BENCHMARK ELECTRONICS INC, S-3, 1999-05-03

BENCHMARK ELECTRONICS INC
S-3, 1999-05-03
PRINTED CIRCUIT BOARDS

Previous: BENCHMARK ELECTRONICS INC, 10-Q, 1999-05-03

Next: HOMESTEAD FUNDS INC, 485BPOS, 1999-05-03

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 3, 1999.
REGISTRATION NO. 333-
================================================================================

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
------------------------

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 NO.)

3000 TECHNOLOGY DRIVE, ANGLETON, TEXAS 77515
TELEPHONE NO. (409) 849-6550
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)

CARY T. FU
BENCHMARK ELECTRONICS, INC.
3000 TECHNOLOGY DRIVE
ANGLETON, TEXAS 77515
(409) 849-6550
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)

COPIES TO:

JOHN R. BRANTLEY PHILIP J. BOECKMAN
BRACEWELL & PATTERSON, L.L.P. CRAVATH, SWAINE & MOORE
SOUTH TOWER PENNZOIL PLACE 825 EIGHTH AVENUE
711 LOUISIANA STREET, SUITE 2900 NEW YORK, NEW YORK 10019-7475
HOUSTON, TEXAS 77002-2781 (212) 474-1000
(713) 221-1301 FAX: (212) 474-3700
FAX: (713) 221-1212

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after this registration statement becomes effective.

If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [ ]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
PROPOSED MAXIMUM
TITLE OF SECURITIES TO BE AMOUNT TO BE AGGREGATE OFFERING AMOUNT OF
REGISTERED REGISTERED PRICE* REGISTRATION FEE
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Stock, par value $0.10 per
share.............................. 4,600,754 shares $154,585,334 $42,975
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
</TABLE>

* Includes shares that the underwriters may purchase to cover over-allotments,
if any, and is estimated solely for the purpose of calculating the
registration fee pursuant to Rule 457(c) (based on the average of the high and
low prices of the common stock as reported in the New York Stock Exchange
composite transaction reporting system on April 27, 1999).

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.

================================================================================
<PAGE>
SUBJECT TO COMPLETION, DATED MAY 3, 1999

PROSPECTUS

[COMPANY LOGO]

4,000,656 SHARES

BENCHMARK ELECTRONICS, INC.

COMMON STOCK
$ PER SHARE
------------------

We are selling 3,000,000 shares of our common stock and the selling
shareholder named in this prospectus is selling 1,000,656 shares. We will not
receive any proceeds from the sale of the shares by the selling shareholder. The
underwriters named in this prospectus may purchase up to 600,098 additional
shares of common stock from us under certain circumstances.

Our common stock is listed on the New York Stock Exchange under the symbol
"BHE." The last reported sale price of our common stock on the New York Stock
Exchange on April 29, 1999, was $33 1/2 per share.
------------------

INVESTING IN OUR COMMON STOCK INVOLVES CERTAIN RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE 6.

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.

------------------

PER SHARE TOTAL
--------- -----------
Public Offering Price $ $
Underwriting Discount $ $
Proceeds to Benchmark (before
expenses) $ $
Proceeds to Selling Shareholder
(before expenses) $ $

The underwriters are offering the shares subject to various conditions. The
underwriters expect to deliver the shares to purchasers on or about
, 1999.

------------------

SALOMON SMITH BARNEY
BANCBOSTON ROBERTSON STEPHENS
DONALDSON, LUFKIN & JENRETTE
SG COWEN

, 1999
<PAGE>
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
DIFFERENT INFORMATION. WE ARE NOT MAKING AN OFFER OF THESE SECURITIES WHERE THE
OFFER IS NOT PERMITTED. YOU SHOULD NOT ASSUME THAT THE INFORMATION PROVIDED BY
THIS PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON THE FRONT OF
THIS PROSPECTUS.
------------------

TABLE OF CONTENTS

PAGE
----
Where You Can Find More Information.. 2
Summary.............................. 3
Cautionary Statements Regarding
Forward-looking Statements......... 5
Risk Factors......................... 6
Price Range of Common Stock and
Dividend Policy.................... 9
Use of Proceeds...................... 9
Capitalization....................... 10
Selected Financial Information....... 11

PAGE
----
Management's Discussion and Analysis
of Financial Condition and Results
of Operations...................... 12
Business............................. 20
Management........................... 25
Selling Shareholder.................. 27
Description of Capital Stock......... 27
Underwriting......................... 29
Legal Matters........................ 30
Experts.............................. 30
Index to Financial Statements........ F-1

WHERE YOU CAN FIND MORE INFORMATION

We file annual, quarterly and special reports, proxy statements and other
information with the SEC. Our SEC filings are available to the public over the
Internet at the SEC's web site at http://www.sec.gov. You may also read and copy
any document we file at the SEC's public reference facilities in Washington,
D.C., New York, New York and Chicago, Illinois at the following addresses:

o 450 Fifth Street, N.W., Washington, D.C. 20549;

o Seven World Trade Center, 13th Floor, New York, New York 10048;
and

o Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661.

Please call the SEC at 1-800-SEC-0330 for further information on the public
reference facilities.

Reports, proxy statements and other information concerning Benchmark can
also be inspected and copied at the offices of the New York Stock Exchange at 20
Broad Street, New York, New York 10005.

The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
an important part of this prospectus, and information that we file later with
the SEC will automatically update and supercede this information. We incorporate
by reference the documents listed below and any future filings made with the SEC
under Sections 13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934
until we and the selling shareholder sell all of the common stock.

o Annual Report on Form 10-K for the fiscal year ended December 31,
1998;

o Current Report on Form 8-K dated March 1, 1999;

o Quarterly Report on Form 10-Q for the quarter ended March 31, 1999;
and

o The description of Benchmark's capital stock set forth in our
Registration Statement on Form 8-A/A filed on June 25, 1990.

You may request a copy of these filings, in most cases without exhibits, at
no cost by writing or telephoning us at the following address:

Corporate Secretary
Benchmark Electronics, Inc.
3000 Technology Drive
Angleton, Texas 77515
(409) 849-6550
2
<PAGE>
SUMMARY

THE FOLLOWING IS A SUMMARY OF CERTAIN INFORMATION CONTAINED ELSEWHERE IN
THIS PROSPECTUS. THE SUMMARY IS NOT INTENDED TO BE A COMPLETE DESCRIPTION OF THE
MATTERS COVERED IN THIS PROSPECTUS AND IS SUBJECT TO AND QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS
(INCLUDING THE NOTES THERETO) APPEARING ELSEWHERE OR INCORPORATED BY REFERENCE
IN THIS PROSPECTUS. UNLESS THE CONTEXT OTHERWISE REQUIRES, REFERENCES HEREIN TO
"WE," "US," OR "OUR COMPANY" ARE TO BENCHMARK ELECTRONICS, INC. AND ITS
CONSOLIDATED SUBSIDIARIES. UNLESS OTHERWISE INDICATED, THE INFORMATION IN THIS
PROSPECTUS ASSUMES THAT THE UNDERWRITERS' OVER-ALLOTMENT OPTION IS NOT
EXERCISED.
OUR COMPANY

We are one of the leading independent providers of electronics
manufacturing services to the enterprise computer, telecommunications, medical
device, industrial control, and testing and instrumentation markets. We offer a
complete range of integrated electronics manufacturing services, from initial
product design to volume production and order fulfillment. We believe that we
have developed particular strengths in the manufacturing process for large,
complex, high-density assemblies. In addition, we offer advanced engineering
services including product design, PCB layout, quickturn prototyping and test
development. Throughout the production process, we offer logistics services,
such as materials procurement, inventory management, packaging and distribution.

We provide electronics manufacturing services to approximately 62
electronics OEMs, including industry leaders such as EMC Corporation, General
Instrument, Hewlett-Packard, Lucent Technologies, Stratus Computer and Texas
Instruments, representing, in the aggregate, 60% of our 1998 sales. These
customers rely on us to manufacture technologically complex products including
telecommunications equipment, high-capacity computer storage devices and
fault-tolerant computer servers. We believe one of our primary strengths is the
fact that we have worked with several of our largest customers for many years.
We have established these long-term relationships by exceeding customer
expectations and providing flexibility while responding to their needs.

We have experienced significant growth over the last three years,
increasing our sales by a compounded annual growth rate of 75.3% since 1995. Our
sales growth during the last three years was twice the sales growth of each of
our four largest competitors. Our growth is driven by three factors. First, we
focus on high-end products in growing technology sectors. As a result, our
growth is influenced by several trends including the build-out of the
communications and Internet infrastructure and the evolution of computer
technology. Second, the accelerating pace at which OEMs are adopting outsourcing
as a core business strategy also contributes to our growth. We were selected for
nine new programs in the first quarter of 1999, four of which represented new
outsourcing initiatives of existing customers. These nine programs are expected
to begin generating sales in the fourth quarter of 1999. Third, our growth is
driven by the successful completion and integration of strategic acquisitions.

Since the beginning of 1996, we have completed three acquisitions that have
broadened our service offerings, diversified our customer base with leading OEMs
and expanded our geographic presence. Specifically, we acquired EMD
Technologies, Inc.; Lockheed Commercial Electronics Company; and, most recently,
certain assets from Stratus Computer Ireland.

Our objective is to enhance our position as an electronics manufacturing
services provider of choice to leading high technology OEMs in the area of
complex products and assemblies. Our strategy to achieve this objective includes
the following key elements:

o Focus on high-end products in growing sectors;

o Deliver complete manufacturing solutions;

o Leverage advanced technological capabilities;

o Establish and maintain close relationships with customers;

o Expand geographic presence; and

o Selectively pursue strategic acquisitions.

Our principal executive offices are located at 3000 Technology Drive,
Angleton, Texas 77515, and our telephone number is (409) 849-6550.

3
<PAGE>
THE OFFERING

<TABLE>
<S> <C>
Common stock we are selling..................... 3,000,000 shares
Common stock the selling shareholder is
selling....................................... 1,000,656 shares
Common stock to be outstanding after the
offering...................................... 14,669,783 shares (1)
Use of Proceeds................................. The net proceeds will be used to
repay indebtedness under our bank
credit facility, and for working
capital and other general corporate
purposes, including acquisitions. See
"Use of Proceeds." We will not
receive any proceeds from shares of
common stock sold by the selling
shareholder.
New York Stock Exchange symbol.................. BHE
</TABLE>

- ------------

(1) Does not include 2,291,245 shares subject to stock options, of which options
to purchase 656,805 shares are presently exercisable.

SUMMARY FINANCIAL INFORMATION

The summary financial information should be read in conjunction with our
financial statements and the related notes thereto included and incorporated by
reference in this prospectus.

<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
MARCH 31, DECEMBER 31,
-------------------- -------------------------------
1999 1998 1998 1997 1996
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
STATEMENTS OF INCOME INFORMATION:
Sales................................ $ 146,546 $ 108,046 $ 524,065 $ 325,229 $ 201,296
Cost of sales........................ 131,856 97,141 472,354 285,630 177,981
--------- --------- --------- --------- ---------
Gross profit..................... 14,690 10,905 51,711 39,599 23,315
Selling, general and administrative
expenses........................... 4,950 3,526 17,680 12,817 7,228
Amortization of goodwill............. 910 585 3,311 1,670 696
--------- --------- --------- --------- ---------
Income from operations........... 8,830 6,794 30,720 25,112 15,391
Interest expense..................... 1,125 902 4,394 2,472 1,442
Interest income...................... 138 168 479 1,163 442
Other income......................... 78 47 85 149 92
--------- --------- --------- --------- ---------
Income before income taxes....... 7,921 6,107 26,890 23,952 14,483
Income tax expense................... 2,884 2,365 10,518 8,862 5,619
--------- --------- --------- --------- ---------
Net income....................... $ 5,037 $ 3,742 $ 16,372 $ 15,090 $ 8,864
========= ========= ========= ========= =========
Earnings per common share:
Basic............................ $ 0.43 $ 0.32 $ 1.41 $ 1.31 $ 0.99
========= ========= ========= ========= =========
Diluted.......................... $ 0.40 $ 0.31 $ 1.35 $ 1.26 $ 0.96
========= ========= ========= ========= =========
Weighted average number of shares
outstanding:
Basic............................ 11,655 11,575 11,594 11,508 8,976
========= ========= ========= ========= =========
Diluted.......................... 12,703 12,243 12,098 12,004 9,218
========= ========= ========= ========= =========
</TABLE>

<TABLE>
<CAPTION>
AS OF AS OF
MARCH 31, 1999 DECEMBER 31, 1998
-------------- -----------------
<S> <C> <C>
BALANCE SHEET INFORMATION:
Working capital...................... $ 83,346 $ 86,265
Total assets......................... 304,261 241,896
Total debt........................... 77,275 54,311
Shareholders' equity................. 143,687 138,001
</TABLE>

<PAGE>
CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS

We make "forward-looking statements" within the "safe harbor" provision
of the Private Securities Litigation Reform Act of 1995 throughout this
prospectus and in the documents we incorporate by reference in this prospectus.
You can identify these statements by forward-looking words such as "may,"
"intend," "will," "expect," "anticipate," "believe," "estimate,"
"should," "strategy," "position," "plan" and "continue" or the
negatives of those words or other variations on them or by comparable
terminology. We have based these statements on our current expectations about
future events. Although we believe that our expectations reflected in or
suggested by our forward-looking statements are reasonable, we cannot assure you
that these expectations will be achieved. Our actual results may differ
materially from what we currently expect. Important factors which could cause
our actual results to differ materially from the forward-looking statements in
this prospectus or in the documents that we incorporate by reference in this
prospectus include, without limitation, the integration of the operations of
Lockheed Commercial Electronics Company and the assets in Ireland purchased from
Stratus Computer Ireland (Stratus Computer); changes in customer concentration;
the absence of long term sales contracts; dependence on the growth of the
enterprise computer, telecommunications, medical device, industrial control, and
testing and instrumentation industries; availability of customer specified
components; dependence on certain key executives; variety of environmental laws;
Year 2000 problems; fluctuations in quarterly results; stock price volatility;
and competition from other providers of electronics manufacturing services, each
as set forth in the "Risk Factors" section of this prospectus, elsewhere in
this prospectus and in the documents that we incorporate by reference in this
prospectus.

You should read this prospectus and the documents that we incorporate by
reference in this prospectus completely and with the understanding that our
actual future results may be materially different from what we expect. We may
not update these forward-looking statements, even though our situation will
change in the future. All forward-looking statements attributable to us are
expressly qualified by these cautionary statements.

5
<PAGE>
RISK FACTORS

BEFORE YOU INVEST IN OUR COMMON STOCK, YOU SHOULD CAREFULLY CONSIDER THE
RISKS DESCRIBED BELOW AND THE OTHER INFORMATION INCLUDED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS.

THE INTEGRATION OF ACQUIRED OPERATIONS MAY POSE DIFFICULTIES FOR US.

We have made two significant acquisitions in the last fifteen months, and a
total of three significant acquisitions since 1996. In addition, we may acquire
the stock or assets of other companies in the future. The integration of
acquired operations requires substantial management, financial and other
resources and involves a number of risks and challenges, including:

o Potential loss of key employees or customers of the acquired
companies;

o Diversion of management's attention;

o Increased expenses and working capital requirements; and

o Increased exposure to Year 2000 or other risks.

The difficulties of integrating acquired businesses may be further complicated
by geographic distances. Our most recent acquisition was in Dublin, Ireland, and
we may make an acquisition in the Far East. During the integration process,
other parts of our business could be disrupted and the financial performance of
our business could be adversely affected. Our success is also dependent upon our
ability to integrate any future acquisitions. Additional expansion or
acquisitions would require investment of financial resources and may require
debt or equity financing which could dilute our shareholders' interest in us. No
assurance can be given that we will consummate any acquisitions in the future,
or that any debt or equity financing required for future acquisitions will be
available on terms acceptable to us.

THE LOSS OF A MAJOR CUSTOMER WOULD ADVERSELY AFFECT US.

A substantial percentage of our sales have been to a relatively small
number of customers, and the loss of a major customer would adversely affect us.
In 1998, our three largest customers each represented in excess of 10% of our
sales and together represented 53% of our sales. We expect to continue to depend
on the sales from our largest customers and any material delay, cancellation or
reduction of orders from these or other significant customers would have a
material adverse effect on our results of operations. For example, our operating
results were adversely affected in 1998 when a major customer reduced its orders
significantly during a period of organizational change within that company. In
addition, we generate significant accounts receivable in connection with
providing manufacturing services to our customers. If one or more of our
customers were to become insolvent or otherwise unable to pay for the
manufacturing services provided by us, our operating results and financial
condition would be adversely affected.

OUR BUSINESS MAY SUFFER IF INDUSTRIES WE SERVE SUFFER.

We are dependent on the continued growth, viability and financial stability
of our customers. Our customers operate in the following industries:

o Enterprise computer;

o Telecommunications;

o Medical device;

o Industrial control; and

o Testing and instrumentation.

These industries are, to a varying extent, subject to rapid technological
change, vigorous competition and short product life cycles. When our customers
are adversely affected by these factors, we may be similarly affected.

6
<PAGE>
OUR BUSINESS IS NOT TYPIFIED BY LONG-TERM CONTRACTS, AND CANCELLATIONS,
REDUCTIONS OR DELAYS IN CUSTOMER ORDERS WOULD AFFECT OUR PROFITABILITY.

