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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 8-K/A
(AMENDMENT NO. 1)
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): August 13, 1999
BENCHMARK ELECTRONICS, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
TEXAS 1-10560 74-2211011
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Indentification No.)
3000 TECHNOLOGY DRIVE, ANGLETON, TEXAS 77515
(Address of principal executive offices) (Zip Code)
</TABLE>
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (409) 849-6550
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<PAGE>
ITEM 5. OTHER EVENTS.
Benchmark Electronics, Inc. (Benchmark) previously announced that it had
entered into a Stock Purchase Agreement with J.M. Huber Corporation (the Seller)
pursuant to which Benchmark would acquire all of the outstanding capital stock
of (a) AVEX Electronics, Inc., an Alabama corporation and a wholly owned
subsidiary of the Seller (AVEX), and (b) a wholly owned subsidiary of the Seller
to be formed under the laws of the Netherlands (Holdings) being formed for the
purpose of succeeding to the ownership of certain non-U.S. holding and operating
companies which currently are owned by another entity owned by the Seller. In
consideration of the capital stock of AVEX and Holdings, Benchmark has agreed to
pay $255 million in cash (less any indebtedness assumed), subject to certain
adjustments, and to issue one million shares of its Common Stock to the Seller.
Benchmark and the Seller have agreed for federal income tax purposes to allocate
the purchase price pursuant to treasury Section 1.338(h)(10)-1(f).
In order to finance this transaction, Benchmark has received a commitment
from a commercial bank to provide (i) a revolving credit facility in an
aggregate amount of up to $100 million (the Revolving Credit Facility), which
will mature on September 30, 2004, and (ii) a term loan in the amount of $75
million, which will mature on September 30, 2004 (Term Loan A). In addition,
Benchmark anticipates funding a term loan in the amount of $50 million, which
will mature on September 30, 2005 (the Term Loan B, and collectively with the
Revolving Credit Facility and the Term Loan A, the Facility). It is expected
that the Revolving Credit Facility and Term Loan A will be funded by a syndicate
of banks, financial institutions and other entities, and will be subject to a
borrowing base calculation. Subject to the agreement of the banks providing the
Revolving Credit Facility and the Term Loan A, Benchmark may elect to increase
the Revolving Credit Facility and the Term Loan A by $25 million each. In such
event, the Term Loan B will not be funded. If the Term Loan B is funded, it is
expected that such funds will be provided by the commercial bank providing the
commitment or syndicated to other banks, financial institutions and other
entities. On August 13, 1999, Benchmark announced the completion of a capital
markets transaction in which it received gross proceeds of $75 million. The net
proceeds of this capital markets transaction will be used for general corporate
purposes, including the funding of a portion of the purchase price of the AVEX
acquisition.
99.4 to this report contains revised unaudited pro forma condensed
combined financial statements of Benchmark Electronics, Inc. as of and for the
six months ended June 30, 1999 and for the year ended December 31, 1998, which
gives effect to the pending acquisition of AVEX by Benchmark under the purchase
method of accounting, and which replace those previously filed as Exhibit 99.3.
We make "forward-looking statements" within the "safe harbor" provision of
the Private Securities Litigation Reform Act of 1995 throughout this Amendment
to Current Report on Form 8-K/A. 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 report include, without limitation, the completion of the pending
acquisition of AVEX and, if completed, the termination by one of AVEX's largest
customers of its turnkey manufacturing agreement with AVEX as a result of our
purchase of AVEX, the integration of the operations of AVEX and the incurrence
of operating losses at AVEX after its acquisition by us; the loss of a major
customer; 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 and, upon completion of the AVEX acquisition, the
networking/servers and high-end video/audio/entertainment, industries; risks
associated with our international operations; availability of customer specified
1
<PAGE>
components; dependence on certain key executives; environmental laws; Year 2000
problems; fluctuations in quarterly results; stock price volatility; and
competition from other providers of electronics manufacturing services. Should
one or more of these risks or uncertainties materialize, or should underlying
assumptions prove incorrect, actual outcomes may vary materially from those
indicated.
You should read this report 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.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits
The following material is filed as an exhibit to this Amendment to Current
Report on Form 8-K/A.
