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Plexus Announces Fiscal Second Quarter 2016 Financial Results
  • Fiscal second quarter 2016 revenue of $619 million
  • GAAP diluted EPS of $0.50; non-GAAP diluted EPS of $0.55, excluding $0.05 per share of restructuring charges
  • Initiates fiscal third quarter 2016 revenue guidance of $640 to $670 million with non-GAAP diluted EPS of $0.73 to $0.81, excluding any restructuring or other charges

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

    Three Months Ended
    Apr 2, 2016   Apr 2, 2016   Jul 2, 2016
    Q2F16 Results       Q2F16 Guidance       Q3F16 Guidance
Summary GAAP Items          
Revenue (in millions) $ 619         $600 to $630     $640 to $670
Operating margin   3.8 %          
Diluted EPS $ 0.50            
             
Summary Non-GAAP Items (1)          
Non-GAAP operating margin (2)   4.1 %     3.6% to 4.0%   4.7% to 5.0%
Non-GAAP diluted EPS (2)(3) $ 0.55       $0.47 to $0.55   $0.73 to $0.81
Return on invested capital (ROIC)         11.6 %          
Economic Return   0.6 %          
             
(1) Refer to Non-GAAP Supplemental Information Tables 1 and 2 for a reconciliation to GAAP measures.
(2) Excludes restructuring charges of $1.9 million for the three months ended April 2, 2016.
(3) Includes stock-based compensation expense of $0.11 for Q2F16 results and $0.11 for Q3F16 guidance.
 

Additional Fiscal Second Quarter 2016 Information

  • Won 38 programs during the quarter representing approximately $174 million in annualized revenue when fully ramped into production
  • Trailing four quarter wins total approximately $667 million in annualized revenue
  • Purchased $7.3 million of our shares at an average price of $34.88 per share

Dean Foate, Chairman, President and CEO, commented, “Our fiscal second quarter revenue result was largely in-line with our guidance.  Non-GAAP diluted EPS was at the top end of our guidance range as a consequence of achieving many of our cost reduction and productivity improvements ahead of plan.  The greatly improved operational performance in our fiscal second quarter sets up our expectation that we will return to our target operating margin range of 4.7% to 5.0% in our fiscal third quarter; one quarter ahead of earlier expectations.  With fiscal third quarter revenue anticipated to be in the range of $640 to $670 million, we expect non-GAAP diluted EPS in the range of $0.73 to $0.81, before any restructuring charges.”

Patrick Jermain, Senior Vice President and CFO, commented, “We continue to see improvement in our working capital.  During the fiscal second quarter, our cash cycle improved 5 days sequentially and exceeded our expectations at 66 days.  Our improved cash cycle and management of our capital spending drove free cash flow of $65 million during the quarter, which exceeded our guidance.  As a result of projected revenue growth and continued progress on our productivity improvements, we expect to sustain our target operating margin range as we exit fiscal 2016.  Lastly, we believe that our stronger margin performance in combination with disciplined invested capital management sets a trajectory for improved ROIC performance.”

Quarterly Comparison     Three Months Ended
      Apr 2, 2016       Jan 2, 2016       Apr 4, 2015
(in thousands, except EPS)     Q2F16         Q1F16         Q2F15
Revenue     $ 618,660     $ 616,664     $ 651,285  
Gross profit     $ 53,272     $ 50,059     $ 59,777  
Operating profit     $ 23,346     $ 21,524     $ 29,452  
Net income     $ 16,787     $ 14,448     $ 23,594  
Diluted EPS     $ 0.50     $ 0.42     $ 0.69  
Adjusted net income*     $ 18,704     $ 15,955     $ 23,594  
Non-GAAP diluted EPS*     $ 0.55     $ 0.47     $ 0.69  
               
Gross margin       8.6 %     8.1 %     9.2 %
Operating margin       3.8 %       3.5 %       4.5 %
Adjusted operating margin*         4.1 %     3.7 %     4.5 %
                   
ROIC*       11.6 %     10.8 %     14.5 %
Economic Return*       0.6 %     -0.2 %     3.5 %
               
*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 58% of revenue during the quarter, down two percentage points from the prior quarter.