We do not typically obtain firm long-term purchase orders or commitments
from our customers. Instead, we work closely with our customers to develop
forecasts for future orders, which are not binding. Customers may cancel their
orders, change production quantities from forecast volumes or delay production
for a number of reasons beyond our control. Cancellations, reductions or delays
by a significant customer or by a group of customers would have an adverse
effect on us. In addition, as many of our costs and operating expenses are
relatively fixed, a reduction in customer demand can adversely affect our gross
margins and operating income.

WE OPERATE IN A HIGHLY COMPETITIVE INDUSTRY.

We compete against many providers of electronics manufacturing services.
Certain of our competitors have substantially greater resources and more
geographically diversified international operations than we do. We also face
competition from the manufacturing operations of our current and future
customers. To compete effectively, we must continue to provide technologically
advanced manufacturing services, maintain strict quality standards, respond
flexibly and rapidly to customers' design and schedule changes and deliver
products on a reliable basis at competitive prices. Our inability to do so could
have an adverse effect on us.

SHORTAGES OF COMPONENTS SPECIFIED BY OUR CUSTOMERS WOULD DELAY SHIPMENTS AND
ADVERSELY AFFECT OUR PROFITABILITY.

Substantially all of our sales are derived from electronics manufacturing
services in which we purchase components specified by our customers. In the
past, supply shortages have substantially curtailed production of all assemblies
using a particular component. In addition, industry-wide shortages of electronic
components, particularly of memory and logic devices, have occurred. If
shortages of these components occur, we may be forced to delay shipments, which
could have an adverse effect on our profit margins. Because of the continued
increase in demand for surface mount components, we anticipate component
shortages and longer lead times for certain components to occur from time to
time. Also, we typically bear the risk of component price increases that occur
between periodic repricings during the term of a customer contract. Accordingly,
certain component price increases could adversely affect our gross profit
margins.

OUR SUCCESS WILL CONTINUE TO DEPEND TO A SIGNIFICANT EXTENT ON OUR EXECUTIVES.

We depend significantly on our three executive officers, Donald E. Nigbor,
Steven A. Barton and Cary T. Fu. The unexpected loss of the services of any one
of these executive officers would have an adverse effect on us. We do not have
employment agreements or non-competition agreements with these executive
officers, and we do not maintain key-man insurance on our executive officers.

WE MUST MAINTAIN OUR TECHNOLOGICAL AND MANUFACTURING PROCESS EXPERTISE.

The market for our manufacturing services is characterized by rapidly
changing technology and continuing process development. We are continually
evaluating the advantages and feasibility of new manufacturing processes. We
believe that our future success will depend upon our ability to develop and
provide manufacturing services which meet our customers' changing needs. This
requires that we maintain technological leadership and successfully anticipate
or respond to technological changes in manufacturing processes on a
cost-effective and timely basis. We cannot assure you that our process
development efforts will be successful.

WE ARE SUBJECT TO A VARIETY OF ENVIRONMENTAL LAWS.

We are subject to a variety of federal, state, local and foreign
environmental regulations relating to the use, storage, discharge and disposal
of hazardous chemicals used during our manufacturing process. If we fail to
comply with any present and future regulations, we could be subject to future

7
<PAGE>
liabilities or the suspension of production. In addition, such regulations could
restrict our ability to expand our facilities or could require us to acquire
costly equipment, or to incur other significant expenses to comply with
environmental regulations.

WE MAY EXPERIENCE YEAR 2000 PROBLEMS.

Many existing computer programs use only two digits to identify a year in
the date field. These programs were designed and developed without considering
the impact of the upcoming change in century. If not corrected, many computer
applications could fail or create erroneous results by or at the Year 2000. We
are actively taking steps to ensure that our information technology
infrastructure and business system applications, manufacturing equipment and
systems will be Year 2000 compliant, and we are seeking assurances of Year 2000
compliance from our suppliers, customers and other third parties with whom we
conduct business. However, we cannot be certain that our efforts will be
appropriate, adequate or complete.

PROVISIONS IN OUR CHARTER DOCUMENTS AND STATE LAW MAY MAKE IT HARDER FOR OTHERS
TO OBTAIN CONTROL OF BENCHMARK EVEN THOUGH SOME SHAREHOLDERS MIGHT CONSIDER SUCH
A DEVELOPMENT TO BE FAVORABLE.

Our shareholder rights plan, provisions of our amended and restated
articles of incorporation and the Texas Business Corporation Act may delay,
inhibit or prevent someone from gaining control of Benchmark through a tender
offer, business combination, proxy contest or some other method. These
provisions include:

o A "poison pill" shareholder rights plan (see "Description of
Capital Stock");

o A statutory restriction on the ability of shareholders to take action
by written consent; and

o A statutory restriction on business combinations with some types of
interested shareholders (see "Description of Capital Stock").

WE MAY EXPERIENCE FLUCTUATIONS IN QUARTERLY RESULTS.

Our quarterly results may vary significantly depending on various factors,
many of which are beyond our control. These factors include:

o The volume of customer orders relative to our capacity;

o Customer introduction and market acceptance of new products;

o Changes in demand for customer products;

o The timing of our expenditures in anticipation of future orders;

o Our effectiveness in managing manufacturing processes;

o Changes in cost and availability of labor and components;

o Changes in our product mix;

o Changes in economic conditions;

o Local factors and events that may affect our production volume (such
as local holidays); and

o Seasonality in customer product requirements.

Additionally, as is the case with many high technology companies, a significant
portion of our shipments typically occurs in the last few weeks of a quarter. As
a result, our sales may shift from one quarter to the next, having a significant
effect on reported results.

OUR STOCK PRICE IS VOLATILE.

Our common stock has experienced significant price volatility, and such
volatility may continue in the future. The price of our common stock could
fluctuate widely in response to a range of factors, including variations in our
reported financial results and changing conditions in the economy in

8
<PAGE>
general or in our industry in particular. In addition, stock markets generally
experience significant price and volume volatility from time to time which may
affect the market price of our common stock for reasons unrelated to our
performance.

PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY

Our common stock is listed on the New York Stock Exchange under the symbol
"BHE." The following table sets forth the high and low sale prices for the
common stock as reported by the New York Stock Exchange for the periods
indicated.

<TABLE>
<CAPTION>
HIGH LOW
---- ----
<S> <C> <C>
1997
First quarter...................... $16 3/8 $ 141/4
Second quarter..................... 20 1/2 123/4
Third quarter...................... 28 1/2 20
Fourth quarter..................... 30 1/2 21 5/16
1998
First quarter...................... 28 1/4 211/8
Second quarter..................... 24 15/16 183/8
Third quarter...................... 25 1/2 175/8
Fourth quarter..................... 37 1/2 177/8
1999
First quarter...................... 38 7/8 267/8
Second quarter (through April 29,
1999)............................. 33 7/8 331/2
</TABLE>

On April 29, 1999, the last reported sale price of our common stock on the
New York Stock Exchange was $33 1/2 per share.

We have not paid any cash dividends on the common stock in the past and
anticipate that, for the foreseeable future, we will retain any earnings
available for dividends for use in our business. Our bank credit facility and
our senior note purchase agreement currently limit the amount of dividends that
may be declared on our common stock. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Liquidity and Capital
Resources."

USE OF PROCEEDS

The net proceeds from our sale of 3,000,000 shares of common stock will be
approximately $95.2 million after deducting underwriting discounts and
commissions and estimated expenses ($114.4 million if the over-allotment option
is exercised in full). Such proceeds will be used to repay $47 million of
indebtedness under our bank credit facility, and for working capital and other
general corporate purposes, including acquisitions. Our management continually
evaluates potential strategic acquisitions or investments, but at the present
time we have no understandings, commitments or agreements with respect to any
such acquisition or investment. As of April 29, 1999, the weighted average
interest rate on the debt to be repaid was 6.35%, and the maturity dates of this
debt range from May 1999 to March 2004. $25 million of this debt was used to
purchase assets from Stratus Computer. We will not receive any proceeds from the
sale of shares of common stock sold by the selling shareholder.

9
<PAGE>
CAPITALIZATION

The following table sets forth our summary capitalization as of March 31,
1999, as adjusted to give effect to our sale of 3,000,000 shares of common stock
and the application of the net proceeds therefrom as described in "Use of
Proceeds." This table should be read in conjunction with our financial
statements and notes thereto and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included and incorporated by
reference in this prospectus.

<TABLE>
<CAPTION>
AS OF MARCH 31, 1999
--------------------------
ACTUAL AS ADJUSTED
---------- -----------
<S> <C> <C>
(IN THOUSANDS)
Cash and cash equivalents............ $ 12,084 $ 60,310
========== ===========
Debt:
Line of credit.................. $ 25,000 $ --
Term loan....................... 22,000 --
Senior note..................... 30,000 30,000
Capital lease obligations....... 275 275
---------- -----------
Total debt................. $ 77,275 $ 30,275
---------- -----------
Shareholders' equity:
Preferred shares, par value
$0.10 per share; 5,000,000
shares authorized, none....... -- --
Common shares, par value $0.10
per share; 30,000,000 shares
authorized;
issued - 11,715,567 and
14,715,567, respectively;
outstanding - 11,666,083 and
14,666,083, respectively...... 1,167 1,467
Additional paid-in capital...... 70,803 165,729
Retained earnings............... 71,837 71,837
Less treasury shares, at cost,
49,484 shares................. (120) (120)
---------- -----------
Total shareholders'
equity.................. 143,687 238,913
---------- -----------
Total capitalization................. $ 220,962 $ 269,188
========== ===========
</TABLE>

10
<PAGE>
SELECTED FINANCIAL INFORMATION

The selected financial information should be read in conjunction with our
financial statements and the related notes thereto included and incorporated by
reference in this prospectus.

<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
-------------------- -----------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
STATEMENTS OF INCOME INFORMATION:
Sales................................ $ 146,546 $ 108,046 $ 524,065 $ 325,229 $ 201,296 $ 97,353 $ 98,168
Cost of sales........................ 131,856 97,141 472,354 285,630 177,981 85,113 86,236
--------- --------- --------- --------- --------- --------- ---------
Gross profit..................... 14,690 10,905 51,711 39,599 23,315 12,240 11,932
Selling, general and administrative
expenses............................. 4,950 3,526 17,680 12,817 7,228 2,990 3,154
Amortization of goodwill............. 910 585 3,311 1,670 696 -- --
--------- --------- --------- --------- --------- --------- ---------
Income from operations........... 8,830 6,794 30,720 25,112 15,391 9,250 8,778
Interest expense..................... 1,125 902 4,394 2,472 1,442 -- --
Interest income...................... 138 168 479 1,163 442 268 252
Other income......................... 78 47 85 149 92 13 11
--------- --------- --------- --------- --------- --------- ---------
Income before income taxes....... 7,921 6,107 26,890 23,952 14,483 9,531 9,041
Income tax expense................... 2,884 2,365 10,518 8,862 5,619 3,383 3,272
--------- --------- --------- --------- --------- --------- ---------
Net income....................... $ 5,037 $ 3,742 $ 16,372 $ 15,090 $ 8,864 $ 6,148 $ 5,769
========= ========= ========= ========= ========= ========= =========
Earnings per common share:
Basic............................ $ 0.43 $ 0.32 $ 1.41 $ 1.31 $ 0.99 $ 0.77 $ 0.72
========= ========= ========= ========= ========= ========= =========
Diluted.......................... $ 0.40 $ 0.31 $ 1.35 $ 1.26 $ 0.96 $ 0.75 $ 0.71
========= ========= ========= ========= ========= ========= =========
Weighted average number of shares
outstanding:
Basic............................ 11,655 11,575 11,594 11,508 8,976 8,031 7,998
========= ========= ========= ========= ========= ========= =========
Diluted.......................... 12,703 12,243 12,098 12,004 9,218 8,213 8,176
========= ========= ========= ========= ========= ========= =========
</TABLE>

<TABLE>
<CAPTION>
AS OF DECEMBER 31,
AS OF -----------------------------------------------------
MARCH 31, 1999 1998 1997 1996 1995 1994
--------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET INFORMATION:
Working capital...................... $ 83,346 $ 86,265 $ 87,879 $ 72,586 $ 37,285 $ 30,890
Total assets......................... 304,261 241,896 190,322 168,174 57,037 48,333
Total debt........................... 77,275 54,311 30,485 30,724 -- --
Shareholders' equity................. 143,687 138,001 120,872 104,999 46,624 40,131
</TABLE>

<PAGE>
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 should be read in conjunction with the "Selected
Financial Information" and the Consolidated Financial Statements of the Company
and the notes thereto appearing elsewhere herein.

RECENT ACQUISITIONS

On March 1, 1999, the Company acquired certain equipment and inventories
from Stratus Computer, a wholly-owned subsidiary of Ascend Communications, Inc.
(Ascend) for approximately $48 million in cash, subject to adjustment. Based on
March 31, 1999 estimates, the acquisition price was allocated $6.6 million to
equipment, $34.8 million to inventories, with an estimated $6.6 million to other
current assets (the Company expects this amount to be remitted back to the
Company as a final adjustment to the transaction). Stratus Computer provided
systems integration services for large and sophisticated fault-tolerant
mainframe computers. In connection with the transaction, the Company entered
into a three-year supply agreement to provide these system integration services
to Ascend and Stratus Holding Limited (Stratus Holding), and the Company hired
approximately 260 employees. In conjunction with the purchase of the Stratus
Computer assets, the Company increased its revolving line of credit to $65
million and borrowed $25 million.

On February 23, 1998, the Company acquired Lockheed Commercial Electronics
Company (LCEC) for $70 million in cash. LCEC, situated in Hudson, New Hampshire,
is one of New England's largest electronics manufacturing services companies,
providing a broad range of services including printed circuit board assembly and
test, system assembly and test, prototyping, depot repair, materials
procurement, and engineering support services. The transaction was accounted for
under the purchase method of accounting, and, accordingly, the results of
operations of LCEC since February 23, 1998, have been included in the Company's
financial statements. The acquisition resulted in goodwill of approximately
$29.5 million that is being amortized on a straight-line basis over 15 years. In
connection with the acquisition of LCEC, the Company obtained $40 million
through borrowings under a five-year Term Loan with a commercial bank.

Completion of the acquisitions of LCEC and the assets in Ireland from
Stratus Computer and the inclusion of LCEC's operations and the operations of
the system integration facility in Ireland in the Company's accounts subsequent
to February 23, 1998 and March 1, 1999, respectively, are responsible for a
substantial portion of the variations in the results of the Company's operations
(including components thereof) for the most recent reported periods, as compared
to corresponding prior periods. The effects of the acquisitions of the Stratus
Computer assets and LCEC on the Company's financial condition and its reported
results of operations should be considered when reviewing the financial
information contained herein.

12
<PAGE>
RESULTS OF OPERATIONS

The following table presents the percentage relationship that certain items
in the Company's Consolidated Statements of Income bear to sales for the periods
indicated.

<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
-------------------- -------------------------------
1999 1998 1998 1997 1996
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Sales................................ 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales........................ 90.0 89.9 90.1 87.8 88.4
--------- --------- --------- --------- ---------
Gross profit.................... 10.0 10.1 9.9 12.2 11.6
Selling, general and administrative
expenses........................... 3.4 3.3 3.4 3.9 3.6
Amortization of goodwill............. .6 .5 .6 .5 .3
--------- --------- --------- --------- ---------
Income from operations.......... 6.0 6.3 5.9 7.8 7.7
--------- --------- --------- --------- ---------
Other income (expense)............... (.6) (.6) (.7) (.4) (.5)
--------- --------- --------- --------- ---------
Income before income taxes...... 5.4 5.7 5.2 7.4 7.2
Income tax expense................... 2.0 2.2 2.0 2.7 2.8
--------- --------- --------- --------- ---------
Net income...................... 3.4% 3.5% 3.2% 4.6% 4.4%
========= ========= ========= ========= =========
</TABLE>

THREE MONTHS ENDED MARCH 31, 1999 COMPARED WITH THREE MONTHS ENDED MARCH 31,
1998

Sales for the first quarter of 1999 were approximately $146.5 million, a
35.6% increase from sales of approximately $108.0 million for the same quarter
in 1998. The net increase in sales resulted primarily from the acquisition of
LCEC, the operation of the system integration facility in Ireland, existing
customers, and the addition of new customers. The Company's results of
operations are dependent upon the success of its customers, and a prolonged
period of reduced demand for its customers' products would have an adverse
effect on the Company's business.

Gross profit increased 34.7% to approximately $14.7 million in the first
quarter of 1999 from approximately $10.9 million in the same quarter in 1998.
The increase in gross profit was due primarily to the higher sales volumes
attributable to the LCEC acquisition and the operation of the new system
integration facility in Ireland, along with changes in product and customer mix
occurring in the ordinary course of business. Gross profit as a percentage of
sales decreased from 10.1% for the first quarter of 1998 to 10.0% for the first
quarter of 1999. 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 quarter ended March 31, 1999, as compared to the
same period in 1998 was due to lower margins on LCEC programs and the system
integration facility in Ireland, changes in the product mix and the initiation
of new programs.

Selling, general and administrative expenses were $5.0 million in the first
quarter of 1999, an increase of 40.4% from $3.5 million for the same quarter in
1998. Selling, general and administrative expenses as a percentage of sales
increased from 3.3% for the first quarter of 1998 to 3.4% for the first quarter
of 1999. 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 continued to add personnel. The
increase in selling, general and administrative expenses during the three-month
period of 1999 reflects these additional personnel and related departmental
expense, as well as the additional administrative expenses resulting from the
inclusion of LCEC for a full three-month period in 1999 and the inclusion of the
system integration facility. The Company anticipates selling, general and
administrative expenses will continue to increase in nominal

13
<PAGE>
terms as the Company continues to build the internal management and support
systems necessary to support higher sales levels.

