BHE
$29.75
Benchmark Electronics
$.50
1.71%
Earnings Details
3rd Quarter September 2017
Wednesday, October 18, 2017 4:02:00 PM
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Summary

Benchmark Electronics Guides Below Estimates

Benchmark Electronics (BHE) reported 3rd Quarter September 2017 earnings of $0.39 per share on revenue of $603.6 million. The consensus earnings estimate was $0.34 per share. Revenue grew 5.1% on a year-over-year basis.

The company said it expects fourth quarter earnings of $0.34 to $0.38 per share on revenue of $590.0 million to $610.0 million. The current consensus earnings estimate is $0.42 per share on revenue of $623.3 million for the quarter ending December 31, 2017.

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
$0.39
Earnings Whisper
-
Consensus Estimate
$0.34
Reported Revenue
$603.6 Mil
Revenue Estimate
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Benchmark Electronics Reports Third Quarter 2017 Results

Benchmark Electronics, Inc. (BHE) today announced financial results for the third quarter ended September 30, 2017.

Three Months Ended
Sep 30,
Jun 30,
Sep 30,
In millions, except EPS
2017
2017
2016
Net sales
$604
$617
$574
Net income
$18
$17
$22
Net income - non-GAAP
$20
$19
$18
Diluted EPS
$0.35
$0.34
$0.44
Diluted EPS - non-GAAP
$0.39
$0.38
$0.36
Operating margin
3.4%
3.6%
3.1%
Operating margin - non-GAAP
4.1%
4.1%
4.3%
A reconciliation of GAAP and non-GAAP results is included below.

"I am pleased by the Company’s performance in the third quarter, meeting or exceeding each of our commitments. Revenues exceeded our guidance and marked the third consecutive quarter that we experienced year-on-year revenue growth. Non-GAAP EPS of $0.39 exceeded the high-end of our guidance by $0.03; cash cycle days ended at 72, within our target range, and an eight-day improvement from the year ago period; and we achieved 9.9% ROIC, a 40 bps quarter-over-quarter improvement," said Paul Tufano, Benchmark’s President and CEO.

"As we work to reposition the Company to achieve our business model objectives, we remain focused on the key initiatives critical to our success, namely the optimization of our global network; the implementation of our market-sector sales organization; and the expansion of our engineering and solutions capabilities," added Tufano. "The transition of our headquarters to the Phoenix area is substantially complete, and we are making progress on our operational excellence and customer care initiatives. Our market-sector sales focus and incremental go-to-market investments are beginning to yield results as reflected in our third quarter bookings, which were above the $150 million level for the first time in 12 quarters."

"We continue to emphasize our engineering-led customer engagements including the recent announcement that Benchmark was named Qualcomm Life’s partner to commercialize their new product line of interconnected biometric sensors and to be the FDA manufacturer of record," said Tufano. "We will work with Qualcomm to have the device ready for FDA submission in 2018 with a goal of commercial availability to customers next year. This engagement is a pivotal milestone, which reinforces our engineering-led solutions business model and supports our ongoing IoT investment strategy."

"Today, we also announce with mixed emotions that Don Adam, Chief Financial Officer, will be retiring from the Company. Don has determined that a permanent relocation to Phoenix would not be in the best interest of his family and will be departing by the end of the year. A search for his successor is currently underway," said Tufano. "Don has been a devoted Benchmark employee for the past 15 years and has been invaluable to me this past year as we have formulated plans to transform Benchmark. We are indebted to Don for his service and wish him all the best in his future endeavors."

Third Quarter 2017 Financial Highlights

-- Operating margin was 3.4% (non-GAAP 4.1%).

Cash conversion cycle improved 8 days from 80 at September 30, 2016 to 72 days at September 30, 2017.

-- Cash was $730 million at September 30, of which $75 million was available in the U.S.

Cash Conversion Cycle

Sep 30,
Jun 30,
Sep 30,
2017
2017
2016
Accounts receivable days
61
57
65
Inventory days
70
67
68
Accounts payable days
(55)
(55)
(53)
Customer deposits
(4)
(4)
-
72
65
80

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

Sep 30,
Jun 30,
Sep 30,
Higher-Value Markets
2017
2017
2016
Industrials
$ 124
20
%
$ 124
20
%
$ 141
25
%
A&D
96
16
100
16
82
14
Medical
101
17
86
14
86
15
Test & Instrumentation
88
15
89
15
66
11
$ 409
68
%
$ 399
65
%
$ 375
65
%
Sep 30,
Jun 30,
Sep 30,
Traditional Markets
2017
2017
2016
Computing
$ 124
20
%
$ 142
23
%
$ 107
19
%
Telecommunications
71
12
76
12
92
16
$ 195
32
%
$ 218
35
%
$ 199
35
%
Total
$ 604
100 %
$ 617
100 %
$ 574
100 %

Overall revenue increased 5% year-over-year driven by continued strong demand in Test & Instrumentation serving the semi-capital equipment market, Computing growth from existing and new customers, Medical growth from new programs and Aerospace and Defense (A&D) growth from defense programs. Industrials and Telecommunications growth remained muted year-over-year from softness across several of our top customers.

Third Quarter 2017 Bookings Update

-- New program bookings of $138 to $165 million.

-- 14 engineering awards supporting early engagement opportunities.

-- 31 manufacturing wins across all market sectors.

The Company projects that new program bookings for the third quarter will result in annualized revenue of $138 to $165 million when fully launched in the next 12-18 months. The new program bookings align with Benchmark’s strategic focus on higher-value markets.

Fourth Quarter 2017 Outlook

-- Revenue between $590 - $610 million.

-- Diluted GAAP earnings per share between $0.29 - $0.33.

Diluted non-GAAP earnings per share between $0.34 - $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.

