BENCHMARK ELECTRONICS INC (Form: 10-Q, Received: 05/10/2016 15:32:38)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_______________

FORM 10‑Q

_______________

X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2016

__ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________________ to________________

Commission File Number: 1‑10560

BENCHMARK ELECTRONICS, INC.

(Exact name of registrant as specified in its charter)

	Texas	74‑2211011
	(State or other jurisdiction	(I.R.S. Employer
	of incorporation or organization)	Identification No.)
3000 Technology Drive		77515
Angleton, Texas		(Zip Code)
(Address of principal executive offices)

(979) 849‑6550

(Registrant ’ s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ Ö ] No [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [ Ö ] No [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b–2 of the Act.

Large accelerated filer [ Ö ]	Accelerated filer [ ]
Non-accelerated filer [ ] (Do not check if a smaller reporting company)	Smaller reporting company [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b–2 of the Act). Yes [ ] No [ Ö ]

As of May 6, 2016 , there were 49,309,715 Common Shares of Benchmark Electronics, Inc., par value $0.10 per share, outstanding.

TABLE OF CONTENTS

PART I

		Page

PART I—FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)	1
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Income	2
	Condensed Consolidated Statements of Comprehensive Income	3
	Condensed Consolidated Statement of Shareholders’ Equity	4
	Condensed Consolidated Statements of Cash Flows	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and	20
	Results of Operations
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	26
Item 4.	Controls and Procedures	27

PART II—OTHER INFORMATION

Item 1.	Legal Proceedings	28
Item 1A.	Risk Factors	28
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	28
Item 6.	Exhibits	29

SIGNATURES		30

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

BENCHMARK ELECTRONICS, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

						March 31,		December 31,
(in thousands, except par value)						2016		2015
						(unaudited)
Assets
	Current assets:
		Cash and cash equivalents			$	519,167	$	465,995
		Accounts receivable, net of allowance for doubtful accounts of $3,314
			and $3,417, respectively			414,184		479,140
		Inventories				389,919		411,986
		Prepaid expenses and other assets				37,058		31,351
		Income taxes receivable				36		156
				Total current assets		1,360,364		1,388,628
	Property, plant and equipment, net of accumulated depreciation of
				$387,852 and $379,088, respectively		173,969		178,170
	Goodwill, net					199,469		199,290
	Deferred income taxes					14,841		14,088
	Other, net					110,571		113,702
					$	1,859,214	$	1,893,878

Liabilities and Shareholders’ Equity
	Current liabilities:
		Current installments of long-term debt and capital lease obligations			$	12,306	$	12,284
		Accounts payable				218,237		251,163
		Income taxes payable				5,014		5,069
		Accrued liabilities				66,113		64,578
				Total current liabilities		301,670		333,094
	Long-term debt and capital lease obligations, less current installments					219,998		222,909
	Other long-term liabilities					17,135		15,971
	Shareholders’ equity:
		Preferred shares, $0.10 par value; 5,000 shares authorized, none issued				—		—
		Common shares, $0.10 par value; 145,000 shares authorized; issued
			and outstanding – 49,664 and 50,178, respectively			4,966		5,018
		Additional paid-in capital				619,994		624,997
		Retained earnings				709,357		704,905
		Accumulated other comprehensive loss				(13,906)		(13,016)
				Total shareholders’ equity		1,320,411		1,321,904
		Commitments and contingencies
					$	1,859,214	$	1,893,878

See accompanying notes to condensed consolidated financial statements.

BENCHMARK ELECTRONICS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Income

(unaudited)

		Three Months Ended
		March 31,
(in thousands, except per share data)			2016		2015

Sales		$	549,225	$	620,925
Cost of sales			498,915		569,146
	Gross profit		50,310		51,779
Selling, general and administrative expenses			31,253		28,202
Restructuring charges and other costs			2,789		4,869
	Income from operations		16,268		18,708
Interest expense			(2,334)		(435)
Interest income			264		432
Other expense, net			(223)		(1,057)
	Income before income taxes		13,975		17,648
Income tax expense			2,923		3,443
	Net income	$	11,052	$	14,205

Earnings per share:
	Basic	$	0.22	$	0.27
	Diluted	$	0.22	$	0.27

Weighted-average number of shares outstanding:
	Basic		49,848		52,463
	Diluted		50,287		53,045

See accompanying notes to condensed consolidated financial statements.

BENCHMARK ELECTRONICS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income

(unaudited)

			Three Months Ended
			March 31,
(in thousands)				2016		2015

Net income			$	11,052	$	14,205
Other comprehensive loss:
	Foreign currency translation adjustments			1,348		(3,462)
	Unrealized gain (loss) on investments, net of tax			(6)		5
	Interest rate swap fair value adjustment, net of tax			(2,232)		-
	Other			-		(4)
Other comprehensive loss				(890)		(3,461)
		Comprehensive income	$	10,162	$	10,744

See accompanying notes to condensed consolidated financial statements.

BENCHMARK ELECTRONICS, INC. AND SUBSIDIARIES

Condensed Consolidated Statement of Shareholders’ Equity

(unaudited)

							Accumulated
			Common Shares		Additional		Other	Total
		Shares		Par	Paid-in	Retained	Comprehensive	Shareholders’
(in thousands)		Outstanding		Value	Capital	Earnings	Loss	Equity

Balances, December 31, 2015			50,178	$ 5,018	$ 624,997	$ 704,905	$ (13,016)	$ 1,321,904
Stock-based compensation expense			-	-	2,113	-	-	2,113
Shares repurchased and retired			(690)	(69)	(7,536)	(6,600)	-	(14,205)
Stock options exercised			47	4	759	-	-	763
Vesting of restricted stock units			149	15	(15)	-	-	-
Shares withheld for taxes			(20)	(2)	(438)	-	-	(440)
Excess tax benefits of stock-based
	compensation		-	-	114	-	-	114
Comprehensive income			-	-	-	11,052	(890)	10,162
Balances, March 31, 2016			49,664	$ 4,966	$ 619,994	$ 709,357	$ (13,906)	$ 1,320,411

See accompanying notes to condensed consolidated financial statements.

BENCHMARK ELECTRONICS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(unaudited)

					Three Months Ended
					March 31,
(in thousands)						2016		2015

Cash flows from operating activities:
	Net income				$	11,052	$	14,205
	Adjustments to reconcile net income to net cash provided by
		(used in) operating activities:
			Depreciation			10,621		10,933
			Amortization			3,286		1,205
			Deferred income taxes			633		1,818
			Gain on the sale of property, plant and equipment			(93)		(14)
			Asset impairments			121		84
			Stock-based compensation expense			2,113		1,940
			Excess tax benefits from stock-based compensation			(149)		(328)
	Changes in operating assets and liabilities, net of effects from
		business acquisition:
			Accounts receivable			65,382		28,361
			Inventories			22,756		(26,914)
			Prepaid expenses and other assets			(5,403)		(4,432)
			Accounts payable			(31,940)		(32,978)
			Accrued liabilities			(2,067)		(5,074)
			Income taxes			201		289
				Net cash provided by (used in) operations		76,513		(10,905)
Cash flows from investing activities:
	Proceeds from sales of investments at par					-		1
	Additions to property, plant and equipment					(7,700)		(16,312)
	Proceeds from the sale of property, plant and equipment					130		412
	Additions to purchased software					(137)		(515)
	Other					62		55
				Net cash used in investing activities		(7,645)		(16,359)
Cash flows from financing activities:
	Proceeds from stock options exercised					763		821
	Excess tax benefits from stock-based compensation					149		328
	Principal payments on long-term debt and capital lease obligations					(3,078)		(155)
	Share repurchases					(14,205)		(15,778)
				Net cash used in financing activities		(16,371)		(14,784)
Effect of exchange rate changes						675		(1,732)
Net increase (decrease) in cash and cash equivalents						53,172		(43,780)
	Cash and cash equivalents at beginning of year					465,995		427,376
	Cash and cash equivalents at end of period				$	519,167	$	383,596

See accompanying notes to condensed consolidated financial statements.

BENCHMARK ELECTRONICS, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(amounts in thousands, except per share data, unless otherwise noted)

(unaudited)

Note 1 – Basis of Presentation

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 (including equipment for the aerospace and defense industries), telecommunication 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.

The unaudited condensed consolidated financial statements included herein have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the SEC). The financial statements reflect all normal and recurring adjustments necessary in the opinion of management for a fair presentation of the financial position, results of operations and cash flows for the interim periods presented. The results of operations for the periods presented are not necessarily indicative of the results to be expected for the full year. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the financial statements and notes included in the Company’s annual report on Form 10‑K for the year ended December 31, 2015 (the 2015 10-K).

Management has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these financial statements in accordance with generally accepted accounting principles in the United States (U.S. GAAP). Actual results could differ from those estimates.

Note 2—Acquisition

On November 12, 2015, the Company acquired all of the outstanding common stock of Secure Communication Systems, Inc. and its subsidiaries (collectively referred to as Secure Technology or Secure) (the Secure Acquisition) for a purchase price of $230 million subject to a working capital adjustment. Secure Technology is a leading provider of customized high-performance electronics, sub-systems, and component solutions for mission critical applications. The transaction was financed with borrowings under the Company’s new term loan facility.