The amortization of goodwill for the three-month periods ended March 31,
1999 and 1998 was $0.9 million and $0.6 million, respectively. The increase was
due to the acquisition of LCEC on February 23, 1998.

Interest expense for the three-month periods ended March 31, 1999 and 1998
was $1.1 million and $0.9 million, respectively. The increase was due to the
additional debt incurred in connection with the purchase of the assets in
Ireland from Stratus Computer on March 1, 1999, and the acquisition of LCEC on
February 23, 1998.

Interest income was approximately $0.1 million and $0.2 million,
respectively, for the three-month periods ended March 31, 1999 and 1998. The
decrease was due to the use of a portion of the Company's cash and cash
equivalents to fund the purchase of the assets in Ireland from Stratus Computer
on March 1, 1999.

Income tax expense for the three-month periods ended March 31, 1999 and
1998 was $2.9 million and $2.4 million, respectively. The increase was due to
higher pretax income and nondeductible amortization of goodwill, partially
offset by lower foreign tax rates applicable to a portion of pretax income in
1999.

YEAR ENDED DECEMBER 31, 1998 COMPARED WITH YEAR ENDED DECEMBER 31, 1997

Sales in 1998 increased $198.8 million, or 61.1% over 1997 sales. The net
increase in sales resulted primarily from increased sales volume from the
acquisition of LCEC on February 23, 1998, existing customers, and the addition
of new customers, which was offset by reduced sales to a major customer during a
period of organizational change.

A substantial percentage of the Company's sales have been to a small number
of customers, and the loss of a major customer, if not replaced, would adversely
affect the Company. During 1998, the Company's three largest customers accounted
for approximately 53% of the Company's sales, and the Company's largest customer
accounted for approximately 28% of sales. The Company's future sales are
dependent on the success of its customers, some of which operate in businesses
associated with rapid technological change and consequent product obsolescence.
Developments adverse to the Company's major customers or their products, or the
failure of a major customer to pay for components or services, could have an
adverse effect on the Company.

The Company had a record year-end backlog of $317 million at December 31,
1998, as compared to the 1997 year-end backlog of $302 million. Although the
Company expects to fill substantially all of this backlog in 1999, at December
31, 1998, the Company had no long-term agreements with its customers and
customer orders can be canceled, changed or delayed by customers. The timely
replacement of canceled, changed or delayed orders with orders from new
customers cannot be assured, nor can there be any assurance that any of the
Company's current customers will continue to utilize the Company's services.

Gross profit increased $12.1 million, or 30.6% over 1997. Gross profit as a
percentage of sales decreased from 12.2% for 1997 to 9.9% for 1998. 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 profit 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 1998 was due primarily to a less profitable customer
mix, and a reduced capacity utilization, at the LCEC facility.

Selling, general and administrative expenses increased $4.9 million, or
37.9%, from 1997 to $17.7 million in 1998. The increase in selling, general and
administrative expenses reflects additional

14
<PAGE>
personnel and related departmental expense, as well as the additional
administrative expenses resulting from the inclusion of LCEC for ten months of
1998.

The amortization of goodwill for the years ended December 31, 1998 and 1997
was $3.3 million and $1.7 million, respectively. Interest expense incurred by
the Company on the debt incurred in connection with the acquisitions of LCEC in
1998 and EMD Technologies, Inc. (EMD) in 1996 was approximately $4.4 million and
$2.5 million, respectively, in 1998 and 1997. The increased amortization and
interest expense in 1998 resulted from the additional goodwill and debt incurred
in connection with the acquisition of LCEC during 1998.

Interest income was approximately $0.5 million in 1998 compared to $1.2
million in 1997. The decrease was due to the use of a portion of the Company's
cash and interest bearing marketable securities to fund the acquisition of LCEC.

Income tax expense of $10.5 million represented an effective tax rate of
39.1% for the year ended December 31, 1998, compared with an effective tax rate
of 37% for the year ended December 31, 1997. The increase is due primarily to
the increase in nondeductible amortization of goodwill.

The Company reported net income of approximately $16.4 million, or diluted
earnings of $1.35 per share, for 1998 compared with net income of approximately
$15.1 million, or diluted earnings of $1.26 per share for 1997. The
approximately $1.3 million increase in net income during 1998 was a result of
the combined effects of the acquisition of LCEC and the overall increase in
revenues resulting from the factors discussed above.

YEAR ENDED DECEMBER 31, 1997 COMPARED WITH YEAR ENDED DECEMBER 31, 1996

Sales in 1997 increased $123.9 million, or 61.6% over 1996 sales. The
increase in sales resulted primarily from increased sales volume from existing
customers, the addition of new customers and the acquisition of EMD on July 30,
1996.

The Company had a then record year-end backlog of $302 million at December
31, 1997, as compared to the 1996 year-end backlog of $230 million.

Gross profit increased $16.3 million, or 69.8% over 1996. Gross profit as a
percentage of sales increased from 11.6% for 1996 to 12.2% for 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 profit 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 increase in gross profit
as a percentage of sales during 1997 was due primarily to the product mix and
the initiation of new programs during 1996.

Selling, general and administrative expenses increased $5.6 million, or
77.3%, from 1996 to $12.8 million. The increase in selling, general and
administrative expenses reflects these additional personnel and related
departmental expense, as well as the additional administrative expenses
resulting from the inclusion of EMD in the full year of 1997.

The amortization of goodwill associated with the acquisition of EMD for the
year ended December 31, 1997 and 1996 was $1.7 million and $0.7 million,
respectively. Interest expense incurred by the Company on the debt incurred in
connection with the acquisition of EMD was approximately $2.5 million and $1.4
million, respectively, in 1997 and 1996. The increased amortization and interest
expense in 1997 reflected the effect of including EMD's operations for a full
year.

15
<PAGE>
Interest income was approximately $1.2 million in 1997 compared to $0.4
million in 1996. The increase was due to the investment by the Company of
available cash in interest bearing marketable securities and cash equivalents.

Income tax expense of $8.9 million represented an effective tax rate of 37%
for the year ended December 31, 1997, compared with an effective tax rate of
38.8% for the year ended December 31, 1996. The decrease was due to the benefit
from the use of a foreign sales corporation and non-taxable interest earned on
municipal investments partially offset by nondeductible amortization of
goodwill.

The Company reported net income of approximately $15.1 million, or diluted
earnings of $1.26 per share, for 1997 compared with net income of approximately
$8.9 million, or diluted earnings of $0.96 per share for 1996. The approximately
$6.2 million increase in net income during 1997 was a result of the combined
effects of the acquisition of EMD and the overall increase in income from
operations resulting from the factors discussed above.

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 funds borrowed
under its credit facilities.

Cash provided by operating activities was $18.4 million and $6.8 million
for the three months ended March 31, 1999 and 1998, respectively. The increase
in cash provided by operations was primarily the result of increases in net
income, depreciation and amortization, and increases in accounts payable
partially offset by increases in accounts receivable and inventories. The
Company's accounts payable, accounts receivables, and inventories have increased
$30.6 million, $23.4 million, and $2.7 million (net of effects from purchase of
assets from Stratus Computer), respectively, during the first three months of
1999, reflecting the Company's increased sales and backlog as compared to the
corresponding period in the prior year. 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 that may not meet Company requirements. The Company
has not experienced significant supply constraints in the recent past.

Cash provided by operating activities was $56.9 million, $19.3 million and
$12.3 million in 1998, 1997 and 1996, respectively. In 1998, substantial
decreases in inventory and accounts receivable, net of effects from the
acquisition of LCEC, and increases in net income, depreciation and amortization
were partially offset by decreases in accounts payable. The Company's
inventories have decreased from $61.1 million at December 31, 1997 to $53.7
million at December 31, 1998, reflecting improved customer forecasting and the
Company's emphasis on supply chain management. In 1997, substantial increases in
inventory were partially offset by net income, depreciation and amortization,
and increases in accounts payable. The Company's inventories increased from
$48.1 million at December 31, 1996 to $61.1 million at December 31, 1997,
reflecting the Company's increased sales and backlog during this period. In
1996, substantial increases in accounts receivable were offset by net income,
depreciation and amortization, and increases in accounts payable and accrued
liabilities and decreases in inventory, net of effects from the acquisition of
EMD. The Company's accounts receivable and inventories increased from $20.2
million and $23.0 million, respectively, at December 31, 1995 to $39.2 million
and $48.1 million, respectively at December 31, 1996, reflecting the Company's
increased sales during this period. The Company expects increases in inventories
to support the anticipated growth in sales.

Cash used in investing activities was $52.7 million and $61.7 million for
the three months ended March 31, 1999 and 1998, respectively. On March 1, 1999,
the Company completed the purchase of inventories and equipment from Stratus
Computer for $48 million in cash. Capital expenditures of $4.0 million for the
three months ended March 31, 1999, were primarily concentrated in test
equipment.

16
<PAGE>
Capitalized software costs of $0.7 million for the three months ended March 31,
1999, were for the purchase and implementation of the Company's Enterprise
Resource Planning System.

Cash used in investing activities was $78.7 million, $12.4 million and
$49.0 million, respectively, for the years ended December 31, 1998, 1997 and
1996. On February 23, 1998, the Company completed its acquisition of LCEC for
approximately $70.7 million in cash. Capital expenditures of $12.2 million
during 1998 consisted primarily of test and manufacturing production equipment
and computer equipment to support the Company's implementation of the new ERP
system. During 1998, the Company invested $7.4 million on the new ERP software
system. Capital expenditures of $10.4 million during 1997 were primarily
concentrated in surface mount assembly, test and manufacturing production
equipment. The Company completed the planned expansion of its production
capacity at the Angleton plant during 1996, after which the Company had 12
surface mount assembly lines in operation at the Angleton plant. Capital
expenditures of $8.7 million during 1996 were primarily concentrated in the
expansion of the Angleton facility and surface mount assembly equipment
associated with this expansion. On July 30, 1996, the Company completed its
acquisition of EMD for approximately $30.8 million in cash. The Company used
$11.4 million of proceeds from the sale of interest bearing marketable
securities during 1998 for the purpose of paying a portion of the purchase price
of LCEC. During 1997 and 1996, the Company invested $2.3 million and $9.5
million, respectively, of available cash in interest bearing marketable
securities.

Cash provided by financing activities was $23.3 million and $39.6 million
for the three months ended March 31, 1999 and 1998, respectively. In connection
with the purchase of the assets from Stratus Computer on March 1, 1999, the
Company increased its revolving line of credit to $65 million and borrowed $25
million. The Company made principal payments on long-term debt totaling $2.0
million during the three months ended March 31, 1999.

Cash provided by financing activities was $23.9 million, $0.4 million and
$47.7 million, respectively, for the years ended December 31, 1998, 1997 and
1996. During 1998, cash provided by financing activities consisted primarily of
$40.0 million of proceeds from the issuance of long-term debt offset by $16.2
million of principal payments on long-term debt. During 1997, cash provided by
financing activities consisted primarily of $0.7 million of proceeds from stock
options exercised, offset by $0.2 million of principal payments on long-term
debt. During 1996, cash provided by financing activities consisted primarily of
$30 million of proceeds from the issuance of long-term debt, $28.5 million of
net proceeds from the public offering of common shares, offset by $10.9 million
of principal payments on long-term debt.

The Company has a $65 million revolving line of credit with a commercial
bank. The Company is entitled to borrow under the line of credit up to the
lesser of $65 million or the sum of 75% of its eligible accounts receivable and
25% of its eligible inventories. Interest on the line of credit is payable
quarterly, at the Company's option, at either the bank's Eurodollar rate plus
.88% to 1.63% or its prime rate. A commitment fee of 0.20% to 0.30% 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 March 31, 2004. As of March
31, 1999, the Company had $25 million outstanding under this line of credit with
$40 million available for future borrowings. The Company intends to repay this
line of credit, as well as its Term Loan, in full with a portion of the proceeds
from the offering contemplated by this prospectus.

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

17
<PAGE>
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, proceeds from this
offering, funds generated from operations, and borrowings under Company's credit
facility will be sufficient to permit the Company to meet its liquidity
requirements 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 during recent years.

YEAR 2000 ISSUES

The Company recognizes that it must ensure that its products and operations
will not be adversely impacted by Year 2000 software failures which can arise in
date-sensitive software applications which utilize a field of two digits rather
than four to define a specific year. Absent corrective actions, date-sensitive
software may recognize a date using "00" as the year 1900 rather than the year
2000. This could result in system failures or miscalculations causing
disruptions to various activities and operations.

STATE OF READINESS

Many of the Company's business and operating systems are currently Year
2000 compliant, and the Company initiated a review of its systems during 1997 to
address those systems that are not currently Year 2000 compliant. Areas
addressed included major third-party suppliers of components of the Company's
products as well as full reviews of the Company's manufacturing equipment,
telephone and voice mail systems, security systems and other office support
systems. The Company has also initiated formal communications with significant
suppliers and customers to determine the extent to which the Company is
vulnerable to those third parties' failure to remediate their own Year 2000
issues. Based on its inquiries to date, the Company believes satisfactory
progress is being made by its significant suppliers and customers on Year 2000
issues. No significant information technology initiatives have been deferred by
the Company as a result of its Year 2000 project.

In addition, the Company has selected Baan U.S.A., Inc. to provide an ERP
System, which will be Year 2000 compliant, to improve processes and
efficiencies. All necessary Year 2000 upgrades of major systems, including those
supplied by vendors, have been identified and conversion strategies have been
developed and are under deployment.

COSTS TO ADDRESS THE YEAR 2000 ISSUE

The estimated total cost to address the Company's Year 2000 issues,
including the cost associated with the new ERP System, is approximately $13.5
million. Costs incurred and expected to be incurred consist primarily of the
cost of Company personnel involved in updating applications and operating
systems and the costs of software updates and patches (many of which are
provided free of charge from the vendors). The estimated total cost associated
with the purchase and implementation of the new ERP System is approximately $13
million. The costs of this software will be capitalized and amortized over the
estimated useful life of the software, and costs associated with the preliminary
project stage and post-implementation stage has been and will be expensed as
incurred. The Year 2000 component of this system can not be readily segregated
from the total cost of the company-wide ERP System implementation. The total
amount expended on Year 2000 issues and the new ERP System through March 31,
1999, is approximately $10 million, of which $9.7 million related to the new ERP
System implementation and approximately $300,000 related to the cost of
identifying and communicating with third parties and installing software
patches. The costs of the Year 2000 process and the timetable on which the
Company believes it will complete any Year 2000 modifications are based on
management's best estimates, which are derived utilizing a number of assumptions
of future events, including the availability of certain resources and other
factors. However, there can be no guarantee that these estimates will be
achieved and actual results could differ materially from those anticipated.
Specific factors that might cause such material differences include, but are not
limited to,

18
<PAGE>
the availability and cost of personnel trained in this area, the ability to
locate and correct all relevant computer codes and similar uncertainties. In
addition, there can be no assurance that the systems of other companies on which
the Company's systems rely will be converted on a timely basis or that such
failure by another company to convert would not have an adverse effect on the
Company's systems.

RISKS PRESENTED BY THE YEAR 2000 ISSUE

There is considerable uncertainty inherent in assessing the Company's
vulnerability to Year 2000 problems, arising in part from the uncertainty of the
Year 2000 readiness of the Company's suppliers and customers. It is possible
that the failure to correct a material Year 2000 problem could result in an
interruption in, or a failure of, certain normal business operations, and that
such failures could materially and adversely affect the Company's results of
operations, liquidity and financial condition. Based on the information
available to it, and subject to the effect of the general uncertainty on the
Company's ability to make a definitive determination, the Company does not
believe it has any material exposure to significant business interruption as a
result of the Year 2000 problem, or that the cost of remedial actions will have
a material adverse effect on its business, financial condition or results of
operations.

CONTINGENCY PLANS

The steps taken by the Company to address the Year 2000 issues are expected
to reduce significantly the Company's level of uncertainty about the Year 2000
problem and, in particular, about the Year 2000 compliance and readiness of its
material third party suppliers and customers. The Company believes that, with
the completion of identifying and communicating with third parties as scheduled,
the possibility of significant interruptions of normal operations should be
reduced.

Accordingly, and as the program is on schedule to be completed during the
fall of 1999, the Company has not formulated a worse case scenario in the event
its Year 2000 project is not completed in a timely manner. The Company has a
contingency plan in place in the event all scheduled implementations are not
completed by the end of 1999. All necessary Year 2000 upgrades of major systems
and software patches, including those supplied by vendors, have been identified
and conversion strategies are under deployment.

19
<PAGE>
BUSINESS

GENERAL

We are one of the leading independent providers of electronics
manufacturing services to the enterprise computer, telecommunications, medical
device, industrial control, and testing and instrumentation markets. We offer a
complete range of integrated electronics manufacturing services, from initial
product design to volume production and order fulfillment. We believe that we
have developed particular strengths in the manufacturing process for large,
complex, high-density assemblies. In addition, we offer advanced engineering
services including product design, PCB layout, quickturn prototyping and test
development. Throughout the production process, we offer logistics services such
as materials procurement, inventory management, packaging and distribution.

We provide electronics manufacturing services to approximately 62
electronics OEMs, including industry leaders such as EMC Corporation, General
Instrument, Hewlett-Packard, Lucent Technologies, Stratus Computer and Texas
Instruments, which represented, in the aggregate, 60% of our 1998 sales. These
customers rely on us to manufacture technologically complex products including
telecommunications equipment, high-capacity computer storage devices and
fault-tolerant computer servers. We believe one of our primary strengths is the
fact that we have worked with several of our largest customers for many years.
We have established these long-term relationships by exceeding customer
expectations and providing flexibility while responding to their needs.

