Ladies and gentlemen, thank you for standing by, and welcome to the Benchmark Electronics First Quarter 2013 Earnings Call. [Operator Instructions] And as a reminder, this conference is being recorded. I'll now turn the conference over to Chief Financial Officer, Don Adam. Please go ahead, sir.

Good morning, and welcome to the Benchmark Electronics earnings call for the first quarter of 2013. This call is being recorded and will be posted for audio playback on the Benchmark website. Gayla Delly, our President and CEO, will begin the call with a few opening statements, then I will provide a review of our financial metrics for the quarter. And Gayla will close with a summary and state of the business. After our prepared remarks, we will take time for your questions in our Q&A session, and we will hold this call to 1 hour. This morning, during our conference call, we will be discussing forward-looking information that involves future events and the future financial performance of the company. We would like to caution you that those statements reflect our current expectations. Actual events or results may differ materially from our projections. We also refer you to Benchmark's periodic reports that are filed from time to time with the Securities and Exchange Commission, including the company's 8-Ks and S-4 filings, quarterly filings on Form 10-Q and our Annual Report on Form 10-K. These documents contain cautionary language and identify important risk factors which could cause actual results to differ materially from our projections or forward-looking statements. We undertake no obligation to update those projections or forward-looking statements in the future. Now I will turn the call over to Gayla.

Good morning, and thank you again for joining our call today. I'm pleased to report that our overall performance remains on track. And results for the first quarter with revenues of $542 million, and our earnings per share of $0.22, were in line with our expectations. As we noted in our last call, the first quarter forecast reflected an expectation of lower demand levels in the competing sector, following the robust levels and performance we experienced during the fourth quarter. In fact, the first quarter did play out as we expected, and we're getting off to a good start on the ramping of our new program. The first quarter, although anticipated, was a bit abnormal, with a significant decline in revenue that was anticipated, and which did in fact occur from the fourth quarter to the first quarter. You would have normally expected that we would have planned and taken significant restructuring actions, but this was not the case. Instead, we are investing and adding talent in support of the increased level of new program ramps, which began in the fourth quarter, and are continuing at a rapid pace today. I am pleased to say that even with a significantly lower volume in the first quarter and the cost and investments associated with our new program ramps, our teams have remained focused on execution and productivity improvement. This, coupled with a favorable revenue mix, allowed us to achieve earnings slightly above our expectations. Our teams have good traction, demonstrating agility in managing through the recent and near-term headwinds of the soft marketplace. We continue to see limited signs of recovery in the industries we serve. The positives we see for revenue growth from our first quarter revenue through the remainder of this year and into next year are primarily related…

Thank you, Gayla. First, I would like to take time to provide a few comments on our first quarter revenue and earnings per share. As Gayla mentioned, our first quarter performance was in line with our expectations. Revenues were $542 million, which was within our guidance of $530 million to $560 million. Our non-GAAP earnings per share were $0.22, which compared to $0.25 last year and was slightly above guidance due to favorable revenue mix and effective management of our new program ramps. Our GAAP earnings per share were $0.21 versus $0.10 in the first quarter of last year, which included the impact of the Thailand flood. The revenue breakdown by industry for the quarter was as follows: computing was 25%; industrial controls were 30%; telecom was 26%; medical was 13%; and test and instrumentation was 6%. As expected, we saw significant variability in the computing sector following a very strong fourth quarter. When comparing this to the fourth quarter of last year, both test and instrumentation and medical sectors were up and the remaining sectors were down. Specifically, test and instrumentation revenues were up 21% sequentially due to slight improvements in the semi-cap space. Medical sector revenues grew 4% sequentially. Computing revenues were down 34%, and a decrease from quarter-to-quarter transpired as we thought it would. Industrial controls were down 5%. And finally, telecom revenues weakened consistent with the overall softness in the marketplace. Now for a quick update on our Thailand recovery process. As you can see in our press release today, we did not have any flood-related charges or recoveries during the first quarter. The work with our insurance carriers on the claims process is ongoing. And as a reminder, upon settlement, recovery items will be recorded as gains when received. Now I want to take some…

