Plexus Corp 10-Q for FY2021 Q3

Plexus Corp (PLXS)

10-Q 2021-08-06 For: 2021-07-03

Added on April 12, 2026

About this 10-Q

Plexus Corp filed this 10-Q on August 6, 2021, covering the quarter ended July 3, 2021 (FY2021 Q3).

Headline figures

Quarter ended July 3, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $842.33M; down 4.3% from $880.05M a year earlier
Net income: $27.61M; down 23.0% from net income of $35.84M a year earlier
Diluted EPS: $0.95; down 20.8% from $1.20 a year earlier

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Wisconsin						39-1344447
(State or other jurisdiction of incorporation)						(I.R.S. Employer Identification No.)


Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, $0.01 par value	PLXS	The Nasdaq Global Select Market



PART I. FINANCIAL INFORMATION			3
ITEM 1. FINANCIAL STATEMENTS			3
Condensed Consolidated Statements of Comprehensive Income			3
Condensed Consolidated Balance Sheets			4
Condensed Consolidated Statements of Shareholders' Equity			5
Condensed Consolidated Statements of Cash Flows			6
Notes to Condensed Consolidated Financial Statements			7
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			21
"Safe Harbor" Cautionary Statement Under the Private Securities Litigation Reform Act of 1995			21
Overview			21
Results of Operations			22
Liquidity of Capital Resources			27
Disclosure About Critical Accounting Policies			32
New Accounting Pronouncements			32
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			32
ITEM 4. CONTROLS AND PROCEDURES			32
PART II. OTHER INFORMATION			33
ITEM 1A. Risk Factors			33
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds			34
ITEM 6. Exhibits			34
SIGNATURES			36


	Three Months Ended				Nine Months Ended
	July 3, 2021		July 4, 2020		July 3, 2021		July 4, 2020
Net sales	$	814,387	$	857,394	$	2,525,627	$	2,477,167
Cost of sales	740,337		774,513		2,281,298		2,253,651
Gross profit	74,050		82,881		244,329		223,516
Selling and administrative expenses	36,439		37,028		107,136		114,517
Restructuring and impairment charges	1,238		—		3,267		6,003
Operating income	36,373		45,853		133,926		102,996
Other income (expense):
Interest expense	(3,190)		(3,988)		(11,094)		(11,934)
Interest income	308		368		1,072		1,546
Miscellaneous, net	(579)		(600)		(2,922)		(2,619)
Income before income taxes	32,912		41,633		120,982		89,989
Income tax expense	5,303		5,791		15,411		10,215
Net income	$	27,609	$	35,842	$	105,571	$	79,774
Earnings per share:
Basic	$	0.97	$	1.23	$	3.68	$	2.73
Diluted	$	0.95	$	1.20	$	3.60	$	2.66
Weighted average shares outstanding:
Basic	28,529		29,199		28,708		29,210
Diluted	29,068		29,793		29,298		29,936
Comprehensive income:
Net income	$	27,609	$	35,842	$	105,571	$	79,774
Other comprehensive income (loss):
Derivative instrument fair value adjustment	(1,218)		3,178		(1,719)		(1,138)
Foreign currency translation adjustments	1,434		5,586		6,730		3,463
Other comprehensive income	216		8,764		5,011		2,325
Total comprehensive income	$	27,825	$	44,606	$	110,582	$	82,099


	July 3, 2021		October 3, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	303,255	$	385,807
Restricted cash	4,242		2,087
Accounts receivable, net of allowances of $1,623 and $3,597, respectively	469,352		482,086
Contract assets	114,022		113,946
Inventories, net	874,718		763,461
Prepaid expenses and other	46,151		31,772
Total current assets	1,811,740		1,779,159
Property, plant and equipment, net	380,545		383,661
Operating lease right-of-use assets	66,838		69,879
Deferred income taxes	25,015		21,422
Other assets	37,299		35,727
Total non-current assets	509,697		510,689
Total assets	$	2,321,437	$	2,289,848

