EX-99.1 2 q3f15pressrelease-final.htm EXHIBIT 99.1 Q3F15PressRelease-FINAL


Plexus Announces Fiscal Third Quarter 2015 Financial Results             

•
Record revenue in fiscal third quarter of $670 million
•
Diluted EPS of $0.69
•
Initiates fiscal fourth quarter 2015 revenue guidance of $650 - $680 million with diluted EPS of $0.64 to $0.72

NEENAH, WI - July 22, 2015 - Plexus (NASDAQ: PLXS) today announced financial results for its fiscal third quarter ended July 4, 2015.

 
Three Months Ended
 
July 4, 2015
 
July 4, 2015
 
October 3, 2015
Summary GAAP Items
Q3F15 Results
 
Q3F15 Preliminary**
 
Q4F15 Guidance
 
 
 
 
 
 
Revenue (millions)
$670
 
$670
 
$650 to $680
Operating margin
4.3%
 
 
 
4.2% to 4.5%
Diluted EPS
0.69*
 
$0.67 to $0.70
 
$0.64 to $0.72***
 
 
 
 
 
 
Summary Non-GAAP Items
 
 
 
 
 
Return on invested capital (ROIC)
14.1%
 
 
 
 
Economic Return
3.1%
 

 

 
*Includes $0.10 per share of stock-based compensation expense
**Preliminary results issued on July 13, 2015; guidance provided on April 22, 2015 was revenue of $670 to $700 million and EPS of $0.71 to $0.79
***Includes $0.10 per share of stock-based compensation expense but excludes any unanticipated special items

Additional Fiscal Third Quarter 2015 Information
•
Won 34 programs during the quarter representing approximately $147 million in annualized revenue when fully ramped into production
•
Trailing four quarter wins total approximately $716 million in annualized revenue
•
Purchased $7.5 million of our shares at an average price of $44.40 per share

Dean Foate, Chairman, President and CEO, commented, “Our fiscal third quarter results were consistent with our announcement of preliminary results on July 13th. While revenue of $670 million set a new quarterly record for the company, our results were disappointing given the stronger expectations we had when we issued our initial guidance in April. Looking forward to next quarter, we expect continuing end-market weakness in our Networking/Communications sector to largely offset anticipated sequential growth in our other three market sectors. As a consequence, we are guiding fiscal fourth quarter 2015 revenue of $650 to $680 million. Achieving the midpoint of our guidance would result in full year revenue growth just shy of our 12% enduring goal. At this level of revenue we expect diluted EPS in the range of $0.64 to $0.72 for the fiscal fourth quarter.”

Patrick Jermain, Senior Vice President and CFO, commented, “Although we met the low end of our initial revenue guidance, our earnings performance for the fiscal third quarter was below our guidance range.


The disproportionate reduction in earnings was largely due to margin underperformance associated with missed product shipments out of one of our Defense/Security/Aerospace focus factories.”

Quarterly Comparison
Three Months Ended
 
July 4, 2015
 
April 4, 2015
 
June 28, 2014
($ in thousands, except per share data)
Q3F15
 
Q2F15
 
Q3F14
 
 
 
 
 
 
Revenue

$669,585

 

$651,285

 

$620,505

Gross profit

$59,087

 

$59,777

 

$58,593

Operating profit

$28,631

 

$29,452

 

$28,198

Net income

$23,794

 

$23,594

 

$24,584

Diluted EPS

$0.69

 

$0.69

 

$0.71

Adjusted net income*

$23,794

 

$23,594

 

$25,799

Adjusted diluted EPS*

$0.69

 

$0.69

 

$0.74

 
 
 
 
 
 
Gross margin
8.8
%
 
9.2
%
 
9.4
%
Operating margin
4.3
%
 
4.5
%
 
4.5
%
Adjusted operating margin*
4.3
%
 
4.5
%
 
4.7
%
ROIC*
14.1
%
 
14.5
%
 
14.6
%
Economic Return*
3.1
%
 
3.5
%
 
3.6
%
 
*Refer to Non-GAAP Supplemental Information Tables 1 and 2 for a reconciliation to GAAP measures
Plexus provides non-GAAP supplemental information, such as ROIC, Economic Return, and free cash flow, because such measures are used for internal management goals and decision making, and because they provide additional insight into financial performance. In addition, management uses these and other non-GAAP measures, such as adjusted net income and adjusted operating margin, to provide a better understanding of core performance for purposes of period-to-period comparisons. For a full reconciliation of non-GAAP measures to comparable GAAP measures, please refer to the attached non-GAAP supplemental data.

