Press Release

<< Back
Plexus Announces Fiscal First Quarter 2016 Financial Results

Primary Logo

  • Fiscal first quarter 2016 revenue of $617 million
  • GAAP diluted EPS of $0.42, non-GAAP diluted EPS of $0.47, excluding $0.05 per share of restructuring charges
  • Initiates fiscal second quarter 2016 revenue guidance of $600 - $630 million with diluted EPS of $0.47 to $0.55, excluding any restructuring or other charges

NEENAH, Wis., Jan. 20, 2016 (GLOBE NEWSWIRE) -- Plexus (NASDAQ:PLXS) today announced financial results for its fiscal first quarter ended January 2, 2016, and guidance for its fiscal second quarter ending April 2, 2016.

 
  Three Months Ended  
  Jan. 2, 2016   Jan. 2, 2016   April 2, 2016  
  Q1F16 Results   Q1F16 Guidance   Q2F16 Guidance  
Summary GAAP Items            
Revenue (in millions) $ 617     $600 to $625   $600 to $630  
Operating margin   3.5 %          
Diluted EPS $ 0.42            
             
Summary Non-GAAP Items            
Non-GAAP operating margin, before restructuring charges (1)   3.7 %     3.3% to 3.6%     3.6% to 4.0%  
Non-GAAP diluted EPS, before restructuring charges (1)(2) $ 0.47       $0.41 to $0.48     $0.47 to $0.55  
Return on invested capital (ROIC)   10.8 %          
Economic Return   -0.2 %          
             

(1) Restructuring charges of $1.5 million for the three months ended January 2, 2016.

(2) Includes stock-based compensation expense of $0.10 for Q1F16 results and $0.11 for Q2F16 guidance.

Additional Fiscal First Quarter 2016 Information

  • Won 34 programs during the quarter representing approximately $179 million in annualized revenue when fully ramped into production
  • Trailing four quarter program wins total approximately $702 million in annualized revenue
  • Purchased $8.5 million of our shares at an average price of $37.23 per share


Dean Foate, Chairman, President and CEO, commented, “Fiscal first quarter revenue and EPS results were largely in-line with our guidance.  Consistent with the expectations we set last quarter, we are guiding our fiscal second quarter revenue sequentially flat at the midpoint of our guidance range, as new program ramps offset revenue lost from the two previously announced program disengagements. Fiscal second quarter 2016 revenue guidance is $600 to $630 million with diluted EPS in the range of $0.47 to $0.55 before restructuring charges.”

Patrick Jermain, Senior Vice President and CFO, commented, “Our working capital initiatives resulted in the fiscal first quarter cash cycle exceeding our expectations at 71 days and contributed to approximately $10 million in free cash flow during the quarter.  The two lower-margin program disengagements that we outlined during our fiscal 2015 year-end earnings call continue to progress largely as planned.  The subsequent announcements to close our Fremont, California site and end volume manufacturing at our Livingston, Scotland facility are both advancing as communicated.  Assuming stability of our fiscal second half 2016 revenue forecasts, these actions, in combination with other productivity initiatives, further our belief that we will exit fiscal 2016 in our target operating margin range of 4.7 to 5.0 percent.”

 
Quarterly Comparison         Three Months Ended
          Jan. 2, 2016       Oct. 3, 2015       Jan. 3, 2015
(in thousands, except EPS)         Q1F16       Q4F15       Q1F15
Revenue         $ 616,664         $ 668,730         $ 664,690  
Gross profit         $ 50,059         $ 59,272         $ 61,414  
Operating profit         $ 21,524         $ 28,571         $ 28,783  
Net income         $ 14,448         $ 23,865         $ 23,079  
Diluted EPS         $ 0.42         $ 0.70         $ 0.67  
Adjusted net income*         $ 15,955         $ 23,514         $ 24,770  
Adjusted diluted EPS*         $ 0.47         $ 0.69         $ 0.72  
                           
Gross margin           8.1 %         8.9 %         9.2 %
Operating margin           3.5 %         4.3 %         4.3 %
Adjusted operating margin*           3.7 %         4.3 %         4.6 %
                           
ROIC*           10.8 %         14.0 %         14.4 %
Economic Return*           -0.2 %         3.0 %         3.4 %
                                       

*Refer to Non-GAAP Supplemental Information Tables 1 and 2 for 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.  Top 10 customers comprised 60% of revenue during the quarter, up five percentage points from the prior quarter.

