Benchmark Electronics(BHE) - 2023 Q1 - Quarterly Report

PART I—FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) This section presents unaudited condensed consolidated financial statements, including balance sheets, income statements, and cash flow statements, with detailed notes on accounting policies and financial line items Condensed Consolidated Balance Sheets The Condensed Consolidated Balance Sheets present the company's financial position as of March 31, 2023, and December 31, 2022, detailing assets, liabilities, and equity Condensed Consolidated Balance Sheets (in thousands) | Metric | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | | :--------------------------------------- | :---------------------------- | :------------------------------- | | Total Current Assets | $1,690,872 | $1,652,149 | | Total Assets | $2,278,648 | $2,227,331 | | Total Current Liabilities | $711,863 | $749,136 | | Long-term Debt, less current installments| $399,924 | $320,675 | | Total Shareholders' Equity | $1,034,626 | $1,026,416 | Condensed Consolidated Statements of Income The Condensed Consolidated Statements of Income detail the company's financial performance for the three months ended March 31, 2023, and 2022, highlighting revenue, costs, and net income Condensed Consolidated Statements of Income (in thousands) | Metric | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Sales | $694,695 | $636,083 | | Gross profit | $63,958 | $57,602 | | Income from operations | $22,742 | $15,407 | | Net income | $12,360 | $10,960 | | Basic Earnings per share | $0.35 | $0.31 | | Diluted Earnings per share | $0.35 | $0.31 | Condensed Consolidated Statements of Comprehensive Income This statement presents comprehensive income for the three months ended March 31, 2023, and 2022, including net income and other comprehensive income components Condensed Consolidated Statements of Comprehensive Income (in thousands) | Metric | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Net income | $12,360 | $10,960 | | Other comprehensive income | $2,424 | $1,271 | | Comprehensive income | $14,784 | $12,231 | Condensed Consolidated Statements of Shareholders' Equity This statement outlines changes in shareholders' equity for the three months ended March 31, 2023, and 2022, detailing movements in common stock, retained earnings, and accumulated other comprehensive loss Condensed Consolidated Statements of Shareholders' Equity (in thousands) | Metric | Balances, December 31, 2022 (in thousands) | Balances, March 31, 2023 (in thousands) | | :--------------------------------------- | :--------------------------------------- | :-------------------------------------- | | Total Shareholders' Equity | $1,026,416 | $1,034,626 | | Net income | - | $12,360 | | Dividends declared | - | $(5,878) | Condensed Consolidated Statements of Cash Flows The Condensed Consolidated Statements of Cash Flows present cash inflows and outflows from operating, investing, and financing activities for the three months ended March 31, 2023, and 2022 Condensed Consolidated Statements of Cash Flows (in thousands) | Metric | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Net cash used in operations | $(24,906) | $(68,025) | | Net cash used in investing activities | $(38,712) | $(16,645) | | Net cash provided by financing activities| $67,024 | $59,134 | | Net increase (decrease) in cash and cash equivalents and restricted cash | $4,260 | $(26,814) | | Cash and cash equivalents and restricted cash at end of period | $211,690 | $244,935 | Notes to Condensed Consolidated Financial Statements These notes provide detailed explanations and disclosures for the condensed consolidated financial statements, covering accounting policies, financial instruments, and segment information Note 1 – Basis of Presentation The unaudited condensed consolidated financial statements are prepared in accordance with SEC rules and U.S. GAAP, reflecting management's estimates and assumptions - The financial statements are unaudited and prepared in accordance with SEC rules and U.S. GAAP, reflecting management's estimates and assumptions[34][35] Note 2 – New Accounting Pronouncements The Company has assessed recently issued accounting standards and determined they will not materially impact its financial position, results of operations, or cash flows - The Company determined that other recently issued accounting standards will not have a material impact on its consolidated financial position, results of operations, or cash flows[36] Note 3 – Inventories This note provides a summary of inventory costs, categorized into raw materials, work in process, and