Market Sector Breakout
Plexus reports revenue based on the market sector breakout set forth in the table below, which reflects the Company’s global market sector focused business development strategy. The Company measures operational performance and allocates resources on a geographic segment basis. Please refer to the attached supplemental information for a breakout of revenue by reportable geographic segments.

Market Sector (millions)
Three Months Ended
 
July 4, 2015
 
April 4, 2015
 
June 28, 2014
 
Q3F15
 
Q2F15
 
Q3F14
Networking/Communications
$
222

33
%
 
$
210

32
%
 
$
203

33
%
Healthcare/Life Sciences
180

27
%
 
191

29
%
 
177

28
%
Industrial/Commercial
176

26
%
 
160

25
%
 
154

25
%
Defense/Security/Aerospace
92

14
%
 
90

14
%
 
87

14
%
Total revenue
$
670

 
 
$
651

 
 
$
621

 

Fiscal Third Quarter 2015 Supplemental Information
Fiscal third quarter cash cycle was 62 days. The company delivered $15 million in cash from operations and used $10 million for capital investment during the quarter, resulting in positive free cash flow of $5


million. Top 10 customers comprised 57% of revenue during the quarter, up two percentage points from the previous quarter.


Cash Conversion Cycle
Three Months Ended
 
July 4, 2015
 
April 4, 2015
 
June 28, 2014
 
Q3F15
 
Q2F15
 
Q3F14
Days in accounts receivable
48
 
48
 
48
Days in inventory
88
 
86
 
84
Days in accounts payable
62
 
63
 
67
Days in cash deposits
12
 
12
 
8
Annualized cash cycle*
62
 
59
 
57
*We calculate cash cycle as the sum of days in accounts receivable and days in inventory, less days in accounts payable and days in cash deposits

Conference Call and Webcast Information
What:   
Plexus Fiscal Third Quarter 2015 Earnings Conference Call and Webcast
When:   
Thursday, July 23 at 8:30 a.m. Eastern Time
Where:    
Participants are encouraged to join the live webcast at the investor relations section of the Plexus website, www.plexus.com or directly at http://edge.media-server.com/m/p/sex9wib2/lan/en 

Conference Call: +1.888.771.4371 with passcode: 40017940
Replay:   
The webcast will be archived on the Plexus website and available via telephone replay
at +1.888.843.7419 or +1.630.652.3042 with passcode: 40017940

Investor and Media Contact
Susan Hanson
+1.920.751.5491
susan.hanson@plexus.com
 



About Plexus – The Product Realization Company
Plexus (www.plexus.com) delivers optimized Product Realization solutions through a unique Product Realization Value Stream service model. This customer-focused services model seamlessly integrates innovative product conceptualization, design, commercialization, manufacturing, fulfillment and sustaining services to deliver comprehensive end-to-end solutions for customers in the America, European and Asia-Pacific regions.

Plexus is the industry leader in servicing mid-to-low volume, higher complexity customer programs characterized by unique flexibility, technology, quality and regulatory requirements. Award-winning customer service is provided to over 140 branded product companies in the Networking/Communications, Healthcare/Life Sciences, Industrial/Commercial and Defense/Security/Aerospace market sectors.