Thank you, Don. In closing, I want to focus on a few items, including our new bookings, our guidance for the second half and an update on the overall marketplace. I will begin with discussing our new bookings. I'm pleased with the efforts of our new teams -- of our teams in the new bookings. During the first quarter, we booked 22 new programs, including 7 engineering projects. These new bookings have an estimated annual revenue run rate between $120 million and $150 million. Our bookings represent new programs with both new and existing customers, and are subject to the normal associated timing and size risk. We are truly excited about our bookings from 2012, which are beginning to ramp and the continuation of the strong booking level trend into 2013. Because of the softness in today's environment, we believe customers are seeking ways to improve their cost structures, and we continue to see this manifest itself in a strong funnel of opportunities. Now let me turn to our second quarter guidance. Based on the overall market today and the feedback that we are receiving from our customers for the second quarter of 2013, our guidance reflects revenue between $560 million and $590 million. Our diluted earnings per share, excluding restructuring and Thai flood-related items, is between $0.25 and $0.30, and we estimate modest restructuring charges of approximately $3 million. We do not have an estimate of insurance recoveries coming in for the quarter. Now looking at the overall marketplace. The overall economic environment remains challenging. We continue to see uncertainty in the marketplace, which drives some variation in a quarter-to-quarter outlook. And as we are often asked about our view of the markets, we want to share with you some insights into what we are hearing from the customers…

[Operator Instructions] Our first question will come from Sherri Scribner with Deutsche Bank.

I was just curious, Don, about the operating margin improvement implied in the guidance. Essentially, if I do the math quickly, I think it's somewhere around 3.4% operating margin. That's below where you were last year, but a significant improvement quarter-over-quarter. Is that primarily driven by the 6% revenue improvement sequentially? Or do you see any additional cost improvements?

Primarily, Sherri, that's primarily going to be increased revenue, which results in better leverage, better efficiency. So not so much on the cost side, but leverage side.

Okay. And then just thinking about that leverage as we move forward, what type of contribution margin do you guys target for the additional revenue that you bring on?

Sure. I'd say, as always, we're driving leverage through utilization rates. There's always an impact from mix. And as we noted, we have a significant number of new program ramps. So focusing on the efficiency and the abilities of the teams to more efficiently support these ramps is critical. So there's a lot of moving parts there, but all of them are -- work together. And with what we've been able to accomplish in each of those areas, we believe we're seeing the mix and the efficiencies that support us driving the margin forward.

Okay. So you don't think about the business in terms of a contribution margin because of that -- lots of moving parts?

Well, it's probably too simplistic. We model it with a number of different variables, and then as you get closer in you actually see what's going to transpire. So longer term, we would model it that way. But in the short term, you're looking at the reality of the demand from the customers which drive it.

Our next question is from Brian Alexander with Raymond James. Brian G. Alexander - Raymond James & Associates, Inc., Research Division: So cash flow was a bright spot in the quarter. You have $425 million in cash, but you aren't really buying back much stock. I just want to know what's holding you back from being more aggressive. I know we talk about this every quarter, but it doesn't seem like you need much cash to run the business. So unless you're considering making some major acquisitions, maybe you can tie in your M&A philosophy? I just don't know what's keeping you from being more aggressive on the buyback.

We continue to exercise and purchase our buyback at -- in our buyback activities as well. As you do highlight, we continue to look at M&A opportunity to expand the types of services in areas in which we are supporting customers. So our working capital fluctuations, as you know, are pretty significant. We have done an excellent job, I would say, on managing our working capital. And as we look forward even into next quarter and the remainder of the year, I think we will be in probably either a utilization of cash or a much lesser type of contribution from free cash flows as we grow the program. So I think that's the sensitivity that generally takes place. But nonetheless, we are actively engaging in our buyback. We haven't done a single significant one because we do see opportunities to put that cash to use in the business, and are actively engaged in looking at potential M&A activities. Brian G. Alexander - Raymond James & Associates, Inc., Research Division: Gayla, just a follow-on to that. Would the M&A be more niche and tuck-in related, or can you envision a scenario where you would do something as large as maybe Pemstar several years ago, which I think was a couple hundred million dollars?

And I'd say we look at each opportunity and are tapping on a variety of areas, but don't have one to announce right now. But they come in all sizes and shapes and forms. And clearly, it would be one that would make sense to us and complement our business. Brian G. Alexander - Raymond James & Associates, Inc., Research Division: And then just the last one. I guess there was some discussion about your largest customer moving production from the U.S. to Mexico. And I'm just wondering if that's something that affects you currently or perhaps in the future? And just how comfortable that your facility in, I think it's Minnesota, will continue to be occupied?

Yes. So we continue to support all our customers. And as always, in our industry, we don't speak on behalf of our customers. But we have a strong relationship working with them. And as in all customers, we will look at the product roadmap, the program roadmaps on an ongoing basis and don't see any significant changes. As you know, that deals with some specific product sets. So any other specifics related to that customer, of course I'll have to ask you to look to that customer for confidentiality. But we have no information that is appropriate or necessary to disclose related to that.

