BENCHMARK ELECTRONICS INC, 10-Q/A, 2000-03-20

BENCHMARK ELECTRONICS INC
10-Q/A, 2000-03-20
PRINTED CIRCUIT BOARDS

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q/A

Amendment No. 1 to

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999

COMMISSION FILE NUMBER: 1-10560

BENCHMARK ELECTRONICS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

TEXAS 74-2211011
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION) IDENTIFICATION NUMBER)

3000 TECHNOLOGY DRIVE 77515
ANGLETON, TEXAS (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

(409) 849-6550
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

Yes [X] No [ ]

As of November 12, 1999 there were 16,221,013 shares of Common Stock, par
value $0.10 per share, outstanding.

This amendment is filed to restate the Financial Statements contained in
Item 1 of Part I to record as an extraordinary loss a prepayment penalty
incurred in connection with the retirement of debt; to revise the Management's
Discussion and Analysis of Financial Condition and Results of Operation
contained in Item 2 of Part I to reflect the restatement of the Financial
Statements and a subsequent event; and to file Pro Forma Financial Statements
for an acquisition covering the nine-month period ended September 30, 1999.
<PAGE>
PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

BENCHMARK ELECTRONICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLAR AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
--------------- --------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ............................................... $ 21,605 $ 23,077
Accounts receivable, net ................................................ 225,205 57,179
Income taxes receivable ................................................. 3,410 1,120
Inventories ............................................................. 196,363 53,718
Prepaid expenses and other current assets ............................... 18,201 1,897
Deferred tax asset ...................................................... 2,301 2,488
--------- ---------
Total current assets ............................................. 467,085 139,479
--------- ---------

Property, plant and equipment, at cost .................................... 179,516 80,826
Accumulated depreciation .................................................. (49,759) (35,264)
--------- ---------
Net property, plant and equipment ................................ 129,757 45,562
--------- ---------

Other assets, net ......................................................... 18,776 7,948
Goodwill, net ............................................................. 177,504 48,907
--------- ---------

$ 793,122 $ 241,896
========= =========

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long term debt ....................................... $ 19,464 $ 8,200
Accounts payable ........................................................ 202,542 37,046
Accrued liabilities ..................................................... 50,239 7,968
--------- ---------
Total current liabilities ........................................ 272,245 53,214

Revolving line of credit .................................................... 60,400 --
Long term debt, less current portion ........................................ 85,111 46,111
Convertible subordinated notes .............................................. 80,200 --
Deferred income taxes ....................................................... 4,697 4,570
Other long term liability ................................................... 10,175 --
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 - 16,267,837 and 11,676,967, respectively;
outstanding - 16,218,353 and 11,627,483, respectively ................. 1,621 1,162
Additional paid-in capital .............................................. 200,564 70,159
Retained earnings ....................................................... 77,481 66,800
Accumulated other comprehensive income .................................. 748 --
Less treasury shares, at cost; 49,484 shares ............................ (120) (120)
--------- ---------
Total shareholders' equity ....................................... 280,294 138,001
Commitments and contingencies
--------- ---------
$ 793,122 $ 241,896
========= =========
</TABLE>

See accompanying notes to condensed consolidated financial statements.

2
<PAGE>
BENCHMARK ELECTRONICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)

<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------------- --------------------------
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Sales ................................................... $ 229,870 $ 139,645 $ 539,037 $ 380,327
Cost of sales ........................................... 216,106 126,100 493,729 343,196
--------- --------- --------- ---------
Gross profit ...................................... 13,764 13,545 45,308 37,131
Selling, general and administrative expense ............. 8,642 4,767 19,269 12,758
Amortization of goodwill ................................ 1,630 909 3,449 2,401
--------- --------- --------- ---------
Income from operations ............................ 3,492 7,869 22,590 21,972
Interest expense ........................................ (2,625) (1,175) (4,940) (3,363)
Interest income ......................................... 328 120 594 343
Other income ............................................ 788 8 472 69
--------- --------- --------- ---------
Income before income taxes and extraordinary item.. 1,983 6,822 18,716 19,021
Income tax expense ...................................... 647 2,640 6,738 7,361
--------- --------- --------- ---------
Income before extraordinary item................... 1,336 4,182 11,978 11,660

Extraordinary item - loss on extinguishment
of debt, net of taxes ............................. (1,297) -- (1,297) --
--------- --------- --------- ---------
Net income......................................... $ 39 $ 4,182 $ 10,681 $ 11,660
========= ========= ========= =========
Earnings per share:
Basic:
Income before extraordinary item............... $ 0.09 $ 0.36 $ 0.90 $ 1.01
Extraordinary Item............................. (0.09) -- (0.10) --
--------- --------- --------- ---------
$ 0.00 $ 0.36 $ 0.80 $ 1.01
========= ========= ========= =========
Diluted:
Income before extraordinary item............... $ 0.08 $ 0.35 $ 0.83 $ 0.96
Extraordinary Item............................. (0.08) -- (0.09) --
--------- --------- --------- ---------
$ 0.00 $ 0.35 $ 0.74 $ 0.96
========= ========= ========= =========
Weighted average number of shares outstanding:
Basic ............................................. 15,626 11,602 13,360 11,586
Diluted ........................................... 16,812 12,116 14,448 12,192
========= ========= ========= =========
</TABLE>

See accompanying notes to condensed consolidated financial statements.

3
<PAGE>
BENCHMARK ELECTRONICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
(UNAUDITED)

<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
---------------------------
1999 1998
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income ........................................................... $ 10,681 $ 11,660
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization expense ............................ 19,407 12,340
Deferred income taxes ............................................ 314 1,412
Gain on sale of property, plant and equipment .................... (329) (8)
Tax benefit of employee stock options exercised .................. 320 194
Amortization of premiums on marketable securities ................ -- 46
Changes in operating assets and liabilities, net of effects
from acquisitions:
Accounts receivable .............................................. (17,407) 1,053
Inventories ...................................................... 11,272 13,541
Prepaid expenses and other assets ................................ (3,872) (513)
Accounts payable ................................................. 29,514 (4,417)
Accrued liabilities .............................................. 1,575 1,110
Income taxes ..................................................... (2,896) (1,010)
--------- ---------
Net cash provided by operations .............................. 48,579 35,408
--------- ---------
Cash flows from investing activities:
Capital expenditures, net ............................................ (17,020) (8,148)
Additions to capitalized software .................................... (2,048) (4,464)
Redemption of marketable securities .................................. -- 11,385
Acquisitions, net of cash acquired ................................... (306,319) (70,680)
--------- ---------
Net cash used in investing activities ........................ (325,387) (71,907)
--------- ---------

Cash flows from financing activities:
Net proceeds from stock offering ..................................... 93,692 --
Debt issuance costs .................................................. (5,950) (390)
Proceeds from issuance of debt ....................................... 289,000 40,000
Proceeds from exercise of employee stock options ..................... 762 336
Proceeds from employee stock purchases ............................... 77 --
Principal payments on long-term debt ................................. (102,711) (14,127)
--------- ---------
Net cash provided by financing activities .................... 274,870 25,819
--------- ---------
Effect of exchange rates on cash ....................................... 466 --
--------- ---------
Net decrease in cash and cash equivalents .............................. (1,472) (10,680)
Cash and cash equivalents at beginning of year ....................... 23,077 21,029
--------- ---------
Cash and cash equivalents at September 30 ............................ $ 21,605 $ 10,349
========= =========

Supplemental disclosures of cash flow information:
Income taxes paid .................................................... $ 8,185 $ 6,649
========= =========
Interest paid ........................................................ $ 5,020 $ 3,649
========= =========
</TABLE>

See accompanying notes to condensed consolidated financial statements.

