Company Quick10K Filing
Quick10K
Benchmark Electronics
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$26.28 38 $1,010
10-Q 2019-06-30 Quarter: 2019-06-30
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-K 2013-12-31 Annual: 2013-12-31
8-K 2019-07-24 Earnings, Exhibits
8-K 2019-07-22 Other Events, Exhibits
8-K 2019-07-08 Other Events, Exhibits
8-K 2019-06-13 Other Events, Exhibits
8-K 2019-05-15 Shareholder Vote
8-K 2019-04-24 Earnings, Exhibits
8-K 2019-03-15 Other Events, Exhibits
8-K 2019-02-07 Earnings, Officers, Exhibits
8-K 2019-01-07 Officers
8-K 2018-12-17 Other Events, Exhibits
8-K 2018-10-30 Earnings, Exhibits
8-K 2018-10-26 Other Events, Exhibits
8-K 2018-09-17 Other Events, Exhibits
8-K 2018-08-06 Other Events, Exhibits
8-K 2018-07-24 Earnings, Exhibits
8-K 2018-07-20 Enter Agreement, Leave Agreement, Off-BS Arrangement, Other Events, Exhibits
8-K 2018-07-18 Other Events
8-K 2018-06-08 Other Events, Exhibits
8-K 2018-05-18 Officers, Other Events, Exhibits
8-K 2018-05-16 Shareholder Vote
8-K 2018-04-25 Earnings, Regulation FD, Exhibits
8-K 2018-03-07 Other Events, Exhibits
8-K 2018-02-22 Enter Agreement, Officers, Exhibits
8-K 2018-02-07 Earnings, Regulation FD, Exhibits
BBL BHP Billiton 115,170
AMRX Amneal Pharmaceuticals 3,300
HUBG Hub Group 1,500
CRK Comstock Resources 642
HCKT Hackett Group 480
LARK Landmark Bancorp 110
SBPH Spring Bank Pharmaceuticals 110
DGLY Digital Ally 54
MKGI Monaker Group 36
EGC Energy XXI Gulf Coast 0
BHE 2019-06-30
Part I - Financial Information
Item 1. Financial Statements.
Note 1 - Basis of Presentation
Note 2 - New Accounting Pronouncements
Note 3 - Revenue
Note 4 - Stock-Based Compensation
Note 5 - Earnings per Share
Note 6 - Goodwill and Other Intangible Assetsgoodwill Allocated To The Company's Reportable Segments Was As Follows:
Note 7 - Borrowing Facilities
Note 8 - Contract Assets
Note 10 - Accounts Receivable Sale Program
Note 12 - Segment and Geographic Information
Note 14 - Contingencies
Note 15 - Restructuring Charges
Note 16 - Fair Value
Note 17 - Accumulated Other Comprehensive Loss
Note 18 - Shareholders' Equity
Note 19 - Leases
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3 - Quantitative and Qualitative Disclosures About Market Risk
Item 4 - Controls and Procedures
Part Ii-Other Information
Item 1. Legal Proceedings
Item 1A.Risk Factors
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
Item 6.Exhibits
EX-10.2 ex102.htm
EX-31.1 ex311.htm
EX-31.2 ex312.htm
EX-32.1 ex321.htm
EX-32.2 ex322.htm

Benchmark Electronics Earnings 2019-06-30

BHE 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

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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 June 30, 2019

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

(Registrants 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

New York Stock Exchange, Inc.

 

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 Act). Yes No

 

As of August 7, 2019, there were 37,627,463 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 (Loss)

2

 

Condensed Consolidated Statements of Comprehensive Income (Loss)

3

 

Condensed Consolidated Statements of Shareholders’ Equity

4

 

Condensed Consolidated Statements of Cash Flows

6

 

Notes to Condensed Consolidated Financial Statements

7

Item 2.

Management’s Discussion and Analysis of Financial Condition and

25

 

Results of Operations

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

34

Item 4.

Controls and Procedures

35

 

 

 

PART II—OTHER INFORMATION

 

 

 

Item 1.

Legal Proceedings

35

Item 1A.

Risk Factors

36

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

36

Item 6.

Exhibits

37

 

 

SIGNATURES

38

 

 


 

PART I - FINANCIAL INFORMATION

 

Item 1. Financial Statements.

