-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TZdfB+JrkC148BWPz21g21eSOUiBzrKvp4mrUUQOsoMCQetir1fhbA3CFeZ3oaJc TH5JJfcxC0n1r2VsRR8l+A== 0000890566-97-002412.txt : 19971113 0000890566-97-002412.hdr.sgml : 19971113 ACCESSION NUMBER: 0000890566-97-002412 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971113 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: BENCHMARK ELECTRONICS INC CENTRAL INDEX KEY: 0000863436 STANDARD INDUSTRIAL CLASSIFICATION: PRINTED CIRCUIT BOARDS [3672] IRS NUMBER: 742211011 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-10560 FILM NUMBER: 97716143 BUSINESS ADDRESS: STREET 1: 3000 TECHNOLOGY DRIVE CITY: ANGLETON STATE: TX ZIP: 77515 BUSINESS PHONE: 4098496550 MAIL ADDRESS: STREET 1: 3000 TECHNOLOGY DR CITY: ANGLETON STATE: TX ZIP: 77515 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997 COMMISSION FILE NUMBER: 1-10560 BENCHMARK ELECTRONICS, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) TEXAS 74-2211011 (STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER OF INCORPORATION) IDENTIFICATION NUMBER) 3000 TECHNOLOGY DRIVE 77515 ANGLETON, TEXAS (ZIP CODE) (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (409) 849-6550 (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] As of November 12, 1997 there were 11,546,768 shares of Common Stock, par value $0.10 per share, outstanding. PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS BENCHMARK ELECTRONICS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (AMOUNTS IN THOUSANDS) SEPTEMBER 30, DECEMBER 31, 1997 1996 --------- --------- (UNAUDITED) ASSETS Current assets: Cash and cash equivalents .................. $ 20,620 $ 13,800 Accounts receivable, net ................... 39,771 39,183 Income taxes receivable .................... -- 388 Inventories ................................ 64,485 48,100 Prepaid expenses and other assets .......... 1,715 820 Deferred tax asset ......................... 1,091 1,091 --------- --------- Total current assets ..................... 127,682 103,382 --------- --------- Property, plant and equipment, at cost ....... 52,183 44,469 Accumulated depreciation ..................... (20,820) (13,834) --------- --------- Net property, plant and equipment ........ 31,363 30,635 --------- --------- Other assets, net ............................ 257 298 Marketable securities ........................ 11,543 9,508 Goodwill, net ................................ 23,098 24,350 --------- --------- $ 193,943 $ 168,173 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current portion of long term debt and capital lease obligations ................ $ 182 $ 239 Accounts payable ........................... 39,948 24,352 Income taxes payable ....................... 39 -- Accrued liabilities ........................ 5,712 6,205 --------- --------- Total current liabilities ................ 45,881 30,796 Long term debt and capital lease obligations, less current portion .......... 30,365 30,485 Deferred income taxes ........................ 1,378 1,893 Shareholders' equity: Preferred shares, $0.10 par value; 5,000,000 shares authorized, none issued .............................. -- -- Common shares, $0.10 par value; 30,000,000 shares authorized; issued - 11,570,852 and 11,526,552, respectively; outstanding - 11,521,368 and 11,477,068, respectively ............................. 1,152 1,146 Additional paid-in capital ................. 69,089 68,635 Retained earnings .......................... 46,198 35,338 Less treasury shares, at cost; 49,484 shares ............................ (120) (120) --------- --------- Total shareholders' equity ............... 116,319 104,999 --------- --------- Commitments and contingencies .............. $ 193,943 $ 168,173 ========= ========= See accompanying notes to condensed consolidated financial statements. 2 BENCHMARK ELECTRONICS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ------------------------- --------------------------- 1997 1996 1997 1996 -------- -------- --------- --------- Sales ........................................................ $ 83,183 $ 62,304 $ 237,062 $ 126,187 Cost of sales ................................................ 73,026 55,754 208,198 111,328 -------- -------- --------- --------- Gross profit ........................................... 10,157 6,550 28,864 14,859 Selling, general and administrative expense .................. 3,172 1,830 9,394 3,816 Amortization expense ......................................... 417 293 1,252 293 -------- -------- --------- --------- Income from operations ................................. 6,568 4,427 18,218 10,750 Interest income .............................................. 328 92 895 130 Interest expense ............................................. (616) (621) (1,857) (708) Other income (expense) ....................................... 79 (6) 131 (7) -------- -------- --------- --------- Income before income tax expense ....................... 6,359 3,892 17,387 10,165 Income tax expense ........................................... 2,346 1,527 6,527 3,936 -------- -------- --------- --------- Net income ............................................. $ 4,013 $ 2,365 $ 10,860 $ 6,229 ======== ======== ========= ========= Earnings per common share .................................... $ 0.33 $ 0.26 $ 0.90 $ 0.72 ======== ======== ========= ========= Weighted average common and equivalent shares outstanding ......................................... 12,322 9,274 12,021 8,605 ======== ======== ========= =========