4
<PAGE>
BENCHMARK ELECTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

NOTE 1 - BASIS OF PRESENTATION

Benchmark Electronics, Inc. (the Company) is a Texas corporation which
provides electronics manufacturing and design services to original equipment
manufacturers (OEMs) in select industries, including enterprise computer and
peripherals, telecommunications, medical device, industrial control, testing and
instrumentation, high-end video/audio/entertainment, and computer.

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
financial statements and notes included in the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1998.

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 1,087,450 and 605,888 for the nine months ended September 30, 1999 and
1998, respectively, and 1,185,858 and 513,923 for the three months ended
September 30, 1999 and 1998, respectively, were used in the calculation of
diluted earnings per share. Options to purchase 213,000 and 290,000 shares of
common stock for the three and nine-month periods ended September 30, 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 for
the respective periods. The effect of the if-converted method for the 6%
Convertible Subordinated Notes (the Notes) is antidilutive and the weighted pro
rata portion of 1,995,025 of potential common shares have not been considered in
computing diluted earnings per share for the three and nine-month periods ended
September 30, 1999.

NOTE 3 - BORROWING FACILITIES

In connection with the acquisition of AVEX Electronics, Inc. and Kilbride
Holdings B.V. (collectively, AVEX), the Company obtained $100 million through
borrowings under a five-year term loan (the Term Loan) through a syndicate of
commercial banks. Principal on the Term Loan is payable in quarterly
installments beginning December 31, 1999 in annual amounts of $3 million in
1999, $16 million in 2000, $18 million in 2001, $20 million in 2002, $22 million
in 2003 and $21 million in 2004. The Term Loan bears interest, at the Company's
option, at either the bank's Eurodollar rate plus 1.25% to 2.50% or its prime
rate plus 0.00% to 1.00%, based upon the Company's debt ratio as specified in
the agreement and interest is payable quarterly. As of September 30, 1999, the
Company had $100 million outstanding under the Term Loan, bearing interest at
rates ranging from 7.875% to 8.000%.

The Company has a $125 million revolving line of credit facility (the
Revolving Credit Facility) with a commercial bank. The Company is entitled to
borrow under the Revolving Credit

5
<PAGE>
Facility up to the lesser of $125 million or the sum of 75% of its eligible
accounts receivable, 45% of its eligible inventories and 50% of its eligible
fixed assets. Interest on the Revolving Credit Facility is payable quarterly, at
the Company's option, at either the bank's Eurodollar rate plus 1.25% to 2.50%
or its prime rate plus 0.00% to 1.00%, based upon the Company's debt ratio as
specified in the agreement. A commitment fee of 0.375% to 0.500% per annum on
the unused portion of the Revolving Credit Facility is payable quarterly in
arrears. The Revolving Credit Facility matures on September 30, 2004. As of
September 30, 1999, the Company had $60.4 million outstanding under the
Revolving Credit Facility, bearing interest at rates ranging from 7.9375% to
9.2500%, $5.2 million outstanding letters of credit and $59.4 million was
available for future borrowings.

The Term Loan and the Revolving Credit Facility (collectively the
Facility) is secured by the Company's domestic inventory and accounts
receivable, 100% of the stock of the Company's domestic subsidiaries, and 65% of
the voting capital stock of each direct foreign subsidiary and substantially all
of the other tangible and intangible assets of the Company and its domestic
subsidiaries. The Facility contains customary financial covenants and restricts
the ability of the Company to incur additional debt without the consent of the
bank, to pay dividends, to sell assets, and to merge or consolidate with other
persons.

In August 1999, the Company issued $80.2 million principal amount of 6%
Convertible Subordinated Notes due August 15, 2006 (the Notes). The Notes are
convertible, unless previously redeemed or repurchased, at the option of the
holder at any time after 90 days following the date of original issuance and
prior to maturity, into shares of the Company's common stock at an initial
conversion price of $40.20 per share, subject to adjustment in certain events.
The Notes are convertible into a total of 1,995,025 shares of the Company's
common stock. Interest is payable February 15 and August 15 each year,
commencing on February 15, 2000.

NOTE 4 - INVENTORIES

Inventory costs are summarized as follows:

SEPTEMBER 30, DECEMBER 31,
1999 1998
------------ ------------

Raw materials ................ $130,160,000 $ 39,230,000
Work in process .............. 66,203,000 14,488,000
------------ ------------
$196,363,000 $ 53,718,000
============ ============

NOTE 5 - INCOME TAXES

Income tax expense (including $0.7 million of benefit allocated to the
extraordinary item) consists of the following:

NINE MONTHS ENDED
SEPTEMBER 30,
1999 1998
---------- ----------

Federal - Current ............... $4,906,000 $5,266,000
Foreign - Current ............... 435,000 --
State - Current ................. 384,000 683,000
Federal/State - Deferred ........ 315,000 1,412,000
---------- ----------
Total ...................... $6,040,000 $7,361,000
========== ==========

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

6
<PAGE>
goodwill, foreign income taxes, state income taxes, net of federal benefit and
the benefit from the use of a foreign sales corporation and non-taxable interest
earned on municipal investments.

The Company considers earnings from its foreign subsidiaries 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 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 Ireland at rates substantially less than the statutory tax rates for
that jurisdiction. As a result of these reduced rates, income tax expense for
the nine-months ended September 30, 1999 is approximately $74,000 (approximately
$.01 per share) lower than the amount computed by applying the
statutory tax rates.

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. Because of the
international scope of AVEX's operations, the Company has initiated a foreign
currency risk management program. The Company has not evaluated the effect of
the adoption of SFAS No. 133 as of January 1, 2001 will have on 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 August 24, 1999, the Company completed the acquisition of all of the
outstanding capital stock of AVEX from J.M. Huber Corporation ("Seller"). AVEX
has manufacturing plants or design centers in the United States in Huntsville,
Alabama and Pulaski, Tennessee, and elsewhere in Campinas, Brazil, Csongrad,
Hungary, Guadalajara, Mexico, Cork, Ireland, Singapore, East Kilbride, Scotland,
and Katrineholm, Sweden. In consideration of the capital stock of AVEX, the
Company paid $265.3 million in cash at closing, subject to certain adjustments,
including a working capital adjustment, and issued one million shares of the
Company's Common Stock to the Seller. In order to finance the AVEX acquisition,
the Company (i) obtained a term loan from a commercial bank in the amount of
$100 million, (ii) obtained a new revolving credit facility permitting draws of
up to $125 million, subject to a borrowing base calculation, and borrowed $46
million under such facility and (iii) issued $80.2 million in convertible
subordinated debt. In connection with the AVEX acquisition, the Company borrowed
$30 million under the new revolving credit facility to refinance existing debt
pursuant to the Company's prior Senior Note. The AVEX acquisition was accounted
for using the purchase method of accounting, and, accordingly, the results of
operations of AVEX since August 24, 1999 have been included in the accompanying
condensed statements of income.