BENCHMARK ELECTRONICS, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(unaudited)

 

 

 

 

 

 

 

 

June 30,

 

 

December 31,

(in thousands, except par value)

 

2019

 

 

2018

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

$

396,613

 

$

458,102

 

 

Accounts receivable, net of allowance for doubtful accounts of $69

 

 

 

 

 

 

 

 

and $1,733, respectively

 

362,881

 

 

468,161

 

 

Contract assets

 

155,546

 

 

140,082

 

 

Inventories

 

316,237

 

 

309,975

 

 

Prepaid expenses and other assets

 

25,730

 

 

27,024

 

 

Income taxes receivable

 

803

 

 

206

 

 

 

 

Total current assets

 

1,257,810

 

 

1,403,550

 

Property, plant and equipment, net of accumulated depreciation of

 

 

 

 

 

 

 

 

 

$464,244 and $460,708, respectively

 

202,665

 

 

210,954

 

Operating lease right-of-use assets

 

83,985

 

 

 

Goodwill

 

192,116

 

 

192,116

 

Deferred income taxes

 

2,269

 

 

2,478

 

Other, net

 

89,033

 

 

90,685

 

 

 

 

 

$

1,827,878

 

$

1,899,783

 

 

 

 

 

 

 

 

 

 

Liabilities and Shareholders’ Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Current installments of long-term debt

$

8,744

 

$

6,793

 

 

Accounts payable

 

372,106

 

 

422,053

 

 

Income taxes payable

 

7,894

 

 

10,435

 

 

Accrued liabilities

 

98,916

 

 

97,878

 

 

 

 

Total current liabilities

 

487,660

 

 

537,159

 

Long-term debt, less current installments

 

143,115

 

 

147,277

 

Operating lease liabilities

 

73,878

 

 

 

Other long-term liabilities

 

63,696

 

 

68,799

 

Deferred income taxes

 

14,479

 

 

14,323

 

Shareholders’ equity:

 

 

 

 

 

 

 

Preferred stock, $5,000 shares authorized, none issued

 

 

 

 

 

Common stock, $145,000 shares authorized; issued

 

 

 

 

 

 

 

 

and outstanding – 37,679 and 41,357, respectively

 

3,768

 

 

4,136

 

 

Additional paid-in capital

 

516,663

 

 

554,939

 

 

Retained earnings

 

539,743

 

 

584,274

 

 

Accumulated other comprehensive loss

 

(15,124)

 

 

(11,124)

 

 

 

 

Total shareholders’ equity

 

1,045,050

 

 

1,132,225

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

$

1,827,878

 

$

1,899,783

See accompanying notes to condensed consolidated financial statements.

1


 

BENCHMARK ELECTRONICS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Income (Loss)

(unaudited)

 

 

 

Three Months Ended

Six Months Ended

 

 

June 30,

June 30,

(in thousands, except per share data)

 

2019

 

2018

 

2019

 

2018

 

 

 

 

 

 

 

 

Sales

$

601,602

$

660,591

$

1,204,422

$

1,268,727

Cost of sales

 

548,604

 

606,292

 

1,097,624

 

1,156,110

 

Gross profit

 

52,998

 

54,299

 

106,798

 

112,617

Selling, general and administrative expenses

 

35,282

 

35,825

 

69,052

 

71,575

Amortization of intangible assets

 

2,361

 

2,367

 

4,728

 

4,733

Restructuring charges and other costs

 

3,414

 

1,758

 

4,990

 

3,993

 

Income from operations

 

11,941

 

14,349

 

28,028

 

32,316

Interest expense

 

(1,718)

 

(2,293)

 

(3,327)

 

(4,721)

Interest income

 

1,053

 

1,645

 

2,350

 

3,578

Other income (expense)

 

808

 

(355)

 

2,412

 

(312)

 

Income before income taxes

 

12,084

 

13,346

 

29,463

 

30,861

Income tax expense

 

2,637

 

2,403

 

6,243

 

43,559

 

Net income (loss)

$

9,447

$

10,943

$

23,220

$

(12,698)

 

 

 

 

 

 

 

 

 

 

Earnings (loss) per share:

 

 

 

 

 

 

 

 

 

Basic

$

0.25

$

0.23

$

0.59

$

(0.26)

 

Diluted

$

0.24

$

0.23

$

0.58

$

(0.26)

 

 

 

 

 

 

 

 

 

 

Weighted-average number of shares outstanding:

 

 

 

 

 

 

 

Basic

 

38,426

 

47,451

 

39,522

 

47,981

 

Diluted

 

38,583

 

47,631

 

39,843

 

47,981

See accompanying notes to condensed consolidated financial statements.

