XML 23 R8.htm IDEA: XBRL DOCUMENT
v3.3.1.900

Summary Of Significant Accounting Policies | 12 Months Ended
--- | ---
Dec. 31, 2015
Accounting Policies [Abstract] |
Significant Accounting Policies | Note 1—Summary of Significant Accounting Policies (a) Business Benchmark Electronics, Inc. (the Company) is a Texas corporation that provides worldwide integrated electronic manufacturing services (EMS). The Company provides services to original equipment manufacturers (OEMs) of industrial control equipment (which includes equipment for the aerospace and defense industry), telecommunica tion equipment, computers and related products for business enterprises, medical devices, and testing and instrumentation products. The Company has manufacturing operations located in the Americas, Asia and Europe. (b) Principles of Consolidation The cons olidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP) and include the financial statements of Benchmark Electronics, Inc. and its wholly owned and majority owned subsid iaries. All significant intercompany balances and transactions have been eliminated in consolidation. (c) Cash and Cash Equivalents The Company considers all highly liquid debt instruments with an original maturity at the date of purchase of three months or less to be cash equivalents. Cash equivalents of $381.6 million and $314.1 million at December 31, 2015 and 2014, respectively, consist primarily of money-market funds and time deposits with an initial term of less than three months. (d) Allowance for Doubtful Accounts Accounts receivable are recorded net of allowances for amounts not expected to be collected. In estimating the allowance, management considers a specific customer’s financial condition, payment history, and various information or disclosures by the customer or other publicly available information. Accounts receivable are charged off against the allowance after all reasonable efforts to collect the full amount (including litigation, where appropriate) have been exhausted. During 2014, the Company recorded a $2.7 million charge for provisions to accounts receivable associated with the bankruptcy filing of a former customer, GT Advance Technologies, on October 6, 2014. (e) Investments Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. A three-tier fair val ue hierarchy of inputs is employed to determine fair value measurements. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets and liabilities. Level 2 inputs are observable prices that are not quoted on active exchanges, suc h as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable. Level 3 inputs are unobservable inputs employed for measuring the fair value of assets or liabilities. This hierarchy requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value. As of December 31, 2015, all of the Co mpany’s long-term investments totaling $1.0 million (par value) were included in other assets and were recorded at fair value using Level 3 inputs. As of December 31, 2015, there were no long-term investments measured at fair value using Level 1 or Leve l 2 inputs. All income generated from these investments is recorded as interest income. (f) Inventories Inventories include material, labor and overhead and are stated at the lower of cost (principally first-in, first-out method) or market. (g) Property, Plant and Equipment Property, plant and equipment are stated at cost. Depreciation is calculated on the straight-line method over the useful lives of the assets – 5 to 40 years for buildings and building improvements, 2 to 10 years for machinery and equipment, 2 to 10 years for furniture and fixtures and 2 to 5 years for vehicles. Leasehold improvements are amortized on the straight-line method over the shorter of the useful life of the improvement or the remainder of the lease term. (h) Goodwill and Other Intangible Assets Goodwill represents the excess of purchase price over fair value of net assets acquired. Goodwill and intangible assets acquired in a business combination and determined to have an indefinite useful life are not amortized, but instead assessed for impairment at least annually. Intangible assets with estimable useful lives are amortized over their respective estimated useful lives to their estimated residual values. (i) Impairment of Long-Lived Assets and Goodwill Long-lived assets, such as property, plant, and equipment, and purchased intangibles subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is evaluated by a comparison of the carrying amount of an asset to es timated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asse t exceeds the estimated fair value of the asset. Assets to be disposed of would be separately disclosed and reported at the lower of the carrying amount or estimated fair value less costs to sell, and are no longer depreciated. The assets and liabilities o f a disposed group classified as held for sale would be disclosed separately in the appropriate asset and liability sections of the consolidated balance sheet. Goodwill is tested for impairment on an annual basis, at a minimum, and whenever events and cha nges in circumstances suggest that the carrying amount may be impaired. Circumstances that may lead to the impairment of goodwill include unforeseen decreases in future performance or industry demand or the restructuring of our operations as a result of a change in our business strategy. A qualitative assessment is allowed to determine if goodwill is potentially impaired. Based on this qualitative assessment, if the Company determines that it is more likely than not that the reporting unit’s fair value is l ess than its carrying value, then it performs a two-step goodwill impairment test, otherwise no further analysis is required. In connection with its annual goodwill impairment assessments as of December 31, 2015, 2014 and 2013, the Company conclu ded that goodwill was not impaired. (j) Earnings Per Share Basic earnings per share is computed using the weighted-average number of shares outstanding. Diluted earnings per share is computed using the weighted-average number of shares outstanding adjusted for the incremental shares attributed to outstanding stock equivalents. Stock equivalents include common shares issuable upon the exercise of stock options and other equity instrume nts, and are computed using the treasury stock method. Under the treasury stock method, the exercise price of a share, the amount of compensation cost, if any, for future service that the Company has not yet recognized, and the amount of estimated tax bene fits that would be recorded in paid-in-capital, if any, when the option is exercised or the share vests are assumed to be used to repurchase shares in the current period. The following table sets forth the calculation of basic and diluted earnings per s hare.