The preliminary allocation of the Secure Acquisition’s net purchase price resulted in $153.5 million of goodwill. The Secure acquisition deepened Benchmark’s engineering capabilities and enhanced its ability to serve customers in the highly regulated industrial markets, including aerospace and defense. The goodwill recognized in connection with the acquisition represents the future economic benefit arising from assets acquired that could not be individually identified and separately recognized and is attributable to the general reputation, acquisition synergies and expected future cash flows of the acquisition as well as the nature of Secure’s products and services and its competitive position in the marketplace. The final allocation of the purchase price, which the Company expects to complete as soon as practicable, but no later than one year from the acquisition date, may differ from the amounts included in these financial statements. Management does not expect additional adjustments, if any, resulting from changes to the purchase price allocation, to have a material effect on the Company’s financial position or results of operations.

The following reconciliation of the purchase price for Secure reflects the preliminary purchase price allocation (in thousands):

Purchase price paid		$	230,504
Cash acquired			(922)
	Purchase price, net of cash received	$	229,582

Acquisition-related costs for 2016		$	85

Recognized amounts of identifiable assets acquired and liabilities assumed:
	Cash	$	922
	Accounts receivable		12,839
	Inventories		16,020
	Other current assets		1,569
	Property, plant and equipment		2,048
	Other assets		97
	Trade names and trademarks intangible		7,800
	Technology licenses intangible		15,500
	Customer relationships intangible		67,100
	Goodwill		153,499
	Current liabilities		(16,893)
	Long-term debt		(24)
	Other long-term liabilities		(800)
	Deferred income taxes		(29,173)
	Total identifiable net assets	$	230,504

The following summary pro forma condensed consolidated financial information reflects the Secure Acquisition as if it had occurred on January 1, 2015 for purposes of the statements of income. This summary pro forma information is not necessarily representative of what the Company’s results of operations would have been had this acquisition in fact occurred on January 1, and is not intended to project the Company’s results of operations for any future period.

Pro forma condensed consolidated financial information for the three months ended March 31, 2015 (unaudited) (in thousands):

	Net sales	$	647,070
	Net income	$	14,436

Note 3 – Stock-Based Compensation

The Company’s 2010 Omnibus Incentive Compensation Plan (the 2010 Plan) authorizes, the Company, upon approval of the compensation committee of the Board of Directors, to grant a variety of awards, including stock options, restricted shares, restricted stock units, stock appreciation rights, performance compensation awards, phantom stock awards and deferred share units, or any combination thereof, to any director, officer, employee or consultant (including any prospective director, officer, employee or consultant) of the Company. Stock options are granted to employees with an exercise price equal to the market price of the Company’s common shares on the date of grant, generally vest over a four-year period from the date of grant and have a term of ten years. Restricted shares and restricted stock units granted to employees generally vest over a four-year period from the date of grant, subject to the continued employment of the employee by the Company. Awards under the 2010 Plan to non-employee directors have been in the form of restricted stock units, which vest in equal quarterly installments over a one-year period, starting on the grant date.

As of March 31, 2016 , 3.1 million additional common shares were available for issuance under the 2010 Plan.

All share-based payments to employees, including 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 $2.1 million and $1.9 million for the three months ended March 31, 2016 and 2015, respectively. The total income tax benefit recognized in the condensed consolidated income statement for stock-based awards was $0.6 million and $0.6 million for the three months ended March 31, 2016 and 2015, respectively. The compensation expense for stock-based awards includes an estimate for forfeitures and is recognized over the vesting period of the awards using the straight-line method. Cash flows from the tax benefits resulting from tax deductions in excess of the compensation cost recognized for stock-based awards (excess tax benefits) are classified as cash flows from financing activities. Awards of restricted shares, restricted stock units, and performance-based restricted stock units are valued at the closing market price of the 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 period. 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 is recognized as a change in accounting estimate.

As of March 31, 2016, the unrecognized compensation cost and remaining weighted-average amortization period 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		$ 3,616		$ 1		$ 11,627		$ 5,852
Remaining weighted-average
amortization period	1.8 years		0.1 years			2.9 years		2.2 years

⁽¹⁾ Based on the probable achievement of the performance goals identified in each award.

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model. The weighted-average fair value per option granted during the three months ended March 31, 2015 was $8.76, respectively. No options were granted during the three months ended March 31, 2016. The weighted-average assumptions used to value the options granted during the three months ended March 31, 2015 were as follows (in thousands):

Options granted			289
Expected term of options			6.4 years
Expected volatility			35%
Risk-free interest rate			1.886%
Dividend yield			zero

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

The total cash received by the Company as a result of stock option exercises for the three months ended March 31, 2016 and 2015 was approximately $0.8 million and $0.8 million, respectively. The actual tax benefit realized as a result of stock option exercises and the vesting of other share-based awards during the three months ended March 31, 2016 and 2015 was $1.5 million and $1.6 million, respectively. For the three months ended March 31, 2016 and 2015, the total intrinsic value of stock options exercised was $0.3 million and $0.3 million, respectively.

The Company awarded performance-based restricted stock units to employees during the three months ended March 31, 2016 and 2015. The number of performance-based 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 certain 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 vest and will be forfeited. Shares subject to forfeited performance-based restricted stock units will be available for issuance under the 2010 Plan.

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

			Weighted-
		Weighted-	Average
		Average	Remaining	Aggregate
	Number of	Exercise	Contractual	Intrinsic
(in thousands, except per share data)	Options	Price	Term (Years)	Value
Outstanding as of December 31, 2015	2,580	$20.49
Exercised	(47)	15.97
Forfeited or expired	(270)	23.20
Outstanding as of March 31, 2016	2,263	$20.27	4.91	$ 7,738
Exercisable as of March 31, 2016	1,789	$19.79	3.43	$ 7,256

The aggregate intrinsic value in the table above is before income taxes and is calculated as the difference between the exercise price of the underlying options and the Company’s closing stock price as of the last business day of the period ended March 31, 2016 for options that had exercise prices that were below the closing price.

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

		Weighted-
		Average
	Number of	Grant Date
(in thousands, except per share data)	Shares	Fair Value
Non-vested shares outstanding as of December 31, 2015	38	$15.38
Vested	(37)	15.38
Non-vested shares outstanding as of March 31, 2016	1	$14.78

The following table summarizes the activities related to the Company’s time-based restricted stock units:

		Weighted-
		Average
	Number of	Grant Date
(in thousands, except per share data)	Units	Fair Value
Non-vested awards outstanding as of December 31, 2015	467	$21.59
Granted	266	21.64
Vested	(149)	20.69
Forfeited	(8)	22.61
Non-vested awards outstanding as of March 31, 2016	576	$21.83

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

		Weighted-
		Average
	Number of	Grant Date
(in thousands, except per share data)	Units	Fair Value
Non-vested units outstanding as of December 31, 2015	306	$19.77
Granted ⁽¹⁾	183	21.64
Forfeited or expired	(98)	16.91
Non-vested units outstanding as of March 31, 2016	391	$21.36

⁽¹⁾ Represents target number of units that can vest based on the achievement of the performance goals.

Note 4 – 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 instruments, and are computed using the treasury stock method. Under the treasury stock method, the exercise price of a share, the amount of compensation cost, if any, for future service that the Company has not yet recognized, and the amount of estimated excess tax benefits that would be recorded in paid-in-capital, if any, when the share is exercised are assumed to be used to repurchase shares in the current period.

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

		Three Months Ended
		March 31,
(in thousands, except per share data)			2016		2015
Net income		$	11,052	$	14,205

Denominator for basic earnings per share - weighted-average number of
	common shares outstanding during the period		49,848		52,463
Incremental common shares attributable to exercise of dilutive options			292		391
Incremental common shares attributable to outstanding restricted shares
	and restricted stock units		147		191
Denominator for diluted earnings per share			50,287		53,045

Basic earnings per share			$0.22		$0.27
Diluted earnings per share			$0.22		$0.27

Options to purchase 1.2 million and 1.0 million common shares for the three months ended March 31, 2016 and 2015, respectively, were not included in the computation of diluted earnings per share because their effect would have been anti-dilutive.

Note 5 – Goodwill and Other Intangible Assets

Goodwill allocated to the Company’s reportable segments was as follows:

(in thousands)		Americas		Asia		Total
Goodwill at December 31, 2015	$	161,188	$	38,102	$	199,290
Purchase accounting adjustments		179		-		179
Goodwill at March 31, 2016	$	161,367	$	38,102	$	199,469

The purchase accounting adjustments in 2016 related to the Secure Acquisition were based on management’s estimates resulting from review of information obtained after the acquisition that related to facts and circumstances that existed at the acquisition date. See Note 2.