2


 

BENCHMARK ELECTRONICS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income (Loss)

(unaudited)

 

 

 

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

 

 

June 30,

 

June 30,

(in thousands)

 

2019

 

 

2018

 

 

2019

 

 

2018

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

$

9,447

 

$

10,943

 

$

23,220

 

$

(12,698)

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

585

 

 

(2,652)

 

 

(248)

 

 

(1,320)

 

Unrealized gain on investments, net of tax

 

 

 

41

 

 

 

 

41

 

Unrealized gain (loss) on derivative, net of tax

 

(2,261)

 

 

244

 

 

(3,546)

 

 

1,077

 

Other

 

(191)

 

 

 

 

(206)

 

 

Other comprehensive loss

 

(1,867)

 

 

(2,367)

 

 

(4,000)

 

 

(202)

 

 

 

Comprehensive income (loss)

$

7,580

 

$

8,576

 

$

19,220

 

$

(12,900)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to condensed consolidated financial statements.

3


 

BENCHMARK ELECTRONICS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Shareholders’ Equity

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

Common Stock

 

Additional

 

 

 

 

Other

 

 

Total

 

 

 

Shares

 

Par

 

Paid-in

 

Retained

 

Comprehensive

Shareholders’

(in thousands)

 

Outstanding

 

Value

 

Capital

 

Earnings

 

 

Loss

 

 

Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances, December 31, 2018

41,357

 

 

$ 4,136

 

$ 554,939

 

$ 584,274

 

 

$ (11,124)

 

 

$ 1,132,225

Stock-based compensation expense

 

 

 

 

 

5,720

 

 

 

 

 

5,720

Shares repurchased and retired

 

 

(3,908)

 

 

(391)

 

(43,424)

 

(56,224)

 

 

 

 

(100,039)

Stock options exercised

 

 

33

 

 

3

 

690

 

 

 

 

 

693

Vesting of restricted stock units

 

 

242

 

 

24

 

(24)

 

 

 

 

 

Shares withheld for taxes

 

 

(45)

 

 

(4)

 

(1,238)

 

 

 

 

 

(1,242)

Dividends declared

 

 

 

 

 

 

(11,527)

 

 

 

 

(11,527)

Net income

 

 

 

 

 

 

23,220

 

 

 

 

23,220

Other comprehensive loss

 

 

 

 

 

 

 

 

(4,000)

 

 

(4,000)

Balances, June 30, 2019

 

 

37,679

 

 

$ 3,768

 

$ 516,663

 

$ 539,743

 

 

$ (15,124)

 

 

$ 1,045,050

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances, March 31, 2019

39,169

 

 

$ 3,917

 

$ 530,261

 

$ 557,804

 

 

$ (13,257)

 

 

$ 1,078,725

Stock-based compensation expense

 

 

 

 

 

2,948

 

 

 

 

 

2,948

Shares repurchased and retired

 

 

(1,525)

 

 

(152)

 

(16,951)

 

(21,856)

 

 

 

 

(38,959)

Stock options exercised

 

 

20

 

 

2

 

412

 

 

 

 

 

414

Vesting of restricted stock units

 

 

15

 

 

1

 

(1)

 

 

 

 

 

Shares withheld for taxes

 

 

 

 

 

(6)

 

 

 

 

 

(6)

Dividends declared

 

 

 

 

 

 

(5,652)

 

 

 

 

(5,652)

Net income

 

 

 

 

 

 

9,447

 

 

 

 

9,447

Other comprehensive loss

 

 

 

 

 

 

 

 

(1,867)

 

 

(1,867)

Balances, June 30, 2019

 

 

37,679

 

 

$ 3,768

 

$ 516,663

 

$ 539,743

 

 

$ (15,124)

 

 

$ 1,045,050

See accompanying notes to condensed consolidated financial statements.

