Benchmark Electronics Reports Third Quarter 2019 Results
TEMPE, Ariz., Oct. 24, 2019 /PRNewswire/ -- Benchmark Electronics, Inc. (NYSE: BHE) today announced financial results for the third quarter ended September 30, 2019.
Three Months Ended
Sep 30,
Jun 30,
Sep 30,
In millions, except EPS 2019 2019 2018
---
Sales $555 $602 $641
Net income $7 $9 $8
Net income - non-GAAP(1) $14 $14 $15
Diluted EPS $0.19 $0.24 $0.17
Diluted EPS - non-GAAP(1) $0.36 $0.36 $0.33
Operating margin 1.8% 2.0% 1.7%
Operating margin - non-GAAP(1) 3.2% 3.1% 2.9%
(1) A reconciliation of GAAP and non-
GAAP results is included below.
Jeff Benck, Benchmark's President and CEO stated, "We are pleased with the solid execution of our team in the third quarter. Revenues were up year-over-year in our Medical and Aerospace & Defense (A&D) markets with non-GAAP gross margins improving 60 bps sequentially to 9.5% and operating margins up 10 bps sequentially to 3.2% respectively."
"We are laying the groundwork for an even stronger Benchmark with the progress our engaged team has made on our strategic priorities which are focused on: improving our go-to-market approach, driving continued operational efficiencies, centralizing our G&A organization, and accelerating our solutions in the market."
Cash Conversion Cycle
Sep 30,
Jun 30,
Sep 30,
2019 2019 2018
Accounts receivable days 56 54 64
Contract asset days 26 23 22
Inventory days 57 52 49
Accounts payable days (53) (61) (57)
Customer deposits (7) (3) (4)
Cash Conversion Cycle days 79 65 74
Third Quarter 2019 Industry Sector Update
Revenue and percentage of sales by industry sector (in millions) was as follows.
Sep 30, Jun 30, Sep 30,
Higher-Value Markets 2019 2019 2018
---
Industrials $
115 21 $
115 19 $
128 20
% % %
A&D 115 21 107 18 105 16
Medical 128 23 114 19 96 15
Semi-Cap 68 12 63 10 77 12
$
426 77 $
399 66 $
406 63
% % %
Sep 30, Jun 30, Sep 30,
Traditional Markets 2019 2019 2018
---
Computing $
59 11 $
133 22 $
146 23
% % %
Telecommunications 70 12 70 12 89 14
$
129 23 $
203 34 $
235 37
% % %
Total $
555 100 $
602 100 $
641 100
% % %
Overall, higher?value markets were up 5% year?over?year due to growth in Medical and A&D, despite softer demand in Semi-Cap. Traditional market revenues were down 45% year-over-year primarily from legacy Computing revenues.
Fourth Quarter 2019 Outlook
-- Revenue between $520 - $570 million
-- Diluted GAAP earnings per share between $0.21 - $0.29
-- Diluted non-GAAP earnings per share between $0.34 - $0.42 (excluding
restructuring charges and other costs and amortization of intangibles)
Restructuring charges are expected to range between $3.5 million to $4.5 million in the fourth quarter.
Third Quarter 2019 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 comprehensive solutions across the entire product life cycle; leading through its innovative technology and engineering design services; leveraging its optimized global supply chain; and delivering world-class manufacturing services in the following industries: aerospace and defense (A&D), medical, complex industrials, semiconductor capital equipment (Semi-Cap), next-generation telecommunications and advanced computing. Benchmark's global operations network includes facilities in seven countries and 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 2019 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, 2018 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.
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 provide additional insight into operating results and underlying trends 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 Nine Months Ended
Sep 30,
Jun 30,
Sep 30,
Sep 30,
2019 2019 2018 2019 2018
Income from operations (GAAP) $
9,798 $
11,941 $
10,957 $
37,826 $
43,273
Restructuring charges and other costs 5,843 3,414 1,845 10,833 5,838
Settlement 773 773
Customer insolvency (recovery) (16) 3,295 (2,758) 2,624
Amortization of intangible assets 2,367 2,361 2,368 7,095 7,101
Non-GAAP income from operations $
18,008 $
18,473 $
18,465 $
53,769 $
58,836
Gross Profit (GAAP) $
52,883 $
52,998 $
52,777 $
159,681 $
165,394
Settlement 773 773
Customer insolvency (recovery) (16) 1,581 (1,040) 910
Non-GAAP gross profit $
52,883 $
53,755 $
54,358 $
159,414 $
166,304
Net income (loss) (GAAP) $
7,136 $
9,447 $
7,799 $
30,356 $
(4,899)
Restructuring charges and other costs 6,168 3,414 1,845 11,158 5,838
Customer insolvency (recovery) (16) 3,295 (2,758) 2,624
Amortization of intangible assets 2,367 2,361 2,368 7,095 7,101
Settlements (83) (330) (2,248)
Refinancing of credit facilities 1,982 1,982
Income tax adjustments(1) (1,879) (1,039) (1,914) (2,711) (3,542)
Tax Cuts and Jobs Act(2) 40,537
Non-GAAP net income $
13,709 $
13,837 $
15,375 $
40,892 $
49,641
Diluted earnings (loss) per share:
Diluted (GAAP) $
0.19 $
0.24 $
0.17 $
0.77 $
(0.10)
Diluted (Non-GAAP) $
0.36 $
0.36 $
0.33 $
1.04 $
1.04
Weighted-average number of shares used in
calculating diluted earnings
(loss) per share:
Diluted (GAAP) 37,645 38,583 46,455 39,184 47,415
Diluted (Non-GAAP) 37,645 38,583 46,455 39,184 47,754
This amount represents the tax
impact of the non-GAAP
adjustments using the
applicable effective tax
(1) rates.
