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 (Exchange Act). These forward-looking statements are identified as any statement that does not relate strictly to historical or current facts and may include words such as “anticipate,” “believe,” “intend,” “plan,” “project,” “forecast,” “strategy,” “position,” “continue,” “estimate,” “expect,” “may,” “will,” or the negative or other variations thereof. In particular, statements, express or implied, concerning future operating results, including guidance for fourth quarter 2021 results and beyond, our ability to generate sales, income or cash flow, the anticipated impact of the COVID-19 pandemic, our anticipated plans and responses to the COVID-19 pandemic, our expectations relating to current supply chain constraints, our expected revenue mix, our business strategy and strategic initiatives, our repurchases of shares of our common stock and our intentions concerning the payment of dividends, among others, are forward-looking statements. Although we believe these statements are based upon reasonable assumptions, they involve risks, uncertainties and assumptions that are beyond our ability to control or predict, relating to operations, markets and the business environment generally, including those discussed in Part I, Item 1A of the 2020 10-K, Part II, Item 1A of this Report and in any of our subsequent reports filed with the SEC. In particular, these statements also depend on the duration, severity and evolution of the COVID-19 pandemic and related risks, including the emergence and severity of its variants, the availability of vaccines and potential hesitancy to utilize them, government and other third-party responses to it and the consequences for the global economy, our business and the businesses of our suppliers and customers, as well as our ability (or inability) to execute on our plans to respond to the COVID-19 pandemic. 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. Undue reliance should not be placed on any forward-looking statements. Forward-looking statements are not guarantees of performance. The following discussion should be read in conjunction with the condensed consolidated financial statements and accompanying notes, and the 2020 10-K. All forward-looking statements included in this document are based upon information available to us as of the date of this document, and we assume no obligation to update them.
OVERVIEW
We are a worldwide provider of innovative product design services, engineering services, technology solutions and advanced manufacturing services (both electronic manufacturing services (EMS) and precision technology services). In this Report, references to Benchmark, the Company or use of the words “we”, “our” and “us” include Benchmark’s subsidiaries unless otherwise noted.
From initial product concept to volume production, including direct order fulfillment and aftermarket services, Benchmark has been providing integrated services and solutions to original equipment manufacturers (OEMs) since 1979. Today, Benchmark proudly serves the following industries: aerospace and defense (A&D), medical technologies, complex industrials, semiconductor capital equipment (semi-cap), next-generation telecommunications and advanced computing.
Our customer engagement focuses on three principal areas:
Design & Engineering Services, which include design for manufacturability, manufacturing process and test development, concurrent and sustaining engineering, turnkey product design and regulatory services. Our engineering services may be for systems, sub-systems, printed circuit boards and assemblies, and components. We provide these services across all the industries we serve, but focus primarily in regulated industries such as medical, complex industrials, A&D, and semi-cap.
Technology Solutions, which involve developing a library of building blocks or reference designs primarily in defense solutions, surveillance systems, radio frequency and high-speed design, and front-end managed connectivity data collection systems. We often merge these technology solutions with engineering services to provide turnkey product development from requirements through to volume production that we support with our manufacturing services. Our building blocks can be utilized across a variety of industries but we have significant capabilities in the A&D and the complex industrials markets. We have also developed differentiated capabilities in radio frequency (RF) and high-speed design for both components and substrates. The need to reduce size, weight, and power (SWaP) to accommodate high frequency electronics communications is important to customers in the A&D, medical, and next-generation telecommunications markets.
Manufacturing Services, which include printed circuit board assemblies (PCBAs) using both traditional surface mount technologies (SMT) and microelectronics, subsystem assembly, system build and integration. System builds and integration often involve 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
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directly to the end-customer across all the industries we serve. Manufacturing services also includes precision technology services comprised of precision machining, advanced metal joining, assembly and functional testing primarily for the semi-cap market (serving semiconductor capital equipment customers) and A&D market.
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 with higher reliability requirements. These capabilities enable us to build strong strategic relationships with our customers and to become an integral part of their business.
