• Plexus Announces Fiscal Second Quarter 2018 Financial Results

    Source: Nasdaq GlobeNewswire / 25 Apr 2018 16:15:54   America/New_York

    • Record quarterly revenue of $699 million during the fiscal second quarter of 2018
    • GAAP diluted EPS of $0.36; non-GAAP adjusted diluted EPS of $0.74, excluding $0.38 per share related to the previously announced one-time bonus paid to full-time, non-executive employees
    • Initiates fiscal third quarter 2018 revenue guidance of $700 to $740 million with GAAP diluted EPS of $0.76 to $0.86

    NEENAH, Wis., April 25, 2018 (GLOBE NEWSWIRE) -- Plexus (NASDAQ:PLXS) today announced financial results for its fiscal second quarter ended March 31, 2018, and guidance for its fiscal third quarter ending June 30, 2018.

     Three Months Ended
     Mar 31, 2018   Mar 31, 2018   June 30, 2018
     Q2F18 Results Q2F18 Guidance (1) Q3F18 Guidance
    Summary GAAP Items      
    Revenue (in millions) $699  $670 to $710          $700 to $740         
    Operating margin 2.5% 4.3% to 4.7%          4.6% to 5.0%         
    Diluted earnings per share (2) $0.36  $0.68 to $0.78          $0.76 to $0.86         
    Summary Non-GAAP Items (3)      
    Adjusted operating margin 4.4%    
    Adjusted diluted EPS $0.74     
    Return on invested capital (ROIC) 15.6%    
    Economic Return 6.1%    

    (1)Q2F18 guidance did not reflect Plexus' subsequent decision to pay the one-time, non-executive employee bonus, which, as noted above, had an impact of $0.38 per share; see Non-GAAP Supplemental Information and related tables for additional detail.
    (2)Includes stock-based compensation expense of $0.13 for both Q2F18 results and Q3F18 guidance.
    (3)Refer to Non-GAAP Supplemental Information in Tables 1 and 2 for non-GAAP financial measures and a reconciliation to GAAP.  Adjusted gross margin, adjusted operating margin and adjusted diluted EPS for the three months ended March 31, 2018, exclude the impact of the one-time, non-executive employee bonus.

    Fiscal Second Quarter 2018 Information

    • Won 41 manufacturing programs during the quarter representing approximately $255 million in annualized revenue when fully ramped into production
    • Trailing four quarter manufacturing wins total approximately $847 million in annualized revenue when fully ramped into production
    • Purchased $31.6 million of our shares at an average price of $61.63 per share under our existing share repurchase program

    Todd Kelsey, President and CEO, commented, “We finished our fiscal second quarter with record revenue of $699 million as our Industrial/Commercial market sector strengthened during the quarter and our Healthcare/Life Sciences and Aerospace/Defense market sectors achieved solid sequential growth.  The result was near the high-end of our guidance range and up approximately 16% from the comparable quarter last year.  Our manufacturing wins were at the highest quarterly level in nearly four years at $255 million, positioning us well for continued future growth.”

    Patrick Jermain, Senior Vice President and CFO, commented, “As a result of U.S. Tax Reform enabling us to more efficiently access offshore cash, on February 20, 2018, we announced a revised capital allocation strategy intended to fund growth investments and enhance shareholder value.  During the fiscal second quarter, we successfully repatriated approximately $280 million from our APAC region.  We deployed the cash, as intended, by funding working capital investments, accelerating our share repurchase program, rewarding our non-executive employees through a one-time bonus and reducing borrowing under our revolving credit facility.  We anticipate repatriating an additional $150 million during the fiscal third quarter while continuing to execute our revised capital allocation strategy.”

    Mr. Kelsey concluded, “We are establishing revenue guidance of $700 to $740 million for the fiscal third quarter as we anticipate another quarter of record revenue.  The mid-point of this guidance suggests we will achieve approximately 3% sequential quarterly revenue growth and more than 15% revenue growth from the comparable quarter last year.  Further, our success ramping new programs, coupled with improving end markets, provides us increasing optimism that we will achieve revenue growth in line with our 12% target in fiscal 2018.  We continue to anticipate that our operating margin will return to our target range of 4.7% to 5.0% for the remainder of fiscal 2018.  Consistent with these expectations, we are guiding fiscal third quarter 2018 GAAP diluted EPS of $0.76 to $0.86.”

