2011 Annual Report to Shareholders
Notice of 2012 Annual Meeting of Shareholders
and Proxy Statement
PROFILE
About Plexus Corp. — The Product Realization Company
Plexus (www.plexus.com) delivers optimized Product Realization solutions through a unique Product
Realization Value Stream services model. This customer focused services model seamlessly integrates
and
innovative product
sustaining services to deliver comprehensive end-to-end solutions for customers in the Americas, European
and Asia-Pacific regions. Award-winning customer service is provided to over 130 branded product
companies in the Wireline/Networking, Wireless Infrastructure, Medical, Industrial/Commercial and
Defense/Security/Aerospace market sectors.
commercialization, manufacturing,
conceptualization, design,
fulfillment
Market Sector
% of F11 Sales
Wireline/Networking
Wireless Infrastructure
Medical
Industrial/Commercial
Defense/Security/Aerospace
39%
7%
21%
24%
9%
Plexus is passionate about its goal to be the leading Electronic Manufacturing Services company in the
world at servicing mid-to-low volume, higher complexity customer programs characterized by unique
flexibility, technology, quality and regulatory requirements. We have aligned our business operations,
processes, workforce and financial metrics to support this strategy.
We operate flexible manufacturing facilities and processes designed to accommodate customers with
multiple product-lines and configurations. Each of our customers are supported by a multi-disciplinary
customer team and one or more uniquely configured “focus factories” supported by a supply-chain and
logistics solution specifically designed to meet the flexibility and responsiveness required to support that
customer’s fulfillment requirements.
Our go-to-market strategy is also tailored to our target market sectors and business strategy, with business
development and customer management teams dedicated to each of the five sectors we serve. These teams
are accountable to understand sector participants, technology, unique quality and regulatory requirements
and longer-term trends in these sectors. These teams also help set our strategy for growth in these sectors
with a particular focus on expanding the services and value-add that we provide customers.
In addition, our financial model is aligned with our business strategy, with our primary focus to earn a
return on invested capital (“ROIC”) 500 basis points in excess of our weighted average cost of capital
(“WACC”). Lower manufacturing volumes, flexibility and fulfillment requirements, our sector-based go-to-
market strategy, and complex quality and regulatory compliance requirements typically result in higher
investments in inventory and selling and administrative costs relative to our competitors. By exercising
discipline to generate a ROIC in excess of our WACC, our goal is to ensure that Plexus creates value for our
shareholders.
Established in 1979, Plexus has approximately 9,000 employees located in 24 active facilities around the
world. These facilities are strategically located to support the global supply chain, manufacturing and
engineering needs of original equipment manufacturers in our targeted market sectors. Plexus’ global
manufacturing and engineering footprint is outlined below:
Geographic Region
# of Facilities*
Sq. Footage
% of F11 Sales
1,369,000
Americas
897,000
Asia-Pacific
140,000
Europe
* Note: Please refer to our Form 10-K for a full list of properties.
11
6
5
48%
48%
4%
Plexus Corp.
One Plexus Way
P.O. Box 156
Neenah, WI 54957-0156
(920) 722-3451
Notice of 2012 Annual Meeting of Shareholders
and Proxy Statement
2011 Annual Report
on Form 10-K
Your vote is important. You may vote in person, electronically via the Internet at www.proxyvote.com,
by phone at 1-800-690-6903 or by mail. If voting via the Internet or by phone, please have the 12
digit control number that was sent to you available. If you did not receive written materials and would
like to receive them, please request them as provided on page 1 of the Proxy Statement.
NOTICE OF ANNUAL MEETING
OF SHAREHOLDERS
on February 15, 2012
To the Shareholders of Plexus Corp.:
Plexus Corp. will hold its annual meeting of shareholders at The Pfister Hotel, located at 424 East
Wisconsin Avenue, Milwaukee, Wisconsin 53202, on Wednesday, February 15, 2012, at 8:00 a.m. Central Time, for
the following purposes:
(1) To elect nine directors to serve until the next annual meeting and until their successors have been duly
elected.
(2) To ratify the selection of PricewaterhouseCoopers LLP as Plexus’ independent auditors.
(3) To hold an advisory vote on the compensation of the Company’s named executive officers, as
disclosed in “Compensation Discussion and Analysis” and “Executive Compensation” herein.
(4) To transact such other business as may properly come before the meeting or any adjournment thereof.
Plexus Corp.’s shareholders of record at the close of business on December 8, 2011, will be entitled to vote
at the meeting or any adjournment of the meeting. On or about December 16, 2011, we expect to mail shareholders
a Notice of Internet Availability of Proxy Materials containing instructions on how to access our proxy statement
and annual report, as well as vote, online.
We call your attention to the proxy statement accompanying this notice for a more complete statement
about the matters to be acted upon at the meeting.
By order of the Board of Directors
Angelo M. Ninivaggi
Senior Vice President, General Counsel,
Corporate Compliance Officer and Secretary
Neenah, Wisconsin
December 14, 2011
You may vote in person or by using a proxy as follows:
• By internet: Go to www.proxyvote.com. Please have the notice we sent to you in hand because it has
your personal 12 digit control number(s) needed for your vote.
• By telephone: Call 1-800-690-6903 on a touch-tone telephone. Please have the notice we sent to you in
hand because it has your personal 12 digit control number(s) needed for your vote.
• By mail:
Please request written materials as provided on page 1 of the proxy statement. Complete,
sign and date the proxy card, and return it to the address indicated on the proxy card.
If you later find that you will be present at the meeting or for any other reason desire to revoke your proxy,
you may do so at any time before it is voted.
One Plexus Way
P.O. Box 156
Neenah, Wisconsin 54957-0156
PROXY STATEMENT
TABLE OF CONTENTS
COMMONLY ASKED QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING . . . . .
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT . . . . .
ELECTION OF DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CORPORATE GOVERNANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Board of Directors Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Director Independence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Board Leadership Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Board’s Role in Risk Oversight . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Board Committees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Communications with the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Code of Ethics, Committee Charters and Other Corporate Governance Documents . . . . . . . . . . . . . . .
Directors’ Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock Ownership Guidelines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Section 16(a) Beneficial Ownership Reporting Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
COMPENSATION DISCUSSION AND ANALYSIS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Elements and Analysis of Direct Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Elements and Analysis of Other Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax Aspects of Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
COMPENSATION COMMITTEE REPORT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Summary Compensation Table . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Grants of Plan-Based Awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outstanding Equity Awards at Fiscal Year-End . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Option Exercises and Stock Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Nonqualified Deferred Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Employment Agreements and Potential Payments Upon Termination or Change in Control . . . . . . . .
COMPENSATION AND RISK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ADVISORY VOTE ON EXECUTIVE COMPENSATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CERTAIN TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
REPORT OF THE AUDIT COMMITTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
AUDITORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1
6
8
12
12
12
13
13
13
17
17
17
20
20
21
21
23
31
34
35
36
36
38
40
43
44
45
49
50
50
50
51
51
ANNUAL MEETING OF SHAREHOLDERS
FEBRUARY 15, 2012
COMMONLY ASKED QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING
Q: WHEN IS THIS PROXY MATERIAL FIRST AVAILABLE TO SHAREHOLDERS?
A: On or about December 16, 2011, Plexus Corp. (“Plexus”, “we” or the “Company”) expects to mail shareholders
a Notice of Internet Availability of Proxy Materials containing instructions on how to access the proxy material over
the internet.
Q: WHY DID I RECEIVE A NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIALS INSTEAD
OF A PRINTED COPY OF THE PROXY MATERIAL?
A: Pursuant to the rules adopted by the Securities and Exchange Commission, we are permitted to provide access
to our proxy material over the internet instead of mailing a printed copy of the proxy material to each shareholder.
As a result, we are mailing shareholders a Notice of Internet Availability of Proxy Materials containing instructions
regarding how to access our proxy material, including our proxy statement and annual report, and vote via the
internet. You will not receive a printed copy of the proxy material unless you request one by following the
instructions included in the Notice of Internet Availability of Proxy Materials or provided below.
Important Notice Regarding the Availability of Proxy Materials for
the Shareholder Meeting to Be Held on February 15, 2012
The proxy statement and annual report are available at www.proxyvote.com.
At www.proxyvote.com, shareholders can view the proxy material, cast their vote and request to receive paper
copies of the proxy material by mail.
Q: HOW CAN SHAREHOLDERS REQUEST PAPER COPIES OF THE PROXY MATERIAL?