The Company has not completed the final evaluation of the working capital
adjustment, and the analysis to allocate the purchase prices to identifiable
tangible and intangible assets and

7
<PAGE>
goodwill. The Company is awaiting finalization of certain appraisals and other
information necessary to complete the purchase price allocation. Accordingly, at
September 30, 1999, the allocation of the purchase price is based on preliminary
estimates and subject to change. Goodwill is being amortized on a straight-line
basis over 15 years.

Pursuant to the terms of the purchase agreement in connection with the
acquisition of AVEX on August 24, 1999, the Company was required to agree upon a
closing working capital adjustment with the Seller by November 22, 1999. The
Company was unable to reach an agreement with the Seller prior to the November
22, 1999 deadline and has entered into several agreements extending this
deadline. At the present time, the parties still have not reached an agreement
and have hired an independent accounting firm to serve as arbitrator to resolve
the dispute and to calculate the final closing working capital adjustment.
Management is unable to predict when the arbitrator will be releasing its
findings but estimates that the net closing working capital adjustment will be
in the range of $20 to $40 million. Management has made its best estimate of the
ultimate resolution of this arbitration proceeding. However, the final working
capital settlement could have a significant effect on the final purchase price
and the allocation of the purchase price.

The net purchase price has been allocated based on preliminary estimates
as follows:

Working capital, other than cash .................. $ 146,337,000
Property, plant and equipment ..................... 76,301,000
Goodwill .......................................... 132,046,000
Other assets ...................................... 2,518,000
Other liabilities ................................. (10,175,000)
Long term debt .................................... (4,575,000)
-------------
Purchase price, net of cash received ........... $ 342,452,000
=============

Net cash portion of purchase price ................ $ 306,439,000
Common stock issued ............................... 36,013,000
-------------
Purchase price, net of cash received .............. $ 342,452,000
=============

The following summary pro forma condensed consolidated financial
information reflects the acquisition of AVEX as if it had occurred on January 1,
1999 for purposes of the statements of operations. The summary pro forma
information is not necessarily representative of what the Company's results of
operations would have been had the AVEX acquisition in fact occurred on January
1, 1999 and is not intended to project the Company's results of operations for
any future period or date.

Pro forma condensed consolidated financial information for the period
ended September 30, 1999 (unaudited):

NINE MONTHS ENDED
SEPTEMBER 30,
1999
--------------------

Net sales ............................................... $ 1,179,211,000
Gross profit ............................................ $ 57,018,000
Income from operations .................................. $ 2,392,000
Net loss (including extraordinary loss of $1.3 million).. $ (8,650,000)
Basic and diluted loss per common share.................. $ (0.58)
Basic and diluted weighted average number of shares
outstanding............................................. 15,009,000

On March 1, 1999, the Company acquired certain equipment and inventories
from Stratus Computer Ireland (Stratus), a wholly-owned subsidiary of Ascend
Communications, Inc. (Ascend) for approximately $42.3 million in cash, as
adjusted. The acquisition price was allocated $6.1 million to equipment and
other assets, and $36.2 million to inventories. Stratus 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

8
<PAGE>
system integration services to Ascend and Stratus Holdings Limited and the
Company hired approximately 260 employees.

On February 23, 1998, the Company completed its acquisition of Lockheed
Commercial Electronics Company (LCEC) for $70 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 statements of income. The acquisition
resulted in goodwill of approximately $29.5 million that is being amortized on a
straight-line basis over 15 years.

NOTE 8 - STOCK OFFERING

On June 3, 1999, the Company issued 3,525,000 shares of common stock in a
public offering and received net proceeds of approximately $93.7 million. The
net proceeds to the Company from the offering have been used to repay
indebtedness outstanding under the Company's bank credit facility, for the AVEX
acquisition and for working capital and other general corporate purposes.

NOTE 9 - BUSINESS SEGMENTS AND GEOGRAPHIC AREAS

The Company currently operates in two reportable operating segments -
Systems Integration and Box Build and Printed Circuit Boards. Prior to the
acquisition of AVEX and the Stratus equipment and inventories the Company had
only one operating segment.

The measurement of profit or loss currently used to evaluate the results
of operations for the operating segments is income (loss) before income taxes
and extraordinary item and unallocated corporate overhead. Sales between
operating segments for the three and nine months ended September 30, 1999
consisted of sales of printed circuit boards to the Systems Integration and Box
Build segment and totaled $13.2 million and $31.4 million, respectively.
Transactions between segments are recorded at cost plus an applicable margin.

<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1999 1999
-------------------- -------------------
(IN THOUSANDS)
<S> <C> <C>
Net sales to external customers:
Systems Integration and Box Build .......... $ 42,028 $ 96,387
Printed Circuit Boards ..................... 187,842 442,650
--------- ---------
Total ............................ $ 229,870 $ 539,037
========= =========

Income (loss) before income taxes and extraordinary item:
Systems Integration and Box Build .......... $ (154) $ 2,999
Printed Circuit Boards ..................... 3,325 17,460
Unallocated corporate overhead ............. (1,188) (1,743)
--------- ---------
Total ............................ $ 1,983 $ 18,716
========= =========

Total assets as of September 30, 1999:
Systems Integration and Box Build .......... $ 62,428
Printed Circuit Boards ..................... 720,259
Corporate .................................. 10,435
---------
Total ............................ $ 793,122
=========
</TABLE>

9
<PAGE>
The Company currently has international operations in Brazil,
Hungary, Ireland, Mexico, Scotland, Singapore and Sweden. For the nine-month
period ended September 30, 1999, the Company's domestic and international sales
were as follows (in thousands):

Net sales to external customers:
Domestic .................................... $400,159
International ............................... 138,878
--------
Total ............................. $539,037
========

International sales by country:
Ireland ..................................... $ 89,568
Scotland .................................... 18,620
Mexico ...................................... 15,156
Sweden ...................................... 7,822
Singapore ................................... 4,205
Brazil ...................................... 3,507
--------
Total ............................. $138,878
========

During the nine months ended September 30, 1999, the Company had export
sales of approximately $11.1 million to Ireland, $4.0 million to Scotland, $2.9
million to Brazil, $438,000 to France, $267,000 to Canada, $121,000 to Israel,
$32,000 to Japan, $11,000 to Singapore, $13,000 to Australia and $9,000 to
Holland. During the nine months ended September 30, 1998, the Company had export
sales of approximately $57.1 million to Ireland, $528,000 to France, $948,000 to
Canada, $217,000 to Hong Kong, $20,000 to Japan, $57,000 to Singapore, $4,000 to
Holland, and $3,000 to Australia.

