONICS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
TEXAS 74-2211011
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION) IDENTIFICATION NUMBER)
3000 TECHNOLOGY DRIVE 77515
ANGLETON, TEXAS (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(409) 849-6550
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
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 [ ]
As of August 12, 1997 there were 5,756,884 shares of Common Stock, par
value $0.10 per share, outstanding.
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BENCHMARK ELECTRONICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS)
JUNE 30, DECEMBER 31,
1997 1996
------- -------
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents $29,317 $13,800
Accounts receivable, net 37,148 39,183
Income taxes receivable 1,705 388
Inventories 57,242 48,100
Prepaid expenses and other assets 1,491 820
Deferred tax asset 1,091 1,091
------- -------
Total current assets 127,994 103,382
------- -------
Property, plant and equipment, at cost 47,803 44,469
Accumulated depreciation (18,567) (13,834)
------ -------
Net property, plant and equipment 29,236 30,635
------ -------
Other assets, net 265 298
Marketable securities 9,354 9,508
Goodwill, net 23,515 24,350
------ -------
$190,364 $168,173
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long term debt and
capital lease obligations $ 207 $ 239
Accounts payable 40,296 24,352
Accrued liabilities 5,782 6,205
------ -------
Total current liabilities 46,285 30,796
Long term debt and capital lease
obligations, less current portion 30,400 30,485
Deferred income taxes 1,682 1,893
Shareholders' equity:
Preferred shares, $0.10 par value;
5,000,000 shares authorized,
none issued - -
Common shares, $0.10 par value;
30,000,000 shares authorized;
issued - 11,545,452 and 11,526,552,
respectively; outstanding - 11,495,968
and 11,477,068, respectively 1,150 1,146
Additional paid-in capital 68,782 68,635
Retained earnings 42,185 35,338
Less treasury shares, at cost;
49,484 shares (120) (120)
------- -------
Total shareholders' equity 111,997 104,999
------- -------
Commitments and contingencies $190,364 $168,173
======== ========
See accompanying notes to condensed consolidated financial statements.
<PAGE>
BENCHMARK ELECTRONICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------- ------------------
1997 1996 1997 1996
------ ------ ------- ------
Sales $78,156 $33,500 $153,879 $63,883
Cost of sales 68,690 29,016 135,171 55,574
------ ------ ------- ------
Gross profit 9,466 4,484 18,708 8,309
Selling, general and
administrative expense 3,042 1,102 6,222 1,986
Amortization expense 417 - 834 -
----- ----- ------ ------
Income from operations 6,007 3,382 11,652 6,323
Interest income 331 - 567 34
Interest expense (627) (86) (1,241) (86)
Other income (expense) 11 (3) 52 2
----- ------ ------ ------
Income before income
tax expense 5,722 3,293 11,030 6,273
Income tax expense 2,165 1,267 4,182 2,408
----- ----- ------ ------
Net income $3,557 $2,026 $6,848 $3,865
===== ===== ====== ======
Earnings per common share $0.30 $0.24 $ 0.58 $ 0.47
===== ===== ====== ======
Weighted average common and
equivalent shares outstanding 11,944 8,320 11,852 8,288
====== ===== ====== ======
See accompanying notes to condensed consolidated financial statements.
<PAGE>
BENCHMARK ELECTRONICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
SIX MONTHS ENDED
JUNE 30,
-------------------------
1997 1996
------- ------
Cash flows from operating activities:
Net Income $ 6,848 $ 3,865
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization expense 6,111 1,308
Deferred income taxes (211) 96
Gain on sale of property,
plant and equipment (27) --
Tax benefit of employee
stock options exercised 31 --
Amortization of premiums
on marketable securities 154 --
Changes in operating assets and liabilities,
net of effects from acquisition of business:
Accounts receivable 2,035 (3,362)
Inventories (9,142) (10,789)
Prepaid expenses and other current assets (671) 51
Accounts payable 15,944 5,629
Accrued liabilities (423) 409
Income taxes (1,317) 305
-------- --------
Net cash provided by (used in) operations 19,332 (2,488)
Cash flows from investing activities: -------- --------
Capital expenditures, net (3,817) (5,034)
Acquisition, net of cash acquired -- (413)
-------- --------
Net cash used in investing activities (3,817) (5,447)
-------- --------
Cash flows from financing activities:
Borrowings under revolving line of credit -- 5,000
Proceeds from exercise of employee stock options 172 222
Stock offering expenses (52) --
Principal payments on long term debt and
capital lease obligations (118) --
-------- --------
Net cash provided by financing activities 2 5,222
-------- --------
Net increase (decrease) in cash 15,517 (2,713)
Cash at beginning of year 13,800 2,785
-------- --------
Cash at June 30 $ 29,317 $ 72
======== ========
Supplemental disclosures of cash flow information:
Income taxes paid $ 1,277 $ 1,450
======== ========
Interest paid $ 5,222 $ --
======== ========
See accompanying notes to condensed consolidated financial statements.
