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CST: 18/10/2019 08:46:54   

Plexus Announces Fiscal Third Quarter 2019 Financial Results

92 Days ago

  • Record quarterly revenue of $800 million during the fiscal third quarter of 2019
  • GAAP diluted EPS of $0.81
  • Initiates fiscal fourth quarter 2019 revenue guidance of $760 to $800 million with GAAP diluted EPS of $0.81 to $0.91, excluding any non-recurring charges 

NEENAH, Wis., July 17, 2019 (GLOBE NEWSWIRE) -- Plexus (NASDAQ: PLXS) today announced financial results for its fiscal third quarter ended June 29, 2019, and guidance for its fiscal fourth quarter ending September 28, 2019.

     
    Three Months Ended
    Jun 29, 2019   Jun 29, 2019   Sept 28, 2019
    Q3F19 Results   Q3F19 Guidance   Q4F19 Guidance
Summary GAAP Items          
Revenue (in millions) $800       $760 to $800   $760 to $800
Operating margin     4.3 %     4.3% to 4.7%   4.5% to 4.9%
Diluted EPS (1) $0.81       $0.76 to $0.86   $0.81 to $0.91
             
Summary Non-GAAP Items (2)          
Return on invested capital (ROIC)     12.9 %          
Economic return     3.9 %          
             
(1 Includes stock-based compensation expense of $0.18 for Q3F19 results, $0.17 for Q3F19 guidance and $0.18 for Q4F19 guidance.  Q4F19 guidance excludes any non-recurring charges. 

(2 Refer to Non-GAAP Supplemental Information in Tables 1 and 2 for non-GAAP financial measures and a reconciliation to GAAP.

Fiscal Third Quarter 2019 Information

  • Won 23 manufacturing programs during the quarter representing $227 million in annualized revenue when fully ramped into production
  • Trailing four quarter manufacturing wins total $938 million in annualized revenue when fully ramped into production
  • Purchased $44.4 million of our shares at an average price of $56.61 per share under our existing share repurchase program

Todd Kelsey, President and CEO, commented, “We achieved record revenue of $800 million in the fiscal third quarter, a 10% increase from the comparable quarter last year.  We delivered revenue at the high end of our guidance range through successful program ramps and healthy demand in our differentiated end markets.  GAAP EPS of $0.81 was in line with our expectations and met the midpoint of our guidance range.”

Patrick Jermain, Executive Vice President and CFO, commented, “During the fiscal third quarter, we continued to execute our capital allocation strategy by repatriating approximately $37 million of offshore cash.  Since the enactment of U.S. tax reform in our last fiscal year, we have brought back over $500 million.  We repurchased approximately $44 million of our shares during the fiscal third quarter, which was primarily funded with repatriated cash.”

Mr. Jermain continued, “On May 15, 2019, we refinanced our credit facility to take advantage of favorable pricing and improve our financial covenants.  In addition, the maximum commitment under the credit facility was expanded to $350 million, with the potential to increase it by an additional $250 million.  The maturity of the credit facility was extended to May 2024.  The amended facility provides us with additional borrowing capacity and flexibility in anticipation of future growth.” 

Mr. Kelsey continued, “Looking ahead to the fiscal fourth quarter, I am encouraged by the anticipated performance of our sectors that feature highly complex products and demanding regulatory environments.  We expect new program ramps and stable end markets within these sectors to soften the impact of a meaningful demand reduction in the Communications sector.  Therefore, we are guiding fiscal fourth quarter revenue in the range of $760 to $800 million, which is consistent with the range we provided for our fiscal third quarter guidance.  We expect continued improvement in operating performance and, as a result, we are guiding GAAP EPS in the range of $0.81 to $0.91.  This excludes any non-recurring charges as a result of addressing revenue declines in our Communications sector.” 

Mr. Kelsey concluded, “Looking forward to fiscal 2020, we expect another year of revenue growth as we continue to deliver meaningful wins performance and ramp new programs in our differentiated markets of Healthcare/Life Sciences, Aerospace/Defense and Industrial/Commercial.  In addition, I am pleased with the readiness of our state of the art facilities in which we invested during fiscal 2019, as well as the progress of our productivity initiatives. We anticipate a combination of these efforts will result in operating margin expansion and EPS leverage during fiscal 2020.”    

