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 Plexus Announces Fiscal Fourth Quarter and Fiscal Year 2017 Financial Results
   Wednesday, October 25, 2017 4:02:19 PM ET

-- Fiscal fourth quarter 2017 record revenue of $670 million

-- GAAP diluted EPS of $0.84

-- Initiates fiscal first quarter 2018 revenue guidance of $665 to $705 million with GAAP diluted EPS of $0.75 to $0.85

Plexus (PLXS ) today announced financial results for its fiscal fourth quarter ended September 30, 2017, and guidance for its fiscal first quarter ending December 30, 2017.

                                  Three Months Ended
                                  Sept 30, 2017                               Sept 30, 2017         Dec 30, 2017
                                  Q4F17 Results                               Q4F17 Guidance        Q1F18 Guidance
Summary GAAP Items
Revenue (in millions)             $670                                        $660 to $700          $665 to $705
Operating margin                                       5.1%                   4.7% to 5.1%          4.6% to 5.0%
Diluted EPS (1)                   $0.84                                       $0.77 to $0.87        $0.75 to $0.85
Summary Non-GAAP Items (2)
Return on invested capital (ROIC)                      16.2%
Economic Return                                        5.7%
(1) Includes stock-based compensation expense of $0.14 for Q4F17 results and $0.11 for Q1F18 guidance.
(2) Refer to Non-GAAP Supplemental Information in Tables 1 and 2 for non-GAAP financial measures discussed in this release, such as ROIC and Economic Return, and a reconciliation of these measures to GAAP.

Fiscal Fourth Quarter 2017 Information

-- Won 34 manufacturing programs during the quarter representing approximately $172 million in annualized revenue when fully ramped into production

-- Trailing four quarter wins total approximately $811 million in annualized revenue when fully ramped into production

-- Purchased $10.3 million of our shares at an average price of $51.98 per share

Fiscal Year 2017 Information

-- Revenue: $2.5 billion

-- GAAP diluted EPS: $3.24, up 45% from fiscal 2016

-- ROIC: 16.2%, delivering an economic return of 570 basis points above our weighted average cost of capital

-- Purchased $34.1 million of our shares at an average price of $52.08 per share

Todd Kelsey, President and CEO, commented, "I am pleased with our fiscal 2017 operating performance. We finished the full year with record GAAP operating profit of $130 million, achieving operating margin of 5.1%. Further, we finished the fiscal fourth quarter with record revenue of $670 million, representing an 8% sequential increase from the fiscal third quarter. Strong operating performance, coupled with the increase in revenue, resulted in fiscal fourth quarter GAAP diluted EPS of $0.84. The fiscal fourth quarter was the sixth consecutive quarter in which we met or exceeded our 4.7% to 5.0% operating margin target range."

Patrick Jermain, Senior Vice President and CFO, commented, "The increase in fiscal fourth quarter revenue and improvements in our inventory management contributed to an 8 day sequential improvement in our fiscal fourth quarter cash cycle days. In fiscal 2017, we delivered return on invested capital of 16.2%. This equates to an economic return of 570 basis points above our weighted average cost of capital of 10.5%, our best annual result in more than 10 years. Further, we increased our annual free cash flow by approximately 37% in fiscal 2017, delivering approximately $133 million."

Mr. Kelsey concluded, "Looking ahead to fiscal 2018, we anticipate leveraging our recent strong wins momentum and robust funnel of qualified opportunities to achieve meaningful revenue growth. In our fiscal first quarter of 2018, strength in our Industrial/Commercial and Communications market sectors are expected to offset modest weakening within our Aerospace/Defense market sector. As a result, we are guiding fiscal first quarter 2018 revenue in the range of $665 million to $705 million. At this level of revenue, we expect GAAP diluted EPS in the range of $0.75 to $0.85 as we continue to invest in new program ramps."

