BHE
$24.77
Benchmark Electronics
($.30)
(1.20%)
Earnings Details
2nd Quarter June 2016
Thursday, July 21, 2016 7:00:00 AM
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Summary

Benchmark Electronics Guides Revenue Below Estimates

Benchmark Electronics (BHE) reported 2nd Quarter June 2016 earnings of $0.31 per share on revenue of $579.3 million. The consensus earnings estimate was $0.33 per share on revenue of $582.9 million. Revenue fell 12.8% compared to the same quarter a year ago.

The company said it expects third quarter earnings of $0.33 to $0.38 per share on revenue of $570.0 million to $600.0 million. The current consensus earnings estimate is $0.36 per share on revenue of $600.7 million for the quarter ending September 30, 2016.

Benchmark Electronics Inc is engaged in the business of manufacturing electronics and it provides its services to original equipment manufacturers of computers and related products.

Results
Reported Earnings
$0.31
Earnings Whisper
-
Consensus Estimate
$0.33
Reported Revenue
$579.3 Mil
Revenue Estimate
$582.9 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Benchmark Electronics Reports Second Quarter Results

Benchmark Electronics, Inc. (BHE) today announced financial results for the second quarter ended June 30, 2016.

Three Months Ended
Jun 30,
Mar 31,
Jun 30,
In millions, except EPS
2016
2016
2015
Net sales
$579
$549
$664
Net income
$13
$11
$21
Net income - non-GAAP(1)
$15
$13
$22
Diluted EPS(2)
$0.26
$0.22
$0.40
Diluted EPS - non-GAAP(1) (2)
$0.31
$0.26
$0.42
Operating margin
3.1%
3.0%
3.9%
Operating margin - non-GAAP
3.7%
3.5%
4.2%
(1) A reconciliation of GAAP and non-GAAP results is included below.
(2) Includes stock-based compensation expense of $0.02, $0.03 and $0.02 per diluted share in Q2 2016, Q1 2016 and Q2 2015, respectively.

"Second quarter revenues were $579 million, with non-GAAP EPS of $0.31," said Gayla Delly, Benchmark’s President and CEO. "Our year-over-year revenue from higher-value markets increased from 53% to 63% for the first half of the year driven by the successful transformation of our customer portfolio and the Secure acquisition."

"We are encouraged by the progress of our initiatives to improve our cash conversion cycle from 99 to 83 days. We have transitioned a number of new programs to more efficient supply chain solutions over the last 18 months, primarily in our international locations and are on track to achieve 75 days as we exit the fourth quarter."

Ms. Delly concluded, "Our balance sheet remains strong, supporting continued investment in our business, strategic growth initiatives and our share repurchase program. Our results for the quarter show continued progress on our strategy to drive shareholder value, including diversifying our portfolio, executing on our lean and operational initiatives and managing our working capital. While our third quarter outlook reflects caution from customer forecasts, we remain committed to delivering higher returns on invested capital through better operating margins and working capital management."

Second Quarter 2016 Financial Highlights

-- Operating margin was 3.1% (non-GAAP 3.7%).

Cash flows from operating activities were $81 million during the quarter and $158 million through the first half of the year.

Common stock repurchases totaled $15 million or 750,000 shares. The amount remaining under our current share repurchase plan is $105 million.

Cash conversion cycle improved 16 days from 99 at March 31, 2016 to 83 days at June 30, 2016.

-- Cash was $573 million at June 30, of which $535 million was held outside the U.S.

"We continue to deliver strong cash flows from operations, which in the second quarter totaled $81 million and free cash flow of $73 million," said Don Adam, Benchmark’s CFO. "During the second quarter we repurchased $15 million of common stock, which represents the 36th consecutive quarter of share buybacks."

Cash Conversion Cycle

Jun 30,
Mar 31,
Jun 30,
2016
2016
2015
Accounts receivable days
66
68
68
Inventory days
64
70
66
Accounts payable days
(47)
(39)
(43)
83
99
91

Second Quarter 2016 Industry Sector Update

Revenue by industry sector (dollars in millions) was as follows.

