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Plexus Announces Fiscal Second Quarter 2015 Financial Results

Plexus Announces Fiscal Second Quarter 2015 Financial Results 

  • Fiscal second quarter revenue of $651 million
  • Diluted EPS of $0.69
  • Initiates Q3 fiscal 2015 revenue guidance of $670 - $700 million with diluted EPS of $0.71 to $0.79

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

  Three Months Ended
  April 4, 2015   April 4, 2015   July 4, 2015
Summary GAAP Items Q2F15 Results   Q2F15 Guidance   Q3F15 Guidance
           
Revenue ($ in millions) $651   $630 to $660   $670 to $700
Operating margin 4.5%   4.4% to 4.7%   4.5% to 4.8%
Diluted EPS $0.69*   $0.64 to  $0.72*   $0.71 to $0.79**
           
Summary Non-GAAP Items          
Return on invested capital (ROIC) 14.5%        
Economic Return 3.5%        
 
*Includes $0.10 per share of stock-based compensation expense

**Includes $0.10 per share of stock-based compensation expense but excludes any unanticipated special items

Additional Q2 Fiscal 2015 Information

  • Won 25 programs during the quarter representing approximately $209 million in annualized revenue when fully ramped into production
  • Trailing four quarter wins total approximately $852 million in annualized revenue
  • Purchased $7.7 million of our shares at an average price of $40.05 per share

Dean Foate, Chairman, President and CEO, commented, "Our fiscal second quarter revenue was above the midpoint of our guidance and up approximately 17% from the comparable quarter last year.  While we guided sequential contraction in our Networking/Communications and Healthcare/Life Sciences sectors, both outperformed our expectations due to better than anticipated end-market demand.  Our fiscal third quarter 2015 revenue guidance of $670 to $700 million suggests a 5% sequential increase at the midpoint of the range.  We are guiding diluted EPS in the range of $0.71 to $0.79, reflecting a 9% sequential improvement at the midpoint."

Patrick Jermain, Senior Vice President and CFO, commented, "Our earnings performance for the fiscal second quarter was consistent with our expectations.  Fiscal second quarter cash cycle was 59 days, a significant improvement of 13 days compared to the fiscal first quarter. The improved cash cycle performance contributed to $124 million in free cash flow during the quarter."

Quarterly Comparison Three Months Ended
  April 4, 2015   January 3, 2015   March 29, 2014
($ in thousands, except per share data) Q2F15   Q1F15   Q2F14
           
Revenue $651,285   $664,690     $557,616  
Gross profit $59,777   $61,414     $52,835  
Operating profit $29,452   $28,783     $19,000  
Net income $23,594   $23,079     $18,516  
Diluted EPS $0.69   $0.67     $0.53  
Adjusted net income* $23,594   $24,770     $20,831  
Adjusted diluted EPS* $0.69   $0.72     $0.60  
           
Gross margin 9.2 %   9.2 %   9.5 %
Operating margin 4.5 %   4.3 %   3.4 %
Adjusted operating margin* 4.5 %   4.6 %   4.5 %
ROIC* 14.5 %   14.4 %   14.1 %
Economic Return* 3.5 %   3.4 %   3.1 %
 
*Refer to Non-GAAP Supplemental Information Tables 1 and 2 for a reconciliation to comparable 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 ($ in millions) Three Months Ended
    April 4, 2015   January 3, 2015   March 29, 2014
    Q2F15   Q1F15   Q2F14
Networking/Communications   $ 210   32 %   $ 234   35 %   $ 162   29 %
Healthcare/Life Sciences   191   29 %   196   30 %   167   30 %
Industrial/Commercial   160   25 %   148   22 %   145   26 %
Defense/Security/Aerospace   90   14 %   87   13 %   84   15 %
Total revenue   $ 651       $ 665       $ 558    

Fiscal Q2 Supplemental Information

Fiscal second quarter cash cycle was 59 days.  The company delivered $131 million in cash from operations and used $7 million for capital investment during the quarter, resulting in positive free cash flow of $124 million.  Top 10 customers comprised 55% of revenue during the quarter, down three percentage points from the previous quarter.