Market Sector ($ in millions)     Three Months Ended
      Apr 2, 2016
Q2F16
        Jan 2, 2016
Q1F16
        Apr 4, 2015
Q2F15
Networking/Communications     $ 157   25 %   $ 157   25 %   $ 210   32 %
Healthcare/Life Sciences     190   31 %   191   31 %   191   29 %
Industrial/Commercial     169   27 %   173   28 %   160   25 %
Defense/Security/Aerospace     103   17 %   96   16 %   90   14 %
Total Revenue       $ 619           $ 617           $ 651    
                                 

Fiscal Second Quarter 2016 Supplemental Information
ROIC for the fiscal second quarter of 2016 was 11.6%.  The Company defines ROIC as tax-effected annualized operating profit, before special items, divided by average invested capital over a three-quarter period for the second quarter.  Invested capital is defined as equity plus debt, less cash and cash equivalents.  The Company’s weighted average cost of capital is 11.0% for fiscal 2016.  ROIC for the second quarter less the Company’s weighted average cost of capital results in an economic return of 0.6%.

Fiscal second quarter cash cycle was 66 days.  The Company delivered $70.0 million in cash from operations and used $5.0 million for capital investments during the quarter, resulting in positive free cash flow of $65.0 million.

Cash Conversion Cycle     Three Months Ended
      Apr 2, 2016
Q2F16
  Jan 2, 2016
Q1F16
  Apr 4, 2015
Q2F15
Days in Accounts Receivable       48       53       48  
Days in Inventory       91       88       86  
Days in Accounts Payable         (62 )       (59 )       (63 )
Days in Cash Deposits         (11 )     (11 )     (12 )
Annualized Cash Cycle*       66       71       59  
 
*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 2016 Earnings Conference Call and Webcast
When: Thursday, April 21, 2016 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/287yxk62 
   
  Conference call at +1.888.771.4371 with passcode: 42104018
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: 42104018
   

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 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   Six Months Ended
    Apr 2,       Apr 4,         Apr 2,       Apr 4,
      2016       2015         2016       2015  
Net sales   $ 618,660     $ 651,285     $ 1,235,324     $ 1,315,975  
Cost of sales     565,388       591,508       1,131,993       1,194,784  
Gross profit     53,272       59,777       103,331       121,191  
Selling and administrative expenses     28,009       30,325       55,037       61,266  
Restructuring charges     1,917           3,424       1,691  
Operating income     23,346       29,452       44,870       58,234  
Other income (expense):                    
Interest expense     (3,674 )       (3,383 )     (7,208 )       (7,160 )
Interest income     1,015       788       1,947       1,686  
Miscellaneous     (1,128 )     (60 )     (2,748 )     78  
Income before income taxes     19,559       26,797       36,861       52,838  
Income tax expense     2,772       3,203       5,626       6,165  
Net income   $ 16,787     $ 23,594     $ 31,235     $ 46,673  
Earnings per share:                
Basic   $ 0.50     $ 0.70     $ 0.94     $ 1.39  
Diluted   $ 0.50     $ 0.69     $ 0.92     $ 1.36  
Weighted average shares outstanding:                
Basic     33,319       33,606       33,368       33,604  
Diluted     33,834       34,342       33,957       34,391  


PLEXUS
NON-GAAP SUPPLEMENTAL INFORMATION TABLE 1
(in thousands, except per share data)
(unaudited)
           
  Three Months Ended
  Apr 2,       Jan 2,       Apr 4,
  2016   2016   2015
Operating profit, as reported $ 23,346     $ 21,524     $ 29,452  
Operating margin, as reported 3.8 %   3.5 %   4.5 %
           
Non-GAAP adjustments:          
Restructuring costs* 1,917     1,507      
           
Operating profit, as adjusted $ 25,263     $ 23,031     $ 29,452  
Operating margin, as adjusted 4.1 %   3.7 %   4.5 %
           
Net income, as reported $ 16,787     $ 14,448     $ 23,594  
           
Non-GAAP adjustments:          
Restructuring costs* 1,917     1,507      
           
Net income, as adjusted $ 18,704     $ 15,955     $ 23,594  
           
Diluted earnings per share, as reported $ 0.50     $ 0.42     $ 0.69  
               
Non-GAAP adjustments:          
Restructuring costs 0.05     0.05      
           
Diluted earnings per share, as adjusted $ 0.55     $ 0.47     $ 0.69  
           
*Summary of restructuring costs          
Employee termination and severance costs   $ 1,656     $ 1,394     $  
Other exit costs 261     113      
Total restructuring costs $ 1,917     $ 1,507     $  
           


PLEXUS
NON-GAAP SUPPLEMENTAL INFORMATION Table 2
(in thousands)
(unaudited)
             
ROIC and Economic Return Calculations   Six Months Ended   Three Months Ended   Six Months Ended
    Apr 2,   Jan 2,   Apr 4,
    2016   2016   2015
Operating profit     $ 44,870       $ 21,524       $ 58,234  
Restructuring charges     3,424       1,507       1,691  
Adjusted operating profit     $ 48,294       $ 23,031       $ 59,925  
    x 2     x 4     x 2  
                   
