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Plexus Reports Record Revenue of $2.7 Billion and 12% Annual Growth for Fiscal 2015
  • Fiscal fourth quarter revenue of $669 million
  • Diluted quarterly EPS of $0.70
  • Initiates fiscal first quarter 2016 revenue guidance of $600 - $625 million with diluted EPS of $0.41 to $0.48

NEENAH, Wis., Oct. 28, 2015 (GLOBE NEWSWIRE) -- Plexus (NASDAQ:PLXS) today announced financial results for its fiscal fourth quarter ended October 3, 2015.

    Three Months Ended
    Oct. 3, 2015   Oct. 3, 2015   Jan. 2, 2016
    Q4F15 Results   Q4F15 Guidance   Q1F16 Guidance
Summary GAAP Items
Revenue (in millions)     $ 669     $650 to $680   $600 to $625
Operating margin        4.3 %   4.2% to 4.5%   3.3% to 3.6%
Diluted EPS*     $ 0.70     $0.64 to $0.72   $0.41 to $0.48
             
Summary Non-GAAP Items            
Return on invested capital (ROIC)      14.0 %        
Economic Return      3.0 %        
             
*Includes stock-based compensation expense of $0.08, $0.10 forecasted and $0.10 forecasted per share for Q4F15 Results, Q4F15 Guidance and Q1F16 Guidance, respectively.

 Additional Fiscal Fourth Quarter 2015 Information 

  • Won 34 programs during the quarter representing approximately $167 million in annualized revenue when fully ramped into production
  • Trailing four quarter wins total approximately $713 million in annualized revenue
  • Purchased $7.5 million of our shares at an average price of $38.25 per share

Fiscal Year 2015 Information

  • Revenue: $2.7 billion, up 12% from prior year
  • Diluted EPS: $2.74, including $0.39 per share of stock-based compensation expense
  • ROIC: 14.0%, 300 basis points above our weighted average cost of capital
  • Purchased $30 million of our shares at an average price of $40.26 per share

Dean Foate, Chairman, President and CEO, commented, “Fiscal fourth quarter revenue and EPS results were consistent with our guidance.  Revenues were $669 million, relatively flat from the prior quarter and the comparable quarter last year, as softness in certain end markets unfolded as anticipated.  Overall, I am pleased with our performance for fiscal 2015.  We delivered record revenue of $2.7 billion, achieving our enduring growth goal of 12%.  Our economic return, while short of our goal, was solidly in value creation territory at 3% for the fiscal year."

Mr. Foate continued, “Looking forward to fiscal 2016, while our visibility is limited, we anticipate a challenging start to the year due to market sector weakness, particularly in Networking/Communications and Industrial/Commercial, in the first half of the fiscal year.  We are guiding fiscal first quarter 2016 revenue of $600 to $625 million with diluted EPS in the range of $0.41 to $0.48.”

Patrick Jermain, Senior Vice President and CFO, commented, “The lower level of revenue in the first half of fiscal 2016 is creating a misaligned cost structure. We are determining the appropriate cost reduction and control actions to mitigate our near-term margin challenges and are assessing our global capacity levels against our longer-term strategic value propositions in order to take prompt action to address the situation.”

Quarterly Comparison Three Months Ended   Twelve Months Ended
  Oct. 3, 2015   July 4, 2015   Sept. 27, 2014   Oct. 3, 2015   Sept. 27, 2014
  Q4F15   Q3F15   Q4F14   F15**   F14**
(in thousands, except EPS)
                   
Revenue $ 668,730     $ 669,585     $ 666,223     $ 2,654,290     $ 2,378,249  
Gross profit $ 59,272     $ 59,087     $ 62,639     $ 239,550     $ 225,569  
Operating profit $ 28,571     $ 28,631     $ 31,648     $ 115,436     $ 100,607  
Net income $ 23,865     $ 23,794     $ 26,450     $ 94,332     $ 87,213  
Diluted EPS $ 0.70     $ 0.69     $ 0.77     $ 2.74     $ 2.52  
Adjusted net income* $ 23,514     $ 23,794     $ 26,761     $ 95,672     $ 94,619  
Adjusted diluted EPS* $ 0.69     $ 0.69     $ 0.77     $ 2.78     $ 2.73  
                   
