BENCHMARK ELECTRONICS, INC.
401(k) EMPLOYEE SAVINGS PLAN
Financial Statements and Supplemental Schedule
December 30, 2010 and 2009
(With Independent Registered Public Accounting Firm’s Report Thereon)
BENCHMARK ELECTRONICS, INC.
401(k) EMPLOYEE SAVINGS PLAN
Table of Contents
The Board of Directors
Benchmark Electronics, Inc.:
We have audited the accompanying statements of net assets available for benefits of the Benchmark Electronics, Inc. 401(k) Employee Savings Plan (the Plan) as of December 30, 2010 and 2009 and the related statement of changes in net assets available for benefits for the year ended December 30, 2010. These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits as of December 30, 2010 and 2009, and the changes in net assets available for benefits for the year ended December 30, 2010, in conformity with accounting principles generally accepted in the United States of America.
Our audits were performed for the purpose of forming an opinion on the basic financial statements taken as a whole. The Supplemental Schedule H, Line 4i - Schedule of Assets (Held at End of Year) as of December 30, 2010 is presented for the purpose of additional analysis and is not a required part of the basic financial statements but is supplementary information required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. This supplemental schedule is the responsibility of the Plan’s management. This supplemental schedule has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.
Hein & Associates LLP
Houston, Texas
June 28, 2011
BENCHMARK ELECTRONICS, INC.
401(k) EMPLOYEE SAVINGS PLAN
December 30, 2010 and 2009
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2010
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|
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2009
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|
| |
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|
|
|
|
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Assets:
|
|
|
|
|
|
|
|
Investments, at fair value
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|
$ |
135,554,170 |
|
|
$ |
126,801,694 |
|
| |
|
|
|
|
|
|
|
|
|
Receivables:
|
|
|
|
|
|
|
|
|
|
Employer contributions
|
|
|
158,553 |
|
|
|
119,391 |
|
|
Participant contributions
|
|
|
229,879 |
|
|
|
206,669 |
|
|
Notes receivable from participants
|
|
|
3,959,263 |
|
|
|
4,391,517 |
|
|
Due from trustee
|
|
|
- |
|
|
|
713 |
|
|
Accrued interest
|
|
|
- |
|
|
|
86,377 |
|
| |
|
|
|
|
|
|
|
|
|
Total receivables
|
|
|
4,347,695 |
|
|
|
4,804,667 |
|
| |
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
139,901,865 |
|
|
|
131,606,361 |
|
| |
|
|
|
|
|
|
|
|
|
Net assets available for benefits at fair value
|
|
|
139,901,865 |
|
|
|
131,606,361 |
|
| |
|
|
|
|
|
|
|
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Adjustment from fair value to contract value for fully benefit-responsive investment contracts
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|
|
- |
|
|
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(618,672 |
) |
| |
|
|
|
|
|
|
|
|
|
Net assets available for benefits
|
|
$ |
139,901,865 |
|
|
$ |
130,987,689 |
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See accompanying notes to financial statements.
BENCHMARK ELECTRONICS, INC.
401(k) EMPLOYEE SAVINGS PLAN
Year ended December 30, 2010
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Investment income (loss):
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|
|
|
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Interest
|
|
$ |
1,454,011 |
|
|
Dividends
|
|
|
759,551 |
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|
Net gain on investments in pooled separate accounts
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|
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1,233,738 |
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|
Net gain on investments in mutual funds
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|
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6,605,661 |
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|
Net depreciation in fair value of common stock
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|
|
(670,747 |
) |
| |
|
|
|
|
| |
|
|
9,382,214 |
|
| |
|
|
|
|
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Interest income on notes from participants
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|
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239,165 |
|
| |
|
|
|
|
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Contributions:
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|
|
|
|
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Employer
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|
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3,450,965 |
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|
Participant
|
|
|
7,313,970 |
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|
Rollovers
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2,322,601 |
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|
|
|
|
| |
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13,087,536 |
|
| |
|
|
|
|
| |
|
|
|
|
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Benefits paid to participants
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|
|
(13,779,802 |
) |
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Administrative fees
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|
|
(14,937 |
) |
| |
|
|
|
|
|
Net increase
|
|
|
8,914,176 |
|
| |
|
|
|
|
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Net assets available for benefits:
|
|
|
|
|
|
Beginning of year
|
|
|
130,987,689 |
|
| |
|
|
|
|
|
End of year
|
|
$ |
139,901,865 |
|
See accompanying notes to financial statements.