See accompanying notes to condensed consolidated financial statements. 3 BENCHMARK ELECTRONICS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (AMOUNTS IN THOUSANDS) (UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30, ------------------------------- 1997 1996 -------- -------- Cash flows from operating activities: Net Income ............................................................................. $ 10,860 $ 6,229 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization expense .............................................. 8,904 3,491 Deferred income taxes .............................................................. (515) 96 (Gain) loss on sale of property, plant and equipment ............................... (98) 97 Tax benefit of employee stock options exercised .................................... 120 -- Amortization of premiums on marketable securities .................................. 230 -- Changes in operating assets and liabilities, net of effects from acquisition of business: Accounts receivable ................................................................ (588) (6,122) Inventories ........................................................................ (16,385) (2,528) Prepaid expenses and other current assets .......................................... (895) 46 Accounts payable ................................................................... 15,596 2,268 Accrued liabilities ................................................................ (493) (775) Income taxes ....................................................................... 427 314 -------- -------- Net cash provided by operations ................................................ 17,163 3,116 -------- -------- Cash flows from investing activities: Capital expenditures, net .............................................................. (8,234) (6,080) Purchase of marketable securities ...................................................... (2,265) -- Acquisition, net of cash acquired ...................................................... -- (30,824) Other .................................................................................. (7) (2) -------- -------- Net cash used in investing activities........................................... (10,506) (36,906) -------- -------- Cash flows from financing activities: Borrowings under revolving line of credit .............................................. -- 3,167 Proceeds from exercise of employee stock options ....................................... 392 358 Stock offering expenses ................................................................ (52) (13) Debt issuance costs .................................................................... -- (291) Proceeds from issuance of long term debt ............................................... -- 30,000 Principal payments on long term debt and capital lease obligations ..................... (177) (38) -------- -------- Net cash provided by financing activities ...................................... 163 33,183 -------- -------- Net increase (decrease) in cash .......................................................... 6,820 (607) Cash at beginning of year .............................................................. 13,800 2,785 -------- -------- Cash at September 30 ................................................................... $ 20,620 $ 2,178 ======== ======== Supplemental disclosures of cash flow information: Income taxes paid ...................................................................... $ 6,038 $ 3,569 ======== ======== Interest paid .......................................................................... $ 2,509 $ 668 ======== ========
See accompanying notes to condensed consolidated financial statements. 4 BENCHMARK ELECTRONICS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - BASIS OF PRESENTATION Benchmark Electronics, Inc. (the Company) is a Texas corporation which provides contract electronics manufacturing and design services to original equipment manufacturers (OEMs) in select industries, including medical devices, communications equipment, industrial and business computers, testing instrumentation, and industrial controls. The condensed consolidated financial statements included herein have been prepared by the Company without audit pursuant to the rules and regulations of the Securities and Exchange Commission. The financial statements reflect all normal and recurring adjustments which in the opinion of management are necessary for a fair presentation of the results of operations and cash flows for the interim periods presented. The results of operations for the periods presented are not necessarily indicative of the results to be expected for the full year. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the financial statements and notes included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1996. NOTE 2 - EARNINGS PER COMMON SHARE Earnings per common and common equivalent share are computed by dividing net income by the weighted average number of common and common equivalent shares outstanding. For the purposes of this calculation, outstanding employee stock options are considered common equivalent shares. Fully diluted earnings per share are materially equivalent to primary earnings per share for all periods presented. Weighted average common and equivalent shares outstanding for the three months ended September 30, 1997 and 1996 were 12,322,383 and 9,273,034, respectively. NOTE 3 - INDEBTEDNESS In order to finance a portion of the cash consideration for the acquisition of EMD Technologies, Inc. (EMD), which was completed on July 30, 1996, the Company issued a $30 million, 8.02% Senior Note due 2006 (the Senior Note) to Northwestern Mutual Life Insurance Company. The Senior Note is unsecured and guaranteed by each of the Company's United States subsidiaries. Principal on the Senior Note is payable in annual installments of $5.0 million