EXHIBIT
NUMBER DESCRIPTION
------- -----------
99.4 -- Unaudited pro forma condensed combined financial
statements of Benchmark Electronics, Inc. as of and
for the six months ended June 30, 1999 and for the
year ended December 31, 1998.
2
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
BENCHMARK ELECTRONICS, INC.
By: /s/ GAYLA J. DELLY
GAYLA J. DELLY
TREASURER
Dated: August 18, 1999
3
<PAGE>
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
------- -----------
99.4 -- Unaudited pro forma condensed combined financial
statements of Benchmark Electronics, Inc. as of and
for the six months ended June 30, 1999 and for the
year ended December 31, 1998, which give effect to
the pending acquisition of AVEX by Benchmark under
the purchase method of accounting.
4
EXHIBIT 99.4
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma condensed combined financial statements
give effect to the proposed acquisition by Benchmark of all the outstanding
capital stock of AVEX and Holdings, the related borrowings under a credit
facility (the Facility) and borrowings under a capital markets transaction
completed by Benchmark on August 13, 1999 (Notes). The AVEX acquisition is
subject to customary conditions including approval from various governmental
agencies.
The AVEX acquisition will be accounted for under the purchase method of
accounting. The assets acquired and liabilities assumed will be recorded at
their fair values. The unaudited pro forma condensed combined financial
statements are based on the historical financial statements of Benchmark and
AVEX and the estimates and assumptions set forth below and in the notes to the
unaudited pro forma condensed combined financial statements. The unaudited pro
forma condensed balance sheet as of June 30, 1999 is presented as if the AVEX
acquisition had occurred on that date. The unaudited pro forma condensed
combined statements of operations for the year ended December 31, 1998, and the
six month period ended June 30, 1999, assume that the AVEX acquisition occurred
at the beginning of the earliest period presented.
The unaudited pro forma condensed combined financial statements should be
read in conjunction with the historical financial statements of Benchmark and
AVEX. The unaudited pro forma condensed combined financial statements do not
purport to represent what Benchmark's financial position or results of
operations would actually have been if the AVEX acquisition had been consummated
on the indicated dates, nor are they necessarily indicative of Benchmark's
financial position or results of operations for any future period. The results
of operations for the six months ended June 30, 1999, are not necessarily
indicative of the results to be expected for the entire year or any other
interim period.
The pro forma adjustments are based on preliminary assumptions and
estimates made by Benchmark management. The information necessary to account for
the AVEX acquisition in accordance with generally accepted accounting principles
is incomplete at this time. Accordingly, the unaudited pro forma condensed
combined financial statements assume that the recorded amounts of AVEX's assets
and liabilities approximate their fair values. The actual allocation of the
consideration paid for AVEX may differ from that reflected in the unaudited pro
forma condensed combined financial statements after a more extensive review of
the fair values of the assets acquired and liabilities assumed has been
completed. Accordingly, the allocation of the purchase price and the resultant
amortization of the excess purchase price, which are based on preliminary
estimates, may differ from the final purchase price allocation and amortization
periods.
THE AVEX ACQUISITION
The Stock Purchase Agreement provides that Benchmark will acquire AVEX for
a total purchase price of $255 million in cash and one million shares of
Benchmark Common Stock. In addition, the final purchase price is subject to an
adjustment for working capital changes, of which an estimate is reflected in the
pro forma adjustments.
Financing for the AVEX acquisition is expected to be provided through the
Facility and the Notes.
AVEX incurred a net loss of $9.7 million during the first six months of
1999 and $84.2 million during 1998. AVEX has taken a number of actions intended
to reduce its fixed and other costs and reverse this trend, including the
closure of two facilities in areas having relatively high labor costs and the
redeployment of the capital assets used in those facilities to plants in areas
having lower labor costs, resulting in improved manufacturing utilization; the
rationalization of its sales organization and the elimination of approximately
916 employee and contractor positions; and the redefinition of AVEX's customer
strategy to focus on fewer, more strategic accounts, with a reduction in the
total number of customers.
1
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As a result of some of the foregoing actions, AVEX recorded charges to
operations in 1998 totaling $33.4 million, including restructuring charges of
$15.7 million and the write down of various assets of $17.7 million.