Safe Harbor and Fair Disclosure Statement
The statements contained in this press release that are guidance or which are not historical facts (such as statements in the future tense and statements including believe, expect, intend, plan, anticipate, goal, target and similar terms and concepts), including all discussions of periods which are not yet completed, are forward-looking statements that involve risks and uncertainties. These risks and uncertainties include, but are not limited to: the risk of customer delays, changes, cancellations or forecast inaccuracies in both ongoing and new programs; the lack of visibility of future orders, particularly in view of changing economic conditions; the economic performance of the industries, sectors and customers we serve; the effects of the volume of revenue from certain sectors or programs on our margins in particular periods; our ability to secure new customers, maintain our current customer base and deliver product on a timely basis; the particular risks relative to new or recent customers, programs or services, which risks include customer and other delays, start-up costs, potential inability to execute, the establishment of appropriate terms of agreements, and the lack of a track record of order volume and timing; the risks of concentration of work for certain customers; the effect of start-up costs of new programs and facilities, such as our new facility in Guadalajara, Mexico; possible unexpected costs and operating disruption in transitioning programs; the risk that new program wins and/or customer demand may not result in the expected revenue or profitability; the fact that customer orders may not lead to long-term relationships; the adequacy of restructuring and similar charges as compared to actual expenses; our ability to manage successfully a complex business model characterized by high customer and product mix, low volumes and demanding quality, regulatory, and other requirements; increasing regulatory and compliance requirements; the potential effects of regional results on our taxes and ability to use deferred tax assets; risks related to information technology systems and data security; the effects of shortages and delays in obtaining components as a result of economic cycles or natural disasters; the risks associated with excess and obsolete inventory, including the risk that inventory purchased on behalf of our customers may not be consumed or otherwise paid for by the customer, resulting in an inventory write-off; the weakness of areas of the global economy; the effect of changes in the pricing and margins of products; raw materials and component cost fluctuations; the potential effect of fluctuations in the value of the currencies in which we transact business; the potential effect of world or local events or other events outside our control (such as changes in energy prices, terrorism and weather events); the impact of increased competition; and other risks detailed in our Securities and Exchange Commission filings (particularly in "Risk Factors" in our fiscal 2014 Form 10-K).


PLEXUS
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
 
 
 
 
 
Three Months Ended
 
Nine Months Ended
 
July 4,
 
June 28,
 
July 4,
 
June 28,
 
2015
 
2014
 
2015
 
2014
Net sales
$
669,585

 
$
620,505

 
$
1,985,560

 
$
1,712,026

Cost of sales
610,498

 
561,912

 
1,805,282

 
1,549,096

 
 
 
 
 
 
 
 
Gross profit
59,087

 
58,593

 
180,278

 
162,930

 
 
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
 
 
Selling and administrative expenses
30,456

 
29,180

 
91,722

 
83,106

Restructuring costs
—

 
1,215

 
1,691

 
10,865

Operating profit
28,631

 
28,198

 
86,865

 
68,959

 
 
 
 
 
 
 
 
Other income (expense):
 
 
 
 
 
 
 
Interest expense
(3,280
)
 
(3,055
)
 
(10,440
)
 
(8,952
)
Interest income
866

 
770

 
2,552

 
2,092

Miscellaneous
471

 
1,271

 
549

 
2,182

 
 
 
 
 
 
 
 
Income before income taxes
26,688

 
27,184

 
79,526

 
64,281

 
 
 
 
 
 
 
 
Income tax expense
2,894

 
2,600

 
9,059

 
3,518

 
 
 
 
 
 
 
 
Net income
$
23,794

 
$
24,584

 
$
70,467

 
$
60,763

 
 
 
 
 
 
 
 
Earnings per share:
 
 
 
 
 
 
 
Basic
$
0.71

 
$
0.73

 
$
2.10

 
$
1.80

Diluted
$
0.69

 
$
0.71

 
$
2.05

 
$
1.75

 
 
 
 
 
 
 
 
Weighted average shares outstanding:
 
 
 
 
 
 
 
Basic
33,653

 
33,837

 
33,617

 
33,810

Diluted
34,454

 
34,670

 
34,400

 
34,686




PLEXUS
NON-GAAP SUPPLEMENTAL INFORMATION TABLE 1
(in thousands, except per share data)
(unaudited)
 
 
 
 
 
 
 
Three Months Ended
 
July 4,
 
April 4,
 
June 28,
 
2015
 
2015
 
2014
Operating profit, as reported
$
28,631

 
$
29,452

 
$
28,198

Operating margin, as reported
4.3
%
 
4.5
%
 
4.5
%
 
 
 
 
 
 
Non-GAAP adjustments:
 
 
 
 
 
Restructuring costs*
—

 
—

 
1,215

 
 
 
 
 
 