    Quarterly ComparisonThree Months Ended
     Mar 31, 2018 Dec 30, 2017 Apr 1, 2017
    (in thousands, except EPS)Q2F18 Q1F18 Q2F17
    Revenue$698,651  $677,294  $604,349 
    Gross profit52,952  63,523  63,800 
    Operating income17,315  31,557  32,571 
    Net income (loss)12,290  (98,493) 29,295 
    Diluted earnings (loss) per share$0.36  $(2.93) $0.84 
    Adjusted net income (1)25,466  26,019  29,295 
    Adjusted diluted EPS (1)$0.74  $0.75  $0.84 
    Gross margin7.6% 9.4% 10.6%
    Adjusted gross margin (1)9.4% 9.4% 10.6%
    Operating margin2.5% 4.7% 5.4%
    Adjusted operating margin (1)4.4% 4.7% 5.4%
    ROIC15.6% 16.2% 16.8%
    Economic Return6.1% 6.7% 6.3%

    (1)Refer to Non-GAAP Supplemental Information in Tables 1 and 2 for non-GAAP financial measures discussed in this release, such as adjusted gross margin, adjusted gross profit, adjusted operating income, adjusted operating margin, adjusted diluted EPS, ROIC and Economic Return, and a reconciliation of these measures to GAAP. 

    Business Segment and Market Sector Revenue

    The Company measures operational performance and allocates resources on a geographic segment basis.  Plexus also 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.  Top 10 customers comprised 58% of revenue during the quarter, consistent with the fiscal first quarter of 2018.

    Business Segments ($ in millions)Three Months Ended
     Mar 31, 2018   Dec 30, 2017   Apr 1, 2017
     Q2F18 Q1F18 Q2F17
    Americas$302  299  $272 
    Asia-Pacific350  346  310 
    Europe, Middle East, and Africa74  64  44 
    Elimination of inter-segment sales(27) (32) (22)
    Total Revenue$699  $677  $604 

    Market Sectors ($ in millions)Three Months Ended
     Mar 31, 2018 Dec 30, 2017 Apr 1, 2017
     Q2F18 Q1F18 Q2F17
    Healthcare/Life Sciences$248 35% $237 35% $205 34%
    Industrial/Commercial242 35% 207 30% 192 32%
    Communications99 14% 133 20% 108 18%
    Aerospace/Defense110 16% 100 15% 99 16%
    Total Revenue$699   $677   $604  

    Non-GAAP Supplemental Information
    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 management and investors additional insight into financial performance.  In addition, management uses these and other non-GAAP measures, such as adjusted operating income, adjusted operating margin, and adjusted diluted EPS, to provide a better understanding of core performance for purposes of period-to-period comparisons.  Plexus believes that these measures are also useful to investors because they provide further insight by eliminating the effect of items, such as the one-time, non-executive employee bonus and the transitional effects of the U.S. Tax Cuts & Jobs Act (“U.S. Tax Reform”), that are not reflective of continuing operations.  For a full reconciliation of non-GAAP measures to comparable GAAP measures, please refer to Non-GAAP Supplemental Information and the attached Non-GAAP Supplemental Information Tables.

    ROIC and Economic Return
    ROIC for the fiscal second quarter of 2018 was 15.6%.  The Company defines ROIC as tax-effected annualized adjusted operating income 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 for fiscal 2018 is 9.5%.  ROIC for the quarter less the Company’s weighted average cost of capital resulted in an economic return of 6.1%.

    Free Cash Flow Calculation
    The Company defines free cash flow as cash flows provided by operations less capital expenditures.  For the three months ended March 31, 2018, cash flows used in operations was $66.3 million, less capital expenditures of $12.4 million, resulting in negative free cash flow of $78.7 million. For the six months ended March 31, 2018, cash flows provided by operations was $2.8 million, less capital expenditures of $29.1 million, resulting in negative free cash flow of $26.3 million.

    Cash Cycle DaysThree Months Ended
     Mar 31, 2018 Dec 30, 2017 Apr 1, 2017
     Q2F18 Q1F18 Q2F17
    Days in Accounts Receivable52 45 48
    Days in Inventory100 100 103
    Days in Accounts Payable(61) (63) (64)
    Days in Cash Deposits(15) (15) (14)
    Annualized Cash Cycle*76 67 73
    * 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 Q2 2018 Earnings Conference Call and Webcast
    When:Thursday, April 26, 2018 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, https://plexus.gcs-web.com/events-and-presentations/upcoming-events, where a slide presentation reviewing fiscal second quarter 2018 results will also be made available ahead of the conference call. 