BENCHMARK ELECTRONICS, INC.
401(k) EMPLOYEE SAVINGS PLAN
The following description of the Benchmark Electronics, Inc. 401(k) Employee Savings Plan (the Plan) provides only general information. Participants should refer to the Plan agreement for more complete information.
The Plan is a defined contribution plan covering all employees of Benchmark Electronics, Inc. (the Company) and employees of the Company’s affiliates, Benchmark Electronics California, Incorporated and Benchmark Electronics Huntsville Inc. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended (ERISA). Effective December 1, 2009, the Plan has adopted the Prudential Retirement Prototype Plan (the Prototype Plan). Prior to December 1, 2009, the Plan used the Dreyfus Non Standardized Prototype Profit Sharing Plan and Trust.
The Plan is administered by the Company and advised by the board of directors of the Company. Effective December 1, 2009, Prudential Bank & Trust, FSB is trustee of the Plan and Prudential Retirement Insurance and Annuity Company is the record keeper. Prior to December 1, 2009, Mellon Trust of New England, N.A. was trustee of the Plan and ACS HR Solutions was the record keeper.
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(b)
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Contributions and Investment Options
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Participants may elect to make pre-tax contributions of up to 100% (in 1.0% increments) of their compensation, as defined. Participant contributions will be matched by the Company on a 100% basis, not to exceed 4.0% of a participant’s compensation (referred to as employer contributions) upon completion of one year of service. The Company may also elect to make an employer discretionary contribution to all employees employed at the end of the Plan year who have completed 1,000 hours of service during such year. The Company did not make a discretionary contribution during the 2010 Plan year. Certain Internal Revenue Service (IRS) limits may apply to both the participants’ contributions and the employers’ contributions. Eligible participants may also elect to roll over distributions from a former employer’s qualified retirement plan.
Participants direct the investment of all contributions into various investment options offered by the Plan. The Plan currently offers 14 mutual funds, Company common stock and an insurance investment contract as investment options for participants.
Each participant’s account is credited with the participant’s contribution and employer matching contributions and an allocation of discretionary employer contributions, if any, and plan earnings. Allocations are based on participant earnings or account balances, as defined. The benefit to which a participant is entitled is the benefit that can be provided from the participant’s vested account.
BENCHMARK ELECTRONICS, INC.
401(k) EMPLOYEE SAVINGS PLAN
Notes to Financial Statements
Participants are immediately vested in their contributions and in employer matching contributions to the Plan plus actual earnings thereon.
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(e)
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Notes Receivable from Participants
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Upon application by a participant, the Plan administrator may make loans to participants not to exceed 50% of the participants’ 401(k) vested balance, with a minimum of $1,000 and a maximum of $50,000 less the participant’s highest outstanding loan balance during the preceding 12 months. Participants’ loans are to be repaid by level monthly payroll deductions of principal plus interest or may be prepaid in full or in part without penalty at any time. The interest rate is set at the prime rate plus 1%. Loan proceeds are reduced by a $75 loan processing fee.
Notes receivable from participants are measured at their unpaid principal balance plus any accrued but unpaid interest. Delinquent loans are treated as distributions based upon the terms of the Plan document.
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(f)
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Administrative Expenses
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Administrative expenses of the Plan are paid partly by the Company and partly by the Plan. Mutual fund redemption fees and investment advisory fees paid by participants are reported in administrative fees in the accompanying statement of changes in net assets available for benefits. Expenses related to the asset management of the investment funds and recordkeeping services are paid via the expense ratios charged on the investments which reduce the investment return reported and credited to participant accounts. Consequently, these management fees and operating expenses are reflected as a reduction of investment return for such investments. In addition, the Company incurs certain expenses administering the Plan, which are not included in the Plan’s financial statements.
On termination of service, a participant may elect to receive either a lump-sum amount equal to the vested value of his/her account or an annuity with various terms and rates or rollover to another qualified plan.
While employed, a participant may make withdrawals from his or her account balance (as allowed under IRS regulations) subject to certain restrictions as described in the Plan. Certain restrictions associated with withdrawals may be waived in the event a participant demonstrates financial hardship.
(Continued)
BENCHMARK ELECTRONICS, INC.
401(k) EMPLOYEE SAVINGS PLAN
Notes to Financial Statements
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(h)
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Termination of the Plan
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Although the Company has not expressed any intent to terminate the Plan, it may do so as provided by the Plan agreement.
At December 30, 2010 and 2009, forfeited participant’s accounts totaled $4,336 and $106. These accounts will be used to reduce future employer contributions.
