10-Q 1 bhe-20220331.htm 10-Q 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

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

For the quarterly period ended March 31, 2022

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________________ to________________

 

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 or organization)

 

Identification No.)

 

 

 

56 South Rockford Drive

 

85281

Tempe, Arizona

 

(Zip Code)

(Address of principal executive offices)

 

 

 

(623) 300-7000

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading Symbol

 

Name of each exchange on which registered

Common Stock, par value $0.10 per share

 

BHE

 

The New York Stock Exchange

 

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 ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

Emerging growth company

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No ☑

As of May 3, 2022, there were 35,132,965 shares of common stock of Benchmark Electronics, Inc., par value $0.10 per share, outstanding.


 

TABLE OF CONTENTS

 

 

 

Page

 

 

 

PART I—FINANCIAL INFORMATION

 

 

 

Item 1.

Financial Statements (Unaudited)

1

 

Condensed Consolidated Balance Sheets

1

 

Condensed Consolidated Statements of Income

2

 

Condensed Consolidated Statements of Comprehensive Income

3

 

Condensed Consolidated Statements of Shareholders’ Equity

4

 

Condensed Consolidated Statements of Cash Flows

5

 

Notes to Condensed Consolidated Financial Statements

6

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

21

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

30

Item 4.

Controls and Procedures

30

 

 

 

PART II—OTHER INFORMATION

 

 

 

Item 1.

Legal Proceedings

32

Item 1A.

Risk Factors

32

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

32

Item 6.

Exhibits

33

 

 

SIGNATURES

34

 

 


 

PART I - FINANCIAL INFORMATION

 

Item 1. Financial Statements.

BENCHMARK ELECTRONICS, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(unaudited)

 

 

 

March 31,

 

 

December 31,

 

(in thousands, except par value)

 

2022

 

 

2021

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

244,935

 

 

$

271,749

 

Accounts receivable, net of allowance for doubtful accounts of
   $
908 and $788, respectively

 

 

381,998

 

 

 

355,883

 

Contract assets

 

 

168,675

 

 

 

155,243

 

Inventories

 

 

608,347

 

 

 

523,240

 

Prepaid expenses and other assets

 

 

47,061

 

 

 

41,688

 

Income taxes receivable

 

 

2

 

 

 

341

 

Total current assets

 

 

1,451,018

 

 

 

1,348,144

 

Property, plant and equipment, net

 

 

190,526

 

 

 

186,666

 

Operating lease right-of-use assets

 

 

92,423

 

 

 

99,158

 

Goodwill

 

 

192,116

 

 

 

192,116

 

Deferred income taxes

 

 

6,352

 

 

 

5,972

 

Other assets, net

 

 

70,121

 

 

 

71,824

 

 

 

$

2,002,556

 

 

$

1,903,880

 

Liabilities and Shareholders’ Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Current installments of long-term debt

 

$

1,808

 

 

$

985

 

Accounts payable

 

 

457,252

 

 

 

426,555

 

Advance payments from customers

 

 

129,600

 

 

 

118,124

 

Income taxes payable

 

 

6,089

 

 

 

6,164

 

Accrued liabilities

 

 

89,716

 

 

 

102,554

 

Total current liabilities

 

 

684,465

 

 

 

654,382

 

Long-term debt, less current installments

 

 

201,510

 

 

 

129,289

 

Operating lease liabilities

 

 

85,024

 

 

 

90,878

 

Other long-term liabilities

 

 

55,068

 

 

 

55,445

 

Deferred income taxes

 

 

84

 

 

 

84

 

Commitments and contingencies

 

 

 

 

 

 

Shareholders’ equity:

 

 

 

 

 

 

Preferred stock, $0.10 par value; 5,000 shares authorized, none
   issued

 

 

 

 

 

 

Common stock, $0.10 par value; 145,000 shares authorized;
   issued and outstanding –
35,261 and 35,213, respectively

 

 

3,526

 

 

 

3,521

 

Additional paid-in capital

 

 

506,714

 

 

 

507,447

 

Retained earnings

 

 

482,052

 

 

 

479,992

 

Accumulated other comprehensive loss

 

 

(15,887

)

 

 

(17,158

)

Total shareholders’ equity

 

 

976,405

 

 

 

973,802

 

 

 

$

2,002,556

 

 

$

1,903,880

 

 

See accompanying notes to condensed consolidated financial statements.

