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NYSEBHE
Benchmark Electronics Reports Third Quarter Results
- Revenue of $574 million
- EPS of $0.44 ($0.36 non-GAAP)
- Operating cash flow of $70 million
- Improved cash conversion cycle to 80 days
- Repurchased $12 million of common stock
PR Newswire
ANGLETON, Texas

ANGLETON, Texas, Oct. 20, 2016 /PRNewswire/ -- Benchmark Electronics, Inc. (NYSE: BHE) today announced financial results for the third quarter ended September 30, 2016.




Three Months Ended





Sep 30,



Jun 30,



Sep 30,


In millions, except EPS


2016



2016



2015


Net sales


$574



$579



$630


Net income


$22



$13



$21


Net income – non-GAAP


$18



$17



$22


Diluted EPS


$0.44



$0.26



$0.40


Diluted EPS – non-GAAP


$0.36



$0.35



$0.43













Operating margin


3.1%



3.1%



4.1%


Operating margin – non-GAAP


4.3%



4.2%



4.5%



A reconciliation of GAAP and non-GAAP results is included below.

"In the September quarter, we made good progress on working capital management, reducing our cash conversion cycle by three days and generating $70M of operating cash flow.  We modestly expanded operating margins on a sequential basis and delivered on our published guidance.  However, the lack of sustained revenue growth continues to be a challenge and a critical focus area for the organization going forward," said Paul Tufano, Benchmark's President and CEO.

Mr. Tufano added, "Since being named Benchmark's CEO four weeks ago, I have traveled to a number of our sites and visited with a variety of customers.  I am excited by the capabilities that we possess, the strength of our customer relationships and the commitment of our people.  As we look forward, we are defining a clear strategy to accelerate long-term revenue growth aligned to an optimized global footprint that leverages our core strengths in design, electronics manufacturing, and precision technologies to add significant value for our customers and shareholders."

Third Quarter 2016 Financial Highlights

  • Operating margin was 3.1% (non-GAAP 4.3%).
  • Cash flows from operating activities were $70 million during the quarter and $228 million for the first nine months of the year.
  • Common stock repurchases totaled $12 million or 483,000 shares. The amount remaining under the Company's current share repurchase plan is $94 million.
  • Cash conversion cycle improved 3 days from 83 at June 30, 2016 to 80 days at September 30, 2016.
  • Cash was $636 million at September 30, of which $592 million was available outside the U.S.

Cash Conversion Cycle



Sep 30,




Jun 30,




Sep 30,




2016




2016




2015


Accounts receivable days


65




66




67


Inventory days


68




64




66


Accounts payable days


(53)




(47)




(43)




80




83




90


 

"We improved our cash conversion cycle to 80 days during the third quarter and remain on track to achieve 75 days exiting the year," said Don Adam, CFO.  "We generated $70 million in cash flow from operations during the quarter, bringing our year-to-date total to $228 million – which is nearly a 100% increase over the same 9-month period last year.  During the quarter, we purchased $12 million of our common shares, extending our share repurchases to 37 consecutive quarters.  We have $94 million remaining in our current share repurchase program."

Third Quarter 2016 Industry Sector Update
Revenue by industry sector (dollars in millions) was as follows.


Higher-Value Markets


Sep 30,
2016




Jun 30,
2016




Sep 30,
2015


Industrials

$

217


38

%


$

214


37

%


$

198


31

%

Medical


86


15




92


16




87


14


Test & Instrumentation


66


11




60


10




58


9




$

369


64

%


$

366


63

%


$

343


54

%








































Traditional Markets


Sep 30,
2016




Jun 30,
2016




Sep 30,
2015


Computing

$

107


19

%


$

120


21

%


$

140


22

%

Telecommunications


98


17




93


16




147


24




$

205


36

%


$

213


37

%


$

287


46

%


Total

$

574


100

%


$

579


100

%


$

630


100

%

 

Third quarter revenues from Benchmark's higher-value markets were in-line with expectations.  Test & Instrumentation revenues were strong, primarily from semi-capital equipment customers; Medical was stable; and Industrials were lower due to new program delays.  In traditional markets, demand was strong, but Telecommunication revenues were below expectations because of customer qualification timing.  The Company expects Telecommunications demand to remain strong through the fourth quarter.

Third Quarter 2016 Bookings Update

  • New program bookings of $110 to $135 million.
  • 20 engineering awards supporting early engagement opportunities.
  • 29 manufacturing wins across all market sectors.