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(2)
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Summary of Accounting Policies
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(a)
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Basis of Financial Statements
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The financial statements of the Plan are prepared under the accrual method of accounting.
The Plan’s investments are stated at fair value. The common stock of the Company and mutual funds are valued at their quoted market price. The investments in common/collective trust funds are valued based upon the quoted market values of the underlying assets. The estimated fair value of the investment in the Mellon Stable Value Fund is then adjusted to contract value in the adjustment from fair value to contract value for fully benefit-responsive investment contracts line item as described in paragraph (c) below. The Guaranteed Income Fund (GIF) is an evergreen group annuity contract and is valued at contract value as estimated by Prudential Retirement Insurance and Annuity Company. The GIF’s interest rates are adjusted to market semi-annually. Accordingly, the GIF contract value, which represents net contributions plus interest at the contract rate, approximates fair value. The GIF is a fully benefit-responsive annuity contract. Participants’ notes receivable are valued at their outstanding balances which approximates fair value.
Purchases and sales of securities are recorded on a trade-date basis. Interest and dividends are recorded as earned. Net investment gain (loss) from mutual funds and common/collective trust funds includes interest, dividends, realized gains (losses) on sale of investments and unrealized appreciation (depreciation) in fair value of investments. Net depreciation in fair value of common stock includes realized gains (losses) on sale of common stock and unrealized appreciation (depreciation) in fair value of common stock.
The Mellon Stable Value Fund, Series I (the Stable Value Fund), which is provided as an investment option to participants in the Plan, holds fully benefit-responsive guaranteed investment contracts (GICs).
As such, contract value is the relevant measurement attribute for that portion of the net assets available for benefits of a defined-contribution plan attributable to fully benefit-responsive investment contracts because contract value is the amount participants would receive if they were to initiate permitted transactions under the terms of the plan. The fully benefit-responsive investment contracts are included at fair value in the investments of the Plan and are adjusted to contract value in the statements of net assets available for Plan benefits.
(Continued)
BENCHMARK ELECTRONICS, INC.
401(k) EMPLOYEE SAVINGS PLAN
Notes to Financial Statements
The Stable Value Fund is a common/collective trust fund and generally consists of three types of investment contracts that are described in detail below:
Guaranteed Investment Contracts – Traditional GICs are unsecured, general account obligations of insurance companies. The obligation is backed by the general account assets of the insurance company that writes the investment contract. The crediting rate on this product is typically fixed for the life of the investment. Separate account GICs are investments in a segregated account of assets maintained by an insurance company for the benefit of the investors. The total return of the segregated account assets supports the separate account GIC’s return. The credited rate on this product will reset periodically and it will have an interest rate of not less than 0%. Fair values of GICs are calculated using the present value of the contract’s future cash flow values discounted by comparable duration Wall Street Journal GIC Index rates.
Fixed Maturity Synthetic Guaranteed Investment Contracts – General fixed maturity synthetic GICs consist of an asset or collection of assets that are owned by the fund and a benefit responsive, book value wrap contract purchased for the portfolio. The wrap contract provides book value accounting for the asset and assures that book value, benefit responsive payments will be made for participant directed withdrawals. The crediting rate of the contract is set at the start of the contract and typically resets every quarter. Generally, fixed maturity synthetics are held to maturity. The initial crediting rate is established based on the market interest rates at the time the initial asset is purchased and it will have an interest crediting rate not less than 0%. Fair values of general fixed maturity GICs are calculated using the sum of all assets’ market values provided by FT Interactive, a third party vendor BNY Mellon has engaged to provide fixed income prices on a monthly basis. Variable synthetic GICs consist of an asset or collection of assets that are managed by the bank or insurance company and are held in a bankruptcy remote vehicle for the benefit of the fund. The contract is benefit responsive and provides next day liquidity at book value. The crediting rate on this product resets every quarter based on the then current market index rates and an investment spread. The investment spread is established at time of issuance and is guaranteed by the issuer for the life of the investment. Fair values for variable synthetic GICs are calculated using the present value of the contract’s future cash flow values discounted by comparable swap rates.