4


 

BENCHMARK ELECTRONICS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Shareholders’ Equity

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

Common Stock

 

Additional

 

 

 

 

Other

 

 

Total

 

 

 

Shares

 

Par

 

Paid-in

 

Retained

 

Comprehensive

Shareholders’

(in thousands)

 

Outstanding

 

Value

 

Capital

 

Earnings

 

 

Loss

 

 

Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances, December 31, 2017

49,143

 

 

$ 4,914

 

$ 634,192

 

$ 708,181

 

 

$ (8,149)

 

 

$ 1,339,138

Stock-based compensation expense

 

 

 

 

 

5,405

 

 

 

 

 

5,405

Shares repurchased and retired

 

 

(2,174)

 

 

(217)

 

(34,183)

 

(41,468)

 

 

 

 

(75,868)

Stock options exercised

 

 

182

 

 

18

 

3,359

 

 

 

 

 

3,377

Vesting of restricted stock units

 

 

209

 

 

21

 

(21)

 

 

 

 

 

Shares withheld for taxes

 

 

(26)

 

 

(3)

 

(768)

 

 

 

 

 

(771)

Dividends declared

 

 

 

 

 

 

(14,236)

 

 

 

 

(14,236)

Net loss

 

 

 

 

 

 

(12,698)

 

 

 

 

(12,698)

Other comprehensive loss

 

 

 

 

 

 

 

 

(202)

 

 

(202)

Balances, June 30, 2018

 

 

47,334

 

 

$ 4,733

 

$ 607,984

 

$ 639,779

 

 

$ (8,351)

 

 

$ 1,244,145

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances, March 31, 2018

47,572

 

 

$ 4,757

 

$ 608,092

 

$ 640,466

 

 

$ (5,984)

 

 

$ 1,247,331

Stock-based compensation expense

 

 

 

 

 

2,535

 

 

 

 

 

2,535

Shares repurchased and retired

 

 

(263)

 

 

(26)

 

(2,931)

 

(4,530)

 

 

 

 

(7,487)

Stock options exercised

 

 

14

 

 

1

 

297

 

 

 

 

 

298

Vesting of restricted stock units

 

 

11

 

 

1

 

(1)

 

 

 

 

 

Shares withheld for taxes

 

 

 

 

 

(8)

 

 

 

 

 

(8)

Dividends declared

 

 

 

 

 

 

(7,100)

 

 

 

 

(7,100)

Net income

 

 

 

 

 

 

10,943

 

 

 

 

10,943

Other comprehensive loss

 

 

 

 

 

 

 

 

(2,367)

 

 

(2,367)

Balances, June 30, 2018

 

 

47,334

 

 

$ 4,733

 

$ 607,984

 

$ 639,779

 

 

$ (8,351)

 

 

$ 1,244,145

 

See accompanying notes to condensed consolidated financial statements.

5


 

BENCHMARK ELECTRONICS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(unaudited)

 

 

 

 

 

 

Six Months Ended

 

 

 

 

 

June 30,

(in thousands)

 

2019

 

 

2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from operating activities:

 

 

 

 

 

 

Net income (loss)

$

23,220

 

$

(12,698)

 

Adjustments to reconcile net income (loss) to net cash provided by

 

 

 

 

 

 

 

operating activities:

 

 

 

 

 

 

 

 

Depreciation

 

18,420

 

 

19,373

 

 

 

Amortization

 

5,705

 

 

5,710

 

 

 

Provision for doubtful accounts

 

(1,462)

 

 

 

 

 

Deferred income taxes

 

1,555

 

 

10,936

 

 

 

Gain on the sale of property, plant and equipment

 

(25)

 

 

(116)

 

 

 

Asset impairments

 

834

 

 

96

 

 

 

Stock-based compensation expense

 

5,720

 

 

5,405

 

 

 

Leases

 

574

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

106,749

 

 

(8,980)

 

 

 

Contract assets

 

(15,464)

 

 

(1,735)

 

 

 

Inventories

 

(6,327)

 

 

(52,063)

 

 

 

Prepaid expenses and other assets

 

1,559

 

 

1,966

 

 

 

Accounts payable

 

(49,428)

 

 

23,103

 

 

 

Accrued liabilities

 

(13,243)

 

 

(16,025)

 

 

 

Income taxes

 