Jun 30,
Mar 31,
Jun 30,
Higher-Value Markets
2016
2016
2015
Industrials
$ 214
37
%
$ 213
39
%
$ 201
30
%
Medical
92
16
83
15
90
14
Test & Instrumentation
60
10
53
10
59
9
$ 366
63
%
$ 349
64
%
$ 350
53
%
Jun 30,
Mar 31,
Jun 30,
Traditional Markets
2016
2016
2015
Computing
$ 120
21
%
$ 98
18
%
$ 137
20
%
Telecommunications
93
16
102
18
177
27
$ 213
37
%
$ 200
36
%
$ 314
47
%
Total
$ 579
100 %
$ 549
100 %
$ 664
100 %

Revenues across all sectors improved quarter-over-quarter, other than Telecommunications, which declined as projected. Among the higher-value markets, Medical and Test & Instrumentation performed better than expected, while product qualification delays reduced revenues to Industrials primarily in the aerospace and defense markets. Computing revenues were higher than anticipated with strong late-quarter demand.

Second Quarter 2016 Bookings Update

-- New program bookings were $105 to $130 million.

-- 12 engineering awards supporting early engagement opportunities.

-- 33 manufacturing wins across all market sectors.

The Company projects new program bookings for the second quarter will result in annualized revenue of $105 to $130 million when fully launched in the next 12-18 months. The new program bookings align with Benchmark’s strategic focus in higher-value markets. For the last 12 months, 77% of new bookings came from these targeted growth markets.

Third Quarter 2016 Outlook

-- Revenue between $570-$600 million.

-- Diluted GAAP earnings per share between $0.28-$0.33.

Diluted non-GAAP earnings per share between $0.33-$0.38 (excluding restructuring charges and amortization of intangibles expected to approximate $0.05 per share). The income tax impact of the non-GAAP adjustments using the applicable effective tax rates is $0.02 per share.

Beginning with the third quarter, our non-GAAP EPS outlook excludes the impact of the amortization of intangibles of approximately $3 million or $0.04 per share net of tax.

Second Quarter 2016 Results Conference Call Details

A conference call hosted by Benchmark management will be held today at 10:00 am CT (11:00 am ET) 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 integrated manufacturing, design and engineering services to original equipment manufacturers of industrial equipment (including equipment for the aerospace and defense industries), telecommunication equipment, computers and related products for business enterprises, medical devices, and test and instrumentation products. Benchmark’s global operations include facilities in seven countries, and its common shares trade on the New York Stock Exchange under the symbol BHE.

Non-GAAP Financial Measures

This press release includes financial measures for earnings and earnings per share that exclude certain items and therefore do not follow U.S. generally accepted accounting principles (GAAP). A detailed reconciliation between the GAAP results and results excluding special items (non-GAAP) is included at the end of this press release. 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 of net income and earnings per share that exclude certain items in order to better assess operating performance and help investors compare results with our previous guidance. Benchmark’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.

The press release also references "free cash flow", which the Company defines as cash flow from operations less additions to property, plant and equipment and purchased software, which aggregated $8 million in the second quarter.

Forward-Looking Statements

This press release contains certain forward-looking statements within the scope of the Securities Act of 1933 and the Securities Exchange Act of 1934. The words "expect," "estimate," "plan," "anticipate," "project," "predict," "goals" and similar terms, and the negatives thereof, often identify forward-looking statements, which are not limited to historical facts. The Company’s forward-looking statements include, among other things, the statement "we are on track to achieve 75 days as we exit the fourth quarter"; projections relating to capital expenditures, strategic growth initiatives, share repurchases, improving shareholder value, portfolio diversification, cost and operating efficiencies, working capital improvements and increasing operating margins; and third quarter 2016 revenues and diluted earnings per share. Although Benchmark believes these statements are based upon reasonable assumptions, they involve risks and uncertainties relating to our operations, markets and 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.

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. Readers are advised to consult further disclosures on related subjects, particularly in Item 1A, "Risk Factors" of the Company’s Annual Report on Form 10-K for the year ended December 31, 2015, in its other filings with the Securities and Exchange Commission and in its press releases.