Constant Duration Synthetic Guaranteed Investment Contracts – Constant duration synthetic GICs consist of a portfolio of securities owned by the fund and a benefit responsive, book value wrap contract purchased for the portfolio. The wrap contract amortizes gains and losses of the underlying securities over the portfolio duration, and assures that book value, benefit responsive payments will be made for participant directed withdrawals. The crediting rate on a constant duration synthetic GIC resets every quarter based on the book value of the contract, the market yield of the underlying assets, the market value of the underlying assets and the average duration of the underlying assets. The crediting rate aims at converging the book value of the contract and the market value of the underlying portfolio over the duration of the contract and therefore will be affected by movements in interest rates and/or changes in the market value of the underlying portfolio. The initial crediting rate is established based on the market interest rates at the time the underlying portfolio is first put together and it will have an interest crediting rate of not less than 0%. Fair values for constant duration synthetic GICs are calculated using the market values provided by the external investment managers BNY Mellon has engaged to provide investment services.
(Continued)
BENCHMARK ELECTRONICS, INC.
401(k) EMPLOYEE SAVINGS PLAN
Notes to Financial Statements
The existence of certain conditions can limit the ability of the Stable Value Fund to transact at book or contract value. Specifically, any event outside the normal operation of the Stable Value Fund which causes a withdrawal from an investment contract may result in a negative market value adjustment with respect to such withdrawal. Examples of such events include, but are not limited to, the following:
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|
·
|
employer-initiated events - events within the control of the Plan or the Company which would have a material and adverse impact on the Stable Value Fund;
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|
|
·
|
employer communications designed to induce participants to transfer from the Stable Value Fund;
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|
|
·
|
competing fund transfer or violation of equity wash or equivalent rules in place;
|
|
|
·
|
changes of qualification status of the Company or the Plan.
|
In general, issuers of investment contracts may terminate the contract and settle at other than contract value if the qualification status of the Company or the Plan changes, breach of material obligations under the contract and misrepresentation by the contract holder, or failure of the underlying portfolio to conform to the pre-established investment.
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|
(d)
|
Concentration of Investments
|
The Plan’s investment in shares of the Company’s common stock represents 7.3% and 8.7% of the Plan’s net assets as of December 30, 2010 and 2009, respectively. The Company has been in operation since 1981 and is listed on the New York Stock Exchange.
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the Plan administrator to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of additions to and deductions from net assets during the reporting period. Actual results could differ from those estimates.
Benefits are recorded when paid.
Subsequent events have been evaluated for potential recognition and disclosure through the date the Plan financial statements were issued.
(Continued)
BENCHMARK ELECTRONICS, INC.
401(k) EMPLOYEE SAVINGS PLAN
Notes to Financial Statements
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|
(h)
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Recently Issued Accounting Pronouncements
|
In September 2010, the Financial Accounting Standards Board issued authoritative guidance on reporting loans to participants by defined contribution plans. This guidance requires participant loans to be measured at their unpaid principal balance plus any accrued but unpaid interest and classified as notes receivable from participants. Previously, loans were measured at fair value and classified as investments. This guidance is effective for fiscal years ending after December 15, 2010 and is required to be applied retrospectively. Adoption of this guidance did not change the value of participant loans from the amount previously reported as of December 30, 2009. Participant loans have been reclassified to notes receivable from participants as of December 30, 2009. The total net assets available for benefits was not changed as a result of this reclassification.
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(3)
|
Benchmark Electronics, Inc. Common Stock
|
Each participant is entitled to exercise voting rights attributable to the shares allocated to his or her account and is notified by the trustee prior to the time that such rights are to be exercised.
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(4)
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Federal Income Tax Exemption
|
The IRS has determined and informed the Company by a letter dated March 31, 2008, that the Prototype Plan and related trust are designed in accordance with Section 401(a) of the Internal Revenue Code of 1986 (IRC) and, accordingly, are entitled to an exemption from federal income taxes under the provisions of Section 501(a). The Plan administrator believes that the Plan is designed, and is currently being operated in compliance with the appropriate IRC sections. The Financial Accounting Standards Board issued new guidance on accounting for uncertainty in income taxes. The Plan adopted this new guidance for the year ended December 30, 2009. Management evaluated the Plan’s tax positions and concluded that the Plan had maintained its tax exempt status and had taken no uncertain tax positions that require adjustment to the financial statements. Therefore, no provision or liability for income taxes has been included in the financial statements.
(Continued)
BENCHMARK ELECTRONICS, INC.
