Benchmark Electronics Annual Report 2012

FY2012 Annual Report · Benchmark Electronics
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

(Mark One)
(cid:2)

Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934

□

For the ﬁscal year ended December 31, 2012
or

Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934

For the transition period from

to
Commission File Number 1-10560

BENCHMARK ELECTRONICS, INC.

(Exact name of registrant as speciﬁed in its charter)

Texas
(State or other jurisdiction of
incorporation or organization)

74-2211011
(I.R.S. Employer
Identiﬁcation Number)

3000 Technology Drive
Angleton, Texas 77515
(979) 849-6550
(Address, including zip code, and telephone number, including area code, of principal executive offices)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Name of each exchange on which registered

Common Stock, par value $0.10 per share
Preferred Stock Purchase Rights

New York Stock Exchange, Inc.
New York Stock Exchange, Inc.

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as deﬁned in Rule 405 of the

Securities Act. Yes (cid:4) No □

Indicate by check mark if the registrant is not required to ﬁle reports pursuant to Section 13 or Section 15(d) of

the Act. Yes □ No (cid:4)

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 (cid:4) No □

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months
(or for such shorter periods that the registrant was required to submit and post such ﬁles). Yes (cid:4) 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. (cid:4)

Indicate by check mark whether the registrant is a large accelerated ﬁler, an accelerated ﬁler, a non-accelerated ﬁler, or a smaller

reporting company. See the deﬁnitions of ‘‘large accelerated ﬁler,’’ ‘‘accelerated ﬁler’’ and ‘‘smaller reporting company’’ in
Rule 12b-2 of the Act.
Large accelerated ﬁler (cid:4)

Non-accelerated ﬁler □

Accelerated ﬁler □

Smaller Reporting Company □

Indicate by check mark whether the registrant is a shell company (as deﬁned in Rule 12b-2 of the Act). Yes □ No (cid:4)
As of June 30, 2012, the number of outstanding Common Shares was 56,581,208. As of such date, the aggregate market value

of the Common Shares held by non-affiliates, based on the closing price of the Common Shares on the New York Stock Exchange on
such date, was approximately $777 million.

As of February 25, 2013, there were 55,195,329 Common Shares of Benchmark Electronics, Inc., par value $0.10 per

share, outstanding.

Portions of the Company’s Proxy Statement for the 2013 Annual Meeting of Shareholders (Part III, Items 10 − 14).

Documents Incorporated by Reference:

TABLE OF CONTENTS

PART I

Item 1.

Business

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 1A.

Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 1B. Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 2.

Item 3.

Item 4.

Properties

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART II

Item 5.

Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer

Purchases of Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 6.

Item 7.

Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Management’s Discussion and Analysis of Financial Condition and

Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 7A. Quantitative and Qualitative Disclosures about Market Risk . . . . . . . . . . . . . . . . . . .

Item 8.

Item 9.

Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Changes in and Disagreements with Accountants on Accounting and

Financial Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 9A.

Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 9B. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART III

Item 10.

Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . .

Item 11.

Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 12.

Security Ownership of Certain Beneﬁcial Owners and Management and Related

Shareholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 13.

Certain Relationships and Related Transactions, and Director Independence . . . . . . . . .

Item 14.

Principal Accounting Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 15.

Exhibits, Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Signatures

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART IV

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Item 1. Business.

Background

PART I

Benchmark Electronics, Inc. (Benchmark), 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 common
shares of the Company to Electronic Investors Corp. In 1988, Electronic Investors Corp. was merged into
Benchmark, and in 1990 we completed the initial public offering of our common shares.

General

We are a worldwide provider of integrated electronic manufacturing services. We provide our services to
original equipment manufacturers (OEMs) of computers and related products for business enterprises, medical
devices, industrial control equipment (which includes equipment for the aerospace and defense industry),
testing and instrumentation products, and telecommunication equipment. The services that we provide are
commonly referred to as electronics manufacturing services (EMS). We offer our customers comprehensive
and integrated design and manufacturing services from initial product design to volume production including
direct order fulﬁllment and post-deployment services. Our manufacturing and assembly operations include
printed circuit boards and subsystem assembly, box build and systems integration, the process of integrating
subsystems and, often, downloading and integrating software, to produce a fully conﬁgured product. Our
precision technology manufacturing capabilities complement our proven electronic manufacturing expertise by
providing further vertical integration of critical mechanical components. These capabilities include precision
machining, advanced metal joining, assembly and functional testing for multiple industries including medical,
instrumentation, aerospace and semiconductor capital equipment. We also are able to 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 Brazil, China, Malaysia, Mexico, Romania and Thailand.

We believe that our global manufacturing presence 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 enable us to build stronger strategic relationships with our customers and to become a more
integral part of their operations. Our customers face challenges in planning, procuring and managing their
inventories efficiently due to ﬂuctuations in customer demand, product design changes, short product life
cycles and component price ﬂuctuations. We employ production management systems to manage their
procurement and manufacturing processes in an efficient and cost-effective manner so that, where possible,
components arrive on a just-in-time, as-and-when-needed basis. We are a signiﬁcant purchaser of electronic
components and other raw materials, and can capitalize on the economies of scale associated with our
relationships with suppliers to negotiate price discounts, obtain components and other raw materials that are in
short supply, and return excess components. Our expertise in supply chain management and our relationships
with suppliers across the supply chain enable us to reduce our customers’ cost of goods sold and
inventory exposure.

Our worldwide facilities include 1.1 million square feet in our domestic facilities in Alabama, Arizona,
California, Minnesota, New Hampshire, North Dakota and Texas; and 1.9 million square feet in our
international facilities in Brazil, China, Malaysia, Mexico, the Netherlands, Romania, Singapore and Thailand.

Our capabilities have continued to grow through acquisitions and through internal expansion. In January 2011,
we acquired facilities and certain other assets to expand our precision technology capabilities in Penang,
Malaysia. In 2009, we added certain precision machining assets and capabilities in Arizona, California and
Mexico through a business acquisition, and we leased a larger facility in Brasov, Romania that expanded our
manufacturing capability in Eastern Europe. In 2008, we completed the construction of a new building in
Suzhou, China and increased our China manufacturing capacity. Our global operations include 21 facilities in
nine countries.

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We believe our primary competitive advantages are our design, manufacturing, testing and supply chain
management capabilities. We offer our customers ﬂexible manufacturing solutions throughout the life cycle of
their products. These solutions 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.

Our Industry

The EMS industry experienced rapid change in growth during the 1990s as an increasing number of OEMs
outsourced their manufacturing requirements. In mid-2001 and again in late 2008, the industry’s revenue
declined as a result of signiﬁcant cutbacks in its customers’ production requirements, which was consistent
with overall global economic downturns. OEMs have continued to turn to outsourcing in order to reduce
product cost, achieve accelerated time-to-market and time-to-volume production, access advanced design and
manufacturing technologies, improve inventory management and purchasing power, and reduce their capital
investment in manufacturing resources. Outsourcing enables OEMs to concentrate on what they believe to be
their core strengths, such as new product deﬁnition, marketing and sales. In addition, the number of industries
serviced by EMS providers and these providers’ market penetration in certain industries has increased in
recent years. We believe further growth opportunities exist for EMS providers to penetrate the worldwide
electronics markets.

Our Strategy

Our goal is to be the EMS outsourcing provider of choice to leading OEMs in the electronics industry that we
perceive from time to time to offer the greatest potential for growth. 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 OEMs in expanding industries by
becoming an integral part of our customers’ manufacturing operations. To accomplish this, we work
closely with our customers throughout the design, manufacturing and distribution process, and we
offer ﬂexible and responsive services. We rely on our local management teams to respond to
frequently changing customer design speciﬁcations and production requirements, which develops
stronger customer relationships.

•

•

Focus on High-End Products in Growth Industries. EMS providers produce products for a wide
range of OEMs in different industries, such as consumer electronics, internet-focused businesses and
information technology 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 targeted for military, medical and other high-end computer use.
Similarly, OEMs’ 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 high volume manufacturing capabilities to our
customer base. Our ability to offer both of these types of services enables us to expand our
business relationships.

Deliver Complete High and Low Volume Manufacturing Solutions Globally. We believe OEMs are
increasingly requiring a wide range of specialized engineering and manufacturing services from
EMS providers in order to reduce 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 OEM customers.
Our systems integration assembly and direct order fulﬁllment services allow our customers to reduce
product cost and risk of product obsolescence by reducing their total work-in-process and ﬁnished
goods inventory. These services are available at many of our manufacturing locations. In 2009, we
added certain precision machining assets and capabilities to provide precision machining, metal
joining and complex electromechanical manufacturing services in Arizona, California and Mexico. In
January 2011, we acquired facilities and certain other assets to expand our precision technologies

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capabilities in Penang, Malaysia. This expansion added sheet metal and frames fabrication services,
advanced metal joining and grinding services, along with complex mechanical assembly and
machining services to our Asia service offerings. We also offer our customers high volume
production in low cost regions of the world, such as Brazil, China, Malaysia, Mexico, Romania and
Thailand. These full service capabilities allow us to offer customers the ﬂexibility to move quickly
from design and initial product introduction to production and distribution. We offer our customers
the opportunity to combine the beneﬁts of low cost manufacturing (for the portions of their products
or systems that can beneﬁt from the use of these geographic areas) with the beneﬁts and capabilities
of our higher complexity support of systems integration in Asia, Europe or the United States.

In addition to traditional strengths in

Leverage Advanced Technological Capabilities.
manufacturing large, complex high-density printed circuit boards and systems, we offer customers
specialized and tailored advanced design, technology and manufacturing solutions for their primary
products. We provide this engineering expertise through our design capabilities at our design centers
and our advanced technology process development in each of our facilities. We believe our
capabilities help our customers utilize cutting edge technologies to improve product performance and
reduce costs.

Continue to Seek Cost Savings and Operational Excellence. We seek to optimize all of our
facilities to provide cost-efficient services for our customers. This is done through our culture of
continuous improvement, sharing best practices and implementing lean principles. We also provide
operations in lower cost locations to further offer cost saving solutions to our customers. These sites
include Brazil, China, Malaysia, Mexico, Romania and Thailand, and we continue to expand our
presence and footprint in these lower cost locations as appropriate to meet the needs of
our customers.

Continue Our Global Focus. A network of strategically positioned facilities can reduce costs,
simplify and shorten an OEM’s supply chain and provide regional solutions, thus reducing the time
it takes to bring product to market. We are committed to maintaining our global focus in order to
support our customers with cost-effective and timely delivery of quality products and services
worldwide. Our ongoing acquisition of facilities has in recent years expanded our presence globally
to include Malaysia, Romania and the Netherlands. These added sites provide a global
manufacturing solution to our customers through our 21 facilities in nine countries located in Brazil,
China, Malaysia, Mexico, the Netherlands, Romania, Singapore, Thailand and the United States.

Pursue Strategic Acquisitions. Our capabilities have continued to grow through acquisitions and we
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;

— provided vertical solutions;

— 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 EMS industry.

Services We Provide

We offer a wide range of engineering, automation, test, manufacturing and fulﬁllment solutions that support
our customers’ products from initial design through prototyping, design validation, testing, ramp-to-volume
production, worldwide distribution and aftermarket support. We support all of our service offerings with

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supply chain management systems, superior quality program management and sophisticated information
technology systems. Our comprehensive service offerings enable us to provide a complete solution for our
customers’ outsourcing requirements.

Engineering Solutions

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.

•

•

New Product Design, Prototype, Test and Related Engineering Solutions. We offer a full spectrum
of new product design, automation, test development, prototype and related engineering solutions.
Our concurrent engineering approach shortens product development cycles and gives our customers
a competitive advantage in time-to-market and time-to-proﬁt. Our multi-disciplined engineering
teams provide expertise in a number of core competencies critical to serving OEMs in our target
markets, including award-winning industrial design, mechanical and electrical hardware, ﬁrmware,
software and systems integration and support. We create speciﬁcations, designs and quick-turn
prototypes, and validate and ramp our customers’ products into high volume manufacturing.

Custom Test and Automation Equipment Design and Build Solutions. We provide our customers
with a comprehensive range of custom automated test equipment, functional test equipment, process
automation and replication solutions. We have expertise in tooling, testers, equipment control,
systems planning, automation, ﬂoor control, systems integration, replication and programming. Our
custom functional test equipment, process automation and replication solutions are available to our
customers as part of our full service product design and manufacturing solutions package or on a
stand-alone basis for products designed and manufactured elsewhere. We also provide custom test
equipment and automation system solutions to OEMs. Our ability to provide these solutions allows
us to capitalize on OEMs’ increasing needs for custom manufacturing solutions and provides an
additional opportunity for us to introduce these customers to our comprehensive engineering and
manufacturing services.

Manufacturing and Fulﬁllment Solutions

As OEMs seek to provide greater functionality in smaller products, they increasingly require more
sophisticated manufacturing technologies and processes. Our investment in advanced manufacturing equipment
and process development as well as our experience in innovative packaging and interconnect technologies
enable us to offer a variety of advanced manufacturing solutions. These packaging and interconnect
technologies include:

•

•

•

Printed Circuit Board Assembly & Test. We offer a wide range of printed circuit board assembly
and test solutions, including printed circuit board assembly, assembly of subsystems, circuitry and
functionality testing of printed assemblies, environmental and stress testing and component
reliability testing.

Flex Circuit Assembly & Test. We provide our customers with a wide range of ﬂex circuit
assembly and test solutions. We utilize specialized tooling strategies and advanced automation
procedures to minimize circuit handling and ensure that consistent processing parameters are
maintained throughout the assembly process.

Systems Assembly & Test. 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 to conﬁrm that the board or assembly operates in accordance with its ﬁnal
design and manufacturing speciﬁcations. We either custom design test equipment and software
ourselves or use test equipment and software provided by our customers. We also offer our own
internally designed functional test solutions for cost effective and ﬂexible test solutions. In addition,
we provide environmental stress tests of assemblies of boards or systems.

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We also have expertise in advanced precision and electromechanical technologies and optical manufacturing
services. In order to meet our customers’ demand for systems assembly and test solutions, we offer
subassembly build, ﬁnal assembly, functionality testing, conﬁguration and software installation and ﬁnal
packaging services.

Precision Electromechanical Assembly and Test. We offer a full spectrum of precision subsystem and system
integration services. These services include assembly, conﬁguration and testing of complex computers and
related products for business enterprises, medical devices, industrial control equipment (which includes
equipment for the aerospace and defense industry), testing and instrumentation products, and
telecommunication equipment. We design, develop and build product speciﬁc manufacturing processes
utilizing manual, mechanized or fully automated lines to meet our customers’ product volume and quality
requirements. All of our assembly and test processes are developed according to customer speciﬁcations and
replicated within our facilities. Product life cycle testing services are provided such as Ongoing Reliability
Testing where units are continuously cycled for extended testing while monitoring for early life failures.

Failure Analysis. We offer an array of analytical solutions and expertise to challenging issues that face our
customers. This includes focused techniques for failure mode, failure mechanism, and root cause
determination. Specialized analytical skill sets associated with electrical, mechanical, and metallurgical
disciplines are used in conjunction with a vast array of equipment such as ion chromatography, x-ray
ﬂorescence, and scanning electron microscopy. Our state-of-the-art lab facilities provide customers with
detailed reporting and support in an unbiased, timely, and cost-effective manner. Mastering emerging
technologies coupled with a complete understanding of potential failure mechanisms positions us to exceed
customer expectations and maintain our technological diversity.

Direct Order Fulﬁllment. We provide direct order fulﬁllment for certain of our OEM customers. Direct order
fulﬁllment involves receiving customer orders, conﬁguring products to quickly ﬁll the orders and delivering
the products either to the OEM, a distribution channel or directly to the end customer. We manage our direct
order fulﬁllment processes using a core set of common systems and processes that receive order information
from the customer and provide comprehensive supply chain management, including procurement and
production planning. These systems and processes enable us to process orders for multiple system
conﬁgurations and varying production quantities, including single units. Our direct order fulﬁllment services
include build-to-order (BTO) and conﬁgure-to-order (CTO) capabilities. BTO involves building a complete
system in real-time to a highly 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 end customer
typically places this order by choosing from a variety of possible system conﬁgurations and options. We are
capable of meeting a 2 to 24hour turnaround time for BTO and CTO. We support our 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.

Aftermarket Non-Warranty Services. We provide our customers with a range of aftermarket non-warranty
services, including repair, replacement, refurbishment, remanufacturing, exchange, systems upgrade and spare
part manufacturing throughout a product’s life cycle. These services are tracked and supported by speciﬁc
information technology systems that can be tailored to meet our customers’ individual requirements.

Value-Added Support Systems. We support our engineering, manufacturing, distribution and aftermarket
support services with an efficient supply chain management system and a superior quality management
program. Our value-added support services are primarily implemented and managed through web-based
information technology systems that enable us to collaborate with our customers throughout all stages of the
engineering, manufacturing and order fulﬁllment processes.

Supply Chain Management. Our inventory management and volume procurement capabilities contribute to
assurance of supply, cost reductions and reduce total cycle time. Our materials strategy is focused on
leveraging our procurement volume companywide while providing local execution for maximum ﬂexibility at
the division level. In addition, our systems integration facilities have developed material processes required to
support system integration operations.

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We utilize a full complement of electronic data interchange transactions with our suppliers to coordinate
forecasts, orders, reschedules, and inventory and component lead times. Our enterprise resource planning
systems provide product and production information to our supply chain management, engineering change
management and ﬂoor control systems. Our information systems also control serialization, production and
quality data for all of our facilities around the world utilizing state-of-the-art statistical process control
techniques for continuous process improvements. To enhance our ability to rapidly respond to changes in our
customers’ requirements by effectively managing changes in our supply chain, we utilize web-based interfaces
and real-time supply chain management software products which allow for scaling operations to meet
customer needs, shifting capacity in response to product demand ﬂuctuations, reducing materials costs and
effectively distributing products to our customers or their end-customers.

Manufacturing Technologies. We offer our customers expertise in a wide variety of traditional and advanced
manufacturing technologies. Our technical expertise supports standard printed circuit board assembly as well
as complex products that require advanced engineering skills and equipment.

We also provide our customers with a comprehensive set of manufacturing technologies and solutions
which include:

•

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•

•

•

•

•

•

•

•

Pin Thru Hole;

Surface Mount Technology;

Fine Pitch;

Ball Grid Array;

Part on Part;

Flip Chip;

Chip On Board/Wire Bonding;

In-Circuit Test;

Board Level Functional Test; and

Stress Testing.

We also provide specialized solutions in support of our customers’ components, products and systems
which include:

•

•

•

•

•

•

Adhesives;

Conformal Coating;

Ultrasonic Welding;

Splicing and Connectorization for Optical Applications;

Hybrid Optical/Electrical Printed Circuit Board Assembly and Testing; and

Sub-Micron Alignment of Optical Sub-Assemblies.

Through our Component Engineering Services, we are helping our customers deal with the changing
international environmental laws or regulations on content, packaging, labeling of their products or similar
issues concerning the environmental impact of their products including: ‘‘RoHS’’ (EU Directive 2002/95/EC
on Restriction of the Use of Hazardous Substances in Electrical and Electronic Equipment); ‘‘WEE’’ (EU
Directive 2002/96/EC on Waste Electrical and Electronic Equipment); ‘‘REACH’’
(EC Regulation No 1907/20067 on Registration, Evaluation and Authorization of Chemicals); EU Member
State’s Implementation of the foregoing; and the People’s Republic of China (PRC) Measures for
Administration of the Pollution Control of Electronic Information Products of 2006. Manufacturing sites in the
Americas, Asia and European regions are certiﬁed in both water soluble and no-clean processes and are
currently producing products that are compliant with these environmental laws and regulations.

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Precision Technologies. We provide precision machining, metal joining and complex electromechanical
manufacturing services and utilize the following precision technologies:

•

•

•

•

•

Complex Small/Medium/Large Computer Numerical Controlled Machining;

Precision Multi-Axis Grinding of Aerospace Engine Blades, Vanes and Nozzles;

Precision Grinding of Mass Spectrometer Components;

Sinker Electrical Discharge Machining;

Turnkey Precision Clean Room Module Assembly and Functional Test;

• Major Electromechanical Sub Assembly;

•

•

Laser Welding; and

Advanced Metal Joining.

Marketing and Customers

We market our services primarily through a direct sales force and, in select markets, independent marketing
representatives. In addition, our divisional and executive management teams are an integral part of our sales
and marketing teams. We generally enter into supply arrangements with our customers. These arrangements,
similar to purchase orders, generally govern the conduct of business between our customer and ourselves
relating to, among other things, the manufacture of products which in many cases were previously produced
by the customer itself. Such arrangements generally identify the speciﬁc products to be manufactured, quality
and production requirements, product pricing and materials management. There can be no assurance that at
any time these arrangements will remain in effect or be renewed.

Our key customer accounts are supported by a dedicated team, including a global account manager who is
directly responsible for account management. Global account managers coordinate activities across divisions
to effectively satisfy customer requirements and have direct access to our executive management to quickly
address customer concerns. Local customer account teams further support the global teams and are linked by a
comprehensive communications and information management infrastructure. In addition, our executive
management is heavily involved in customer relations and devotes signiﬁcant attention to broadening existing
and developing new customer relationships.

The following table sets forth the percentages of our sales by industry for 2012, 2011 and 2010.

. . . . . . . . . . . . . . . .
Computers and related products for business enterprises
Industrial control equipment
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Telecommunication equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Testing and instrumentation products
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Medical devices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2012
31%
27
26
6
10

2011
29%
29
23
10
9

2010
32%
25
23
10
10

Historically, a substantial percentage of our sales have been made to a small number of customers. Sales to
our ten largest customers represented 56%, 53% and 47% of our sales in 2012, 2011 and 2010, respectively.
In 2012, sales to International Business Machines Corporation represented 21% of our sales. The loss of a
major customer, if not replaced, would adversely affect us. 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.

Seasonality

Seasonality in our business has historically been driven by customer and product mix, particularly the
industries which our customers serve. Although we have in the past experienced higher levels of sales during
the fourth quarter, this pattern has not repeated itself every year. The extent to which our business will
become more seasonal in the future depends upon our future customer base and the industries that they serve,
which we are unable to predict. Sales to our customers in the computers and related products for business

7

enterprises industry have recently exhibited particular strength toward the end of the calendar year. As a result,
we may experience stronger revenues in our fourth quarter as compared to our ﬁrst quarter.

Suppliers

We maintain a network of suppliers of components and other materials used in our operations. We procure
components 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. If any of these single source
suppliers were to be unable to provide these materials, a shortage of these components could temporarily
interrupt our operations and lower our proﬁts until such time as an alternate component could be identiﬁed
and qualiﬁed for use. Although we experience component shortages and longer lead times for 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. In addition, by developing long-term relationships
with suppliers, we have been better able to minimize the effects of component shortages compared to
manufacturers without such relationships. The goal of these procedures is to reduce our inventory risk.

Backlog

We had sales backlog of approximately $1.5 billion at December 31, 2012, as compared to the 2011 year-end
backlog of $1.6 billion. Backlog consists of purchase orders received, including, in some instances, forecast
requirements released for production under customer contracts. Although we expect to ﬁll substantially all of
our year-end backlog during 2013, we currently do not have long-term agreements with all of our customers
and customer orders can be canceled, changed or delayed. 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, our 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
from the in-house manufacturing capabilities of current and potential customers. Our competitors include
Celestica Inc., Flextronics International Ltd., Hon Hai Precision Industry Co., Ltd., Jabil Circuit, Inc., Plexus
Corp and Sanmina-SCI 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 engineering capabilities, product quality, ﬂexibility, cost and timeliness in
responding to design and schedule changes, reliability in meeting product delivery schedules, pricing,
technological sophistication and geographic location.