Approximately $7.4 million of the restructuring charge relates to the severance
and related cost associated with the elimination of approximately 916 contractor
and employee positions. AVEX also closed its San Jose, California manufacturing
facility and discontinued a design center. As a result, the restructuring charge
also included a $6.0 million write down to fair value of certain equipment and
leasehold improvements, $2.0 million related to the write off of certain prepaid
assets. The write down of various assets totaling $17.7 million, which included
adjustments to inventory, accounts receivable and other assets, is included in
cost of sales and selling, general and administrative expenses. In the
preparation of the unaudited pro forma condensed combined financial statements,
the $7.8 million of charges related to the closing of the San Jose, California
facility have been excluded as a pro forma adjustment. These charges relate to a
facility not a part of AVEX at the time Benchmark expects to close the AVEX
acquisition. The remaining charges of $25.6 million have been included in the
Unaudited Pro Forma Condensed Combined Financial Statements.
The Unaudited Pro Forma Condensed Combined Financial Statements reflect
savings that will be realized from the elimination of certain redundant
executive headquarter costs and the termination of intercompany services
previously provided by the Seller to AVEX under an intercompany agreement,
offset by the costs Benchmark will incur to replace the services provided by
Seller. No adjustments have been made to reflect other identified actions that
could result in potential cost savings but which cannot be quantified at this
time.
2
<PAGE>
BENCHMARK ELECTRONICS, INC.
PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
----------------------- ---------------------------
BENCHMARK AVEX ADJUSTMENTS COMBINED
---------- ---------- ------------ ----------
(IN THOUSANDS)
ASSETS
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents.......... $ 44,863 $ 11,552 $(44,863)a $ --
(11,552)b
Accounts receivable, net........... 87,932 135,599 -- 223,531
Income taxes receivable............ 581 -- -- 581
Inventories........................ 90,437 115,941 -- 206,378
Prepaid expenses and other
assets.......................... 4,723 11,563 -- 16,286
Deferred tax asset................. 2,515 -- -- 2,515
---------- ---------- ------------ ----------
Total current assets....... 231,051 274,655 (56,415) 449,291
Net property, plant and equipment.... 53,084 77,258 -- 130,342
Goodwill, net........................ 47,087 -- -- 47,087
Excess purchase price to be
allocated.......................... -- -- 121,726b 121,726
Other assets......................... 9,513 4,605 7,000a 21,118
---------- ---------- ------------ ----------
$340,735 $ 356,518 $ 72,311 $769,564
========== ========== ============ ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
(DEFICIT)
Current liabilities:
Current portion of long-term
debt............................ $ 19 $ -- $ 8,420a $ 8,439
Notes payable...................... -- 29,599 (29,599)b --
Accounts payable................... 53,392 126,010 -- 179,402
Accrued liabilities................ 9,378 34,645 -- 44,023
Income taxes payable............... -- 1,106 -- 1,106
Notes payable to parent............ -- 226,899 (226,899)b --
---------- ---------- ------------ ----------
Total current
liabilities.............. 62,789 418,259 (248,078) 232,970
Revolving lines of credit............ -- -- 21,626a 21,626
Long-term debt, less current
portion............................ 30,111 -- 116,580a 146,691
Convertible debt..................... -- -- 75,000a 75,000
Deferred tax liability............... 4,697 26 -- 4,723
Other long term liability............ -- 9,443 -- 9,443
Due to parent........................ -- 1,919 (1,919)b --
---------- ---------- ------------ ----------
Total liabilities.......... 97,597 429,647 (36,791) 490,453
Shareholders' equity (deficit):
Common shares...................... 1,520 1 100a 1,620
(1)b
Additional paid-in capital......... 164,296 41,662 35,873a 200,169
(41,662)b
Retained earnings.................. 77,442 (111,566) 111,566b 77,442
Accumulated other comprehensive
loss............................ -- (3,226) 3,226b --
Less treasury shares, at cost...... (120) -- -- (120)
---------- ---------- ------------ ----------
Total shareholders' equity
(deficit)................ 243,138 (73,129) 109,102 279,111
---------- ---------- ------------ ----------
$340,735 $ 356,518 $ 72,311 $769,564
========== ========== ============ ==========
</TABLE>
See accompanying notes to unaudited pro forma condensed combined financial
statements.