Gross margin   8.9 %     8.8 %     9.4 %     9.0 %     9.5 %
Operating margin   4.3 %     4.3 %     4.8 %     4.3 %     4.2 %
Adjusted operating margin*   4.3 %     4.3 %     4.8 %     4.4 %     4.7 %
                                                 
ROIC*   14.0 %     14.1 %     15.2 %     14.0 %     15.2 %
Economic Return*   3.0 %     3.1 %     4.2 %     3.0 %     4.2 %
                                                 
*Refer to Non-GAAP Supplemental Information Tables 1 and 2 for reconciliation to GAAP measures
**Fiscal year 2015 contained 53 weeks and fiscal year 2014 contained 52 weeks.

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   Twelve Months Ended
  Oct. 3, 2015
Q4F15
  July 4, 2015
Q3F15
  Sept. 27, 2014
Q4F14
  Oct. 3, 2015
F15*
  Sept. 27, 2014
F14*
Networking/Communications $ 179   27 %   $ 222   33 %   $ 234   35 %     $ 845   32 %     $ 763   32 %  
Healthcare/Life Sciences   183     27 %     180     27 %     189     28 %        750   28 %        697   29 %  
Industrial/Commercial   201     30 %     176     26 %     150     23 %        685   26 %        583   25 %  
Defense/Security/Aerospace   106     16 %     92     14 %     93     14 %        374   14 %        335   14 %  
Total Revenue $ 669         $ 670         $ 666           $  2,654         $  2,378      
                                                             
*Fiscal year 2015 contained 53 weeks and fiscal year 2014 contained 52 weeks.

Fiscal Fourth Quarter 2015 Supplemental Information

Fiscal fourth quarter cash cycle was 66 days. The Company delivered $21.0 million in cash flow provided by operations and used $8.2 million for capital investments during the quarter, resulting in positive free cash flow of $12.8 million. The Company defines free cash flow as cash flow provided by (or used in) operations less capital expenditures.  Top 10 customers comprised 55% of revenue during the quarter, down two percentage points from the prior quarter.

Cash Conversion Cycle Three Months Ended
  Oct. 3, 2015
Q4F15
  July 4, 2015
Q3F15
  Sept. 27, 2014
Q4F14
Days in Accounts Receivable    53       48       44  
Days in Inventory    85       88       80  
Days in Accounts Payable    (60 )     (62 )     (60 )
Days in Cash Deposits    (12 )     (12 )     (8 )
Annualized Cash Cycle*    66       62       56  
                       
 *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.

 Fiscal 2015 Supplemental Information

The Company delivered $76.6 million in cash flow provided by operations and used $35.1 million for capital investments during fiscal 2015, resulting in positive free cash flow of $41.5 million. Top 10 customers comprised 56% of revenue during fiscal 2015, up one percentage point from 2014.

ROIC for fiscal 2015 and its fiscal fourth quarter was 14.0%.  The Company defines ROIC as tax-effected annualized operating profit, before special items, divided by average invested capital over a five-quarter period for the fourth quarter and a four-quarter period for the third quarter.  Invested capital is defined as equity plus debt, less cash and cash equivalents. The Company’s weighted average cost of capital for fiscal 2015 was 11.0%.

Conference Call and Webcast Information

What: Plexus Fiscal Fourth Quarter 2015 Earnings Conference Call and Webcast
When: Thursday, October 29 at 8:30 a.m. Eastern Time
Where:  Participants are encouraged to join the live webcast at the investor relations section of Plexus’ website, www.plexus.com or directly at: http://edge.media-server.com/m/p/7zi255ie/lan/en

Conference call at +1.888.771.4371 with passcode: 40738400.
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: 40738400


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; 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   Twelve Months Ended
  Oct. 3,   Sept. 27,   Oct. 3,   Sept. 27,
    2015       2014     2015*   2014*
Net sales $ 668,730     $ 666,223     $ 2,654,290     $ 2,378,249  
Cost of sales   609,458       603,584       2,414,740       2,152,680  
               
Gross profit   59,272       62,639       239,550       225,569  
               
Operating expenses:              
Selling and administrative expenses   30,701       30,576       122,423       113,682  
Restructuring and impairment charges       415       1,691         11,280  
Operating profit   28,571       31,648       115,436       100,607  
               