NOTE 10 - COMPREHENSIVE INCOME

Comprehensive income, which includes net income and the change in the
cumulative translation adjustment, for the three and nine months ended September
30, 1999 was $0.8 million and $11.4 million, respectively. For the 1998 periods,
comprehensive income and net income was the same.

NOTE 11 - EXTRAORDINARY ITEM

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The following Management's Discussion and Analysis of Financial Condition
and Results of Operations, and the discussion of market risk in Item 3 below,
contains certain forward-looking statements regarding future financial condition
and results of operations and our business operations. We have based these
statements on our expectations about future events. The words "may," "intend,"
"will," "expect," "anticipate," "objective," "projection," "forecast," "plan,"
"management believes," "estimate," "continue," "should," "strategy" or
"position" or the negatives of those terms or other variations of them or by
comparable terminology are intended to identify forward-looking statements. 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 include, without
limitation, integration of the operations of AVEX Electronics, Inc. and Kilbride
Holdings B.V. (AVEX); incurrence of operating losses at AVEX after our
acquisition of

10
<PAGE>
AVEX; the integration of the operations of Lockheed Commercial Electronics
Company (LCEC) and the assets in Ireland purchased from Stratus Computer Ireland
(Stratus); the loss of one or more of our major customers; changes in our
customer concentration; the absence of long-term sales contracts with our
customers; our dependence on the growth of the enterprise computer,
telecommunications, medical device, industrial control, testing and
instrumentation, networking/servers and high-end video/audio/entertainment
industries; risks associated with international operations; the availability and
cost of customer specified components; our dependence on certain key executives;
the effects of domestic and foreign environmental laws; Year 2000 problems;
fluctuations in our quarterly results of operation; the volatility of the price
of our common stock; 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.

GENERAL

We are one of the leading independent providers of electronics
manufacturing services (EMS) with 14 facilities in 8 countries and a customer
base of approximately 90 original equipment operators (OEMs) in a broader range
of end user markets. We currently service OEMs in the enterprise computer and
peripherals, telecommunications, medical device, industrial control, testing and
instrumentation, high-end video/audio/entertainment, and computer markets.

We offer OEMs a turnkey EMS solution, from initial product design to
volume production and direct order fulfillment. We provide advanced engineering
services including product design, printed circuit board (PCB) layout,
quick-turn prototyping and test development. We believe that the AVEX
acquisition will allow us to complement our strengths in the manufacturing
process for large, complex, high-density assemblies with AVEX's ability to
manufacture high and low volume products in lower cost regions such as Latin
America, Eastern Europe and Southeast Asia. As OEM's expand internationally,
they are increasingly requiring their EMS partners to have strategic regional
locations and global procurement abilities. We believe a global manufacturing
solution increases our ability to be responsive to our customers' needs by
providing accelerated time-to-market and time-to-volume production of high
quality products. These enhanced capabilities should enable us to build stronger
strategic relationships with our customers and to become a more integral part of
their operations.

Substantially all of our manufacturing services are provided on a turnkey
basis, whereby we purchase customer-specified components from our suppliers,
assemble the components on finished PCBs, perform post-production testing and
provide our customer with production process and testing documentation. We offer
our customers flexible, "just-in-time" delivery programs allowing product
shipments to be closely coordinated with our customers' inventory requirements.
In certain instances, we complete the assembly of our customers' products at our
facilities by integrating printed circuit board assemblies into other elements
of our customers' products. We also provide manufacturing services on a
consignment basis, whereby we, utilizing components provided by the customer,
provide only assembly and post-production testing services. We currently operate
a total of 49 surface mount production lines at our domestic facilities in
Angleton, Texas; Beaverton, Oregon; Hudson, New Hampshire; Huntsville, Alabama;
Pulaski, Tennesse; and Winona, Minnesota; and 32 surface mount production lines
at our international facilities in Cork and Dublin, Ireland; Campinas, Brazil;
Csongrad, Hungary; Guadalajara, Mexico; Singapore; East Kilbride, Scotland; and
Katrineholm, Sweden.

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<PAGE>
Sales are recognized at the time products are shipped to customers and may
vary depending on the timing of customers' orders, product mix and availability
of component parts. Substantially all of our business is performed on a turnkey
basis, which involves the procurement of component parts. The gross profit
margin for such materials is generally lower than the gross profit associated
with the manufacturing process and other value-added services.

We do not typically obtain long-term purchase orders or commitments from
our customers. Instead we work with our customers to develop forecasts for
future orders, which are not binding. Customers may cancel their orders, change
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.

A substantial percentage of our sales have been made to a relatively small
number of customers, and the loss of a major customer would adversely affect us.
During the nine months ended September 30, 1999, our two largest customers each
represented in excess of 10% our sales and together represented 43.6% of our
sales. On a pro forma basis for the nine months ended September 30, 1999, the
two largest customers of the Company and AVEX accounted for 24.4% of 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, if not replaced, would have a material adverse effect on
our results of operations. We are dependent on the continued growth, viability
and financial stability of our customers, some of which operate in industries
that are, to a varying extent, subject to technological change, vigorous
competition and short product life cycles. When our customers are adversely
affected by these factors, we may be similarly affected.

We have made three significant acquisitions in the last two years, and a
total of four 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 and other risks, including the
integration of different information systems.

The difficulties of integrating acquired businesses may be further complicated
by size and geographic distances. Our most recent acquisition includes
international locations in seven countries across Europe, South America, Asia
and Latin America. 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 dependent upon our ability to integrate the
AVEX acquisition and other acquisitions we may make in the future, with our
existing operations. 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 following discussion should be read in conjunction with the unaudited
financial statements of the Company, and the notes thereto, included elsewhere
in this report.

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<PAGE>
RECENT ACQUISITIONS

On August 24, 1999, we completed the previously announced acquisition of
AVEX from J.M. Huber Corporation (the "Seller"). As consideration for the
acquisition, the Company paid the Seller $265.3 million in cash at closing,
subject to certain adjustments, including a working capital adjustment, and
issued to the Seller one million shares of the Company's Common Stock. In order
to finance the AVEX acquisition, the Company (i) obtained a term loan from a
commercial bank in the amount of $100 million, (ii) obtained a new revolving
credit facility permitting draws of up to $125 million, subject to a borrowing
base calculation, and borrowed $46 million under such facility and (iii) issued
$80.2 million in convertible subordinated debt. In connection with the AVEX
acquisition, the Company borrowed $30 million under the new revolving credit
facility to refinance existing debt pursuant to the Company's prior Senior Note.
See Note 7 of Notes to Condensed Consolidated Financial Statements.