|  |  | Year Ended December 31,
(in thousands, except per share data) |  | 2015 |  | 2014 |  | 2013
Net income | $ | 95,401 | $ | 81,241 | $ | 110,945
Denominator for basic earnings per share – weighted- |  |  |  |  |  |
| average number of common shares outstanding |  |  |  |  |  |
| during the period |  | 51,573 |  | 53,538 |  | 54,213
Incremental common shares attributable to exercise of |  |  |  |  |  |
| dilutive options |  | 318 |  | 450 |  | 324
Incremental common shares attributable to outstanding |  |  |  |  |  |
| restricted shares and restricted stock units |  | 197 |  | 234 |  | 242
Denominator for diluted earnings per share |  | 52,088 |  | 54,222 |  | 54,779
Basic earnings per share | $ | 1.85 | $ | 1.52 | $ | 2.05
Diluted earnings per share | $ | 1.83 | $ | 1.50 | $ | 2.03
Options to purchase 1.3 million, 0.7 million and 1.2 million common shares in 2015, 2014 and 2013, respectively, were not included in the computation of diluted earnings per share because their effect would have been anti-dilutive. (k) Revenue Recognition Revenue from the sale of manufactured products built to customer specifications and excess inventory is recognized when title and risk of ownership have passed, the price to the buyer is fixed or determinable and rec overability is reasonably assured, which generally is when the goods are shipped. Revenue from design, development and engineering services is recognized when the services are performed and collectibility is reasonably certain. Such services provided under fixed price contracts are accounted for using the percentage-of-completion method. The Company assumes no significant obligations after shipment as it typically warrants workmanship only. Therefore, the warranty provisions are generally not significant. (l) Income Taxes Income taxes are accounted for under the asset and liability method. Deferred income taxes are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and l iabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the enactment date. The Company records a valuation allowance to reduce its deferred tax assets to the amounts that are more likely than not to be realized. The Co mpany has considered the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in assessing the need for the valuation allowance. (m) Stock-Based Compensation All share-based payments to employees, inc luding grants of employee stock options, are recognized in the financial statements based on their grant date fair values. The total compensation cost recognized for stock-based awards was $7.7 million, $6.4 million and $7.1 million for 2015, 2014 and 2013, respectively. The total income tax benefit recognized in the income statement for stock-based awards was $3.1 million, $2.6 million and $2.6 million for 2015, 2014 and 2013, respectively. The compens ation expense for stock-based awards includes an estimate for forfeitures and is recognized over the vesting period of the awards using the straight-line method. Cash flows from the tax benefits resulting from tax deductions in excess of the compensation c ost recognized for stock-based awards (excess tax benefits) are classified as cash flows from financing activities. Awards of restricted shares, restricted stock units and performance-based restricted stock units are valued at the closing market price of t he Company’s common shares on the date of grant. For performance-based restricted stock units, compensation expense is based on the probability that the performance goals will be achieved, which is monitored by management throughout the requisite service p eriod. When it becomes probable, based on the Company’s expectation of performance during the measurement period, that more or less than the previous estimate of the awarded shares will vest, an adjustment to stock-based compensation expense will be recogn ized as a change in accounting estimate. As of December 31, 2015, the unrecognized compensation cost and remaining weighted-average amortization related to stock-based awards were as follows:
|  |  |  |  |  |  |  | Performance-
|  |  |  |  |  |  |  | based
|  |  |  |  |  | Restricted |  | Restricted
|  | Stock |  | Restricted |  | Stock |  | Stock
(in thousands) |  | Options |  | Shares |  | Units |  | Units(1)
Unrecognized compensation cost | $ | 4,194 | $ | 84 | $ | 7,169 | $ | 2,301
Remaining weighted-average |  |  |  |  |  |  |  |
amortization period |  | 1.6 years |  | 0.1 years |  | 2.2 years |  | 1.8 years
(1) Based on the probable achievement of the performance goals identified in each award.