In addition, in recent years, original design manufacturers (ODMs) that provide design and manufacturing
services to OEMs have signiﬁcantly increased their share of outsourced manufacturing services provided to
OEMs in markets such as notebook and desktop computers, personal computer motherboards, and consumer
electronic products. Competition from ODMs may increase if our business in these markets grows or if ODMs
expand further into or beyond these markets.

Sustainability

Benchmark is committed to being a responsible corporate citizen. We use the term ‘‘sustainability’’ to describe
our long-term approach to address social, economic and environmental responsibilities that achieve our
business objectives and contribute to a more sustained world. Our sustainability priorities include: upholding
the principle of human rights and observing fair labor practices within our organization and our supply chain;
protecting the environment by conserving energy and natural resources and preventing pollution through
appropriate management technology and practices; ensuring ethical organizational governance; and applying
fair, transparent and accountable operating practices. All Benchmark manufacturing facilities are either
currently certiﬁed or undergoing certiﬁcation to ISO 14001. We have endorsed the Electronics Industry
Citizenship Coalition Code of Conduct, and ﬂowed speciﬁc requirements to our supply chain through our
Purchase Order Terms and Conditions, Supplier Assurance Manual, and Supplier Code of Conduct. We have
also completed a B-level Global Reporting Initiative (GRI) Report as a baseline for our sustainability efforts.

8

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 security clearance, environmental, waste management, and 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, which could affect our earnings and competitive position. 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, 2012, we employed 9,949 people, of whom 7,160 were engaged in manufacturing and
operations, 1,486 in materials control and procurement, 510 in design and development, 271 in marketing and
sales, and 522 in administration. None of our domestic employees are represented by a labor union. In certain
international locations, our employees are represented by labor unions and by works councils. Some European
countries also often have mandatory legal provisions regarding terms of employment, severance compensation
and other conditions of employment that are more restrictive than U.S. laws. We have never experienced a
strike or similar work stoppage and we believe that our employee relations are satisfactory.

Segments and International Operations

We have manufacturing facilities in the Americas, Asia and Europe regions to serve our customers.
Benchmark is operated and managed geographically and management evaluates performance and allocates
resources on a geographic basis. We currently operate outside the United States in Brazil, China, Malaysia,
Mexico, the Netherlands, Romania, Singapore and Thailand. During 2012, 2011 and 2010, 50%, 51% and
48%, respectively, of our sales were from our international operations. 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, burdens of complying with a wide
variety of foreign laws and, in certain parts of the world, political instability. Additionally, some of our
operations are in developing countries. Certain events, including natural disasters, can impact the infrastructure
of a developing country more severely than they would impact the infrastructure of a developed country. A
developing country can also take longer to recover from such events, which could lead to delays in our ability
to resume full operations. There can be no assurances that these factors will not have an adverse impact on
our results of operations in the future. See Item 1A 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. See Note 8 and Note 12 of Notes to
Consolidated Financial Statements in Item 8 of this report for segment and geographical information.

Available Information

Our internet address is http://www.bench.com. We make available free of charge through our internet website
our ﬁlings with the Securities and Exchange Commission (SEC), including our annual reports on Form 10-K,
quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports ﬁled or
furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after
electronically ﬁling such material with, or furnishing it to, the SEC. All reports we ﬁle with the SEC are also
available free of charge via EDGAR through the SEC’s website at http://www.sec.gov or to read and copy at
the SEC Public Reference Room located at 100 F Street NE, Washington, DC 20549. Information can be
obtained on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.

9

Item 1A. Risk Factors.

Adverse market conditions in the electronics industry could reduce our future sales and earnings
per share.

Uncertainty over an erosion of global consumer conﬁdence amidst concerns over declining asset values,
inﬂation, volatility in energy costs, geopolitical issues, the availability and cost of credit, rising
unemployment, and the stability and solvency of ﬁnancial institutions, ﬁnancial markets, businesses, and
sovereign nations slowed global economic growth and have resulted in recessions in many countries, including
in the United States, Europe and certain countries in Asia over the past several years. Even though we have
seen signs of an overall economic recovery, such recovery may be weak and/or short-lived and recessionary
conditions may return. If any of these potential negative economic conditions occur, they may result in lower
spending by businesses in the future, which in turn may affect demand for our customers’ products and thus
adversely affect our sales. Consequently, our past operating results, earnings and cash ﬂows may not be
indicative of our future operating results, earnings and cash ﬂows.

In addition to our customers or potential customers reducing or delaying orders, a number of other negative
effects on our business could materialize, including the insolvency of key suppliers, which could result in
production delays, shorter payment terms from suppliers due to reduced availability of credit default insurance
in the market, the inability of customers to obtain credit, and the insolvency of one or more customers. Any of
these effects could impact our ability to effectively manage inventory levels and collect receivables, increase
our need for cash, and decrease our net revenue and proﬁtability.

We are exposed to general economic conditions, which could have a material adverse impact on our
business, operating results and ﬁnancial condition.

Our business is cyclical and has experienced economic and industry downturns. If the economic conditions
and demand for our customers’ products deteriorate, we may experience a material adverse impact on our
business, operating results and ﬁnancial condition.

In cases where the evidence suggests a customer may not be able to satisfy its obligation to us, we set up
reserves in an amount we determine appropriate for the perceived risk. There can be no assurance that our
reserves will be adequate. If the ﬁnancial condition of our customers were to deteriorate, resulting in an
impairment of their ability to make payments, additional receivable and inventory reserves may be required
and restructuring charges may be incurred.

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 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 and industry-wide shortages of electronic components, particularly of
memory and logic devices, have occurred. For example, the 2011 earthquake and tsunami in Japan disrupted
the global supply chain for certain components manufactured in Japan that were incorporated in the products
we manufactured, and the ﬂooding in Thailand in 2011 had a similar impact. Any such component shortages
may result in delayed shipments, which could have an adverse effect on our proﬁt margins. Also, 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 may bear the risk of
component price increases that occur between periodic re-pricings of product during the term of a customer
contract. Accordingly, certain component price increases could adversely affect our gross proﬁt margins.

We are dependent on the success of our customers. When our customers experience a downturn in their
business, we may be similarly affected.

We are dependent on the continued growth, viability and ﬁnancial stability of our customers. Our customers
are OEMs of:

•

•

computers and related products for business enterprises;

medical devices;

10

•

•

•

industrial control equipment;

testing and instrumentation products; and

telecommunication equipment.

Often, these industries are subject to rapid technological change, vigorous competition, short product life
cycles and consequent product obsolescence. When our customers are adversely affected by these factors, we
may be similarly affected.

The loss of a major customer would adversely affect us.

Historically, a substantial percentage of our sales have been made to a small number of customers. The loss of
a major customer, if not replaced, would adversely affect us. Sales to our ten largest customers represented
56%, 53% and 47% of our sales in 2012, 2011 and 2010, respectively. In 2012, sales to International Business
Machines Corporation represented 21% of our 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 to our largest customers and any material delay, cancellation or
reduction of orders from these customers or other signiﬁcant customers would have a material adverse effect
on our results of operations. In addition, we generate signiﬁcant accounts receivables 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.

Most of our customers do not commit to long-term production schedules, which makes it difficult for us
to schedule production and achieve maximum efficiency of our manufacturing capacity.

The volume and timing of sales to our customers may vary due to:

•

•

•

•

•

variation in demand for our customers’ products;

our customers’ attempts to manage their inventory;

design changes;

changes in our customers’ manufacturing strategy; and

acquisitions of or consolidations among customers.

Due in part to these factors, most of our customers do not commit to ﬁrm production schedules for more than
one quarter in advance. Our inability to forecast the level of customer orders with certainty makes it difficult
to schedule production and maximize utilization of manufacturing capacity. In the past, we have been required
to increase staffing and other expenses in order to meet the anticipated demand of our customers. Anticipated
orders from many of our customers have, in the past, failed to materialize or delivery schedules have been
deferred as a result of changes in our customers’ business needs, thereby adversely affecting our results of
operations. On other occasions, our customers have required rapid increases in production, which have placed
an excessive burden on our resources. Such customer order ﬂuctuations and deferrals have had a material
adverse effect on us in the past, and we may experience such effects in the future. A business downturn
resulting from any of these external factors could have a material adverse effect on our operating income. See
Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7 of
this report.

Our customers may cancel their orders, change production quantities, delay production or change their
sourcing strategy.

EMS providers must provide increasingly rapid product turnaround for their customers. We generally do not
obtain ﬁrm, long-term purchase commitments from our customers and we continue to experience reduced
lead-times in customer orders. Customers may cancel their orders, change production quantities, delay

11

production or change their sourcing strategy for a number of reasons. The degree of success or failure of our
customers’ products in the market affects our business. Cancellations, reductions, delays or changes in the
sourcing strategy by a signiﬁcant customer or by a group of customers could negatively impact our
operating income.

In addition, we make signiﬁcant decisions, including determining the levels of business that we will seek and
accept, production schedules, component procurement commitments, personnel needs, capital expenditures and
other resource requirements, based on our estimate of customer requirements. The short-term nature of our
customers’ commitments and the possibility of rapid changes in demand for their products may impede our
ability to accurately estimate the future requirements of those customers.

On occasion, customers may require rapid increases in production, which can stress our resources and reduce
operating margins. In addition, because many of our costs and operating expenses are relatively ﬁxed, a
reduction in customer demand can harm our gross proﬁts and operating results. See Management’s Discussion
and Analysis of Financial Condition and Results of Operations in Item 7 of this report.

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. See Management’s Discussion and Analysis of Financial Condition and Results of
Operations in Item 7 of this report.

Our international operations may be subject to certain risks.

We currently operate outside the United States in Brazil, China, Malaysia, Mexico, the Netherlands, Romania,
Singapore and Thailand. During 2012, 2011 and 2010, 50%, 51% and 48%, respectively, of our sales were
from our international operations. These international operations may be subject to a number of
risks, including:

•

•

•

•

•

•

•

•

•

•

•

•

difficulties in staffing and managing foreign operations;

coordinating communications and logistics across geographic distances and multiple time zones;

less ﬂexible employee relationships which can be difficult and expensive to terminate;

political and economic instability (including acts of terrorism and outbreaks of war), which could
impact our ability to ship and/or receive product;

changes in government policies, regulatory requirements and laws, which could impact our business;

longer customer payment cycles and difficulty collecting accounts receivable;

export duties, import controls and trade barriers (including quotas);

governmental restrictions on the transfer of funds;

risk of governmental expropriation of our property;

burdens of complying with a wide variety of foreign laws and labor practices, including minimum
wage regulations;

ﬂuctuations in currency exchange rates, which could affect component costs, local payroll, utility
and other expenses; and

inability to utilize net operating losses incurred by our foreign operations to reduce our
U.S. income taxes.

In addition, several of the countries where we operate have emerging or developing economies, which may be
subject to greater currency volatility, negative growth, high inﬂation, limited availability of foreign exchange
and other risks. Additionally, some of our operations are in developing countries. Certain events, including

12

natural disasters, can impact the infrastructure of a developing country more severely than they would impact
the infrastructure of a developed country. A developing country can also take longer to recover from such
events, which could lead to delays in our ability to resume full operations. These factors may harm our results
of operations, and any measures that we may implement to reduce the effect of volatile currencies and other
risks of our international operations may not be effective. In our experience, entry into new international
markets requires considerable management time as well as start-up expenses for market development, hiring
and establishing office facilities before any signiﬁcant revenues are generated. As a result, initial operations in
a new market may operate at low margins or may be unproﬁtable.

Our operations in certain foreign locations receive favorable income tax treatment in the form of tax holidays
or other incentives. In the event that such tax holidays or other incentives are not extended or are repealed, or
in the event that we no longer qualify for such programs, our taxes may increase, which would reduce our
net income.

Additionally, certain foreign jurisdictions restrict the amount of cash that can be transferred to the U.S or
impose taxes and penalties on such transfers of cash. To the extent we have excess cash in foreign locations
that could be used in, or is needed by, our operations in the United States, we may incur signiﬁcant penalties
and/or taxes to repatriate these funds.

Another signiﬁcant legal risk resulting from our international operations is compliance with the U.S. Foreign
Corrupt Practices Act (FCPA). In many foreign countries, particularly in those with developing economies, it
may be a local custom that businesses operating in such countries engage in business practices that are
prohibited by the FCPA, other U.S. laws and regulations, or similar laws of host countries and related
anti-bribery conventions. Although we have implemented policies and procedures designed to cause
compliance with the FCPA and similar laws, there can be no assurance that all of our employees, and agents,
as well as those companies to which we outsource certain of our business operations, will not take actions in
violation of our policies. Any such violation, even if prohibited by our policies, could have a material adverse
effect on our business.

We operate in a highly competitive industry; if we are not able to compete effectively in the EMS
industry, our business could be adversely affected.

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., Hon
Hai Precision Industry Co., Ltd., Jabil Circuit, Inc., Plexus Corp and Sanmina-SCI Corporation. In addition,
we may in the future encounter competition from other large electronic manufacturers that are selling, or may
begin to sell, electronics manufacturing services.

We also face competition from the manufacturing operations of our current and future customers, who are
continually evaluating the merits of manufacturing products internally against the advantages of outsourcing to
EMS providers. In addition, in recent years, ODMs that provide design and manufacturing services to OEMs,
have signiﬁcantly increased their share of outsourced manufacturing services provided to OEMs in several
markets, such as notebook and desktop computers, personal computer motherboards, and consumer electronic
products. Competition from ODMs may increase if our business in these markets grows or if ODMs expand
further into or beyond these markets.

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 more offshore
facilities located where labor and other costs are lower.

We experience intense competition, which can intensify further as more companies enter the markets in which
we operate, as existing competitors expand capacity and as the industry consolidates. The availability of
excess manufacturing capacity at many of our competitors creates intense pricing and competitive pressure on
the EMS industry as a whole and Benchmark in particular. To compete effectively, we must continue to
provide technologically advanced manufacturing services, maintain strict quality standards, respond ﬂexibly

13

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.

The integration of acquired operations may pose difficulties for us.

Our capabilities have continued to grow through acquisitions and we may pursue additional acquisitions over
time. These acquisitions involve risks, including:

•

•

•

•

•

•

integration and management of the operations;

retention of key personnel;

integration of purchasing operations and information systems;

retention of the customer base of acquired businesses;

management of an increasingly larger and more geographically disparate business; and

diversion of management’s attention from other ongoing business concerns.

Our proﬁtability will suffer if we are unable to successfully integrate any acquisition 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 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:

•

•

•

•

•

•

•

•

•

•

the volume of customer orders relative to our capacity;

customer introduction and market acceptance of new products;

changes in demand for customer products;

pricing and other competitive pressures;

the timing of our expenditures in anticipation of future orders;

our effectiveness in managing manufacturing processes;

changes in cost and availability of labor and components;

changes in our product mix;

changes in political and economic conditions; and

local factors and events that may affect our production volume, such as local holidays or
natural disasters.

Additionally, as is the case with many high technology companies, a signiﬁcant portion of our shipments
typically occur in the last few weeks of a given quarter. Accordingly, sales shifts from quarter to quarter may
not be readily apparent until the end of a given quarter, and may have a signiﬁcant effect on reported results.

Our investments in auction rate securities are subject to risks which may cause losses and affect the
liquidity of these investments.

As of December 31, 2012, we held $12.2 million (par value) of auction rate securities, classiﬁed as long-term
investments, whose underlying assets were in guaranteed student loans backed by a U. S. Government agency
and municipal issue bonds. Auction rate securities are adjustable rate debt instruments whose interest rates
were intended to reset every 7 to 35 days through an auction process. Overall changes in the global credit and
capital markets led to failed auctions for these securities beginning in early 2008. These failed auctions, in
addition to overall global economic conditions, impacted the liquidity of these investments and resulted in our
continuing to hold these securities beyond their typical auction reset dates. The market for these types of
securities remains illiquid as of December 31, 2012. As a result, our ability to liquidate and fully recover the
carrying value of our adjustable rate securities in the near term may be limited or not exist. If the issuers of

14

these adjustable rate securities are unable to successfully close future auctions or their credit quality
deteriorates, we may in the future be required to record an impairment charge on these investments. We may
be required to wait until market stability is restored for these instruments or until the ﬁnal maturity of the
underlying notes (up to 40 years) to realize our investments’ recorded value. As of December 31, 2012, we
had $1.9 million of unrealized losses on these securities that is recorded in other comprehensive loss. We
estimated the fair value of each security using Level 3 inputs with the assistance of an independent valuation
ﬁrm. We have not to date incurred any payment defaults on any auction rate securities we hold.

Start-up costs and inefficiencies related to new or transferred programs can adversely affect our
operating results and such costs may not be recoverable if such new programs or transferred programs
are cancelled.

Start-up costs, the management of labor and equipment resources in connection with the establishment of new
programs and new customer relationships, and the need to estimate required resources in advance can
adversely affect our gross margins and operating results. These factors are particularly evident in the early
stages of the life cycle of new products and new programs or program transfers and in the opening of new
facilities. These factors also affect our ability to efficiently use labor and equipment. We are currently
managing a number of new programs. If any of these new programs or new customer relationships were
terminated, our operating results could be harmed, particularly in the short term. We may not be able to
recoup these start-up costs or replace anticipated new program revenues.

We may be affected by consolidation in the electronics industry, which could create increased pricing
and competitive pressures on our business.

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 EMS industry as a whole and our business 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 and marketing power, could also
result in increased pricing and competitive pressures for us. Accordingly, industry consolidation could harm
our business. We may need to increase our efficiencies to compete and may incur additional
restructuring charges.

We are subject to the risk of increased taxes.

We base our tax position upon the anticipated nature and conduct of our business and upon our understanding
of the tax laws of the various countries in which we have assets or conduct activities. Our tax position,
however, is subject to review and possible challenge by taxing authorities and to possible changes in law. We
cannot determine in advance the extent to which some jurisdictions may assess additional tax or interest and
penalties on such additional taxes.

Several countries in which we are located allow for tax holidays or provide other tax incentives to attract and
retain business. We have obtained holidays or other incentives where available. Our taxes could increase if
certain tax holidays or incentives are retracted, or if they are not renewed upon expiration, or tax rates
applicable to us in such jurisdictions are otherwise increased. In addition, further acquisitions may cause our
effective tax rate to increase. Given the scope of our international operations and our international tax
arrangements, proposed changes to the manner in which U.S. based multinational companies are taxed in the
U.S. could have a material impact on our ﬁnancial results and competitiveness.

We are exposed to intangible asset risk; our goodwill may become further impaired.

We have recorded intangible assets, including goodwill, in connection with business acquisitions. We are
required to assess goodwill and intangible assets for impairment at least on an annual basis and whenever
events or circumstances indicate that the carrying value may not be recoverable from estimated future cash
ﬂows. Our annual goodwill impairment analysis in the fourth quarter of 2008 indicated there was an
impairment of goodwill in two of our reporting segments, the Americas and Europe, primarily due to a decline

15

in our market capitalization and market turmoil. Accordingly, we recorded a non-cash impairment charge in
the fourth quarter of 2008 totaling $247.5 million. A further signiﬁcant and sustained decline in our market
capitalization could result in material charges in future periods that could be adverse to our operating results
and ﬁnancial position. As of December 31, 2012, we had $37.9 million in goodwill and $11.2 million of
identiﬁable intangible assets. See Note 1(i) to the consolidated ﬁnancial statements in Item 8 of this report.

There are inherent uncertainties involved in estimates, judgments and assumptions used in the
preparation of ﬁnancial statements in accordance with US GAAP. Any changes in estimates, judgments
and assumptions could have a material adverse effect on our ﬁnancial position and results of operations.

The consolidated ﬁnancial statements included in the periodic reports we ﬁle with the SEC are prepared in
accordance with accounting principles generally accepted in the United States (US GAAP). The preparation of
ﬁnancial statements in accordance with US GAAP involves making estimates, judgments and assumptions that
affect reported amounts of assets (including intangible assets), liabilities and related reserves, revenues,
expenses and income. Estimates, judgments and assumptions are inherently subject to change in the future,
and any such changes could result in corresponding changes to the amounts of assets, liabilities, revenues,
expenses and income. Any such changes could have a material adverse effect on our ﬁnancial position and
results of operations.

We are involved in various legal proceedings.

In the past, we have been notiﬁed of claims relating to various matters including intellectual property rights,
contractual matters or other issues arising in the ordinary course of business. In the event of such a claim, we
may be required to spend a signiﬁcant amount of money to defend or otherwise address the claim. Any
litigation, even where a claim is without merit, could result in substantial costs and diversion of resources.
Accordingly, the resolution or adjudication of such disputes, even those encountered in the ordinary course of
business, could have a material adverse effect on our business, consolidated ﬁnancial conditions and results
of operations.

Our success will continue to depend to a signiﬁcant extent on our key personnel.

We depend signiﬁcantly on our executive officers and other key personnel. The unexpected loss of the services
of any one of these executive officers or other key personnel would have an adverse effect on us.

If we are unable to maintain our technological and manufacturing process expertise, our business could
be adversely affected.

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. Our failure to maintain our technological and manufacturing
process expertise could have a material adverse effect on our business.

Our stock price is volatile.

Our common shares have experienced signiﬁcant price volatility, and such volatility may continue in the
future. The price of our common shares 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 shares for reasons unrelated to
our performance.

16

Provisions in our shareholder rights plan, our charter documents and state law may make it harder for
others to obtain control of our company even though some shareholders might consider such a
development to be favorable.

Our shareholder rights plan, as amended, provisions of our amended and restated articles of incorporation, as
amended, and the Texas Business Corporation Act may delay, inhibit or prevent someone from gaining control
of our company through a tender offer, business combination, proxy contest or some other method. These
provisions include:

•

•

•

a ‘‘poison pill’’ shareholder rights plan;

a statutory restriction on the ability of shareholders to take action by less than unanimous written
consent; and

a statutory restriction on business combinations with some types of interested shareholders.

Compliance or the failure to comply with governmental regulations could cause us signiﬁcant expense.

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.

Our worldwide operations are subject to local laws and regulations. Over the last several years, we have
become subject to the RoHS directive and the Waste Electrical and Electronic Equipment Directive. These
directives restrict the distribution of products containing certain substances, including lead, within applicable
geographies and require a manufacturer or importer to recycle products containing those substances.

These directives affect the worldwide electronics and electronics components industries as a whole. If we or
our customers fail to comply with such laws and regulations, we could incur liabilities and ﬁnes and our
operations could be suspended.

In addition, as climate change issues become more prevalent, the U.S. and foreign governments are beginning
to respond to these issues. This increasing governmental focus on climate change may result in new
environmental regulations that may negatively affect us, our suppliers and our customers. This could cause us
to incur additional direct costs or obligations in complying with any new environmental regulations, as well as
increased indirect costs resulting from our customers, suppliers or both incurring additional compliance costs
that get passed on to us. These costs may adversely impact our operations and ﬁnancial condition.

Our business may be adversely impacted by geopolitical events.

