Business Context and Reporting Period
Company: Plexus Corp.
Filing Type: Form 10-Q (Quarterly Report)
Reporting Period: Quarter and six months ended March 31, 1995
Business Overview: Plexus Corp. operates an Advanced Manufacturing Facility providing volume to new and existing customers. The company reported strong growth driven by increased capacity utilization.
Key Financial Metrics
| Metric (in thousands) | Q2 1995 (3 Months) | Q2 1994 (3 Months) | YTD 1995 (6 Months) | YTD 1994 (6 Months) |
|---|---|---|---|---|
| Net Sales | $69,380 | $61,323 | $134,721 | $117,267 |
| Gross Profit | $5,938 | $4,482 | $10,296 | $8,072 |
| Gross Margin % | 8.6% | 7.3% | 7.6% | 6.9% |
| Operating Income | $2,999 | $2,484 | $4,939 | $4,275 |
| Net Income | $1,470 | $1,023 | $2,365 | $1,727 |
| Diluted EPS | $0.21 | $0.16 | $0.33 | $0.27 |
| Cash Flow from Operations (YTD) | $3,668 (vs. $(3,536) YTD 1994) | |||
| Total Debt (Current + Long-term) | $38,291 (as of Mar 31, 1995) | |||
| Working Capital | $62,475 (as of Mar 31, 1995) |
Material Changes vs. Prior Period
- Revenue Growth: Net sales increased 13.1% in Q2 and 14.9% YTD compared to the prior year, attributed to additional volume from new and existing customers enabled by the Advanced Manufacturing Facility.
- Margin Expansion: Gross profit margins improved significantly (from 7.3% to 8.6% in Q2) due to better absorption of fixed manufacturing costs over increased sales volume.
- Expense Increases: Selling and administrative expenses rose 47% in Q2 ($941,000 increase), primarily due to the hiring of 38 administrative personnel and a $117,000 bad debt expense.
- Debt Reduction: Total debt decreased, improving the debt-to-equity ratio from 2.50 to 1 (Sept 1994) to 2.07 to 1 (Mar 1995). Interest expense decreased in Q2 due to lower borrowings.
- Cash Flow: Operating cash flow turned positive, providing $3.7 million YTD, compared to a negative $3.5 million in the prior year period.
Outlook, Risks, and Management Commentary
- Outlook: Management is optimistic that sales growth will continue throughout fiscal year 1995.
- Liquidity: The company believes current credit facilities and projected cash flows are sufficient for short and long-term needs. Management anticipates increasing its revolving credit facility in the fourth quarter of fiscal 1995.
- Unusual Items: Other income included a net write-off of a $73,000 investment related to "Smarthouse." Management does not expect additional write-offs of investments.
- Risks: The company noted an increasing interest rate environment, which impacted interest expense in the first half of the year despite Q2 reductions.
Investor Verification Checklist
- Verify the sustainability of the 13.1% revenue growth rate and the specific contribution of the Advanced Manufacturing Facility.
- Confirm the impact of the 38 new administrative hires on future operating leverage and expense ratios.
- Review the details of the $117,000 bad debt expense to assess credit risk exposure.
- Monitor the planned increase in the revolving credit facility in Q4 1995 and its impact on interest costs.
- Validate the inventory levels ($59.2 million) relative to the sales growth to ensure no overstocking.