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Benchmark Electronics Reports Fourth Quarter And FY 2017 Results

[February 07, 2018]

Benchmark Electronics Reports Fourth Quarter And FY 2017 Results

SCOTTSDALE, Ariz., Feb. 7, 2018 /PRNewswire/ -- Benchmark Electronics, Inc. (NYSE: BHE) today announced financial results for the fourth quarter and year ended December 31, 2017.

Benchmark Electronics (PRNewsfoto/Benchmark Electronics, Inc.)

	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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