Benchmark Electronics Inc (NYSE: BHE) is an EMS, ODM, and OEM company[5] based in Angleton, TX.[6] It provides contract manufacturing services.
Benchmark Electronics, Inc. (Benchmark), incorporated in 1981, is a provider of integrated electronic manufacturing services. The Company provides its services to original equipment manufacturers (OEMs) of computers and related products for business enterprises, medical devices, industrial control equipment, testing and instrumentation products, and telecommunication equipment. The services that Benchmark provides are referred to as electronics manufacturing services (EMS). The Company offers its customers integrated design and manufacturing services, including initial product design, volume production and direct order fulfillment. It also provides precision machining, metal joining and electro-mechanical manufacturing services.
The Company provides specialized engineering services, including product design, software development, industrial design, assembly automation, printed circuit board layout, prototyping and test development. As of December 31, 2009, Benchmark operated a total of 54 surface mount production lines (where electrical components are soldered directly onto printed circuit boards) at its domestic facilities and 73 surface mount production lines at the Company’s international facilities. Its worldwide facilities include 1.6 million square feet in the Company’s domestic facilities in Alabama, Arizona, California, Minnesota, New Hampshire, North Dakota, Oregon and Texas, and 1.5 million square feet in its international facilities in Brazil, China, Ireland, Malaysia, Mexico, the Netherlands, Romania, Singapore and Thailand.
The Company offers a range of engineering, automation, test, manufacturing and fulfillment solutions. Benchmark supports its service offerings with supply chain management systems, program management and information technology systems. It provides its customers with a range of automated test equipment, functional test equipment, process automation and replication solutions. The Company also provides test equipment and automation system solutions to OEMs. Benchmark offers a range of printed circuit board assembly and test solutions, including printed circuit board assembly, assembly of subsystems, circuitry and functionality testing of printed assemblies and component reliability testing.
The Company provides its customers with a range of flex circuit assembly and test solutions. Its test capabilities include manufacturing defect analysis, in-circuit tests to test the circuitry of the board and functional tests to confirm that the board or assembly operates in accordance with its final design and manufacturing specifications. In addition, the Company provides environmental stress tests of assemblies of boards or systems. It offers a range of precision subsystem and system integration services. These services include assembly, configuration and test of complex computers and related products for business enterprises, medical devices, industrial control equipment, testing and instrumentation products, and telecommunication equipment.
The Company designs, develops and builds product specific manufacturing processes utilizing manual, mechanized or automated lines. The Company provides direct order fulfillment for certain of its OEM customers. Its direct order fulfillment services include build-to-order (BTO) and configure-to-order (CTO) capabilities. BTO involves building a system in real-time to a customized configuration ordered by the OEM customer. CTO involves configuring systems to an end customer’s specifications at the time the product is ordered. The Company supports its direct order fulfillment services with logistics that include delivery of parts and assemblies to the final assembly site, distribution and shipment of finished systems, and processing of customer returns. It provides its customers with a range of aftermarket non-warranty services, including repair, replacement, refurbishment, remanufacturing, exchange, systems upgrade and spare part manufacturing throughout a products life cycle.
The Company competes with Celestica Inc., Flextronics International Ltd., Hon Hai Precision Industry Co., Ltd., Jabil Circuit, Inc. and Sanmina-SCI Corporation.
As the contract electronics manufacturing sector continued to expand in 1999, with an increasing number of OEMs electing to divest themselves of their manufacturing units, the pace of CEM mergers and acquisitions picked up dramatically. In June, Benchmark made another offering of stock, raising a net total of $93.6 million with the purpose of paying down debt as well as financing further acquisitions. Less than a month later, after just two weeks of negotiations, Benchmark announced the largest-ever CEM acquisition, one that had the potential of making the company one of the top five contract manufacturers in the world. For $289.1 million in cash and stock Benchmark acquired Avex Electronics Inc. from the privately held J.M. Huber Corporation, a conglomerate with a stronger interest in oil and gas, chemicals, and timber than in contract manufacturing. Avex had been a top three CEM in 1994, but because it was controlled by a private company without access to the markets to raise the level of funding required in the heated environment of the CEM industry of the late 1990s, it sank to seventh in size by 1998.