On March 1, 1999, we acquired certain assets from Stratus Computer Ireland
(Stratus), a wholly-owned subsidiary of Ascend Communications, Inc. (Ascend) for
approximately $42.3 million in cash, as adjusted. The acquisition price was
allocated $6.1 million to equipment and other assets, and $36.2 million to
inventories. Stratus 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 Holdings Limited and the
Company hired approximately 260 employees. See Note 7 of Notes to Condensed
Consolidated Financial Statements.

The inclusion of AVEX's operations and the operations of the systems
integration facility in Ireland in the Company's accounts are responsible for a
substantial portion of the variations in the results of the Company's operations
(including components thereof) from period to period. The effects of the
acquisitions of the Stratus assets and AVEX on the Company's financial condition
and its reported results of operations should be considered when reading the
financial information contained herein.

The acquisition of AVEX constitutes a significant expansion of the
Company's operations. Accordingly, the potential effect of the AVEX acquisition
on the Company's future financial condition, liquidity and results of operations
should be considered when reading the historical financial information and
related discussions set forth in the following section. See Note 7 of Notes to
Condensed Consolidated Financial Statements.

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<PAGE>
RESULTS OF OPERATIONS

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

<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------- ----------------------
1999 1998 1999 1998
----- ----- ----- -----
<S> <C> <C> <C> <C>
Sales ............................................. 100.0% 100.0% 100.0% 100.0%
Cost of sales ..................................... 94.0 90.3 91.6 90.2
----- ----- ----- -----
Gross profit ................................ 6.0 9.7 8.4 9.8
Selling, general and administrative expense ....... 3.8 3.4 3.6 3.4
Amortization of goodwill .......................... 0.7 0.7 0.6 0.6
----- ----- ----- -----
Income from operations ...................... 1.5 5.6 4.2 5.8
Interest expense .................................. (1.1) (0.8) (0.9) (0.9)
Interest income ................................... 0.1 0.1 0.1 0.1
Other income ...................................... 0.3 0.0 0.0 0.0
----- ----- ----- -----
Income before income taxes and
extraordinary item......................... 0.9 4.9 3.5 5.0
Income tax expense ................................ 0.3 1.9 1.3 1.9
----- ----- ----- -----
Income before extraordinary item............. 0.6 3.0 2.2 3.1
Extraordinary item - loss on extinguishment
of debt, net of taxes ........................... (0.6) 0.0 (0.2) 0.0
----- ----- ----- -----
Net income .................................. 0.0% 3.0% 2.0% 3.1%
===== ===== ===== =====

</TABLE>

Sales for the third quarter of 1999 were approximately $229.9 million, a
64.6% increase from sales of approximately $139.6 million for the same quarter
in 1998. Sales for the first nine months of 1999 were approximately $539.0
million, a 41.7% increase from sales of $380.3 million for the same period of
1998. The net increases in sales resulted primarily from the acquisition of
AVEX, the operation of the systems integration facility in Dublin, Ireland,
increased sales to 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. During the nine months ended
September 30, 1999, the Company's two largest customers each represented in
excess of 10% of our sales and represented 43.6% of the Company's sales in the
aggregate. The loss of a major customer, if not replaced, would adversely affect
the Company.

One of AVEX's largest customers in 1998 has the right to terminate its
inventory manufacturing agreement with AVEX in the event of a change of control
of AVEX. Our acquisition of AVEX constituted a change of control of AVEX,
entitling such customer to terminate its agreement with AVEX. This customer,
like any customer, is not obligated to continue using AVEX in the future.
Additionally, AVEX's largest customer in 1998 has substantially reduced its
purchases from AVEX during 1999 as a result of changed circumstances affecting
this customer's products, and another large customer is currently undergoing a
period of organizational change and has reduced its purchases as a result.

Gross profit increased 1.6% to approximately $13.8 million in the third
quarter of 1999 from approximately $13.5 million in the same quarter in 1998.
Gross profit increased 22.0% to $45.3 million during the first nine months of
1999 from $37.1 million for the same period in 1998. The increases in gross
profit were due primarily to the higher sales volumes attributable to the AVEX
acquisition and also to the operation of the new systems integration facility in
Ireland and changes in product and customer mix occurring in the ordinary course
of business. Gross profit as a percentage of sales decreased from 9.7% for the
third quarter of 1998 to 6.0% for the third quarter of 1999. Gross profit as a
percentage of sales decreased from 9.8% for the first nine

14
<PAGE>
months of 1998 to 8.4% for the first nine months 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 with precision the separate effect of each factor.
The Company attributes the decrease in gross profit as a percentage of sales
during the quarter and nine months ended September 30, 1999, as compared to the
same periods in 1998, to the slower ramping up of new projects which resulted in
significant underabsorption of costs. Quarterly results also were adversely
impacted by higher costs and lower than expected contribution from AVEX. The
Company expects that a number of high dollar volume programs of AVEX will remain
subject to contractual and competitive restraints on the margin that may be
realized from such programs and that these restraints will exert downward
pressure on the Companies margins in the near term.

We anticipate continued challenges during the fourth quarter with certain
components, especially in light of the earthquake that occurred in Taiwan in
September 1999, which affected the production of microchips and other components
specified by our customers for their products. While the full effect of this
natural disaster on us is not known at this time, we expect that prices for such
components will increase, and that a temporary shortage of these components may
occur. If such events were to occur, they would have an adverse effect on our
results of operations. At the present time, however, Benchmark is unable to
predict the extent of any shortages or price increase or the effect on the
Company.

Selling, general and administrative expenses were $8.6 million in the
third quarter of 1999, an increase of 81.3% from $4.7 million for the same
quarter in 1998. Selling, general and administrative expenses were $19.3 million
for the first nine months of 1999, an increase of 51.0% from $12.8 million for
the same period in 1998. Selling, general and administrative expenses as a
percentage of sales increased from 3.4% for the third quarter of 1998 to 3.8%
for the third quarter of 1999 and increased from 3.4% for the first nine months
of 1998 to 3.6% of sales for the nine months ended September 30, 1999. The
increases in selling, general and administrative expenses during the quarter and
nine months ended September 30, 1999 reflect the additional administrative
expenses resulting from the acquisitions of AVEX, and the inclusion of the
systems integration facility in Dublin, Ireland. 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 Company anticipates selling,
general and administrative expenses will continue to increase as the Company
continues to build the internal management and support systems necessary to
support higher sales levels and the integration of AVEX.

The amortization of goodwill for the three and nine-month periods ended
September 30, 1999 was $1.6 million and $3.4 million, respectively, compared to
$909,000 and $2.4 million, respectively for the same periods of 1998. The
increases are attributable to the acquisition of AVEX on August 24, 1999 and
LCEC on February 23, 1998.

Interest expense for the quarters ended September 30, 1999 and 1998 was
$2.6 million and $1.2 million, respectively. For the nine months ended September
30, 1999, interest expense increased to $3.4 million from $2.4 million for the
same period in 1998, as a result of the additional debt incurred in connection
with the acquisition of AVEX on August 24, 1999, the purchase of the assets in
Ireland from Stratus on March 1, 1999 and the acquisition of LCEC on February
23, 1998. The Company expects interest expense during future periods to reflect
the increase in indebtedness resulting from the AVEX acquisition.

