EXHIBIT 99.2
BENCHMARK ELECTRONICS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
Effective January 8, 2007, Benchmark Electronics, Inc. (Benchmark) completed its previously announced acquisition of Pemstar Inc. (Pemstar) (the Merger). With the closing of the Merger, Pemstar became a wholly owned subsidiary of Benchmark. The following unaudited pro forma condensed consolidated financial information is based upon Benchmark’s and Pemstar’s historical consolidated financial statements, and has been prepared to reflect the Merger based on the purchase method of accounting. The historical consolidated financial information has been adjusted to give effect to pro forma events that are directly attributable to the Merger and factually supportable. The unaudited pro forma condensed consolidated statements of income, which have been prepared for the twelve months ended December 31, 2006, give effect to the merger as if it had occurred on January 1, 2006. The unaudited pro forma condensed consolidated balance sheet has been prepared as of December 31, 2006 and gives effect to the Merger as if it had occurred on that date.
The unaudited pro forma condensed consolidated financial information is presented for informational purposes only. The pro forma information is not necessarily indicative of what the financial position or results of operations actually would have been had the Merger been completed at the dates indicated. In addition, the unaudited pro forma condensed consolidated financial information does not purport to project the future financial position or operating results of Benchmark after completion of the Merger.
The unaudited pro forma condensed consolidated financial information does not give effect to any potential cost savings or other operating efficiencies that could result from the Merger. In addition, Benchmark’s cost to acquire Pemstar will be allocated to the assets acquired and liabilities assumed based upon their estimated fair values as of the date of acquisition. Accordingly, the purchase price allocation pro forma adjustments are preliminary and may differ from the final purchase price allocation.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
DECEMBER 31, 2006
|
|
|
Benchmark |
|
Pemstar |
|
Pro Forma |
|
Pro Forma |
|
||||
|
(in thousands) |
|
Historical |
|
Historical |
|
Adjustments |
|
Consolidated |
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
Assets |
|
|
|
|
|
|
|
|
|
||||
|
Current assets: |
|
|
|
|
|
|
|
|
|
||||
|
Cash and cash equivalents |
|
$ |
123,872 |
|
$ |
16,401 |
|
$ |
(304 |
)(e) |
$ |
139,969 |
|
|
Short-term investments |
|
100,460 |
|
— |
|
|
|
100,460 |
|
||||
|
Accounts receivable, net |
|
462,953 |
|
136,402 |
|
|
|
599,355 |
|
||||
|
Recoverable income taxes |
|
— |
|
206 |
|
|
|
206 |
|
||||
|
Inventories, net |
|
420,347 |
|
68,526 |
|
(1,236 |
)(c) |
487,637 |
|
||||
|
Prepaid expenses and other assets |
|
56,444 |
|
12,698 |
|
|
|
69,142 |
|
||||
|
Deferred tax asset |
|
6,534 |
|
1 |
|
|
|
6,535 |
|
||||
|
Assets related to discontinued operations |
|
— |
|
436 |
|
|
|
436 |
|
||||
|
Total current assets |
|
1,170,610 |
|
234,670 |
|
(1,540 |
) |
1,403,740 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
Property, plant and equipment, net |
|
110,912 |
|
36,416 |
|
10,092 |
(c) |
157,420 |
|
||||
|
Goodwill, net |
|
112,999 |
|
33,878 |
|
118,162 |
(a) |
265,039 |
|
||||
|
Intangible assets |
|
— |
|
— |
|
17,877 |
(f) |
17,877 |
|
||||
|
Deferred income taxes |
|
— |
|
3,216 |
|
14,069 |
(b) |
17,285 |
|
||||
|
Other, net |
|
11,599 |
|
14,392 |
|
(4,575 |
) |
21,416 |
|
||||
|
Non-current assets related to discontinued operations |
|
— |
|
16 |
|
|
|
16 |
|
||||
|
|
|
$ |
1,406,120 |
|
$ |
322,588 |
|
$ |
154,085 |
|
$ |