finished goods, as of March 31, 2023, and December 31, 2022 Inventories (in thousands) | Inventory Category | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | | :----------------- | :---------------------------- | :------------------------------- | | Raw materials | $757,586 | $710,494 | | Work in process | $18,077 | $15,546 | | Finished goods | $2,474 | $1,709 | | Total Inventories | $778,137 | $727,749 | Note 4 – Goodwill and Intangible Assets This note details the composition and amortization of goodwill and identifiable intangible assets, including customer relationships and capitalized software, as of March 31, 2023, and December 31, 2022 Intangible Assets Net Carrying Amount (in thousands) | Intangible Asset Category | March 31, 2023 Net Carrying Amount (in thousands) | December 31, 2022 Net Carrying Amount (in thousands) | | :------------------------ | :------------------------------------------------ | :--------------------------------------------------- | | Customer relationships | $32,528 | $34,114 | | Capitalized software costs| $17,456 | $15,781 | | Technology licenses | — | — | | Trade names and trademarks| $7,800 | $7,800 | | Other | $488 | $491 | | Total Intangible Assets | $58,272 | $58,186 | Amortization Expense (in thousands) | Amortization Type | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | | :---------------- | :--------------------------------------- | :--------------------------------------- | | Intangible assets | $1,592 | $1,609 | | Capitalized software costs | $1,050 | $909 | | Debt costs | $114 | $85 | | Total Amortization| $2,756 | $2,603 | Estimated Future Amortization Expense (in thousands) | Year Ending December 31, | Estimated Future Amortization Expense (in thousands) | | :----------------------- | :--------------------------------------------------- | | 2023 (remaining nine months) | $4,388 | | 2024 | $4,817 | | 2025 | $4,817 | | 2026 | $4,817 | Note 5 – Borrowing Facilities This note describes the company's credit agreements, including the Revolving Credit Facility and Term Loan Facility, their terms, outstanding balances, and compliance with financial covenants Debt Balances (in thousands) | Debt Type | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | | :------------------------ | :---------------------------- | :------------------------------- | | Revolving credit facility | $275,000 | $195,000 | | Term loan | $129,609 | $131,250 | | Less unamortized debt issuance costs | $(1,715) | $(1,829) | | Long-term debt | $402,894 | $324,421 | - As of March 31, 2023, the Company had $129.6 million outstanding under the Term Loan Facility, $275.0 million under the Revolving Credit Facility, and $3.9 million in letters of credit[72] - $171.1 million was available for future borrowings under the Revolving Credit Facility[72] - The Credit Agreement was amended on May 20, 2022, increasing the Revolving Credit Facility from $250 million to $450 million, and on February 3, 2023, increasing the maximum amount of trade accounts that can be sold to $200.0 million[63][54] - A portion of the outstanding debt ($129.6 million) is effectively at a fixed interest rate of 2.928% due to an interest rate swap contract[56] Note 6 – Leases This note outlines the company's lease arrangements, primarily operating leases for facilities, vehicles, and equipment, detailing lease assets, liabilities, and associated costs Lease Metrics (in thousands) | Lease Metric | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | | :--------------------------------------- | :---------------------------- | :------------------------------- | | Operating lease right-of-use assets | $95,156 | $93,081 | | Operating lease liabilities, noncurrent | $87,561 | $86,687 | | Weighted average remaining lease term – operating leases | 9.3 years | 9.8 years | | Weighted average discount rate – operating leases | 4.1 % | 4.1 % | Lease Costs (in thousands) | Lease Cost Type | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | | :------------------------ | :--------------------------------------- | :--------------------------------------- | | Operating lease cost | $4,571 | $4,274 | | Short-term lease cost | $140 | $80 | | Variable lease cost | $456 | $469 | | Total lease cost | $5,197 | $4,855 | - Future operating leases not yet commenced include a new facility lease in the Americas, expiring in 2032, with initial annual minimum lease payments of approximately $2.4 million[75] Note 7 – Common Stock and Stock-Based Awards Plans This note details the company's dividend policy, share repurchase authorization, and stock-based compensation plans, including stock options and