|  |  | Year Ended December 31,
(in thousands) |  | 2015 |  | 2014 |  | 2013
| Options granted |  | 289 |  | 378 |  | 348
| Expected term of options |  | 6.4 years |  | 7.0 years |  | 7.4 years
| Expected volatility |  | 35% |  | 39% |  | 42%
| Risk-free interest rate |  | 1.886% |  | 2.081% |  | 1.396%
| Dividend yield |  | zero |  | zero |  | zero
The expected term of the options represents the estimated period of time until exercise and is based on historical experience, giving consideration to the contractual terms, vesting schedules and expectations of future plan participant behavior. Separate groups of plan participants that have similar historical exercise behavior are considered separately for valuation purposes. Expected stock price volatility is based on the historical volatility of the Company’s common shares. The risk-free interest rate i s based on the U.S. Treasury zero-coupon rates in effect at the time of grant with an equivalent remaining term. The dividend yield reflects that the Company has not paid any cash dividends since inception and does not anticipate paying cash dividends in t he foreseeable future. The total cash received as a result of stock option exercises in 2015, 2014 and 2013 was approximately $2.0 million, $18.9 million and $11.2 million, respectively. The tax benefit realized as a result of sto ck option exercises and the vesting of other share-based awards during 2015, 2014 and 2013 was $2.1 million, $2.9 million and $2.2 million, respectively. For 2015, 2014 and 2013, the total intrinsic value of sto ck options exercised was $0.7 million, $3.7 million and $3.2 million, respectively. The Company awarded performance-based restricted stock units to employees during 2015, 2014 and 2013. The number of performance-bas ed restricted stock units that will ultimately be earned will not be determined until the end of the corresponding performance periods, and may vary from as low as zero to as high as three times the target number depending on the level of achievement of ce rtain performance goals. The level of achievement of these goals is based upon the audited financial results of the Company for the last full calendar year within the performance period. The performance goals consist of certain levels of achievement using the following financial metrics: revenue growth, operating margin expansion, and return on invested capital. If the performance goals are not met based on the Company’s financial results, the applicable performance-based restricted stock units will not ves t and will be forfeited. Shares subject to forfeited performance-based restricted stock units will be available for issuance under the Company’s 2010 Omnibus Incentive Compensation Plan (the 2010 Plan). (n) Use of Estimates Management of the Company has m ade a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these financial statements in accordance with U.S. GAAP. On an ongoing basis, management evalua tes these estimates, including those related to accounts receivable, inventories, income taxes, long-lived assets, stock-based compensation a nd contingencies and litigation. Actual results could differ from those estimates. (o) Fair Values of Financial Ins truments The Company’s financial instruments consist of cash and cash equivalents, accounts and other receivables, accounts payable, accrued liabilities, capital lease and long-term debt obligations and derivative instruments. The Company believes that th e carrying values of these instruments approximate their fair value. As of December 31, 2015, the Company’s long-term investments are recorded at fair value. See Note 11. (p) Foreign Currency For foreign subsidiaries using the local currency as their functional currency, assets and liabilities are translated at exchange rates in effect at the balance sheet date and income and expenses are translated at average exchange rates. The effects of these translation adjustments are reported in other com prehensive income. Exchange losses arising from transactions denominated in a currency other than the functional currency of the entity involved are included in other expense and totaled approximately $2.3 million, $1.3 million and $0.9 million in 2015, 2014 and 2013, respectively. These amounts include the amount of gain (loss) recognized in income due to forward currency exchange contracts. (q) Derivative Instruments All derivative instruments are recorded on the balance sheet at fair value. T he Company periodically enters into forward currency exchange contracts and effective December 31, 2015 entered into an interest rate swap agreement. The Company does not intend to use derivative financial instruments for speculative purposes. Generally, i f a derivative instrument is designated as a cash flow hedge, the change in the fair value of the derivative is recorded in other