Title: Plexus F3Q10 Earnings Call Transcript

Symbol: PLXS

Call Start: 8:30

Call End: 9:30

Plexus (PLXS)

F3Q10 (Qtr End 7/3/10 )Earnings Call

July 22, 2010 8:30 a.m. ET

Executives

Ginger Jones – VP and CFO

Dean Foate – President and CEO

Todd Kelsey - SVP, Global Customer Services

Mike Buseman – SVP, Global Manufacturing Operations

Analysts

Reik Read – Robert W. Baird

William Stein – Credit Suisse

Jim Suva – Citi

Sherri Scribner – Deutsche Bank

Joe Witten – Longbow Research

Sean Hannan – Needham & Company

Brian Alexander – Raymond James

Brian White – Ticonderoga

Presentation

Operator

Good morning, ladies and gentlemen and welcome to the Plexus Corp. conference call regarding its third 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 Ms. Ginger Jones, Plexus Vice President and Chief Financial Officer. Ms. Jones, you may begin.

Ginger Jones

Good morning 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 Penang, assisting our team with a many initiatives we have in that region. So I will take his portion of the call for this quarter.

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, Todd Kelsey, Senior Vice President of Global Customer Services and Mike Buseman, Senior VP of Global Manufacturing Operations.

We will begin today’s call with Dean providing third fiscal quarter commentary about our market sector performance and outlook, our new business wins, capacity utilization, and guidance for the fourth quarter of fiscal 2010. I will follow up with details about the third quarter financial performance and make some additional comments about the fourth 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 third fiscal quarter of 2010. Revenues were $536 million, with EPS of $0.59. Revenue was in line with the mid-point of our guidance range, while EPS approached the higher end of the range due to strong operating leverage. Our third fiscal quarter marked the first time we exceeded $500 million in revenues, establishing an important milestone for the company.

We anticipated a strong quarter when we established guidance. Revenues were up 9% sequentially, while EPS grew 16%. Return on invested capital improved to 19%, closing in on our target of 20%. Ginger will provide additional insight on our financial performance and model during her comments in a few minutes.

While our third-quarter performance was strong overall, included with results in our guidance range, it is important to consider that we guided conservatively relative to an even stronger internal forecast. The quarter was challenging, with several customers adjusting forecasts lower during the period.

For a few weeks in June it appeared that we might conclude the third quarter near the bottom end of our guidance range. European demand reductions in our wireline networking sector played a role in the forecast reductions, although the reset in our customers’ European regional demand appears stable at this point.

While a few customers did improve their forecast during the quarter, the constrained supply chain environment continued to limit our ability to service near-term increases in demand. Customer forecast reductions also impacted our fourth fiscal quarter, as our guidance suggests a pause in revenue growth.

The inventory in our balance sheet bears witness to some forecast pushouts with the anticipation of sequential revenue growth, resuming as we enter fiscal 2011.

Turning now to comments on our sector performance in our third fiscal quarter and our current expectations for our fourth quarter of 2010. Our wireline networking sector was up about 6% in Q3, slightly better than expectations when we established guidance as we benefitted from some late quarter demands that offset weakness in European end markets. Looking ahead to Q4, we currently expect our wireline networking sector to be flat to slightly down as the majority of our top 10 customers in this sector have trimmed their forecasts.

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