Other assets consist primarily of acquired identifiable intangible assets and capitalized purchased software costs. Acquired identifiable intangible assets as of March 31, 2016 and December 31, 2015 were as follows:

		Gross				Net
		Carrying	Accumulated			Carrying
(in thousands)		Amount	Amortization			Amount
Customer relationships	$	100,137	$	(21,885)	$	78,252
Purchased software costs		29,911		(27,699)		2,212
Technology licenses		26,800		(11,253)		15,547
Trade names and trademarks		7,800		-		7,800
Other		868		(219)		649
Other intangible assets, March 31, 2016	$	165,516	$	(61,056)	$	104,460

		Gross				Net
		Carrying	Accumulated			Carrying
(in thousands)		Amount	Amortization			Amount
Customer relationships	$	100,092	$	(19,822)	$	80,270
Purchased software costs		29,754		(27,394)		2,360
Technology licenses		26,800		(10,477)		16,323
Trade names and trademarks		7,800		-		7,800
Other		868		(213)		655
Other intangible assets, December 31, 2015	$	165,314	$	(57,906)	$	107,408

Customer relationships are being amortized on a straight-line basis over a period of 10 to 14 years. Capitalized purchased software costs are being amortized on a straight-line basis over the estimated useful life of the related software, which ranges from 2 to 10 years. Technology licenses are amortized over their estimated useful lives in proportion to the economic benefits consumed. Amortization of intangible assets with definite lives for the three months ended March 31, 2016 and 2015 was $3.1 million and $1.2 million, respectively. The increase in the amortization of intangible assets reflects the impact of the Secure Acquisition. See Note 2.

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

Year ending December 31,		Amount
2016 (remaining nine months)	$	9,965
2017		10,670
2018		9,813
2019		9,693
2020		9,170

Note 6 – Borrowing Facilities

On November 12, 2015, the Company entered into a $430 million Credit Agreement (the Credit Agreement) by and among Benchmark, JPMorgan Chase Bank, N.A. as administrative agent and collateral agent (the Administrative Agent), and the financial institutions acting as lenders from time to time . This Credit Agreement provides for a five-year $200 million revolving credit facility and a five-year $230 million term loan facility (the Term Loan), both with a maturity date of November 12, 2020. The proceeds of the $230 million term loan facility were used to finance the purchase price of the acquisition of Secure Technology. The revolving credit facility is available for general corporate purposes, may be drawn in foreign currencies up to an amount equivalent to $20 million, and may be used for letters of credit up to $20 million. The Credit Agreement includes an accordion feature, pursuant to which total commitments under the facility may be increased by an additional $150 million, subject to satisfaction of certain conditions.

The Term Loan is payable in minimum quarterly principal installments, which began on March 31, 2016, of $2.9 million in 2016 and 2017, $4.3 million in 2018, $5.8 million in 2019, and $8.6 million in 2020, with the balance payable on the maturity date.

Interest on outstanding borrowings under the Credit Agreement accrues, at our option, at (a) the adjusted London interbank offered rate as administered by the ICE Benchmark Administration (LIBO) plus 1.25% to 2.25%, or (b) the alternative base rate plus 0.25% to 1.25%, and is payable quarterly in arrears. The alternative base rate is equal to the highest of (i) the Administrative Agent’s prime rate, (ii) the federal funds rate plus 0.50% and (iii) the adjusted LIBO rate plus 1.00%. The margin on the interest rates fluctuates based upon the ratio of Benchmark’s debt to its consolidated EBITDA (the Total Leverage Ratio). As of March 31, 2016, $170.3 million of the outstanding debt under the Credit Agreement was effectively at a fixed interest rate as a result of a $170.3 million notional interest rate swap contract discussed in Note 14. A commitment fee of 0.30% to 0.40% per annum (based on the Total Leverage Ratio) on the unused portion of the revolving credit line is payable quarterly in arrears.

The Credit Agreement is generally secured by a pledge of (a) all the capital stock of Benchmark’s domestic subsidiaries and 65% of the capital stock of Benchmark’s directly owned foreign subsidiaries, (b) any indebtedness owed to Benchmark and its subsidiaries and (c) all or substantially all other personal property of Benchmark and its domestic subsidiaries (including, accounts receivable, inventory and fixed assets of Benchmark and its domestic subsidiaries), in each case, subject to customary exceptions and limitations. The Credit Agreement contains financial covenants as to debt leverage and interest coverage, and certain customary affirmative and negative covenants, including restrictions on our ability to incur additional debt and liens, pay dividends, repurchase shares, sell assets and merge or consolidate with other persons. Amounts due under the Credit Agreement may 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 March 31, 2016 and December 31, 2015, the Company was in compliance with all of these covenants and restrictions.

As of March 31, 2016, the Company had $227.1 million in borrowings outstanding under the Term Loan facility and $1.6 million in letters of credit outstanding under the revolving credit facility. The Company has $198.4 million available for future borrowings under the revolving credit facility.

The Company’s Thailand subsidiary has a multi-purpose credit facility with Kasikornbank Public Company Limited (the Thai Credit Facility) that provides for 350 million Thai baht working capital availability. The Thai Credit Facility is secured by land and buildings in Thailand owned by the Company’s Thailand subsidiary. Availability of funds under the Thai Credit Facility is reviewed annually and is currently accessible through October 2016. As of both March 31, 2016 and 2015, there were no working capital borrowings outstanding under the facility.

The aggregate maturities of long-term debt and capital lease obligations for each of the five years subsequent to March 31, 2016 are as follows: 2016, $9.2 million; 2017, $12.4 million; 2018, $18.3 million; 2019, $24.2 million; and 2020, $168.1 million.

Note 7 – Inventories
Inventory costs are summarized as follows:
		March 31,		December 31,
(in thousands)		2016		2015
Raw materials	$	264,982	$	276,470
Work in process		89,352		86,475
Finished goods		35,585		49,041
	$	389,919	$	411,986

Note 8 – Income Taxes
Income tax expense consists of the following:
	Three Months Ended
	March 31,
(in thousands)		2016		2015
Federal – current	$	815	$	127
Foreign – current		1,375		1,421
State – current		100		77
Deferred		633		1,818
	$	2,923	$	3,443

Income tax expense differs from the amount computed by applying the U.S. federal statutory income tax rate to income before income tax primarily due to the mix of taxable income by taxing jurisdiction, the impact of tax incentives and tax holidays in foreign locations, and state income taxes (net of federal benefit).

The Company considers earnings from foreign subsidiaries to be indefinitely reinvested and, accordingly, no provision for U.S. federal and state income taxes has been made for these earnings. Upon distribution of foreign subsidiary earnings in the form of dividends or otherwise, such distributed earnings would be subject to U.S. income taxes and foreign withholding taxes, reduced by any applicable foreign tax credits. Determination of the amount of any unrecognized deferred tax liability on these undistributed earnings is not practicable.

The Company has been granted certain tax incentives, including tax holidays, for its subsidiaries in Malaysia and Thailand that will expire at various dates, unless extended or otherwise renegotiated, through 2025 in Malaysia and 2028 in Thailand, and are subject to certain conditions with which the Company expects to comply. The net impact of these tax incentives was to lower income tax expense for the three months ended March 31, 2016 and 2015 by approximately $0.9 million (approximately 0.02 per diluted share) and $1.7 million (approximately $0.03 per diluted share), respectively, as follows:

	Three Months Ended
	March 31,
(in thousands)		2016		2015
China	$	-	$	353
Malaysia		367		419
Thailand		560		962
	$	927	$	1,734

The Company’s Chinese subsidiary had a tax incentive that expired in December 2015 and expects to submit an application for a new tax incentive in China during the second half of 2016.

As of March 31, 2016, the total amount of the reserve for uncertain tax benefits including interest and penalties was $16.6 million. The reserve is classified as a current or long-term liability in the condensed consolidated balance sheets based on the Company’s expectation of when the items will be settled. The amount of accrued potential interest and penalties, respectively, on unrecognized tax benefits included in the reserve as of March 31, 2016, was $1.7 million and $1.6 million. No material changes affected the reserve during the three months ended March 31, 2016.

The Company and its subsidiaries in Brazil, China, Ireland, Luxembourg, Malaysia, Mexico, the Netherlands, Romania, Singapore, Thailand and the United States remain open to examination by the various local taxing authorities, in total or in part, for fiscal years 2004 to 2015.

The Company is subject to examination by tax authorities for varying periods in various U.S. and foreign tax jurisdictions. Currently, the Company does not have any ongoing Internal Revenue Service income tax audits. During the course of such examinations, disputes may occur as to matters of fact or law. Also, in most tax jurisdictions, the passage of time without examination will result in the expiration of applicable statutes of limitations thereby precluding examination of the tax period(s) for which such statute of limitation has expired. The Company believes that it has adequately provided for its tax liabilities.

Note 9 – Segment and Geographic Information

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

		Three Months Ended
		March 31,
(in thousands)			2016		2015
Net sales:
	Americas	$	352,814	$	380,982
	Asia		173,370		230,220
	Europe		42,015		35,699
	Elimination of intersegment sales		(18,974)		(25,976)
		$	549,225	$	620,925

Depreciation and amortization:
	Americas	$	5,766	$	5,895
	Asia		4,120		4,470
	Europe		704		646
	Corporate		3,317		1,127
		$	13,907	$	12,138

Income from operations:
	Americas	$	18,045	$	12,489
	Asia		10,892		16,185
	Europe		2,952		1,472
	Corporate and intersegment eliminations		(15,621)		(11,438)
		$	16,268	$	18,708

Capital expenditures:
	Americas	$	4,209	$	6,928
	Asia		3,109		7,890
	Europe		181		1,639
	Corporate		338		370
		$	7,837	$	16,827

			March 31,		December 31,
			2016		2015
Total assets:
	Americas	$	808,816	$	867,858
	Asia		619,503		604,554
	Europe		315,713		305,833
	Corporate and other		115,182		115,633
		$	1,859,214	$	1,893,878

Geographic net sales information reflects the destination of the product shipped. Long-lived assets
information is based upon the physical location of the asset.
		Three Months Ended
		March 31,
(in thousands)			2016		2015
Geographic net sales:
	United States	$	384,988	$	447,325
	Asia		71,462		82,391
	Europe		64,944		52,707
	Other foreign		27,831		38,502
		$	549,225	$	620,925

			March 31,		December 31,
			2016		2015
Long-lived assets:
	United States	$	169,870	$	172,958
	Asia		75,028		77,237
	Europe		9,384		9,704
	Other foreign		29,337		31,046
		$	283,619	$	290,945

Note 10 – Supplemental Cash Flow Information
The following is additional information concerning supplemental disclosures of cash payments.

