<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) Quarterly Report Under Section 13 or 15 (d) of the Securities Exchange
Act of 1934
For the Quarter ended June 30, 1996
or
( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File Number 0-14824
PLEXUS CORP.
(Exact name of registrant as specified in charter)
Wisconsin 39-1344447
(State of Incorporation) (IRS Employer Identification No.)
55 Jewelers Park Drive
Neenah, Wisconsin 54957-0156
(Address of principal executive offices)(Zip Code)
Telephone Number (414) 722-3451
(Registrant's telephone number, Including Area Code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
--- ---
As of August 8, 1996 there were 6,498,196 shares of Common Stock of the
Company outstanding.
<PAGE> 2
PLEXUS CORP.
TABLE OF CONTENTS
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements:
Condensed Consolidated Statements of Operations
Three Months and Nine Months Ended
June 30, 1996 and 1995.....................................3
Condensed Consolidated Balance Sheets
June 30, 1996 and September 30, 1995.......................4
Condensed Consolidated Statements of Cash Flows
Nine Months Ended June 30, 1996 and 1995...................5
Notes to Condensed Consolidated Financial Statements.....6-7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations:
General..................................................7-8
Results of Operations...................................8-10
Liquidity and Capital Resources...........................10
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.................................11
Signatures.......................................................11
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
PLEXUS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
Unaudited
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
JUNE 30, JUNE 30,
---------------------- ----------------------
1996 1995 1996 1995
---------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales $ 86,066 $ 72,354 $ 232,660 $ 207,075
Cost of sales 78,143 66,079 214,888 190,504
--------- --------- --------- ---------
Gross profit 7,923 6,275 17,772 16,571
Selling and administrative
expenses 3,145 2,692 9,274 8,049
--------- --------- --------- ---------
Operating income 4,778 3,583 8,498 8,522
--------- --------- --------- ---------
Other income (expense):
Interest (452) (723) (1,578) (2,180)
Other 78 128 222 524
--------- --------- --------- ---------
(374) (595) (1,356) (1,656)
--------- --------- --------- ---------
Income before income taxes 4,404 2,988 7,142 6,866
Provision for income taxes 1,800 1,165 2,894 2,678
--------- --------- --------- ---------
Net income $ 2,604 $ 1,823 $ 4,248 $ 4,188
========= ========= ========= =========
Net income per common share
primary and fully diluted $ .36 $ .26 $ .59 $ .59
========= ========= ========= =========
Average number of common
and common equivalent
shares outstanding:
Primary 7,159,833 7,125,298 7,189,209 7,100,791
========= ========= ========= =========
Fully diluted 7,197,929 7,125,298 7,197,823 7,100,791
========= ========= ========= =========
</TABLE>
See notes to condensed consolidated financial statements
3
<PAGE> 4
PLEXUS CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
JUNE 30, SEPTEMBER 30,
1996 1995
--------- -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 2,429 $ 3,569
Accounts receivable, net
of allowance of $145 34,908 47,560
Inventories 54,883 48,966
Deferred income taxes 904 904
Prepaid expenses and other 1,846 1,930
-------- --------
Total current assets 94,970 102,929
Property, plant and equipment, net 11,156 11,829
Other 230 330
-------- --------
Total assets $106,356 $115,088
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
<CAPTION>
<S> <C> <C>
Current liabilities:
Current portion of long-term debt $ 88 $ 107
Accounts payable 26,011 23,279
Customer deposits 7,957 3,530
Accrued liabilities:
Salaries and wages 3,423 2,618
Other 3,692 2,093
-------- --------
Total current liabilities 41,171 31,627
Long-term debt 19,674 41,734
Deferred income taxes 718 718
Stockholders' equity:
Series A preferred stock, $.01 par value,
$1,000 face value, 7,000 shares
authorized, issued and outstanding
(aggregate liquidation preference
of $7 million) 0 0
Preferred stock $.01 par value,
4,993,000 shares authorized,
none issued - -
Common Stock, $.01 par value,
30,000,000 shares authorized,