comprehensive income to the extent the derivative is effective, and recognized in the Consolidated Statement of Income when th e hedged item affects earnings. Changes in fair value of derivatives that are not designated as hedges are recorded in earnings. Cash receipts and cash payments related to derivative instruments are recorded in the same category as the cash flows from the items being hedged on the Consolidated Statements of Cash Flows. (r) Recently Enacted Accounting Principles In February 2016, the Financial Accounting Standards Board (FASB) issued a new accounting standards update changing the accounting for leases and including a requirement to record all leases on the consolidated balance sheet s as assets and liabilities. This update is effective for fiscal years beginning after December 15, 2018. The Company will adopt this update effective January 1, 2019. The adoption of this standard will impact the Company’s consolidated balance sheet. The Company is currently evaluating the impact this standard will have on its consolidated financial statements and related disclosure s. In November 2015, the FASB issued guidance that simplifies the presentation of deferred income taxes by elim inating the requirement for companies to present deferred tax liabilities and assets as current and non-current on the consolidated statements of position. Instead, companies are required to classify all deferred tax assets and liabilities as non-current. This guidance is effective for annual and interim periods beginning after December 15, 2016 and early adoption is permitted. The Company early adopted this guidance retrospectively on December 31, 2015. As a result, the Company reclassified current deferre d tax assets to non-current deferred tax assets on the consolidated balance sheet. The adoption of this guidance did not have a material impact on the Company’s consolidated balance, and had no impact on its results of operations or cash flows. All prior p eriod financial information presented herein has been adjusted to reflect the retrospective application of this guidance. In September 2015, the FASB issued an accounting standards update to simplify the accounting for measurement-period adjustments for an acquirer in a business combination. The update will require an acquirer to recognize any adjustments to provisional amounts of the initial accountin g for a business combination with a corresponding adjustment to goodwill in the reporting period in which the adjustments are determined, as opposed to revising prior periods presented in financial statements. Thus, an acquirer shall adjust its financial s tatements as needed, including recognizing in its current-period earnings the full effect of changes in depreciation, amortization, or other income effects, by line item, if any, as a result of the change to the provisional amounts calculated as if the acc ounting had been completed at the acquisition date. This update is effective for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Early adoption is permitted, and the update must be applied prospectively. The C ompany will adopt this update effective January 1, 2016 and does not expect the standard to have a material impact on its consolidated financial position, results of operations and cash flows. In July 2015, the FASB issued an accounting standards update, which applies to inventory that is measured using first-in, first-out or average cost, with new guidance on simplifying the measurement of inventory. Inventory within the scope of this update is required to be measured at the lower of its cost or net reali zable value, with net realizable value being the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The standards update is effective prospectively for fiscal years and interim periods beginning after December 15, 2016, with early adoption permitted. The Company is currently evaluating the impact this standard will have on its consolidated financial statements. In April 2015, the FASB issued a new standard that changes the presentation of debt issuance costs in the financial statements to present such costs as a direct deduction from the related debt liability rather than as an asset. Amortization of debt issuance costs are reported as interest expense. This new standard is effective for annual reporting periods beginning after December 15, 2015. The Company early adopted this standard on December 31, 2015. As a result, the Company reflected debt issuance costs as a direct deduction to long-term debt on the consolidated b alance sheet as of December 31, 2015. The adoption of this standard did not have an impact on the 2014 consolidated balance sheet as the Company had no borrowings outstanding as of December 31, 2014, and had no impact on its results of operations or cash f lows. See Note 6. In May 2014, the FASB issued a new