Benchmark Electronics Reports Results for the Quarter Ended September 30, 2011

Company to discuss impact of Thailand Flood in Today's Conference Call

Oct 27, 2011, 07:00 ET from Benchmark Electronics, Inc.

ANGLETON, Texas, Oct. 27, 2011 /PRNewswire/ -- Benchmark Electronics, Inc. (NYSE: BHE), a leading integrated contract manufacturing provider, announced sales of $570 million for the quarter ended September 30, 2011, compared to $614 million for the same quarter in the prior year. The Company reported third quarter net income of $20 million, or $0.34 per diluted share, which includes a discrete income tax benefit of $9 million, or $0.16 per diluted share. In the comparable period in 2010, the Company reported net income of $22 million, or $0.36 per diluted share. Excluding restructuring charges, the Company would have reported net income of $20 million, or $0.34 per diluted share, in the third quarter of 2011 and $23 million, or $0.37 per diluted share, in the same quarter of 2010.

"During the quarter we experienced an unanticipated decline in demand primarily concentrated in the test and instrumentation industry. The significant drop in revenues, and to a lesser extent, transition costs to low-cost geographies, adversely impacted our operating margin for the quarter," said Cary T. Fu, the Company's Chief Executive Officer.

"Recently, we announced that our Thailand facilities have been impacted by severe regional flooding. Our teams first focused on ensuring the safety of our employees and jointly working disaster recovery plans with our customers. To ensure that our customers' critical requirements are met in Q4 and beyond, we are rapidly ramping capacity at our other facilities around the world including our recently restarted facility in Korat, Thailand. We are grateful for our dedicated employees in Thailand who have worked tirelessly supporting customers while managing personal challenges associated with the flood. We also want to thank our customers for their support with our transition activities. While there are many unknowns remaining at this time, we anticipate resuming full support for customer demands in Q1 of 2012."

Third Quarter 2011 Financial Highlights

  • Income tax benefit includes $9 million ($0.16 per diluted share) of net discrete tax benefits primarily related to income tax valuation allowances. Excluding these tax benefits the tax rate for the quarter was 7.4%.
  • Operating margin for the third quarter was 2.1% excluding restructuring charges.
  • Cash flows used in operating activities for the third quarter were approximately $12 million.
  • Cash and long-term investments balance was $279 million at September 30, 2011. Long-term investments consist of $25 million of auction rate securities.
  • Accounts receivable was $463 million at September 30, 2011; calculated days sales outstanding were 73 days.
  • Inventory was $430 million at September 30, 2011; inventory turns were 5.0 times.
  • Repurchases of common shares for the third quarter totaled $29 million or 2 million shares.

Industry Sectors

The following table sets forth sales by industry sector for the quarters ended September 30, 2011, June 30, 2011 and September 30, 2010.

September 30,

June 30,

September 30,

2011

2011

2010

Industrial control equipment

29%

28%

26%

Computers and related products for business enterprises

28%

28%

31%

Telecommunications equipment

27%

23%

22%

Medical devices

9%

10%

10%

Testing and instrumentation products

7%

11%

11%

Fourth Quarter 2011 Outlook

The uncertainties of the impact of the unprecedented Thailand flooding on our operations make it challenging to provide guidance. Without giving effect to further adverse changes in the Thailand situation or the effect of the costs and expenses of returning that facility to operation after the waters recede, sales for the fourth quarter of 2011 are expected to range from $475 million to $525 million. Diluted earnings per share for the fourth quarter, excluding restructuring charges, are expected to be between $0.00 and $0.11. The guidance provided includes the benefit of mitigation efforts to support production at alternate sites and a projected level of insurance recoveries associated with our business interruption coverage.

Non-GAAP Financial Measures

This press release includes financial measures for earnings and earnings per share that exclude certain items and therefore are not in accordance with generally accepted accounting principles (GAAP). A detailed reconciliation between the GAAP results and results excluding special items (non-GAAP) is included at the end of this press release. By disclosing this non-GAAP information, management intends to provide investors with additional information to further analyze the company's performance and underlying trends. Management utilizes a measure of net income and earnings per share on a non-GAAP basis that excludes certain items to better assess operating performance and to help investors compare our results with our previous guidance.

The non-GAAP information included in this press release is not necessarily comparable to non-GAAP information of other companies. Non-GAAP information should not be viewed as a substitute for, or superior to, net income or other data prepared in accordance with GAAP as measures of our profitability or liquidity. Users of this financial information should consider the types of events and transactions for which adjustments have been made.

Forward-Looking Statements

This news release contains certain forward-looking statements within the scope of the Securities Act of 1933 and the Securities Exchange Act of 1934. The words "expect," "estimate," "anticipate," "predict," and similar expressions, and the negatives of such expressions, are intended to identify forward-looking statements. Our forward-looking statements may be deemed to include, among other things, statements related to suspending operations at our manufacturing facilities in Ayudhaya, Thailand, the potential recovery of insurance proceeds associated with our business interruption coverage, and the potential related effects on our future revenues, our sales and diluted earnings per share (excluding special items) guidance for the fourth quarter of 2011, as well as other statements, express or implied, concerning: future operating results or the ability to generate sales, income or cash flow; and Benchmark's business and growth strategies, including expected internal growth and performance goals. Although Benchmark believes that these statements are based upon reasonable assumptions, such statements involve risks, uncertainties and assumptions, including but not limited to uncertainties concerning Thailand and the extent of damage to our facilities and equipment, the timeframe for the flood waters in Thailand receding and the restoration of operations and associated costs with such restoration, our ability to effectively shift production from our Ayudhaya facilities to other facilities in order to maintain supply continuity for our customers, industry and economic conditions, and customer actions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual outcomes may vary materially from those indicated.