restricted stock units - The Company declared a quarterly cash dividend of $0.165 per share for both Q1 2023 and Q1 2022, totaling $5.8 million in cash dividends paid for both periods[5] - As of March 31, 2023, the Company had an aggregate of $154.6 million remaining under its stock repurchase program, with no repurchases made during Q1 2023[76] Unrecognized Compensation Cost and Amortization Period | Stock-Based Award Type | Unrecognized Compensation Cost (in thousands) | Remaining Weighted-Average Amortization Period | | :--------------------- | :-------------------------------------------- | :--------------------------------------------- | | Restricted Stock Units | $32,123 | 3.0 years | | Performance-based Restricted Stock Units | $8,890 | 2.2 years | - Total compensation cost recognized for stock-based awards was $4.8 million for Q1 2023, up from $4.2 million for Q1 2022[84] Note 8 – Income Taxes This note details the components of income tax expense, the impact of tax incentives, and the company's policy regarding undistributed foreign earnings and uncertain tax benefits Income Tax Expense (in thousands) | Income Tax Component | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | | :------------------- | :--------------------------------------- | :--------------------------------------- | | Current: U.S. Federal| $525 | $97 | | Current: State and local | $66 | $171 | | Current: Foreign | $3,444 | $3,466 | | Deferred | $(1,010) | $(1,201) | | Total Income Tax Expense | $3,025 | $2,533 | - Tax incentives and holidays in China (through 2023) and Thailand (through 2030) lowered foreign income tax expense by approximately $1.9 million ($0.05 per diluted share) in Q1 2023, compared to $1.2 million ($0.03 per diluted share) in Q1 2022[82][89] - As of December 31, 2022, the Company had $365.2 million in cumulative undistributed foreign earnings not subject to U.S. income tax if distributed[16] Note 9 – Revenue This note details the company's revenue recognition policies, primarily from manufacturing services, and provides a disaggregation of revenue by market sector and geographic segment - Revenue is primarily generated from manufacturing services (sale of manufactured products built to customer specifications) and design, development, and engineering services[83][98] - For Q1 2023 and Q1 2022, 90.4% and 89.3% of revenue, respectively, was recognized for products and services transferred over time[94] External Revenue by Market Sector (in thousands) | Market Sector | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | | :-------------------------- | :--------------------------------------- | :--------------------------------------- | | Industrials | $143,526 | $137,146 | | A&D | $79,415 | $81,187 | | Medical | $137,049 | $116,873 | | Semi-Cap | $148,469 | $183,437 | | Advanced Computing | $95,998 | $55,056 | | Next Generation Communications | $90,238 | $62,384 | | Total External Revenue | $694,695 | $636,083 | - Contract assets increased to $194.1 million as of March 31, 2023, from $183.6 million as of December 31, 2022, primarily representing consideration for work completed but not yet billed[95] Note 10 – Accounts Receivable Sale Programs This note describes the company's programs for selling accounts receivable to unaffiliated financial institutions at a discount to manage liquidity - As of March 31, 2023, the Company could sell up to $200.0 million of specific accounts receivable at any one time[104] - During Q1 2023, the Company sold $152.8 million of accounts receivable, receiving $151.8 million in cash proceeds (net of discount), compared to $107.2 million sold and $107.0 million received in Q1 2022[105] Note 11 – Contingencies The company is involved in various legal actions in the ordinary course of business, but management believes their ultimate disposition will not materially adversely affect its financial position or results of operations - Management believes that the ultimate disposition of ongoing legal actions will not have a material adverse effect on the Company's consolidated financial position or results of operations[106] Note 12 – Restructuring Charges This note details restructuring initiatives undertaken to improve utilization and reduce costs, including site closures and staff reductions, and the associated charges recognized - The Company recognized $1.4 million in restructuring charges during Q1 2023, primarily related to the closure of its Moorpark, California site and other capacity reductions[108] Restructuring Charges (in thousands) | Restructuring Component | Balance as of Dec 31, 2022 (in thousands) | Restructuring Charges (in thousands) | Cash