A: Shareholders may request that paper copies of the proxy material, including an annual report, proxy statement
and proxy card, be sent to them without charge as follows:
•
•
•
By internet:
www.proxyvote.com
By email:
Send a blank email with your 12 digit control number(s) in the subject line to
sendmaterial@proxyvote.com
By telephone:
1-800-579-1639
When you make your request, please have your 12 digit control number(s) available; that control number was
included in the notice that was mailed to you. To assure timely delivery of the proxy material before the annual
meeting, please make your request no later than February 1, 2012.
1
Q: WHAT AM I VOTING ON?
A: At the annual meeting you will be voting on three proposals:
1. The election of nine directors to the board of directors to serve until Plexus’ next annual meeting and until
their successors have been duly elected. This year’s nominees are:
• Ralf R. Böer
• Stephen P. Cortinovis
• David J. Drury
• Dean A. Foate
• Peter Kelly
• Phil R. Martens
• John L. Nussbaum
• Michael V. Schrock
• Mary A. Winston
2. A proposal to ratify the Audit Committee’s selection of PricewaterhouseCoopers LLP as Plexus’
independent auditor for 2012.
3. An advisory proposal to approve the compensation of the Company’s named executive officers, as
disclosed in “Compensation Discussion and Analysis” and “Executive Compensation” herein.
Q: WHAT ARE THE BOARD’S VOTING RECOMMENDATIONS?
A: The board of directors is soliciting this proxy and recommends the following votes:
• FOR each of the nominees for election to the board of directors;
• FOR the ratification of the Audit Committee’s selection of PricewaterhouseCoopers LLP as Plexus’
independent auditors for 2012; and
• FOR approval of the compensation of the Company’s named executive officers.
Q: WHAT VOTE IS REQUIRED TO APPROVE EACH PROPOSAL?
A: To conduct the annual meeting, more than 50% of the Plexus’ outstanding shares entitled to vote must be
present in person or by duly authorized proxy. This is referred to as a “quorum.” Abstentions and shares that are the
subject of broker non-votes will be counted for the purpose of determining whether a quorum exists; shares
represented at a meeting for any purpose are counted in the quorum for all matters to be considered at the meeting.
Assuming a quorum is present, directors are elected by a plurality of the votes cast in person or by proxy by the
holders of Plexus common stock entitled to vote at the election at the meeting. “Plurality” means that the
individuals who receive the highest number of votes are elected as directors, up to the number of directors to be
chosen at the meeting. Any votes attempted to be cast “against” a candidate are not given legal effect and are not
counted as votes cast in the election of directors. Therefore, any shares that are not voted, whether by withheld
authority, broker non-vote or otherwise, have no effect in the election of directors except to the extent that the failure
to vote for any individual results in another individual receiving a relatively larger number of votes.
Ratification of PricewaterhouseCoopers LLP as Plexus’ independent auditors will be determined by a majority of
the shares voting on that matter, assuming a quorum is present. The plurality of votes cast will also be used to
determine the results of the advisory vote to approve the compensation of the Company’s named executive officers.
Abstentions and broker non-votes will not affect these votes, except insofar as they reduce the number of shares that
are voted.
2
Q: WHAT IF I DO NOT VOTE?
A: The effect of not voting will depend on how your share ownership is registered.
If you own shares as a registered holder and you do not vote, the shares that you do not vote will not be represented
at the meeting and will not count toward the quorum requirement. If a quorum is obtained, then the shares that you
have not voted will not affect whether a proposal is approved or rejected.
If you are a shareholder whose shares are not registered in your name and you do not vote, then your bank, broker or
other holder of record may still represent your shares at the meeting for purposes of obtaining a quorum. In the
absence of your voting instructions, your bank, broker or other holder of record may or may not vote your shares in
its discretion depending on the proposal before the meeting. Your broker may no longer vote your shares in its
discretion in the election of directors; therefore, you must vote your shares if you want them to be counted in the
election of directors. In addition, your broker is also not permitted to vote your shares in its discretion regarding
matters related to executive compensation, including advisory votes on executive compensation. However, your
broker may vote your shares in its discretion on routine matters such as the ratification of the Plexus’ independent
auditors.
Q: WHO MAY VOTE?
A: You may vote at the annual meeting if you were a shareholder of record of Plexus common stock as of the
close of business on December 8, 2011, which is the “Record Date.” As of the Record Date, Plexus had 34,625,591
shares of common stock outstanding. Each outstanding share of common stock is entitled to one vote on each
matter presented. Any shareholder entitled to vote may vote either in person or by duly authorized proxy.
Q: HOW DO I VOTE?
A: We offer four methods for you to vote your shares at the annual meeting—in person; via the internet; by
telephone; or by mail. You may vote in person at the annual meeting or authorize the persons named as proxies on
the proxy card, John L. Nussbaum, Dean A. Foate and Angelo M. Ninivaggi, to vote your shares. We recommend
that you vote as soon as possible, even if you are planning to attend the annual meeting, so that the vote count will
not be delayed.
While we offer four methods, we encourage you to vote via the internet, as it is the most cost-effective method
available. There is no charge to vote your shares via the internet, though you may incur costs associated with
electronic access, such as usage charges from internet access providers. If you choose to vote your shares via the
internet, there is no need for you to request or mail back a proxy card.
• By internet: Go to www.proxyvote.com. Please have the notice we sent to you in hand because it has
your personal 12 digit control number(s) needed for your vote.
• By telephone: On a touch-tone telephone, call 1-800-690-6903. Please have the notice we sent to you in
hand because it has your personal 12 digit control number(s) needed for your vote.
• By mail:
Please request written materials as provided on page 1 of the proxy statement. Complete,
sign and date the proxy card, and return it to the address indicated on the proxy card.
If your shares are not registered in your name, then you vote by giving instructions to the firm that holds your shares
rather than using any of these methods. Please check the voting form of the firm that holds your shares to see if it
offers internet or telephone voting procedures.
3
Q: WHAT DOES IT MEAN IF I RECEIVE MORE THAN ONE REQUEST TO VOTE?
A:
It means your shares are held in more than one account. You should vote the shares on all of your proxy
requests. You may help us reduce costs by consolidating your accounts so that you receive only one set of proxy
materials in the future. To consolidate your accounts, please contact our transfer agent, American Stock Transfer &
Trust Company, LLC, toll-free at 1-800-937-5449.
Q: WHAT IF I OWN SHARES AS PART OF PLEXUS’ 401(k) SAVINGS PLAN AND/OR EMPLOYEE
STOCK PURCHASE PLANS?
A: Shareholders who own shares as part of Plexus’ 401(k) Savings Plan (the “401(k) Plan”) and/or the Plexus
2000 and 2005 Employee Stock Purchase Plans (the “Purchase Plans”) will receive a separate means for proxy
voting their shares held in each account. Shares held by the 401(k) Plan for which participant designations are
received will be voted in accordance with those designations; those shares for which designations are not received
will be voted proportionally, based on the votes for which voting directions have been received from participants.
Shares held in accounts under the Purchase Plans will be voted in accordance with management recommendations,
except for shares for which contrary designations from participants are received.
Q: WHO WILL COUNT THE VOTE?
A: Broadridge Financial Solutions, Inc. will use an automated system to tabulate the votes. Its representatives will
also serve as the election inspectors.
Q: WHO CAN ATTEND THE ANNUAL MEETING?
A: All shareholders of record as of the close of business on December 8, 2011, can attend the meeting. However,
seating is limited and will be on a first arrival basis.
To attend the annual meeting, please follow these instructions:
• Bring proof of ownership of Plexus common stock and a form of identification; or
• If a broker or other nominee holds your shares, bring proof of ownership of Plexus common stock through
such broker or nominee and a form of identification.
Q: CAN I CHANGE MY VOTE AFTER I RETURN OR SUBMIT MY PROXY?
A: Yes. Even after you have submitted your proxy, proxies may be revoked at any time prior to the voting thereof
either by written notice filed with the secretary or acting secretary of the meeting or by oral notice to the presiding
officer during the meeting. Presence at the annual meeting of a shareholder who has appointed a proxy does not in
itself revoke a proxy.
Q: MAY I VOTE AT THE ANNUAL MEETING?
If you complete a proxy card or vote via the internet, you may still vote in person at the annual meeting. To
A:
vote at the meeting, please either give written notice that you would like to revoke your original proxy to the
secretary or acting secretary of the meeting or oral notice to the presiding officer during the meeting.
If a broker, bank or other nominee holds your shares and you wish to vote in person at the annual meeting you must
obtain a proxy issued in your name from the broker, bank or other nominee; otherwise you will not be permitted to
vote in person at the annual meeting.
4
Q: WHO IS MAKING THIS SOLICITATION?