As a global business, we operate and have customers located in many countries. Geopolitical events such as
terrorist acts may affect the overall economic environment and negatively impact the demand for our
customers’ products or our ability to ship or receive products. As a result, customer orders may be lower and
our ﬁnancial results may be adversely affected.

Our business may be adversely impacted by natural disasters.

Some of our facilities, including our corporate headquarters, are located in areas which may be impacted by
hurricanes, earthquakes, water shortages, tsunamis, ﬂoods, typhoons, ﬁres, extreme weather conditions and
other natural or manmade disasters. Our insurance coverage with respect to natural disasters is limited and is
subject to deductibles and coverage limits. Such coverage may not be adequate, or may not continue to be
available at commercially reasonable rates and terms.

In addition, some of our facilities possess certiﬁcations necessary to work on specialized products that our
other locations lack. If work is disrupted at one of these facilities, it may be impractical, or we may be

17

unable, to transfer such specialized work to another facility without signiﬁcant costs and delays. Thus, any
disruption in operations at a facility possessing specialized certiﬁcations could adversely affect our ability to
provide products and services to our customers, and thus negatively affect our relationships and
ﬁnancial results.

We may be exposed to interest rate ﬂuctuations.

We will have exposure to interest rate risk under our variable rate revolving credit facilities to the extent we
incur indebtedness under such facilities. These facilities’ interest rates are based on the spread over the bank’s
prime rate or LIBOR. We are also exposed to interest rate risk on our invested cash balances.

Changes in ﬁnancial accounting standards or policies have affected, and in the future may affect, our
reported ﬁnancial condition or results of operations. Additionally, changes in securities laws and
regulations have increased, and are likely to continue to increase, our operating costs.

We prepare our ﬁnancial statements in conformity with US GAAP. These principles are subject to
interpretation by the Financial Accounting Standards Board (FASB), the American Institute of Certiﬁed Public
Accountants (AICPA), the SEC and various bodies formed to interpret and create appropriate accounting
policies. A change in those policies can have a signiﬁcant effect on our reported results and may affect our
reporting of transactions which are completed before a change is announced. Changes to those rules or the
questioning of how we interpret or implement those rules may have a material adverse effect on our reported
ﬁnancial results or on the way we conduct business. For example, although not yet currently required, we
could be required to adopt International Financial Reporting Standards (IFRS), which is different from
US GAAP.

In addition, in connection with our Section 404 certiﬁcation process, we may identify from time to time
deﬁciencies in our internal controls. Any material weakness or deﬁciency in our internal controls over
ﬁnancial reporting could materially and negatively impact our reported ﬁnancial results and the market price
of our stock could signiﬁcantly decline. Additionally, adverse publicity related to the disclosure of a material
weakness or deﬁciency in internal controls over ﬁnancial reporting could have a negative impact on our
reputation, business and stock price.

Finally, corporate governance, public disclosure and compliance practices continue to evolve based upon
continuing legislative action, agency rulemaking and stockholder advisory group policies. As a result, the
number of rules and regulations applicable to us may increase, which would also increase our legal and
ﬁnancial compliance costs and the amount of time management must devote to compliance activities. For
example, the Dodd-Frank Wall Street Reform and Consumer Protection Act contains provisions to improve
transparency and accountability concerning the supply of certain minerals originating from the Democratic
Republic of Congo (DRC) and adjoining countries that are believed to be beneﬁtting armed groups. As a
result, the SEC has recently adopted new due diligence, disclosure and reporting requirements for companies
which manufacture products that include components containing such minerals, regardless of whether the
minerals are mined in the DRC or adjoining countries. These requirements may decrease the acceptable
sources of supply of such minerals, increase their cost and disrupt our supply chain if we need to obtain
components from different suppliers. Since we manufacture products containing such minerals for our
customers, we will be required to comply with the new SEC rules, with our ﬁrst required report due in
May 2014. As the method of complying with the new regulation is unclear, the compliance process may be
time-consuming and costly. Failure to comply with this new regulation could result in additional costs
(including but not limited to, ﬁnes or penalties) as well as affect our reputation. Increasing regulatory burdens
could also make it more difficult for us to attract and retain members of our board of directors, particularly to
serve on our audit committee, and executive officers in light of an increase in actual or perceived workload
and liability for serving in such positions.

Energy price increases may negatively impact our results of operations.

Certain of the components that we use in our manufacturing activities are petroleum-based. In addition, we,
along with our suppliers and customers, rely on various energy sources (including oil) in our transportation
activities. While signiﬁcant uncertainty currently exists about the future levels of energy prices, a signiﬁcant

18

increase is possible. Increased energy prices could cause an increase to our raw material costs and
transportation costs. In addition, increased transportation costs of certain of our suppliers and customers could
be passed along to us. We may not be able to increase our product prices enough to offset these increased
costs. In addition, any increase in our product prices may reduce our future customer orders and proﬁtability.

Introducing programs requiring implementation of new competencies, including new process technology
within our mechanical operations, could affect our operations and ﬁnancial results.

The introduction of programs requiring implementation of new competencies, including new process
technology within our mechanical operations, presents challenges in addition to opportunities. Deployment of
such programs may require us to invest signiﬁcant resources and capital in facilities, equipment and/or
personnel. We may not meet our customers’ expectations or otherwise execute properly or in a cost-efficient
manner, which could damage our customer relationships and result in remedial costs or the loss of our
invested capital and anticipated revenues and proﬁts. In addition, there are risks of market acceptance and
product performance that could result in less demand than anticipated and our having excess capacity. The
failure to ensure that our agreed terms appropriately reﬂect the anticipated costs, risks, and rewards of such an
opportunity could adversely affect our proﬁtability. If we do not meet one or more of these challenges, our
operations and ﬁnancial results could be adversely affected.

If our manufacturing processes and services do not comply with applicable statutory and regulatory
requirements, or if we manufacture products containing design or manufacturing defects, demand for
our services may decline and we may be subject to liability claims.

We manufacture and design products to our customers’ speciﬁcations, and, in some cases, our manufacturing
processes and facilities may need to comply with applicable statutory and regulatory requirements. For
example, medical devices that we manufacture or design, as well as the facilities and manufacturing processes
that we use to produce them, are regulated by the U.S. Food and Drug Administration and non-U.S.
counterparts of this agency. Similarly, items we manufacture for customers in the defense and aerospace
industries, as well as the processes we use to produce them, are regulated by the Department of Defense and
the Federal Aviation Authority. In addition, our customers’ products and the manufacturing processes that we
use to produce them often are highly complex. As a result, products that we manufacture may at times contain
manufacturing or design defects, and our manufacturing processes may be subject to errors or not be in
compliance with applicable statutory and regulatory requirements. Defects in the products we manufacture or
design, whether caused by a design, manufacturing or component failure or error, or deﬁciencies in our
manufacturing processes, may result in delayed shipments to customers or reduced or cancelled customer
orders. If these defects or deﬁciencies are signiﬁcant, our business reputation may also be damaged. The
failure of the products that we manufacture or our manufacturing processes and facilities to comply with
applicable statutory and regulatory requirements may subject us to legal ﬁnes or penalties and, in some cases,
require us to shut down or incur considerable expense to correct a manufacturing process or facility. In
addition, these defects may result in liability claims against us or expose us to liability to pay for the recall of
a product. The magnitude of such claims may increase as we expand our medical and aerospace and defense
manufacturing services, as defects in medical devices and aerospace and defense systems could seriously harm
or kill users of these products and others. Even if our customers are responsible for the defects, they may not,
or may not have resources to, assume responsibility for any costs or liabilities arising from these defects,
which could expose us to additional liability claims.

Customer relationships with emerging companies may present more risks than with
established companies.

Customer relationships with emerging companies present special risks because such companies do not have an
extensive product history. As a result, there is less demonstration of market acceptance of their products,
making it harder for us to anticipate needs and requirements than with established customers. In addition, due
to the current economic environment, additional funding for such companies may be more difficult to obtain
and these customer relationships may not continue or materialize to the extent we planned or we previously
experienced. This tightening of ﬁnancing for start-up customers, together with many start-up customers’ lack
of prior operations and unproven product markets increase our credit risk, especially in trade accounts

19

receivable and inventories. Although we perform ongoing credit evaluations of our customers and adjust our
allowance for doubtful accounts receivable for all customers, including start-up customers, based on the
information available, these allowances may not be adequate. This risk may exist for any new emerging
company customers in the future.

We are subject to breach of our security systems.

We have implemented security systems with the intent of maintaining the physical security of our facilities
and protecting our customers’ and our suppliers’ conﬁdential information. Despite such efforts, we are subject
to breach of security systems, which may result in unauthorized access to our facilities and/or the information
we are trying to protect. If unauthorized parties gain physical access to one of our facilities or electronic
access to our information systems or such information is misdirected, lost or stolen during transmission or
transport, any theft or misuse of such information could result in, among other things, unfavorable publicity,
governmental inquiry and oversight, difficulty in marketing our services, allegations by our customers that we
have not performed our contractual obligations, litigation by affected parties and possible ﬁnancial obligations
for damages related to the theft or misuse of such information, any of which could have a material adverse
effect on our proﬁtability and cash ﬂow.

The risk of uninsured losses will be borne by Benchmark.

As a result of the massive ﬂooding in the Fall of 2011, we have been unable to renew or otherwise obtain
cost-effective ﬂood insurance to adequately cover assets at our facilities in Thailand. We continue to
investigate all ﬂood risk-mitigation alternatives in Thailand. We maintain insurance on all our properties and
operations — including our assets in Thailand — for risks and in amounts customary in the industry. While
such insurance includes general liability, property & casualty, and directors & officers liability coverage, not
all losses are insured, and we retain certain risks of loss through deductibles, limits and self-retentions. In the
event we were to experience a signiﬁcant uninsured loss in Thailand or elsewhere, it could have a material
adverse effect on our business, ﬁnancial condition and results of operations.

Item 1B. Unresolved Staff Comments.

None.

Item 2. Properties.

Our customers market numerous products throughout the world and therefore need to access manufacturing
services on a global basis. To enhance our EMS offerings, we seek to locate our facilities either near our
customers and our customers’ end markets in major centers for the electronics industry or, where appropriate,
in lower cost locations. Many of our plants located near customers and their end markets are focused
primarily on ﬁnal system assembly and test, while plants located in lower cost areas are engaged primarily in
less complex component and subsystem manufacturing and assembly.

20

The following chart summarizes our principal manufacturing facilities owned or leased by Benchmark and
its subsidiaries:

Location
Almelo, the Netherlands
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Angleton, Texas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ayudhaya, Thailand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ayudhaya, Thailand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Brasov, Romania . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Campinas, Brazil
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Concord, California . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dunseith, North Dakota . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dunseith, North Dakota . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Freemont, California . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Guadalajara, Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Guaymas, Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Huntsville, Alabama . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Korat, Thailand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Nashua, New Hampshire . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Penang, Malaysia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Penang, Malaysia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rochester, Minnesota . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Suzhou, China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Singapore . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tempe, Arizona . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Winona, Minnesota . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total

Sq. Ft.
132,000
110,000
281,000
224,000
131,000
49,000
77,000
45,000
51,000
52,000
214,000
52,000
180,000
190,000
154,000
103,000
190,000
250,000
326,000
42,000
48,000
181,000
3,082,000

Ownership
Leased
Owned
Owned
Owned
Leased
Leased
Leased
Owned
Leased
Leased
Leased
Leased
Owned
Owned
Leased
Owned
Owned
Leased
Owned
Leased
Leased
Owned

We lease other facilities with a total of 13,000 sq. ft. that house individuals that provide engineering and
procurement services. We also own facilities with a total of 366,000 sq. ft. that are currently not in operation.

Item 3. Legal Proceedings.

We are involved in various 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 our
consolidated ﬁnancial position or results of operations.

Item 4. Mine Safety Disclosures.

Not applicable.

21

PART II

Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of
Equity Securities.

Our common shares are listed on the New York Stock Exchange under the symbol ‘‘BHE.’’ The following
table shows the high and low sales prices for our common shares as reported on the New York Stock
Exchange for the quarters (or portions thereof) indicated.

High

Low

2013

First quarter (through February 25, 2013) . . . . . . . . . . . . . . . . . . . . . . . . .

$18.44

$16.46

2012

Fourth quarter
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Third quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Second quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
First quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2011

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fourth quarter
Third quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Second quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
First quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$16.65
$16.95
$17.09
$18.87

$15.54
$17.04
$19.21
$20.24

$12.54
$12.95
$12.77
$13.65

$12.01
$12.03
$15.21
$17.18

The last reported sale price of our common shares on February 25, 2013, as reported by the New York Stock
Exchange, was $17.44. There were approximately 835 record holders of our common shares as of
February 25, 2013.

We have not paid any cash dividends on our common shares in the past. In addition, our credit facility
includes restrictions on the amount of dividends we may pay to shareholders. We currently expect to retain
future earnings for use in the operation and expansion of our business and do not anticipate paying cash
dividends in the foreseeable future.

Issuer Purchases of Equity Securities

The following table provides information about the Company’s repurchase of its equity securities that are
registered pursuant to Section 12 of the Exchange Act during the quarter ending December 31, 2012, at a total
cost of $15.7 million:

Period
October 1 to 31, 2012 . . . . . . . . .
November 1 to 30, 2012 . . . . . . .
December 1 to 31, 2012 . . . . . . .
. . . . . . . . . . . . . . . . . . . .
Total

(a)
Total Number of
Shares (or Units)
Purchased(1)
613,800
375,000
40,000
1,028,800

(b)
Average Price
Paid per Share
(or Unit)(2)
$15.31
$15.06
$16.39
$15.26

(d)
Maximum Number
(or Approximate
Dollar Value) of
Shares (or Units)
that May Yet Be
Purchased Under
the Plans or
Programs(3)
$94.3 million
$88.7 million
$88.0 million

(c)
Total Number of
Shares (or Units)
Purchased as Part
of Publicly
Announced Plans
or Programs
613,800
375,000
40,000
1,028,800

(1) All share repurchases were made on the open market.
(2) Average price paid per share is calculated on a settlement basis and excludes commission.
(3) On June 13, 2012, the Board of Directors of the Company approved the repurchase of up to $100 million
of the Company’s outstanding common shares. Share purchases may be made in the open market, in
privately negotiated transactions or block transactions, at the discretion of the Company’s management

22

and as market conditions warrant. Purchases will be funded from available cash and may be commenced,
suspended or discontinued at any time without prior notice. Shares repurchased under the program will
be retired.

During the year ended December 31, 2012, the Company repurchased a total of 3.2 million common shares
for $47.1 million at an average price of $14.59 per share. All share purchases were made in the open market
and the shares repurchased through December 31, 2012 were retired.

Performance Graph

The following Performance Graph compares the cumulative total shareholder return on our common shares for
the ﬁve-year period commencing December 31, 2007 and ending December 31, 2012, with the cumulative
total return of the Standard & Poor’s 500 Stock Index (which does not include Benchmark), and the Peer
Group Index, which is composed of Celestica Inc., Flextronics International, Ltd., Jabil Circuit, Inc., Plexus
Corp and Sanmina-SCI Corp. Dividend reinvestment has been assumed.

 $120.00

 $100.00

 $80.00

 $60.00

 $40.00

 $20.00

 $0.00

Dec-07

Dec-08

Dec-09

Dec-10

Dec-11

Dec-12

Benchmark Electronics, Inc.

Peer Group

S&P 500

Benchmark Electronics, Inc.
. . . . . . .
Peer Group . . . . . . . . . . . . . . . . . . .
S&P 500 . . . . . . . . . . . . . . . . . . . .

Dec-07
$100.00
$100.00
$100.00

Dec-08
$72.00
$33.60
$61.50

Dec-09
$106.70
$ 85.40
$ 75.90

Dec-10
$102.40
$ 93.20
$ 85.60

Dec-11
$76.00
$77.10
$85.60

Dec-12
$93.70
$80.80
$97.10

NOTES: Assumes $100 invested on December 31, 2007 in Benchmark Electronics, Inc. Common Shares, in
the S&P 500, and in the Peer Group Index. Reﬂects month-end dividend reinvestment, and annual reweighting
of the Peer Group Index portfolios.

23

Item 6. Selected Financial Data.

(in thousands, except per share data)
Selected Statements of Income

(Loss) Data

Sales . . . . . . . . . . . . . . . . . . . . .
Cost of sales . . . . . . . . . . . . . . . .
Gross proﬁt . . . . . . . . . . . . . . .

Selling, general and administrative

expenses . . . . . . . . . . . . . . . . .
. . . . . . . .

Restructuring charges(1)
Thailand ﬂood related charges, net

of insurance(2)

. . . . . . . . . . . . .
Goodwill impairment(3) . . . . . . . . .
Income (loss) from operations
. .
Interest expense . . . . . . . . . . . . . .
Interest income . . . . . . . . . . . . . .
. . . . . . . .
Other income (expense)
Income tax expense (beneﬁt)(4)
. . .
Net income (loss) . . . . . . . . . . .

Earnings (loss) per share:(5) . . . . . .
Basic . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . .

Weighted-average number of shares

outstanding:
Basic . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . .

(in thousands)
Selected Balance Sheet Data
Working capital
. . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . .
Total debt
. . . . . . . . . . . . . . . . . .
Shareholders’ equity . . . . . . . . . . .

2012

2011

Year Ended December 31,
2010

2009

2008

$2,468,150
2,291,412
176,738

$2,253,030
2,114,195
138,835

$2,402,143
2,214,728
187,415

$2,089,253
1,943,188
146,065

$2,590,167
2,414,231
175,936

89,951
2,200

9,028
—
75,559
(1,580)
1,306
154
18,832
56,607

1.01
1.00

89,665
4,515

3,362
—
41,293
(1,327)
1,768
(602)
(10,827)
51,959

0.88
0.87

$

$
$

$

$
$

92,245
6,724

—
—
88,446
(1,362)
1,621
(1,689)
7,258
79,758

1.28
1.27

$

$
$

85,500
8,264

—
—
52,301
(1,399)
2,210
(1,705)
(1,974)
53,381

92,154
2,780

—
247,482
(166,480)
(1,455)
8,675
1,772
(21,856)
$ (135,632)

0.82
0.82

$
$

(2.02)
(2.02)

$

$
$

56,320
56,634

59,284
59,773

62,141
62,692

64,758
65,116

67,060
67,060

2012

2011

December 31,
2010

2009

2008

$ 883,676
1,501,477
10,600
$1,139,525

$ 849,051
1,499,998
11,019
$1,115,748

$ 891,637
1,477,068
11,381
$1,119,225

$ 852,896
1,465,206
11,681
$1,090,389

$ 813,035
1,433,040
11,939
$1,050,574

(1) See Note 15 to the Consolidated Financial Statements for a discussion of the restructuring charges

occurring in 2012, 2011 and 2010. During 2009 and 2008, the Company recognized restructuring charges
totaling $8.3 million and $2.8 million related to reductions in workforce and the resizing and closure of
certain facilities.

(2) See Note 16 to the Consolidated Financial Statements for a discussion of Thailand ﬂood related charges,

net of insurance.

(3) During the fourth quarter of 2008, the Company recorded a non-cash goodwill impairment charge

totaling $247.5 million.

(4) See Note 8 to the Consolidated Financial Statements for a discussion of income taxes. During the third
quarter of 2009, the Company recorded a $2.7 million discrete tax beneﬁt related to a previously closed
facility, a $2.4 million discrete tax beneﬁt related to a revaluation loss in Mexico and a $1.9 million
discrete tax beneﬁt related to intercompany pricing deductions. During the third quarter of 2008, the
Company recorded a $3.4 million discrete tax beneﬁt related to a previously closed facility.
(5) See Note 1(j) to the Consolidated Financial Statements for the basis of computing earnings (loss)

per share.

24

Item 7. 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 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 Item 1A of this report. 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. Undue reliance should not be placed 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 in Item 8 of this report.

OVERVIEW

We are a worldwide provider of integrated electronic manufacturing services. We provide our services to
original equipment manufacturers (OEMs) of computers and related products for business enterprises, medical
devices, industrial control equipment (which includes equipment for the aerospace and defense industry),
testing and instrumentation products, and telecommunication equipment. The services that we provide are
commonly referred to as electronics manufacturing services (EMS). We offer our customers comprehensive
and integrated design and manufacturing services from initial product design to volume production including
direct order fulﬁllment and post deployment services. Our manufacturing and assembly operations include
printed circuit boards and subsystem assembly, box build and systems integration, the process of integrating
subsystems and, often, downloading and integrating software, to produce a fully conﬁgured product. Our
precision technology manufacturing capabilities complement our proven electronic manufacturing expertise by
providing further vertical integration of critical mechanical components. These capabilities include precision
machining, advanced metal joining, and functional testing for multiple industries including medical,
instrumentation, aerospace and semiconductor capital equipment. We also are able to 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 Brazil, China, Malaysia, Mexico, Romania and Thailand.

During the past several years, we have made the necessary changes to align our business operations with our
customers’ demand. These changes include, among other activities, moving production between facilities,
reducing staff levels, realigning our business processes and reorganizing our management. During the years
ended December 31, 2012, 2011 and 2010, the Company recognized $2.2 million, $4.5 million and
$6.7 million (pre-tax) of restructuring charges, primarily related to the closure of facilities, capacity reductions
and costs associated with involuntary termination of employees in connection with reductions in workforce of
certain facilities worldwide.

We believe that our global manufacturing presence 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 enable us to build stronger strategic relationships with our customers and to become a more
integral part of their operations. Our customers face challenges in planning, procuring and managing their
inventories efficiently due to customer demand ﬂuctuations, product design changes, short product life cycles
and component price ﬂuctuations. We employ production management systems to manage their procurement
and manufacturing processes in an efficient and cost-effective manner so that, where possible, components
arrive on a just-in-time, as-and-when-needed basis. We are a signiﬁcant purchaser of electronic components

25

and other raw materials, and can capitalize on the economies of scale associated with our relationships with
suppliers to negotiate price discounts, obtain components and other raw materials that are in short supply, and
return excess components. Our expertise in supply chain management and our relationships with suppliers
across the supply chain enables us to reduce our customers’ cost of goods sold and inventory exposure.

We recognize revenue from the sale of manufactured products built to customer speciﬁcations and excess
inventory when title and risk of ownership have passed, the price to the buyer is ﬁxed and determinable and
collectibility is reasonably assured, which generally is when the goods are shipped. Revenue from design,
development and engineering services is recognized when the services are performed and collectibility is
reasonably certain. Such services provided under ﬁxed price contracts are accounted for using the percentage
of completion method. We generally assume no signiﬁcant obligations after product shipment as we typically
warrant workmanship only. Therefore, our warranty provisions are generally not signiﬁcant.

Our cost of sales includes the cost of materials, electronic components and other materials that comprise the
products we manufacture, the cost of labor and manufacturing overhead, and adjustments for excess and
obsolete inventory. Our procurement of materials for production requires us to commit signiﬁcant working
capital to our operations and to manage the purchasing, receiving, inspection and stocking of materials.
Although we bear the risk of ﬂuctuations in the cost of materials and excess scrap, we periodically negotiate
cost of materials adjustments with our customers. Our gross margin for any product depends on the sales
price, the proportionate mix of the cost of materials in the product and the cost of labor and manufacturing
overhead allocated to the product. We typically have the potential to realize higher gross margins on products
where the proportionate level of labor and manufacturing overhead is greater than that of materials. As we
gain experience in manufacturing a product, we usually achieve increased efficiencies, which result in lower
labor and manufacturing overhead costs for that product and higher gross margins. Our operating results are
impacted by the level of capacity utilization of manufacturing facilities. Operating income margins have
generally improved during periods of high production volume and high capacity utilization. During periods of
low production volume, we generally have idle capacity and reduced operating income margins.