Quarterly & Annual Comparison Three Months Ended                                                                                 Twelve Months Ended
                              Sept 30, 2017                    Jul 1, 2017                      Oct 1, 2016                      Sept 30, 2017                    Oct 1, 2016
(in thousands, except EPS)    Q4F17                            Q3F17                            Q4F16                            F17                              F16
Revenue                       $              669,852           $              618,832           $              653,064           $              2,528,052         $              2,556,004
Gross profit                  66,514                           61,185                           61,530                           255,855                          227,359
Operating income              33,965                           29,469                           23,651                           129,908                          99,439
Net income                    29,009                           25,579                           19,093                           112,062                          76,427
Diluted EPS                   $              0.84              $              0.74              $              0.56              $              3.24              $              2.24
Adjusted net income*          29,009                           25,579                           28,261                           112,062                          90,824
Adjusted diluted EPS*         $              0.84              $              0.74              $              0.82              $              3.24              $              2.66
Gross margin                  9.9                           %  9.9                           %  9.4                           %  10.1                          %  8.9                           %
Adjusted gross margin**       9.9                           %  9.9                           %  9.9                           %  10.1                          %  9.0                           %
Operating margin              5.1                           %  4.8                           %  3.6                           %  5.1                           %  3.9                           %
Adjusted operating margin*    5.1                           %  4.8                           %  5.1                           %  5.1                           %  4.5                           %
ROIC*                         16.2                          %  16.1                          %  13.8                          %  16.2                          %  13.8                          %
Economic Return*              5.7                           %  5.6                           %  2.8                           %  5.7                           %  2.8                           %
*Refer to Non-GAAP Supplemental Information Tables 1 and 2 for a reconciliation to GAAP measures.
**A Non-GAAP measure that excludes $2.9 million of primarily inventory losses sustained from a typhoon that impacted the Company’s manufacturing facilities in Xiamen, China in Q4F16 that were recorded in cost of sales in the accompanying Condensed Consolidated Statements of Operations.

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 55% of revenue during the fiscal fourth quarter, up one percentage point from the fiscal third quarter of 2017, and 56% of revenue during fiscal year 2017, down three percentage points from the prior fiscal year.

Business Segments ($ in millions)  Three Months Ended          Twelve Months Ended
                                   Sept 30, 2017  Oct 1, 2016  Sept 30, 2017  Oct 1, 2016
Americas                           $   314        $  334       $   1,166      $  1,329
Asia-Pacific                       334            299          1,279          1,162
Europe, Middle East, and Africa    55             44           193            170
Elimination of inter-segment sales (33)           (24)         (110)          (105)
Total Revenue                      $   670        $  653       $   2,528      $  2,556
Market Sectors ($ in millions) Three Months Ended                           Twelve Months Ended
                               Sept 30, 2017  Jul 1, 2017    Oct 1, 2016    Sept 30, 2017    Oct 1, 2016
                               Q4F17          Q3F17          Q4F16          F17              F16
Healthcare/Life Sciences       $  233  35 %   $  210  34 %   $  192  29 %   $  859    34 %   $  780    31 %
Industrial/Commercial          189     28 %   201     32 %   231     35 %   788       31 %   774       30 %
Communications                 140     21 %   99      16 %   128     20 %   478       19 %   597       23 %
Aerospace/Defense*             108     16 %   109     18 %   102     16 %   403       16 %   405       16 %
Total Revenue                  $  670         $  619         $  653         $  2,528         $  2,556

*Formerly known as Defense/Security/Aerospace

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, adjusted gross margin and adjusted operating margin, 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 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 each of fiscal 2017 and the fiscal fourth quarter was 16.2%. The Company defines ROIC as tax-effected annualized adjusted operating income divided by average invested capital over a five-quarter period for the fourth quarter. Invested capital is defined as equity plus debt, less cash and cash equivalents. The Company’s weighted average cost of capital for fiscal 2017 was 10.5%. ROIC for each of fiscal 2017 and the fiscal fourth quarter less the Company’s weighted average cost of capital resulted in an economic return of 5.7%.

Free Cash Flow Calculation

The Company defines free cash flow as cash flows provided by operations less capital expenditures. For the three months ended September 30, 2017, cash flows provided by operations was $49.8 million, less capital expenditures of $14.1 million, resulting in free cash flow of $35.7 million. For the twelve months ended September 30, 2017, cash flows provided by operations was $171.7 million, less capital expenditures of $38.5 million, resulting in free cash flow of $133.2 million.

Cash Cycle Days             Three Months Ended
                            Sept 30, 2017      Jul 1, 2017        Oct 1, 2016
                            Q4F17              Q3F17              Q4F16
Days in Accounts Receivable 50                 47                 58
Days in Inventory           99                 107                87
Days in Accounts Payable    (63)               (65)               (61)
Days in Cash Deposits       (16)               (13)               (13)
Annualized Cash Cycle*      70                 76                 71
*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 Q4 2017 Earnings Conference Call and Webcast
When:   Thursday, October 26, 2017 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, www.plexus.com or directly at: http://edge.media-server.com/m6/p/mu7t6rf7 
        Conference call at +1.800.708.4539 with passcode: 45706549
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: 45706549

Investor and Media Contact

Susan Hanson

+1.920.751.5491

susan.hanson@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 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 potential effects of regional results on our taxes and 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, 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 2016 Form 10-K).

