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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-K
(MARK ONE)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ______________ TO ______________
COMMISSION FILE NUMBER 1-10560
BENCHMARK ELECTRONICS, INC.
(Exact Name of Registrant as Specified in its Charter)
------------------------
TEXAS 74-2211011
(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
3000 TECHNOLOGY DRIVE 77515
ANGLETON, TEXAS (Zip Code)
(Address of Principal Executive
Offices)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
(979) 849-6550
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SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- -------------------
Common Stock, par value $0.10 per share New York Stock Exchange, Inc.
Preferred Stock Purchase Rights New York Stock Exchange, Inc.
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE
------------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. /X/
As of March 15, 2002, the number of outstanding shares of Common Stock was
19,783,012. As of such date, the aggregate market value of the shares of Common
Stock held by non-affiliates, based on the closing price of the Common Stock on
the New York Stock Exchange on such date, was approximately $565.1 million.
DOCUMENTS INCORPORATED BY REFERENCE:
(1) Portions of the Company's Annual Report to Shareholders for the fiscal year
ended December 31, 2001 (Part II Items 5-8 and Part IV Item 14(a)(1)).
(2) Portions of the Company's Proxy Statement for the 2002 Annual Meeting of
Shareholders (Part III, Items 10-13).
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TABLE OF CONTENTS
PAGE
--------
PART I
ITEM 1. Business.................................................... 1
ITEM 2. Properties.................................................. 8
ITEM 3. Legal Proceedings........................................... 9
ITEM 4. Submission of Matters to a Vote of Security Holders......... 9
PART II
ITEM 5. Market for Registrant's Common Equity and Related
Shareholder Matters....................................... 9
ITEM 6. Selected Financial Data..................................... 10
ITEM 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 10
ITEM Quantitative and Qualitative Disclosures About Market
7A. Risk...................................................... 10
ITEM 8. Financial Statements and Supplementary Data................. 10
ITEM 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................. 10
PART III
ITEM Directors and Executive Officers of the Registrant..........
10. 10
ITEM Executive Compensation......................................
11. 10
ITEM Security Ownership of Certain Beneficial Owners and
12. Management................................................ 10
ITEM Certain Relationships and Related Transactions..............
13. 10
PART IV
ITEM Exhibits, Financial Statement Schedules, and Reports on Form
14. 8-K....................................................... 11
i
PART I
ITEM 1. BUSINESS
BACKGROUND
Benchmark Electronics, Inc., formerly named Electronics, Inc., began
operations in 1979 and was incorporated under Texas law in 1981 as a wholly
owned subsidiary of Intermedics, Inc., a medical implant manufacturer based in
Angleton, Texas. In 1986, Intermedics sold 90% of the outstanding shares of
common stock of the Company to Electronic Investors Corp., a corporation formed
by Donald E. Nigbor, Steven A. Barton and Cary T. Fu, three of our executive
officers. In 1988, Electronic Investors Corp. was merged into Benchmark, and in
1990 we completed the initial public offering of our common stock.
GENERAL
We are in the business of manufacturing electronics and provide our services
to original equipment manufacturers of telecommunication equipment, computers
and related products for business enterprises, video/audio/entertainment
products, industrial control equipment, testing and instrumentation products and
medical devices. The services that we provide are commonly referred to as
electronics manufacturing services. We offer our customers comprehensive and
integrated design and manufacturing services, from initial product design to
volume production and direct order fulfillment. We provide specialized
engineering services, including product design, printed circuit board layout,
prototyping and test development. We believe that we have developed strengths in
the manufacturing process for large, complex, high-density printed circuit
boards as well as the ability to manufacture high and low volume products in
lower cost regions such as Latin America and Southeast Asia. As our customers
expand internationally, they increasingly require their electronics
manufacturing services partners to have strategic regional locations and global
procurement capabilities. We believe that our global manufacturing presence of
14 facilities in six countries increases our ability to be responsive to our
customers' needs by providing accelerated time-to-market and time-to-volume
production of high quality products. These capabilities should enable us to
build stronger strategic relationships with our customers and to become a more
integral part of their operations.
Substantially all of our manufacturing services are provided on a turnkey
basis, whereby we purchase customer-specified components from our suppliers,
assemble the components on finished printed circuit boards, perform
post-production testing and provide our customers with production process and
testing documentation. We offer our customers flexible, "just-in-time" delivery
programs allowing product shipments to be closely coordinated with our
customers' inventory requirements. Additionally, we complete the assembly of our
customers' products at our facilities by integrating printed circuit board
assemblies into other elements of our customers' products. We also provide
manufacturing services on a consignment basis, whereby we utilize components
supplied by the customer to provide assembly and post-production testing
services. We currently operate, on approximately 1.6 million square feet, a
total of 44 surface mount production lines at our domestic facilities in
Alabama, Minnesota, New Hampshire, Oregon, Texas and Virginia; and 27 surface
mount production lines at our international facilities in Brazil, Ireland,
Mexico, Scotland, and Singapore. Surface mount production lines are assembly
lines where electrical components are soldered directly onto printed circuit
boards.
Since July 1996, we have completed five acquisitions that have broadened our
service offerings, diversified our customer base with leading original equipment
manufacturers and expanded our geographic presence. Our October 2000 acquisition
of the assets of the MSI Division of Outreach Technologies, Inc. provided us
with additional manufacturing capacity in the northeastern United States. Our
August 1999 acquisition of AVEX Electronics, Inc. and Kilbride Holdings B.V.
provided us with a global presence and enabled us to increase our scale of
operations and expand our customer
1
base significantly. We have also acquired EMD Technologies, Inc., Lockheed
Commercial Electronics Company, and certain assets from Stratus Computer
Ireland, which improved our engineering capabilities, increased our
manufacturing capacity and expanded our international presence. In addition to
these acquisitions, the opening of new systems integration facilities in
Huntsville, Alabama in 2000 and Singapore in 2001 expanded our systems
integration capabilities.