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,
June 30,
2016
2016
2015
2016
2015
Income from operations (GAAP)
$
17,740
$
16,268
$
26,208
$
34,008
$ 44,916
Restructuring charges and other costs
3,602
2,789
1,588
6,391
6,457
Non-GAAP income from operations
$
21,342
$
19,057
$
27,796
$
40,399
$ 51,373
Net income (GAAP)
$
12,685
$
11,052
$
21,210
$
23,737
$ 35,415
Restructuring charges and other costs
3,602
2,789
1,588
6,391
6,457
Income tax adjustments(1)
(1,078)
(691)
(816)
(1,769)
(2,089)
Non-GAAP net income
$
15,209
$
13,150
$
21,982
$
28,359
$ 39,783
Earnings per share: (GAAP)
Basic
$
0.26
$
0.22
$
0.41
$
0.48
$ 0.68
Diluted
$
0.26
$
0.22
$
0.40
$
0.47
$ 0.67
Earnings per share: (Non-GAAP)
Basic
$
0.31
$
0.26
$
0.42
$
0.57
$ 0.76
Diluted
$
0.31
$
0.26
$
0.42
$
0.57
$ 0.75
Weighted-average number of shares used in calculating earnings per share:
Basic
49,323
49,848
52,180
49,586
52,321
Diluted
49,667
50,287
52,671
50,042
52,884
(1) This amount represents the tax impact of the non-GAAP adjustments using the applicable effective tax rates.
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,
2016
2015
2016
2015
Sales
$
579,342 $ 664,038
$
1,128,567 $ 1,284,963
Cost of sales
526,658
608,322
1,025,573
1,177,468
Gross profit
52,684
55,716
102,994
107,495
Selling, general and administrative expenses
31,342
27,920
62,595
56,122
Restructuring charges and other costs
3,602
1,588
6,391
6,457
Income from operations
17,740
26,208
34,008
44,916
Interest expense
(2,299)
(497)
(4,633)
(932)
Interest income
329
293
593
725
Other income (expense), net
71
596
(152)
(461)
Income before income taxes
15,841
26,600
29,816
44,248
Income tax expense
3,156
5,390
6,079
8,833
Net income
$
12,685
$ 21,210
$
23,737
$ 35,415
Earnings per share:
Basic
$
0.26
$ 0.41
$
0.48
$ 0.68
Diluted
$
0.26
$ 0.40
$
0.47
$ 0.67
Weighted-average number of shares used in calculating earnings per share:
Basic
49,323
52,180
49,586
52,321
Diluted
49,667
52,671
50,042
52,884
Supplementary income statement table
Amortization expense was as follows:
Amortization of intangibles $
2,972
$ 1,111
$
5,775
$ 1,936
Other amortization
482
386
965
766
Total
$
3,454
$ 1,497
$
6,740
$ 2,702
Benchmark Electronics, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands)
June 30,
December 31,
2016
2015
(unaudited)
Assets
Current assets:
Cash and cash equivalents
$
573,248
$
465,995
Accounts receivable, net
421,939
479,140
Inventories
375,085
411,986
Other current assets
37,826
31,507
Total current assets
1,408,098
1,388,628
Property, plant and equipment, net
170,602
178,170
Goodwill and other, net
321,449
327,080
Total assets
$
1,900,149
$
1,893,878
Liabilities and Shareholders’ Equity
Current liabilities:
Current installments of long-term debt and capital lease obligations $
12,336
$
12,284
Accounts payable
272,970
251,163
Accrued liabilities
62,036
69,647
Total current liabilities
347,342
333,094
Long-term debt and capital lease obligations, less current installments
217,086
222,909
Other long-term liabilities
17,604
15,971
Shareholders’ equity
1,318,117
1,321,904
Total liabilities and shareholders’ equity
$
1,900,149
$
1,893,878
Benchmark Electronics, Inc. and Subsidiaries
Condensed Consolidated Statement of Cash Flows
(in thousands)
(UNAUDITED)
Six Months Ended
June 30,
2016
2015
Cash flows from operating activities:
Net income
$ 23,737
$ 35,415
Depreciation and amortization
27,900
24,480
Stock-based compensation expense
3,981
4,020
Accounts receivable, net
57,044
18,606
Inventories
37,034
(44,446)
Accounts payable
23,084
3,441
Other changes in working capital and other
(15,182)
(403)
Net cash provided by operations
157,598
41,113
Cash flows from investing activities:
Additions to property, plant and equipment and software
(16,203)
(25,006)
Other investing activities, net
305
489
Net cash used in investing activities
(15,898)
(24,517)
Cash flows from financing activities:
Share repurchases
(29,315)
(34,558)
Other financing activities, net
(5,204)
1,484
Net cash used in financing activities
(34,519)
(33,074)
Effect of exchange rate changes
72
(1,583)
Net increase (decrease) in cash and cash equivalents
107,253
(18,061)
Cash and cash equivalents at beginning of year
465,995
427,376
Cash and cash equivalents at end of period
$ 573,248
$ 409,315

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/benchmark-electronics-reports-second-quarter-results-300301872.html

SOURCE Benchmark Electronics, Inc.

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