Plexus Corp. F2Q10 Earnings Call Transcript

Plexus Corp. F2Q10 Earnings Call Transcript
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Plexus Corp. (PLXS)

F2Q10 Earnings Call

April 21, 2010 08:30 am ET

Executives

Ginger Jones – VP and CFO

Dean Foate – President and CEO

Mike Buseman – SVP, Global Manufacturing Operations

Analysts

Reik Read – Robert W. Baird

Jim Suva – Citi

William Stein – Credit Suisse

Sherri Scribner – Deutsche Bank

Brian Alexander – Raymond James

Shawn Harrison – Longbow Research

Sean Hannan – Needham & Company

Brian White – Ticonderoga

Alex Langton – Engelhoff and Sneider

Presentation

Operator

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Good morning, ladies and gentlemen and welcome to the Plexus Corp. conference call regarding its second fiscal quarter 2010 earnings announcement. At this time, all participants are in a listen-only mode. After a brief discussion by management, we will open the conference call for questions. The conference call is scheduled to last approximately one hour.

I would now like to turn the call over to Mr. Ginger Jones, Plexus Vice President and Chief Financial Officer. Ms. Jones, you may begin.

Ginger Jones

Hello and thank you for joining us this morning. Normally, Angelo would open the conference call and present the Safe Harbor information. But he is currently on assignment in (Pune), assisting our team with a many initiatives we have in that region. So I will take his portion of the call for the next few quarters.

Before we begin, I would like to establish that statements made during this conference call that are not historical in nature, such as statements in the future tense and statements including believe, expect, intend, plan, anticipate and similar terms and concepts are forward-looking statements.

Forward-looking statements are not guarantees since there are inherent difficulties in predicting future results, and actual results could differ materially from those expressed or implied in the forward-looking statements. For a list of major factors that could cause actual results to differ materially from those projected, please refer to the company’s periodic SEC filings, particularly the risk factors in our Form 10-K filings for the fiscal year ended October 3rd, 2009 and the Safe Harbor and Fair Disclosure statement in yesterday’s press release.

The company provides non-GAAP supplemental information. For example, our call today may refer to earnings or EPS excluding restructuring costs or other unusual items. Non-GAAP financial data is provided to facilitate meaningful period-to-period comparisons of underlying operational performance by eliminating infrequent or unusual charges. Similar non-GAAP financial measures including return on invested capital are used for internal management assessments because such measures provide additional insight into ongoing financial performance. For a full reconciliation of non-GAAP supplemental information, please refer to yesterday’s press release and our periodic SEC filings.

Joining me this morning are Dean Foate, President and CEO and Mike Buseman, Senior VP of Global Manufacturing Operations.

We will begin today’s call with Dean providing second quarter commentary about our market sector performance and outlook, our new business wins, capacity utilization and guidance for the third quarter of fiscal 2010. I will follow up with details about the second quarter financial performance and make some additional comments about the third quarter of fiscal 2010.

Let me now turn the call over to Dean Foate. Dean?

Dean Foate

Thank you, Ginger. Good morning everyone. Last night we reported results for our second fiscal quarter of 2010. Revenues were $491 million, with EPS of $0.51. Both revenue and EPS were near the top-end of our guidance ranges.

We anticipated an exceptional quarter when we provided guidance for our fiscal Q2 back in January. Revenues were up 14% quarter-over-quarter while EPS grew approximately 16%. We experienced growth in all of our market sectors both as a consequence of improving end market conditions and production ramps of manufacturing programs won over the past few quarters. Working capital management improved sequentially and helped drive return on invested capital to 18.7%, closer to our target of 20%.

While the quarter was strong, we experienced a number of puts and takes in production demand during the quarter as many customers continued to struggle with their forecast during the recovery. In some cases, the constrained supply chain is limiting our ability to service our customers request for demand upside or accommodate product mix changes with the agility they desire. While this creates a near-term stress, it also provides a catalyst for some customers to adopt a more intelligent supply chain strategy designed specifically to provide them with the added flexibility and agility so that we can service their demand volatility with heightened predictability.

We believe this ultimately plays to one of our competencies, creates competitive advantage for our customers, and results in particular relationships. If you want to learn more, there is an article published this month by AMR Research that discusses Plexus’ supply chain solutions capability in detail. And we will be happy to get you a copy of that report, so if you just contact Ginger.

Turning now to some comments on our sector performance in the fiscal second quarter and the current expectations for our third quarter of fiscal 2010. Our wireline networking sector was up about 4% in Q2, slightly better than expectations when we established guidance as demand improved during the quarter for the majority of our top 10 customers. Additionally, we continued to ramp new programs won in recent quarters. Looking ahead to Q3, we currently expect sequential growth to continue in the low single digit percentage range for our wireline networking sector.

Our wireless infrastructure sector was up strong in Q2, up approximately 42% sequentially due to strong, yet lumpy demand from a newer significant customer. Additionally we benefited from the start of production for the new customer won just last quarter. In Q3, our wireless infrastructure sector revenues are currently forecasted to decline in the high single digit percentage range. We have a relatively short list of significant customers in the sector and we anticipate that their demand environment will remain lumpy over the coming quarters.

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