    Conference call at +1.800.708.4539 with passcode: 46687589 

    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: 46687589

    Investor and Media Contact
    Susan Hanson

    About Plexus – The Product Realization Company
    Since 1979, Plexus has been partnering with companies to create the products that build a better world.  We are a team of over 16,000, providing global Design and Development, Supply Chain Solutions, New Product Introduction, Manufacturing, and Aftermarket Services.  Plexus is an industry leader that specializes in serving customers with complex products used in demanding regulatory environments.  With a culture built around innovation and customer service, Plexus’ teams create customized end-to-end solutions to assure the realization of the most intricate products.  For more information about Plexus, visit our website, plexus.com.

    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 transitions between Company facilities; 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; risks related to information technology systems and data security; the effects of U.S. Tax Reform and of related foreign jurisdiction tax developments; current or potential future barriers to the repatriation of funds that are currently held outside of the United States as a result of actions taken by other countries or otherwise; the potential effects of jurisdictional results on our taxes, tax rates, and our ability to use deferred tax assets and net operating losses; 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 effects of changes in economic conditions, political conditions, tariffs, other trade protection measures, and tax matters in the United States and in the other countries in which we do business (including as a result of the United Kingdom’s pending exit from the European Union); the potential effect of other 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; changes in financial accounting standards; and other risks detailed herein and in our other Securities and Exchange Commission filings (particularly in "Risk Factors" in our fiscal 2017 Form 10-K).

    (in thousands, except per share data)
     Three Months Ended Six Months Ended
     Mar 31, Apr 1, Mar 31, Apr 1,
     2018 2017 2018 2017
    Net sales$698,651  $604,349  $1,375,945  $1,239,368 
    Cost of sales645,699  540,549  1,259,470  1,111,212 
    Gross profit 52,952   63,800  116,475  128,156 
    Selling and administrative expenses35,637  31,229  67,603  61,682 
    Operating income 17,315   32,571  48,872  66,474 
    Other income (expense):       
    Interest expense(3,547) (3,262) (7,272) (6,536)
    Interest income1,426  1,185  2,981  2,256 
    Miscellaneous(477) 1,925  (823) 1,251 
    Income before income taxes 14,717   32,419  43,758  63,445 
    Income tax expense2,427  3,124  129,961  5,971 
    Net income (loss)$12,290  $29,295  $(86,203) $57,474 
    Earnings (loss) per share:       
    Basic$0.37  $0.87  $(2.57) $1.71 
    Diluted$0.36  $0.84  $(2.57) $1.66 
    Weighted average shares outstanding:       
    Basic 33,538   33,703   33,552   33,619 
    Diluted34,387  34,702  33,552  34,631 

    (in thousands, except per share data)
     Mar 31, Sept 30,
     2018 2017
    Current assets:   
    Cash and cash equivalents$402,470  $568,860 
    Restricted cash845  394 
    Accounts receivable400,262  365,513 
    Inventories701,666  654,642 
    Prepaid expenses and other32,313  28,046 
    Total current assets 1,537,556   1,617,455 
    Property, plant and equipment, net324,484  314,665 
    Deferred income taxes5,464  5,292 
    Other42,470  38,770 
    Total non-current assets 372,418   358,727 
        Total assets$1,909,974  $1,976,182 
    Current liabilities:   
    Current portion of long-term debt and capital lease obligations$180,772  $286,934 
    Accounts payable431,659  413,999 
    Customer deposits104,914  107,837 
    Accrued salaries and wages48,973  49,376 
    Other accrued liabilities66,844  49,445 
    Total current liabilities 833,162   907,591 
    Long-term debt and capital lease obligations, net of current portion27,217  26,173 
    Accrued income taxes payable91,905   
    Deferred income taxes19,738   
    Other Liabilities17,449  16,479 
    Total non-current liabilities 156,309   42,652 
        Total liabilities 989,471   950,243 
    Shareholders’ equity:   
    Common stock, $.01 par value, 200,000 shares authorized,   
    52,435 and 51,934 shares issued, respectively,   
    and 33,293 and 33,464 shares outstanding, respectively524  519 
    Additional paid-in-capital567,535  555,297 
    Common stock held in treasury, at cost, 19,142 and 18,470 shares, respectively(615,263) (574,104)
    Retained earnings963,003  1,049,206 
    Accumulated other comprehensive income (loss)4,704  (4,979)
    Total shareholders’ equity 920,503   1,025,939 
        Total liabilities and shareholders’ equity$1,909,974  $1,976,182 