3
<PAGE>
BENCHMARK ELECTRONICS, INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
---------------------- --------------------------
BENCHMARK AVEX ADJUSTMENTS COMBINED
--------- ---------- ----------- ------------
<S> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Sales................................ $524,065 $ 841,045 -- $ 1,365,110
Cost of sales........................ 472,354 857,407 -- 1,329,761
--------- ---------- ----------- ------------
Gross profit.................... 51,711 (16,362) -- 35,349
Selling, general & administrative
expenses........................... 17,680 44,365 (4,955)c 57,090
Amortization of goodwill and excess
purchase price to be allocated..... 3,311 -- 8,115 d 11,426
Restructuring charges................ 15,687 (7,805)e 7,882
--------- ---------- ----------- ------------
Income (loss) from operations........ 30,720 (76,414) 4,645 (41,049)
Interest and other income............ 563 (116) 447
Interest expense..................... (4,393) (11,012) 11,012 g (21,800)
(1,293)h
(16,114)i
--------- ---------- ----------- ------------
Income (loss) before taxes........... 26,890 (87,542) (1,750) (62,402)
Income taxes......................... 10,517 (3,348) (595)j (21,217)
(27,791)k
--------- ---------- ----------- ------------
Net income (loss)............... $ 16,373 $ (84,194) $ 26,636 $ (41,185)
========= ========== =========== ============
Earnings (loss) per common
share -- Basic..................... $ 1.41 $ (3.27)
Earnings (loss) per common
share -- Diluted................... $ 1.35 $ (3.27)
Weighted average number of shares
outstanding -- Basic............... 11,594 1,000 l 12,594
Weighted average number of shares
outstanding -- Diluted............. 12,098 496 l 12,594
</TABLE>
See accompanying notes to unaudited pro forma condensed combined financial
statements.
4
<PAGE>
BENCHMARK ELECTRONICS, INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
------------------------- -----------------------
BENCHMARK AVEX ADJUSTMENTS COMBINED
------------ ---------- ----------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Sales................................... $309,167 $ 505,916 -- $815,083
Cost of sales........................... 277,623 485,659 -- 763,282
------------ ---------- ----------- --------
Gross profit....................... 31,544 20,257 -- 51,801
Selling, general & administrative
expenses.............................. 10,628 17,610 (2,319)c 26,319
400 e
Amortization of goodwill and excess
purchase price to be allocated........ 1,819 -- 4,058 d 5,877
------------ ---------- ----------- --------
Income from operations............. 19,097 2,647 (2,139) 19,605
Interest and other income
(expense) -- net...................... (50) 262 (153)f 59
Interest expense........................ (2,315) (11,553) 11,553 g (11,018)
(646)h
(8,057)i
------------ ---------- ----------- --------
Income (loss) before taxes.............. 16,732 (8,644) 558 8,646
Income taxes............................ 6,090 1,091 218 j 3,372
(4,027)k
------------ ---------- ----------- --------
Net income (loss).................. $ 10,642 $ (9,735) $ 4,367 $ 5,274
============ ========== =========== ========
Earnings per common share -- Basic...... $ 0.87 $ 0.40
Earnings per common share -- Diluted.... $ 0.80 $ 0.37
Weighted average number of shares
outstanding -- Basic.................. 12,209 1,000 l 13,209
Weighted average number of shares
outstanding -- Diluted................ 13,256 1,000 l 14,256
</TABLE>
See accompanying notes to unaudited pro forma condensed combined financial
statements.
5
<PAGE>
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS
Adjustments have been made to the unaudited pro forma condensed combined
financial statements to reflect the following:
(a) The Stock Purchase Agreement provides that Benchmark will acquire AVEX for
a total purchase price of $255 million in cash and one million shares of
Benchmark Common Stock. In addition, the final purchase price is subject
to an adjustment for working capital changes, of which an estimate is
reflected in the pro forma adjustments.
