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<SEC-DOCUMENT>0000912057-02-010374.txt : 20020415
<SEC-HEADER>0000912057-02-010374.hdr.sgml : 20020415
ACCESSION NUMBER: 0000912057-02-010374
CONFORMED SUBMISSION TYPE: 10-K405
PUBLIC DOCUMENT COUNT: 9
CONFORMED PERIOD OF REPORT: 20011231
FILED AS OF DATE: 20020319
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: BENCHMARK ELECTRONICS INC
CENTRAL INDEX KEY: 0000863436
STANDARD INDUSTRIAL CLASSIFICATION: PRINTED CIRCUIT BOARDS [3672]
IRS NUMBER: 742211011
STATE OF INCORPORATION: TX
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 10-K405
SEC ACT: 1934 Act
SEC FILE NUMBER: 001-10560
FILM NUMBER: 02578128
BUSINESS ADDRESS:
STREET 1: 3000 TECHNOLOGY DRIVE
CITY: ANGLETON
STATE: TX
ZIP: 77515
BUSINESS PHONE: 9798496550
MAIL ADDRESS:
STREET 1: 3000 TECHNOLOGY DR
CITY: ANGLETON
STATE: TX
ZIP: 77515
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K405
<SEQUENCE>1
<FILENAME>a2073293z10-k405.txt
<DESCRIPTION>10-K405
<TEXT>
<Page>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-K
(MARK ONE)
<Table>
<C> <S>
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
</Table>
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001
OR
<Table>
<C> <S>
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
</Table>
FOR THE TRANSITION PERIOD FROM ______________ TO ______________
COMMISSION FILE NUMBER 1-10560
BENCHMARK ELECTRONICS, INC.
(Exact Name of Registrant as Specified in its Charter)
------------------------
<Table>
<S> <C>
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)
</Table>
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
(979) 849-6550
------------------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
<Table>
<Caption>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- -------------------
<S> <C>
Common Stock, par value $0.10 per share New York Stock Exchange, Inc.
Preferred Stock Purchase Rights New York Stock Exchange, Inc.
</Table>
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).
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<Page>
TABLE OF CONTENTS
<Table>
<Caption>
PAGE
--------
<S> <C> <C>
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
</Table>
i
<Page>
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
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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
<Page>
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
<Page>
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
<Page>
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
<Page>
The following table sets forth the percentages of the Company's sales by
industry for 2001, 2000 and 1999.
<Table>
<Caption>
2001 2000 1999
-------- -------- --------
<S> <C> <C> <C>
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
</Table>
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
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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
<Page>
ITEM 2. PROPERTIES
Benchmark currently has 14 facilities worldwide.
[LOGO]
The following chart summarizes the facilities owned or leased by Benchmark
and its subsidiaries:
<Table>
<Caption>
LOCATION SQ. FT. FUNCTION OWNERSHIP
- -------- --------- -------------------------------- --------------
<S> <C> <C> <C>
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
=========
</Table>
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
<Page>
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
<Page>
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
<Page>
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)
<Table>
<Caption>
ADDITIONS
BALANCE AT ---------------------- BALANCE AT
BEGINNING CHARGES TO OTHER END OF
OF PERIOD OPERATIONS ADDITIONS DEDUCTIONS PERIOD
---------- ---------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
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
</Table>
- ------------------------
(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.
11
<Page>
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
12
<Page>
3. EXHIBITS
Each exhibit marked with an asterisk is filed with this Annual Report on
Form 10-K.
<Table>
<Caption>
EXHIBIT
NUMBER DESCRIPTION
--------------------- -----------
<C> <C> <S>
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).
</Table>
13
<Page>
<Table>
<C> <C> <S>
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).
</Table>
14
<Page>
<Table>
<C> <C> <S>
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).
</Table>
15
<Page>
<Table>
<C> <C> <S>
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).
</Table>
16
<Page>
<Table>
<C> <C> <S>
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).
</Table>
- ------------------------
(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
<Page>
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.
<Table>
<S> <C> <C>
BENCHMARK ELECTRONICS, INC.
By: /s/ DONALD E. NIGBOR
-----------------------------------------
Donald E. Nigbor
CHIEF EXECUTIVE OFFICER
</Table>
<Table>
<S> <C>
Date: March 15, 2002
</Table>
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.
<Table>
<Caption>
NAME POSITION DATE
---- -------- ----
<S> <C> <C>
/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
</Table>
18
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-3.2
<SEQUENCE>3
<FILENAME>a2073293zex-3_2.txt
<DESCRIPTION>EX-3.2
<TEXT>
<PAGE>
EXHIBIT 3.2
AMENDED AND RESTATED BYLAWS
OF
BENCHMARK ELECTRONICS, INC.
MARCH 15, 2002
ARTICLE 1
OFFICES AND AGENT
The Corporation may have such offices, either within or without the State
of Texas, as the Board of Directors may designate or as the business of the
Corporation may require from time to time.
The registered office of the Corporation required by the Texas Business
Corporation Act to be maintained in the State of Texas may be, but need not be,
the same as the principal office in the State of Texas, as designated by the
Board of Directors. The address of the registered office or the identity of the
registered agent may be changed from time to time by the Board of Directors.
The address of the registered office of the Corporation is 811 Dallas
Avenue, Houston, Texas 77002, and the name of the registered agent of the
Corporation at such address is C T Corporation System.
ARTICLE 2
SHAREHOLDERS
Section 1. ANNUAL MEETING. The annual meeting of the shareholders shall be
held on such date in each year and at such time and place as may be determined
by the Board of Directors, for the purpose of electing directors and for the
transaction of such other business as may come before the meeting. If the day
fixed for the annual meeting is a legal holiday in the State of Texas, such
meeting shall be held on the next succeeding business day. If the election of
directors is not held on the day designated for the annual meeting of the
shareholders or at any adjournment thereof, the Board of Directors shall cause
the election to be held at a special meeting of the shareholders as soon
thereafter as may be convenient.
Section 2. SPECIAL MEETINGS. Special meetings of the shareholders may be
called by (a) the CHIEF EXECUTIVE OFFICER OR THE President, (b) the Board of
Directors, (c) THE CHIEF
-2-
<PAGE>
EXECUTIVE OFFICER, the President or the Secretary at the request in writing of a
majority of the Board of Directors, or (d) THE CHIEF EXECUTIVE OFFICER, the
President or the Secretary at the request in writing of the holders of at least
ten percent of all the shares entitled to vote at the proposed special meeting.
Any such request to call a special meeting of the shareholders shall state the
purpose or purposes of such meeting.
Section 3. PLACE OF MEETING. The Board of Directors may designate any
place within or without the State of Texas as the place of meeting for any
annual or special meeting of shareholders called by or at the request of the
Board of Directors. If no designation is made, or if a special meeting is called
otherwise than by or at the request of the Board of Directors, the place of
meeting shall be the principal office of the Corporation in the State of Texas.
Section 4. NOTICE OF MEETING. Written or printed notice stating the place,
day and hour of the meeting and, in case of a special meeting, the purpose or
purposes for which the meeting is called, shall be delivered not less than ten
nor more than sixty days before the date of the meeting, either personally or by
mail, by or at the direction of the President, the Secretary, or the officer or
persons calling the meeting, to each shareholder entitled to vote at such
meeting. If mailed, such notice shall be deemed to be delivered when deposited
in the United States mail addressed to the shareholder at his address as it
appears on the share transfer records of the Corporation, with postage thereon
prepaid. Attendance by a shareholder, whether in person or by proxy, at a
shareholder's meeting shall constitute a waiver of notice of such meeting of
which he has had no notice.
The notice of any meeting of shareholders may be accompanied by a form of
proxy and other proxy solicitation materials approved by the Board of Directors.
Section 5. FIXING RECORD DATES FOR MATTERS OTHER THAN CONSENTS TO ACTION.
For the purpose of determining shareholders entitled to notice of or to vote at
any meeting of shareholders or any adjournment thereof, or entitled to receive a
distribution by the Corporation (other than a distribution involving a purchase
or redemption by the Corporation of any of its own shares) or a share dividend,
or in order to make a determination of shareholders for any other proper purpose
(other than determining shareholders entitled to consent to action by
shareholders proposed to be taken without a meeting of shareholders), the Board
of Directors of the Corporation may provide that the share transfer records
shall be closed for a stated period not to exceed, in any case, sixty days. If
the share transfer records shall be closed for the purpose of determining
shareholders entitled to notice of or to vote at a meeting of shareholders, such
records shall be closed for at least ten days immediately preceding such
meeting. In lieu of closing the share transfer records, the Board of Directors
may fix in advance a date as the record date for any such determination of
shareholders, such date in any case to be not more than sixty days and, in the
case of a meeting of shareholders, not less than ten days, prior to the date on
which the particular action requiring such determination of shareholders is to
be taken. If the share transfer records are not closed and no record date is
fixed for the determination of shareholders entitled to notice of or to vote at
a meeting of shareholders, or shareholders entitled to receive a distribution
(other than a distribution involving a purchase or redemption by the Corporation
of any of its own shares) or a share dividend, the date on which notice of the
meeting is mailed or the date on which the resolution of the Board of Directors
declaring such
-3-
<PAGE>
distribution or share dividend is adopted, as the case may be, shall be the
record date for such determination of shareholders. When a determination of
shareholders entitled to vote at any meeting of shareholders has been made as
provided in this Section 5, such determination shall apply to any adjournment
thereof except where the determination has been made through the closing of the
share transfer records and the stated period of closing has expired.
Section 6. FIXING RECORD DATES FOR CONSENTS TO ACTION. Unless a record
date shall have previously been fixed or determined pursuant to Section 5 of
this Article 2, whenever action by shareholders is proposed to be taken by
consent in writing without a meeting of shareholders, the Board of Directors may
fix a record date for the purpose of determining shareholders entitled to
consent to that action, which record date shall not precede, and shall not be
more than ten days after, the date upon which the resolution fixing the record
date is adopted by the Board of Directors. If no record date has been fixed by
the Board of Directors and the prior action of the Board of Directors is not
required by the Texas Business Corporation Act, the record date for determining
shareholders entitled to consent to action in writing without a meeting shall be
the first date on which a signed written consent setting forth the action taken
or proposed to be taken is delivered to the Corporation by delivery to its
registered office, its principal place of business, or an officer or agent of
the Corporation having custody of the books in which proceedings of meetings of
shareholders are recorded. Delivery shall be by hand or by certified or
registered mail, return receipt requested. Delivery to the Corporation's
principal place of business shall be addressed to the President or the CHIEF
EXECUTIVE OFFICER of the Corporation. If no record date shall have been fixed by
the Board of Directors and prior action of the Board of Directors is required by
the Texas Business Corporation Act, the record date for determining shareholders
entitled to consent to action in writing without a meeting shall be at the close
of business on the date on which the Board of Directors adopts a resolution
taking such prior action.
Section 7. VOTING LIST. The officer or agent having charge of the share
transfer records of the Corporation shall make, at least ten days before each
meeting of shareholders, a complete list of the shareholders entitled to vote at
such meeting or any adjournment thereof, arranged in alphabetical order, with
the address of and the number of shares held by each, which list, for a period
of ten days prior to such meeting, shall be kept on file at the registered
office or principal place of business of the Corporation and shall be subject to
inspection by any shareholder at any time during usual business hours. Such list
also shall be produced and kept open at the time and place of the meeting and
shall be subject to the inspection of any shareholder during the whole time of
the meeting. The original share transfer records shall be prima-facie evidence
as to who are the shareholders entitled to examine such list or transfer records
or to vote at any meeting of shareholders. The failure to comply with the
requirements of this Section 7 shall not affect the validity of any action taken
at the meeting.
Section 8. QUORUM OF SHAREHOLDERS. A quorum shall be present at a meeting
of shareholders if the holders of a majority of the shares entitled to vote are
represented at the meeting in person or by proxy. Once a quorum is present at a
meeting of shareholders, the shareholders represented in person or by proxy at
the meeting may conduct such business as may be properly brought before the
meeting until it is adjourned, and the subsequent withdrawal from the meeting of
any shareholder or the refusal of any shareholder represented in person or by
proxy to vote shall not affect the presence of a quorum at the meeting. The
shareholders
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represented in person or by proxy at a meeting of shareholders at which a quorum
is not present may adjourn the meeting until such time and to such place as may
be determined by a vote of the holders of a majority of the shares represented
in person or by proxy at that meeting.
Section 9. PROXIES. Any shareholder may vote either in person or by proxy
executed in writing by the shareholder. A telegram, telex, cablegram or similar
transmission by the shareholder, or a photographic, photostatic, facsimile or
similar reproduction of a writing executed by the shareholder, shall be treated
as an execution in writing for purposes of this Section 9. No proxy shall be
valid after eleven months from the date of its execution unless otherwise
provided in the proxy. A proxy shall be revocable unless the proxy form
conspicuously states that the proxy is irrevocable and the proxy is coupled with
an interest.
Section 10. VOTING RIGHTS. Except as otherwise expressly provided in any
resolution or resolutions adopted by the Board of Directors establishing any
series of Preferred Stock, the exclusive voting power of the Corporation shall
be vested in the Common Stock. Except as otherwise expressly provided in any
such resolution or resolutions, or as otherwise provided by the Texas Business
Corporation Act, each outstanding share of Common Stock shall be entitled to one
vote on each matter submitted to a vote at a meeting of shareholders.
Section 11. VOTING REQUIREMENT. With respect to any matter, other than the
election of directors or a matter for which the affirmative vote of the holders
of a specified portion of the shares entitled to vote is required by the Texas
Business Corporation Act, the act of the shareholders shall be the affirmative
vote of the holders of a majority of the shares entitled to vote on that matter
and represented in person or by proxy at a meeting of shareholders at which a
quorum is present.
With respect to the election of directors, a director shall be elected
only if the director receives the vote of the holders of a majority of the
shares entitled to vote in the election of directors and represented in person
or by proxy at a meeting of shareholders at which a quorum is present.
With respect to any matter for which the affirmative vote of the holders
of a specified portion of the shares entitled to vote is required by the Texas
Business Corporation Act, the act of the shareholders on that matter shall be
the affirmative vote of the holders of a majority of the shares entitled to vote
on that matter, rather than the affirmative vote otherwise required by the Texas
Business Corporation Act.
Section 12. BUSINESS AT MEETING. To be properly brought before any meeting
of shareholders for consideration, the business must be (a) specified in the
notice of meeting given pursuant to Section 4 of this Article 2, (b) properly
brought before the meeting by or at the direction of the Board of Directors, or
(c) properly brought before the meeting by a shareholder.
If a shareholder desires to bring business before a meeting for
consideration, the shareholder must submit a written notice of the proposed
business to the Secretary as provided herein. In the case of the annual meeting
of shareholders, the shareholder's notice must be received at the principal
office of the Corporation not less than sixty days in advance of the date
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of the Corporation's notice of annual meeting given in connection with the
previous year's annual meeting of shareholders. If no such annual meeting was
held in the previous year or the date of the current year's annual meeting has
been changed by more than thirty days from the date contemplated in the previous
year's notice of annual meeting, the shareholder's notice must be received by
the Corporation a reasonable period of time before the date of the Corporation's
notice of annual meeting for the current year and any accompanying solicitation
of proxies are made. In the case of a special meeting of shareholders, the
shareholder's notice must be received at the principal office of the Corporation
a reasonable period of time prior to the date of the meeting to allow sufficient
time for the dissemination of information to the shareholders entitled to vote
at such meeting; provided, however, that if at least thirty days' notice of the
meeting has been given to the shareholders, the shareholder's notice must be
received by the Corporation no later than ten days prior to the date of the
meeting.
A shareholder's notice of proposed business shall set forth as to each
matter that the shareholder proposes to bring before the meeting of shareholders
the following information: (a) a brief description of the business proposed to
be brought before the meeting and the reason or reasons for conducting such
business at the meeting; (b) the name and address of the shareholder proposing
such business; (c) the class, series (if applicable), and number of shares of
the Corporation that such shareholder owns beneficially; (d) any material
interest of the shareholder in the proposed business; and (e) if the business
that the shareholder proposes to bring before the meeting of shareholders is the
election to the Board of Directors of a person or persons to be nominated by or
on behalf of the shareholder, the information set forth in Section 8 of Article
3.
After receipt of the shareholder's notice of proposed business but before
the commencement of the meeting of shareholders, the Board of Directors, to the
extent allowed by law, may consider the subject matter of the proposed business
and the reason or reasons for conducting such business at the meeting to
determine whether such business should be considered. Proposed business, notice
of which is submitted by a shareholder in accordance with the foregoing
procedures, shall be considered at the meeting of shareholders unless the Board
of Directors determines that the proposed business should not be conducted at
the meeting. If the business is not to be considered at the meeting, the Board
of Directors shall notify the presiding officer of the meeting of such
determination, and such presiding officer shall declare to the meeting that such
proposed business is not properly before the meeting and will not be considered.
In addition, with respect to any business proposed to be considered, the
presiding officer of the meeting may determine that such business has not been
brought properly before the meeting in accordance with the foregoing procedures
and, if such determination is made, such proposed business will not be
considered at the meeting.
Section 13. ACTIONS WITHOUT MEETING. Any action required by the Texas
Business Corporation Act to be taken at any annual or special meeting of
shareholders, or any action which may be taken at any annual or special meeting
of shareholders, may be taken without a meeting, without prior notice, and
without a vote, if a consent or consents in writing, setting forth the action so
taken, shall be signed by the holder or holders of all the shares entitled to
vote with respect to the action that is the subject of the consent.
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Every written consent shall bear the date of signature of each shareholder
who signs the consent. No written consent shall be effective to take the action
that is the subject of the consent unless, within sixty days after the date of
the earliest dated consent delivered to the Corporation in the manner required
by this Section 13, a consent or consents signed by the holder or holders of
shares having not less than the minimum number of votes that would be necessary
to take the action that is the subject of the consent are delivered to the
Corporation by delivery to its registered office, its principal place of
business, or an officer or agent of the Corporation having custody of the books
in which proceedings of meetings of shareholders are recorded. Delivery shall be
by hand or by certified or registered mail, return receipt requested. Delivery
to the Corporation's principal place of business shall be addressed to the
President or principal executive officer of the Corporation.
A telegram, telex, cablegram or similar transmission by a shareholder, or
a photographic, photostatic, facsimile or similar reproduction of a writing
signed by a shareholder, shall be regarded as signed by the shareholder for
purposes of this Section 13.
Prompt notice of the taking of any action by shareholders without a
meeting by less than unanimous written consent shall be given to those
shareholders who did not consent in writing to the action.
Section 14. TELEPHONE MEETINGS. Subject to the provisions required or
permitted by the Texas Business Corporation Act for notice of meetings,
shareholders may participate in and hold a meeting of such shareholders by means
of conference telephone or similar communications equipment whereby all persons
participating in the meeting can hear and speak to each other.
ARTICLE 3
BOARD OF DIRECTORS
Section 1. POWER. The powers of the Corporation shall be exercised by or
under the authority of, and the business and affairs of the Corporation shall be
managed under the direction of, the Board of Directors of the Corporation.
Section 2. NUMBER, TENURE AND QUALIFICATIONS. The Board of Directors shall
consist of NOT LESS THAN FIVE NOR MORE THAN NINE members. The number of
directors may be increased or decreased from time to time by amendment to these
Amended and Restated Bylaws, but no decrease shall have the effect of shortening
the term of any incumbent director. Unless removed in accordance with the
provisions of these Amended and Restated Bylaws, each director shall hold office
until the next annual meeting of shareholders, and until his successor shall
have been elected and qualified. A director need not be a resident of the State
of Texas or a shareholder of the Corporation.
Section 3. REGULAR MEETINGS. A regular meeting of the Board of Directors
shall be held without notice other than this Section 3 immediately after, and at
the same place as, the annual meeting of shareholders. The Board of Directors
may provide, by resolution, the time and place,
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either within or without the State of Texas, for the holding of additional
regular meetings without notice other than such resolution.
Section 4. SPECIAL MEETINGS. Special meetings of the Board of Directors
may be called by or at the request of the CHAIRMAN of the Board of Directors,
THE CHIEF EXECUTIVE OFFICER, the President or any two directors. The person or
persons authorized to call special meetings of the Board of Directors may fix
any place, either within or without the State of Texas, as the place for holding
any special meeting called by such person or persons.
Section 5. NOTICE. Notice of any special meeting of the Board of Directors
shall be given at least one day prior thereto by written notice delivered
personally or mailed to each director at his business address, or by telegram,
telex, telecopy or similar means of visual data transmission. If mailed, such
notice shall be deemed to be delivered three days after deposited in the United
States mail so addressed, with postage thereon prepaid. If notice is given by
telegram, telex, telecopy or similar means of visual data transmission, such
notice shall be deemed to be delivered when transmitted for delivery to the
recipient. Any director may waive notice of any meeting. The attendance of a
director at a meeting shall constitute a waiver of notice of such meeting,
except where a director attends a meeting for the express purpose of objecting
to the transaction of any business on the grounds that such meeting is not
lawfully called or convened. Neither the business to be transacted at, nor the
purpose of, any regular or special meeting of the Board of Directors need be
specified in the notice or waiver of notice of such meeting.
Section 6. QUORUM. A majority of the number of directors fixed in Section
2 of this Article 3 shall constitute a quorum for the transaction of business at
any meeting of the Board of Directors. If less than a majority of such number of
directors is present at a meeting, a majority of the directors present may
adjourn such meeting from time to time without further notice.
Section 7. MANNER OF ACTING.
(a) ACTIONS AT MEETING. Except as provided in Paragraph (b) of this
Section 7, the act of the majority of the directors present at a meeting at
which a quorum is present shall be the act of the Board of Directors.
(b) ACTIONS WITHOUT MEETING. Any action required or permitted to be
taken at a meeting of the Board of Directors or any committee may be taken
without a meeting if a consent in writing, setting forth the action so taken, is
signed by all the members of the Board of Directors or committee, as the case
may be. Such consent shall have the same force and effect as a unanimous vote at
a meeting. A telegram, telex, cablegram or similar transmission by a director,
or a photographic, photostatic, facsimile or similar reproduction of a writing
signed by a director, shall be regarded as signed by the director for purposes
of this Paragraph (b).
(c) TELEPHONE MEETINGS. Subject to the provisions required or
permitted by the Texas Business Corporation Act for notice of meetings, members
of the Board of Directors or any committee designated by the Board of Directors
may participate in and hold a meeting of the Board of Directors or such
committee by means of conference telephone or similar
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communications equipment by means of which all persons participating in the
meeting can hear and speak to each other.
Section 8. NOMINATIONS FOR ELECTION. Nominations of persons for election
to the Board of Directors at the annual meeting of shareholders or any special
meeting of shareholders called for the specific purpose of electing directors
may be made at any such meeting (a) by or at the direction of the Board of
Directors, any nominating committee thereof, or any person appointed by the
Board of Directors or such committee to make such nominations, or (b) by any
shareholder entitled to vote for the election of directors who complies with the
procedures set forth in this Section 8 as well as Section 12 of Article 2.
The shareholder's notice with respect to the nomination of persons for
election to the Board of Directors shall set forth, as to each person whom the
shareholder proposes to nominate, (a) the nominee's name, age, business and
residence address; (b) the principal occupation or employment of the nominee;
(c) the class, series (if applicable), and number of shares of the Corporation
that the nominee owns beneficially; and (d) any other information relating to
the nominee that is required to be disclosed in solicitations of proxies for the
election of directors pursuant to Regulation 14A under the Securities Exchange
Act of 1934, as amended, including, without limitation, the nominee's consent to
being named in the proxy statement as a nominee and to serving as a director if
elected. The Corporation may require any proposed nominee to furnish such other
information as may reasonably be required by the Corporation to determine the
eligibility of such proposed nominee to serve as a director of the Corporation.
No person shall be eligible for nomination as a director of the
Corporation at any meeting of shareholders unless such person is nominated in
accordance with the procedures set forth herein. The presiding officer of the
meeting may determine that a proposed nomination was not made in accordance with
such procedures and, if such determination is made, such proposed nomination
will not be considered at the meeting.
Section 9. REMOVAL. At any meeting of shareholders called expressly for
the purpose of removal, any director or the entire Board of Directors may be
removed, with or without cause, by a vote of the holders of a majority of the
shares then entitled to vote at an election of directors. In the event that any
director is so removed, a new director may be elected at the same meeting for
the unexpired term of the director so removed. The failure to elect a director
to fill the unexpired term of any director so removed shall be deemed to create
a vacancy in the Board of Directors.
Section 10. VACANCIES. A vacancy in the Board of Directors shall be deemed
to exist by reason of the death or resignation of a director or upon the failure
of shareholders to elect a director to fill the unexpired term of any director
removed in accordance with the provisions of Section 9 of this Article 3.
Any vacancy occurring in the Board of Directors may be filled (a) by
election at an annual or special meeting of shareholders called for that
purpose, or (b) by a majority of the remaining directors though less than a
quorum of the Board of Directors, provided that the remaining directors may not
fill more than two such directorships during the period between any two
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successive annual meetings of shareholders. A director elected to fill a vacancy
shall be elected for the unexpired term of his predecessor in office.
Section 11. COMMITTEES OF BOARD OF DIRECTORS. The Board of Directors, by
resolution adopted by a majority of the full Board of Directors, may designate
from among its members one or more committees, each of which shall be comprised
of one or more of its members, and may designate one or more of its members as
alternative members of any committee, who may, subject to any limitations
imposed by the Board of Directors, replace absent or disqualified members at any
meeting of that committee. Any such committee, to the extent provided in such
resolution, shall have and may exercise all of the authority of the Board of
Directors, subject to the limitations set forth in the Texas Business
Corporation Act. The designation of a committee of the Board of Directors and
the delegation thereto of authority shall not operate to relieve the Board of
Directors, or any member thereof, of any responsibility imposed by law.
Section 12. COMPENSATION. By resolution of the Board of Directors, the
directors may be paid their expenses, if any, of attendance at each meeting of
the Board of Directors or any committee, and may be paid a fixed sum for
attendance at each meeting of the Board of Directors or any committee or a
stated salary as directors or committee members. No such payment shall preclude
any director from serving the Corporation in any other capacity and receiving
compensation therefor.
Section 13. PRESUMPTION OF ASSENT. A director of the Corporation who is
present at a meeting of the Board of Directors or any committee at which action
on any corporate matter is taken shall be presumed to have assented to the
action taken unless his dissent shall be entered in the minutes of the meeting
or unless he shall file his written dissent to such action with the person
acting as the secretary of the meeting before the adjournment thereof or shall
forward such dissent by registered mail to the Secretary of the Corporation
immediately after the adjournment of the meeting. Such right to dissent shall
not apply to a director who voted in favor of such action.
ARTICLE 4
OFFICERS
Section 1. OFFICES. The officers of the Corporation shall consist of a
CHAIRMAN OF THE BOARD OF DIRECTORS, A CHIEF EXECUTIVE OFFICER, A President, one
or more Vice Presidents (the number and specific titles thereof to be determined
by the Board of Directors), a Secretary, A CHIEF FINANCIAL OFFICER and a
Treasurer, each of whom shall be elected by the Board of Directors. Such other
officers, including assistant officers, and agents as may be deemed necessary
may be elected or appointed by the Board of Directors. Any two or more offices
may be held by the same person.
Section 2. ELECTION AND TERM OF OFFICE. The officers of the Corporation
shall be elected annually by the Board of Directors at the regular meeting of
the Board of Directors held after each annual meeting of the shareholders. If
the election of officers is not held at such meeting, such election shall be
held as soon thereafter as may be convenient. Each officer shall hold office
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until his successor shall have been duly elected and qualified, or until his
earlier death, resignation or removal in accordance with the provisions of
Section 3 of this Article 4.