1


 

BENCHMARK ELECTRONICS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Income

(unaudited)

 

 

 

Three Months Ended
March 31,

 

(in thousands, except per share data)

 

2022

 

 

2021

 

Sales

 

$

636,083

 

 

$

505,721

 

Cost of sales

 

 

578,481

 

 

 

463,494

 

Gross profit

 

 

57,602

 

 

 

42,227

 

Selling, general and administrative expenses

 

 

36,289

 

 

 

30,548

 

Amortization of intangible assets

 

 

1,609

 

 

 

1,598

 

Restructuring charges and other costs

 

 

4,297

 

 

 

1,591

 

Ransomware related incident costs (recovery), net

 

 

 

 

 

(3,444

)

Income from operations

 

 

15,407

 

 

 

11,934

 

Interest expense

 

 

(1,750

)

 

 

(2,149

)

Interest income

 

 

130

 

 

 

165

 

Other expense

 

 

(294

)

 

 

(276

)

Income before income taxes

 

 

13,493

 

 

 

9,674

 

Income tax expense

 

 

2,533

 

 

 

1,757

 

Net income

 

$

10,960

 

 

$

7,917

 

Earnings per share:

 

 

 

 

 

 

Basic

 

$

0.31

 

 

$

0.22

 

Diluted

 

$

0.31

 

 

$

0.22

 

Weighted-average number of shares outstanding:

 

 

 

 

 

 

Basic

 

 

35,245

 

 

 

36,250

 

Diluted

 

 

35,470

 

 

 

36,711

 

 

See accompanying notes to condensed consolidated financial statements.

2


 

BENCHMARK ELECTRONICS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income

(unaudited)

 

 

 

Three Months Ended
March 31,

 

(in thousands)

 

2022

 

 

2021

 

Net income

 

$

10,960

 

 

$

7,917

 

Other comprehensive income (loss):

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

(1,155

)

 

 

(2,420

)

Unrealized gain on derivatives, net of tax

 

 

2,447

 

 

 

945

 

Other

 

 

(21

)

 

 

139

 

Other comprehensive income (loss)

 

 

1,271

 

 

 

(1,336

)

Comprehensive income

 

$

12,231

 

 

$

6,581

 

 

See accompanying notes to condensed consolidated financial statements.

3


 

BENCHMARK ELECTRONICS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Shareholders’ Equity

(unaudited)

 

(in thousands)

 

Shares

 

 

Common
Stock

 

 

Additional
Paid-in
Capital

 

 

Retained
Earnings

 

 

Accumulated
Other
Comprehensive
Loss

 

 

Total
Shareholders’
Equity

 

Balances, December 31, 2021

 

 

35,213

 

 

$

3,521

 

 

$

507,447

 

 

$

479,992

 

 

$

(17,158

)

 

$

973,802

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

4,206

 

 

 

 

 

 

 

 

 

4,206

 

Shares repurchased and retired

 

 

(214

)

 

 

(21

)

 

 

(2,375

)

 

 

(3,086

)

 

 

 

 

 

(5,482

)

Stock options exercised

 

 

32

 

 

 

3

 

 

 

456

 

 

 

 

 

 

 

 

 

459

 

Vesting of restricted stock units

 

 

346

 

 

 

35

 

 

 

(35

)

 

 

 

 

 

 

 

 

 

Shares withheld for taxes

 

 

(116

)

 

 

(12

)

 

 

(2,985

)

 

 

 

 

 

 

 

 

(2,997

)

Dividends declared

 

 

 

 

 

 

 

 

 

 

 

(5,814

)

 

 

 

 

 

(5,814

)

Net income

 

 

 

 

 

 

 

 

 

 

 

10,960

 

 

 

 

 

 

10,960

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,271

 

 

 

1,271

 

Balances, March 31, 2022

 

 

35,261

 

 

$

3,526

 

 

$

506,714

 

 

$

482,052

 

 

$

(15,887

)

 

$

976,405

 

 

(in thousands)

 

Shares

 

 

Common
Stock

 

 

