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Benchmark Electronics, Inc.$24.90($.10)(.40%)

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 Benchmark Electronics Reports Fourth Quarter And FY 2017 Results
   Wednesday, February 07, 2018 4:01:00 PM ET

Benchmark Electronics, Inc. (BHE ) today announced financial results for the fourth quarter and year ended December 31, 2017.

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                             Three Months Ended
                             Dec 31,   Sep 30,   Dec 31,
In millions, except EPS      2017      2017      2016
Net sales                    $680      $604      $608
Net income (loss) (1)        $(76)     $18       $19
Net income - non-GAAP        $25       $20       $22
Diluted EPS (1)              ($1.54)   $0.35     $0.37
Diluted EPS - non-GAAP       $0.49     $0.39     $0.45
Operating margin             3.4%      3.4%      3.9%
Operating margin - non-GAAP  4.2%      4.1%      4.8%
                                       Twelve Months Ended
                                       Dec 31,   Dec 31,
In millions, except EPS                2017      2016
Net sales                              $2,467    $2,310
Net income (loss) (1)                  ($32)     $64
Net income - non-GAAP                  $81       $72
Diluted EPS (1)                        ($0.64)   $1.29
Diluted EPS - non-GAAP                 $1.61     $1.45
Operating margin                       3.2%      3.3%
Operating margin - non-GAAP            4.1%      4.3%
(1) Includes $98 million ($1.95 per share for the three months and $1.94 per share for the twelve months ended December 31, 2017) of tax expense related to the effects of the U.S. Tax Cuts and Jobs Act (U.S. Tax Reform).
A reconciliation of GAAP and non-GAAP results is included below.

"I am extremely pleased with both our fourth quarter performance as well as the progress we have made in 2017, posting a 7% revenue increase for the full year. We continue to expand our gross margins and have made further improvement on balance sheet management, resulting in operating cash flows for the full year of $146 million. Additionally, ROIC improved by 210 bps year-over-year to 10.5%," said Paul Tufano, Benchmark’s President and CEO.

"During 2017, we made significant progress on our key initiatives to reposition the Company," added Tufano. "As we look forward to 2018, we will continue our focus on these foundational areas: customer acquisition and experience, engineering and solutions expansion, operational excellence, and balance sheet management. In 2018, we plan to leverage and refine the base we established this past year. Our resulting progress will shape our trajectory for years to come."

Fourth Quarter 2017 Financial Highlights Cash flow from operations was $56 million for the three months ended December 31, 2017 driven by an improvement in our cash conversion cycle.

Cash Conversion Cycle

                          Dec 31,    Sep 30,    Dec 31,
                          2017       2017       2016
Accounts receivable days  58         61         65
Inventory days            58         70         62
Accounts payable days     (53)       (55)       (53)
Customer deposits         (3)        (4)        -
                          60         72         74

Fourth Quarter 2017 Industry Sector Update Revenue by industry sector (dollars in millions) was as follows.

                                   Dec 31,       Sep 30,       Dec 31,
            Higher-Value Markets   2017          2017          2016
Industrials                      $ 131  19  %  $ 124  20  %  $ 137  22  %
A&D                                98   15       96   16       102  17
Medical                            103  15       101  17       86   14
Test & Instrumentation             95   14       88   15       65   11
                                 $ 427  63  %  $ 409  68  %  $ 390  64  %
                                   Dec 31,       Sep 30,       Dec 31,
            Traditional Markets    2017          2017          2016
Computing                        $ 174  26  %  $ 124  20  %  $ 119  20  %
Telecommunications                 79   11       71   12       99   16
                                 $ 253  37  %  $ 195  32  %  $ 218  36  %
            Total                $ 680  100 %  $ 604  100 %  $ 608  100 %

Fourth quarter revenues from higher-value markets were in line with expectations, including strong demand in Test & Instrumentation from semi-capital equipment customers. Higher-value markets were up 10% year-over-year from Test & instrumentation and Medical markets.