Interest income was approximately $328,000 and $120,000, respectively, for
the three-month periods ended September 30, 1999 and 1998, and approximately
$594,000 and $343,000,

15
<PAGE>
respectively, for the nine-month periods ended September 30, 1999 and 1998. The
increase in interest income was due to the interest earned on cash equivalents
from the proceeds of the public offering of the Company's common stock in June
1999.

Income tax expense for the three-month periods ended September 30, 1999
and 1998 was $647,000 and $2.6 million, respectively. Income tax expense for the
nine-month periods ended September 30, 1999 and 1998 was $6.7 million and $7.4
million, respectively. The decrease was due to lower pretax income and foreign
tax rates applicable to a portion of pretax income in 1999, partially offset by
nondeductible amortization of goodwill.

In connection with the financing of the acquisition of AVEX, the Company
prepaid the 8.02% Senior Note due 2006. An extraordinary loss of $1,297,000 (net
of income tax benefit of $698,000) was incurred as a result of the early
extinguishment of the Senior Note. See Note 11 of Notes to Condensed
Consolidated Financial Statements. As a result of this extraordinary item, the
Company's net income for the three-month period ended September 30, 1999 was
$39,000, as compared to $4,182,000 for the same period in 1998. For the
nine-month period ended September 30, 1999, net income was $10,681,000, as
compared to $11,060,000 for the same period in 1998.

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 convertible
notes and funds borrowed under its credit facilities.

Cash provided by operating activities was $48.6 million and $35.4 million
for the nine months ended September 30, 1999 and 1998, respectively. The
increase in cash provided by operations was primarily the result of increases in
depreciation and amortization and accounts payable and decreases in inventories
partially offset by increases in accounts receivable. The Company's accounts
payable increased, and inventories have decreased, $29.5 million and $11.3
million (net of effects from the acquisition of AVEX and the purchase of assets
from Stratus), respectively, during the first nine 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. During the three months
ended September 30, 1999, the failure of certain suppliers to deliver components
in a timely manner caused certain shipments to be delayed until the fourth
quarter. The Company expects supply constraints during the fourth quarter,
especially in light of the recent earthquake in Taiwan.

Cash used in investing activities was $325.4 million and $71.9 million for
the nine months ended September 30, 1999 and 1998, respectively. On August 24,
1999, the Company completed the AVEX acquisition with $265.3 million paid in
cash at closing. On March 1, 1999, the Company completed the purchase of
inventories and equipment from Stratus for $42.3 million in cash. See Note 7 of
Notes to Condensed Consolidated Financial Statements. Capital expenditures of
$17.0 million for the nine months ended September 30, 1999, were primarily
concentrated in test and computer equipment. Capitalized software costs of $2.0
million for the nine months ended September 30, 1999, were for the
implementation of the Company's Enterprise Resource Planning System.

16
<PAGE>
Cash provided by financing activities was $274.9 million and $25.8 million
for the nine months ended September 30, 1999 and 1998, respectively. In
connection with the purchase of the assets from Stratus on March 1, 1999, the
Company borrowed $25 million. In June 1999, the Company completed a public
offering of 3,525,000 shares of its common stock and used a portion of the net
proceeds of $93.7 million to repay borrowings under its bank credit facilities.
In August 1999, the Company borrowed $100 million under the Term Loan, $76
million under the Revolving Credit Facility and issued $80.2 million principal
amount of 6% Convertible Subordinated Notes. The Company made principal payments
on long-term debt totaling $102.7 million during the nine months ended September
30, 1999.

The Company has a $125 million revolving line of credit facility (the
Revolving Credit Facility) with a commercial bank. The Company is entitled to
borrow under the Revolving Credit Facility up to the lesser of $125 million or
the sum of 75% of its eligible accounts receivable, 45% of its eligible
inventories and 50% of its eligible fixed assets. Interest on the Revolving
Credit Facility is payable quarterly, at the Company's option, at either the
bank's Eurodollar rate plus 1.25% to 2.50% or its prime rate plus 0.00% to
1.00%, based upon the Company's debt ratio as specified in the agreement. A
commitment fee of 0.375% to 0.500% per annum on the unused portion of the
Revolving Credit Facility is payable quarterly in arrears. The Revolving Credit
Facility matures on September 30, 2004. As of September 30, 1999, the Company
had $60.4 million outstanding under the Revolving Credit Facility, bearing
interest at rates ranging from 7.9375% to 9.2500%, $5.2 million outstanding
letters of credit and $59.4 million was available for future borrowings.

The Company's operations, and the operations of businesses it acquires,
are subject to certain foreign, federal, state and local regulatory requirements
relating to environmental, waste management, health and safety matters. The
Company believes it operates in substantial compliance with all applicable
requirements and the Company seeks to ensure that newly acquired businesses
comply or will comply substantially with applicable requirements. However,
material costs and liabilities may arise from these requirements or from new,
modified or more stringent requirements in the future. In addition, past,
current and future operations may give rise to claims of exposure by employees
or the public, or to other claims or liabilities relating to environmental,
waste management or health and safety concerns.

The Company may require additional capital to finance further enhancements
to or acquisitions or expansions of its manufacturing capacity. Management
believes that the level of working capital will continue to grow at a rate
generally consistent with the growth of the Company's operations. Management
continually evaluates potential strategic acquisitions and investments, but at
the present time, we have no understandings, commitments or agreements with
respect to any such acquisition or investment. 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.

At September 30, 1999, the Company's debt to total capitalization ratio
was 47%, as compared to 28% at December 31, 1998. Our acquisitions in 1999 have
significantly increased our leverage ratio and decreased our interest coverage
ratio. The level of indebtedness, among other things, could make it difficult
for us to obtain any necessary financing in the future for other acquisitions,
working capital, capital expenditures, debt service requirements and other
expenses; limit our flexibility in planning for, or reacting to changes in, our
business; and make us more vulnerable in the event of an economic downturn in
our business.

17
<PAGE>
Management believes that the existing cash balances, funds generated from
operations, and borrowings under the Revolving Credit Facility will be
sufficient to permit the Company to meet its liquidity requirements for the
foreseeable future. In this regard, the Company is evaluating the working
capital adjustment contemplated by the agreement related to the AVEX
acquisition. The Company has recorded a current liability at September 30, 1999
for the estimated amount, and expects to fund any amount required from operating
cash flows and borrowings under the Revolving Credit Facility. At the present
time, this amount is estimated to range from $20 to $40 million.

Historically, the Company has not held or issued derivative financial
instruments in the normal course of business. However, the Company is exposed to
market risks, including changes in foreign currency exchange rates and interest
rates, which may adversely affect its results of operations and financial
position. In seeking to minimize the risks and/or costs associated with such
activities, the Company manages exposure to changes in interest rates by
balancing the amount of its borrowings between fixed rate and variable interest
rates. Inflation and changing prices have not significantly affected the
Company's operating results or the markets in which the Company performs
services. Because of the international scope of AVEX's operations, the Company
has initiated a foreign currency risk management program.