Section 3. REMOVAL. Any officer or agent may be removed by the Board of
Directors whenever in its judgment the best interests of the Corporation will be
served thereby, but such removal shall be without prejudice to the contract
rights, if any, of the person so removed.
Section 4. VACANCIES. A vacancy in any office occurring for any reason may
be filled by the Board of Directors. An officer elected to fill a vacancy shall
be elected for the unexpired term of his predecessor in office.
Section 5. POWERS AND DUTIES OF THE CHAIRMAN OF THE BOARD. THE CHAIRMAN OF
THE BOARD, IF ANY, SHALL PRESIDE AT ALL MEETINGS OF SHAREHOLDERS AND OF THE
BOARD OF DIRECTORS, AND SHALL HAVE SUCH OTHER AUTHORITY AND PERFORM SUCH OTHER
DUTIES AS ARE PRESCRIBED BY LAW, THE ARTICLES OF INCORPORATION, THESE BYLAWS OR
BY THE BOARD OF DIRECTORS.
SECTION 6. POWERS AND DUTIES OF THE CHIEF EXECUTIVE OFFICER. THE CHIEF
EXECUTIVE OFFICER SHALL BE THE CHIEF EXECUTIVE OFFICER OF THE CORPORATION.
SUBJECT TO THE CONTROL OF THE BOARD OF DIRECTORS AND THE EXECUTIVE COMMITTEE (IF
ANY), THE CHIEF EXECUTIVE OFFICER SHALL HAVE GENERAL EXECUTIVE CHARGE,
MANAGEMENT AND CONTROL OF THE PROPERTIES, BUSINESS AND OPERATIONS OF THE
CORPORATION WITH ALL SUCH POWERS AS MAY BE REASONABLY INCIDENT TO SUCH
RESPONSIBILITIES; MAY AGREE UPON AND EXECUTE ALL LEASES, CONTRACTS, EVIDENCES OF
INDEBTEDNESS AND OTHER OBLIGATIONS IN THE NAME OF THE CORPORATION; MAY SIGN ALL
CERTIFICATES FOR SHARES OF CAPITAL STOCK OF THE CORPORATION; AND SHALL HAVE SUCH
OTHER POWERS AND DUTIES AS DESIGNATED IN ACCORDANCE WITH THESE BYLAWS AND AS
FROM TIME TO TIME MAY BE ASSIGNED TO THE CHIEF EXECUTIVE OFFICER BY THE BOARD OF
DIRECTORS. IN THE ABSENCE OF THE CHAIRMAN OF THE BOARD (OR IF THERE BE NO
CHAIRMAN OF THE BOARD), THE CHIEF EXECUTIVE OFFICER SHALL PRESIDE AT ALL
MEETINGS OF THE SHAREHOLDERS AND, IF THE CHIEF EXECUTIVE OFFICER SHALL ALSO BE A
DIRECTOR, AT ALL MEETINGS OF THE BOARD OF DIRECTORS.
SECTION 7. POWERS AND DUTIES OF THE PRESIDENT. THE PRESIDENT SHALL REPORT
TO THE CHIEF EXECUTIVE OFFICER AND SHALL SERVE AS THE CHIEF OPERATING OFFICER OF
THE CORPORATION. SUBJECT TO THE CONTROL OF THE BOARD OF DIRECTORS, THE EXECUTIVE
COMMITTEE (IF ANY) AND THE CHIEF EXECUTIVE OFFICER, THE PRESIDENT SHALL HAVE
GENERAL EXECUTIVE CHARGE, MANAGEMENT AND CONTROL OF THE PROPERTIES, BUSINESS AND
OPERATIONS OF THE CORPORATION WITH ALL SUCH POWERS AS MAY BE REASONABLY INCIDENT
TO SUCH RESPONSIBILITIES; MAY AGREE UPON AND EXECUTE ALL LEASES, CONTRACTS,
EVIDENCES OF INDEBTEDNESS AND OTHER OBLIGATIONS IN THE NAME OF THE CORPORATION;
MAY SIGN ALL CERTIFICATES FOR SHARES OF CAPITAL STOCK OF THE CORPORATION; AND
SHALL HAVE SUCH OTHER POWERS AND DUTIES AS DESIGNATED IN ACCORDANCE WITH THESE
BYLAWS AND AS FROM TIME TO TIME MAY BE ASSIGNED TO THE PRESIDENT BY THE CHIEF
EXECUTIVE OFFICER OR BY THE BOARD OF DIRECTORS. IN THE ABSENCE OF THE CHAIRMAN
OF THE BOARD AND THE CHIEF EXECUTIVE OFFICER, THE PRESIDENT SHALL PRESIDE AT ALL
MEETINGS OF THE SHAREHOLDERS.
Section 8. VICE PRESIDENTS. In the absence of the CHIEF EXECUTIVE OFFICER
AND President, or in the event of THEIR DEATHS or inability or refusal to act,
the Vice President (or if there is more than one Vice President, the Vice
Presidents in the order designated at the time of
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their election, or in the absence of any such designation, in the order of their
election) shall perform the duties of the CHIEF EXECUTIVE OFFICER, and when so
acting, shall have all the powers of and be subject to all the restrictions upon
the CHIEF EXECUTIVE OFFICER. Each Vice President shall perform such other duties
as the CHIEF EXECUTIVE OFFICER, President or the Board of Directors may assign
to him from time to time.
Section 9. SECRETARY. The Secretary shall (a) keep the minutes of the
meetings of the shareholders and of the Board of Directors in one or more books
provided for that purpose; (b) see that all notices are duly given in accordance
with the provisions of these Amended and Restated Bylaws or as required by law;
(c) have custody of, and be responsible for, the corporate records and the seal
of the Corporation, and see that the seal of the Corporation is affixed to all
documents as may be necessary or appropriate; (d) keep a register of the post
office address of each shareholder furnished to the Secretary by such
shareholder; (e) have general charge of the share transfer records of the
Corporation; and (f) in general, perform all duties incident to the office of
the Secretary and such other duties the President or the Board of Directors may
assign to him from time to time.
SECTION 10. CHIEF FINANCIAL OFFICER. THE CHIEF FINANCIAL OFFICER SHALL
REPORT TO THE PRESIDENT. THE CHIEF FINANCIAL OFFICER SHALL KEEP AND MAINTAIN, OR
CAUSE TO BE KEPT AND MAINTAINED, ADEQUATE AND CORRECT BOOKS AND RECORDS OF
ACCOUNT IN WRITTEN FORM OR ANY OTHER FORM CAPABLE OF BEING CONVERTED INTO
WRITTEN FORM. THE CHIEF FINANCIAL OFFICER SHALL DEPOSIT, OR CAUSE TO BE
DEPOSITED, ALL MONIES AND OTHER VALUABLES IN THE NAME AND TO THE CREDIT OF THE
CORPORATION WITH SUCH DEPOSITORIES AS MAY BE DESIGNATED BY THE BOARD OF
DIRECTORS. THE CHIEF FINANCIAL OFFICER SHALL DISBURSE ALL FUNDS OF THE
CORPORATION AS MAY BE ORDERED BY THE BOARD OF DIRECTORS, SHALL RENDER TO THE
CHIEF EXECUTIVE OFFICER, THE PRESIDENT AND THE MEMBERS OF THE BOARD OF
DIRECTORS, WHENEVER THEY REQUEST IT, AN ACCOUNT OF THE FINANCIAL CONDITION OF
THE CORPORATION, SHALL PERFORM OTHER DUTIES COMMONLY INCIDENT TO SUCH OFFICE AND
SHALL HAVE SUCH OTHER POWERS AND PERFORM SUCH OTHER DUTIES AS MAY BE PRESCRIBED
BY THE BOARD OF DIRECTORS, THE CHIEF EXECUTIVE OFFICER OR THE PRESIDENT. THE
CHIEF EXECUTIVE OFFICER OR PRESIDENT MAY DIRECT THE TREASURER TO ASSUME AND
PERFORM THE DUTIES OF THE CHIEF FINANCIAL OFFICER IN THE ABSENCE OR DISABILITY
OF THE CHIEF FINANCIAL OFFICER, AND THE TREASURER SHALL PERFORM OTHER DUTIES
COMMONLY INCIDENT TO SUCH OFFICE AND SHALL ALSO PERFORM SUCH OTHER DUTIES AND
HAVE SUCH OTHER POWERS AS THE BOARD OF DIRECTORS, THE CHIEF EXECUTIVE OFFICER,
THE PRESIDENT OR THE CHIEF FINANCIAL OFFICER SHALL DESIGNATE FROM TIME TO TIME.
Section 11. TREASURER. THE TREASURER SHALL REPORT TO THE CHIEF FINANCIAL
OFFICER. SUBJECT TO CONTROL OF THE CHIEF FINANCIAL OFFICER, the Treasurer shall
(a) have charge and custody of, and be responsible for, all funds and securities
of the Corporation from any source whatsoever, and deposit all such funds in the
name of the Corporation in such banks, trust companies or other depositories as
shall be selected by the Board of Directors; and (b) in general, perform all
duties incident to the office of the Treasurer and such other duties as the
CHIEF EXECUTIVE OFFICER, the President or the Board of Directors may assign to
him from time to time. If required by the Board of Directors, the Treasurer
shall give a bond for the faithful discharge of his duties in such sum, and with
such surety or sureties, as the Board of Directors shall determine.
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Section 12. ASSISTANT SECRETARIES AND ASSISTANT TREASURERS. The Assistant
Secretaries, when authorized by the Board of Directors, may sign with the
President or a Vice President certificates for shares of the Corporation, the
issuance of which shall have been authorized by the Board of Directors. The
Assistant Treasurers, if required by the Board of Directors, shall give bonds
for the faithful discharge of their duties in such sums, and with such sureties,
as the Board of Directors shall determine. The Assistant Secretaries and the
Assistant Treasurers, in general, shall perform such duties as the Secretary or
the Treasurer, respectively, the President or the Board of Directors may assign
to them from time to time.
Section 13. SALARIES. The salaries, if any, of the officers shall be fixed
by the Board of Directors from time to time, and no officer shall be prevented
from receiving such salary by reason of the fact that he also is a director of
the Corporation.
ARTICLE 5
CERTIFICATES REPRESENTING SHARES, TRANSFER AND REPLACEMENT
Section 1. CERTIFICATES REPRESENTING SHARES. Certificates representing
shares of the Corporation shall be in such form as shall be determined by the
Board of Directors. The certificates shall be signed by the CHIEF EXECUTIVE
OFFICER, OR THE President, or a Vice President and by the Secretary or an
Assistant Secretary, and the signatures of such officers on such certificates
may be facsimiles. The certificates may be sealed with the seal of the
Corporation or a facsimile thereof. In case any officer who has signed or whose
facsimile signature has been placed upon any certificate shall have ceased to be
such officer before such certificate is issued, it may be issued by the
Corporation with the same effect as if he were such officer at the date of its
issuance. All certificates for shares shall be consecutively numbered or
otherwise identified. The name and address of the person to whom the shares
represented thereby are issued, together with the number of shares and date of
issue, shall be entered in the share transfer records of the Corporation. All
certificates surrendered to the Corporation for transfer shall be cancelled, and
no new certificate shall be issued until the former certificate for a like
number of shares shall have been surrendered and cancelled, except that in case
of a lost, stolen or destroyed certificate, a new certificate may be issued
therefor as provided in Section 3 of this Article 5.
Section 2. TRANSFER OF SHARES. A transfer of shares of the Corporation
shall be made only in the share transfer records of the Corporation by the
holder of record thereof, or by his legal representative who shall furnish
proper evidence of authority to transfer, or by his attorney thereunto
authorized by power of attorney, duly executed and filed with the Secretary of
the Corporation, and on surrender for cancellation of the certificate for such
shares. The Corporation shall regard the person in whose name any shares issued
by the Corporation are registered in the share transfer records of the
Corporation at any particular time (including, without limitation, as of a
record date fixed pursuant to Section 5 or 6 of Article 2) as the owner of those
shares at that time for the purposes specified by the Texas Business Corporation
Act.
Section 3. LOST, STOLEN OR DESTROYED CERTIFICATES. The Corporation shall
issue a new certificate in place of any certificate representing shares
previously issued if the registered owner
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of the certificate (a) makes proof in affidavit form that it has been lost,
destroyed or wrongfully taken; (b) requests the issuance of a new certificate
before the Corporation has notice that the certificate has been acquired by a
purchaser for value in good faith and without notice of an adverse claim; (c)
gives a bond in such form, and with such surety or sureties, with fixed or open
penalty, as the Corporation may direct, or indemnifies the Corporation (and its
transfer agent and registrar, if any) against any claim that may be made on
account of the alleged loss, destruction or theft of the certificate; and (d)
satisfies any other reasonable requirements imposed by the Corporation. If a
certificate has been lost, apparently destroyed or wrongfully taken, and the
registered holder of the shares represented thereby fails to notify the
Corporation within a reasonable time after he has notice of it, and the
Corporation registers a transfer of such shares before receiving such
notification, the registered holder shall be precluded from making any claim
against the Corporation for the transfer or for a new certificate.
ARTICLE 6
FISCAL YEAR
The Board of Directors, by resolution, shall fix the fiscal year of the
Corporation.
ARTICLE 7
DISTRIBUTIONS
The Board of Directors may authorize, and the Corporation may make,
distributions subject to any restrictions in its Articles of Incorporation and
to the limitations set forth in the Texas Business Corporation Act.
ARTICLE 8
INDEMNIFICATION
Section 1. INDEMNIFICATION. As permitted by Section G of Article 2.02-1 of
the Texas Business Corporation Act (the "Indemnification Article"), the
Corporation (a) makes mandatory the indemnification permitted under Section B of
the Indemnification Article as contemplated by Section G thereof, and (b) agrees
to advance the reasonable expenses of a director upon such director's compliance
with the requirements of Sections K and L of the Indemnification Article.
Section 2. NON-EXCLUSIVITY. The provisions of Section 1 of this Article 8
shall not be deemed exclusive of any other rights to which any director of the
Corporation may be entitled under any agreement, pursuant to a vote of the Board
of Directors, any committee thereof or the shareholders, as a matter of law or
otherwise, either as to action in his official capacity or as to action in
another capacity while holding such office, shall continue as to a person who
has ceased to be a director, and shall inure to the benefit of the heirs,
executors and administrators of such person.
-14-
<PAGE>
Section 3. LIMITATION. No person shall be entitled to indemnification
pursuant to this Article 8 in relation to any matter as to which indemnification
shall not be permitted by law.
Section 4. DEFINED TERMS. Terms used herein that are defined in the
Indemnification Article shall have the respective meanings set forth therein.
ARTICLE 9
SEAL
The Board of Directors shall provide for a corporate seal, which shall be
circular in form and shall have inscribed thereon the name of the Corporation,
the state of incorporation, and the five-pointed Texas star.
ARTICLE 10
WAIVER OF NOTICE
Whenever any notice is required to be given to any shareholder or director
of the Corporation under the provisions of the Articles of Incorporation, these
Amended and Restated Bylaws or the Texas Business Corporation Act, a waiver
thereof in writing signed by the person or persons entitled to such notice,
whether before or after the time stated therein, shall be deemed equivalent to
the giving of such notice.
ARTICLE 11
PROCEDURE
Meetings of the shareholders and of the Board of Directors shall be
conducted in accordance with the procedures ESTABLISHED BY THE PRESIDING OFFICER
OF THE MEETING.
ARTICLE 12
PARTICIPATION OF DIRECTORS AND
OFFICERS IN RELATED BUSINESSES
Unless otherwise provided by contract, directors and officers of the
Corporation may hold positions as directors and officers of other corporations
in related businesses, and their efforts to advance the interests of those
corporations will not create a breach of fiduciary duty to this Corporation in
the absence of bad faith.
-15-
<PAGE>
ARTICLE 13
AMENDMENT
These Amended and Restated Bylaws may be amended or repealed, as to all or
some portion thereof, and new bylaws may be adopted, by (a) the Board of
Directors or (b) the shareholders.
-16-
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.15
<SEQUENCE>4
<FILENAME>a2073293zex-10_15.txt
<DESCRIPTION>EXHIBIT 10.15
<TEXT>
<PAGE>
EXHIBIT 10.15
LEASE
This agreement is made and entered into as of July 30, 1996, by and
between David H. Arnold and Muriel M. Arnold, husband and wife, and Daniel M.
Rukavina and Patricia A. Rukavina, husband and wife, parties of the first part,
Lessors, and EMD Associates, Inc., a Minnesota corporation, party of the second
part, Lessee;
WITNESSETH:
That the said parties of the first part, in consideration of the tents and
covenants hereinafter mentioned, do hereby demise, lease and let unto the said
party of the second part, and the said party of the second part does hereby hire
and take from the said parties of the first part the premises situated at 4155
Theurer Boulevard, Goodview, Minnesota, legally described as Lots Four (4) and
Five (5), Block One (1), Goodview Industrial Park.
TO HAVE AND TO HOLD the above rented premises unto the said Lessee, its
successors and assigns, just as they are, without any liability or obligation on
the part of said Lessors of making any alterations, improvements or repairs of
any kind on or about said premises, except as expressly provided herein, for and
during the full term of ten (10) years from and after September 1, 1996, and
thereafter from year to year until terminated by either party by providing the
other party with written notice of such party's election to terminate the lease
not less than 180 days prior to the expiration of the term (as the term may be
extended year to year as provided herein), for the following purposes, to-wit:
Offices and manufacturing or other similar lawful uses.
And the said Lessee agrees to and with the said Lessors to pay as rent for
the above mentioned premises the sum of Seventeen Thousand One Hundred Fifty and
no/100 ($17,150.00) Dollars per month during the full term of this lease.
Lessee shall be afforded reasonable access to the leased premises before
September 1, 1996, to make improvements and prepare the premises for its use,
provided Lessee shall not interfere with occupancy and use of the leased
premises by Lessors and their current tenant. If Lessors and their current
tenant vacate part of the leased premises before the commencement date of this
lease specified above, and Lessee elects to occupy and use such vacated part,
this lease shall commence with the date such use begins, and the rent specified
herein shall be equitably prorated for the period before the specified
commencement date.
The Lessee, for itself, its successors and assigns, hereby covenants with
the Lessors, their heirs, executors, administrators, and assigns:
(1) That it will promptly pay all gas, oil, electric, light, sewage, water
rates or charges which may become payable during the continuance of this lease
for gas, oil, electric, light and water used on said premises.
-1-
<PAGE>
(2) That it will keep all and singular the said building and premises,
including the plumbing and heating plant and all driveways, parking areas and
other appurtenances, in such repair as the same are at the commencement of the
said term or may be put in during the continuance thereof, reasonable wear and
tear and damage by fire or extended coverage perils only excepted, and will
promptly replace all glass thereof broken during the said term by other of the
same quality and size.
(3) That it will not injure, overload or deface or suffer to be injured,
overloaded or defaced the premises or any part thereof.
(4) That it will save harmless and indemnify the Lessors from and against
all loss, liability or expense that may be incurred by reason of any accident
with the machinery, pipes or from any damage or neglect arising from or in any
way growing out of the misuse or abuse of the city water or from the bursting of
any pipes or from any neglect in not removing snow and ice from the premises; or
from any accident or other occurrence on or about said premises.
(5) That it will not make or suffer any unlawful, improper or offensive
use of the premises or any use or occupancy thereof contrary to any law of the
State or any ordinance of the City now or hereafter made, or which shall be
injurious to any person or property or which shall be liable to endanger or
affect any insurance on the said building or to increase the premium thereof.
(6) That it will not make any alterations or additions in or to the
premises without the written consent of the Lessors; nor suffer any holes to be
made or drilled in the outside stone or brick work; nor to suffer any signs to
be placed upon the building except such as the Lessors shall in writing approve.
(7) Lessee shall not assign, underlet or part with the possession of the
whole or any part of the demised premises without first obtaining the written
consent of the Lessors.
(8) Lessors at all reasonable times may enter to view the premises and to
make repairs which Lessors may see fit to make, or to show the premises to
persons who may wish to buy or lease, and that during three (3) months next
preceding the expiration of the term Lessors will be permitted to place and keep
next to the sidewalk in the front of said premises a notice 24" x 24" that the
premises are for rent or sale.
(9) That at the expiration of said term Lessee will peaceably yield up to
Lessors or those having their estates therein the premises and all erections or
additions made upon the same in good repair in all respects, reasonable use and
wear and damage by fire and other unavoidable casualty excepted, as the same now
are or may be put in by Lessors.
(10) That all property of any kind that may be on the premises during the
continuance of this lease shall be at the sole risk of the Lessee, and that the
Lessors shall not be liable to the Lessee
-2-
<PAGE>
or any other persons for any injury, loss or damage to property or to any person
on the premises; and neither Lessee nor Lessors will make any claim against the
other for losses arising by reason of fire or extended coverage perils for which
full recovery has been made from any other person, corporation, or association.
(11) Lessee covenants and agrees to pay for the costs of procuring and
maintaining and keeping in full force during the term hereof the following
insurance which shall be procured and renewed from time to time by Lessee at
Lessee's cost and expense:
(a) Insurance upon all of the buildings and improvements located
on the demised premises against loss thereof, or damage
thereto, by fire and the risks included in what is commonly
known as an "all risk policy", for the replacement cost from
time to time of said buildings and improvements; and any loss
insured against shall be payable to Lessors and Lessee as
their respective interests may appear.
(b) Comprehensive general liability insurance insuring Lessors and
Lessee against liability for injury to and destruction of
property and for injury to or loss of life of persons, with a
combined single limit of at least One Million Dollars per
accident or occurrence.
(c) The policies or certificates evidencing the aforesaid
insurance shall be delivered to the Lessors and in turn may be
delivered by the Lessors to their mortgage.
(d) All policies shall provide that the same shall not be canceled
or altered except on ten (10) days' prior written notice to
Lessors and to the mortgagee.
(12) Lessee covenants and agrees that it will not use or permit any person
to use said demised premises or any part thereof for any use or purpose in
violation of the laws of the United States of America, the State of Minnesota or
ordinances or other regulations of any municipality in which said premises are
situated, or of any other lawful authorities, or use or permit, or suffer any
person or use of said premises or any buildings thereon for the manufacture or
sale of intoxicating liquor of any kind, character or description whatsoever;
that during said term it will keep said demised premises and every part thereof
and all buildings at any time situated thereon in a clean and wholesome
condition, and generally that it will in all respects and at all times fully
comply with all lawful health, police and fire regulations, and also that it
will keep the improvements at any time situated on the demised premises and all
sidewalks and areas adjacent thereto, as well as the area thereof, safe, secure
and comfortable to the lawful and valid requirements of any municipality in
which said premises may be situated, and of all other public authorities.
-3-
<PAGE>
(13) That no assent, express or implied by the Lessors, to any breach of
any of the Lessee's covenants shall be deemed to be a waiver of any succeeding
breach of the same covenant.
Provided always that these presents are upon this condition that if the
Lessee or its representatives, successors or assigns, shall neglect or fail to
perform and observe any covenant herein contained which on the Lessee's part is
to be performed, or if their leasehold estate shall be taken in execution, or if
the Lessee shall be declared bankrupt or insolvent according to law or shall
make an assignment for the benefit of their creditors, then and in any case the
Lessors or those having the estate of the Lessors in the premises, lawfully may
immediately or at any time thereafter and without notice or demand, enter into
and upon the demised premises or any part thereof and repossess the same as if
of their former estate and expel the Lessee and those claiming under it and
remove Lessee's effect forcibly if necessary without being taken or deemed to be
guilty of any manner of trespass. And thereupon this demise shall absolutely
determine but without prejudice to any remedies which might otherwise be used by
the Lessors for arrears of rent or any breach of the Lessee's covenants herein
contained.
Provided also that in case the demised premises or any part thereof shall
at any time during said term be destroyed or damaged by fire or other
unavoidable casualty so as to be unfit for occupancy and use and so the premises
cannot be rebuilt or restored by the Lessors within one (1) year thereafter,
then and in that case this demise shall terminate, but if the premises can be
rebuilt or restored within one (1) year, and if proceeds of insurance payable
for such casualty are sufficient therefor, the Lessors will at their own expense
and with due diligence so rebuild or restore the premises and Lessee shall
continue to pay the rents hereunder without abatement.
Provided also that in case the whole or any part of the premises hereby
demised shall be taken by the City or State or other public authority for any
use, then this demise shall terminate from the time when such possession of the
whole or any part so taken shall be required for such public use and the rents
properly apportioned shall be paid up to that time; and such taking shall not be
deemed a breach of the Lessors' covenant for quiet enjoyment hereinbefore
contained.
(14) Lessee covenants and agrees to pay all taxes due and payable and all
assessments hereafter levied during the term or extension thereof of this lease.
(15) Each party hereto hereby waives all claims for recovery from the
other party for any loss or damage to any of its property insured under valid
and collectible insurance policies to the extent of any recovery collectible
under such insurance, subject to the limitation that this waiver shall apply
only when the fire and extended coverage policies of both parties contain a
clause to the effect this waiver shall not affect said policies or the right of
both parties to recover thereunder. Both parties agree that such insurance
policies will include such clause as long as the same is includable without
extra cost.
-4-
<PAGE>
This lease shall be subject to and subordinate to the lien of any mortgage
or mortgages or deed or deeds of trust which at any time may be placed upon the
fee title to the premises above described; provided, however, that the rights of
the Lessee, its successors and assigns hereunder shall not be cut off or
affected by foreclosure of any such mortgage or mortgages or deed or deeds of
trust so long as the Lessee, its successors and assigns, shall not be in default
hereunder.
Lessor hereby grants to Lessee an option to purchase the Leased Premises
for a stipulated and agreed upon sum of $1,389,000. The term of said purchase
option shall commence on the date hereof and shall expire on July 31, 1999. In
the event Lessee desires to exercise its option to purchase the Leased Premises,
Lessee shall notify Lessor in writing of Lessee's exercise of such purchase
option on or before January 31, 1999; otherwise, the purchase option shall be
null and void and of no further force or effect. In the event Lessee timely
exercises its option to purchase the Leased Premises, Lessor and Lessee agree to
cooperate with each other in good faith to close the purchase of the Leased
Premises within thirty (30) days following the date that Lessee notifies Lessor
in writing that Lessee has exercised its purchase option. The purchase option
shall cover the entire Leased Premises, including all improvements, structures,
buildings and fixtures, located therein or thereon, and all of Lessor's right,
title and interest in and to all easements and other appurtenances thereto, and
the same shall be conveyed by Lessor to Lessee by warranty deed and bills of
sale and assignments, with covenants of general warranty, free and clear of all
liens and encumbrances.
Concurrently with the execution of this agreement, Lessor and Lessee agree
to execute and file of record in the appropriate public records of Winona
County, Minnesota, a Memorandum of Option specifying the leased premises and the
term of the option described in the preceding paragraph, in the form attached
hereto as "Exhibit A".
IN WITNESS WHEREOF, the parties hereto have executed this agreement,
effective the day and year first above written.
/S/ DAVID H. ARNOLD
David H. Arnold
/S/ MURIEL M. ARNOLD
Muriel M. Arnold
/S/ DANIEL M. RUKAVINA
Daniel M. Rukavina
/S/ PATRICIA A. RUKAVINA
Patricia A. Rukavina
-5-
<PAGE>
EMD ASSOCIATES, INC.
By: /S/ DAVID FRADIN
David Fradin, President
-6-
<PAGE>
AMENDMENT TO LEASE
This Amendment to Lease (this "Amendment") is made and entered into on
this 30th day of July, 1996, by and between David H. Arnold and Muriel M.
Arnold, husband and wife, and Daniel M. Rukavina and Patricia A. Rukavina,
husband and wife (collectively, "Lessor"), and EMD Associates, Inc., a Minnesota
corporation ("Lessee").
