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NYSEBHE
Benchmark Electronics Reports Fourth Quarter And FY 2016 Results
- Quarterly revenue of $608 million
- Quarterly operating margin of 3.9% (4.8% non-GAAP)
- Quarterly EPS of $0.37 ($0.45 non-GAAP)
- Improved cash conversion cycle to 74 days
- Annual operating cash flow of $273 million
- Repurchased $42 million of common stock in 2016
PR Newswire
ANGLETON, Texas

ANGLETON, Texas, Feb. 8, 2017 /PRNewswire/ -- Benchmark Electronics, Inc. (NYSE: BHE) today announced financial results for the fourth quarter and year ended December 31, 2016.




Three Months Ended





Dec 31,



Sep 30,



Dec 31,


In millions, except EPS


2016



2016



2015


Net sales


$608



$574



$626


Net income


$19



$22



$39


Net income – non-GAAP


$22



$18



$24


Diluted EPS


$0.37



$0.44



$0.77


Diluted EPS – non-GAAP


$0.45



$0.36



$0.48













Operating margin


3.9%



3.1%



3.5%


Operating margin – non-GAAP


4.8%



4.3%



4.8%


 




Twelve Months Ended





Dec 31,



Dec 31,


In millions, except EPS


2016



2015


Net sales


$2,310



$2,541


Net income


$64



$95


Net income – non-GAAP


$72



$88


Diluted EPS


$1.29



$1.83


Diluted EPS – non-GAAP


$1.45



$1.68


Operating margin (%)


3.3%



3.7%


Operating margin – non-GAAP (%)


4.3%



4.4%


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

"I am pleased by the Company's performance in the fourth quarter, which met or exceeded each of our commitments.  Revenue and margins were at the top end of our guidance, and non-GAAP EPS of $0.45 exceeded by two cents.  We generated operating cash flow of $273 million for the year and ended 2016 with cash conversion days of 74, one day lower than our target and a twenty-day improvement from the year ago period," said Paul Tufano, Benchmark's CEO and President.

"During 2017, we will be realigning and invigorating the organization with three priorities critical to our success", Tufano added.  "First, the optimization of our global network coupled with a relentless focus on execution excellence.  Within our global teams, we are driving greater ownership and accountability and a heightened sense of urgency.  Second, the investment in a market segment organization tasked with driving appropriate customer acquisition, revenue and margin growth.  Third, the expansion of our engineering capabilities to provide our customers with the design services and technology building blocks that will allow them to go to market faster and more economically."

Tufano concluded, "I remain excited by our opportunities going forward and the enthusiasm and support of our customers and employees.  Looking ahead, our objective is to meet our commitments to customers, shareholders and employees while we reposition Benchmark for long-term growth."

Fourth Quarter 2016 Financial Highlights

  • Operating margin was 3.9% (non-GAAP 4.8%).
  • Cash flows from operating activities were $44 million during the quarter and $273 million for the year.
  • Cash conversion cycle improved 6 days from 80 at September 30, 2016 to 74 days at December 31, 2016.
  • Cash was $681 million at December 31, of which $626 million was held outside the U.S.

Cash Conversion Cycle



Dec 31,




Sep 30,




Dec 31,




2016




2016




2015


Accounts receivable days


65




65




69


Inventory days


62




68




65


Accounts payable days


(53)




(53)




(40)




74




80




94


"We exceeded our 75-day cash conversion cycle target and exited the year at 74 days," said Don Adam, CFO.  "For the fourth quarter, we generated $44 million of cash flow from operations, bringing our full year total to $273 million.  We are targeting a cash conversion cycle range of 68-73 days and annual operating cash flows in the range of $125 - $150 million in 2017.  For the full year, we purchased $42 million of our common shares and have $93 million remaining in our current share repurchase program."

Fourth Quarter 2016 Industry Sector Update

Revenue by industry sector (dollars in millions) was as follows.




Dec 31,




Sep 30,




Dec 31,



Higher-Value Markets


2016




2016




2015


Industrials

$

230


37

%


$

217


38

%


$

223


35

%

Medical


86


14




86


15




91


15


Test & Instrumentation


65


11




66


11




52


8




$

381


62

%


$

369


64

%


$

366


58

%










































Dec 31,




Sep 30,




Dec 31,



Traditional Markets


2016




2016




2015


Computing

$

120


20

%


$

107


19

%


$

155


25

%

Telecommunications


107


18




98


17




105


17




$

227


38

%


$

205


36

%


$

260


42

%


Total

$

608


100

%


$

574


100

%


$

626


100

%

Fourth quarter revenues from higher-value markets were in line with expectations.  Test & Instrumentation revenues from semi-capital equipment customers remained strong, and new Industrial programs ramped as expected.  Medical revenues were slightly lower than anticipated due to regulatory delays.  Traditional revenues in Computing and Telecommunications were up on stronger computing demand and the completion of Telecommunications qualifications.

Fourth Quarter 2016 Bookings Update

  • New program bookings of $115 to $140 million.
  • 12 engineering awards supporting early engagement opportunities.
  • 19 manufacturing wins across all market sectors.

The Company projects that new program bookings for the fourth quarter will result in annualized revenue of $115 to $140 million when fully launched in the next 12-18 months.  The new program bookings align with Benchmark's strategic focus on higher-value markets.

First Quarter 2017 Outlook

  • Revenue between $530-$550 million.
  • Diluted GAAP earnings per share between $0.19-$0.23.
  • Diluted non-GAAP earnings per share between $0.24-$0.28 (excluding restructuring charges and amortization of intangibles expected to approximate $0.05 per share).  The income tax impact of the non-GAAP adjustments using the applicable effective tax rates is $0.02 per share.