We will go next to Amit Daryanani with RBC Capital Markets.

I just had a -- two questions for me. One, I think Gayla, you talked about the fact that you guys have reoriented the way you report these new win numbers, are you starting to see an uptick to them from your customer forecast now? So I think in 2012, the average amount of new wins you have was about $500 million. Could you quantify how much of it is now being driven by -- how much for uptick are you seeing, I guess, to that run rate? And of that $500 million, how much do you anticipate ramping in 2013?

Amit, thank you. The -- it's what we're saying is, as we move into 2014, so you know we've used as a general rule of thumb, it probably takes about 9 months to get to a ramp state, and maybe longer on the complex products. And sometimes, we see it much longer. But what I was indicating is that we were tempering the outlook for the programs. And in doing so, we don't have enough data points yet to say it's -- what that upside is in terms of percentages. But we would say that in some cases, rather than seeing the program fall short, we're seeing the optimism from the customers and the reception of the marketplace for the new product and in the success they're having launching those new product, that they are outlooking the opportunity to meet and exceed our expectations. So to me, that's kind of a testament to the fact that they're seeing improvement in the opportunities for those new products.

Got it. And could you just maybe touch on linearity that you saw in the quarter? Because from so many working capital metrics, and it almost suggest that maybe we're more stronger in the month of Jan and Feb versus March. I'm wondering if that's accurate.

Amit, I think it's pretty customary. I mean, we're kind of looking for flex here. But no, we don't think it was any different than the norm. It's typically a bit back-end loaded, and we saw that also in March.

Your next question is from Sean Hannan with Needham & Company. Sean K.F. Hannan - Needham & Company, LLC, Research Division: So Gayla and Don, I think that from the comments you have this morning, you seem very encouraged by the new programs coming on here in '13, and those not really seeming to be too tempered at all. So I wanted to see if you can elaborate a little bit around that? And then separately, or a follow-on, when you aggregate your views of how that impacts business for the remainder of the year, can you see sequential improvement in September, as well as December? Or how do we think about that?

Sean, I guess the way I would respond is that typical of what we've seen historically is, in a downturn, oftentimes, the customers are very focused on R&D and investments in new solutions to bring to market. And what we've seen more recently is that those new solutions are gaining momentum and getting good market acceptance. And so with that, that's why we're kind of optimistic about those because they're a very important part of the future. Now trying to layer that in and understand, first of all, we were trying to get -- give view of the future. But as you know, we're not giving guidance for the outquarters given the current environment and marketplace. And clearly, the undertone in the market are the softness that prevails. So I don't think that has changed, but the thing that we are excited about is that we have been successful in the new bookings. We are supporting such a strong number of new products and new programs. And we believe that, that is good insulation and opportunity. Insulation if the market is a -- are soft and get softer, and opportunity should the underlying markets begin to firm up. Sean K.F. Hannan - Needham & Company, LLC, Research Division: Okay. But I guess, as I look to the second half of the year, it feels like at this point in time, that this -- your confidence around seeing a stronger second half seems to be stronger, I think, at this point. Is that accurate?

Yes. I would say at this point, based on what we see, absolutely. And trying to true that up with the various points of softness in the marketplace and how that forms going forward is what we don't have clarity to. But based on where we sit right now, yes, we feel that the second half is looking much stronger. Sean K.F. Hannan - Needham & Company, LLC, Research Division: Okay. And then last question for the moment. In terms of getting back to a 4% operating margin, I realize this is a question you get a lot. Is there an opportunity to be able to do that by year's end? When you think about those ramp schedules, as well as kind of offsetting pressures and efficiencies around those or inefficiencies around those new programs, is that something that could be on the horizon? Or would that be more difficult based on the mix of existing versus new programs, et cetera?

I think it could be on the horizon. And again, as you all have seen, I mean, even though we don't give guidance, we see the model that you all have put out there. And I think that with the softness in the marketplace, even your models out there indicate already a good second half and a return in second half, and that's aligned with what we would see generally is it gets better in the second half. And the mix and the level of new program ramps is exactly as you state. The impact that potentially could allow us to not meet 4%, or if there's a stronger level of existing business in there, we could meet 4%. So it really is dependent upon how much the underlying business is a part of that revenue mix as we get to Q4.

We will go next to Jim Suva with Citi.

When you mentioned about the computing softness in Q1, that was a little bit more pronounced than normal seasonality, you mentioned that had to do with some timing. Can you help us better understand about that timing? Was it customer timing? Was it like qualification timing? Was it giving the right components timing? And if so, now that April is for the most part behind us, has that timing come back online, and now we're looking for a stronger Q2 forward? Or is it simply that you've given an overall macro environment, the timing has kind of pushed out to kind of the second half of this year?