We believe our primary competitive advantages are our design, manufacturing,
testing and supply chain management capabilities. We offer our customers
complete and flexible manufacturing solutions that provide accelerated
time-to-market, time-to-volume production, and reduced production costs. As a
result of working closely with our customers and responding promptly to their
needs, we have become an integral part of their operations. In addition, our
workforce is led by a management team that founded the Company and has an
average of 20 years of industry experience.
BUSINESS STRATEGY
Our goal is to be the electronics manufacturing services outsourcing
provider of choice to leading original equipment manufacturers in the high
growth segments of the electronics industry. To meet this goal, we have
implemented the following strategies:
- MAINTAIN AND DEVELOP CLOSE, LONG-TERM RELATIONSHIPS WITH CUSTOMERS. Our
core strategy is to maintain and establish long-term relationships with
leading original equipment manufacturers in expanding industries by
becoming an integral part of our customers' manufacturing operations. To
this end, we work closely with our customers throughout the design,
manufacturing and distribution process, and we offer flexible and
responsive services. We believe we develop stronger customer relationships
by relying on our local management teams that respond to frequently
changing customer design specifications and production requirements.
- FOCUS ON HIGH-END PRODUCTS IN HIGH GROWTH SECTORS. Electronics
manufacturing services providers produce products for a wide range of
original equipment manufacturers in different high growth industries, such
as consumer electronics, Internet-focused businesses and
telecommunications equipment. The product scope ranges from easy to
assemble, low-cost high-volume products targeted for the consumer market
to complicated state-of-the-art, mission critical electronic hardware.
Similarly, original equipment manufacturers' customers range from
consumer-oriented companies that compete primarily on price and redesign
their products every year to manufacturers of high-end telecommunications
equipment and computer and related products for business enterprises that
compete on technology and quality. We currently offer state-of-the-art
products for industry leaders who require specialized engineering design
and production services as well as offering high volume manufacturing
capabilities to our customer base. Our ability to offer both of these
services enables us to expand our business relationships.
- DELIVER COMPLETE HIGH AND LOW VOLUME MANUFACTURING SOLUTIONS GLOBALLY. We
believe original equipment manufacturers are increasingly requiring from
electronics manufacturing services providers a wide range of specialized
engineering and manufacturing services in order to reduce their costs and
accelerate their time-to-market and time-to-volume production. Building on
our integrated engineering and manufacturing capabilities, we offer
services from initial product design and test to final product assembly
and distribution to the original equipment manufacturers' customers. With
the AVEX acquisition, we also offer our customers high volume production
in low cost regions of the world, such as Brazil and Mexico. These full
service capabilities allow us to offer customers the flexibility to move
quickly from design and initial introduction to production and
distribution.
- LEVERAGE ADVANCED TECHNOLOGICAL CAPABILITIES. Our traditional strengths in
the manufacturing processes for assembling large, complex high-density
printed circuit boards enable us to offer customers advanced design,
technology and manufacturing solutions for their primary products.
2
We provide this engineering expertise through our design capabilities in
each of our facilities, and in our design centers located in Winona,
Minnesota, Huntsville, Alabama and Cork, Ireland. We believe our
capabilities help our customers improve product performance and reduce
costs.
- CONTINUE OUR GLOBAL EXPANSION. A strategically positioned facilities
network can simplify and shorten an original equipment manufacturer's
supply chain and reduce the time it takes to bring product to market. We
are committed to pursuing geographic expansion in order to support our
global customers with cost-effective and timely delivery of quality
products and services worldwide. Our AVEX acquisition significantly
expanded our service scope to provide a global manufacturing solution to
our customers at 14 facilities located in Brazil, Ireland, Mexico,
Scotland, Singapore and the United States.
- SELECTIVELY PURSUE STRATEGIC ACQUISITIONS. We have completed five
acquisitions since July 1996 and will continue to selectively seek
acquisition opportunities. Our acquisitions have enhanced our business in
the following ways:
- expanded geographic presence;
- enhanced customer growth opportunities;
- developed strategic relationships;
- broadened service offerings;
- diversified into new market sectors; and
- added experienced management teams.
We believe that growth by selective acquisitions is critical for
achieving the scale, flexibility and breadth of customer services
required to remain competitive in the electronics manufacturing services
industry.
ACQUISITIONS
Since July 1996, we have completed five acquisitions. These acquisitions were:
- MSI DIVISION. On October 2, 2000, we acquired substantially all of the
assets and properties, net of assumed liabilities, of the MSI Division of
Outreach Technologies, Inc. Now operated as our Manassas, Virginia
division, this facility provided additional manufacturing capacity in the
northeastern United States.
- AVEX ELECTRONICS, INC. AND RELATED COMPANIES. On August 24, 1999, we
completed the acquisition of AVEX, one of the largest privately-held
contract manufacturers. This acquisition provided us a global presence and
expanded our customer base to approximately 90 original equipment
manufacturers in a broader range of end user markets.
- STRATUS COMPUTER IRELAND. On March 1, 1999, we acquired various assets
from Stratus Computer Ireland, and in connection with the transaction
entered into a three-year supply agreement to provide system integration
services to Ascend and Stratus Holdings Limited. The acquired assets
increased our ability to provide a broad range of services to the European
market and enhanced our systems integration capabilities and our box build
engineering capabilities, which is the process of building the finished
product from subassemblies. The process may also involve loading software
and optional configuration.