SUBSEQUENT EVENTS

Pursuant to the terms of the purchase agreement in connection with the
acquisition of AVEX on August 24, 1999, we were required to agree upon a closing
working capital adjustment with the Seller by November 22, 1999. We were unable
to reach an agreement with the Seller prior to the November 22, 1999 deadline
and have entered into several agreements extending this deadline. At the present
time, the parties still have not reached an agreement and have hired an
independent accounting firm to serve as arbitrator to resolve the dispute and to
calculate the final closing working capital adjustment. We are unable to
predict when the arbitrator will be releasing its findings but estimate that the
net closing working capital adjustment will be in the range of $20 to $40
million. Management has made its best estimate of the ultimate resolution of
this arbitration proceeding. However, the final working capital settlement could
have a significant effect on the final purchase price and the allocation of the
purchase price.

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 those 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. 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.

18
<PAGE>
COSTS TO ADDRESS THE YEAR 2000 ISSUE

The estimated total cost to address the Company's Year 2000 issues is
approximately $750,000. 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 total amount expended on Year
2000 issues is approximately $600,000 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, 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 by the
end of 1999, the Company has not formulated a worst 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 stratgies are under deployment.

AVEX had initiated a Year 2000 Plan to identify, assess, and remediate
Year 2000 issues within each of its significant computer programs and certain
equipment which contain microprocessors. A large portion of the plan was
completed by the third quarter of 1999.

19
<PAGE>
ENTERPRISE RESOURCE PLANNING SYSTEM

The Company has selected Baan U.S.A., Inc. to provide an Enterprise
Resource Planning System, which will be Year 2000 compliant, to improve
processes and to increase efficiencies. The estimated total cost associated with
the purchase and implementation of the new Enterprise Resource Planning 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 have been and
will be expensed as incurred. The total amount expended on the new Enterprise
Resource Planning System through September 30, 1999, is approximately $11.1
million.

QUARTERLY RESULTS

Although management does not believe that the Company's business is
affected by seasonal factors, the Company's sales and earnings may vary from
quarter to quarter, depending primarily upon the timing of manufacturing orders.
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. Therefore, the Company's operating results for any
particular quarter may not be indicative of the results for any future quarter
or for the year.

20
<PAGE>
PART II - OTHER INFORMATION

ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits.

4.1 Indenture dated as of August 13, 1999 by and between
Benchmark Electronics, Inc. and Harris Trust Company of New
York, as trustee, incorporated by reference from Exhibit
99.3 to Benchmark Electronics, Inc.'s Form 8-K dated August
24, 1999 and filed on September 8, 1999.

10.1 Amended and Restated Stock Purchase Agreement dated as of
August 12, 1998 by and between Benchmark Electronics, Inc.
and J. M. Huber Corporation, incorporated by reference from
Exhibit 2 to Benchmark Electronics, Inc.'s Form 8-K dated
August 24, 1999 and filed on September 8, 1999.

10.2 Credit Agreement dated as of August 24, 1999 by and among
Benchmark Electronics, Inc., the lenders party thereto and
Chase Bank of Texas, National Association, as
administrative agent, incorporated by reference from
Exhibit 99.1 to Benchmark Electronics, Inc.'s Form 8-K
dated August 24, 1999 and filed on September 8, 1999.

10.3 Registration Rights Agreement dated as of August 24, 1999
by and between Benchmark Electronics, Inc. and J. M. Huber
Corporation, incorporated by reference from Exhibit 99.2 to
Benchmark Electronics, Inc.'s Form 8-K dated August 24,
1999 and filed on September 8, 1999.

10.4 Registration Agreement dated as of August 9, 1999 by and
among Benchmark Electronics, Inc., Salomon Smith Barney
Inc. and Chase Securities Inc., incorporated by reference
from Exhibit 99.4 to Benchmark Electronics, Inc.'s Form 8-K
dated August 24, 1999 and filed on September 8, 1999.

*27.1 Financial Data Schedule

*99.1 Unaudited proforma condensed combined statement of
operations for the nine months ended September 30, 1999.

* Filed herewith.

(b) The following Current Reports on Form 8-K were filed by the
Company during the quarter ended September 30, 1999 or during the
period from September 30, 1999, to the date of this Form 10-Q/A:

Benchmark Electronics, Inc.'s Current Report on Form 8-K dated
and filed on August 2, 1999;

Benchmark Electronics, Inc.'s Current Reports on Form 8-K dated
and filed August 2, 1999, as amended by Form 8-K/A dated
August 13, 1999 and filed on August 18, 1999;

Benchmark Electronics, Inc.'s Current Report on Form 8-K dated
August 13, 1999 and filed on August 16, 1999;

Benchmark Electronics, Inc.'s Current Report on Form 8-K dated
August 24, 1999 and filed on September 8, 1999.

Benchmark Electronics, Inc.'s Current Report on Form 8-K dated and
filed on November 23, 1999.

Benchmark Electronics, Inc.'s Current Report on Form 8-K dated and
filed on December 15, 1999.

Benchmark Electronics, Inc.'s Current Report on Form 8-K dated and
filed on February 8, 2000.

21
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized on March __, 2000.

BENCHMARK ELECTRONICS, INC.
(Registrant)

By: /s/ DONALD E. NIGBOR
Donald E. Nigbor
President
(Principal Executive Officer)

By: /s/ CARY T. FU
Cary T. Fu
Executive Vice President
(Principal Financial Officer)

22
<PAGE>
EXHIBIT INDEX

EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
--------- -------------------------

4.1 Indenture dated as of August 13, 1999 by and between
Benchmark Electronics, Inc. and Harris Trust Company of New
York, as trustee, incorporated by reference from Exhibit 99.3
to Benchmark Electronics, Inc.'s Form 8-K dated August 24,
1999 and filed on September 8, 1999.

10.2 Credit Agreement dated as of August 24, 1999 by and among
Benchmark Electronics, Inc., the lenders party thereto and
Chase Bank of Texas, National Association, as administrative
agent, incorporated by reference from Exhibit 99.1 to
Benchmark Electronics, Inc.'s Form 8-K dated August 24, 1999
and filed on September 8, 1999.

10.3 Registration Rights Agreement dated as of August 24, 1999 by
and between Benchmark Electronics, Inc. and J. M. Huber
Corporation, incorporated by reference from Exhibit 99.2 to
Benchmark Electronics, Inc.'s Form 8-K dated August 24, 1999
and filed on September 8, 1999.

10.4 Registration Agreement dated as of August 9, 1999 by and
among Benchmark Electronics, Inc., Salomon Smith Barney Inc.
and Chase Securities Inc., incorporated by reference from
Exhibit 99.4 to Benchmark Electronics, Inc.'s Form 8-K dated
August 24, 1999 and filed on September 8, 1999.