The Company projects new program bookings for the third quarter will result in annualized revenue of $110 to $135 million when fully launched in the next 12-18 months.  The new program bookings align with Benchmark's strategic focus on higher-value markets.  For the last 12 months, 75% of new bookings came from these targeted growth markets.

Fourth Quarter 2016 Outlook

  • Revenue between $590-$610 million.
  • Diluted GAAP earnings per share between $0.33-$0.37.
  • Diluted non-GAAP earnings per share between $0.39-$0.43 (excluding restructuring charges and amortization of intangibles expected to approximate $0.06 per share). The income tax impact of the non-GAAP adjustments using the applicable effective tax rates is $0.03 per share.

Third Quarter 2016 Results Conference Call Details
A conference call hosted by Benchmark management will be held today at 4:00 p.m. Central Time (5:00 p.m. Eastern Time) to discuss the Company's financial results and outlook.  This call will be broadcast via the internet and may be accessed by logging on to the Company's website at www.bench.com.

About Benchmark Electronics, Inc.
Benchmark provides integrated manufacturing, design and engineering services to original equipment manufacturers of industrial equipment (including equipment for the aerospace and defense industries), telecommunication equipment, computers and related products for business enterprises, medical devices, and test and instrumentation products.  Benchmark's global operations include facilities in seven countries, and its common shares trade on the New York Stock Exchange under the symbol BHE.

Non-GAAP Financial Measures
This press release includes financial measures for earnings and earnings per share that exclude certain items and therefore do not follow U.S. 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.  Management discloses non-GAAP information to provide investors with additional information to analyze the Company's performance and underlying trends.  Management uses non-GAAP measures of net income and earnings per share that exclude certain items in order to better assess operating performance and help investors compare results with our previous guidance.  Benchmark's non-GAAP information is not necessarily comparable to the non-GAAP information used by 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 a measure of the Company's profitability or liquidity. Readers should consider the types of events and transactions for which adjustments have been made.

Forward-Looking Statements
This press 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," "plan," "anticipate," "project," "predict," "goals" and similar terms, and the negatives thereof, often identify forward-looking statements, which are not limited to historical facts.  The Company's forward-looking statements include, among other things, the statement "the Company expects Telecommunications demand to remain strong through the fourth quarter"; projections relating to capital expenditures, strategic growth initiatives, share repurchases, improving shareholder value, portfolio diversification, cost and operating efficiencies, working capital improvements and increasing operating margins; and fourth quarter 2016 revenues and diluted earnings per share.  Although Benchmark believes these statements are based upon reasonable assumptions, they involve risks and uncertainties relating to our operations, markets and business environment generally.  If one or more of these risks or uncertainties materializes or 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 hereof, and the Company assumes no obligation to update them.  Readers are advised to consult further disclosures on related subjects, particularly in Item 1A, "Risk Factors" of the Company's Annual Report on Form 10-K for the year ended December 31, 2015, in its other filings with the Securities and Exchange Commission and in its press releases.

 

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




Sep 30,


Jun 30,


Sep 30,



September 30,




2016


2016


2015



2016


2015














Income from operations (GAAP)

$

18,082

$

17,740

$

26,148


$

52,090

$

71,064

Restructuring charges and other costs


3,485


3,602


1,096



9,876


7,553

Amortization of intangible assets(1)


3,170


2,972


1,104



8,945


3,039

Non-GAAP income from operations

$

24,737

$

24,314

$

28,348


$

70,911

$

81,656



























Net income (GAAP)

$

21,742

$

12,685

$

20,565


$

45,479

$

55,980

Restructuring charges and other costs


3,485


3,602


1,096



9,876


7,553

Amortization of intangible assets(1)


3,170


2,972


1,104



8,945


3,039

Income tax adjustments(2)


(2,207)


(2,087)


(834)



(5,935)


(3,472)

Discrete tax benefits


(8,270)


-


-



(8,270)


-

Non-GAAP net income

$

17,920

$

17,172

$

21,931


$

50,095

$

63,100














Earnings per share: (GAAP)













Basic

$

0.44

$

0.26

$

0.40


$

0.92

$

1.08


Diluted

$

0.44

$

0.26

$

0.40


$

0.91

$

1.07














Earnings per share: (Non-GAAP)













Basic

$

0.37

$

0.35

$

0.43


$

1.01

$

1.21


Diluted

$

0.36

$

0.35

$

0.43


$

1.00

$

1.20














Weighted-average number of shares used in calculating earnings per share:












Basic


48,965


49,323


51,192



49,377


51,940


Diluted


49,414


49,667


51,588



49,878


52,448



(1)

Beginning with the third quarter, our non-GAAP income and earnings per share exclude the impact of the amortization of intangible assets. The non-GAAP earnings per share for prior periods presented above exclude the impact of the amortization of intangible assets.

