CORRESP 1 filename1.htm corresp
 

(PLEXUS LOGO)
55 Jewelers Park Drive
Neenah WI 54956
February 11, 2008
VIA EDGAR
Mr. Stephan Krikorian
Accounting Branch Chief
Mail Stop 4561
Securities and Exchange Commission
100 F Street, NE
Washington DC 20549
RE:   Plexus Corp.
Commission File No. 000-14824
Dear Mr. Krikorian:
     This letter responds to the comments which Commission Staff made in your letter dated January 29, 2008, addressed to Dean A. Foate, Plexus Corp.’s President and Chief Executive Officer, relating to Plexus’ fiscal 2007 Annual Report on Form 10-K and Form 8-K dated January 23, 2008. I am answering at Mr. Foate’s request. The response is made to the comments in numbered Paragraph 1 of your letter.
Plexus Response
     Plexus regularly uses after-tax return on invested capital (“ROIC”) as an internal management tool to evaluate performance, particularly to note year over year changes. Also, a derivative of ROIC (Return on Capital Employed — “ROCE”) is used as one of the key components under Plexus’ annual variable incentive compensation plan. We chose to provide this information to investors because we believe it provides insight into the metrics that are driving management as well as management’s performance under the tests which it sets for itself. In particular, we believed it was an important disclosure to shareholders in 2007, when ROIC showed a decline from the prior year, to continue consistent disclosure. We also provide this disclosure because we believe investors find it to be a useful measurement.
     Since Plexus views ROIC as a ratio of performance and not a “GAAP” disclosure, we did not consider the inclusion of ROIC comparisons to be a “non-GAAP” disclosure that would require reconciliation to a “GAAP” ratio. Rather, we considered ROIC as an internal ratio that is

 

 

Mr. Stephan Krikorian
February 11, 2008
Page 2
prepared from data and other information to compare changes from period to period. We have reviewed the definition of non-GAAP financial measures and the discussion of them in Release 33-8176, and now have a better appreciation for why the Staff would consider our ROIC presentation to be a non-GAAP disclosure. We will treat it accordingly on a going-forward basis.
     In the Form 10-K, we included a table and a definition to explain our computation of ROIC, with the intent of making the ratio more understandable to readers. We also provided the discussion of ROIC after our discussion of key GAAP metrics to not unduly highlight ROIC. Going forward, we will be mindful of the provisions of Regulation S-K, Item 10(e). As requested by the Staff, set forth on Appendix A is a reconciliation of the ROIC numbers which we presented.
     On a going forward basis, we will provide a more thorough explanation of why we use ROIC internally. We will also augment the information which we provide regarding the calculation of ROIC; for example, to the extent we use any adjusted numbers in its calculation, we will begin our calculation with numbers prior to any adjustment and show the changes in a manner similar to but abbreviated from the reconciliation attached to our quarterly earnings press releases. We will further consider whether there is a GAAP ratio to which we should specifically reconcile the ROIC information; however, we have not at this point determined one that we believe is reasonably comparable.
*       *       *
     On behalf of Plexus, and as requested in your letter, we acknowledge that:
  •   Plexus is responsible for the adequacy and accuracy of the disclosure in its filings;
 
  •   Staff comments or changes in disclosure in response to Staff comments in the filings reviewed by the Staff do not foreclose the Commission from taking any action with respect to the filing; and
 
  •   Plexus may not assert Staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.

 

 

Mr. Stephan Krikorian
February 11, 2008
Page 3
     We trust that you will find this letter responsive to your comments. Please feel free to contact me at (920) 751-5487, Angelo M. Ninivaggi, Plexus’ General Counsel, at (920) 751-3524, or Kenneth V. Hallett of Quarles & Brady LLP, our outside counsel, at (414) 277-5345, if you have any questions or need further information.
         
  Very truly yours,

PLEXUS CORP.
 		  
  By:   /s/ Ginger M. Jones    
    Ginger M. Jones   
    Vice President and Chief Financial Officer   
 
cc:   Mr. Dean A. Foate
Angelo M. Ninivaggi, Esq.
Kenneth V. Hallett, Esq.

 

 

Appendix A
ROIC calculation with non-GAAP numbers
                                 
    Quarter ended     Fiscal year ended  
    December 29,     September 29,     September 30,     October 1,  
    2007     2007     2006     2005  
 
                                
Operating income
   $ 31,928     $ 79,438     $ 80,262     $ (9,745 )
Plus unusual charges (restructuring and/or impairment)
     —       1,838       —       39,162  
 
                        
 
                                
Operating income (excluding unusual charges)
     31,928       81,276       80,262       29,417  
Tax rate (excluding unusual charges)
     18.0%     22.0%     0.6%     5.0%
 
                        
Income taxes — Non-GAAP
     5,747       17,881       482       1,471  
 
                        
Operating income (tax effected)
   $ 26,181     $ 63,395     $ 79,780     $ 27,946  
 
                        
 
                                
Average capital employed
   $ 404,600     $ 360,308     $ 277,033     $ 321,611  
 
                                
ROIC
     25.9%     17.6%     28.8%     8.7%
                         
    Actual     Actual     Average capital  
    9/29/07     12/29/2007     employed  
 
                        
Equity
   $ 573,265     $ 604,792          
Plus:
                        
Debt — current
     1,720       1,815          
Debt — non-current
     25,082       24,681          
Less:
                        
Cash and cash equivalents
     (154,109 )     (158,547 )        
Short-term investments
     (55,000 )     (54,500 )        
 
                    
 
   $ 390,958     $ 418,241     $ 404,600  
 
                    
                                                 
    Actual     Actual     Actual     Actual     Actual     Average capital  
    9/30/06     12/30/06     3/31/07     6/30/07     9/29/07     employed  
 
                                                
Equity
   $ 481,567     $ 503,457     $ 518,023     $ 540,437     $ 573,265          
Plus:
                                                
Debt — current
     997       1,049       1,643       1,701       1,720          
Debt — non-current
     25,653       25,739       25,551       25,460       25,082          
Less:
                                                
Cash and cash equivalents
     (164,912 )     (132,872 )     (132,706 )     (145,206 )     (154,109 )        
Short-term investments
     (30,000 )     (45,000 )     (45,000 )     (45,000 )     (55,000 )        
 
                                      
 
   $ 313,305     $ 352,373     $ 367,511     $ 377,392     $ 390,958     $ 360,308  
 
                                      
                                                 
    Actual     Actual     Actual     Actual     Actual     Average capital  
    10/1/05     12/31/05     4/1/06     7/1/06     9/30/06     employed  
 
                                                
Equity
   $ 340,015     $ 356,629     $ 393,111     $ 437,038     $ 481,567          
Plus:
                                                
Debt — current
     770       1,758       1,553       1,245       997          
Debt — non-current
     22,310       21,959       21,623       21,666       25,653          
Less:
                                                
Cash and cash equivalents
     (98,727 )     (109,667 )     (124,673 )     (139,750 )     (164,912 )        
Short-term investments
     (10,000 )     (10,000 )     (25,000 )     (30,000 )     (30,000 )        
 
                                      
 
   $ 254,368     $ 260,679     $ 266,614     $ 290,199     $ 313,305     $ 277,033  
 
                                      
                                                 
    Actual     Actual     Actual     Actual     Actual     Average capital  
    9/30/04     1/1/05     4/2/05     7/2/05     10/1/05     employed  
 
                                                
Equity
   $ 351,413     $ 358,819     $ 352,722     $ 326,759     $ 340,015          
Plus:
                                                
Debt — current
     811       2,744       2,077       1,165       770          
Debt — non-current
     23,160       29,912       22,638       22,523       22,310          
Addback of goodwill written-off
                             26,915       26,915          
Less:
                                                
Cash and cash equivalents
     (40,924 )     (43,614 )     (36,119 )     (64,225 )     (98,727 )        
Short-term investments
     (4,005 )     —       —       (6,000 )     (10,000 )        
 
