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What changed in BENCHMARK ELECTRONICS INC's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of BENCHMARK ELECTRONICS INC's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+308 added−318 removedSource: 10-K (2024-02-27) vs 10-K (2023-02-24)

Top changes in BENCHMARK ELECTRONICS INC's 2023 10-K

308 paragraphs added · 318 removed · 248 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

160 edited+27 added−31 removed174 unchanged
Biggest changeWe believe our primary competitive advantage is our ability to engage with our customers at any point in their product development to production process by providing our leading edge technical capabilities in engineering services (including full life cycle from product design in which we can take a product idea from concept to design to volume manufacturing), technology solutions (especially high frequency RF solutions, microelectronics, and miniaturization), and manufacturing services (including electronics and complex precision machining capabilities) provided by highly skilled personnel.
Biggest changeThis is enabled by our highly skilled personnel’s ability to provide leading-edge technical capabilities in engineering services (including full lifecycle), high frequency RF solutions, microelectronics, miniaturization, and manufacturing services (including electronics and complex precision machining). These capabilities are brought to bear across diversified commercial end-markets, many of which are government regulated.
We provide these services across all the industries we serve. • Technology Solutions , which involve developing a library of building blocks or reference designs primarily in defense solutions, surveillance systems, millimeter wave (mmWave) radio frequency (RF) subsystems, and front-end managed 1 connected data collection systems.
We provide these services across all the industries we serve. 1 • Technology Solutions , which involve developing a library of building blocks or reference designs primarily in defense solutions, surveillance systems, millimeter wave (mmWave) radio frequency (RF) subsystems, and front-end managed connected data collection systems.
Dodd-Frank Wall Street Reform and Consumer Protection Act § 1502(b), implementing legislation and rules; and the People’s Republic of China (PRC) Management Methods for the Restriction of the Use of Hazardous Substances in Electrical and Electronic Products. Manufacturing sites in the Americas, Asia and Europe regions are experienced with both water soluble and no-clean processes. • Systems Assembly & Test.
Dodd-Frank Wall Street Reform and Consumer Protection Act § 1502(b), implementing legislation and rules; and the People’s Republic of China (PRC) Management Methods for the Restriction of the Use of Hazardous Substances in Electrical and Electronic Products. Manufacturing sites in the Americas, Asia and Europe regions are experienced with both water soluble and no-clean processes. • Systems Assembly and Test.
Benchmark Precision Technologies delivers critical tolerance to metal fabrication and assembly, building components, sub-assemblies, and full module assemblies for highly regulated industries, including semi-conductor capital equipment, aerospace & defense, medical, and complex industrials.
Benchmark Precision Technologies delivers critical tolerance to metal fabrication and assembly, building components, sub-assemblies, and full module assemblies for highly regulated industries, including semi-conductor capital equipment, aerospace and defense, medical, and complex industrials.
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.
If we or the 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.
In the fourth quarter of fiscal 2019, a ransomware incident encrypted information on our systems and disrupted customer and employee access to our systems and services, which resulted in the Company incurring costs relating to this event, including to retain third party consultants and forensic experts to assist with the restoration and remediation of systems and, with the assistance of law enforcement, to investigate the attack, as well as increased expenditures for our information technology (IT) infrastructure, systems and network.
In the fourth quarter of fiscal 2019, a ransomware incident encrypted information on our systems and disrupted customer and employee access to our systems and services, which resulted in the Company incurring costs relating to this event, including costs to retain third party consultants and forensic experts to assist with the restoration and remediation of systems and, with the assistance of law enforcement, to investigate the attack, as well as increased expenditures for our information technology (IT) infrastructure, systems and network.
Our projections of results and successful integration of acquired operations into our network involve risks, including: • integration and management of the operations; • as noted above, demand can vary, and our projections of results may be wrong due to deferred or reduced demand; • 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; • the possibility that past transactions or practices may lead to future commercial or regulatory risks; • diversion of management’s attention from other ongoing business concerns; and • inadequate internal control over financial reporting and our ability to bring such controls into compliance with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 in a timely manner.
Our projections of results and successful integration of acquired operations into our network involve risks, including: • integration and management of the operations; • as noted above, demand can vary, and our projections of results may be wrong due to deferred or reduced demand; • 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; 27 • the possibility that past transactions or practices may lead to future commercial or regulatory risks; • diversion of management’s attention from other ongoing business concerns; and • inadequate internal control over financial reporting and our ability to bring such controls into compliance with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 in a timely manner.
We provide support to our customers to assist their understanding of the evolving international environmental laws and regulations on content, packaging, labeling and similar issues concerning the 4 environmental impact of their products, including: “RoHS” (EU Directives 2011/65/EU on Restriction of certain Hazardous Substances Directive and 2015/863 amending Annex II to Directive 2011/65/EU); “WEEE” (EU Directive 2002/96/EC on Waste Electrical and Electronic Equipment); “REACH” (EC Regulation No 1907/2006 on Registration, Evaluation and Authorization of Chemicals); EU Member States’ Implementation of the foregoing; “Conflict Minerals” as defined in the U.S.
We provide support to our customers to assist their understanding of the evolving international environmental laws and regulations on content, packaging, labeling and similar issues concerning the environmental impact of their products, including: “RoHS” (EU Directives 2011/65/EU on Restriction of certain Hazardous Substances Directive and 2015/863 amending Annex II to Directive 2011/65/EU); “WEEE” (EU Directive 2002/96/EC on Waste Electrical and Electronic Equipment); “REACH” (EC Regulation No 1907/2006 on Registration, Evaluation and Authorization of Chemicals); EU Member States’ Implementation of the foregoing; “Conflict Minerals” as defined in the U.S.
Further, the cost of implementing our sustainability and/or Environmental, Social and Governance (“ESG”) initiatives, our ability to execute on our sustainability and/or ESG target and objectives as planned, the effectiveness and impact of intended actions, the impact of changing legislation, regulations and directives, and other factors, many of which are beyond the Company’s control, could cause the outcomes, results and achievement of our sustainability and/or ESG targets, goals, objectives, commitments and/or the implementation of our sustainability and/or ESG initiatives to differ materially than those expressed or implied by the Company.
Further, the cost of implementing our sustainability and/or Environmental, Social and Governance (“ESG”) initiatives, our ability to execute on our sustainability and/or ESG targets and objectives as planned, the effectiveness and impact of intended actions, the impact of changing legislation, regulations and directives, and other factors, many of which are beyond the Company’s control, could cause the outcomes, results and achievement of our sustainability and/or ESG targets, goals, objectives, commitments and/or the implementation of our sustainability and/or ESG initiatives to differ materially than those expressed or implied by the Company.
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. • Direct Order Fulfillment .
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. 7 • Direct Order Fulfillment .
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. The availability of excess manufacturing capacity at many of our competitors creates intense pricing and competitive pressure on the EMS industry as a whole.
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 generally lower. The availability of excess manufacturing capacity at many of our competitors creates intense pricing and competitive pressure on the EMS industry as a whole.
These forward-looking statements are identified as any statement that does not relate strictly to historical or current facts and may include words such as “anticipate,” “believe,” “intend,” “plan,” “project,” “forecast,” “strategy,” “position,” “continue,” “estimate,” “expect,” “may,” “will,” “could,” “predict,” and similar expressions or the negative or other variations thereof.
These forward-looking statements are identified as any statement that does not relate strictly to historical or current facts and may include words such as “anticipate,” “believe,” “intend,” “plan,” “project,” “forecast,” “strategy,” “position,” “continue,” “estimate,” “expect,” “may,” “will,” “could,” “predict,” and similar expressions of the negative or other variations thereof.
If one or more of our customers were to become insolvent or otherwise unable to pay for the 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.
If one or more of our customers were to become insolvent or otherwise unable to pay for the services provided by us, our operating results and financial condition would be adversely affected. 16 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.
We will continue to evaluate our global footprint to ensure we are optimizing the utilization of our facilities, including expansion in regions of strategic importance to our customers and investing in new capabilities aligned to evolving market needs. Historically, this has led to re-allocation of resources, including site closures, new facilities and capacity expansions as appropriate. • Pursue Strategic Acquisitions.
We will continue to evaluate our global footprint to ensure we are optimizing the utilization of our facilities, including expansion in regions of strategic importance to our customers and investing in new capabilities aligned to evolving market needs. Historically, this has led to re-allocation of resources, including site closures, new facilities and capacity expansion, as appropriate. • Pursue Strategic Acquisitions.
We have historically had an acquisition-oriented expansion strategy. In more recent years we have focused on driving growth by organic means. However, we will continue to selectively evaluate acquisitions which may expand our core technology capabilities and expand the value of our services to new and existing customers. • Capital Allocation.
We have historically had an acquisition-oriented expansion strategy. In more recent years, we have focused on driving growth by organic means. However, we will continue to selectively evaluate acquisitions which may expand our core technology capabilities and expand the value of our services to new and existing customers. 3 • Capital Allocation.
We provide our customers 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.
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.
All our services are supported through a strong quality management system designed to globally provide the process discipline to reliably deliver high quality services, solutions and products to our customers. Manufacturing Services (Electronics Manufacturing and Testing Services): As OEMs seek to provide greater functionality in smaller form-factors, they increasingly require sophisticated manufacturing technologies and processes.
All of our services are supported through a strong quality management system designed to globally provide the process discipline to reliably deliver high quality services, solutions and products to our customers. Manufacturing Services (Electronics Manufacturing and Testing Services) As OEMs seek to provide greater functionality in smaller form-factors, they increasingly require sophisticated manufacturing technologies and processes.
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. 20 Our worldwide operations are subject to local laws and regulations.
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.
Our financial results depend, in part, on our ability to perform on our U.S. government contracts, which are subject to uncertain levels of funding, timing and termination. We provide services both as a prime contractor and subcontractor for the U.S. government. Consequently, a portion of our financial results depends on our performance under these contracts.
Our financial results depend, in part, on our ability to perform on our U.S. government contracts, which are subject to uncertain levels of funding, timing and termination. We provide services both as a prime contractor and subcontractor for the U.S. government. Consequently, a portion of our financial results depend on our performance under these contracts.
If we do not meet one or more of these challenges, our operations and financial results could be adversely affected. Customer relationships with start-up or emerging companies may present more risks than with established companies. Customer relationships with start-up or emerging companies present special risks because these companies do not have an extensive product history.
If we do not meet one or more of these challenges, our operations and financial results could be adversely affected. 20 Customer relationships with start-up or emerging companies may present more risks than with established companies. Customer relationships with start-up or emerging companies present special risks because these companies do not have an extensive product history.
We may need to increase our efficiencies to compete and may incur additional restructuring charges. 19 Regulatory, Compliance and Litigation Risks Government contracts are subject to significant regulation, including rules related to bidding, billing, kickbacks and false claims, and any non-compliance could subject us to fines and penalties or debarment.