Payment (in thousands) | Balance as of Mar 31, 2023 (in thousands) | | :---------------------- | :---------------------------------------- | :----------------------------------- | :-------------------------- | :---------------------------------------- | | Severance | $3,683 | $868 | $(1,921) | $2,630 | | Lease facility costs | $17 | $46 | $(47) | $16 | | Other exit costs | $81 | $512 | $(512) | $81 | | Total | $3,781 | $1,426 | $(2,480) | $2,727 | Note 13 – Earnings Per Share This note provides the calculation of basic and diluted earnings per share, including the weighted-average number of shares outstanding and the impact of dilutive stock equivalents Earnings Per Share (in thousands, except per share data) | Metric | Three Months Ended March 31, 2023 (in thousands, except per share data) | Three Months Ended March 31, 2022 (in thousands, except per share data) | | :--------------------------------------- | :---------------------------------------------------------------------- | :---------------------------------------------------------------------- | | Net income | $12,360 | $10,960 | | Denominator for basic EPS | 35,336 | 35,245 | | Denominator for diluted EPS | 35,592 | 35,470 | | Basic earnings per share | $0.35 | $0.31 | | Diluted earnings per share | $0.35 | $0.31 | Note 14 – Financial Instruments This note discusses the company's financial instruments, including cash equivalents and long-term debt, and its use of derivative instruments to manage foreign currency and interest rate risks - The Company uses derivative instruments (forward currency exchange contracts and interest rate swaps) to manage foreign currency and interest rate variability, not for speculative purposes[112][113][119] Derivative Instrument Fair Values (in thousands) | Derivative Instrument | Balance Sheet Location | Fair Values as of March 31, 2023 (in thousands) | Fair Values as of December 31, 2022 (in thousands) | | :-------------------- | :--------------------- | :---------------------------------------------- | :----------------------------------------------- | | Forward currency exchange contracts | Other current assets | $2,071 | $407 | | Interest rate swap | Other current assets | $507 | $639 | - The interest rate swap agreement, with a notional amount of $120.0 million as of March 31, 2023, converts a portion of floating rate interest expense to a fixed rate of 2.928%[119] Note 15 – Accumulated Other Comprehensive Loss This note presents the changes in accumulated other comprehensive loss by component, including foreign currency translation adjustments and unrealized gains/losses on derivative instruments Accumulated Other Comprehensive Loss (in thousands) | Component | Beginning Balance Dec 31, 2022 (in thousands) | Other Comprehensive Gain (Loss) before Reclassifications (in thousands) | Amounts Reclassified from AOCI (in thousands) | Net Current Period Other Comprehensive Gain (Loss) (in thousands) | Ending Balance Mar 31, 2023 (in thousands) | | :--------------------------------------- | :-------------------------------------------- | :---------------------------------------------------------------------- | :-------------------------------------------- | :---------------------------------------------------------------- | :----------------------------------------- | | Foreign Currency Translation Adjustments | $(15,877) | $1,050 | — | $1,050 | $(14,827) | | Net Derivative Instruments, Net of Tax | $788 | $1,576 | $(428) | $1,148 | $1,936 | | Other | $(1,144) | $226 | — | $226 | $(918) | | Total | $(16,233) | $2,852 | $(428) | $2,424 | $(13,809) | Note 16 – Segment and Geographic Information This note provides financial information disaggregated by the company's three reportable operating segments (Americas, Asia, and Europe) and by geographic net sales and long-lived assets - The Company operates and is managed geographically, with three reportable segments: Americas, Asia, and Europe[123][124] Segment Performance (in thousands) | Segment | Net Sales Q1 2023 (in thousands) | Net Sales Q1 2022 (in thousands) | Operating Income Q1 2023 (in thousands) | Operating Income Q1 2022 (in thousands) | | :-------- | :------------------------------- | :------------------------------- | :-------------------------------------- | :-------------------------------------- | | Americas | $397,208 | $305,580 | $13,331 | $10,365 | | Asia | $268,043 | $287,246 | $28,784 | $27,806 | | Europe | $77,855 | $70,341 | $6,686 | $4,638 | | Total Net Sales | $694,695 | $636,083 | $22,742 | $15,407 | Geographic Net Sales (in thousands) | Geographic Net Sales | Q1 2023 (in thousands) | Q1 2022 (in