Severe Flooding in Thailand and Suspension of Thailand Operations

Our facilities in Ayudhaya, Thailand were ﬂooded and remained closed from October 13, 2011 to
December 20, 2011. As a result of the ﬂooding and temporary closing of our facilities, we recognized
estimated property losses of $46.2 million and incurred $13.4 million of ﬂood related costs during the three
months ended December 31, 2011. We carried property and business interruption insurance that we believe
was appropriate and adequate for this situation. Our combined limit for real and personal property as well as
business interruption insurance was approximately $300 million. As such, during the three months ended
December 31, 2011, we recorded estimated recoveries from insurance for these property losses and ﬂood
related costs totaling $56.2 million. These estimated insurance recoveries included $46.2 million of property
losses from the involuntary conversion of property, plant and equipment and inventory and $10.0 million of
other costs directly related to the ﬂooding in Thailand.

During the year ended December 31, 2012, we reduced the previously estimated property losses and the
corresponding estimated insurance recoveries for these property losses by $5.1 million. In addition, we
received $58.2 million of insurance proceeds, which exceeded our previously recorded insurance receivable by
$7.1 million. The insurance proceeds included $48.2 million for Thailand property losses and $10.0 million
for other ﬂood related costs. As of December 31, 2012, we have collected our recorded insurance receivable
for these property losses and ﬂood related costs.

During the year ended December 31, 2012, we recognized additional Thailand ﬂood related charges totaling
$16.1 million, which were offset by the insurance recoveries of $7.1 million in excess of previously
recognized inventory and property, plant and equipment losses. While all of these charges consist of costs
directly attributable to the Thailand ﬂood which we expect to recover from our insurance, we will record
additional insurance recoveries when the appropriate recognition criteria have been met. We cannot estimate
the timing of the receipt of insurance proceeds we will ultimately realize. We do not expect to incur additional
signiﬁcant Thailand ﬂood related charges. As a result of the ﬂooding, we have been unable to renew or
otherwise obtain adequate cost-effective ﬂood insurance to cover assets at our Thailand facilities. We continue
to investigate all ﬂood risk-mitigation alternatives in Thailand. In the event we were to experience a

26

signiﬁcant uninsured loss in Thailand or elsewhere, it could have a material adverse effect on our business,
ﬁnancial condition and results of operations.

The Ayudhaya, Thailand facilities are among our largest. As a result, the impact on revenue and operations
was signiﬁcant in the fourth quarter of 2011.

We and our customers implemented contingency and recovery plans as a result of the ﬂood to help enable us
to meet customer needs. As part of those plans, we restarted production at our Korat, Thailand facility in
November 2011, and we shifted production from our Ayudhaya facilities to our various other sites around the
globe. As a result of the capital purchases associated with our contingency and recovery plans, we have
incurred approximately $25.4 million in capital expenditures.

Summary of 2012 Results

Sales for the year ended December 31, 2012 increased 9.5% to $2.5 billion compared to $2.3 billion in 2011.
This increase in sales was primarily due to increased demand from our existing customers, including new
program wins, most notably in the computers and related products for business enterprises industry, the
telecommunication equipment industry and the medical devices industry, in addition to our recovery from the
Thailand ﬂooding that impacted us in the fourth quarter of 2011. These increases were partially offset by
decreased demand from customers in the testing and instrumentation products industry as a result of a
slowdown in the semiconductor industry and market uncertainty in the global economy.

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. A substantial percentage of our sales have been made to a small number
of customers, and the loss of a major customer, if not replaced, would adversely affect us. Sales to our
ten largest customers represented 56% and 53% of our sales in 2012 and 2011, respectively. In 2012 and
2011, sales to International Business Machines Corporation represented 21% and 14%, respectively, of our
sales.

Our gross proﬁt as a percentage of sales increased to 7.2% for the year ended December 31, 2012 from 6.2%
in the same period of 2011. This increase was primarily due to an increase in sales, partially driven by new
programs, our continued focus on cost controls, and our recovery from the 2011 Thailand ﬂood that resulted
in lower sales volume and resulting under-absorbed manufacturing overhead costs. In addition, the 2011 gross
proﬁt was impacted by $4.4 million of settlement costs associated with the transfer of a major program. 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.

We have undertaken initiatives to restructure our business operations with the intention of improving
utilization and realizing cost savings in the future. During the year ended December 31, 2012, the Company
recognized $2.2 million (pre-tax) of restructuring charges, primarily related to capacity reduction and
reductions in workforce of certain facilities worldwide, primarily in Europe.

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 in Item 8 of this report. 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 ongoing basis, we
evaluate our estimates, including those related to accounts receivable, inventories, income taxes, long-lived

27

assets, stock-based compensation 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 materially 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 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 allowance 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.

Inventory obsolescence reserve

We purchase inventory based on forecasted demand and record inventory at the lower of cost or market. We
reserve for estimated obsolescence as necessary in an amount equal to the difference between the cost of
inventory and estimated market value based on assumptions of future demands and market conditions. We
evaluate our inventory valuation on a quarterly basis based on current and forecasted usage and the latest
forecasts of product demand and production requirements from our customers. Customers frequently make
changes to their forecasts, requiring us to make changes to our inventory purchases, commitments, and
production scheduling and which may require us to cancel open purchase commitments with our vendors. This
process may lead to on-hand inventory quantities and on-order purchase commitments that are in excess of
our customers’ revised needs, or parts that become obsolete before use in production. We record inventory
reserves on excess and obsolete inventory. These reserves are established on inventory which we have
determined our customers are not responsible for or on inventory which we believe our customers will be
unable to fulﬁll their obligation to ultimately purchase. If actual market conditions are less favorable than
those we projected, additional inventory write-downs may be required.

Income Taxes

We estimate our income tax provision in each of the jurisdictions in which we operate, including estimating
exposures related to uncertain tax positions. We must also make judgments regarding the ability to realize the
deferred tax assets. 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 excess of our net recorded
amount, an adjustment to the valuation allowance 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
assets in the future, an adjustment to the valuation allowance would reduce income in the period such
determination was made.

During 2011, we evaluated the recoverability of our deferred tax assets using the criteria described above and
concluded that our projected future taxable income in the U.S. is sufficient to utilize additional net operating
loss carryforwards and other deferred tax assets. As a result, we reduced our valuation allowance by
$19.1 million in the U.S. and, at the same time, decreased our valuation allowance by $1.5 million in
foreign jurisdictions.

We are subject to examination by tax authorities for varying periods in various U.S. and foreign tax
jurisdictions. During the course of such examinations, disputes may occur as to matters of fact and/or law. In
most tax jurisdictions the passage of time without examination will result in the expiration of applicable

28

statutes of limitations, thereby precluding the taxing authority from conducting an examination of the tax
period(s) for which such statute of limitations has expired. We believe that we have adequately provided for
our tax liabilities.

Our subsidiary in Thailand has ﬁled for a refund of $8.4 million of previously paid income taxes applicable to
the years 2004 and 2005, which is included in other assets. The Thailand tax authorities have conducted their
initial examination of the applicable refund ﬁlings. We received official notiﬁcation that the tax authorities
have rejected our refund claim during the fourth quarter of 2012. We have ﬁled an appeal of the rejected
refund claim as we believe that the conclusions of the Thailand tax authorities are incorrect. During 2011, we
recorded a reserve for uncertain tax beneﬁts of $7.1 million against this refund claim.

Impairment of Long-Lived Assets and Goodwill

Long-lived assets, such as property, plant, and equipment, and purchased intangibles subject to amortization,
are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount
of an asset may not be recoverable. The recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to the estimated undiscounted future cash ﬂows expected to be
generated by the asset. If the carrying amount of an asset exceeds its estimated undiscounted future cash
ﬂows, an impairment charge would be recognized by the amount that the carrying amount of the asset exceeds
the fair value of the asset.

Goodwill is assessed annually for impairment, and is assessed for impairment more frequently if events and
circumstances indicate that the asset might be impaired. An impairment loss would be recognized to the extent
that the carrying amount exceeds the asset’s fair value. For purposes of performing our goodwill impairment
assessment, our reporting units are the same as our operating segments as deﬁned in Note 12 to the
Consolidated Financial Statements in Item 8 of this report. As of December 31, 2012, 2011 and 2010, we had
goodwill associated with our Asia business segment of approximately $37.9 million. Beginning in 2012, we
elected to perform a qualitative assessment for our annual goodwill impairment test. If the qualitative
assessment indicates that it is more likely than not that the fair value of a reporting unit is less than its
carrying amount, or if we elect to not perform a qualitative assessment, then we would be required to perform
a quantitative impairment test for goodwill. This two-step process involves determining the fair values of the
reporting units and comparing those fair values to the carrying values, including goodwill, of the
reporting unit.

Based on our qualitative assessment of goodwill as of December 31, 2012, we concluded that it was more
likely than not that the fair value of our Asia business segment was greater than its carrying amount, and
therefore no further testing was required. We completed our annual impairment tests performed as of
December 31, 2011 and 2010 and concluded that goodwill was not impaired. We estimated that the fair value
of our Asia business segment exceeded its carrying amount by approximately 25% and 117%, respectively, as
of December 31, 2011 and 2010. The decrease in 2011 was primarily a result of the Thailand ﬂood.
Circumstances that may lead to future impairment of goodwill include unforeseen decreases in future
performance or industry demand, the restructuring of our operations as a result of a change in our business
strategy or other factors.

In 2011 and 2010, we determined the fair value of our reporting units, with the assistance of an independent
valuation ﬁrm, based upon a combination of the income approach (discounted cash ﬂow method) and market
approach (market comparable model) methodologies. In concluding on the fair value estimates of our
reporting units in 2011 and 2010, the income approach was given a 75% weighting and the market approach
was given a 25% weighting based on the quality and suitability of information available in performing the
income approach, relative to the market approach.

The income approach methodology utilized in estimating the fair value of our reporting units for purposes of
the goodwill impairment testing required various judgmental assumptions about revenues, operating margins,
growth rates, working capital requirements and appropriate discount rate. In determining those judgmental
assumptions, we considered a variety of data, including — for each reporting unit — its annual budget for the
upcoming year, its longer-term business plan, anticipated future cash ﬂows, market data, and historical cash
ﬂow growth rates. The key assumptions used to estimate the fair value of our reporting units under the

29

discounted cash ﬂow method were (i) projected revenue growth over a ten-year period and the annual
compounded average growth rate; (ii) projected operating margins over a ten-year period; and (iii) a
weighted-average cost of capital.

Under the market approach, the value of our reporting units was estimated by comparing it to publicly-traded
ﬁrms in similar lines of business and geographic markets. The market approach takes into account, among
other things, the market value of total invested capital to earnings before interest, taxes, depreciation and
amortization (EBITDA) multiples of comparable companies adjusted to reﬂect differences in size and growth
prospects. The selected multiples were then applied to the present value of our reporting unit’s projected
EBITDA to arrive at an indicated range of value. This value was then adjusted for a control premium of 25%
in 2011 and 30% in 2010 based on a review of premiums paid for companies similar in nature to our
reporting units and then adjusted for any working capital requirement excess (deﬁcit) to determine a ﬁnal
value under the market approach.

Changes in economic and operating conditions that occur after the annual impairment analysis or an interim
impairment analysis, and that impact these assumptions, may result in a future goodwill impairment charge.

Stock-Based Compensation

We recognize stock-based compensation expense in our consolidated statements of income. The fair value of
each option grant is estimated on the date of grant using the Black-Scholes option-pricing model.
Option-pricing models require the input of subjective assumptions, including the expected life of the option
and the expected stock price volatility. Judgment is also required in estimating the number of stock-based
awards that are expected to vest as a result of satisfaction of time-based vesting schedules. If actual results or
future changes in estimates differ signiﬁcantly from our current estimates, stock-based compensation could
increase or decrease. For restricted stock unit awards with performance conditions, compensation expense is
based on the probability that the performance goals will be achieved, which is monitored by management
throughout the requisite service period. If it becomes probable, based on our expectation of performance
during the measurement period, that more or less than the previous estimate of the awarded shares will vest,
an adjustment to stock-based compensation expense will be recognized as a change in accounting estimate.
See Note 1(m) to the Consolidated Financial Statements in Item 8 of this report.

Recently Enacted Accounting Principles

See Note 1(q) to the Consolidated Financial Statements in Item 8 of this report for a discussion of recently
enacted accounting principles.

RESULTS OF OPERATIONS

The following table presents the percentage relationship that certain items in our Consolidated Statements of
Income 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 in Item 8 of this report.

Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross proﬁt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative expenses
. . . . . . . . . . . . . .
Restructuring charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thailand ﬂood related charges, net of insurance . . . . . . . . . . . .
Income from operations . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . .
Income tax expense (beneﬁt) . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Year ended December 31,
2011
100.0%
93.8
6.2
4.0
0.2
0.1
1.8
(0.0)
1.8
(0.5)
2.3%

2012
100.0%
92.8
7.2
3.6
0.1
0.4
3.1
(0.0)
3.1
0.8
2.3%

2010
100.0%
92.2
7.8
3.8
0.3
—
3.7
(0.1)
3.6
0.3
3.3%

30

Year Ended December 31, 2012 Compared With Year Ended December 31, 2011

Sales

Sales for the year ended December 31, 2012 increased 9.5% to $2.5 billion compared to $2.3 billion in 2011.
The increase in sales was primarily due to increased demand from our existing customers, including new
program wins, most notably in the computers and related products for business enterprises industry,
telecommunication equipment industry and the medical devices industry, in addition to our recovery from the
Thailand ﬂooding that impacted us in the fourth quarter of 2011. These increases were partially offset by
decreased demand from customers in the testing and instrumentation products industry as a result of a
slowdown in the semiconductor industry and market uncertainty in the global economy. The following table
sets forth the percentages of our sales by industry for 2012 and 2011.

. . . . . . . . . . . . . . . . . . . .
Computers and related products for business enterprises
Industrial control equipment
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Telecommunication equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Medical devices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Testing and instrumentation products

2012

31%
27
26
10
6
100%

2011

29%
29
23
9
10
100%

Computers and Related Products for Business Enterprises. Sales to customers in the computers and
related products for business enterprises industry for the year ended December 31, 2012 increased 16% to
$771.5 million from $663.2 million in 2011 primarily as a result of new program wins.

Industrial Control Equipment. Sales to customers in the industrial control equipment industry for the year
ended December 31, 2012 increased 3% to $660.2 million from $641.4 million in 2011.

Telecommunication Equipment. Sales to customers in the telecommunication equipment industry for the
year ended December 31, 2012 increased 22% to $637.9 million from $521.8 million in 2011 primarily as a
result of our recovery from the Thailand ﬂooding that impacted us in the fourth quarter of 2011 as well as
new program wins.

Medical Devices. Sales to customers in the medical devices industry for the year ended December 31, 2012
increased 15% to $244.1 million from $212.2 million in 2011 primarily as a result of new program wins.

Testing and Instrumentation Products. Sales to customers in the testing and instrumentation products
industry for the year ended December 31, 2012 decreased 28% to $154.4 million from $214.5 million in 2011
as a result of a slowdown in the semiconductor industry and market uncertainty in the global economy.

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. Adverse worldwide economic conditions have impacted our customers.
See Note 9 to the Consolidated Financial Statements in Item 8 of this report.

A substantial percentage of our sales have been made to a small number of customers, and the loss of a major
customer, if not replaced, would adversely affect us. Sales to our ten largest customers represented 56% and
53% of our sales in 2012 and 2011, respectively. In 2012 and 2011, sales to International Business Machines
Corporation represented 21% and 14%, respectively, of our sales.

Our international operations are subject to the risks of doing business abroad. See Item 1A 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.
During 2012 and 2011, 50% and 51%, respectively, of our sales were from our international operations.

We had a backlog of approximately $1.5 billion at December 31, 2012, as compared to the 2011 year-end
backlog of $1.6 billion. Backlog consists of purchase orders received, including, in some instances, forecast
requirements released for production under customer contracts. Although we expect to ﬁll substantially all of
our backlog at December 31, 2012 during 2013, we do not have long-term agreements with all of our

31

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.

Gross Proﬁt

Gross proﬁt increased 27% to $176.7 million for 2012 from $138.8 million in 2011 due primarily to an
increase in sales. Our gross proﬁt as a percentage of sales increased to 7.2% for the year ended December 31,
2012 from 6.2% in the same period of 2011. This increase was primarily due to an increase in sales, partially
driven by new programs, our continued focus on cost controls, and our recovery from the 2011 Thailand ﬂood
that resulted in lower sales volume and resulting under-absorbed manufacturing overhead costs. In addition,
the 2011 gross proﬁt was impacted by $4.4 million of settlement costs associated with the transfer of a major
program. 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 under-absorbed 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

Selling, general and administrative expenses increased to $90.0 million in 2012 from $89.7 million in 2011.
The increase in selling, general and administrative expenses is primarily due to higher variable compensation
expenses offset by reduced overhead resulting from cost controls and lower employee related expenses.
Selling, general and administrative expenses, as a percentage of sales, were 3.6% and 4.0%, respectively, for
2012 and 2011. The decrease in selling, general and administrative expenses as a percentage of sales was
primarily associated with the impact of higher sales volumes in 2012.

Restructuring Charges

We recognized $2.2 million in restructuring charges during 2012 primarily related to capacity reduction and
reductions in workforce of certain facilities worldwide, primarily in Europe.

The recognition of the restructuring charges requires that we make certain judgments and estimates regarding
the nature, timing and amount of costs associated with planned exit activities. To the extent our actual results
in exiting these facilities differ from our estimates and assumptions, we may be required to revise the
estimates of future liabilities, requiring the recognition of additional restructuring charges or the reduction of
liabilities already recognized. At the end of each reporting period, we evaluate the remaining accrued balances
to ensure that no excess accruals are retained and the utilization of the provisions are for their intended
purpose in accordance with developed exit plans. See Note 15 to the Consolidated Financial Statements in
Item 8 of this report.

Thailand Flood Related Charges, Net of Insurance

During 2012, we recognized additional Thailand ﬂood related charges totaling $16.1 million offset by
insurance recoveries totaling $7.1 million in excess of previously recognized inventory and property, plant and
equipment losses. During 2011, we recognized $3.4 million in Thailand ﬂood related charges, net of estimated
insurance recoveries. The ﬂood related charges consist of costs directly attributable to the Thailand ﬂood,
which are expected to be recovered from insurance in subsequent periods. We will record additional insurance
recoveries when the appropriate recognition criteria have been met. We do not expect to incur signiﬁcant
additional Thailand ﬂood related charges. See Note 16 to the Consolidated Financial Statements in Item 8 of
this report.

32

Income Tax Expense (Beneﬁt)

Income tax expense of $18.8 million represented an effective tax rate of 25.0% for 2012, compared with
income tax beneﬁt of $10.8 million at a negative effective tax rate of 26.3% in 2011. In 2012, we recorded a
$0.5 million tax expense related to changes in tax rates in foreign jurisdictions. In 2011, we recorded a
$0.6 million tax beneﬁt as a result of a 2010 tax rate incentive received by one of our China subsidiaries
during the ﬁrst quarter of 2011, a $20.6 million tax beneﬁt as a result of a decrease in valuation allowances
on deferred tax assets, a $2.7 million tax beneﬁt related to the settlement of income tax audits offset by a tax
expense of $7.1 million of additional reserves for uncertain tax beneﬁts. Excluding these tax beneﬁts, the
effective tax rate would have been 24.3% in 2012 compared to 14.7% in 2011. This increase in the effective
tax rate was primarily due to a shift in the proportion of the consolidated taxable income earned in
jurisdictions taxed at higher tax rates. We have been granted certain tax incentives, including tax holidays, for
our subsidiaries in China, Malaysia and Thailand that will expire at various dates, unless extended or
otherwise renegotiated, through 2012, 2015 and 2018, respectively, and are subject to certain conditions with
which we expect to comply. See Note 8 to the Consolidated Financial Statements in Item 8 of this report.

On January 2, 2013 the American Taxpayer Relief Act (ATRA) of 2012 was signed into law. Some of the
provisions were retroactive to January 1, 2012. Had the ATRA had been enacted and signed prior to
January 1, 2013 our overall tax expense would have been approximately $ 0.8 million lower in 2012. This
$0.8 million tax beneﬁt will be reﬂected in income tax expense in the ﬁrst quarter of 2013 as a discreet event.

Net Income

We reported net income of approximately $56.6 million, or $1.00 per diluted share for 2012, compared with
net income of approximately $52.0 million, or $0.87 per diluted share for 2011. The net increase of $4.6
million in 2012 was due to the factors discussed above.

Year Ended December 31, 2011 Compared With Year Ended December 31, 2010

Sales

Sales for the year ended December 31, 2011 decreased 6% to $2.3 billion compared to $2.4 billion in 2010.
This decrease was primarily due to reduced demand from customers in addition to the Thailand ﬂood. The
following table sets forth the percentages of our sales by industry for 2011 and 2010.

. . . . . . . . . . . . . . . . . . . .
Computers and related products for business enterprises
Industrial control equipment
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Telecommunication equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Medical devices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Testing and instrumentation products

2011

29%
29
23
9
10
100%

2010

32%
25
23
10
10
100%

During the year ended December 31, 2011, sales to customers in the medical devices industry, testing and
instrumentation industry, computers and related products for business enterprises industry, and
telecommunication equipment industry decreased 16%, 15%, 13% and 3%, respectively, from 2010. These
decreases were partially offset by an 8% increase in sales to customers in the industrial control equipment
industry during the same period.

During 2011 and 2010, 51% and 48%, respectively, of our sales were from our international operations.

We had a backlog of approximately $1.6 billion at December 31, 2011, as compared to the 2010 year-end
backlog of $1.5 billion.

Gross Proﬁt

Gross proﬁt decreased 26% to $138.8 million for 2011 from $187.4 million in 2010. The impact on revenue
and operations from the ﬂooding in Thailand was signiﬁcant in the fourth quarter of 2011. In addition to the
lower sales volume and the resulting under-absorbed manufacturing overhead costs, the decrease in gross
proﬁt was also a result of $4.4 million of settlement costs associated with the transfer of a major program,
new program ramp costs and capacity expansion costs, primarily in Asia, incurred in 2011.

33

Selling, General and Administrative Expenses

Selling, general and administrative expenses decreased 3% to $89.7 million in 2011 from $92.2 million in
2010 primarily due to reduced stock-based compensation expenses, decreased overhead resulting from cost
controls and lower variable compensation expenses, which were partially offset by higher other employee
related costs. Selling, general and administrative expenses, as a percentage of sales, were 4.0% and 3.8%,
respectively, for 2011 and 2010. The increase in selling, general and administrative expenses as a percentage
of sales was due to the impact of lower sales volumes during 2011.

Restructuring Charges

We recognized $4.5 million in restructuring charges during 2011 primarily related to the decision to close our
Dublin, Ireland facility.

Thailand Flood Related Charges, Net of Insurance

We recognized $3.4 million in Thailand ﬂood related charges, net of insurance recoveries during the fourth
quarter of 2011. See Note 16 to the Consolidated Financial Statements in Item 8 of this report.

