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8-K - FORM 8-K - PLEXUS CORP | c64236e8vk.htm |
Exhibit 99.1
Plexus
Reports Record Fiscal Second Quarter Revenue of $568 Million, EPS of $0.59
Initiates Q3 Revenue Guidance of $550 $580 Million
NEENAH, WI, April 20, 2011 Plexus Corp. (Nasdaq: PLXS) today announced:
Three Months Ended | ||||||||||||
April 2, 2011 | January 1, 2011 | April 3, 2010 | ||||||||||
(US$ in thousands, except EPS) | Q2 F11 | Q1 F11 | Q2 F10 | |||||||||
Revenue |
$ | 568,145 | $ | 565,774 | $ | 490,978 | ||||||
Gross profit |
$ | 55,470 | $ | 54,910 | $ | 50,471 | ||||||
Operating profit |
$ | 26,410 | $ | 27,849 | $ | 23,388 | ||||||
Net income |
$ | 23,860 | $ | 25,033 | $ | 20,714 | ||||||
Earnings per share |
$ | 0.59 | $ | 0.61 | $ | 0.51 | ||||||
Gross margin |
9.8 | % | 9.7 | % | 10.3 | % | ||||||
Operating margin |
4.6 | % | 4.9 | % | 4.8 | % | ||||||
Return on invested capital |
16.8 | % | 17.3 | % | 18.7 | % |
Q2 Fiscal 2011 Results (quarter ended April 2, 2011): | |||
| Revenue: $568 million, relative to guidance of $540 to $570 million | ||
| Diluted EPS: $0.59, including $0.07 per share of stock-based compensation expense, relative to guidance of $0.53 to $0.58 | ||
Q3 Fiscal 2011 Guidance: | |||
| Revenue: $550 to $580 million | ||
| Diluted EPS: $0.52 to $0.57, excluding any restructuring charges and including approximately $0.07 per share of stock-based compensation expense |
Dean Foate, President and CEO, commented, Fiscal second quarter revenues were a record $568
million with EPS of $0.59. Both revenue and EPS were consistent with the high-end of the guidance
range we provided last quarter. Return on invested capital was 16.8%, below our target, but still
well above our weighted average cost of capital of 13.5%. During the fiscal second quarter we won
21 new programs in our Manufacturing Solutions group that we anticipate will generate approximately
$134 million in annualized revenue when fully ramped into production. This is a good result and
included strong performance by our medical sector, which represented $60 million of the total. Our
Engineering Solutions group also enjoyed a strong quarter of new program wins, totaling
approximately $18 million. We believe the continuing strength of our new business win performance
is a direct result of our sector-based go-to-market strategy and confirmation of the power of the
Plexus brand for delivering comprehensive Product Realization Value Steam Solutions. Of course, all
future revenues are subject to the timing and ultimate realization of customer forecasts and
orders.
Ginger Jones, Senior Vice President and CFO, commented, Gross margin was 9.8% for the fiscal
second quarter, slightly better than our expectations when we set guidance for the quarter, as a
result of the mix of revenue during the quarter and leverage from our operations. Relative
to our expectations for the quarter, selling and administrative expenses were higher than expected
as a result of higher incentive compensation expense and headcount related costs. These increases
were partially offset by lower stock option expense, which was $0.07 per share relative to guidance
of $0.08 per share. While selling and administrative expenses were higher, the stronger gross
margin performance allowed us to deliver operating margin in-line with our original expectations.
Our estimated tax rate for fiscal 2011 remains unchanged at 3%.
Ms. Jones continued, Fiscal second quarter cash cycle days including customer deposits were 71
days, a healthy improvement of seven days from the fiscal first quarter 78 days. The cash cycle
improvement was largely the result of reductions of days in receivables, including the impact of
negotiated accelerated payments from certain customers. In addition, our ongoing efforts to reduce
inventory levels, while continuing to meet our customers needs for flexibility and agility,
produced a four-day decrease in inventory days during the quarter.
Ms. Jones concluded, During the fiscal second quarter we repurchased 2.7 million shares under the
share repurchase plan approved on February 16, 2011, totaling $83.4 million at an average price of
$30.57. We utilized existing cash to fund these repurchases, with new borrowing of $175 million
anticipated to close on April 21, 2011. This is 7-year private placement debt that will be funded
in two tranches, with a fixed interest rate of 4.97%. The first tranche of $100 million will be
funded on April 21, 2011, with the final tranche of $75 million funded in mid-June 2011. We
believe this level of debt appropriately leverages our balance sheet to improve weighted average
cost of capital and create shareholder value.