- LOCKHEED COMMERCIAL ELECTRONICS COMPANY. In February 1998, we acquired
Lockheed Commercial Electronics Company. This acquisition provided us with
manufacturing capacity in
3
the northeastern United States and 19 additional customers. Now operated
as our Hudson, New Hampshire division, the facility provides a broad range
of services including:
- assembly and testing of printed circuit boards;
- systems assembly and testing;
- prototyping, which is building initial quantities of a new product to
test and refine the design;
- depot repair, which is the method of repairing equipment in which the
customer ships a damaged product to a central location for repair, as
opposed to field repair;
- materials procurement; and
- engineering and design support services.
- EMD TECHNOLOGIES, INC. In July 1996, we acquired EMD Technologies, Inc.,
an independent provider of electronics manufacturing and product design
services. Now operated as our Winona, Minnesota division, this facility
provides a complete range of enhanced product design and configurations
for subsystems and enclosures. In addition to design services, this
acquisition provided us with manufacturing capabilities in the midwestern
United States and 19 additional customers.
ELECTRONICS MANUFACTURING SERVICES INDUSTRY
Many original equipment manufacturers in the electronics industry are
increasingly using electronics manufacturing service providers in their business
and manufacturing strategies and are seeking to outsource a broad range of
manufacturing and related engineering services. Outsourcing allows original
equipment manufacturers to take advantage of the manufacturing expertise of, and
capital investments by, electronics manufacturing service providers. This
enables original equipment manufacturers to concentrate on what they believe to
be their core strengths, such as product development, marketing and sales.
Original equipment manufacturers utilize electronics manufacturing service
providers to enhance their competitive position by:
- reducing capital investment requirements and fixed overhead costs;
- accessing advanced manufacturing and design capabilities;
- reducing production costs;
- accelerating time-to-market and time-to-volume production;
- improving inventory management and purchasing power; and
- accessing worldwide manufacturing capabilities.
SERVICES WE PROVIDE
ENGINEERING. Our approach is to coordinate and integrate our design,
prototype and other engineering capabilities. Through this approach, we provide
a broad range of engineering services and, in some cases, dedicated production
lines for prototypes. These services strengthen our relationships with
manufacturing customers and attract new customers requiring specialized
engineering services.
To assist customers with initial design, we offer computer assisted
engineering, computer assisted design, engineering for manufacturability,
circuit board layout and test development. We also coordinate industrial design
and tooling for product manufacturing. After product design, we offer quickturn
prototyping, which means a rapid process of prototyping. During this process, we
assist with the transition to volume production. By participating in product
design and prototype development, we
4
can reduce manufacturing costs and accelerate the cycle from product
introduction to large-scale production.
MATERIALS PROCUREMENT AND MANAGEMENT. Materials procurement and management
consists of the planning, purchasing, expediting and warehousing of components
and materials. Our inventory management and volume procurement capabilities
contribute to cost reductions and reduce total cycle time. Our materials
strategy is focused on leveraging our procurement volume corporate wide while
providing local execution for maximum flexibility at the division level. In
addition, our Dublin, Ireland facility has developed material processes required
to support high-end computer system integration operations.
ASSEMBLY AND MANUFACTURING. Our manufacturing and assembly operations
include printed circuit boards and subsystem assembly, box build and systems
integration, the process of integrating sub-systems and downloading software
before producing a fully configured product. We purchase the printed circuit
boards used in our assembly operations from third parties. A substantial portion
of our sales is derived from the manufacture and assembly of complete products.
We employ various inventory management techniques, such as just-in-time,
ship-to-stock and autoreplenish, which are programs designed to ensure timely,
convenient and efficient delivery of assembled products to our customers. As
original equipment manufacturers seek to provide greater functionality in
smaller products, they increasingly require more sophisticated manufacturing
technologies and processes. Our investment in advanced manufacturing equipment
and our experience in innovative packaging and interconnect technologies enable
us to offer a variety of advanced manufacturing solutions. These packaging and
interconnect technologies include:
- chip scale packaging, the part of semiconductor manufacturing in which the
semiconductor die is bonded and sealed into a ceramic or plastic package
which physically protects the semiconductor device; and
- ball grid array, a method of attaching components to a printed circuit
board through balls of solder that are arranged in a grid pattern.
TESTING. We offer computer-aided testing of assembled printed circuit
boards, subsystems and systems, which contributes significantly to our ability
to deliver high-quality products on a consistent basis. We work with our
customers to develop product-specific test strategies. Our test capabilities
include manufacturing defect analysis, in-circuit tests to test the circuitry of
the board and functional tests. We either custom design test equipment and
software ourselves or use test equipment and software provided by our customers.
In addition, we provide environmental stress tests of assemblies of boards or
systems.
DISTRIBUTION. We offer our customers flexible, just-in-time delivery
programs allowing product shipments to be closely coordinated with customers'
inventory requirements. Increasingly, we ship products directly into customers'
distribution channels or directly to the end-user. We believe that this service
can provide our customers with a more comprehensive solution and enable them to
be more responsive to market demands.
MARKETING AND CUSTOMERS
We market our services through a direct sales force and independent
marketing representatives. In addition, our divisional and executive management
teams are an integral part of our sales and marketing teams. During 2001, our
two largest customers, Sun Microsystems and EMC, each represented in excess of
10% of total sales and, in the aggregate, represented 37.3% of total sales.
5
The following table sets forth the percentages of the Company's sales by
industry for 2001, 2000 and 1999.