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt and finance lease obligations	$	60,468	$	146,829
Accounts payable	579,571		516,297
Customer deposits	179,831		159,972
Accrued salaries and wages	67,943		76,927
Other accrued liabilities	113,746		103,492
Total current liabilities	1,001,559		1,003,517
Long-term debt and finance lease obligations, net of current portion	187,690		187,975
Long-term accrued income taxes payable	47,974		53,899
Long-term operating lease liabilities	33,193		36,779
Deferred income taxes payable	6,475		6,433
Other liabilities	24,096		23,765
Total non-current liabilities	299,428		308,851
Total liabilities	1,300,987		1,312,368
Commitments and contingencies
Shareholders’ equity:
Preferred stock, $0.01 par value, 5,000 shares authorized, none issued or outstanding	—		—
Common stock, $0.01 par value, 200,000 shares authorized, 53,848 and 53,525 shares issued, respectively, and 28,377 and 29,002 shares outstanding, respectively	538		535
Additional paid-in capital	633,151		621,564
Common stock held in treasury, at cost, 25,471 and 24,523 shares, respectively	(1,013,841)		(934,639)
Retained earnings	1,400,650		1,295,079
Accumulated other comprehensive loss	(48)		(5,059)
Total shareholders’ equity	1,020,450		977,480
Total liabilities and shareholders’ equity	$	2,321,437	$	2,289,848


☒						QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐						TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


	July 3, 2021		October 3, 2020
Raw materials	$	754,762	$	630,833
Work-in-process	44,397		53,602
Finished goods	75,559		79,026
Total inventories, net	$	874,718	$	763,461


	July 3, 2021		October 3, 2020
4.05% Senior Notes, due June 15, 2025	$	100,000	$	100,000
4.22% Senior Notes, due June 15, 2028	50,000		50,000
Borrowings under the revolving commitment	50,000		—
Term Loans, due April 28, 2021	—		138,000
Finance lease and other financing obligations	49,164		48,435
Unamortized deferred financing fees	(1,006)		(1,631)
Total obligations	248,158		334,804
Less: current portion	(60,468)		(146,829)
Long-term debt, finance lease and other financing obligations, net of current portion	$	187,690	$	187,975


Derivative Impact on Gain (Loss) Recognized in Condensed Consolidated Statements of Comprehensive Income (in thousands)
for the Three Months Ended
Derivatives in cash flow hedging relationships	Classification of Gain (Loss) Reclassified from Accumulated OCL into Income	Amount of Gain (Loss) Reclassified from Accumulated OCL into Income
		July 3, 2021		July 4, 2020
Foreign currency forward contracts	Cost of sales	$	1,290	$	(1,102)
Foreign currency forward contracts	Selling and administrative expenses	$	92	$	(86)


Derivative Impact on Gain (Loss) Recognized in Condensed Consolidated Statements of Comprehensive Income (in thousands)
for the Nine Months Ended
Derivatives in cash flow hedging relationships	Classification of Gain (Loss) Reclassified from Accumulated OCL into Income	Amount of Gain (Loss) Reclassified from Accumulated OCL into Income
		July 3, 2021		July 4, 2020
Foreign currency forward contracts	Cost of sales	$	3,031	$	(925)
Foreign currency forward contracts	Selling and administrative expenses	$	263	$	(87)


Fair Value Measurements Using Input Levels (Liability)/Asset (in thousands)
July 3, 2021	Level 1		Level 2		Level 3		Total
Derivatives
Foreign currency forward contracts	$	—	$	(863)	$	—	$	(863)

October 3, 2020
Derivatives
Foreign currency forward contracts	$	—	$	1,201	$	—	$	1,201


	Financial Statement Line Item	July 3, 2021		October 3, 2020
ASSETS
Finance lease assets	Property, plant and equipment, net	$	39,655	$	36,408
Operating lease assets	Operating lease right-of-use assets	66,838		69,879
Total lease assets		$	106,493	$	106,287

LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Finance lease liabilities	Current portion of long-term debt and finance lease obligations	$	4,753	$	2,700
Operating lease liabilities	Other accrued liabilities	9,130		7,724
Non-current
Finance lease liabilities	Long-term debt and finance lease obligations, net of current portion	37,355		37,033
Operating lease liabilities	Long-term operating lease liabilities	33,193		36,779
Total lease liabilities		$	84,431	$	84,236


	July 3, 2021		October 3, 2020
Total assets:
AMER	$	756,076	$	759,030
APAC	1,188,842		1,073,951
EMEA	270,103		279,757
Corporate and eliminations	106,416		177,110
	$	2,321,437	$	2,289,848