401(k) EMPLOYEE SAVINGS PLAN
Notes to Financial Statements
|
(5)
|
Reconciliation of Financial Statements to Form 5500
|
Reconciliation of the net assets available for benefits reported in the accompanying statements to the net assets available for benefits reported per the Form 5500 as of December 30, 2010 and 2009 is as follows:
| |
|
2010 |
|
|
2009 |
|
|
Net assets available for benefits reported per the Form 5500
|
|
$ |
139,513,433 |
|
|
|
130,660,916 |
|
|
Adjustment in employer contributions receivable
|
|
|
158,553 |
|
|
|
119,391 |
|
|
Adjustment in participants contributions receivable
|
|
|
229,879 |
|
|
|
206,669 |
|
|
Adjustment in due from trustee
|
|
|
— |
|
|
|
713 |
|
| |
|
|
|
|
|
|
|
|
|
Net assets available for benefits reported in the accompanying statement
|
|
$ |
139,901,865 |
|
|
|
130,987,689 |
|
Reconciliation of the changes in net assets available for benefits reported in the accompanying statement to the net changes in net assets available for benefits reported per the Form 5500 for the year ended December 30, 2010 is as follows:
|
Net changes in net assets available for benefits reported per the Form 5500
|
|
$ |
8,852,517 |
|
|
Adjustment in contributions from employer
|
|
|
39,162 |
|
|
Adjustment in contributions from participants
|
|
|
23,210 |
|
|
Adjustment in amounts due from trustee
|
|
|
(713 |
) |
| |
|
|
|
|
Net changes in net assets available for benefits reported in the accompanying statement
|
|
$ |
8,914,176 |
|
The following table presents investments that represent 5 percent or more of the Plan’s net assets as of December 30, 2010 and 2009:
| |
|
2010
|
|
|
2009
|
|
| |
|
|
|
|
|
|
|
Guaranteed Income Fund
|
|
$ |
47,650,697 |
|
|
|
* |
|
|
PIMCO Total Return Fund, Class A
|
|
|
11,705,068 |
|
|
|
10,871,357 |
|
|
Artisan Mid Cap Value Fund
|
|
|
10,722,201 |
|
|
|
10,194,568 |
|
|
Dryden S&P 500® Index Fund
|
|
|
9,684,945 |
|
|
|
9,389,930 |
|
|
Dreyfus Appreciation Fund, Inc.
|
|
|
9,105,816 |
|
|
|
9,146,195 |
|
|
American Funds Europacific Growth Fund®, Class R-4
|
|
|
8,824,804 |
|
|
|
7,728,874 |
|
|
GAMCO Westwood Balanced Fund, Class AAA
|
|
|
* |
|
|
|
6,592,914 |
|
| |
|
|
|
|
|
|
|
|
|
Mellon Stable Value Fund, Series I
(contract value - $0 and $41,817,782, respectively)
|
|
|
* |
|
|
|
42,436,454 |
|
* Investment not greater than 5 percent.
(Continued)
BENCHMARK ELECTRONICS, INC.
401(k) EMPLOYEE SAVINGS PLAN
Notes to Financial Statements
|
(7)
|
Party-in-Interest Transactions
|
The Plan engages in investment transactions with funds managed by Prudential Retirement Insurance and Annuity Company and Prudential Investments LLC. These companies are all affiliated with Prudential Financial Inc. which is the parent company for Prudential Bank & Trust, FSB, the trustee. The Plan also engages in investment transactions with funds managed by The Dreyfus Corporation, Mellon Trust of New England and Mellon Institutional Funds Investment Trust. These companies are all affiliated with The Bank of New York Mellon Corporation which is the parent company for The Dreyfus Corporation and Mellon Trust of New England, N.A., the trustee prior to December 1, 2009. These transactions are covered by an exemption from the prohibited transaction provisions of ERISA and IRC.
The Plan invests in shares of the Company’s common stock. As the Company is the sponsor of the Plan, these transactions qualify as party-in-interest transactions which are also exempt under ERISA.
|
(8)
|
Risks and Uncertainties
|
The Plan invests in various investment securities. Investment securities are exposed to various risks such as interest rate, market and credit risks. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect participants’ account balances and the amounts reported in the statement of net assets available for benefits.
The GIF earned an average yield and credited an interest rate to the participants of 3.50% and 3.20%, respectively, for the year ended December 30, 2010. The minimum crediting rate under the GIF contract is 1.50%. There are no reserves against contract value for credit risk of the contract issuer or otherwise. The guarantee is based on Prudential’s ability to meet its financial obligations from its general assets.
|
(8)
|
Fair Value Measurements
|
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. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). An asset or liability’s classification within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The three levels of the fair value hierarchy are described below:
(Continued)
BENCHMARK ELECTRONICS, INC.
401(k) EMPLOYEE SAVINGS PLAN
Notes to Financial Statements