beginning July 31, 2001 with a final installment on the unpaid principal amount due July 31, 2006. Interest on the Senior Note is payable semi-annually on January 31st and July 31st. The purchase agreement relating to the Senior Note (the Purchase Agreement) includes customary affirmative and negative covenants and restricts the ability of the Company to incur additional debt and to pay dividends. Upon any prepayment of all or a portion of the Senior Note, the Company is obligated to pay the holder a premium on the amount prepaid. The Purchase Agreement contains a provision that in the event of a change of control (defined generally to mean the acquisition by a person or group (as defined in the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder) of beneficial ownership of more than 50% of the total voting power of the outstanding voting stock of the Company), the Company must offer to repurchase the Senior Note at par plus any prepayment penalty. 5 BENCHMARK ELECTRONICS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) The Company has a $15,000,000, four-year revolving line of credit with a commercial bank, which is available primarily to finance accounts receivable and inventory requirements. The Company is entitled to borrow under the line of credit up to the lesser of $15,000,000 or the sum of 80% of its eligible accounts receivable and 25% of its eligible inventories. Interest on the line of credit is payable quarterly and accrues, at the Company's option, at either the bank's prime rate or its Fixed Eurodollar Rate plus 0.625% to 1.75% per annum. A commitment fee of 0.17% per annum on the unused portion of the line of credit is payable quarterly in arrears. The line of credit agreement contains certain financial covenants and restricts the ability of the Company to incur additional debt without the consent of the bank and to pay dividends. The line of credit matures on July 31, 2000. As of September 30, 1997, the Company had no borrowings outstanding under this line of credit. NOTE 4 - INVENTORIES Inventory costs are summarized as follows: SEPTEMBER 30, DECEMBER 31, 1997 1996 ------------ ----------- (UNAUDITED) Raw materials ............................. $ 47,141,082 $31,670,562 Work in process ........................... 17,344,268 16,429,776 ------------ ----------- $ 64,485,350 $48,100,338 ============ =========== NOTE 5 - INCOME TAXES Income tax expense (benefit) consists of the following (unaudited): NINE MONTHS ENDED SEPTEMBER 30, ---------------------------- 1997 1996 ------------ ----------- Federal - Current ......................... $ 6,081,000 $ 3,269,000 State - Current ........................... 961,000 571,000 Federal/State - Deferred .................. (515,000) 96,000 ------------ ----------- Total ................................ $ 6,527,000 $ 3,936,000 ============ =========== 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 goodwill, state income taxes, net of federal benefit and the benefit from the use of a foreign sales corporation. NOTE 6 - NEW ACCOUNTING PRONOUNCEMENT In February 1997 the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings Per Share". SFAS No. 128 establishes a different method of computing earnings per share than is currently required under the provisions of Accounting Principles Board Opinion No. 15. SFAS No. 128 introduces the concept of basic earnings per share, which represents net income divided by the weighted average common shares outstanding - without the dilutive effects of common stock equivalents (options, warrants, etc.). SFAS No. 128 is effective for financial statements for both interim and annual periods ending after December 15, 1997. Earlier application is not permitted. The Company plans to adopt SFAS No. 6 128 in its fiscal quarter ending December 31, 1997 and at that time all historical earnings per share data presented will be restated to conform to the provisions of SFAS No. 128. NOTE 7 - STOCK SPLIT On July 28, 1997, the Board of Directors declared a two-for-one stock split effected in the form of a stock dividend payable on August 14, 1997, to shareholders of record as of August 7, 1997. Shareholders' equity has been restated to give retroactive recognition to the stock split in prior periods by reclassifying from additional paid-in capital to common stock the par value of the additional shares arising from the split. All share and per share data appearing in the consolidated financial statements and notes thereto have been retroactively adjusted for the stock split. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following Management's Discussion and Analysis of Financial Condition and Results of Operations contains certain forward-looking statements regarding future financial condition and results of operations and the Company's business operations. The words "expect," "estimate," "anticipate," "predict," and similar expressions are intended to identify forward-looking statements. Such statements involve risks, uncertainties and assumptions, including, but not limited to, industry and economic conditions and customer actions and other factors discussed in this Form 10-Q and in the Company's other filings with the Securities and Exchange Commission. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual outcomes may vary materially from those indicated. GENERAL The Company provides contract electronics manufacturing and design services to OEMs in select industries, including medical devices, communications equipment, industrial and business computers, testing instrumentation and industrial controls. The Company specializes in manufacturing high quality, technologically complex printed circuit board assemblies with computer-automated equipment using surface mount and pin-through-hole interconnection technologies for customers requiring low to medium volume production runs. The Company frequently works with customers from product design and prototype stages through ongoing production and, in some cases, final assembly of the customers' products and provides manufacturing services for successive product generations. As a result, the Company believes that it is often an integral part of its customers' operations. Substantially all of the Company's manufacturing services are provided on a turnkey basis, whereby the Company purchases customer-specified components from its extensive network of suppliers, assembles the components on finished printed circuit boards, performs post-production testing and provides the customer with production process and testing documentation. The Company offers its customers flexible, "just-in-time" delivery programs allowing product shipments to be closely coordinated with the customers' inventory requirements. In certain instances, the Company completes the assembly of its customers' products at the Company's facilities by integrating printed circuit board assemblies into other elements of the customers' products. The Company also provides manufacturing services on a consignment basis, whereby the Company, utilizing components provided by the customer, provides only assembly and post-production testing services. The Company operates a total of 31 surface mount production lines at its facilities in Angleton, Texas, Beaverton, Oregon, and Winona, Minnesota. 7 Revenues are recognized at the time products are shipped to customers and may vary depending on the timing of customers' orders, product mix and availability of component parts. Substantially all of the Company's business is performed on a turnkey basis, which involves the procurement of component parts. The gross profit margin for such materials is generally lower than the gross profit associated with the manufacturing process and other value-added services. The Company anticipates that selling, general and administrative expenses will continue to increase in nominal terms as the Company continues to build the internal management and support systems necessary to support higher revenue levels. The level and timing of purchase orders placed by the Company's customers are affected by a number of factors not within the control of the Company, including variation in demand for customers' products, customer attempts to manage inventory and changes in customers' manufacturing strategies. The Company typically does not obtain long-term purchase orders or commitments but instead works with its customers to develop nonbinding forecasts of the future volume of orders. Based on such nonbinding forecasts, the Company makes commitments regarding the level of business that it will seek and accept, the timing of production schedules and the levels and utilization of personnel and other resources. A variety of conditions, both specific to each individual customer and generally affecting each customer's industry, may cause customers to cancel, reduce or delay purchase orders and commitments without penalty, except for payment for services rendered, materials purchased and, in certain circumstances, charges associated with such cancellation, reduction or delay. Significant or numerous cancellations, reductions or delays in orders by customers, or any inability of customers to pay for services provided by the Company or to pay for components and materials purchased by the Company on such customers' behalf, could have an adverse effect on the Company's business, financial condition and results of operations. The Company seeks to serve a sufficiently large number of customers to minimize dependence on any one customer or industry. This strategy was enhanced by the acquisition of EMD, as there was no customer overlap between the Company and EMD. Although historically a substantial percentage of the Company's sales have been to a small number of customers, by successfully undertaking the transition to serve a much larger and more diversified customer base, the Company has been able to reduce its dependence on certain significant customers and lessen the impact of a substantial reduction in business from one such customer. Nevertheless, during the nine months ended September 30, 1997, the Company's three largest customers accounted for 55% of the Company's sales. Although the loss of a major customer could have an adverse effect on the Company, the Company does not believe that any such effect would be material unless the Company were unable to replace such customer's business. The Company's future sales are dependent on the success of its customers, some of which operate in businesses associated with rapid technological change, vigorous competition, short product life cycles and pricing and margin pressures. Additionally, certain of the industries served by the Company are subject to economic cycles and have in the past experienced, and are likely in the future to experience, recessionary periods. Developments adverse to the Company's major customers or their products could have an adverse effect on the Company. The acquisition of EMD represented a significant expansion in the scope of the Company's operations, and the integration and consolidation of EMD into the Company has and will require substantial management, financial and other resources. During the integration process, the financial performance of the Company will be subject to the risks commonly associated with the acquisition of businesses, including the impact of expenses incurred in connection with an acquisition and the potential disruptions associated with the integration of