	Three Months Ended July 3, 2021
	Reportable Segment:
	AMER		APAC		EMEA		Total
Market Sector:
Industrial	$	109,672	$	243,121	$	19,126	$	371,919
Healthcare/Life Sciences	143,033		144,874		36,529		324,436
Aerospace/Defense	64,038		33,614		20,380		118,032
External revenue	316,743		421,609		76,035		814,387
Inter-segment sales	2,155		25,306		484		27,945
Segment revenue	$	318,898	$	446,915	$	76,519	$	842,332


	Nine Months Ended
	July 3, 2021		July 4, 2020
Cash flows from operating activities
Net income	$	105,571	$	79,774
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation and amortization	45,785		42,216
Deferred income taxes	(1,032)		2,560
Share-based compensation expense and related charges	18,047		17,367
Provision for allowance for doubtful accounts	(2,405)		3,155
Asset impairment charges	—		3,054
Other, net	1,538		491
Changes in operating assets and liabilities:
Accounts receivable	18,134		(32,299)
Contract assets	(66)		(25,224)
Inventories	(107,066)		(116,810)
Other current and non-current assets	(19,161)		1,758
Accrued income taxes payable	(14,533)		(15,202)
Accounts payable	62,315		111,634
Customer deposits	18,871		32,962
Other current and non-current liabilities	5,514		(12,917)
Cash flows provided by operating activities	131,512		92,519
Cash flows from investing activities
Payments for property, plant and equipment	(34,384)		(41,223)
Proceeds from sales of property, plant and equipment	244		886
Other, net	(200)		(200)
Cash flows used in investing activities	(34,340)		(40,537)
Cash flows from financing activities
Borrowings under debt agreements	242,687		595,240
Payments on debt and finance lease obligations	(336,536)		(554,077)
Debt issuance costs	—		(699)
Repurchases of common stock	(79,202)		(19,484)
Proceeds from exercise of stock options	3,555		10,965
Payments related to tax withholding for share-based compensation	(9,647)		(10,625)
Cash flows (used in) provided by financing activities	(179,143)		21,320
Effect of exchange rate changes on cash and cash equivalents	1,574		87
Net (decrease) increase in cash and cash equivalents and restricted cash	(80,397)		73,389
Cash and cash equivalents and restricted cash:
Beginning of period	387,894		226,254
End of period	$	307,497	$	299,643


	Nine Months Ended
	July 3, 2021		July 4, 2020
Reserve balance, beginning of period	$	6,386	$	6,276
Accruals for warranties issued during the period	2,102		2,323
Settlements (in cash or in kind) during the period	(2,434)		(1,712)
Reserve balance, end of period	$	6,054	$	6,887


	Three Months Ended July 4, 2020
	Reportable Segment:
	AMER		APAC		EMEA		Total
Market Sector (1):
Industrial	$	112,741	$	253,127	$	20,391	$	386,259
Healthcare/Life Sciences	106,130		172,441		51,503		330,074
Aerospace/Defense	85,277		36,979		18,805		141,061
External revenue	304,148		462,547		90,699		857,394
Inter-segment sales	1,793		19,720		1,147		22,660
Segment revenue	$	305,941	$	482,267	$	91,846	$	880,054
(1) During the three months ended January 2, 2021, the Company consolidated the previously reported Industrial/Commercial and Communications market sectors to form the Industrial market sector. Prior period amounts have been reclassified to conform to the current period presentation.


	Nine Months Ended July 4, 2020
	Reportable Segment:
	AMER		APAC		EMEA		Total
Market Sector (1):
Industrial	$	350,716	$	683,740	$	58,701	$	1,093,157
Healthcare/Life Sciences	347,469		440,199		125,673		913,341
Aerospace/Defense	286,963		123,161		60,545		470,669
External revenue	985,148		1,247,100		244,919		2,477,167
Inter-segment sales	8,723		74,154		5,407		88,284
Segment revenue	$	993,871	$	1,321,254	$	250,326	$	2,565,451
(1) During the three months ended January 2, 2021, the Company consolidated the previously reported Industrial/Commercial and Communications market sectors to form the Industrial market sector. Prior period amounts have been reclassified to conform to the current period presentation.