We may need to increase our efficiencies to compete and may incur additional restructuring charges. Regulatory, Compliance and Litigation Risks Government contracts are subject to significant regulation, including rules related to bidding, billing, kickbacks and false claims, and any non-compliance could subject us to fines and penalties or debarment.
Our Chief Human Resources Officer, and other key leaders in our organization, update the Human Capital and Compensation Committee on our strategy for talent development and retention, including succession planning for key positions in the Company. 12 Health and Safety The safety of our employees is also of paramount concern to us.
Our Chief Human Resources Officer, and other key leaders in our organization, update the Human Capital and Compensation Committee on our strategy for talent development and retention, including succession planning for key positions in the Company. Health and Safety The safety of our employees is also of paramount concern to us.
This requires that we maintain technological leadership and successfully anticipate or respond to technological changes in manufacturing 21 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 operations are subject to cyberattacks that could have a material adverse effect on our business.
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 operations are subject to cyberattacks that could have a material adverse effect on our business.
We also offer our customers the opportunity to combine the benefits of low-cost manufacturing with the benefits and capabilities of our higher complexity support in the Americas, Asia and Europe. • Continue to Seek Cost Savings and Operational Excellence. We seek to optimize our network of facilities to provide cost-efficient services for our customers.
We also offer our customers the opportunity to combine the benefits of low-cost manufacturing with the benefits and capabilities of our higher complexity support in the Americas, Asia, and Europe. • Continue to Seek Cost Savings and Operational Excellence. We seek to optimize our global network of facilities to provide cost-efficient services for our customers.
Our investment in advanced manufacturing equipment and process development, as well as our 3 experience in innovative packaging and interconnect technologies, enable us to address these evolving requirements. Our specialization in packaging and interconnect technologies include but are not limited to: • Printed Circuit Board Assembly (PCBA) & Test .
Our investment in advanced manufacturing equipment and process development, as well as our experience in innovative packaging and interconnect technologies, enable us to address these evolving requirements. Our specialization in packaging and interconnect technologies include but are not limited to: • Printed Circuit Board Assembly (PCBA) and Test .
See Note 1(i) to the consolidated financial statements in Part II, Item 8 of this Report. We may be exposed to interest rate fluctuations. We have exposure to interest rate risk on our outstanding borrowings under our variable rate credit agreement.
See Note 1(i) to the consolidated financial statements in Part II, Item 8 of this Report. 25 We may be exposed to interest rate fluctuations. We have exposure to interest rate risk on our outstanding borrowings under our variable rate credit agreement.
Changes made that impact the way we operate internally could have a negative impact on us and reduce the demand for our foreign manufacturing facilities. Moreover, any regulatory actions by other countries where we operate could also negatively impact our financial performance.
Changes that impact the way we operate internally could have a negative impact on us and reduce the demand for our foreign manufacturing facilities. Moreover, any regulatory actions by other countries where we operate could also negatively impact our financial performance.
We offer a full spectrum of new product design, automation, test development, prototype and related engineering services for projects contracted by our customers who pay for but maintain ownership of the resulting designs in our contract design services business.
We offer a full spectrum of new product design, automation, test development, prototype and related engineering services for projects contracted by our customers who pay for and maintain ownership of the resulting designs in our contract design services business.
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 24-hour turnaround time for BTO and CTO fulfillment.
The end customer typically places this order by choosing from a variety of possible system configurations and options. We are often capable of meeting a 2- to 24-hour turnaround time for BTO and CTO fulfillment.
Our strategy is focused on establishing long-term relationships with leading OEMs in growth industries by becoming an integral part of their concept-to-production and full product life cycle solution.
Our strategy is focused on establishing long-term relationships with leading OEMs in targeted growth industries by becoming an integral part of their concept-to-production and full product life cycle solution.
We support all our service offerings with supply chain management systems, superior quality program management and integrated information technology systems. Our comprehensive service offerings enable us to provide a complete solution for our customers’ outsourcing requirements.
We support all of our service offerings with supply chain management systems, superior quality program management, and integrated information technology systems. Our comprehensive service offerings enable us to provide a complete solution for our customers’ outsourcing requirements.
We employ a proven seven-step process from concept-to-production in our design services model which enables a shorter product development cycle and provides our customers a competitive advantage in time-to-market and time-to-profit.
We employ a proven seven-step process from concept-to-production in our design services model which enables a shorter product development cycle and provides our customers with a competitive advantage in time-to-market and time-to-profit.
Consistent with the Conflict Minerals Law and the OECD Due Diligence Guidance concerning conflict minerals, Benchmark adopted the Responsible Minerals Initiative Due Diligence reporting process and seeks to obtain conflict minerals content declarations from its suppliers, promoting supply chain 10 transparency.
Consistent with the Conflict Minerals Law and the OECD Due Diligence Guidance concerning conflict minerals, Benchmark adopted the Responsible Minerals Initiative Due Diligence reporting process and seeks to obtain conflict minerals content declarations from its suppliers, promoting supply chain transparency.
Our inability to do so could have an adverse effect on us. We may be affected by consolidation in the electronics industry, which could create increased pricing and competitive pressures on our business.
Our inability to do so could have an adverse effect on us. 21 We may be affected by consolidation in the electronics industry, which could create increased pricing and competitive pressures on our business.
Any delay in the upgrade of our information systems could disrupt our operations and cause unanticipated increases in our costs. We are currently upgrading our IT infrastructure and ERP system, which we anticipate taking several years.
Any delay in the upgrade of our information systems could disrupt our operations and cause unanticipated increases in our costs. We are currently upgrading our information technology (IT) infrastructure and ERP system, which we anticipate taking several years.
Further, the price of our common shares may experience volatility in response to fluctuating quarterly results. Provisions in our governing documents and state law may make it harder for others to obtain control of the Company.
Further, the price of our common shares may experience volatility in response to fluctuating quarterly results. 26 Provisions in our governing documents and state law may make it harder for others to obtain control of the Company.
In addition, a proxy contest for the election of directors would require us to incur significant fees and expenses, as well as requiring significant time and 24 attention by management and our Board of Directors.
In addition, a proxy contest for the election of directors would require us to incur significant fees and expenses, as well as requiring significant time and attention by management and our Board of Directors.
We make available free of charge through our internet website our filings with the 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.
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.
To facilitate open and honest communication, our whistleblower Helpline includes local phone numbers in each global location, together with language support, that allows reporters to “Speak Up!” in over 150 native languages. In addition, team members access our web portal to report concerns, ask questions, or quickly access ethics and compliance policies.
To facilitate open and honest communication, our whistleblower Helpline includes local phone numbers in each global location, together with language support, which allows reporters to “Speak Up!” in over 150 native languages. In addition, team members access our web portal to report concerns, ask questions, or quickly access ethics and compliance policies.
Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual outcomes, including the future results of our operations, may vary materially from those indicated. Undue reliance should not be placed on any forward-looking statements. Forward-looking statements are not guarantees of performance.
Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual outcomes, including the future results of the Company's operations, may vary materially from those indicated. Undue reliance should not be placed on any forward-looking statements. Forward-looking statements are not guarantees of performance.
We believe these efforts strengthen our enterprise ethics and compliance efforts and foster the environment where employees and stakeholders can express and have concerns resolved. From a governance perspective, Benchmark continues to advance its ESG strategy and is implementing and managing long-term, strategic sustainability initiatives.
We believe these efforts strengthen our enterprise ethics and compliance efforts and foster an environment where employees and stakeholders can express and have concerns resolved. From a governance perspective, Benchmark continues to advance its ESG strategy and is implementing and managing long-term, strategic sustainability initiatives.
In addition, further acquisitions may cause our effective tax rate to increase. Given the scope of our international operations and our international tax arrangements, 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.
In addition, further acquisitions may cause our effective tax rate to increase. Given the scope of our international operations and our international tax arrangements, changes to the manner in which U.S. based multinational companies are taxed in the United States. could have a material impact on our financial results and competitiveness.
In addition, our customers’ products and the manufacturing processes or documentation 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 noncompliant with applicable statutory and regulatory requirements.
In addition, our customers’ products and the manufacturing processes or documentation 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 noncompliance with applicable statutory and regulatory requirements.
Our Human Capital and Compensation Committee of our Board of Directors is responsible for overseeing the Company’s human capital practices and management compensation philosophy, including the incentive compensation and equity-based plans for 11 executives. Our Chief Human Resources Officer reports on important human capital management topics to this committee every quarter, including the Company’s all-important diversity, equity and inclusion initiatives.
Our Human Capital and Compensation Committee of our Board of Directors is responsible for overseeing the Company’s human capital practices and management compensation philosophy, including the incentive compensation and equity-based plans for executives. Our Chief Human Resources Officer reports on important human capital management topics to this committee every quarter, including the Company’s diversity, equity and inclusion initiatives.
Consequently, references to 2022 relate to the calendar year ended December 31, 2022; references to 2021 relate to the calendar year ended December 31, 2021, etc. General Benchmark Electronics, Inc. (the Company) is a Texas corporation that provides advanced manufacturing services (electronic manufacturing services (EMS) and precision technology (PT) services), which includes design and engineering services and technology solutions.
Consequently, references to 2023 relate to the calendar year ended December 31, 2023; references to 2022 relate to the calendar year ended December 31, 2022, etc. General Benchmark Electronics, Inc. (the Company) is a Texas corporation that provides advanced manufacturing services (electronic manufacturing services (EMS) and precision technology (PT) services), which includes design and engineering services and technology solutions.
For additional information, see “Risk Factors—Shortages or price increases of components specified by our customers have delayed and are expected to continue delaying shipments and may adversely affect our profitability” in Part I, Item 1A of this Report.
For additional information, see “Risk Factors—Shortages or price increases of components specified by our customers have in the past delayed, and are expected to continue delaying shipments and may adversely affect our profitability” in Part I, Item 1A of this Report.
Benchmark also conducts a supply chain monitoring system to assess adherence in these areas with regard to our supply chain partners. Benchmark also supports the EcoVadis rating system; Eco Vadis is a provider of sustainability ratings, intelligence and collaborative performance improvement tools for global supply chains.
Benchmark also conducts a supply chain monitoring system to assess adherence in these areas with regard to our supply chain partners. Benchmark also supports the EcoVadis rating system; EcoVadis is a provider of sustainability ratings, intelligence and collaborative performance improvement tools for global supply chains.
We have a global culture of continuous improvement, which rewards the sharing of best practices and implementation of lean principles. We will continue to drive lean and operational excellence initiatives, bound by common global processes, which enable us to optimize our capacity and efficiency.
We have a company-wide culture of continuous improvement, which rewards the sharing of best practices and implementation of lean principles. We will continue to drive lean and operational excellence initiatives, bound by common global processes, which enable us to optimize our capacity and efficiency.