thousands) | | :------------------- | :--------------------- | :--------------------- | | United States | $431,185 | $329,110 | | Singapore | $86,956 | $105,672 | | Other Asia | $45,253 | $74,910 | | Europe | $104,693 | $99,265 | | Other | $26,608 | $27,126 | | Total | $694,695 | $636,083 | Note 17 –Supplemental Cash Flow and Non-Cash Information This note provides additional disclosures regarding cash payments for income taxes and interest, as well as non-cash investing activities Supplemental Cash Flow Information (in thousands) | Supplemental Information | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | | :----------------------- | :--------------------------------------- | :--------------------------------------- | | Income taxes paid, net | $4,428 | $3,478 | | Interest paid | $5,874 | $1,562 | | Additions to property, plant and equipment in accounts payable | $5,555 | $3,744 | Note 18 –Subsequent Events This note discloses subsequent events, specifically Amendment No. 3 to the Credit Agreement, which further increased the Revolving Credit Facility commitments and updated interest rate terms - On May 1, 2023, Amendment No. 3 to the Credit Agreement increased the Revolving Credit Facility commitments from $450 million to $550 million and updated the interest rate basis to Term SOFR[141] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition and results of operations for the three months ended March 31, 2023, discussing overall performance, segment results, liquidity, and capital resources OVERVIEW Benchmark Electronics, Inc. provides advanced manufacturing services, design, engineering, and technology solutions, serving diverse market sectors globally with integrated solutions and supply chain management - Benchmark provides advanced manufacturing services (EMS and PT), design and engineering services, and technology solutions to OEMs since 1979[143][144] - Key market sectors include aerospace and defense (A&D), medical technologies, complex industrials, semiconductor capital equipment (Semi-Cap), next-generation communications, and advanced computing[144] - The company's competitive advantages include leading-edge technical capabilities in engineering, technology solutions (RF, microelectronics, miniaturization), and manufacturing services (precision machining, advanced metal joining)[138][145][146][147][151] First Quarter 2023 Highlights The first quarter of 2023 saw a 9% increase in sales, driven by strong performance in Advanced Computing, Next Generation Communications, and Medical sectors, despite ongoing supply chain constraints - Sales for Q1 2023 increased 9% to $694.7 million from $636.1 million in Q1 2022[158] - Sales growth was primarily driven by Advanced Computing (+74%), Next Generation Communications (+45%), and Medical (+17%)[158][159] - Component supply chain constraints continue to impact production, leading to inefficiencies and increased costs, although lead times are improving[160] - Restructuring charges of $1.4 million were recognized in Q1 2023 due to site closures and workforce reductions[162] RESULTS OF OPERATIONS This section provides a detailed analysis of the company's financial performance for the first quarter of 2023, comparing it to the same period in 2022, across key income statement items Key Financial Metrics as a Percentage of Sales | Metric | Q1 2023 (% of Sales) | Q1 2022 (% of Sales) | | :--------------------------------------- | :------------------- | :------------------- | | Sales | 100.0 % | 100.0 % | | Gross profit | 9.2 % | 9.1 % | | Selling, general and administrative expenses | 5.5 % | 5.7 % | | Restructuring charges and other costs | 0.2 % | 0.7 % | | Income from operations | 3.3 % | 2.4 % | | Net income | 1.8 % | 1.7 % | Sales Sales increased by 9% in Q1 2023 compared to Q1 2022, driven by growth in Advanced Computing, Next Generation Communications, and Medical sectors, with the Americas segment showing significant growth Sales by Market Sector (in thousands) | Market Sector | Q1 2023 Sales (in thousands) | Q1 2022 Sales (in thousands) | YoY Change (%) | | :-------------------------- | :--------------------------- | :--------------------------- | :------------- | | Industrials | $143,526 | $137,146 | +5% | | A&D | $79,415 | $81,187 | -2% | | Medical | $137,049 | $116,873 | +17% | | Semi-Cap | $148,469 | $183,437 | -19% | | Advanced Computing | $95,998 | $55,056 | +74% | | Next Generation Communications | $90,238 | $62,384 | +45% | | Total | $694,695 | $636,083 | +9% | Net Sales by Geographic Segment (in thousands) | Geographic Segment | Q1 2023 Net Sales (in thousands) | Q1 2022 Net Sales (in thousands) | YoY