Income Tax Expense (Beneﬁt)

Income tax beneﬁt of $10.8 million represented a negative effective tax rate of 26.3% for 2011, compared
with income tax expense of $7.3 million at an effective tax rate of 8.3% for the same period in 2010. In 2011,
we recorded a $0.6 million tax beneﬁt as a result of a 2010 tax rate incentive received by one of our China
subsidiaries during the ﬁrst quarter of 2011, a $20.6 million tax beneﬁt as a result of a decrease in valuation
allowances on deferred tax assets, a $2.7 million tax beneﬁt related to the settlement of income tax audits
offset by $7.1 million of additional reserves for uncertain tax beneﬁts. In 2010, we recorded a $10.5 million
tax beneﬁt as a result of a decrease in valuation allowances on deferred tax assets in the U.S., and a
$1.4 million tax beneﬁt as a result of the expiration of the statute of limitations primarily related to an
intercompany transaction between two of our subsidiaries. Excluding these tax beneﬁts, the effective tax rate
would have been 14.7% in 2011 compared to 22.0% in 2010. This decrease in the effective tax rate was
primarily due to a shift in the proportion of the consolidated taxable income earned in jurisdictions taxed at
lower tax rates, an increase in tax incentives in certain foreign jurisdictions and the reduced tax rate in China
for one of our subsidiaries during 2011. See Note 8 to the Consolidated Financial Statements in Item 8 of
this report.

Net Income

We reported net income of approximately $52.0 million, or $0.87 per diluted share for 2011, compared with
net income of approximately $79.8 million, or $1.27 per diluted share for 2010. The net decrease of
$27.8 million in 2011 was due to the factors discussed above.

LIQUIDITY AND CAPITAL RESOURCES

We have historically ﬁnanced our growth and operations through funds generated from operations and
proceeds from the sale and maturity of our investments. Cash and cash equivalents totaled $384.6 million at
December 31, 2012 and $283.9 million at December 31, 2011, of which $261.2 million at December 31, 2012
and $195.9 million at December 31, 2011 was held outside the U.S. in various foreign subsidiaries.
Substantially all of the amounts held outside of the U.S. are intended to be indeﬁnitely reinvested in foreign
operations. Under current tax laws and regulations, if cash and cash equivalents held outside the U.S. were to
be distributed to the U.S. in the form of dividends or otherwise, we would be subject to additional
U.S. income taxes and foreign withholding taxes.

Cash provided by operating activities was $151.1 million in 2012. The cash provided by operations during
2012 consisted primarily of net income of $56.6 million adjusted for $35.7 million of depreciation and
amortization, a $66.1 million decrease in inventories, and a $32.4 decrease in prepaid expense and other assets
resulting from Thailand ﬂood insurance recoveries, offset by a $34.4 million increase in accounts receivable
and a $21.1 million decrease in accounts payable. Working capital was $883.7 million at December 31, 2012
and $849.0 million at December 31, 2011. We experienced a strong demand pull from customers late in the
fourth quarter of 2012 which reduced inventories and improved cash ﬂows from operations.

34

We are continuing the practice of purchasing components only after customer orders or forecasts are received,
which mitigates, but does not eliminate, the risk of loss on inventories. 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. If shortages of these components and other material supplies used in
operations occur, vendors may not ship the quantities we need for production and we may be forced to delay
shipments, which would increase backorders and therefore impact cash ﬂows.

Cash used in investing activities was $9.5 million for the year ended December 31, 2012 primarily due to the
purchases of additional property, plant and equipment totaling $47.9 million, offset by Thailand ﬂood property
insurance proceeds totaling $23.4 million and proceeds from the redemptions of investments totaling
$15.8 million. Purchases of additional property, plant and equipment were primarily of machinery and
equipment in the Americas and Asia.

Cash used in ﬁnancing activities was $43.7 million for the year ended December 31, 2012. During the year
ended December 31, 2012, share repurchases totaled $47.1 million and we received $4.7 million from the
exercise of stock options.

Under the terms of a credit agreement (the U.S. Credit Agreement), we have a $200.0 million ﬁve-year
revolving credit facility to be used for general corporate purposes with a maturity date of July 30, 2017. The
U.S. Credit Agreement includes an accordion feature under which total commitments under the facility may be
increased by an additional $100 million, subject to satisfaction of certain conditions and lender approval.
Interest on outstanding borrowings under the U.S. Credit Agreement is payable quarterly, at our option, at
LIBOR plus 1.75% to 2.75% or a prime rate plus 0.75% to 1.75%, based upon our leverage ratio as speciﬁed
in the U.S. Credit Agreement. A commitment fee of 0.30% to 0.40% per annum (based upon our liquidity
ratio) on the unused portion of the revolving credit line is payable quarterly in arrears. As of December 31,
2012 and December 31, 2011, we had no borrowings outstanding under the Credit Agreement and
$200.0 million was available for future borrowings.

The U.S. Credit Agreement is 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 U.S. Credit
Agreement contains customary ﬁnancial covenants as to debt leverage and ﬁxed charges, and restricts our
ability to incur additional debt, pay dividends, repurchase shares, sell assets and merge or consolidate with
other persons. As of December 31, 2012, we were in compliance with all such covenants and restrictions.

Our Thailand subsidiary has a multi-purpose credit facility with Kasikornbank Public Company Limited (the
Thai Credit Facility) that provides for approximately $11.3 million (350 million Thai baht) in working capital
availability. The Thai Credit Facility is secured by land and buildings in Thailand. The availability of funds
under the Thai Credit Facility is reviewed annually and is currently accessible through October 2013. As of
December 31, 2012 and 2011, our Thailand subsidiary had no working capital borrowings outstanding.

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.

As of December 31, 2012, we had cash and cash equivalents totaling $384.6 million and $200.0 million
available for borrowings under the U.S. Credit Agreement. During the next twelve months, we believe our
capital expenditures will be approximately $35 million to $45 million, principally for machinery and
equipment to support our ongoing business around the globe.

On June 13, 2012, our Board of Directors approved the repurchase of up to $100 million of our outstanding
common shares (the 2012 Repurchase Program). As of December 31, 2012, we have $88.0 million remaining

35

under the 2012 Repurchase Program to repurchase additional shares. We are under no commitment or
obligation to repurchase any particular amount of common shares. Management believes that our existing cash
balances and funds generated from operations will be sufficient to permit us to meet our liquidity requirements
over the next twelve months. Management further believes that our ongoing cash ﬂows from operations and
any borrowings we may incur under our credit facilities will enable us to meet operating cash requirements in
future years. Should we desire to consummate signiﬁcant acquisition opportunities, our capital needs would
increase and could possibly result in our need to increase available borrowings under our revolving credit
facility or access public or private debt and equity markets. There can be no assurance, however, that we
would be successful in raising additional debt or equity on terms that we would consider acceptable.

CONTRACTUAL OBLIGATIONS

We have certain contractual obligations that extend out beyond 2013 under lease obligations and debt
arrangements. Non-cancelable purchase commitments do not typically extend beyond the normal lead-time of
several weeks. Purchase orders beyond this time frame are typically cancelable. 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. The total contractual cash obligations in
existence at December 31, 2012 due pursuant to contractual commitments are:

(in thousands)
Operating lease obligations . .
Capital lease obligations . . . .
Total obligations . . . . . . . . .

Total
$25,383
17,440
$42,823

Less than 1
year
$6,817
1,550
$8,367

Payments due by period
1 − 3
years
$11,347
3,194
$14,541

3 − 5
years
$4,510
3,323
$7,833

More than
5 years
$ 2,709
9,373
$12,082

The amount of unrecognized tax beneﬁts as of December 31, 2012 including interest and penalties was
$21.3 million. We have not provided a detailed estimate of the timing of future cash outﬂows associated with
the liabilities recognized in this balance due to the uncertainty of when the related tax settlements may
become due. See Note 8 to the Consolidated Financial Statements in Item 8 of this report.

OFF-BALANCE SHEET ARRANGEMENTS

As of December 31, 2012, we did not have any signiﬁcant off-balance sheet arrangements. See Note 10 to the
Consolidated Financial Statements in Item 8 of this report.

36

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Our international sales are a signiﬁcant portion of our net sales; we are exposed to risks associated with
operating internationally, including the following:

•

•

•

•

Foreign currency exchange risk;

Import and export duties, taxes and regulatory changes;

Inﬂationary economies or currencies; and

Economic and political instability.

Additionally, some of our operations are in developing countries. Certain events, including natural disasters,
can impact the infrastructure of a developing country more severely than they would impact the infrastructure
of a developed country. A developing country can also take longer to recover from such events, which could
lead to delays in our ability to resume full operations.

We do not use derivative ﬁnancial instruments for speculative purposes. As of December 31, 2012, we did not
have any foreign currency hedges. In the future, signiﬁcant transactions involving our international operations
may cause us to consider engaging in hedging transactions to attempt to mitigate our exposure to ﬂuctuations
in foreign exchange rates. These exposures are primarily, but not limited to, vendor payments and
intercompany balances in currencies other than the currency in which our foreign operations primarily
generate and expend cash. 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. Our sales are substantially
denominated in U.S. dollars. Our foreign currency cash ﬂows are generated in certain Asian and European
countries, Mexico and Brazil.

We are also exposed to market risk for changes in interest rates, a portion of which relates to our invested
cash balances. We do not use derivative ﬁnancial instruments in our investing activities. We place cash and
cash equivalents and investments with various major ﬁnancial institutions. We protect our invested principal
funds by limiting default risk, market risk and reinvestment risk. As of December 31, 2012, the outstanding
amount in the long-term investment portfolio included $12.2 million (par value) of auction rate securities with
an average annual return of approximately 0.30%.

37

Item 8. Financial Statements and Supplementary Data.

BENCHMARK ELECTRONICS, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

(in thousands, except par value)
Assets

Current assets:

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable, net of allowance for doubtful accounts of

$1,442 and $1,094, respectively . . . . . . . . . . . . . . . . . . . . . . . .
Inventories, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other assets . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Liabilities and Shareholders’ Equity

Current liabilities:

Current installments of capital lease obligations . . . . . . . . . . . . . . .
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital lease obligations, less current installments . . . . . . . . . . . . . . .
Other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Shareholders’ equity:

Preferred shares, $0.10 par value; 5,000 shares authorized,

December 31,

2012

2011

$ 384,579

$ 283,920

459,081
324,041
29,539
8,062
8,889
1,214,191
10,324
176,104
37,912
29,535
33,411
$1,501,477

$

497
260,622
3,828
65,568
330,515
10,103
19,578
1,756

425,936
391,580
84,723
6,667
8,175
1,201,001
24,673
163,660
37,912
37,420
35,332
$1,499,998

$

419
285,671
5,224
60,636
351,950
10,600
21,700
—

none issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—

—

Common shares, $0.10 par value; 145,000 shares authorized;

issued – 55,297 and 57,902, respectively; outstanding − 55,186 and
57,791, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . .
Less treasury shares, at cost; 111 shares. . . . . . . . . . . . . . . . . . . . .
Total shareholders’ equity. . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Commitments and contingencies

5,519
651,148
493,666
(10,536)
(272)
1,139,525

5,779
674,498
449,193
(13,450)
(272)
1,115,748

$1,501,477

$1,499,998

See accompanying notes to consolidated ﬁnancial statements.

38

BENCHMARK ELECTRONICS, INC. AND SUBSIDIARIES

Consolidated Statements of Income

(in thousands, except per share data)
Sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross proﬁt . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative expenses . . . . . . . . .
Restructuring charges . . . . . . . . . . . . . . . . . . . . . . . .
Thailand ﬂood related charges, net of insurance. . . . . . .
Income from operations . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest income. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income (expense) . . . . . . . . . . . . . . . . . . . . . . .
Income before income taxes . . . . . . . . . . . . . . . . . .
Income tax expense (beneﬁt) . . . . . . . . . . . . . . . . . . .
Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Earnings per share:

2012
$2,468,150
2,291,412
176,738
89,951
2,200
9,028
75,559
(1,580)
1,306
154
75,439
18,832
56,607

$

Year ended December 31,
2011
$2,253,030
2,114,195
138,835
89,665
4,515
3,362
41,293
(1,327)
1,768
(602)
41,132
(10,827)
51,959

$

2010
$2,402,143
2,214,728
187,415
92,245
6,724
—
88,446
(1,362)
1,621
(1,689)
87,016
7,258
79,758

$

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$
$

1.01
1.00

$
$

0.88
0.87

$
$

1.28
1.27

Weighted-average number of shares outstanding:

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

56,320
56,634

59,284
59,773

62,141
62,692

See accompanying notes to consolidated ﬁnancial statements.

39

BENCHMARK ELECTRONICS, INC. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income

(in thousands)
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income (loss):

Foreign currency translation adjustments . . . . . . . . . .
Unrealized gain on investments, net of tax . . . . . . . .
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Comprehensive income . . . . . . . . . . . . . . . . . . . .

2012
$56,607

993
1,476
445
$59,521

Year ended December 31,
2011
$51,959

(6,903)
526
(111)
$45,471

2010
$79,758

(2,318)
536
(187)
$77,789

The components of accumulated other comprehensive loss are as follows:

(in thousands)
Foreign currency translation losses . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized loss on investments, net of tax . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

December 31,

2012
$ (8,681)
(1,851)
(4)
$(10,536)

2011
$ (9,674)
(3,327)
(449)
$(13,450)

See accompanying notes to consolidated ﬁnancial statements.

40

BENCHMARK ELECTRONICS, INC. AND SUBSIDIARIES

Consolidated Statement of Shareholders’ Equity

Common
shares
$6,410

Additional
paid-in
capital

Retained
earnings
$732,956 $356,288

Accumulated
other
comprehensive
loss
$ (4,993)

Total
shareholders’
equity

Treasury
shares
$(272) $1,090,389

(in thousands)
Balances, December 31, 2009
Stock-based compensation

expense . . . . . . . . . . . . . . .
Shares repurchased and retired
Stock options exercised. . . . . .
Issuance of restricted shares,

Shares
64,097

—
(3,320)
290

—
(332)
29

5,415
(35,689)
3,223

—
(22,834)
—

net of forfeitures. . . . . . . . .

18

2

(2)

—

Excess tax beneﬁt of

stock-based compensation . .
Comprehensive income . . . . . .
Balances, December 31, 2010
Stock-based compensation

expense . . . . . . . . . . . . . . .
Shares repurchased and retired
Stock options exercised. . . . . .
Issuance of restricted shares,

—
—
61,085

—
(3,715)
257

—
—
6,109

1,235

—
— 79,758
413,212

707,138

—
(372)
26

5,097
(39,931)
2,545

—
(15,978)
—

net of forfeitures. . . . . . . . .

164

16

(16)

—

Excess tax shortfall of

stock-based compensation . .
Comprehensive income . . . . . .
Balances, December 31, 2011
Stock-based compensation

expense . . . . . . . . . . . . . . .
Shares repurchased and retired
Stock options exercised. . . . . .
Issuance of restricted shares,

—
—
57,791

—
(3,224)
375

—
—
5,779

(335)

—
— 51,959
449,193

674,498

—
(322)
38

6,270
(34,650)
4,619

—
(12,134)
—

net of forfeitures. . . . . . . . .

244

24

(24)

—

Excess tax beneﬁt of

—
—
—

—

—
—
—

—

5,415
(58,855)
3,252

—

—
(1,969)
(6,962)

—
—
(272)

1,235
77,789
1,119,225

—
—
—

—

—
—
—

—

5,097
(56,281)
2,571

—

—
(6,488)
(13,450)

—
—
(272)

(335)
45,471
1,115,748

—
—
—

—

—
—
—

—

6,270
(47,106)
4,657

—

stock-based compensation . .
Comprehensive income . . . . . .
Balances, December 31, 2012

—
—
55,186

—
—
$5,519

435

—
— 56,607
$651,148 $493,666

—
2,914
$(10,536)

—
—

435
59,521
$(272) $1,139,525

See accompanying notes to consolidated ﬁnancial statements.

41

BENCHMARK ELECTRONICS, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(in thousands)
Cash ﬂows from operating activities:

Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile net income to net cash provided by

operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . .
Asset impairment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Insurance recovery . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on liquidation of subsidiary . . . . . . . . . . . . . . . . . . .
Gain on the sale of property, plant and equipment. . . . . . . .
Stock-based compensation expense . . . . . . . . . . . . . . . . . .
Excess tax shortfall (beneﬁts) from stock-based

Year Ended December 31,
2011

2010

2012

$ 56,607

$ 51,959

$ 79,758

35,713
9,064
—
—
—
(229)
6,270

35,484
(17,991)
46,530
(56,152)
—
(190)
5,097

39,830
280
237
—
315
(69)
5,415

compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(76)

14

(1,176)

Changes in operating assets and liabilities:

Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other assets . . . . . . . . . . . . . . . . . . .
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by operations . . . . . . . . . . . . . . . . . .

Cash ﬂows from investing activities:

Proceeds from sales and redemptions of investments. . . . . . . .
Additions to property, plant and equipment . . . . . . . . . . . . . .
Proceeds from the sale of property, plant and equipment . . . . .
Additions to purchased software . . . . . . . . . . . . . . . . . . . . .
Thailand ﬂood property insurance proceeds . . . . . . . . . . . . . .
Net cash used in investing activities . . . . . . . . . . . . . . .

Cash ﬂows from ﬁnancing activities:

Proceeds from stock options exercised . . . . . . . . . . . . . . . . .
Excess tax (shortfall) beneﬁts from

stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . .
Principal payments on capital lease obligations . . . . . . . . . . .
Share repurchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt issuance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash used in ﬁnancing activities . . . . . . . . . . . . . . .
Effect of exchange rate changes . . . . . . . . . . . . . . . . . . . . . . .
Net increase (decrease) in cash and cash equivalents . . . . . . . . .
Cash and cash equivalents at beginning of year . . . . . . . . . . .
Cash and cash equivalents at end of year . . . . . . . . . . . . . . .

(34,359)
66,089
32,375
(21,081)
3,176
(2,402)
151,147

15,825
(47,911)
346
(1,124)
23,372
(9,492)

27,703
(72,666)
12,087
28,391
2,655
(8,137)
54,784

11,150
(71,396)
369
(601)
—
(60,478)

(40,190)
(48,008)
(18,480)
(16,675)
5,356
(1,427)
5,166

10,925
(35,778)
257
(261)
—
(24,857)

4,657

2,571

3,252

76
(419)
(47,106)
(931)
(43,723)
2,727
100,659
283,920
$384,579

(14)
(363)
(56,281)
—
(54,087)
(2,644)
(62,425)
346,345
$283,920

1,176
(300)
(58,855)
—
(54,727)
(480)
(74,898)
421,243
$346,345

See accompanying notes to consolidated ﬁnancial statements.

42

Notes to Consolidated Financial Statements
(amounts in thousands, except per share data, unless otherwise noted)

Note 1 — Summary of Signiﬁcant Accounting Policies

(a) Business

Benchmark Electronics, Inc. (the Company) is a Texas corporation that provides worldwide integrated
electronic manufacturing services. The Company provides services to original equipment manufacturers
(OEMs) of computers and related products for business enterprises, medical devices, industrial control
equipment (which includes equipment for the aerospace and defense industry), testing and instrumentation
products and telecommunication equipment. The Company has manufacturing operations located in the
Americas, Asia and Europe.

(b) Principles of Consolidation

The consolidated ﬁnancial statements include the ﬁnancial statements of Benchmark Electronics, Inc. and its
wholly owned and majority 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 at the date of purchase of
three months or less to be cash equivalents. Cash equivalents of $286.1 million and $155.0 million at
December 31, 2012 and 2011, respectively, consist primarily of money-market funds, certiﬁcates of deposit,
time deposits, commercial paper and U.S. Government backed Agency securities with an initial term of less
than three months.

(d) Allowance for Doubtful Accounts

Accounts receivable are recorded net of allowances for amounts not expected to be collected. In estimating
the allowance, management considers a speciﬁc customer’s ﬁnancial condition, payment history, and various
information or disclosures by the customer or other publicly available information. Accounts receivable are
charged off against the allowance after all reasonable efforts to collect the full amount (including litigation,
where appropriate) have been exhausted.

(e) Investments

Fair value is deﬁned as the exchange price that would be received for an asset or paid to transfer a liability
(an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction
between market participants on the measurement date. A three-tier fair value hierarchy of inputs is employed
to determine fair value measurements. Level 1 inputs are quoted prices (unadjusted) in active markets for
identical assets and liabilities. Level 2 inputs are observable prices that are not quoted on active exchanges,
such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; and
model-derived valuations whose inputs are observable or whose signiﬁcant value drivers are observable. Level
3 inputs are unobservable inputs employed for measuring the fair value of assets or liabilities. This hierarchy
requires the Company to use observable market data, when available, and to minimize the use of unobservable
inputs when determining fair value.

As of December 31, 2012, $12.2 million (par value) of long-term investments were recorded at fair value. The
long-term investments consist of auction rate securities, primarily secured by guaranteed student loans backed
by a U.S. government agency, and are classiﬁed as available-for-sale. Auction rate securities are adjustable
rate debt instruments whose interest rates were intended to reset every 7 to 35 days through an auction
process. Overall changes in the global credit and capital markets led to failed auctions for these securities
beginning in early 2008. These failed auctions, in addition to overall global economic conditions, impacted the
liquidity of these investments and resulted in the Company continuing to hold these securities beyond their
typical auction reset dates. The market for these types of securities remains illiquid as of December 31, 2012.
These securities are classiﬁed as long-term investments and the contractual maturity of these securities is over
ten years.

43

Notes to Consolidated Financial Statements
(amounts in thousands, except per share data, unless otherwise noted)

Note 1 — Summary of Signiﬁcant Accounting Policies − (continued)

These long-term investments were valued using Level 3 inputs as of December 31, 2012, as the assets were
subject to valuation using signiﬁcant unobservable inputs. The Company estimated the fair value of each
security with the assistance of an independent valuation ﬁrm using a discounted cash ﬂow model to calculate
the present value of projected cash ﬂows based on a number of inputs and assumptions including the security
structure and terms, the current market conditions and the related impact on the expected weighted-average
life, interest rate estimates and default risk of the securities.

As of December 31, 2012, the Company has recorded an unrealized loss of $1.9 million on the long-term
investments based upon this valuation. This unrealized loss reduced the fair value of the Company’s auction
rate securities as of December 31, 2012 to $10.3 million. These investments have been in an unrealized loss
position for greater than 12 months. During 2012, 2011 and 2010, the Company recorded unrealized gains of
$1.5 million, $0.5 million and $0.5 million, respectively, on its long-term investments.

The Company conducts periodic reviews to identify and evaluate each investment that has an unrealized loss.
An unrealized loss exists when the current fair value of an individual security is less than its amortized cost
basis. Due to the unrealized losses on the auction rate securities held, the Company has assessed whether the
calculated impairment is other-than-temporary. In performing this assessment, even though the Company has
no intention to sell the securities before the amortized cost basis is recovered and believes it is
more-likely-than-not that it will not be required to sell the securities prior to recovery, the Company has
performed additional analyses to determine if a portion of the unrealized loss is considered a credit loss. A
credit loss would be identiﬁed as the amount of the principal cash ﬂows not expected to be received over the
remaining term of the security as projected using the Company’s best estimates. The Company has assessed
each security for credit impairment, taking into account factors such as (i) the length of time and the extent to
which fair value has been below cost; (ii) activity in the market of the issuer which may indicate adverse
credit conditions; (iii) the payment structure of the security; and (iv) the failure of the issuer of the security to
make scheduled payments. The Company used an independent valuation ﬁrm to assist in making
these assessments.