A: This solicitation is being made on behalf of Plexus by its board of directors. Plexus will pay the expenses in
connection with the solicitation of proxies. Upon request, Plexus will reimburse brokers, dealers, banks and voting
trustees, or their nominees, for reasonable expenses incurred in forwarding copies of the proxy material and annual
report to the beneficial owners of shares which such persons hold of record. Plexus will solicit proxies by mailing a
Notice of Internet Availability of Proxy Materials to all shareholders; paper copies of the proxy material will be sent
upon request as provided above as well as in the Notice of Internet Availability of Proxy Materials. Proxies may be
solicited in person, or by telephone, e-mail or fax, by officers and regular employees of Plexus who will not be
separately compensated for those services.
Q: WHEN ARE SHAREHOLDER PROPOSALS AND SHAREHOLDER NOMINATIONS DUE FOR THE
2013 ANNUAL MEETING?
A: The Secretary must receive a shareholder proposal no later than August 18, 2012, in order for the proposal to be
considered for inclusion in our proxy materials for the 2013 annual meeting. The 2013 annual meeting of
shareholders is tentatively scheduled for February 13, 2013. To otherwise bring a proposal or nomination before the
2013 annual meeting, you must comply with our bylaws. Currently, our bylaws require written notice to the
Secretary between October 7, 2012, and November 1, 2012. The purpose of this requirement is to assure adequate
notice of, and information regarding, any such matter as to which shareholder action may be sought. If we receive
your notice after November 1, 2012, then your proposal or nomination will be untimely. In addition, your proposal
or nomination must comply with the procedural provisions of our bylaws. If you do not comply with these
procedural provisions, your proposal or nomination can be excluded. Should the board nevertheless choose to
present your proposal, the named Proxies will be able to vote on the proposal using their best judgment.
Q: WHAT IS THE ADDRESS OF THE SECRETARY?
A: The address of the Secretary is:
Plexus Corp.
Attn: Angelo M. Ninivaggi
One Plexus Way
P.O. Box 156
Neenah, Wisconsin 54957-0156
Q: WILL THERE BE OTHER MATTERS TO VOTE ON AT THIS ANNUAL MEETING?
A: We are not aware of any other matters that you will be asked to vote on at the annual meeting. Other matters
may be voted on if they are properly brought before the annual meeting in accordance with our bylaws. If other
matters are properly brought before the annual meeting, then the named proxies will vote the proxies they hold in
their discretion on such matters.
For matters to be properly brought before the meeting, our bylaws require that we receive written notice, together
with specified information, not less than 45 days nor more than 70 days before the first anniversary of the date in
which proxy materials for the previous year’s annual meeting were first made available to shareholders. We did not
receive notice of any matters by the deadline for the 2012 annual meeting, which was November 2, 2011.
5
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table presents certain information as of December 8, 2011, regarding the beneficial
ownership of the Plexus common stock held by each director or nominee for director, each executive officer
appearing in the “Summary Compensation Table” included in “Executive Compensation,” all directors and
executive officers as a group, and each known 5%-or-greater shareholder of Plexus.
Name
Ralf R. Böer
Stephen P. Cortinovis
David J. Drury
Dean A. Foate
Peter Kelly
Phil R. Martens
John L. Nussbaum
Michael V. Schrock
Mary A. Winston
Ginger M. Jones
Michael D. Buseman
Todd P. Kelsey
Yong Jin Lim
Shares
Beneficially
Owned (1)
Percentage
of Shares
Outstanding
62,500
71,000
72,500
838,082
74,100
7,000
141,523
50,000
25,000
81,567
75,794
88,578
84,395
*
*
*
2.3%
*
*
*
*
*
*
*
*
*
All executive officers and directors
as a group (17 persons)
1,899,642
5.3%
Disciplined Growth Investors, Inc. (2)
The Vanguard Group, Inc. (3)
Columbia Wanger Asset Management, LLC (4)
2,817,930
1,917,383
1,792,000
8.1%
5.5%
5.2%
__________________________________
* Less than 1%
(1)
The specified persons have sole voting and sole dispositive powers as to all shares, except as otherwise
indicated. The amounts include shares subject to options granted under Plexus’ option plans which are
exercisable currently or within 60 days of December 8, 2011. The options include those held by Mr. Böer
(53,500 shares), Mr. Cortinovis (62,000), Mr. Drury (63,500), Mr. Foate (705,046), Mr. Kelly (50,000),
Mr. Martens (5,000), Mr. Nussbaum (22,500), Mr. Schrock (40,000), Ms. Winston (19,000), Ms. Jones
(66,000), Mr. Buseman (65,750), Mr. Kelsey (77,350) and Mr. Lim (70,000), and all executive officers and
directors as a group (1,480,711). While the total for all executive officers and directors as a group includes
190 shares that may be acquired pursuant to stock-settled stock appreciation rights (“SARs”) granted under
Plexus’ equity incentive plans that are currently vested, it excludes certain SARs because the respective
exercise prices of those SARs were below the market value of Plexus common stock on December 8, 2011.
SARs are owned by an individual who is neither a director nor an executive officer named in the
“Summary Compensation Table.” In addition, the amounts reported in the table for Messrs. Böer,
Cortinovis and Nussbaum and Ms. Winston each include 2,000 deferred stock units, which are payable in
shares of the Company’s common stock on a one-for-one basis.
6
(2)
(3)
(4)
Disciplined Growth Investors, Inc. filed a report on Schedule 13G dated June 30, 2008, reporting that it
held sole voting power as to 1,899,904 shares and sole dispositive power as to 2,168,854 shares of common
stock. Disciplined Growth Investors subsequently filed a report on Form 13F for the quarter ended
September 30, 2011, showing sole investment power as to 2,817,930 shares and sole voting power as to
1,977,205 shares. The address of Disciplined Growth Investors, an investment advisor, is 150 South Fifth
Street, Suite 2550, Minneapolis, Minnesota 55402.
The Vanguard Group, Inc. filed a report on Schedule 13G dated December 31, 2010, reporting sole voting
power as to 52,623 shares, and sole dispositive power as to 2,532,404 shares of common stock. Vanguard
subsequently filed a report on Form 13F for the quarter ended September 30, 2011, showing sole
investment power as to 1,865,966 shares and sole voting power as to 51,417 shares. The address of
Vanguard Group, an investment advisor, is P.O. Box 2600, Valley Forge, Pennsylvania 19482.
Columbia Wanger Asset Management, LLC filed a report on Schedule 13G dated December 31, 2010,
reporting sole voting power as to 2,281,000 shares and sole dispositive power as to 2,484,000 share of
common stock. Columbia Wanger subsequently filed a report on Form 13F for the quarter ended
September 30, 2011, showing sole investment power as to 1,792,000 shares and sole voting power as to
1,613,000 shares. The address of Columbia Wanger, an investment advisor, is 227 West Monroe Street,
Suite 3000, Chicago, Illinois 60606.
7
ELECTION OF DIRECTORS
Plexus believes that it needs to attract and retain talented, focused, and motivated leadership to develop the
long-term strategy and deliver the economic profit that our shareholders expect. For Plexus, the concept of
leadership is not limited to the leadership within the Company; leadership also includes the individuals who serve on
Plexus’ board.
In accordance with Plexus’ bylaws, the board of directors has determined that there shall be nine directors
elected at the annual meeting of shareholders to serve until their successors are duly elected and qualified. The
persons who are nominated as directors, and for whom proxies will be voted unless a shareholder specifies
otherwise, are named below. If any of the nominees should decline or be unable to act as a director, which is not
foreseen, the proxies will be voted with discretionary authority for a substitute nominee designated by the board of
directors. Plexus’ bylaws authorize up to ten directors, as determined by the board. The Plexus board may expand
the board up to the number of directors authorized in Plexus’ bylaws and elect directors to fill empty seats, including
those created by an expansion, between shareholders’ meetings.
Name and Age
Ralf R. Böer, 63
Director since 2004
Stephen P. Cortinovis, 61
Director since 2003
David J. Drury, 63
Director since 1998
Dean A. Foate, 53
Director since 2000
Principal Occupation,
Business Experience and Education (1)
Mr. Böer is a Partner at Foley & Lardner LLP, a national law firm, and was also
its Chairman and Chief Executive Officer from 2002 until June 2011. Mr. Böer’s
practice includes international and domestic acquisitions, international business
transactions and licensing and technology transfers. He is also a director of
Fiskars Corporation, a global consumer products company. Mr. Böer obtained his
B.A. from the University of Wisconsin-Milwaukee and his J.D. from the
University of Wisconsin Law School.
Mr. Cortinovis is a private equity investor in Lasco Foods Company. He was
previously a Partner of Bridley Capital Partners Limited, a private equity group,
and prior thereto served as President—Europe of Emerson Electric Co., a
diversified global technology company. He is also a director of Insituform
Technologies, Inc., a company specializing in trenchless technology for
underground pipes, as well as the chair of its Corporate Governance and
Nominating Committee. Mr. Cortinovis obtained both his B.A. and J.D. from St.