Change (%) | | :----------------- | :------------------------------- | :------------------------------- | :------------- | | Americas | $397,208 | $305,580 | +30% | | Asia | $268,043 | $287,246 | -7% | | Europe | $77,855 | $70,341 | +11% | | Total Net Sales | $694,695 | $636,083 | +9% | - International operations accounted for 59% of sales in Q1 2023, down from 61% in Q1 2022[187] Gross Profit Gross profit increased by 11% in Q1 2023, primarily due to higher revenue and improved operational efficiencies - Gross profit increased 11% to $64.0 million in Q1 2023 from $57.6 million in Q1 2022, driven by higher revenue and operational efficiencies[190] Operating Income Operating income surged by 48% in Q1 2023, mainly due to increased revenue, higher gross profit, and reduced restructuring charges, partially offset by higher SG&A expenses - Operating income increased 48% to $22.7 million in Q1 2023 from $15.4 million in Q1 2022[191] Operating Income by Segment (in thousands) | Operating Segment | Q1 2023 Operating Income (in thousands) | Q1 2022 Operating Income (in thousands) | | :---------------- | :-------------------------------------- | :-------------------------------------- | | Americas | $13,331 | $10,365 | | Asia | $28,784 | $27,806 | | Europe | $6,686 | $4,638 | | Corporate and other costs | $(26,059) | $(27,402) | | Total Operating Income | $22,742 | $15,407 | Selling, General and Administrative Expenses SG&A expenses increased in Q1 2023 due to higher variable compensation and investments in IT infrastructure - SG&A expenses increased to $38.2 million in Q1 2023 from $36.3 million in Q1 2022, primarily due to increased variable compensation and IT infrastructure investments[195] Amortization of Intangible Assets Amortization of intangible assets remained consistent in Q1 2023 compared to Q1 2022 - Amortization of intangible assets was $1.6 million in both Q1 2023 and Q1 2022[196] Restructuring Charges and Other Costs Restructuring charges decreased significantly in Q1 2023, mainly due to lower expenses from site closures and workforce reductions compared to the prior year - Restructuring charges and other costs decreased to $1.4 million in Q1 2023 from $4.3 million in Q1 2022[197] - The Q1 2022 figure included a $2.0 million loss on assets held for sale[38] Interest Income Interest income increased substantially in Q1 2023, driven by higher interest rates - Interest income increased to $1.3 million in Q1 2023 from $0.1 million in Q1 2022, primarily due to higher interest rates[206] Interest Expense Interest expense rose significantly in Q1 2023 due to increased borrowings and higher interest rates - Interest expense increased to $6.5 million in Q1 2023 from $1.8 million in Q1 2022, primarily due to increased borrowings and higher interest rates[182] Income Tax Expense Income tax expense increased in Q1 2023, with a slightly higher effective tax rate, mainly due to the mix of profits across different tax jurisdictions - Income tax expense was $3.0 million (19.7% effective tax rate) in Q1 2023, compared to $2.5 million (18.8% effective tax rate) in Q1 2022, reflecting changes in profit mix by jurisdiction[198] Net Income Net income and diluted EPS increased in Q1 2023, driven by the factors discussed in the results of operations - Net income was $12.4 million ($0.35 per diluted share) in Q1 2023, up from $11.0 million ($0.31 per diluted share) in Q1 2022[199] LIQUIDITY AND CAPITAL RESOURCES This section discusses the company's sources and uses of cash, including operating, investing, and financing activities, as well as its credit facilities and dividend policy, highlighting its ability to meet future liquidity requirements - Cash and cash equivalents and restricted cash totaled $211.7 million at March 31, 2023, with $192.1 million held outside the U.S.[200] - Cash used in operating activities was $24.9 million in Q1 2023, primarily due to increases in inventories and contract assets, and decreases in accrued liabilities and advance payments from customers[201] - Cash used in investing activities was $38.7 million in Q1 2023, mainly for additions to property, plant and equipment ($35.9 million) and purchased software ($2.8 million)[202] - Cash provided by financing activities was $67.0 million in Q1 2023, including $230.0 million in borrowings and $151.6 million in principal payments under the Credit Agreement[210] - The Company believes existing cash, operating cash flows, and available borrowings ($171.1 million under the revolving credit facility) will be sufficient to meet liquidity requirements for the next 12 months[214][218] - Capital expenditures are projected