Benchmark Electronics Reports Second Quarter 2018 Results
SCOTTSDALE, Ariz., July 24, 2018 /PRNewswire/ -- Benchmark Electronics, Inc. (NYSE: BHE) today announced financial results for the second quarter ended June 30, 2018.
Three Months Ended
------------------
Jun 30, Mar 31, Jun 30,
In millions, except EPS 2018 2018 2017(1)
----------------------- ---- ---- ------
Net sales $661 $608 $620
Net income (loss) (2) $11 $(24) $18
Net income - non-GAAP $14 $20 $20
Diluted EPS (2) $0.23 $(0.49) $0.36
Diluted EPS - non-GAAP $0.30 $0.41 $0.40
Operating margin 2.2% 3.0% 3.7%
Operating margin - non-GAAP 2.7% 3.7% 4.3%
(1) Prior period amounts have
been adjusted to reflect the
adoption of ASC 606 on a
retrospective basis.
(2) Includes $40 million ($0.82
per share) for the three months
ended March 31, 2018 of foreign
withholding taxes and state tax
expense related to repatriation
of foreign cash to US parent
company.
On January 1, 2018, we adopted new accounting guidance, FASB ASC Topic 606 "Revenue from Contracts with Customers" (ASC 606), relating to revenue recognition. We adopted ASC 606 using the full retrospective transition method. Accordingly, we have adjusted prior period information to be consistent with ASC 606. The adoption of ASC 606 did not materially impact our overall financial position.
A reconciliation of GAAP and non-GAAP results is included below.
"On balance, we met our commitments for the second quarter. Bookings grew to $177 million and were above our target mix; revenue was up 7% year-over-year; and cash cycle days of 69 were at the lower end of our target range. During the quarter, we navigated through a number of medical transitions and made meaningful progress in addressing program ramp challenges. While our operating margin profile was lower than expected from higher computing revenue, results were in line with our expectations," said Paul Tufano, Benchmark's President and CEO.
"Over the past 90 days, we have completed our ASR program and year-to-date have repurchased $78 million worth of stock, which puts us on track to exceed our $100 million target for the year. We also refinanced and expanded our credit facilities to a combined total of $650 million, which will be accretive to earnings on an annual basis."
"Our guidance for the third quarter of 2018 reflects our continuing improvement in operational execution and revenue expansion, but is tempered by softness in the semi-cap market."
Capital Allocation Highlights
-- Accelerated Share Repurchase (ASR) Program completed on July 18 reducing
common shares outstanding by 1.7 million shares.
-- Completed expansion of credit facilities to $650 million from $430
million on July 20.
-- Extended maturity date of credit facilities to July 2023.
Cash Conversion Cycle
Jun 30, Mar 31, Jun 30,
2018 2018 2017
---- ---- ----
(as adjusted)
Accounts receivable days 61 59 57
Contract asset days 20 22 22
Inventory days 47 50 45
Accounts payable days (57) (60) (55)
Customer deposits (2) (3) (4)
--- --- ---
69 68 65
=== === ===
Second Quarter 2018 Industry Sector Update
Revenue and percentage of sales by industry sector (in millions) was as follows.
Jun 30, Mar 31, Jun 30,
Higher-Value Markets 2018 2018 2017 (as adjusted)
-------------------- ---- ---- -----------------
Industrials $118 18% $125 20% $125 20%
A&D 103 15 98 16 100 16
Medical 97 15 97 16 87 14
Test & Instrumentation 106 16 102 17 89 15
--- --- --- --- --- ---
$424 64% $422 69% $401 65%
---- --- ---- --- ---- ---
Jun 30, Mar 31, Jun 30,
Traditional Markets 2018 2018 2017 (as adjusted)
------------------- ---- ---- -----------------
Computing $160 24% $103 17% $142 23%
Telecommunications 77 12 83 14 77 12
--- --- --- --- --- ---
$237 36% $186 31% $219 35%
---- --- ---- --- ---- ---
Total $661 100% $608 100% $620 100%
Higher?value markets were up 6% year?over?year from stronger demand in Test & Instrumentation and new Medical program ramps. Traditional market revenues were up 8% year-over-year primarily from strong storage demand.
Second Quarter 2018 Bookings Update
-- New program bookings of $177 million at the midpoint of projected
annualized revenue.
-- 25 engineering awards supporting early engagement opportunities.
-- 25 manufacturing wins across all market sectors.
The Company projects that new program bookings for the second quarter will result in annualized revenue of $148 to $205 million when fully launched in the next 12-24 months, medical up to 36 months. The new program bookings align with Benchmark's strategic focus.
Third Quarter 2018 Outlook
-- Revenue between $610 - $650 million.