Louis University.
Mr. Drury is Chairman and Chief Executive Officer of Poblocki Sign Company
LLC, an exterior and interior sign systems company, and was also its President
until June 2011. He is a director of Journal Communications, Inc., a media
holding company, as well as its lead director and the chair of its Nominating and
Corporate Governance Committee and its Executive Committee. In addition, Mr.
Drury is a trustee of The Northwestern Mutual Life Insurance Company, an
insurance and financial products company. Mr. Drury earned his B.B.A. from the
University of Wisconsin-Whitewater and is a Certified Public Accountant who
practiced as such for 18 years.
Mr. Foate has served as President and Chief Executive Officer of Plexus since
2002. He was previously Chief Operating Officer and Executive Vice President
of Plexus, and President of Plexus Technology Group, Inc., Plexus’ engineering
services business, prior thereto. Mr. Foate is also a director of Regal Beloit
Corporation, an electrical motors and mechanical products company, as well as
the chair of its Compensation and Human Resources Committee. Mr. Foate
earned his B.S. in Electrical and Computer Engineering from the University of
Wisconsin-Madison and his Master of Science in Engineering Management from
the Milwaukee School of Engineering.
8
Name and Age
Peter Kelly, 54
Director since 2005
Phil R. Martens, 51
Director since 2010
John L. Nussbaum, 69
Director since 1980
Michael V. Schrock, 58
Director since 2006
Mary A. Winston, 50
Director since 2008
Principal Occupation,
Business Experience and Education (1)
Mr. Kelly has served as Executive Vice President and General Manager of
Operations of NXP Semiconductors N.V., a provider of high performance mixed
signal and standard semi-conductor product solutions, since March 2011. He was
Vice President and Chief Financial Officer of UGI Corp., a distributor and
marketer of energy products and services, from 2007 until February 2011. Prior
thereto, Mr. Kelly was Chief Financial Officer and Executive Vice President of
Agere Systems, a semi-conductor company, from 2005 to 2007, and Executive
Vice President of Agere’s Global Operations Group. Mr. Kelly earned a B.S. from
the University of Manchester (U.K.) Institute of Science and Technology and is a
fellow of the Chartered Institute of Management Accountants.
Mr. Martens has served as Chief Executive Officer of Novelis Inc., an aluminum
rolled products producer, since February 2011, and as its President since 2009.
He was also Chief Operating Officer of Novelis Inc. from 2009 until 2011. Mr.
Martens previously served as Senior Vice President and President, Light Vehicle
Systems for ArvinMeritor, Inc., a supplier of integrated systems, modules and
components, from 2006 to 2009, and as President and Chief Operating Officer of
Plastech Engineered Products, Inc., an automotive component supplier. Prior
thereto, he held various engineering and leadership positions at Ford Motor
Company. Mr. Martens obtained a B.S. from Virginia Polytechnic Institute and
State University and an M.B.A. from the University of Michigan. In addition, he
was awarded an honorary Doctorate in Engineering from Lawrence Technical
Institution for his extensive contributions to the global automotive industry. (2)
Mr. Nussbaum has served as Chairman of Plexus since 2002. He is a co-founder
of Plexus, was its Chief Executive Officer until 2002, and served as Plexus'
President and Chief Operating Officer prior thereto. Mr. Nussbaum earned a B.A.
from St. John’s University (Minnesota).
Mr. Schrock has served as President and Chief Operating Officer of Pentair, Inc.,
a diversified manufacturer, since 2006. He previously was President and Chief
Operating Officer of Pentair’s Technical Products and Filtration Divisions. Prior
to joining Pentair, Mr. Schrock held various senior management positions with
Honeywell International Inc., a diversified technology and manufacturing
company, covering North America as well as the European, Africa and Middle
East regions. Mr. Schrock earned a B.S. from Bradley University and an M.B.A.
from Northwestern University, Kellogg School of Management.
Ms. Winston has served as Senior Vice President and Chief Financial Officer of
Giant Eagle, Inc., a food retailer and food distributor, since 2008. She was
President and Founder of WinsCo Financial, LLC, a financial solutions consulting
firm, from 2007 to 2008. Prior thereto, Ms. Winston served as Executive Vice
President and Chief Financial Officer of Scholastic Corporation, a children’s
publishing and media company, from 2004 to 2007, as a Vice President of Visteon
Corporation, an automotive parts supplier, and as a Vice President of Pfizer Inc., a
global biopharmaceutical company. She is also a director of Dover Corporation, a
diversified manufacturing company, and the chair of its Audit Committee. Ms.
Winston obtained a B.B.A. from the University of Wisconsin-Milwaukee, an
M.B.A. from Northwestern University, Kellogg School of Management and is a
Certified Public Accountant.
__________________
(1)
(2)
Unless otherwise noted, all directors have been employed in their principal occupation listed above for the
past five years or more.
Plastech Engineered Products, Inc. filed for Chapter 11 bankruptcy protection in February 2008,
approximately two years after Mr. Martens left the company.
9
The Company believes it is important for its board to be comprised of individuals with diverse
backgrounds, skills and experiences. All board members are expected to meet Plexus’ board member selection
criteria, which are listed below:
•
Impeccable honesty and integrity.
• A high level of knowledge gained through formal education and/or specific practical experience.
•
Broad based business acumen, including a general understanding of operations management, marketing,
finance, human resources management, corporate governance and other elements relevant to the success of
a large publicly-traded company.
• An understanding of the Company’s business on a technical level.
• Global thinking and focus as well as a general understanding of the world economy.
•
Strategic thinking and an ability to envision future opportunities and risks.
• A willingness to engage in thoughtful debate and challenging discussions in a respectful manner.
• A network of important contacts that can bring knowledge and assistance to Plexus.
• A commitment to spend requisite time on board responsibilities.
In addition to the board member selection criteria identified above, the board and the Nominating and
Corporate Governance Committee review the board’s composition annually to ensure that an appropriate diversity
of backgrounds, skills and experiences is represented. Important skills and experiences currently identified are as
follows:
•
•
•
•
Significant experience as a chief executive officer and/or chief operating officer of a publicly-traded
company, or of a major division of a publicly-traded company.
Financial and accounting skills as well as experience in a public company, preferably with experience as a
controller and/or chief financial officer; any such person is expected to fulfill the Securities and Exchange
Commission’s requirements for an “audit committee financial expert.”
International experience with an understanding of conducting business on a global scale.
In-depth knowledge and significant practical experience in sales and marketing at an electronic
manufacturing services (“EMS”) company or at another company in a related industry.
• A manufacturing management background,
large, well respected
manufacturing-based company, preferably one that relies on supply chain management for a competitive
advantage.
ideally an engineer, from a
•
•
Considerable human resources management experience involving the design of both short-term and long-
term compensation programs, and an understanding of benefit plans.
Experience managing succession planning and leadership development for a successful company.
10
The following is the Company’s current matrix of experience for our board, which together with the
directors’ principal occupations and business experience described above, as well as the Company’s board member
selection criteria, provide the reasons that each individual is being re-nominated as a director. Boxes marked with
an “X” in the matrix below indicate that the particular experience is one of the specific reasons that the director has
been re-nominated to serve on the board. The lack of an “X” does not mean that the director does not possess that
experience, but rather that it is not a particular area of focus or expertise of the director which was specifically
identified as a reason for that director’s nomination.
Mr.
Böer
Mr.
Cortinovis
Mr.
Drury
Mr.
Foate
X
Mr.
Kelly
X
Mr.
Martens
X
Mr.
Nussbaum
X
Mr.
Schrock
X
Ms.
Winston
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
CEO/COO Experience
Financial and
Accounting Experience
Global Business
Experience
Sales and Marketing
Experience
Manufacturing
Management
Background
Supply Chain
Management
Experience
Compensation and
Benefits Experience
Leadership
Development and
Succession Planning
Experience
11
Board of Directors Meetings
CORPORATE GOVERNANCE
The board of directors held four meetings during fiscal 2011. As part of these meetings, non-management
directors regularly meet without management present. All of our directors attended at least 75% of the total
meetings of the board and the committees of the board on which they served. The Plexus board of directors
conducts an annual self-evaluation process, reviewing the performance of each individual board member as well as
the performance of the board as a whole.
Plexus encourages all of its directors to attend the annual meeting of shareholders. Plexus generally holds a
board meeting coincident with the annual meeting of shareholders to minimize director travel obligations and
facilitate their attendance at the shareholders’ meeting. All directors attended the 2011 annual meeting of
shareholders.
Director Independence
As a matter of good corporate governance, we believe that the board of directors should provide a strong
voice in the governance of our company. Therefore, under our corporate governance policies and in accordance
with Nasdaq Global Select Stock Market rules, at least a majority of our directors must be “independent directors.”
When the board of directors makes its determination regarding which directors are independent, the board
first considers and follows the Nasdaq Global Select Stock Market rules. The board also reviews other transactions
and relationships, if any, involving Plexus and the directors or their family members or related parties; see “Certain
Transactions” herein for a discussion of our policy regarding such transactions. Plexus expects its directors to
inform it of any transaction, whether direct or indirect through an immediate family member or any business entity
controlled by any of them, involving the director; Plexus also surveys directors periodically to confirm this
information. Plexus does not use any dollar amount to screen transactions that should be reported to the Company.
The board reviews the information submitted by its directors for its separate determination of materiality and
compliance with Nasdaq and other standards when it determines independence.
In determining independence for the coming year, the board considered two relationships that, upon review,
the board did not believe affected the independence of the directors.
• Mr. Kelly is an executive officer of NXP Semiconductors N.V., which is a supplier to Plexus.
Plexus’ payments to NXP’s distributors in fiscal 2011 were $3,146,621, which represented
approximately one-tenth of one percent of each of Plexus’ and NXPs annual revenues.
• Mr. Schrock is an executive officer of Pentair, Inc., which is a supplier to Plexus. Plexus’
payments to Pentair in fiscal 2011 were $1,693,419, which represented less than one-tenth of one
percent of each of Plexus’ and Pentair’s annual revenues.
Based on the applicable standards and the board’s review and consideration, the board of directors has
determined that Messrs. Böer, Cortinovis, Drury, Kelly, Martens and Schrock, and Ms. Winston are each
“independent” under applicable rules and guidelines. Mr. Foate, as chief executive officer of the Company, and Mr.
Nussbaum, who is a former chief executive officer of Plexus and receives retirement payments from Plexus, are not
considered to be “independent.”
Our independent directors have the opportunity to meet in executive session, without the other directors or
management, as part of each regular board meeting.
12
Board Leadership Structure
Mr. Nussbaum, our former Chief Executive Officer, serves as the Chairman of the Board. The Company
believes that having our former CEO serve as Chairman is an appropriate leadership structure at the current time
because Mr. Nussbaum has extensive knowledge of the Company and the EMS industry, which continue to be
valuable in communicating with and leading the board in his role as Chairman.
The Company’s bylaws do not mandate, nor does the board have a policy that requires, the separation or
combination of the CEO and Chairman roles. The board may reconsider our leadership structure in the future,
including in connection with its succession planning efforts, based on the best interests of the Company at that time.
Board’s Role in Risk Oversight
It is management’s responsibility to manage the Company’s enterprise risks on a day-to-day basis.
Through regular updates, the board of directors oversees management’s efforts to ensure that they effectively
identify, prioritize, manage and monitor all material business risks to Plexus’ strategy.
The board delegates certain risk management oversight responsibilities to its committees. The Audit
Committee reviews and discusses the Company’s major financial risk exposures and the steps management has
taken to identify, monitor and control such risks. The Compensation and Leadership Development Committee is
responsible for overseeing risk related to the Company’s compensation programs, including considering whether
such programs are in line with the Company’s strategic objectives and incentivize appropriate risk-taking. The
Nominating and Corporate Governance Committee is tasked with risks associated with corporate governance and
compliance.
Board Committees
The board of directors has three standing committees, all comprised solely of independent directors: Audit,
Compensation and Leadership Development, and Nominating and Corporate Governance. The committees on
which our directors currently serve, and the chairs of those committees, are identified in the following table:
Director
Ralf R. Böer
Stephen P. Cortinovis
David J. Drury
Peter Kelly
Phil R. Martens
Michael V. Schrock
Mary A. Winston
Audit
X
Chair
X
X
Compensation
and Leadership
Development
Nominating and
Corporate
Governance
Chair
Chair
X
X
X
X
X
X
Messrs. Foate and Nussbaum are not “independent” directors; therefore, they are not eligible to serve on these
committees under Nasdaq rules or the committees’ charters.
Audit Committee
The Audit Committee met eight times in fiscal 2011. The Audit Committee chooses the Company’s
independent auditors and oversees the audit process as well as the Company’s accounting, finance and tax functions.
Among its other responsibilities, the Committee also oversees the Company’s ethics and whistle-blowing reporting
programs, in conjunction with the Nominating and Corporate Governance Committee. See also “Report of the
Audit Committee.”
13
Audit Committee Financial Experts
The board has determined that Messrs. Drury and Kelly and Ms. Winston are “audit committee financial
experts” based on a review of each individual’s educational background and business experience. For purposes of
Securities and Exchange Commission (“SEC”) and Nasdaq rules, Messrs. Drury and Kelly and Ms. Winston are,
along with Mr. Cortinovis, the other member of the Audit Committee, “independent” of Plexus. All members of the
Audit Committee are “financially literate” and meet the other SEC and Nasdaq requirements for Audit Committee
membership.
Compensation and Leadership Development Committee
The Compensation and Leadership Development Committee (in this subsection, the “Committee”) held six
meetings during fiscal 2011. The Committee establishes the general compensation philosophies and plans for
Plexus, determines the CEO’s and other executive officers’ compensation and approves equity grants and awards
under Plexus’ compensation plans. The Committee also considers and makes recommendations to the board with
respect to other employee compensatory plans and arrangements. Further, the Committee is responsible for
reviewing Plexus’ leadership structure, talent management efforts, leadership development and executive succession
plans. In addition to the following subsection, see also “Compensation Discussion and Analysis” and
“Compensation Committee Report” below for further information on the Committee’s philosophies and practices,
and its determinations in fiscal 2011.
Overview of the Compensation Decision-Making Process
In accordance with the philosophy and the goals described below in “Compensation Discussion and
Analysis,” Plexus compensates its executive officers through salaries and various other compensation plans. The
Committee considers many factors in its decision-making process about the compensation of Plexus’ leadership and
the design of compensation plans company-wide.
When determining compensation in fiscal 2011, as in past years, the Committee compared the
compensation of Plexus’ executive officers with that paid by other companies in the general industries in which
Plexus recruits, comparable companies in the electronic manufacturing services industry, companies with similar
financial profiles and numerous general and electronics industry published surveys. The Committee performed a
full review of the composition of the peer group during fiscal 2010 because, due to acquisitions within the peer
group and other changes, the Committee believed that certain companies had become less comparable to Plexus than
when they were originally selected. The Committee intends to conduct reviews of the peer group and selection
criteria on a periodic basis to ensure that both are appropriate. Consistent with the selection of its previous peer
group, companies were chosen using filtering criteria, such as industry codes, peer companies identified as
competitors, company size and employee base, profitability, geographic location, company complexity and recent
financial performance; anomalies or special circumstances (primarily acquisitions or significant size differences)
that caused certain companies to not be in fact comparable were also reviewed. In addition, the Committee also
identified financial peers that were not in a similar business but which were similar in size and financial
performance to Plexus.
Our resulting peer group for fiscal 2011 compensation planning consisted of:
• Agilent Technologies, Inc.
• Altera Corporation
• Amphenol Corporation
• Arris Group, Inc.
• AVX Corporation
•
Benchmark Electronics, Inc.
Bruker Corporation
Celestica Inc.
Esterline Technologies Corporation
•
•
•
• Harris Corporation
•
•
Invacare Corporation
Jabil Circuit, Inc.
• Molex Incorporated
•
Regal-Beloit Corporation
•
Sanmina-SCI Corporation
•
Teledyne Technologies Incorporated
•
Trimble Navigation Limited
• Vishay Intertechnology, Inc.
This peer group is being used for fiscal 2012 executive compensation planning.
14
When making compensation determinations, the Committee’s analysis includes a review of the Company’s
financial results, an internal calibration of pay and equity award levels and an accumulated value analysis. In
performing these analyses, the Committee continues to use tally sheets, which provide a comprehensive view of
Plexus’ compensation payout exposure under various performance scenarios, and also assist in the Committee’s
evaluation of the reasonableness of compensation as a whole. The accumulated value analysis examines the CEO’s
accumulation of wealth through the deferred compensation plan and annual equity awards. These assessments also
identify the proportionality of the CEO’s pay to the pay of executives at other levels in the organization and compare
this information with published survey data. In addition, the Committee uses the vested and unvested equity
information to balance the level of existing awards with the desire to reward performance and to provide retention
incentives.