WHEREAS, Lessor and Lessee entered into a Lease Agreement dated July 30,
1996 (the "Lease"), whereby Lessor demised and let unto Lessee the premises
located at 4155 Theurer Boulevard, Goodview Minnesota, and legally described in
said Lease as Lots Four (4) and (5), Block One (1), record plat of Goodview
Industrial Park, for a term commencing September 1, 1996, and continuing until
August 31, 2006, and thereafter from year to year until terminated as provided
therein, for a net rent of $17,150 per month, subject to adjustment as provided
therein; and
WHEREAS, the Lease remains in full force and effect; and
WHEREAS, the parties have agreed that the legal description of the
premises was incorrectly described, and the parties desire to modify and amend
the Lease to correct the legal description of the premises covered by the Lease,
and to otherwise modify the Lease in other respects, all as more particularly
described herein;
NOW, THEREFORE, in consideration of the premises, the mutual covenants
herein contained and other good and valuable consideration, the receipt and
sufficiency of all of which is hereby acknowledged and confessed, the parties
hereto hereby agree as follows:
(16) The legal description of the premises described in the Lease was
incorrect and the parties hereby agree that the premises described in the Lease
shall be modified to be those certain premises located at 4155 Theurer
Boulevard, Goodview, Winona County, Minnesota, and legally described on Exhibit
A attached hereto and incorporated herein for all purposes.
(17) In the event Lessor is unable to deliver the premises to Lessee free
and clear of all other tenancies, and with all of the prior tenant's property
removed therefrom, on or before September 1, 1996, then the term of the Lease
(and Lessee's obligations thereunder, including, without limitation, the
obligation to pay rent) shall not commence until such premises are delivered to
Lessee in the aforementioned condition. Notwithstanding the foregoing, however,
in the event Lessor is able to deliver the entire manufacturing portion of the
premises to Lessee prior to delivering the office portion of the premises to
Lessee, then Lessor and Lessee agree that the Lease shall commence (and Lessee's
obligations under the Lease, including the payment of rent) only with respect to
the manufacturing portion of the premises on the date that the entire
manufacturing portion of the premises is delivered to Lessee in the
aforementioned conditioned; provided, however, until the remainder of the
premises is delivered to Lessee, all rent and other charges payable under the
-7-
<PAGE>
Lease shall be prorated such that Lessee shall only be obligated to pay a
percentage thereof based upon the ratio that the square footage of the
manufacturing portion of the premises bears to the total square footage of the
manufacturing portion and the office portion of the premises. Notwithstanding
any of the foregoing or anything in the Lease to the contrary, Lessor covenants
and agrees to deliver the entirety of the premises to Lessee in the
aforementioned condition not later than September 30, 1996.
(18) Except as amended herein, the said Lease shall be and remain in full
force and effect.
IN WITNESS WHEREOF, the paries hereto have executed this Amendment,
effective July 30, 1996.
/S/ DAVID H. ARNOLD
David H. Arnold
/S/ MURIEL M. ARNOLD
Muriel M. Arnold
/S/ DANIEL M. RUKAVINA
Daniel M. Rukavina
/S/ PATRICIA A. RUKAVINA
Patricia A. Rukavina
EMD ASSOCIATES, INC.
By: /s/ DAVID W. FRADIN
Name: DAVID W. FRADIN
Title: PRESIDENT
-8-
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.16
<SEQUENCE>5
<FILENAME>a2073293zex-10_16.txt
<DESCRIPTION>EXHIBIT 10.16
<TEXT>
<PAGE>
EXHIBIT 10.16
LEASE
This agreement is made and entered into as of December 15, 1992, by and
between David H. Arnold and Muriel M. Arnold, husband and wife, and Daniel M.
Rukavina and Patricia A. Rukavina, husband and wife parties of the first part,
Lessors, and EMD Associates, Inc., a Minnesota corporation, party of the second
part, Lessee;
WITNESSETH:
That the said parties of the first part, in consideration of the rents and
covenants hereinafter mentioned, do hereby demise, lease and let unto the said
party of the second part, and the said party of the second part does hereby hire
and take from the said parties of the first part the premises situated at
Theurer Boulevard and 41st Avenue, Goodview, Minnesota, legally described as
Lots One (1), Two (2), and Three (3), Block Two (2), Goodview Industrial Park.
TO HAVE AND TO HOLD the above rented premises unto the said Lessee, its
successors and assigns, just as they are, without any liability or obligations
on the part of said Lessors of making any alterations, improvements or repairs
of any kind on or about said premises, except as expressly provided herein, for
and during the full term of five (5) years from and after December 15, 1992, and
thereafter from year to year until terminated by either party by sixty (60) days
written notice, for the following purposes, to-wit: Offices and manufacturing or
other similar lawful uses.
And the said Lessee agrees to and with the said Lessors to pay as rent for
the above mentioned premises the sum of Fifty Thousand Three Hundred and no/100
($50,300.00) Dollars per
<PAGE>
month during the full term of this lease; subject to adjustment as follows: If,
during any lease year, the Average Prime Rate, as hereinafter defined, exceeds
13%, the rent for such lease year shall be adjusted by an amount equal to the
annual rent provided herein multiplied by a fraction, the numerator of which
shall be the difference between the Average Prime Rate and 11 1/2 , and the
denominator of which shall be 11 1/2. The amount of any such adjustment shall be
determined by Lessors at the end of the lease year, and shall be due and payable
within thirty (30) days after written notice to Lessee, showing the amount and
basis for the adjustment. The Prime Rate shall be the rate of interest
established by Chase Manhattan Bank of New York as its "base" or "prime" rate,
as published from time to time. The Average Prime Rate shall be the weighted
average of the Prime Rates in effect during the lease year, calculated by
multiplying each Prime Rate in effect during the lease year by the number of
days such rate was in effect, then adding all of the products so determined, and
then dividing that sum by the number of days in the lease year.
The Lessee, for itself, its successors and assigns, hereby covenants with
the Lessors, their heirs, executors, administrators, and assigns:
(1) That it will promptly pay all gas, oil, electric, light, sewage, water
rates or charges which may become payable during the continuance of this lease
for gas, oil, electric, light and water used on said premises.
(2) That it will keep all and singular the said building and premises,
including the plumbing and heating plant and all driveways, parking areas and
other appurtenances, in such repair as the same are at the commencement of the
said term or may be put in during the continuance
-2-
<PAGE>
thereof, reasonable wear and tear and damage by fire or extended coverage perils
only excepted, and will promptly replace all glass thereof broken during the
said term by other of the same quality and size.
(3) That it will not injure, overload or deface or suffer to be injured,
overloaded or defaced the premises or any part thereof.
(4) That it will save harmless and indemnify the Lessors from and against
all loss, liability or expense that may be incurred by reason of any accident
with the machinery, pipes or from any damage or neglect arising from or in any
way growing out of the misuse or abuse of the city water or from the bursting of
any pipes or from any neglect in not removing snow and ice from the premises; or
from any accident or other occurrence on or about said premises.
(5) That it will not make or suffer any unlawful, improper or offensive
use of the premises or any use or occupancy thereof contrary to any law of the
State or any ordinance of the City now or hereafter made, or which shall be
injurious to any person or property or which shall be liable to endanger or
affect any insurance on the said building or to increase the premium thereof.
(6) That it will not make any alterations or additions in or to the
premises without the written consent of the Lessors; nor suffer any holes to be
made or drilled in the outside stone or brick work; not to suffer any signs to
be placed upon the building except such as the Lessors shall in writing approve.
(7) Lessee shall not assign, underlet or part with the possession of the
whole or any part of the demised premises without first obtaining the written
consent of the Lessors.
-3-
<PAGE>
(8) Lessors at all reasonable times may enter to view the premises and to
make repairs which Lessors may see fit to make, or to show the premises to
persons who may wish to buy or lease, and that during three (3) months next
preceding the expiration of the term Lessors will be permitted to place and keep
next to the sidewalk in the front of said premises a notice 24" x 24" that the
premises are for rent or sale.
(9) That at the expiration of said term Lessee will peaceably yield up to
Lessors or those having their estates therein the premises and all erections or
additions made upon the same in good repair in all respects, reasonable use and
wear and damage by fire and other unavoidable casualty excepted, as the same now
are or may be put in by Lessors.
(10) That all property of any kind that may be on the premises during the
continuance of this lease shall be at the sole risk of the Lessee, and that the
Lessors shall not be liable to the Lessee or any other persons for any injury,
loss or damage to property or to any person on the premises; and neither Lessee
nor Lessors will make any claim against the other for losses arising by reason
of fire or extended coverage perils for which full recovery has been made from
any other person, corporation, or association.
(11) Lessee covenants and agrees to pay for the costs of procuring and
maintaining and keeping in full force during the term hereof the following
insurance which shall be procured and renewed from time to time by Lessee at
Lessee's cost and expense:
(a) Insurance upon all of the buildings and improvements located
on the demised premises against loss thereof, or damage
thereto, by fire and the risks included in what is commonly
known as an "all risk policy", for the replacement cost from
time to time of said buildings and improvements; and
-4-
<PAGE>
any loss insured against shall be payable to Lessors and
Lessee as their respective interests may appear.
(b) Comprehensive general liability insurance insuring Lessors and
Lessee against liability for injury to and destruction of
property and for injury to or loss of life of persons, with a
combined single limit of at least One Million Dollars per
accident or occurrence.
(c) The policies or certificates evidencing the aforesaid
insurance shall be delivered to the Lessors and in turn may be
delivered by the Lessors to their mortgagee.
(d) All policies shall provide that the same shall not be
cancelled or altered except on ten (10) days' prior written
notice to Lessors and to the mortgagee.
(12) Lessee covenants and agrees that it will not use or permit any person
to use said demised premises or any part thereof for any use or purpose in
violation of the laws of the United States of America, the State of Minnesota or
ordinances or other regulations of any municipality in which said premises are
situated, or of any other lawful authorities, or use or permit, or suffer any
person or use of said premises or any buildings thereof for the manufacture or
sale of intoxicating liquor of any kind, character or description whatsoever;
that during said term it will keep said demised premises and every part thereof
and all buildings at any time situated thereon in a clean and wholesome
condition, and generally that it will in all respects and at all times fully
comply with all lawful health, police and fire regulations, and also that it
will keep the improvements at any time situated on the demised premises and all
sidewalks and areas adjacent thereto, as well as the area thereof, safe, secure
and comfortable to the lawful and valid requirements of any municipality in
which said premises may be situated, and of all other public authorities.
-5-
<PAGE>
(13) That no assent, express or implied by the Lessors, to any breach of
any of the Lessee's covenants shall be deemed to be a waiver of any succeeding
breach of the same covenant.
Provided always that these presents are upon this condition that if the
Lessee or its representatives, successors or assigns, shall neglect or fail to
perform and observe any covenant herein contained which on the Lessee's part is
to be performed, or if their leasehold estate shall be taken in execution, or if
the Lessee shall be declared bankrupt or insolvent according to law or shall
make assignment for the benefit of their creditors, then and in any case the
Lessors or those having the estate of the Lessors in the premises, lawfully may
immediately or at any time thereafter and without notice or demand, enter into
and upon the demised premises or any part thereof and repossess the same as if
of their former estate and expel the Lessee and those claiming under it and
remove Lessee's effects forcibly if necessary without being taken or deemed to
be guilty of any manner of trespass. And thereupon this demise shall absolutely
determine but without prejudice to any remedies which might otherwise be used by
the Lessors for arrears of rent or any breach of the Lessee's covenants herein
contained.
Provided also that in case the demised premises or any part thereof shall
at any time during said term be destroyed or damaged by fire or other
unavoidable casualty so as to be unfit for occupancy and use and so the premises
cannot be rebuilt or restored by the Lessors within one (1) year thereafter,
then and in that case this demise shall terminate, but if the premises can be
rebuilt or restored within one (1) year, and if proceeds of insurance payable
for such casualty are sufficient
-6-
<PAGE>
therefor, the Lessors will at their own expense and with due diligence so
rebuild or restore the premises and Lessee shall continue to pay the rents
hereunder without abatement.
Provided also that in case the whole or any part of the premises hereby
demised shall be taken by the City or State or other public authority for any
use, then this demise shall terminate from the time when such possession of the
whole or any part so taken shall be required for such public use and the rents
properly apportioned shall be paid up to that time; and such taking shall not be
deemed a breach of the Lessors' covenant for quiet enjoyment hereinbefore
contained.
(14) Lessee covenants and agrees to pay all taxes due and payable and all
assessments hereafter levied during the term or extension thereof of this lease.
(15) Each party hereto hereby waives all claims for recovery from the
other party for any loss or damage to any of its property insured under valid
and collectible insurance policies to the extent of any recovery collectible
under such insurance, subject to the limitation that this waiver shall apply
only when the fire and extended coverage policies of both parties contain a
clause to the effect this waiver shall not affect said policies or the right of
both parties to recover thereunder. Both parties agree that such insurance
policies will include such clause as long as the same is includable without
extra cost.
This lease shall be subject to and subordinate to the lien of any mortgage
or mortgages or deed or deeds of trust which at any time may be placed upon the
fee title to the premises above described; provided, however, that the rights of
the Lessee, its successors and assigns hereunder shall
-7-
<PAGE>
not be cut off or affected by foreclosure of any such mortgage or mortgages or
deed or deeds of trust so long as the Lessee, its successors and assigns, shall
not be in default hereunder.
This lease amends and supersedes a Lease Agreement between the parties
dated July 1, 1988, as previously amended.
IN WITNESS WHEREOF, the parties hereto have executed this agreement,
effective the day and year first above written.
/S/ DAVID H. ARNOLD
David H. Arnold
/S/ MURIEL M. ARNOLD
Muriel M. Arnold
/S/ DANIEL M. RUKAVINA
Daniel M. Rukavina
/S/ PATRICIA A. RUKAVINA
Patricia A. Rukavina
EMD ASSOCIATES, INC.
By /S/ DANIEL M. RUKAVINA
Daniel M. Rukavina, President
By /S/ DAVID H. ARNOLD
David H. Arnold, Secretary
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<PAGE>
AMENDMENT TO LEASE
This agreement is made and entered into as of January 1, 1994, by and
between David H. Arnold and Muriel M. Arnold, husband and wife, and Daniel M.
Rukavina and Patricia A. Rukavina, husband and wife, Lessors, and EMD
Associates, Inc., a Minnesota corporation, Lessee.
WHEREAS, the parties hereto entered into a Lease Agreement dated December
15, 1992, whereby Lessors demised and let unto Lessee certain premises situated
at Theurer Boulevard and 41st Avenue, Goodview, Minnesota, legally described as
Lots One (1), Two (2), and Three (3), Block Two (2), Goodview Industrial Park,
upon which was then situated a manufacturing and office building, for a term of
five (5) years from and after December 15, 1992, and thereafter from year to
year until terminated as provided therein, for a net rent of $50,300.00 per
month, subject to adjustment as provided therein; and
WHEREAS, the said Lease remains in effect; and
WHEREAS, at the request and direction of Lessee, Lessors acquired an
adjacent parcel of real estate, legally described in Exhibit A attached hereto,
for improvement and use by Lessee for vehicle parking (the "Parking Area");
NOW THEREFORE, the parties hereto agree as follows:
1. From and after January 1, 1994, the leased premises shall include
the Parking Area.
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<PAGE>
2. From and after January 1, 1994, Lessee shall pay to Lessors as rent for
the leased premises the sum of $50,932.00 per month during the full remaining
term of the Lease, subject to adjustment as provided therein.
3. Except as amended herein, the said Lease Agreement shall be and
remain in full fore and effect.
IN WITNESS WHEREOF, the parties hereto have executed this agreement,
effective the day and year first above written.
/S/ DAVID H. ARNOLD
David H. Arnold
/S/ MURIEL M. ARNOLD
Muriel M. Arnold
/S/ DANIEL M. RUKAVINA
Daniel M. Rukavina
/S/ PATRICIA A. RUKAVINA
Patricia A. Rukavina
EMD ASSOCIATES, INC.
By /S/ DAVID FRADIN
David Fradin, President and CEO
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<PAGE>
EXHIBIT A
That part of the Southeast Quarter of the Southwest Quarter (SE 1/4 of SW 1/4)
of Section Seventeen (17), Township One Hundred Seven (107) North, of Range
Seven (7), West of the Fifth Principal Meridian, Winona County, Minnesota,
described as follows:
Commencing at the Southeast corner of said SE 1/4 of the SW 1/4, thence on
an assumed bearing of North along the East line of said SE1/4 of the SW1/4, a
distance of 1.20 feet to the Northerly right of way line of the Soo Line
Railroad Company; thence North 61(degree)57'00" West way line distant 134.60
feet Southeasterly of the most Southerly corner of Lot 1, Block 2, record plat
of Goodview Industrial Park, Winona County, Minnesota, and the point of
beginning of the land to be described; thence continue North 61(degree)57'00"
West, along said right of way line, 134.60 feet to said most Southerly corner of
Lot 1; thence North 27(degree)55' East, along the Southeasterly line of said Lot
1, a distance of 240.00 feet to the most Easterly corner of said Lot 1; then
South 61(degree)57'00" East, along the Southwesterly line of Lot 3, said Block
2, a distance of 134.60 feet to the most Southerly corner of said Lot 3; thence
South 27(degree)55' West, 240.00 feet to the point of beginning.
Excepting therefrom and reserving to Lessors the metal storage building situated
thereon, and the right of ingress thereto and egreiss therefrom.
-11-
<PAGE>
AMENDMENT TO LEASE
This agreement is made and entered into as of December 15, 1995, by and
between David H. Arnold and Muriel M. Arnold, husband and wife, and Daniel M.
Rukavina and Patricia A. Rukavina, husband and wife, Lessors, and EMD
Associates, Inc., a Minnesota corporation, Lessee.
WHEREAS, the parties hereto entered into a Lease Agreement dated December
15, 1992, whereby Lessors demised and let unto Lessee certain premises situated
at Theurer Boulevard and 41st Avenue, Goodview, Minnesota, legally described as
Lots One (1), Two (2), and Three (3), Block Two (2), Goodview Industrial Park,
upon which was then situated a manufacturing and office building, for a term of
five (5) years from and after December 15, 1992, and thereafter from year to
year until terminated as provided therein, for a net rent of $50,300.00 per
month, subject to adjustment as provided therein; and
WHEREAS, the said Lease was amended by an Amendment to Lease dated as of
January 1, 1994, to include an adjacent parking area, and to increase the rent
for the leased premises to the sum of $50,932.00 per month for the remaining
term of the lease; and
WHEREAS, the said Lease, as so amended, remains in effect; and WHEREAS,
the parties have agreed to extend the said lease as provided herein; NOW
THEREFORE, the parties hereto agree as follows:
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<PAGE>
4. The term of the said lease shall be extended for a period of ten (10)
years from and after December 15, 1995, and shall continue until December 15,
2005, and thereafter from year to year until terminated by either party by sixty
(60) days written notice.
5. Except as amended herein, the said Lease Agreement shall be and remain
in full force and effect. /S/ DAVID H. ARNOLD David H. Arnold
/S/ MURIEL M. ARNOLD
Muriel M. Arnold
/S/ DANIEL M. RUKAVINA
Daniel M. Rukavina
/S/ PATRICIA A. RUKAVINA
Patricia A. Rukavina
EMD ASSOCIATES, INC.
By /S/ DAVID FRADIN
David Fradin, President and CEO
-13-
<PAGE>
AMENDMENT TO LEASE
This Amendment to Lease (this "Amendment") is made and entered into on
this 30th day of July, 1996, by and between David H. Arnold and Muriel M.
Arnold, husband and wife, and Daniel M. Rukavina and Patricia A. Rukavina,
husband and wife (collectively, "Lessor"), and EMD Associates, Inc., a Minnesota
corporation ("Lessee").
WHEREAS, the Lessor and Lessee entered into a Lease Agreement dated
December 15, 1992 (the "Original Lease"), whereby Lessor demised and let unto
Lessee certain premises situated at Theurer Boulevard and 41st Avenue, Goodview,
Minnesota, legally described as Lots One (1), Two (2) and Three (3), Block Two
(2), Goodview Industrial Park, upon which is situated a manufacturing and office
building, for a term of five (5) years from and after December 15, 1992, and
thereafter from year to year until terminated as provided therein, for a net
rent of $50,300 per month, subject to adjustments as provided therein; and
WHEREAS, the Original Lease was amended by (i) an Amendment to Lease dated
as of January 1, 1994, to include an adjacent parking area within the leased
premises, and to increase the rent for the leased premises to the sum of $50,932
per month for the remaining term of the Lease, and (ii) an Amendment to Lease
dated as of December 15, 1995, to extend the term of the Lease for a period of
ten (10) years from and after December 15, 1995 and continuing until December
15, 2005, and thereafter from year to year until terminated by either party by
sixty (60) days written notice (the "Original Lease, as so amended, being herein
referred to as the "Lease"); and
WHEREAS, the Lease remains in full force and effect; and
WHEREAS, the parties have agreed to further modify and amend the Lease,
and to provide for a purchase option in favor of Lessee covering the leased
premises covered by the Lease (the "Leased Premises"), as more particularly
described herein;
NOW, THEREFORE, in consideration of the premises, the mutual covenants
herein contained and other good and valuable consideration, the receipt and
sufficiency of all of which is hereby acknowledged and confessed, the parties
hereto hereby agree as follows:
6. The term of the Lease is hereby amended such that the term of the Lease
shall continue for a period of ten (10) years from and after July 30, 1996, and
shall continue until July 31, 2006, and thereafter from year to year until
terminated by either party by providing the other party with written notice of
such party's election to terminate the Lease not less than one hundred eighty
-14-
<PAGE>
(180) days prior to the expiration of the term (as the term may be extended year
to year as provided herein).
7. From and after August 1, 1996, the rent for the Leased Premises shall
be the sum of $50,932.00 per month for the remaining term of the Lease. The rent
shall not be subject to adjustment provided in the Lease (and such adjustment
provision is hereby deleted and of no further force and effect).
8. Lessor hereby grants to Lessee an option to purchase the Leased
Premises for a stipulated and agreed upon sum of $4,711,000.00. The term of said
purchase option shall commence on the date hereof and shall expire on July 31,
1999. In the event Lessee desires to exercise its option to purchase the Leased
Premises, Lessee shall notify Lessor in writing of Lessee's exercise of such
purchase option on or before July 31, 1999; otherwise, the purchase option shall
be null and void and of no further force or effect. In the event Lessee timely
exercises its option to purchase the Leased Premises, Lessor and Lessee agree to
cooperate with each other in good faith to close the purchase of the Leased
Premises within thirty (30) days following the date that Lessee notifies Lessor
in writing that Lessee has exercised its purchase option. The purchase option
shall cover the entire Leased Premises, including all improvements, structures
and buildings thereon, all fixtures, located therein or thereon, and all of
Lessor's right, title and interest in and to all easements and other
appurtenances thereto, and the same shall be conveyed by Lessor to Lessee by
warranty deed and bills of sale and assignments, with covenants of general
warranty, free and clear of all liens and encumbrances.
9. In each instance in the Lease where consent or approval is required to
be obtained from a party to the Lease, such consent or approval shall not be
unreasonably withheld, delayed or conditioned.
10. Concurrently with the execution of this agreement, Lessor and Lessee
agree to execute and file of record in the appropriate public records of Winona
County, Minnesota, a Memorandum of Option specifying the leased premises and the
term of the option described in Paragraph 3 above, in the form attached hereto
as EXHIBIT "A"/
11. Except as amended herein, the said Lease shall be and remain in full
force and effect.
-15-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment,
effective July 30, 1996.
EMD ASSOCIATES, INC. /S/ DAVID H. ARNOLD
David H. Arnold
By: /S/ DAVID W. FRADIN /S/ MURIEL M. ARNOLD
Name: DAVID W. FRADIN Muriel M. Arnold
Title: PRESIDENT /S/ DANIEL M. RUKAVINA
Daniel M. Rukavina
/S/ PATRICIA A. RUKAVINA
Patricia A. Rukavina
-16-
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.33
<SEQUENCE>6
<FILENAME>a2073293zex-10_33.txt
<DESCRIPTION>EXHIBIT 10.33
<TEXT>
<PAGE>
Exhibit 10.33
KEY CONTRIBUTOR SEVERANCE AGREEMENT
SEVERANCE AGREEMENT, dated as of January 24, 2002, by and between
BENCHMARK ELECTRONICS, INC. ("Benchmark"), and GAYLA J. DELLY ("Employee").
A. The Executive Compensation Committee of the Board of Directors of Benchmark
has recommended, and the Board of Directors has approved, that Benchmark enter
into severance agreements with key employees who are from time to time
designated by the Executive Compensation Committee;
B. Should Benchmark become subject to any proposed or threatened Change of
Control (as hereinafter defined), the Board of Directors believes it imperative
that Benchmark and the Board of Directors be able to rely upon Employee to
continue in Employee's position, and that Benchmark be able to receive and rely
upon Employee's advice, if requested, as to the best interests of Benchmark and
its stockholders without concern that Employee might be distracted by the
personal uncertainties and risks created by such a proposal or threat;
C. Should Benchmark receive any such proposals, in addition to Employee's
regular duties, Employee may be called upon to assist in the assessment of such
proposals, advise management and the Board of Directors as to whether such
proposals would be in the best interests of Benchmark and its stockholders, and
to take such other actions as the Board of Directors of Directors might
determine to be appropriate;
Accordingly, Benchmark and Employee agree as follows:
1. SERVICES DURING CERTAIN EVENTS. In the event a third person begins a
tender or exchange offer, circulates a proxy to stockholders, or takes other
steps to effect a Change of Control, Employee agrees not to voluntarily leave
the employ of Benchmark or its subsidiaries, and to render the services
contemplated in the recitals to this Agreement, until the third person has
abandoned or terminated his efforts to effect a Change of Control until a Change
of Control has occurred.
2. TERMINATION FOLLOWING CHANGE OF CONTROL. Except as provided in Section
4 hereof, Benchmark will provide or cause to be provided to Employee the rights
and benefits described in Section 3 hereof in the event that Employee's
employment is terminated:
(a) at any time within two years following a Change of Control by
Benchmark or its subsidiaries for reasons other than for "cause" (as such term
is defined in Section 4 hereof) or other than as a consequence of Employee's
death, permanent disability or retirement at or after the normal retirement date
as provided under Benchmark's Retirement Plan as in effect immediately preceding
such date ("Normal Retirement Date"); or
<PAGE>
(b) at any time within two years following a Change of Control by
Employee following the occurrence of any of the following events without
Employee's written consent:
(i) the reduction of Employee's annual salary (including any
deferred portions thereof), annual or long-term cash or stock bonus
opportunities, or level of benefits or supplemental compensation; or
(ii) the transfer of Employee to a location requiring a change
in Employee's residence or a material increase in the amount of
travel normally required of Employee in connection with Employee's
employment.
3. RIGHTS AND BENEFITS UPON TERMINATION. In the event of the termination
of Employee's employment under any of the circumstances set forth in Section 2
hereof ("Termination"), Benchmark agrees to provide or cause to be provided to
Employee the following rights and benefits:
(A) LUMP SUM PAYMENT AT TERMINATION. Employee shall be entitled to
receive within 30 days of Termination (i) a lump-sum payment in cash in
the amount equal to two times Employee's Earnings (as such term is defined
in this Section 3(a)), plus (ii) an additional amount sufficient to pay
all excise taxes incurred by Employee in connection with such lump sum
payment so that Employee will receive the same net after-tax amount he
would have received if no excise tax had been imposed; PROVIDED, HOWEVER,
that if there are fewer than 12 months remaining from the date of
Termination to Employee's Normal Retirement Date, the amount calculated
pursuant to this paragraph will be reduced by multiplying such amount by a
fraction, the numerator of which is the number of months (including any
fraction of a month) so remaining to Employee's Normal Retirement Date and
the denominator of which is 12.