 
Market Sector ($ in millions)         Three Months Ended
          Jan. 2, 2016
Q1F16
  Oct. 3, 2015
Q4F15
  Jan. 3, 2015
Q1F15
Networking/Communications         $ 157     25 %   $ 179     27 %   $ 234     35 %
Healthcare/Life Sciences           191     31 %     183     27 %     196     30 %
Industrial/Commercial           173     28 %     201     30 %     148     22 %
Defense/Security/Aerospace           96     16 %     106     16 %     87     13 %
Total Revenue         $   617         $   669         $   665      
 

Fiscal First Quarter 2016 Supplemental Information
ROIC for the fiscal first quarter of 2016 was 10.8%.  The Company defines ROIC as tax-effected annualized operating profit, before special items, divided by average invested capital over a two-quarter period for the first quarter.  Invested capital is defined as equity plus debt, less cash and cash equivalents.  The Company’s weighted average cost of capital for the first fiscal quarter of 2016 was 11.0%.  ROIC for the quarter less the Company’s weighted average cost of capital results in an economic return of -0.2%.

Fiscal first quarter cash cycle was 71 days. The Company delivered $21.3 million in cash from operations and used $11.8 million for capital investments during the quarter, resulting in positive free cash flow of $9.5 million.

 
Cash Conversion Cycle           Three Months Ended
            Jan. 2, 2016
Q1F16
  Oct. 3, 2015
Q4F15
  Jan. 3, 2015
Q1F15
Days in Accounts Receivable             53       53       52  
Days in Inventory             88       85       82  
Days in Accounts Payable             (59 )     (60 )     (53 )
Days in Cash Deposits             (11 )     (12 )     (9 )
Annualized Cash Cycle*             71       66       72  
 

*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 First Quarter 2016 Earnings Conference Call and Webcast
When:             Thursday, January 21, 2016 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/nnoa2mdj/lan/en

Conference call at +1.800.708.4539 with passcode: 41445105
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: 41445105
               

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, including as a result of a facility closure; 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; our ability to manage successfully and execute a complex business model characterized by high product mix, low volumes and demanding quality, regulatory, and other requirements; the ability to realize anticipated savings from restructuring or similar actions, as well as the adequacy of related charges as compared to actual expenses; increasing regulatory and compliance requirements; the potential effects of regional results on our taxes and ability to use deferred tax assets and net operating losses; 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 other Securities and Exchange Commission filings (particularly in "Risk Factors" in our fiscal 2015 Form 10-K).

 
PLEXUS
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
           
          Three Months Ended
          Jan. 2,       Jan. 3,
            2016           2015  
Net sales         $ 616,664         $ 664,690  
Cost of sales           566,605           603,276  
Gross profit           50,059           61,414  
Selling and administrative expenses           27,028           30,940  
Restructuring and impairment charges           1,507           1,691  
Operating income           21,524           28,783  
Other income (expense):                  
Interest expense           (3,534 )         (3,777 )
Interest income           932           897  
Miscellaneous           (1,620 )         138  
Income before income taxes           17,302           26,041  
Income tax expense           2,854           2,962  
Net income         $ 14,448         $ 23,079  
Earnings per share:                  
Basic         $ 0.43         $ 0.69  
Diluted         $ 0.42         $ 0.67  
Weighted average shares outstanding:                  
Basic           33,396           33,602  
Diluted           34,062           34,439  


 
PLEXUS
NON-GAAP SUPPLEMENTAL INFORMATION TABLE 1
(in thousands, except per share data)
(unaudited)
           
  Three Months Ended
  Jan. 2,   Oct. 3,   Jan. 3,
  2016   2015   2015
Operating profit, as reported $ 21,524     $ 28,571     $ 28,783  
Operating margin, as reported 3.5 %   4.3 %   4.3 %
           
Non-GAAP adjustments:          
Restructuring costs* 1,507         1,691  
           
Operating profit, as adjusted $ 23,031     $ 28,571     $ 30,474  
Operating margin, as adjusted 3.7 %   4.3 %   4.6 %
           
Net income, as reported $ 14,448     $ 23,865     $ 23,079  
           
Non-GAAP adjustments:          
Discrete tax benefit, net     (351 )    
Restructuring costs* 1,507         1,691  
           
Net income, as adjusted $ 15,955     $ 23,514     $ 24,770  
           
Diluted earnings per share, as reported $ 0.42     $ 0.70     $ 0.67  
           
Non-GAAP adjustments:          
Discrete tax benefit, net     (0.01 )    
Restructuring costs 0.05         0.05  
           
Diluted earnings per share, as adjusted $ 0.47     $ 0.69     $ 0.72  
           
*Summary of restructuring costs          
Employee termination and severance costs $ 1,394     $     $ 144  
Other exit costs 113         1,547  
Total restructuring costs $ 1,507     $     $ 1,691  
           