Within each of our targeted sectors, we believe there is a general trend toward higher complexity, additional outsourcing, and elongating product life cycles. • Lead with Design & Engineering Services and Leverage Advanced Technology Solutions.
Within each of our targeted sectors, we believe there is a general trend toward higher complexity, additional outsourcing, and elongated product life cycles. • Lead with Design & Engineering Services and Leverage Advanced Technology Solutions.
Some of our competitors have substantially greater financial, manufacturing or marketing resources than we do and have more geographically diversified international operations than we do. Our competitors include Celestica Inc., Flex Ltd., Jabil Inc., Kimball Electronics, Plexus Corporation and Sanmina Corporation.
Some of our competitors have substantially greater financial, manufacturing or marketing resources than we do and have more geographically diversified international operations than we do. Our competitors include Celestica Inc., Flex Ltd., Jabil Inc., Plexus Corporation and Sanmina Corporation.
There can be no assurance that these arrangements will remain in effect or be renewed, but we focus intently on customer care in an effort to anticipate and meet the current and future needs of our customers. Our key customer accounts are supported by dedicated teams directly responsible for account management.
There can be no assurance that these arrangements will remain in effect or be renewed, but we focus intently on customer care to anticipate and meet the current and future needs of our customers. Our key customer accounts are supported by dedicated teams directly responsible for global account management.
The following risk factors should be read carefully when reviewing the Company’s business, the forward-looking statements contained in this Report, and the other statements the Company or its representatives make from time to time.
Ri sk Factors The following risk factors should be read carefully when reviewing the Company’s business, the forward-looking statements contained in this Report, and the other statements the Company or its representatives make from time to time.
Mastering emerging technologies, coupled with an understanding of potential failure mechanisms, positions us to exceed customer expectations and maintain our technological diversity. Precision Technology Services ( Precision Machining and Complex Vertically Integrated Assemblies): In addition to traditional EMS, we offer complex precision technology services including full electromechanical assembly and testing services.
Mastering emerging technologies, coupled with an understanding of potential failure mechanisms, positions us to exceed customer expectations and maintain our technological diversity. Precision Technology Services ( Precision Machining and Complex Vertically Integrated Assemblies) In addition to traditional EMS, we offer complex precision technology (PT) services including full electromechanical assembly and test services.
Our global network of operations includes manufacturing facilities in seven countries, which are strategically located to support full product life cycle services for our customers. We have domestic facilities in Alabama, Arizona, California, Minnesota, New Hampshire and Texas and international facilities in China, Malaysia, Mexico, Netherlands, Romania and Thailand.
Our Global Network Our operations include manufacturing facilities in seven countries, which are strategically located to support full product life cycle services for our customers. We have domestic facilities in Alabama, Arizona, California, Minnesota, New Hampshire and Texas and international facilities in China, Malaysia, Mexico, Netherlands, Romania and Thailand.
Our engineering services may be for systems, sub-systems, printed circuit boards and assemblies, and components. We have the flexibility and capability to engage anywhere in the customers design process flow.
Our engineering services may be for systems, sub-systems, printed circuit boards and assemblies, and components. We have the flexibility and capability to engage anywhere in the customer's design process flow.
Certain foreign jurisdictions, as well as the U.S. government, restrict the amount of cash that can be transferred to the U.S. or impose taxes and penalties on such transfers of cash.
Certain foreign jurisdictions, as well as the U.S. government, restrict the amount of cash that can be transferred to the United States or impose taxes and penalties on such transfers of cash.
Governmental Regulation Our operations, and the operations of businesses that we acquire, are subject to foreign, federal, state and local regulatory requirements relating to security clearance, trade compliance, anticorruption, environmental, waste management, and health and safety matters. We are committed to operating in compliance with all applicable requirements.
Governmental Regulation Our operations, and the operations of businesses that we acquire, are subject to foreign, federal, state and local regulatory requirements relating to security clearance, trade compliance, anti-corruption, environmental, waste management, and health and safety matters. We are committed to operating in compliance with all applicable requirements.
We create for our customers specifications, designs and quick-turn prototypes, which are then validated and ramped into volume manufacturing. • Custom Testing and Automation Equipment Design and Build Services. We provide our customers a comprehensive range of custom circuit and functional test equipment, process automation and replication solutions.
We create for our customers specifications, designs and quick-turn prototypes, which are then validated and ramped into volume manufacturing. 6 • Custom Test and Automation Equipment Design and Build Services. We provide our customers with a comprehensive range of custom circuit and functional test equipment, process automation and replication solutions.
Accordingly, the resolution 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. See Part I, Item 3. Legal Proceedings. Compliance or the failure to comply with environmental and climate change regulations could cause us significant expense.
Accordingly, the resolution 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. See Part I, Item 3 of this Report. Compliance or the failure to comply with environmental and climate change regulations could cause us significant expense.
Our precision technology services and complex mechanical manufacturing, along with our systems integration assembly and direct order fulfillment services, enable our customers to potentially reduce product cost and risk of product obsolescence by reducing their total work-in-process and finished goods inventory.
Our PT services and complex mechanical manufacturing, along with our systems integration assembly and direct order fulfillment services, enable our customers to potentially reduce product cost and risk of product obsolescence by reducing their total work-in-process and finished goods inventory.
Like all government contractors, we are subject to risks associated with this contracting. These risks include substantial civil and criminal fines and penalties if we were to fail to follow procurement integrity and bidding rules or cost accounting standards, employ improper billing practices, receive or pay kickbacks or file false claims.
Like all government contractors, we are subject to risks associated with federal and/or state contracting and procurement terms. These risks include substantial civil and criminal fines and penalties if we were to fail to follow procurement integrity and bidding rules or cost accounting standards, employ improper billing practices, receive or pay kickbacks or file false claims.
The Company has manufacturing operations located in the United States and Mexico (the Americas), Asia and Europe. In this Report, references to Benchmark, the Company or use of the words “we”, “our” and “us” include Benchmark’s subsidiaries unless otherwise noted.
The Company has manufacturing operations located in the United States and Mexico (the Americas), Asia and Europe. In this Report, references to Benchmark, the Company or use of the words “we,” “our” and “us” include Benchmark’s subsidiaries unless otherwise noted.
This tightening of 18 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 receivable and inventories.
This tightening of financing for start-up customers, together with many early stage customers’ lack of prior operations and unproven product markets increase our credit risk, especially in trade accounts receivable and inventories.
These international operations are subject to a number of risks, including: • public health crises, such as the COVID pandemic, which can result in varying impacts to our business, employees, customers, suppliers, vendors and partners internationally as discussed elsewhere in this “Risk Factors” section; • difficulties in staffing and managing foreign operations; • coordinating communications and logistics across geographic distances and multiple time zones; • less flexible employee relationships, which complicate meeting demand fluctuations and can be difficult and expensive to terminate; • political and economic instability (including acts of terrorism, outbreaks of war, such as Russia’s invasion of Ukraine, and trade restrictions and tariffs), which could impact our ability to ship and/or receive product; • changes in foreign or domestic government policies, regulatory requirements and laws, which could impact our business; • longer customer payment cycles and difficulty collecting accounts receivable; • export controls, import duties, tariffs, and trade restrictions (including quotas and border taxes); • 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 various and changing minimum wage regulations; 16 • high inflation and fluctuations in currency exchange rates, which could affect foreign taxes due, component costs, local payroll, utility and other expenses; and • inability to utilize net operating losses incurred by our foreign operations which would increase our overall effective tax rate.
These international operations are subject to a number of risks, including: • public health crises, such as the COVID pandemic, which can result in varying impacts to our business, employees, customers, suppliers, vendors and partners internationally; • difficulties in staffing and managing foreign operations; • coordinating communications and logistics across geographic distances and multiple time zones; • less flexible employee relationships, which complicate meeting demand fluctuations and can be difficult and expensive to terminate; • political and economic instability (including acts of terrorism, outbreaks of war, ongoing conflicts, such as between Russia and Ukraine and in Israel and Gaza, and trade restrictions and tariffs), which could impact our ability to ship and/or receive product; • changes in foreign or domestic government policies, regulatory requirements and laws, which could impact our business; • longer customer payment cycles and difficulty collecting accounts receivable; • export controls, import duties, tariffs, and trade restrictions (including quotas and border taxes); • governmental restrictions on the transfer of funds; • risk of governmental expropriation of our property; 18 • burdens of complying with a wide variety of foreign laws and labor practices, including various and changing minimum wage regulations; • high inflation and fluctuations in currency exchange rates, which could affect foreign taxes due, component costs, local payroll, utility and other expenses; and • inability to utilize net operating losses incurred by our foreign operations which would increase our overall effective tax rate.
Further, 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. Sales to our ten largest customers represented 52%, 47% and 41% of our sales in 2022, 2021 and 2020, respectively.
Further, 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. Sales to our ten largest customers represented 52%, 52% and 47% of our total sales in 2023, 2022 and 2021, respectively.
By leveraging our advanced technology and engineering solutions, our customers can focus their efforts on branding and go-to-market, while relying on a trusted partner to delivery product faster and more efficiently. • Maintain and Develop Close, Long-Term Relationships with our Customers .
By leveraging our advanced technology and engineering solutions, our customers can focus their efforts on branding and go-to-market, while relying on a trusted partner to deliver products faster and more efficiently. • Maintain and Develop Close, Long-Term Relationships with our Customers .
Additionally, increasing tariffs and other trade protection measures between the U.S. and China may affect the cost of our products originating in China as well as the demand for our products manufactured in China in the event our customers reduce operations in China as a result of such tariffs or trade protection measures.
Additionally, increasing tariffs and other trade protection measures between the United States and China may affect the cost of our products originating in China as well as the demand for our products manufactured in China in the event our customers reduce operations in China as a result of such tariffs or trade protection measures.
Benchmark therefore expects our suppliers to: • utilize responsible sourcing practices per the Benchmark Conflict Minerals policy and to purge all high-risk smelters from their supply chain. • preferentially source 3TG from smelters and refiners validated as being conflict free and do not directly or indirectly benefit or finance armed groups in any Covered Country. • fully-comply with the Conflict Minerals Law and provide all necessary Conflict Minerals (3TG) declarations. • have a credible, robust conflict minerals program (3TG) which should include: a written conflict minerals policy, communication of requirements to suppliers, CM data collection using the RMI CMRT template, a professional analysis and risk assessment with corrective action on the basis of the CMRTs collected from the suppliers. • pass these requirements through their supply chain and determine the 3TG sources (Smelters or Refiners – SORs). • for suppliers representing the top 90% of our global corporate materials spend (our yearly corporate sample), provide their most recent RMI CMRT form, complete and accurate in the latest version with robust comments where appropriate, during our active yearly CM data collection campaign.