Other income (expense):              
Interest expense   (3,524 )     (3,344 )     (13,964 )     (12,295 )
Interest income   947       842       3,499       2,934  
Miscellaneous   775       (103 )     1,324       2,079  
               
Income before income taxes   26,769       29,043       106,295       93,325  
               
Income tax expense   2,904       2,593       11,963       6,112  
               
Net income $ 23,865     $ 26,450     $ 94,332     $ 87,213  
               
Earnings per share:              
Basic $ 0.71     $ 0.78     $ 2.81     $ 2.58  
Diluted $ 0.70     $ 0.77     $ 2.74     $ 2.52  
               
Weighted average shares outstanding:              
Basic   33,597       33,713       33,618       33,785  
Diluted   34,248       34,570       34,379       34,655  
                               
*Fiscal year 2015 contained 53 weeks and fiscal year 2014 contained 52 weeks.


PLEXUS
NON-GAAP SUPPLEMENTAL INFORMATION TABLE 1
(in thousands, except per share data)
(unaudited)
                   
  Three Months Ended   Twelve Months Ended
  Oct. 3,   July 4,   Sept. 27,   Oct. 3,   Sept. 27,
  2015   2015   2014   2015*   2014*
Operating profit, as reported $ 28,571     $ 28,631     $ 31,648     $ 115,436     $ 100,607  
Operating margin, as reported 4.3 %   4.3 %   4.8 %   4.3 %   4.2 %
                   
Non-GAAP adjustments:                  
Restructuring costs*         415     1,691     11,280  
                   
Operating profit, as adjusted $ 28,571     $ 28,631     $ 32,063     $ 117,127     $ 111,887  
Operating margin, as adjusted 4.3 %   4.3 %   4.8 %   4.4 %   4.7 %
                   
Net income, as reported $ 23,865     $ 23,794     $ 26,450     $ 94,332     $ 87,213  
                   
Non-GAAP adjustments:                  
Discrete tax benefit, net (351 )       (104 )   (351 )   (3,874 )
Restructuring costs*         415     1,691     11,280  
                   
Net income, as adjusted $ 23,514     $ 23,794     $ 26,761     $ 95,672     $ 94,619  
                   
Diluted earnings per share, as reported $ 0.70     $ 0.69     $ 0.77     $ 2.74     $ 2.52  
                   
Non-GAAP adjustments:                  
Discrete tax benefit, net (0.01 )       (0.01 )   (0.01 )   (0.11 )
Restructuring costs         0.01     0.05     0.32  
                   
Diluted earnings per share, as adjusted $ 0.69     $ 0.69     $ 0.77     $ 2.78     $ 2.73  
                   
*Summary of restructuring costs                  
Severance costs $     $     $     $ 144     $ 3,180  
Fixed asset impairment                 3,160  
Other exit costs         415     1,547     4,940  
Total restructuring costs $     $     $ 415     $ 1,691     $ 11,280  
                                       
*Fiscal year 2015 contained 53 weeks and fiscal year 2014 contained 52 weeks.


PLEXUS
NON-GAAP SUPPLEMENTAL INFORMATION Table 2
 (in thousands)
(unaudited)
           
ROIC and Economic Return Calculations Twelve Months
 Ended
  Nine Months
Ended
  Twelve Months
Ended
  Oct. 3,   July 4,   Sept. 27,
  2015*   2015   2014*
Operating profit   $ 115,436       $ 86,865       $ 100,607  
Restructuring and impairment charges   $ 1,691       $ 1,691       $ 11,280  
Adjusted operating profit   $ 117,127       $ 88,556       $ 111,887  
        ÷ 3        
                 
        x 4        
Annualized operating profit   117,127       118,076       111,887  
Tax rate x   11 %   x   11 %   x   9 %
Tax impact   12,884       12,988       10,070  
Operating profit (tax effected)   104,243       105,088       101,817  
                 
Average invested capital   $ 745,611       $ 745,030       $ 669,659  
                 
ROIC     14.0 %       14.1 %       15.2 %
Weighted average cost of capital     11.0 %       11.0 %       11.0 %
Economic return     3.0 %       3.1 %       4.2 %
                 
*Fiscal year 2015 contained 53 weeks and fiscal year 2014 contained 52 weeks. 