6,497,697 and 6,491,345 issued
and outstanding, respectively 65 65
Additional paid-in capital 14,212 14,160
Retained earnings 30,516 26,784
-------- --------
44,793 41,009
-------- --------
Total liabilities and
stockholders' equity $106,356 $115,088
======== ========
</TABLE>
See notes to condensed consolidated financial statements
4
<PAGE> 5
PLEXUS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
Unaudited
<TABLE>
<CAPTION>
NINE MONTHS ENDED
JUNE 30,
--------------------
1996 1995
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 4,248 $4,188
Adjustments to reconcile net income to net cash
flows from operating activities:
Depreciation and amortization 2,323 2,247
Change in assets and liabilities:
Accounts receivable, net 12,652 907
Inventories (5,917) (659)
Prepaid expenses and other 84 2,105
Accounts payable 2,732 (5,882)
Customer deposits 4,427 1,583
Accrued liabilities 2,404 383
Other 100 31
--------- ---------
Net cash flows provided by operating
activities 23,053 4,903
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for property, plant and equipment (1,667) (1,560)
Other, net 17 2
--------- ---------
Net cash flows used for investing
activities (1,650) (1,558)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Net decrease in outstanding debt (22,079) (2,777)
Issuance of common stock 52 -
Payments of preferred stock dividends (516) (543)
--------- ---------
Net cash flows used for financing
activities (22,543) (3,320)
--------- ---------
Net increase (decrease) in cash and
cash equivalents (1,140) 25
Cash and cash equivalents:
Beginning of period 3,569 1,081
--------- ---------
End of period $ 2,429 $1,106
========= =========
</TABLE>
See notes to condensed consolidated financial statements
5
<PAGE> 6
PLEXUS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS AND NINE MONTHS ENDED JUNE 30, 1996
NOTE (1) - BASIS OF PRESENTATION
The condensed consolidated financial statements included herein have been
prepared by the Company without audit and pursuant to the rules and regulations
of the Securities and Exchange Commission. In the opinion of the Company, the
financial statements reflect all adjustments, which consist only of normal
recurring adjustments, necessary to present fairly the financial position of
Plexus Corp. at June 30, 1996 and the results of operations for the three
months and nine months ended June 30, 1996 and 1995 and the cash flows for the
same nine-month periods.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to the SEC rules and
regulations dealing with interim financial statements. However, the Company
believes that the disclosures made in the condensed consolidated financial
statements included herein are adequate to make the information presented not
misleading. It is suggested that these condensed consolidated financial
statements be read in conjunction with the financial statements and notes
thereto included in the Company's 1995 Annual Report.
The year-end condensed consolidated balance sheet data was derived from
audited financial statements, but does not include all disclosures required by
generally accepted accounting principals.
NOTE (2) - REVENUE RECOGNITION
Revenue is recognized primarily when inventory is shipped. Revenue
relating to product design and development contracts (such sales are less than
10% of total revenue) is recognized as costs are incurred utilizing the
percentage-of-completion method. Progress toward completion of product design
and development contracts are consistently based on units of work for labor
content and cost for component content.
NOTE (3) - CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.
NOTE (4) - INVENTORIES
The major classes of inventories are as follows:
<TABLE>
<CAPTION>
June 30, September 30,
1996 1995
-------- -------------
<S> <C> <C>
Assembly Parts $35,033 $33,950
Work-in-Process 19,525 14,782
Finished Goods 325 234
------- -------
$54,883 $48,966
======= =======
</TABLE>
6
<PAGE> 7
NOTE (5) - RECLASSIFICATIONS
Certain amounts in prior years' condensed consolidated financial
statements have been reclassified to conform to the 1996 presentation.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
Plexus Corp. is a contract provider of design, manufacturing and testing
services to the electronics industry. Headquartered in Neenah, Wisconsin, the
Company is the largest electronic assembly organization in the Midwest.