<PAGE>
BENCHMARK ELECTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
Benchmark Electronics, Inc. (the Company) is a Texas corporation which
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 condensed consolidated financial statements included herein have been
prepared by the Company without audit pursuant to the rules and regulations of
the Securities and Exchange Commission. The financial statements reflect all
normal and recurring adjustments which in the opinion of management are
necessary for a fair presentation of the results of operations and cash flows
for the interim periods presented. The results of operations for the periods
presented are not necessarily indicative of the results to be expected for the
full year. The accompanying unaudited condensed consolidated financial
statements should be read in conjunction with the financial statements and notes
included in the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996.
NOTE 2 - EARNINGS PER COMMON SHARE
Earnings per common and common equivalent share are computed by dividing
net income by the weighted average number of common and common equivalent shares
outstanding. For the purposes of this calculation, outstanding employee stock
options are considered common equivalent shares. Fully diluted earnings per
share are materially equivalent to primary earnings per share for all periods
presented. Weighted average common and equivalent shares outstanding for the
three months ended June 30, 1997 and 1996 were 11,943,184 and 8,319,134,
respectively.
NOTE 3 - INDEBTEDNESS
In order to finance a portion of the cash consideration for the
acquisition of EMD Technologies, Inc. (EMD), which was completed on July 30,
1996, the Company issued a $30 million, 8.02% Senior Note due 2006 (the Senior
Note) to Northwestern Mutual Life Insurance Company. The Senior Note is
unsecured and guaranteed by each of the Company's United States subsidiaries.
Principal on the Senior Note is payable in annual installments of $5.0 million
beginning July 31, 2001 with a final installment on the unpaid principal amount
due July 31, 2006. Interest on the Senior Note is payable semi-annually on
January 31st and July 31st.
The purchase agreement relating to the Senior Note (the Purchase
Agreement) includes customary affirmative and negative covenants and restricts
the ability of the Company to incur additional debt and to pay dividends. Upon
any prepayment of all or a portion of the Senior Note, the Company is obligated
to pay the holder a premium on the amount prepaid. The Purchase Agreement
contains a provision that in the event of a change of control (defined generally
to mean the acquisition by a person or group (as defined in the Securities
Exchange Act of 1934, as amended, and the rules and regulations thereunder) of
beneficial ownership of more than 50% of the total voting power of the
outstanding voting stock of the Company), the Company must offer to repurchase
the Senior Note at par plus any prepayment penalty.
<PAGE>
BENCHMARK ELECTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
The Company has a $15,000,000, four-year revolving line of credit with a
commercial bank which is available primarily to finance accounts receivable and
inventory requirements. The Company is entitled to borrow under the line of
credit up to the lesser of $15,000,000 or the sum of 80% of its eligible
accounts receivable and 25% of its eligible inventories. Interest on the line of
credit is payable quarterly and accrues, at the Company's option, at either the
bank's prime rate or its Fixed Eurodollar Rate plus 0.625% to 1.75% per annum. A
commitment fee of 0.17% per annum on the unused portion of the line of credit is
payable quarterly in arrears. The line of credit agreement contains certain
financial covenants and restricts the ability of the Company to incur additional
debt without the consent of the bank and to pay dividends. The line of credit
matures on July 31, 2000. As of June 30, 1997, the Company had no borrowings
outstanding under this line of credit.