Traditional markets revenues in Computing and Telecommunications were up sequentially from exceptionally stronger Computing demand and increased Telecommunications orders. Traditional markets were up 16% year-over-year driven by Computing.

Fourth Quarter 2017 Bookings Update

-- New program bookings of $156 million at the midpoint.

-- 13 engineering awards supporting early engagement opportunities.

-- 30 manufacturing wins across all market sectors.

The Company projects that new program bookings for the fourth quarter will result in annualized revenue of $142 to $170 million when fully launched in the next 12-24 months. The new program bookings align with Benchmark’s strategic focus.

First Quarter 2018 Outlook

-- Revenue between $585 - $605 million.

-- Diluted GAAP earnings per share between $0.27 - $0.31.

-- Diluted non-GAAP earnings per share between $0.34 - $0.38 (excluding any additional impact related to U.S. Tax Reform, restructuring charges and amortization of intangibles).

Fourth Quarter 2017 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 integrated electronics manufacturing services (EMS), engineering and design services, 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; 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, 2016 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 Appendix of 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. This document also references "free cash flow", which the Company defines as cash flow from operations less additions to property, plant and equipment and purchased software. 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                       Year Ended
                                                                                         Dec 31,       Sep 30,      Dec 31,       December 31,
                                                                                         2017          2017         2016          2017          2016
Income from operations (GAAP)                               $                            23,144   $    20,815  $    23,548   $    78,603   $    75,638
Restructuring charges and other costs                                                    3,062         2,511        2,663         8,628         12,539
Customer insolvency (recovery)                                                           (239)         (1,514)      -             2,657         -
Amortization of intangible assets                                                        2,367         2,736        2,893         10,065        11,838
Non-GAAP income from operations                             $                            28,334   $    24,548  $    29,104   $    99,953   $    100,015
Net income (loss) (GAAP)                                    $                            (76,340) $    17,512  $    18,568   $    (31,965) $    64,047
Restructuring charges and other costs                                                    3,062         2,511        2,663         8,628         12,539
Customer insolvency (recovery)                                                           (239)         (1,514)      -             2,657         -
Amortization of intangible assets                                                        2,367         2,736        2,893         10,065        11,838
Income tax adjustments(1)                                                                (1,793)       (1,674)      (1,781)       (6,312)       (7,695)
Tax Cuts and Jobs Act(2)                                                                 97,633        -            -             97,633        -
Discrete tax benefits                                                                    -             -            -             -             (8,270)
Non-GAAP net income                                         $                            24,690   $    19,571  $    22,343   $    80,706   $    72,459
Diluted Earnings (loss) per share:
                              Diluted (GAAP)                $                            (1.54)   $    0.35    $    0.37     $    (0.64)   $    1.29
                              Diluted (Non-GAAP)            $                            0.49     $    0.39    $    0.45     $    1.61     $    1.45
Weighted-average number of shares used in calculating diluted earnings (loss) per share:
                              Diluted (GAAP)(3)                                          49,576        50,330       49,544        49,680        49,825
                              Diluted (Non-GAAP)                                         49,998        50,330       49,544        50,250        49,825
(1) This amount represents the tax impact of the non-GAAP adjustments using the applicable effective tax rates.
(2) This amount represents the estimated impact of the U.S. Tax Reform and includes the impact of a one-time mandatory tax on the deemed repatriation of undistributed foreign earnings and the re-measurement of U.S. deferred tax assets and liabilities for the decrease in the U.S. federal tax rate from 35% to 21%.
(3) Potentially diluted securities totaling 0.4 million and 0.6 million for the three and twelve months ended December 31, 2017, respectively, were not included in the computation of GAAP diluted loss per share because their effect would have 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       Year Ended
                                                                                 December 31,             December 31,
                                                                                 2017       2016          2017           2016
Sales                                                 $                          679,856  $ 607,507  $    2,466,811 $    2,310,415
Cost of sales                                                                    617,961    550,037       2,239,114      2,096,952
                           Gross profit                                          61,895     57,470        227,697        213,463
Selling, general and administrative expenses                                     33,322     28,366        130,401        113,448
Amortization of intangible assets                                                2,367      2,893         10,065         11,838
Restructuring charges and other costs                                            3,062      2,663         8,628          12,539