Mr. Foate continued, Strengthening demand from customers, the ramping of new programs won in prior
quarters and solid execution enabled us to deliver a strong fiscal second quarter at the top-end of
our guidance range. We are establishing fiscal third quarter 2011 revenue guidance of $550 to $580
million with EPS of $0.52 to $0.57, excluding any restructuring charges and including approximately
$0.07 per share of stock-based compensation expense. Our guidance range suggests that our fiscal
third quarter revenue will be sequentially flat when compared to our second quarter. Some customer
forecasts for the second half of the fiscal year strengthened later in our fiscal second quarter,
improving our outlook for our fiscal third quarter when compared to the expectations we set in our
fiscal first quarter press release.
Mr. Foate concluded, Looking ahead to the remainder of the fiscal year, we currently anticipate
sequential revenue growth in our fiscal fourth quarter, improving our full-year growth range to 12%
to 15%. We believe this would be an excellent result in a year when we are ramping down production for
two significant customers as previously disclosed. We expect that our operating performance will, however, remain
below our long-term targets for the fiscal year as we absorb the financial impact of ramping down
these two mature production programs while ramping new programs to offset the lost revenue and
further drive our top-line growth. New programs are inherently less profitable in early production
quarters. Despite what we believe are short-term obstacles in the current fiscal year, we remain
committed to our enduring goals of delivering long-term organic growth of 15% and generating
economic profit for our shareholders by delivering returns on invested capital exceeding our
weighted average cost of capital by 500 basis points. Our confidence in our long-term growth
opportunities compels us to proceed with capacity investments required to serve our customers. We
began construction of our previously announced second manufacturing facility in Xiamen, China this
month. We also expect to announce, during our fiscal fourth quarter, the construction of a larger
facility in Oradea, Romania to replace leased
buildings that served as our start-up solution in lower-cost Europe. Finally, the construction of
our previously announced fourth facility in Penang, Malaysia continues on schedule and should be
ready for production around September 2011.
Plexus provides non-GAAP supplemental information such as return on invested capital (ROIC).
ROIC is used for internal management assessments because it provides additional insight into
ongoing financial performance. In addition, we provide ROIC because we believe it offers insight
into the metrics that are driving management decisions as well as managements performance under
the tests that it sets for itself. Please refer to the attached reconciliations of 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 Companys focus on its global business and market development sector strategy.
Market Sector ($ in millions) | Q2 F11 | Q1 F11 | Q2 F10 | |||||||||||||||||||||
Wireline/Networking |
$ | 230 | 40 | % | $ | 234 | 41 | % | $ | 210 | 43 | % | ||||||||||||
Wireless Infrastructure |
$ | 37 | 6 | % | $ | 57 | 10 | % | $ | 70 | 14 | % | ||||||||||||
Medical |
$ | 128 | 23 | % | $ | 116 | 21 | % | $ | 93 | 19 | % | ||||||||||||
Industrial/Commercial |
$ | 123 | 22 | % | $ | 118 | 21 | % | $ | 81 | 17 | % | ||||||||||||
Defense/Security/Aerospace |
$ | 50 | 9 | % | $ | 41 | 7 | % | $ | 37 | 7 | % | ||||||||||||
Total Revenue |
$ | 568 | $ | 566 | $ | 491 |
FISCAL Q2 SUPPLEMENTAL INFORMATION
| ROIC for the fiscal second quarter was 16.8%. The Company defines ROIC as tax-effected annualized operating income divided by average invested capital over a rolling three-quarter period for the second quarter and a rolling two-quarter period for the first quarter. Invested capital is defined as equity plus debt, less cash and cash equivalents and short-term investments. |
| Cash flow provided by operations was approximately $73 million for the quarter. Capital expenditures for the quarter were $15 million. Free cash flow was positive for the quarter, at approximately $58 million. The Company defines free cash flow as cash flow provided by (or used in) operations less capital expenditures. |
| Top 10 customers comprised 53% of revenue during the quarter, down 3 percentage points from the previous quarter. |
| Juniper Networks, Inc., with 16% of revenue, was the only customer representing 10% or more of revenue for the quarter. |
| Cash Conversion Cycle: |
Cash Conversion Cycle | Q2 F11 | Q1 F11 | Q2 F10 | |||||||||
Days in Accounts Receivable |
45 | 52 | 45 | |||||||||
Days in Inventory |
89 | 93 | 89 | |||||||||
Days in Accounts Payable |
(58 | ) | (62 | ) | (68 | ) | ||||||
Days in Cash Deposits |
(5 | ) | (5 | ) | (6 | ) | ||||||
Annualized Cash Cycle |
71 | 78 | 60 |
Conference Call/Webcast and Replay Information:
What: | Plexus Corp.s Fiscal Q2 Earnings Conference Call | ||
When: | Thursday, April 21st at 8:30 a.m. Eastern Time | ||
Where: | (877) 312-9395 or (408) 774-4005 with conference ID: 53184789 http://tinyurl.com/4rvltdf (requires Windows Media Player) | ||
Replay: | The call will be archived until April 28, 2011 at midnight Eastern Time http://tinyurl.com/4rvltdf or via telephone replay at (800) 642-1687 or (706) 645-9291 with conference ID: 53184789 |
For further information, please contact:
Ginger Jones, Senior VP and Chief Financial Officer
920-751-5487 or ginger.jones@plexus.com
Ginger Jones, Senior VP and Chief Financial Officer
920-751-5487 or ginger.jones@plexus.com
About Plexus Corp. 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 100 branded product companies in the
Wireline/Networking, Wireless Infrastructure, Medical, Industrial/Commercial and
Defense/Security/Aerospace market sectors.