 
PLEXUS
NON-GAAP SUPPLEMENTAL INFORMATION Table 2
 (in thousands)
(unaudited)
                         
ROIC and Economic Return Calculations       Three Months Ended       Twelve Months Ended       Three Months Ended
        Jan. 2,       Oct. 3,       Jan. 3,
        2016       2015       2015
Operating profit         $ 21,524           $ 115,436           $ 28,783  
Restructuring and impairment charges         $ 1,507           $ 1,691           $ 1,691  
Adjusted operating profit         $ 23,031           $ 117,127           $ 30,474  
        x   4         x   1         x   4  
                               
                               
Annualized operating profit           92,124             117,127             121,896  
Tax rate       x   12 %       x   11 %       x   10 %
Tax impact           11,055             12,884             12,190  
Operating profit (tax effected)           81,069             104,243             109,706  
                               
Average invested capital       ÷ $ 753,078         ÷ $ 745,611         ÷ $ 759,676  
                               
ROIC           10.8 %           14.0 %           14.4 %
Weighted average cost of capital           11.0 %           11.0 %           11.0 %
Economic return           -0.2 %           3.0 %           3.4 %


 
  Three Months Ended
Average Invested Capital Jan. 2,   Oct. 3,   July 4,   April 4,   Jan. 3,   Sept. 27,
Calculations   2016       2015       2015       2015       2015       2014  
Equity $ 850,794     $ 842,272     $ 835,063     $ 808,468     $ 792,298     $ 781,133  
Plus:                      
Debt - current   2,864       3,513       4,281       4,774       4,793       4,368  
Debt – non-current   259,289       259,257       259,284       260,025       260,990       262,046  
Less:                      
Cash and cash equivalents   (354,728 )     (357,106 )     (354,830 )     (356,296 )     (239,685 )     (346,591 )
  $ 758,219     $ 747,936     $ 743,798     $ 716,971     $ 818,396     $ 700,956  
 

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 January 2, 2016 cash flow provided by operations was $21.3 million, less capital expenditures of $11.8 million, resulting in free cash flow of $9.5 million.

 
PLEXUS
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
(unaudited)
           
  Jan. 2,       Oct. 3,
    2016           2015  
ASSETS          
Current assets:          
Cash and cash equivalents $ 354,728         $ 357,106  
Accounts receivable   360,220           384,680  
Inventories   549,501           569,371  
Deferred income taxes   10,662           10,686  
Prepaid expenses and other   23,130           22,882  
Total current assets   1,298,241           1,344,725  
Property, plant and equipment, net   313,656           317,351  
Deferred income taxes   3,584           3,635  
Other   36,559           36,677  
Total non-current assets   353,799           357,663  
Total assets $ 1,652,040         $ 1,702,388  
           
LIABILITIES AND SHAREHOLDERS’ EQUITY          
Current liabilities:          
Current portion of long-term debt and capital lease obligations $ 2,864         $ 3,513  
Accounts payable   368,030           400,710  
Customer deposits   71,863           81,359  
Accrued salaries and wages   35,715           49,270  
Other accrued liabilities   40,030           44,446  
Total current liabilities   518,502           579,298  
Long-term debt and capital lease obligations, net of current portion   259,289           259,257  
Deferred income taxes   9,664           9,664  
Other liabilities   13,791           11,897  
Total non-current liabilities   282,744           280,818  
Total liabilities   801,246           860,116  
Shareholders’ equity:          
Common stock, $.01 par value, 200,000 shares authorized,                   
50,558 and 50,554 shares issued, respectively,                  
and 33,276 and 33,500 shares outstanding, respectively   506           506  
Additional paid-in-capital   500,888           497,488  
Common stock held in treasury, at cost, 17,282 and 17,054, respectively   (518,431 )         (509,968 )
Retained earnings   875,165           860,717  
Accumulated other comprehensive (loss) income   (7,334 )         (6,471 )
Total shareholders’ equity   850,794           842,272  
Total liabilities and shareholders’ equity $ 1,652,040         $ 1,702,388  


 
PLEXUS
REVENUE BY REPORTABLE GEOGRAPHIC SEGMENTS
(in thousands)
(unaudited)
                         
        Three Months Ended
        Jan. 2,       Oct. 3,       Jan. 3,
          2016           2015           2015  
Americas       $ 305,097         $ 359,142         $ 335,262  
Asia-Pacific         299,346           319,472           333,377  
Europe, Middle East, and Africa         42,087           42,556           28,079  
Elimination of inter-segment sales         (29,866 )         (52,440 )         (32,028 )
Total Revenue       $ 616,664         $ 668,730         $ 664,690  
 
Investor and Media Contact Susan Hanson +1.920.751.5491 susan.hanson@plexus.com