We have experienced significant growth over the last three years,
increasing our sales by a compounded annual growth rate of 75.3% since 1995. Our
sales growth was twice the sales growth of each of our four largest competitors
in our industry during the last three years. Our growth is driven by three
factors. First, we focus on high-end products in growing technology sectors. As
a result, our growth is influenced by several trends including the build-out of
the communications and Internet infrastructure and the evolution of computer
technology. Second, the accelerating pace at which OEMs are adopting outsourcing
as a core business strategy also contributes to our growth. We were selected for
nine new customer programs in the first quarter of 1999, four of which
represented new outsourcing initiatives of existing customers. These nine
programs are expected to begin generating sales in the fourth quarter of 1999.
Third, our growth is driven by the successful completion and integration of
strategic acquisitions.

o STRATUS COMPUTER IRELAND. On March 1, 1999, we acquired certain
assets from Stratus Computer Ireland, and in connection with the
transaction we entered into a three-year supply agreement with Ascend
and Stratus Holding Limited. The acquired assets augment our ability
to provide a broad range of services to the European market and
enhance our systems integration and box build engineering
capabilities.

o LOCKHEED COMMERCIAL ELECTRONICS COMPANY. In February 1998, we
acquired Lockheed Commercial Electronics Company. This acquisition
provided us with manufacturing capacity in the northeastern United
States and 18 additional customers. Now operated as our Hudson, New
Hampshire division, the facility provides a broad range of services
including printed circuit board assembly and test, system assembly and
test, prototyping, depot repair, materials procurement, and
engineering and design support services.

o EMD TECHNOLOGIES, INC. In July 1996, we acquired EMD Technologies,
Inc., an independent provider of electronics manufacturing and product
design services. Now operated as our Winona, Minnesota division, this
facility provides a complete range of enhanced product design and
development capabilities, including circuit board conceptual design
and subsystem and enclosure configuration. In addition to design
services, this acquisition provided us with manufacturing capabilities
in the midwestern United States and 19 additional customers.

20
<PAGE>
We believe our primary competitive advantages are our design,
manufacturing, testing and supply chain management capabilities. We offer our
customers complete and flexible manufacturing solutions that provide accelerated
time-to-market, time-to-volume production, and reduced production costs. As a
result of working closely with our customers and responding promptly to their
needs, we have become an integral part of their operations. In addition, our
workforce is led by a management team that founded the Company and has an
average of 18 years of industry experience.

BUSINESS STRATEGY

FOCUS ON HIGH-END PRODUCTS IN GROWING SECTORS. Electronics manufacturing
service providers produce products for a wide range of OEMs in different
industries. The product scope ranges from easy to assemble, low-cost high-volume
products targeted for the consumer market to complicated state-of-the-art,
mission critical electronic hardware. Similarly, OEM customers range from
consumer-oriented companies that compete primarily on price and redesign their
products every year to high-end telecommunications and enterprise computer
manufacturers that compete on technology and quality. We currently focus on
state-of-the-art products for industry leaders who require advanced engineering
design and production services. Our ability to offer these services enables us
to expand our business relationships.

DELIVER COMPLETE MANUFACTURING SOLUTIONS. We believe OEMs increasingly
require a wide range of advanced engineering and manufacturing services in order
to reduce their costs and accelerate their time-to-market. Building on our
integrated engineering and manufacturing capabilities, we offer services from
initial product design and test to final product assembly and distribution to
the OEMs' customers. In addition, we offer customers the flexibility to move
more rapidly from design and initial introduction to production and
distribution.

LEVERAGE ADVANCED TECHNOLOGICAL CAPABILITIES. Our strengths in the
manufacturing processes for large, complex high-density assemblies enable us to
offer customers advanced design, technology and manufacturing solutions for
their primary products. Our design capabilities in each of our facilities,
together with our corporate design center located in Winona, Minnesota, offer
engineering expertise to our customers. These capabilities help our customers
improve product performance and reduce costs.

ESTABLISH AND MAINTAIN CLOSE RELATIONSHIPS WITH CUSTOMERS. We believe we
can become an integral part of our customers' operations by working closely with
them throughout the design, manufacturing and distribution process, and by
offering flexible and responsive services. We believe we develop stronger
customer relationships through local management teams that respond to frequently
changing customer design specifications and production requirements.

EXPAND GEOGRAPHIC PRESENCE. A strategically positioned facilities network
can simplify and shorten an OEM's supply chain and reduce the time it takes to
bring product to market. We believe we can deliver additional value to our
customers by increasing our presence in low-cost locations close to component
suppliers or OEM customers.

SELECTIVELY PURSUE STRATEGIC ACQUISITIONS. We have completed three
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 in high technology regions;

o Addition of experienced management teams;

o Enhanced customer growth opportunities;

o Development of strategic relationships;

o Broadened service offerings; and

o Diversification into new market sectors.

21
<PAGE>
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.

ELECTRONICS MANUFACTURING SERVICES INDUSTRY

Many OEMs in the electronics industry are increasingly using electronics
manufacturing service providers in their business and manufacturing strategies
and are seeking to outsource a broad range of manufacturing and related
engineering services. Outsourcing allows OEMs to take advantage of the
manufacturing expertise and capital investments of electronics manufacturing
service providers, thereby enabling OEMs to concentrate on what they believe to
be their core strengths, such as product development, marketing and sales. OEMs
utilize electronics manufacturing service providers to enhance their competitive
position by:

o Reducing capital investment requirements and fixed overhead costs;

o Accessing advanced manufacturing and design capabilities;

o Reducing production costs;

o Accelerating time-to-market and time-to-volume production;

o Improving inventory management and purchasing power; and

o Accessing worldwide manufacturing capabilities.

We believe that OEMs, recognizing benefits such as these, are increasing by
outsourcing their electronics manufacturing operations. Industry sources
estimate that the overall market for electronics manufacturing services will
have grown at an average annual rate of 25% from 1996 to 2002. In addition,
according to industry sources the electronics manufacturing services industry's
revenue accounted for approximately 12% of the cost of goods sold in the
electronics industry in 1996. By 2001, industry sources estimate that this
percentage will increase to 26%.

SERVICES PROVIDED BY BENCHMARK

ENGINEERING SERVICES. 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 advanced
engineering services.

To assist customers with initial design, we offer CAE and CAD-based design,
engineering for manufacturability, circuit board layout and test development. We
also coordinate industrial design and tooling for product manufacturing. After
product design, we offer quickturn prototyping. During this process, we assist
with the transition to volume production. By participating in product design and
prototype development, we can reduce manufacturing costs and accelerate the time
to volume production.

MATERIALS PROCUREMENT AND MANAGEMENT. Materials procurement and management
consists of the planning, purchasing, expediting and warehousing of components
and materials. Our inventory management and volume procurement capabilities
contribute to cost reductions and reduce total cycle time. Our materials
strategy is focused on leveraging our procurement volume corporate wide while
providing local execution for maximum flexibility at the division level. In
addition, our Ireland facility has developed material processes required to
support high-end computer system integration operations.

ASSEMBLY AND MANUFACTURING. Our assembly and manufacturing operations
include PCB and subsystem assembly and box build. A substantial portion of our
sales are derived from the manufacture and assembly of complete products. We
employ various inventory management techniques such as just-in-time,
ship-to-stock and autoreplenish programs. As OEMs seek to provide greater
functionality in smaller products, they increasingly require more sophisticated
manufacturing technologies and processes. Our investment in advanced
manufacturing equipment and our experience in innovative packaging and
interconnect technologies (such as chip scale packaging and ball grid array)
enable us to offer a variety of advanced manufacturing solutions.

22
<PAGE>
TEST. We offer computer-aided testing of assembled PCBs, subsystems and
systems, which contributes significantly to our ability to deliver high-quality
products on a consistent basis. We work with our customers to develop
product-specific test strategies. Our test capabilities include manufacturing
defect analysis, in-circuit tests and functional tests. We either custom design
test equipment and software ourselves or use test equipment and software
provided by our customers. In addition, we also provide environmental stress
tests of board or system assemblies.

DISTRIBUTION. We offer our customers flexible, just-in-time delivery
programs allowing product shipments to be closely coordinated with customers'
inventory requirements. Increasingly, we ship products directly into customers'
distribution channels or directly to the end-user. We believe that this service
can provide our customers with a more comprehensive solution and enable them to
be more responsive to market demands.

MARKETING AND CUSTOMERS

We market our services through a direct sales force and independent
marketing representatives. In addition, our divisional and executive management
teams are an integral part of our sales and marketing teams. During 1998, our
three largest customers, EMC, Lucent and Stratus Computer, each represented in
excess of 10% of total sales and, in the aggregate, represented 53% of total
sales.

We target customers in five industries and seek to maintain a balance in
our sales to those industries. The following table sets forth the percentages of
our sales to each of the five industries for 1998, 1997 and 1996.

<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
Enterprise Computer.................. 44 % 39 % 25 %
<S> <C> <C> <C>
Telecommunications................... 31 21 26
Medical Device....................... 11 17 18
Industrial Control................... 9 12 16
Testing and Instrumentation.......... 5 11 15
</TABLE>

SUPPLIERS

We maintain a network of suppliers of components and other materials used
in assembling printed circuit boards. We procure components 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. We reduce shortages by working with customers
to reschedule deliveries, by working with suppliers to provide the needed
components using just-in-time inventory programs, or by purchasing components at
somewhat higher prices from distributors, rather than directly from
manufacturers. These procedures reduce, but do not eliminate, our inventory
risk. In addition, by developing long-term relationships with suppliers, we have
been better able to minimize the effects of component shortages than
manufacturers without such relationships. Because of the continued increase in
demand for surface mount components, we anticipate shortages and longer lead
times for certain components to occur from time to time.

COMPETITION

The electronics manufacturing services we provide is 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.

23
<PAGE>
GOVERNMENTAL REGULATION

Our operations, and the operations of businesses that we acquire, are
subject to certain federal, state and local regulatory requirements relating to
environmental, waste management, and health and safety matters. There can be no
assurance that material costs and liabilities will not be incurred or that past
or future operations will not result in exposure to injury or claims of injury
by employees or the public. Although some risk of costs and liabilities related
to these matters is inherent in our business, as with many similar businesses,
we believe that our business is operated in substantial compliance with
applicable regulations. However, new, modified or more stringent requirements or
enforcement policies could be adopted, which could adversely affect us.

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 March 31, 1999, we had 2,552 employees, of whom 1,902 were engaged in
manufacturing and operations, 374 in materials control and procurement, 82 in
design and development, 43 in marketing and sales, and 151 in administration.
None of our employees is subject to a collective bargaining agreement.
Management believes that our relationship with our employees is satisfactory.

EXPORT SALES

In 1998, we had export sales of approximately $87 million to Europe, $2
million to Canada, $92,000 to Asia, and $8,000 to Australia from our United
States operations. In 1997 and 1996, we had export sales of approximately $86
million and $29 million, respectively, to Europe from our United States
operations.

PROPERTIES

Our executive offices and one of our manufacturing facilities are located
in an approximately 109,000 square foot facility on 18.9 acres of land we own in
Angleton, Texas, where we have six surface mount manufacturing lines. We lease
an approximately 52,000 square foot facility in Beaverton, Oregon, where we have
four surface mount production lines. This lease expires in June 2002. Our
facilities in Winona, Minnesota consist of five leased buildings with total
square footage of approximately 137,000 and a 64,000 square foot building that
we own. For the primary leased facilities in Winona, we have leases through July
2006, each with purchase options that expire in June 1999. We are currently
evaluating whether we will exercise these purchase options. The Winona
facilities include manufacturing facilities with 15 surface mount production
lines and warehouse facilities. We lease our approximately 200,000 square foot
facility in Hudson, New Hampshire, which contains 14 surface mount production
lines. The Hudson lease expires in June 2000, with an option to extend the lease
for an additional four years. Our approximate 74,000 square foot facilities in
Dublin, Ireland, where we will consolidate the assets purchased in March 1999
from Stratus Computer, are leased for various periods through September 2003.
Our Angleton, Beaverton and Hudson facilities are certified under ISO-9002, and
the Winona facilities are certified under ISO-9001. We believe that our
properties are and will be sufficient to conduct our operations for the
foreseeable future.

<PAGE>
MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth certain information with respect to our
current directors and executive officers.

<TABLE>
<CAPTION>
NAME AGE POSITION
- ---------------------------------------- --- ------------------------------------------------
<S> <C> <C>
John C. Custer.......................... 68 Director and Chairman of the Board
Donald E. Nigbor........................ 51 President of Benchmark; Director
Steven A. Barton........................ 50 Executive Vice President of Benchmark; Director
Cary T. Fu.............................. 50 Executive Vice President of Benchmark; Director
Peter G. Dorflinger..................... 48 Director
Gerald W. Bodzy......................... 47 Director
David H. Arnold......................... 61 Director
</TABLE>

JOHN C. CUSTER has been Chairman of the Board of Directors of Benchmark
since 1988 and a member of the Compensation Committee of the Board of Directors
since 1990. Mr. Custer was employed by Mason & Hanger, a technical services
contracting and engineering firm, from 1951 until his retirement in February
1996. Mr. Custer became a member of the board of directors of Mason & Hanger in
1983, serving as Chairman of the Board of Mason & Hanger from 1994 until his
retirement, and served in various other management and operations positions
prior to 1994. Mason & Hanger is the selling shareholder in this offering.

DONALD E. NIGBOR has been a director and President of Benchmark since 1986
and was our General Manager from 1984 to 1990. Before joining us, he was
employed by Intermedics, Inc., a medical implant manufacturer, serving as a
Manufacturing Analyst for its Pacemaker division from 1980 to 1984. Mr. Nigbor
holds B.S. and M.S. degrees in engineering from Rensselaer Polytechnic Institute
and received an M.B.A. from the Amos Tuck School of Business at Dartmouth
College.

STEVEN A. BARTON has been a director and Executive Vice President of
Benchmark since 1990. He served as Executive Vice President -- Marketing and
Sales of Benchmark from 1990 to April 1992. Since June 1, 1993 he has worked
part-time for us for personal reasons. He also has served Benchmark as Executive
Vice President from 1988 to 1990, a director and Vice President from 1986 to
1988, and President from 1979 to 1983. From 1977 to 1986, Mr. Barton was
employed by Intermedics in various management positions. Mr. Barton holds B.S.
and M.S. degrees in electrical engineering from the University of South Florida
and received an M.B.A. from the Harvard Business School.

CARY T. FU has been a director and Executive Vice President of Benchmark
since 1990. He served as Executive Vice President -- Financial Administration of
Benchmark from 1990 to April 1992. He also has served Benchmark as Treasurer
from 1986 to January 1996, Secretary from 1990 to January 1996, a director and
Secretary from 1986 to 1988 and Assistant Secretary from 1988 to 1990. From 1983
to 1986, Mr. Fu was employed by Intermedics as Controller of Benchmark and
another subsidiary. Mr. Fu holds an M.S. degree in accounting from the
University of Houston and is a certified public accountant.

PETER G. DORFLINGER has been a director of Benchmark and a member of the
Audit Committee and Compensation Committee of the Board of Directors since 1990.
He is currently President and Chief Operating Officer of GlasTech, Inc., a
dental products manufacturer, a position he has held since November 1998. From
January 1998 through October 1998, he served as President and Chief Operating
Officer of Physicians Resource Group, Inc., a physicians practice management
company. From January 1997 through January 1998, he served as Vice President and
General Counsel of Advanced Medical Instruments, Inc., a manufacturer of medical
monitoring equipment. From March 1987 through October 1996, he served as Vice
President, General Counsel and Secretary of Intermedics. From June 1990 through
October 1996, he served as Group Vice President and General Counsel of
SULZERmedica, a division of Sulzer Limited of Switzerland, composed of eight
operating

25
<PAGE>
medical device companies in Europe and the United States. Mr. Dorflinger
received a J.D. degree from the University of Houston and also is a director of
Maxxim Medical, Inc., a medical products manufacturer and supplier.

GERALD W. BODZY has been a director of Benchmark since September 1994 and
has been a member of the Audit Committee since March 1995. He has been employed
since 1990 by Stephens Inc., serving as Senior Vice President and Managing
Director. From 1979 to 1990, Mr. Bodzy was employed by Smith Barney Inc., as an
investment banker, serving as Managing Director from 1986 to 1990.

DAVID H. ARNOLD became a director of Benchmark in 1996 pursuant to the
terms of the agreement relating to our acquisition of EMD in July 1996. Mr.
Arnold has been a member of the Audit Committee since 1997. Mr. Arnold was a
co-founder of EMD and served as a director and officer of EMD from 1974 until we
acquired it. Mr. Arnold is currently President and Chairman of the Board of DCM
Tech, Inc., a privately-held manufacturer of machine tools. Mr. Arnold earned a
B.S. degree in mechanical engineering from Iowa State University and an M.S.
degree in mechanical engineering from the University of Michigan. He also serves
as a director of Town and Country State Bank in Winona, Minnesota.

The agreement relating to our acquisition of EMD requires us to include
either Mr. Arnold or Mr. Daniel M. Rukavina (the other EMD co-founder), or an
acceptable person designated by them, on our recommended slate of nominees for
election to our Board of Directors for so long as Mr. Arnold and Mr. Rukavina
own beneficially in the aggregate at least 10% of the outstanding shares of our
common stock.