Safe Harbor and Fair Disclosure Statement
The statements contained in this release which 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 poor
visibility of future orders, particularly in view of current 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 risk that
our revenue and/or profits associated with customers who are acquired by third parties will be
negatively affected; the particular risks relative to new customers, including our arrangements
with The Coca-Cola Company, 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; 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;
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 effects
of the current constrained supply environment, which has led and may continue to lead to periods of
shortages and delays in obtaining components based on the lack of capacity at some of our suppliers
to meet increased demand, or which may cause customers to increase forecasts and orders to secure
raw material supply or result in our inability to secure raw materials required to complete product
assemblies; raw materials and component cost fluctuations particularly due to sudden increases in
customer demand; 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
customer resulting in an inventory write-off; the weakness of the global economy and the continuing
instability of the global financial markets and banking system, including the potential inability
of our customers or suppliers to access credit facilities; the effect of changes in the pricing and
margins of products; the effect of start-up costs of new programs and facilities, including our
recent and planned expansions, such as our new replacement facility in Oradea, Romania, and our
plans to further expand in Penang, Malaysia, Darmstadt, Germany and Xiamen, China; the risk of
unanticipated costs, unpaid duties and penalties related to an ongoing audit of our import
compliance by U.S. Customs and Border Protection; possible unexpected costs and operating
disruption in transitioning programs; the ability to execute the approved share repurchase program
at the share price and in the timeframe we intend; 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 drug cartel-related violence in Mexico,
changes in oil prices, terrorism, war in the Middle East, and the earthquake and tsunami in Japan);
the impact of increased competition; and other risks detailed in the Companys Securities and
Exchange Commission filings (particularly in Part I, Item 1A of our annual report on Form 10-K for
the fiscal year ended October 2, 2010). The anticipated April
21, 2011 closing of the debt private placement remains subject to
execution of related documents and customary closing conditions.
(financial tables follow)
PLEXUS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
Three Months Ended | Six Months Ended | |||||||||||||||
April 2, | April 3, | April 2, | April 3, | |||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Net sales |
$ | 568,145 | $ | 490,978 | $ | 1,133,919 | $ | 921,377 | ||||||||
Cost of sales |
512,675 | 440,507 | 1,023,539 | 826,365 | ||||||||||||
Gross profit |
55,470 | 50,471 | 110,380 | 95,012 | ||||||||||||
Operating expenses: |
||||||||||||||||
Selling and administrative expenses |
29,060 | 27,083 | 56,121 | 51,402 | ||||||||||||
Operating income |
26,410 | 23,388 | 54,259 | 43,610 | ||||||||||||
Other income (expense): |
||||||||||||||||
Interest expense |
(2,082 | ) | (2,418 | ) | (4,263 | ) | (4,977 | ) | ||||||||
Interest income |
273 | 367 | 566 | 823 | ||||||||||||
Miscellaneous expense |
(16 | ) | (16 | ) | (157 | ) | (111 | ) | ||||||||
Income before income taxes |
24,585 | 21,321 | 50,405 | 39,345 | ||||||||||||
Income tax expense |
725 | 607 | 1,512 | 787 | ||||||||||||
Net income |
$ | 23,860 | $ | 20,714 | $ | 48,893 | $ | 38,558 | ||||||||
Earnings per share: |
||||||||||||||||
Basic |
$ | 0.60 | $ | 0.52 | $ | 1.22 | $ | 0.97 | ||||||||
Diluted |
$ | 0.59 | $ | 0.51 | $ | 1.19 | $ | 0.95 | ||||||||
Weighted average shares outstanding: |
||||||||||||||||
Basic |
39,927 | 39,885 | 40,197 | 39,736 | ||||||||||||
Diluted |
40,659 | 40,761 | 40,934 | 40,529 | ||||||||||||
PLEXUS CORP.