2001 2000 1999
-------- -------- --------
Computers & related products for business enterprises....... 44% 36% 30%
Telecommunication equipment................................. 31 34 39
Video/Audio/Entertainment products.......................... 4 10 6
Industrial control equipment................................ 9 8 9
Testing & instrumentation products.......................... 5 7 4
Medical devices............................................. 7 5 6
Personal computers.......................................... -- -- 6
SUPPLIERS
We maintain a network of suppliers of components and other materials used in
assembling printed circuit boards. We procure components only when a purchase
order or forecast is received from a customer and occasionally utilize
components or other materials for which a supplier is the single source of
supply. Although we experience component shortages and longer lead times of
various components from time to time, we have generally been able to reduce the
impact of the component shortages by working with customers to reschedule
deliveries, by working with suppliers to provide the needed components using
just-in-time inventory programs, or by purchasing components at somewhat higher
prices from distributors, rather than directly from manufacturers. These
procedures reduce, but do not eliminate, our inventory risk. In 2001 and 2000,
customer modifications to orders for inventory previously procured by us
resulted in excess and obsolete inventory for the related customers that could
not be recovered through put backs to vendors or the specific customer
concerned. In addition, by developing long-term relationships with suppliers, we
have been better able to minimize the effects of component shortages than
manufacturers without such relationships.
BACKLOG
We had a year-end backlog of approximately $855.1 million at December 31,
2001, as compared to the 2000 year-end backlog of $1,600.4 million. Although we
expect to fill substantially all of our backlog during 2002, at December 31,
2001 we did not have long-term agreements with all of our customers and customer
orders can be canceled, changed or delayed by customers. The timely replacement
of canceled, changed or delayed orders with orders from new customers cannot be
assured, nor can there be any assurance that any of our current customers will
continue to utilize our services. Because of these factors, backlog is not a
meaningful indicator of future financial results.
COMPETITION
The electronics manufacturing services we provide are available from many
independent sources as well as in-house manufacturing capabilities of current
and potential customers. Our competitors include Celestica, Inc., Flextronics
International Ltd., Jabil Circuit, Inc., Sanmina-SCI Corporation and Solectron
Corporation, who may be more established in the industry and have substantially
greater financial, manufacturing or marketing resources than we do. We believe
that the principal competitive factors in our targeted markets are product
quality, flexibility and timeliness in responding to design and schedule
changes, reliability in meeting product delivery schedules, pricing,
technological sophistication and geographic location.
GOVERNMENTAL REGULATION
Our operations, and the operations of businesses that we acquire, are
subject to certain foreign, federal, state and local regulatory requirements
relating to environmental, waste management, and
6
health and safety matters. We believe we operate in substantial compliance with
all applicable requirements. However, material costs and liabilities may arise
from these requirements or from new, modified or more stringent requirements. In
addition, our past, current and future operations, and those of businesses we
acquire, may give rise to claims of exposure by employees or the public or to
other claims or liabilities relating to environmental, waste management or
health and safety concerns.
We periodically generate and temporarily handle limited amounts of materials
that are considered hazardous waste under applicable law. We contract for the
off-site disposal of these materials and have implemented a waste management
program to address related regulatory issues.
EMPLOYEES
As of December 31, 2001, we employed 4,233 people, of whom 3,157 were
engaged in manufacturing and operations, 590 in materials control and
procurement, 90 in design and development, 98 in marketing and sales, and 298 in
administration. Although a majority of our workforce is non-union, employees in
our facilities in Brazil and Mexico are unionized, and work councils have been
established at our facilities in Cork, Ireland, and Scotland. The Company has
not experienced a strike or similar work stoppage and its relations with its
employees are satisfactory.
SEGMENTS AND INTERNATIONAL OPERATIONS
Benchmark has 14 manufacturing facilities in the Americas, Europe, and Asia
regions to serve its customers. Benchmark is operated and managed geographically
and management evaluates performance and allocates Benchmark's resources on a
geographic basis. See Note 11 of Notes to Consolidated Financial Statements for
segment and geographical information. Prior to the acquisitions in 1999, all of
our operations were in the Americas region. We currently operate outside the
United States in Brazil, Ireland, Mexico, Scotland, and Singapore. In 2001,
approximately 23.3% of our sales were from operations outside of the United
States. As a result of continuous customer demand overseas, we expect foreign
sales to increase. Our foreign sales and operations are subject to risk of doing
business abroad, including fluctuations in the value of currency, export duties,
import controls and trade barriers, including stoppages, longer payment cycles,
greater difficulty in accounts receivable collection, burdens of complying with
wide variety of foreign laws and, in certain parts of the world, political
instability. While, to date, these factors have not adversely materially
affected Benchmark's results of operations, we cannot assure that there will not
be an adverse impact in the future.
7
ITEM 2. PROPERTIES
Benchmark currently has 14 facilities worldwide.
[LOGO]
The following chart summarizes the facilities owned or leased by Benchmark
and its subsidiaries:
LOCATION SQ. FT. FUNCTION OWNERSHIP
-------- --------- -------------------------------- --------------
Angleton, Texas................. 109,000 Executive, manufacturing, and
procurement Owned
Beaverton, Oregon............... 77,000 Manufacturing Leased
Campinas, Brazil................ 40,000 Manufacturing Leased
Cork, Ireland................... 24,000 Manufacturing and design Owned
Dublin, Ireland................. 104,000 Manufacturing and procurement Leased
East Kilbride, Scotland......... 80,000 Manufacturing and procurement Owned
Guadalajara, Mexico............. 150,000 Manufacturing Leased
Hudson, New Hampshire........... 262,000 Manufacturing and procurement Leased
Huntsville, Alabama............. 276,000 Manufacturing, design and
procurement Owned
Huntsville, Alabama (SI)........ 144,000 Manufacturing and design Leased
Manassas, Virginia.............. 44,000 Manufacturing and procurement Leased
Singapore....................... 37,000 Manufacturing and procurement Leased
Singapore (SI).................. 36,000 Manufacturing and procurement Leased
Winona, Minnesota............... 208,000 Manufacturing, design and
procurement Leased, Owned
---------
Total........................... 1,591,000
=========
In addition, we own a manufacturing facility in Pulaski, Tennessee with
113,000 sq. ft. that is currently being held for sale. Also, we have a leased
facility in Mansfield, Massachusetts with 44,000 sq. ft. that is currently not
in operation.