Fourth Quarter 2016 Results Conference Call Details
A conference call hosted by Benchmark management will be held today at 4:30 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 worldwide integrated electronics manufacturing services (EMS), engineering and design services, and precision machine 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 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 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," "targeting" 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, projections relating to expanding or realigning contractual terms, optimizing execution, realigning its footprint, maximizing operational performance, its cash conversion cycle, operating cash flows, the future value of bookings and first quarter 2017 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



Year Ended




Dec 31,


Sep 30,


Dec 31,



December 31,




2016


2016


2015



2016


2015














Income from operations (GAAP)

$

23,548

$

18,082

$

21,905


$

75,638

$

92,969

Restructuring charges and other costs


2,663


3,485


6,308



12,539


13,861

Amortization of intangible assets(1)


2,893


3,170


1,923



11,838


4,962

Non-GAAP income from operations

$

29,104

$

24,737

$

30,136


$

100,015

$

111,792



























Net income (GAAP)

$

18,568

$

21,742

$

39,421


$

64,047

$

95,401

Restructuring charges and other costs


2,663


3,485


6,308



12,539


13,861

Amortization of intangible assets(1)


2,893


3,170


1,923



11,838


4,962

Income tax adjustments(2)


(1,781)


(2,207)


(2,234)



(7,695)


(5,495)

Discrete tax benefits


-


(8,270)


(21,174)



(8,270)


(21,174)

Non-GAAP net income

$

22,343

$

17,920

$

24,244


$

72,459

$

87,555














Earnings per share: (GAAP)













Basic

$

0.38

$

0.44

$

0.78


$

1.30

$

1.85


Diluted

$

0.37

$

0.44

$

0.77


$

1.29

$

1.83














Earnings per share: (Non-GAAP)













Basic

$

0.46

$

0.37

$

0.48


$

1.47

$

1.70


Diluted

$

0.45

$

0.36

$

0.48


$

1.45

$

1.68














Weighted-average number of shares used in

   calculating earnings per share:












Basic


49,063


48,965


50,482



49,298


51,573


Diluted


49,544


49,414


50,914



49,825


52,088



(1)         

Beginning with the third quarter of 2016, 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



Year Ended




December 31,



December 31,



2016


2015



2016


2015

Sales

$

607,507

$

625,719


$

2,310,415

$

2,540,873

Cost of sales


550,037


568,810



2,096,952


2,321,619


Gross profit


57,470


56,909



213,463


219,254

Selling, general and administrative expenses


28,366


26,773



113,448


107,462

Amortization of intangible assets


2,893


1,923



11,838


4,962

Restructuring charges and other costs


2,663


6,308



12,539


13,861


Income from operations


23,548


21,905



75,638


92,969

Interest expense


(2,369)


(1,569)



(9,304)


(2,996)

Interest income


966


236



2,136


1,207

Other income (expense), net


253


441



(282)


(1,141)


Income before income taxes


22,398


21,013



68,188


90,039

Income tax expense (benefit)


3,830


(18,408)



4,141


(5,362)


Net income

$

18,568

$

39,421


$

64,047

$

95,401












Earnings per share:











Basic

$

0.38

$

0.78


$

1.30

$

1.85


Diluted

$

0.37

$

0.77


$

1.29

$

1.83












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










Basic


49,063


50,482



49,298


51,573


Diluted


49,544


50,914



49,825


52,088

 

Benchmark Electronics, Inc. and Subsidiaries










Condensed Consolidated Balance Sheets

(UNAUDITED)

(in thousands)







December 31,


December 31,







2016


2015

Assets






Current assets:







Cash and cash equivalents

$

681,433

$

465,995



Accounts receivable, net


440,692


479,140



Inventories


381,334


411,986



Other current assets


28,203


31,507





Total current assets


1,531,662


1,388,628


Property, plant and equipment, net


166,148


178,170


Goodwill and other, net


300,858


327,080





Total assets

$

1,998,668

$

1,893,878










Liabilities and Shareholders' Equity






Current liabilities:







Current installments of long-term debt and capital lease obligations

$

12,396

$

12,284



Accounts payable


326,249


251,163



Accrued liabilities


73,736


69,647





Total current liabilities


412,381


333,094


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


211,252


222,909


Other long-term liabilities


9,570


15,971


Shareholders' equity


1,365,465


1,321,904





Total liabilities and shareholders' equity

$

1,998,668

$

1,893,878

 

Benchmark Electronics, Inc. and Subsidiaries










Condensed Consolidated Statement of Cash Flows

(in thousands)

(UNAUDITED)
















Year Ended







December 31,







2016


2015

Cash flows from operating activities:   






Net income

$

64,047

$

95,401


Depreciation and amortization


55,139


49,672


Stock-based compensation expense


5,322


7,709


Accounts receivable, net


37,573


52,847


Inventories


27,749


3,974


Accounts payable


76,039


(41,388)


Other changes in working capital and other


6,651


(21,411)



Net cash provided by operations


272,520


146,804







Cash flows from investing activities:   






Additions to property, plant and equipment and software


(32,334)


(38,062)


Business acquisition, net of cash acquired


10,750


(229,582)


Other investing activities, net


339


843



Net cash used in investing activities


(21,245)


(266,801)










Cash flows from financing activities:   






Share repurchases  


(41,929)


(68,365)


Net debt activity


(12,301)


229,324


Other financing activities, net


19,488


(1,322)



Net cash provided by (used in) financing activities


(34,742)


159,637

Effect of exchange rate changes   


(1,095)


(1,021)

Net increase in cash and cash equivalents


215,438


38,619


Cash and cash equivalents at beginning of year


465,995


427,376


Cash and cash equivalents at end of period

$

681,433

$

465,995

 

SOURCE Benchmark Electronics, Inc.

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