Through its two wholly-owned subsidiaries, Plexus Technology Group, Inc. and
Plexus Electronic Assembly Corporation, the Company develops, assembles and
tests a variety of electronic component and subsystem products for major
corporations in industries such as computer (primarily mainframe and peripheral
products), medical, telecommunications and automotive. The Company operates
manufacturing facilities in Neenah, Wisconsin and Richmond, Kentucky.
Many of the industries for which the Company currently provides electronic
products are subject to rapid technological change, product obsolescence and
increased competition. These and other factors which affect the industries the
Company provides services for, and which affect any of the Company's major
customers in particular, could have a material adverse effect on the Company's
results of operations.
The Company has no long-term volume commitments from its customers, and
lead-times for customer orders and product-life cycles continue to contract.
Customer programs can be canceled and volume levels can be changed or delayed
at any time. The timely replacement of delayed, canceled or reduced programs
with new business cannot be assured. Because of these and other factors, there
can be no assurance that the Company's recent historical sales growth rate will
continue.
The Company's sales can be negatively impacted by component shortages.
Shortages of key electronic components which are provided directly from
customers or suppliers can cause manufacturing interruptions, customer
rescheduling issues, production downtime and production set-up and restart
inefficiencies. Allocations of components are an integral part of the
electronics industry. Shortages that occurred in the past few years, mainly in
logic and memory devices, have been mitigated over the past three months due to
a shift in the supply-demand cycle for such components. While in general the
marketplace for such components has eased allowing greater availability, key
component shortage issues can still occur with respect to specific industries
or particular components. In response to this dynamic environment, the Company
has a corporate procurement organization whose primary purpose is to create
strong supplier alliances to assure a steady flow of components and mitigate
shortages. However, because of the limited number of suppliers for certain
electronic components and other supply and demand concerns, the Company can
neither eliminate component shortages nor determine the timing or impact of
such shortages on the Company's results. As a result, the Company's sales and
profitability can be affected from period to period.
7
<PAGE> 8
The discussion of the Company's results of operations and financial condition
should be read in conjunction with the condensed consolidated financial
statements and the notes thereto appearing elsewhere in this Form 10-Q.
"Safe Harbor" Cautionary Statement under the Private Securities Litigation
Reform Act of 1995: The statements contained in this Form 10-Q which are not
historical facts are forward looking statements that involve risks and
uncertainties, including, but not limited to, the Company's ability to secure
new customers and maintain its current customer base, the risk of customer
reductions, delays or cancellations in both on-going and new programs, the
results of cost reduction efforts, the adequate availability of components and
related parts for production, the effect of economic conditions, the impact of
technological changes and increased competition, and other risks detailed
herein and in the Company's other Securities and Exchange Commissions filings.
RESULTS OF OPERATIONS
Net Sales
Net sales for the three and nine months ended June 30, 1996, increased $13.7
million or 19.0% and $25.6 million or 12.4%, respectively, compared to net
sales for the same periods in the prior fiscal year. The increases in net
sales were due to increased orders from existing customers, including on-going
and new programs, and the addition of new customers. While the Company has
seen sales increases across all of the industries it services, growth has been
more pronounced in the telecommunications and medical segments of the
electronics market. However, certain customers are adjusting near-term
production schedules because of their internal excess manufacturing capacity.
Therefore, subject to the development and timing of new business, the Company
presently anticipates that sales growth for the fourth quarter of fiscal 1996
may not be as strong as the third quarter growth rate.
The Company's two largest customers during the first nine months of fiscal 1996
continue to be International Business Machines Corporation (IBM) and General
Electric Company (GE). Net sales to IBM (including up to six subsidiaries or
divisions) for the nine months ended June 30, 1996 and 1995 were 28.0% and
26.8%, respectively, of total net sales. Net sales to GE (including up to five
subsidiaries or divisions) for the nine months ended June 30, 1996 and 1995
were 13.7% and 18.7%, respectively, of total net sales. Each division or
subsidiary of these companies contracts independently of the other division or
subsidiary, and the Company does not believe that sales to any particular
division or subsidiary depends upon sales to any other. While the combined net
sales for these two customers increased in absolute amounts during the nine
months ended June 30, 1996 compared to the same period in the prior fiscal
year, the Company has continued to obtain new business from other customers.
