Plexus Corp 10-Q for FY2021 Q2

Plexus Corp (PLXS)

10-Q 2021-05-07 For: 2021-04-03

Added on April 12, 2026

About this 10-Q

Plexus Corp filed this 10-Q on May 7, 2021, covering the quarter ended April 3, 2021 (FY2021 Q2).

Headline figures

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

Revenue: $906.89M; up 13.9% from $796.3M a year earlier
Net income: $41.76M; up 223.1% from net income of $12.93M a year earlier
Diluted EPS: $1.42; up 230.2% from $0.43 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 (Loss)			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			20
"Safe Harbor" Cautionary Statement Under the Private Securities Litigation Reform Act of 1995			20
Overview			20
Results of Operations			21
Liquidity of Capital Resources			27
Disclosure About Critical Accounting Policies			31
New Accounting Pronouncements			31
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			31
ITEM 4. CONTROLS AND PROCEDURES			31
PART II. OTHER INFORMATION			32
ITEM 1A. Risk Factors			32
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds			32
ITEM 6. Exhibits			33
SIGNATURES			34


	Three Months Ended				Six Months Ended
	April 3, 2021		April 4, 2020		April 3, 2021		April 4, 2020
Net sales	$	880,885	$	767,364	$	1,711,240	$	1,619,773
Cost of sales	789,883		705,919		1,540,961		1,479,138
Gross profit	91,002		61,445		170,279		140,635
Selling and administrative expenses	38,286		38,233		70,697		77,489
Restructuring and impairment charges	2,029		6,003		2,029		6,003
Operating income	50,687		17,209		97,553		57,143
Other income (expense):
Interest expense	(3,818)		(3,814)		(7,904)		(7,946)
Interest income	390		533		764		1,178
Miscellaneous, net	(825)		154		(2,343)		(2,019)
Income before income taxes	46,434		14,082		88,070		48,356
Income tax expense	4,671		1,156		10,108		4,424
Net income	$	41,763	$	12,926	$	77,962	$	43,932
Earnings per share:
Basic	$	1.45	$	0.44	$	2.71	$	1.50
Diluted	$	1.42	$	0.43	$	2.65	$	1.46
Weighted average shares outstanding:
Basic	28,736		29,291		28,799		29,216
Diluted	29,310		29,925		29,409		29,999
Comprehensive income (loss):
Net income	$	41,763	$	12,926	$	77,962	$	43,932
Other comprehensive (loss) income:
Derivative instrument fair value adjustment	(4,556)		(6,539)		(501)		(4,316)
Foreign currency translation adjustments	(3,404)		(7,327)		5,296		(2,123)
Other comprehensive (loss) income	(7,960)		(13,866)		4,795		(6,439)
Total comprehensive income (loss)	$	33,803	$	(940)	$	82,757	$	37,493


	April 3, 2021		October 3, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	294,370	$	385,807
Restricted cash	142		2,087
Accounts receivable, net of allowances of $1,675 and $3,597, respectively	508,576		482,086
Contract assets	116,440		113,946
Inventories, net	771,605		763,461
Prepaid expenses and other	36,202		31,772
Total current assets	1,727,335		1,779,159
Property, plant and equipment, net	379,014		383,661
Operating lease right-of-use assets	68,877		69,879
Deferred income taxes	22,351		21,422
Other assets	39,226		35,727
Total non-current assets	509,468		510,689
Total assets	$	2,236,803	$	2,289,848

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt and finance lease obligations	$	50,229	$	146,829
Accounts payable	528,363		516,297
Customer deposits	175,099		159,972
Accrued salaries and wages	64,860		76,927
Other accrued liabilities	100,722		103,492
Total current liabilities	919,273		1,003,517
Long-term debt and finance lease obligations, net of current portion	188,730		187,975
Long-term accrued income taxes payable	47,974		53,899
Long-term operating lease liabilities	34,751		36,779
Deferred income taxes payable	7,042		6,433
Other liabilities	25,081		23,765
Total non-current liabilities	303,578		308,851
Total liabilities	1,222,851		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, 53,838 and 53,525 shares issued, respectively, and 28,659 and 29,002 shares outstanding, respectively	538		535
Additional paid-in capital	627,176		621,564
Common stock held in treasury, at cost, 25,179 and 24,523 shares, respectively	(986,539)		(934,639)
Retained earnings	1,373,041		1,295,079
Accumulated other comprehensive loss	(264)		(5,059)
Total shareholders’ equity	1,013,952		977,480
Total liabilities and shareholders’ equity	$	2,236,803	$	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


	April 3, 2021		October 3, 2020
Raw materials	$	657,404	$	630,833
Work-in-process	46,693		53,602
Finished goods	67,508		79,026
Total inventories, net	$	771,605	$	763,461