(2) This amount represents the
impact of repatriating foreign
earnings from our foreign
jurisdictions to the U.S.,
offset by available U.S.
foreign tax credits, and a
non-recurring tax true-up
benefit as a result of
finalizing our federal and
state income tax accounting
for the U.S. transitions toll
tax from the 2017 Tax Cuts and
Jobs Act.
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,
2019 2018 2019 2018
Sales $
555,229 $
640,688 $
1,759,651 $
1,909,415
Cost of sales 502,346 587,911 1,599,970 1,744,021
Gross profit 52,883 52,777 159,681 165,394
Selling, general and administrative expenses 34,875 37,607 103,927 109,182
Amortization of intangible assets 2,367 2,368 7,095 7,101
Restructuring charges and other costs 5,843 1,845 10,833 5,838
Income from operations 9,798 10,957 37,826 43,273
Interest expense (1,687) (3,822) (5,014) (8,543)
Interest income 734 1,619 3,084 5,197
Other income (expense), net (136) 1,139 2,276 827
Income before income taxes 8,709 9,893 38,172 40,754
Income tax expense 1,573 2,094 7,816 45,653
Net income (loss) $
7,136 $
7,799 $
30,356 $
(4,899)
Earnings (loss) per share:
Basic $
0.19 $
0.17 $
0.78 $
(0.10)
Diluted $
0.19 $
0.17 $
0.77 $
(0.10)
Weighted-average number of shares used in calculating
earnings (loss)
per share:
Basic 37,419 46,301 38,813 47,415
Diluted 37,645 46,455 39,184 47,415
Benchmark Electronics, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(UNAUDITED)
(in thousands)
September 30,
December 31,
2019 2018
Assets
Current assets:
Cash and cash equivalents $
348,042 $
458,102
Accounts receivable, net 348,099 468,161
Contract assets 161,068 140,082
Inventories 315,835 309,975
Other current assets 25,071 27,230
Total current assets 1,198,115 1,403,550
Property, plant and equipment, net 199,256 210,954
Operating lease right-of-use assets 79,854
Goodwill and other, net 281,521 285,279
Total assets $
1,758,746 $
1,899,783
Liabilities and Shareholders' Equity
Current liabilities:
Current installments of long-term debt and finance lease
obligations $
8,784 $
6,793
Accounts payable 295,693 422,053
Accrued liabilities 136,760 108,313
Total current liabilities 441,237 537,159
Long-term debt and finance lease obligations, less current
installments 141,017 147,277
Operating lease liabilities 70,167
Other long-term liabilities 77,553 83,122
Shareholders' equity 1,028,772 1,132,225
Total liabilities and shareholders' equity $
1,758,746 $
1,899,783
Benchmark Electronics, Inc. and Subsidiaries
Condensed Consolidated Statement of Cash Flows
(in thousands)
(UNAUDITED)
Nine Months Ended
September 30,
2019 2018
Cash flows from operating activities:
Net income (loss) $
30,356 $
(4,899)
Depreciation and amortization 36,389 39,643
Stock-based compensation expense 8,461 8,229
Accounts receivable, net 121,171 (20,019)
Contract assets (20,986) (9,402)
Inventories (6,557) (54,342)
Accounts payable (122,156) 12,620
Other changes in working capital and other, net 10,636 10,877
Net cash provided by (used in)
operations 57,314 (17,293)
Cash flows from investing activities:
Additions to property, plant and equipment and
software (25,942) (52,933)
Other investing activities, net 252 (2,102)
Net cash used in investing activities (25,690) (55,035)
Cash flows from financing activities:
Share repurchases (118,350) (122,053)
Net debt activity (4,614) (57,758)
Other financing activities, net (17,699) (13,897)
Net cash used in financing activities (140,663) (193,708)
Effect of exchange rate changes (1,021) (797)
Net decrease in cash and cash equivalents (110,060) (266,833)
Cash and cash equivalents at beginning of year 458,102 742,546
Cash and cash equivalents at end of period $
348,042 $
475,713
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SOURCE Benchmark Electronics, Inc.