-- Diluted GAAP earnings per share between $0.19 - $0.26.
-- Diluted non-GAAP earnings per share between $0.28 - $0.36 (excluding any
additional impact related to U.S. Tax Reform, restructuring charges and
other costs, amortization of intangibles and the write-off of existing
deferred financing charges).
Second Quarter 2018 Results Conference Call Details
A conference call hosted by Benchmark management will be held today at 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 worldwide engineering services, integrated technology solutions and manufacturing services (both electronics manufacturing services (EMS) and precision machining services) to original equipment manufacturers in the following industries: industrial controls, aerospace and defense, telecommunications, computers and related products for business enterprises, medical devices, and test and instrumentation. Benchmark's global operations include facilities in eight countries, and its common shares trade on the New York Stock Exchange under the symbol BHE.
Forward-Looking Statements
This document contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. The words "expect," "estimate," "anticipate," "predict" and similar expressions, and the negatives thereof, often identify forward-looking statements, which are not limited to historical facts. Forward-looking statements include, among other things: guidance for 2018 results; projected annual revenues resulting from new program bookings; statements, express or implied, concerning future operating results or margins, the ability to generate sales and income or cash flow; and Benchmark's business and growth strategies and expected growth and performance. Although Benchmark believes these statements are based upon reasonable assumptions, they involve risks and uncertainties relating to operations, markets and the 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. Readers are advised to consult further disclosures on these risks and uncertainties, particularly in Item 1A, "Risk Factors", of the Company's Annual Report on Form 10-K for the year ended December 31, 2017 and in its subsequent filings with the Securities and Exchange Commission. All forward-looking statements included in this document are based upon information available to the Company as of the date of this document, and it assumes no obligation to update them.
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.
Non-GAAP Financial Measures
This document includes certain financial measures that exclude items and therefore are not in accordance with U.S. generally accepted accounting principles ("GAAP"). A detailed reconciliation between GAAP results and results excluding special items ("non-GAAP") is included in the following tables attached to this document. 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. The Company'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.
Benchmark Electronics, Inc. and Subsidiaries
Reconciliation of GAAP to Non-GAAP Financial Results
(Amounts in Thousands, Except Per Share Data)
(UNAUDITED)
Three Months Ended Six Months Ended
------------------ ----------------
Jun 30, Mar 31, Jun 30, Jun 30,
2018 2018 2017 2018 2017
---- ---- ---- ---- ----
(as adjusted) (as adjusted)
Income from operations (GAAP) $14,349 $17,967 $23,124 $32,316 $34,013
Restructuring charges and other costs 1,758 2,235 1,544 3,993 3,055
Customer insolvency (recovery) (330) (341) (710) (671) 4,410
Amortization of intangible assets 2,367 2,366 2,481 4,733 4,962
----- ----- ----- ----- -----
Non-GAAP income from operations $18,144 $22,227 $26,439 $40,371 $46,440
Net income (loss) (GAAP) $10,943 $(23,641) $18,074 $(12,698) $26,629
Restructuring charges and other costs 1,758 2,235 1,544 3,993 3,055
Customer insolvency (recovery) (330) (341) (710) (671) 4,410
Amortization of intangible assets 2,367 2,366 2,481 4,733 4,962
Income tax adjustments(1) (811) (818) (1,265) (1,629) (2,845)
Tax Cuts and Jobs Act(2) 423 40,114 - 40,537 -
Non-GAAP net income $14,350 $19,915 $20,124 $34,265 $36,211
Diluted Earnings (loss) per share:
Diluted (GAAP) $0.23 $(0.49) $0.36 $(0.26) $0.53
Diluted (Non-GAAP) $0.30 $0.41 $0.40 $0.71 $0.72
Weighted-average number of shares used in
calculating diluted earnings (loss) per share:
Diluted (GAAP)(3) 47,631 48,517 50,239 47,981 50,209
Diluted (Non-GAAP) 47,631 48,837 50,239 48,314 50,209
This amount represents the tax
impact of the non-GAAP
adjustments using the
applicable effective tax
(1) rates.
This amount represents the
impact of repatriating foreign
earnings from our foreign
jurisdictions to the U.S. For
the three months ended June 30
and March 31, 2018, this
includes estimated foreign
withholding taxes applicable
to historical earnings prior
to December 31, 2017 and for
the applicable state tax
impact of foreign cash
(2) distributions into the U.S.
Potentially diluted securities
totaling 0.3 million for the
three months ended March 31,
2018 and six months ended June
30, 2018 were not included in
the computation of GAAP
diluted loss per share because
their effect would have
(3) decreased the loss per share.
