Plexus (PLXS) Q4 2013 earnings summary

Executive summary

• Fiscal 2013 net sales fell 3.4% YoY to $2.228B; reported net income rose 32.5% to $82.3M, primarily due to lower valuation allowance charges year over year.

• Excluding valuation allowances and out-of-period tax adjustments, net income was $86.1M versus $86.2M in fiscal 2012; adjusted diluted EPS was $2.47 versus $2.43.

Financial highlights

• Gross profit declined 3.1% to $213.2M; gross margin edged up to 9.6% from 9.5%, while operating income fell to $96.6M from $104.2M.

• Operating margin decreased to 4.3% from 4.5%; reported diluted EPS was $2.36 versus $1.75, including significant year-over-year tax allowance effects.

• Operating cash flow increased to $207.6M from $157.5M; free cash flow rose to $99.5M from $93.8M, supported by improved working capital and a 10-day reduction in cash cycle.

Outlook and guidance

• Fiscal 2014 annual effective tax rate expected at 8%–10%; capital expenditures estimated at $75M, with operations expected to fund the investment.

• Organic revenue growth target for fiscal 2014 and beyond was reduced to 12% from 15%; the fiscal 2014 WACC estimate was lowered to 11% from 12%.

• Neenah facility consolidation was expected to incur $3.0M–$4.0M of restructuring charges in fiscal 2014 H1; Guadalajara facility completion was expected in fiscal 2014 H2.