standard that will supersede most of the existing revenue recognition requirements in current U.S. GAAP. The new standard will require companies to recognize revenue in an amount reflecting the co nsideration to which they expect to be entitled in exchange for transferring goods or services to a customer. The new standard will also require significantly expanded disclosures regarding the qualitative and quantitative information of the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The new standard will permit the use of either the retrospective or cumulative effect transition method, with early application not permitted. In July 2015, the FASB deferred the effective date of the new revenue standard. As a result, the Company will be required to adopt the new standard as of January 1, 2018. Early adoption is permitted to the original effective date of January 1, 2017. The Company is currently eval uating the impact the pronouncement will have on its consolidated financial statements and related disclosures and has not yet selected a transition method. As the new standard will supersede all existing revenue guidance affecting the Company under U.S. G AAP, it could impact revenue and cost recognition on contracts across all its business segments, in addition to its business processes and information technology systems. As a result, the Company’s evaluation of the effect of the new standard will likely e xtend over several future periods. The Company has determined that all other recently issued accounting standards will not have a material impact on its consolidated financial position, results of operations and cash flows, or do not apply to its operatio ns. (s) Reclassifications Certain reclassifications of prior period amounts have been made to conform to the current year presentation. (t) Adjustments to Previously Reported Amounts During the third quarter of 2015, management identified and recorded a correction of an immaterial error related to the remeasurement of a foreign-currency-denominated receivable at one of the Company’s foreign locations. Management evaluated the materiality of the error from qualitative and quantitative perspectives and dete rmined the error to be immaterial to the consolidated financial statements for the current and prior periods. The Company has revised its previously reported 2014 and 2013 historical consolidated financial statements as published herein to reflect the corr ection of this immaterial error. The effect on certain line items in the December 31, 2014 consolidated balance sheet was as follows:
|  | December 31, 2014
| (as previously |  |
(in thousands) |  | reported) |  |  | (as revised)
Prepaids and other assets | $ | 30,453 |  | $ | 29,018
Income taxes payable |  | 5,470 |  |  | 5,450
Retained earnings | $ | 645,500 |  | $ | 644,085
The effect on certain line items in the 2014 and 2013 consolidated statements of income as previously reported was as follows:
|  | Year Ended |  | Year Ended
|  |  | December 31, 2014 |  | December 31, 2013
|  | (as previously |  |  |  | (as previously |  |
(in thousands) |  | reported) |  | (as revised) |  |  | reported) |  | (as revised)
Other expense | $ | (452) |  | $ | (1,673) |  | $ | (101) |  | $ | (315)
Income tax expense |  | 17,408 |  |  | 17,388 |  |  | 5,018 |  |  | 5,018
Net income | $ | 82,442 |  | $ | 81,241 |  | $ | 111,159 |  | $ | 110,945
Earnings per share: |  |  |  |  |  |  |  |  |  |  |
| Basic | $ | 1.54 |  | $ | 1.52 |  | $ | 2.05 |  | $ | 2.05
| Diluted | $ | 1.52 |  | $ | 1.50 |  | $ | 2.03 |  | $ | 2.03
The effect on cert ain line items in the 2014 and 2013 consolidated statements of cash flows as previously reported was as follows:
|  | December 31, 2014 |  |  | December 31, 2013
| (as previously |  |  |  | (as previously |  |
(in thousands) |  | reported) |  |  | (as revised) |  |  | reported) |  |  | (as revised)
Net cash provided by operations | $ | 136,601 |  | $ | 135,440 |  | $ | 99,077 |  | $ | 98,863
Effect of exchange rate changes | $ | (2,483) |  | $ | (1,262) |  | $ | 724 |  | $ | 938

X
- References No definition available. + Details
Name: | us-gaap_AccountingPoliciesAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for all significant accounting policies of the reporting entity. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section 50 -Paragraph 6 -URI http://asc.fasb.org/extlink&oid=51655414&loc=d3e18861-107790 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=51655414&loc=d3e18780-107790 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=51655414&loc=d3e18726-107790 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=51655414&loc=d3e18743-107790 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=51655414&loc=d3e18854-107790 + Details
Name: | us-gaap_SignificantAccountingPoliciesTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration