Plexus Corp. FY2021 Form 10-K Summary
Reporting period: Fiscal year ended October 2, 2021 (52 weeks). Fiscal 2020 had 53 weeks, which affects comparability. Plexus provides electronics manufacturing services, including design, supply chain, manufacturing and aftermarket support, primarily in Industrial, Healthcare/Life Sciences and Aerospace/Defense markets.
Financial performance
| Metric | FY2021 | FY2020 | Change |
|---|---|---|---|
| Net sales | $3,368.9 million | $3,390.4 million | Down 0.6% |
| Gross profit / margin | $323.3 million / 9.6% | $312.7 million / 9.2% | Margin up 40 bps |
| Operating income / margin | $176.3 million / 5.2% | $153.4 million / 4.5% | Income up 14.9%; margin up 70 bps |
| Net income | $138.9 million | $117.5 million | Up 18.2% |
| Diluted EPS | $4.76 | $3.93 | Up 21.1% |
| Operating cash flow | $142.6 million | $210.4 million | Down $67.8 million |
| Free cash flow | $85.5 million | $160.3 million | Down $74.8 million |
- Gross and operating margin gains reflected favorable customer mix, lower COVID-related costs and reduced selling and administrative expense; fixed-cost increases and lower sales partly offset improvements.
- Cash flow was pressured by a $206.5 million increase in inventory cash use, as Plexus built stock for new program ramps and longer component lead times. Inventory rose to $972.3 million from $763.5 million; annualized cash-cycle days increased to 85 from 69.
- Cash and restricted cash were $270.5 million at year-end. Total debt, finance lease obligations and other financing were $253.3 million; revolving-credit borrowings were $55 million, with $295 million of the $350 million revolving commitment available. The company reported compliance with debt covenants.
- Capital expenditures were $57.1 million. Management estimated FY2022 capex of $100 million to $120 million, principally for the Bangkok facility, new program ramps and equipment replacement.
- The effective tax rate was 13.4%. Management expected an FY2022 rate of approximately 13%–15%, assuming no tax-law changes. An APAC tax holiday reduced FY2021 tax by approximately $34.4 million, net of GILTI effects.
Material changes and business trends
- Sales fell slightly overall, while Industrial sales increased 1.9% to $1,549.0 million and Healthcare/Life Sciences rose 5.4% to $1,326.9 million. Aerospace/Defense fell 19.4% to $493.0 million, primarily due to weaker commercial aerospace demand associated with COVID-19.
- By region, APAC sales increased 1.4% to $1,850.6 million; AMER declined 0.8% to $1,317.4 million; and EMEA declined 10.4% to $312.7 million.
- Component shortages, extended lead times and workforce restrictions—particularly temporary capacity reductions in Malaysia during the second half—limited production and prevented Plexus from fully meeting customer demand. Management expected supply constraints to continue into FY2022 and require further inventory investment.
- GE represented 11.2% of FY2021 sales; the ten largest customers accounted for 55.2%. Customers generally provide no firm long-term purchase commitments.
- Plexus repurchased $108.5 million of shares in FY2021 and had $46.9 million remaining under its new $50 million authorization at year-end. It has not paid cash dividends and expects to retain most earnings for investment and working capital.
Outlook, risks and unusual items
- Management described customer demand as robust entering FY2022, but said shortages, labor availability, inflation and operating inefficiencies would constrain the ability to capture that demand. No specific FY2022 revenue or earnings guidance is provided in the filing.
- Key risks include continued COVID-19 disruption; component availability, supplier concentration and price increases; customer order cancellations or forecast changes; customer and market-sector concentration; inventory obsolescence; and the ability to recruit and retain skilled labor.
- International operations and cash are concentrated in APAC, especially Malaysia. Other disclosed exposures include currency, trade and tariff changes, tax-law developments, cybersecurity and data privacy, regulation, and natural disasters or other facility disruptions.
- FY2021 restructuring and impairment charges were $3.3 million, primarily related to workforce reductions. Ordinary-course litigation was not expected by management to have a material effect.
- Approximately 91% of FY2021 revenue was recognized over time using cost-based progress estimates. The auditor identified this revenue-recognition process—particularly contract eligibility and estimated profit margins—as a critical audit matter. The financial statements and internal control over financial reporting received unqualified audit opinions.
Important facts for investors to verify
- Whether component supply, Malaysia staffing and production capacity improve enough to convert strong demand into shipments and revenue.
- Whether inventory levels, cash-cycle days and operating cash flow normalize after the FY2021 buildup.
- Whether Aerospace/Defense demand recovers and whether Industrial and Healthcare/Life Sciences growth persists.
- How customer concentration, especially GE and the top ten accounts, evolves, and whether new program ramps achieve expected margins.
- Whether FY2022 capex, the stated tax-rate range and the APAC tax-holiday assumptions remain on track.