PLEXUS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
                                     Three Months Ended             Twelve Months Ended
                                     Sept 30,        Oct 1,         Sept 30,           Oct 1,
                                     2017            2016           2017               2016
Net sales                            $   669,852     $  653,064     $    2,528,052     $   2,556,004
Cost of sales                        603,338         591,534        2,272,197          2,328,645
Gross profit                         66,514          61,530         255,855            227,359
Selling and administrative expenses  32,549          36,074         125,947            120,886
Restructuring and other charges      --              1,805          --                 7,034
Operating income                     33,965          23,651         129,908            99,439
Other income (expense):
Interest expense                     (3,748      )   (3,790     )   (13,578        )   (14,635       )
Interest income                      1,487           1,161          5,042              4,242
Miscellaneous                        (697        )   799            451                (1,652        )
Income before income taxes           31,007          21,821         121,823            87,394
Income tax expense                   1,998           2,728          9,761              10,967
Net income                           $   29,009      $  19,093      $    112,062       $   76,427
Earnings per share:
Basic                                $   0.86        $  0.57        $    3.33          $   2.29
Diluted                              $   0.84        $  0.56        $    3.24          $   2.24
Weighted average shares outstanding:
Basic                                33,541          33,455         33,612             33,374
Diluted                              34,482          34,335         34,553             34,098
PLEXUS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
(unaudited)
                                                                        Sept 30,             Oct 1,
                                                                        2017                 2016
ASSETS
Current assets:
Cash and cash equivalents                                               $    568,860         $    432,964
Restricted cash                                                         394                  --
Accounts receivable                                                     365,513              416,888
Inventories                                                             654,642              564,131
Prepaid expenses and other                                              28,046               19,364
Total current assets                                                    1,617,455            1,433,347
Property, plant and equipment, net                                      314,665              291,225
Deferred income taxes                                                   5,292                4,834
Other                                                                   38,770               36,413
Total non-current assets                                                358,727              332,472
Total assets                                                            $    1,976,182       $    1,765,819
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt and capital lease obligations         $    286,934         $    78,507
Accounts payable                                                        413,999              397,200
Customer deposits                                                       107,837              84,637
Accrued salaries and wages                                              49,376               41,806
Other accrued liabilities                                               49,445               48,286
Total current liabilities                                               907,591              650,436
Long-term debt and capital lease obligations, net of current portion    26,173               184,002
Other liabilities                                                       16,479               14,584
Total non-current liabilities                                           42,652               198,586
Total liabilities                                                       950,243              849,022
Shareholders’ equity:
Common stock, $.01 par value, 200,000 shares authorized,
51,934 and 51,272 shares issued, respectively,
and 33,464 and 33,457 shares outstanding, respectively                  519                  513
Additional paid-in-capital                                              555,297              530,647
Common stock held in treasury, at cost, 18,470 and 17,815, respectively (574,104       )     (539,968       )
Retained earnings                                                       1,049,206            937,144
Accumulated other comprehensive loss                                    (4,979         )     (11,539        )
Total shareholders’ equity                                              1,025,939            916,797
Total liabilities and shareholders’ equity                              $    1,976,182       $    1,765,819
PLEXUS CORP. AND SUBSIDIARIES
NON-GAAP SUPPLEMENTAL INFORMATION Table 1
(in thousands, except per share data)
(unaudited)
                                                 Three Months Ended                                                                                 Twelve Months Ended
                                                 Sept 30,                         Jul 1,                           Oct 1,                           Sept 30,                         Oct 1,
                                                 2017                             2017                             2016                             2017                             2016
Operating income, as reported                    $              33,965            $              29,469            $              23,651            $              129,908           $              99,439
Operating margin, as reported                    5.1                           %  4.8                           %  3.6                           %  5.1                           %  3.9                           %
Non-GAAP adjustments:
Typhoon-related losses (1)                       --                               --                               2,871                            --                               2,871
Accelerated stock-based compensation expense (2) --                               --                               5,210                            --                               5,210
Restructuring and other charges*                 --                               --                               1,805                            --                               7,034
Adjusted operating income                        $              33,965            $              29,469            $              33,537            $              129,908           $              114,554
Adjusted operating margin                        5.1                           %  4.8                           %  5.1                           %  5.1                           %  4.5                           %