NOTE 4 - INVENTORIES
Inventory costs are summarized as follows:
JUNE 30, DECEMBER 31,
1997 1996
---------- ----------
(UNAUDITED)
Raw materials $40,523,961 $31,670,562
Work in process 16,718,059 16,429,776
---------- ----------
$57,242,020 $48,100,338
========== ==========
NOTE 5 - INCOME TAXES
Income tax expense (benefit) consists of the following (unaudited):
SIX MONTHS ENDED
JUNE 30,
-------------------------
1997 1996
---- ----
Federal - Current $3,848,853 $2,062,380
State - Current 543,384 250,020
Federal/State - Deferred (210,666) 96,000
-------- --------
Total $4,181,571 $2,408,400
========== ==========
Income tax expense differs from the amount computed by applying the U.S.
federal statutory income tax rate to pretax income due to the impact of
nondeductible amortization of goodwill, state income taxes, net of federal
benefit and the benefit from the use of a foreign sales corporation.
NOTE 6 - NEW ACCOUNTING PRONOUNCEMENT
In February 1997 the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings Per
Share". SFAS No. 128 establishes a different method of computing earnings per
share than is currently required under the provisions of Accounting Principles
Board Opinion No. 15. SFAS No. 128 introduces the concept of basic earnings per
share, which represents net income divided by the weighted average common shares
outstanding - without the dilutive effects of common stock equivalents (options,
warrants, etc.). SFAS No. 128 is effective for financial statements for both
interim and annual periods ending after December 15, 1997. Earlier application
is not permitted. The Company plans to adopt SFAS No.
<PAGE>
128 in its fiscal quarter ending December 31, 1997 and at that time all
historical earnings per share data presented will be restated to conform to the
provisions of SFAS No. 128.
NOTE 7 - SUBSEQUENT EVENT
On July 28, 1997, the Board of Directors declared a two-for-one stock
split effected in the form of a stock dividend payable on August 14, 1997, to
shareholders of record as of August 7, 1997. Shareholders' equity has been
restated to give retroactive recognition to the stock split in prior periods by
reclassifying from additional paid-in capital to common stock the par value of
the additional shares arising from the split. All share and per share data
appearing in the consolidated financial statements and note thereto have been
retroactively adjusted for the stock split.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following Management's Discussion and Analysis of Financial Condition
and Results of Operations contains certain forward-looking statements regarding
future financial condition and results of operations and the Company's business
operations. The words "expect," "estimate," "anticipate," "predict," and similar
expressions are intended to identify forward-looking statements. Such statements
involve risks, uncertainties and assumptions, including, but not limited to,
industry and economic conditions and customer actions and other factors
discussed in this Form 10-Q and in the Company's other filings with the
Securities and Exchange Commission. Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove incorrect,
actual outcomes may vary materially from those indicated.
GENERAL
The Company provides contract electronics manufacturing and design
services to 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 31 surface
mount production lines at its facilities in Angleton, Texas, Beaverton, Oregon,
and Winona, Minnesota.
<PAGE>
Revenues are recognized at the time products are shipped to customers and
may vary depending on the timing of customers' orders, product mix and
availability of component parts. Substantially all of the Company's business is
performed on a turnkey basis, which involves the procurement of component parts.
The gross profit margin for such materials is generally lower than the gross
profit associated with the manufacturing process and other value-added services.
The Company anticipates that selling, general and administrative expenses will
continue to increase in nominal terms as the Company continues to build the
internal management and support systems necessary to support higher revenue
levels.
The level and timing of purchase orders placed by the Company's customers
are affected by a number of factors not within the control of the Company,
including variation in demand for customers' products, customer attempts to
manage inventory and changes in customers' manufacturing strategies. The Company
typically does not obtain long-term purchase orders or commitments but instead
works with its customers to develop nonbinding forecasts of the future volume of
orders. Based on such nonbinding forecasts, the Company makes commitments
regarding the level of business that it will seek and accept, the timing of
production schedules and the levels and utilization of personnel and other
resources. A variety of conditions, both specific to each individual customer
and generally affecting each customer's industry, may cause customers to cancel,
reduce or delay purchase orders and commitments without penalty, except for
payment for services rendered, materials purchased and, in certain
circumstances, charges associated with such cancellation, reduction or delay.