Jim, when you're looking at Q4, Q1, I think a couple of points. As we mentioned last quarter, we saw a strength in demand that we didn't anticipate. And I think if you looked it over a 2-quarter period, it's probably about right. But what happened, we had strength in Q4, so it's really a timing issue between Q4 and Q1. I think the other thing I want to point out is, as we mentioned on multiple calls last year, we did have a program win that we had won that was short term in nature. It was only, basically, it was only for 2012. So you have the timing issue, as well as the wind-down of that short-term program.

Great. Then my follow-up is, your new business wins are growing, which is encouraging. Is there a rule of thumb to get Benchmark companies in totality back to year-over-year sales growth we should kind of be looking at for a rule of thumb for those new business wins?

Well, I think the difficult -- while the bookings have been strong, as Gayla indicated, I think the difficulty there is what's the underlying base business is doing. So in a challenging market like you have today where you've got, I'd say weakness in the base business and new programs really providing the growth, it's hard to pinpoint a number. What I would say is the bookings that we have won last year as well as this year, we feel certainly provides a platform for growth moving forward.

Great. And finally, to get to the operating margin of 4%, is it kind of a revenue run rate is the major contributing factor? And if so, that run rate on a quarterly basis, is it kind of closer to say, $625 million? Or have things kind of, put and take, a little bit there kind on a cost side base, which is mostly revenue-driven? Is that will be $625 million about each or we should be looking for 4%?

Generally, I would say that. But as you can see, if you look back at your models from prior years with the mix and the revenue level that we have forecast for Q2 at the midpoint, if you look back at your model from prior years, we're gaining momentum in our productivity improvements and our efficiency improvements, as well as adjustments to our footprint that we've made over the course of the last couple of years. So we're confidently driving to get improved results on our revenue base, doing that through our productivity improvements and through our revenue mix. So that's why I hesitate to do it as a single number or even as a tightened range because we're driving improvements in all areas on an ongoing basis.

And next, we have Brian White with Topeka.

Yes, just kind of a big picture question. When we look back, before the downturn of '07, and even through this year, it looks like we're going to have 5 years where earnings fell year-over-year, 2 years where they increase. So just as we move forward, how do we think about Benchmark over cycles? Is this a company that can grow earnings over cycles? And what type of rates should we think about?

I think, yes, Brian, you see that we're driving continuous improvement in all areas to grow. And as you've seen throughout the technology sectors, it's probably a couple -- there's probably more than a couple, but I'll point out a couple of areas that significantly impact us. First, any time you have a downturn, the -- and supply and demand are out of sync, it starts with the component markets. And the content, the components go down in cost, our revenue base goes down. It has nothing to do with units of production. So that's huge variability in revenue base just based on a cost of materials. Second of all, there's been a large reduction in just a general demand for a variety of different products and the number of customers and opportunities out there. So what we've done is continue to be true and committed to the marketplace that we serve, going to the 5 key industries and expanding the services and types of skills and solutions we bring to our customer to drive improvement and drive profitable growth. So what we haven't done is foregone our focus on profitable growth. But we have, as others in our industry, been challenged by the marketplace in general. So we believe we are performing well and driving each of the key initiatives in the correct direction for profitable growth. But you have seen the impact some, and you can tick through each of the industries, as well as each of the technology players today to see that we have lots of company in that type of a scenario.

Okay. So on over cycles, you feel like you can grow your earnings?

Oh, absolutely. And I think we've demonstrated that. And as I've said, if you look back at some of the similar periods in time, that's exactly what you'll see, is that we're driving the improvements so that we can get a, I consider it a tighter, gearing ratio, and the ability to drive profitability.

Okay. Just one quick follow-up. I wasn't clear, June quarter computing will rise sequentially, is that true?

Yes, we expect it to rise sequentially.

Our next question is from Rick D'Auteuil with Columbia Management.

I just have a quick one. I know you didn't collect any insurance proceeds this quarter. What's still pending? And if there's some issues around the amount, maybe the bid-ask on the magnitude of that?

In terms of the collections, Rick, this is Don, just working through the process, there is -- the process has been slow in Thailand thinking about the markets down there. So in terms of the scope of the claim relative to the size of the country, there was just time delays going through that. But in terms of progress, I would say we're continuing to make progress. And hopefully, we'll get the thing resolved shortly.