Benchmark does not directly source tin, tantalum, tungsten or gold (3TG) from mines, smelters or refiners, and is in most cases several or more levels removed from these supply chain participants. 11 Benchmark therefore expects our suppliers to: • utilize responsible sourcing practices per the Benchmark Conflict Minerals policy and to purge all high-risk smelters from their supply chain. • preferentially source 3TG from smelters and refiners validated as being conflict free and do not directly or indirectly benefit or finance armed groups in any Covered Country. • fully-comply with the Conflict Minerals Law and provide all necessary Conflict Minerals (3TG) declarations. • have a credible, robust conflict minerals program (3TG) which should include: a written conflict minerals policy, communication of requirements to suppliers, CM data collection using the RMI CMRT template, a professional analysis and risk assessment with corrective action on the basis of the CMRTs collected from the suppliers. • pass these requirements through their supply chain and determine the 3TG sources (Smelters or Refiners – SORs). • for suppliers representing the top 90% of our global corporate materials spend (our yearly corporate sample), provide their most recent RMI CMRT form, complete and accurate in the latest version with robust comments where appropriate, during our active yearly CM data collection campaign.
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.
Our multi-disciplined engineering teams provide expertise in several 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.
The response details our management and oversight of climate-related issues as well as key challenges and opportunities for our Company related to climate change. • Benchmark is pursuing opportunities to expand our renewable energy use by procuring renewable electricity, where available, and installing solar panels on a site-by-site basis.
Our responses detail our management and oversight of climate-related issues as well as key challenges and opportunities for our Company related to climate change. • Benchmark is pursuing opportunities to expand our renewable energy use by procuring renewable electricity, where available, and installing solar panels on a site-by-site basis.
We are exposed to intangible asset risk; our goodwill may become 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.
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.
Higher-volume manufacturing customers often compete on the price of products with short life cycles which require less value-add from EMS providers.
Higher-volume manufacturing customers often compete on the price of products with short lifecycles, which require less value-add from EMS providers.
In support of our financial goals, we will maintain a strong focus on cash conversion and capital management. We are focused on effective capital deployment through the balance of investments to support organic growth of the business and returns to our shareholders through dividends and share repurchases.
In support of our financial goals, we will maintain a strong focus on cash conversion and working capital management. We are focused on effective capital deployment through the balance of investments to support organic growth of the business and returns to our shareholders through our regular dividend distributions and share repurchases.
For example, it could: • increase our vulnerability to general adverse economic and industry conditions; • impair our ability to obtain additional debt or equity financing in the future for working capital, capital expenditures, acquisitions or other purposes; • require us to dedicate a material portion of our cash flows from operations to the payment of principal and interest on our indebtedness, thereby reducing the availability of our cash flows to fund working capital needs, capital expenditures, acquisitions and other purposes; • expose us to the risk of increased interest rates since the Term Loan has a variable rate; • limit our flexibility in planning for, or reacting to, changes in our business or industry; • place us at a disadvantage compared to our competitors that have less debt; and • make it more difficult for us to satisfy our debt obligations. 22 Any of these risks could materially impact our ability to fund our operations or limit our ability to expand our business, which could have a material adverse effect on our business, financial condition and results of operations.
For example, it could: • increase our vulnerability to general adverse economic and industry conditions; • impair our ability to obtain additional debt or equity financing in the future for working capital, capital expenditures, acquisitions or other purposes; • require us to dedicate a material portion of our cash flows from operations to the payment of principal and interest on our indebtedness, thereby reducing the availability of our cash flows to fund working capital needs, capital expenditures, acquisitions and other purposes; • expose us to the risk of increased interest rates since the term loan has a variable rate; • limit our flexibility in planning for, or reacting to, changes in our business or industry; • place us at a disadvantage compared to our competitors that have less debt; and • make it more difficult for us to satisfy our debt obligations.
We provide our customers with a comprehensive set of PCBA manufacturing technologies and solutions, which include: • Surface Mount Technology - Micro-Ball Grid Array - Land Grid Array - Quad Flat No-Leads - Package-on-Package - 01005 Chip Components - Circuit Design and Fabrication of Hybrid interconnect and CCDs • Substrate Technology; Rigid Epoxy, Flex, Ceramic, Glass, Rigid-Flex; • Plated Through Hole Technology; • Pin-in-Paste Technology; • Hybrid RoHS Soldering Processes; • Wafer-Level CSP (WLCSP); • Flip Chip; • Chip-on-Board and Wire-Bonding; • In-Circuit Test; • Microelectronics, and - Mixed SMT and Microelectronics Assembly • Inspection and Test Solutions - Automated Optical Inspection (2D & 3D) - Automated X-ray Inspection - Flying Probe - Boundary Scan Test - In-Circuit Test - Board Level Functional Testing - Device/System Integration Functional Test - Electrical Safety Test - Microelectronics Test - Vibration, ESS, HASS and HALT We also provide specialized solutions in support of our customers’ components, products and systems, which include: • Conformal Coating and Potting; • Underfill and Encapsulation; • Ultrasonic Welding; • Automation Solutions; • Complex Final Assembly; • Configure | Build to Order; • Fluidics Assembly; • Splicing and Connectorization for Optical Applications; • Hybrid Optical/Electrical Printed Circuit Board Assembly and Testing; and • Sub-Micron Alignment of Optical Sub-Assemblies. • Component Engineering Services .
We provide our customers with a comprehensive set of PCBA manufacturing technologies and solutions, which include: ▪ Surface Mount Technology ▪ Substrate Technology; Rigid Epoxy, Flex, Ceramic, Glass, Rigid-Flex; ▪ Plated Through Hole Technology; ▪ Pin-in-Paste Technology; ▪ Hybrid RoHS Soldering Processes; ▪ Wafer-Level CSP (WLCSP); ▪ Flip Chip; ▪ Chip-on-Board and Wire-Bonding; ▪ In-Circuit Test; ▪ Microelectronics ▪ Mixed SMT and Microelectronics Assembly ▪ Inspection and Test Solutions ▪ Automated Optical Inspection (2D & 3D) ▪ Automated X-ray Inspection ▪ Flying Probe ▪ Boundary Scan Test ▪ In-Circuit Test ▪ Board Level Functional Testing ▪ Device/System Integration Functional Test ▪ Electrical Safety Test ▪ Microelectronics Test; and ▪ Vibration, ESS, HASS and HALT 4 We also provide specialized solutions in support of our customers’ components, products and systems, which include: ▪ Conformal Coating and Potting; ▪ Underfill and Encapsulation; ▪ Ultrasonic Welding; ▪ Automation Solutions; ▪ Complex Final Assembly; ▪ Configure | Build to Order; ▪ Fluidics Assembly; ▪ Splicing and Connectorization for Optical Applications; ▪ Hybrid Optical/Electrical Printed Circuit Board Assembly and Testing; and ▪ Sub-Micron Alignment of Optical Sub-Assemblies. • Component Engineering Services .
In 2022, Benchmark installed rooftop solar panels at production facilities in Korat, Thailand. • We understand that energy management involves changing a company’s culture along with changing out inefficient equipment. To that end, we have developed a set of principles that we communicate company-wide to reduce energy use.
Benchmark installed rooftop solar panels at production facilities in Korat, Thailand in 2022 and in Suzhou, China in 2023. • We understand that energy management involves changing a company’s culture along with changing out inefficient equipment. To that end, we have developed a set of principles and initiatives that we communicate company-wide to help reduce energy use.
A 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, 2022, we had $192.1 million in goodwill and $58.2 million of identifiable intangible assets.
A 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, 2023, we had $192.1 million in goodwill and $51.0 million of identifiable intangible assets.
The processes supporting these include: - Complex Small / Medium / Large Precision Machining; - Advanced metal joining including vacuum chamber welding, electron beam laser and brazing; - Multi-Axis Robotic Grinding for demanding applications such as turbine blades and scientific instruments; - Complex Clean Room Assembly and Functional Test; - Major Electromechanical Assemblies; - Large precision and industrial frame fabrication, welding, grinding, bead blasting and coating; and - Sheet metal forming, power coating and painting.
We provide vertically integrated precision mechanical components and complex electromechanical assemblies. 5 The processes supporting these include: ▪ Complex Small / Medium / Large Precision Machining; ▪ Advanced metal joining including vacuum chamber welding, electron beam laser and brazing; ▪ Multi-Axis Robotic Grinding for demanding applications such as turbine blades and scientific instruments; ▪ Complex Clean Room Assembly and Functional Test; ▪ Major Electromechanical Assemblies; ▪ Large precision and industrial frame fabrication, welding, grinding, bead blasting and coating; and ▪ Sheet metal forming, powder coating and painting.
Our taxes could increase if certain tax holidays or incentives were retracted, or if they were not renewed upon expiration, such as the nonrenewal of our tax holiday in Malaysia that expired as of March 31, 2021, for which the Company applied for an extension in 2022, or tax rates applicable to us in such jurisdictions were otherwise increased.
Our taxes could increase if certain tax holidays or incentives were retracted, or if they were not renewed upon expiration, such as the non-renewal of our tax holiday in Malaysia that expired as of March 31, 2021, for which the Company is applying for an extension, or tax rates applicable to us in such jurisdictions were otherwise increased.
Leading with engineering is important to our strategy to partner with our customers through the entire product life cycle, ensuring high quality, extreme reliability and low product failure rates.
Leading with design and engineering is important to our strategy to partner with our customers through the entire product lifecycle, ensuring high quality, extreme reliability and low product failure rates.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeAmericas United States: Alabama 200,000 Arizona 234,180 California 306,000 Minnesota 456,000 New Hampshire 153,000 Texas 45,000 Mexico 502,000 Asia China 326,000 Malaysia 347,000 Thailand 756,000 Europe Netherlands 159,000 Romania 143,000 Total 3,627,180 Our principal manufacturing facilities consist of 1.8 million square feet in facilities that we own, with the remaining 1.8 million square feet in leased facilities whose terms expire between 2023 and 2036.
Biggest changeA summary of the approximate square footage of each of our principal manufacturing facilities by country follows: Square (in thousands) Footage Americas: United States: Alabama 200 Arizona 234 California 310 Minnesota 481 New Hampshire 153 Texas 45 Mexico 838 Asia: China 326 Malaysia 436 Thailand 756 Europe: Netherlands 159 Romania 222 Total square footage 4,160 Our principal manufacturing facilities consist of 1.9 million square feet in facilities that we own, with the remaining 2.3 million square feet in leased facilities whose terms expire between 2024 and 2036.
We currently lease our corporate headquarters in Tempe, Arizona. This lease consists of approximately 64,000 square feet. We lease other facilities with a total of 26,700 square feet dedicated to engineering, sales and procurement services.