	Three Months Ended
	March 31,
(in thousands)		2016		2015
Income taxes paid, net	$	2,117	$	1,404
Interest paid		2,731		401

Note 11 – Contingencies

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

Note 12 – Impact of Recently Enacted Accounting Standards

In March 2016, the Financial Accounting Standards Board (FASB) issued a new accounting standard update intended to simplify several aspects of the accounting for share-based payment transactions including: income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. Specifically, the update requires that excess tax benefits and tax deficiencies (the difference between the deduction for tax purposes and the compensation cost recognized for financial reporting purposes) be recognized as income tax expense or benefit in the Consolidated Statement of Income, introducing a new element of volatility to the provision for income taxes. This update is effective for fiscal years beginning after December 15, 2016. Early adoption is permitted. The application of the amendments requires various transition methods depending on the specific item. The Company is currently evaluating the impact this standard will have on its consolidated financial statements and related disclosures.

In February 2016, the FASB issued a new accounting standards update changing the accounting for leases

and including a requirement to record all leases on the consolidated balance sheets 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 disclosures.

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 realizable 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 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 consideration 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 evaluating 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. GAAP, 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 extend over several future periods.

The Company has determined that no other recently issued accounting standards will have a material impact on its consolidated financial position, results of operations and cash flows, or will not apply to its operations.

Note 13 – Restructuring Charges

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

The Company recognized restructuring charges during 2016 and 2015 primarily related to the closure of facilities in the Americas, capacity reduction and reductions in workforce in certain facilities across various regions.

The following table summarizes the 2016 activity in the accrued restructuring balances related to the restructuring activities initiated prior to March 31, 2016:

		Balance as of						Foreign			Balance as of
		December 31,		Restructuring			Cash	Exchange			March 31,
(in thousands)			2015		Charges		Payment	Adjustments			2016
2016 Restructuring:
	Severance	$	-	$	1,403	$	(1,403)	$	-	$	-
	Other exit costs		-		459		(459)		-		-
			-		1,862		(1,862)		-		-

2015 Restructuring:
	Severance		222		-		(151)		3		74
	Leased facilities and equipment		928		-		(516)		-		412
	Other exit costs		186		(22)		(164)		-		-
			1,336		(22)		(831)		3		486

Total		$	1,336	$	1,840	$	(2,693)	$	3	$	486

Note 14 – Fair Value

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

The Company’s financial instruments include cash equivalents, accounts and other receivables, accounts payable, accrued liabilities and long-term debt and capital lease obligations. The Company believes that the carrying values of these instruments approximate fair value. As of March 31, 2016, the Company’s long-term investments and derivative instruments were recorded at fair value using Level 3 inputs. The Company uses derivative instruments to manage the variability of foreign currency obligations and interest rates. The Company does not enter into derivatives for speculative purposes.

The forward currency exchange contracts in place as of March 31, 2016 have not been designated as accounting hedges and, therefore, changes in fair value are recorded within the Condensed Consolidated Statements of Income.

The Company has an interest rate swap agreement with a notional amount of $170.3 million and $172.5 million as of March 31, 2016 and December 31, 2015, respectively, to hedge a portion of its interest rate exposure on the outstanding borrowings under the Credit Agreement. Under this interest rate swap agreement, the Company receives variable rate interest rate payments based on the one-month LIBOR rate and pays fixed rate interest payments. The fixed interest rate for the contract is 1.4935%. The effect of this swap is to convert a portion of the Company’s floating rate interest expense to fixed interest rate expense. Based on the terms of the interest rate swap contract and the underlying borrowings outstanding under the Credit Agreement, the interest rate contract was determined to be effective, and thus qualifies and has been

designated as a cash flow hedge. As such, changes in the fair value of the interest rate swap are recorded in other comprehensive income on the accompanying Condensed Consolidated Balance Sheets until earnings are affected by the variability of cash flows. The fair value of the interest rate swap was a $3.6 million liability as of March 31, 2016 and $0 as of December 31, 2015, which was its effective date. During the three months ended March 31, 2016, the Company recorded unrealized losses of $3.6 million ($2.2 million net of tax) on the swap. See Note 15.

Note 15 – Accumulated Other Comprehensive Loss

The changes in accumulated other comprehensive loss by component were as follows:

			Foreign			Unrealized
			currency		Derivative	loss on
			translation		instruments,	investments,
(in thousands)			adjustments		net of tax		net of tax		Other		Total
Balances, December 31, 2015		$	(13,079)	$	—	$	(95)	$	158	$	(13,016)
	Other comprehensive loss before reclassifications		1,348		(2,232)		(6)		—		(890)
Net current period other comprehensive loss			1,348		(2,232)		(6)		—		(890)
Balances, March 31, 2016		$	(11,731)	$	(2,232)	$	(101)	$	158	$	(13,906)

See Note 14 for further explanation of the change in derivative instruments that is recorded to Accumulated Other Comprehensive Loss.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This quarterly report (this Report) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act). These forward-looking statements are identified as any statement that does not relate strictly to historical or current facts and include words such as “anticipate,” “believe,” “intend,” “plan,” “projection,” “forecast,” “strategy,” “position,” “continue,” “estimate,” “expect,” “may,” “will,” or the negative or other variations thereof. In particular, statements, whether express or implied, concerning future operating results or the ability to generate sales, income or cash flow are forward-looking statements. Undue reliance should not be placed on any forward-looking statements. Forward-looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions that are beyond our ability to control or predict, including those discussed under Part II, Item 1A of this Report and in Part I, Item 1A of the 2015 10-K. 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. The following discussion should be read in conjunction with the Condensed Consolidated Financial Statements and accompanying notes, and the 2015 10-K.

OVERVIEW

We are a worldwide provider of integrated manufacturing, design and engineering services and product life cycle solutions. In this Report, references to Benchmark or the Company or use of the words “we”, “our” and “us” include the subsidiaries of Benchmark unless otherwise noted.

We provide our services to OEMs of industrial equipment (including equipment for the aerospace and defense industries), telecommunication equipment, computers and related products for business enterprises, medical devices, and test and instrumentation products.

We offer comprehensive and integrated design and manufacturing services and solutions—from initial

product concept to volume production including direct order fulfillment and post-deployment services. Our operations comprise three principal areas:

· Manufacturing and assembly operations , which include printed circuit board assemblies (PCBAs) and subsystem assembly, box build and systems integration. Systems integration is often building a finished assembly that includes PCBAs, complex subsystem assemblies, mechatronics, displays, optics, and other components. These final products may be configured to order and delivered directly to the end customer across all the industries we serve.

· Precision technology manufacturing , which complements our electronic manufacturing expertise by providing further vertical integration of critical mechanical components. These capabilities include precision machining, advanced metal joining, assembly and functional testing primarily for customers in the medical, aerospace, and test & instrumentation markets (which include semiconductor capital equipment).

· Specialized engineering services and solutions , which includes product design for electronic systems, sub-systems, and components, printed circuit board layout, prototyping, automation and test development. We provide these services across all the industries we serve, but lead with engineering to manufacturing solutions primarily in regulated industries such as medical, complex industrials, aerospace and defense.

As part of our long-term strategy to expand into higher-value markets, on November 12, 2015, we acquired Secure Technology, a leading provider of customized high-performance electronics, sub-systems, and component solutions for mission critical applications, for a purchase price of $230 million. The purchase price represented approximately 8.5 times estimated 2016 earnings before interest, taxes, depreciation and amortization of the acquired entity. In addition, Secure has consistently generated gross margins in excess of 30% and increased their revenues at a compound annual growth rate of greater than 10% since 2012. This acquisition deepened Benchmark’s engineering capabilities and enhanced its ability to serve customers in the highly regulated industrial markets, including aerospace and defense.

Our core strength lies in our ability to provide concept-to-production solutions in support of our customers. Our global manufacturing presence increases our ability to respond to our customers’ needs by providing accelerated time-to-market and time-to-volume production of high-quality products – especially for complex products with lower volume and higher mix in regulated markets. These capabilities enable us to build strong strategic relationships with our customers and to become an integral part of their operations.

Our customers often face challenges in designing supply chains, planning demand, procuring materials and managing their inventories efficiently due to fluctuations in their customer demand, product design changes, short product life cycles and component price fluctuations. We employ enterprise resource planning (ERP) systems and lean manufacturing principles to manage the procurement and manufacturing processes in an efficient and cost-effective manner so that, where possible, components arrive on a just-in-time, as-and-when-needed basis. We are a significant purchaser of electronic components and other raw materials and can capitalize on the economies of scale associated with our relationships with suppliers to negotiate price discounts, obtain components and other raw materials that are in short supply, and return excess components. Our agility and expertise in supply chain management and our relationships with suppliers across the supply chain enable us to help reduce our customers’ cost of goods sold and inventory exposure.