Cash Conversion Cycle Three Months Ended
  April 4, 2015   January 3, 2015   March 29, 2014
  Q2F15   Q1F15   Q2F14
Days in accounts receivable 48   52   49
Days in inventory 86   82   84
Days in accounts payable 63   53   63
Days in cash deposits 12   9   8
Annualized cash cycle* 59   72   62
*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 Second Quarter 2015 Earnings Conference Call and Webcast
When: Thursday, April 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/w9b3pqhb/lan/en

 

Conference Call:  +1.888.771.4371 with passcode: 39170464
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: 39170464

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 poor 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   Six Months Ended
  April 4,   March 29,   April 4,   March 29,
  2015   2014   2015   2014
Net sales $ 651,285     $ 557,616     $ 1,315,975     $ 1,091,521  
Cost of sales 591,508     504,781     1,194,784     987,184  
               
Gross profit 59,777     52,835     121,191     104,337  
               
Operating expenses:              
Selling and administrative expenses 30,325     27,790     61,266     53,926  
Restructuring costs -     6,045     1,691     9,650  
Operating profit 29,452     19,000     58,234     40,761  
               
Other income (expense):              
Interest expense (3,383 )   (3,082 )   (7,160 )   (5,896 )
Interest income 788     683     1,686     1,322  
Miscellaneous (60 )   671     78     911  
               
Income before income taxes 26,797     17,272     52,838     37,098  
               
Income tax expense (benefit) 3,203     (1,244 )   6,165     919  
               
Net income $ 23,594     $ 18,516     $ 46,673     $ 36,179  
               
Earnings per share:              
Basic $ 0.70     $ 0.55     $ 1.39     $ 1.07  
Diluted $ 0.69     $ 0.53     $ 1.36     $ 1.04  
               
Weighted average shares outstanding:              
Basic 33,606     33,868     33,604     33,799  
Diluted 34,342     34,703     34,391     34,698  


 

PLEXUS
NON-GAAP SUPPLEMENTAL INFORMATION TABLE 1
(in thousands, except per share data)
(unaudited)
           
  Three Months Ended
  April 4,   January 3,   March 29,
  2015   2015   2014
Operating profit, as reported $ 29,452     $ 28,783     $ 19,000  
Operating margin, as reported 4.5 %   4.3 %   3.4 %
           
Non-GAAP adjustments:          
Restructuring costs* -     1,691     6,045  
           
Operating profit, as adjusted $ 29,452     $ 30,474     $ 25,045  
Operating margin, as adjusted 4.5 %   4.6 %   4.5 %
           
Net income, as reported $ 23,594     $ 23,079     $ 18,516  
           
Non-GAAP adjustments:          
Restructuring costs* -     1,691     6,045  
Discrete tax benefit, net -     -     (3,730 )
           
Net income, as adjusted $ 23,594     $ 24,770     $ 20,831  
           
Diluted earnings per share, as reported $ 0.69     $ 0.67     $ 0.53  
           
Non-GAAP adjustments:          
Restructuring costs -     0.05     0.18  
Discrete tax benefit, net -     -     (0.11 )
           
Diluted earnings per share, as adjusted $ 0.69     $ 0.72     $ 0.60  
           
*Summary of restructuring costs          
Severance costs $ -     $ 144     $ 2,245  
Fixed asset impairment -     -     3,160  
Other exit costs -     1,547     640  
Total restructuring costs $ -     $ 1,691     $ 6,045  

PLEXUS
NON-GAAP SUPPLEMENTAL INFORMATION TABLE 2
 (in thousands)
(unaudited)
                 
ROIC and Economic Return Calculations Six Months
Ended
  Three Months  Ended   Six Months  Ended
  April 4,   January 3,   March 29,
  2015   2015   2014
Operating profit   $ 58,234       $ 28,783       $ 40,761  
Restructuring costs   1,691       1,691       9,650  
Adjusted operating profit   $ 59,925       $ 30,474       $ 50,411  
  x 2     x 4     x 2  
Annualized operating profit   $ 119,850       $ 121,896       $ 100,822  
Tax rate x 10 %   x 10 %   x 9 %
Tax impact   11,985       12,190       9,074  
Operating profit (tax effected)   $ 107,865       $ 109,706       $ 91,748  
                 
Average invested capital ÷ $ 745,441     ÷ $ 759,676     ÷ $ 650,061  
                 
ROIC   14.5 %     14.4 %     14.1 %
Weighted average cost of capital   11.0 %     11.0 %     11.0 %
Economic Return   3.5 %     3.4 %     3.1 %