In addition to reviewing compensation to help assure that it provides an incentive for strong Company
performance, the Company and the Committee periodically review comparable information from peer group
companies and other sources, as discussed above, to maintain a competitive compensation package that aids in
executive retention and fairly compensates the executives for performance. However, it does not aim for any
numerical or percentile tests within this comparable information. The Committee believes that it is important for it
to use its judgment in applying this information in individual cases, rather than arbitrarily attempting to aim for a
particular numerical equivalence. In that consideration, the Committee discusses total compensation (including
outstanding equity awards) for all executive officers, the level of experience and leadership each provides, and
financial and personal performance results. The Committee seeks to balance different types of compensation in
order to promote retention and strong Company performance. The Committee believes this approach results in a
comprehensive and thoughtful compensation review process because it allows the Committee to use discretion when
appropriate in responding to particular circumstances. The Committee intends to continue these practices in the
future.
Management Participation. Members of management, particularly the CEO and human resources
personnel, regularly participate in the Committee’s meetings at the Committee’s request. Management’s role is to
contribute information to the Committee and provide staff support and analysis for its discussions. However,
management does not make any recommendation for the CEO’s compensation, nor does management make the final
determination of the CEO’s or the other executive officers’ amount or form of executive compensation. The CEO
does recommend compensation for the other executive officers to the Committee, subject to the Committee’s final
decision. To assist in determining compensation recommendations for the other executive officers, the CEO
considers Plexus’ compensation philosophy and, in partnership with the human resources management team, utilizes
the same compensation decision-making process as the Committee. Decisions regarding the compensation of the
CEO are made in executive sessions at which the Committee members participate with select members of human
resources management to review competitive practices and overall plan expense. The sessions generally focus on
the CEO’s performance achievement and the elements of his compensation. The Committee also discusses and
reviews materials comparing the CEO’s compensation to peer group and survey data as well as Plexus’ overall
performance relative to the companies in our peer group. Materials presented also include a pay comparison of the
CEO to our other executive officers and a review of the CEO’s vested and unvested equity grants, as well as
accumulated value, in an effort to assess possible retention risks.
Use of Consultants. The Committee uses outside compensation consultants to assist it in analyzing Plexus’
compensation programs and in determining appropriate levels of compensation and benefits. The decision to retain
consultants, and if so which consultant(s) to retain, is determined solely by the Committee. Management has the
authority to approve compensation consultant fees on a project basis, although the Committee reviews all fees
relating to executive compensation.
Plexus human resources personnel meet with the compensation consultants to help the consultants
understand Plexus’ business model, organizational structure and compensation philosophy. This interaction
provides the consultants with a framework to Plexus’ approach to compensation and its application. As part of its
staff support function, Plexus human resources personnel also discuss results and conclusions with the compensation
consultants. These discussions permit Plexus human resources personnel to be aware of the consultants’
recommendations and analysis, as well as to understand the rationale and methodology behind their conclusions.
15
For fiscal 2011 compensation planning, at the direction of the Committee, Towers Watson was engaged to
conduct a detailed analysis of the Company’s current executive compensation package, as described above. For
fiscal 2012 compensation planning, the Committee directed the Company’s internal human resources staff to prepare
an analysis of the Company’s executive compensation package consistent with prior years. Plexus’ internal staff
obtained market-based data to provide the Committee with the same data and analysis as in previous years. It is
expected that an external firm will perform a detailed analysis of the Company’s executive compensation package
every other year going forward; therefore, we anticipate that Towers Watson will be preparing such an analysis for
fiscal 2013 compensation planning.
Neither the Company nor the Committee places any limitations or restrictions on its consulting firms or
their reviews. Towers Watson and previous consulting firms have been retained by the Company only for projects
related to the Company’s executive and director compensation programs. The Company does provide substantive
information about Plexus to help its consultants better understand the Company. Human resources personnel also
meet with the consultants to discuss the consultants’ conclusions as to Plexus’ executive pay practices,
organizational matters, the duties and responsibilities of particular positions, and overall conclusions based upon
Plexus’ compensation principles and goals.
Compensation Committee Interlocks and Insider Participation
Each of the members of the Committee was an independent director and there were no relationships or
transactions in fiscal 2011 with those members requiring disclosure under SEC rules. See, however, “Director
Independence” above for certain other relationships that the board considered when determining the independence
of the directors.
Nominating and Corporate Governance Committee
The Nominating and Corporate Governance Committee (the “Nominating Committee”) met two times in
fiscal 2011. The Nominating Committee considers candidates for board membership, reviews the effectiveness of
the board, makes recommendations to the board regarding directors’ compensation, monitors Plexus’ compliance
and ethics efforts, and evaluates as well as oversees corporate governance and related issues.
The Nomination Process
The Nominating Committee generally utilizes a director search firm to identify candidates, but it evaluates
those individuals on its own; the Committee would also consider candidates suggested by outside directors,
management and/or shareholders. As described above in “Election of Directors,” in accordance with the Company’s
board member selection criteria, the Nominating Committee considers the diversity of backgrounds, skills and
experiences among board members in identifying areas which could be augmented by new members. To help assure
that directors have the time to devote to their duties, Plexus directors may not serve on the boards of more than three
additional public companies. The composition of the Board is reviewed annually to insure that an appropriate mix
of skills, experiences and backgrounds is represented; the membership mix of the Board may also be changed as
necessary to meet business needs.
The Nominating Committee would consider proposed nominees to the board submitted to it by
shareholders. If a qualified candidate expresses a serious interest, and if there is a position available and the
candidate’s experience indicates that the candidate may be an appropriate addition to the board, the Nominating
Committee would review the background of the candidate and, if appropriate, meet with the candidate. A decision
would then be made whether to nominate that person to the board. The Nominating Committee’s policy is to not
evaluate proposed nominees differently depending upon who has proposed the potential nominee.
If a shareholder wishes to propose someone as a director for the Nominating Committee’s consideration,
the name of that nominee and related personal information should be forwarded to the Nominating Committee, in
care of the Secretary, at least six months before the next annual meeting of shareholders to assure time for
meaningful consideration by the Nominating Committee. See also “Commonly Asked Questions and Answers
About the Annual Meeting” for bylaw requirements for nominations. Plexus has neither received nor rejected any
candidates put forward by significant shareholders.
16
Communications with the Board
Any communications to the board of directors should be sent to Plexus’ headquarters office in care of
Plexus’ Secretary, Angelo M. Ninivaggi. Any communication sent to the board in care of the Chief Executive
Officer, the Secretary or any other corporate officer is forwarded to the board. There is no screening process and
any communication will be delivered directly to the director or directors to whom it is addressed. Any other
procedures which may be developed, and any changes in those procedures, will be posted as part of our Corporate
Governance Guidelines on Plexus’ website at www.plexus.com, under the link titled “Investor Relations” then
“Corporate Governance” (or at http://www.plexus.com/corporategovernanceguidelines.php).
Code of Ethics, Committee Charters and Other Corporate Governance Documents
Plexus regularly reviews and augments its corporate governance practices and procedures. As part of its
corporate governance practices, Plexus has adopted a Code of Conduct and Business Ethics, Corporate Governance
Guidelines and written charters for each of its board committees discussed above. Plexus will be responding to and
complying with related SEC and Nasdaq Global Select Stock Market directives as they are finalized, adopted and
become effective. Plexus has posted on its website, at www.plexus.com, under the link titled “Investor Relations”
then “Corporate Governance” (or at http://www.plexus.com/corporategovernanceguidelines.php), copies of its Code
of Conduct and Business Ethics, its Corporate Governance Guidelines, the charters for its Audit, Compensation and
Leadership Development, and Nominating and Corporate Governance Committees, director selection criteria
(included as an appendix to our Corporate Governance Guidelines), director and officer stock ownership guidelines,
compensation clawback policy and other corporate governance documents. If those documents (including the
committee charters, the Code of Conduct and Business Ethics and the Corporate Governance Guidelines) are
changed, waivers from the Code of Conduct and Business Ethics are granted, or new procedures are adopted, those
new documents, changes, waivers and/or procedures will be posted on Plexus’ corporate website at the address
above.
Directors’ Compensation
The Nominating and Corporate Governance Committee of the board of directors recommends, subject to
board approval, compensation paid to non-employee directors, including equity awards to non-employee directors
under the 2008 Long-Term Plan. In determining the compensation paid to the non-employee directors, the
Nominating and Corporate Governance Committee considers similar types of factors, including comparisons with
peer companies and company performance, that are considered by the Compensation and Leadership Development
Committee when determining executive compensation.