We recognize revenue from the sale of manufactured products built to customer specifications and excess inventory when title and risk of ownership have passed, the price to the buyer is fixed or determinable and recoverability is reasonably assured, which generally is when the goods are shipped. Revenue from design, development and engineering services is recognized when the services are performed and collectibility is

reasonably certain. Such services provided under fixed price contracts are accounted for using the percentage-of-completion method. We generally assume no significant obligations after shipment as we typically warrant workmanship only. Therefore, our warranty provisions are generally not significant.

2016 Highlights

Sales for the three months ended March 31, 2016 decreased 12% to $549.2 million compared to $620.9 million for 2015. During 2016, sales to customers in our various industry sectors fluctuated from the comparable 2015 period as follows:

· Industrials increased by 7%,

· Telecommunications decreased by 39%,

· Computing decreased by 18%,

· Medical increased by 2%, and

· Test & Instrumentation decreased by 2%.

A significant portion of the overall decrease in sales resulted from a decrease in Telecommunications revenue primarily related to product lifecycle transitions at one of our top customers and many of our Telecommunications customers experiencing order declines related to broader demand weakness associated with reduced infrastructure spending. In addition, Computing revenue declined due to lower demand from many of our computing customers.

Our sales depend on the success of our customers, some of which operate in businesses associated with rapid technological change and consequent product obsolescence. Developments adverse to our major customers or their products, or the failure of a major customer to pay for components or services, can adversely affect us. 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 43% and 47% of our sales in the three months ended March 31, 2016 and 2015 , respectively. We had no customers that represented 10% or more of our sales in the first quarter of 2016 or 2015.

We experience fluctuations in gross profit from period to period. Different programs contribute different gross profits depending on factors such as the types of services involved, location of production, size of the program, complexity of the product and level of material costs associated with the various products. Moreover, new programs can contribute relatively less to our gross profit in their early stages when manufacturing volumes are usually lower, resulting in inefficiencies and unabsorbed manufacturing overhead costs. In addition, a number of our new and higher volume programs remain subject to competitive constraints that could exert downward pressure on our margins. During periods of low production volume, we generally have idle capacity and reduced gross profit.

We have undertaken initiatives to restructure our business operations with the intention of improving utilization and realizing cost savings. During the first three months of 2016, we recognized $1.8 million of restructuring charges and $0.1 million of integration costs, primarily related to the closing of certain facilities in the Americas. In addition, we recognized $0.9 million of costs in connection with the proxy contest relating to our 2016 annual meeting of shareholders.

RESULTS OF OPERATIONS

The following table presents the percentage relationship that certain items in our Condensed Consolidated Statements of Income bear to sales for the periods indicated. The financial information and the discussion below should be read in conjunction with the Condensed Consolidated Financial Statements and Notes thereto in Item 1 of this Report. For ease of reference, we refer to the first quarter of 2016 below simply as “2016” and the first quarter of 2015 simply as “2015”.

		Three Months Ended
		March 31,
			2016		2015
Sales			100.0	%	100.0	%
Cost of sales			90.8		91.7
	Gross profit		9.2		8.3
Selling, general and administrative expenses			5.7		4.5
Restructuring charges and other costs			0.5		0.8
	Income from operations		3.0		3.0
Other income (expense), net			(0.4)		(0.2)
	Income before income taxes		2.5		2.8
Income tax expense			0.5		0.5
	Net income		2.0	%	2.3	%

Sales

Sales for 2016 were $549.2 million, a 12% decrease from sales of $620.9 million in 2015 . The following table sets forth, for the periods indicated, the percentages of our sales by industry sector.

	Three Months Ended
	March 31,
		2016		2015
Industrials (including aerospace and defense)		39	%	32	%
Telecommunications		18		27
Computing		18		19
Medical		15		13
Testing & instrumentation		10		9
		100	%	100	%

Industrials. 2016 sales increased 7% to $213.1 million from $199.0 million in 2015 primarily as a result of new programs from both new and existing customers.

Telecommunications. 2016 sales decreased 39% to $101.8 million from $166.3 million in 2015 related to product lifecycle transitions at one of our top customers as well as many of our Telecommunications customers experiencing order declines related to broader demand weakness associated with reduced infrastructure spending .

Computing. 2016 sales decreased 18% to $98.4 million from $119.6 million in 2015. The decrease is primarily due to lower demand from many of our computing customers.

Medical. 2016 sales increased 2% to $82.5 million from $81.3 million in 2015.

Testing & Instrumentation. 2016 sales decreased 2% to $53.4 million from $54.7 million in 2015 .

Our international operations are subject to the risks of doing business abroad. See Part I, Item 1A of our 2015 10-K for factors pertaining to our international sales and fluctuations in the exchange rates of foreign currency and for further discussion of potential adverse effects in operating results associated with the risks of doing business abroad. During 2016 and 2015, 50% and 53%, respectively, of our sales were from international operations.

Gross Profit

Gross profit decreased 3% to $50.3 million for 2016 from $51.8 million in 2015. Our 2016 gross profit as a percentage of sales increased to 9.2% from 8.3% in 2015 primarily due to benefits from our increased higher-value market revenue base and ongoing operational excellence initiatives offset by decreased utilization associated with lower sales volumes. We experience fluctuations in gross profit from period to period.

Selling, General and Administrative Expenses

SG&A increased 11% to $31.3 million in 2016 from $28.2 million in 2015 primarily related to the Secure Acquisition. SG&A, as a percentage of sales, increased to 5.7% in 2016 from 4.5% in 2015. The increase in SG&A as a percentage of sales related primarily to the decreased sales volumes.

Restructuring Charges and Other Costs

During 2016, we recognized $2.8 million of restructuring charges and other costs, primarily related to reductions in workforce in certain facilities across various regions and costs associated with the proxy contest relating to our 2016 annual meeting of shareholders. We expect to incur an additional $2.6 to $4.1 million in the second quarter of 2016 in connection with the proxy contest. In 2015, we recognized $4.9 million of restructuring charges and other costs, primarily related to the closure of certain facilities in the Americas. See Note 13 to the Condensed Consolidated Financial Statements in Item 1 of this Report.

Interest Expense

Interest expense increased to $2.3 million in 2016 from $0.4 million in 2015 due to the additional debt incurred in connection with the Secure Acquisition.

Income Tax Expense

Income tax expense of $2.9 million represented an effective tax rate of 20.9% for 2016, compared with $3.4 million for 2015, which represented an effective tax rate of 19.5%. The increase in the effective tax rate was primarily a result of the China tax incentive that expired in December 2015.

We have been granted certain tax incentives, including tax holidays, for our subsidiaries in Malaysia and Thailand that will expire at various dates, unless extended or otherwise renegotiated, through 2025 in Malaysia, and 2028 in Thailand. See Note 8 to the Condensed Consolidated Financial Statements in Item 1 of this report.

Net Income

We reported net income of $11.1 million, or diluted earnings per share of $0.22 for 2016, compared with net income of $14.2 million, or diluted earnings per share of $0.27 for 2015. The net decrease of $3.1 million from 2015 was due to the factors discussed above.

LIQUIDITY AND CAPITAL RESOURCES

We have historically financed our organic growth and operations through funds generated from operations. In connection with the Secure Acquisition in 2015, we borrowed $230.0 million under the Term Loan facility to finance the purchase price of the acquisition. Cash and cash equivalents totaled $519.2 million at March 31, 2016 and $466.0 million at December 31, 2015, of which $476.9 million at March 31, 2016 and $424.0 million at December 31, 2015 was held outside the U.S. in various foreign subsidiaries. Substantially all of the amounts held outside of the U.S. are intended to be permanently reinvested in foreign operations. Under current tax laws and regulations, if cash and cash equivalents held outside the U.S. were to be distributed to the U.S. in the form of dividends or otherwise, we would be subject to additional U.S. income taxes and foreign withholding taxes, reduced by any applicable foreign tax credits.

Cash provided by operating activities was $76.5 million for 2016 and consisted primarily of $11.1 million of net income adjusted for $13.9 million of depreciation and amortization, a $65.4 million decrease in accounts receivable, a $22.8 million decrease in inventories offset by a $31.9 million decrease in accounts payable. The decrease in accounts receivable and inventories was primarily driven by the decrease in sales from the fourth quarter of 2015 to the first quarter of 2016. The decrease in accounts payable is primarily related to purchases of inventories. Working capital was $1.1 billion at both March 31, 2016 and December 31, 2015.

We are continuing the practice of purchasing components only after customer orders or forecasts are received, which mitigates, but does not eliminate, the risk of loss on inventories. Supplies of electronic components and other materials used in operations are subject to industry-wide shortages. In certain instances, suppliers may allocate available quantities to us. If shortages of these components and other material supplies used in operations occur, vendors may not ship the quantities we need for production, and we may be forced to delay shipments, which would increase backorders and impact cash flows.

Cash used in investing activities was $7.6 million for 2016 primarily due to purchases of additional property, plant and equipment totaling $7.7 million. These purchases were primarily for machinery and equipment in the Americas and Asia.

Cash used in financing activities was $16.4 million for 2016. Share repurchases totaled $14.2 million, principal payments on long-term debt totaled $3.1 million, and we received $0.8 million from the exercise of stock options.