We currently lease our corporate headquarters in Tempe, Arizona. This lease consists of approximately 64,000 square feet. We lease other facilities with a total of 26,700 square feet dedicated to engineering, sales and procurement services. We believe our facilities are suitable for their intended uses and are sufficient to meet our expected needs for the foreseeable future.
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The following chart summarizes the approximate square footage of our principal manufacturing facilities by country: Location Sq. Ft.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeIn 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 Safe ty Disclosures. Not applicable. 25 PART II
Biggest changeIn 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 Safe ty Disclosures Not applicable. 30 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest change(d) Maximum Number (or (c) Approximate Total Number of Dollar Value) Shares (or Units) of Shares (or (a) Purchased as Units) that Total Number of (b) Part of Publicly May Yet Be Purchased Shares (or Average Price Announced Under the Units) Paid per Share Plans or Plans or Period Purchased (or Unit) Programs Programs(1) October 1 to 31, 2022 — $ — — $154.6 million November 1 to 30, 2022 — — — $154.6 million December 1 to 31, 2022 — — — $154.6 million Total — $ — — (1) On October 30, 2018, the Company announced that the Board of Directors authorized the repurchase of $100 million of the Company’s common stock in addition to the $250 million previously announced on March 7, 2018.
Biggest changeIssuer Purchases of Equity Securities The following table provides information about the Company’s repurchase activity during the quarter ended December 31, 2023 related to its equity securities that are registered pursuant to Section 12 of the Exchange Act: (d) (c) Maximum Total Number (or Number of Approximate Shares (or Units) Dollar Value) of (a) Purchased as Shares (or Units) Total (b) Part of Publicly that May Yet Be Number of Average Price Announced Purchased Under Shares (or Units) Paid per Share Plans or the Plans or (amounts in millions, except per share data) Purchased (or Unit) Programs Programs (1) October 1 to 31, 2023 — $ — — $ 154.6 November 1 to 31, 2023 — — — 154.6 December 1 to 31, 2023 — — — 154.6 Total — $ — — $ 154.6 The Company did not repurchase shares in 2023.
The graph assumes that $100 was invested on December 31, 2017 in our common shares and in each of the two indices, and that dividends, if any, were reinvested.
The graph assumes that $100 was invested on December 31, 2018 in our common shares and in each of the two indices, and that dividends, if any, were reinvested.
However, the Company’s future dividend policy is subject to its compliance with applicable law, and depending on, among other things, our results of operations, financial condition, level of indebtedness, capital requirements, contractual restrictions, restrictions in our debt agreements, and other factors that the Board of Directors may deem relevant, including the impact of the COVID pandemic.
However, the Company’s future dividend policy is subject to its compliance with applicable law, and depending on, among other things, our results of operations, financial condition, level of indebtedness, capital requirements, contractual restrictions, restrictions in our debt agreements, and other factors that the Board of Directors may deem relevant.
There were approximately 500 record holders of our common shares as of February 21, 2023. Because many of our common shares are held by brokers and other institutions on behalf of shareholders, we are unable to estimate the total number of shareholders represented by these record holders.
There were approximately 500 record holders of our common shares as of February 22, 2024. Because many of our common shares are held by brokers and other institutions on behalf of shareholders, we are unable to estimate the total number of shareholders represented by these record holders.
Item 5. Market for Registrant’s Common Equity, Related S tockholder Matters and Issuer Purchases of Equity Securities. Our common shares are listed on the New York Stock Exchange under the symbol “BHE.” The last reported sale price of our common shares on February 21, 2023, as reported by the New York Stock Exchange, was $24.25.
Item 5. Market for Registrant’s Common Equity, Related S tockholder Matters and Issuer Purchases of Equity Securities Our common shares are listed on the New York Stock Exchange under the symbol “BHE.” The last reported sale price of our common shares on February 22, 2024, as reported by the New York Stock Exchange, was $29.62.
During 2022, cash dividends paid totaled $23.2 million. The Board of Directors currently intends to continue paying quarterly dividends.
During 2023, cash dividends paid totaled $23.5 million. The Board of Directors currently intends to continue paying quarterly dividends.
During 2022, the Company repurchased a total of 0.4 million common shares for an aggregate of $9.4 million at an average price of $24.96 per share. Since 2018, the Company has repurchased a total of 15.7 million common shares for an aggregate of $408.5 million at an average price of $26.06 per share.
Since 2018, the Company has repurchased a total of 15.7 million common shares for an aggregate of $408.5 million at an average price of $26.06 per share.
Performance Graph The following graph compares the cumulative total shareholder return on our common shares for the five‑year period commencing December 31, 2017 and ending December 31, 2022, 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., Flex Ltd., Jabil Inc., Plexus Corp and 26 Sanmina Corporation.
As of December 31, 2023, the Company had 154.6 million remaining under the share repurchase authorization. 31 Performance Graph The following graph compares the cumulative total shareholder return on our common shares for the five‑year period commencing December 31, 2018 and ending December 31, 2023, 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., Flex Ltd., Jabil Inc., Plexus Corp and Sanmina Corporation.
Dividend payments are not mandatory or guaranteed; there can be no assurance that we will continue to pay a dividend in the 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, 2022.
Dividend payments are not mandatory or guaranteed; there can be no assurance that we will continue to pay a dividend in the future.
Removed
On February 24, 2020, the Company announced that the Board of Directors authorized the repurchase of an additional $150 million of the Company’s common stock. Net of shares repurchased to date, the total remaining authorization as of December 31, 2022 is 154.6 million.
Added
Base Year December 31, December 31, 2018 2019 2020 2021 2022 2023 Benchmark Electronics, Inc. $ 100.00 $ 162.23 $ 127.53 $ 127.95 $ 126.02 $ 130.50 Peer Group 100.00 154.16 177.30 227.52 248.78 380.85 S&P 500 100.00 128.88 149.83 190.13 153.16 190.27 Item 6. [Reserved] 32
Removed
Stock 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 are funded from available cash and may be commenced, suspended or discontinued at any time without prior notice. Shares of stock repurchased under the program are retired.
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Dec-17 Dec-18 Dec-19 Dec-20 Dec-21 Dec-22 Benchmark Electronics, Inc. $ 100.00 $ 72.30 $ 118.08 $ 92.82 $ 93.13 $ 91.72 Peer Group $ 100.00 $ 65.93 $ 104.57 $ 123.52 $ 126.24 $ 162.42 S&P 500 $ 100.00 $ 92.97 $ 120.84 $ 140.49 $ 178.27 $ 143.61 Item 6. [Reserved] 27

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

70 edited+32 added−35 removed17 unchanged
Biggest changeDuring 2022, sales to customers in our various industry sectors fluctuated from 2021 as follows: • Industrials increased by 39%, • A&D decreased by 9% • Medical increased by 28%, • Semi-cap increased by 31%, 28 • Advanced Computing increased by 56%, and • Next Generation Communications increased by 36%.
Biggest changeDuring 2023, sales to customers in our various industry sectors fluctuated from 2022 as follows: • Complex Industrials increased by 1% • A&D increased by 4% • Medical decreased by 6% • Semi-Cap decreased by 11% • Advanced Computing increased by 9% • Next-Generation Communications increased by 6% The overall revenue decrease was primarily due to lower semi-cap revenue, as a result of lower demand from existing customers, and lower medical revenue, as a result of general softness across the industry and lower demand from existing customers, which were mostly offset by an increase in A&D revenue, as a result of strength in both defense and commercial aerospace and improved supply availability, and an increase in next-generation communications revenue, as a result of growth in broadband infrastructure programs.
Generally, there are no subjective customer acceptance requirements or further obligations related to goods of services provided. Our contracts with customer do not allow for a general right of return. Income Taxes We estimate our income tax provision in each of the jurisdictions where we operate, including estimating exposures related to uncertain tax positions.
Generally, there are no subjective customer acceptance requirements or further obligations related to goods or services provided. Our contracts with customers do not allow for a general right of return. Income Taxes We estimate our income tax provision in each of the jurisdictions where we operate, including estimating exposures related to uncertain tax positions.
The determination of how our performance obligations are satisfied requires judgment and is assessed on a contract by contract basis. Under the majority of our 34 contracts, our performance obligations are satisfied over time as work progresses since the customer controls all of the work-in-progress as products are being built.
The determination of how our performance obligations are satisfied requires judgment and is assessed on a contract by contract basis. Under the majority of our contracts, our performance obligations are satisfied over time as work progresses since the customer controls all of the work-in-progress as products are being built.
In addition, our past, current and future operations, and the operations of businesses we have or may 33 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.
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.
See Note 5 to the consolidated financial statements in Part II, Item 8 of this Report for more information regarding the terms of the Credit Agreement.
See Note 5 to the consolidated financial statements in Part II, Item 8 of this Report for more information regarding the terms of our Credit Agreement.
Amounts due under the Credit Agreement could be accelerated upon specified events of default, including a failure to pay amounts due, breach of a covenant, material inaccuracy of a representation, or occurrence of bankruptcy or insolvency, subject, in some cases, to cure periods. As of December 31, 2022, we were in compliance with all of these covenants and restrictions.
Amounts due under the Credit Agreement could be accelerated upon specified events of default, including a failure to pay amounts due, breach of a covenant, material inaccuracy of a representation, or occurrence of bankruptcy or insolvency, subject, in some cases, to cure periods. As of December 31, 2023, we were in compliance with all of these covenants and restrictions.
A summary of our long-term debt obligations as of December 31, 2022 can be found in Note 5 to the consolidated financial statements in Part II, Item 8 of this Report. U.S. federal income tax on deemed mandatory repatriation is payable over four years pursuant to the U.S. Tax Reform.
A summary of our long-term debt obligations as of December 31, 2023 can be found in Note 5 to the consolidated financial statements in Part II, Item 8 of this Report. U.S. federal income tax on deemed mandatory repatriation is payable over four years pursuant to the U.S. Tax Reform.
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.
Impairment of Long-Lived Assets and Goodwill Long-lived assets, such as property, plant, and equipment and purchased intangible assets, 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.
For our other contracts, revenue is recognized upon transfer of control of the product or service, which is generally upon shipment or delivery pending on the terms of the underlying contract. Revenue from design, development and engineering services is generally recognized over time as the services are performed.
For our other contracts, revenue is recognized upon transfer of control of the product or service, which is generally upon shipment or delivery depending on the terms of the underlying contract. Revenue from design, development and engineering services is generally recognized over time as the services are performed.
This 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. An impairment loss would be recognized to the extent that the carrying amount exceeds the asset’s fair value.
This process involves determining the fair values of the reporting units and comparing those fair values to the carrying values, including goodwill, of the reporting units. An impairment loss would be recognized to the extent that the carrying amount exceeds the fair value.
A summary of our operating lease obligations as of December 31, 2022 can be found in Note 6 to the consolidated financial statements in Part II, Item 8 of this Report.