COMMON STOCK OWNERSHIP OF MANAGEMENT

The following table sets forth certain information with respect to the
beneficial ownership, as defined in Rule 13d-3 of the Securities Exchange Act of
1934, as amended, of our common stock as of April 30, 1999, by each of our
executive officers.

<TABLE>
<CAPTION>
PERCENTAGE OF
OUTSTANDING
SHARES OF
COMMON
COMMON STOCK STOCK
BENEFICIALLY AFTER
BENEFICIAL OWNERS OWNED(1) OFFERING
- ------------------------------------- ------------- -------------
<S> <C> <C>
Donald E. Nigbor..................... 321,632(2) 2.2%
Steven A. Barton..................... 31,170(3) (4)
Cary T. Fu........................... 342,010(5) 2.3%
</TABLE>

- ------------

(1) Unless otherwise noted, each person identified possesses sole voting and
dispositive power with respect to the shares of common stock listed,
subject to community property laws.

(2) Includes (i) 3,200 shares of common stock held by Mr. Nigbor's children as
to which shares of common stock Mr. Nigbor expressly disclaims beneficial
ownership, and (ii) 160,000 shares of common stock that may be acquired
upon the exercise of options that are currently exercisable.

(3) Includes 28,400 shares of common stock that may be acquired upon the
exercise of options that are currently exercisable.

(4) Less than 1%.

(5) Includes (i) 2,640 shares of common stock held by a certain family member
of Mr. Fu as custodian for his children under the Uniform Gifts to Minors
Act, as to which shares of common stock Mr. Fu expressly disclaims
beneficial ownership, (ii) 1,320 shares of common stock held by a certain
family member of Mr. Fu, as to which shares of common stock Mr. Fu
expressly disclaims beneficial ownership, and (iii) 160,000 shares of
common stock that may be acquired upon the exercise of options that are
currently exercisable.

26
<PAGE>
SELLING SHAREHOLDER

<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
BEFORE STOCK OFFERING AFTER STOCK OFFERING
---------------------- SHARES TO ---------------------
SELLING SHAREHOLDER SHARES PERCENTAGE BE SOLD SHARES PERCENTAGE
- ------------------------------------- --------- ---------- ---------- ------ ----------
<S> <C> <C> <C> <C> <C>
Mason & Hanger....................... 1,000,656 8.6% 1,000,656 -0- -0-
</TABLE>

DESCRIPTION OF CAPITAL STOCK

The following description of the material features of our capital stock is
intended as a summary only and is qualified in its entirety by reference to our
amended and restated articles of incorporation, a copy of which has been filed
as an exhibit to our report on Form 10-K for the year ended December 31, 1998,
which is incorporated herein by reference. See "Risk Factors -- Provisions in
our charter documents and state law may make it harder for others to obtain
control of Benchmark even though some shareholders might consider such a
development to be favorable."

COMMON STOCK

Our amended and restated articles of incorporation authorize us to issue
30,000,000 shares of common stock. There are currently outstanding 11,669,783
shares of common stock. Upon the issuance and sale of 3,000,000 shares of common
stock in this offering, we will have outstanding 14,669,783 shares of common
stock. In addition, we have issued options to purchase 2,291,245 shares of
common stock, of which options to purchase 656,805 shares are currently
exercisable.

Each share of common stock has an equal and ratable right to receive
dividends to be paid from our assets legally available therefor when, as and if
declared by the Board of Directors. We have never paid, and do not anticipate
that we will pay in the foreseeable future, cash dividends on the common stock.
In addition, the agreement relating to our credit facility and the purchase
agreement relating to our Senior Note currently restricts the amount of cash
dividends that we may pay on common stock. The holders of common stock have no
preemptive or other rights to subscribe for additional shares of common stock or
any other securities of Benchmark. Each share of common stock entitles the
holder thereof to one vote in the election of directors and on all other matters
submitted to a vote of our shareholders. The holders of common stock have no
right to cumulate their votes in the election of directors. In the event of our
dissolution or liquidation, the holders of common stock will be entitled to
share equally and ratably in our assets available for distribution after
payments are made to our creditors and the holders of any outstanding shares of
preferred stock. The outstanding shares of common stock are, and the shares of
common stock offered hereby, when issued, will be fully paid and non-assessable.

The common stock is traded on the New York Stock Exchange under the symbol
"BHE." The transfer agent and registrar for the common stock is Harris Trust
and Savings Bank, 88 Pine Street, New York, New York 10005.

PREFERRED STOCK

Our amended and restated articles of incorporation authorize us to issue
5,000,000 shares of preferred stock, par value $0.10 per share. We have
established and designated a series of our preferred stock known as Series A
Cumulative Junior Participating Preferred Stock, par value $0.10 per share,
consisting of an aggregate of 30,000 shares. None of this preferred series has
been issued.

In addition, the Board of Directors has the authority, without shareholder
approval, to cause the issuance of other preferred stock in one or more series,
with such designations, preferences, limitations and rights as the Board of
Directors may determine. We have not issued, and have no plans to issue, any
shares of preferred stock. If we were to do so, however, the provisions of the
preferred stock may include, among others, extraordinary voting, dividend,
redemption, conversion or exchange rights.

27
<PAGE>
SHAREHOLDER RIGHTS PLAN

On December 11, 1998, the Board of Directors adopted a shareholder rights
plan. Under this plan, a dividend of one preferred share purchase right (Right)
was declared for each outstanding share of common stock, payable December 21,
1998 to shareholders of record on that date. Each Right entitles shareholders to
buy one one-thousandth of a share of newly created Series A Cumulative Junior
Participating Preferred Stock at an exercise price of $155, subject to
adjustment in the event a person acquires, or makes a tender or exchange offer
for, 15% or more of the outstanding common stock. In such event, each Right
entitles the holder (other than the person acquiring 15% or more of the
outstanding common stock) to purchase shares of common stock with a market value
of twice the Right's exercise price. In addition, if a company acquires us in a
merger or other business combination, or if we sell more than 50% of our
consolidated assets or earning power, these rights will entitle our shareholders
(other than the acquiror) to purchase, for the exercise price, shares of the
common stock of the acquiring company or its parent having a market value of two
times the exercise price. At any time prior to such event, the Board of
Directors may redeem the Rights at one cent per Right. The Rights can be
transferred only with common stock and expire in ten years. The existence of the
Rights may, under certain circumstances, render more difficult or discourage
attempts to acquire us.

STATUTORY BUSINESS COMBINATION PROVISIONS

Our company is subject to Article 13 of the Texas Business Corporation Act
(Article 13) which, with certain exceptions, prohibits a Texas corporation from
engaging in a "business combination" (as defined in Article 13) with any
shareholder who is a beneficial owner of 20% or more of the corporation's
outstanding stock for a period of three years after such shareholder acquires
the 20% ownership position, unless: (1) the board of directors of the
corporation approves the transaction or the shareholder's acquisition of shares
prior to the acquisition or (2) two-thirds of the unaffiliated shareholders of
the corporation approve the transaction at a shareholders' meeting. Shares that
are issuable, but have not yet been issued, pursuant to options, conversion or
exchange rights or other agreements are not considered outstanding for purposes
of Article 13.

28
<PAGE>
UNDERWRITING

Subject to the terms and conditions stated in the underwriting agreement
dated the date hereof, each underwriter named below has severally agreed to
purchase, and we and the selling shareholder have agreed to sell to such
underwriter, the number of shares set forth opposite the name of such
underwriter.

<TABLE>
<CAPTION>
NAME NUMBER OF SHARES
- ---------------------------------------- ----------------
<S> <C>
Salomon Smith Barney Inc................
BancBoston Robertson Stephens Inc.......
Donaldson, Lufkin & Jenrette Securities
Corporation......................
SG Cowen Securities Corporation.........

----------------
Total.................... 4,000,656
----------------
</TABLE>

The underwriting agreement provides that the obligations of the several
underwriters to purchase the shares included in this offering are subject to
approval of certain legal matters by counsel and to certain other conditions.
The underwriters are obligated to purchase all the shares (other than those
covered by the over-allotment option described below) if they purchase any of
the shares.

The underwriters, for whom Salomon Smith Barney Inc., BancBoston Robertson
Stephens Inc., Donaldson, Lufkin & Jenrette Securities Corporation and SG Cowen
Securities Corporation are acting as representatives, propose to offer some of
the shares directly to the public at the public offering price set forth on the
cover page of this prospectus and some of the shares to certain dealers at the
public offering price less a concession not in excess of $ per share. The
underwriters may allow, and such dealers may reallow, a concession not in excess
of $ per share on sales to certain other dealers. If all of the shares are
not sold at the initial offering price, the representatives may change the
public offering price and the other selling terms.

Benchmark granted to the underwriters an option, exercisable for 30 days
from the date of this prospectus, to purchase up to 600,098 additional shares of
common stock at the public offering price less the underwriting discount. The
underwriters may exercise such option solely for the purpose of covering
over-allotments, if any, in connection with this offering. To the extent such
option is exercised, each underwriter will be obligated, subject to certain
conditions, to purchase a number of additional shares approximately
proportionate to such underwriter's initial purchase commitment.

We, our officers and our directors have agreed that, for a period of 90
days from the date of this prospectus, we will not, without the prior written
consent of Salomon Smith Barney Inc., dispose of or hedge any shares of our
common stock or any securities convertible into or exchangeable for our common
stock. Salomon Smith Barney Inc. in its sole discretion may release any of the
securities subject to these lock-up agreements at any time without notice.

The common stock is listed on the New York Stock Exchange under the symbol
"BHE."

29
<PAGE>
The following table shows the underwriting discounts and commissions to be
paid to the underwriters by Benchmark and the selling shareholder in connection
with this offering. These amounts are shown assuming both no exercise and full
exercise of the underwriters' option to purchase additional shares of common
stock.

<TABLE>
<CAPTION>
PAID BY BENCHMARK PAID BY SELLING SHAREHOLDER
---------------------------- ----------------------------
NO EXERCISE FULL EXERCISE NO EXERCISE FULL EXERCISE
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Per share............................... $ $ $ $
Total................................... $ $ $ $
</TABLE>

In connection with the offering, Salomon Smith Barney Inc., on behalf of
the underwriters, may purchase and sell shares of common stock in the open
market. These transactions may include over-allotment, syndicate covering
transactions and stabilizing transactions. Over-allotment involves syndicate
sales of common stock in excess of the number of shares to be purchased by the
underwriters in the offering, which creates a syndicate short position.
Syndicate covering transactions involve purchases of the common stock in the
open market after the distribution has been completed in order to cover
syndicate short positions. Stabilizing transactions consist of certain bids or
purchases of common stock made for the purpose of preventing or retarding a
decline in the market price of the common stock while the offering is in
progress.

The underwriters also may impose a penalty bid. Penalty bids permit the
underwriters to reclaim a selling concession from a syndicate member when
Salomon Smith Barney Inc., in covering syndicate short positions or making
stabilizing purchases, repurchases shares originally sold by that syndicate
member.

Any of these activities may cause the price of the common stock to be
higher than the price that otherwise would exist in the open market in the
absence of such transactions. These transactions may be effected on the New York
Stock Exchange on in the over-the-counter market, or otherwise and, if
commenced, may be discontinued at any time.

The underwriters or their affiliates have performed certain investment
banking and advisory services for Benchmark from time to time for which they
have received customary fees and expenses. The underwriters or their affiliates
may, from time to time, engage in transactions with and perform services for
Benchmark in the ordinary course of their business. Some of the underwriters may
be lenders under our credit facility that is being repaid with certain of the
proceeds of the offering.

We and the selling shareholder estimate that our respective portions of the
total expenses of this offering (excluding underwriting discounts and
commissions) will be $500,000 and $7,500.

We and the selling shareholder have agreed to indemnify the underwriters
against certain liabilities, including liabilities under the Securities Act of
1933, or to contribute to payments the underwriters may be required to make in
respect of any of those liabilities.

LEGAL MATTERS

Certain legal matters including the validity of the shares of common stock
offered hereby are being passed upon for us by Bracewell & Patterson, L.L.P.,
Houston, Texas. Certain legal matters in connection with the offering are being
passed upon for the underwriters by Cravath, Swaine & Moore, New York, New York.
Certain legal matters in connection with the offering are being passed upon for
the selling shareholder by Wyatt Tarrant & Combs, Louisville, Kentucky.

EXPERTS

The consolidated financial statements of Benchmark Electronics, Inc. and
subsidiaries as of December 31, 1998 and 1997 and for each of the years in the
three-year period ended December 31, 1998, have been included and incorporated
by reference herein in reliance on the report of KPMG LLP, independent certified
public accountants, appearing elsewhere herein and incorporated by reference
herein, and upon the authority of said firm as experts in accounting and
auditing.

<PAGE>
INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Audited Annual Financial Statements:
Independent Auditors' Report.... F-2
Consolidated Balance Sheets as
of December 31, 1998 and
1997........................... F-3
Consolidated Statements of
Income for the Years Ended
December 31, 1998, 1997 and
1996........................... F-4
Consolidated Statements of
Shareholders' Equity for the
Years Ended
December 31, 1998, 1997 and
1996........................... F-5
Consolidated Statements of Cash
Flows for the Years Ended
December 31, 1998, 1997 and
1996........................... F-6
Notes to Consolidated Financial
Statements..................... F-7
Unaudited Interim Financial
Statements:
Condensed Consolidated Balance
Sheet as of March 31, 1999..... F-18
Condensed Consolidated
Statements of Income for the
Three Months Ended
March 31, 1999 and 1998....... F-19
Condensed Consolidated
Statements of Cash Flows for
the Three Months Ended
March 31, 1999 and 1998....... F-20
Notes to Condensed Consolidated
Financial Statements........... F-21
</TABLE>

F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT

The Board of Directors and Shareholders
Benchmark Electronics, Inc.:

We have audited the accompanying consolidated balance sheets of Benchmark
Electronics, Inc. and subsidiaries as of December 31, 1998 and 1997, and the
related consolidated statements of income, shareholders' equity, and cash flows
for each of the years in the three-year period ended December 31, 1998. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Benchmark
Electronics, Inc. and subsidiaries as of December 31, 1998 and 1997, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1998, in conformity with generally accepted
accounting principles.

KPMG LLP

Houston, Texas
January 22, 1999

F-2
<PAGE>
BENCHMARK ELECTRONICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------
1998 L997
--------------- ---------------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents....... $ 23,076,582 $ 21,029,347
Accounts receivable, net........ 57,178,757 39,772,435
Income taxes receivable......... 1,120,343 313,594
Inventories..................... 53,718,247 61,133,963
Prepaid expenses and other
assets........................ 1,896,888 1,545,110
Deferred tax asset.............. 2,488,328 1,359,205
--------------- ---------------
Total current assets....... 139,479,145 125,153,654
Property, plant and equipment........ 80,826,164 54,061,241
Accumulated depreciation............. (35,264,179) (23,245,264)
--------------- ---------------
Net property, plant and
equipment............... 45,561,985 30,815,977
Goodwill, net........................ 48,906,481 22,680,551
Marketable securities................ -- 11,430,757
Other................................ 7,948,086 240,859
--------------- ---------------
$ 241,895,697 $ 190,321,798
=============== ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current installments of
long-term debt................ $ 8,199,910 $ 155,505
Accounts payable................ 37,046,161 31,694,123
Accrued liabilities............. 7,968,412 5,424,939
--------------- ---------------
Total current
liabilities............. 53,214,483 37,274,567
--------------- ---------------
Long-term debt, excluding current
installments....................... 46,110,646 30,329,828
Deferred tax liability............... 4,569,654 1,845,846
Shareholders' equity:
Preferred shares, $.10 par
value; 5,000,000 shares
authorized,
none issued................... -- --
Common shares, $.10 par value;
30,000,000 shares authorized:
issued 11,676,967 and
11,623,252, respectively;
outstanding 11,627,483 and
11,573,768, respectively...... 1,162,748 1,157,376
Additional paid-in capital...... 70,159,115 69,407,600
Retained earnings............... 66,800,001 50,427,531
Less treasury shares, at cost,
49,484 shares................. (120,950) (120,950)
--------------- ---------------
Total shareholders'
equity.................. 138,000,914 120,871,557
Commitments and contingencies...
--------------- ---------------
$ 241,895,697 $ 190,321,798
=============== ===============
</TABLE>

See accompanying notes to consolidated financial statements.

F-3
<PAGE>
BENCHMARK ELECTRONICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------
1998 1997 1996
--------------- --------------- ---------------
<S> <C> <C> <C>
Sales................................ $ 524,065,077 $ 325,229,015 $ 201,296,320
Cost of sales........................ 472,354,251 285,630,163 177,981,328
--------------- --------------- ---------------
Gross profit............... 51,710,826 39,598,852 23,314,992
Selling, general and administrative
expenses........................... 17,680,338 12,817,317 7,227,833
Amortization of goodwill............. 3,310,661 1,669,740 695,722
--------------- --------------- ---------------
Income from operations..... 30,719,827 25,111,795 15,391,437
Interest expense..................... (4,393,528) (2,472,183) (1,441,834)
Interest income...................... 479,075 1,162,958 442,384
Other income......................... 84,663 149,276 90,880
--------------- --------------- ---------------
Income before income
taxes................... 26,890,037 23,951,846 14,482,867
Income tax expense................... 10,517,567 8,862,183 5,619,352
--------------- --------------- ---------------
Net income................. $ 16,372,470 $ 15,089,663 $ 8,863,515
=============== =============== ===============
Earnings per share:
Basic........................... $ 1.41 $ 1.31 $ 0.99
Diluted......................... $ 1.35 $ 1.26 $ 0.96
=============== =============== ===============
Weighted average number of shares
outstanding:
Basic........................... 11,594,271 11,508,407 8,976,192
Diluted......................... 12,098,349 12,003,741 9,217,801
=============== =============== ===============
</TABLE>

See accompanying notes to consolidated financial statements.