During fiscal 2011, each Plexus director who was not a full-time Plexus officer or employee (all directors
except Mr. Foate) received an annual director’s fee of $45,000 plus meeting fees of $2,000 for each board meeting
attended in person ($1,000 if attended other than in person) and an additional $1,500 for each committee meeting
attended in person ($750 if other than in person). The chairs of each committee received additional annual fees for
service as a committee chair; the chair of the Audit Committee received $15,000 and the chairs of the Compensation
and Leadership Development Committee and the Nominating and Corporate Governance Committee each received
$10,000. Additionally, in certain circumstances directors may be reimbursed for attending educational seminars or,
in each individual’s capacity as a director, other meetings at Plexus’ behest. For fiscal 2012, the annual director’s
fee will increase to $55,000, and the fee for serving as the chair of the Compensation and Leadership Development
Committee will increase to $12,500. Directors are eligible to defer their cash fees, as well as stock awards
(excluding options), through the Non-Employee Directors Deferred Compensation Plan. Prior to fiscal 2011,
directors were eligible to defer their cash fees through Plexus’ supplemental executive retirement plan, which is
described in “Compensation Discussion and Analysis” below.
Directors may also participate in the 2008 Long-Term Plan, which permits the grant of stock options,
stock-settled stock appreciation rights (“SARs”), restricted stock (which may be designated as restricted stock
awards or restricted stock unit awards), unrestricted stock awards, performance stock awards, and cash incentive
awards. Stock options are generally granted to directors quarterly, at the same time as employee grants, and vest
immediately on the respective grant dates. The exercise price of stock options is equal to the average of the high
and low sale prices of Plexus stock on the Nasdaq Global Select Market on the grant date. In addition, unrestricted
stock awards are granted to directors at the same time as employee equity grants during the second quarter of the
17
fiscal year. The mix of unrestricted stock awards and stock options is designed to balance the Company’s goal of
aligning directors’ interests, through stock awards, with the long-term ownership interests of our shareholders with
the incentives offered by stock options, which provide rewards based on the increase in our share price.
The following table sets forth the compensation that was paid by Plexus to each of our non-employee
directors in fiscal 2011:
Director Compensation Table
Name
Fees Earned
or Paid in
Cash ($)(1)
Option
Awards
($)(2)
Stock
Awards
($)(2)
Other
Benefits
($)(3)
Ralf R. Böer
$64,750
$69,433
$54,286
Stephen P. Cortinovis
78,000
69,433
54,286
David J. Drury
Peter Kelly
Phil R. Martens
78,000
69,433
54,286
62,250
69,433
54,286
62,000
52,999
54,286
--
--
--
--
--
Total ($)
$188,469
201,719
201,719
185,969
169,285
John L. Nussbaum
121,058
69,433
54,286
$363,622
608,399
Michael V. Schrock
60,750
69,433
54,286
Charles M. Strother, MD (4)
15,000
31,823
54,286
Mary A. Winston
60,500
69,433
54,286
--
--
--
184,469
101,109
184,219
(1) Includes annual retainer, meeting, committee and chairmanship fees and, in the case of Mr. Nussbaum, his fee
for serving as Chairman of the Board. See below regarding Mr. Nussbaum’s compensation.
(2) The amounts shown represent the grant date fair value computed in accordance with Accounting Standards
Codification Topic 718 of stock options and unrestricted stock awards granted in fiscal 2011. Generally
accepted accounting principles (“GAAP”) require us to recognize compensation expense for stock options and
other stock-related awards granted to our employees and directors based on the estimated fair value of the
equity instrument at the time of grant. Compensation expense is recognized over the vesting period. The
assumptions used to determine the valuation of the awards are discussed in footnote 11 to our consolidated
financial statements.
The following table provides cumulative information about the grant date fair value of options and stock awards
granted to directors in fiscal 2011, determined as of the respective grant dates in accordance with GAAP. It
also provides the number of outstanding stock options that were held by our non-employee directors at October
1, 2011. The Company began granting unrestricted stock awards to directors in fiscal 2010; however, restricted
stock awards were not granted to directors in fiscal 2011 or any prior years.
18
Option Awards
Stock Awards
Grant Date
Fair Value of
2011 Option
Awards ($)
$69,433
69,433
69,433
69,433
52,999
69,433
69,433
31,823
69,433
Number of
Securities
Underlying
Unexercised
Options (#)
52,250
60,750
62,250
48,750
3,750
21,250
38,750
26,250
17,750
Grant Date
Fair Value of
2011 Stock
Awards ($)
$54,286
54,286
54,286
54,286
54,286
54,286
54,286
54,286
54,286
Name
Mr. Böer
Mr. Cortinovis
Mr. Drury
Mr. Kelly
Mr. Martens
Mr. Nussbaum
Mr. Schrock
Dr. Strother
Ms. Winston
Each non-employee director serving at the time was awarded options for 1,250 shares on each of November 1,
2010, January 24, 2011, April 25, 2011, and July 25, 2011. All options granted to non-employee directors vest
immediately on the respective grant dates. Options granted to non-employee directors expire on the earlier of
(a) ten years from the date of grant, or (b) two years after termination of service as a director. In addition, on
January 24, 2011, each non-employee director received an unrestricted stock award for 2,000 shares; the
average of the high and low trading prices of our shares on the Nasdaq Global Select Stock Market on that date
was approximately $27.14. Messrs. Böer, Cortinovis and Nussbaum and Ms. Winston each elected to defer
receipt of the 2011 unrestricted stock award.
(3) Other than Mr. Nussbaum, the non-employee directors do not receive any additional benefits although they are
reimbursed for their actual expenses of attending board, committee and shareholder meetings. For Mr.
Nussbaum, this represents the amounts paid to him in fiscal 2011 under his deferred compensation
arrangements plus the value of the health and other welfare benefits, as well as Company matching
contributions to the 401(k) Plan, provided to him. See the discussion immediately below.
(4) Dr. Strother did not stand for re-election at the Company’s 2011 annual meeting and, therefore, left the board on
February 16, 2011.
Compensation of Current and Former Executive Officers who Serve on the Board
See “Executive Compensation” for Mr. Foate’s compensation as an executive officer of Plexus generally
and his employment and change in control agreements.
Mr. Nussbaum is a former executive officer of Plexus. He ceased being considered an executive officer or
employee of Plexus when he retired as its Chief Executive Officer in 2002. However, as a consequence of his many
years of service as an executive officer of Plexus, he continues to be compensated under deferred compensation
arrangements which were put in place during his service as an executive officer and as the non-executive Chairman
of the Board.
In 1996, the Committee established special retirement arrangements for Mr. Nussbaum as well as for two
other executive officers and directors who subsequently retired. Those arrangements were intended to both reward
past service and maintain an additional incentive for those officers’ continued performance on behalf of Plexus. The
related supplemental executive retirement agreement for Mr. Nussbaum was amended in 2009 in order to align the
agreement’s provisions regarding the determination of payment amounts to a fixed 15-year annual installment
payment stream. The amendment was consistent with the intent of the original agreement and with the manner in
which the agreement operated in practice. The arrangements are designed to provide specified retirement and death
benefits to Mr. Nussbaum in addition to those provided under the 401(k) Plan. Plexus’ commitment was funded in
19
fiscal 2002 and prior years. Mr. Nussbaum has received payments under the special retirement arrangements since
2002, including payments of $325,635 for fiscal 2009, $338,660 for fiscal 2010 and $352,742 for fiscal 2011.
The contributions for Mr. Nussbaum’s special retirement arrangement are invested in life insurance policies
acquired by Plexus on his life. To the extent that any of the payments constitute excess parachute payments
subjecting Mr. Nussbaum to an excise tax, the agreement provides for an additional payment (the “gross-up
payment”) to be made by Plexus to him so that after the payment of all taxes imposed on the gross-up payment, he
retains an amount of the gross-up payment equal to the excise tax imposed. If Mr. Nussbaum dies prior to receiving
all of the 15-year annual installment payments, specified death benefit payments become due.
For his service as Plexus’ non-executive Chairman of the Board, Mr. Nussbaum received a fee of $75,000
in fiscal 2011 plus health and other welfare benefits, as well as Company matching contributions to the 401(k) Plan,
in addition to the above retirement payments and his regular board fees. Since his retirement, Mr. Nussbaum has
been eligible to receive options or stock awards in his capacity as a non-employee director and has received the
same awards as other non-employee directors under Plexus’ stock incentive plans.
Stock Ownership Guidelines
Plexus believes that it is important for directors and executive officers to maintain an equity stake in Plexus
to further align their interests with those of our shareholders. Directors and executive officers must comply with
stock ownership guidelines as determined from time to time by the board. The ownership guidelines for directors
currently require that directors must own 5,000 shares of common stock within five years of election or appointment
to the board, of which 2,000 shares must be owned within the first year of service. Unexercised stock options
(whether or not vested) do not count toward a director’s ownership for purposes of these guidelines. Currently, all
of our directors are in compliance with these guidelines. The stock ownership guidelines for executive officers are
discussed at “Compensation Discussion and Analysis—Elements and Analysis of Direct Compensation—Equity
Ownership Guidelines.”