NON-GAAP SUPPLEMENTAL INFORMATION
(in thousands, except per share data)
(unaudited)
NON-GAAP SUPPLEMENTAL INFORMATION
(in thousands, except per share data)
(unaudited)
Six Months | Three Months | Six Months | ||||||||||
Ended | Ended | Ended | ||||||||||
ROIC Calculation | April 2, 2011 | January 1, 2011 | April 3, 2010 | |||||||||
Operating income |
$ | 54,259 | $ | 27,849 | $ | 43,610 | ||||||
x | 2 | x | 4 | x | 2 | |||||||
Annualized operating income |
108,518 | 111,396 | 87,220 | |||||||||
Tax rate |
x | 3 | % | x | 3 | % | x | 2 | % | |||
Tax impact |
- | 3,256 | - | 3,342 | - | 1,744 | ||||||
Operating income (tax effected) |
$ | 105,262 | $ | 108,054 | $ | 85,476 | ||||||
Average invested capital |
$ | 625,945 | $ | 624,867 | $ | 458,134 | ||||||
ROIC |
16.8 | % | 17.3 | % | 18.7 | % | ||||||
April 2, 2011 | January 1, 2011 | October 2, 2010 | ||||||||||
Equity |
$ | 630,403 | $ | 680,474 | $ | 651,855 | ||||||
Plus: |
||||||||||||
Debt current |
17,119 | 17,052 | 17,409 | |||||||||
Debt non-current |
103,961 | 108,220 | 112,466 | |||||||||
Less: |
||||||||||||
Cash and cash equivalents |
(123,381 | ) | (149,498 | ) | (188,244 | ) | ||||||
$ | 628,102 | $ | 656,248 | $ | 593,486 | |||||||
Fiscal
2011 second quarter average invested capital (April 2, 2011,
January 1, 2011, October 2, 2010) $625,945
Fiscal 2011 first quarter average invested capital ( January 1, 2011, October 2, 2010) $624,867
Fiscal 2011 first quarter average invested capital ( January 1, 2011, October 2, 2010) $624,867
April 3, 2010 | January 2, 2010 | October 3, 2009 | ||||||||||
Equity |
$ | 585,954 | $ | 549,618 | $ | 527,446 | ||||||
Plus: |
||||||||||||
Debt current |
17,655 | 21,626 | 16,907 | |||||||||
Debt non-current |
121,692 | 125,908 | 133,936 | |||||||||
Less: |
||||||||||||
Cash and cash equivalents |
(234,028 | ) | (233,931 | ) | (258,382 | ) | ||||||
$ | 491,273 | $ | 463,221 | $ | 419,907 | |||||||
Fiscal 2010 second quarter average invested capital (April 3, 2010, January 2, 2010, October 3, 2009) $458,134
PLEXUS CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
(unaudited)
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
(unaudited)
April 2, | October 2, | |||||||
2011 | 2010 | |||||||
ASSETS |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 123,381 | $ | 188,244 | ||||
Accounts receivable |
279,534 | 311,205 | ||||||
Inventories |
499,482 | 492,430 | ||||||
Deferred income taxes |
21,976 | 18,959 | ||||||
Prepaid expenses and other |
19,268 | 15,153 | ||||||
Total current assets |
943,641 | 1,025,991 | ||||||
Property, plant and equipment, net |
237,435 | 235,714 | ||||||
Deferred income taxes |
8,265 | 11,787 | ||||||
Other |
17,674 | 16,887 | ||||||
Total assets |
$ | 1,207,015 | $ | 1,290,379 | ||||
LIABILITIES AND SHAREHOLDERS EQUITY |
||||||||
Current liabilities: |
||||||||
Current portion of long-term debt and capital lease obligations |
$ | 17,119 | $ | 17,409 | ||||
Accounts payable |
322,447 | 360,686 | ||||||
Customer deposits |
29,506 | 27,301 | ||||||
Accrued liabilities: |
||||||||
Salaries and wages |
36,255 | 46,639 | ||||||
Other |
45,330 | 50,484 | ||||||
Total current liabilities |
450,657 | 502,519 | ||||||
Long-term debt and capital lease obligations, net of current portion |
103,961 | 112,466 | ||||||
Other liabilities |
21,994 | 23,539 | ||||||
Total non-current liabilities |
125,955 | 136,005 | ||||||
Shareholders equity: |
||||||||
Common stock, $.01 par value, 200,000 shares authorized,
48,102 and 47,849 shares issued, respectively, and 37,928 and
40,403 shares outstanding, respectively |
481 | 478 | ||||||
Additional paid-in-capital |
407,391 | 399,054 | ||||||
Common stock held in treasury, at cost, 10,174 and 7,446 shares,
respectively |
(283,531 | ) | (200,110 | ) | ||||
Retained earnings |
494,380 | 445,568 | ||||||
Accumulated other comprehensive income |
11,682 | 6,865 | ||||||
Total shareholders equity |
630,403 | 651,855 | ||||||
Total liabilities and shareholders equity |
$ | 1,207,015 | $ | 1,290,379 | ||||
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