                           Income from operations                                23,144     23,548        78,603         75,638
Interest expense                                                                 (2,544)    (2,369)       (9,405)        (9,304)
Interest income                                                                  1,749      966           5,370          2,136
Other income (expense), net                                                      (481)      253           (1,786)        (282)
                           Income before income taxes                            21,868     22,398        72,782         68,188
Income tax expense                                                               98,208     3,830         104,747        4,141
                           Net income (loss)          $                          (76,340) $ 18,568   $    (31,965)  $    64,047
Earnings (loss) per share:
                           Basic                      $                          (1.54)   $ 0.38     $    (0.64)    $    1.30
                           Diluted                    $                          (1.54)   $ 0.37     $    (0.64)    $    1.29
Weighted-average number of shares used in calculating earnings (loss) per share:
                           Basic                                                 49,576     49,063        49,680         49,298
                           Diluted                                               49,576     49,544        49,680         49,825
Benchmark Electronics, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(UNAUDITED)
(in thousands)
                                                                                                    December 31,      December 31,
                                                                                                    2017              2016
Assets
        Current assets:
                          Cash and cash equivalents                                            $    742,546      $    681,433
                          Accounts receivable, net                                                  436,560           440,692
                          Inventories                                                               397,181           381,334
                          Other current assets                                                      42,383            28,203
                                                  Total current assets                              1,618,670         1,531,662
        Property, plant and equipment, net                                                          186,473           166,148
        Goodwill and other, net                                                                     292,174           300,858
                                                  Total assets                                 $    2,097,317    $    1,998,668
Liabilities and Shareholders’ Equity
        Current liabilities:
                          Current installments of long-term debt and capital lease obligations $    18,274       $    12,396
                          Accounts payable                                                          362,701           326,249
                          Accrued liabilities                                                       97,341            73,736
                                                  Total current liabilities                         478,316           412,381
        Long-term debt and capital lease obligations, less current installments                     193,406           211,252
        Other long-term liabilities                                                                 96,776            9,570
        Shareholders’ equity                                                                        1,328,819         1,365,465
                                                  Total liabilities and shareholders’ equity   $    2,097,317    $    1,998,668
Benchmark Electronics, Inc. and Subsidiaries
Condensed Consolidated Statement of Cash Flows
(in thousands)
(UNAUDITED)
                                                                   Year Ended
                                                                   December 31,
                                                                   2017       2016
Cash flows from operating activities:
         Net income (loss)                                       $ (31,965) $ 64,047
         Depreciation and amortization                             48,672     55,139
         Stock-based compensation expense                          7,815      5,322
         Accounts receivable, net                                  6,354      37,573
         Inventories                                               (14,015)   27,749
         Accounts payable                                          29,542     76,039
         Other changes in working capital and other                99,439     7,219
                       Net cash provided by operations             145,842    273,088
Cash flows from investing activities:
         Additions to property, plant and equipment and software   (54,506)   (32,334)
         Business acquisition, net of cash acquired                -          10,750
         Other investing activities, net                           (1,615)    339
                       Net cash used in investing activities       (56,121)   (21,245)
Cash flows from financing activities:
         Share repurchases                                         (29,348)   (41,929)
         Net debt activity                                         (12,396)   (12,301)
         Other financing activities, net                           10,392     18,920
                       Net cash used in financing activities       (31,352)   (35,310)
Effect of exchange rate changes                                    2,744      (1,095)
Net increase in cash and cash equivalents                          61,113     215,438
         Cash and cash equivalents at beginning of year            681,433    465,995
         Cash and cash equivalents at end of period              $ 742,546  $ 681,433

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SOURCE Benchmark Electronics, Inc.

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