While Huber gained capital with which it could grow its other businesses, in one stroke Benchmark accomplished a number of goals, not least of which was boosting annual sales well beyond the $1 billion target for 2000. With the addition of 4,440 Avex employees, Benchmark's workforce nearly tripled. The acquisition also gave Benchmark a global footprint, adding nine manufacturing plants in Alabama, Tennessee, Hungary, Mexico, Brazil, Ireland, Scotland, Singapore, and Sweden. Other than Ireland, the foreign facilities did not overlap, and Benchmark was able to gain much needed presence in the Far East, South America, and Europe. Furthermore, the Avex deal provided access to new customers. With its roots in the medical equipment business, Benchmark had mostly worked on high-cost, low-volume products, whereas Avex focused on low-cost, high-volume products, such as circuit board assemblies for personal computers.
The reaction on Wall Street to the Avex deal was generally positive. Benchmark already had experience in digesting large acquisitions that greatly increased its size, but there were still some reservations about how management would assimilate a multisite, international acquisition. Although analysts predicted continued strong growth for the CEM industry as a whole, many investors began to question whether the desire of CEMs to expand might lead to overpaying for assets and whether intense competition might lead to even thinner margins than were already common in the industry.
In October 1999, when Benchmark reported disappointing third quarter earnings, after delaying the announcement for a week, the acquisition of Avex would come under severe criticism. Nigbor blamed the poor financial results on defective components, the failure of suppliers to deliver on time, and lower than expected contributions from Avex. Analysts generally concluded that Benchmark had bitten off more than it could chew with Avex. Investor reaction was swift and harsh. The delay in reporting had itself caused a 22 percent drop in the price of Benchmark stock. The results themselves precipitated another 48 percent drop. In short order, the price tumbled from $35 per share to just $15.
Benchmark also found itself involved in litigation on two fronts. It was sued by shareholders who contended that the company's delay in releasing third quarter results had violated federal securities laws. At the same time, Benchmark sued Huber for breach of contract and fraud over the Avex transaction. In essence, Benchmark charged that the Avex financial statements were false, that Huber had failed to disclose that key customers had decided to either cut back on their contracts or discontinue them entirely, and that Huber had exaggerated the true value of Avex by tens of millions of dollars. Subsequently, Huber would countersue Benchmark.
As the various suits made their torturous journey through the legal system, Benchmark carried on with the job of absorbing Avex into its operations. Results for 1999 were less than anticipated, falling well short of the $1 billion mark in sales, coming in at $877.8 million. Benchmark's fortunes, however, would improve in 2000, as the company began to take advantage of underutilized Avex facilities and sign up new customers. Sales for 2000 would almost double, reaching more than $1.7 billion by the end of the year. The company's stock also rebounded and reached new heights, as did the stock of other contract manufacturers in general. As soon as one of the major CEMs announced that it would miss its quarterly earnings estimate, however, all of the stocks in the sector would tumble. Benchmark and the other large CEMs found themselves incurring debt through further stock offerings or loans in order to keep growing, lest they fall by the wayside. Everyone in 2000 was scrambling to bolster their performance in China and the Far East.
When judged in terms of operating margins and return on equity, CEMs were panned by critics, who contended that no matter how big these companies became, they were actually not very profitable. Yet, the continued move of OEMs to outsource manufacturing and unload facilities was indisputable. How Benchmark responded to the uncertainties of its volatile industry, and how financially sound it would be when everything settled, remained to be seen.
Principal Subsidiaries: AVEX Holdings; Benchmark Electronics AB (Sweden); Benchmark Electronics FSC; Benchmark Electronics UK; Benchmark BV Holdings.