For purposes of this Agreement, "Earnings" shall mean the sum of (1)
Employee's Annual Base Pay (as defined below), and (2) Employee's Recent
Cash Bonus (as defined below).
"Annual Base Pay" shall mean the greater of (1) the annualized
amount of Employee's rate of base pay (as shown in Benchmark's payroll
records) immediately before the Change of Control, and (2) the annualized
amount of Employee's rate of base pay (as shown in Benchmark's payroll
records) immediately before the date of Termination.
"Recent Cash Bonus" shall mean the highest bonus received by the
Employee in the year in which a Change of Control occurs or during either
of the proceeding two years, calculated as a percentage of Annual Base Pay
as of the time of such payment. To
2
<PAGE>
calculate this amount, Benchmark will divide (a) the sum of the bonuses
paid to Employee during the first calendar quarter of each of those three
years, by (b) the annualized amount of Employee's rate of base pay (as
shown in Benchmark's payroll records) at the time of such payment.
(B) OTHER BONUSES. Employee shall be entitled to any individual
bonuses or individual incentive compensation not yet paid but payable
under Benchmark's plans for years prior to the year of Employee's
termination of employment. Such amounts shall be paid to Employee in a
single lump sum cash payment along with the payment of the lump sum
severance payment described in 3(a).
(C) DUTY TO MITIGATE. Employee's entitlement to benefits hereunder
shall not be governed by any duty to mitigate damages by seeking further
employment nor offset by any compensation which Employee may receive from
future employment.
(D) PAYMENT OBLIGATIONS ABSOLUTE. Benchmark's obligation to pay or
cause to be paid to Employee the benefits and to make the arrangements
provided in this Section 3 shall be absolute and unconditional and shall
not be affected by any circumstances, including, without limitation, any
setoff, counterclaim, recoupment, defense or other right, which Benchmark
may have against Employee or anyone else. All amounts payable by or on
behalf of Benchmark hereunder shall be paid without notice or demand. Each
and every payment made hereunder by or on behalf of Benchmark shall be
final and Benchmark and its subsidiaries shall not, for any reason
whatsoever, seek to recover all or any part of such payment from Employee
or from whomever shall be entitled thereto.
4. CONDITIONS TO THE OBLIGATIONS OF BENCHMARK. Benchmark shall have no
obligation to provide or cause to be provided to Employee the rights and
benefits described in Section 3 hereof if either of the following events shall
occur:
(A) TERMINATION FOR CAUSE. Benchmark or its subsidiaries shall
terminate Employee's employment for "cause." For purposes of this
Agreement, the parties agree that the phrase "for cause" should be
interpreted in the context of an employment arrangement for an executive
with unique responsibilities to participate in the execution of the
business plan adopted by Benchmark's Board of Directors. Accordingly, the
term "for cause" includes (i) acts of dishonesty; (ii) knowing violations
of any written policy of Company or applicable to Benchmark's operations;
(iii) violations of applicable laws, rules or regulations that expose
Company to damages or liability; (iv) breach of fiduciary duty; and (v)
failure to fulfill assigned responsibilities to achieve the earnings,
revenue or profitability targets established by the Board of Directors.
3
<PAGE>
(B) RESIGNATION AS DIRECTOR. Employee shall, promptly after
Termination and upon receiving a written request to do so, resign as a
director and/or officer of each subsidiary and affiliate of Benchmark of
which Employee is then serving as a director and/or officer.
5. CONFIDENTIALITY; NON-SOLICITATION; COOPERATION.
(A) CONFIDENTIALITY. Employee agrees that at all times following
Termination, Employee will not, without the prior written consent of
Benchmark, disclose to any person, firm or corporation any confidential
information of Benchmark or its subsidiaries which is now known to
Employee or which hereafter may become known to Employee as a result of
Employee's employment or association with Benchmark and which could be
helpful to a competitor, unless such disclosure is required under the
terms of a valid and effective subpoena or order issued by a court or
governmental body; PROVIDED, HOWEVER, that the foregoing shall not apply
to confidential information which becomes publicly disseminated by means
other than a breach of this Agreement.
(B) NON-SOLICITATION. Employee agrees that for a period of three
years following the date of Termination (or until Employee's Normal
Retirement Date, whichever is sooner) Employee will not induce, either
directly or indirectly, any employee of senior to manager level of
Benchmark or any of its subsidiaries to terminate his or her employment.
(C) COOPERATION. Employee agrees that, at all times following
Termination, Employee will furnish such information and render such
assistance and cooperation as may reasonably be requested in connection
with any litigation or legal proceedings concerning Benchmark or any of
its subsidiaries (other than any legal proceedings concerning Employee's
employment). In connection with such cooperation, Benchmark will pay or
reimburse Employee for reasonable expenses.
(D) REMEDIES FOR BREACH. It is recognized that damages in the event
of breach of this Section 5 by Employee would be difficult, if not
impossible, to ascertain, and it is therefore agreed that Benchmark, in
addition to and without limiting any other remedy or right it may have,
shall have the right to an injunction or other equitable relief in any
court of competent jurisdiction, enjoining any such breach, and Employee
hereby waives any and all defenses Employee may have on the ground of lack
of jurisdiction or competence of the court to grant such an injunction or
other equitable relief. The existence of this right shall not preclude
Benchmark from pursuing any other rights and remedies at law or in equity
which Benchmark may have.
6. TERM OF AGREEMENT. This Agreement shall terminate on December 31, 2002;
PROVIDED, HOWEVER, that this Agreement shall automatically renew for successive
one-year terms
4
<PAGE>
unless Benchmark notifies Employee in writing at least 30 days prior to an
expiration date that it does not desire to renew the Agreement for an additional
term. This Agreement shall also terminate if and when the management of
Benchmark determines that Employee is no longer a key employee for purposes of
being a party to a severance agreement with Benchmark and so notifies Employee
in writing. The preceding provisions of this Section 6 to the contrary
notwithstanding, this Agreement shall not terminate (i) within three years after
a Change of Control or (ii) during any period of time when Benchmark has reason
to believe that any third person has begun a tender or exchange offer,
circulated a proxy to stockholders, or taken other steps or formulated plans to
effect a Change of Control, such period of time to end when, in the opinion of
the Executive Compensation Committee, the third person has abandoned or
terminated his efforts or plans to effect a Change of Control.
7. ARBITRATION. It is the mutual intention of the parties to have any
dispute concerning this Agreement resolved out of court. Accordingly, the
parties agree that any claim or controversy of whatever nature arising from or
relating in any way to this Agreement or the employment of the Employee by the
Company, and any continuing obligations under this Agreement, including disputes
arising under the common law or federal or state statutes, laws or regulations
and disputes with respect to the arbitrability of any claim or controversy,
shall be resolved exclusively by final and binding arbitration before a single
experienced employment arbitrator selected in accordance with the Employment
Dispute Resolution ("EDR") Rules of the American Arbitration Association
("AAA"). The arbitration will be conducted pursuant to the EDR Rules of the AAA,
and the arbitrator shall have full authority to award or grant all remedies
provided by law. The judgment upon the award may be enforced by any court having
jurisdiction thereof. Benchmark shall pay for the fees of the arbitrator and the
administrative and filing fees charged by the AAA.
8. EXPENSES. Benchmark shall pay or reimburse Employee for all costs and
expenses, including, without limitation, attorneys' fees, incurred by Employee
as a result of any arbitration proceeding (including an arbitration claim or
proceeding by Employee against Benchmark) arising out of, or challenging the
validity or enforceability of, this Agreement or any provision hereof.
9. MISCELLANEOUS.
(A) ASSIGNMENT. No right, benefit or interest hereunder shall be
subject to assignment, anticipation, alienation, sale, encumbrance,
charge, pledge, hypothecation or set-off in respect of any claim, debt or
obligation, or to execution, attachment, levy or similar process;
PROVIDED, HOWEVER, that Employee may assign any right, benefit or interest
hereunder if such assignment is permitted under the terms of any plan or
policy of insurance or annuity contract governing such right, benefit or
interest.
5
<PAGE>
(B) CONSTRUCTION OF AGREEMENT. Nothing in this Agreement shall be
construed to amend any provision of any plan or policy of Benchmark and
its subsidiaries. This Agreement is not, and nothing herein shall be
deemed to create, a commitment of continued employment of Employee by
Benchmark or any of its subsidiaries.
(C) AMENDMENT. This Agreement may not be amended, modified or
canceled except by written agreement of the parties.
(D) WAIVER. No provision of this Agreement may be waived except by a
writing signed by the party to be bound thereby.
Employee may at any time or from time to time waive any or all
of the rights and benefits provided for herein which have not been
received by Employee at the time of such waiver. In addition, prior to the
last day of the calendar year in which Employee's Termination occurs,
Employee may waive any or all rights and benefits provided for herein
which have been received by Employee; provided that prior to the end of
such year Employee repays to Benchmark (or, if the benefit was received
from an employee benefit plan trust, to such trust) the amount of the
benefit received together with interest thereon at the minimum rate
required to avoid imputed income. Any waiver of benefits pursuant to this
paragraph shall be irrevocable. If Employee waives a right or benefit
provided for herein and such waiver is determined by the Internal Revenue
Service not to be effective, Benchmark shall indemnify Employee for any
federal income and excise taxes Employee incurs as a result of that
determination, so as to put Employee in the position Employee would have
been in had the waiver been given effect.
(E) SEVERABILITY. In the event that any provision or portion of this
Agreement shall be determined to be invalid or unenforceable for any
reason, the remaining provisions of this Agreement shall remain in full
force and effect to the fullest extent permitted by law.
(F) SUCCESSORS. This Agreement shall be binding upon and inure to
the benefit of Employee and Employee's personal representative and heirs,
and Benchmark and any successor organization or organizations which shall
succeed to substantially all of the business and property of Benchmark,
whether by means of merger, consolidation, acquisition of substantially
all of the assets of Benchmark or otherwise, including by operation of
law.
(G) TAXES. Any payment or delivery required under this Agreement
shall be subject to all requirements of the law with regard to withholding
of taxes, filing, making of reports and the like, and Benchmark shall use
its best efforts to satisfy promptly all such requirements.
6
<PAGE>
(H) DEFINITION OF CHANGE OF CONTROL. For purposes of this Agreement,
"Change of Control" shall mean:
1. The acquisition by any individual, entity or group of 20%
or more of either (i) the then outstanding shares of common stock of
Benchmark (the "Outstanding Common Stock") or (ii) the combined voting
power of the then outstanding voting securities of Benchmark entitled to
vote generally in the election of directors (the "Outstanding Voting
Securities"); provided, however, that for purposes of this subsection A,
the following acquisitions shall not constitute a Change of Control: (i)
any acquisition directly from Benchmark, (ii) any acquisition by
Benchmark, (iii) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by Benchmark or any corporation controlled
by Benchmark or (iv) any acquisition by any corporation pursuant to a
transaction which complies with clauses (i), (ii) and (iii) of subsection
(h)(3); or
2. Individuals who, as of the date hereof, constitute the
Board of Directors (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board of Directors; provided,
however that any individual becoming a director subsequent to the date
hereof whose election, or nomination for election by Benchmark's
shareholders, was approved by a vote of at least majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as
a result of an actual or threatened election contest with respect to the
election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than
the Board of Directors; or
3. Consummation of a reorganization, merger or consolidation
or sale or other disposition of all or substantially all of the assets of
Benchmark (a "Business Combination"), in each case, unless, following such
Business Combination, (i) all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the Outstanding
Common Stock and Outstanding Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly, more than
50% of, respectively, the then outstanding voting shares of common stock
and the combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as the case may
be, of the corporation resulting from such Business Combination
(including, without limitation, a corporation which as a result of such
transaction owns Benchmark or all or substantially all of Benchmark's
assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership, immediately prior
to such Business Combination, or the Outstanding Common Stock and
Outstanding Voting Securities, as the case may be, (ii) no Person
(excluding any corporation resulting from such Business Combination or any
employee benefit plan (or related trust) of Benchmark or such corporation
resulting from such Business Combination) beneficially owns, directly or
indirectly, 20% or more of, respectively, the then outstanding shares of
common stock of the corporation resulting from
7
<PAGE>
such Business Combination or the combined voting power of the then
outstanding voting securities of such corporation except to the extent
that such ownership existed prior to the Business Combination and (iii) at
least a majority of the members of the board of directors of the
corporation resulting from such Business Combination were members of the
Incumbent Board at the time of the execution of the initial agreement, or
of the action of the Board of Directors, providing for such Business
Combination.
4. Sections (h)(1-3) shall be interpreted in accordance with the
provisions of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act") and in accordance with the
meaning of Rule 13(d)-3 promulgated under the Exchange Act.
(I) GOVERNING LAW. Except to the extent that federal law controls,
this Agreement shall be governed and construed in accordance with the laws
of the State of Texas.
(J) ENTIRE AGREEMENT. This Agreement sets forth the entire agreement
and understanding of the parties hereto with respect to the matters
covered hereby, and incorporates into one document any previous severance
agreement executed by the parties and all amendments thereto as of the
date hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement as of January
24, 2002.
BENCHMARK ELECTRONICS, INC
By: /s/ CARY T. FU
------------------------------------
Cary T. Fu
President and Chief Operating Officer
/s/ GAYLA J. DELLY
------------------------------------
Signature of Employee
GAYLA J. DELLY
------------------------------------
Chief Financial Officer
8
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-12
<SEQUENCE>7
<FILENAME>a2073293zex-12.txt
<DESCRIPTION>EXHIBIT 12
<TEXT>
<Page>
EXHIBIT 12
Benchmark Electronics, Inc.
Ratio of Earnings to Fixed Charges
(Dollars in thousands)
<Table>
<Caption>
2001 2000 1999 1998 1997
-------- ------ ------ ------ -----
<S> <C> <C> <C> <C> <C>
Earnings:
Income (loss) before income taxes and
extraordinary item $(58,293) 28,430 20,276 26,890 23,952
Fixed charges 20,667 28,304 11,637 5,346 2,984
-------- ------ ------ ------ ------
Income before income taxes,
extraordinary item and fixed charges (37,626) 56,734 31,913 32,236 26,936
======== ====== ====== ====== ======
Fixed Charges:
Amortization of debt issuance costs 1,640 1,609 570 122 60
Interest expense 15,358 22,787 9,696 4,393 2,472
Interest component of rental expense 3,669 3,908 1,371 831 452
-------- ------ ------ ------ ------
Total fixed charges $ 20,667 28,304 11,637 5,346 2,984
======== ====== ====== ====== ======
Earnings to fixed charges ratio -- 2.00x 2.74x 6.03x 9.03x
Deficiency $ 58,293 n/a n/a n/a n/a
</Table>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-13
<SEQUENCE>8
<FILENAME>a2073293zex-13.txt
<DESCRIPTION>EXHIBIT 13
<TEXT>
<Page>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
References in this report to "the Company", "Benchmark", "we", or "us" mean
Benchmark Electronics, Inc. together with its subsidiaries. The following
Management's Discussion and Analysis of Financial Condition and Results of
Operations contains certain forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended and Section 21E of the
Securities Exchange Act of 1934, as amended. These forward-looking statements
are identified as any statement that does not relate strictly to historical or
current facts. They use words such as "anticipate," "believe," "intend," "plan,"
"projection," "forecast," "strategy," "position," "continue," "estimate,"
"expect," "may," "will," or the negative of those terms or other variations of
them or by comparable terminology. In particular, statements, express or
implied, concerning future operating results or the ability to generate sales,
income or cash flow are forward-looking statements. Forward-looking statements
are not guarantees of performance. They involve risks, uncertainties and
assumptions, including those discussed under the heading Risk Factors below. The
future results of our operations may differ materially from those expressed in
these forward-looking statements. Many of the factors that will determine these
results are beyond our ability to control or predict. You should not put undue
reliance on any forward-looking statements. Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove incorrect,
actual outcomes may vary materially from those indicated.
The following discussion should be read in conjunction with the Consolidated
Financial Statements and Notes thereto.
RECENT ACQUISITIONS AND DISPOSITION
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.
This operation in Manassas, Virginia was acquired for $3.5 million, as adjusted.
The transaction was accounted for under the purchase method of accounting, and,
accordingly, the results of operations of the Manassas division since October 2,
2000 have been included in our financial statements. The acquisition resulted in
goodwill of approximately $0.4 million that is being amortized on a
straight-line basis over 15 years.
On September 15, 2000, we closed the previously announced sale of our Swedish
operations for $19.6 million. The Swedish operations accounted for 3.7% and 3.0%
of our sales and 14.4% and 16.0% of our operating income for the years ended
December 31, 2000 and 1999, respectively.
On August 24, 1999, we acquired AVEX Electronics, Inc. As consideration for the
acquisition, we paid $265.3 million in cash at closing, subject to certain
adjustments, including a working capital adjustment, and issued one million
shares of our common stock. The working capital adjustment was settled in the
second quarter of 2000 and $35.3 million was paid to the seller. The transaction
was accounted for under the purchase method of accounting, and, accordingly, the
results of operations of AVEX since August 24, 1999 have been included in our
financial statements. The acquisition resulted in goodwill of approximately
$139.5 million, which is being amortized on a straight line basis over 15 years.
In order to finance the AVEX acquisition, we (i) obtained a term loan from a
syndicate of commercial banks in the amount of $100 million, (ii) obtained a new
revolving credit facility permitting draws of up to $125 million, subject to a
borrowing base calculation, and borrowed $46 million under such facility and
(iii) issued $80.2 million in convertible subordinated debt. In connection with
the AVEX acquisition, we borrowed $30 million under the new revolving credit
facility to refinance our prior senior indebtedness. Disputes have arisen
between us and the seller relating to the AVEX acquisition resulting in legal
proceedings between the parties over the transaction. See RISK FACTORS.
On March 1, 1999, we acquired certain assets from Stratus, a wholly-owned
subsidiary of Ascend Communications, Inc. for approximately $42.3 million in
cash, as adjusted. The acquisition price was allocated $6.1 million to equipment
and other assets and $36.2 million to inventories. Stratus provided systems
integration services for large and sophisticated fault-tolerant mainframe
computers. In connection with the transaction, we entered into a three-year
supply agreement to provide these system integration services to Ascend and
Stratus Holdings Limited and we hired approximately 260 employees. This
agreement is under negotiation for renewal and extension.
Recently adopted accounting principles will change the way we account for
amortization of goodwill by requiring us to
<Page>
no longer amortize goodwill effective January 1, 2002. We will also be required
to test goodwill for impairment at least annually. We are currently reviewing
this statement to determine the impact its adoption will have on our financial
position, results of operations and cash flow. See Notes 1 and 2 to the
Consolidated Financial Statements.
RESULTS OF OPERATIONS
The following table presents the percentage relationship that certain items in
our Consolidated Statements of Income (Loss) bear to sales for the periods
indicated. The financial information and the discussion below should be read in
conjunction with the Consolidated Financial Statements and Notes thereto.
<Table>
<Caption>
Percentage of Sales
Year ended December 31,
2001 2000 1999
------ ------ ------
<S> <C> <C> <C>
Sales 100.0% 100.0% 100.0%
Cost of sales 92.7 92.7 92.3
----- ----- -----
Gross profit 7.3 7.3 7.7
Selling, general and administrative expenses 4.3 3.4 3.7
Restructuring charges .6 -- --
Asset write-offs 4.8 -- --
Amortization of goodwill 1.0 .8 .7
----- ----- -----
Income (loss) from operations (3.4) 3.1 3.3
Other income (expense) (1.2) (1.4) (1.0)
----- ----- -----
Income (loss) before income taxes
and extraordinary item (4.6) 1.7 2.3
Income tax benefit (expense) .3 (.5) (.8)
Income (loss) before extraordinary item (4.3) 1.2 1.5
----- ----- -----
Extraordinary item - loss on extinguishment
of debt, net of tax -- -- .1
----- ----- -----
Net income (loss) (4.3)% 1.2% 1.4%
===== ===== =====
</Table>
YEAR ENDED DECEMBER 31, 2001 COMPARED WITH YEAR ENDED DECEMBER 31, 2000
Sales
Sales in 2001 decreased $428.0 million, or 25.1%, as compared to 2000 sales,
primarily as a result of recent unfavorable economic conditions and a decline in
demand due to the downturn experienced by the electronics industry. Of this net
decrease, there is a 14.8% decrease resulting from the sale of the Swedish
operations, a 23.5% increase attributable to the operation of the new facilities
added during the fourth quarter of 2000 and an approximately 108.7% net decrease
in sales volume resulting from the continued slowdown in the technology
marketplace.
We have 14 manufacturing facilities in the Americas, Europe and Asia to serve
our customers. We are operated and managed geographically. See Note 11 to the
Consolidated Financial Statements. Our facilities in the Americas provided 84.6%
and 84.1% of net sales, respectively, during 2001 and 2000. Our Americas region
includes facilities in Angleton, Texas, Beaverton, Oregon, Campinas, Brazil,
Guadalajara, Mexico, Hudson, New Hampshire, Huntsville, Alabama, Manassas,
Virginia and Winona, Minnesota. There are two facilities in Huntsville, Alabama
- - a systems integration facility opened during 2000 and the PCB facility
acquired from AVEX in 1999. During 2001, we consolidated the Pulaski, Tennessee
manufacturing facility into the Huntsville, Alabama facility. The Pulaski
facility is currently being held for sale. Our facilities in Europe provided
13.3% and 13.8% of net sales, respectively, during 2001 and 2000. Our Europe
region includes facilities in Cork, Ireland, Dublin, Ireland and East Kilbride,
Scotland. Our facilities in Asia provided 2.1% of our net sales during 2001 and
2000. There are two facilities in Singapore - a systems integration facility
opened at the end of 2000 and the PCB facility acquired from AVEX in 1999. We
are currently in the process of combining the two facilities in Singapore into
one site.
<Page>
As a result of our international sales and facilities, our operations are
subject to the risks of doing business abroad. These dynamics have not had a
material adverse effect on our results of operations through December 31, 2001.
However, we cannot assure you that there will not be an adverse impact in the
future. See RISK FACTORS for factors pertaining to our international sales and
fluctuations in the exchange rates of foreign currency and for further
discussion of potential adverse effects in operating results associated with the
risks of doing business abroad.
A substantial percentage of our sales have been to a small number of customers,
and the loss of a major customer, if not replaced, would adversely affect us.
During 2001, our three largest customers accounted for approximately 44.9% of
our sales, and our largest customer accounted for approximately 21.9% of sales.
Our future sales are dependent on the success of our customers, some of which
operate in businesses associated with rapid technological change and consequent
product obsolescence. Developments adverse to our major customers or their
products, or the failure of a major customer to pay for components or services,
could have an adverse effect on us. Recently our customers have experienced a
decline in demand for their products, which has had an adverse effect on our
results of operations. See Note 10 to the Consolidated Financial Statements.
During 2001 and 2000, 23.3% and 28.5% of our sales were from our international
operations. The decrease in the percentage of international sales for 2001 as
compared to 2000 primarily reflects the sale of the Swedish operations in
September 2000 partially offset by additional sales resulting from the operation
of the new systems integration facility in Singapore opened at the end of 2000.
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 do
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.
Americas
Sales in the Americas during 2001 decreased $353.1 million compared to 2000 as a
result of recent unfavorable economic conditions and a decline in demand due to
the downturn experienced by the electronics industry. Of this net decrease,
there is a 23.3% increase attributable to the operation of the systems
integration facility in Huntsville, Alabama added during the fourth quarter of
2000, approximately 3.1% was attributable to the acquisition of the Manassas,
Virginia facility and an approximately 126.4% resulted from a net decrease in
sales volume. During 2001, we consolidated the Pulaski, Tennessee manufacturing
facility into the Huntsville, Alabama facility. The Pulaski facility is
currently being held for sale.
Europe
Sales in Europe during 2001 decreased $64.8 million compared to 2000 due
primarily to the sale of the Swedish operations in September 2000 (representing
approximately 97.7% of this net decrease). The remaining 2.3% of the decrease in
sales resulted from decreases in sales volume.
In connection with the AVEX acquisition, we acquired operations in Sweden. On
September 15, 2000, we closed the previously announced sale of our Swedish
operations for $19.6 million. The Swedish operations accounted for 3.7% of our
sales and 14.4% of our operating income for the year ended December 31, 2000. On
a pro forma basis, after giving effect to the disposition of the Swedish
operations as if it had occurred on January 1, 2000, our income before income
taxes and extraordinary item for the year ended December 31, 2000 would have
been $21.7 million.
Asia
Sales in Asia during 2001 decreased by $10.1 million compared to 2000. This
decrease in sales was partially offset by additional sales resulting from the
operation of the new systems integration facility in Singapore opened at the end
of 2000.
<Page>
Gross Profit
Gross profit decreased 24.7% to $93.5 million for 2001 from $124.1 million in
2000. Gross profit as a percentage of sales remained consistent at 7.3% for both
years. The decrease in gross profit was a result of the combined effect of the
operation of new facilities added during the fourth quarter of 2000, the sale of
the Swedish operations, fluctuations in capacity utilization, lower sales
volumes, changes in product mix, favorable component market conditions, cost
reductions, and efforts to integrate recent acquisitions. The combined effect of
these factors, which are continually changing and are interrelated, make it
impracticable to determine with precision the separate effect of each factor. We
expect that a number of high volume programs serving customers in price
sensitive markets will remain subject to competitive restraints on the margin
that may be realized from these programs and that these restraints will exert
downward pressure on our margins in the near future. For the foreseeable future,
our gross margin is expected to depend primarily on the length and severity of
the general slowdown in the technology marketplaces, facility utilization,
product mix, start-up of new programs, pricing within the electronics industry,
and the integration of acquisitions. The gross margins at each facility and for
Benchmark as a whole are expected to continue to fluctuate. Increases in
start-up costs associated with new programs and pricing within the electronics
industry also could adversely impact our gross margin.
The 2001 and 2000 gross profit reflects charges related to the write down of
inventory. In 2001 and 2000, $7.6 million and $3.7 million of inventory was
written down, respectively. These charges related to inventory written down to
lower of cost (principally first-in, first-out method), or market, raw materials
held specific to customers who were no longer in business, and changes in
customer demand for inventory that resulted in excess quantities on hand.
Inventory is procured by us based on specific customer orders. Correspondingly,
customer modifications to orders for inventory previously procured by us (e.g.
cancellations as well as inventory that is highly customized and therefore not
available for use by other customers) resulted in excess and obsolete inventory
for the related customers that could not be recovered through put back to
vendors or the specific customer concerned.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for 2001 decreased $3.5 million, or
6.0%, from 2000 to $54.4 million in 2001. The decrease in selling, general and
administrative expenses reflects the impact of on-going efforts to manage
operating expenses in response to the current business environment, offset by
additional administrative expenses resulting from the acquisition of the
Manassas, Virginia facility and the opening of additional facilities during the
fourth quarter of 2000. We anticipate selling, general and administrative
expenses will increase in absolute dollars in the future as we continue to
develop the infrastructure necessary to support our current and prospective
business.
The charge to operations for bad debt allowance was $2.6 million for 2001 as
compared to $0.9 million in 2000.
Restructuring Charges and Asset Write-offs
During 2001, we recorded restructuring charges of approximately $7.6 million
($5.3 million after-tax). These charges related to reductions in our cost
structure, including reductions in force and included costs resulting from
payment of employee severance, consolidation of facilities and abandonment of
leased equipment. These restructuring costs included severance costs of
approximately $6.6 million and losses from lease commitments of $1.0 million.
Cash paid for severance costs and leasing expenses during the year ended
December 31, 2001 totaled approximately $5.6 million and $0.9 million,
respectively.