We believe our primary competitive advantages are our leading edge technical capabilities in engineering services (including product design in which we can take a product idea from concept to design to volume manufacturing), technology solutions (especially high frequency RF solutions, microelectronics, and miniaturization), and manufacturing services (including electronics and complex precision machining capabilities) provided by highly skilled personnel. We also have diversified end market and regulated market experience in our targeted higher-value markets. To support customers in these markets, we have invested in strategic global supply chain design and execution.
In addition, we believe that a strong focus on human capital through the talent we hire and retain is critical to maintaining our competitiveness. We are driving a customer-centric organization with a high degree of accountability and ownership to develop processes necessary to exceed customer expectations and deliver financial performance aligned to our goals. Through our employee feedback process, we solicit and act upon information to improve our Company and better support our customers and business processes in the future. We have taken steps to attract the best leaders and are accelerating our efforts to increase our diversity and inclusion in our employee and management ranks as we seek to develop an innovative and forward thinking workforce for the future.
Our customers often face challenges in designing supply chains, demand planning, 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 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. Because we are a significant purchaser of electronic components and other raw materials, we are generally able to 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. Utilizing our agility and expertise in supply chain management and our relationships with suppliers across the supply chain we strive to help reduce our customers’ cost of goods sold and inventory exposure. However, due to the COVID-19 pandemic, as well as global labor and supply disruptions, we continue to see component supply chain constraints across all commodity categories that are constraining our ability to produce the full demand forecasts we are receiving from customers.
We recognize revenue as the customer takes control of the manufactured products built to customer specifications. We also generate revenue from our design, development and engineering services, in addition to the sale of other inventory.
Revenue is measured based on the consideration specified in a contract with a customer. Under the majority of our manufacturing contracts with customers, the customer controls all the work-in-progress as products are being built. Revenues under these contracts are recognized progressively based on the cost-to-cost method. For other manufacturing contracts, the customer does not take control of the product until it is completed. Under these contracts, we recognize revenue upon transfer of control of product to the customer, which is generally when the goods are shipped. Revenue from design, development and engineering services is recognized over time as the services are performed. As a general matter, we assume no significant obligations after shipment as we typically warrant workmanship only. Therefore, the warranty provisions are generally not significant.
COVID-19 Pandemic Update
In late 2019, there was an outbreak of a new strain of coronavirus (COVID-19) first identified in Wuhan, Hubei Province, China, which has since spread globally. On March 11, 2020, the World Health Organization declared COVID-19 a pandemic. Further, the COVID-19 outbreak has resulted in government authorities around the world implementing numerous measures to try to reduce the spread of COVID-19, such as travel bans and restrictions, quarantines, “shelter-in-place,” “stay-at-home,” and total lock-down orders, business limitations or shutdowns and similar orders. As a result, the COVID-19 pandemic has negatively impacted the global economy, disrupted global supply chains and workforce participation, and created significant volatility and disruption of financial markets. In an effort to first and foremost protect the health and safety of our employees, we also took proactive action to adopt social distancing policies at our locations globally, including working from home for certain employees, limiting the number of employees
22
attending meetings, reducing the number of people in our locations at any one time, and significantly limiting employee travel. More recently, a more contagious variant of COVID-19 (the Delta Variant) has spread globally, which has caused some governments to reimplement various measures to reduce the spread. It is unclear at this point the full impact the Delta Variant will have on the global economy and on our Company.
As a result of the COVID-19 pandemic, our revenue during 2020 was negatively impacted primarily as a result of operational inefficiencies relating to reduced productivity levels throughout our facilities and supply chain constraints, which affected our ability to support customer demand. Additionally, the COVID-19 pandemic negatively impacted our 2020 results due to increased direct costs associated with labor expenses and personal protective equipment for our employees, as well as under absorption of fixed costs.