Significant or numerous cancellations, reductions or delays in orders by
customers, or any inability of customers to pay for services provided by the
Company or to pay for components and materials purchased by the Company on such
customers' behalf, could have an adverse effect on the Company's business,
financial condition and results of operations.
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 of EMD, 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 serve 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 the six months ended June 30, 1997, the Company's
three largest customers accounted for 52.7% 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's future
sales are dependent on the success of its customers, some of which operate in
businesses associated with rapid technological change, vigorous competition,
short product life cycles and pricing and margin pressures. Additionally,
certain of the industries served by the Company are subject to economic cycles
and have in the past experienced, and are likely in the future to experience,
recessionary periods. Developments adverse to the Company's major customers or
their products could have an adverse effect on the Company.
The acquisition of EMD represented a significant expansion in the scope of
the Company's operations, and the integration and consolidation of EMD into the
Company has and will require substantial management, financial and other
resources. During the integration process, the financial performance of the
Company will be subject to the risks commonly associated with the acquisition of
businesses, including the impact of expenses incurred in connection with an
acquisition and the potential disruptions associated with the integration of
businesses. The integration process may
<PAGE>
place a significant strain on the Company's management, production, technical,
financial and other resources, and may pose a risk with respect to production,
customer service and market share.
The Company's future success is dependent upon its ability to effectively
integrate EMD into the Company, including its ability to implement potentially
available marketing and cost saving opportunities, some of which may involve
operational changes. There can be no assurance as to the timing or amount of any
marketing opportunities or cost savings that may be realized as the result of
operational changes implemented during the integration process. Further, there
can be no assurance that the Company will not experience difficulties with
customers, personnel and business prospects or that the combination of the
Company and EMD will be successful.
The following discussion should be read in conjunction with the unaudited
financial statements of the Company included elsewhere in this report.
Completion of the acquisition of EMD on July 30, 1996 and the inclusion of
EMD's operations in the Company's accounts subsequent to that date is
responsible for a substantial portion of the variation in the results of the
Company's operations (including the components thereof) for the three and six
month periods ended June 30, 1997, as compared to the same periods during the
prior year. The acquisition of EMD accounts for the increase in long term debt
as compared to the same period in the prior year. The effects of the acquisition
of EMD on the Company's financial condition as of June 30, 1997, and its
reported results of operations for the three and six month periods then ended,
should be considered when reviewing the financial information contained herein.
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated certain items in
the Company's Condensed Consolidated Statements of Operations as a percentage of
sales:
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ ---------------
1997 1996 1997 1996
---- ---- ---- ----
Sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 87.9 86.6 87.8 87.0
----- ----- ---- ----
Gross profit 12.1 13.4 12.2 13.0
Selling, general and administrative expense 3.9 3.3 4.0 3.1
Amortization of goodwill 0.5 0.0 0.6 0.0
----- ----- ----- -----
Income from operations 7.7 10.1 7.6 9.9
Interest income 0.4 0.0 0.4 0.1
Interest expense (0.8) (0.3) (0.8) (0.1)
----- ------ ----- -----
Income before income tax expense 7.3 9.8 7.2 9.9
Income tax expense 2.8 3.8 2.7 3.8
----- ----- ----- -----
Net income 4.5% 6.0% 4.5% 6.1%
===== ===== ===== =====
Sales for the second quarter of 1997 were approximately $78.2 million, a
133.4% increase from sales of approximately $33.5 million for the same quarter
of 1996. Sales for the first six months of 1997 were approximately $153.9
million, a 140.8% increase from sales of $63.9 million for the same period of
1996. The increase in sales resulted from increased production volumes made
possible by the acquisition of EMD and the expansion of the surface mount
assembly capacity at the Company's Angleton, Texas facility, which was completed
during the second quarter of 1996.
<PAGE>
Gross profit increased 111.1% to approximately $9.5 million in the second
quarter of 1997 from approximately $4.5 million in the same quarter of 1996.