Under the terms of the Credit Agreement, in addition to the Term Loan Facility, we have a $200.0 million five-year revolving credit facility to be used for general corporate purposes with a maturity date of November 12, 2020. The Credit Agreement includes an accordion feature pursuant to which total commitments under the facility may be increased by an additional $150.0 million, subject to satisfaction of certain conditions. As of March 31, 2016 , we had $227.1 million in borrowings outstanding under the Term Loan Facility and $1.6 million in letters of credit outstanding under the revolving credit facility. We have $198.4 million available for future borrowings under the revolving credit facility. See Note 6 to the Condensed Consolidated Financial Statements included in Item 1 of this Report for more information regarding the terms of the Credit Agreement.

Our operations, and the operations of businesses we acquire, are subject to certain foreign, federal, state and local regulatory requirements relating to environmental, waste management, health and safety matters. We believe we operate in substantial compliance with all applicable requirements and we seek to ensure that newly acquired businesses comply or will comply substantially with applicable requirements. To date, the costs of compliance and workplace and environmental remediation have not been material to us. However, material costs and liabilities may arise from these requirements or from new, modified or more

stringent requirements in the future. In addition, our past, current and future operations, and the operations of businesses we have or may acquire, may give rise to claims of exposure by employees or the public, or to other claims or liabilities relating to environmental, waste management or health and safety concerns.

As of March 31, 2016, we had cash and cash equivalents totaling $519.2 million and $198.4 million available for borrowings under the Credit Agreement. During the next 12 months, we believe our capital expenditures will be approximately $40 million, principally for machinery and equipment to support our ongoing business around the globe.

In December 2014 and again in December 2015, our Board of Directors approved the repurchase of up to $100.0 million of our outstanding common shares. As of March 31, 2016, we had $120.5 million remaining under the repurchase programs to purchase additional shares. We are under no commitment or obligation to repurchase any particular amount of common shares. Management believes that our existing cash balances and funds generated from operations will be sufficient to permit us to meet our liquidity requirements over the next 12 months. Management further believes that our ongoing cash flows from operations and any borrowings we may incur under our revolving credit facility will enable us to meet operating cash requirements in future years. Should we desire to consummate significant acquisition opportunities, our capital needs would increase and could possibly result in our need to increase available borrowings under our 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.

CONTRACTUAL OBLIGATIONS

We have certain contractual obligations for operating and capital leases that were summarized in a table of Contractual Obligations in our 2015 10-K . There have been no material changes to our contractual obligations, outside of the ordinary course of our business, since December 31, 2015.

OFF-BALANCE SHEET ARRANGEMENTS

As of March 31, 2016, we did not have any significant off-balance sheet arrangements.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Management’s discussion and analysis is based upon our condensed consolidated financial statements, which have been prepared in accordance with U.S. GAAP. Our significant accounting policies are summarized in Note 1 to the Consolidated Financial Statements included in our 2015 10-K . See Note 12 to the Condensed Consolidated Financial Statements for a discussion of recently enacted accounting principles.

Item 3 – Quantitative and Qualitative 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.

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

events, which could lead to delays in our ability to resume full operations.

We transact business in various foreign countries and are subject to foreign currency fluctuation risks. We use natural hedging and forward contracts to economically hedge transactional exposure primarily associated with trade accounts receivable, other receivables and trade accounts payable denominated in a currency other than the functional currency of the respective operating entity. We do not use derivative financial instruments for speculative purposes. The forward contracts in place as of March 31, 2016 have not been designated as accounting hedges and, therefore, changes in fair value are recorded within our Consolidated Statements of Income.

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. We place cash and cash equivalents and investments with various major financial institutions. We protect our invested principal funds by limiting default risk, market risk and reinvestment risk. We mitigate default risk by generally investing in investment grade securities.

We are also exposed to interest rate risk on borrowings under our Credit Agreement. As of March 31, 2016, we had $227.1 million outstanding on the floating rate term loan facility, and we have an interest rate swap agreement with a notional amount of $170.3 million. Under this interest rate swap agreement, we receive variable rate interest rate payments and pay fixed rate interest payments. The effect of this swap is to convert a portion of our floating rate interest expense to fixed interest rate expense. The interest rate swap is designated as a cash flow hedge .

Item 4 – Controls and Procedures

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

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

Our management, including our chief executive officer and chief financial officer, does not expect that our disclosure controls and internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. These inherent

limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple errors or mistakes. Additionally, controls can be circumvented by individuals’ acts, by collusion of two or more people, or by management overriding the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, a control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

PART II—OTHER INFORMATION

Item 1. Legal Proceedings

We are involved in various legal actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on our consolidated financial position or results of operations.

Item 1A. Risk Factors

There are no material changes to the risk factors set forth in Part I, Item 1A of our 2015 10-K .

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

(c) The following table provides information for the quarter ended March 31, 2016 about the Company’s repurchases of its equity securities registered pursuant to Section 12 of the Exchange Act, at a total cost of $14.2 million:

ISSUER PURCHASES OF EQUITY SECURITIES
				(d) Maximum
			(c) Total	Number (or
			Number of	Approximate
			Shares	Dollar Value)
			(or Units)	of Shares
			Purchased as	(or Units) that
	(a) Total		Part of	May Yet Be
	Number of		Publicly	Purchased
	Shares (or	(b) Average	Announced	Under the
	Units)	Price Paid per Share	Plans or	Plans or
Period	Purchased ⁽¹⁾	(or Unit) ⁽²⁾	Programs	Programs ⁽³⁾
January 1 to 31, 2016	330,000	$19.41	330,000	$128.3 million
February 1 to 29, 2016	105,000	$20.62	105,000	$126.1 million
March 1 to 31, 2016	255,000	$22.04	255,000	$120.5 million
Total	690,000	$20.57	690,000

⁽¹⁾ All share repurchases were made on the open market.

⁽²⁾ Average price paid per share is calculated on a settlement basis and excludes commission.

⁽³⁾ In December 2014 and again in December 2015, the Board of Directors approved the repurchase of up to $100 million of the Company’s outstanding common shares. Share purchases may be made in the open market, in privately negotiated transactions or block transactions, at the discretion of the Company’s management and as market conditions warrant. Purchases will be funded from available cash and may be commenced, suspended or discontinued at any time without prior notice. Shares repurchased under the program are retired.

Item 6. Exhibits

Exhibit
Number	Description of Exhibit
3.1	Restated Certificate of Formation of the Company dated November 4, 2014 (incorporated by reference to Exhibit 3.1 to the Company's quarterly report on Form 10-Q filed with the SEC on November 7, 2014) (the 10-Q) (Commission file number 1-10560)
3.2	Amended and Restated Bylaws of the Company dated November 4, 2014 (incorporated by reference to Exhibit 3.2 to the 10-Q)
4.1	Specimen form of certificate evidencing the Common Shares (incorporated by reference to Exhibit 4.1 to the 10-Q)
10.1*	Form of Performance-based Restricted Stock Unit Award agreement for use under the Benchmark Electronics, Inc. 2010 Omnibus Incentive Compensation Plan.
31.1*	Section 302 Certification of Chief Executive Officer
31.2*	Section 302 Certification of Chief Financial Officer
32.1*	Section 1350 Certification of Chief Executive Officer
32.2*	Section 1350 Certification of Chief Financial Officer
101.INS ⁽¹⁾	XBRL Instance Document
101.SCH ⁽¹⁾	XBRL Taxonomy Extension Schema Document
101.CAL ⁽¹⁾	XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB ⁽¹⁾	XBRL Taxonomy Extension Label Linkbase Document
101.PRE ⁽¹⁾	XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF ⁽¹⁾	XBRL Taxonomy Extension Definition Linkbase Document

* Filed herewith.

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

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized on May 10, 2016 .

	BENCHMARK ELECTRONICS, INC.
	(Registrant)
	By: /s/ Gayla J. Delly
	Gayla J. Delly
	President and Chief Executive Officer
	(Principal Executive Officer)


	By: /s/ Donald F. Adam
	Donald F. Adam
	Chief Financial Officer
	(Principal Financial Officer)

EXHIBIT INDEX

Exhibit
Number	Description of Exhibit

3.1	Restated Certificate of Formation of the Company dated November 4, 2014 (incorporated by reference to Exhibit 3.1 to the Company's quarterly report on Form 10-Q filed with the SEC on November 7, 2014) (the 10-Q) (Commission file number 1-10560)
3.2	Amended and Restated Bylaws of the Company dated November 4, 2014 (incorporated by reference to Exhibit 3.2 to the 10-Q)
4.1	Specimen form of certificate evidencing the Common Shares (incorporated by reference to Exhibit 4.1 to the 10-Q)
10.1*	Form of Performance-based Restricted Stock Unit Award agreement for use under the Benchmark Electronics, Inc. 2010 Omnibus Incentive Compensation Plan.
31.1*	Section 302 Certification of Chief Executive Officer
31.2*	Section 302 Certification of Chief Financial Officer
32.1*	Section 1350 Certification of Chief Executive Officer
32.2*	Section 1350 Certification of Chief Financial Officer
101.INS(1)	XBRL Instance Document
101.SCH(1)	XBRL Taxonomy Extension Schema Document
101.CAL(1)	XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB(1)	XBRL Taxonomy Extension Label Linkbase Document
101.PRE(1)	XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF(1)	XBRL Taxonomy Extension Definition Linkbase Document

* Filed herewith.