1,882,793 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Liabilities and Shareholders’ Equity |
|
|
|
|
|
|
|
|
|
||||
|
Current liabilities: |
|
|
|
|
|
|
|
|
|
||||
|
Cash overdraft |
|
$ |
— |
|
$ |
3,494 |
|
|
|
$ |
3,494 |
|
|
|
Revolving credit facilities and current maturities of long-term debt |
|
— |
|
61,515 |
|
|
|
61,515 |
|
||||
|
Current maturities of capital lease obligations |
|
— |
|
617 |
|
|
|
617 |
|
||||
|
Accounts payable |
|
335,470 |
|
127,827 |
|
|
|
463,297 |
|
||||
|
Income taxes payable |
|
31,300 |
|
3,876 |
|
|
|
35,176 |
|
||||
|
Accrued liabilities |
|
42,948 |
|
31,600 |
|
$ |
8,869 |
(c) |
83,635 |
|
|||
|
|
|
|
|
|
|
218 |
(d) |
|
|
||||
|
Liabilities related to discontinued operations |
|
— |
|
1,242 |
|
|
|
1,242 |
|
||||
|
Total current liabilities |
|
409,718 |
|
230,171 |
|
9,087 |
|
648,976 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
Long-term debt, less current maturities |
|
— |
|
4,746 |
|
|
|
4,746 |
|
||||
|
Capital lease obligations, less current maturities |
|
— |
|
11,714 |
|
|
|
11,714 |
|
||||
|
Other long-term liabilities |
|
2,306 |
|
1,762 |
|
|
|
4,068 |
|
||||
|
Deferred tax liability |
|
9,074 |
|
— |
|
3,460 |
(b) |
12,534 |
|
||||
|
Shareholders’ equity: |
|
|
|
|
|
|
|
|
|
||||
|
Preferred shares |
|
— |
|
— |
|
|
|
— |
|
||||
|
Common shares |
|
6,475 |
|
456 |
|
274 |
(e) |
7,205 |
|
||||
|
Additional paid in capital |
|
586,349 |
|
255,850 |
|
(40,847 |
)(e) |
801,352 |
|
||||
|
Retained earnings (accumulated deficit) |
|
398,949 |
|
(185,557 |
) |
185,557 |
(e) |
398,949 |
|
||||
|
Accumulated other comprehensive income (loss) |
|
(6,479 |
) |
3,446 |
|
(3,446 |
)(e) |
(6,479 |
) |
||||
|
Less treasury shares |
|
(272 |
) |
— |
|
|
|
(272 |
) |
||||
|
Total shareholders’ equity |
|
985,022 |
|
74,195 |
|
141,538 |
|
1,200,755 |
|
||||
|
|
|
$ |
1,406,120 |
|
$ |
322,588 |
|
$ |
154,085 |
|
$ |
1,882,793 |
|
See accompanying notes to unaudited proforma condensed consolidated financial information.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 2006
|
|
|
Benchmark |
|
Pemstar |
|
Pro Forma |
|
Pro Forma |
|
||||
|
|
|
Historical |
|
Historical |
|
Adjustments |
|
Consolidated |
|
||||
|
|
|
(in thousands, except per share data) |
|
||||||||||
|
Sales |
|
$ |
2,907,304 |
|
$ |
817,341 |
|
$ |
(244,913 |
)(g) |
$ |
3,479,732 |
|
|
Cost of sales |
|
2,707,781 |
|
760,690 |
|
(4,216 |
)(h) |
3,224,704 |
|
||||
|
|
|
|
|
|
|
(239,551) |
(g) |
|
|
||||
|
Gross profit |
|
199,523 |
|
56,651 |
|
(1,146 |
) |
255,028 |
|
||||
|
Selling, general and administrative expenses |
|
69,299 |
|
39,258 |
|
(2,612 |
)(g) |
105,945 |
|
||||
|
Restructuring charges |
|
4,723 |
|
27,679 |
|
|
|
32,402 |
|
||||
|
Income (loss) from operations |
|
125,501 |
|
(10,286 |
) |
1,466 |
|
116,681 |
|
||||
|
Interest expense |
|
(354 |
) |
(8,608 |
) |
|
|
(8,962 |
) |
||||
|
Other income (expense) |
|
6,610 |
|
(2,527 |
) |
|
|
4,083 |
|
||||
|
Income (loss) before income taxes |
|
131,757 |
|
(21,421 |
) |
1,466 |
|
111,802 |
|
||||
|
Income tax expense |
|
20,080 |
|
777 |
|
223 |
(i) |
21,080 |
|
||||
|
Net income (loss) from continuing operations |
|
$ |
111,677 |
|
$ |
(22,198 |
) |
$ |
1,243 |
|
$ |
90,722 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Earnings per share: |
|
|
|
|
|
|
|
|
|
||||
|
Basic |
|
$ |
1.74 |
|
|
|
|
|
$ |
1.27 |
|
||
|
|
|
|
|
|
|
|
|
|
|
||||
|
Diluted |
|
$ |
1.71 |
|
|
|
|
|
$ |
1.25 |
|
||
|
|
|
|
|
|
|
|
|
|
|
||||
|
Weighted average number of shares outstanding: |
|
|
|
|
|
|
|
|
|
||||
|
Basic |
|
64,306 |
|
|
|
|
|
71,608 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
Diluted |
|
65,121 |
|
|
|
|
|
73,050 |
|
||||
See accompanying notes to unaudited proforma condensed consolidated financial information.