    (in thousands, except per share data)
     Three Months Ended Six Months Ended
     Mar 31, Dec 30, Apr 1, Mar 31, Apr 1,
     2018 2017 2017 2018 2017
    Gross profit, as reported$52,952  $63,523  $63,800  $116,475  $128,156 
    Gross margin, as reported7.6% 9.4% 10.6% 8.5% 10.3%
    Non-GAAP adjustments:         
    One-time employee bonus (1)12,590      12,590   
    Adjusted gross profit$65,542  $63,523  $63,800  $129,065  $128,156 
    Adjusted gross margin9.4% 9.4% 10.6% 9.4% 10.3%
    Operating income, as reported$17,315  $31,557  $32,571  $48,872  $66,474 
    Operating margin, as reported2.5% 4.7% 5.4% 3.6% 5.4%
    Non-GAAP adjustments:         
    One-time employee bonus (1)13,512      13,512   
    Adjusted operating income$30,827  $31,557  $32,571  $62,384  $66,474 
    Adjusted operating margin4.4% 4.7% 5.4% 4.5% 5.4%
    Net income (loss), as reported$12,290  $(98,493) $29,295  $(86,203) $57,474 
    Non-GAAP adjustments:         
    One-time employee bonus, net of tax (1)13,176      13,176   
    Income tax expense due to U.S. Tax Reform (2)  124,512    124,512   
    Adjusted net income$25,466  $26,019  $29,295  $51,485  $57,474 
    Diluted weighted average shares outstanding, as reported34,387  33,567  34,702  33,552  34,631 
    Diluted weighted average shares outstanding, as adjusted (3)34,387  34,630  34,702  34,487  34,631 
    Diluted earnings (loss) per share, as reported$0.36  $(2.93) $0.84  $(2.57) $1.66 
    Non-GAAP per share adjustments:         
    One-time employee bonus, net of tax (1)0.38      0.38   
    Impact of dilutive shares excluded from GAAP results due to the net loss position (3)  0.09    0.09   
    Income tax expense due to U.S. Tax Reform (2)  3.59    3.59   
    Adjusted diluted earnings per share$0.74  $0.75  $0.84  $1.49  $1.66 

    (1)During Q2F18, a $13.5 million one-time employee bonus was paid; of this amount, $12.6 million was recorded in cost of sales and $0.9 million was recorded in selling and administrative expenses in the accompanying Condensed Consolidated Statements of Operations.
    (2)During Q1F18, $124.5 million of tax expense was recorded as a result of the enactment of U.S. Tax Reform.  The results for the three months ended March 31, 2018, were not impacted by U.S. Tax(2) Reform as the provisional amounts recorded in Q1F18 remain unchanged.
    (3)For the three months ended December 30, 2017 and the six months ended March 31, 2018, the total weighted average number of potentially-dilutive shares was 1.1 million and 2.0 million, respectively. However, these shares were not included in the computation of GAAP diluted net loss per share since to do so would have decreased the loss per share.  No shares were excluded in any of the other reported periods.

     (in thousands)
    ROIC and Economic Return CalculationsSix Months Ended Three Months Ended Six Months Ended
     Mar 31, Dec 30, Apr 1,
     2018 2017 2017
    Operating income, as reported $48,872   $31,557   $66,474 
    One-time employee bonus+13,512       
    Adjusted operating income 62,384   31,557   66,474 
     x2  x4  x2 
    Adjusted annualized operating income $124,768   $126,228   $132,948 
    Adjusted effective tax ratex11% x10% x9%
    Tax impact 13,724   12,623   11,965 
    Adjusted operating income (tax effected) $111,044   $113,605   $120,983 
    Average invested capital÷$709,764  ÷$701,635  ÷$718,524 
    ROIC 15.6%  16.2%  16.8%
    Weighted average cost of capital9.5% 9.5% 10.5%
    Economic return 6.1%  6.7%  6.3%

     Three Months Ended
    Average Invested CapitalMar 31, Dec 30, Sept 30, Jul 1, Apr 1, Dec 31, Oct 1,
    Calculations2018  2017  2017  2017  2017  2016  2016 
    Equity$920,503  $933,849  $1,025,939  $991,306  $961,438  $927,542  $916,797 
    Debt - current180,772  179,881  286,934  267,297  92,623  78,879  78,507 
    Debt - long-term27,217  26,047  26,173  26,138  185,638  184,136  184,002 
    Cash and cash equivalents(402,470) (506,694) (568,860) (519,172) (524,520) (496,505) (432,964)
     $726,022  $633,083  $770,186  $765,569  $715,179  $694,052  $746,342 

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