EXHIBIT 10.1

PERFORMANCE-BASED RESTRICTED STOCK UNIT AWARD AGREEMENT

Performance-Based Restricted Stock Unit Award Agreement under the Benchmark Electronics, Inc. 2010 Omnibus Incentive Compensation Plan , dated as of ____________, between Benchmark Electronics, Inc. (the “ Company ”), a Texas corporation, and [NAME].

This Performance-Based Restricted Stock Unit Award Agreement (this “ Award Agreement ”) sets forth the terms and conditions of a target award (the “ Award ”) of _______ restricted stock units that are subject to the terms and conditions specified herein (“ RSUs ”) and that are being granted to you on the date hereof under the Benchmark Electronics, Inc. 2010 Omnibus Incentive Compensation Plan (the “ Plan ”). Each RSU subject to this Award constitutes an unfunded and unsecured promise of the Company to deliver (or cause to be delivered) to you, subject to the terms of this Award Agreement, a share of the Company’s common stock, $0.10 par value (a “ Share ”), as set forth in Section 3 of this Award Agreement.

THIS AWARD IS SUBJECT TO ALL TERMS AND CONDITIONS OF THE PLAN AND THIS AWARD AGREEMENT, INCLUDING THE DISPUTE RESOLUTION PROVISIONS SET FORTH IN SECTION 10 OF THIS AWARD AGREEMENT. BY SIGNING YOUR NAME BELOW, YOU SHALL HAVE CONFIRMED YOUR ACCEPTANCE OF THE TERMS AND CONDITIONS OF THIS AWARD AGREEMENT.

The Plan. This Award is made pursuant to the Plan, all the terms of which are hereby incorporated in this Award Agreement. In the event of any conflict between the terms of the Plan and the terms of this Award Agreement, the terms of the Plan shall govern. In the event of any conflict between the terms of this Award Agreement and the terms of any individual employment agreement between you and the Company or any of its Subsidiaries (an “ Employment Agreement ”), the terms of your Employment Agreement shall govern.

Definitions. Capitalized terms used in this Award Agreement that are not defined in this Award Agreement have the meanings as used or defined in the Plan. As used in this Award Agreement, the following terms have the meanings set forth below:

(a) “ Business Day ” means a day that is not a Saturday, a Sunday or a day on which banking institutions are legally permitted to be closed in the City of New York.

(b) “ Cause ” means the occurrence of any one of the following:

(i) your gross negligence in the performance of your duties with the Company, which gross negligence results in a material adverse effect on the Company, provided that no such gross negligence shall constitute “Cause” if it relates to an action taken or omitted by you in the good faith, reasonable belief that such action or omission was in or not opposed to the best interests of the Company;

(ii) your habitual neglect or disregard of your duties with the Company that is materially and demonstrably injurious to the Company, after written notice from the Company stating the duties you have failed to perform;

(iii) your engaging in conduct or misconduct that materially harms the reputation or financial position of the Company;

(iv) your obstruction, impedance or failure to materially cooperate with an investigation authorized by the Board, a self-regulatory organization empowered with self-regulatory responsibilities under Federal or state laws, or a governmental department or agency; or

(v) your conviction of a felony, provided that no such conviction will constitute “Cause” if it relates to an action taken or omitted by you in the good faith, reasonable belief that such action or omission was in or not opposed to the best interests of the Company.

(i) a material diminution of your duties or responsibilities;

(ii) a greater than 10% reduction in your base salary, annual bonus opportunity or long-term incentive compensation opportunity; or

(iii) a material breach by the Company of any provision of your Employment Agreement or any other agreement between you and the Company.

A termination of your employment by you for Good Reason shall be effectuated by giving the Company written notice (“ Notice of Termination for Good Reason ”), not later than 90 days following the date of the occurrence of the circumstance that constitutes Good Reason, setting forth in reasonable detail the specific conduct of the Company or any of its Subsidiaries that constitutes Good Reason and the specific provisions of this Award Agreement, your Employment Agreement or any other agreement between you and the Company on which you relied. The Company shall be entitled, during the 30-day period following receipt of a Notice of Termination for Good Reason, to cure the circumstances that gave rise to Good Reason, provided that the Company shall be entitled to waive its right to cure or reduce the cure period by delivery of written notice to that effect to you (such 30-day or shorter period, the “ Cure Period ”). If, during the Cure Period, such circumstance is remedied, you shall not be permitted to terminate your employment for Good Reason as a result of such circumstance. If, at the end of the Cure Period, the circumstance that constitutes Good Reason has not been remedied, you shall be entitled to terminate your employment for Good Reason during the 90-day period that follows the end of the Cure Period (the “ Termination Period ”). If you do not terminate your employment during the Termination Period, you shall not be permitted to terminate your employment for Good Reason as a result of such circumstance.

“ Payment Formula ” means the formula set forth in ________ that determines the number of RSUs that shall vest pursuant to this Award Agreement based on whether, or the extent to which, the Performance Goals are achieved.

“ Performance Goals ” means the goals set forth in ________, the achievement of which determines the number of RSUs that shall vest pursuant to this Award Agreement.

“ Performance Period ” means the period of time specified in ________, over which the achievement of the Performance Goals shall be measured.

Vesting and Delivery. (a) Performance-Based Vesting.
Except as otherwise provided in your Employment Agreement or Section 3(b) of this Award Agreement, the vesting of your rights with respect to the RSUs shall be contingent on the achievement of the Performance Goals as set forth in Attachment A. Accordingly, unless otherwise provided in your Employment Agreement or Section 3(b) of this Award Agreement, your rights with respect to the RSUs subject to this Award Agreement shall not become vested unless and until the Committee, in its sole discretion, determines whether, or the extent to which, the Performance Goals have been achieved. As soon as reasonably practicable following the end of the Performance Period and in no event later than March 15 of the calendar year following the calendar year in which the Performance Period ends, the Committee shall determine whether, or the extent to which, the Performance Goals have been achieved (the date of such determination, the “ Determination Date ”) and shall provide notice to you of such determination as soon as reasonably practicable following such determination in accordance with Section 11 of this Award Agreement. Upon such determination by the Committee and subject to the provisions of the Plan and this Award Agreement (including Section 3(c) of this Award Agreement), you shall vest in that percentage of the target number of RSUs that is determined pursuant to the Payment Formula set forth in ________. Notwithstanding the foregoing, pursuant to Section 4 of this Award Agreement and except as otherwise provided in your Employment Agreement or Section 3(b) of this Award Agreement, in order for your rights with respect to any RSUs to become vested, you must be

employed by the Company or one of its Subsidiaries on the last day of the Performance Period and by March 15 ^th of the following calendar year.

Vesting following a Change of Control. If, during the two-year period immediately following a Change of Control, your employment is terminated by the Company or any of its Subsidiaries without Cause or you terminate your employment for Good Reason on or prior to the last day of the Performance Period, then you shall vest in 100% of the target number of RSUs set forth in ________, and the date of such termination of employment shall be deemed to be the Determination Date.

Negative Discretion. This Award is intended to constitute a Performance Compensation Award that qualifies as “qualified performance-based compensation” under Section 162(m) of the Code and, therefore, is subject to all provisions of Section 6(e) of the Plan, including the Committee’s authority to reduce or eliminate the number of RSUs awarded to you pursuant to this Award Agreement, even if the Performance Goals have been achieved and without regard to your Employment Agreement.

Delivery of Shares. As soon as reasonably practicable following the Determination Date and in no event later than March 15 of the calendar year following the calendar year in which (i) the Performance Period ends or (ii) in the event Section 3(b) of this Award Agreement applies, the Determination Date occurs, the Company shall deliver to you one Share for each RSU awarded to you pursuant to this Award Agreement that has vested in accordance with the terms of this Award Agreement, subject to tax withholding provisions of Section 7 (a) below.

Equity Ownership Policy . Because the Company believes that stock ownership by senior management further aligns their interest with the interests of the company’s shareholders, the Company has established an equity ownership policy for certain of senior management. According to that policy, the Company expects you to retain 20% of each vesting of RSUs until you own during the term of your employment with the Company shares of stock having a market value equal to _______ times your annual base salary (such salary measured as of January 1 ^st of the year of the Vesting Date).

Forfeiture of RSUs. Unless the Committee determines otherwise, and except as otherwise provided in your Employment Agreement or Section 3(b) of this Award Agreement, if your rights with respect to any RSUs awarded to you pursuant to this Award Agreement have not become vested prior to the date on which your employment with the Company and its Subsidiaries terminates, your rights with respect to such RSUs shall immediately terminate, and you shall be entitled to no further payments or benefits with respect thereto.

Voting Rights; Dividend Equivalents. Prior to the date on which Shares are delivered to you in settlement of the RSUs pursuant to this Award Agreement, you shall not be entitled to exercise any voting rights with respect to the Shares underlying such RSUs and shall not be entitled to receive dividends or other distributions with respect to such Shares.

Non-Transferability of RSUs. Unless otherwise provided by the Committee in its discretion, RSUs may not be sold, assigned, alienated, transferred, pledged, attached or otherwise encumbered except as provided in Section 9(a) of the Plan. Any purported sale, assignment, alienation, transfer, pledge, attachment or other encumbrance of an RSU in violation of the provisions of this Section 6 and Section 9(a) of the Plan shall be void.