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Pro Forma Presentation
The pro forma information related to the Merger has been prepared in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 141, Business Combinations and SFAS 142, Goodwill and Other Intangible Assets.
The following is an estimate of the purchase price for Pemstar and the preliminary purchase price allocation (in thousands):
|
Acquisition of the outstanding common stock of Pemstar at $4.44 share for 45.6 million shares |
|
$ |
202,475 |
|
|
Estimated fair value of Pemstar stock options and warrants |
|
8,732 |
|
|
|
Estimated fair value of convertible debt |
|
4,830 |
|
|
|
Acquisition costs |
|
4,793 |
|
|
|
Total purchase price |
|
220,830 |
|
|
|
|
|
|
|
|
|
Current assets |
|
233,434 |
|
|
|
Property, plant and equipment |
|
54,108 |
|
|
|
Deferred taxes |
|
17,285 |
|
|
|
Goodwill |
|
152,040 |
|
|
|
Intangible assets |
|
17,877 |
|
|
|
Other assets |
|
6,808 |
|
|
|
Total assets acquired |
|
481,552 |
|
|
|
|
|
|
|
|
|
Current liabilities |
|
239,040 |
|
|
|
Long-term debt, capital lease obligations and other long-term liabilities |
|
21,682 |
|
|
|
Total liabilities assumed |
|
260,722 |
|
|
|
Net assets acquired |
|
$ |
220,830 |
|
Benchmark has engaged an independent appraisal firm to assist in finalizing the allocation of the purchase price. This final assessment may materially differ from the estimate presented herein as additional information becomes available and is assessed by Benchmark and the appraisal firm. The fair value of estimated stock options and warrants are assumed to have been exercised as of the Merger date.
Due to different fiscal period ends, the unaudited pro forma condensed combined income statement for the year ended December 31, 2006 combines the historical results for Benchmark for the year ended December 31, 2006 and the historical results of Pemstar for the three months ended March 31, 2006 plus the nine months ended December 31, 2006.
2. Pro Forma Adjustments
The unaudited pro forma condensed consolidated financial statements have been adjusted for the following:
(a) To reflect the adjustment to goodwill for the acquisition of Pemstar based on preliminary purchase price allocation as follows (in thousands):
|
Total estimated purchase price |
|
$ |
220,830 |
|
|
Less book value of Pemstar’s net assets |
|
(74,195 |
) |
|
|
Intangible assets |
|
(17,877 |
) |
|
|
Deferred income taxes |
|
(10,609 |
) |
|
|
Estimated liability for exit costs |
|
8,869 |
|
|
|
Adjustment to historical net book value of assets to fair value |
|
(8,856 |
) |
|
|
Pro Forma Goodwill Adjustment |
|
$ |
118,162 |
|
(b) Estimated fair value adjustment to the valuation allowance on deferred tax assets based on Benchmark’s expected utilization of net operating loss carryforwards as well as the tax effects of fair value adjustments related to identifiable assets.
(c) To reflect assets and liabilities acquired at estimated fair value, including the estimated costs associated with the planned termination of certain revenue producing facilities, including planned disposition of acquired assets. Final purchase price adjustments based on a third-party valuation may materially differ from these preliminary estimates.
(d) Represents the accrual of estimated direct acquisition costs.
(e) To reflect the elimination of Pemstar’s historical equity and the issuance of Benchmark common shares and payment of cash to effect this transaction.
(f) To record the preliminary fair value of intangible assets, principally contractual agreements and customer relationships.
(g) To record adjustment for revenues and costs specifically identifiable with the termination of the revenue producing activities in Tianjin, China.
(h) To reflect adjustments to depreciation and amortization expense based on the estimated fair values of acquired assets calculated over the remaining estimated useful lives of the assets.
(i) To record adjustment to income tax expense for the pro forma adjustments.