In the third quarter of 2001, we recorded asset write-offs of approximately
$61.7 million ($43.2 million after-tax) for the write-down of long-lived assets
to fair value. Included in the long-lived asset impairment are charges of
approximately $28.0 million which related to property, plant and equipment
associated with the consolidation and downsizing of certain manufacturing
facilities and the write-off of approximately $33.7 million of the remaining
goodwill and other intangibles related to these facilities.
<Page>
The employee severance and benefit costs related to the elimination of
approximately 1,600 positions worldwide. Approximately 85% of the positions
eliminated were in the Americas region, 13% were in Europe and 2% were in Asia.
The employment reductions primarily affected employees in manufacturing.
Facilities and equipment subject to restructuring were primarily located in the
Americas and Europe. See Note 16 to the Consolidated Financial Statements.
Goodwill
The amortization of goodwill for the years ended December 31, 2001 and 2000 was
$12.2 million and $12.8 million, respectively. The decrease was due to the
write-off of $33.7 million of goodwill related to certain facilities that were
consolidated and downsized during 2001. Recently adopted accounting principles
will change the way we account for amortization of goodwill by requiring us to
no longer amortize goodwill effective January 1, 2002. We will also be required
to test goodwill for impairment at least annually. We are currently reviewing
this statement to determine the impact its adoption will have on our financial
position, results of operations and cash flow. See Notes 1 and 2 to the
Consolidated Financial Statements.
Interest Expense
Interest expense was approximately $17.0 million and $24.4 million,
respectively, in 2001 and 2000. The decrease was due to reductions in interest
rates and repayments of outstanding debt. See Note 6 to the Consolidated
Financial Statements.
Interest Income
Interest income was approximately $1.5 million in 2001 compared to $0.8 million
in 2000. The increase was due to the investment of increased available cash in
interest bearing cash equivalents offset by declining rates.
Income Tax Benefit (Expense)
Income tax benefit of $4.0 million represented an effective tax rate of 6.8% for
the year ended December 31, 2001, compared with an effective tax rate of 30.0%
for the year ended December 31, 2000. The decrease in the effective tax rate was
due primarily to lower foreign tax rates applicable to a portion of pretax
income in 2001, partially offset by nondeductible amortization of goodwill and
for tax losses for which no benefit was recognized. See Note 9 to the
Consolidated Financial Statements.
Net Income (loss)
We reported net losses of approximately $(54.3) million, or diluted loss of
$(2.77) per share for 2001, compared with net income of approximately $19.9
million, or diluted earnings of $1.06 per share, respectively for 2000. The net
decrease of $74.2 million in 2001 was a result of the decline in revenue caused
by the reductions in demand for our customers' products and the related
restructuring charges and asset write-offs combined with the other factors
discussed above.
YEAR ENDED DECEMBER 31, 2000 COMPARED WITH YEAR ENDED DECEMBER 31, 1999
Sales
Sales in 2000 increased $827.1 million, or 94.2%, over 1999 sales. Of this total
increase in sales approximately 67.3% was attributable to the acquisition of
AVEX, approximately 2.8% was attributable to the operation of the systems
integration facility in Huntsville, approximately 1.1% was attributable to the
operation of the systems integration facility in Dublin, Ireland, approximately
0.4% was attributable to the acquisition of the Manassas operation, and
approximately 28.4% resulted from ramping up of new programs and increase in
sales volume from both existing and new customers.
Our facilities in the Americas provided 84.1% and 80.9% of net sales,
respectively, during 2000 and 1999. Our facilities in Europe provided 13.8% and
17.6% of net sales, respectively, during 2000 and 1999. Our facilities in Asia
provided 2.1% and 1.5% of our net sales, respectively, during 2000 and 1999.
A substantial percentage of our sales have been to a small number of customers,
and the loss of a major customer, if not
<Page>
replaced, would adversely affect us. During 2000, our three largest customers
accounted for approximately 34.2% of our sales, and our largest customer
accounted for approximately 15.9% of sales.
After giving effect to the AVEX acquisition, we would have derived 46% of our
pro forma combined sales in fiscal year 1999 from our international operations.
During 2000, 28.5% of our sales were from our international operations. The
decrease in the percentage of international sales on an actual basis for 2000 as
compared to the pro forma basis for 1999 reflects the sale of the Swedish
operations and the loss of two of AVEX's customers. The loss of one of these
customers, as well as the deterioration in other customer relationships,
including the major customer of the former Swedish operations, are the subject
of litigation between Huber and us.
We had a record year-end backlog of approximately $1.6 billion at December 31,
2000, as compared to the 1999 year-end backlog of $1.0 billion.
Americas
Of the Americas sales growth of approximately $723.0 million in fiscal 2000,
approximately 70.5% was due to the acquisition of AVEX, approximately 3.2% was
attributable to the operation of the systems integration facility in Huntsville,
Alabama, approximately 0.5% was attributable to the acquisition of the Manassas,
Virginia facility and approximately 25.8% resulted from demand increases from
existing and new customers.
Europe
Of the sales growth in Europe of approximately $80.8 million in fiscal 2000,
approximately 29.6% was due to the acquisition of AVEX, approximately 11.6% was
due to the systems integration facility revenues in Dublin, Ireland and
approximately 58.8% resulted from demand increases from existing and new
customers. The 1999 Dublin, Ireland revenues were positively impacted by
significant backlog fulfillment during that period resulting from a period of
customer transition. Dublin's sales during the remainder of 1999 and 2000 have
returned to normalized run rates.
In connection with the AVEX acquisition, we acquired operations in Sweden. On
September 15, 2000, we closed the previously announced sale of our Swedish
operations for $19.6 million. The Swedish operations accounted for 3.7% and 3.0%
of our sales and 14.4% and 16.0% of our operating income for the years ended
December 31, 2000 and 1999, respectively. On a pro forma basis, after giving
effect to the disposition of the Swedish operations as if it had occurred on
January 1, 2000, our income before income taxes and extraordinary item for the
year ended December 31, 2000 would have been $21.7 million. On a pro forma
basis, after giving effect to the AVEX acquisition, the Swedish operations
accounted for 3.0% of our 1999 sales and 96.7% of our 1999 operating income.
Asia
Our Singapore sales growth in fiscal 2000 was approximately $23.3 million
generated from the acquired AVEX facility. The new Singapore systems integration
facility began sales contribution in January 2001.
Gross Profit
Gross profit increased $56.6 million, or 83.8%, over 1999. Gross profit as a
percentage of sales decreased from 7.7% for 1999 to 7.3% for 2000 primarily due
to lower gross margins at AVEX than at our other operations. The increase in
gross profit was due primarily to higher sales volumes attributable to the AVEX
acquisition, the operations of the new systems integration facilities in Dublin,
Ireland and Huntsville, Alabama and a shift in mix to customer programs with
higher gross margins. The decrease in gross profit as a percentage of sales
during 2000 was attributable primarily to the inclusion of AVEX in the results
of operations during 2000 for the full year, whereas during 1999, the AVEX
operations were included beginning on August 24, 1999, the date of acquisition.
Historically, the AVEX operations have had lower gross margin levels.
Additionally, other factors impacting our gross margin for 2000 include the
level of start-up costs and inefficiencies associated with new programs, product
mix, overall improved capacity utilization of surface mount and other equipment,
and pricing within the electronics industry. The combined effect of these
factors, which are continually changing and are interrelated, make it
impracticable to determine with precision the separate effect of each factor.
<Page>
Selling, General and Administrative Expenses
Selling, general and administrative expenses for 2000 increased $25.4 million,
or 78.2% from 1999 to $57.8 million in 2000. The increase in selling, general
and administrative expenses for 2000 is primarily the result of the acquisition
of AVEX. For the period beginning January 1 and ending August 24, 1999, prior to
our acquisition of AVEX, AVEX recorded $33.3 million of selling, general and
administrative expenses. Additionally, the increase reflects the investment in
personnel and the incurrence of related corporate and administrative expenses
necessary to support the increased size and complexity of our business.
The charges to operations for bad debt allowance and inventory obsolescence were
$0.9 million and $3.7 million in 2000, respectively, as compared to $0.3 million
and $1.9 million in 1999, respectively.
Goodwill
Goodwill is amortized on a straight-line basis over an estimated life of 15
years. The amortization of goodwill for the years ended December 31, 2000 and
1999 was $12.8 million and $6.4 million, respectively. The increase was due to
the acquisition of AVEX on August 24, 1999. See Note 2 to the Consolidated
Financial Statements.
Interest Expense
Interest expense was approximately $24.4 million and $9.7 million, respectively,
in 2000 and 1999. The increase was due to the additional debt incurred in
connection with the acquisition of AVEX on August 24, 1999. See Note 6 to the
Consolidated Financial Statements.
Interest Income
Interest income was approximately $0.8 million in 2000 compared to $0.6 million
in 1999.
Income Tax Expense
Income tax expense of $8.5 million represented an effective tax rate of 30.0%
for the year ended December 31, 2000, compared with an effective tax rate of
34.5% for the year ended December 31, 1999. The decrease is due primarily to
lower foreign tax rates applicable to a portion of pretax income in 2000 and a
2.4% benefit related to prior years' amended U.S. tax returns filed in 2000,
partially offset by nondeductible amortization of goodwill. See Note 9 to the
Consolidated Financial Statements.
Net Income
We reported net income of approximately $19.9 million, or diluted earnings of
$1.06 per share, for 2000 compared with net income of approximately $12.0
million, or diluted earnings of $0.80 per share for 1999. The approximately $7.9
million net increase in net income during 2000 was a result of the combined
effects of the acquisition of AVEX, the $1.3 million (net of income tax benefit
of $0.7 million) extraordinary loss on extinguishment of debt in 1999 and the
increase in interest expense.
LIQUIDITY AND CAPITAL RESOURCES
We have financed our growth and operations through funds generated from
operations, proceeds from the sale of our securities and funds borrowed under
our credit facilities.
Cash provided by (used in) operating activities was $170.3 million, $(47.0)
million and $69.9 million in 2001, 2000 and 1999, respectively. In 2001,
significant decreases in accounts receivable and inventories were partially
offset by decreases in accounts payable. Our accounts receivables and
inventories at December 31, 2001 decreased $95.8 million and $145.4 million,
respectively, over their levels at December 31, 2000, reflecting our decreased
backlog, caused by reduced demand for our customers' products, and effective
working capital management during 2001. In 2000, significant increases in
accounts receivable and inventories, net of effects from the acquisition of the
Manassas facility, were partially offset by increases in accounts payable,
depreciation and amortization. Our accounts receivables and inventories at
December 31, 2000 increased $81.3 million and $132.4 million, respectively, over
their levels at December 31, 1999, reflecting our increased sales and backlog
during 2000. In 1999, significant decreases in accounts receivable, net of
effects from the acquisition of AVEX, increases in accounts payable, and
increases in depreciation
<Page>
and amortization were partially offset by increases in inventories and decreases
in accrued liabilities, net of effects from the acquisition of AVEX. Our
inventories increased from $53.7 million at December 31, 1998 to $214.6 million
at December 31, 1999, reflecting the acquisitions of AVEX and certain assets
from Stratus during 1999 and increased sales and backlog during this period. We
expect increases in inventories to support the anticipated growth in sales. We
are continuing the practice of purchasing components only after customer orders
are received, which mitigates, but does not eliminate the risk of loss on
inventories. During 2001 and 2000, our gross profit was adversely effected by
the writedown of $7.6 million and $3.7 million, respectively, in excess and
obsolete inventory that could not be put back to vendors or customers. Supplies
of electronic components and other materials used in operations are subject to
industry-wide shortages. In certain instances, suppliers may allocate available
quantities to us.
Cash used in investing activities was $20.8 million, $85.5 million and $333.8
million, respectively, for the years ended December 31, 2001, 2000 and 1999.
Capital expenditures of $17.6 million and $48.0 million during 2001 and 2000,
respectively were primarily concentrated in test and manufacturing production
equipment. Capital expenditures of $23.8 million during 1999 consisted primarily
of test and computer equipment. During 2001, 2000 and 1999, we invested $3.5
million, $0.6 million and $2.5 million, respectively, on new software. Pursuant
to the terms of the purchase agreement in connection with the AVEX acquisition,
the working capital adjustment was settled in the second quarter of 2000 and
$35.3 million was paid to Huber. The final working capital adjustment was $2.0
million greater than the current liability we had recorded at December 31, 1999
as an estimate of the working capital adjustment. We recorded the $2.0 million
as an increase in goodwill during the quarter ended June 30, 2000. On October 2,
2000, we acquired substantially all of the assets and properties, net of assumed
liabilities, of the Manassas facility for $3.5 million in cash. On August 24,
1999, we completed the AVEX acquisition with $265.3 million paid in cash at
closing. On March 1, 1999, we completed the purchase of inventories and
equipment from Stratus for $42.3 million in cash. See Note 2 of Notes to
Consolidated Financial Statements.
Cash provided by (used in) financing activities was $(112.2) million, $147.1
million and $249.8 million, respectively, for the years ended December 31, 2001,
2000 and 1999. During 2001, we decreased borrowings outstanding under our
revolving line of credit by $93.5 million (net) and made principal payments on
other long-term debt of $20.3 million. On August 14, 2000, we completed the
public offering of 3,162,500 shares of our common stock for net proceeds of
$113.3 million. We used such proceeds to temporarily repay indebtedness
outstanding under our revolving credit facility. During 2000, we increased
borrowings outstanding under our revolving line of credit by $52.0 million (net)
and made principal payments on other long-term debt totaling $19.7 million. In
August 1999 in connection with the AVEX acquisition, we borrowed $100 million
under a term loan, $76 million under a revolving credit facility and issued
$80.2 million principal amount of 6% Convertible Subordinated Notes. In
connection with the purchase of the assets from Stratus on March 1, 1999, we
borrowed $25 million under a revolving credit facility. In June 1999, we
completed a public offering of 3,525,000 shares of its common stock and used a
portion of the net proceeds of $93.7 million to repay borrowings under our bank
credit facilities. Principal payments on other long-term debt and debt issuance
costs totaled $58.4 million and $6.4 million, respectively, during 1999.
Principal on the term loan is payable in quarterly installments of $5 million
and $5.5 million during 2002 and 2003, respectively. The final three
installments of $7 million are due on the last day of March, June and September
2004.
We have a $175 million revolving line of credit facility with a commercial bank.
We are entitled to borrow under the revolving credit facility up to the lesser
of $175 million or the sum of 75% of our eligible accounts receivable, 45% of
our eligible inventories and 50% of our eligible fixed assets. Interest on the
revolving credit facility is payable quarterly, at our option, at either the
bank's Eurodollar rate plus 1.25% to 3.00% or its prime rate plus 0.00% to
1.75%, based upon our debt ratio as specified in the agreement. A commitment fee
of 0.375% to 0.500% per annum on the unused portion of the revolving credit
facility is payable quarterly in arrears. The revolving credit facility matures
on September 30, 2004. As of December 31, 2001, we had no borrowings outstanding
under the revolving credit facility, $0.4 million outstanding letters of credit
and $174.6 million was available for future borrowings.
The term loan and the revolving credit facility are secured by our domestic
inventory and accounts receivable, 100% of the stock of our domestic
subsidiaries, and 65% of the voting capital stock of each direct foreign
subsidiary and substantially all of our and our domestic subsidiaries' other
tangible and intangible assets. The term loan and revolving
<Page>
credit facility contain customary financial covenants as to working capital,
interest coverage, debt leverage, fixed charges, and consolidated net worth, and
restricts our ability to incur additional debt, pay dividends, sell assets and
to merge or consolidate with other persons without the consent of the bank. At
December 31, 2001, we were in compliance with all such restrictions.
We have outstanding $80.2 million principal amount of 6% Convertible
Subordinated Notes. The indenture relating to the notes contains affirmative and
negative covenants, including covenants restricting our ability to merge or
engage in certain other extraordinary corporate transactions unless certain
conditions are satisfied. Upon the occurrence of a change of control (as defined
in the indenture relating to the notes) of our company, each holder of notes
will have the right to require us to repurchase all or part of the holder's
notes at 100% of the face amount thereof, plus accrued and unpaid interest. The
notes are convertible into shares of our common stock at an initial conversion
price of $40.20 per share at the option of the holder at any time prior to
maturity, unless previously redeemed or repurchased.
Our operations, and the operations of businesses we acquire, are subject to
certain foreign, federal, state and local regulatory requirements relating to
environmental, waste management, health and safety matters. We believe we
operate in substantial compliance with all applicable requirements and we seek
to ensure that newly acquired businesses comply or will comply substantially
with applicable requirements. To date the costs of compliance and workplace and
environmental remediation have not been material to us. However, material costs
and liabilities may arise from these requirements or from new, modified or more
stringent requirements in the future. In addition, our past, current and future
operations, and the operations of businesses we have or may 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.
Our acquisitions in 1999 have significantly increased our leverage ratio and
decreased our interest coverage ratio. At December 31, 2001, our debt to total
capitalization ratio was 30%, as compared to 39% at December 31, 2000, 44% at
December 31, 1999 and 11% at June 30, 1999, the last fiscal quarter end prior to
the AVEX acquisition. The level of indebtedness, among other things, could make
it difficult for us to obtain any necessary financing in the future for other
acquisitions, working capital, capital expenditures, debt service requirements
and other expenses; limit our flexibility in planning for, or reacting to
changes in, our business; and make us more vulnerable in the event of an
economic downturn in our business.
Management believes our existing cash balances, funds generated from operations
and available funds under our revolving credit facility will be sufficient to
permit us to meet our liquidity requirements for the next 9-12 months.
We may require additional capital to finance further enhancements to or
acquisitions or expansions of our manufacturing capacity. Management believes
that the level of working capital will grow at a rate generally consistent with
the growth of our operations. Management continually evaluates potential
strategic acquisitions and investments, but at the present time, we have no
understandings, commitments or agreements with respect to any such acquisition
or investment. Although no assurance can be given that future financing will be
available on terms acceptable to us, we may seek additional funds from time to
time through public or private debt or equity offerings or through bank
borrowings to the extent permitted by our existing debt agreements.
<Page>
Contractual Obligations
We have certain contractual obligations that extend out beyond 2002. These
commitments include other long-term debt and lease obligations. We do not
utilize off-balance sheet financing techniques other than traditional operating
leases and we have not guaranteed the obligations of any entity that is not one
of our wholly-owned subsidiaries. We lease manufacturing and office facilities
in Minnesota from a partnership whose partners include stockholders and a
director of Benchmark. These operating leases have initial terms of ten years,
expiring through August 2006 with annual renewals thereafter. Total rent expense
associated with these leases was $0.8 million for each of the years ended
December 31, 2001, 2000 and 1999. The total contractual cash obligations in
existence at December 31, 2001 due pursuant to contractual commitments are:
<Table>
<Caption>
Payments Due by Year
(in thousands) Total 2002 2003 2004 2005 2006 Thereafter
<S> <C> <C> <C> <C> <C> <C> <C>
Other long-term debt $ 67,062 22,367 23,623 21,061 11 -- --
Operating leases 37,220 8,062 6,359 4,336 2,986 1,920 13,557
Convertible subordinated notes 80,200 -- -- -- -- 80,200 --
---------------------------------------------------------------------------------------
Total contractual cash obligations $184,482 30,429 29,982 25,397 2,997 82,120 13,557
</Table>
We also have made certain commitments for letters of credit totaling $350
thousand that mature during 2002.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Management's discussion and analysis of financial condition and results of
operations is based upon our consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States of America. Our significant accounting policies are summarized in
Note 1 to the Consolidated Financial Statements. The preparation of these
financial statements requires us to make estimates and judgments that affect the
reported amounts of assets, liabilities, revenues and expenses, and related
disclosure of contingent assets and liabilities. On an on-going basis, we
evaluate our estimates, including those related to allowance for doubtful
accounts, inventories, deferred taxes, impairment of long-lived assets, and
contingencies and litigation. We base our estimates on historical experience and
on various other assumptions that we believe to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates. We believe the
following critical accounting policies affect our more significant judgments and
estimates used in the preparation of our consolidated financial statements.
Allowance for doubtful accounts
Our accounts receivable balance is recorded net of allowances for amounts not
expected to be collected from our customers. Because our accounts receivable are
typically unsecured, we periodically evaluate the collectibility of our accounts
based on a combination of factors, including a particular customer's ability to
pay as well as the age of the receivables. To evaluate a specific customer's
ability to pay, we analyze financial statements, payment history, third-party
credit analysis reports and various information or disclosures by the customer
or other publicly available information. In cases where the evidence suggests a
customer may not be able to satisfy its obligation to us, we set up a specific
reserve in an amount we determine appropriate for the perceived risk. If the
financial condition of our customers were to deteriorate, resulting in an
impairment of their ability to make payments, additional allowances may be
required. The allowance for doubtful accounts was $2.2 million at December 31,
2001.
Inventory obsolescence reserve
We write down our inventories for estimated obsolescence equal to the difference
between the cost of inventory and estimated market value based on assumptions on
future demands and market conditions. We evaluate on a quarterly basis the
status of our inventory to ensure the amount recorded in our financial
statements reflects the lower of our cost
<Page>
or the value we expect to receive when we sell the inventory. The allowance for
excess and obsolete inventory was $9.0 million at December 31, 2001. If actual
market conditions are less favorable than those we projected, additional
inventory write downs may be required.
Deferred Taxes
We record a valuation allowance to reduce our deferred tax assets to the amount
that is more likely than not to be realized. While we have considered future
taxable income and ongoing prudent and feasible tax planning strategies in
assessing the need for the valuation allowance, in the event we were to
subsequently determine that we would be able to realize our deferred tax assets
in the future in excess of our net recorded amount, an adjustment to the
deferred tax asset would increase income in the period such determination was
made. Similarly, should we determine that we would not be able to realize all or
part of our net deferred tax asset in the future, an adjustment to the deferred
tax asset would reduce income in the period such determination was made.
Impairment of Long-Lived Assets
We assess the impairment of our identifiable intangibles, long-lived assets and
related goodwill whenever events or changes in circumstances indicate that the
carrying value may not be recoverable. Factors considered important which could
trigger an impairment review include significant underperformance relative to
expected historical or projected future operating results, significant changes
in the manner of our use of the acquired assets or the strategy for the overall
business, significant negative industry or economic trends, and our market
capitalization relative to net book value. When it is determined that the
carrying value of intangibles, long-lived assets and related goodwill may not be
recoverable based upon the existence of one or more of the above indicators of
impairment, the measurement of any impairment is determined and the carrying
value is reduced as appropriate. As of December 31, 2001, we had net goodwill of
approximately $119.2 million.
RISK FACTORS
We are exposed to general economic conditions, which could have a material
adverse impact on our business, operating results and financial condition.
As a result of recent unfavorable economic conditions and a decline in demand by
the electronics industry, our sales declined 25% during 2001. We started to see
sales decline in the technology sector worldwide at the end of the first quarter
of 2001 and it continued throughout 2001. If the economic conditions and demand
for our customers' products do not improve, we may experience a material adverse
impact on our business, operating results and financial condition.
The loss of a major customer would adversely affect us.
A substantial percentage of our sales have been to a small number of customers,
and the loss of a major customer, if not replaced, would adversely affect us.
During 2001, our three largest customers accounted for approximately 44.9% of
our sales, and our largest customer accounted for approximately 21.9% of sales.
Our future sales are dependent on the success of our customers, some of which
operate in businesses associated with rapid technological change and consequent
product obsolescence. Developments adverse to our major customers or their
products, or the failure of a major customer to pay for components or services,
could have an adverse effect on us.
We expect to continue to depend on the sales from our largest customers and any
material delay, cancellation or reduction of orders from these or other
significant customers would have a material adverse effect on our results of
operations. In addition, we generate significant accounts receivable in
connection with providing manufacturing services to our customers. If one or
more of our customers were to become insolvent or otherwise unable to pay for
the manufacturing services provided by us, our operating results and financial
condition would be adversely affected.
<Page>
We may encounter significant delays or defaults in payments owed to us by
customers for products we have manufactured or components that are unique to
particular customers.
We structure our agreements with customers to mitigate our risks related to
obsolete or unsold inventory. However, enforcement of these contracts may result
in material expense and delay in payment for inventory. If any of our
significant customers become unable or unwilling to purchase such inventory, our
business may be materially harmed. During 2001 and 2000, our gross profit was
adversely affected by the write down of $7.6 million and $3.7 million,
respectively, in excess and obsolete inventory that could not be put back to
vendors or customers.
We are dependent on the success of our customers
We are dependent on the continued growth, viability and financial stability of
our customers. Our customers are original equipment manufacturers of:
o telecommunication equipment;
o computers and related products for business enterprises;
o industrial control equipment;
o medical devices;
o video/audio/entertainment products; and
o testing and instrumentation products.
These industries are, to a varying extent, subject to rapid technological
change, vigorous competition and short product life cycles. When our customers
are adversely affected by these factors, we may be similarly affected. Recently,
our customers have experienced a decline in demand for their products, which has
had an adverse effect on our results of operations.
Long-term contracts are unusual in our business and cancellations, reductions or
delays in customer orders would affect our profitability.
We do not typically obtain firm long-term purchase orders or commitments from
our customers. Instead, we work closely with our customers to develop forecasts
for future orders, which are not binding. Customers may cancel their orders,
change production quantities from forecast volumes or delay production for a
number of reasons beyond our control. Cancellations, reductions or delays by a
significant customer or by a group of customers would have an adverse effect on
us. As many of our costs and operating expenses are relatively fixed, a
reduction in customer demand can disproportionately affect our gross margins and
operating income. Our customers' products have life cycles of varying duration.
In the ordinary course of business, production starts, increases, declines and
stops in accordance with a product's life cycle. Should we fail to replace
products reaching the end of their life cycles with new programs, or if there
should be a substantial time difference between the loss of a product and the
receipt of revenue from replacement production, our revenues could be adversely
affected.
We operate in a highly competitive industry.
We compete against many providers of electronics manufacturing services. Certain
of our competitors have substantially greater resources and more geographically
diversified international operations than we do. Our competitors include large
independent manufacturers such as Celestica, Inc., Flextronics International
Ltd., Jabil Circuit, Inc, Sanmina-SCI Corporation and Solectron Corporation. We
also face competition from the manufacturing operations of our current and
future customers.
During periods of recession in the electronics industry, our competitive
advantages in the areas of quick turnaround manufacturing and responsive
customer service may be of reduced importance to electronics OEMs, who may
become more price sensitive. We may also be at a competitive disadvantage with
respect to price when compared to manufacturers with lower cost structures,
particularly those with offshore facilities located where labor and other costs
are lower.
<Page>
We will experience intense competition, which is expected to intensify further
as more companies enter markets in which we operate, as existing competitors
expand capacity and as the industry consolidates. To compete effectively, we
must continue to provide technologically advanced manufacturing services,
maintain strict quality standards, respond flexibly and rapidly to customers'
design and schedule changes and deliver products globally on a reliable basis at
competitive prices. Our inability to do so could have an adverse effect on us.
We may be affected by consolidation in the electronics industry.
As a result of the current economic climate, consolidation in the electronics
industry may increase. Consolidation in the electronics industry could result in
an increase in excess manufacturing capacity as companies seek to close plants
or take other steps to increase efficiencies and realize synergies of mergers.
The availability of excess manufacturing capacity could create increased pricing
and competitive pressures for the electronics manufacturing services industry as
a whole and Benchmark in particular. In addition, consolidation could also
result in an increasing number of very large electronics companies offering
products in multiple sectors of the electronics industry. The growth of these
large companies, with significant purchasing power and market power, could also
result in increased pricing and competitive pressures for us. Accordingly,
industry consolidation could harm our business.
Our international operations may be subject to certain risks.