Based on these assessments, the Company has determined that there is no credit loss associated with its
auction rate securities as of December 31, 2012, as shown by the cash ﬂows expected to be received over the
remaining life of the securities.

The following table provides a reconciliation of the beginning and ending balance of the Company’s auction
rate securities classiﬁed as long-term investments measured at fair value using signiﬁcant unobservable inputs
(Level 3 inputs):

(in thousands)
Balance as of January 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net unrealized gains included in other comprehensive income . . . . . .
Sales of investments at par value . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance as of December 31. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2012
$ 24,673
1,476
(15,825)
$ 10,324

2011
$ 35,297
526
(11,150)
$ 24,673

Unrealized losses still held . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 1,851

$ 3,327

The cumulative unrealized loss is included as a component of accumulated other comprehensive loss within
shareholders’ equity in the accompanying consolidated balance sheet. As of December 31, 2012, there were no
long-term investments measured at fair value using Level 1 or Level 2 inputs. All income generated from
these investments is recorded as interest income.

(f) Inventories

Inventories include material, labor and overhead and are stated at the lower of cost (principally ﬁrst-in, ﬁrst-
out method) or market.

44

Notes to Consolidated Financial Statements
(amounts in thousands, except per share data, unless otherwise noted)

Note 1 — Summary of Signiﬁcant Accounting Policies − (continued)

(g) 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 — 5 to 40 years for buildings and building improvements, 2 to 10 years for
machinery and equipment, 2 to 10 years for furniture and ﬁxtures and 2 to 5 years for vehicles. 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.

(h) Goodwill and Other Intangible Assets

Goodwill represents the excess of purchase price over fair value of net assets acquired. Goodwill and
intangible assets acquired in a business combination and determined to have an indeﬁnite useful life are not
amortized, but instead assessed for impairment at least annually. Intangible assets with estimable useful lives
are amortized over their respective estimated useful lives to their estimated residual values.

(i) Impairment of Long-Lived Assets and Goodwill

Long-lived assets, such as property, plant, and equipment, and purchased intangibles subject to amortization,
are 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 evaluated by a comparison
of the carrying amount of an asset to estimated undiscounted future cash ﬂows expected to be generated by
the asset. If the carrying amount of an asset exceeds its estimated undiscounted future cash ﬂows, an
impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the
estimated fair value of the asset. Assets to be disposed of would be separately disclosed and reported at the
lower of the carrying amount or estimated fair value less costs to sell, and are no longer depreciated. The
assets and liabilities of a disposed group classiﬁed as held for sale would be disclosed separately in the
appropriate asset and liability sections of the balance sheet.

In September 2011, the Financial Accounts Standards Board (FASB) issued an accounting standards update
that gives an entity the option to perform a qualitative assessment to determine whether or not it is required to
calculate the fair value of a reporting unit. Based on this qualitative assessment, if the entity determines that it
is not more likely than not that the reporting unit’s fair value is less than its carrying value, then the entity is
not required to perform the two-step goodwill impairment test. Effective January 1, 2012, the Company
adopted the provisions of this update and, in connection with its annual goodwill impairment assessment as of
December 31, 2012, concluded that goodwill was not impaired. The Company will continue to perform this
qualitative assessment for goodwill impairment on an annual basis, at a minimum, and whenever events and
changes in circumstances suggest that the carrying amount may be impaired. Circumstances that may lead to
the impairment of goodwill include unforeseen decreases in future performance or industry demand or the
restructuring of our operations as a result of a change in our business strategy.

The Company completed the annual two-step goodwill impairment test as of December 31, 2011 and 2010
and determined that goodwill was not impaired.

(j) 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 equivalents during the years ended December 31, 2012,
2011 and 2010. Stock equivalents include common shares issuable upon the exercise of stock options and
other equity instruments, and are computed using the treasury stock method. Under the treasury stock method,
the exercise price of a share, the amount of compensation cost, if any, for future service that the Company has
not yet recognized, and the amount of estimated tax beneﬁts that would be recorded in paid-in-capital, if any,
when the share is exercised are assumed to be used to repurchase shares in the current period.

45

Notes to Consolidated Financial Statements
(amounts in thousands, except per share data, unless otherwise noted)

Note 1 — Summary of Signiﬁcant Accounting Policies − (continued)

The following table sets forth the calculation of basic and diluted earnings per share.

(in thousands, except per share data)
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Denominator for basic earnings per share − weighted-average

Year Ended December 31,
2011
$51,959

2010
$79,758

2012
$56,607

number of common shares outstanding during the period. . . . .

56,320

59,284

62,141

Incremental common shares attributable to exercise of

outstanding dilutive options. . . . . . . . . . . . . . . . . . . . . . . . .

150

270

455

Incremental common shares attributable to outstanding restricted

shares, restricted stock units and phantom stock . . . . . . . . . . .
Denominator for diluted earnings per share. . . . . . . . . . . . . . . .

Basic earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Diluted earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . .

164
56,634

$

$

1.01

1.00

219
59,773

$

$

0.88

0.87

96
62,692

$

$

1.28

1.27

Options to purchase 3.7 million, 3.4 million and 2.7 million common shares in 2012, 2011 and 2010,
respectively, were not included in the computation of diluted earnings per share because their effect would
have been anti-dilutive.

(k) Revenue Recognition

Revenue from the sale of manufactured products built to customer speciﬁcations and excess inventory is
recognized when title and risk of ownership have passed, the price to the buyer is ﬁxed and determinable and
recoverability is reasonably assured, which generally is when the goods are shipped. To a lesser extent, the
Company also derives revenue from non-manufacturing services, such as product design, circuit board layout
and test development. Revenue from design, development and engineering services is recognized when the
services are performed and collectibility is reasonably certain. Such services provided under ﬁxed price
contracts are accounted for using the percentage of completion method. The Company assumes no signiﬁcant
obligations after shipment as the Company typically warrants workmanship only. Based on historical
experience, the warranty provision is immaterial.

(l) 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. The Company records a valuation allowance to reduce
its deferred tax assets to the amounts that is more likely than not to be realized. The Company has considered
the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in
assessing the need for the valuation allowance.

(m) Stock-Based Compensation

All share-based payments to employees, including grants of employee stock options, are recognized in the
ﬁnancial statements based on their fair values. The total compensation cost recognized for stock-based awards
was $6.3 million, $5.1 million and $5.4 million for 2012, 2011 and 2010, respectively. The total income tax
beneﬁt recognized in the income statement for stock-based awards was $2.1 million, $1.7 million and
$1.9 million for 2012, 2011 and 2010, respectively. The compensation expense for stock-based awards
includes an estimate for forfeitures and is recognized over the vesting period of the awards using the
straight-line method. Cash ﬂows from the tax beneﬁts resulting from tax deductions in excess of the
compensation cost recognized for stock-based awards (excess tax beneﬁts) are classiﬁed as cash ﬂows from

46

Notes to Consolidated Financial Statements
(amounts in thousands, except per share data, unless otherwise noted)

Note 1 — Summary of Signiﬁcant Accounting Policies − (continued)

ﬁnancing activities. Awards of restricted shares, restricted stock units, performance restricted stock units and
phantom stock are valued at the closing market price of the Company’s common shares on the date of grant.
For restricted stock unit awards with performance conditions, compensation expense is based on the
probability that the performance goals will be achieved, which is monitored by management throughout the
requisite service period. If it becomes probable, based on the Company’s expectation of performance during
the measurement period, that more or less than the previous estimate of the awarded shares will vest, an
adjustment to stock-based compensation expense will be recognized as a change in accounting estimate.

As of December 31, 2012, there was approximately $4.2 million of total unrecognized compensation cost
related to nonvested stock options. That cost is expected to be recognized over a weighted-average period of
2.0 years. As of December 31, 2012, there was $4.5 million of total unrecognized compensation cost related
to restricted share awards. That cost is expected to be recognized over a weighted-average period of 2.7 years.
As of December 31, 2012, there was $1.3 million of total unrecognized compensation cost related to restricted
stock units and phantom stock awards. That cost is expected to be recognized over a weighted-average period
of 2.2 years. As of December 31, 2012, there was $2.2 million of total unrecognized compensation cost
related to performance based restricted stock units. That cost is expected to be recognized over a
weighted-average period of 2.8 years.

During the years ended December 31, 2012, 2011 and 2010, the Company issued 0.4 million, 0.4 million and
61 thousand options, respectively. The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model. The weighted-average assumptions used to value the option grants
during the years ended December 31, 2012, 2011 and 2010 were as follows:

Year Ended December 31,
2011

2010

2012

Stock Options

Expected term of options . . . . . . . . . . . . . . . . . . .
Expected volatility . . . . . . . . . . . . . . . . . . . . . . . .
Risk-free interest rate . . . . . . . . . . . . . . . . . . . . . .
Dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . .

6.3 years
42%
1.305%
zero

6.2 years
41%
2.674%
zero

7.0 years
40%
2.94%
zero

The expected term of the options represents the estimated period of time until exercise and is based on
historical experience, giving consideration to the contractual terms, vesting schedules and expectations of
future plan participant behavior. Separate groups of plan participants that have similar historical exercise
behavior are considered separately for valuation purposes. Expected stock price volatility is based on the
historical volatility of the Company’s common shares. The risk-free interest rate is based on the U.S. Treasury
zero-coupon rates in effect at the time of grant with an equivalent remaining term. The dividend yield reﬂects
that the Company has not paid any cash dividends since inception and does not anticipate paying cash
dividends in the foreseeable future.

The weighted-average fair value per option granted during the years ended December 31, 2012, 2011 and
2010 was $6.83, $8.14 and $9.03, respectively. The total cash received as a result of stock option exercises for
the years ended December 31, 2012, 2011 and 2010 was approximately $4.7 million, $2.6 million and
$3.3 million, respectively. The actual tax beneﬁt realized as a result of stock option exercises and the vesting
of other share-based awards during 2012, 2011 and 2010 was $1.3 million, $0.9 million and $1.3 million,
respectively. For the years ended December 31, 2012, 2011 and 2010, the total intrinsic value of stock options
exercised was $1.4 million, $1.4 million and $2.1 million, respectively.

The Company issued performance based restricted stock unit awards to employees during 2012 and 2011. The
number of performance based restricted stock unit awards that will ultimately be earned will not be
determined until the end of the performance periods, which are December 31, 2014 and 2015, and may vary
from as low as zero to as high as three times the target number depending on the level of achievement of
certain performance goals. The level of achievement of these goals is based upon the audited ﬁnancial results

47

Notes to Consolidated Financial Statements
(amounts in thousands, except per share data, unless otherwise noted)

Note 1 — Summary of Signiﬁcant Accounting Policies − (continued)

of the Company for the last full calendar year within the performance period (the years ending December 31,
2014 and 2015). The performance goals consist of certain levels of achievement using the following ﬁnancial
metrics: revenue growth, operating income margin expansion, and return on invested capital. If the
performance goals are not met based on the Company’s ﬁnancial results, the applicable performance based
restricted stock unit awards will not vest and will be forfeited.

(n) 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.

(o) Fair Values of Financial Instruments

The Company’s ﬁnancial instruments consist of cash equivalents, accounts receivable, accrued liabilities,
accounts payable and capital lease obligations. The Company believes that the carrying value of these
instruments approximate their fair value. As of December 31, 2012, the Company’s long-term investments are
recorded at fair value. See Note 10.

(p) 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. Exchange losses arising from transactions denominated in a currency other than the functional
currency of the entity involved are included in other expense and totaled approximately $1.2 million,
$1.5 million and $2.4 million in 2012, 2011, and 2010, respectively.

(q) Recently Enacted Accounting Principles

In December 2011, the FASB issued an amendment to disclosures about offsetting assets and liabilities. The
amended standard requires an entity to disclose information about offsetting and related arrangements to
enable users of its ﬁnancial statements to understand the effect of those arrangements on its ﬁnancial position.
An entity is required to apply the amendments for annual reporting periods beginning on or after January 1,
2013, and interim periods within those annual periods. An entity should provide the disclosures required by
those amendments retrospectively for all comparative periods presented. The Company will adopt the
provisions of this guidance effective January 1, 2013. Adoption of this guidance is for disclosure purposes
only and will not have any impact on the Company’s consolidated ﬁnancial statements.

The Company has determined that all other recently issued accounting standards will not have a material
impact on its consolidated ﬁnancial position, results of operations and cash ﬂows, or do not apply to
its operations.

Note 2 — Inventories

Inventory costs are summarized as follows:

(in thousands)
Raw materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Work in process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

December 31,

2012
$213,027
67,221
43,793
$324,041

2011
$293,618
71,574
26,388
$391,580

48

Notes to Consolidated Financial Statements
(amounts in thousands, except per share data, unless otherwise noted)

Note 3 — Property, Plant and Equipment

Property, plant and equipment consists of the following:

(in thousands)
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Buildings and building improvements . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Machinery and equipment
Furniture and ﬁxtures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vehicles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Less accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . .

December 31,

2012

2011

$

6,172
85,668
390,237
6,799
893
14,200
2,147
506,116
(330,012)
$ 176,104

$

6,172
79,420
363,803
7,351
784
17,708
1,405
476,643
(312,983)
$ 163,660

Note 4 — Goodwill and Other Intangible Assets

Goodwill associated with the Company’s Asia business segment totaled $37.9 million at December 31, 2012,
2011 and 2010.

Other assets consist primarily of acquired identiﬁable intangible assets, capitalized purchased software costs
and assets held for sale. Other intangible assets as of December 31, 2012 and 2011 were as follows:

(in thousands)
Customer relationships
. . . . . . . . . . . . . . . . . . . . . .
Technology licenses . . . . . . . . . . . . . . . . . . . . . . . .
Other
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other intangible assets, December 31, 2012 . . . . . . . .

(in thousands)
Customer relationships
. . . . . . . . . . . . . . . . . . . . . .
Technology licenses . . . . . . . . . . . . . . . . . . . . . . . .
Other
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other intangible assets, December 31, 2011 . . . . . . . .

Gross
Carrying
Amount
$17,793
11,300
868
$29,961

Gross
Carrying
Amount
$17,763
11,300
868
$29,931

Accumulated
Amortization
$(10,702)
(7,880)
(142)
$(18,724)

Accumulated
Amortization
$ (8,916)
(6,974)
(118)
$(16,008)

Net
Carrying
Amount
$ 7,091
3,420
726
$11,237

Net
Carrying
Amount
$ 8,847
4,326
750
$13,923

Customer relationships are being amortized on a straight-line basis over a period of ten years. Technology
licenses are being amortized over their estimated useful lives in proportion to the economic beneﬁts
consumed. Amortization of other intangible assets for the years ended December 31, 2012, 2011 and 2010 was
$2.7 million, $4.6 million and $4.2 million, respectively.

The estimated future amortization expense of other intangible assets for each of the next ﬁve years is as
follows (in thousands):

Year ending December 31,
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Amount
$2,573
2,573
2,573
2,512
399

49

Notes to Consolidated Financial Statements
(amounts in thousands, except per share data, unless otherwise noted)

Note 4 — Goodwill and Other Intangible Assets − (continued)

During 2012, 2011 and 2010, $1.1 million, $0.6 million and $0.3 million, respectively, of purchased software
costs were capitalized. As of December 31, 2012 and 2011, purchased software, net of accumulated
amortization totaled $1.9 million and $1.9 million, respectively. The accumulated amortization of purchased
software costs at December 31, 2012 and 2011 was $24.1 million and $24.1 million, respectively. Capitalized
purchased software costs are amortized straight-line over the estimated useful life of the related software,
which ranges from 3 to 7 years.

As of both December 31, 2012 and 2011, the Company had an asset held for sale in other assets with a net
book value of $8.9 million. This asset is a manufacturing facility in Tianjin, China acquired in an acquisition
and is available for immediate sale. During 2008, the Company committed to a plan to divest its
Tianjin facility.

Note 5 — Borrowing Facilities

Under the terms of a credit agreement (the U.S. Credit Agreement), the Company has a $200 million ﬁve-year
revolving credit facility for general corporate purposes with a maturity date of July 30, 2017. The U.S. Credit
Agreement includes an accordion feature under which total commitments under the facility may be increased
by an additional $100 million, subject to satisfaction of certain conditions and lender approval.

Interest on outstanding borrowings under the U.S. Credit Agreement is payable quarterly, at the Company’s
option, at either LIBOR plus 1.75% to 2.75% or a prime rate plus 0.75% to 1.75%, based upon the
Company’s leverage ratio as speciﬁed in the U.S. Credit Agreement. A commitment fee of 0.30% to 0.40%
per annum (based upon the Company’s liquidity ratio as speciﬁed in the U.S. Credit Agreement) on the
unused portion of the revolving credit line is payable quarterly in arrears. As of December 31, 2012 and 2011,
the Company had no borrowings outstanding under the U.S. Credit Agreement and $200 million was available
for future borrowings.

The U.S. Credit Agreement is secured by the Company’s domestic inventory and accounts receivable, 100%
of the stock of the Company’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 domestic
subsidiaries. The U.S. Credit Agreement contains customary ﬁnancial covenants as to debt leverage and ﬁxed
charges, and restricts our ability to incur additional debt, pay dividends, repurchase shares, sell assets and
merge or consolidate with other persons. As of December 31, 2012, the Company was in compliance with all
such covenants and restrictions.

The Company’s Thailand subsidiary has a multi-purpose credit facility with Kasikornbank Public Company
Limited (the Thai Credit Facility) that provides for approximately $11.3 million (350 million Thai baht) in
working capital availability. The Thai Credit Facility is secured by land and buildings in Thailand. Availability
of funds under the Thai Credit Facility is reviewed annually and is currently accessible through October 2013.
As of December 31, 2012 and 2011, the Company’s Thailand subsidiary had no working capital
borrowings outstanding.

Note 6 — 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 the years ended
December 31, 2012, 2011 and 2010 was $9.1 million, $10.3 million and $11.0 million, respectively.

50

Notes to Consolidated Financial Statements
(amounts in thousands, except per share data, unless otherwise noted)

Note 6 — Commitments − (continued)

The Company is obligated under a capital lease that expires in 2023. As of December 31, 2012, property,
plant and equipment include the following amounts under capital leases (in thousands):

Buildings and building improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$12,207
(4,507)
$ 7,700

Capital lease obligations outstanding consist of the following:

(in thousands)
Capital lease obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less current installments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital lease obligations, less current installments . . . . . . . . . . . . . . . .

2012
$10,600
497
$10,103

2011
$11,019
419
$10,600

December 31,

Future minimum lease payments under noncancelable operating leases and future minimum capital lease
payments are as follows (in thousands):

Year ending December 31,
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total minimum lease payments . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: amount representing interest . . . . . . . . . . . . . . . . . . . . . . . . .
Present value of minimum lease payments . . . . . . . . . . . . . . . . . . .
Less: current installments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital lease obligations, less current installments . . . . . . . . . . . . . .

Capital
Leases
$ 1,550
1,581
1,613
1,645
1,678
9,373
$17,440
6,840
10,600
497
$10,103

Operating
Leases
$ 6,817
5,855
5,492
3,644
866
2,709
$25,383

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 performed 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 7 — Common Shares and Stock-Based Awards Plans

On October 12, 2012, the Company completed the repurchase of 6.7 million of its common shares under the
$100 million share repurchase program approved by the Board of Directors on March 3, 2010. On June 13,
2012, the Board of Directors approved the additional repurchase of up to $100 million of the Company’s
outstanding common shares (the 2012 Repurchase Program). As of December 31, 2012, the Company has
$88.0 million remaining under the 2012 Repurchase Program to repurchase additional shares.

Share purchases may be made in the open market, in privately negotiated transactions or block transactions, at
the discretion of the Company’s management and as market conditions warrant. Purchases will be funded
from available cash and may be commenced, suspended or discontinued at any time without prior notice.
Shares repurchased under the program will be retired. During 2012, the Company repurchased a total of
3.2 million common shares for $47.1 million at an average price of $14.59 per share. During 2011, the

51

Notes to Consolidated Financial Statements
(amounts in thousands, except per share data, unless otherwise noted)

Note 7 — Common Shares and Stock-Based Awards Plans − (continued)

Company repurchased a total of 3.7 million common shares for $56.3 million at an average price of $15.13
per share. During 2010, the Company repurchased a total of 3.3 million common shares for $58.9 million at
an average price of $17.70 per share.

The Benchmark Electronics, Inc. 2000 Stock Awards Plan (the 2000 Plan) and the Benchmark Electronics,
Inc. 2010 Omnibus Incentive Compensation Plan (the 2010 Plan) authorize 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 shares, restricted stock units, stock appreciation rights, performance
compensation awards, phantom stock awards and deferred share units, or any combination thereof, to any
director, officer, employee or consultant (including any prospective director, officer, employee or consultant) of
the Company. Stock options are granted to employees with an exercise price equal to the market price of the
Company’s common shares on the date of grant, generally vest over a four-year period from the date of grant
and have a term of ten years. Restricted shares, restricted stock units and phantom stock awards granted to
employees generally vest over a four-year period from the date of grant, subject to the continued employment
of the employee by the Company. The 2000 Plan expired on February 16, 2010 and no additional grants can
be made under that plan. The 2010 Plan was approved by the Company’s shareholders on May 18, 2010 and
replaced the 2000 Plan. Members of the Board of Directors who are not employees of the Company hold
awards under the Benchmark Electronics, Inc. 2002 Stock Option Plan for Non-Employee Directors (the 2002
Plan). Stock options were granted pursuant to the 2002 Plan upon the occurrence of the non-employee
director’s election or re-election to the Board of Directors. All awards under the 2002 Plan were fully vested
upon the date of grant and have a term of ten years. The 2002 Plan was approved by the Company’s
shareholders on May 14, 2002 and expired February 26, 2012. No additional grants may be made under the
2002 Plan. Non-employee directors are currently eligible to receive equity awards under the 2010 Plan.
Beginning in 2011, awards under the 2010 Plan to non-employee directors were in the form of restricted stock
units, which vest in equal quarterly installments over a one-year period, starting from the grant date. As of
December 31, 2012, 3.0 million additional common shares are available for issuance under the Company’s
existing plans.

The following table summarizes the activities relating to the Company’s stock options:

(in thousands, except per share data)
Outstanding at December 31, 2009 . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited or expired . . . . . . . . . . . . . . . . . . . . .
Outstanding at December 31, 2010 . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited or expired . . . . . . . . . . . . . . . . . . . . .
Outstanding at December 31, 2011 . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited or expired . . . . . . . . . . . . . . . . . . . . .
Outstanding at December 31, 2012 . . . . . . . . . . .

Number of
Options
5,531
61
(290)
(477)
4,825
399
(257)
(442)
4,525
432
(375)
(342)
4,240

Weighted-
Average
Exercise
Price
$19.20
19.41
11.21
24.32
19.18
18.56
9.98
18.74
19.69
15.77
12.42
20.42
$19.88

Exercisable at December 31, 2012 . . . . . . . . . . .

3,517

$20.46

52

Weighted-
Average
Remaining
Contractual
Term (Years)

Aggregate
Intrinsic Value

4.75

3.96

$2,601

$2,251

Notes to Consolidated Financial Statements
(amounts in thousands, except per share data, unless otherwise noted)

Note 7 — Common Shares and Stock-Based Awards Plans − (continued)

The aggregate intrinsic value in the table above is before income taxes and is calculated as the difference
between the exercise price of the underlying options and the Company’s closing stock price as of the last
business day of the year ended December 31, 2012 for options that had exercise prices that were below the
closing price.