Net sales to the Company's top ten customers accounted for approximately 71%
and 76%, of total net sales for the nine months ended June 30, 1996 and 1995,
respectively. The Company is dependent upon continued sales to IBM, GE and the
rest of its significant customers. Any material change in orders from these or
other customers could have a material effect on the Company's results of
operations.
8
<PAGE> 9
The Company believes that its growth has been achieved in significant part by
its approach to partnering with customers mainly through its product design and
development services. Approximately 20% of the Company's contract
manufacturing sales are a direct result of these services. The Company intends
to continue to leverage this aspect of its product design and development
services for continued growth. In order to achieve expanded sales growth, the
Company must continue to generate additional sales from existing customers from
both current and future programs, and must successfully market to new
customers.
Gross Profit
The Company's gross profit for the three and nine months ended June 30, 1996
increased $1.6 million or 26.3% and $1.2 million or 7.2%, respectively,
compared to gross profits for the same periods in the prior fiscal year. Gross
margins increased to 9.2% from 8.7% of net sales for the three months, but
decreased to 7.6% from 8.0% for the nine months ended June 30, 1996,
respectively, as compared to the same periods in fiscal 1995. The increase in
gross margins for the third quarter reflects the cost saving initiatives
implemented by the Company during the second quarter of 1996, together with
enhanced procurement management and the continued broadening of the Company's
customer base. The cost savings initiatives included reductions in production
and administrative personnel through layoffs and attrition and equipment lease
reductions. Based on the actions taken, the Company's goal is to realize at
least $3 million of annual cost savings, on a pre-tax basis, beginning with the
third quarter. The achievement of that level of cost savings is dependent on
the Company's ability to maintain realigned expense levels.
During the third quarter, the Company also implemented a flexible labor force
program, which utilizes temporary employment agencies to provide trained,
production personnel on an as-needed basis, within its Wisconsin operations.
This program should enable the Company to react more rapidly to fluctuations in
its labor force requirements, while converting a portion of its fixed
manufacturing costs to variable costs that can be managed based on customer
needs.
The Company's gross margin reflects a number of factors including product mix,
the level of start up costs and efficiencies associated with new programs,
capacity utilization of surface mount and other equipment, labor efficiencies,
and pricing within the electronics industry.
Selling and Administrative Expenses
Selling and administrative (S&A) expenses for the three and nine months ended
June 30, 1996 increased $453,000 or 16.8% and $1.2 million or 15.2%,
respectively, from the comparable prior periods. As a percentage of net sales,
S&A expenses remained flat at 3.7% for the three months, and increased slightly
to 4.0% from 3.9% for the nine months ended June 30, 1996 and 1995,
respectively. The increases in S&A expenses were due primarily to increased
staffing and increased investments in information systems to support higher
revenue levels. The Company anticipates future S&A expenses will increase in
absolute dollar amounts, and may increase as a percentage of net sales over the
near term, as the Company expands its sales and marketing efforts, systems
development and customer support.
9
<PAGE> 10
Interest Expense
Interest expense was $452,000 and $1.6 million, respectively, for the three and
nine months ended June 30, 1996, compared to $723,000 and $2.2 million for the
comparable periods in fiscal 1995. The decrease in interest expense is
primarily due to reduced borrowings required to support working capital,
coupled with lower interest rates.
Income Taxes
The Company's effective tax rate was 40.9% and 40.5% for the three and nine
months ended June 30, 1996, respectively, as compared to a tax rate of 39.0%
for the three and nine months ended June 30, 1995. These rates approximate the
blended Federal and state statutory rate as a result of all of the Company's
operations being located within the United States.