Operating profit, as adjusted
$
28,631

 
$
29,452

 
$
29,413

Operating margin, as adjusted
4.3
%
 
4.5
%
 
4.7
%
 
 
 
 
 
 
Net income, as reported
$
23,794

 
$
23,594

 
$
24,584

 
 
 
 
 
 
Non-GAAP adjustments:
 
 
 
 
 
Restructuring costs*
—

 
—

 
1,215

 
 
 
 
 
 
Net income, as adjusted
$
23,794

 
$
23,594

 
$
25,799

 
 
 
 
 
 
Diluted earnings per share, as reported
$
0.69

 
$
0.69

 
$
0.71

 
 
 
 
 
 
Non-GAAP adjustments:
 
 
 
 
 
Restructuring costs
—

 
—

 
0.03

 
 
 
 
 
 
Diluted earnings per share, as adjusted
$
0.69

 
$
0.69

 
$
0.74

 
 
 
 
 
 
 
 
 
 
 
 
*Summary of restructuring costs
 
 
 
 
 
Severance costs
$
—

 
$
—

 
$
669

Fixed asset impairment
—

 
—

 
25

Other exit costs
—

 
—

 
521

Total restructuring costs
$
—

 
$
—

 
$
1,215



PLEXUS
NON-GAAP SUPPLEMENTAL INFORMATION TABLE 2
 (in thousands)
(unaudited)
 
 
 
 
 
 
 
 
 
ROIC and Economic Return Calculations
Nine Months Ended
 
Six Months
Ended
 
Nine Months Ended
 
July 4,
 
April 4,
 
June 28,
 
2015
 
2015
 
2014
Operating profit
 
$
86,865

 
 
$
58,234

 
 
$
68,959

Restructuring costs
 
1,691

 
 
1,691

 
 
10,865

Adjusted operating profit
 
$
88,556

 
 
$
59,925

 
 
$
79,824

 
÷
3

 
 
 
 
÷
3

 
 
29,519

 
 



 
26,608

 
x
4

 
x
2

 
x
4

Annualized operating profit
 
$
118,076

 
 
$
119,850

 
 
$
106,432

Tax rate
x
11
%
 
x
10
%
 
x
9
%
Tax impact
 
12,988

 
 
11,985

 
 
9,579

Operating profit (tax effected)
 
$
105,088

 
 
$
107,865

 
 
$
96,853

 
 
 
 
 
 
 
 
 
Average invested capital
÷
$
745,030

 
÷
$
745,441

 
÷
$
661,835

 
 
 
 
 
 
 
 
 
ROIC
 
14.1
%
 
 
14.5
%
 
 
14.6
%
Weighted average cost of capital
 
11.0
%
 
 
11.0
%
 
 
11.0
%
Economic Return
 
3.1
%
 
 
3.5
%
 
 
3.6
%


Average Invested Capital Calculations
 
 
 
 
 
 
 
 
 
 
 
 
July 4,
 
April 4,
 
January 3,
 
September 27,
 
 
 
2015
 
2015
 
2015
 
2014
Equity
 
 
$
835,063

 
$
808,468

 
$
792,298

 
$
781,133

Plus:
 
 
 
 
 
 
 
 
 
Debt - current
 
 
4,281

 
4,774

 
4,793

 
4,368

Debt - non-current
 
 
259,284

 
260,025

 
260,990

 
262,046

Less:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
 
(354,830
)
 
(356,296
)
 
(239,685
)
 
(346,591
)
 
 
 
$
743,798

 
$
716,971

 
$
818,396

 
$
700,956

 
 
 
 
 
 
 
 
Third quarter fiscal 2015 average invested capital (July 4, 2015, April 4, 2015, January 3, 2015 and September 27, 2014) was $745,030. Second quarter fiscal 2015 average invested capital (April 4, 2015, January 3, 2015 and September 27, 2014) was $745,441.