At December 31, 2012, 2011 and 2010, the number of options exercisable was 3.5 million, 3.7 million and
3.6 million, respectively, and the weighted-average exercise price of those options was $20.46, $20.32 and
$20.40, respectively.

The following table summarizes the activities relating to the Company’s restricted shares:

(in thousands, except per share data)
Outstanding at December 31, 2009 . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outstanding at December 31, 2010 . . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outstanding at December 31, 2011 . . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outstanding at December 31, 2012 . . . . . . . . . . . . . . . . . . . . . . . .

Shares
290
(105)
(7)
178
195
(66)
(63)
244
209
(87)
(26)
340

Weighted-
Average
Grant Date
Fair Value
$16.67
15.81
17.02
17.17
18.57
16.66
17.92
18.23
15.56
17.57
17.49
$16.81

The following table summarizes the activities relating to the Company’s time based restricted stock units and
phantom stock awards:

(in thousands, except per share data)
Outstanding at December 31, 2009 . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outstanding at December 31, 2010 . . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outstanding at December 31, 2011 . . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outstanding at December 31, 2012 . . . . . . . . . . . . . . . . . . . . . . . .

Shares
81
(26)
(8)
47
86
(32)
(18)
83
95
(61)
(14)
103

Weighted-
Average
Grant Date
Fair Value
$16.50
15.33
17.04
17.05
17.77
16.66
17.37
17.88
15.50
16.35
17.07
$16.70

53

Notes to Consolidated Financial Statements
(amounts in thousands, except per share data, unless otherwise noted)

Note 7 — Common Shares and Stock-Based Awards Plans − (continued)

The following table summarizes the activities related to the Company’s performance based restricted stock
unit awards:

(in thousands, except per share data)
Outstanding at December 31, 2010 . . . . . . . . . . . . . . . . . . . . . . . .
Granted(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outstanding at December 31, 2011 . . . . . . . . . . . . . . . . . . . . . . . .
Granted(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outstanding at December 31, 2012 . . . . . . . . . . . . . . . . . . . . . . . .

Shares
—
93
(25)
68
103
(7)
164

Weighted-
Average
Grant Date
Fair Value
$ —
18.57
18.57
18.57
15.11
18.57
$16.39

(1) Represents target number of shares that can vest based on the achievement of certain performance criteria

Note 8 — Income Taxes

Income tax expense (beneﬁt) based on income before income taxes consists of:

(in thousands)
Current:

U.S. Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State and local
. . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Deferred:

U.S. Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State and local
. . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Year Ended December 31,
2011

2010

2012

$

776
640
8,352
9,768

9,914
1,560
(2,410)
9,064
$18,832

$

75
86
7,003
7,164

(16,963)
442
(1,470)
(17,991)
$(10,827)

$ 300
948
5,730
6,978

(407)
(52)
739
280
$7,258

Worldwide income before income taxes consisted of the following:

(in thousands)
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Year Ended December 31,
2011
$ 5,405
35,727
$41,132

2010
$27,650
59,366
$87,016

2012
$27,538
47,901
$75,439

54

Notes to Consolidated Financial Statements
(amounts in thousands, except per share data, unless otherwise noted)

Note 8 — Income Taxes − (continued)

Income tax expense (beneﬁt) differed from the amounts computed by applying the U.S. Federal statutory
income tax rate to income before income taxes as a result of the following:

(in thousands)
Tax at statutory rate . . . . . . . . . . . . . . . . . . . . . . . .
State taxes, net of federal tax effect . . . . . . . . . . . . . .
Effect of foreign operations and tax incentives . . . . . .
Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . .
Thailand reserve for uncertain tax beneﬁts . . . . . . . . .
. . . . . . . . . . . . . . . .
Settlement of foreign tax audits
Intercompany transactions . . . . . . . . . . . . . . . . . . . .
Losses in foreign jurisdictions for which no beneﬁt has
been provided . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . .

Other
Total income tax expense (beneﬁt)

2012
$ 26,404
2,012
(11,710)
(44)
—
—
—

Year Ended December 31,
2011
$ 14,396
343
(12,442)
(23,674)
7,056
(2,710)
2,801

2010
$ 30,456
582
(13,021)
(10,657)
—
—
(1,321)

927
1,243
$ 18,832

3,068
335
$(10,827)

63
1,156
$ 7,258

The tax effects of temporary differences that give rise to signiﬁcant portions of the deferred tax assets and
deferred tax liabilities are presented below:

(in thousands)
Deferred tax assets:
Carrying value of inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued liabilities and allowances deductible for tax purposes on a

cash basis

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net operating loss carryforwards . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax credit carryforwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other

Less: valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net deferred tax assets

Deferred tax liabilities:
Plant and equipment, due to differences in depreciation . . . . . . . . . .
Other
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross deferred tax liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net deferred tax asset

Recorded as:
Current deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-current deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-current deferred tax liabilities
. . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net deferred tax asset

December 31,

2012

2011

$ 2,786

$ 2,240

8,956
10,526
8,251
39,670
5,848
7,564
83,601
(41,858)
41,743

(3,887)
(1,188)
(5,075)
$ 36,668

$ 8,889
29,535
(1,756)
$ 36,668

5,367
14,397
7,398
49,561
5,400
9,850
94,213
(42,524)
51,689

(4,586)
(1,508)
(6,094)
$ 45,595

$ 8,175
37,420
—
$ 45,595

The net change in the total valuation allowance for the years ended December 31, 2012, 2011 and 2010 was a
decrease of $0.7 million, $19.3 million and $11.1 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

55

Notes to Consolidated Financial Statements
(amounts in thousands, except per share data, unless otherwise noted)

Note 8 — Income Taxes − (continued)

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 as of December 31, 2012. During 2011, the
Company evaluated the recoverability of its deferred tax assets using the criteria described above and
concluded that the Company’s projected future taxable income in the U.S. is sufficient to utilize additional net
operating loss carryforwards and other deferred tax assets. As a result, the Company reduced its valuation
allowance by $19.1 million in the U.S. During 2010, the valuation allowance on U.S. net deferred tax assets
was reduced by $10.5 million as a result of utilizing U.S. net operating losses and other deferred tax assets
during the year.

As of December 31, 2012, the Company had $76.0 million in U.S. Federal operating loss carryforwards which
will expire from 2022 to 2031, state operating loss carryforwards of approximately $90.4 million which will
expire from 2017 to 2031, foreign operating loss carryforwards of approximately $37.1 million with indeﬁnite
carryforward periods, and foreign operating loss carryforwards of approximately $6.7 million which will
expire at varying dates through 2021. 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. The Company
has U.S. federal tax credit carryforwards of $4.2 million which will expire at varying dates through 2031. The
Company has state tax credit carryforwards of $1.7 million which will expire at varying dates through 2027.

Cumulative undistributed earnings of certain foreign subsidiaries amounted to approximately $534 million as
of December 31, 2012. The Company considers earnings from 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). Determination of the amount of any unrecognized deferred tax liability on these undistributed
earnings is not practical.

The Company has been granted certain tax incentives, including tax holidays, for its subsidiaries in China,
Malaysia and Thailand that will expire at various dates, unless extended or otherwise renegotiated, through
2012, 2015 and 2018, respectively, and are subject to certain conditions with which the Company expects to
comply. The net impact of these tax incentives was to lower income tax expense for the years ended
December 31, 2012, 2011, and 2010 by approximately $8.0 million (approximately $0.14 per diluted share),
$10.5 million (approximately $0.18 per diluted share) and $8.7 million (approximately $0.14 per diluted
share), respectively, as follows:

(in thousands)
China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Malaysia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thailand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Year Ended December 31,
2011
$ 1,474
—
9,036
$10,510

2010
$ 498
696
7,490
$8,684

2012
$2,449
992
4,594
$8,035

The Company must determine whether it is ‘‘more-likely-than-not’’ that a tax position will be sustained upon
examination, including resolution of any related appeals or litigation processes, based on the technical merits
of the position. Once it is determined that a position meets the more-likely-than-not recognition threshold, the
position is measured to determine the amount of beneﬁt to recognize in the ﬁnancial statements. As of

56

Notes to Consolidated Financial Statements
(amounts in thousands, except per share data, unless otherwise noted)

Note 8 — Income Taxes − (continued)

December 31, 2012, the total amount of the reserve for uncertain tax beneﬁts including interest and penalties
is $21.3 million. A reconciliation of the beginning and ending amount of unrecognized tax beneﬁts, excluding
interest and penalties, is as follows:

(in thousands)
Balance as of January 1 . . . . . . . . . . . . . . . . . . . . .
Additions related to prior year tax positions . . . . . . . .
Decreases related to prior year tax positions . . . . . . . .
Decreases as a result of a lapse of the applicable statute
of limitations in current year . . . . . . . . . . . . . . . . .
Balance as of December 31 . . . . . . . . . . . . . . . . . . .

2012
$18,091
141
(162)

—
$18,070

December 31,
2011
$14,759
7,056
(3,724)

—
$18,091

2010
$16,036
120
—

(1,397)
$14,759

The increase in the total amount of unrecognized tax beneﬁts reserve during 2011 is primarily the result of
recording an income tax reserve against an income tax receivable that the Company had previously recorded
for a subsidiary in Thailand offset by a decrease in the unrecognized tax beneﬁts reserve for a settlement of
income tax audits outside the United States. The decreases in the unrecognized tax beneﬁts reserve during
2010 are primarily the result of the expiration of the statute of limitations for worthless stock deductions and
intercompany transactions.

The reserve is classiﬁed as a current or long-term liability in the consolidated balance sheet based on the
Company’s expectation of when the items will be settled. The Company records interest expense and penalties
accrued in relation to uncertain income tax beneﬁts as a component of current income tax expense. The total
amount of interest and penalties included in income tax expense during the year ended December 31, 2012,
2011 and 2010 was $0.0 million, $(0.2) million and $(0.3) million, respectively. The amount of accrued
potential interest and penalties on unrecognized tax beneﬁts included in the reserve as of December 31, 2012
is $1.6 million and $1.6 million, respectively. A subsidiary of the Company in Thailand has ﬁled for a refund
of $8.4 million of previously paid income taxes applicable to the years 2004 and 2005, which is included in
other assets. The Thailand tax authorities have conducted an initial examination of the applicable refund
ﬁlings. The Company received official notiﬁcation that the tax authorities have rejected its refund claim during
the fourth quarter of 2012. The Company has ﬁled an appeal of the rejected refund claim as management
believes that the conclusions of the Thailand tax authorities are incorrect. During 2011, the Company recorded
a reserve for uncertain beneﬁts of $7.1 million against this refund claim.

The Company and its subsidiaries in Brazil, China, Ireland, Luxembourg, Malaysia, Mexico, the Netherlands,
Romania, Singapore, Thailand and the United States remain open to examination by the various local taxing
authorities, in total or in part, for ﬁscal years 2004 to 2012.

The Company is subject to examination by tax authorities for varying periods in various U.S. and foreign tax
jurisdictions. During the course of such examinations disputes occur as to matters of fact and/or law. Also, in
most tax jurisdictions the passage of time without examination will result in the expiration of applicable
statutes of limitations thereby precluding the taxing authority from conducting an examination of the tax
period(s) for which such statute of limitation has expired. The Company believes that it has adequately
provided for its tax liabilities.

Note 9 — 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.

57

Notes to Consolidated Financial Statements
(amounts in thousands, except per share data, unless otherwise noted)

Note 9 — Major Customers − (continued)

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 the ten largest customers represented 56%, 53% and 47% of total sales for 2012, 2011 and 2010,
respectively. Sales to our largest customer were as follows for the indicated periods:

(in thousands)
International Business Machines Corporation . . . . . . .

2012
$506,126

Year ended December 31,
2011
$319,411

2010
$*

*

amount is less than 10% of total sales

Note 10 — Financial Instruments and Concentration of Credit Risk

The carrying amounts of cash equivalents, accounts receivable, accrued liabilities, accounts payable and
capital lease obligations approximate fair value. As of December 31, 2012, the Company’s investments are
recorded at fair value. See Note 1(e). As of December 31, 2012, the Company had no signiﬁcant off-balance
sheet concentrations of credit risk such as foreign currency exchange contracts or other hedging arrangements.
Financial instruments that subject the Company to credit risk consist of cash and cash equivalents, investments
and trade accounts receivable. Management maintains the majority of the Company’s cash and cash
equivalents with ﬁnancial institutions. One of the most signiﬁcant credit risks is the ultimate realization of
accounts receivable. This risk is mitigated by (i) sales to well established companies, (ii) ongoing credit
evaluation of customers, and (iii) frequent contact with customers, thus enabling management to monitor
current changes in business operations and to respond accordingly. Management considers these concentrations
of credit risks in establishing our allowance for doubtful accounts and believes these allowances are adequate.
The Company’s largest customer represented approximately 23% and 21% of its gross accounts receivable as
of December 31, 2012 and 2011, respectively.

Note 11 — Concentrations of Business Risk

Substantially all of the Company’s sales are derived from manufacturing services 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.

58

Notes to Consolidated Financial Statements
(amounts in thousands, except per share data, unless otherwise noted)

Note 12 — Segment and Geographic Information

The Company has manufacturing facilities in the Americas, Asia and Europe to serve its customers. The
Company is operated and managed geographically, and management evaluates performance and allocates the
Company’s resources on a geographic basis. Intersegment sales are generally recorded at prices that
approximate arm’s length transactions. Operating segments’ measure of proﬁtability is based on income from
operations. 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, Asia, and Europe.
Information about operating segments was as follows:

(in thousands)
Net sales:

Americas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . .
Elimination of intersegment sales

Depreciation and amortization:

Americas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Income from operations:

Americas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate and intersegment eliminations . . . . . . . . .

Capital expenditures:

Americas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total assets:

Americas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate and other . . . . . . . . . . . . . . . . . . . . . . .

Year Ended December 31,
2011

2010

2012

$1,440,298
978,093
139,684
(89,925)
$2,468,150

$1,360,943
867,008
166,730
(141,651)
$2,253,030

$1,538,034
864,627
164,196
(164,714)
$2,402,143

$

$

$

$

$

$

14,755
15,180
2,544
3,234
35,713

60,320
51,978
1,117
(37,856)
75,559

19,437
25,636
2,274
1,688
49,035

$

$

$

$

$

$

16,670
12,859
2,664
3,291
35,484

46,170
30,804
7
(35,688)
41,293

18,008
47,413
4,592
1,984
71,997

$

$

$

$

$

$

20,031
13,444
2,913
3,442
39,830

64,632
57,721
3,488
(37,395)
88,446

18,486
14,283
2,233
1,036
36,038

$ 569,212
636,481
200,563
95,221
$1,501,477

$ 650,998
610,596
197,132
41,272
$1,499,998

$ 583,724
515,414
243,872
134,058
$1,477,068

59

Notes to Consolidated Financial Statements
(amounts in thousands, except per share data, unless otherwise noted)

Note 12 — Segment and Geographic Information − (continued)

Geographic net sales information provided below reﬂects the destination of the product shipped. Long-lived
assets information is based on the physical location of the asset.

(in thousands)
Geographic net sales:

United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other

Long-lived assets:

United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other

Year Ended December 31,
2011

2010

2012

$1,739,794
398,890
273,560
55,906
$2,468,150

$1,518,940
346,267
333,781
54,042
$2,253,030

$

76,216
107,151
10,948
15,200
$ 209,515

$

70,756
98,675
11,817
17,744
$ 198,992

$1,764,544
216,599
367,599
53,401
$2,402,143

$

72,386
67,365
9,785
16,237
$ 165,773

Note 13 — Employee Beneﬁt Plans

The Company has a deﬁned contribution plan qualiﬁed under Section 401(k) of the Internal Revenue Code for
the beneﬁt of all its U.S. employees. Under the provisions of the plan, the Company will match a portion of
each participant’s contribution upon completion of one year of service. The Company may also make
discretionary contributions to the plan. During 2012, 2011 and 2010, the Company made contributions to the
plan of approximately $3.5 million, $3.5 million and $3.5 million, respectively. The Company also has deﬁned
contribution beneﬁt plans for certain of its international employees primarily dictated by the custom of the
regions in which it operates. During 2012, 2011 and 2010, the Company made contributions to the
international plans of approximately $0.1 million, $0.3 million and $0.3 million, respectively.

Note 14 — Contingencies

The Company is involved in various legal actions arising in the ordinary course of business. In the opinion of
management, the ultimate disposition of these other matters will not have a material adverse effect on the
Company’s consolidated ﬁnancial position or results of operations.

Note 15 — Restructuring Charges

The Company has undertaken initiatives to restructure its business operations with the intention of improving
utilization and realizing cost savings in the future. These initiatives have included changing the number and
location of production facilities, largely to align capacity and infrastructure with current and anticipated
customer demand. This alignment includes transferring programs from higher cost geographies to lower cost
geographies. The process of restructuring entails, among other activities, moving production between facilities,
reducing staff levels, realigning our business processes and reorganizing our management.

The Company recognized restructuring charges during 2012, 2011, 2010 and 2009 primarily related to the
closure of facilities, capacity reduction and reductions in workforce in certain facilities worldwide. These
charges were recorded pursuant to plans developed and approved by management.

60

Notes to Consolidated Financial Statements
(amounts in thousands, except per share data, unless otherwise noted)

Note 15 — Restructuring Charges − (continued)

The following table summarizes the 2012 activity in the accrued restructuring balances related to the various
restructuring activities initiated prior to December 31, 2012:

(in thousands)
2012 Restructuring:

Severance . . . . . . . . . . . . . . . . .
Lease facility costs
. . . . . . . . . .
Other exit costs . . . . . . . . . . . . .

2011 Restructuring:

Severance . . . . . . . . . . . . . . . . .
Lease facility costs
. . . . . . . . . .
Other exit costs . . . . . . . . . . . . .

2010 Restructuring:

Severance . . . . . . . . . . . . . . . . .
Other exit costs . . . . . . . . . . . . .

2009 Restructuring:

Lease facility costs

. . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . . . .

Balance as of
December 31,
2011

Restructuring
Charges

Cash Payment

Foreign
Exchange
Adjustments

Balance as of
December 31,
2012

$ —
—
—
—

189
1,664
—
1,853

34
20
54

402
402
$2,309

$1,529
55
209
1,793

408
(153)
17
272

(4)
52
48

87
87
$2,200

$ (998)
(54)
(45)
(1,097)

(611)
(1,474)
(17)
(2,102)

(30)
(72)
(102)

(489)
(489)
$(3,790)

$ 7
(1)
2
8

14
(24)
—
(10)

—
—
—

—
—
$ (2)

$538
—
166
704

—
13
—
13

—
—
—

—
—
$717

The components of the restructuring charges initiated during 2012 were as follows:

(in thousands)
Severance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Facility lease costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other exit costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Americas
$494
—
—
$494

Europe
$531
—
176
$707

Asia
$504
55
33
$592

Total
$1,529
55
209
$1,793

During 2012, the Company recognized $1.5 million of employee termination costs associated with the
involuntary terminations of 139 employees in connection with reductions in workforce of certain facilities
worldwide. The identiﬁed involuntary employee terminations by reportable geographic region amounted to
approximately 68, 61 and 10 for the Americas, Asia and Europe, respectively.

61

Notes to Consolidated Financial Statements
(amounts in thousands, except per share data, unless otherwise noted)

Note 15 — Restructuring Charges − (continued)

The following table summarizes the 2011 activity in the accrued restructuring balances related to the various
restructuring activities initiated prior to December 31, 2011:

(in thousands)
2011 Restructuring:

Severance . . . . . . . . . . .
Lease facility costs
. . . .
Other exit costs . . . . . . .

2010 Restructuring:

Severance . . . . . . . . . . .
Other exit costs . . . . . . .

2009 Restructuring:

Lease facility costs
. . . .
Other exit costs . . . . . . .

Total . . . . . . . . . . . . . . . .

Balance as of
December 31,
2010

Restructuring
Charges

Cash Payment

Non-Cash
Activity

Foreign
Exchange
Adjustments

Balance as of
December 31,
2011

$ —
—
—
—

1,767
709
2,476

1,506
27
1,533
$4,009

$2,386
1,958
514
4,858

(503)
181
(322)

—
(21)
(21)
$4,515

$(2,215)
(294)
(159)
(2,668)

(1,317)
(872)
(2,189)

(1,161)
(6)
(1,167)
$(6,024)

$ —
—
(355)
(355)

—
—
—

—
—
—
$(355)

$ 18
—
—
18

87
2
89

57
—
57
$164

$ 189
1,664
—
1,853

34
20
54

402
—
402
$2,309

The components of the restructuring charges initiated during 2011 were as follows:

(in thousands)
Severance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Facility lease costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other exit costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Americas
$421
—
22
$443

Europe
$1,829
1,335
203
$3,367

Asia
$ 136
623
289
$1,048

Total
$2,386
1,958
514
$4,858

During 2011, the Company recognized $2.4 million of employee termination costs associated with the
involuntary terminations of 196 employees in connection with reductions in workforce of certain facilities
worldwide. In Europe, these involuntary terminations were in connection with the closure of the Dublin,
Ireland facility. The identiﬁed involuntary employee terminations by reportable geographic region amounted to
approximately 107, 38 and 51 for the Americas, Asia and Europe, respectively. The Company also recorded
approximately $2.0 million for facility lease obligations and approximately $0.5 million for other exit costs,
including $0.4 million of asset impairments associated with the closure of certain leased facilities.

The components of the restructuring charges initiated during 2010 were as follows:

(in thousands)
Severance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Facility lease costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other exit costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Americas
$1,388
494
369
$2,251

Europe
$1,374
—
137
$1,511

Asia
$1,384
—
679
$2,063

Total
$4,146
494
1,185
$5,825

During 2010, the Company recognized $4.2 million of employee termination costs associated with the
involuntary terminations of 751 employees in connection with reductions in workforce of certain facilities.
The identiﬁed involuntary employee terminations by reportable geographic region amounted to approximately
286, 421 and 44 for the Americas, Asia and Europe, respectively. The Company also recorded approximately
$0.5 million for facility lease obligations and approximately $1.2 million for other exit costs, including
$0.2 million of asset impairments associated with the closure of certain leased facilities.

62

Notes to Consolidated Financial Statements
(amounts in thousands, except per share data, unless otherwise noted)

Note 16 — Thailand Flood Related Charges

The Company’s facilities in Ayudhaya, Thailand were ﬂooded and remained closed from October 13, 2011 to
December 20, 2011. As a result of the ﬂooding and temporary closing of these facilities, the Company
recognized estimated property losses of $46.2 million and incurred $13.4 million of ﬂood related costs during
the three months ended December 31, 2011. The Company carried property and business interruption
insurance with a combined limit for real and personal property as well as business interruption insurance of
approximately $300 million. As such, during the three months ended December 31, 2011, the Company
recorded estimated recoveries from insurance for these property losses and ﬂood related costs totaling
$56.2 million, including $46.2 million of property losses from the involuntary conversion of property, plant
and equipment and inventory and $10.0 million of other costs directly related to the ﬂooding in Thailand.