A summary of our operating lease obligations as of December 31, 2023 can be found in Note 6 to the consolidated financial statements in Part II, Item 8 of this Report.
If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized by the amount that the carrying amount of the asset exceeds the fair value of the asset.
If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized for the amount that the carrying amount of the asset exceeds the fair value of the asset.
For example, a significant increase in our operations in our foreign locations, future accretive acquisitions in our foreign locations, would result in a reduction in the valuation allowance and would increase income in the period such determination was made.
For example, a significant increase in the operations of our foreign locations or future accretive acquisitions of our foreign locations would result in a reduction in our valuation allowance in the period of occurrence and would increase our income in the period such determination was made.
Additionally, during the year ended December 31, 2022, the Company agreed to $3.3 million in legal settlements. See Note 17 to the consolidated financial statements in Part II, Item 8 of this Report for additional information on our restructuring charges.
Additionally, during 2022, the Company agreed to $3.3 million in legal settlements. See Note 17 to the consolidated financial statements in Part II, Item 8 of this Report for additional information on our restructuring charges.
A substantial percentage of our sales are 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 52% and 47% of our total sales in 2022 and 2021, respectively.
A substantial percentage of our sales are 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 52% of our total sales in 2023 and in 2022.
See Note 8 to the consolidated financial statements in Part II, Item 8 of this Report. 36
See Note 8 to the consolidated financial statements in Part II, Item 8 of this Report. 42
Based on our qualitative assessments of goodwill as of December 31, 2022, 2021 and 2020, we concluded that it was more likely than not that the fair value of our Americas and Asia business segments were greater than their carrying amounts, and therefore no further testing was required.
Based on our qualitative assessments of goodwill as of December 31, 2023 and 2022, we concluded that it was more likely than not that the fair value of our Americas and Asia reporting units were greater than their carrying amounts, and therefore no further testing was required.
The Company has been granted certain tax incentives, including tax holidays, for its subsidiaries in China, Malaysia, and Thailand that expire at various dates, unless extended or otherwise renegotiated and are subject to certain conditions with which the Company expects to comply. The expiration dates of these tax incentives are as follows: 2023 in China and 2030 in Thailand.
The Company has been granted certain tax incentives, including tax holidays, for its subsidiaries in Thailand, China and Malaysia that expire at various dates, unless extended or otherwise renegotiated, and are subject to certain conditions with which the Company expects to comply. The tax incentives in Thailand will expire on December 31, 2030.
Restructuring Charges and Other Costs During 2022, we recognized $5.7 million of restructuring and other costs due primarily to expenses associated with announced site closures, reduction in force and other restructuring activities primarily in the Americas.
During 2022, we recognized $5.7 million of restructuring charges primarily due to expenses associated with announced site closures or exits, reductions in workforce and other restructuring activities primarily in the Americas.
See Part I, Item 1A of this Report for risk factors pertaining to international sales, fluctuations in foreign currency exchange rates and a discussion of potential adverse effects in 30 operating results associated with the risks of doing business abroad. During 2022 and 2021, 61% and 55%, respectively, of our sales were from international operations.
Our international operations are subject to the risks of doing business abroad. See Part I, Item 1A of this Report for risk factors pertaining to international sales, fluctuations in foreign currency exchange rates and a discussion of potential adverse effects in operating results associated with the risks of doing business abroad.
The net increase of $32.4 million in 2022 is primarily the result of items discussed above. LIQUIDITY AND CAPITAL RESOURCES We have historically financed our organic growth and operations through funds generated from operations and occasional borrowings under our Credit Agreement (as defined below).
The decrease of $3.9 million in 2023 is primarily the result of items discussed above. 37 LIQUIDITY AND CAPITAL RESOURCES We have historically financed our organic growth and operations through funds generated from operations and occasional borrowings under our Credit Agreement (as defined below).
In certain instances, suppliers may allocate available quantities to us. When shortages of these components and other material supplies used in operations have occurred, vendors have at times been unable to ship the quantities we need for production, forcing us to delay shipments, which can increase backorders and impact cash flows.
When shortages of these components and other material supplies used in operations have occurred, vendors have at times been unable to ship the quantities we need for production, forcing us to delay shipments, which can increase backorders and impact cash flows. Vendors also may increase the costs of components based on the market conditions including these shortages.
Under the terms of the Amended and Restated Credit Agreement, in addition to the $131.3 million Term Loan facility, we have a $250.0 million five-year revolving credit facility to be used for general corporate purposes, both with a maturity date of December 21, 2026.
Under the terms of the Amended and Restated Credit Agreement, in addition to the $131.3 million term loan facility, we have a $250.0 million five-year revolving credit facility to be used for general corporate purposes, both with a maturity date of December 21, 2026. 38 On May 20, 2022, the Company entered into Amendment No. 1 (the Amendment) to the Amended and Restated Credit Agreement (as amended, the Credit Agreement).
On March 6, 2018, our Board of Directors approved an expanded stock repurchase program granting us the authority to repurchase up to $250 million in shares of common stock in addition to the $100 million approved on December 7, 2015.
Share Repurchase Authorization On March 6, 2018, the Board of Directors approved an expanded share repurchase authorization granting the Company authority to repurchase up to $250 million in common stock in addition to the $100 million previously approved on December 7, 2015.
Working capital was $0.9 billion at December 31, 2022 and $0.7 billion at December 31, 2021. We primarily purchase 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.
Working capital was $0.9 billion as of December 31, 2023. We primarily purchase 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.
During 2021, we recognized $9.3 million of restructuring and other costs due primarily to expenses associated with announced site closures, reduction in force and other restructuring activities primarily in the Americas. During 2021, the Company made the decision to no longer continue certain manufacturing capabilities in the Americas.
Restructuring Charges and Other Costs During 2023, we recognized $7.3 million of restructuring charges primarily due to expenses associated with announced site closures or exits, reductions in work force and other restructuring activities primarily in the Americas. During 2023, we made the decision to no longer continue certain manufacturing capabilities in the Americas.
Developments adverse to our major customers or their products, the availability of electronic component supply, or the failure of a major customer to pay for components or services, including in each case as a result of the COVID pandemic, have adversely affected us by not fulfilling our total customer demand.
Developments adverse to our major customers or their products, the availability of electronic component supply, or the failure of a major customer to pay for components or services have adversely affected us by not allowing us to fulfill our total customer demand.
During the next 12 months, we believe our capital expenditures will approximate $60 million to $70 million, principally for machinery and equipment to help increase our production capacity to support anticipated revenue growth and our ongoing business around the globe.
As of December 31, 2023, we had $340.6 million available for borrowings under the Credit Agreement. During the next 12 months, we believe our capital expenditures will approximate $60 million to $70 million, principally for machinery and equipment to help increase our production capacity to support anticipated revenue growth and our ongoing business around the globe.
CONTRACTUAL OBLIGATIONS We have certain contractual obligations that extend beyond 2023 under lease obligations and debt arrangements. Non-cancellable purchase commitments do not typically extend beyond normal lead-times of 4 to 20 weeks; however, some electronic component manufacturers now have lead-times in excess of 52 weeks.
Non-cancellable purchase commitments do not typically extend beyond normal lead-times of 4 to 20 weeks; however, some electronic component manufacturers now have lead-times in excess of 52 weeks.
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 statutes of limitations, thereby precluding the taxing authority from examining the relevant tax period(s). We believe that we have adequately provided for our tax liabilities.
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 examining the relevant tax period(s). We believe that we have adequately provided for our tax liabilities.
If we consummated significant acquisitions in the future, our capital needs would increase and could possibly result in our need to increase available borrowings under our Credit Agreement 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 acceptable terms.
If we consummated significant acquisitions in the future, our capital needs would increase and could possibly result in our need to increase available borrowings under our Credit Agreement or access public or private debt and equity markets.
For further discussion and analysis regarding our financial condition and results of operations for the year ended December 31, 2021 as compared to the year ended December 31, 2020, refer to Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 filed with the SEC on February 25, 2022.
For discussion and analysis regarding our financial condition and results of operations for the year ended December 31, 2022 as compared to the year ended December 31, 2021, refer to Part II, Item 7 in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 filed with the SEC on February 24, 2023. 2023 OVERVIEW Sales for 2023 were $2.8 billion, a 2% decrease from sales of $2.9 billion in 2022.
We must also make judgments regarding the ability to realize our deferred tax assets. We record a valuation allowance to reduce our deferred tax assets to the amount that we believe is more likely than not to be realized. Our valuation allowance as of December 31, 2022 of $18.7 million relates to deferred tax assets from our foreign locations.
We must also make judgments regarding our ability to realize the future tax benefit from our deferred tax assets. We record a valuation allowance to reduce our deferred tax assets to the amount that we believe is more likely than not to be realized.
Most purchase orders beyond this time frame are normally cancelable; however, more manufacturers in the current constrained environment are looking to limit their liability and adding NCNR terms. We do not use 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.
Most purchase orders beyond this time frame are normally cancellable; however, as a result of the recent constrained environment some manufacturers have looked to limit their liability by adding non-cancellable, non-renewable (NCNR) terms. We do not use off-balance sheet financing techniques and we have not guaranteed the obligations of any entity that is not one of our wholly owned subsidiaries.
Dividend payments are not mandatory or guaranteed; there can be no assurance that the Company will continue to pay a dividend in the future. Management believes that our existing cash balances, funds generated from operations, and borrowing availability under our revolving credit facility will be sufficient to permit us to meet our liquidity requirements over the next 12 months.
Management believes that our existing cash balances, funds generated from operations, and borrowing availability under our revolving credit facility will be sufficient to permit us to meet our liquidity requirements over the next 12 months.
Alternatively, significant economic downturns in the United States or foreign locations generating additional operating loss carryforwards could possibly result in an increase in any valuation allowance and would decrease income in the period such determination was made. We are subject to examination by tax authorities for different periods in various U.S. and foreign tax jurisdictions.
Alternatively, significant economic downturns in our U.S. or foreign locations generating additional operating loss carryforwards could possibly result in an increase in our valuation allowance and would decrease our income in the period such determination was made.
Year Ended December 31, 2022 2021 Sales 100.0 % 100.0 % Cost of sales 91.2 90.9 Gross profit 8.8 9.1 Selling, general and administrative expenses 5.2 6.1 Amortization of intangible assets 0.2 0.3 Restructuring charges and other costs 0.3 0.6 Ransomware related incident costs (recovery), net — (0.2 ) Income from operations 3.1 2.4 Other expense, net (0.1 ) (0.3 ) Income before income taxes 3.0 2.0 Income tax expense 0.6 0.4 Net income 2.4 % 1.6 % 2022 Compared With 2021 Sales As noted above, sales increased 28% in 2022.
