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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 ComparisonThree 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 CycleThree 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 reported4.3% 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 adjusted4.3% 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 CalculationsTwelve 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
x4
Annualized operating profit 117,127 118,076 111,887
Tax ratex 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 CapitalOct. 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.

Source: Plexus