We currently operate outside the United States in Brazil, Ireland, Mexico,
Scotland, and Singapore. During 2001 and 2000, 23.3% and 28.5% of our sales were
from our international operations. These international operations may be subject
to a number of risks, including:
o difficulties in staffing and managing foreign operations;
o political and economic instability;
o unexpected changes in regulatory requirements and laws;
o longer customer payment cycles and difficulty collecting accounts
receivable;
o export duties, import controls and trade barriers (including quotas);
o governmental restrictions on the transfer of funds;
o burdens of complying with a wide variety of foreign laws and labor
practices;
o fluctuations in currency exchange rates, which could affect component
costs, local payroll, utility and other expenses; and
o inability to utilize net operating losses incurred by our foreign
operations to reduce our U.S. income taxes.
We cannot assure you that our international operations will contribute
positively to our business, financial conditions or results of operations.
We do not use derivative financial instruments for speculative purposes. Our
policy is to maintain a hedged position for certain significant transaction
exposures. These exposures are primarily, but not limited to, vendor payments
and inter-company balances in currencies other than the functional currency of
the operating entity. Our international operations in some instances operate in
a natural hedge because both operating expenses and a portion of sales are
denominated in local currency. Certain significant transactions involving our
international operations may now require us to engage in hedging transactions to
attempt to mitigate our exposure to fluctuations in foreign exchange rates.
Effective Jan. 1, 2001, we adopted the provisions of the Financial Accounting
Standards Board's (FASB) Statement of Financial Accounting Standards (SFAS) No.
133, "Accounting for Derivative Instruments and Certain Hedging Activities" and
SFAS No. 138, "Accounting for Derivative Instruments and Certain Hedging
Activities, an Amendment of SFAS 133". Note 1 to the consolidated Financial
Statements describes and quantifies our adoption of SFAS No. 133 and 138.
<Page>
Shortages or price increases of components specified by our customers would
delay shipments and adversely affect our profitability.
Substantially all of our sales are derived from electronics manufacturing
services in which we purchase components specified by our customers. In the
past, supply shortages have substantially curtailed production of all assemblies
using a particular component. In addition, industry-wide shortages of electronic
components, particularly of memory and logic devices, have occurred. If
shortages of these components occur or if components received are defective, we
may be forced to delay shipments, which could have an adverse effect on our
profit margins. Because of the continued increase in demand for surface mount
components, we anticipate component shortages and longer lead times for certain
components to occur from time to time. Also, we typically bear the risk of
component price increases that occur between periodic repricings during the term
of a customer contract. Accordingly, certain component price increases could
adversely affect our gross profit margins.
Our success will continue to depend to a significant extent on our executives.
We depend significantly on certain key executives, including, but not limited
to, Donald E. Nigbor, Steven A. Barton, Cary T. Fu and Gayla J. Delly. The
unexpected loss of the services of any one of these executive officers would
have an adverse effect on us.
We must successfully integrate the operations of acquired companies to maintain
profitability.
We have completed five acquisitions since July 1996. We may pursue additional
acquisitions over time. These acquisitions involve risks, including:
o integration and management of the operations;
o retention of key personnel;
o integration of purchasing operations and information systems;
o retention of the customer base of acquired businesses;
o management of an increasingly larger and more geographically disparate
business; and o diversion of management's attention from other ongoing
business concerns.
Our profitability will suffer if we are unable to successfully integrate and
manage any future acquisitions that we might pursue, or if we do not achieve
sufficient revenue to offset the increased expenses associated with these
acquisitions.
We must maintain our technological and manufacturing process expertise.
The market for our manufacturing services is characterized by rapidly changing
technology and continuing process development. We are continually evaluating the
advantages and feasibility of new manufacturing processes. We believe that our
future success will depend upon our ability to develop and provide manufacturing
services which meet our customers' changing needs. This requires that we
maintain technological leadership and successfully anticipate or respond to
technological changes in manufacturing processes on a cost-effective and timely
basis. We cannot assure you that our process development efforts will be
successful.
Environmental laws may expose us to financial liability and restrictions on
operations.
We are subject to a variety of federal, state, local and foreign environmental
laws and regulations relating to environmental, waste management, and health and
safety concerns, including the handling, storage, discharge and disposal of
hazardous materials used in or derived from our manufacturing processes. If we
or companies we acquire have failed or fail in the future to comply with such
laws and regulations, then we could incur liabilities and fines and our
operations could be suspended. Such laws and regulations could also restrict our
ability to modify or expand our facilities, could require us to acquire costly
equipment, or could impose other significant expenditures. In addition, our
operations may give rise to claims of property contamination or human exposure
to hazardous chemicals or conditions.
<Page>
Our acquisitions have significantly increased our leverage.
Our acquisitions in 1999 have significantly increased our leverage ratio and
decreased our interest coverage ratio. At December 31, 2001, our debt to total
capitalization ratio was 30%, as compared to 39% at December 31, 2000, 44% at
December 31, 1999 and 11% at June 30, 1999, the last fiscal quarter end prior to
the AVEX acquisition. The level of our indebtedness, among other things, could:
o make it difficult for us to obtain any necessary financing in the future
for other acquisitions, working capital, capital expenditures, debt service
requirements or other purposes;
o limit our flexibility in planning for, or reacting to changes in, our
business; and
o make us more vulnerable in the event of a downturn in our business.
There can be no assurance that we will be able to meet our debt service
obligations.
Provisions in our charter documents and state law may make it harder for others
to obtain control of Benchmark even though some shareholders might consider such
a development to be favorable.
Our shareholder rights plan, provisions of our amended and restated articles of
incorporation and the Texas Business Corporation Act may delay, inhibit or
prevent someone from gaining control of Benchmark through a tender offer,
business combination, proxy contest or some other method. These provisions
include:
o a "poison pill" shareholder rights plan;
o a statutory restriction on the ability of shareholders to take action by
less than unanimous written consent; and
o a statutory restriction on business combinations with some types of
interested shareholders.
We may experience fluctuations in quarterly results.
Our quarterly results may vary significantly depending on various factors, many
of which are beyond our control. These factors include:
o the volume of customer orders relative to our capacity;
o customer introduction and market acceptance of new products;
o changes in demand for customer products;
o the timing of our expenditures in anticipation of future orders;
o our effectiveness in managing manufacturing processes;
o changes in cost and availability of labor and components;
o changes in our product mix;
o changes in economic conditions; and
o local factors and events that may affect our production volume, such as
local holidays.
Additionally, as is the case with many high technology companies, a significant
portion of our shipments typically occurs in the last few weeks of a quarter. As
a result, our sales may shift from one quarter to the next, having a significant
effect on reported results.
Our stock price is volatile.
Our common stock has experienced significant price volatility, and such
volatility may continue in the future. The price of our common stock could
fluctuate widely in response to a range of factors, including variations in our
reported financial results and changing conditions in the economy in general or
in our industry in particular. In addition, stock markets generally experience
significant price and volume volatility from time to time which may affect the
market price of our common stock for reasons unrelated to our performance.
<Page>
We are exposed to interest rate fluctuations.
We have exposure to interest rate risk under our variable rate revolving credit
and term loan facilities. These facilities are based on the spread over the
bank's Eurodollar rate or its prime rate. We currently have an interest rate
swap transaction agreement for a notional amount of $31.5 million under which we
pay a fixed rate of interest of 6.63%, plus 1.25% to 3.00% based upon our debt
ratio as specified in the debt agreement, hedging against the variable interest
rates charged by the term loan. The receive rate under the swap is based on
LIBOR. The interest rate swap expires in the year 2003.
The following tables present principal cash flows and related interest rates by
year of maturity for debt obligations. The variable interest rate for future
years assumes the same rate as of each year end.
<Table>
<Caption>
Fair Value at
Expected Year of Maturity ($ in '000's) December 31,
Debt 2002 2003 2004 2005 2006 Total 2001
-------- -------- -------- -------- ------- ------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Convertible subordinated notes -- -- -- -- $80,200 $80,200 $64,361
Fixed interest rate 6.00% 6.00% 6.00% 6.00% 6.00%
Variable rate term loan $20,000 $22,000 $21,000 -- -- $63,000 $63,000
Average interest rate 4.03% 4.03% 4.03% -- --
Interest Rate Derivative Financial
Instruments Related to Debt
Interest rate swap
Pay fixed/receive variable $10,000 $21,500 -- -- -- $31,500 $(1,556)
Average pay rate 8.26% 8.26% -- -- --
Average receive rate 3.94% 3.94% -- -- --
</Table>
<Table>
<Caption>
Fair Value at
Expected Year of Maturity ($ in '000's) December 31,
Debt 2001 2002 2003 2004 Thereafter Total 2000
-------- -------- -------- -------- ---------- ------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Convertible subordinated notes -- -- -- -- $80,200 $80,200 $70,408
Fixed interest rate 6.00% 6.00% 6.00% 6.00% 6.00%
Variable rate term loan $18,000 $20,000 $22,000 $21,000 -- $81,000 $81,000
Average interest rate 9.47% 9.47% 9.47% 9.47% --
Variable rate revolving credit facility -- -- -- $93,500 -- $93,500 $93,500
Average interest rate 11.00% 11.00% 11.00% 11.00% --
Interest Rate Derivative Financial
Instruments Related to Debt
Interest rate swap
Pay fixed/receive variable $ 9,000 $10,000 $21,500 -- -- $40,500 $ (667)
Average pay rate 9.38% 9.38% 9.38% -- --
Average receive rate 9.19% 9.19% 9.19% -- --
</Table>
<Page>
We are involved in legal proceedings related to class action lawsuits, the Avex
acquisition and a patent infringement lawsuit. An unfavorable decision in any of
these proceedings could have a material adverse effect on us.
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 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.
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.
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.
<Page>
Consolidated Balance Sheets
Benchmark Electronics, Inc. and Subsidiaries
<Table>
<Caption>
December 31,
(in thousands) 2001 2000
---------------------------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 59,879 $ 23,541
Accounts receivable, net of allowance for
doubtful accounts of $2,211 and $4,276, respectively 180,021 277,620
Income taxes receivable 1,711 --
Inventories, net 197,278 346,463
Prepaid expenses and other assets 12,928 18,412
Deferred tax asset 9,080 3,135
--------------------------------
Total current assets 460,897 669,171
Property, plant and equipment 210,556 202,404
Accumulated depreciation (116,751) (66,016)
--------------------------------
Net property, plant and equipment 93,805 136,388
Goodwill, net 119,209 166,514
Other, net 12,194 19,148
--------------------------------
$ 686,105 $ 991,221
============ ============
Liabilities and Shareholders' Equity
Current liabilities:
Current installments of other long-term debt $ 22,367 $ 20,275
Accounts payable 144,150 268,358
Income taxes payable -- 1,911
Accrued liabilities 26,541 31,309
------------ ------------
Total current liabilities 193,058 321,853
Revolving line of credit -- 93,500
Convertible subordinated notes 80,200 80,200
Other long-term debt, excluding current installments 44,695 67,094
Other long-term liability 7,771 6,957
Deferred tax liability 8,699 9,672
Shareholders' equity:
Preferred shares, $.10 par value; 5,000 shares
authorized, none issued -- --
Common shares, $.10 par value; 30,000 shares
authorized: issued 19,751 and 19,643, respectively;
outstanding 19,702 and 19,594, respectively 1,970 1,959
Additional paid-in capital 319,875 317,849
Retained earnings 44,363 98,675
Accumulated other comprehensive loss (14,406) (6,418)
Less treasury shares, at cost, 49 shares (120) (120)
--------------------------------
Total shareholders' equity 351,682 411,945
Commitments and contingencies
$ 686,105 $ 991,221
============ ============
</Table>
See accompanying notes to consolidated financial statements.
<Page>
Consolidated Statements of Income (Loss)
Benchmark Electronics, Inc. and Subsidiaries
<Table>
<Caption>
Year ended December 31,
(in thousands, except per share data) 2001 2000 1999
--------------------------------------
<S> <C> <C> <C>
Sales $ 1,276,950 $ 1,704,924 $ 877,839
Cost of sales 1,183,440 1,580,817 810,309
----------------------------------------------
Gross profit 93,510 124,107 67,530
Selling, general and administrative expenses 54,383 57,871 32,477
Restructuring charges 7,569 -- --
Asset write-offs 61,720 -- --
Amortization of goodwill 12,219 12,841 6,430
----------------------------------------------
Income (loss) from operations (42,381) 53,395 28,623
Interest expense (16,998) (24,396) (9,696)
Interest income 1,508 770 605
Other income (expense) (422) (1,339) 744
----------------------------------------------
Income (loss) before income taxes and
extraordinary item (58,293) 28,430 20,276
Income tax benefit (expense) 3,981 (8,529) (7,005)
----------------------------------------------
Income (loss) before extraordinary item (54,312) 19,901 13,271
Extraordinary item - loss on extinguishment of debt, net of tax -- -- (1,297)
----------------------------------------------
Net income (loss) $ (54,312) $ 19,901 $ 11,974
==============================================
Earnings (loss) per share:
Basic:
Income (loss) before extraordinary item $ (2.77) $ 1.13 $ 0.94
Extraordinary item -- -- (0.09)
----------------------------------------------
Earnings (loss) per share $ (2.77) $ 1.13 $ 0.85
==============================================
Diluted:
Income (loss) before extraordinary item $ (2.77) $ 1.06 $ 0.88
Extraordinary item -- -- (0.08)
==============================================
Earnings (loss) per share $ (2.77) $ 1.06 $ 0.80
==============================================
Weighted average number of shares outstanding:
Basic 19,625 17,578 14,081
Diluted 19,625 18,718 15,010
==============================================
</Table>
See accompanying notes to consolidated financial statements.
<Page>
Consolidated Statements of Shareholders' Equity and Comprehensive Income (Loss)
Benchmark Electronics, Inc. and Subsidiaries
<Table>
<Caption>
Accumulated
Additional other Total
Common paid-in Retained comprehensive Treasury shareholders'
(in thousands) Shares shares capital earnings income (loss) shares equity
<S> <C> <C> <C> <C> <C> <C> <C>
Balances, December 31, 1998 11,628 $ 1,162 $ 70,159 $ 66,800 -- $ (120) $ 138,001
Common shares issued in
public offering net of expenses 3,525 353 93,338 -- -- -- 93,691
Stock options exercised 65 7 797 -- -- -- 804
Federal tax benefit of
stock options exercised -- -- 322 -- -- -- 322
Common shares issued under
Employee Stock Purchase Plan 22 2 452 -- -- -- 454
Acquisition of Avex
Electronics, Inc. 1,000 100 35,912 -- -- -- 36,012
Net income -- -- -- 11,974 -- -- 11,974
Foreign currency translation
adjustments -- -- -- -- 677 -- 677
-----------
Comprehensive income -- -- -- -- -- -- 12,651
--------------------------------------------------------------------------------------
Balances, December 31, 1999 16,240 1,624 200,980 78,774 677 (120) 281,935
Common shares issued in
public offering net of expenses 3,163 316 112,971 -- -- -- 113,287
Stock options exercised 127 13 1,734 -- -- -- 1,747
Federal tax benefit of
stock options exercised -- -- 921 -- -- -- 921
Common shares issued under
Employee Stock Purchase Plan 64 6 1,210 -- -- -- 1,216
Federal tax benefit of
Employee Stock Purchase Plan -- -- 33 -- -- -- 33
Net income -- -- -- 19,901 -- -- 19,901
Foreign currency translation
adjustments -- -- -- -- (7,095) -- (7,095)
-----------
Comprehensive income -- -- -- -- -- -- 12,806
--------------------------------------------------------------------------------------
Balances, December 31, 2000 19,594 1,959 317,849 98,675 (6,418) (120) 411,945
Accrued compensation expense -- -- 361 -- -- -- 361
Stock options exercised 32 3 289 -- -- -- 292
Federal tax benefit of
stock options exercised -- -- 61 -- -- -- 61
Common shares issued under
Employee Stock Purchase Plan 76 8 1,282 -- -- -- 1,290
Federal tax benefit of
Employee Stock Purchase Plan -- -- 33 -- -- -- 33
Net loss -- -- -- (54,312) -- -- (54,312)
Change in fair market value of derivative
instruments -- -- -- -- (998) -- (998)
Foreign currency translation
adjustments -- -- -- -- (6,990) -- (6,990)
-----------
Comprehensive loss -- -- -- -- -- -- (62,300)
--------------------------------------------------------------------------------------
Balances, December 31, 2001 19,702 $ 1,970 $ 319,875 $ 44,363 $ (14,406) $ (120) $ 351,682
======================================================================================
</Table>
See accompanying notes to consolidated financial statements.
<Page>
Consolidated Statements of Cash Flows
Benchmark Electronics, Inc. and Subsidiaries
<Table>
<Caption>
Year ended December 31,
(in thousands) 2001 2000 1999
--------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (54,312) $ 19,901 $ 11,974
Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating activities:
Depreciation and amortization 39,640 39,841 24,637
Asset write-offs 61,720 -- --
Accrued compensation expense 361 -- --
Deferred income taxes (6,360) 3,206 841
Federal tax benefit of stock options exercised 61 921 322
Federal tax benefit of Employee Stock Purchase Plan 33 33 --
Tax benefit of acquired net operating loss carryforwards 743 360 --
Amortization of goodwill 12,219 12,841 6,430
Gain on the sale of property, plant and equipment -- (24) (455)
Extraordinary loss on extinguishment of debt -- -- 1,297
Changes in operating assets and liabilities, net of effects
from acquisitions of businesses:
Accounts receivable 95,806 (81,290) 10,745
Income taxes receivable (3,622) 5,262 (1,533)
Inventories 145,449 (132,425) (10,681)
Prepaid expenses and other assets 7,355 (5,494) 734
Accounts payable (123,454) 86,430 38,490
Accrued liabilities (5,348) 3,399 (12,932)
--------------------------------------------
Net cash provided by (used in) operations 170,291 (47,039) 69,869
--------------------------------------------
Cash flows from investing activities:
Additions to property, plant and equipment (17,613) (47,984) (23,871)
Additions to capitalized software (3,459) (645) (2,485)
Proceeds from the sale of property, plant and equipment 269 1,777 1,467
Acquisitions, net of cash acquired -- (38,685) (308,877)
--------------------------------------------
Net cash used in investing activities (20,803) (85,537) (333,766)
--------------------------------------------
Cash flows from financing activities:
Net proceeds from public offering of common shares -- 113,287 93,691
Proceeds from issuance (repayment) of revolving
line of credit, net (93,500) 52,000 41,500
Proceeds from issuance of other long-term debt -- -- 180,200
Principal payments on other long-term debt (20,307) (19,731) (58,473)
Repayment premium on extinguishment of debt -- -- (1,995)
Debt issuance costs -- (1,383) (6,390)
Proceeds from Employee Stock Purchase Plan 1,290 1,216 454
Proceeds from stock options exercised 292 1,747 804
--------------------------------------------
Net cash provided by (used in) financing activities (112,225) 147,136 249,791
Effect of exchange rate changes (925) (456) 466
--------------------------------------------
Net increase (decrease) in cash and cash equivalents 36,338 14,104 (13,640)
Cash and cash equivalents at beginning of year 23,541 9,437 23,077
--------------------------------------------
Cash and cash equivalents at end of year $ 59,879 $ 23,541 $ 9,437
============================================
Supplemental disclosures of cash flow information:
Income taxes paid (refunded) $ 7,731 $ (809) $ 8,195
============================================
Interest paid $ 17,602 $ 22,277 $ 8,604
============================================
</Table>
See accompanying notes to consolidated financial statements.
<Page>
Notes to Consolidated Financial Statements
Note 1 - Summary of Significant Accounting Policies
(a) Business
Benchmark Electronics, Inc. (the Company) is a Texas corporation in
the business of manufacturing electronics and provides services to original
equipment manufacturers (OEMs) 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 Company has manufacturing operations located in the Americas,
Europe and Asia.
(b) Principles of Consolidation
The consolidated financial statements include the financial statements of
Benchmark Electronics, Inc. and its wholly owned subsidiaries. All significant
intercompany balances and transactions have been eliminated in consolidation.
(c) Cash and Cash Equivalents
The Company considers all highly liquid debt instruments with an original
maturity of three months or less to be cash equivalents.
(d) Inventories
Inventories include material, labor and overhead and are stated at the lower of
cost (principally first-in, first-out method) or market.
(e) Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation is calculated on
the straight-line method over the useful lives of the assets, which range from
three to thirty years. Leasehold improvements are amortized on the straight-line
method over the shorter of the useful life of the improvement or the remainder
of the lease term.
(f) Goodwill and Other Assets
Goodwill, which represents the excess of purchase price over fair value of net
assets acquired, is amortized on a straight-line basis over the period of
expected benefit of 15 years. The accumulated amortization of goodwill at
December 31, 2001 and 2000 was $37.2 million and $24.9 million, respectively.
Other assets consist primarily of capitalized software costs, which are
amortized over the estimated useful life of the related software, and deferred
financing costs, which are amortized over the life of the related debt. During
2001, 2000 and 1999, $3.5 million, $0.6 million and $2.5 million of software
costs were capitalized in connection with the new ERP system implementation. The
accumulated amortization of capitalized software costs at December 31, 2001 and
2000 was $2.9 million and $1.3 million, respectively. The accumulated
amortization of deferred financing costs at December 31, 2001 and 2000 was $3.7
million and $2.1 million, respectively. Recently enacted accounting principles
will affect both the valuation of and the amortization of intangible assets in
future years. See Recently Enacted Accounting Principles below.
(g) Impairment
In assessing and measuring the impairment of long-lived assets, the Company
applies the provisions of Statement of Financial Accounting Standards (SFAS) No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of". This Statement requires that long-lived assets and
certain identifiable intangibles be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net cash flows expected
to be generated by the asset. If the long-lived asset or identifiable intangible
being tested for impairment was acquired in a purchase business combination, the
goodwill that arose in that transaction is included in the asset grouping in
determining whether an impairment has occurred. If some but not all of the
assets acquired in that transaction are being tested, goodwill is allocated to
the assets being tested for impairment based on the relative fair values of the
long-lived assets and identifiable intangibles acquired at the acquisition date.
If such assets are considered to be impaired, the impairment to be recognized is
measured by the amount by which the carrying amount of the assets exceeds the
fair value of the assets. Additionally, where an impairment loss is recognized
<Page>
for long-lived assets and identifiable intangibles where goodwill has been
allocated to the asset grouping, as described immediately above, the carrying
amount of the allocated goodwill is impaired (eliminated) before reducing the
carrying amounts of impaired long-lived assets. Assets to be disposed of are
reported at the lower of the carrying amount or fair value less costs to sell.
With respect to the carrying amounts of goodwill remaining after the testing for
impairment of long-lived assets and identifiable intangibles, including
enterprise level goodwill not subject to impairment testing under SFAS No. 121,
the Company assesses such carrying value for impairment whenever events or
changes in circumstances indicate that the carrying amount of such goodwill may
not be recoverable. The Company assesses the recoverability of this goodwill by
determining whether the amortization of goodwill over its remaining life can be
recovered through undiscounted future operating cash flows of the acquired
business. The amount of goodwill impairment, if any, is measured based on
projected discounted operating cash flows compared to the carrying value of such
goodwill.
With respect to capitalized software costs, the Company assesses the carrying
value for impairment whenever events or changes in circumstances indicate that
the carrying amount of this long-lived asset may not be recoverable.
Recoverability of capitalized software costs is measured by a comparison of
excess future cash flows (i.e., cash flows in excess of carrying amounts of
other long-lived assets, identifiable intangibles and goodwill) at a
consolidated level. The measurement of impairment, if any, is based on the
excess of the carrying value of the capitalized software costs over the
discounted excess cash flows.
See Recently Enacted Accounting Principles below relating to recently issued
accounting standards regarding the impairment of long-lived assets.
(h) Earnings Per Share
Basic earnings per share is computed using the weighted average number of shares
outstanding. Diluted earnings per share is computed using the weighted average
number of shares outstanding adjusted for the incremental shares attributed to
outstanding stock options to purchase common stock. Incremental shares of 1.1
million, and 0.9 million in 2000 and 1999, respectively, were used in the
calculation of diluted earnings per share. For the year ended December 31, 2001,
a total of 0.6 million options were not included in the calculation of diluted
earnings per share because the effect would have been antidilutive. Options to
purchase 0.9 million, 24,000, and 0.3 million shares of common stock in 2001,
2000 and 1999, respectively, were not included in the computation of diluted
earnings per share because the option exercise price was greater than the
average market price of the common stock. The effect of the if-converted method
for the 6% Convertible Subordinated Notes (the Notes) is antidilutive and the
weighted average portion of the 2.0 million of potential common shares has not
been considered in computing diluted earnings per share in 2001, 2000 and 1999.
(i) Revenue Recognition
Revenues are recognized at the time the circuit boards are shipped to the
customer, for both turnkey and consignment method sales. Under the consignment
method, OEMs provide the Company with the electronic components to be assembled,
and the Company recognizes revenue only on the labor used to assemble the
product.
(j) Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred
income taxes are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred taxes of a change in tax rates is
recognized in income in the period that includes the enactment date.
(k) Employee Stock Plans
The Company applies the intrinsic value-based method of accounting prescribed by
Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued
to Employees," and related interpretations, in accounting for its stock option
plan and its Employee Stock Purchase Plan. As such, compensation expense would
be recorded on the
<Page>
date of grant only if the current market price of the underlying stock exceeded
the exercise price. SFAS No. 123, "Accounting for Stock-Based Compensation,"
established accounting and disclosure requirements using a fair value-based
method of accounting for stock-based employee compensation plans. As allowed by
SFAS No. 123, the Company has elected to continue to apply the intrinsic
value-based method of accounting described above, and has adopted the disclosure
requirements of SFAS No. 123.
(l) Use of Estimates
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these financial statements in
accordance with generally accepted accounting principles. Actual results could
differ from those estimates.
(m) Fair Values of Financial Instruments
The Company's financial instruments consist of cash equivalents, accounts
receivable, accrued liabilities, accounts payable, interest rate swaps and
long-term debt. The Company believes that, with the exception of the 6.5%
Convertible Subordinated Notes and the interest rate swaps, the carrying value
of these instruments approximate their fair value. See Note 13 and Accounting
for Derivative Instruments and Certain Hedging Activities below.
(n) Foreign Currency
For foreign subsidiaries using the local currency as their functional currency,
assets and liabilities are translated at exchange rates in effect at the balance
sheet date and income and expenses are translated at average exchange rates. The
effects of these translation adjustments are reported in other comprehensive
income (loss). Exchange gains and losses arising from transactions denominated
in a currency other than the functional currency of the entity involved are
included in other income (expense) and totaled approximately $(0.7) million,
$(1.3) million and $(1.5) million in 2001, 2000 and 1999, respectively.
(o) Accounting for Derivative Instruments and Certain Hedging Activities
Effective January 1, 2001, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Certain
Hedging Activities" and SFAS No. 138, "Accounting for Certain Derivative
Instruments and Certain Hedging Activities, an Amendment of SFAS 133." These
statements establish accounting and reporting standards requiring that
derivative instruments, including certain derivative instruments embedded in
other contracts, be recorded on the balance sheet at fair value as either assets
or liabilities. The accounting for changes in the fair value of a derivative
instrument depends on the intended use and designation of the derivative at its
inception. Special accounting for qualifying hedges allows a derivative's gains
and losses to offset related results of the hedged item in the statements of
operations, and requires the Company to formally document, designate and assess
the effectiveness of the hedge transaction to receive hedge accounting. For
derivatives designated as cash-flow hedges, changes in fair value, to the extent
the hedge is effective, are recognized in other comprehensive income until the
hedged item is recognized in earnings. Overall hedge effectiveness is measured
at least quarterly, Any changes in the fair value of the derivative instrument
resulting from hedge ineffectiveness, as defined by SFAS No. 133 and measured
based on the cumulative changes in the fair value of the derivative instrument
and the cumulative changes in the estimated future cash flows of the hedged
item, are recognized immediately in earnings.