LIQUIDITY AND CAPITAL RESOURCES
Cash flows from operating activities were $23.1 million and $4.9 million for
the nine months ended June 30, 1996 and 1995, respectively. Cash from
operations was provided primarily by decreases in accounts receivable and
increases in accounts payable and customer deposits offset by an increase in
inventories. Increases in inventories continue to be influenced mainly by
customer-imposed program reductions or delays. The Company is attempting to
mitigate the impact of such reductions or delays by obtaining customer deposits
for inventories carried by the Company in situations of this nature. The cash
generated from operating activities was utilized primarily to reduce
outstanding debt. Borrowings under the Company's long-term revolving credit
agreement have been reduced by $22 million from $41.5 million at September 30,
1995 to $19.5 million at June 30, 1996.
Capital additions of $1.7 million for the nine months ended June 30, 1996 were
primarily concentrated in surface mount assembly equipment and management
information systems hardware and software. The Company has historically
utilized operating leases to fund the majority of its manufacturing equipment
needs. The Company now anticipates utilizing operating leases primarily in
situations where technical obsolescence concerns are determined to outweigh the
benefits of financing the equipment purchase. Due to this change in strategy,
the Company anticipates increased future capital additions due to the number of
operating leases expiring through the remainder of fiscal 1996 and fiscal 1997.
Groundbreaking for the new 111,000 square foot Green Bay, Wisconsin
manufacturing facility took place in July, 1996. This facility, which will be
leased from Oneida Nations Electronics through a unique business relationship,
is currently scheduled to be completed in the second quarter of calendar 1997.
The total debt to equity ratio as of June 30, 1996 of 1.4 to 1 was an
improvement from 1.8 to 1 at September 30, 1995.
The Company believes that its credit facilities, leasing capabilities and
projected cash flows from operations will be sufficient to meets its
anticipated short-term and long-term capital requirements.
* * * * *
10
<PAGE> 11
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 11 - Statement Regarding Computation of Per Share
Earnings
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
None
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant had duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
8/8/96 /s/ Peter Strandwitz
- ------ ------------------------
Date Peter Strandwitz
Chairman and CEO
8/8/96 /s/ Thomas B. Sabol
- ------ ------------------------
Date Thomas B. Sabol
Vice President-Finance &
Chief Financial Officer
11
<PAGE> 1
EXHIBIT 11
JUNE 30, 1996 FORM 10-Q
PLEXUS CORP.
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
June 30, 1996 June 30, 1996
------------------ -----------------
Fully Fully
Primary Diluted Primary Diluted
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net income $2,604 $2,604 $4,248 $4,248
====== ====== ====== ======
Weighted average number
of common shares
outstanding 6,497 6,497 6,495 6,495
Adjustment:
Assumed issuances under
stock option plan 108 146 139 148
Assumed conversion of
preferred stock 555 555 555 555
------ ------ ------ ------
Common equivalent shares
outstanding 7,160 7,198 7,189 7,198
====== ====== ====== ======
Net income per common share $.36 $.36 $.59 $.59
====== ====== ====== ======
</TABLE>
12
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> JUN-30-1996
<CASH> 2,429
<SECURITIES> 0
<RECEIVABLES> 35,053
<ALLOWANCES> 145
<INVENTORY> 54,883
<CURRENT-ASSETS> 94,970
<PP&E> 31,451
<DEPRECIATION> 20,295
<TOTAL-ASSETS> 106,356
<CURRENT-LIABILITIES> 41,171
<BONDS> 0
0
0
<COMMON> 65
<OTHER-SE> 44,728
<TOTAL-LIABILITY-AND-EQUITY> 106,356
<SALES> 232,660
<TOTAL-REVENUES> 232,660
<CGS> 214,888
<TOTAL-COSTS> 214,888
<OTHER-EXPENSES> 9,274
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,578
<INCOME-PRETAX> 7,142
<INCOME-TAX> 2,894
<INCOME-CONTINUING> 4,248
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,248
<EPS-PRIMARY> .59
<EPS-DILUTED> .59
</TABLE>