                   
Annualized operating profit     $ 96,588       $ 92,124       $ 119,850  
Tax rate   x 11 %   x 12 %   x 10 %
Tax impact     10,625       11,055       11,985  
Operating profit (tax effected)     $ 85,963       $ 81,069       $ 107,865  
                       
Average invested capital   ÷ $ 743,112     ÷ $ 753,078     ÷ $ 745,441  
                   
ROIC     11.6 %     10.8 %     14.5 %
Weighted average cost of capital     11.0 %     11.0 %     11.0 %
Economic return       0.6 %     -0.2 %     3.5 %
                         


    Three Months Ended
Average Invested Capital   Apr 2,   Jan 2,   Oct 3,   Jul 4,   Apr 4,   Jan 3,   Sep 27,
Calculations     2016       2016       2015       2015       2015       2015       2014  
Equity   $ 871,111
    $ 850,794
    $ 842,272
    $ 835,063
    $ 808,468
    $ 792,298
    $ 781,133
 
Plus:                            
Debt - current     2,300       2,864       3,513       4,281       4,774       4,793       4,368  
Debt – non-current     259,565       259,289       259,257       259,284       260,025       260,990       262,046  
Less:                            
Cash and cash equivalents     (409,796 )     (354,728 )     (357,106 )     (354,830 )     (356,296 )     (239,685 )     (346,591 )
    $ 723,180
    $ 758,219
    $ 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 operations less capital expenditures.  For the three months ended April 2, 2016 cash flow provided by operations was $70.0 million, less capital expenditures of $5.0 million, resulting in free cash flow of $65.0 million.  For the six months ended April 2, 2016 cash flow provided by operations was $91.3 million, less capital expenditures of $16.8 million, resulting in free cash flow of $74.5 million.

PLEXUS
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
(unaudited)
       
  Apr 2,   Oct 3,
    2016       2015  
ASSETS      
Current assets:      
Cash and cash equivalents $ 409,796     $ 357,106  
Accounts receivable   325,392       384,680  
Inventories   563,291       569,371  
Deferred income taxes   10,522       10,686  
Prepaid expenses and other   27,095       22,882  
Total current assets   1,336,096       1,344,725  
Property, plant and equipment, net   307,227       317,351  
Deferred income taxes   3,591       3,635  
Other   36,610       36,677  
Total non-current assets   347,428       357,663  
Total assets $ 1,683,524     $ 1,702,388  
       
LIABILITIES AND SHAREHOLDERS’ EQUITY      
Current liabilities:      
Current portion of long-term debt and capital lease obligations $ 2,300     $ 3,513  
Accounts payable   383,092       400,710  
Customer deposits   70,620           81,359  
Accrued salaries and wages   31,252       49,270  
Other accrued liabilities   41,890       44,446  
Total current liabilities   529,154       579,298  
Long-term debt and capital lease obligations, net of current portion   259,565       259,257  
Deferred income taxes   9,664       9,664  
Other liabilities   14,030       11,897  
Total non-current liabilities   283,259       280,818  
Total liabilities   812,413       860,116  
Shareholders’ equity:      
Common stock, $.01 par value, 200,000 shares authorized,      
50,757 and 50,554 shares issued, respectively,        
and 33,267 and 33,500 shares outstanding, respectively   508       506  
Additional paid-in-capital   502,625       497,488  
Common stock held in treasury, at cost, 17,490 and 17,054, respectively     (525,706 )     (509,968 )
Retained earnings   891,952       860,717  
Accumulated other comprehensive income (loss)   1,732       (6,471 )
Total shareholders’ equity   871,111       842,272  
Total liabilities and shareholders’ equity $ 1,683,524     $ 1,702,388  
               


PLEXUS
REVENUE BY REPORTABLE GEOGRAPHIC SEGMENTS
(in thousands)
(unaudited)
             
    Three Months Ended
    Apr 2,   Jan 2,   Apr 4,
      2016           2016           2015  
Americas   $ 330,240     $ 305,097     $ 328,753  
Asia-Pacific     270,544       299,346       319,156  
Europe, Middle East, and Africa     43,703       42,087       35,773  
Elimination of inter-segment sales       (25,827 )       (29,866 )       (32,397 )
Total Revenue   $ 618,660     $ 616,664     $ 651,285  
                         
Investor and Media Contact
Susan Hanson
+1.920.751.5491
susan.hanson@plexus.com

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