The Company enters into interest rate swap agreements to reduce its exposure to
market risks from changing interest rates. The Company has designated its swap
agreements as a cash flow hedge. Adoption of SFAS No. 133 at January 1, 2001
resulted in recognition of approximately $0.7 million of derivative liabilities
on the Company's balance sheet in accrued liabilities and $0.7 million of
hedging losses included in accumulated other comprehensive loss as the
cumulative effect of a change in accounting principle. Amounts were determined
as of January 1, 2001 based on market quotes of the Company's interest rate swap
agreements. During 2001, the Company recognized $0.8 million in losses, included
in interest expense, on the interest rate swap attributable to interest costs
occurring during the year. No gain or loss on ineffectiveness was required to be
recognized. The fair value of the interest rate swap agreements was a loss of
$1.6 million as of December 31, 2001. Approximately $1.5 million of such amount
is anticipated to be transferred into earnings over the next twelve months as
interest costs on the term loan are recognized.
The Company has utilized and expects to continue to utilize derivative financial
instruments with respect to a portion of
<Page>
its interest rate risks to achieve a more predictable cash flow by reducing its
exposure to interest rate fluctuations. These transactions generally are swaps
and are entered into with major financial institutions. Derivative financial
instruments related to the Company's interest rate risks are intended to reduce
the Company's exposure to increases in the benchmark interest rates underlying
the Company's variable rate Facility.
(p) Recently Enacted Accounting Principles
In July 2001, the Financial Accounting Standards Board (FASB) issued SFAS No.
141, "Business Combinations", and SFAS No. 142, "Goodwill and Other Intangible
Assets". SFAS No. 141 requires that the purchase method of accounting be used
for all business combinations initiated or completed after June 30, 2001, and
specifies criteria for the recognition and reporting of intangible assets apart
from goodwill. Under SFAS No. 142, beginning January 1, 2002, the Company will
no longer amortize goodwill and intangible assets with indefinite useful lives,
but instead will test those assets for impairment at least annually. SFAS No.
142 will also require that intangible assets with definite useful lives be
amortized over such lives to their estimated residual values.
The Company adopted SFAS No. 141 effective July 1, 2001 and SFAS No. 142
effective January 1, 2002. Any goodwill and any intangible asset determined to
have an indefinite useful life that is acquired in a purchase business
combination completed after June 30, 2001 will not be amortized. Goodwill and
intangible assets acquired in business combinations completed before July 1,
2001 continued to be amortized through December 31, 2001.
SFAS No. 142 will require the Company to perform a transitional goodwill
impairment evaluation as of the date of adoption. To accomplish this the Company
must identify its reporting units and determine the carrying value of each
reporting unit by assigning the assets and liabilities, including the existing
goodwill and intangible assets, to those reporting units as of the date of
adoption. The Company will then have up to six months from the date of adoption
to determine the fair value of each reporting unit and compare it to the
reporting unit's carrying amount. To the extent a reporting unit's carrying
amount exceeds its fair value, an indication exists that the reporting unit's
goodwill may be impaired and the Company must perform the second step of the
transitional impairment test. In the second step, the Company must compare the
implied fair value of the reporting unit's goodwill, determined by allocating
the reporting unit's fair value to all of it assets (recognized and
unrecognized) and liabilities in a manner similar to a purchase price allocation
in accordance with SFAS No. 141, to its carrying amount, both of which would be
measured as of the date of adoption. This second step is required to be
completed as soon as possible, but no later than the end of the year of
adoption. Any transitional impairment loss will be recognized as the cumulative
effect of a change in accounting principle in the Company's statement of
earnings.
As of the date of adoption, the Company expects to have unamortized goodwill in
the amount of $119.2 million and unamortized identifiable intangible assets in
the amount of $11.6 million, all of which will be subject to the transition
provisions of Statements 141 and 142. Amortization expense related to goodwill
was $12.2 million, $12.8 million and $6.4 million for the years ended December
31, 2001, 2000 and 1999, respectively. The adoption of Statement 141 did not
have a material effect on the Company's consolidated financial statements.
Because of the extensive effort needed to comply with adopting Statement 142, it
is not practicable to reasonably estimate the impact of adopting this Statement
on the Company's financial statements at the date of this report, including
whether any transitional impairment losses will be required to be recognized as
the cumulative effect of a change in accounting principle.
In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations". SFAS No. 143 requires the Company to record the fair value of an
asset retirement obligation as a liability in the period in which it incurs a
legal obligation associated with the retirement of tangible long-lived assets
that result from the acquisition, construction, development and/or normal use of
the assets. The Company also records a corresponding asset which is depreciated
over the life of the asset. Subsequent to the initial measurement of the asset
retirement obligation, the obligation will be adjusted at the end of each period
to reflect the passage of time and changes in the estimated future cash flows
underlying the obligation The Company will adopt the requirements of SFAS No.
143 as of January 1, 2003.
In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets". SFAS No. 144 supersedes SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of", but retains many of its fundamental provisions. SFAS No. 144
also clarifies certain
<Page>
measurement and classification issues from SFAS No. 121. In addition, SFAS No.
144 supercedes the accounting and reporting provisions for the disposal of a
business segment as found in Accounting Principles Board Opinion No. 30,
"Reporting the Results of Operations - Reporting the Effects of Disposal of a
Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions" (APB 30). However, SFAS No. 144 retains the requirement
in APB 30 to separately report discontinued operations, and broadens the scope
of such requirement to include more types of disposal transactions. The scope of
SFAS No. 144 excludes goodwill and other intangible assets that are not to be
amortized, as the accounting for such items is prescribed by SFAS No. 142. The
provisions of SFAS No. 144 are effective for fiscal years beginning after
December 15, 2001, and are to be applied prospectively. The Company will adopt
the requirements of SFAS No. 144 as of January 1, 2002.
(q) Reclassifications
Certain reclassifications of prior period amounts have been made to conform to
the current presentation.
<Page>
Note 2 - Acquisitions and Dispositions
On October 2, 2000, the Company acquired substantially all of the assets and
properties, net of assumed liabilities, of the MSI Division of Outreach
Technologies, Inc. This operation in Manassas, Virginia was acquired for $3.5
million, as adjusted. The transaction was accounted for under the purchase
method of accounting, and, accordingly, the results of operations of the
Manassas division since October 2, 2000 have been included in the accompanying
consolidated statements of income. The acquisition resulted in goodwill of
approximately $0.4 million. The acquisition was allocated $1.9 million to
inventories, $2.1 million to accounts receivable, $0.1 million to prepaid
expenses and other current assets, $0.8 million to equipment, $1.1 million to
accounts payable, $0.3 million to accrued liabilities, $0.4 million to other
long-term debt and $0.4 million to goodwill.
On September 15, 2000, the Company closed the previously announced sale of its
Swedish operations for $19.6 million, as adjusted. The Swedish operations
accounted for 3.7% and 3.0% of the Company's sales and 14.4% and 16.0% of its
operating income for the years ended December 31, 2000 and 1999, respectively.
On August 24, 1999, the Company completed the acquisition of all of the
outstanding capital stock of AVEX from J.M. Huber Corporation (the Seller). AVEX
had manufacturing plants or design centers in the United States in Huntsville,
Alabama and Pulaski, Tennessee, and elsewhere in Campinas, Brazil, Csongrad,
Hungary, Guadalajara, Mexico, Cork, Ireland, Singapore, East Kilbride, Scotland,
and Katrineholm, Sweden. In consideration for the capital stock of AVEX, the
Company paid $265.3 million in cash at closing, subject to certain adjustments,
including a working capital adjustment, and issued one million shares of the
Company's common stock to the Seller. The working capital adjustment was settled
in the second quarter of 2000 and $35.3 million was paid to the Seller. In
addition, the Company paid $5.2 million in acquisition costs. In order to
finance the AVEX acquisition, the Company (i) obtained a term loan from a
syndicate of commercial banks in the amount of $100 million, (ii) obtained a new
revolving credit facility permitting draws of up to $125 million, subject to a
borrowing base calculation, and borrowed $46 million under such facility and
(iii) issued $80.2 million in Notes. In connection with the AVEX acquisition,
the Company borrowed $30 million under the new revolving credit facility to
refinance existing debt pursuant to the Company's prior senior note
indebtedness. The AVEX acquisition was accounted for using the purchase method
of accounting. The acquisition resulted in goodwill of approximately $139.5
million.
The net purchase price paid in the AVEX acquisition has been allocated as
follows :
<Table>
<Caption>
(in thousands) 1999
<S> <C>
Working capital, other than cash $ 135,311
Property, plant and equipment 71,295
Goodwill 139,517
Other assets 4,152
Other liabilities (5,629)
Deferred income taxes (1,229)
Long-term debt (4,457)
------------
Purchase price, net of cash received $ 338,960
============
Net cash portion of purchase price $ 302,948
Common stock issued 36,012
------------
Purchase price, net of cash received $ 338,960
============
</Table>
On March 1, 1999, the Company acquired certain equipment and inventories from
Stratus Computer Ireland (Stratus), a wholly owned subsidiary of Ascend
Communications, Inc. (Ascend) for approximately $42.3 million in cash as
adjusted. The acquisition price was allocated $6.1 million to equipment and
other assets, and $36.2 million to inventories. Stratus provided systems
integration services for large and sophisticated fault-tolerant mainframe
computers. In connection with the transaction, the Company entered into a
three-year supply agreement to provide these system integration services to
Ascend and Stratus Holdings Limited and the Company hired approximately 260
employees.
<Page>
The following unaudited pro forma condensed consolidated financial information
reflects the acquisition of AVEX as if it had occurred on January 1, 1999. The
summary pro forma information is not necessarily representative of what the
Company's results of operations would have been had the acquisition of AVEX in
fact occurred on January 1, 1999, and is not intended to project the Company's
results of operations for any future period or date.
<Table>
<Caption>
(in thousands, except per share data) 1999
----
<S> <C>
Net sales $ 1,518,013
Gross profit 75,510
Income from operations 4,054
Income (loss) before extraordinary item (12,255)
Extraordinary item - loss on extinguishment of debt (1,297)
Net loss (13,552)
Earnings (loss) per share:
Basic and diluted:
Income (loss) before extraordinary item $(0.80)
Extraordinary item (0.08)
Net income (loss) $(0.88)
Weighted average number of shares outstanding:
Basic 15,387
Diluted 15,387
</Table>
Note 3 - Inventories
Inventory costs are summarized as follows:
<Table>
<Caption>
December 31,
(in thousands) 2001 2000
---- -----
<S> <C> <C>
Raw materials $ 166,129 273,758
Work in process 28,147 64,727
Finished goods 12,026 16,204
Obsolescence reserve (9,024) (8,226)
-----------------------------
$ 197,278 346,463
=============================
</Table>
Note 4 - Property, Plant and Equipment
Property, plant and equipment consists of the following:
<Table>
<Caption>
December 31,
(in thousands) 2001 2000
---- -----
<S> <C> <C>
Land $ 3,219 2,709
Buildings 19,398 23,317
Machinery and equipment 166,957 155,637
Furniture and fixtures 11,570 11,302
Vehicles 343 377
Leasehold improvements 9,069 9,062
-----------------------------
$ 210,556 202,404
=============================
</Table>
<Page>
Note 5 - Comprehensive Income (Loss)
Comprehensive income (loss), which includes net income (loss), the change in the
cumulative translation adjustment and the effect of accounting for cash flow
hedging derivatives, for the years ended December 31, 2001, 2000 and 1999 was as
follows:
<Table>
<Caption>
Years Ended
December 31,
(in thousands) 2001 2000 1999
----------------------------------------------
<S> <C> <C> <C>
Net income (loss) $ (54,312) 19,901 11,974
Cumulative translation adjustment (6,990) (7,095) 677
Hedge accounting for derivative financial
instruments, net of tax of $319 (570) -- --
Cumulative effect attributable to adoption
of SFAS No. 133 (See note 1), net of tax of $239 (428) -- --
----------------------------------------------
Comprehensive income (loss) $ (62,300) 12,806 12,651
==============================================
</Table>
Included in the hedge accounting for derivative financial instruments of $(0.6)
million in 2001 are reclassification adjustments of approximately $0.5 million.
Accumulated foreign currency translation losses were $13.4 million and $6.4
million at December 31, 2001 and 2000, respectively. During 2001 and 2000, the
foreign currency translation loss resulted primarily from unrealized losses
related to the Company's subsidiaries in Brazil and Scotland. All of the
Company's foreign currency translation adjustment amounts relate to investments
that are permanent in nature. To the extent that such amounts relate to
investments that are permanent in nature, no adjustment for income taxes is
made.
Note 6 - Borrowing Facilities
Other long-term debt consists of the following:
<Table>
<Caption>
December 31,
(in thousands) 2001 2000
---- ----
<S> <C> <C>
Term loan $ 63,000 81,000
Capital lease obligations 3,962 6,250
Other 100 119
-----------------------------
Total other long-term debt 67,062 87,369
Less current installments 22,367 20,275
-----------------------------
Other long-term debt $ 44,695 67,094
=============================
</Table>
In order to finance the acquisition of AVEX, the Company obtained $100 million
through borrowings under a five-year term loan (the Term Loan) through a
syndicate of commercial banks. Principal on the Term Loan is payable in
quarterly installments in annual amounts of $20 million in 2002, $22 million in
2003 and $21 million in 2004. The Term Loan bears interest, at the Company's
option, at either the bank's Eurodollar rate plus 1.25% to 3.00% or its prime
rate plus 0.00% to 1.75%, based upon the Company's debt ratio as specified in
the agreement and interest is payable quarterly. As of December 31, 2001, the
Company had $63 million outstanding under the Term Loan, bearing interest at
rates ranging from 3.9375% to 8.255%.
In connection with the financing of the acquisition of AVEX, the Company prepaid
its outstanding 8.02% Senior Note (the Senior Note) due 2006. An extraordinary
loss of $1.3 million (net of income tax benefit of $0.7 million) was incurred as
a result of the early extinguishment of the Senior Note.
<Page>
The Company has a $175 million revolving line of credit facility (the Revolving
Credit Facility) with a commercial bank. The Company is entitled to borrow under
the Revolving Credit Facility up to the lesser of $175 million or the sum of 75%
of its eligible accounts receivable, 45% of its eligible inventories and 50% of
its eligible fixed assets. Interest on the Revolving Credit Facility is payable
quarterly, at the Company's option, at either the bank's Eurodollar rate plus
1.25% to 3.00% or its prime rate plus 0.00% to 1.75%, based upon the Company's
debt ratio as specified in the agreement. A commitment fee of 0.375% to 0.500%
per annum on the unused portion of the Revolving Credit Facility is pay-able
quarterly in arrears. The Revolving Credit Facility matures on September 30,
2004. As of December 31, 2001, the Company had no borrowings outstanding under
the Revolving Credit Facility, $0.4 million outstanding letters of credit and
$174.6 million was available for future borrowings.
The Term Loan and the Revolving Credit Facility (collectively the Facility) are
secured by the Company's U.S. domestic inventory and accounts receivable, 100%
of the stock of the Company's U.S. domestic subsidiaries, and 65% of the voting
capital stock of each direct foreign subsidiary and substantially all of the
other tangible and intangible assets of the Company and its U.S. domestic
subsidiaries. The Facility contains customary financial covenants as to working
capital, interest coverage, debt leverage, fixed charges, and consolidated net
worth, and restricts the ability of the Company to incur additional debt, pay
dividends, sell assets and to merge or consolidate with other persons without
the consent of the bank. At December 31, 2001, the Company was in compliance
with all such restrictions.
In August 1999, the Company issued $80.2 million principal amount of 6%
Convertible Subordinated Notes due August 15, 2006 (the Notes). The indenture
relating to the Notes contains affirmative and negative covenants, including
covenants restricting the Company's ability to merge or engage in certain other
extraordinary corporate transactions unless certain conditions are satisfied.
Upon the occurrence of a change of control (as defined in the indenture relating
to the Notes) of the Company, each holder of Notes will have the right to
require the Company to repurchase all or part of the holder's notes at 100% of
the face amount thereof, plus accrued and unpaid interest.
The Notes are convertible, unless previously redeemed or repurchased, at the
option of the holder at any time prior to maturity, into shares of the Company's
common stock at an initial conversion price of $40.20 per share, subject to
adjustment in certain events. The Notes are convertible into a total of
1,995,000 shares of the Company's common stock. Interest is payable February 15
and August 15 each year.
The aggregate maturities of long-term debt for each of the five years subsequent
to December 31, 2001 are as follows: 2002, $22.4 million; 2003, $23.6 million;
and 2004, $21.1 million.
The Company currently has an interest rate swap transaction agreement for a
notional amount of $31.5 million under which it pays a fixed rate of interest of
6.63%, plus 1.25% to 3.00% based upon its debt ratio as specified in the debt
agreement, hedging against the variable interest rates charged by the term loan.
The receive rate under the swap is based on LIBOR. The interest rate swap
expires in the year 2003.
Note 7 - Commitments
The Company leases certain manufacturing equipment, office equipment, vehicles
and office, warehouse and manufacturing facilities under operating leases. Some
of the leases provide for escalation of the lease payments as maintenance costs
and taxes increase. The leases expire at various times through 2020. Leases for
office space and manufacturing facilities generally contain renewal options.
Rental expense for each of the years in the three-year period ended December 31,
2001 was $11.0 million, $11.7 million and $3.9 million, respectively.
The Company leases manufacturing and office facilities in Minnesota from a
partnership whose partners include stockholders and a director of the Company.
These operating leases have initial terms of ten years, expiring through August
2006 with annual renewals thereafter. Total rent expense associated with these
leases was $0.8 million for each of the years ended December 31, 2001, 2000 and
1999.
<Page>
In connection with the acquisition of AVEX, the Company assumed prepaid
operating leases of manufacturing equipment with initial terms of three years
that expired through 2001. The lease expense associated with these leases for
the periods ended December 31, 2001, 2000 and 1999 was $1.9 million, $2.4
million and $1.5 million, respectively.
Aggregate annual rental payments on future operating lease commitments are as
follows:
<Table>
<Caption>
December 31, (in thousands)
<S> <C>
2002 $ 8,062
2003 6,359
2004 4,336
2005 2,986
2006 1,920
Thereafter 13,557
-------
Total $37,220
-------
</Table>
The Company enters into contractual commitments to deliver products and services
in the ordinary course of business. The Company believes that all such
contractual commitments will be met or renegotiated such that no material
adverse financial impact on the Company's financial position, results of
operations or liquidity will result from these commitments.
Note 8 - Common Stock and Stock Option Plans
During 2000 and 1999, the Company issued 3.2 million and 3.5 million shares of
common stock, respectively, in public offerings for net proceeds of $113.3
million and $93.7 million, respectively.
In 1990, the Board of Directors of the Company adopted and its shareholders
approved a Stock Option Plan (the 1990 Plan) for the benefit of its employees,
including executive officers. The 1990 Plan authorized the Company, upon
recommendation of the compensation committee of the Board of Directors, to grant
options to purchase a total of 3.2 million shares of the Company's common stock
to key employees of the Company. The 1990 Plan expired in May 2000, and no
additional grants may be made under that plan.
The 1990 Plan provided for the discretionary granting by the Company of
"incentive stock options" within the meaning of Section 422A of the Internal
Revenue Code of 1986, as amended, as well as non qualified stock options. The
exercise price of any incentive stock option must not be less than the fair
market value of the common stock on the date of grant. The stock options will
terminate no later than 10 years after the date of grant. Although options may
vest in increments over time, they historically have become 20% vested two years
after the options are granted and 100% vested after 5 years.
On February 16, 2000 the Board of Directors of the Company adopted and
subsequently its shareholders approved the Benchmark Electronics, Inc. 2000
Stock Awards Plan (the 2000 Plan). The 2000 Plan authorizes the Company, upon
recommendation of the compensation committee of the Board of Directors, to grant
a variety of types of awards, including stock options, restricted stock awards,
stock appreciation rights, performance awards, and phantom stock awards, or any
combination thereof, to key employees of the Company. The maximum number of
shares of common stock that may be subject to outstanding awards determined
immediately after the grant of any award, and the maximum number of shares which
may be issued under the 2000 Plan pursuant to all awards, may not exceed 2.0
million shares (subject to antidilutive adjustment).
The 2000 Plan provides for the discretionary granting by the Company of
"incentive stock options" within the meaning of Section 422A of the Internal
Revenue Code of 1986, as amended, as well as non qualified stock options.
Incentive stock options may only be granted to employees of the Company or its
subsidiaries. The exercise price of any incentive stock option must not be less
than the fair market value of the common stock on the date of grant. The
exercise price of any incentive stock option granted to 10% shareholders
(employees who possess more than 10% of the total combined
<Page>
voting power of all classes of shares of the Company) must be at least 110% of
the fair market value of the common stock at the time such option is granted.
The stock options will terminate 5 years after the grant date for 10%
shareholders and 10 years after the date of grant for all other optionees.
Options granted under the 2000 Plan vest over 4 years.
In December of 1994, the Board of Directors of the Company adopted the Benchmark
Electronics, Inc. 1994 Stock Option Plan for Non-Employee Directors (the
"Plan") for the benefit of members of the Board of Directors of the Company or
its affiliates who are not employees of the Company or its affiliates (as
defined in the Plan). The aggregate number of shares of common stock for which
options may be granted under the Plan is 200,000.
Under the terms of the Plan, as amended, each member of the Board of Directors
of the Company or its affiliates who was not an employee of the Company or any
of its affiliates on the date of the grant (a "Non-Employee Director") will
receive a grant of an option to purchase 6,000 shares of the Company's common
stock upon the date of his election or re-election to the Board of Directors.
Additionally, any Non-Employee Director who was a director on the date the Board
of Directors adopted the Plan received (a) an option to purchase 6,000 shares of
common stock for the fiscal year in which the Plan was adopted by the Board of
Directors and (b) an option to purchase shares of common stock in amount equal
to (i) 6,000, multiplied by (ii) the number of consecutive fiscal years
(immediately preceding the fiscal year during which the Plan was adopted) that
the individual served as a director of the Company, provided that the number
under clause (ii) shall not exceed three (3). During 2001, 2000 and 1999,
pursuant to the Plan, 18,000, 24,000 and 12,000 options, respectively, were
granted to Directors to purchase shares of common stock at an exercise price of
$24.98, $36.88 and $32.13 per share, respectively.
In April, 1999, the Board of Directors of the Company adopted and subsequently
its shareholders approved the Benchmark Electronics, Inc. Employee Stock
Purchase Plan (the Purchase Plan). Under the Purchase Plan, employees meeting
specific employment qualifications are eligible to participate and can purchase
shares semi-annually through payroll deductions at the lower of 85% of the fair
market value of the stock at the commencement or end of the offering period. The
Purchase Plan permits eligible employees to purchase common stock through
payroll deductions for up to the lesser of 17% of qualified compensation or
$25,000. As of December 31, 2001, 337,366 shares remain available for issuance
under the Purchase Plan. The weighted-average fair value of the purchase rights
granted during 2001, 2000 and 1999 was $6.10, $7.93 and $7.22, respectively.
The following table summarizes the activities relating to the Company's stock
option plans:
<Table>
<Caption>
Weighted
Number of Average
Options Exercise
-------------------------
(options in thousands) Price
-------------------------
<S> <C> <C>
Balance at December 31, 1998 2,109 $ 16.22
Granted 715 $ 31.01
Exercised (65) $ 12.20
Canceled (146) $ 24.09
------- -------
Balance at December 31, 1999 2,613 $ 19.93
Granted 471 $ 24.47
Exercised (127) $ 13.79
Canceled (214) $ 27.29
------- -------
Balance at December 31, 2000 2,743 $ 20.44
Granted 510 $ 20.77
Exercised (32) $ 9.22
Canceled (170) $ 27.26
------- -------
Balance at December 31, 2001 3,051 $ 20.24
======= =======
</Table>
<Page>
The following table summarizes information concerning currently outstanding and
exercisable options:
(options in thousands)
<Table>
<Caption>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
Weighted
Average Weighted Weighted
Range of Outstanding Average Average
Exercise Number Contractual Exercise Number Exercise
Prices Outstanding Life (years) Price Exercisable Price
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$5.75-$10 133 1.22 $ 7.66 133 $ 7.66
$10-$15 695 3.99 $ 13.15 695 $ 13.15
$15-$20 710 6.57 $ 17.56 368 $ 16.75
$20-$25 790 8.04 $ 21.30 183 $ 22.01
$25-$30 275 6.53 $ 28.33 151 $ 27.17
$30-$35 424 7.59 $ 33.50 68 $ 31.37
$35-$40 24 8.33 $ 36.88 24 $ 36.88
----- -----
3,051 1,622
===== =====
</Table>
At December 31, 2001, the range of exercise prices and weighted average
remaining contractual life of outstanding options was $5.75 - $36.88 and 6.28
years, respectively.
At December 31, 2001, 2000 and 1999, the number of options exercisable was 1.6
million, 1.1 million and 0.8 million, respectively, and the weighted average
exercise price of those options was $16.93, $14.89 and $12.86, respectively.
The Company applies APB Opinion No. 25 in accounting for its stock option plans
and, accordingly, no compensation cost has been recognized for its stock options
in the financial statements. Had the Company determined compensation cost based
on the fair value at the grant date for its stock options under SFAS No. 123,
the Company's net income (loss) would have been approximately $(59.0) million,
or $(3.00) per share diluted during 2001, $15.0 million, or $0.80 per share
diluted during 2000, and $7.9 million, or $0.53 per share diluted during 1999.
The weighted average fair value of the options granted during 2001, 2000, and
1999 is estimated as $5.66, $6.65 and $9.06, respectively, on the date of grant
using the Black-Scholes option-pricing model with the following assumptions: no
dividend yield for all years, volatility of 54% for 2001, 50% for 2000 and 50%
for 1999, risk-free interest rate of 4.03% to 4.15% in 2001, 6.12% to 6.72% in
2000, 4.46% to 5.83% in 1999, assumed annual forfeiture rate of 22% for 2001,
20% for 2000 and 16% for 1999, and an expected life of 4 years for all years.
<Page>
Note 9 - Income Taxes
Income tax expense (benefit) based on income (loss) before income taxes and
extraordinary item consists of:
<Table>
<Caption>
Year ended December 31,
(in thousands) 2001 2000 1999
<S> <C> <C> <C>
Current:
U.S. Federal $ 2,428 (1,480) 1,855
State and local 106 178 908
Foreign (992) 5,311 2,260
--------------------------------------------
1,542 4,009 5,023
Deferred:
U.S. Federal (5,698) 2,332 1,146
State and local (608) 269 --
Foreign (54) 605 (305)
--------------------------------------------
(6,360) 3,206 841
Charges in lieu of taxes:
Attributable to employee stock plans 94 954 322
Attributable to acquired net operating loss carryforwards 743 360 819
--------------------------------------------
837 1,314 1,141
$ (3,981) 8,529 7,005
============================================
</Table>
Included in deferred taxes for 2001 is $0.6 million related to the cumulative
effect attributed to the adoption of SFAS No. 133 and the change of the fair
value of the derivative financial instrument included in other comprehensive
income (loss).
Total income tax expense for 1999 is $6.3 million including the $0.7 million
benefit allocated to the extraordinary loss.