Principal Competitors: ACT Manufacturing; Celestica; Flextronics Inc.; Jabil Circuit, Inc.; SCI Systems, Inc.; Solectron Corporation.
OVERALL
Beta: 1.14
Market Cap (Mil.): $1,033.51
Shares Outstanding (Mil.): 61.15
Annual Dividend: --
Yield (%): --
FINANCIALS
BHE.N Industry Sector
P/E (TTM): 13.05 9.73 19.31
EPS (TTM): 56.32 -- --
ROI: 7.10 5.67 16.24
ROE: 7.33 5.96 17.90
Statistics:
Public Company
Incorporated: 1981 as Electronics, Inc.
Employees: 5,856
Sales: $1.7 billion (2000)
Stock Exchanges: New York
Ticker Symbol: BHE
NAIC: 334412 Bare Printed Circuit Board; 421610 Electrical Apparatus and Equipment, Wiring Supplies, and Construction Material Wholesalers
Key Dates:
1979: Company is created as Electronics, Inc., a subsidiary of Intermedics.
1981: Electronics, Inc. is incorporated in Texas in 1981.
1986: Electronics, Inc. is sold to investor group.
1988: Company is renamed Benchmark Electronics, Inc.
1990: Company makes initial public offering of stock.
1999: Company acquires Avex.
2000: Annual sales top $1 billion.
Name Age Since Current Position
Fu, Cary 62 2009 Chairman of the Board, Chief Executive Officer
Delly, Gayla 51 2006 President
Adam, Donald 47 2006 Chief Financial Officer
Dorflinger, Peter 59 1990 Independent Director
Strom, Bernee 63 2004 Independent Director
Lang, Laura 2005 Independent Director
Duncan, Douglas 60 2006 Independent Director
Dawson, Michael 57 2006 Independent Director
Williams, Clay 48 2008 Independent Director
Address:
3000 Technology Drive
Angleton, Texas 77515
U.S.A.
Benchmark Electronics, Inc. (Benchmark), incorporated in 1981, is a provider of integrated electronic manufacturing services. The Company provides its services to original equipment manufacturers (OEMs) of computers and related products for business enterprises, medical devices, industrial control equipment, testing and instrumentation products, and telecommunication equipment. The services that Benchmark provides are referred to as electronics manufacturing services (EMS). The Company offers its customers integrated design and manufacturing services, including initial product design, volume production and direct order fulfillment. It also provides precision machining, metal joining and electro-mechanical manufacturing services.
The Company provides specialized engineering services, including product design, software development, industrial design, assembly automation, printed circuit board layout, prototyping and test development. As of December 31, 2009, Benchmark operated a total of 54 surface mount production lines (where electrical components are soldered directly onto printed circuit boards) at its domestic facilities and 73 surface mount production lines at the Company’s international facilities. Its worldwide facilities include 1.6 million square feet in the Company’s domestic facilities in Alabama, Arizona, California, Minnesota, New Hampshire, North Dakota, Oregon and Texas, and 1.5 million square feet in its international facilities in Brazil, China, Ireland, Malaysia, Mexico, the Netherlands, Romania, Singapore and Thailand.
The Company offers a range of engineering, automation, test, manufacturing and fulfillment solutions. Benchmark supports its service offerings with supply chain management systems, program management and information technology systems. It provides its customers with a range of automated test equipment, functional test equipment, process automation and replication solutions. The Company also provides test equipment and automation system solutions to OEMs. Benchmark offers a range of printed circuit board assembly and test solutions, including printed circuit board assembly, assembly of subsystems, circuitry and functionality testing of printed assemblies and component reliability testing.