F-4
<PAGE>
BENCHMARK ELECTRONICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
ADDITIONAL TOTAL
COMMON PAID-IN RETAINED TREASURY SHAREHOLDERS'
SHARES SHARES CAPITAL EARNINGS SHARES EQUITY
----------- ----------- ------------ ------------ ---------- --------------
<S> <C> <C> <C> <C> <C> <C>
Balances, December 31, 1995.......... 8,042,800 $ 804,280 $ 19,466,385 $ 26,474,353 $ (120,950) $ 46,624,068
Common shares issued in public
offering, net of expenses.......... 2,033,000 203,300 28,287,841 -- -- 28,491,141
Stock options exercised.............. 51,340 5,134 402,310 -- -- 407,444
Federal tax benefit of stock options
exercised.......................... -- -- 88,536 -- -- 88,536
Acquisition of EMD Technologies,
Inc................................ 1,349,928 134,992 20,375,814 -- -- 20,510,806
Net income........................... -- -- -- 8,863,515 -- 8,863,515
Effect of difference between fair
value and cost of shares released
from collateral.................... -- -- 13,904 -- -- 13,904
----------- ----------- ------------ ------------ ---------- --------------
Balances, December 31, 1996.......... 11,477,068 1,147,706 68,634,790 35,337,868 (120,950) 104,999,414
Stock options exercised.............. 96,700 9,670 669,927 -- -- 679,597
Federal tax benefit of stock options
exercised.......................... -- -- 154,820 -- -- 154,820
Net income........................... -- -- -- 15,089,663 -- 15,089,663
Other................................ -- -- (51,937) -- -- (51,937)
----------- ----------- ------------ ------------ ---------- --------------
Balances, December 31, 1997.......... 11,573,768 1,157,376 69,407,600 50,427,531 (120,950) 120,871,557
Stock options exercised.............. 53,715 5,372 487,870 -- -- 493,242
Federal tax benefit of stock options
exercised.......................... -- -- 263,645 -- -- 263,645
Net income........................... -- -- -- 16,372,470 -- 16,372,470
----------- ----------- ------------ ------------ ---------- --------------
Balances, December 31, 1998.......... 11,627,483 $ 1,162,748 $ 70,159,115 $ 66,800,001 $ (120,950) $138,000,914
=========== =========== ============ ============ ========== ==============
</TABLE>

See accompanying notes to consolidated financial statements.

F-5
<PAGE>
BENCHMARK ELECTRONICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------
1998 1997 1996
---------------- ---------------- ----------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income...................... $ 16,372,470 $ 15,089,663 $ 8,863,515
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and
amortization............... 13,306,975 10,150,586 5,723,922
Amortization of premiums on
marketable securities...... 46,026 342,193 25,940
Deferred income taxes......... 2,305,482 (314,801) 408,346
Federal tax benefit of stock
options exercised.......... 263,645 154,820 88,536
Amortization of goodwill...... 3,310,661 1,669,740 695,722
Gain on the sale of property,
plant and equipment........ (3,696) (86,973) (42,878)
ESOP shares contribution...... -- -- 13,904
Changes in operating assets
and liabilities, net of
effects from acquisitions
of businesses:
Accounts receivable........ 7,403,982 (589,806) (10,119,586)
Income taxes receivable.... (806,749) 74,270 994,179
Inventories................ 30,930,316 (13,033,625) 3,131,340
Prepaid expenses and other
assets.................. (353,729) (729,367) (124,259)
Accounts payable........... (15,369,675) 7,341,651 1,782,239
Accrued liabilities........ (552,417) (779,596) 895,208
---------------- ---------------- ----------------
Net cash provided by
operations............ 56,853,291 19,288,755 12,336,128
Cash flows from investing activities:
Additions to property, plant and
equipment..................... (12,204,071) (10,352,112) (8,684,400)
Additions to capitalized
software...................... (7,383,410) -- --
Proceeds from the sale of
property, plant and
equipment..................... 182,810 168,912 75,281
Acquisitions, net of cash
acquired...................... (70,679,312) -- (30,833,300)
Proceeds from the sale of
marketable securities......... 11,384,731 -- --
Purchase of marketable
securities.................... -- (2,264,716) (9,534,174)
---------------- ---------------- ----------------
Net cash used in
investing
activities............ (78,699,252) (12,447,916) (48,976,593)
Cash flows from financing activities:
Net proceeds from public
offering of common shares..... -- (51,937) 28,491,141
Proceeds from issuance of
long-term debt................ 40,000,000 -- 30,000,000
Principal payments on long-term
debt.......................... (16,174,777) (239,165) (10,928,329)
Debt issuance costs............. (425,269) -- (315,114)
Proceeds from stock options
exercised..................... 493,242 679,597 407,444
---------------- ---------------- ----------------
Net cash provided by
financing activities.. 23,893,196 388,495 47,655,142
---------------- ---------------- ----------------
Net increase in cash and cash
equivalents........................ 2,047,235 7,229,334 11,014,677
---------------- ---------------- ----------------
Cash and cash equivalents at
beginning of year.................. 21,029,347 13,800,013 2,785,336
---------------- ---------------- ----------------
Cash and cash equivalents at end of
year............................... $ 23,076,582 $ 21,029,347 $ 13,800,013
================ ================ ================
Supplemental disclosures of cash flow
information:
Income taxes paid............... $ 8,755,264 $ 8,491,894 $ 4,171,224
================ ================ ================
Interest paid................... $ 4,264,706 $ 2,537,089 $ 369,021
================ ================ ================
</TABLE>

See accompanying notes to consolidated financial statements.

F-6

<PAGE>
BENCHMARK ELECTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(A) BUSINESS

Benchmark Electronics, Inc. (the Company) is a Texas corporation which
provides contract manufacturing and design services to original equipment
manufacturers (OEMs) in select industries, including enterprise computer,
telecommunications, medical device, industrial control, and testing and
instrumentation.

(B) PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the financial statements of
Benchmark Electronics, Inc. and its wholly owned subsidiaries. All significant
intercompany balances and transactions have been eliminated in consolidation.

The Company considers all highly liquid debt instruments with an original
maturity of three months or less to be cash equivalents.

(D) MARKETABLE SECURITIES

Management determines the appropriate classification of its investments in
debt and equity securities at the time of purchase and reevaluates such
determination at each balance sheet date. Debt securities for which the Company
does not have the intent or ability to hold to maturity are classified as
available for sale. Securities available for sale are carried at fair value,
with the unrealized gains and losses, net of tax, reported in shareholders'
equity as other comprehensive income. Held-to-maturity securities are recorded
at amortized cost, adjusted for the amortization or accretion of premiums or
discounts to maturity.

Such amortization and interest are included in interest income. Realized
gains and losses from the sale of available for sale securities are included in
other income or expense and are determined on a specific identification method.

At December 31, 1997, the Company's investments in marketable securities
consisted of Texas state guaranteed obligation bonds with an amortized cost of
$4,831,833, fair value of $4,851,000 and unrealized gain of $19,167; Lynnwood,
Washington guaranteed obligation bonds with an amortized cost of $4,359,096,
fair value of $4,362,000 and unrealized gain of $2,904; Austin, Texas guaranteed
obligation bonds with an amortized cost of $1,213,257, fair value of $1,212,000,
and unrealized loss of $1,257; and Maryland state guaranteed obligation bonds
with an amortized cost of $1,026,571, fair value of $1,032,000, and unrealized
gain of $5,429. These investments were sold during 1998 in connection with the
purchase of Lockheed Commercial Electronics Company (LCEC).

(E) INVENTORIES

Inventories include material, labor and overhead and are stated at the
lower of cost (first-in, first-out) or market.

(F) PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are stated at cost. Depreciation is
calculated on the straight-line method over the useful lives of the assets,
which range from three to thirty years. Leasehold improvements are amortized on
the straight-line method over the shorter of the useful life of the improvement
or the remainder of the lease term.

In assessing and measuring impairment of long-lived assets, the Company
applies the provisions of Statement of Financial Accounting Standards (SFAS) No.
121, "Accounting for the Impairment of Long-

F-7
<PAGE>
BENCHMARK ELECTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Lived Assets and for Long-Lived Assets to Be Disposed Of". This Statement
requires that long-lived assets and certain identifiable intangibles be reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable.

(G) GOODWILL AND OTHER ASSETS

Goodwill, which represents the excess of purchase price over fair value of
net assets acquired, is amortized on a straight-line basis over the period of
expected benefit of 15 years. The accumulated amortization of goodwill at
December 31, 1998 and 1997 was $5,676,123 and $2,365,462, respectively. The
carrying value of goodwill will be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of the acquired
assets may not be recoverable. The Company assesses the recoverability of this
intangible asset by determining whether the amortization of the goodwill balance
over its remaining life can be recovered through undiscounted future operating
cash flows of the acquired operation. The amount of goodwill impairment, if any,
is measured based on projected discounted future operating cash flows compared
to the carrying value of goodwill. Other assets consists of capitalized software
costs, which are amortized over the estimated useful life of the related
software and deferred financing costs, which are amortized over the life of the
related debt. During 1998, $7,383,410 of software costs was capitalized in
connection with the new ERP system implementation. The accumulated amortization
of deferred financing costs at December 31, 1998 and 1997 was $207,311 and
$85,521, respectively.

(H) EARNINGS PER SHARE

Basic earnings per share is computed using the weighted average number of
shares outstanding. Diluted earnings per share is computed using the weighted
average number of shares outstanding adjusted for the incremental shares
attributed to outstanding stock options to purchase common stock. Incremental
shares of 504,078, 495,334, and 241,609 in 1998, 1997 and 1996, respectively,
were used in the calculation of diluted earnings per share. Options to purchase
3,000 and 124,000 shares of common stock in 1998 and 1997, respectively, were
not included in the computation of diluted earnings per share because the option
exercise price was greater than the average market price of the common stock.

(I) REVENUE RECOGNITION

Revenues are recognized at the time the circuit boards are shipped to the
customer, for both turnkey and consignment method sales. Under the consignment
method, OEMs provide the Company with the electronic components to be assembled,
and the Company recognizes revenue only on the labor used to assemble the
product.

(J) INCOME TAXES

Income taxes are accounted for under the asset and liability method.
Deferred income taxes are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. The effect on deferred taxes of a change in tax rates
is recognized in income in the period that includes the enactment date.

(K) STOCK OPTION PLANS

On January 1, 1996, the Company adopted the provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation", which permits entities to recognize
as expense over the vesting period the fair value of all stock-based awards on
the date of grant. Alternately, SFAS No. 123 also allows entities to continue to
apply the provisions of Accounting Principles Board (APB) Opinion No. 25
"Accounting for Stock Issued to Employees", and provide pro forma net income
and pro forma earnings per share disclosures for

F-8
<PAGE>
BENCHMARK ELECTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

employee stock option grants made in 1995 and future years as if the
fair-value-based method defined in SFAS No. 123 had been applied. The Company
has elected to continue to apply the provisions of APB Opinion No. 25 and
provide the pro forma disclosure provisions of SFAS No. 123. Under APB Opinion
No. 25, compensation expense is recorded on the date of grant only if the
current market price of the underlying stock exceeds the exercise price.

(L) USE OF ESTIMATES

Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these financial statements in
accordance with generally accepted accounting principles. Actual results could
differ from those estimates.

(M) FAIR VALUES OF FINANCIAL INSTRUMENTS

The fair values of the Company's cash equivalents, accounts receivable,
accrued liabilities, and accounts payable approximated their carrying values due
to the short-term maturities of these instruments. The estimated fair value of
long-term debt approximates its carrying value based on the Company's current
incremental borrowing rates for similar types of borrowing agreements.

(N) COMPREHENSIVE INCOME

On January 1, 1998, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income". SFAS No. 130 establishes standards for reporting and
presentation of comprehensive income and its components in a full set of
financial statements. The Company currently does not have any items that require
additional presentation of other comprehensive income. Accordingly, adoption of
SFAS No. 130 did not affect the Company's consolidated financial statements.

(O) BUSINESS SEGMENTS

On January 1, 1998, the Company adopted SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information." The Company currently
operates in a single business segment. Accordingly, adoption of SFAS No. 131 did
not affect the Company's consolidated financial statements.

(P) CAPITALIZED SOFTWARE COSTS

On January 1, 1998, the Company adopted the American Institute of Certified
Public Accountants (AICPA) Statement of Position (SOP) 98-1, "Accounting for
the Costs of Computer Software Developed or Obtained for Internal Use" on a
prospective basis. SOP 98-1 establishes criteria for capitalizing certain costs
related to internal-use software. The adoption of SOP 98-1 did not have a
material impact on the Company's financial position, results of operations or
liquidity.

(Q) RECENTLY ENACTED ACCOUNTING PRONOUNCEMENTS

In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133
establishes methods of accounting for derivative financial instruments and
hedging activities related to those instruments as well as other hedging
activities. The Company expects that the adoption of SFAS No. 133 will have no
material impact on its financial position, results of operations or liquidity.

In April 1998, the AICPA issued SOP 98-5, "Reporting on the Costs of
Start-up Activities." SOP 98-5 requires that all start-up costs related to new
operations must be expensed as incurred. In addition, all start-up costs that
were capitalized in the past must be expensed when SOP 98-5 is adopted. The
Company expects that the adoption of SOP 98-5 will have no material impact on
its financial position, results of operations or cash flows. The Company will be
required to implement SOP 98-5 in 1999.

F-9
<PAGE>
BENCHMARK ELECTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 2 -- ACQUISITIONS

On February 23, 1998, the Company completed the acquisition of LCEC for
$70,679,312 in cash. LCEC, situated in Hudson, New Hampshire, provides a broad
range of services including printed circuit board assembly and test, system
assembly and test, prototyping, depot repair, materials procurement, and
engineering support services. The transaction was accounted for under the
purchase method of accounting, and accordingly, the results of operations of
LCEC since February 23, 1998 have been included in the consolidated statements
of income. The acquisition resulted in goodwill of $29,536,591 that is being
amortized on a straight-line basis over 15 years.

The net purchase price was allocated as follows:

<TABLE>
<S> <C>
Working capital, other than cash..... $ 30,574,621
Property, plant and equipment........ 15,904,987
Goodwill............................. 29,536,591
Other liabilities.................... (3,095,890)
Deferred income taxes................ (2,240,997)
--------------
Purchase price, net of cash
received................... $ 70,679,312
==============
</TABLE>

The following unaudited summary pro forma condensed financial information
reflects the acquisition of LCEC as if the acquisition had occurred on January
1, 1997 for purposes of the consolidated statements of income. The summary pro
forma information is not necessarily representative of what the Company's
results of operations would have been had the acquisition in fact occurred on
January 1, 1997 and is not intended to project the Company's results of
operations for any future period or date.

<TABLE>
<CAPTION>
1998 1997
---------- ---------
(IN THOUSANDS, EXCEPT
PER SHARE DATA)
<S> <C> <C>
Net sales............................ $ 548,335 607,439
Gross Profit......................... 50,091 52,069
Income from operations............... 27,004 25,615
Net income........................... 13,796 12,453
Earnings per share:
Basic........................... $1.19 1.08
Diluted......................... $1.14 1.04
Weighted average number of shares
outstanding:
Basic........................... 11,594 11,508
Diluted......................... 12,098 12,003
</TABLE>

On July 30, 1996, the Company completed its acquisition of EMD
Technologies, Inc. (EMD). This business, headquartered in Winona, Minnesota, was
acquired for 1,349,928 shares of common stock, $30,447,033 in cash, and the
Company paid $2,208,136 in acquisition costs. The transaction was accounted for
under the purchase method of accounting, and accordingly, the results of
operations of EMD since July 30, 1996 have been included in the consolidated
statements of income. The acquisition resulted in goodwill of $25,046,013, which
is being amortized on a straight line basis over 15 years.

F-10
<PAGE>
BENCHMARK ELECTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The net purchase price was allocated as follows:

<TABLE>
<S> <C>
Working capital, other than cash..... $ 10,638,671
Property, plant and equipment........ 17,598,785
Other assets......................... 12,379
Goodwill............................. 25,046,013
Other liabilities.................... (1,951,742)
--------------
Purchase price, net of cash
received...................... $ 51,344,106
==============
Net cash portion of purchase price... $ 30,833,300
Common stock issued.................. 20,510,806
--------------
Purchase price, net of cash
received........................... $ 51,344,106
==============
</TABLE>

NOTE 3 -- INVENTORIES

Inventory costs are summarized as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1998 1997
-------------- ------------
Raw materials........................ $ 39,230,450 41,837,205
<S> <C> <C>
Work in process...................... 14,487,797 19,296,758
-------------- ------------
$ 53,718,247 61,133,963
============== ============
</TABLE>

NOTE 4 -- PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1998 1997
-------------- ------------
Land................................. $ 391,969 391,969
<S> <C> <C>
Buildings............................ 8,441,221 8,417,497
Machinery and equipment.............. 64,189,215 38,025,436
Furniture and fixtures............... 6,856,395 6,480,183
Vehicles............................. 14,383 14,383
Leasehold improvements............... 750,111 731,773
Construction in progress............. 182,870 --
-------------- ------------
$ 80,826,164 54,061,241
============== ============
</TABLE>

NOTE 5 -- BORROWING FACILITIES

Long-term debt consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1998 1997
-------------- ------------
<S> <C> <C>
Senior note.......................... $ 30,000,000 30,000,000
Term loan............................ 24,000,000 --
Other................................ 310,556 485,333
-------------- ------------
Total long-term debt............ 54,310,556 30,485,333
Less current installments............ 8,199,910 155,505
-------------- ------------
Long-term debt....................... $ 46,110,646 30,329,828
============== ============
</TABLE>

F-11
<PAGE>
BENCHMARK ELECTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

In order to finance a portion of the cash consideration for the acquisition
of EMD, the Company issued a $30 million, 8.02% Senior Note due 2006 ("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.