Benchmark provides critical infrastructure products and essential services in each of our locations, which has allowed us to continue to operate. The COVID-19 pandemic continues to affect the Company’s operations into 2021. End market demand continues to grow as more customers recover from the pandemic. However, we continue to see component supply chain constraints across all commodity categories which are constraining our ability to produce the full demand forecasts we are receiving from customers. See "Third Quarter 2021 Highlights" below and "Risk Factors-Shortages or price increases of components specified by our customers have resulted in delayed shipments and could adversely affect our profitability" in Part II, Item 1A of this Report for additional information.
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was enacted in the United States in response to the COVID-19 pandemic. The CARES Act, among other things, permits NOL carryovers and carrybacks to offset 100% of taxable income for taxable years beginning before 2021, and contains modifications on the limitation of business interest for tax years beginning in 2019 and 2020. The Company evaluated the impact of these provisions and determined these provisions did not have any impact on the year ended December 31, 2020 or the nine months ended September 30, 2021. In addition, the CARES Act allows for employee retention tax credits to be taken in U.S. payroll tax filings and allows for the deferral of the employer portion of social security taxes with 50% to be paid at the end of calendar years 2021 and 2022, respectively. Accordingly, the Company has deferred the payment of the employer portion of social security taxes for the year ended December 31, 2020 until the end of 2021 and 2022, respectively. The Company has also determined it was entitled to employee retention credits and filed for the credits in the second quarter 2020 payroll tax reports pursuant to the guidance provided by the Internal Revenue Service. The amount of credits has been recorded in operating expenses for the year ended December 31, 2020. The Company has determined that it is not eligible for employee retention tax credits as of September 30, 2021, and the deferral of the employer portion of social security taxes is not available for 2021.
We continue to monitor the evolving situation and guidance from international and domestic authorities, including federal, state and local public health authorities, and may take additional actions based on their recommendations. In these circumstances, there may be developments outside our control requiring us to adjust our operating plan. As such, the exact extent of the impact of the COVID-19 pandemic on our business, financial condition and results of operations, is currently unknown and will depend on future developments, which are highly uncertain, continuously evolving and cannot be predicted. This includes, but is not limited to, the duration and spread of the COVID-19 pandemic and its severity; the emergence and severity of its variants, including the Delta Variant; the actions to contain the virus or treat its impact, including the availability and efficacy of vaccinations (particularly with respect to emerging strains of the virus) and the rate of inoculations; general economic factors, such as increased inflation; global supply chain constraints and shortages; labor supply issues; and how quickly and to what extent normal economic and operating conditions can resume, which may not return fully to pre-pandemic levels.
Accordingly, our current results and financial condition discussed herein may not be indicative of future operating results and trends. See “Risk Factors” in Part I, Item 1A of our 2020 10-K and in Part II, Item 1A of this Report for additional risks we face due to the COVID-19 pandemic.
Third Quarter 2021 Highlights
Sales for the three months ended September 30, 2021 were $571.9 million, a 9% increase from sales of $526.0 million during the three months ended September 30, 2020. During the third quarter of 2021, sales to customers in our various industry sectors fluctuated from the third quarter of 2020 as follows:
Higher-Value Markets
Industrials increased by 26%,
A&D decreased by 4%,
Medical decreased by 12%, and
Semi-cap increased by 35%.
23
Traditional Markets
Computing increased by 28%, and
Telecommunications decreased by 5%.
Higher-value market revenues were up 9% year-over-year from strength in Industrials and Semi-cap, partially offset by decreases in A&D and Medical. Traditional market revenues were up 9% year-over-year from strength in the Computing market.
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, the availability of electronic component supply, or the failure of a major customer to pay for components or services, including in each case as a result of the COVID-19 pandemic, have adversely affected 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 47% and 42% of our sales during the nine months ended September 30, 2021 and 2020, respectively.
For the three and nine months ended September 30, 2021, lead times continue to extend, and more components are being placed on allocation by suppliers. During the three months ended September 30, 2021, there was an increase in pushouts of previously committed component orders and tighter allocation and timing restrictions across the component suppliers. These last-minute allocations created inefficiencies in our operations and contributed to the sequential increase in inventory days for the quarter.