The Company provides its customers with a range of flex circuit assembly and test solutions. Its test capabilities include manufacturing defect analysis, in-circuit tests to test the circuitry of the board and functional tests to confirm that the board or assembly operates in accordance with its final design and manufacturing specifications. In addition, the Company provides environmental stress tests of assemblies of boards or systems. It offers a range of precision subsystem and system integration services. These services include assembly, configuration and test of complex computers and related products for business enterprises, medical devices, industrial control equipment, testing and instrumentation products, and telecommunication equipment.
The Company designs, develops and builds product specific manufacturing processes utilizing manual, mechanized or automated lines. The Company provides direct order fulfillment for certain of its OEM customers. Its direct order fulfillment services include build-to-order (BTO) and configure-to-order (CTO) capabilities. BTO involves building a system in real-time to a customized configuration ordered by the OEM customer. CTO involves configuring systems to an end customer’s specifications at the time the product is ordered. The Company supports its direct order fulfillment services with logistics that include delivery of parts and assemblies to the final assembly site, distribution and shipment of finished systems, and processing of customer returns. It provides its customers with a range of aftermarket non-warranty services, including repair, replacement, refurbishment, remanufacturing, exchange, systems upgrade and spare part manufacturing throughout a products life cycle.
The Company competes with Celestica Inc., Flextronics International Ltd., Hon Hai Precision Industry Co., Ltd., Jabil Circuit, Inc. and Sanmina-SCI Corporation.
As the contract electronics manufacturing sector continued to expand in 1999, with an increasing number of OEMs electing to divest themselves of their manufacturing units, the pace of CEM mergers and acquisitions picked up dramatically. In June, Benchmark made another offering of stock, raising a net total of $93.6 million with the purpose of paying down debt as well as financing further acquisitions. Less than a month later, after just two weeks of negotiations, Benchmark announced the largest-ever CEM acquisition, one that had the potential of making the company one of the top five contract manufacturers in the world. For $289.1 million in cash and stock Benchmark acquired Avex Electronics Inc. from the privately held J.M. Huber Corporation, a conglomerate with a stronger interest in oil and gas, chemicals, and timber than in contract manufacturing. Avex had been a top three CEM in 1994, but because it was controlled by a private company without access to the markets to raise the level of funding required in the heated environment of the CEM industry of the late 1990s, it sank to seventh in size by 1998.
While Huber gained capital with which it could grow its other businesses, in one stroke Benchmark accomplished a number of goals, not least of which was boosting annual sales well beyond the $1 billion target for 2000. With the addition of 4,440 Avex employees, Benchmark's workforce nearly tripled. The acquisition also gave Benchmark a global footprint, adding nine manufacturing plants in Alabama, Tennessee, Hungary, Mexico, Brazil, Ireland, Scotland, Singapore, and Sweden. Other than Ireland, the foreign facilities did not overlap, and Benchmark was able to gain much needed presence in the Far East, South America, and Europe. Furthermore, the Avex deal provided access to new customers. With its roots in the medical equipment business, Benchmark had mostly worked on high-cost, low-volume products, whereas Avex focused on low-cost, high-volume products, such as circuit board assemblies for personal computers.
The reaction on Wall Street to the Avex deal was generally positive. Benchmark already had experience in digesting large acquisitions that greatly increased its size, but there were still some reservations about how management would assimilate a multisite, international acquisition. Although analysts predicted continued strong growth for the CEM industry as a whole, many investors began to question whether the desire of CEMs to expand might lead to overpaying for assets and whether intense competition might lead to even thinner margins than were already common in the industry.
In October 1999, when Benchmark reported disappointing third quarter earnings, after delaying the announcement for a week, the acquisition of Avex would come under severe criticism. Nigbor blamed the poor financial results on defective components, the failure of suppliers to deliver on time, and lower than expected contributions from Avex. Analysts generally concluded that Benchmark had bitten off more than it could chew with Avex. Investor reaction was swift and harsh. The delay in reporting had itself caused a 22 percent drop in the price of Benchmark stock. The results themselves precipitated another 48 percent drop. In short order, the price tumbled from $35 per share to just $15.