In connection with the acquisition of LCEC on February 23, 1998, the
Company obtained $40 million through borrowings under a five-year term loan (the
Term Loan) with a commercial bank. Principal on the Term Loan is payable in
quarterly installments of $2.0 million beginning June 30, 1998 with a final
installment of the unpaid principal amount due March 31, 2003. The Term Loan
bears interest, at the Company's option, at either the bank's Eurodollar rate
plus .625% to 1.375% or its prime rate, and interest is payable quarterly. The
margin on the Eurodollar rate fluctuates with the Company's ratio of debt to
earnings before interest, taxes, depreciation and amortization (EBITDA). The
Term Loan includes customary affirmative and negative covenants and restricts
the Company's ability to incur additional indebtedness and to pay dividends. As
of December 31, 1998, the Company had $24 million outstanding under the Term
Loan bearing interest at rates ranging from 5.8125% to 6.0625%.

The aggregate maturities of long-term debt for each of the five years
subsequent to December 31, 1998 are as follows: 1999, $8,199,910; 2000,
$8,019,693; 2001, $13,020,699; 2002, $5,021,756; 2003, $5,022,867 and thereafter
$15,025,631.

The Company has a $25 million revolving line of credit with a commercial
bank. The Company is entitled to borrow under the line of credit up to the
lesser of $25 million or the sum of 75% of its eligible accounts receivable and
25% of its eligible inventories. Interest on the line of credit is payable
quarterly, at the Company's option, at either the bank's Eurodollar rate plus
.625% to 1.375% or its prime rate. A commitment fee of 0.25% 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 March 31, 2003. As of
December 31, 1998 and 1997, the Company had no borrowings outstanding under this
line of credit.

NOTE 6 -- COMMITMENTS

The Company has several noncancelable operating leases for office space,
manufacturing facilities and manufacturing equipment that expire through 2006.
Rental expense for each of the years in the three-year period ended December 31,
1998 was $2,493,146, $1,354,607 and $921,526, respectively.

The Company leases manufacturing and office facilities in Minnesota from a
partnership whose partners include stockholders and a director of the Company.
These operating leases have initial terms of eight to ten years, expiring
through December 2006 with annual renewals thereafter. Total rent expense
associated with these leases for the years ended December 31, 1998, 1997 and
1996 was $828,900, $828,900 and $413,784, respectively.

F-12
<PAGE>
BENCHMARK ELECTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Aggregate annual rental payments on future lease commitments at December
31, 1998 were as follows:

<TABLE>
<S> <C>
1999................................. $ 2,043,007
2000................................. 1,651,734
2001................................. 1,613,734
2002................................. 1,463,734
2003................................. 1,152,123
Thereafter........................... 2,150,425
--------------
$ 10,074,757
==============
</TABLE>

NOTE 7 -- COMMON STOCK AND STOCK OPTION PLANS

During 1996, the Company issued 2,033,000 shares of common stock in a
public offering for net proceeds of $28,491,141.

The Company's stock option plan authorizes the Company, upon recommendation
of the compensation committee of the Board of Directors, to grant options to
purchase a total of 3,200,000 shares of the Company's common stock to key
employees of the Company.

The stock option plan provides for the discretionary granting by the
Company of "incentive stock options" within the meaning of Section 422A of the
Internal Revenue Code of 1986, as amended, as well as nonqualified stock
options. The exercise price of any incentive stock option must not be less than
the fair market value of the common stock on the date of grant. The stock
options will terminate no later than 10 years after the date of grant. Although
options may vest in increments over time, they historically have become 20%
vested two years after the options are granted and 100% vested after 5 years.

In December of 1994, the Board of Directors of the Company adopted the
Benchmark Electronics, Inc., 1994 Stock Option Plan for Non-Employee Directors
(the "Plan") for the benefit of members of the Board of Directors of the
Company or its Affiliates who are not employees of the Company or its Affiliates
(as defined in the Plan). The aggregate number of shares of Common Stock for
which options may be granted under the Plan is 200,000.

Under the terms of the Plan, each member of the Board of Directors of the
Company or its Affiliates who was not an employee of the Company or any of its
Affiliates on the date of the grant (a "Non-Employee Director") will receive a
grant of an option to purchase 3,000 shares of the Company's Common Stock upon
the date of his election or re-election to the Board of Directors. Additionally,
any Non-Employee Director who was a director on the date the Board of Directors
adopted the Plan received (a) an option to purchase 6,000 shares of Common Stock
for the fiscal year in which the Plan was adopted by the Board of Directors and
(b) an option to purchase shares of Common Stock in amount equal to (i) 6,000,
multiplied by (ii) the number of consecutive fiscal years (immediately preceding
the fiscal year during which the Plan was adopted) that the individual served as
a director of the Company, provided that the number under clause (ii) shall not
exceed three (3). During 1998, 1997 and 1996, pursuant to the Plan, 12,000,
24,000 and 30,000 options, respectively, were granted to Directors to purchase
shares of Common Stock at an exercise price of $21.38, $16.32 and $14.69 per
share, respectively.

F-13
<PAGE>
BENCHMARK ELECTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following table summarizes the activities relating to the Company's
stock option plans:

<TABLE>
<CAPTION>
WEIGHTED
NUMBER OF AVERAGE
SHARES EXERCISE PRICE
--------- --------------
<S> <C> <C>
Balance at December 31, 1995......... 801,200 $ 9.85
Granted......................... 653,000 $14.43
Exercised....................... (51,340) $ 8.13
Canceled........................ (45,200) $13.80
--------- --------------
Balance at December 31, 1996......... 1,357,660 $12.00
Granted......................... 426,000 $19.27
Exercised....................... (96,700) $ 7.03
Canceled........................ (96,800) $15.95
--------- --------------
Balance at December 31, 1997......... 1,590,160 $14.11
Granted......................... 653,000 $20.99
Exercised....................... (53,715) $ 9.18
Canceled........................ (80,000) $17.94
--------- --------------
Balance at December 31, 1998......... 2,109,445 $16.22
========= ==============
</TABLE>

The following table summarizes information concerning currently outstanding
and exercisable options:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
----------------------------------------- OPTIONS EXERCISABLE
WEIGHTED -----------------------
AVERAGE WEIGHTED WEIGHTED
RANGE OF OUTSTANDING AVERAGE AVERAGE
EXERCISE NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
PRICES OUTSTANDING LIFE PRICE EXERCISABLE PRICE
- ------------------------------------- ------------- ------------ -------- ----------- --------
$4.38-$10............................ 170,200 4.16 $ 7.37 170,200 $ 7.37
<S> <C> <C> <C> <C> <C>
$10-$15.............................. 887,245 6.71 $13.18 424,785 $12.49
$15-$20.............................. 532,000 8.41 $17.40 39,200 $15.88
$20-$25.............................. 393,000 8.94 $21.99 12,000 $21.35
$25-$30.............................. 127,000 8.52 $26.50 -- --
------------- -----------
2,109,445 646,185
============= ===========
</TABLE>

At December 31, 1998, the range of exercise prices and weighted average
remaining contractual life of outstanding options was $4.38-$26.88 and 7.74
years, respectively.

At December 31, 1998, 1997 and 1996, the number of options exercisable was
646,185, 492,920 and 500,340, respectively, and the weighted average exercise
price of those options was $11.51, $10.30 and $9.20, respectively.

The Company applies APB Opinion No. 25 in accounting for its stock option
plans and, accordingly, no compensation cost has been recognized for its stock
options in the financial statements. Had the Company determined compensation
cost based on the fair value at the grant date for its stock options under SFAS
No. 123, the Company's net income would have been approximately $13,916,901, or
$1.15 per share diluted during 1998, $13,396,245, or $1.11 per share diluted
during 1997, and $7,851,515, or $0.85 per share diluted during 1996. Pro forma
net income reflects only options granted since 1995. The weighted average fair
value of the options granted during 1998, 1997, and 1996 is estimated as $6.41,
$8.55 and $5.23, respectively, on the date of grant using the Black-Scholes
option-pricing model with the following

F-14
<PAGE>
BENCHMARK ELECTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

assumptions: no dividend yield for all years, volatility of 30% for all years,
risk-free interest rate of 4.33% to 5.86% in 1998, 5.46% to 6.57% in 1997 and
5.31% to 6.57% in 1996, assumed annual forfeiture rate of 5% for all years, and
an expected life of 4 years in 1998 and 5 years in 1997 and 1996.

NOTE 8 -- INCOME TAXES

Income tax expense (benefit) consists of:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------
1998 1997 1996
-------------- ----------- -----------
<S> <C> <C> <C>
Federal -- current................... $ 7,275,581 8,178,203 4,322,471
State -- current..................... 936,504 998,781 888,535
Federal/State -- deferred............ 2,305,482 (314,801) 408,346
-------------- ----------- -----------
$ 10,517,567 8,862,183 5,619,352
============== =========== ===========
</TABLE>

Income tax expense differed from the amounts computed by applying the U.S.
federal statutory income tax rate to pretax income as a result of the following:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------
1998 1997 1996
-------------- ----------- -----------
<S> <C> <C> <C>
Tax at statutory rate................ $ 9,411,513 8,383,146 4,924,175
State taxes, net of federal
benefit............................ 608,728 649,208 586,433
Tax exempt interest.................. (165,288) (386,658) (49,882)
Tax benefit from use of foreign sales
corporation........................ (349,727) (393,839) (139,218)
Effect of foreign operations......... 132,364 -- --
Amortization of goodwill............. 1,122,751 562,413 236,545
Other................................ (242,774) 47,913 61,299
-------------- ----------- -----------
Total income tax expense............. $ 10,517,567 8,862,183 5,619,352
============== =========== ===========
</TABLE>

The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December 31,
1998 and 1997 are presented below:

<TABLE>
<CAPTION>
1998 1997
-------------- ------------
<S> <C> <C>
Deferred tax assets:
Carrying values of
inventories................... $ 1,358,217 710,124
Accrued liabilities deductible
for tax purposes on a cash
basis......................... 1,130,111 649,081
-------------- ------------
2,488,328 1,359,205
Less valuation allowance............. -- --
-------------- ------------
Net deferred tax assets.... $ 2,488,328 1,359,205
============== ============
Deferred tax liabilities:
Plant and equipment, due to
differences in depreciation... $ (4,442,867) (1,797,228)
Other................................ (126,787) (48,618)
-------------- ------------
Gross deferred tax liability......... (4,569,654) (1,845,846)
-------------- ------------
Net deferred tax
liability............... $ (2,081,326) (486,641)
============== ============
</TABLE>

F-15
<PAGE>
BENCHMARK ELECTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 9 -- MAJOR CUSTOMERS

The Company's customers operate in businesses associated with rapid
technological change and consequent product obsolescence. Developments adverse
to the electronics industry, the Company's customers or their products could
impact the Company's overall credit risk.

The Company extends credit based on evaluation of its customers' financial
condition and generally does not require collateral or other security from its
customers and would incur an accounting loss equal to the carrying value of the
accounts receivable if its customer failed to perform according to the terms of
the credit arrangement.

Sales to major customers were as follows for the indicated periods:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1998 1997 1996
---------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Customer A........................... $ 148,674 -- --
Customer B........................... 70,908 42,983 28,638
Customer C........................... 58,424 120,500 33,680
Customer D........................... 19,033 13,381 8,938
Customer E........................... 18,919 -- --
</TABLE>

In 1998, the Company had export sales of approximately $87 million to
Europe, $2 million to Canada, $92,000 to Asia, and $8,000 to Australia from the
Company's United States operations. In 1997 and 1996, the Company had export
sales of approximately $86 million and $29 million, respectively, to Europe from
the Company's United States operations.

NOTE 10 -- EMPLOYEE BENEFIT PLANS

The Company has a defined contribution plan qualified under Section 401(k)
of the Internal Revenue Code for the benefit of its employees. The Plan covers
all employees with at least one year of service. The Company has agreed to
contribute an amount equal to 50% of each participant's contributions to the
extent such participant's contribution does not exceed 4% of their compensation
for the year and 1% of each participant's compensation. A participant's
contribution may not exceed 20% of annual compensation, or the maximum amount
allowed as determined by the Internal Revenue Code. The Company may also make
discretionary contributions to the plan. During 1998, 1997 and 1996 the Company
made contributions to the plan of approximately $1,098,000, $689,000 and
$430,000, respectively.

Effective May 6, 1992, the Company adopted an Incentive Bonus Plan ("Bonus
Plan") for the benefit of its employees, including executive officers. The
Bonus Plan replaced the Company's Incentive Bonus Plan which was adopted in
1990. The Bonus Plan is administered by the Compensation Committee. The total
amount of cash bonus awards to be made under the Bonus Plan for any plan year
depends primarily on the Company's sales and net income for such year.

For any plan year, the Company's sales and net income must meet or exceed,
or in combination with other factors satisfy, levels targeted by the Company in
its business plan, as established at the beginning of each fiscal year, for any
bonus awards to be made. Aggregate bonus awards to all participants under the
Bonus Plan may not exceed 7% of the Company's net income. The Compensation
Committee has the authority to determine the total amount of bonus awards, if
any, to be made to the eligible employees for any plan year based on its
evaluation of the Company's financial condition and results of operations, the
Company's business and prospects, and such other criteria as it may determine to
be relevant or appropriate. The Company expensed $1,434,000 in 1998, $738,000 in
1997 and $320,000 in 1996 in conjunction with the bonus plans.

F-16
<PAGE>
BENCHMARK ELECTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 11 -- CONCENTRATIONS OF BUSINESS RISK

The Company uses numerous suppliers of electronic components and other
materials for its operations. Some components used by the Company have been
subject to industry-wide shortages, and suppliers have been forced to allocate
available quantities among their customers. The Company's inability to obtain
any needed components during periods of allocation could cause delays in
manufacturing and could adversely affect results of operations.

NOTE 12 -- CONTINGENCIES

The Company is involved in various legal actions arising in the ordinary
course of business. In the opinion of management, the ultimate disposition of
these matters will not have a material adverse effect on the Company's
consolidated financial position, results of operations or liquidity.

NOTE 13 -- EVENT SUBSEQUENT TO DATE OF AUDITORS' REPORT (UNAUDITED)

On March 1, 1999, the Company acquired certain assets from Stratus Computer
Ireland (Stratus), a wholly-owned subsidiary of Ascend Communications, Inc.
(Ascend) for approximately $48 million, subject to adjustment. In connection
with the transaction, the Company entered into a three-year supply agreement to
provide system integration services to Ascend and Stratus Holding Limited and
the Company hired 260 employees. In conjunction with the purchase of the Stratus
assets, the Company increased its revolving line of credit to $65 million and
borrowed $25 million.

F-17

<PAGE>
BENCHMARK ELECTRONICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
MARCH 31,
1999
-----------
<S> <C>
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents....... $ 12,084
Accounts receivable, net........ 80,545
Inventories..................... 91,230
Prepaid expenses and other
assets.......................... 8,819
Deferred tax asset.............. 2,501
-----------
Total current assets....... 195,179
-----------
Property, plant and equipment, at
cost................................. 91,444
Accumulated depreciation............. (39,165)
-----------
Net property, plant and
equipment.................... 52,279
-----------
Other assets, net.................... 8,806
Goodwill, net........................ 47,997
-----------
$ 304,261
===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long term
debt............................ $ 33,164
Accounts payable................ 67,654
Income taxes payable............ 1,448
Accrued liabilities............. 9,567
-----------
Total current
liabilities.................. 111,833
Long term debt, less current
portion.............................. 44,111
Deferred income taxes................ 4,630
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 -- 11,715,567;
outstanding -- 11,666,083...... 1,167
Additional paid-in capital...... 70,803
Retained earnings............... 71,837
Less treasury shares, at cost;
49,484 shares................... (120)
-----------
Total shareholders'
equity....................... 143,687
Commitments and contingencies........
-----------
$ 304,261
===========
</TABLE>

See accompanying notes to condensed consolidated financial statements.

F-18
<PAGE>
BENCHMARK ELECTRONICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------
1999 1998
---------- ----------
<S> <C> <C>
(UNAUDITED)
Sales................................... $ 146,546 $ 108,046
Cost of sales........................... 131,856 97,141
---------- ----------
Gross profit....................... 14,690 10,905
Selling, general and administrative
expense............................... 4,950 3,526
Amortization of goodwill................ 910 585
---------- ----------
Income from operations............. 8,830 6,794
Interest expense........................ (1,125) (902)
Interest income......................... 138 168
Other income............................ 78 47
---------- ----------
Income before income taxes......... 7,921 6,107
Income tax expense...................... 2,884 2,365
---------- ----------
Net income......................... $ 5,037 $ 3,742
========== ==========
Earnings per share:
Basic.............................. $ 0.43 $ 0.32
Diluted............................ $ 0.40 $ 0.31
========== ==========
Weighted average number of shares
outstanding:
Basic.............................. 11,655 11,575
Diluted............................ 12,703 12,243
========== ==========
</TABLE>

See accompanying notes to condensed consolidated financial statements.

