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Benchmark Electronics Inc. Reports Operating Results (10-Q)

August 07, 2009 | About:

Benchmark Electronics Inc. (BHE) filed Quarterly Report for the period ended 2009-06-30.

Benchmark Electronics Inc. provides contract electronics manufacturing and design services to original equipment manufacturers in select industries including medical devices communications equipment industrial and business computers testing instrumentation and industrialcontrols. They specializes in manufacturing high quality technologically complex printed circuit board assemblies with computer-automated equipment using surface mount and pin-through-hole interconnection technologies for customers requiring low to medium volume production runs. Benchmark Electronics Inc. has a market cap of $1.06 billion; its shares were traded at around $16.2 with a P/E ratio of 17.2 and P/S ratio of 0.4. Benchmark Electronics Inc. had an annual average earning growth of 5.5% over the past 10 years.

Highlight of Business Operations:

Sales for the three months ended June 30, 2009 decreased 29% to $481.8 million compared to $682.4 million for the same period of 2008 primarily as a result of the overall economic downturn that has been impacting businesses worldwide since mid 2008. The decline in sales has been broad based and impacted customers in all industries that we serve when comparing 2009 to 2008. Sales to customers in the computers and related products for business enterprises industry, industrial control equipment industry, medical devices industry, and the testing and instrumentation products industry declined 45%, 13%, 29% and 56%, respectively, from 2008 to 2009. In 2009, these declines were partially offset by sales increases to customers in the telecommunication equipment (5%) industry. Our new customer and new program ramps contributed to our sales in the second quarter, but not enough to offset the overall decline in sales. Sales to our customers in the computers and related products for business enterprises industry sector represented 38% of our sales in the second quarter 2009 compared to 48% of our sales in the second quarter of 2008. Sales to this industry sector decreased $147.1 million from $327.5 million in the second quarter of 2008 to $180.4 million in the second quarter of 2009 due to reduced demand.

Sales to our customers in the computers and related products for business enterprises industry sector represented 38% of our sales in the second quarter 2009 compared to 48% of our sales in the second quarter of 2008. Sales to this industry sector decreased $147.1 million from $327.5 million in the second quarter of 2008 to $180.4 million in the second quarter of 2009. Sales to this industry sector decreased $276.0 million from $675.2 million in the first six months of 2008 to $399.2 million in the first six months of 2009. This decrease is due to reduced demand.

Gross profit decreased 25% to $34.6 million for the three months ended June 30, 2009 from $45.9 million in the same period of 2008 and decreased 27% to $66.2 million for the six months ended June 30, 2009 from $90.9 million in the same period of 2008 due primarily to lower sales volumes. Gross profit as a percentage of sales increased to 7.2% during the second quarter of 2009 from 6.7% in 2008 and increased to 6.8% during the first six months of 2009 from 6.7% in 2008 primarily due to a better product mix, operating efficiencies and an aggressive management of our costs. We experience fluctuations in gross profit from period to period. Different programs contribute different gross profits depending on factors such as the types of services involved, location of production, size of the program, complexity of the product, and level of material costs associated with the various products. Moreover, new programs can contribute relatively less to our gross profit in their early stages when manufacturing volumes are usually lower, resulting in inefficiencies and unabsorbed manufacturing overhead costs. In addition, a number of our new and higher volume programs remain subject to competitive constraints that could exert downward pressure on our margins. During periods of low production volume, we generally have idle capacity and reduced gross profit.

Selling, general and administrative expenses decreased 9% to $21.2 million in the second quarter of 2009 from $23.4 million in the second quarter of 2008 and decreased 12% to $41.5 million in the first six months of 2009 from $47.4 million in the first six months of 2008. Selling, general and administrative expenses, as a percentage of sales, were 4.4% and 3.4%, respectively, for the second quarter of 2009 and 2008, and 4.2% and 3.5%, respectively, for the first six months of 2009 and 2008. The decrease in selling, general and administrative expenses is primarily due to reduced overhead resulting from cost controls and lower employee related expenses due to the overall lower sales volume when comparing the periods. The increase in selling, general and administrative expenses as a percentage of sales is also due to the impact of lower sales volumes during 2009.

We reported net income of approximately $20.8 million, or diluted earnings per share of $0.32 for the first six months of 2009, compared with net income of approximately $44.5 million, or diluted earnings per share of $0.65 for the same period of 2008. The net decrease of $23.7 million from 2008 was primarily due to the factors discussed above.

Cash provided by operating activities was $76.8 million in 2009. The cash provided by operations during 2009 consisted primarily of $20.8 million of net income adjusted for $19.5 million of depreciation and amortization, a $71.9 million decrease in accounts receivable, and a $29.5 million decrease in inventories, offset by a $62.5 million decrease in accounts payable and a $5.6 million decrease in accrued liabilities. Working capital was $838.5 million at June 30, 2009 and $822.4 million at December 31, 2008.

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