   
Quarterly Comparison Three Months Ended
  Jun 29, 2019   Mar 30, 2019   Jun 30, 2018
(in thousands, except EPS) Q3F19   Q2F19   Q3F18
Revenue $ 799,644     $ 789,051     $ 726,385  
Gross profit 71,030     70,636     67,821  
Operating income 34,403     33,174     32,446  
Net income 24,801     24,758     26,501  
Diluted earnings per share $ 0.81     $ 0.79     $ 0.79  
           
Gross margin   8.9 %     9.0 %     9.3 %
Operating margin   4.3 %     4.2 %     4.5 %
           
ROIC (1)   12.9 %     13.3 %     15.9 %
Economic return (1)   3.9 %     4.3 %     6.4 %
           
(1) Refer to Non-GAAP Supplemental Information in Tables 1 and 2 for non-GAAP financial measures discussed and/or disclosed in this release, such as adjusted net income, 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 54% of revenue during the fiscal third quarter, down two percentage points from the fiscal second quarter of 2019.

   
Business Segments ($ in millions) Three Months Ended
  Jun 29, 2019
Q3F19
  Mar 30, 2019
Q2F19
  Jun 30, 2018
Q3F18
Americas $ 367     $ 364     $ 298  
Asia-Pacific 385     378     384  
Europe, Middle East, and Africa 81     76     74  
Elimination of inter-segment sales (33 )   (29 )   (30 )
Total Revenue $ 800     $ 789     $ 726  
           


   
Market Sectors ($ in millions) Three Months Ended
  Jun 29, 2019
Q3F19
  Mar 30, 2019
Q2F19
  Jun 30, 2018
Q3F18
Healthcare/Life Sciences $ 309   39 %   $ 300   38 %   $ 266   37 %
Industrial/Commercial 248   31 %   250   32 %   225   31 %
Aerospace/Defense 151   19 %   140   18 %   115   16 %
Communications 92   11 %   99   12 %   120   16 %
Total Revenue $ 800       $ 789       $ 726    
                 

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 net income 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 continuing transitional effects of the U.S. Tax Cuts & Jobs Act (“U.S. Tax Reform”) and the one-time, non-executive employee bonus paid in the second quarter of fiscal 2018, which are not reflective of continuing operations. For a full reconciliation of non-GAAP measures to comparable GAAP measures, please refer to the attached Non-GAAP Supplemental Information Tables.

ROIC and Economic Return
ROIC for the fiscal third quarter was 12.9%. The Company defines ROIC for the fiscal third quarter as tax-effected annualized adjusted operating income divided by average invested capital over a four-quarter period. Invested capital is defined as equity plus debt, less cash and cash equivalents. The Company’s weighted average cost of capital for fiscal 2019 is 9.0%. ROIC for the fiscal third quarter less the Company’s weighted average cost of capital resulted in an economic return of 3.9%.

Free Cash Flow Calculation
The Company defines free cash flow as cash flows provided by operations less capital expenditures.  For the three months ended June 29, 2019, cash flows provided by operations were $41.5 million, less capital expenditures of $20.0 million, resulting in positive free cash flow of $21.5 million. For the nine months ended June 29, 2019, cash flows provided by operations was $7.0 million, less capital expenditures of $74.6 million, resulting in negative free cash flow of $67.6 million.

   
Cash Cycle Days Three Months Ended
  Jun 29, 2019
Q3F19
  Mar 30, 2019
Q2F19
  Jun 30, 2018
Q3F18
Days in Accounts Receivable 52     51     48  
Days in Contract Assets (1) 12     10     -  
Days in Inventory (1) 95     102     105  
Days in Accounts Payable (54 )   (61 )   (66 )
Days in Cash Deposits (16 )   (16 )   (14 )
Annualized Cash Cycle (1) 89     86     73  
           
(1) The Company calculates cash cycle as the sum of days in accounts receivable, contract assets and days in inventory, less days in accounts payable and days in cash deposits.  On September 30, 2018, the Company adopted Accounting Standards Update No. 2014-09 (“ASU 2014-09”), Revenue Recognition (Topic 606).  For the three months ended June 29, 2019 and March 30, 2019, cash cycle days include contract assets and an associated reduction in inventory.  As the guidance was adopted using a modified retrospective approach, no impact to prior periods was required to be recognized.
 

Conference Call and Webcast Information

What: Plexus Fiscal 2019 Q3 Earnings Conference Call and Webcast
When: Thursday, July 18, 2019 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 third quarter 2019 results will also be made available ahead of the conference call.

Conference call at +1.800.708.4540 with passcode: 48751712

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: 48751712
   

Investor and Media Contact
Heather Beresford
+1.920.751.3612
heather.beresford@plexus.com

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 19,000 individuals who are dedicated to providing global Design and Development, Supply Chain Solutions, New Product Introduction, Manufacturing, and Aftermarket Services.  Plexus is a global leader that specializes in serving customers in industries with highly complex products and demanding regulatory environments.  Plexus delivers customer service excellence to leading global companies by providing innovative, comprehensive solutions throughout the product’s lifecycle.  For more information about Plexus, visit our website at www.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 shortages and delays in obtaining components as a result of economic cycles, natural disasters or otherwise; the effects of tariffs and other trade protection measures; 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 effects 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 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, 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 2018 Form 10-K).