We experience fluctuations in gross profit from period to period. Different programs contribute different gross profits depending on the type 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 program ramps remain subject to competitive constraints that can 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 reducing costs. During the first nine months of 2021, we recognized $5.2 million of restructuring and other costs due in part to expenses associated with various site closures and restructuring activities.
RESULTS OF OPERATIONS
The following table presents the percentage relationship that certain items in our condensed consolidated statements of income bear on 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 Part I, Item 1 of this Report.
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
Sales
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
Cost of sales
|
|
|
90.6
|
|
|
|
91.2
|
|
|
|
91.1
|
|
|
|
91.9
|
|
Gross profit
|
|
|
9.4
|
|
|
|
8.8
|
|
|
|
8.9
|
|
|
|
8.1
|
|
Selling, general and administrative expenses
|
|
|
6.0
|
|
|
|
5.7
|
|
|
|
6.1
|
|
|
|
5.9
|
|
Amortization of intangible assets
|
|
|
0.3
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|
|
|
0.5
|
|
|
|
0.3
|
|
|
|
0.5
|
|
Restructuring charges and other costs
|
|
|
1.1
|
|
|
|
1.4
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|
|
|
0.6
|
|
|
|
1.0
|
|
Ransomware related incident costs (recovery), net
|
|
|
(0.1
|
)
|
|
|
(0.3
|
)
|
|
|
(0.2
|
)
|
|
|
(0.1
|
)
|
Income from operations
|
|
|
2.1
|
|
|
|
1.6
|
|
|
|
2.1
|
|
|
|
0.9
|
|
Other expense, net
|
|
|
(0.3
|
)
|
|
|
(0.3
|
)
|
|
|
(0.3
|
)
|
|
|
(0.3
|
)
|
Income before income taxes
|
|
|
1.8
|
|
|
|
1.4
|
|
|
|
1.8
|
|
|
|
0.5
|
|
Income tax expense
|
|
|
0.4
|
|
|
|
0.2
|
|
|
|
0.4
|
|
|
|
0.1
|
|
Net income
|
|
|
1.4
|
%
|
|
|
1.1
|
%
|
|
|
1.4
|
%
|
|
|
0.4
|
%
|
24
Sales
As noted above, sales for the third quarter of 2021 increased 9% from the same quarter in 2020. Sales for the first nine months of 2021 increased 6% from the same period in 2020. Sales by industry sector were as follows:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
(in thousands)
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
Higher-Value Markets
|
|
|
|
|
|
|
|
|
|
|
|
|
Industrials
|
|
$
|
108,192
|
|
|
$
|
86,184
|
|
|
$
|
303,550
|
|
|
$
|
276,140
|
|
A&D
|
|
|
100,838
|
|
|
|
104,899
|
|
|
|
286,899
|
|
|
|
312,623
|
|
Medical
|
|
|
117,793
|
|
|
|
134,142
|
|
|
|
334,888
|
|
|
|
386,869
|
|
Semi-Cap
|
|
|
133,576
|
|
|
|
98,721
|
|
|
|
385,890
|
|
|
|
268,292
|
|
|
|
|
460,399
|
|
|
|
423,946
|
|
|
|
1,311,227
|
|
|
|
1,243,924
|
|
Traditional Markets
|
|
|
|
|
|
|
|
|
|
|
|
|
Computing
|
|
|
56,557
|
|
|
|
44,339
|
|
|
|
139,841
|
|
|
|
124,793
|
|
Telecommunications
|
|
|
54,926
|
|
|
|
57,666
|
|
|
|
171,197
|
|
|
|
163,164
|
|
|
|
|
111,483
|
|
|
|
102,005
|
|
|
|
311,038
|
|
|
|
287,957
|
|
Total
|
|
$
|
571,882
|
|
|
$
|
525,951
|
|
|
$
|
1,622,265
|
|
|
$
|
1,531,881
|
|
Industrials. Third quarter 2021 sales increased 26% to $108.2 million from $86.2 million in the third quarter of 2020. Sales during the first nine months of 2021 increased 10% to $303.6 million from $276.1 million in the same period of 2020. The increases were primarily due to continued demand improvements from oil & gas, commercial and building infrastructure programs as well as a new program ramp for LiDAR applications.