During the year ended December 31, 2012, the Company reduced the estimated property losses and the
corresponding estimated insurance recoveries for these property losses by $5.1 million. In addition, the
Company received $58.2 million of insurance proceeds which exceeded our previously recorded insurance
receivable by $7.1 million. The insurance proceeds included $48.2 million for Thailand property losses and
$10.0 million for other ﬂood related costs. As of December 31, 2012, the Company has collected its recorded
insurance receivable for these property losses and ﬂood related costs.

During the year ended December 31, 2012, the Company recognized additional Thailand ﬂood related charges
totaling $16.1 million, which were offset by the insurance recoveries totaling $7.1 million in excess of
previously recognized inventory and property, plant and equipment losses. While all of these charges consist
of costs directly attributable to the Thailand ﬂood which the Company expects to recover from its insurance,
the Company will record additional insurance recoveries when the appropriate recognition criteria have been
met. The Company cannot estimate the timing of the receipt of insurance proceeds it will ultimately realize.
The Company does not expect to incur signiﬁcant additional Thailand ﬂood related charges. As a result of the
ﬂooding, the Company has been unable to renew or otherwise obtain adequate cost-effective ﬂood insurance
to cover assets at its facilities in Thailand. The Company continues to investigate all ﬂood risk-mitigation
alternatives in Thailand. In the event the Company was to experience a signiﬁcant uninsured loss in Thailand
or elsewhere, it could have a material adverse effect on its business, ﬁnancial condition and results of
operations.

Note 17 — 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 2012, 2011 and 2010. 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.

(in thousands, except per share data)
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . .
Gross proﬁt
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . .
Earnings per common share:

1st
$593,417
40,508
5,598

2012 Quarter

2nd
$630,031
45,991
13,580

3rd
$610,769
44,780
19,314

4th
$633,933
45,459
18,115

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . .

0.10
0.10

0.24
0.24

0.35
0.34

0.33
0.33

63

Notes to Consolidated Financial Statements
(amounts in thousands, except per share data, unless otherwise noted)

Note 17 — Quarterly Financial Data (Unaudited) − (continued)

(in thousands, except per share data)
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross proﬁt
. . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . .
Earnings per common share:

2011 Quarter

1st
$538,312
37,624
14,513

2nd
$585,549
37,751
14,701

3rd
$570,083
34,635
19,867

4th
$559,086
28,825
2,878

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . .

0.24
0.24

0.24
0.24

0.34
0.34

0.05
0.05

(in thousands, except per share data)
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross proﬁt
. . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . .
Earnings per common share:

2010 Quarter

1st
$571,905
45,237
18,142

2nd
$589,449
46,254
20,137

3rd
$613,864
47,192
22,469

4th
$626,925
48,732
19,010

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . .

0.29
0.28

0.32
0.32

0.36
0.36

0.31
0.31

Note 18 — Supplemental Cash Flow and Non-Cash Information

The following is additional information concerning supplemental disclosures of cash payments.

(in thousands)
Income taxes paid, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Year ended December 31,
2011
$7,759
$1,290

2010
$8,577
$1,324

2012
$11,975
$ 1,353

Non-cash investing activity:
Additions to property, plant and equipment in accounts payable . . . .

$ 2,020

$ —

$ —

64

Report of Independent Registered Public Accounting Firm

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, 2012 and 2011, and the related consolidated statements of income,
comprehensive income, shareholders’ equity and cash ﬂows for each of the years in the three-year period
ended December 31, 2012. These consolidated ﬁnancial statements are the responsibility of Benchmark
Electronics, Inc.’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 the standards of the Public Company Accounting Oversight
Board (United States). 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 opinions.

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, 2012 and 2011, and
the results of their operations and their cash ﬂows for each of the years in the three-year period ended
December 31, 2012, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States), Benchmark Electronics, Inc.’s internal control over ﬁnancial reporting as of December 31,
2012, based on criteria established in Internal Control — Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO), and our report dated February 28, 2013
expressed an unqualiﬁed opinion on the effectiveness of Benchmark Electronics, Inc.’s internal control over
ﬁnancial reporting.

(signed) KPMG LLP

Houston, Texas
February 28, 2013

65

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 U.S. generally accepted accounting principles 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 safeguarded 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 independent, outside directors, has reviewed all ﬁnancial data
included in this report. The committee meets periodically with the Company’s management and independent
registered public accountants on ﬁnancial reporting matters. The independent registered 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 registered public accountants is to render a professional, independent opinion on
management’s ﬁnancial statements to the extent required by the standards of the Public Company Accounting
Oversight Board (United States). Benchmark’s responsibility is to conduct its affairs according to the highest
standards of personal and corporate conduct.

66

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

Item 9A. Controls and Procedures.

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

As of the end of the period covered by this report, the Company’s management (with the participation of its
chief executive officer and chief ﬁnancial officer) conducted an evaluation pursuant to Rule 13a-15
promulgated under the Securities Exchange Act of 1934, as amended (the Exchange Act), of the effectiveness
of the design and operation of the Company’s disclosure controls and procedures. Based on this evaluation,
the Company’s chief executive officer and chief ﬁnancial officer concluded that as of the end of the period
covered by this report such disclosure controls and procedures were effective to provide reasonable assurance
that information required to be disclosed by the Company in reports it ﬁles or submits under the Exchange
Act is recorded, processed, summarized and reported within the time periods speciﬁed in the rules and forms
of the Securities and Exchange Commission, and include controls and procedures designed to ensure that
information required to be disclosed by the Company in such reports is accumulated and communicated to the
Company’s management, including the Company’s chief executive officer and chief ﬁnancial officer, as
appropriate to allow timely decisions regarding required disclosure.

There has been no change in our internal control over ﬁnancial reporting that occurred during the last ﬁscal
quarter covered by this Annual Report on Form 10-K that has materially affected, or is reasonably likely to
materially affect, our internal control over ﬁnancial reporting.

Our management, including our chief executive officer and chief ﬁnancial officer, does not expect that our
disclosure controls and internal controls will prevent all errors and all fraud. A control system, no matter how
well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the
control system are met. Further, the design of a control system must reﬂect the fact that there are resource
constraints, and the beneﬁts of controls must be considered relative to their costs. Because of the inherent
limitations in all control systems, no evaluation of controls can provide absolute assurance that all control
issues and instances of fraud, if any, within the company have been detected. These inherent limitations
include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because
of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons,
by collusion of two or more people, or by management override of the control. The design of any system of
controls also is based in part upon certain assumptions about the likelihood of future events, and there can be
no assurance that any design will succeed in achieving its stated goals under all potential future conditions;
over time, a control may become inadequate because of changes in conditions, or the degree of compliance
with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control
system, misstatements due to error or fraud may occur and not be detected.

67

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over ﬁnancial
reporting, as such term is deﬁned in Exchange Act Rule 13a-15(f). Under the supervision and with the
participation of our management, including our principal executive officer and principal ﬁnancial officer, we
conducted an evaluation of the effectiveness of our internal control over ﬁnancial reporting based on the
framework in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations
of the Treadway Commission. Based on our evaluation under the framework in Internal Control — Integrated
Framework, our management concluded that our internal control over ﬁnancial reporting was effective as of
December 31, 2012.

The effectiveness of the Company’s internal control over ﬁnancial reporting as of December 31, 2012 has
been audited by KPMG LLP, an independent registered public accounting ﬁrm, as stated in their report which
is included below.

68

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders
Benchmark Electronics, Inc.:

We have audited Benchmark Electronics, Inc.’s internal control over ﬁnancial reporting as of December 31,
2012, based on criteria established in Internal Control — Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO). Benchmark Electronics, Inc.’s management
is responsible for maintaining effective internal control over ﬁnancial reporting and for its assessment of the
effectiveness of internal control over ﬁnancial reporting, included in the accompanying Management’s Report
on Internal Control over Financial Reporting. Our responsibility is to express an opinion on Benchmark
Electronics, Inc.’s internal control over ﬁnancial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether effective internal control over ﬁnancial reporting was maintained in all material respects. Our
audit included obtaining an understanding of internal control over ﬁnancial reporting, assessing the risk that a
material weakness exists, and testing and evaluating the design and operating effectiveness of internal control
based on the assessed risk. Our audit also included performing such other procedures as we considered
necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over ﬁnancial reporting is a process designed to provide reasonable assurance
regarding the reliability of ﬁnancial reporting and the preparation of ﬁnancial statements for external purposes
in accordance with generally accepted accounting principles. A company’s internal control over ﬁnancial
reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reﬂect the transactions and dispositions of the assets of the company;
(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of ﬁnancial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of
the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company’s assets that could have a material effect on the
ﬁnancial statements.

Because of its inherent limitations, internal control over ﬁnancial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.

In our opinion, Benchmark Electronics, Inc. maintained, in all material respects, effective internal control over
ﬁnancial reporting as of December 31, 2012, based on criteria established in Internal Control — Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States), the consolidated balance sheets of Benchmark Electronics, Inc. and subsidiaries as of
December 31, 2012 and 2011, and the related consolidated statements of income, comprehensive income,
shareholders’ equity, and cash ﬂows for each of the years in the three-year period ended December 31, 2012,
and our report dated February 28, 2013, expressed an unqualiﬁed opinion on those consolidated
ﬁnancial statements.

(signed) KPMG LLP

Houston, Texas
February 28, 2013

69

Item 9B. Other Information.

Not applicable.

70

PART III

Item 10. Directors, Executive Officers and Corporate Governance.

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 2013 Annual
Meeting of Shareholders (the 2013 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 captions ‘‘Compensation Discussion and Analysis’’ and ‘‘Report of Compensation
Committee’’ in the 2013 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 and Related Shareholder
Matters.

The information under the caption ‘‘Common Share Ownership of Certain Beneﬁcial Owners and
Management’’ in the 2013 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.

The following table sets forth certain information relating to our equity compensation plans as of
December 31, 2012:

Number of
securities to be
issued upon
exercise of
outstanding
options,
warrants and
rights

Weighted-
average exercise
price of
outstanding
options,
warrants and
rights

Number of
securities
remaining
available for
future issuance

Plan Category
Equity compensation plans approved by

security holders

. . . . . . . . . . . . . . . . .

4,507,338(1)

$19.88(1)

3,029,180

(1)

Includes 267,256 restricted share units, phantom stock awards and performance restricted share units. The
weighted-average exercise price does not take these awards into account.

Item 13. Certain Relationships and Related Transactions, and Director Independence.

The information under the caption ‘‘Election of Directors’’ in the 2013 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 14. Principal Accounting Fees and Services.

The information under the caption ‘‘Audit Committee Report to Shareholders’’ in the 2013 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.

71

PART IV

Item 15. Exhibits, Financial Statement Schedules.

(a) (1) Financial statements of the Company ﬁled as part of this report:

See Item 8 — Financial Statements and Supplementary Data.

(2) Financial statement schedule ﬁled as part of this report:

Schedule II — Valuation Accounts

Additions

Balance at
Beginning
of Period

Charges to
Operations

Other

Deductions

(in thousands)
Year ended December 31, 2012:

Allowance for doubtful accounts(1)

. . . . . . . .

$1,094

407

13

Year ended December 31, 2011:

Allowance for doubtful accounts(1)

. . . . . . . .

$ 586

546

(23)

72

15

Balance at
End of
Period

1,442

1,094

Year ended December 31, 2010:

Allowance for doubtful accounts(1)

. . . . . . . .

$ 417

385

(29)

187

586

(1) Deductions in the allowance for doubtful accounts represent write-offs, net of recoveries, of amounts

determined to be uncollectible.

Report of Independent Registered Public Accounting Firm on Schedule

The Board of Directors and Shareholders
Benchmark Electronics, Inc.:

Under date of February 28, 2013, we reported on the consolidated balance sheets of Benchmark Electronics,
Inc. and subsidiaries (the Company) as of December 31, 2012 and 2011, and the related consolidated
statements of income, comprehensive income, shareholders’ equity, and cash ﬂows for each of the years in the
three-year period ended December 31, 2012, in this annual report on Form 10-K for the year 2012. In
connection with our audits of the aforementioned consolidated ﬁnancial statements, we also audited the related
consolidated ﬁnancial statement schedule included in Item 15(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.

(signed) KPMG LLP

Houston, Texas
February 28, 2013

72

(3) Exhibits

Each exhibit marked with an asterisk is ﬁled with this Annual Report on Form 10-K.

Exhibit
Number

2.1

Description

— Agreement and Plan of Merger dated October 16, 2006 among the Company, Autobahn
Acquisition Corp. and Pemstar Inc. (incorporated by reference to Exhibit 2.1 to the
Company’s Form 8-K dated October 16, 2006 and ﬁled on October 18, 2006 (Commission
ﬁle number 1-10560)).

3.1

— Restated Articles of Incorporation of the Company dated May 10, 1990 (incorporated by

reference to Exhibit 3.1 to the Company’s Registration Statement on Form S-1 (Registration
Number 33-46316) (the ‘‘Registration Statement’’)).

3.2

— Amendment to the Restated Articles of Incorporation of the Company adopted by the

shareholders of the Company on May 20, 1997 (incorporated by reference to Exhibit 3.3 to
the Company’s Annual Report on Form 10-K for the year ended December 31, 1998
(Commission ﬁle number 1-10560)).

3.3

— Amendment to the Restated Articles of Incorporation of the Company approved by the

shareholders of the Company on August 13, 2002 (incorporated by reference to Exhibit 4.7
to the Company’s Form S-8 (Registration Number 333-103183)).

3.4

— Amended and Restated Bylaws of the Company dated May 18, 2006 (incorporated by

reference to Exhibit 99.2 to the Company’s Form 8-K dated May 18, 2006 and ﬁled on
May 19, 2006 (Commission ﬁle number 1-10560)).

3.5

— Amendment to the Restated Articles of Incorporation of the Company approved by the

4.1

4.2

4.3

4.4

4.5

shareholders of the Company on May 10, 2006 (incorporated by reference to Exhibit 99.1 to
the Company’s Form 8-K dated October 16, 2006 and ﬁled on October 16, 2006
(Commission ﬁle number 1-10560)).

— Restated Articles of Incorporation of the Company (incorporated by reference to Exhibit 3.1

to the Registration Statement).

— Amendment to the Restated Articles of Incorporation of the Company adopted by the

shareholders of the Company on May 20, 1997 (incorporated by reference to Exhibit 3.3 to
the Company’s Annual Report on Form 10-K for the year ended December 31, 1998
(Commission ﬁle number 1-10560)).

— Specimen form of certiﬁcate evidencing the Common Share (incorporated by reference to

Exhibit 4.3 to the Registration Statement).

— 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 (Commission ﬁle number 1-10560)).

— Statement of Resolution Establishing Series A Cumulative Junior Participating Preferred
Stock of the Company (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
(Commission ﬁle number 1-10560)).

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 (Commission ﬁle
number 1-10560)).

73

Exhibit
Number

Description

4.7

— Amendment to the Restated Articles of Incorporation of the Company approved by the

shareholders of the Company on August 13, 2002 (incorporated by reference to Exhibit 4.7
to the Company’s Form S-8 (Registration
Number 333-103183)).

4.8

— Amended and Restated Bylaws of the Company (incorporated by reference to Exhibit 99.2
to the Company’s Form 8-K dated May 18, 2006 and ﬁled on May 19, 2006 (Commission
ﬁle number 1-10560)).

4.9

— Amendment to the Restated Articles of Incorporation of the Company approved by the

shareholders of the Company on May 10, 2006 (incorporated by reference to Exhibit 99.1 to
the Company’s Form 8-K dated October 16, 2006 and ﬁled on October 16, 2006
(Commission ﬁle number 1-10560)).

4.10

— Amendment No. 1 dated as of December 10, 2008, to the Rights Agreement dated as of

December 11, 1998 (incorporated by reference to Exhibit 4.1 to the Company’s Form 8-K
dated December 10, 2008 and ﬁled on December 11, 2008 (Commission ﬁle number
1-10560)).

4.11

— Amendment No. 2 dated as of May 18, 2010, to the Rights Agreement dated as of

December 11, 1998, as amended by Amendment No. 1 dated as of December 10, 2008
(incorporated by reference to Exhibit 4.1 to the Registrant’s Form 8-A12B/A ﬁled May 25,
2010 (Commission ﬁle number 1-10560)).

10.1

— Form of Indemnity Agreement between the Company and its directors and executive officers

(incorporated by reference to Exhibit 10.1 to the Company’s Annual Report on Form 10-K
for the year ended December 31, 2003 (Commission ﬁle number 1-10560)).

10.2

— Benchmark Electronics, Inc. 2000 Stock Awards Plan (incorporated by reference to Exhibit

4.8 to the Company’s Registration Statement on Form S-8 (Registration Number
333-54186)).

10.3

— Form of incentive stock option agreement for use under the 2000 Stock Awards Plan

(incorporated by reference to Exhibit 4.8 to the Company’s Registration Statement on Form
S-8 (Registration Number 333-54186)).

10.4

— Form of phantom stock agreement for use under the 2000 Stock Awards Plan (incorporated

by reference to Exhibit 10.9 to the Company’s Annual Report on Form 10-K for the year
ended December 31, 2008 (Commission ﬁle number 1-10560)).

10.5

— Form of nonqualiﬁed stock option agreement for use under the 2000 Stock Awards Plan

(incorporated by reference to Exhibit 10.10 to the Company’s Annual Report on Form 10-K
for the year ended December 31, 20088 (Commission ﬁle number 1-10560)).

10.6

— Form of restricted stock agreement for use under the 2000 Stock Awards Plan (incorporated

by reference to Exhibit 10.1 to the Company’s Form 8-K dated March 17, 2008
(Commission ﬁle number 1-10560)).

10.7

— Benchmark Electronics, Inc. Deferred Compensation Plan dated as of December 16, 2008

(incorporated by reference to Exhibit 99.1 to the Company’s Form S-8 (Registration Number
333-156202)).

10.8

— Fourth Amended and Restated Credit Agreement dated as of July 30, 2012 among the

Company; the borrowing subsidiaries; the lenders party thereto; JPMorgan Chase Bank,
N.A. as administrative agent, collateral agent and issuing lender; Bank of America, N.A.,
Wells Fargo Bank, N.A. and Comerica Bank as co-documentation agents; and J.P. Morgan
Securities Inc. as lead arranger (incorporated by reference from Exhibit 10.1 to the
Company’s Form 8-K dated July 30, 2012 and ﬁled on August 3, 2012 (Commission ﬁle
number 1-10560)).

74

Exhibit
Number

Description

10.9

— Employment Agreement between the Company and Donald F. Adam dated as of March 10,

2009 (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K dated
March 10, 2009 (Commission ﬁle number 1-10560)).

10.10

— Benchmark Electronics, Inc. 2002 Stock Option Plan for Non-Employee Directors

(incorporated by reference to Appendix A to the Company’s Deﬁnitive Proxy Statement on
Schedule 14A ﬁled April 15, 2002 (Commission ﬁle number 1-10560)).

10.11

— Code of Conduct (incorporated by reference to Exhibit 10.20 to the Company’s Annual
Report on Form 10-K for the year ended December 31, 2009 (Commission ﬁle number
1-10560)).

10.12

— Amendment No. 1 to the Benchmark Electronics, Inc. 2002 Stock Option Plan for

Non-Employee Directors (incorporated by reference to Exhibit 99.3 to the Company’s Form
8-K dated May 18, 2006 ﬁled on May 19, 2006 (Commission ﬁle number 1-10560)).

10.13

— Benchmark Electronics, Inc. 2010 Omnibus Incentive Compensation Plan (incorporated by

reference to Exhibit 99.1 to the Company’s Registration Statement on Form S-8
(Registration Number 333-168426)).

10.14

10.15

— Form of option award agreement for use under the 2010 Omnibus Incentive Compensation
Plan (incorporated by reference to Exhibit 4.10 to the Company’s Registration Statement on
Form S-8 (Registration Number 333-168426)).

— Form of restricted share award agreement for use under the 2010 Omnibus Incentive
Compensation Plan (incorporated by reference to Exhibit 4.11 to the Company’s
Registration Statement on Form S-8 (Registration Number 333-168426)).

10.16

— Form of restricted stock unit award agreement for use under the 2010 Omnibus Incentive

Compensation Plan (incorporated by reference to Exhibit 4.12 to the Company’s
Registration Statement on Form S-8 (Registration Number 333-168426)).

10.17

— Employment Termination and Settlement Agreement dated November 8, 2011 between the

Company and Cary T. Fu (incorporated by reference to Exhibit 10.1 to the Company’s Form
8-K dated November 8, 2011 (Commission ﬁle number 1-10560)).

10.18

— Consulting Services and Non-Compete Agreement dated November 8, 2011 between the

Company and Cary T. Fu (incorporated by reference to Exhibit 10.2 to the Company’s Form
8-K dated November 8, 2011 (Commission ﬁle number 1-10560)).

10.19

— Amended and Restated Employment Agreement dated November 8, 2011 between the

Company and Gayla J. Delly (incorporated by reference to Exhibit 10.3 to the Company’s
Form 8-K dated November 8, 2011 (Commission ﬁle number 1-10560)).

11

— Statement regarding Computation of Per-Share Earnings (incorporated by reference to

‘‘Notes to Consolidated Financial Statements, Note 1(j) — Earnings Per Share’’ in Item 8 of
this report).

21*

23*

31.1*

31.2*

32.1*

32.2*

— Subsidiaries of Benchmark Electronics, Inc.

— Consent of Independent Registered Public Accounting Firm concerning incorporation by
reference in the Company’s Registration Statements on Form S-8 (Registration No.
333-28997, No. 333-101744, No. 333-156202 and No. 333-168427).

— Section 302 Certiﬁcation of Chief Executive Officer

— Section 302 Certiﬁcation of Chief Financial Officer

— Section 1350 Certiﬁcation of Chief Executive Officer

— Section 1350 Certiﬁcation of Chief Financial Officer

101.INS(1) XBRL Instance Document
101.SCH(1) XBRL Taxonomy Extension Schema Document

75

Exhibit
Number

Description

101.CAL(1) XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB(1) XBRL Taxonomy Extension Label Linkbase Document
101.DEF(1) XBRL Taxonomy Extension Deﬁnition Linkbase Document

(1) XBRL (Extensible Business Reporting Language) information is furnished and not ﬁled or a part of a
registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, is
deemed not ﬁled for purposes of section 18 of the Securities Exchange Act of 1934 and otherwise is not
subject to liability under these sections.
Filed herewith.

*

76

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.

SIGNATURES

BENCHMARK ELECTRONICS, INC.

By: /s/ Gayla J. Delly
Gayla J. Delly
Chief Executive Officer
Date: February 27, 2013

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the capacities indicated and on the dates indicated.

Name

/s/ Peter G. Dorﬂinger
Peter G. Dorﬂinger

/s/ Gayla J. Delly
Gayla J. Delly

/s/ Donald F. Adam
Donald F. Adam

/s/ Michael R. Dawson
Michael R. Dawson

/s/ Douglas G. Duncan
Douglas G. Duncan

/s/ David W. Scheible
David W. Scheible

/s/ Bernee D.L. Strom
Bernee D.L. Strom

/s/ Clay C. Williams
Clay C. Williams

Position

Date

Chairman of the Board

February 27, 2013

President, Chief Executive Officer and Director
(principal executive officer)

February 27, 2013

Chief Financial Officer
(principal ﬁnancial and accounting officer)

Director

Director

Director

Director

Director

February 27, 2013

February 27, 2013

February 27, 2013

February 27, 2013

February 27, 2013

February 27, 2013

77