Additional
Paid-in
Capital

 

 

Retained
Earnings

 

 

Accumulated
Other
Comprehensive
Loss

 

 

Total
Shareholders’
Equity

 

Balances, December 31, 2020

 

 

36,295

 

 

$

3,629

 

 

$

510,405

 

 

$

492,205

 

 

$

(16,651

)

 

$

989,588

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

2,850

 

 

 

 

 

 

 

 

 

2,850

 

Shares repurchased and retired

 

 

(442

)

 

 

(41

)

 

 

(4,928

)

 

 

(8,083

)

 

 

 

 

 

(13,052

)

Stock options exercised

 

 

25

 

 

 

2

 

 

 

274

 

 

 

 

 

 

 

 

 

276

 

Vesting of restricted stock units

 

 

284

 

 

 

28

 

 

 

(28

)

 

 

 

 

 

 

 

 

 

Shares withheld for taxes

 

 

(100

)

 

 

(10

)

 

 

(2,914

)

 

 

 

 

 

 

 

 

(2,924

)

Dividends declared

 

 

 

 

 

 

 

 

 

 

 

(5,772

)

 

 

 

 

 

(5,772

)

Net income

 

 

 

 

 

 

 

 

 

 

 

7,917

 

 

 

 

 

 

7,917

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,336

)

 

 

(1,336

)

Balances, March 31, 2021

 

 

36,062

 

 

$

3,608

 

 

$

505,659

 

 

$

486,267

 

 

$

(17,987

)

 

$

977,547

 

 

See accompanying notes to condensed consolidated financial statements.

4


 

BENCHMARK ELECTRONICS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(unaudited)

 

 

 

Three Months Ended
March 31,

 

(in thousands)

 

2022

 

 

2021

 

Cash flows from operating activities:

 

 

 

 

 

 

Net income

 

$

10,960

 

 

$

7,917

 

Adjustments to reconcile net income to net cash
   provided by (used in) operating activities:

 

 

 

 

 

 

Depreciation

 

 

8,294

 

 

 

8,973

 

Amortization

 

 

2,603

 

 

 

2,082

 

Provision for doubtful accounts

 

 

120

 

 

 

 

Deferred income taxes

 

 

(1,201

)

 

 

(161

)

Loss (gain) on the sale of property, plant and equipment

 

 

41

 

 

 

(8

)

Loss on assets held for sale

 

 

1,983

 

 

 

 

Stock-based compensation expense

 

 

4,206

 

 

 

2,850

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

(26,356

)

 

 

32,561

 

Contract assets

 

 

(13,431

)

 

 

(5,426

)

Inventories

 

 

(85,751

)

 

 

(28,700

)

Prepaid expenses and other assets

 

 

(8,742

)

 

 

(6,675

)

Accounts payable

 

 

35,869

 

 

 

42,439

 

Advance payments from customers

 

 

11,475

 

 

 

(7,289

)

Accrued liabilities

 

 

(7,960

)

 

 

(11,990

)

Operating leases

 

 

(398

)

 

 

(608

)

Income taxes

 

 

263

 

 

 

648

 

Net cash (used in) provided by operations

 

 

(68,025

)

 

 

36,613

 

Cash flows from investing activities:

 

 

 

 

 

 

Additions to property, plant and equipment

 

 

(17,203

)

 

 

(5,770

)

Proceeds from the sale of property, plant and equipment

 

 

 

 

 

13

 

Proceeds from the sale of assets held for sale

 

 

1,325

 

 

 

 

Additions to purchased software

 

 

(772

)

 

 

(652

)

Other

 

 

5

 

 

 

 

Net cash used in investing activities

 

 

(16,645

)

 

 

(6,409

)

Cash flows from financing activities:

 

 

 

 

 

 

Proceeds from stock options exercised

 

 

459

 

 

 

276

 

Employee taxes paid for with shares withheld

 

 

(2,997

)

 

 

(2,924

)

Dividends paid

 

 

(5,805

)

 

 

(5,805

)

Borrowings under credit agreement

 

 

203,000

 

 

 

 

Principal payments on credit agreement

 

 

(130,000

)

 

 

(1,875

)

Principal payments on finance leases

 

 

(41

)