Benchmark Electronics, Inc. and Subsidiaries
Condensed Consolidated Statements of Income
(Amounts in Thousands, Except Per Share Data)
(UNAUDITED)
Three Months Ended Six Months Ended
June 30, June 30,
2018 2017 2018 2017
---- ---- ---- ----
(as adjusted) (as adjusted)
Sales $660,591 $619,611 $1,268,727 $1,177,514
Cost of sales 606,292 560,127 1,156,110 1,070,498
------- ------- --------- ---------
Gross profit 54,299 59,484 112,617 107,016
Selling, general and administrative expenses 35,825 32,335 71,575 64,986
Amortization of intangible assets 2,367 2,481 4,733 4,962
Restructuring charges and other costs 1,758 1,544 3,993 3,055
----- ----- ----- -----
Income from operations 14,349 23,124 32,316 34,013
Interest expense (2,293) (2,312) (4,721) (4,537)
Interest income 1,645 1,213 3,578 2,287
Other expense, net (355) (830) (312) (911)
---- ---- ---- ----
Income before income taxes 13,346 21,195 30,861 30,852
Income tax expense 2,403 3,121 43,559 4,223
----- ----- ------ -----
Net income (loss) $10,943 $18,074 $(12,698) $26,629
Earnings (loss) per share:
Basic $0.23 $0.36 $(0.26) $0.54
Diluted $0.23 $0.36 $(0.26) $0.53
Weighted-average number of shares used in calculating
earnings (loss) per share:
Basic 47,451 49,766 47,981 49,640
Diluted 47,631 50,239 47,981 50,209
For the three months ended June 30, 2017, the adoption of ASC 606 increased revenue by $2.7 million, operating income by $0.9 million, net income by $0.9 million and diluted earnings per share by $0.02. For the six months ended June 30, 2017, the adoption of ASC 606 decreased revenue by $5.9 million, operating income by $0.6 million, net income by $0.2 million and diluted earnings per share by $0.01.
Benchmark Electronics, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(UNAUDITED)
(in thousands)
June 30, December 31,
2018 2017
---- ----
(as adjusted)
Assets
Current assets:
Cash and cash equivalents $595,639 $742,546
Accounts receivable, net 444,953 436,560
Contract assets 148,231 146,496
Inventories 318,986 268,917
Other current assets 35,277 36,138
------ ------
Total current assets 1,543,086 1,630,657
--------- ---------
Property, plant and equipment, net 203,872 186,473
Goodwill and other, net 290,227 292,174
Total assets $2,037,185 $2,109,304
========== ==========
Liabilities and Shareholders' Equity
Current liabilities:
Current installments of long-term debt and capital
lease obligations $21,219 $18,274
Accounts payable 383,606 362,701
Accrued liabilities 96,171 97,342
------ ------
Total current liabilities 500,996 478,317
Long-term debt and capital lease obligations, less current
installments 181,777 193,406
Other long-term liabilities 110,267 98,443
Shareholders' equity 1,244,145 1,339,138
Total liabilities and shareholders' equity $2,037,185 $2,109,304
Benchmark Electronics, Inc. and Subsidiaries
Condensed Consolidated Statement of Cash Flows
(in thousands)
(UNAUDITED)
Six Months Ended
June 30,
2018 2017
---- ----
(as adjusted)
Cash flows from operating activities:
Net income (loss) $(12,698) $26,629
Depreciation and amortization 25,083 24,317
Stock-based compensation expense 5,405 4,505
Accounts receivable, net (8,980) 49,394
Contract assets (1,735) 3,466
Inventories (52,063) (39,478)
Accounts payable 23,103 16,675
Other changes in working capital and other, net 5,703 7,021
Net cash provided by (used in) operations (16,182) 92,529
------- ------
Cash flows from investing activities:
Additions to property, plant and equipment and
software (38,363) (26,379)
Other investing activities, net (2,201) 380
Net cash used in investing activities (40,564) (25,999)
------- -------
Cash flows from financing activities:
Share repurchases (65,868) (2,000)
Equity forward contract related to accelerated share
repurchase (10,000) -
Net debt activity (9,121) (6,185)
Other financing activities, net (4,530) 7,282
Net cash used in financing activities (89,519) (903)
------- ----
Effect of exchange rate changes (642) 2,251
---- -----
Net increase (decrease) in cash and cash equivalents (146,907) 67,878
Cash and cash equivalents at beginning of year 742,546 681,433
------- -------
Cash and cash equivalents at end of period $595,639 $749,311
View original content with multimedia:http://www.prnewswire.com/news-releases/benchmark-electronics-reports-second-quarter-2018-results-300685890.html
SOURCE Benchmark Electronics, Inc.