Yes. So I think what you see typically is if you're a one-off insurance claim due to an event that may be isolated in nature, and an unfortunate single disaster, typically the process would be completed in a more expeditious manner. Given that there is such a significant number of parties making claims on what is likely a similar insurance base, I would say that those insurers are simply overwhelmed by the amount of data analysis and activities that they're having to undergo, as well as the significance of the claims that they're paying out. So it's a little bit different than it would be if it was a one-off claim. And so we're working very closely with our insurers to wrap it up, and there is a constant level of activity ongoing to get it closed. And we believe we're getting to the point where we're seeing the light at the end of the tunnel. We're just not there yet.

Just back to the premise of the question that the -- is it a $10 million claim or is it a $50 million claim? Just give me relative size.

Given that we are still in discussions and working through all of the finer details, I would not feel it to be appropriate to disclose that information at this point in time.

[Operator Instructions] Our next question is from Wamsi Mohan with Bank of America Merrill Lynch.

Gayla, Don, just to follow up on an earlier question on cash. Your cash position is extremely robust. You've been -- it's been steadily growing. You have been doing some repurchases. But just wondering if you think that securing a dividend will make any sense given where your cash balances are, what you present over the course of the past year? Or if M&A is potentially the more preferred use, can you talk about where you think valuations are? What is the willingness of sellers or do we have to actually wait for some sort of pullback in the equity markets for seeing M&A?

So to your first question, I do not believe at this time that we're seeing indicators or evidence that a dividend is appropriate for us or for the industry we participate in currently. And we do see a number of M&A opportunities that we are looking into, that we find that might be appropriate for us to engage in. The market in M&A has geared up, as I'm sure you've seen, and the number of announcements we seem to wake up to almost every morning. And so I believe that there is a lot of volume, a lot of activity and opportunity out there and the pricing markets are what they are. To a seller, they're never strong enough and to a buyer, they're always too high. And I don't think that's going to change, but I do believe they're very active, which means that there is a happy medium being achieved in a number of instances. And so we're going to continue on path to look for the right opportunities for us to utilize that as part of our profitable growth roadmap.

Okay. And Don, maybe you could answer. How much of the 100 basis points quarter-over-quarter decline and the op margins was from lower revenues versus impact from new program ramps?

Yes. I think, as we said in our calls, primarily revenue deleveraging and timing of program ramps. I mean, to quantify that, it's primarily going to be revenue.

Your next question is from David Fondrie with Heartland Funds.

I wonder if you could -- well, kind of my question on insurance has been asked. Can you give us some indication of what the pipeline is? You talk about new design wins. Is the pipeline of opportunities, can you quantify that or give us some indication whether it's improved or declined?

I mean, generally, I would say the pipeline has improved. As we, David, as we mentioned in -- and Gayla mentioned, out of the 22 wins, for example, this quarter, 7 of them were engineering. But I would characterize the funnel as being pretty good right now, and we're certainly optimistic about the bookings and the pipeline moving forward.

So David, we don't share the top of the funnel, what that looks like. I think that's not necessarily a relevant number because it's the conversion rate that really is important. But suffice it to say, it's pretty robust, I'd say it's robust for us and probably everybody in the industry. And as I pointed to earlier in my prepared comments, that's probably not atypical of what happens. And again, one of the benefits of a downturn is when customers seek alternative solutions, better ways to improve their cost structures, and especially in a time where we see a lot of opportunities for products to move into new geographies, into expanding markets. The flexibility that outsourcing provides is something that's very valuable to customers. So we do see a strong pipeline that has continued to grow pretty sizably and notably over the past 4 to 6 months, at least. So that is a very good sign, and we're excited about that.

Positive. Going back to the cash and the balance sheet and M&A opportunities, how do you -- what kind of metrics are you looking at where an M&A activity would be more attractive than buying back your own stock when the stock is trading book value? And any repurchases would be highly accretive, both book value and to earnings per share? It's hard for me to imagine an opportunity in a market that -- where sellers are, I don't think, giving things away, that there would be a better opportunity than buying back your own stock. Maybe you could just help us understand the metrics that you're looking at.

So we're continuing our buyback, and are committed to continuing our buyback. And we're also very committed to engaging as a profitable growth business, and we'll continue to look at investing in our business. We don't see a situation where we want to buy back the stock and get to the point where we're not looking at opportunities to grow. So we're going to engage on both fronts, buybacks and investing in our future growth.

Thank you. We have no one else in queue, so please go ahead with any closing remark.

That's it for prepared remarks from us, and we'll be available for follow-up calls today. Thank you.

Thank you, everyone.

Thank you. And ladies and gentlemen, that does conclude our conference for today. Thank you for your participation and for using AT&T Executive Teleconference. You may now disconnect.