 
 
June 28,
 
March 29,
 
December 28,
 
September 28,
 
 
 
2014
 
2014
 
2013
 
2013
Equity
 
 
$
760,184

 
$
736,493

 
$
722,021

 
$
699,301

Plus:
 
 
 
 
 
 
 
 
 
Debt - current
 
 
4,232

 
3,901

 
3,796

 
3,574

Debt - non-current
 
 
263,056

 
256,090

 
256,949

 
257,773

Less:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
 
(330,314
)
 
(323,695
)
 
(324,156
)
 
(341,865
)
 
 
 
$
697,158

 
$
672,789

 
$
658,610

 
$
618,783

 
 
 
 
 
 
 
 
 
 
Third quarter fiscal 2014 average invested capital (June 28, 2014, March 29, 2014, December 28, 2013, and September 28, 2013) was $661,835.

Free Cash Flow Calculation
The Company defines free cash flow as cash flows provided by (or used in) operations less capital expenditures. For the three months ended July 4, 2015, cash flow provided by operations was approximately $15 million and capital expenditures were approximately $10 million, resulting in positive free cash flow of approximately $5 million.


 
PLEXUS
 
CONDENSED CONSOLIDATED BALANCE SHEETS
 
(in thousands, except per share data)
 
(unaudited)
 
 
July 4,
 
September 27,
 
 
2015
 
2014
 
ASSETS
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
$
354,830

 
$
346,591

 
Accounts receivable
349,922

 
324,072

 
Inventories
588,453

 
525,970

 
Deferred income tax
6,399

 
6,449

 
Prepaid expenses and other
26,012

 
27,757

 
 
 
 
 
 
Total current assets
1,325,616

 
1,230,839

 
 
 
 
 
 
Property, plant and equipment, net
322,821

 
334,926

 
Deferred income tax
3,493

 
3,675

 
Other
40,309

 
39,586

 
 
 
 
 
 
Total assets
$
1,692,239

 
$
1,609,026

 
 
 
 
 
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
 
Current liabilities:
 
 
 
 
Current portion of long-term debt and capital lease obligations
$
4,281

 
$
4,368

 
Accounts payable
416,190

 
396,363

 
Customer deposits
76,049

 
56,155

 
Deferred income tax
567

 
647

 
Accrued liabilities:
 
 
 
 
Salaries and wages
48,681

 
52,043

 
Other
34,556

 
37,739

 
 
 
 
 
 
Total current liabilities
580,324

 
547,315

 
 
 
 
 
 
Long-term debt and capital lease obligations, net of current portion
259,284

 
262,046

 
Deferred income tax
5,189

 
5,191

 
Other liabilities
12,379

 
13,341

 
 
 
 
 
 
Total non-current liabilities
276,852

 
280,578

 
 
 
 
 
 
Commitments and contingent liabilities
 
 
 
 
Shareholders’ equity:
 
 
 
 
Preferred stock, $.01 par value, 5,000 shares authorized, none issued or outstanding
—

 
—

 
Common stock, $.01 par value, 200,000 shares authorized,
 
 
 
 
50,549 and 49,962 shares issued, respectively,
 
 
 
 
and 33,690 and 33,653 shares outstanding, respectively
505

 
500

 
Additional paid-in-capital
494,790

 
475,634

 
Common stock held in treasury, at cost, 16,859 and 16,309 shares, respectively
(502,488
)
 
(479,968
)
 
Retained earnings
836,852

 
766,385

 
Accumulated other comprehensive income
5,404

 
18,582

 
 
 
 
 
 
Total shareholders’ equity
835,063

 
781,133

 
 
 
 
 


 
Total liabilities and shareholders’ equity
$
1,692,239

 
$
1,609,026

PLEXUS
REVENUE BY REPORTABLE GEOGRAPHIC SEGMENTS
(in thousands)
(unaudited)
 
 
 
 
 
 
 
Three Months Ended
 
July 4, 2015
 
April 4, 2015
 
June 28, 2014
 
Q3F15
 
Q2F15
 
Q3F14
Americas
$
365,861

55
 %
 
$
328,753

50
 %
 
$
324,544

52
 %
Asia-Pacific
313,900

47
 %
 
319,156

49
 %
 
295,625

48
 %
Europe, Middle East, and Africa
33,885

5
 %
 
35,773

6
 %
 
27,563

4
 %
Elimination of inter-segment sales
(44,061
)
(7
)%
 
(32,397
)
(5
)%
 
(27,227
)
(4
)%
Total revenue
$
669,585

 
 
$
651,285

 
 
$
620,505