	April 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	38,000		—
Term Loans, due April 28, 2021	—		138,000
Finance lease and other financing obligations	52,037		48,435
Unamortized deferred financing fees	(1,078)		(1,631)
Total obligations	238,959		334,804
Less: current portion	(50,229)		(146,829)
Long-term debt, finance lease and other financing obligations, net of current portion	$	188,730	$	187,975


Derivative Impact on Gain (Loss) Recognized in Condensed Consolidated Statements of Comprehensive Income (Loss) (in thousands)
for the Three Months Ended
Derivatives in cash flow hedging relationships	Classification of Gain Reclassified from Accumulated OCL into Income	Amount of Gain Reclassified from Accumulated OCL into Income
		April 3, 2021		April 4, 2020
Foreign currency forward contracts	Cost of sales	$	1,643	$	204
Foreign currency forward contracts	Selling and administrative expenses	$	165	$	10


Derivative Impact on Gain (Loss) Recognized in Condensed Consolidated Statements of Comprehensive Income (Loss) (in thousands)
for the Six 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
		April 3, 2021		April 4, 2020
Foreign currency forward contracts	Cost of sales	$	1,741	$	177
Foreign currency forward contracts	Selling and administrative expenses	$	171	$	(1)


Fair Value Measurements Using Input Levels Asset (in thousands)
April 3, 2021	Level 1		Level 2		Level 3		Total
Derivatives
Foreign currency forward contracts	$	—	$	355	$	—	$	355

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


	Financial Statement Line Item	April 3, 2021		October 3, 2020
ASSETS
Finance lease assets	Property, plant and equipment, net	$	41,157	$	36,408
Operating lease assets	Operating lease right-of-use assets	68,877		69,879
Total lease assets		$	110,034	$	106,287

LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Finance lease liabilities	Current portion of long-term debt and finance lease obligations	$	5,270	$	2,700
Operating lease liabilities	Other accrued liabilities	9,314		7,724
Non-current
Finance lease liabilities	Long-term debt and finance lease obligations, net of current portion	38,265		37,033
Operating lease liabilities	Long-term operating lease liabilities	34,751		36,779
Total lease liabilities		$	87,600	$	84,236


	April 3, 2021		October 3, 2020
Total assets:
AMER	$	773,337	$	759,030
APAC	1,085,492		1,073,951
EMEA	271,193		279,757
Corporate and eliminations	106,781		177,110
	$	2,236,803	$	2,289,848


	Three Months Ended April 3, 2021
	Reportable Segment:
	AMER		APAC		EMEA		Total
Market Sector:
Industrial	$	131,341	$	255,537	$	20,040	$	406,918
Healthcare/Life Sciences	155,027		149,863		44,877		349,767
Aerospace/Defense	75,188		31,320		17,692		124,200
External revenue	361,556		436,720		82,609		880,885
Inter-segment sales	3,141		22,152		713		26,006
Segment revenue	$	364,697	$	458,872	$	83,322	$	906,891


	Three Months Ended				Six Months Ended
	April 3, 2021		April 4, 2020		April 3, 2021		April 4, 2020
Common stock - shares outstanding
Beginning of period	28,766		29,222		29,002		29,004
Exercise of stock options and vesting of other share-based awards	242		189		313		498
Treasury shares purchased	(349)		(225)		(656)		(316)
End of period	28,659		29,186		28,659		29,186

Total stockholders' equity, beginning of period	$	1,006,959	$	908,372	$	977,480	$	865,576
Common stock - par value
Beginning of period	536		532		535		529
Exercise of stock options and vesting of other share-based awards	2		2		3		5
End of period	538		534		538		534
Additional paid-in capital
Beginning of period	624,859		609,168		621,564		597,401
Share-based compensation expense	6,473		5,779		11,822		10,825
Exercise of stock options and vesting of other share-based awards, including tax withholding	(4,156)		(7,501)		(6,210)		(780)
End of period	627,176		607,446		627,176		607,446
Treasury stock
Beginning of period	(957,410)		(899,577)		(934,639)		(893,247)
Treasury shares purchased	(29,129)		(13,154)		(51,900)		(19,484)
End of period	(986,539)		(912,731)		(986,539)		(912,731)
Retained earnings
Beginning of period	1,331,278		1,208,606		1,295,079		1,178,677
Net income	41,763		12,926		77,962		43,932
Cumulative effect adjustment for adoption of new accounting pronouncement (1)	—		—		—		(1,077)
End of period	1,373,041		1,221,532		1,373,041		1,221,532
Accumulated other comprehensive loss
Beginning of period	7,696		(10,357)		(5,059)		(17,784)
Other comprehensive (loss) income	(7,960)		(13,866)		4,795		(6,439)
End of period	(264)		(24,223)		(264)		(24,223)
Total stockholders' equity, end of period	$	1,013,952	$	892,558	$	1,013,952	$	892,558