businesses. The integration process may 8 place a significant strain on the Company's management, production, technical, financial and other resources, and may pose a risk with respect to production, customer service and market share. The Company's future success is dependent upon its ability to effectively integrate EMD into the Company, including its ability to implement potentially available marketing and cost saving opportunities, some of which may involve operational changes. There can be no assurance as to the timing or amount of any marketing opportunities or cost savings that may be realized as the result of operational changes implemented during the integration process. Further, there can be no assurance that the Company will not experience difficulties with customers, personnel and business prospects or that the combination of the Company and EMD will be successful. The following discussion should be read in conjunction with the unaudited financial statements of the Company included elsewhere in this report. RESULTS OF OPERATIONS The following table sets forth for the periods indicated certain items in the Company's Condensed Consolidated Statements of Operations as a percentage of sales: THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, -------------- -------------- 1997 1996 1997 1996 ----- ----- ----- ----- Sales ..................................... 100.0% 100.0% 100.0% 100.0% Cost of sales ............................. 87.8 89.5 87.8 88.2 ----- ----- ----- ----- Gross profit ........................ 12.2 10.5 12.2 11.8 Selling, general and administrative expense ................................. 3.8 2.9 4.0 3.0 Amortization of goodwill .................. 0.5 0.5 0.5 0.2 ----- ----- ----- ----- Income from operations .............. 7.9 7.1 7.7 8.6 Interest income ........................... 0.4 0.1 0.4 0.1 Interest expense .......................... (0.7) (1.0) (0.8) (0.6) ----- ----- ----- ----- Income before income tax expense .... 7.6 6.2 7.3 8.0 Income tax expense ........................ 2.8 2.4 2.8 3.1 ----- ----- ----- ----- Net income .......................... 4.8% 3.8% 4.5% 4.9% ===== ===== ===== ===== Sales for the third quarter of 1997 were approximately $83.2 million, a 33.5% increase from sales of approximately $62.3 million for the same quarter of 1996. Sales for the first nine months of 1997 were approximately $237.1 million, an 87.9% increase from sales of $126.2 million for the same period of 1996. The increase in sales resulted primarily from increased sales volume from existing customers, the addition of new customers and the acquisition of EMD on July 30, 1996. Gross profit increased 54.5% to approximately $10.2 million in the third quarter of 1997 from approximately $6.6 million in the same quarter of 1996. Gross profit increased 94.0% to $28.9 million from $14.9 million for the first nine months of 1996. Gross profit as a percentage of sales increased from 10.5% for the third quarter of 1996 to 12.2% for the third quarter of 1997. Gross profit as a percentage of sales increased from 11.8% for the first nine months of 1996 to 12.2% for the first nine months of 1997. The increase in gross profit was due primarily to higher sales volumes and normal changes in product mix and customer mix. The Company's gross margin reflects a number of factors, including product mix, the level of start up costs and efficiencies associated with new programs, capacity utilization of surface mount and other equipment, and 9 pricing within the electronics industry. All of these factors are continually changing and are interrelated, making it impracticable to determine separately the effect of each factor. The increase in gross profit as a percentage of sales during the three and nine month periods ended September 30, 1997 as compared to the same period in 1996 was due primarily to changes in the product mix and the initiation of new programs. Selling, general and administrative expenses were $3.2 million in the third quarter, an increase of 77.8% from $1.8 million for the same quarter of 1996. Selling, general and administrative expenses were $9.4 million for the first nine months of 1997, an increase of $147.4% from $3.8 million for the same period of 1996. Selling, general and administrative expenses as a percentage of sales increased from 2.9% for the third quarter of 1996 to 3.8% for the third quarter of 1997. Selling, general and administrative expenses as a percentage of sales increased from 3.0% for the first nine months of 1996 to 4.0% for the first nine months of 1997. In order to satisfy the increased level of business activity and to continue the development and improvement of the systems and processes necessary to accommodate future growth, the Company has continued to add personnel. The increase in selling, general and administrative expenses during the three and nine month periods of 1997 reflects these additional personnel and related departmental expense, as well as the additional administrative expenses resulting from the inclusion of EMD in the full nine months of 1997. The Company anticipates selling, general and administrative expenses will continue to increase in nominal terms as the Company continues to build the internal management and support systems necessary to support higher revenue levels. The amortization of goodwill associated with the acquisition of EMD for the three and nine month periods ended September 30, 1997 was $417,000, and $1,252,000, respectively, compared to $293,000 for the same periods of 1996. Interest expense for the three and nine month periods ended September 30, 1997 was $616,000 and $1,857,000, respectively, which was incurred by the Company on the debt incurred in connection with the