Net income                                       $              29,009            $              25,579            $              19,093            $              112,062           $              76,427
Non-GAAP adjustments:
Typhoon-related losses (1)                       --                               --                               2,871                            --                               2,871
Related tax impact                               --                               --                               (718                          )  --                               (718                          )
Accelerated stock-based compensation expense (2) --                               --                               5,210                            --                               5,210
Restructuring and other charges*                 --                               --                               1,805                            --                               7,034
Adjusted net income                              $              29,009            $              25,579            $              28,261            $              112,062           $              90,824
Diluted earnings per share                       $              0.84              $              0.74              $              0.56              $              3.24              $              2.24
Non-GAAP adjustments:
Typhoon-related losses (1)                       --                               --                               0.08                             --                               0.08
Related tax impact                               --                               --                               (0.02                         )  --                               (0.02                         )
Accelerated stock-based compensation expense (2) --                               --                               0.15                             --                               0.15
Restructuring and other charges*                 --                               --                               0.05                             --                               0.21
Adjusted diluted earnings per share              $              0.84              $              0.74              $              0.82              $              3.24              $              2.66
*Summary of restructuring and other charges
Employee termination and severance costs         $              --                $              --                $              565               $              --                $              5,255
Other exit costs                                 --                               --                               460                              --                               999
Loss on sale leaseback of building               --                               --                               780                              --                               780
Total restructuring and other charges            $              --                $              --                $              1,805             $              --                $              7,034
(1) During Q4F16 $2.9 million of charges were recorded in cost of sales in the accompanying Condensed Consolidated Statements of Operations; these charges resulted primarily from inventory losses sustained from a typhoon that impacted the Company’s manufacturing facilities in Xiamen, China.
(2) During Q4F16 $5.2 million of accelerated stock-based compensation expense was recorded in selling and administrative expenses in the accompanying Condensed Consolidated Statements of Operations pursuant to the retirement agreement with the Company’s former Chief Executive Officer.
PLEXUS CORP. AND SUBSIDIARIES
NON-GAAP SUPPLEMENTAL INFORMATION Table 2
(in thousands)
(unaudited)
ROIC and Economic Return Calculations        Twelve Months Ended     Nine Months Ended       Twelve Months Ended
                                             Sept 30,                Jul 1,                  Oct 1,
                                             2017                    2017                    2016
Operating income                                  $    129,908            $    95,943             $    99,439
Typhoon-related losses                       +    --                 +    --                 +    2,871
Accelerated stock-based compensation expense +    --                 +    --                 +    5,210
Restructuring and other charges              +    --                 +    --                 +    7,034
Adjusted operating income                         $    129,908            $    95,943             $    114,554
                                                                        3
                                                                          $    31,981
                                                                     x    4
Adjusted annualized operating income              $    129,908            $    127,924            $    114,554
Tax rate                                     x    8            %     x    8            %     x    11           %
Tax impact                                        10,393                  10,234                  12,601
Adjusted operating income (tax effected)          $    119,515            $    117,690            $    101,953
Average invested capital                        $    738,266          $    730,286          $    739,986
ROIC                                              16.2         %          16.1         %          13.8         %
Weighted average cost of capital             -    10.5         %     -    10.5         %     -    11.0         %
Economic return                                   5.7          %          5.6          %          2.8          %
                          Three Months Ended
Average Invested Capital  Sept 30,          Jul 1,         Apr 1,         Dec 31,        Oct 1,
Calculations              2017              2017           2017           2016           2016
Equity                    $  1,025,939      $  991,306     $  961,438     $  927,542     $  916,797
Plus:
Debt - current            286,934           267,297        92,623         78,879         78,507
Debt - long-term          26,173            26,138         185,638        184,136        184,002
Less:
Cash and cash equivalents (568,860      )   (519,172    )  (524,520    )  (496,505    )  (432,964    )
                          $  770,186        $  765,569     $  715,179     $  694,052     $  746,342
                          Three Months Ended
Average Invested Capital  Jul 2,         Apr 2,         Jan 2,         Oct 3,
Calculations              2016           2016           2016           2015
Equity                    $  895,175     $  871,111     $  850,794     $  842,272
Plus:
Debt - current            78,279         2,300          2,864          3,513
Debt - long-term          184,479        259,565        259,289        259,257
Less:
Cash and cash equivalents (433,679    )  (409,796    )  (354,728    )  (357,106    )
                          $  724,254     $  723,180     $  758,219     $  747,936

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