 
PLEXUS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
           
  Three Months Ended   Nine Months Ended
  Jun 29,   Jun 30,   Jun 29,   Jun 30,
  2019   2018   2019   2018
Net sales $ 799,644     $ 726,385     $ 2,354,239     $ 2,102,330  
Cost of sales 728,614     658,564     2,140,190     1,918,034  
Gross profit   71,030       67,821       214,049       184,296  
Selling and administrative expenses 36,627     35,375     109,521     102,978  
Operating income   34,403       32,446       104,528       81,318  
Other income (expense):              
Interest expense (3,711 )   (2,910 )   (9,105 )   (10,182 )
Interest income 445     1,068     1,410     4,049  
Miscellaneous, net (1,419 )   (1,052 )   (4,304 )   (1,875 )
Income before income taxes   29,718       29,552       92,529       73,310  
Income tax expense 4,917     3,051     20,744     133,012  
Net income (loss) $ 24,801     $ 26,501     $ 71,785     $ (59,702 )
Earnings (loss) per share:              
Basic $ 0.83     $ 0.81     $ 2.34     $ (1.79 )
Diluted $ 0.81     $ 0.79     $ 2.28     $ (1.79 )
Weighted average shares outstanding:              
Basic   29,912       32,796       30,637       33,300  
Diluted 30,635     33,651     31,420     33,300  


 
PLEXUS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
(unaudited)
       
  Jun 29,   Sept 29,
  2019   2018
ASSETS      
Current assets:      
Cash and cash equivalents $ 198,395     $ 297,269  
Restricted cash 7,004     417  
Accounts receivable 459,311     394,827  
Contract assets 105,201      
Inventories 757,206     794,346  
Prepaid expenses and other 30,584     30,302  
Total current assets   1,557,701       1,517,161  
Property, plant and equipment, net 381,351     341,306  
Deferred income taxes 10,827     10,825  
Intangible assets 7,214     8,239  
Other 59,138     55,111  
Total non-current assets   458,530       415,481  
Total assets $ 2,016,231     $ 1,932,642  
       
LIABILITIES AND SHAREHOLDERS’ EQUITY      
Current liabilities:      
Current portion of long-term debt and capital lease obligations $ 138,976     $ 5,532  
Accounts payable 430,586     506,322  
Customer deposits 130,626     90,782  
Accrued salaries and wages 68,016     66,874  
Other accrued liabilities 107,432     68,163  
Total current liabilities   875,636       737,673  
Long-term debt and capital lease obligations, net of current portion 187,581     183,085  
Accrued income taxes payable 58,296     56,130  
Deferred income taxes 14,829     14,376  
Other liabilities 19,098     20,235  
Total non-current liabilities   279,804       273,826  
Total liabilities   1,155,440       1,011,499  
Shareholders’ equity:      
Common stock, $.01 par value, 200,000 shares authorized,      
52,862 and 52,567 shares issued, respectively,      
and 29,487 and 31,838 shares outstanding, respectively 529     526  
Additional paid-in-capital 592,316     581,488  
Common stock held in treasury, at cost, 23,375 and 20,729, respectively (861,842 )   (711,138 )
Retained earnings 1,141,846     1,062,246  
Accumulated other comprehensive loss (12,058 )   (11,979 )
Total shareholders’ equity   860,791       921,143  
Total liabilities and shareholders’ equity $ 2,016,231     $ 1,932,642  
       


PLEXUS CORP. AND SUBSIDIARIES
NON-GAAP SUPPLEMENTAL INFORMATION Table 1
(in thousands, except per share data)
(unaudited)
                     
    Three Months Ended   Nine Months Ended
    Jun 29,   Mar 30,   June 30,   June 29,   June 30,
    2019   2019   2018   2019   2018
Gross profit, as reported $ 71,030     $ 70,636     $ 67,821     $ 214,049     $ 184,296  
Gross margin, as reported 8.9 %   9.0 %   9.3 %   9.1 %   8.8 %
                     
Non-GAAP adjustments:                  
  One-time employee bonus (1)                 12,590  
Adjusted gross profit $ 71,030     $ 70,636     $ 67,821     $ 214,049     $ 196,886  
Adjusted gross margin 8.9 %   9.0 %   9.3 %   9.1 %   9.4 %
                     
Operating income, as reported 34,403     33,174     32,446     104,528     81,318  
Operating margin, as reported 4.3 %   4.2 %   4.5 %   4.4 %   3.9 %
                     