acquisition of EMD. Interest expense for the three and nine month periods ended September 30, 1996 was $621,000 and $708,000, respectively. Interest income was approximately $328,000 and $895,000, respectively, for the three and nine month periods ended September 30, 1997. Interest income for the three and nine month periods ended September 30, 1996 was $92,000 and $130,000, respectively. The increase is due to the investment by the Company of available cash in interest bearing marketable securities and cash equivalents. Income tax expense in the third quarter of 1997 was $2,346,000, an increase of 53.6% from the same period in 1996. The increase is due to higher pre-tax income and nondeductible amortization of goodwill offset by the benefit from the use of a foreign sales corporation. LIQUIDITY AND CAPITAL RESOURCES The Company has financed its growth and operations through funds generated from operations, proceeds from the sale of its common stock and, during 1996, funds borrowed under its credit facilities. Prior to the second quarter of 1996 the Company had never borrowed any amounts under its available line of credit. Cash provided by operating activities was $17.2 million for the nine months ended September 30, 1997. Cash provided by operations was primarily the result of increases in net income, depreciation and amortization, and accounts payable offset by decreases in accrued 10 liabilities and increases in inventories, accounts receivable, and prepaid expenses and other current assets. The Company's accounts payable, and inventories have increased $15.6 million, and $16.4 million, respectively, during the first nine months of 1997, reflecting the Company's increased sales during this period. The Company expects continued increases in accounts payable and inventories to support the anticipated growth in sales. The Company is continuing the practice of purchasing components only after customer orders are received, which mitigates, but does not eliminate, the risk of loss on inventories. Supplies of electronic components and other materials used in operations are subject to industry-wide shortages. In certain instances, suppliers may allocate available quantities to the Company. The Company has not experienced significant supply constraints in the past year nor does it expect to in the near future. Cash used in investing activities, consisting primarily of capital expenditures, was $10.5 million for the nine months ended September 30, 1997. Capital expenditures were primarily concentrated in test equipment and computers. Cash provided by financing activities was $163,000 for the nine months ended September 30, 1997. The Company's operations are subject to certain federal, state and local regulatory requirements relating to environmental, waste management, health and safety matters. Some risk of costs and liabilities related to these matters is inherent in the Company's business as with many similar businesses. Management believes that the Company's business is operated in substantial compliance with applicable environmental, waste management, health and safety regulations. The Company may require additional capital to finance further enhancements to or acquisitions or expansions of its manufacturing capacity. Management believes that the level of working capital will continue to grow at a rate generally consistent with the growth of the Company's operations. Although no assurance can be given that future financing will be available on terms acceptable to the Company, the Company may seek additional funds from time to time through public or private debt or equity offerings or through bank borrowings to the extent permitted by its existing debt agreements. Management believes that the existing cash balances, funds generated from operations, and borrowings under the Company's credit facility will be sufficient to permit the Company to meet its liquidity requirements in 1997 and for the foreseeable future. The Company does not hold or issue derivative financial instruments in the normal course of business. Inflation and changing prices have not significantly affected the Company's operating results or the markets in which the Company performs services. QUARTERLY RESULTS Although Management does not believe that the Company's business is affected by seasonal factors, the Company's sales and earnings may vary from quarter to quarter, depending primarily upon the timing of manufacturing orders. Therefore, the Company's operating results for any particular quarter may not be indicative of the results for any future quarter or for the year. 11 PART II - OTHER INFORMATION ITEM 1 - LEGAL PROCEEDINGS The Company is not currently a party to any material pending legal proceedings. ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits. 27 Financial Data Schedule. (b) Reports on Form 8-K. No reports on Form 8-K were filed during the three months ended September 30, 1997. 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 November 13, 1997. BENCHMARK ELECTRONICS, INC. (Registrant) By: /s/ DONALD E. NIGBOR Donald E. Nigbor President (Principal Executive Officer) By: /s/ CARY T. FU Cary T. Fu Executive Vice President (Principal Financial Officer) EXHIBIT INDEX EXHIBIT NUMBER DESCRIPTION OF EXHIBIT ------ ---------------------- 27 Financial Data Schedule. 13 EX-27 2
5 THE SCHEDULE CONTAONS CUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE THIRD QUARTER 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS DEC-31-1997 SEP-30-1997 20,620 0 39,771 0 64,485 127,682 52,183 20,820 193,943 45,881 30,365 0 0 1,152 115,167 193,943 237,062 237,062 208,198 208,198 0 0 1,857 17,387 6,527 10,860 0 0 0 10,860 0.90 0.90
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