Average Invested Capital Calculations                  
          April 4,   January 3,   September 27,
          2015   2015   2014
Equity         $ 808,468     $ 792,298     $ 781,133  
Plus:                  
Debt - current         4,774     4,793     4,368  
Debt - non-current         260,025     260,990     262,046  
Less:                  
Cash and cash equivalents         (356,296 )   (239,685 )   (346,591 )
          $ 716,971     $ 818,396     $ 700,956  
               
Second quarter fiscal 2015 average invested capital (April 4, 2015, January 3, 2015 and September 27, 2014) was $745,441. First quarter fiscal 2015 average invested capital (January 3, 2015 and September 27, 2014) was $759,676.
 

 
        March 29,   December 28,   September 28,
          2014   2013   2013
Equity         $ 736,493     $ 722,021     $ 699,301  
Plus:                  
Debt - current         3,901     3,796     3,574  
Debt - non-current         256,090     256,949     257,773  
Less:                  
Cash and cash equivalents         (323,695 )   (324,156 )   (341,865 )
          $ 672,789     $ 658,610     $ 618,783  
                   
Second quarter fiscal 2014 average invested capital (March 29, 2014, December 28, 2013, and September 28, 2013) was $650,061.

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 April 4, 2015, cash flow provided by operations was approximately $131 million and capital expenditures were approximately $7 million, resulting in positive free cash flow of approximately $124 million.

 

  PLEXUS
  CONDENSED CONSOLIDATED BALANCE SHEETS
  (in thousands, except per share data)
  (unaudited)
    April 4,   September 27,
    2015   2014
  ASSETS      
  Current assets:      
  Cash and cash equivalents $ 356,296     $ 346,591  
  Accounts receivable 342,163     324,072  
  Inventories 557,040     525,970  
  Deferred income tax 6,411     6,449  
  Prepaid expenses and other 26,929     27,757  
         
  Total current assets 1,288,839     1,230,839  
         
  Property, plant and equipment, net 323,722     334,926  
  Deferred income tax 3,506     3,675  
  Other 40,082     39,586  
         
  Total assets $ 1,656,149     $ 1,609,026  
         
  LIABILITIES AND SHAREHOLDERS' EQUITY      
  Current liabilities:      
  Current portion of long-term debt and capital lease obligations $ 4,774     $ 4,368  
  Accounts payable 407,428     396,363  
  Customer deposits 75,830     56,155  
  Deferred income tax 560     647  
  Accrued liabilities:      
  Salaries and wages 39,736     52,043  
  Other 40,096     37,739  
         
  Total current liabilities 568,424     547,315  
         
  Long-term debt and capital lease obligations, net of current portion 260,025     262,046  
  Deferred income tax 5,190     5,191  
  Other liabilities 14,042     13,341  
         
  Total non-current liabilities 279,257     280,578  
         
  Shareholders' equity:      
  Preferred stock, $.01 par value, 5,000 shares authorized, none issued or outstanding -     -  
  Common stock, $.01 par value, 200,000 shares authorized,      
  50,284 and 49,962 shares issued, respectively,      
  and 33,595 and 33,653 shares outstanding, respectively 503     500  
  Additional paid-in-capital 483,960     475,634  
  Common stock held in treasury, at cost, 16,689 and 16,309 shares, respectively (494,950 )   (479,968 )
  Retained earnings 813,058     766,385  
  Accumulated other comprehensive income 5,897     18,582  
         
  Total shareholders' equity 808,468     781,133  
         
  Total liabilities and shareholders' equity $ 1,656,149     $ 1,609,026  

PLEXUS
REVENUE BY REPORTABLE GEOGRAPHIC SEGMENTS
(in thousands)
(unaudited)
           
  Three Months Ended
    April 4, 2015   January 3, 2015   March 29, 2014
    Q2F15   Q1F15   Q2F14
Americas   $ 328,753   50 %   $ 335,262   51 %   $ 279,271   50 %
Asia-Pacific   319,156   49 %   333,377   50 %   265,582   48 %
Europe, Middle East, and Africa   35,773   6 %   28,079   4 %   32,240   6 %
Elimination of inter-segment sales   (32,397 ) (5 )%   (32,028 ) (5 )%   (19,477 ) (4 )%
Total revenue   $ 651,285       $ 664,690       $ 557,616    

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