8
ITEM 3. LEGAL PROCEEDINGS
On October 18, 1999, we announced that our third quarter 1999 earnings
announcement would be delayed and subsequently, on October 22, we announced our
earnings for the third quarter 1999 were below the level of the same periods
during 1998 and were below expectations. Several class action lawsuits were
filed in November 1999 in federal district court in Houston, Texas against
Benchmark and two of its officers and directors alleging violations of the
federal securities laws. These lawsuits were consolidated in February 2000. The
lawsuits seek to recover unspecified damages. We deny the allegations in the
lawsuits, however, and further deny that such allegations provide a basis for
recovery of damages as we believe that we have made all required disclosures on
a timely basis. Management is vigorously defending against these actions. No
material developments occurred in this proceeding during the period covered by
this report.
Benchmark filed suit against J.M. Huber Corporation (Seller) in the United
States District Court for the Southern District of Texas for breach of contract,
fraud and negligent misrepresentation on December 14, 1999 and is seeking an
unspecified amount of damages in connection with the contract between Benchmark
and Seller pursuant to which Benchmark acquired all of the stock of AVEX and
Kilbride Holdings B.V. On January 5, 2000, Seller filed suit in the United
States District Court for the Southern District of New York alleging that
Benchmark failed to comply with certain obligations under the contract requiring
Benchmark to register shares of its common stock issued to Seller as partial
consideration for the acquisition. Seller's suit has been consolidated with
Benchmark's suit in the United States District Court for the Southern District
of Texas. Benchmark intends to vigorously pursue its claims against Seller and
defend against Seller's allegations. No material developments occurred in this
proceeding during the period covered by this report.
On April 14, 2000, Benchmark, along with numerous other companies, was named
as a defendant in a lawsuit filed in the United States District Court for the
District of Arizona by the Lemelson Medical, Education & Research Foundation
(the Foundation). The lawsuit alleges that Benchmark has infringed certain of
the Foundation's patents relating to machine vision and bar code technology
utilized in machines Benchmark has purchased. On November 2, 2000, Benchmark
filed an Answer, Affirmative Defenses, and a Motion to Stay based upon
Declaratory Judgement Actions filed by Cognex and Symbol, manufacturers of the
equipment at issue. On March 29, 2001, the Court granted the defendants' Motion
to Stay and ordered that the lawsuit be stayed pending the entry of a final
non-appealable judgment in the cases filed by Cognex and Symbol. We continue to
explore any indemnity or similar rights Benchmark may have against manufacturers
of the machines or other third parties. Management intends to vigorously defend
against such claim and pursue all rights it has against third parties. No
material developments occurred in this proceeding during the period covered by
this report.
Benchmark is also involved in various other legal actions arising in the
ordinary course of business. In the opinion of management, the ultimate
disposition of these matters will not have a material adverse effect on
Benchmark's consolidated financial position or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of 2001.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
The information on page 52 of the Company's Annual Report to Stockholders
for the fiscal year ended December 31, 2001 (the "2001 Annual Report") is
incorporated herein by reference in response to this item.
9
ITEM 6. SELECTED FINANCIAL DATA
The information on page 53 of the 2001 Annual Report is incorporated herein
by reference in response to this item.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information on pages 13 through 29 of the 2001 Annual Report is
incorporated herein by reference in response to this item.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information on pages 23 through 29 of the 2001 Annual Report is
incorporated herein by reference in response to this item.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information on pages 30 through 51 of the 2001 Annual Report is
incorporated herein by reference in response to this item.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information under the captions "Election of Directors," "Executive
Officers" and "Section 16(a) Beneficial Ownership Reporting Compliance" in the
Company's Proxy Statement for the 2002 Annual Meeting of Shareholders (the "2002
Proxy Statement"), to be filed not later than 120 days after the close of the
Company's fiscal year, is incorporated herein by reference in response to this
item.
ITEM 11. EXECUTIVE COMPENSATION
The information under the caption "Executive Compensation and Other Matters"
in the 2002 Proxy Statement, to be filed not later than 120 days after the close
of the Company's fiscal year, is incorporated herein by reference in response to
this item.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information under the caption "Common Stock Ownership of Certain
Beneficial Owners and Management" in the 2002 Proxy Statement, to be filed not
later than 120 days after the close of the Company's fiscal year, is
incorporated herein by reference in response to this item.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information under the caption "Certain Transactions" in the 2002 Proxy
Statement, to be filed not later than 120 days after the close of the Company's
fiscal year, is incorporated herein by reference in response to this item.