Total consideration (in thousands)
Purchase price:
Cash.................................... $ 255,000
1,000,000 shares of Benchmark common
stock (valued at $35.97 per share).... 35,973
Change in working capital............... 1,389
----------
Total consideration..................... 292,362
Plus:
Transaction and financing costs......... 10,100
----------
Total acquisition and financing
costs............................. $ 302,462
==========
Source of funds (in thousands)
Cash on hand............................ $ 44,863
Debt.................................... 221,626
Equity.................................. 35,973
----------
Total.............................. $ 302,462
==========
Debt financing (in thousands)
Term Loan A............................. $ 75,000
Term Loan B............................. 50,000
Revolving Credit Facility............... 21,626
Notes................................... 75,000
----------
Total.............................. $ 221,626
==========
(b) The excess of the total purchase price over the estimated fair value of
the net assets acquired is the excess purchase price to be allocated. The
calculation of excess purchase price to be allocated is based on the
following assumptions and calculation (in thousands):
Total consideration..................... $ 292,362
Transaction costs....................... 3,100
----------
Total purchase price.................... 295,462
AVEX net book deficit at June 30,
1999.................................. 73,129
AVEX cash and cash equivalents not
acquired.............................. 11,552
AVEX due to parent not assumed.......... (228,818)
AVEX notes payable not assumed.......... (29,599)
----------
Excess purchase price to be allocated... $ 121,726
==========
6
<PAGE>
(c) To eliminate the historical costs related to (i) certain redundant
executive headquarter costs (ii) the termination of intercompany services
previously provided by the Seller to AVEX under an intercompany
arrangement that included fees based on the estimated utilization of
Seller's resources; (iii) AVEX's domestic defined benefit pension plan,
which plan and the obligations thereunder are not being continued by
Benchmark; offset by (iv) the costs that Benchmark will incur to replace
the Seller's intercompany services arrangement. A summary of such
adjustments follows (in thousands):
FOR THE PERIOD ENDED
--------------------------
DECEMBER 31, JUNE 30,
1998 1999
------------ --------
Redundant executive headquarter
costs......................... $ (455) $ (228)
Historical intercompany service
fee........................... (4,400) (1,800)
Historical cost of pension plan
not continued................. (1,100) (791)
Benchmark replacement of
intercompany services
arrangement................... 1,000 500
------------ --------
Total.................... $ (4,955) $ (2,319)
============ ========
(d) To record amortization of excess purchase price to be allocated over an
estimated useful life of 15 years.
(e) To eliminate the 1998 write down of certain assets related to AVEX's San
Jose, California facility which are not being acquired by Benchmark, as
described above. In 1999, to eliminate a reduction to the aforementioned
write down included in AVEX's historical financial statements.
(f) To reduce interest income related to cash balances utilized in funding a
portion of the AVEX acquisition.
(g) To eliminate intercompany interest expense with the Seller and interest on
AVEX notes payable not assumed under the Stock Purchase Agreement.
(h) To record amortization of debt issuance costs over the life of the
applicable debt instruments.
(i) To record interest expense at 7.75%, 7.75%, 8.25% and 6.0% on the amounts
outstanding under the Revolving Credit Facility, Term Loan A, Term Loan B
and the Notes, respectively, based on current interest rates. A change in
the interest rate of 1/8 of a percent would result in a change in annual
interest expense related to the amounts outstanding under the Revolving
Credit Facility, Term Loan A, and Term Loan B of approximately $183,000.
(j) To record income tax adjustments related to the above pro forma
adjustments.
(k) To adjust AVEX historical income tax expense or benefit as if AVEX was
included in the consolidated federal income tax return of Benchmark. In
the historical combined financial statements of AVEX, federal income taxes
were provided as if AVEX filed a separate income tax return.
(l) The following information reconciles the number of shares used to compute
historical and pro forma earnings (loss) per common share (in thousands):
<TABLE>
<CAPTION>
FOR THE PERIOD ENDED
----------------------------------------
DECEMBER 31, JUNE 30,
1998 1999
------------------ ------------------
BASIC DILUTED BASIC DILUTED
------ -------- ------ --------
<S> <C> <C> <C> <C>
Benchmark historical................. 11,594 12,098 12,209 13,256
Common shares to be issued in AVEX
acquisition........................ 1,000 1,000 1,000 1,000
Elimination of Benchmark stock
options -- antidilutive
on a pro forma basis in 1998....... -- (504) -- --
------ -------- ------ --------
12,594 12,594 13,209 14,256
====== ======== ====== ========
</TABLE>
For both 1998 and 1999, the effect of the if-converted method for the Notes
is antidilutive and 2.5 million of potential common shares have not been
considered in computing diluted earnings per common share.
7