Third 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.

Non-GAAP Financial Measures This press release includes financial measures 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 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.

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 "project," "expect," "estimate," "plan," "anticipate," "predict," "goals," "targeting" 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, projections relating to the future value of bookings and fourth quarter 2017 revenues and diluted earnings per share. 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.

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, 2016, 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
Nine Months Ended
Sep 30,
Jun 30,
Sep 30,
September 30,
2017
2017
2016
2017
2016
Income from operations (GAAP)
$
20,815
$
22,227
$
18,082
$
55,459
$ 52,090
Restructuring charges and other costs
2,511
1,544
3,485
5,566
9,876
Customer insolvency (recovery)
(1,514)
(710)
-
2,896
-
Amortization of intangible assets
2,736
2,481
3,170
7,698
8,945
Non-GAAP income from operations
$
24,548
$
25,542
$
24,737
$
71,619
$ 70,911
Net income (GAAP)
$
17,512
$
17,176
$
21,742
$
44,375
$ 45,479
Restructuring charges and other costs
2,511
1,544
3,485
5,566
9,876
Customer insolvency (recovery)
(1,514)
(710)
-
2,896
-
Amortization of intangible assets
2,736
2,481
3,170
7,698
8,945
Income tax adjustments(1)
(1,674)
(1,265)
(2,207)
(4,519)
(5,935)
Discrete tax benefits
-
-
(8,270)
-
(8,270)
Non-GAAP net income
$
19,571
$
19,226
$
17,920
$
56,016
$ 50,095
Earnings per share: (GAAP)
Basic
$
0.35
$
0.35
$
0.44
$
0.89
$ 0.92
Diluted
$
0.35
$
0.34
$
0.44
$
0.88
$ 0.91
Earnings per share: (Non-GAAP)
Basic
$
0.39
$
0.39
$
0.37
$
1.13
$ 1.01
Diluted
$
0.39
$
0.38
$
0.36
$
1.11
$ 1.00
Weighted-average number of shares used in calculating earnings per share:
Basic
49,865
49,766
48,965
49,716
49,377
Diluted
50,330
50,239
49,414
50,292
49,878
(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
Nine Months Ended
September 30,
September 30,
2017
2016
2017
2016
Sales
$
603,550 $ 574,341
$
1,786,955 $ 1,702,908
Cost of sales
545,395
521,519
1,621,153
1,546,915
Gross profit
58,155
52,822
165,802
155,993
Selling, general and administrative expenses
32,093
28,085
97,079
85,082
Amortization of intangible assets
2,736
3,170
7,698
8,945
Restructuring charges and other costs
2,511
3,485
5,566
9,876
Income from operations
20,815
18,082
55,459
52,090
Interest expense
(2,324)
(2,302)
(6,861)
(6,935)
Interest income
1,334
577
3,621
1,170
Other expense, net
(394)
(383)
(1,305)
(535)
Income before income taxes
19,431
15,974
50,914
45,790
Income tax expense (benefit)
1,919
(5,768)
6,539
311
Net income
$
17,512
$ 21,742
$
44,375
$ 45,479
Earnings per share:
Basic
$
0.35
$ 0.44
$
0.89
$ 0.92
Diluted
$
0.35
$ 0.44
$
0.88
$ 0.91
Weighted-average number of shares used in calculating
earnings per share:
Basic
49,865
48,965
49,716
49,377
Diluted
50,330
49,414
50,292
49,878
Benchmark Electronics, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(UNAUDITED)
(in thousands)
September 30,
December 31,
2017
2016
Assets
Current assets:
Cash and cash equivalents
$
730,146
$
681,433
Accounts receivable, net
411,550
440,692
Inventories
421,858
381,334
Other current assets
42,349
28,203
Total current assets
1,605,903
1,531,662
Property, plant and equipment, net
178,122
166,148
Goodwill and other, net
292,681
300,858
Total assets
$
2,076,706
$
1,998,668
Liabilities and Shareholders’ Equity
Current liabilities:
Current installments of long-term debt and capital lease obligations $
16,804
$
12,396
Accounts payable
335,315
326,249
Accrued liabilities
93,674
73,736
Total current liabilities
445,793
412,381
Long-term debt and capital lease obligations, less current installments
197,766
211,252
Other long-term liabilities
8,236
9,570
Shareholders’ equity
1,424,911
1,365,465
Total liabilities and shareholders’ equity
$
2,076,706
$
1,998,668
Benchmark Electronics, Inc. and Subsidiaries
Condensed Consolidated Statement of Cash Flows
(in thousands)
(UNAUDITED)
Nine Months Ended
September 30,
2017
2016
Cash flows from operating activities:
Net income
$ 44,375
$ 45,479
Depreciation and amortization
36,591
42,002
Stock-based compensation expense
6,819
4,302
Accounts receivable, net
30,926
61,776
Inventories
(38,778)
13,991
Accounts payable
3,922
59,183
Other changes in working capital and other
6,035
1,851
Net cash provided by operations
89,890
228,584
Cash flows from investing activities:
Additions to property, plant and equipment and software
(37,736)
(25,398)
Business acquisition, net of cash acquired
-
10,750
Other investing activities, net
364
213
Net cash used in investing activities
(37,372)
(14,435)
Cash flows from financing activities:
Share repurchases
(5,887)
(40,862)
Net debt activity
(9,288)
(9,224)
Other financing activities, net
9,012
5,289
Net cash used in financing activities
(6,163)
(44,797)
Effect of exchange rate changes
2,358
336
Net increase in cash and cash equivalents
48,713
169,688
Cash and cash equivalents at beginning of year
681,433
465,995
Cash and cash equivalents at end of period
$ 730,146
$ 635,683

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SOURCE Benchmark Electronics, Inc.

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