 

 

(380

)

Share repurchases

 

 

(5,482

)

 

 

(13,052

)

Net cash provided by (used in) financing activities

 

 

59,134

 

 

 

(23,760

)

Effect of exchange rate changes

 

 

(1,278

)

 

 

(2,006

)

Net (decrease) increase in cash and cash equivalents and restricted cash

 

 

(26,814

)

 

 

4,438

 

Cash and cash equivalents and restricted cash at beginning of year

 

 

271,749

 

 

 

395,990

 

Cash and cash equivalents and restricted cash at end of period

 

$

244,935

 

 

$

400,428

 

 

See accompanying notes to condensed consolidated financial statements.

5


 

BENCHMARK ELECTRONICS, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(amounts in thousands, except per share data, unless otherwise noted)

(unaudited)

 

Note 1 – Basis of Presentation

Benchmark Electronics, Inc. (the Company) is a Texas corporation that provides advanced manufacturing services, which includes design and engineering services and technology solutions. From initial product concept to volume production, including direct order fulfillment and aftermarket services, the Company has been providing integrated services and solutions to original equipment manufacturers (OEMs) since 1979. The Company serves the following industries: aerospace and defense (A&D), medical technologies, complex industrials, semiconductor capital equipment (Semi-Cap), next-generation telecommunications and advanced computing. The Company has manufacturing operations located in the United States and Mexico (the Americas), Asia and Europe.

The unaudited condensed consolidated financial statements included herein have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the SEC). The condensed consolidated financial statements reflect all normal and recurring adjustments necessary in the opinion of management 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 year ended December 31, 2021 (the 2021 10-K).

Management has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these condensed consolidated financial statements in accordance with generally accepted accounting principles in the United States (U.S. GAAP) with consideration given to the potential impacts of the coronavirus disease (COVID) pandemic. However, actual results could differ materially from these estimates and be significantly affected by the severity and duration of the pandemic, the extent of actions to contain or treat COVID, how quickly and to what extent normal economic and operating activity can resume, and the severity and duration of the global economic downturn that results from the pandemic.

 

Note 2 – New Accounting Pronouncements

Not Yet Adopted

 

In March 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting (Topic 848). The pronouncement provides temporary optional expedients and exceptions for applying U.S. GAAP to transactions affected by reference rate (e.g., LIBOR) reform if certain criteria are met to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. This update is effective as of March 12, 2020 through December 31, 2022. We will evaluate transactions or contract modifications occurring as a result of reference rate reform and determine whether to apply the optional guidance on an ongoing basis. The update is currently not expected to have a material impact on our consolidated financial statements.

 

The Company has determined that other recently issued accounting standards will either not have a material impact on its consolidated financial position, results of operations or cash flows, or will not apply to its operations.

 

Note 3 – Inventories

Inventory costs are summarized as follows:

 

 

 

March 31,

 

 

December 31,

 

(in thousands)

 

2022

 

 

2021

 

Raw materials

 

$

589,489

 

 

$

504,307

 

Work in process

 

 

17,134

 

 

 

15,338

 

Finished goods

 

 

1,724

 

 

 

3,595

 

 

 

$

608,347

 

 

$

523,240

 

 

6


 

Note 4 – Goodwill and Other Intangible Assets

Goodwill allocated to the Company’s reportable segments were as follows:

 

(in thousands)

 

Americas

 

 

Asia

 

 

Total

 

Goodwill as of December 31, 2021 and March 31, 2022

 

$

154,014

 

 

$

38,102

 

 

$

192,116

 

 

Other assets, net consist primarily of acquired identifiable intangible assets and capitalized purchased software costs. Acquired identifiable intangible assets and purchased software as of March 31, 2022 and December 31, 2021 were as follows:

 

(in thousands)

 

Gross
Carrying
Amount

 

 

Accumulated
Amortization

 

 

Net
Carrying
Amount

 

Customer relationships

 

$

100,113

 

 

$

(61,243

)

 

$

38,870

 

Purchased software costs

 

 

48,615

 

 

 

(33,563

)

 

 

15,052

 

Technology licenses

 

 

26,800

 

 

 

(26,800

)

 

 

 

Trade names and trademarks

 

 

7,800