Non-GAAP adjustments:                  
  One-time employee bonus (1)                 13,512  
Adjusted operating income $ 34,403     $ 33,174     $ 32,446     $ 104,528     $ 94,830  
Adjusted operating margin 4.3 %   4.2 %   4.5 %   4.4 %   4.5 %
                     
Net income (loss), as reported $ 24,801     $ 24,758     $ 26,501     $ 71,785     $ (59,702 )
                     
Non-GAAP adjustments:                  
  One-time employee bonus, net of tax (1)                 13,176  
  Non-recurring tax impacts (2)             7,035     124,512  
Adjusted net income $ 24,801     $ 24,758     $ 26,501     $ 78,820     $ 77,986  
                     
Diluted weighted average shares outstanding, as reported 30,635     31,385     33,651     31,420     33,300  
Diluted weighted average shares outstanding, as adjusted (3) 30,635     31,385     33,651     31,420     34,242  
                     
Diluted earnings (loss) per share, as reported $ 0.81     $ 0.79     $ 0.79     $ 2.28     $ (1.79 )
                     
Non-GAAP per share adjustments:                  
  One-time employee bonus, net of tax (1)                 0.38  
  Impact of dilutive shares excluded from GAAP results due to the net loss position (3)                 0.05  
  Non-recurring tax impacts (2)             0.23     3.64  
Adjusted diluted earnings per share $ 0.81     $ 0.79     $ 0.79     $ 2.51     $ 2.28  
                     
(1 ) During the nine months ended June 30, 2018, a $13.5 million one-time, non-executive 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 the three months ended December 29, 2018, non-recurring tax expense of $7.0 million was recorded in accordance with new regulations issued in November 2018 under U.S. Tax Reform.  These regulations impacted the treatment of foreign taxes paid.

During the nine months ended June 30, 2018, $124.5 million of tax expense was recorded as a result of the enactment of U.S. Tax Reform. The results for the nine months ended June 30, 2018, were not impacted by U.S. Tax Reform as the provisional amounts recorded in the three months ended December 30, 2017, remained unchanged at that time.

(3 ) For the nine months ended June 30, 2018, the total weighted average number of potentially-dilutive securities was 0.9 million. However, these securities 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.


 
PLEXUS CORP. AND SUBSIDIARIES
NON-GAAP SUPPLEMENTAL INFORMATION Table 2
 (in thousands)
(unaudited)
           
ROIC and Economic Return Calculations Nine Months Ended   Six Months Ended   Nine Months Ended
  Jun 29,   Mar 30,   Jun 30,
  2019   2019   2018
Operating income, as reported   $ 104,528         $ 70,125         $ 81,318    
One-time employee bonus +       +       + 13,512    
Adjusted operating income   $ 104,528         $ 70,125         $ 94,830    
  ÷ 3       ÷     ÷ 3    
    34,843               31,610    
  x 4       x 2       x 4    
                 
Adjusted annualized operating income   $ 139,372         $ 140,250         $ 126,440    
Adjusted effective tax rate x   15 %     x   15 %     x   10 %  
Tax impact   20,906         21,038         12,644    
Adjusted operating income (tax effected)   $ 118,466         $ 119,212         $ 113,796    
                 
Average invested capital ÷ $ 921,435       ÷ $ 898,929       ÷ $ 716,374    
                 
ROIC     12.9 %         13.3 %         15.9 %  
Weighted average cost of capital -   9.0 %     -   9.0 %     -   9.5 %  
Economic return     3.9 %         4.3 %         6.4 %  


     
    Three Months Ended
Average Invested Capital   Jun 29,   Mar 30,   Dec 29,   Sept 29,
Calculations   2019    2019    2018    2018 
Equity   $ 860,791     $ 875,444     $ 905,163     $ 921,143  
Plus:                
Debt - current   138,976     93,197     8,633     5,532  
Debt - long-term   187,581     187,120     187,567     183,085  
Less:                
Cash and cash equivalents   (198,395 )   (184,028 )   (188,799 )   (297,269 )
    $ 988,953     $ 971,733     $ 912,564     $ 812,491  


   
  Three Months Ended
Average Invested Capital   Jun 30,   Mar 31,   Dec 30,   Sept 30,
Calculations   2018    2018    2017    2017 
Equity   $ 882,360     $ 920,503     $ 933,849     $ 1,025,939  
Plus:                
Debt - current   6,365     180,772     179,881     286,934  
Debt - long-term   180,204     27,217     26,047     26,173  
Less:                
Cash and cash equivalents   (332,723 )   (402,470 )   (506,694 )   (568,860 )
    $ 736,206     $ 726,022     $ 633,083     $ 770,186  

 

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