(9,615)

 

 

8,846

 

 

 

 

Net cash provided by (used in) operations

 

68,772

 

 

(16,182)

Cash flows from investing activities:

 

 

 

 

 

 

Proceeds from sales of investments at par

 

50

 

 

522

 

Additions to property, plant and equipment

 

(14,163)

 

 

(36,708)

 

Proceeds from the sale of property, plant and equipment

 

28

 

 

137

 

Additions to purchased software

 

(1,332)

 

 

(1,655)

 

Business acquisition, net of cash acquired

 

 

 

(2,731)

 

Other

 

(29)

 

 

(129)

 

 

 

 

Net cash used in investing activities

 

(15,446)

 

 

(40,564)

Cash flows from financing activities:

 

 

 

 

 

 

Proceeds from stock options exercised

 

693

 

 

3,377

 

Employee taxes paid for shares withheld

 

(1,242)

 

 

(771)

 

Dividends paid

 

(12,079)

 

 

(7,136)

 

Borrowings under credit agreement

 

 

 

50,000

 

Principal payments on long-term debt

 

(2,441)

 

 

(59,121)

 

Share repurchases

 

(100,039)

 

 

(65,868)

 

Equity forward contract related to accelerated share repurchase

 

 

 

(10,000)

 

 

 

 

Net cash used in financing activities

 

(115,108)

 

 

(89,519)

Effect of exchange rate changes

 

293

 

 

(642)

Net decrease in cash and cash equivalents

 

(61,489)

 

 

(146,907)

 

Cash and cash equivalents at beginning of year

 

458,102

 

 

742,546

 

Cash and cash equivalents at end of period

$

396,613

 

$

595,639

 

See accompanying notes to condensed consolidated financial statements.

6


 

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 innovative product design, engineering services, technology solutions and advanced manufacturing services. 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 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, 2018 (the 2018 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 financial statements in accordance with generally accepted accounting principles in the United States (U.S. GAAP). Actual results could differ from those estimates and assumptions.

 

 

Note 2 – New Accounting Pronouncements

Adopted in 2019

In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-02, Leases (Topic 842), amended by ASU 2018-01, Land Easement Practical Expedient for Transition to ASU 842, ASU No. 2018-10, Codification Improvements to ASU 842 and ASU No. 2018-11, Targeted Improvements. The new standard established a right-to-use model (ROU) that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months.

 

The Company adopted this standard on its effective date of January 1, 2019 using the effective date as its date of initial application under the modified retrospective approach. Therefore, financial information for prior periods were not restated. Management elected the package of practical expedients in transition for leases that commenced prior to January 1, 2019, which permits the Company to carry forward its original assessment about lease identification, lease classification and initial directs costs. For all new and modified leases after adoption, management elected the short-term lease recognition exemption for all of the Company’s leases that qualify, in addition to the practical expedient to not separate lease and nonlease components.

 

Lease assets and liabilities are initially recognized based on the present value of lease payments over the lease term calculated using our incremental borrowing rate, unless the implicit rate is readily determinable. Lease assets also include any upfront lease payments made and exclude lease incentives. Lease terms include options to extend or terminate the lease when it is reasonably certain that those options will be exercised. Leases are classified as finance or operating, with classification affecting the pattern and

7


 

classification of expense recognition in the income statement. See Note 19.

 

 

Not Yet Adopted

In June 2016, the FASB issued an accounting standards update, which replaces the current incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. This update is effective for annual reporting periods beginning after December 15, 2019. The Company does not expect the implementation of this update to have a material impact on its consolidated financial position, results of operations or cash flows, and will adopt this update effective January 1, 2020.

 

The Company has determined that other recently issued accounting standards will either have no material impact on its consolidated financial position, results of operations or cash flows, or will not apply to its operations.

 

Note 3 – Revenue

The Company’s revenues are generated primarily from the sale of manufactured products built to customer specifications. The Company also generates revenue from design, development and engineering services, in addition to the sale of other inventory.

 

Revenue is measured based on consideration specified in a contract with a customer. The Company recognizes revenue when it satisfies a performance obligation by transferring control over a manufactured product to a customer. The Company’s contracts with customers are generally short-term in nature. Customers are generally billed when the product is shipped or as services are performed. Under the majority of the Company’s manuf