(2)

This amount represents the tax impact of the non-GAAP adjustments using the applicable effective tax rates.

 

Benchmark Electronics, Inc. and Subsidiaries












Condensed Consolidated Statements of Income

(Amounts in Thousands, Except Per Share Data)

(UNAUDITED)





Three Months Ended



Nine Months Ended




September 30,



September 30,



2016


2015



2016


2015

Sales

$

574,341

$

630,191


$

1,702,908

$

1,915,154

Cost of sales


521,519


575,627



1,546,915


1,752,809


Gross profit


52,822


54,564



155,993


162,345

Selling, general and administrative expenses


28,085


26,216



85,082


80,689

Amortization of intangible assets


3,170


1,104



8,945


3,039

Restructuring charges and other costs


3,485


1,096



9,876


7,553


Income from operations


18,082


26,148



52,090


71,064

Interest expense


(2,302)


(495)



(6,935)


(1,427)

Interest income


577


246



1,170


971

Other expense, net


(383)


(1,121)



(535)


(1,582)


Income before income taxes


15,974


24,778



45,790


69,026

Income tax expense (benefit)


(5,768)


4,213



311


13,046


Net income

$

21,742

$

20,565


$

45,479

$

55,980












Earnings per share:











Basic

$

0.44

$

0.40


$

0.92

$

1.08


Diluted

$

0.44

$

0.40


$

0.91

$

1.07












Weighted-average number of shares used in calculating earnings per share:










Basic


48,965


51,192



49,377


51,940


Diluted


49,414


51,588



49,878


52,448

 

Benchmark Electronics, Inc. and Subsidiaries










Condensed Consolidated Balance Sheets

(in thousands)







September 30,


December 31,







2016


2015







(unaudited)



Assets






Current assets:







Cash and cash equivalents

$

635,683

$

465,995



Accounts receivable, net


417,325


479,140



Inventories


395,948


411,986



Other current assets


31,755


31,507





Total current assets


1,480,711


1,388,628


Property, plant and equipment, net


168,806


178,170


Goodwill and other, net


309,551


327,080





Total assets

$

1,959,068

$

1,893,878










Liabilities and Shareholders' Equity






Current liabilities:







Current installments of long-term debt and capital lease obligations

$

12,365

$

12,284



Accounts payable


308,859


251,163



Accrued liabilities


79,908


69,647





Total current liabilities


401,132


333,094


Long-term debt and capital lease obligations, less current installments


214,171


222,909


Other long-term liabilities


9,448


15,971


Shareholders' equity


1,334,317


1,321,904





Total liabilities and shareholders' equity

$

1,959,068

$

1,893,878

 

Benchmark Electronics, Inc. and Subsidiaries










Condensed Consolidated Statement of Cash Flows

(in thousands)

(UNAUDITED)
















Nine Months Ended







September 30,







2016


2015

Cash flows from operating activities:   






Net income

$

45,479

$

55,980


Depreciation and amortization


42,002


36,490


Stock-based compensation expense


4,302


6,021


Accounts receivable, net


61,776


52,217


Inventories


13,991


(21,059)


Accounts payable


59,183


(9,222)


Other changes in working capital and other


1,297


(1,705)


          Net cash provided by operations


228,030


118,722







Cash flows from investing activities:   






Additions to property, plant and equipment and software


(25,398)


(32,882)


Business acquisition


10,750


-


Other investing activities, net


213


714


          Net cash used in investing activities


(14,435)


(32,168)










Cash flows from financing activities:   






Share repurchases  


(40,862)


(52,323)


Other financing activities, net


(3,381)


1,528


          Net cash used in financing activities


(44,243)


(50,795)

Effect of exchange rate changes   


336


(1,041)

Net increase in cash and cash equivalents


169,688


34,718


Cash and cash equivalents at beginning of year


465,995


427,376


Cash and cash equivalents at end of period

$

635,683

$

462,094

 

SOURCE Benchmark Electronics, Inc.

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