Withholding, Consents and Legends. (i) Withholding. The delivery of Shares pursuant to Section 3 of this Award Agreement is conditioned on satisfaction of any applicable withholding taxes in accordance with Section 9(d) of the Plan. In the event that there is withholding tax liability in connection with the settlement of RSUs, you may satisfy, in whole or in part, any withholding tax liability by having the Company withhold from the Shares you would be entitled to receive upon settlement of the RSUs a number of Shares having a Fair Market Value (which shall either have the meaning set forth in the Plan or shall have such other meaning as determined by the Company in accordance with applicable withholding requirements) equal to such withholding tax liability.

Consents; Compliance with Law. Your rights in respect of the RSUs are conditioned on the receipt to the full satisfaction of the Committee of any required consents that the Committee may determine to be

necessary or advisable (including your consenting to the Company’s supplying to any third-party record-keeper of the Plan such personal information as the Committee deems advisable to administer the Plan) and, in accordance with Section 9(l) of the Plan, subject to the Committee’s determination that the issuance of Shares pursuant to this Award Agreement is compliant with applicable law.

Legends. The Company may affix to certificates for Shares issued pursuant to this Award Agreement any legend that the Committee determines to be necessary or advisable (including to reflect any restrictions to which you may be subject under any applicable securities laws). The Company may advise the transfer agent to place a stop order against any legended Shares.

Successors and Assigns of the Company. The terms and conditions of this Award Agreement shall be binding upon and shall inure to the benefit of the Company and its successors and assigns.

Committee Discretion. Subject to the terms of this Award Agreement and your Employment Agreement, the Committee shall have discretion with respect to any actions to be taken or determinations to be made in connection with this Award Agreement, and its determinations shall be final, binding and conclusive.

Dispute Resolution. (ii) Jurisdiction and Venue. Notwithstanding any provision in your Employment Agreement, you and the Company hereby irrevocably submit to the exclusive jurisdiction of (i) the United States District Court for the Southern District of Texas and (ii) the courts of the State of Texas for the purposes of any action, suit or other proceeding arising out of this Award Agreement or the Plan. You and the Company agree to commence any such action, suit or other proceeding either in the United States District Court for the Southern District of Texas or, if such action, suit or other proceeding may not be brought in such court for jurisdictional reasons, in the courts of the State of Texas. You and the Company further agree that service of any process, summons, notice or document by U.S. registered mail to the applicable address set forth in Section 11 of this Award Agreement shall be effective service of process for any action, suit or other proceeding in Texas with respect to any matters to which you have submitted to jurisdiction in this Section 10(a). You and the Company irrevocably and unconditionally waive any objection to the laying of venue of any action, suit or other proceeding arising out of this Award Agreement or the Plan in (A) the United States District Court for the Southern District of Texas or (B) the courts of the State of Texas, and hereby and thereby further irrevocably and unconditionally waive and agree not to plead or claim in any such court that any such action, suit or other proceeding brought in any such court has been brought in an inconvenient forum.

Waiver of Jury Trial. You and the Company hereby waive, to the fullest extent permitted by applicable law, any right either of you may have to a trial by jury in respect to any litigation directly or indirectly arising out of, under or in connection with this Award Agreement or the Plan.

Confidentiality. You hereby agree to keep confidential the existence of, and any information concerning, a dispute described in this Section 10, except that you may disclose information concerning such dispute to the court that is considering such dispute or to your legal counsel, accountants and other representatives (provided that such counsel, accountants and other representatives agree not to disclose any such information other than as necessary to the prosecution or defense of the dispute).

Notice. All notices, requests, demands and other communications required or permitted to be given under the terms of this Award Agreement shall be in writing and shall be deemed to have been duly given when delivered by hand or overnight courier or three Business Days after they have been mailed by U.S. registered mail, return receipt requested, postage prepaid, addressed to the other party as set forth below:

If to the Company:

Benchmark Electronics, Inc.
3000 Technology Drive
Angleton, Texas 77515

Attention: General Counsel

If to you:

To your address as most recently supplied to the Company and set forth in the Company’s records

The parties may change the address to which notices under this Award Agreement shall be sent by providing written notice to the other in the manner specified above.

G overning Law. This Award Agreement shall be deemed to be made in the State of Texas, and the validity, construction and effect of this Award Agreement in all respects shall be determined in accordance with the laws of the State of Texas, without giving effect to the conflict of law principles thereof.

Headings and Construction. Headings are given to the Sections and subsections of this Award Agreement solely as a convenience to facilitate reference. Such headings shall not be deemed in any way material or relevant to the construction or interpretation of this Award Agreement or any provision thereof. Whenever the words “include”, “includes” or “including” are used in this Award Agreement, they shall be deemed to be followed by the words “but not limited to”. The term “or” is not exclusive.

Amendment of this Award Agreement. The Committee may waive any conditions or rights under, amend any terms of, or alter, suspend, discontinue, cancel or terminate this Award Agreement prospectively or retroactively; provided , however , that any such waiver, amendment, alteration, suspension, discontinuance, cancelation or termination that would materially and adversely impair your rights under this Award Agreement shall not to that extent be effective without your consent (it being understood, notwithstanding the foregoing proviso, that this Award Agreement and the RSUs shall be subject to the provisions of Section 7(c) of the Plan).

SECTION 2. Section 409A. (a) For purposes of Section 409A of the Code (“ Section 409A ”), it is intended that amounts payable pursuant to this Award Agreement qualify for the short-term deferral exception under Treas. Reg. Section 1.409A-1(b)(4) or any successor thereto, and all provisions of this Award Agreement shall be construed and interpreted in a manner consistent with such exception.

(b) In the event that it is determined that any amounts payable pursuant to this Award Agreement do not qualify for the short-term deferral exception under Treas. Reg. Section 1.409A-1(b)(4) or any successor thereto, it is intended that the provisions of this Award Agreement comply with Section 409A, and all provisions of this Award Agreement shall be construed and interpreted in a manner consistent with the requirements for avoiding taxes or penalties under Section 409A and any similar state or local law.

(c) Neither you nor any of your creditors or beneficiaries shall have the right to subject any deferred compensation (within the meaning of Section 409A) payable under this Award Agreement to any anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment or garnishment. Except as permitted under Section 409A, any deferred compensation (within the meaning of Section 409A) payable to you or for your benefit under this Award Agreement may not be reduced by, or offset against, any amount owing by you to the Company or any of its Subsidiaries.

(d) To the extent required by Section 409A, any amount payable under the Award Agreement that constitutes deferred compensation (within the meaning of Section 409A) subject to, and not exempt from, Section 409A, payable or provided to you upon a termination of employment shall only be paid or provided to you upon your separation from service (within the meaning of Section 409A). If, at the time of your separation from service, (i) you are a specified employee (within the meaning of Section 409A and using the identification methodology selected by the Company from time to time) and (ii) the Company shall make a good faith determination that an amount payable under this Award Agreement constitutes deferred compensation the payment of which is required to be delayed pursuant to the six-month delay rule set forth in Section 409A in order to avoid taxes or penalties under Section 409A, then the Company (or its Subsidiary, as applicable) shall not pay such amount on the otherwise scheduled payment date but shall instead accumulate such amount and pay it, without interest, on the first business day after such six-month period.

You shall be solely responsible and liable for the satisfaction of all taxes and penalties that may be imposed on you or for your account in connection with this Award Agreement (including any taxes and penalties under Section 409A), and neither the Company nor any of its Subsidiaries shall have any obligation to indemnify or otherwise hold you harmless from any or all such taxes or penalties.

Counterparts. This Award Agreement may be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.

IN WITNESS WHEREOF, the parties have duly executed this Award Agreement as of the date first written above.

	BENCHMARK ELECTRONICS, INC.,

	by
	Name:
	Title:



	NAME /Date

Exhibit 31.1

Section 302 Certification of Chief Executive Officer

I, Gayla J. Delly, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Benchmark Electronics, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. Benchmark’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for Benchmark and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to Benchmark, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of Benchmark’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in Benchmark’s internal control over financial reporting that occurred during Benchmark’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, Benchmark’s internal control over financial reporting; and

5. Benchmark’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to Benchmark’s auditors and the audit committee of Benchmark’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect Benchmark’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in Benchmark’s internal control over financial reporting.

	By: /s/ Gayla J. Delly
	Gayla J. Delly
	President and Chief Executive Officer
	May 10, 2016

Exhibit 31.2

Section 302 Certification of Chief Financial Officer

I, Donald F. Adam, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Benchmark Electronics, Inc.;

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in Benchmark’s internal control over financial reporting.

	By: /s/ Donald F. Adam
	Donald F. Adam
	Chief Financial Officer
	May 10, 2016

Exhibit 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
(Section 906 of the Sarbanes-Oxley Act of 2002)

In connection with the Quarterly Report of Benchmark Electronics, Inc. (the Company) on Form 10-Q for the period ending March 31, 2016 (the Report), I certify to the best of my knowledge that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

	By: /s/ Gayla J. Delly
	Gayla J. Delly
	President and Chief Executive Officer
	May 10, 2016

Exhibit 32.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
(Section 906 of the Sarbanes-Oxley Act of 2002)

In connection with the Quarterly Report of Benchmark Electronics, Inc. (the Company) on Form 10-Q for the period ending March 31, 2016 (the Report), I certify to the best of my knowledge that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

	By: /s/ Donald F. Adam
	Donald F. Adam
	Chief Financial Officer
	May 10, 2016