10
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Financial Statements, Financial Statement Schedules, and Exhibits
1. FINANCIAL STATEMENTS OF THE COMPANY
Reference is made to the Financial Statements, the report thereon, the notes
thereto and supplementary data commencing at page 30 of the 2001 Annual Report,
which financial statements, report, notes and data are incorporated herein by
reference in response to this item. Set forth below is a list of such Financial
Statements:
Consolidated Financial Statements of the Company
Independent Auditors' Report
Consolidated Balance Sheets as of December 31, 2001 and 2000
Consolidated Statements of Income (Loss) for the years ended December 31,
2001, 2000 and 1999
Consolidated Statements of Shareholders' Equity and Comprehensive Income
(Loss) for the years ended December 31, 2001, 2000 and 1999
Consolidated Statements of Cash Flows for the years ended December 31, 2001,
2000 and 1999
Notes to Consolidated Financial Statements
2. FINANCIAL STATEMENT SCHEDULE
Benchmark Electronics, Inc.
Schedule II--Valuation Accounts
(in thousands)
ADDITIONS
BALANCE AT ---------------------- BALANCE AT
BEGINNING CHARGES TO OTHER END OF
OF PERIOD OPERATIONS ADDITIONS DEDUCTIONS PERIOD
---------- ---------- --------- ---------- ----------
Year ended December 31, 2001
Allowance for doubtful accounts(1)......... $ 4,276 2,616 -- 4,681 2,211
Inventory obsolescence reserve(3).......... $ 8,226 7,607 -- 6,809 9,024
Year ended December 31, 2000
Allowance for doubtful accounts(1)(2)...... $ 7,705 921 64 4,414 4,276
Inventory obsolescence reserve(2)(3)....... $20,000 3,748 140 15,662 8,226
Year ended December 31, 1999
Allowance for doubtful accounts(1)(4)...... $ 100 273 7,332 -- 7,705
Inventory obsolescence reserve(4).......... $ 3,510 1,911 14,579 -- 20,000
------------------------
(1) Deductions in the allowance for doubtful accounts represent write-offs, net
of recoveries, of amounts determined to be uncollectible.
(2) Other addition relates to the acquisition of MSI.
(3) Deductions in the inventory obsolescence reserve represent disposals of
inventory determined to be obsolete.
(4) Other addition relates to the acquisition of AVEX.
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Independent Auditors' Report on Schedule
The Board of Directors and Shareholders
Benchmark Electronics, Inc.:
Under date of February 5, 2002, we reported on the consolidated balance sheets
of Benchmark Electronics, Inc. and subsidiaries as of December 31, 2001 and
2000, and the related consolidated statements of income (loss), shareholders'
equity and comprehensive income (loss), and cash flows for each of the years in
the three-year period ended December 31, 2001, as incorporated by reference in
this annual report on form 10-K for the year 2001. In connection with the audits
of the aforementioned consolidated financial statements, we also have audited
the related consolidated financial statement schedule included in Item 14(a)2.
This financial statement schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion on this financial
statement schedule based on our audits.
In our opinion, such financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth therein.
KPMG LLP
Houston, Texas
February 5, 2002
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3. EXHIBITS
Each exhibit marked with an asterisk is filed with this Annual Report on
Form 10-K.
EXHIBIT
NUMBER DESCRIPTION
--------------------- -----------
2.1 -- Purchase Agreement dated as of January 22, 1998 by and
between the Company and Lockheed Martin Corporation
(incorporated herein by reference to Exhibit 2 to the
Company's Current Report on Form 8-K dated February 23,
1998).
2.2 -- Agreement and Plan of Merger dated as of March 27, 1996 by
and among the Company, Electronics Acquisition, Inc., EMD
Technologies, Inc., David H. Arnold and Daniel M. Rukavina
(incorporated herein by reference to Appendix A of the
Company's Registration Statement on Form S-4 (Registration
No. 333-4230)).
2.3 -- Amendment No. 1 to Agreement and Plan of Merger dated as of
April 5, 1996 by and among the Company, Electronics
Acquisition, Inc., EMD Technologies, Inc., David H. Arnold
and Daniel M. Rukavina (incorporated herein by reference to
Exhibit 2.2 to the Company's Registration Statement on Form
S-4 (Registration No. 333-4230)).
2.4 -- Purchase and Sale Agreement by and among Stratus Computer
Ireland, Ascend Communications Inc., BEI Electronics Ireland
Limited and the Company dated January 22, 1999 (incorporated
by reference herein to Exhibit 2.1 to the Company's Current
Report on Form 8-K dated January 22, 1999).
2.5 -- Amended and Restated Stock Purchase Agreement dated as of
August 12, 1999 by and between the Company and J. M. Huber
Corporation (incorporated by reference herein to Exhibit 2
to the Company's Current Report on Form 8-K dated
August 24, 1999 and filed on September 8, 1999).
2.6 -- Asset Purchase Agreement by and between Benchmark
Electronics AB and Flextronics International Sweden AB
(incorporated by reference herein to Exhibit 2 to the
Company's Current Report on Form 8-K/A dated July 31, 2000).
3.1 -- Amended and Restated Articles of Incorporation of the
Company (incorporated herein by reference to Exhibit 3.1 to
the Company's Registration Statement on Form S-1
(Registration No. 33-46316) (the "Registration Statement")).
3.2* -- Amended and Restated Bylaws of the Company.
3.3 -- Amendment to Amended and Restated Articles of Incorporation
of the Company adopted by the shareholders of the Company on
May 20, 1997 (incorporated herein by reference to Exhibit
3.3 to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1998).
3.4 -- Statement of Resolution Establishing Series A Cumulative
Junior Participating Preferred Stock of Benchmark
Electronics, Inc. (incorporated by reference to Exhibit B of
the Rights Agreement dated December 11, 1998 between the
Company and Harris Trust Savings Bank, as Rights Agent,
included as Exhibit 1 to the Company's Form 8A12B filed
December 11, 1998).
4.1 -- Restated Articles of Incorporation of the Company
(incorporated herein by reference to Exhibit 3.1 to the
Registration Statement).
13
4.2 -- Amended and Restated Bylaws of the Company (incorporated
herein by reference to Exhibit 3.2 to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31,
1998).
4.3 -- Amendment to the Restated Articles of Incorporation of the
Company adopted by the shareholders of the Company on May
20, 1997 (incorporated herein by reference to Exhibit 3.3 to
the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1998).
4.4 -- Specimen form of certificate evidencing the Common Stock
(incorporated herein by reference to Exhibit 4.3 to the
Registration Statement).
4.5 -- Rights Agreement dated December 11, 1998 between the Company
and Harris Trust Savings Bank, as Rights Agent, together
with the following exhibits thereto: Exhibit A--Form of
Statement of Resolution Establishing Series A Cumulative
Junior Participating Preferred Stock of Benchmark
Electronics, Inc.; Exhibit B--Form of Right Certificate; and
Exhibit C--Summary of Rights to Purchase Preferred Stock of
Benchmark Electronics, Inc. (incorporated by reference to
Exhibit 1 to the Company's Form 8A12B filed December 11,
1998).
4.6 -- Summary of Rights to Purchase Preferred Stock of the Company
(incorporated by reference to Exhibit 3 to the Company's
Form 8A12B/A filed December 22, 1998).
4.7 -- Indenture dated as of August 13, 1999 by and between the
Company and Harris Trust Company of New York, as trustee
(incorporated by reference from Exhibit 99.3 to Benchmark's
Form 8-K dated August 24, 1999 and filed on September 8,
1999).
10.1 -- Form of Indemnity Agreement between the Company and each of
its directors and officers (incorporated herein by reference
to Exhibit 10.11 to the Registration Statement).
10.2 -- Benchmark Electronics, Inc. Stock Option Plan dated May 11,
1990 (incorporated herein by reference to Exhibit 10.12 to
the Registration Statement).
10.3 -- Form of Benchmark Electronics, Inc. Incentive Stock Option
Agreement used under the 1990 Stock Option Plan between the
Company and the optionee (incorporated herein by reference
to Exhibit 10.13 to the Registration Statement).
10.4 -- Form of Benchmark Electronics, Inc. Nonqualified Stock
Option Agreement used under the 1990 Stock Option Plan
between the Company and the optionee (incorporated herein by
reference to Exhibit 10.14 to the Registration Statement).
10.5 -- First Amendment to Lucent Technologies Network Systems do
Brasil S.A. dated June 14, 2000 by and between Benchmark
Electronics Ltda and Lucent Technologies Network Systems do
Brasil S.A. (incorporated herein by reference to
Exhibit 10.5 to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 2000.)
10.6 -- Benchmark Electronics, Inc. 1994 Stock Option Plan for
Non-Employee Directors (incorporated herein by reference to
Exhibit 10.21 to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1994).
10.7 -- Benchmark Electronics, Inc. 401(k) Employee Savings Plan
Adoption Agreement dated January 2, 2001 by and between
Benchmark Electronics, Inc. and Boston Safe Deposit and
Trust Company (incorporated herein by reference to Exhibit
10.1 to the Company's Form 11-K for the fiscal year ended
December 31, 2000).
14
10.8 -- Dreyfus Prototype Defined Contribution Plan Basic Plan
Document No. 01 (incorporated by reference to Exhibit 10.2
to the Company's Form 11-K for the fiscal year ended
December 31, 2000).
10.9 -- Benchmark Electronics, Inc. Employee Stock Purchase Plan
(incorporated by reference to Exhibit 99.1 to the Company's
Registration Statement on Form S-8 (Registration Number
333-76207)).
10.10 -- Benchmark Electronics, Inc. 2000 Stock Awards Plan
(incorporated herein by reference to Exhibit 4.8 to the
Company's Registration Statement on Form S-8 (Registration
Number 333-54186)).
10.11 -- Form of incentive stock option agreement for use under the
2000 Stock Awards Plan (incorporated herein by reference to
Exhibit 4.8 to the Company's Registration Statement on Form
S-8 (Registration Number 333-54186)).
10.12 -- First Amendment to the Benchmark Electronics, Inc. Employee
Stock Purchase Plan (incorporated herein by reference to
Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 2000).
10.13 -- Lease Agreement dated June 1, 2000 between Industrial
Properties of the South and the Company (incorporated by
reference to Exhibit 10.12 to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 2000).
10.14 -- Lease Agreement dated February 29, 2000 between Millikan
Properties, LLC and the Company (incorporated herein by
reference to Exhibit 10.12 to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1999).
10.15 -- Lease Agreement dated July 30, 1996 by and among David H.
Arnold, Muriel M. Arnold, Daniel M. Rukavina, Patricia A.
Rukavina and EMD Associates, Inc., as amended by Amendment
to Lease dated July 30, 1996.
10.16* -- Lease Agreement dated December 15, 1992 by and among David
H. Arnold, Muriel M. Arnold, Daniel M. Rukavina, Patricia A.
Rukavina and EMD Associates, Inc., as amended by Amendment
to Lease dated January 1, 1994, Amendment to Lease dated
December 15, 1995, and Amendment to Lease dated July 30,
1996.
10.17 -- CE Facility Lease dated February 23, 1998 by and between the
Company and Lockheed Martin Corporation Plan (incorporated
herein by reference to Exhibit 10.15 to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31,
1999).
10.18 -- Sander's Sublease dated February 23, 1998 by and between the
Company and Sanders, a Lockheed Martin Company and a
division of Lockheed Martin Corporation (incorporated herein
by reference to Exhibit 10.16 to the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1999).
10.19 -- First Amendment to CE Facility Lease dated February 21, 2000
by and between the Company and Lockheed Martin Corporation
(incorporated herein by reference to Exhibit 10.17 to the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1999).
10.20 -- First Amendment to Sanders Sublease dated February 24, 2000
by and between the Company and Sanders, a Lockheed Martin
Company and a division of Lockheed Martin Corporation
(incorporated herein by reference to Exhibit 10.18 to the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1999).
15
10.21 -- Lease Agreement dated February 22, 1999 by and between
Serto, S.A. de C.V. and AVEX Electronics de Mexico, S.R.L.
de C.V. (incorporated herein by reference to Exhibit 10.19
to the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1999).
10.22 -- Sublease Agreement dated February 22, 1999 by and between
Operadora Farmaceutica, S.A. de C.V. and AVEX Electronics de
Mexico, S.R.L. de C.V. (incorporated herein by reference to
Exhibit 10.20 to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1999).
10.23 -- Lease Renewal Amendment dated September 29, 2000 by and
between the Company and General Electric Capital Corporation
(incorporated by reference to Exhibit 10.22 to the Company's
Annual Report on Form 10-K for the fiscal year ended
December 31, 2000).
10.24 -- Guarantee dated September 10, 1998 by the Company in favor
of Kilmore Developments Limited (incorporated herein by
reference to Exhibit 10.14 to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1998).
10.25 -- Lease Agreement dated March 9, 2001 by and between BEI
Electronics Ireland Limited and Canada Life Assurance
(Ireland) Limited (incorporated by reference to Exhibit
10.24 to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 2000).
10.26 -- Amended and Restated Credit Agreement dated as of June 23,
2000 by and among the Company, the Borrowing Subsidiaries,
the lenders party thereto, Fleet National Bank, as
documentation agent, Credit Suisse First Boston, as
syndication agent, Bank of America, N.A., Bank One NA and
Sun Trust Bank as co-agents, and Chase Bank of Texas,
National Association, as administrative agent, collateral
agent and issuing bank (incorporated by reference to Exhibit
10.25 to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 2000).
10.27 -- Registration Rights Agreement dated as of August 24, 1999 by
and between the Company and J. M. Huber Corporation
(incorporated by reference from Exhibit 99.2 to Benchmark
Electronics, Inc.'s Form 8-K dated August 24, 1999 and filed
on September 8, 1999).
10.28 -- Registration Agreement dated as of August 9, 1999 by and
among the Company, Salomon Smith Barney Inc. and Chase
Securities Inc. (incorporated by reference from Exhibit 99.4
to Benchmark Electronics, Inc.'s Form 8-K dated August 24,
1999 and filed on September 8, 1999).
10.29 -- Lease Agreement dated September 15, 2000 by and between
Benchmark Electronics Corp. and Nancy E. Thompson, Trustee
of Goat Hollow Realty Trust (incorporated by reference to
Exhibit 10.28 to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 2000).
10.30 -- Lease Agreement dated June 15, 1998 by and between AVEX
Electronics do Brasil Ltda and Lucent Technologies Network
Systems do Brasil S.A. (incorporated by reference to Exhibit
10.29 to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 2000).
16
10.31 -- First Amendment to Lucent Technologies Network Systems do
Brasil S.A. dated June 14, 2000 by and between Benchmark
Electronics Ltda and Lucent Technologies Network Systems do
Brasil S.A. (incorporated by reference to Exhibit 10.30 to
the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1999).
10.32 -- Form of Employment Agreements between the Company and its
Chief Executive Officer, President and Executive Vice
President dated August 1, 2001 (incorporated by reference
from Exhibit 10.1 to Benchmark Electronics, Inc.'s Form 10-Q
dated September 30, 2001 and filed on November 13, 2001).
10.33* -- Severance Agreement between the Company and Gayla J. Delly
dated January 24, 2002.
12* -- Statement regarding Computation of Ratios.
13* -- Benchmark Electronics, Inc. Annual Report to Shareholders
for the fiscal year ended December 31, 2001.
21* -- Subsidiaries of Benchmark Electronics, Inc.
23* -- Consent of Independent Auditors concerning incorporation by
reference in the Company's Registration Statements on Form
S-8 (Registration No. 33-61660, No. 333-26805,
No. 333-28997, No. 333-54186, No. 333-66889, and
No. 333-76207) and on Form S-3 (Registration No. 333-90723
and No. 333-90887).
------------------------
(b) The Company did not file any Current Reports on Form 8-K during the quarter
ended December 31, 2001 or during the period from December 31, 2000 to the
date of this Form 10-K.
17
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
BENCHMARK ELECTRONICS, INC.
By: /s/ DONALD E. NIGBOR
-----------------------------------------
Donald E. Nigbor
CHIEF EXECUTIVE OFFICER
Date: March 15, 2002
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated and on the dates indicated.
NAME POSITION DATE
---- -------- ----
/s/ DONALD E. NIGBOR Chairman of the Board and Chief
------------------------------- Executive Officer March 15, 2002
Donald E. Nigbor (principal executive officer)
/s/ STEVEN A. BARTON
------------------------------- Director and Executive March 15, 2002
Steven A. Barton Vice President
/s/ CARY T. FU
------------------------------- Director and President March 15, 2002
Cary T. Fu (principal operating officer)
/s/ GAYLA J. DELLY Chief Financial Officer
------------------------------- (principal financial March 15, 2002
Gayla J. Delly and accounting officer)
------------------------------- Director
John C. Custer
------------------------------- Director
Peter G. Dorflinger
------------------------------- Director
David H. Arnold
18