	Six Months Ended
	April 3, 2021		April 4, 2020
Cash flows from operating activities
Net income	$	77,962	$	43,932
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation and amortization	30,671		27,938
Deferred income taxes	1,454		2,226
Share-based compensation expense	11,822		10,825
Provision for allowance for doubtful accounts	(2,405)		3,402
Asset impairment charges	—		3,054
Other, net	1,060		(13)
Changes in operating assets and liabilities:
Accounts receivable	(21,955)		21,671
Contract assets	(2,439)		(20,300)
Inventories	(4,689)		(65,662)
Other current and non-current assets	(10,860)		7,619
Accrued income taxes payable	(15,720)		(17,050)
Accounts payable	16,317		41,595
Customer deposits	14,284		(3,049)
Other current and non-current liabilities	(6,643)		(10,780)
Cash flows provided by operating activities	88,859		45,408
Cash flows from investing activities
Payments for property, plant and equipment	(23,149)		(30,679)
Proceeds from sales of property, plant and equipment	201		694
Other, net	(200)		—
Cash flows used in investing activities	(23,148)		(29,985)
Cash flows from financing activities
Borrowings under debt agreements	151,967		335,694
Payments on debt and finance lease obligations	(254,396)		(329,756)
Repurchases of common stock	(51,900)		(19,484)
Proceeds from exercise of stock options	3,303		9,850
Payments related to tax withholding for share-based compensation	(9,510)		(10,625)
Cash flows used in financing activities	(160,536)		(14,321)
Effect of exchange rate changes on cash and cash equivalents	1,443		(68)
Net (decrease) increase in cash and cash equivalents and restricted cash	(93,382)		1,034
Cash and cash equivalents and restricted cash:
Beginning of period	387,894		226,254
End of period	$	294,512	$	227,288


	Six Months Ended
	April 3, 2021		April 4, 2020
Reserve balance, beginning of period	$	6,386	$	6,276
Accruals for warranties issued during the period	967		1,554
Settlements (in cash or in kind) during the period	(1,747)		(1,466)
Reserve balance, end of period	$	5,606	$	6,364


	Three Months Ended April 4, 2020
	Reportable Segment:
	AMER		APAC		EMEA		Total
Market Sector (1):
Industrial	$	118,088	$	202,576	$	18,234	$	338,898
Healthcare/Life Sciences	117,143		118,033		35,804		270,980
Aerospace/Defense	96,197		42,933		18,356		157,486
External revenue	331,428		363,542		72,394		767,364
Inter-segment sales	3,026		24,303		1,609		28,938
Segment revenue	$	334,454	$	387,845	$	74,003	$	796,302
(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.


	Six Months Ended April 3, 2021
	Reportable Segment:
	AMER		APAC		EMEA		Total
Market Sector:
Industrial	$	253,367	$	493,785	$	37,808	$	784,960
Healthcare/Life Sciences	281,466		303,909		83,705		669,080
Aerospace/Defense	152,168		65,579		39,453		257,200
External revenue	687,001		863,273		160,966		1,711,240
Inter-segment sales	5,263		46,901		1,079		53,243
Segment revenue	$	692,264	$	910,174	$	162,045	$	1,764,483


	Six Months Ended April 4, 2020
	Reportable Segment:
	AMER		APAC		EMEA		Total
Market Sector (1):
Industrial	$	237,975	$	430,613	$	38,310	$	706,898
Healthcare/Life Sciences	241,339		267,758		74,170		583,267
Aerospace/Defense	201,686		86,182		41,740		329,608
External revenue	681,000		784,553		154,220		1,619,773
Inter-segment sales	6,930		54,434		4,260		65,624
Segment revenue	$	687,930	$	838,987	$	158,480	$	1,685,397
(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.


	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


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)
January 3, 2021 - January 30, 2021	81,673	$	81.20	81,673	$	75,295,631
January 31, 2021 - February 27, 2021	157,754	81.09		157,754	63,133,461
February 28, 2021 - April 3, 2021	109,870	88.33		109,870	53,428,468
Total	349,297	$	83.39	349,297


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 April 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 April 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):

	Six Months Ended				Three Months Ended				Six Months Ended
		Apr 3,				Jan 2,				Apr 4,
		2021				2021				2020
Operating income, as reported		$	97,553			$	46,866			$	57,143
Restructuring and other charges	+	2,029			+	—			+	6,003
Adjusted operating income		99,582				46,866				63,146
	x	2			x	4			x	2

Adjusted annualized operating income		$	199,164			$	187,464			$	126,292
Adjusted effective tax rate	x	13		%	x	13		%	x	13		%
Tax impact		$	25,891			$	24,370			$	16,418
Adjusted operating income (tax effected)		$	173,273			$	163,094			$	109,874

Average invested capital		$	1,002,260			$	1,002,087			$	966,630

ROIC		17.3		%		16.3		%		11.4		%
WACC		8.1		%		8.1		%		8.8		%
Economic Return		9.2		%		8.2		%		2.6		%


(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.