The following table presents the percentage relationship that certain items in our consolidated statements of income bear to sales for the periods indicated: Year Ended December 31, 2023 2022 Sales 100.0% 100.0% Cost of sales 90.5% 91.2% Gross profit 9.5% 8.8% Selling, general and administrative expenses 5.1% 5.2% Amortization of intangible assets 0.2% 0.2% Restructuring charges and other costs 0.3% 0.3% Income from operations 3.9% 3.1% Other expense, net (1.0)% (0.1)% Income before income taxes 2.9% 3.0% Income tax expense 0.6% 0.6% Net income 2.3% 2.4% 2023 Compared With 2022 Sales As noted above, sales decreased 2% in 2023.
The financial information and the discussion below should be read in conjunction with the consolidated financial statements and Notes thereto in Part II, Item 8 of this Report.
Actual results could differ from these estimates under different assumptions or conditions. RESULTS OF OPERATIONS The financial information and the discussion below should be read in conjunction with the consolidated financial statements and notes thereto in Part II, Item 8 of this Report.
For purposes of performing our goodwill impairment assessment, our reporting units are the same as our operating segments as defined in Note 13 to the consolidated financial statements in Part II, Item 8 of this Report. As of December 31, 2022 and 2021, we had goodwill of approximately $192.1 million, respectively, associated with our Americas and Asia business segments.
For purposes of performing our goodwill impairment assessment, our reporting units are the same as our operating segments as defined in Note 13 to the consolidated financial statements in Part II, Item 8 of this Report.
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. Our significant accounting policies are summarized in Note 1 to the consolidated financial statements in Part II, Item 8 of this Report.
Dividend payments are not mandatory or guaranteed; there can be no assurance that the Company will continue to pay a dividend in the future. 39 CRITICAL ACCOUNTING POLICIES AND ESTIMATES Management’s discussion and analysis of financial condition and results of operations is based upon our consolidated financial statements in Part II, Item 8 of this Report, which have been prepared in accordance with accounting principles generally accepted in the United States.
On December 12, 2022, the Company declared a quarterly cash dividend of $0.165 per share of the Company’s common stock to shareholders of record as of December 30, 2022. The dividend of $5.8 million was paid on January 13, 2023. The Board of Directors currently intends to continue paying quarterly dividends.
Dividends During 2023, 2022 and 2021, cash dividends paid totaled $23.5 million, $23.2 million and $23.3 million, respectively. On December 13, 2023, the Company declared a quarterly cash dividend of $0.165 per share of the Company’s common stock to shareholders of record as of December 29, 2023. The dividend of $5.9 million was paid on January 12, 2024.
See Note 8 to the consolidated financial statements in Part II, Item 8 of this Report. 32 Net Income We reported a net income of $68.2 million, or $1.91 per diluted share for 2022, compared with a net income of $35.8 million, or $0.99 per diluted share, for 2021.
There is no guarantee of being awarded these tax incentives in the future. See Note 8 to the consolidated financial statements in Part II, Item 8 of this Report. Net Income We reported net income of $64.3 million, or $1.79 per diluted share, for 2023, compared with net income of $68.2 million, or $1.91 per diluted share, for 2022.
As of December 31, 2022, we had $131.3 million in borrowings outstanding under the term loan facility and $195.0 million outstanding and $3.9 million in letters of credit outstanding under our revolving credit facility. As of December 31, 2022, $251.1 million remains available for future borrowings under the revolving credit facility.
As of December 31, 2023, we had $127.1 million in borrowings outstanding under the term loan facility and $205.0 million outstanding under our revolving credit facility and $4.4 million in letters of credit outstanding under our revolving credit facility.
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, revenue recognition, income taxes, long-lived assets, stock-based compensation and contingencies and litigation.
On an ongoing basis, we evaluate our estimates, including those related to accounts receivable, inventories, revenue recognition, income taxes, long-lived assets, stock-based compensation and contingencies and litigation.
On May 20, 2022, the Company entered into Amendment No. 1 (the Amendment) to the Amended and Restated Credit Agreement (as amended, the Credit Agreement). The Amendment, among other things, increased the revolving credit facility commitments from $250 million to $450 million.
On May 1, 2023, the Company entered into Amendment No. 3 to the Credit Agreement (Amendment No. 3), which increased the revolving credit facility commitments from $450 million to $550 million.
These last-minute allocations created inefficiencies in our operations and contributed to the sequential increase in inventory. We experience fluctuations in gross profit from period to period. Different programs contribute different gross profits depending on the type of services involved, location of production, size of the program, complexity of the product and level of material costs associated with the various products.
Different programs contribute different gross profits depending on the type of services involved, location of production, size of the program, complexity of the product and level of material costs associated with the various products.
In connection with that decision, the Company assessed the facility and equipment assets used in those manufacturing capabilities using valuation information from third parties and recorded $4.4 million of impairment charges as a result of that assessment.
In connection with that decision, we assessed the facility and equipment assets used in those manufacturing capabilities and recorded $1.1 million of impairment charges as a result of that assessment. The asset impairment charges are included in restructuring charges and other costs in the consolidated statement of income.
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 program ramps remain subject to competitive constraints that can exert downward pressure on our margins.
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. During periods of low production volume, we generally have unabsorbed manufacturing overhead costs and reduced gross profit.
Operating income by reportable segment was as follows: Year Ended December 31, (in thousands) 2022 2021 Operating income: Americas $ 55,202 $ 45,807 Asia 134,649 90,725 Europe 16,889 11,054 Corporate and other costs (116,671 ) (94,524 ) Total operating income $ 90,069 $ 53,062 Americas. 2022 operating income increased 21% to $55.2 million from $45.8 million in 2021.
Income from operations by reportable segment was as follows: Year Ended December 31, (in thousands) 2023 2022 Income from operations: Americas $ 63,484 $ 55,202 Asia 124,279 134,649 Europe 17,380 16,889 Corporate and intersegment eliminations (95,479 ) (116,671 ) Total income from operations $ 109,664 $ 90,069 35 Americas. 2023 operating income increased 15% to $63.5 million from $55.2 million in 2022.
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. 35 Recently Enacted Accounting Principles See Note 1(r) to the consolidated financial statements in Part II, Item 8 of this Report for a discussion of recently enacted accounting principles.
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.
Differences in our future operating results as compared to the estimates utilized in the determination of the valuation allowances could result in adjustments in valuation allowances in future periods.
As of December 31, 2023, our valuation allowance was $18.5 million and primarily relates to the deferred tax assets of our foreign locations. Differences in our future operating results as compared to the estimates utilized in the determination of the valuation allowance against our deferred tax assets could result in adjustments to the respective valuation allowances in future periods.
The overall revenue increase was due to strength in Next Generation Communications, Advanced Computing, Industrials, Medical and Semi-Cap sectors (as discussed below). Our sales depend on the success of our customers, some of which operate in businesses associated with rapid technological change and consequent product obsolescence.
Our sales depend on the success of our customers, some of which operate in businesses associated with rapid technological change and consequent product obsolescence.
The percentages of our sales by sector were as follows: 2022 2021 Industrials 21 % 20 % A&D 12 15 Medical 21 20 Semi-Cap 25 26 Advanced Computing 10 9 Next Generation Communications 11 10 Total 100 % 100 % Industrials. 2022 sales increased 39% to $593.6 million from $428.4 million in 2021 primarily due to continued demand improvements from energy-related control systems and building infrastructure programs.
The percentages of our sales by market sector were as follows: Year Ended December 31, 2023 2022 Complex Industrials 21% 21% A&D 13% 12% Medical 20% 21% Semi-Cap 23% 25% Advanced Computing 12% 10% Next-Generation Communications 11% 11% Total 100% 100% Complex Industrials. 2023 sales increased 1% to $596.5 million from $593.6 in 2022 as a result of strength with existing customers.
Operating Income 2022 operating income increased 70% to $90.1 million from $53.1 million in 2021. The increase was primarily due to an increase in revenue and respective gross profit partially offset by an increase in selling, general and administrative (SG&A) expenses.
Income from Operations 2023 income from operations increased 22% to $109.7 million from $90.1 million in 2022. The increase was primarily due to improved gross margin and cost actions taken to reduce selling, general and administrative (SG&A) expenses.
On December 21, 2021, the Company amended and restated the Company’s prior $650 million credit agreement by entering into a $381 million amended and restated credit agreement (the Amended and Restated Credit Agreement).
In addition, we paid $23.5 million of dividends during 2023 and $5.8 million for employee taxes paid to settle stock-based awards exercised during the year. Credit Agreement On December 21, 2021, the Company amended and restated the Company’s prior $650 million credit agreement by entering into a $381 million amended and restated credit agreement (the Amended and Restated Credit Agreement).
The purchases of property, plant and equipment were primarily for machinery and equipment in the Americas and Asia. Cash provided by financing activities was $159.2 million in 2022.
The purchases of property, plant and equipment were primarily for machinery and equipment in the Americas. Cash used in financing activities was $23.6 million in 2023. Borrowings under the Credit Agreement were $749.5 million and principal payments under the Credit Agreement were $743.6 million.
As of December 31, 2021, the Company has collected insurance recoveries totaling $10.5 million. No further insurance recoveries are expected. Interest Expense Interest expense increased to $12.9 million in 2022 from $8.5 million in 2021 primarily due to additional borrowings to support our growth as well as the higher interest rate environment.
Interest Expense Interest expense increased to $31.9 million in 2023 from $12.9 million in 2022 primarily due to additional borrowings to support our operations as well as the higher interest rate environment. Interest Income Interest income increased to $6.3 million in 2023 from $1.7 million in 2022 primarily due to higher interest rates.
The increase was primarily due to higher revenue. Asia. 2022 operating income increased 48% to $134.6 million from $90.7 million in 2021. The increase was primarily due to higher revenue and improved productivity in labor. Europe. 2022 operating income increased 53% to $16.9 million from $11.1 million in 2021. The increase was primarily due to higher revenue.
The increase was primarily due to higher revenue and expense control. Asia. 2023 operating income decreased 8% to $124.3 million from $134.6 million in 2022. The decrease was primarily due to lower revenue partially offset by expense control. Europe. 2023 operating income increased 3% to $17.4 million from $16.9 million in 2022.
The Malaysia tax incentive expired as of March 31, 2021, but the Company has applied for an extension of the Malaysia tax holiday in 2022 which will extend the tax holiday for another five years until 2026.
The tax incentives in China expired on December 31, 2023 and the tax incentives in Malaysia expired on March 31, 2021. The Company has applied for a continuation of the Malaysia tax holiday, which will extend the tax incentive period for five to ten years if approved. The Company will also apply for a China tax holiday in 2024.
On February 19, 2020 and October 26, 2018, the Board of Directors authorized the repurchase of an additional $150 million and $100 million, respectively, of shares of the Company’s common stock. As of December 31, 2022, we had $154.6 million remaining under the share repurchase authorization to purchase additional shares.