Aerospace and Defense. Third quarter 2021 sales decreased 4% to $100.8 million from $104.9 million in the third quarter of 2020. Sales during the first nine months of 2021 decreased 8% to $286.9 million from $312.6 million in the same period of 2020. The decreases were primarily due to a decline in customer demand in the commercial aerospace sector year over year.
Medical. Third quarter 2021 sales decreased 12% to $117.8 million from $134.1 million in the third quarter of 2020. Sales during the first nine months of 2021 decreased 13% to $334.9 million from $386.9 million in the same period of 2020. The decreases were due to the reduction of demand in COVID specific programs and supply chain constraints impacting demand recovery for certain customers.
Semiconductor Capital Equipment. Third quarter 2021 sales increased 35% to $133.6 million from $98.7 million in the third quarter of 2020. Sales during the first nine months of 2021 increased 44% to $385.9 million from $268.3 million in the same period of 2020. The increases were primarily due to high demand levels and our future backlog increasing for our precision machining and large electro-mechanical assembly services, which are primarily related to front-end wafer fab equipment.
Computing. Third quarter 2021 sales increased 28% to $56.6 million from $44.3 million in the third quarter of 2020. Sales during the first nine months of 2021 increased 12% to $139.8 million from $124.8 million in the same period of 2020. The increases were primarily due to a planned ramp of a high performance computing program that will continue into 2022.
Telecommunications. Third quarter 2021 sales decreased 5% to $54.9 million from $57.7 million in the third quarter of 2020. The decrease was primarily due to delays in new program ramps tied to component shortages. Sales during the first nine months of 2021 increased 5% to $171.2 million from $163.2 million in the same period of 2020. The increase was primarily due to strong demand from new and existing programs in commercial broadband.
Our international operations are subject to the risks of doing business abroad. See Part I, Item 1A of our 2020 10-K for factors pertaining to our international sales, fluctuations in foreign currency exchange rates and a discussion of potential adverse effects in operating results associated with the risks of doing business abroad. During the third quarter of 2021 and 2020, 54% and 51%, respectively, of our sales were from international operations.
Gross Profit
Gross profit increased 15.7% to $53.7 million in the third quarter of 2021 from $46.4 million in the third quarter of 2020, and increased 15.6% to $143.8 million for the first nine months of 2021 from $124.4 million for the same period in 2020. Gross margin increased primarily due to higher revenues.
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Selling, General and Administrative (SG&A) Expenses
SG&A increased to $34.4 million in the third quarter of 2021 from $29.7 million in the third quarter of 2020, and increased to $99.0 for the first nine months of 2021 from $89.8 for the same period of 2020. The increases were primarily due to higher variable compensation costs and U.S. medical expenses.
Amortization of Intangible Assets
Amortization of intangible assets was $1.6 million in the third quarter of 2021 and $2.4 million in the third quarter of 2020, and $4.8 million for the first nine months of 2021 compared to $7.1 million for the same period in 2020. The decreases were primarily due to an intangible asset becoming fully amortized in 2020.
Restructuring Charges and Other Costs
During the first nine months of 2021, we recognized $5.2 million of restructuring and other costs primarily due to expenses associated with announced site closures or exits, reduction in force and other restructuring activities primarily in the Americas. During the first nine months of 2020, we recognized $8.7 million of restructuring charges, primarily related to site closures and restructuring activities in certain facilities in the Americas and Asia. In addition, during the first nine months of 2021, we incurred $4.4 million in costs related to asset impairments in the Americas. During the first nine months of 2020, we incurred $5.7 million and $1.0 million in costs related to asset impairments in the Americas and Asia, respectively. See Note 12 to the condensed consolidated financial statements in Part I, Item 1 of this Report for additional information on our restructuring charges.