	Nine Months Ended July 3, 2021
	Reportable Segment:
	AMER		APAC		EMEA		Total
Market Sector:
Industrial	$	363,039	$	736,906	$	56,934	$	1,156,879
Healthcare/Life Sciences	424,499		448,783		120,234		993,516
Aerospace/Defense	216,206		99,193		59,833		375,232
External revenue	1,003,744		1,284,882		237,001		2,525,627
Inter-segment sales	7,418		72,207		1,563		81,188
Segment revenue	$	1,011,162	$	1,357,089	$	238,564	$	2,606,815


	Fixed Asset and Operating Right-of-Use Asset Impairment		Employee Termination and Severance Costs		Total
Accrual balance, January 2, 2021	$	—	$	22	$	22
Restructuring and Impairment Charges	—		2,029		2,029
Amounts utilized	—		(440)		(440)
Accrual balance, April 3, 2021	$	—	$	1,611	$	1,611
Restructuring and Impairment Charges	—		1,238		1,238
Amounts utilized	—		(1,997)		(1,997)
Accrual balance, July 3, 2021	$	—	$	852	$	852


Remaining 2021	$	—
2022	5.6
2023	5.6
2024	10.6
2025	14.2
2026	17.6
Total	$	53.6


Period	Total number of shares purchased	Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs	Maximum approximate dollar value of shares that may yet be purchased under the plans or programs(1)
April 4, 2021 - May 1, 2021	74,766	$	92.27	74,766	$	46,530,079
May 2, 2021 - May 29, 2021	98,354	95.43		98,354	37,144,367
May 30, 2021 - July 3, 2021	118,778	92.75		118,778	26,127,128
Total	291,898	$	93.53	291,898


Exhibit No.						Exhibit
31.1						Certification of Chief Executive Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002.
31.2						Certification of Chief Financial Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002.
32.1						Certification of the CEO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2						Certification of the CFO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
99.1						Reconciliation of ROIC to GAAP and Economic Return Financial Statements
101						The following materials from Plexus Corp.’s Quarterly Report on Form 10-Q for the quarter ended July 3, 2021, formatted in Inline Extensible Business Reporting Language ("XBRL"): (i) the Condensed Consolidated Statements of Comprehensive Income (Loss), (ii) the Condensed Consolidated Balance Sheets, (iii) the Condensed Consolidated Statements of Shareholders’ Equity, (iv) the Condensed Consolidated Statements of Cash Flows, and (v) Notes to Condensed Consolidated Financial Statements.
101.INS						Inline XBRL Instance Document (the instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document)
101.SCH						Inline XBRL Taxonomy Extension Schema Document
101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB						Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document
104						The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended July 3, 2021, formatted in Inline XBRL and contained in Exhibit 101.



			/s/ Todd P. Kelsey
			Todd P. Kelsey
			President and Chief Executive Officer


			/s/ Patrick J. Jermain
			Patrick J. Jermain
			Executive Vice President and Chief Financial Officer


										Exhibit 99.1
Return on Invested Capital ("ROIC") and Economic Return Calculations GAAP to non-GAAP reconciliation (dollars in thousands):

	Nine Months Ended				Six Months Ended				Nine Months Ended
		Jul 3,				Apr 3,				July 4,
		2021				2021				2020
Operating income, as reported		$	133,926			$	97,553			$	102,996
Restructuring and impairment charges	+	3,267			+	2,029			+	6,003
Adjusted operating income		137,193				99,582				108,999
	÷	3							÷	3
		45,731								36,333
	x	4			x	2			x	4
Adjusted annualized operating income		$	182,924			$	199,164			$	145,332
Adjusted effective tax rate	x	13		%	x	13		%	x	13		%
Tax impact		$	23,780			$	25,891			$	18,893
Adjusted operating income (tax effected)		$	159,144			$	173,273			$	126,439

Average invested capital		$	1,003,614			$	1,002,260			$	982,231

ROIC		15.9		%		17.3		%		12.9		%
WACC		8.1		%		8.1		%		8.8		%
Economic Return		7.8		%		9.2		%		4.1		%


(1)			Included in other accrued liabilities on the Condensed Consolidated Balance Sheets.
(2)			In fiscal 2020, Plexus adopted and applied Topic 842 to all leases using the modified retrospective method of adoption. The prior year comparative information has not been restated and continues to be reported under the accounting standards in effect for fiscal 2019.