On October 26, 2018 and February 19, 2020, the Board of Directors authorized the repurchase of an additional $100 million and $150 million of the Company’s common stock, respectively. 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.
Income Tax Expense Income tax expense of $16.1 million in 2022 represented a 19.1% effective tax rate for 2022, compared with $9.6 million for 2021 representing an effective tax rate of 21.2%. The higher effective tax rate in 2021 is the result of the mix of profits in our foreign and U.S. jurisdictions.
The higher effective tax rate in 2023 is the result of the mix of profits in our foreign and U.S. jurisdictions and higher tax rates for our locations in Asia.
Gross Profit Gross profit increased 23.9% to $255.2 million in 2022 from $205.9 million in 2021 primarily due to higher revenues, mix of revenues and improved absorption of fixed and variable manufacturing costs. Gross profit margin decreased to 8.8% in 2022 from 9.1% in 2021 primarily due to higher supply chain premiums.
Gross Profit Gross profit increased 6% to $271.1 million in 2023 from $255.2 million in 2022 primarily due to our mix of revenue and expense discipline. Gross profit margin increased to 9.5% in 2023 from 8.8% in 2022 primarily due to improved operational efficiencies and the proactive cost reduction actions taken by our manufacturing sites.
Year Ended December 31, (in thousands) 2022 2021 Net sales: Americas $ 1,475,929 $ 1,203,544 Asia 1,251,475 912,560 Europe 284,103 228,834 Elimination of intersegment sales: (125,176 ) (89,619 ) Total net sales $ 2,886,331 $ 2,255,319 Americas. 2022 sales increased 23% to $1,475.9 million from $1,203.5 million in 2021.
Sales by geographical segment were as follows: Year Ended December 31, (in thousands) 2023 2022 Sales: Americas $ 1,611,783 $ 1,475,929 Asia 1,055,938 1,251,475 Europe 299,835 284,103 Elimination of intersegment sales (128,580 ) (125,176 ) Total sales $ 2,838,976 $ 2,886,331 Americas. 2023 sales increased 9% to $1.6 billion from $1.5 billion in 2022 primarily due to increases in sales in our advanced computing, complex industrials and next-generation communications sectors.
Selling, General and Administrative (SG&A) Expenses SG&A increased to $150.2 million in 2022 from $136.7 million in 2021. The increase was primarily due to the increase in variable compensation, continued investment in our IT environment and medical expenses. 31 Amortization of Intangible Assets Amortization of intangible assets was $6.4 million in both 2022 and 2021.
The increase was primarily due to higher revenue and expense control. Selling, General and Administrative (SG&A) Expenses SG&A expense decreased to $147.0 million in 2023 from $150.2 million in 2022. The decrease was primarily due to cost actions taken, coupled with lower variable compensation expense.
Cash and cash equivalents and restricted cash totaled $207.4 million at December 31, 2022 and $271.7 million at December 31, 2021. During 2022 and 2021, we repatriated $20.0 million and $35.0 million, respectively, of foreign earnings to the U.S. Cash used in operating activities was $177.5 million in 2022.
Cash and cash equivalents and restricted cash totaled $283.2 million at December 31, 2023 and $207.4 million at December 31, 2022, of which $269.6 million and $167.7 million, respectively, was held outside the United States in various foreign subsidiaries.
Interest Income Interest income increased to $1.7 million in 2022 from $0.5 million in 2021 primarily due to higher interest rates. Other Income (Expense) Other income (expense) increased to $5.4 million in 2022 from $0.3 million in 2021 primarily due to gains on litigation settlements partially offset by foreign exchange losses.
Other income, net, was $5.4 million in 2022 primarily consisting of gain on litigation settlements, partially offset by foreign exchange losses. 36 Income Tax Expense Income tax expense in 2023 was $16.9 million representing an effective tax rate of 20.8% compared with $16.1 million of income tax expense in 2022 representing an effective tax rate of 19.1%.
Cash used in investing activities was $41.2 million in 2022 primarily due to purchases of additional property, plant and equipment of $43.4 million and additions to purchased software of $3.4 million, partially offset by proceeds from the sale of assets held for sale of $5.4 million.
For example, we have been impacted by supply chain constraints, including shortages, longer lead times and increased transit times. Cash used in investing activities was $77.1 million in 2023 primarily due to capital expenditures for property, plant and equipment of $73.5 million and purchased software of $4.3 million.
See Note 17 to the consolidated financial statements in Part II, Item 8 of this Report for additional information on our restructuring charges. 29 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.
Additionally, during 2022, the Company agreed to $3.3 million in legal settlements. See Note 17 to the consolidated financial statements in Part II, Item 8 of this Report for additional information on our restructuring charges. Inflation, interest rates, disruption in the global economy and financial markets, and geopolitical events continue to create uncertainty.
We have undertaken initiatives to restructure our business operations with the intention of improving utilization and reducing costs. During 2022, we recognized $5.7 million of restructuring and other costs due in part to expenses associated with various site closures and restructuring activities. During 2021, the Company made the decision to no longer continue certain manufacturing capabilities in the Americas.
Moorpark, California operations ceased as of March 31, 2023 with restructuring activity substantially completed in 2023. 33 During 2022, we recognized $5.7 million of restructuring charges primarily due to expenses associated with announced site closures or exits, reductions in workforce and other restructuring activities primarily in the Americas.
Europe. 2022 sales increased 24% to $284.1 million from $228.8 million in 2021. The increases were primarily due to increasing demand with existing customers and new customer program ramps.
Asia. 2023 sales decreased 16% to $1.1 billion from $1.3 billion in 2022 primarily due to a decrease in existing customer demand of our semi-cap and medical sectors. Europe. 2023 sales increased 6% to $299.8 million from $284.1 million in 2022 primarily due to an increase in sales in our semi-cap and A&D sectors.
Removed
COVID Pandemic Update As a result of the COVID pandemic, our revenue during 2020 and 2021 was negatively impacted primarily as a result of operational inefficiencies relating to reduced productivity levels throughout our facilities and supply chain constraints, which affected our ability to support customer demand.
Added
Sales to Applied Materials, Inc. and subsidiaries, our largest customer in 2023 and 2022 represented 12% and 15% of our total sales in 2023 and 2022, respectively.
Removed
Additionally, the COVID pandemic negatively impacted our 2020 and 2021 results due to increased direct costs associated with labor expenses and personal protective equipment for our employees, as well as under absorption of fixed costs. The COVID pandemic continued to affect the Company’s operations into 2022.
Added
After a period of unprecedented global labor and supply disruptions, we have seen a general easing of certain material constraints across commodity categories, with the exception of older technologies where semiconductor original equipment manufacturers are not adding incremental capacity.
Removed
While end market demand continued to grow as more customers recovered from the pandemic, we continued to see component supply chain constraints across all commodity categories which constrained our ability to produce the full demand forecasts we received from customers.
Added
The lack of capacity regarding these older technologies could constrain our ability to produce the full demand forecasts we are receiving from customers needing those parts. Lead times are also improving from the previous highs that prompted many suppliers to categorize some of their constrained components with non-cancellable and non-returnable business terms.
Removed
See "2022 Overview" below and "Risk Factors-Shortages or price increases of components specified by our customers have delayed and are expected to continue delaying shipments and may adversely affect our profitability" in Part I, Item 1A of this Report for additional information.
Added
Until recently, these constraints led to last-minute allocations and created inefficiencies in our operations, as well as increased costs to us and our customers. We experience fluctuations in gross profit from period to period.
Removed
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was enacted in the United States in response to the COVID pandemic.
Added
Gross profit can also be impacted by higher costs associated with other situations, such as supply chain constraints. This includes supply chain premiums for excess component costs paid to secure available supply resulting in revenue with cost recovery only with no margin.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeOn July 30, 2021, the Company entered into forward currency exchange contracts designated as cash flow hedges of forecasted foreign currency expenses. Changes in the fair value of the derivatives are recorded in accumulated other comprehensive loss in the condensed consolidated balance sheets until earnings are affected by the variability of the cash flows.
Biggest changeThe Company enters into forward currency exchange contracts designated as cash flow hedges of forecasted foreign currency expenses. Changes in the fair value of the derivatives are recorded in accumulated other comprehensive loss on the consolidated balance sheet until earnings are affected by the variability of the cash flows. Our sales are substantially denominated in U.S. dollars.
Item 7A. Quantitative and Qualitat ive Disclosures About Market Risk. Our international sales comprise a significant portion of our net sales. We are exposed to risks associated with operating internationally, including: • Foreign currency exchange risk; • Import and export duties, taxes and regulatory changes; • Inflationary economies or currencies; and • Economic and political instability.
Item 7A. Quantitative and Qualitat ive Disclosures About Market Risk Our international sales comprise a significant portion of our business. We are exposed to risks associated with operating internationally, including: • Foreign currency exchange risk; • Import and export duties, taxes and regulatory changes; • Inflationary economies or currencies; and • Economic and political instability.
The effect of this swap is to convert our floating rate interest expense to fixed interest rate expense. The interest rate swap is designated as a cash flow hedge. For additional information, see Note 10 to the Notes to consolidated financial statements in Part II, Item 8 of this Report. 37
The effect of this swap is to convert our floating rate interest expense to fixed interest rate expense. The interest rate swap is designated as a cash flow hedge. For additional information, see Note 10 to the consolidated financial statements in Part II, Item 8 of this Report.
Our sales are substantially denominated in U.S. dollars. Our foreign currency cash flows are generated in certain European and Asian countries and Mexico. We are also exposed to market risk for changes in interest rates on our financial instruments, a portion of which relates to our invested cash balances. We do not use derivative financial instruments in our investing activities.
Our foreign currency cash flows are generated in certain European and Asian countries and Mexico. We are also exposed to market risk for changes in interest rates on our financial instruments, a portion of which relates to our invested cash balances. We do not use derivative financial instruments in our investing activities.
As of December 31, 2022, we had $131.3 million outstanding on the floating rate Term Loan facility, and we have an interest rate swap agreement with a notional amount of $121.9 million. Under this swap agreement, we receive variable rate interest rate payments and pay fixed rate interest payments.
As of December 31, 2023, we had $127.1 million outstanding on the floating rate term loan facility, and we have an interest rate swap agreement with a notional amount of $127.1 million. Under this swap agreement, we receive variable rate interest rate payments and pay fixed rate interest payments.
We do not use derivative financial instruments for speculative purposes. Certain forward currency exchange contracts in place as of December 31, 2022 have not been designated as accounting hedges and, therefore, changes in fair value are recorded within our consolidated statements of income.
We do not use derivative financial instruments for speculative purposes. Certain forward currency exchange contracts in place as of December 31, 2023 have not been designated as accounting hedges and, therefore, changes in fair value are recorded within our consolidated statement of income in Part II, Item 8 of this Report.

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