Ransomware Incident Related Costs, Net
During the fourth quarter ended December 31, 2019, ransomware incident related costs incurred totaled $12.7 million or $7.7 million, net of estimated insurance recoveries of $5.0 million. These costs were primarily comprised of certain employee related expenses and various third party consulting services, including forensic experts, legal counsel and other IT professional expenses. During the year ended December 31, 2020, we collected $6.6 million of insurance recoveries which include the $5.0 million of estimated insurance recoveries recorded in 2019 and an additional $1.6 million recorded in 2020. During the first nine months of 2021, we collected an additional $3.9 million of insurance recoveries. As of September 30, 2021, the Company has collected insurance recoveries totaling $10.5 million. No further insurance recoveries are expected.
Interest Expense
Interest expense was $6.2 million during both the first nine months of 2021 and 2020.
Interest Income
Interest income decreased to $0.5 million in the first nine months of 2021 from $1.0 million in the same period of 2020 due to lower invested cash equivalents and lower interest rates.
Income Tax Expense
Income tax expense of $6.0 million represented an 20.4% effective tax rate for the first nine months of 2021, compared with $1.6 million for the same period of 2020 representing an effective tax rate of 19.9%. The slightly higher effective tax rate in 2021 is the result of lower profits in 2020 and the effect of the expired Malaysia tax holiday as of April 1, 2021.
We have been granted certain tax incentives, including tax holidays, for our subsidiaries in Malaysia and Thailand that will expire or expired at various dates, unless extended or otherwise renegotiated, through March 31, 2021 in Malaysia and 2028 in Thailand. See Note 8 to the condensed consolidated financial statements in Part I, Item 1 of this Report.
Net Income
We reported a net income of $23.4 million, or $0.64 per diluted share, for the first nine months of 2021, compared with a net income of $6.4 million, or $0.17 per diluted share, for the same period in 2020. The net increase of $17 million in 2021 is primarily the result of items discussed above.
LIQUIDITY AND CAPITAL RESOURCES
We have historically financed our organic growth and operations through funds generated from operations and occasional borrowings under our Credit Agreement (as defined below). Cash and cash equivalents and restricted cash totaled $291.2 million at September 30,
26
2021 and $396.0 million at December 31, 2020, of which $185.2 million and $207.3 million, respectively, were held outside the U.S. in various foreign subsidiaries.
Cash used by operating activities was $1.3 million during the first nine months of 2021. The cash used by operations during 2021 consisted primarily of an $151.5 million increase in inventories, a $17.4 million increase in contract assets, a $9.1 million decrease in accrued liabilities, a $9.5 million increase in prepaids and other assets and a $2.3 million increase in accounts receivable, partially offset by $23.4 million of net income, $33.0 million of depreciation and amortization, a $114.5 million increase in accounts payable, and a $7.3 million increase in advance payments from customers. Working capital was $0.7 billion at both September 30, 2021 and December 31, 2020.
We primarily purchase 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. When shortages of these components and other material supplies used in operations have occurred, vendors have at times been unable to ship the quantities we need for production, forcing us to delay shipments, which can increase backorders and impact cash flows. In certain instances, we request and receive advance payments from customers as prepayments of inventory to meet working capital demands of a contract, offset inventory risks such as inventory purchased in advance of current needs and protect the Company from the failure of other parties to fulfill obligations under a contract. For example, as discussed above under “COVID-19 Pandemic Update,” we have been impacted by supply chain constraints, including shortages, longer lead times and increased transit times.
Cash used in investing activities was $32.1 million during the first nine months of 2021 primarily due to purchases of additional property, plant and equipment totaling $29.5 million. The purchases of property, plant and equipment were primarily for machinery and equipment in the Americas.
Cash used in financing activities was $66.9 million during the first nine months of 2021. Borrowings under the Credit Agreement were $30.0 million. Principal payments under the Credit Agreement and finance lease obligations totaled $35.6 million and $0.8 million, respectively, share repurchases totaled $40.2 million, dividends paid totaled $17.4 million, and we received $0.3 million from the exercise of stock options.