F-19
<PAGE>
BENCHMARK ELECTRONICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------
1999 1998
--------- ---------
<S> <C> <C>
(UNAUDITED)
Cash flows from operating activities:
Net income...................... $ 5,037 $ 3,742
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and
amortization expense.... 4,818 3,435
Deferred income taxes...... 47 320
Gain on sale of property,
plant and equipment..... (34) (7)
Tax benefit of employee
stock options
exercised............... 211 20
Amortization of premiums on
marketable securities... -- 46
Changes in operating assets and
liabilities, net of effects
from acquisitions:
Accounts receivable........ (23,366) (7,890)
Inventories................ (2,718) (3,536)
Prepaid expenses and other
assets.................. (323) 7
Accounts payable........... 30,608 8,919
Accrued liabilities........ 1,599 (304)
Income taxes............... 2,568 2,017
--------- ---------
Net cash provided by
operations......... 18,447 6,769
--------- ---------
Cash flows from investing activities:
Capital expenditures, net....... (3,956) (2,433)
Additions to capitalized
software....................... (734) --
Proceeds from sale of marketable
securities..................... -- 11,385
Acquisitions, net of cash
acquired....................... (48,000) (70,646)
--------- ---------
Net cash used in
investing
activities......... (52,690) (61,694)
--------- ---------
Cash flows from financing activities:
Debt issuance costs............. (152) (390)
Proceeds from issuance of
debt........................... 25,000 40,000
Proceeds from exercise of
employee stock options......... 438 33
Principal payments on long-term
debt........................... (2,036) (52)
--------- ---------
Net cash provided by
financing
activities......... 23,250 39,591
--------- ---------
Net decrease in cash and cash
equivalents........................ (10,993) (15,334)
Cash and cash equivalents at
beginning of year.................. 23,077 21,029
--------- ---------
Cash and cash equivalents at March
31................................. $ 12,084 $ 5,695
========= =========
Supplemental disclosures of cash flow
information:
Income taxes paid............... $ 57 $ 9
========= =========
Interest paid................... $ 1,610 $ 1,217
========= =========
</TABLE>

See accompanying notes to condensed consolidated financial statements.

F-20
<PAGE>
BENCHMARK ELECTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

NOTE 1 -- BASIS OF PRESENTATION

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 financial position, 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 audited
annual financial statements and notes included elsewhere herein.

NOTE 2 -- EARNINGS PER SHARE

Basic earnings per share is computed using the weighted average number of
shares outstanding. Diluted earnings per share is computed using the weighted
average number of shares outstanding adjusted for the incremental shares
attributed to outstanding stock options to purchase common stock. Incremental
shares of 1,047,686 and 668,494 for the three months ended March 31, 1999 and
1998, respectively, were used in the calculation of diluted earnings per share.
Options to purchase 147,000 shares of common stock for the three-month period
ended March 31, 1998, were not included in the computation of diluted earnings
per share because the option exercise price was greater than the average market
price of the common stock.

NOTE 3 -- BORROWING FACILITIES

In order to finance a portion of the cash consideration for the acquisition
of EMD Technologies, Inc. (EMD) 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 31 and July 31. 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. As of March 31, 1999, the Company had $30
million outstanding under the Senior Note.

In connection with the acquisition of Lockheed Commercial Electronics
Company (LCEC) on February 23, 1998, the Company obtained $40 million through
borrowings under a five-year term loan (the Term Loan) with a commercial bank.
Principal on the Term Loan is payable in quarterly installments of $2.0 million
with a final installment of the unpaid principal amount due March 31, 2003. The
Term Loan bears interest, at the Company's option, at either the bank's
Eurodollar rate plus .625% to 1.375% or its prime rate, and interest is payable
quarterly. The margin on the Eurodollar rate fluctuates with the Company's ratio
of debt to earnings before interest, taxes, depreciation and amortization
(EBITDA). The Term Loan includes customary affirmative and negative covenants
and restricts the Company's ability to

F-21
<PAGE>
BENCHMARK ELECTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

incur additional indebtedness and to pay dividends. As of March 31, 1999, the
Company had $22 million outstanding under the Term Loan bearing interest at
rates ranging from 6.3125% to 7.75%.

The Company has a $65 million revolving line of credit with a commercial
bank. The Company is entitled to borrow under the line of credit up to the
lesser of $65 million or the sum of 75% of its eligible accounts receivable and
25% of its eligible inventories. Interest on the line of credit is payable
quarterly, at the Company's option, at either the bank's Eurodollar rate plus
.88% to 1.63% or its prime rate. A commitment fee of 0.20% to 0.30% 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 March 31, 2004. As of March
31, 1999, the Company had $25 million outstanding under this line of credit and
$40 million was available for future borrowings.

NOTE 4 -- INVENTORIES

Inventory costs are summarized as follows:

<TABLE>
<CAPTION>
MARCH 31,
1999
--------------
<S> <C>
Raw materials........................ $ 57,952,000
Work in process...................... 33,278,000
--------------
$ 91,230,000
==============
</TABLE>

NOTE 5 -- INCOME TAXES

Income tax expense consists of the following:

<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------------
1999 1998
------------ ------------
<S> <C> <C>
Federal -- Current................... $ 2,305,000 $ 1,860,000
Foreign -- Current................... 105,000 --
State -- Current..................... 427,000 185,000
Federal/State -- Deferred............ 47,000 320,000
------------ ------------
Total........................... $ 2,884,000 $ 2,365,000
============ ============
</TABLE>

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, foreign income taxes, state income
taxes, net of federal benefit and the benefit from the use of a foreign sales
corporation and, in 1998, non-taxable interest earned on municipal investments.

The Company considers earnings from its foreign subsidiary to be
indefinitely reinvested and, accordingly, no provision for U.S. federal and
state income taxes has been made for these earnings. Upon distribution of
foreign subsidiary earnings in the form of dividends or otherwise, the Company
would be subject to both U.S. income taxes (subject to adjustment for foreign
tax credits).

In addition for a period of up to ten years the Company will be subject to
taxes in a certain foreign location at rates substantially less than the normal
tax rates for that jurisdiction. The effects of these reduced rates on income
tax expense for the three months ended March 31, 1999 was not significant.

F-22
<PAGE>
BENCHMARK ELECTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 6 -- NEW ACCOUNTING PRONOUNCEMENTS

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 establishes methods of
accounting for derivative financial instruments and hedging activities related
to those instruments as well as other hedging activities. The Company currently
does not hold or issue derivative financial instruments in the normal course of
business. Accordingly, adoption of SFAS No. 133 as of January 1, 2000 is not
expected to affect the Company's consolidated financial statements.

In April 1998, the American Institute of Certified Public Accountants
(AICPA) issued Statement of Position (SOP) 98-5, "Reporting on the Costs of
Start-up Activities." SOP 98-5 requires all start-up costs related to new
operations be expensed as incurred. In addition, all start-up costs that were
capitalized in the past must be expensed when SOP 98-5 is adopted. The adoption
of SOP 98-5 as of January 1, 1999 did not have a material impact on the
Company's financial position, results of operations or liquidity.

NOTE 7 -- ACQUISITIONS

On March 1, 1999, the Company acquired certain plant and equipment and
inventories from Stratus Computer Ireland (Stratus), a wholly-owned subsidiary
of Ascend Communications, Inc. (Ascend) for approximately $48 million, subject
to adjustment. Based on March 31, 1999 estimates, the acquisition price was
allocated $6.6 million to equipment, $34.8 million to inventories with an
estimated $6.6 million to other current assets (as the Company expects this
amount to be remitted back to the Company as final adjustment to the
transaction). Stratus provided systems integration services for large and very
sophisticated fault-tolerant mainframe computers. In connection with the
transaction, the Company entered into a three-year supply agreement to provide
these system integration services to Ascend and Stratus Holding Limited and the
Company hired 260 employees. In conjunction with the purchase of the Stratus
assets, the Company increased its revolving line of credit to $65 million and
borrowed $25 million.

On February 23, 1998, the Company completed its acquisition of LCEC for
$70.7 million in cash. LCEC, situated in Hudson, New Hampshire, provides a broad
range of services including printed circuit board assembly and test, system
assembly and test, prototyping, depot repair, materials procurement, and
engineering support services. The transaction was accounted for under the
purchase method of accounting, and, accordingly, the results of operations of
LCEC since February 23, 1998 have been included in the accompanying condensed
consolidated statement of income. The acquisition resulted in goodwill of
approximately $29.5 million that is being amortized on a straight-line basis
over 15 years.

F-23

<PAGE>
================================================================================

4,000,656 SHARES

BENCHMARK ELECTRONICS, INC.

COMMON STOCK

[LOGO]

------------

PROSPECTUS

, 1999

------------

SALOMON SMITH BARNEY
BANCBOSTON ROBERTSON STEPHENS
DONALDSON, LUFKIN & JENRETTE
SG COWEN

================================================================================

<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table sets forth the expenses to be incurred by Benchmark
Electronics, Inc. (the "Company") in connection with the issuance and sale of
the securities being registered. Except for the Securities and Exchange
Commission registration fee and the National Association of Securities Dealers,
Inc. filing fee, all amounts shown are estimates. All such fees and expenses
will be paid by the Company except the selling shareholder will pay its pro rata
portion of the Securities and Exchange Commission registration fee, the National
Association of Securities Dealers, Inc. filing fee, and any Blue Sky filing fees
and any other fees and expenses incurred solely as a result of their
participation in the offering.

Securities and Exchange Commission
registration fee..................... $ 42,975
National Association of Securities
Dealers, Inc. filing fee........... 15,959
Printing expenses.................... *
Listing fees......................... *
Legal fees and expenses of counsel
for the Company.................... *
Accounting fees and expenses......... *
Blue sky filing fees and expenses
(including legal fees and
expenses).......................... *
Transfer Agent fees.................. *
Miscellaneous........................ *
----------
Total................................ $
==========

- ------------

* To be completed by amendment

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Texas Business Corporation Act

Article 2.02-1.B of the Texas Business Corporation Act, as amended (the
"TBCA"), grants to a corporation the power to indemnify a person who was, is
or is threatened to be made a named defendant or respondent in a proceeding
because the person is or was a director of the corporation against judgments,
penalties (including excise and similar taxes), fines, settlements and
reasonable expenses actually incurred in connection therewith, only if it is
determined that the person (1) conducted himself in good faith; (2) reasonably
believed that (a) in the case of conduct in his official capacity as a director
of the corporation, his conduct was in the corporation's best interests, and (b)
in all other cases, his conduct was at least not opposed to the corporation's
best interests; and (3) in the case of any criminal proceeding, he had no
reasonable cause to believe that his conduct was unlawful. Article 2.02-1.C
limits the allowable indemnification by providing that, except to the extent
permitted by Article 2.02-1.E, a director may not be indemnified in respect of a
proceeding in which the person was found liable (1) on the basis that he
improperly received a personal benefit, whether or not the benefit resulted from
an action taken in his official capacity, or (2) to the corporation. Article
2.02-1.E provides that if a director is found liable to the corporation or is
found liable on the basis that he received a personal benefit, the permissible
indemnification (1) is limited to reasonable expenses actually incurred by the
person in connection with the proceeding, and (2) shall not be made in respect
of any proceeding in which the person shall have been found liable for willful
or intentional misconduct in the performance of his duty to the corporation.
Finally, Article 2.02-1.H provides that a corporation shall indemnify a director
against reasonable expenses incurred by him in connection with a proceeding in
which he is a named defendant or respondent because he is or was a director if
he has been wholly successful, on the merits or otherwise, in defense of the
proceeding.

II-1
<PAGE>
With respect to the officers of a corporation, Article 2.02-1.O of the TBCA
provides that a corporation may indemnify and advance expenses to an officer of
the corporation to the same extent that it may indemnify and advance expenses to
directors under Article 2.02-1. Further, Article 2.02-1.O provides that an
officer of a corporation shall be indemnified as, and to the same extent,
provided by Article 2.02-1.H for a director.

Amended and Restated Bylaws

The Amended and Restated Bylaws of the Company make mandatory the
indemnification of and advancement of expenses to its directors who become
involved in indemnifiable legal proceedings, subject to their compliance with
certain requirements imposed by Texas law.

Indemnity Agreements

The Company has entered into Indemnity Agreements with its directors and
officers pursuant to which the Company generally is obligated to indemnify its
directors and officers to the full extent permitted by Texas law.

Underwriting Agreement

Certain provisions of the Underwriting Agreement by and among the Company,
the selling shareholder and the underwriters, the form of which is filed as
Exhibit 1 hereto, provide for indemnification of the officers and directors of
the Company in certain circumstances.

Registration Rights Agreement

The Registration Rights Agreement by and between the Company and Mason &
Hanger, pursuant to which shares held by Mason & Hanger are included in the
shares covered by this Registration Statement, provides for the indemnification
of the officers and directors of the Company by Mason & Hanger under certain
circumstances.

ITEM 16. EXHIBITS.

EXHIBIT
NUMBER DESCRIPTION
------ -----------
1* -- Form of Underwriting Agreement by and
among the Company, the selling
shareholder and the Underwriters.

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)).

3.2 -- Amended and Restated Bylaws of the
Company (incorporated herein by
reference to Exhibit 3.2 of the
Company's Annual Report on Form 10-K for
1998 -- File No. 001-10560).

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 of
the Company's Annual Report on Form 10-K
for the year ended December 31,
1998 -- File No. 001-10560).

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).

5* -- Opinion of Bracewell & Patterson,
L.L.P., regarding the validity of the
shares covered by this Registration
Statement.

23.1* -- Consent of Bracewell & Patterson, L.L.P.
(included in the opinion filed as
Exhibit 5 hereto).

23.2 -- Consent of KPMG LLP.

24 -- Powers of Attorney (included on the
signature page of this Registration
Statement).
- ------------
* To be filed by amendment.

II-2
<PAGE>
ITEM 17. UNDERTAKINGS.

(a) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each
filing of the Registrant's annual report pursuant to section 13(a) or
section 15(d) of the Securities Exchange Act of 1934 that is
incorporated by reference in the Registration Statement shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.

(b) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.

(1) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus
filed as part of this Registration Statement in reliance upon
Rule 430A and contained in a form of prospectus filed by the
Registrant pursuant to Rule 424(b)(1) or (4) or 497)(h) under the
Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the
Securities Act of 1933, each post effective amendment that
contains a form of prospectus shall be deemed to be a new
registration statement relating to the securities offered
therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering
thereof.

II-3
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement or amendment to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Angleton, State of Texas, on April 30, 1999.

BENCHMARK ELECTRONICS, INC.

By: /s/ DONALD E. NIGBOR
DONALD E. NIGBOR
PRESIDENT

Each person whose signature appears below on this Registration Statement
hereby constitutes and appoints Donald E. Nigbor and Cary T. Fu, each with full
power to act without the other, his true and lawful attorney-in-fact and agent,
with full power of substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities (until revoked in writing) to sign
any and all amendments (including post-effective amendments and amendments
thereto) to this Registration Statement and any subsequent registration
statement filed by the Registrant pursuant to Rule 462 of the Securities Act of
1933, and to file the same, with all exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agent full power and authority to do and perform each
and every act and thing he might do or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agent, or his substitute, may
lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement or amendment has been signed by the following
persons in the capacities and on the dates indicated.

NAME POSITION DATE
- ---------------------------- ------------------------------- ---------------
/s/JOHN C. CUSTER Chairman of the Board April 30, 1999
JOHN C. CUSTER of Directors

/s/DONALD E. NIGBOR Director and President April 30, 1999
DONALD E. NIGBOR (principal executive officer)

/s/STEVEN A. BARTON Director and Executive April 30, 1999
STEVEN A. BARTON Vice President

/s/CARY T. FU Director and Executive April 30, 1999
CARY T. FU Vice President (principal
financial and accounting
officer)

/s/PETER G. DORFLINGER Director April 30, 1999
PETER G. DORFLINGER

/s/GERALD W. BODZY Director April 30, 1999
GERALD W. BODZY

/s/DAVID H. ARNOLD Director April 30, 1999
DAVID H. ARNOLD

II-4

<PAGE>
INDEX TO EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------------------------ ------------------------------------------------------------------------------------------
<C> <S>
1* -- Form of Underwriting Agreement by and among the Company, the selling shareholder and the
underwriters.

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)).

3.2 -- Amended and Restated Bylaws of the Company (incorporated herein by reference to Exhibit
3.2 of the Company's Annual Report on Form 10-K for 1998 - File No. 001-10560).

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 of the Company's Annual Report on Form 10-K for the year ended December 31, 1998 -
File No. 001-10560).

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).

5* -- Opinion of Bracewell & Patterson, L.L.P., regarding the validity of the shares covered by
this Registration Statement.

23.1* -- Consent of Bracewell & Patterson, L.L.P. (included in the opinion filed as Exhibit 5
hereto).

23.2 -- Consent of KPMG LLP.

24 -- Powers of Attorney (included on the signature page of this Registration Statement).
</TABLE>
- ------------
* To be filed with a subsequent amendment to this Registration Statement.

EXHIBIT 23.2

The Board of Directors
Benchmark Electronics, Inc.

We consent to the use of our report included and incorporated herein by
reference and to the reference to our firm under the heading "Experts" in the
prospectus.

KPMG LLP

Houston, Texas
April 30, 1999