Gross profit increased 125.2% to $18.7 million from $8.3 million for the first
six months of 1997. Gross profit as a percentage of sales decreased from 13.4%
for the second quarter of 1996 to 12.1% for the second quarter of 1997. Gross
profit as a percentage of sales decreased from 13.0% for the first six months of
1996 to 12.2% for the first six months of 1997. The increase in gross profit was
due primarily to higher sales volumes and normal changes in product mix and
customer mix. The Company's gross margin reflects a number of factors, including
product mix, the level of start up costs and efficiencies associated with new
programs, capacity utilization of surface mount and other equipment, and pricing
within the electronics industry. All of these factors are continually changing
and are interrelated, making it impracticable to determine separately the effect
of each factor. The decrease in gross profit as a percentage of sales during the
three and six month periods ended June 30, 1997 as compared to the same period
in 1996 was due primarily to changes in the product mix and the initiation of
new programs.
Selling, general and administrative expenses were $3.0 million in the
second quarter, an increase of 176.0% from $1.1 million for the same quarter of
1996. Selling, general and administrative expenses were $6.2 million for the
first six months of 1997, an increase of $213.3% from $2.0 for the same period
of 1996. Selling, general and administrative expenses as a percentage of sales
increased from 3.3% for the second quarter of 1996 to 3.9% for the second
quarter of 1997. Selling, general and administrative expenses increased from
3.1% for the first six months of 1996 to 4.0% for the first six months of 1997.
In order to satisfy the increased level of business activity and to continue the
development and improvement of the systems and processes necessary to
accommodate future growth, the Company has added management personnel. The
increase in selling, general and administrative expenses during the three and
six month periods of 1997 reflects these additional personnel and related
departmental expenses, as well as the additional administrative expenses, such
as travel and communication costs resulting from the acquisition of EMD and the
inclusion of the EMD selling, general and administrative expenses. The Company
anticipates selling, general and administrative expenses will continue to
increase in nominal terms as the Company continues to build the internal
management and support systems necessary to support higher revenue levels.
The amortization of goodwill associated with the acquisition of EMD for
the three and six month periods ended June 30, 1997 was $417,000, and $834,000,
respectively.
Interest expense for the three and six month periods ended June 30, 1997
was $627,000 and $1,241,000, respectively, which was incurred by the Company on
the debt incurred in connection with the acquisition of EMD. Interest expense
for the three and six month periods ended June 30, 1996 was $86,000.
Interest income was approximately $331,000 and $567,000, respectively, for
the three and six month periods ended June 30, 1997. Interest income for the
three and six month periods ended June 30, 1996 was zero and $34,000,
respectively. The increase is due to the investment by the Company of excess
cash in interest bearing marketable securities and cash equivalents.
Income tax expense in the second quarter of 1997 was $2,165,000, an
increase of 70.9% from the same period in 1996. The increase is due to higher
pre-tax income and nondeductible amortization of goodwill offset by the benefit
from the use of a foreign sales corporation.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its growth and operations through funds generated
from operations, proceeds from the sale of its common stock and, during 1996,
funds borrowed under its credit facilities. Prior to the second quarter of 1996
the Company had never borrowed any amounts under its available line of credit.
Cash provided by operating activities was $19.3 million for the six months
ended June 30, 1997. Cash provided by operations was primarily the result of
increases in net income, depreciation and amortization, and accounts payable and
decreases in accounts receivable offset by decreases in accrued liabilities and
increases in inventories, income taxes receivable, and prepaid expenses and
other current assets. The Company's accounts payable, and inventories have
increased $15.9 million, and $9.1 million, respectively, during the first six
months of 1997, reflecting the Company's increased sales during this period. The
Company expects continued increases in accounts payable and inventories to
support the anticipated growth in sales. The Company is continuing the practice
of purchasing components only after customer orders are received, which
mitigates, but does not eliminate, the risk of loss on inventories. Supplies of
electronic components and other materials used in operations are subject to
industry-wide shortages. In certain instances, suppliers may allocate available
quantities to the Company. The Company has not experienced significant supply
constraints in the past year nor does it expect to in the near future.
Cash used in investing activities, consisting primarily of capital
expenditures, was $3.8 million for the six months ended June 30, 1997. Capital
expenditures were primarily concentrated in test equipment and computers.
Cash provided by financing activities was $2,000 for the six months ended
June 30, 1997.
The Company's operations are subject to certain federal, state and local
regulatory requirements relating to environmental, waste management, health and
safety matters. Some risk of costs and liabilities related to these matters is
inherent in the Company's business as with many similar businesses. Management
believes that the Company's business is operated in substantial compliance with
applicable environmental, waste management, health and safety regulations.