27.1 Financial Data Schedule

99.1 Unaudited proforma condensed combined statement of
operations for the nine months ended September 30, 1999.

<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE THIRD
QUARTER 10Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 21,605
<SECURITIES> 0
<RECEIVABLES> 225,205
<ALLOWANCES> 0
<INVENTORY> 196,363
<CURRENT-ASSETS> 467,085
<PP&E> 179,516
<DEPRECIATION> 49,759
<TOTAL-ASSETS> 793,122
<CURRENT-LIABILITIES> 272,245
<BONDS> 225,711
0
0
<COMMON> 1,621
<OTHER-SE> 278,673
<TOTAL-LIABILITY-AND-EQUITY> 793,122
<SALES> 539,037
<TOTAL-REVENUES> 539,037
<CGS> 493,729
<TOTAL-COSTS> 493,729
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 19,269
<INCOME-PRETAX> 22,590
<INCOME-TAX> 6,738
<INCOME-CONTINUING> 11,978
<DISCONTINUED> 0
<EXTRAORDINARY> (1,297)
<CHANGES> 0
<NET-INCOME> 10,681
<EPS-BASIC> 0.80
<EPS-DILUTED> 0.74

</TABLE>

EXHIBIT 99.1

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

The following unaudited pro forma condensed combined statement of
operations gives effect to the acquisition by Benchmark of all the outstanding
capital stock of AVEX Electronics, Inc. and its subsidiaries and certain
affiliates ("AVEX") as if it occurred as of January 1, 1998.

The AVEX acquisition was accounted for under the purchase method of
accounting. The unaudited pro forma condensed combined statement of operations
is based on the historical financial statements of Benchmark and AVEX and the
estimates and assumptions in the notes to the unaudited pro forma condensed
combined statement of operations. The unaudited pro forma condensed combined
statement of operations for the year ended December 31, 1998 has been previously
filed on a Current Report on Form 8-K dated August 24, 1999 and filed on
September 8, 1999 (the "Current Report"). No pro forma balance sheet at
September 30, 1999 has been provided as the AVEX acquisition is included in
Benchmark's historical balance sheet at September 30, 1999.

The unaudited pro forma condensed combined statement of operations should
be read in conjunction with the historical financial statements of Benchmark and
AVEX and "Management's Discussion and Analysis of Financial Conditions and
Results of Operations" of Benchmark. The unaudited pro forma condensed combined
statement of operations does not purport to represent what Benchmark's results
of operations would actually have been if the AVEX acquisition had been
consummated on the indicated date, nor are they necessarily indicative of
Benchmark's results of operations for any future period. The results of
operations for the nine months ended September 30, 1999, are not necessarily
indicative of the results to be expected for the entire year or any other
interim period.

Reference should be made to the unaudited pro forma condensed combined
financial statements filed on the Current Report for additional information
regarding the estimates and assumptions inherent in the preparation of this
statement.
<PAGE>
BENCHMARK ELECTRONICS, INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(UNAUDITED)

<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
--------------------------- ---------------------------------------
BENCHMARK AVEX (A) ADJUSTMENTS COMBINED
---------- ---------- ---------- ----------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>

Sales ............................................ $539,037 $640,174 $1,179,211
Cost of sales .................................... 493,729 630,682 (2,218) d 1,122,193
--------------------------- ---------------------------------------
Gross profit ................................ 45,308 9,492 2,218 57,018

Selling, general & administrative expenses ....... 19,269 31,095 (5,456) b 45,308
400 d
--
Amortization of goodwill ......................... 3,449 -- 5,869 c 9,318
--------------------------- ---------------------------------------
Income (loss) from operations ............... 22,590 (21,603) 1,405 2,392

Interest and other income - net .................. 1,066 108 (300) e 874
Interest expense ................................. (4,940) (13,941) 13,941 f (16,574)
(882) g
(10,752) h
--------------------------- ---------------------------------------
Income (loss) before taxes and
extraordinary item ......................... 18,716 (35,436) 3,412 (13,308)

Income taxes ..................................... 6,738 960 1,194 i (4,658)
(13,550) j
--------------------------- ---------------------------------------
Income (loss) before extraordinary item .... 11,978 (36,396) 15,768 (8,650)

Income (loss) before extraordinary item
per common share - Basic ........................ $ 0.90 $ (0.58)
Income (loss) before extraordinary item
per common share - Diluted ...................... $ 0.83 $ (0.58)

Weighted average common shares outstanding:
Basic ........................................ 13,360 1,649 k 15,009
Diluted ...................................... 14,448 561 k 15,009
</TABLE>

See accompanying notes to unaudited pro forma condensed combined statement of
operations.
<PAGE>
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED STATEMENT OF OPERATIONS

Adjustments have been made to the unaudited pro forma condensed combined
statement of operations to reflect the following:

(a) Includes the historical results of operations of AVEX for the period to
August 24, 1999 the consummation date of the acquisition.

(b) To eliminate the historical costs related to (i) certain redundant
executive headquarter costs (ii) the termination of intercompany services
previously provided by the J.M Huber Corporation (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):
<TABLE>
<CAPTION>
FOR THE PERIOD ENDED
--------------------
SEPTEMBER 30, 1999
--------------------
<S> <C>
Redundant executive headquarter costs ............................. $ (2,948)
Historical intercompany service fee ............................... (2,384)
Historical cost of pension plan not continued ..................... (791)
Benchmark replacement of intercompany services arrangement ........ 667
--------------------
Total ......................................................... $ (5,456)
====================
</TABLE>
(c) To record amortization of goodwill over an estimated useful life of 15
years.

(d) To eliminate adjustments to the 1998 write down of certain assets related
to AVEX's San Jose, California facility, which were not acquired by
Benchmark, included in AVEX's historical financial statements.

(e) To reduce interest income related to cash balances utilized in funding a
portion of the AVEX acquisition.

(f) To eliminate intercompany interest expense with the Seller and interest on
AVEX notes payable not assumed under the Stock Purchase Agreement.

(g) To record amortization of debt issuance costs over the life of the
applicable debt instruments.

(h) To record interest expense at 7.75%, 7.75% and 6.0% on the amounts
outstanding under the Revolving Credit Facility, Term Loan, 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 and Term Loan of approximately $220,000.

(i) To record income tax adjustments related to the above pro forma
adjustments.

(j) To adjust AVEX historical income tax expense 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.
<PAGE>
(k) 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
--------------------
SEPTEMBER 30, 1999
--------------------
BASIC DILUTED
-------- ---------
<S> <C> <C>
Benchmark historical ...................................... 13,360 14,448
Common shares issued in AVEX acquisition on pro forma basis
as of January 1, 1999 .................................. 861 861
Common shares issued in public offering on pro forma basis
as of January 1, 1999 .................................. 788 788
Elimination of Benchmark stock options -- antidilutive
on a pro forma basis in 1999 ............................. -- (1,088)
-------- ---------
15,009 15,009
======== =========
</TABLE>
The effect of the if-converted method for the Notes is antidilutive and 2.0
million of potential common shares have not been considered in computing
diluted loss per common share.