Income tax expense (benefit) differed from the amounts computed by applying the
U.S. federal statutory income tax rate to income (loss) before income tax and
extraordinary item as a result of the following:
<Table>
<Caption>
Year ended December 31,
(in thousands) 2001 2000 1999
<S> <C> <C> <C>
Tax at statutory rate $ (20,403) 9,950 7,097
State taxes, net of federal benefit (326) 291 590
Tax exempt interest -- -- (208)
Tax benefit from use of foreign sales corporation (446) (1,386) (341)
Effect of foreign operations (2,093) (2,554) (1,616)
Amortization of goodwill 1,935 2,032 1,481
Write-off of goodwill 7,380 -- --
Adjustment to US taxes on foreign income 2,555 -- --
Losses in foreign jurisdictions for which no
benefit has been provided 7,449 -- --
Other (32) 196 2
--------------------------------------------
Total income tax expense (benefit) $ (3,981) 8,529 7,005
</Table>
<Page>
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities are presented below:
<Table>
<Caption>
December 31,
(in thousands) 2001 2000
<S> <C> <C>
Deferred tax assets:
Carrying values of inventories $ 1,299 1,607
Accrued liabilities and allowances deductible for
tax purposes on a cash basis 4,727 1,528
Plant and equipment 2,534 --
Goodwill 4,895 --
Net operating loss carryforwards 3,494 1,173
-------------------------
16,949 4,308
Less valuation allowance (7,869) (1,173)
-------------------------
Net deferred tax assets 9,080 3,135
Deferred tax liabilities:
Plant and equipment, due to differences in depreciation (4,155) (7,557)
Undistributed earnings of foreign subsidiary (2,555) --
Other (1,989) (2,115)
-------------------------
Gross deferred tax liability (8,699) (9,672)
-------------------------
Net deferred tax asset (liability) $ 381 (6,537)
=========================
</Table>
The valuation allowance for deferred tax assets as of January 1, 1999 was zero.
The net change in the total valuation allowance for the years ended December 31,
2001, 2000 and 1999 was an increase of $6.7 million, $0.7 million and $0.5
million, respectively. In assessing the realizability of deferred tax assets,
management considers whether it is more likely than not that some portion or all
of the deferred tax assets will not be realized. The ultimate realization of
deferred tax assets is dependent upon the generation of future taxable income
during the periods in which those temporary differences become deductible.
Management considers the scheduled reversal of deferred tax liabilities,
projected future taxable income, and tax planning strategies in making this
assessment. Based upon the level of historical taxable income and projections
for future taxable income over the periods which the deferred tax assets are
deductible, management believes it is more likely than not the Company will
realize the benefits of these deductible differences, net of the existing
valuation allowances at December 31, 2001. At December 31, 2001, the Company had
operating loss carryforwards of approximately $1.2 million in Brazil, $2.5
million in Scotland, and $2.4 million in Ireland with indefinite carryforward
periods and $6.0 million in Mexico with a ten-year carryforward period. The
utilization of these net operating loss carryforwards is limited to the future
operations of the Company in the tax jurisdictions in which such carryforwards
arose. Tax benefits of approximately $0.4 million that are realized in the
future from the utilization of these carryforwards will be reported as a
reduction of goodwill.
Worldwide income (loss) before income taxes and extraordinary item consisted of
the following:
<Table>
<Caption>
Year ended December 31,
(in thousands) 2001 2000 1999
<S> <C> <C> <C>
United States $(51,552) 1,656 10,294
Foreign (6,741) 26,774 9,982
---------------------------------------
$(58,293) 28,430 20,276
=======================================
</Table>
Cumulative undistributed earnings of certain foreign subsidiaries amounted to
$44.3 million as of December 31, 2001. The Company considers earnings from these
foreign subsidiaries to be indefinitely reinvested and, accordingly, no
provision for U.S. federal and state income taxes has been made for these
earnings. Upon distribution of foreign subsidiary earnings in the form of
dividends or otherwise, such distributed earnings would be reportable for U.S.
income tax purposes (subject to adjustment for foreign tax credits). The
Company's manufacturing operations in Ireland are subject to a 10% tax rate
through December 2010. Thereafter, the applicable statutory tax rate will be
<Page>
12.5%. As a result of these reduced rates, income tax expense for the years
ended December 31, 2001, 2000 and 1999 is approximately $1.1 million
(approximately $0.06 per share diluted), $1.2 million (approximately $0.06 per
share diluted) and $1.0 million (approximately $0.07 per share diluted),
respectively, lower than the amount computed by applying the statutory tax rates
(20% in 2001, 24% in 2000 and 28% in 1999).
Note 10 - Major Customers
The Company's customers operate in industries that are, to a varying extent,
subject to rapid technological change, vigorous competition and short product
life cycles. Developments adverse to the electronics industry, the Company's
customers or their products could impact the Company's overall credit risk.
The Company extends credit based on evaluation of its customers' financial
condition and generally does not require collateral or other security from its
customers and would incur a loss equal to the carrying value of the accounts
receivable if its customer failed to perform according to the terms of the
credit arrangement.
Sales to major customers were as follows for the indicated periods:
<Table>
<Caption>
Year ended December 31,
(in thousands) 2001 2000 1999
--------------------------------------
<S> <C> <C> <C>
Customer A 279,425 140,597 46,776
Customer B 197,245 270,901 143,173
Customer C 96,694 171,178 153,694
Customer D 42,842 118,224 27,135
</Table>
<Page>
Note 11 - Segment and Geographic Information
The Company has 14 manufacturing facilities in the Americas, Europe, and Asia
regions to serve its customers. The Company is operated and managed
geographically. The Company's management evaluates performance and allocates the
Company's resources on a geographic basis. Intersegment sales, primarily
constituting sales from the Americas to Europe, are generally recorded at prices
that approximate arm's length transactions. Operating segments' measure of
profitability is based on income (loss) from operations (prior to amortization
of goodwill and unallocated corporate expenses). Certain corporate expenses,
including items such as insurance and software licensing costs, are allocated to
these operating segments and are included for performance evaluation.
Amortization expense associated with capitalized software costs is allocated to
these operating segments, but the related assets are not allocated. Amortization
expense associated with goodwill is not allocated to the results of operations
in analyzing segments, but the related balances are allocated to the segments.
The accounting policies for the reportable operating segments are the same as
for the Company taken as a whole. The Company has three reportable operating
segments: the Americas, Europe, and Asia. Information about operating segments
was as follows:
<Table>
<Caption>
Year ended December 31,
(in thousands, except per share data) 2001 2000 1999
<S> <C> <C> <C>
Net sales:
Americas $ 1,151,330 1,631,317 724,963
Europe 251,173 304,002 219,393
Asia 27,670 38,793 14,393
Elimination of intersegment sales (153,223) (269,188) (80,910)
-----------------------------------------------
$ 1,276,950 1,704,924 877,839
===============================================
Depreciation and amortization:
Americas $ 33,760 31,496 19,222
Europe 5,188 7,617 5,180
Asia 692 728 235
Corporate - goodwill 12,219 12,841 6,430
-----------------------------------------------
$ 51,859 52,682 31,067
===============================================
Income (loss) from operations:
Americas $ 16,824 51,580 26,140
Europe 2,013 19,085 11,040
Asia 2,186 3,138 826
Corporate and intersegment eliminations (63,404) (20,408) (9,383)
-----------------------------------------------
$ (42,381) 53,395 28,623
===============================================
Capital expenditures:
Americas $ 14,783 42,179 20,364
Europe 2,023 5,175 3,347
Asia 807 630 160
-----------------------------------------------
$ 17,613 47,984 23,871
===============================================
Total assets:
Americas $ 532,047 812,882 572,904
Europe 113,824 143,265 146,004
Asia 17,346 16,537 20,026
Corporate 22,888 18,537 21,904
-----------------------------------------------
$ 686,105 991,221 760,838
===============================================
</Table>
Corporate assets consist primarily of capitalized software costs and debt
financing costs.
<Page>
The following enterprise-wide information is provided in accordance with SFAS
No.131. Geographic net sales information reflects the destination of the product
shipped. Long-lived assets information is based on the physical location of the
asset.
<Table>
<Caption>
Year ended December 31,
(in thousands, except per share data) 2001 2000 1999
<S> <C> <C> <C>
Net sales derived from:
Printed circuit boards $ 1,036,348 1,594,967 756,552
Systems integration and box build 240,602 109,957 121,287
-----------------------------------------------
$ 1,276,950 1,704,924 877,839
-----------------------------------------------
Geographic net sales:
United States $ 959,163 1,204,165 659,134
Europe 190,259 251,839 168,193
Asia and other 127,528 248,920 50,512
-----------------------------------------------
$ 1,276,950 1,704,924 877,839
-----------------------------------------------
Long-lived assets:
United States $ 84,877 108,415 93,805
Europe 12,215 18,539 24,538
Asia and other 8,907 28,582 21,874
-----------------------------------------------
$ 105,999 155,536 140,217
-----------------------------------------------
</Table>
Note 12 - Employee Benefit Plans
The Company has defined contribution plans qualified under Section 401(k) of the
Internal Revenue Code for the benefit of its U.S. employees. The plans cover all
U.S. employees with at least one year of service. Under the provisions of the
plans, the Company will match a portion of each participant's contribution. The
Company may also make discretionary contributions to the plans. During 2001,
2000 and 1999 the Company made contributions to the plans of approximately $2.2
million, $2.2 million and $1.7 million, respectively.
The Company has incentive bonus plans for the benefit of its employees,
including executive officers. These incentive bonus plans replaced the Company's
Incentive Bonus Plan, which was adopted in 1992. The total amount of cash bonus
awards to be made under these incentive bonus plans for any period depends
primarily on the Company's earnings before income tax for that period.
For any plan period, the Company's earnings before income tax must meet or
exceed, or in combination with other factors satisfy, levels targeted by the
Company, or the Company's division or subsidiary, in its business plan, as
established at the beginning of each plan period, for any bonus awards to be
made. The Compensation Committee of the Company's Board of Directors has the
authority to determine the total amount of bonus awards, if any, to be made to
the Company's corporate employees for any plan year based on its evaluation of
the Company's financial condition and results of operations, the Company's
business and prospects, and such other criteria as it may determine to be
relevant or appropriate. The Company expensed $1.8 million in 2001 and $4.1
million in 2000 in conjunction with these incentive bonus plans. No bonus
amounts were accrued or expensed in 1999.
<Page>
Note 13 - Financial Instruments
The carrying values and estimated fair values of financial instruments,
including derivative financial instruments were as follows:
<Table>
<Caption>
December 31, 2001 December 31, 2000
----------------------------------------------------
Carrying Fair Carrying Fair
(in thousands) Amount Value Amount Value
------------------------------------------------------------
<S> <C> <C> <C> <C>
Liabilities:
Other long-term debt, excluding current installments $ 44,695 44,742 67,094 67,551
Revolving credit facility -- -- 93,500 93,500
Convertible subordinated notes 80,200 64,361 80,200 70,408
Derivative liabilities:
Interest rate swap $ (1,556) (1,556) -- (667)
</Table>
The Company used market quotes to estimate the fair value of its financial
instruments. The carrying amounts of cash equivalents, accounts receivable,
accrued liabilities, accounts payable and current installments of other
long-term debt approximate fair value.
Note 14 - Concentrations of Business Risk
Substantially all of the Company's sales are derived from EMS in which the
Company purchases components specified by its customers. The Company uses
numerous suppliers of electronic components and other materials for its
operations. Some components used by the Company have been subject to
industry-wide shortages, and suppliers have been forced to allocate available
quantities among their customers. The Company's inability to obtain any needed
components during periods of allocation could cause delays in manufacturing and
could adversely affect results of operations.
Note 15 - Contingencies
On October 18, 1999, the Company announced that its third quarter earnings
announcement would be delayed and subsequently, on October 22, the Company
announced its earnings for the third quarter were below the level of the same
periods during 1998 and were below expectations. Several class action lawsuits
were filed in federal district court in Houston, Texas against the Company 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. The Company denies the allegations in the lawsuits,
however, and further denies that such allegations provide a basis for recovery
of damages as the Company believes that it has made all required disclosures on
a timely basis. Management is vigorously defending against these actions. At the
present time, the Company is unable to reasonably estimate the possible loss, if
any, associated with these matters.
The Company filed suit against J.M. Huber Corporation (the 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 Amended and Restated Stock
Purchase Agreement dated August 12, 1999 between the parties whereby the Company
acquired all of the stock of AVEX from Seller. On January 5, 2000, Seller filed
suit in the United States District Court for the Southern District of New York
alleging that the Company failed to comply with certain obligations under the
contract requiring the Company to register shares of its common stock issued to
Seller as partial consideration for the acquisition. Seller's suit has been
consolidated with the Company's suit in the United States District Court for the
Southern District of Texas. The Company is vigorously pursuing its claims
against Seller and defending against Seller's allegations. At the present time,
the Company is unable to reasonably estimate the possible loss, if any,
associated with these matters.
On April 14, 2000, the Company, along with numerous other companies, was named
as a defendant in a lawsuit filed in
<Page>
the United States District Court for the District of Arizona by the Lemelson
Medical, Education & Research Foundation (the Foundation). The lawsuit alleges
that the Company has infringed certain of the Foundation's patents relating to
machine vision and bar code technology utilized in machines the Company has
purchased. On November 2, 2000, the Company filed an Answer, Affirmative
Defenses, and a Motion to Stay based upon Declaratory Judgment 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. The Company continues to explore any indemnity or similar
rights the Company may have against manufacturers of the machines or other third
parties. The Company intends to vigorously defend against such claim and pursue
all rights it has against third parties. At the present time, the Company is
unable to reasonably estimate the possible loss, if any, associated with these
matters.
The Company 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 the
Company's consolidated financial position or results of operations.
Note 16 - Restructuring Charges and Asset Write-offs
During 2001, the Company recorded restructuring charges of approximately $7.6
million ($5.3 million after-tax). These charges related to reductions in the
Company's cost structure, including reductions in force and included costs
resulting from payment of employee severance, consolidation of facilities and
abandonment of leased equipment. These restructuring costs included severance
costs of approximately $6.6 million and losses from lease commitments of $1.0
million. Cash paid for severance costs and leasing expenses during the year
ended December 31, 2001 totaled approximately $5.6 million and $0.9 million,
respectively.
In the third quarter of 2001, the Company recorded asset write-offs of
approximately $61.7 million ($43.2 million after-tax) for the write-down of
long-lived assets to fair value. Included in the long-lived asset impairment are
charges of approximately $28.0 million which related to property, plant and
equipment associated with the consolidation and downsizing of certain
manufacturing facilities and the write-off of approximately $33.7 million of the
remaining goodwill and other intangibles related to these facilities.
The employee severance and benefit costs related to the elimination of
approximately 1,600 positions worldwide. Approximately 85% of the positions
eliminated were in the Americas region, 13% were in Europe and 2% were in Asia.
The employment reductions primarily affected employees in manufacturing.
Facilities and equipment subject to restructuring were primarily located in the
Americas and Europe.
<Page>
Independent Auditors' Report
The Board of Directors and Shareholders
Benchmark Electronics, Inc.:
We have audited the accompanying 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. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Benchmark
Electronics, Inc. and subsidiaries as of December 31, 2001 and 2000, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 2001, in conformity with accounting
principles generally accepted in the United States of America.
As discussed in note 1 to the consolidated financial statements, the Company
changed its method of accounting for derivative instruments and hedging
activities in 2001.
KPMG LLP
Houston, Texas
February 5, 2002
<Page>
Management's Report
The management of Benchmark Electronics, Inc. has prepared and is responsible
for the consolidated financial statements and related financial data contained
in this report. The consolidated financial statements were prepared in
accordance with accounting principles generally accepted in the United States of
America and necessarily include certain amounts based upon management's best
estimates and judgments. The financial information contained elsewhere in this
annual report is consistent with that in the consolidated financial statements.
The Company maintains internal accounting control systems that are adequate to
prepare financial records and to provide reasonable assurance that the assets
are safe-guarded from loss or unauthorized use. We believe these systems are
effective, and the cost of the systems does not exceed the benefits obtained.
The Audit Committee, composed exclusively of outside directors, has reviewed all
financial data included in this report. The committee meets periodically with
the Company's management and independent public accountants on financial
reporting matters. The independent public accountants have complete access to
the Audit Committee and may meet with the committee, without management present,
to discuss their audit results and opinions on the quality of financial
reporting.
The role of independent public accountants is to render a professional,
independent opinion on management's financial statements to the extent required
by generally accepted auditing standards in the United States of America.
Benchmark's responsibility is to conduct its affairs according to the highest
standards of personal and corporate conduct.
Donald E. Nigbor
Chairman & Chief Executive Officer
Cary T. Fu
President & Chief Operating Officer
Gayla J. Delly
Vice President Finance, Chief Financial Officer & Treasurer
<Page>
Corporate Information
Quarterly Financial Data (unaudited)
The following table sets forth certain unaudited quarterly information with
respect to the Company's results of operations for the years 2001, 2000 and
1999. Earnings per share are computed independently for each of the quarters
presented. Therefore, the sum of the quarterly earnings per share may not equal
the total earnings per share amounts for the fiscal year.
<Table>
<Caption>
2001 Quarter
(in thousands, except per share data) 1st 2nd 3rd 4th
<S> <C> <C> <C> <C>
Sales $ 431,905 317,433 257,969 269,643
Gross profit 32,163 22,052 18,898 20,397
Net income (loss) 5,112 (2,093) (57,015) (316)
Earnings (loss) per common share:
Basic 0.26 (0.11) (2.90) (0.02)
Diluted 0.25 (0.11) (2.90) (0.02)
<Caption>
2000 Quarter
1st 2nd 3rd 4th
<S> <C> <C> <C> <C>
Sales $ 349,155 406,572 459,539 489,658
Gross profit 23,646 29,704 33,900 36,857
Net income 1,977 3,605 6,236 8,081
Earnings per common share:
Basic 0.12 0.22 0.34 0.41
Diluted 0.12 0.21 0.32 0.40
<Caption>
1999 Quarter
1st 2nd 3rd 4th
<S> <C> <C> <C> <C>
Sales $ 146,546 162,621 229,870 338,802
Gross profit 14,690 16,854 13,764 22,222
Income before extraordinary item 5,037 5,605 1,336 1,293
Extraordinary item- loss on extinguishment of debt -- -- (1,297) --
Net income 5,037 5,605 39 1,293
Earnings per common share:
Basic 0.43 0.44 0.00 0.08
Diluted 0.40 0.41 0.00 0.08
</Table>
<Page>
Market for the Registrant's Common Equity and Related Shareholder Matters
The Company's Common Stock is listed on the New York Stock Exchange under the
symbol "BHE." The following table shows the high and low sales prices for the
Common Stock as reported on the New York Stock Exchange for the fiscal quarters
(or portions thereof) indicated.
<Table>
<Caption>
Quarter
1st 2nd 3rd 4th
<S> <C> <C> <C> <C>
2002 (through March 15, 2002)
High $ 32.2200
Low $ 18.6000
2001
High $ 34.4500 28.5000 26.6000 23.1500
Low $ 17.5000 16.9500 14.4500 15.0500
2000
High $ 39.3125 42.5000 64.1875 54.5000
Low $ 17.8125 31.6250 36.5625 19.6875
</Table>
The last reported sale price of Common Stock on March 15, 2002, as reported by
the New York Stock Exchange, was $29.70. There were approximately 107 record
holders of Common Stock as of March 15, 2002.
The Company has not paid any cash dividends on the Common Stock in the past and
anticipates that, for the foreseeable future, it will retain any earnings
available for dividends for use in its business.
<Page>
Selected Financial Data
Benchmark Electronics, Inc. and Subsidiaries
<Table>
<Caption>
Year ended December 31,
(in thousands, except per share data) 2001 2000 1999 1998 1997
<S> <C> <C> <C> <C> <C>
Selected Statements of Income Data (1)
Sales $ 1,276,950 $ 1,704,924 $ 877,839 $ 524,065 $ 325,229
Cost of sales 1,183,440 1,580,817 810,309 472,354 285,630
--------------------------------------------------------------------
Gross profit 93,510 124,107 67,530 51,711 39,599
Selling, general and administrative expenses 54,383 57,871 32,477 17,680 12,817
Restructuring charges (2) 7,569 -- -- -- --
Asset write-offs (2) 61,720 -- -- -- --
Amortization of goodwill 12,219 12,841 6,430 3,311 1,670
--------------------------------------------------------------------
Income (loss) from operations (42,381) 53,395 28,623 30,720 25,112
Interest expense (16,998) (24,396) (9,696) (4,394) (2,472)
Interest income 1,508 770 605 479 1,163
Other income (expense) (422) (1,339) 744 85 149
Income tax benefit (expense) 3,981 (8,529) (7,005) (10,518) (8,862)
--------------------------------------------------------------------
Income (loss) before extraordinary item (54,312) 19,901 13,271 16,372 15,090
Extraordinary item - loss on extinguishment
of debt -- -- (1,297) -- --
--------------------------------------------------------------------
Net income (loss) $ (54,312) $ 19,901 $ 11,974 $ 16,372 $ 15,090
====================================================================
Earnings (loss) per share (3)
Basic:
Income (loss) before extraordinary item $ (2.77) $ 1.13 $ 0.94 $ 1.41 $ 1.31
Extraordinary item -- -- (0.09) -- --
--------------------------------------------------------------------
Earnings (loss) per share (3) $ (2.77) $ 1.13 $ 0.85 $ 1.41 $ 1.31
====================================================================
Diluted:
Income (loss) before extraordinary item $ (2.77) $ 1.06 $ 0.88 $ 1.35 $ 1.26
Extraordinary item -- -- (0.08) -- --
--------------------------------------------------------------------
Earnings (loss) per share (3) $ (2.77) $ 1.06 $ 0.80 $ 1.35 $ 1.26
====================================================================
Weighted average number of shares outstanding
Basic 19,625 17,578 14,081 11,594 11,508
Diluted 19,625 18,718 15,010 12,098 12,004
Ratio of earnings to fixed charges -- 2.00x 2.74x 6.03x 9.03x
Deficiency $ 58,293 N/A N/A N/A N/A
<Caption>
December 31,
(in thousands) 2001 2000 1999 1998 1997
<S> <C> <C> <C> <C> <C>
Selected Balance Sheet Data
Working capital $ 267,839 $ 347,318 $ 177,926 $ 86,265 $ 87,879
Total assets 686,105 991,221 760,838 241,896 190,322
Total debt 147,262 261,069 221,995 54,311 30,485
Shareholders' equity $ 351,682 $ 411,945 $ 281,935 $ 138,001 $ 120,872
</Table>
(1) See Note 2 of Notes to Consolidated Financial Statements for discussion of
acquisitions and disposition.
(2) See Note 16 of Notes to Consolidated Financial Statements for a discussion
of the restructuring charges and asset write-offs occurring in 2001.
(3) See Note 1 of Notes to Consolidated Financial Statements for the basis of
computing earnings (loss) per common share.
<Page>
Corporate and Shareholder Data
Officers
Donald E. Nigbor(1)
Chairman of the Board and
Chief Executive Officer
Cary T. Fu(1)
President and
Chief Operating Officer
Gayla J. Delly(1)
Vice President Finance,
Chief Financial Officer
and Treasurer
Steven A. Barton(2)
Executive Vice President
Lenora A. Gurton
Secretary
Christopher Nawrocki
Group President
Legal Counsel
Bracewell & Patterson, L.L.P.
Houston, Texas
Independent Auditors
KPMG LLP
Houston, Texas
Directors
David H. Arnold(3)(4)
Retired - Former President
EMD Associates, Inc.
Winona, Minnesota
(Acquired by Benchmark, 1996)
John C. Custer(3)(4)
Retired - Former Chairman of the Board
Mason & Hanger-Silas Mason Co., Inc.
Lexington, Kentucky
(Technical services contracting and engineering firm)
Steven A. Barton
Executive Vice President
Benchmark Electronics, Inc.
Peter G. Dorflinger(3)(4)
President
GlasTech, Inc.
Austin, Texas
(Dental products manufacturer)
Cary T. Fu
President and Chief Operating Officer
Benchmark Electronics, Inc.
Donald E. Nigbor
Chairman of the Board and
Chief Executive Officer
Benchmark Electronics, Inc.
(1) Executive Officer
(2) Part-time since June 1993
(3) Member of Audit Committee
(4) Member of Compensation Committee
Notices
Stock Transfer Agent and Registrar
Communications concerning stock transfer requirements, lost certificates or
changes of address should be directed to:
Computershare Trust Company
P.O. Box 1596
Denver, CO. 80201-1596
303/986-5400.
Stock Trading
The common stock of Benchmark Electronics, Inc. trades on the New York Stock
Exchange under the symbol BHE.
SEC Form 10-K
Benchmark will provide a copy of its Annual Report on Form 10-K (without
exhibits) for the fiscal year ended December 31, 2001, filed with the Securities
and Exchange Commission, without charge upon written request to:
Gayla J. Delly
Vice President Finance
Chief Financial Officer and Treasurer
Benchmark Electronics, Inc.
3000 Technology Drive
Angleton, TX 77515.
Financial Mailing List
Shareholders whose stock is held in trust or by a brokerage firm may receive
timely financial mailings directly from Benchmark by writing to Ms. Gayla J.
Delly at the above address.
Annual Meeting
Shareholders are invited to attend the Benchmark Electronics, Inc. annual
meeting, which will be held at 10:00 a.m. on Tuesday, May 14, 2002, at the
Hyatt Regency Houston
1200 Louisiana Street
Houston, Texas.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-21
<SEQUENCE>9
<FILENAME>a2073293zex-21.txt
<DESCRIPTION>EXHIBIT 21
<TEXT>
<Page>
EXHIBIT 21
SUBSIDIARIES OF BENCHMARK ELECTRONICS, INC.
SUBSIDIARIES OF BENCHMARK ELECTRONICS, INC.
BEI Electronics Ireland Ltd., a Republic of Ireland private limited company
Benchmark Electronics FSC, Inc., a Barbados corporation
Benchmark Electronics Huntsville Inc., an Alabama corporation
Benchmark Electronics Corp., a Delaware corporation
AVEX Holdings, Inc., a Delaware corporation
Benchmark Electronics AB, a Sweden corporation
Benchmark Electronics Pte. Ltd., a Singapore corporation
AVEX Constitution, Inc., a Delaware corporation
AVEX Liberty, Inc., a Delaware corporation
Benchmark Electronics de Mexico, S. de R.L. de C.V., a Mexico corporation
Benchmark Electronics Servicios, S. de R.L. de C.V., a Mexico corporation
AVEX International Corporation, an Alabama corporation
Benchmark Electronics Ltda, a Brazil corporation
Benchmark BV Holdings, Inc., a Delaware corporation
Tedok B.V., a Netherlands corporation
Kilbride Holdings B.V., a Netherlands corporation
Benchmark Electronics Scotland Limited, a Scotland corporation
Burle Caribe Holdings Limited, an Ireland corporation
Burle Cayman Holdings Limited, an Ireland corporation
Benchmark Electronics Cork, an Ireland corporation
Benchmark Elektronikai Termekeket Gyarto Fekekisegu Tarsasag
(Benchmark Elektronikai Kft.), a Hungary corporation
Blitz 01-842 GmbH, a Germany corporation
All subsidiaries are wholly owned, directly or indirectly, by Benchmark
Electronics, Inc.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23
<SEQUENCE>10
<FILENAME>a2073293zex-23.txt
<DESCRIPTION>EXHIBIT 23
<TEXT>
<Page>
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Benchmark Electronics, Inc.:
We consent to incorporation by reference in the registration statements
on Form S-8 (No. 33-61660, No. 333-26805, No. 333-28997, No. 333-54186,
No. 333-66889 and No. 333-76207) and Form S-3 (No. 333-90723 and No. 333-90887)
of Benchmark Electronics, Inc. of our report dated February 5, 2002, related
to 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, which report is incorporated by reference in the
December 31, 2001 annual report on Form 10-K of Benchmark Electronics, Inc.,
and our report dated February 5, 2002 related to the consolidated financial
statement schedule, which report is included in the December 31, 2001 annual
report on Form 10-K of Benchmark Electronics, Inc.
KPMG LLP
Houston, Texas
March 15, 2002
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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