                                      
 
   $ 330,455     $ 347,861     $ 341,318     $ 307,137     $ 281,283     $ 321,611  
 
                                      

 

Appendix A
ROIC calculation with GAAP numbers
                                 
    Quarter ended     Fiscal year ended  
    December 29,     September 29,     September 30,     October 1,  
    2007     2007     2006     2005  
 
                                
Operating income
   $ 31,928     $ 79,438     $ 80,262     $ (9,745 )
Tax rate
     18.0%     22.0%     -20.6%     -12.9%
 
                        
 
                                
Income taxes — GAAP
   5,747     17,476     (16,534 )   1,257  
 
                                
 
                        
Operating income (tax effected)
   $ 26,181     $ 61,962     $ 96,796     $ (11,002 )
 
                        
 
                                
Average capital employed
   $ 404,600     $ 360,308     $ 277,033     $ 310,845  
 
                                
ROIC
     25.9%     17.2%     34.9%     -3.5%
                         
    Actual     Actual     Average capital  
    9/29/07     12/29/2007     employed  
 
                        
Equity
   $ 573,265     $ 604,792          
Plus:
                        
Debt — current
     1,720       1,815          
Debt — non-current
     25,082       24,681          
Less:
                        
Cash and cash equivalents
     (154,109 )     (158,547 )        
Short-term investments
     (55,000 )     (54,500 )        
 
                    
 
   $ 390,958     $ 418,241     $ 404,600  
 
                    
                                                 
    Actual     Actual     Actual     Actual     Actual     Average capital  
    9/30/06     12/30/06     3/31/07     6/30/07     9/29/07     employed  
 
                                                
Equity
   $ 481,567     $ 503,457     $ 518,023     $ 540,437     $ 573,265          
Plus:
                                                
Debt — current
     997       1,049       1,643       1,701       1,720          
Debt — non-current
     25,653       25,739       25,551       25,460       25,082          
Less:
                                                
Cash and cash equivalents
     (164,912 )     (132,872 )     (132,706 )     (145,206 )     (154,109 )        
Short-term investments
     (30,000 )     (45,000 )     (45,000 )     (45,000 )     (55,000 )        
 
                                      
 
   $ 313,305     $ 352,373     $ 367,511     $ 377,392     $ 390,958     $ 360,308  
 
                                      
                                                 
    Actual     Actual     Actual     Actual     Actual     Average capital  
    10/1/05     12/31/05     4/1/06     7/1/06     9/30/06     employed  
 
                                                
Equity
   $ 340,015     $ 356,629     $ 393,111     $ 437,038     $ 481,567          
Plus:
                                                
Debt — current
     770       1,758       1,553       1,245       997          
Debt — non-current
     22,310       21,959       21,623       21,666       25,653          
Less:
                                                
Cash and cash equivalents
     (98,727 )     (109,667 )     (124,673 )     (139,750 )     (164,912 )        
Short-term investments
     (10,000 )     (10,000 )     (25,000 )     (30,000 )     (30,000 )        
 
                                      
 
   $ 254,368     $ 260,679     $ 266,614     $ 290,199     $ 313,305     $ 277,033  
 
                                      
                                                 
    Actual     Actual     Actual     Actual     Actual     Average capital  
    9/30/04     1/1/05     4/2/05     7/2/05     10/1/05     employed  
 
                                                
Equity
   $ 351,413     $ 358,819     $ 352,722     $ 326,759     $ 340,015          
Plus:
                                                
Debt — current
     811       2,744       2,077       1,165       770          
Debt — non-current
     23,160       29,912       22,638       22,523       22,310          
Less:
                                                
Cash and cash equivalents
     (40,924 )     (43,614 )     (36,119 )     (64,225 )     (98,727 )        
Short-term investments
     (4,005 )     —       —       (6,000 )     (10,000 )        
 
                                      
 
   $ 330,455     $ 347,861     $ 341,318     $ 280,222     $ 254,368     $ 310,845