All forward-looking statements included in this release are based upon information available to Benchmark as of the date of this release, and Benchmark assumes no obligation to update any such forward-looking statements. Persons are advised to consult further disclosures on related subjects in Benchmark's Form 10-K for the year ended December 31, 2010, in its other filings with the Securities and Exchange Commission and in its press releases.

Additional Information

Benchmark Electronics, Inc. provides integrated electronics manufacturing, design and engineering services to original equipment manufacturers of computers and related products for business enterprises, medical devices, industrial control equipment, which includes equipment for the aerospace and defense industry, testing and instrumentation products, and telecommunication equipment. Benchmark's global operations include 21 facilities in ten countries. Benchmark's Common Shares trade on the New York Stock Exchange under the symbol BHE.

A conference call hosted by Benchmark management will be held today at 10:00 am (Central time) to discuss the financial results of the Company and its future outlook. As previously reported, the Company will provide an update of the impact of the severe flooding in Thailand on its Ayudhaya facility. This call will be broadcast via the Internet and may be accessed by logging on to our website at www.bench.com.

Benchmark Electronics, Inc. and Subsidiaries

Reconciliation of GAAP to Non-GAAP Financial Results

(Amounts in Thousands, Except Per Share Data)

(UNAUDITED)

Three Months Ended

Nine Months Ended

September 30,

September 30,

2011

2010

2011

2010

Income from operations (GAAP)

$11,616

$23,361

$41,563

$67,607

Restructuring charges

145

452

625

2,149

Non-GAAP income from operations

$11,761

$23,813

$42,188

$69,756

Net income (GAAP)

$19,867

$22,469

$49,081

$60,748

Restructuring charges, net of tax

115

365

592

1,283

Non-GAAP net income

$19,982

$22,834

$49,673

$62,031

Earnings per share: (GAAP)

   Basic

$0.34

$0.36

$0.82

$0.97

   Diluted

$0.34

$0.36

$0.81

$0.96

Earnings per share: (Non-GAAP)

   Basic

$0.34

$0.37

$0.83

$0.99

   Diluted

$0.34

$0.37

$0.82

$0.98

Weighted average shares used in calculating

    earnings per share:

   Basic

58,615

61,712

59,889

62,597

   Diluted

58,879

62,103

60,391

63,162

Benchmark Electronics, Inc. and Subsidiaries

Consolidated Statements of Income

(Amounts in Thousands, Except Per Share Data)

(UNAUDITED)

Three Months Ended

September 30,

Nine Months Ended

September 30,

2011

2010

2011

2010

Net sales

$

570,083

$

613,864

$

1,693,944

$

1,775,218

Cost of sales

535,448

566,672

1,583,934

1,636,535

Gross profit

34,635

47,192

110,010

138,683

Selling, general and administrative expenses

22,874

23,379

67,822

68,927

Restructuring charges

145

452

625

2,149

Income from operations

11,616

23,361

41,563

67,607

Other income (expense):

Interest income

446

394

1,293

1,208

Interest expense

(334)

(343)

(997)

(1,022)

Other

(202)

1,212

94

162

Total other income (expense), net

(90)

1,263

390

348

Income before income taxes

11,526

24,624

41,953

67,955

Income tax expense (benefit)

(8,341)

2,155

(7,128)

7,207

Net income

$

19,867

$

22,469

$

49,081

$

60,748

Denominator for basic earnings per share - weighted average number of common shares outstanding during the period

58,615

61,712

59,889

62,597

Incremental common shares attributable to restricted shares and the exercise of outstanding equity instruments

264

391

502

565

Denominator for diluted earnings per share

58,879

62,103

60,391

63,162

Earnings per share:

          Basic

$

0.34

$

0.36

$

0.82

$

0.97

          Diluted

$

0.34

$

0.36

$

0.81

$

0.96

The results for the three and nine months ended September 30, 2010 reflect corrections to the Company's prior period financial statements, related to inventory and accounts payable balances, that the Company deems immaterial. The aggregate impact of these corrections on earnings per share was $0.01 and $0.02 for the three and nine months ended September 30, 2010, respectively.

Benchmark Electronics, Inc. and Subsidiaries

Condensed Consolidated Balance Sheet

September 30, 2011

(Amounts in Thousands)

(UNAUDITED)

Assets

Current assets:

 Cash and cash-equivalents

$253,845

 Accounts receivable, net

462,532

 Inventories, net

429,785

 Other current assets

49,190

   Total current assets

1,195,352

Long-term investments

24,795

Property, plant and equipment, net

156,381

Other assets, net

76,981

Goodwill, net

37,912

   Total assets

$1,491,421

Liabilities and Shareholders' Equity

Current liabilities:

 Current installments of capital lease obligations

$401

 Accounts payable

277,297

 Accrued liabilities

52,150

   Total current liabilities

329,848

Capital lease obligations, less current installments

10,709

Other long-term liabilities

31,916

Shareholders' equity

1,118,948

   Total liabilities and shareholders' equity

$1,491,421

SOURCE Benchmark Electronics, Inc.



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