  Three Months Ended
Average Invested Capital Oct. 3,   July 4,   Apr. 4,   Jan. 3,   Sept. 27,
Calculations   2015       2015       2015       2015       2014  
Equity $ 842,272     $ 835,063     $ 808,468      $ 792,298     $ 781,133  
Plus:                  
Debt - current   3,513       4,281       4,774       4,793       4,368  
Debt – non-current   259,257       259,284       260,025       260,990       262,046  
Less:                  
Cash and cash equivalents   (357,106 )     (354,830 )     (356,296 )     (239,685 )     (346,591 )
  $ 747,936     $ 743,798     $ 716,971     $ 818,396     $ 700,956  
                   

Free Cash Flow Calculation

The Company defines free cash flow as cash flow provided by (or used in) operations less capital expenditures.  For the three months ended October 3, 2015, cash flow provided by operations was $21.0 million less capital expenditures of $8.2 million, resulting in free cash flow of $12.8 million.  For the twelve months ended October 3, 2015, cash flow provided by operations was $76.6 million less capital expenditures of $35.1 million, resulting in free cash flow of $41.5 million.


PLEXUS 
CONDENSED CONSOLIDATED BALANCE SHEETS 
(in thousands, except per share data) 
(unaudited) 
       
  Oct. 3,   Sept. 27,
   2015     2014 
ASSETS      
Current assets:      
Cash and cash equivalents $ 357,106     $ 346,591  
Accounts receivable   384,680       324,072  
Inventories   569,371       525,970  
Deferred income taxes   10,686       6,449  
Prepaid expenses and other   22,882       27,757  
       
Total current assets   1,344,725       1,230,839  
       
Property, plant and equipment, net   317,351       334,926  
Deferred income taxes   3,635       3,675  
Other   36,677       39,586  
       
Total assets $ 1,702,388     $ 1,609,026  
       
LIABILITIES AND SHAREHOLDERS’ EQUITY      
Current liabilities:      
Current portion of long-term debt and capital lease obligations $ 3,513     $ 4,368  
Accounts payable   400,710       396,363  
Customer deposits   81,359       56,155  
Deferred income taxes     647  
Accrued liabilities:      
Salaries and wages   49,270       52,043  
Other   44,446       37,739  
       
Total current liabilities   579,298       547,315  
       
Long-term debt and capital lease obligations, net of current portion   259,257       262,046  
Deferred income taxes   9,664       5,191  
Other liabilities   11,897       13,341  
       
Total non-current liabilities   280,818       280,578  
       
Shareholders’ equity:      
Common stock, $.01 par value, 200,000 shares authorized,      
50,554 and 49,962 shares issued, respectively,      
and 33,500 and 33,653 shares outstanding, respectively   506       500  
Additional paid-in-capital   497,488       475,634  
Common stock held in treasury, at cost, 17,054 and 16,309, respectively   (509,968 )     (479,968 )
Retained earnings   860,717       766,385  
Accumulated other comprehensive (loss) income   (6,471 )     18,582  
       
Total shareholders’ equity   842,272       781,133  
       
Total liabilities and shareholders’ equity $ 1,702,388     $ 1,609,026  
 


PLEXUS
REVENUE BY REPORTABLE GEOGRAPHIC SEGMENTS
(in thousands)
(unaudited)
       
  Three Months Ended   Twelve Months Ended
  Oct. 3,   Sept. 27,   Oct. 3,   Sept. 27,
    2015       2014     2015*   2014*
Americas $ 359,142     $ 369,401     $ 1,389,017     $ 1,238,225  
Asia-Pacific   319,472       301,145       1,285,905       1,132,503  
Europe, Middle East, and Africa   42,556       29,276       140,292       115,893  
Elimination of inter-segment sales   (52,440 )     (33,599 )     (160,924 )     (108,372 )
Total Revenue $ 668,730     $ 666,223     $ 2,654,290     $ 2,378,249  
               
*Fiscal year 2015 contained 53 weeks and fiscal year 2014 contained 52 weeks.

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