to be $50 million to $60 million over the next 12 months for production capacity and ongoing business[215] CONTRACTUAL OBLIGATIONS This section states that there have been no material changes to the company's contractual obligations, outside of the ordinary course of business, since December 31, 2022, other than those discussed in the leases note - No material changes to contractual obligations since December 31, 2022, other than those discussed in Note 6 (Leases)[219] CRITICAL ACCOUNTING POLICIES AND ESTIMATES AND RECENTLY ENACTED ACCOUNTING PRINCIPLES This section confirms that there have been no changes to the critical accounting estimates previously disclosed in the 2022 10-K and refers to Note 2 for a discussion of recently enacted accounting principles - No changes to critical accounting estimates disclosed in the 2022 10-K[221] - Recently enacted accounting principles are discussed in Note 2[221] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section discusses the company's exposure to market risks, primarily foreign currency exchange risk and interest rate risk, and the strategies employed to manage these risks, including natural hedging and derivative instruments - The Company is exposed to foreign currency exchange risk and interest rate risk[204][205][239] - Foreign currency risk is managed through natural hedging and forward contracts, primarily for transactional exposure in Mexico, Europe, and Thailand[204][118][223] - Interest rate risk on borrowings is managed with an interest rate swap agreement, converting floating rate interest to a fixed rate for a portion of the term loan facility[224] Item 4. Controls and Procedures This section confirms the effectiveness of the company's disclosure controls and procedures as of March 31, 2023, and states that there have been no material changes to internal control over financial reporting, while also noting ongoing ERP system upgrades - The CEO and CFO concluded that disclosure controls and procedures were effective at a reasonable assurance level as of March 31, 2023[225][227] - No material changes to internal control over financial reporting occurred during the last fiscal quarter[228] - The Company is upgrading its ERP system in phases, with ongoing assessment of its impact on internal control over financial reporting[229] PART II—OTHER INFORMATION Item 1. Legal Proceedings The company is involved in various legal actions in the ordinary course of business, but management believes their ultimate disposition will not materially adversely affect its consolidated financial position or results of operations - The Company is involved in various legal actions in the ordinary course of business, with management believing the ultimate disposition will not materially affect financial position or results of operations[244] Item 1A. Risk Factors This section states that there have been no material changes to the risk factors previously disclosed in the company's 2021 10-K - No material changes to risk factors previously disclosed in the 2021 10-K[245] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section provides information on the company's equity security repurchases for the quarter ended March 31, 2023, indicating no repurchases during the period and the remaining authorization under the stock repurchase program Equity Security Repurchases (in millions) | Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs | | :------------------- | :------------------------------- | :--------------------------- | :------------------------------------------------------------------------------- | :---------------------------------------------------------------------------------------------------------- | | January 1 to 31, 2023| — | $— | — | $154.6 million | | February 1 to 28, 2023| — | — | — | $154.6 million | | March 1 to 31, 2023 | — | — | — | $154.6 million | - As of March 31, 2023, the total remaining authorization under the stock repurchase program was $154.6 million[231] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including organizational documents, credit agreement amendments, and certifications - Exhibits include Restated Certificate of Formation, Amended and Restated Bylaws, Specimen form of Common Shares certificate, Amendment No. 3 to Amended and Restated Credit Agreement, and Section 302 and 1350 Certifications[250] SIGNATURES The report is duly signed on behalf of Benchmark Electronics, Inc. by its President and Chief Executive Officer, Jeffrey W. Benck, and Chief Financial Officer, Roop K. Lakkaraju - The report is signed by Jeffrey W. Benck, President and CEO, and Roop K. Lakkaraju, CFO[249][251]