Under the terms of our $650.0 million credit agreement (Credit Agreement), in addition to a $150.0 million term loan facility, we have a $500.0 million five-year revolving credit facility to be used for general corporate purposes, both with a maturity date of July 20, 2023. The Credit Agreement includes an accordion feature pursuant to which total commitments under the facility may be increased by an additional $275.0 million, subject to satisfaction of certain conditions. As of September 30, 2021, we had $131.3 million in borrowings outstanding under the term loan facility, $3.9 million in letters of credit outstanding under our revolving credit facility, and $496.1 million remains available for future borrowings under the revolving credit facility, subject to compliance with financial covenants as to interest coverage and debt leverage, in addition to other debt covenant restrictions. See Note 5 to the condensed consolidated financial statements in Part I, Item 1 of this Report for more information regarding the terms of the Credit Agreement.
The Credit Agreement contains certain financial covenants related to interest coverage and debt leverage, 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 could 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 September 30, 2021, we were in compliance with all of these covenants and restrictions.
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 September 30, 2021, we had cash and cash equivalents, including restricted cash, totaling $291.2 million and $496.1 million available for borrowings under the Credit Agreement, subject to compliance with financial covenants as to interest coverage and debt leverage, in addition to other debt covenant restrictions.
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During the next 12 months, we believe our capital expenditures will approximate $50 million to $60 million, principally for machinery and equipment to help increase our production capacity to support anticipated revenue growth and our ongoing business around the globe.
On March 6, 2018, our Board of Directors approved an expanded stock repurchase program granting us the authority to repurchase up to $250 million in common stock in addition to the $100 million approved on December 7, 2015. On February 19, 2020 and October 26, 2018 , the Board of Directors authorized the repurchase of an additional $150 million and $100 million, respectively, of the Company's common stock. During the nine months ended September 30, 2021, we repurchased a total of 1.4 million common shares for an aggregate of $40.2 million at an average price of $26.53 per share. As of September 30, 2021, we had $164.0 million remaining under the share repurchase authorization to purchase additional shares. We are under no commitment or obligation to repurchase any particular amount of common stock.
The Company began declaring and paying quarterly dividends during the first quarter of 2018. In February 2020, the Board of Directors approved a quarterly dividend increase, raising the quarterly dividend from $0.15 to $0.16 per common share. In May 2021, the Board of Directors approved another quarterly dividend increase, raising the quarterly dividend from $0.16 to $0.165 per common share. During the first nine months of 2021 and 2020, cash dividends paid totaled $17.4 million and $17.2 million, respectively. On September 15, 2021, the Company declared a quarterly cash dividend of $0.165 per share of the Company’s common stock to shareholders of record as of September 30, 2021. The dividend of $5.8 million was paid on October 14, 2021. The Board of Directors currently intends to continue paying quarterly dividends. However, the Company’s future dividend policy is subject to the Company’s compliance with applicable law, and depends on, among other things, the Company’s results of operations, financial condition, level of indebtedness, capital requirements, contractual restrictions, restrictions in the Company’s debt agreements, and other factors that the Board of Directors may deem relevant, including the impact of the COVID-19 pandemic. Dividend payments are not mandatory or guaranteed; there can be no assurance that the Company will continue to pay a dividend in the future.
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. If we consummated significant acquisitions in the future, 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 2020 10-K. There have been no material changes to our contractual obligations, outside of the ordinary course of our business, since December 31, 2020.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES AND RECENTLY ENACTED ACCOUNTING PRINCIPLES
Management’s discussion and analysis is based upon our condensed consolidated financial statements, which have been prepared in accordance with U.S. GAAP. See Note 2 to the condensed consolidated financial statements in Part 1, Item 1 of this Report for a discussion of recently enacted accounting principles. Also, our significant accounting policies are summarized in Note 1 to the Consolidated Financial Statements included in our 2020 10-K.