Benchmark Electronics Inc. (
Q3 2010 Earnings Call
October 26, 2010 11:00 am ET
Donald Adam - CFO
Cary Fu - Chairman & CEO
Gayla Delly - President
Amit Daryanani - RBC Capital Markets
Alexander Blanton - Ingalls & Snyder
Brian White - Ticonderoga
Jim Suva - Citi
Sherri Scribner - Deutsche Bank
Brian Alexander - Raymond James
Sean Hannan - Needham & Company
Previous Statements by BHE
» Benchmark Electronics, Inc. Q2 2010 Earnings Call Transcript
» Benchmark Electronics, Inc. Q1 2010 Earnings Call Transcript
» Benchmark Electronics Q4 2009 Earnings Call Transcript
Ladies and gentlemen, thank you for standing by; and welcome to the Benchmark Electronics Third Quarter 2010 Earnings Conference Call. At this time, all lines are in a listen-only mode. Later, there will be a question-and-answer session and instructions will be given at that time. (Operator Instructions) As a reminder, today’s call is being recorded.
At this time then, I’d like to turn the conference over to Mr. Don Adam. Please go ahead, sir.
Good morning. Welcome to the Benchmark Electronics conference call to discuss our financial results for the third quarter of 2010. I am Don Adam, CFO of Benchmark Electronics. Today, Cary Fu, our CEO, will begin the call reviewing the current business environment in the third quarter and looking forward. Gayla Delly, our President, will then discuss our activities and performance for the third quarter and our outlook for the final quarter of 2010. I will then follow with a review of our financial metrics for the third quarter. After our prepared remarks, Gayla, Cary and I will take time for your questions in our Q&A session.
We will hold this call to one hour. During this conference call, we may make projections or other forward-looking statements regarding future events or the future financial performance of the company. We would like to caution you that those statements reflect our current expectations and that actual events or results may differ materially. We’d also like to refer you to Benchmark’s periodic reports that are filed from time to time with the Securities and Exchange Commission, including the Company’s 8-K’s and S4 filings, quarterly filings and Form 10-Q and our annual report on Form 10-K. These documents contain cautionary language and identify important risk factors which could cause actual results to differ materially from our projections or forward-looking statements. We undertake no obligation to update those projections or forward-looking statements in the future.
Now, I will turn the call over to Cary.
Good morning. Thank you for joining our call today. Once again, the third quarter of 2010 presented many challenges to the Benchmark; and once again, our teams were able to step to the plate and execute for our customers. We’re very happy with our solid results. I’d also like to take this opportunity to thank our team for their excellent performance for the quarters.
Revenue for the third quarter of 2010 was up 20% from prior years and up 4% sequentially. Quarter three EPS were up 41% from prior years and 15% sequentially. Compared to the year-to-year period, 2010 revenues were up 19% and EPS up 64% compared to 2009, excluding special items.
Our team met and exceeded the key metrics we set – operational metrics we set for the quarters. Our team did this given the continued but improving supply chain challenge and the continued mix challenges from our customers, among other things.
As reflected in our Q4 guidance, we are seeing a softness in the demand from our customers. Related to computing sectors, with the exception of one customer, we have seen a broad-based decline in demand, which is including the finalization of a production from a former major customer. To a lesser extent, we have also seen weakness in the demand from our telecom customers.
Related to the supply chains, this seems to be getting better, although there continues to be a long lead-time part in place. We will anticipate its continuing improvement in supply chains throughout Q4.
As noted in the press release, one of our key initiatives has been the expansion of precision technology service. This has been progressed well and provides further diversification of our customer base, strengthening our business model and enhancing our margin potential. We are very excited about the success of our initiative, as it has received favorable response from our – we included new business, from our customers across multiple industries.
Our PT service providing final production assembly and integration and tests for medical instrumentation and industrial concern customers. The service that we’re providing including mechatronics, precision machining and advanced metal joining, clean room assemblies, as well as high level assemblies.
This capability is also strengthening our customer relationships by providing vertical mechanical integration of a critical component, plus supporting new product development. The availability of this service is a great opportunity and a potential for us, with both a current as well as new customer to continue to add to the overall Benchmark value proposition.
In addition to the precision technology asset we purchased in 2009, we plan to continue to expand these capabilities and expect to open additional capacity in Asia by the end of this quarter. As we are currently looking at several global realignment activity as we continue to review our global footprint in relation to the customer demand and the overall marketplace to include Q4, we anticipate to incur approximately $5 million in the restructuring charges related to this activity.
Now I turn the call over to Gayla.
Thank you, Cary. We were pleased with our operating metrics for our third quarter. These included increased revenues, EPS exceeding our guidance, reduced inventory levels, consistent operating margins, and improved cash flows for the quarter. As Cary mentioned, the third quarter resulted in year-over-year and quarter-over-quarter increased revenues, along with increased EPS which exceeded our guidance. This is due to our consistent operating margins, plus favorable impact from FX and a favorable tax rate. We were able to reduce our inventory levels as planned and had a positive cash flow of $14 million for the quarter.