Benchmark also found itself involved in litigation on two fronts. It was sued by shareholders who contended that the company's delay in releasing third quarter results had violated federal securities laws. At the same time, Benchmark sued Huber for breach of contract and fraud over the Avex transaction. In essence, Benchmark charged that the Avex financial statements were false, that Huber had failed to disclose that key customers had decided to either cut back on their contracts or discontinue them entirely, and that Huber had exaggerated the true value of Avex by tens of millions of dollars. Subsequently, Huber would countersue Benchmark.
As the various suits made their torturous journey through the legal system, Benchmark carried on with the job of absorbing Avex into its operations. Results for 1999 were less than anticipated, falling well short of the $1 billion mark in sales, coming in at $877.8 million. Benchmark's fortunes, however, would improve in 2000, as the company began to take advantage of underutilized Avex facilities and sign up new customers. Sales for 2000 would almost double, reaching more than $1.7 billion by the end of the year. The company's stock also rebounded and reached new heights, as did the stock of other contract manufacturers in general. As soon as one of the major CEMs announced that it would miss its quarterly earnings estimate, however, all of the stocks in the sector would tumble. Benchmark and the other large CEMs found themselves incurring debt through further stock offerings or loans in order to keep growing, lest they fall by the wayside. Everyone in 2000 was scrambling to bolster their performance in China and the Far East.
When judged in terms of operating margins and return on equity, CEMs were panned by critics, who contended that no matter how big these companies became, they were actually not very profitable. Yet, the continued move of OEMs to outsource manufacturing and unload facilities was indisputable. How Benchmark responded to the uncertainties of its volatile industry, and how financially sound it would be when everything settled, remained to be seen.
Principal Subsidiaries: AVEX Holdings; Benchmark Electronics AB (Sweden); Benchmark Electronics FSC; Benchmark Electronics UK; Benchmark BV Holdings.
Principal Competitors: ACT Manufacturing; Celestica; Flextronics Inc.; Jabil Circuit, Inc.; SCI Systems, Inc.; Solectron Corporation.
OVERALL
Beta: 1.14
Market Cap (Mil.): $1,033.51
Shares Outstanding (Mil.): 61.15
Annual Dividend: --
Yield (%): --
FINANCIALS
BHE.N Industry Sector
P/E (TTM): 13.05 9.73 19.31
EPS (TTM): 56.32 -- --
ROI: 7.10 5.67 16.24
ROE: 7.33 5.96 17.90
Statistics:
Public Company
Incorporated: 1981 as Electronics, Inc.
Employees: 5,856
Sales: $1.7 billion (2000)
Stock Exchanges: New York
Ticker Symbol: BHE
NAIC: 334412 Bare Printed Circuit Board; 421610 Electrical Apparatus and Equipment, Wiring Supplies, and Construction Material Wholesalers
Key Dates:
1979: Company is created as Electronics, Inc., a subsidiary of Intermedics.
1981: Electronics, Inc. is incorporated in Texas in 1981.
1986: Electronics, Inc. is sold to investor group.
1988: Company is renamed Benchmark Electronics, Inc.
1990: Company makes initial public offering of stock.
1999: Company acquires Avex.
2000: Annual sales top $1 billion.
Name Age Since Current Position
Fu, Cary 62 2009 Chairman of the Board, Chief Executive Officer
Delly, Gayla 51 2006 President
Adam, Donald 47 2006 Chief Financial Officer
Dorflinger, Peter 59 1990 Independent Director
Strom, Bernee 63 2004 Independent Director
Lang, Laura 2005 Independent Director
Duncan, Douglas 60 2006 Independent Director
Dawson, Michael 57 2006 Independent Director
Williams, Clay 48 2008 Independent Director
Address:
3000 Technology Drive
Angleton, Texas 77515
U.S.A.