The Company may require additional capital to finance further enhancements
to or acquisitions or expansions of its manufacturing capacity. Management
believes that the level of working capital will continue to grow at a rate
generally consistent with the growth of the Company's operations. Although no
assurance can be given that future financing will be available on terms
acceptable to the Company, the Company may seek additional funds from time to
time through public or private debt or equity offerings or through bank
borrowings to the extent permitted by its existing debt agreements. Management
believes that the existing cash balances, funds generated from operations, and
borrowings under the Company's credit facility will be sufficient to permit the
Company to meet its liquidity requirements in 1997 and for the foreseeable
future.
The Company does not hold or issue derivative financial instruments in the
normal course of business. Inflation and changing prices have not significantly
affected the Company's operating results or the markets in which the Company
performs services.
<PAGE>
QUARTERLY RESULTS
Although Management does not believe that the Company's business is
affected by seasonal factors, the Company's sales and earnings may vary from
quarter to quarter, depending primarily upon the timing of manufacturing orders.
Therefore, the Company's operating results for any particular quarter may not be
indicative of the results for any future quarter or for the year.
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
The Company is not currently a party to any material pending legal
proceedings.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Annual Meeting of Shareholders held on May 20, 1997, the Company's
nominees for directors to serve until the 1998 Annual Meeting of Shareholders
were elected, KPMG Peat Marwick LLP was appointed as the independent auditors
for the Company for the fiscal year ended December 31, 1997, and the Company's
Restated Articles of Incorporation were amended to increase the number of
authorized shares of common stock from 10 million to 30 million shares. With
respect to the election of directors, the voting was as follows:
NOMINEE FOR WITHHELD
------- --- --------
John C. Custer 3,608,162 195,560
Donald E. Nigbor 3,609,162 194,560
Steven A. Barton 3,609,162 194,560
Cary T. Fu 3,609,162 194,560
Peter G. Dorflinger 3,608,162 195,560
Gerald W. Bodzy 3,608,162 195,560
David H. Arnold 3,609,162 194,560
With respect to the ratification of the appointment of KPMG Peat Marwick LLP as
the independent auditors of the Company, the voting was as follows:
FOR AGAINST ABSTAIN NON-VOTE
--- ------- ------- --------
3,685,644 870 7,400 109,808
With respect to the amendment of the Restated Articles of Incorporation of the
Company, the voting was as follows:
FOR AGAINST ABSTAIN NON-VOTE
--- ------- ------- --------
3,133,380 651,189 19,153 -0-
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
27 -- Financial Data Schedule.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the three months ended June
30, 1997.
<PAGE>
SIGNATURES
Pursuant to the requirements 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 on August 12, 1997.
BENCHMARK ELECTRONICS, INC.
(Registrant)
By: /s/ DONALD E. NIGBOR
Donald E. Nigbor
President
(Principal Executive Officer)
By: /s/ CARY T. FU
Cary T. Fu
Executive Vice President
(Principal Financial Officer)
<PAGE>
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------ ----------------------
27 -- Financial Data Schedule.
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<LEGEND>
THE SCHEDULE CONTAONS CUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE SECOND
QUARTER 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
[/LEGEND]
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 29,317
<SECURITIES> 0
<RECEIVABLES> 37,148
<ALLOWANCES> 0
<INVENTORY> 57,242
<CURRENT-ASSETS> 127,994
<PP&E> 47,803
<DEPRECIATION> 18,567
<TOTAL-ASSETS> 190,364
<CURRENT-LIABILITIES> 46,285
<BONDS> 30,400
0
0
<COMMON> 1,150
<OTHER-SE> 110,847
<TOTAL-LIABILITY-AND-EQUITY> 190,364
<SALES> 153,879
<TOTAL-REVENUES> 153,879
<CGS> 135,171
<TOTAL-COSTS> 135,171
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,241
<INCOME-PRETAX> 11,030
<INCOME-TAX> 4,182
<INCOME-CONTINUING> 6,848
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,848
<EPS-PRIMARY> 0.58
<EPS-DILUTED> 0.58
</TABLE>