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires Plexus’ officers and directors, and persons
who beneficially own more than 10% of Plexus’ common stock, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission. These “insiders” are required by SEC regulation to
furnish Plexus with copies of all forms they file under Section 16(a).
All publicly-held companies are required to disclose the names of any insiders who fail to make any such
filing on a timely basis within the preceding fiscal year, and the number of delinquent filings and transactions, based
solely on a review of the copies of the Section 16(a) forms furnished to Plexus, or written representations that no
such forms were required. On the basis of filings and representations received by Plexus, Plexus believes that
during fiscal 2011 our insiders have complied with all Section 16(a) filing requirements that were applicable to them
with the following exceptions. Mr. Foate and Joseph E. Mauthe, Plexus’ Senior Vice President – Global Human
Resources, each timely reported the vesting of restricted stock units on November 5, 2010, but reported the
withholding of a portion of the shares received upon such vesting for tax purposes late. The related transactions by
Messrs. Foate and Mauthe, which involved 3,746 shares and 204 shares, respectively, were each reported on
December 23, 2010.
20
COMPENSATION DISCUSSION AND ANALYSIS
The Compensation and Leadership Development Committee (in this section, the “Committee”) of the
Plexus board of directors sets general compensation policies for Plexus. The Committee makes decisions with
respect to compensation of the Chief Executive Officer and other Plexus executive officers and grants stock options,
restricted stock units and other awards. This section discusses the Committee’s executive compensation philosophy
and decisions on executive compensation.
Plexus provides further detail regarding executive compensation in the tables and other information
included in the “Executive Compensation” section of this proxy statement.
Executive Summary
Executive Compensation Philosophy, Goals and Process
The Committee’s philosophy is to fairly compensate all employees, including executives, for their
contributions to Plexus, appropriately motivate employees to provide value to Plexus’ shareholders, and consider the
ability of Plexus to fund any compensation decisions, plans or programs. Fair compensation must balance both
short-term and long-term considerations and take into consideration competitive forces, best practices, and the
performance of Plexus and the employee. Compensation packages should also motivate executives to make
decisions and pursue opportunities that are aligned with the interests of our shareholders while not exposing the
Company to inappropriate risk. Finally, the Committee considers Plexus’ financial condition, the conditions in
Plexus’ industry and end-markets, and the effects of those conditions on Plexus’ sales and profitability in making
compensation decisions.
Plexus’ executive compensation program is designed to provide a rational, consistent reward system that:
•
•
•
•
attracts, motivates and retains the talent needed to lead a strong global organization;
drives global financial and operational success that creates shareholder value without
encouraging inappropriate risk-taking;
creates an ownership mindset and drives behaviors that improve Plexus’ performance and
maximize shareholder value; and
appropriately balances Company performance and individual contribution towards the
achievement of success.
For a discussion of the Committee’s decision-making process, its use of consultants and the role of Plexus’
executive officers and staff, see “Corporate Governance—Board Committees—Compensation and Leadership
Development Committee—Overview of the Compensation Decision-Making Process” above in this proxy
statement.
Overview of Executive Compensation and Benefits
Plexus uses the following compensation reward components working together to create competitive
compensation arrangements for our executive officers:
Reward Component
Base Salary
Purpose
Base salary is intended to provide compensation which is not “at risk”; however, salary
levels and subsequent increases are not guaranteed. Our base salaries are designed to
offer regular fixed compensation for the fulfillment of the duties and responsibilities
associated with the job roles of our executives and employees. They are also important
because they present a starting point for considering compensation when we seek to
attract and retain talented individuals.
21
Reward Component
Annual Incentive
Long-Term Incentives
Benefits
Retirement Plans
Agreements
Purpose
Our annual cash incentive compensation plan, the Variable Incentive Compensation
Plan (the “VICP”), is designed to reward employees for the achievement of important
corporate financial goals. There is also a small component of the VICP that rewards
employees for the attainment of individual and/or team objectives. The opportunity to
earn annual cash incentive payments under the VICP provides a substantial portion of
compensation that is at risk and that depends upon the achievement of measurable
corporate financial goals and individual objectives. The design of the VICP offers
incentives based on our direct performance, as distinguished from equity-based
compensation, which is significantly affected by market factors that may be unrelated to
our results. We use payouts from the VICP to provide further incentives for our
executive officers and employees to achieve these corporate financial goals and
individual objectives. As it applies to executive officers, the VICP is now a sub-plan of
the 2008 Long-Term Plan.
A substantial part of compensation, which is also at risk, is long-term equity-based
compensation, typically awarded in the form of stock options and restricted stock units
(“RSUs”) under the 2008 Long-Term Plan. Our long-term incentives are designed to tie
a major part of our key executives’ total compensation opportunities to Plexus’ market
performance and the long-term enhancement of shareholder value, as well as encourage
the long-term retention of these executives.
The health and well-being of our employees and their families is important to us.
Therefore, we provide all of our employees in the United States with various benefits,
such as health and life insurance. Offering these benefits also assists the Company in
attracting, as well as retaining, executive officers and key personnel.
The Company maintains retirement plans to help our employees provide for their
retirement on a tax-advantaged basis. Offering retirement plans helps the Company to
attract and retain qualified employees, as well as meet competitive conditions. The
401(k) Plan includes a Plexus stock fund as one of its choices to permit employees to
maintain Plexus ownership if they wish. The Company also provides a supplemental
executive retirement plan under which certain executive officers may elect to defer
some or all of their compensation and the Company makes additional contributions on
their behalf.
Only our Chief Executive Officer has an employment agreement, which is intended to
help assure the continuing availability of his services over a period of time and protect
the Company from competition post-employment. All executive officers have change
in control agreements to help assure that they will not be distracted by personal interests
in the case of a potential acquisition of Plexus and to assist in maintaining their
continuing loyalty.
At Plexus’ 2011 annual meeting of shareholders, the Company held its first shareholder advisory vote on
executive compensation. Over 96% of shares voting supported the proposal and, therefore, the advisory resolution
regarding executive compensation was approved. Although the vote was non-binding, the Company, the board of
directors and the Committee all pay close attention to communications received from shareholders regarding the
Company’s executive compensation policies and decisions. The Committee reviewed the results of the vote and
considered the high approval rate as an indication that shareholders generally support the Company’s executive
compensation philosophy, program and decisions.
22
Elements and Analysis of Direct Compensation
Overview of Direct Compensation
Plexus uses three primary components of total direct compensation—salary, annual cash incentive
payments under the VICP and long-term equity-based awards under the 2008 Long-Term Plan. Each of these
components is complementary to the others, addressing different aspects of direct compensation and seeking to
motivate employees, including executive officers, in varying ways.
The Committee does not use any specific numerical or percentage test to determine what percentage of
direct compensation will be paid in base salary versus the compensation at risk through the VICP or equity-based
compensation. However, the Committee believes that a meaningful portion of compensation should be at risk.
VICP targets for executive officers other than the CEO ranged from 45% to 60% of base salary in fiscal 2011 with
the opportunity to earn cash incentives beyond those levels if company financial goals were exceeded. In the case of
the CEO, the potential target compensation at risk as a percentage of base salary was 100%, reflecting his overall
greater responsibility for the Company. Long-term incentives for executive officers are in the form of stock options,
which contain an inherent amount of risk since no value is received unless there is an appreciation in stock price,
and RSUs that vest based on continued service. After determining each element, the Committee also reviews the
resulting total compensation to determine that it is reasonable as a whole.
Base salary adjustments and equity awards are generally targeted for implementation in the second quarter
of each fiscal year. The Committee believes this timing aligns employee rewards with the Company’s processes to
evaluate employees’ performance and forges a strong link between performance and pay.
The resulting total targeted direct compensation mix used for fiscal 2011 for the Chief Executive Officer
and the other executive officers named in the Summary Compensation Table herein (the “named executive officers”)
is illustrated in the charts below:
CEO
Other Named Executive Officers
Base Salary
19%
Base Salary
28%
Long-Term
Incentives
62%
Base Salary
Annual Incentive
19%
Long-Term
Incentives
57%
Annual Incentive
15%
Structure. The Company and the Committee review market-based comparisons, peer group analysis and
other third-party survey data as reference points for compensation practices as well as sources of
comparative information to assist in establishing appropriate base salaries for its executive officers.
Through this form of benchmarking, we do not aim for particular numerical or percentage tests as
compared to the peer group or the surveys, we generally target base salaries within ranges near market
medians of those groups, with adjustments made to reflect individual circumstances. The Committee
expects to make determinations of base salary adjustments for our executive officers in December 2011
after it has reviewed and considered the analysis discussed above in “Corporate Governance–Board
Committees–Compensation and Leadership Development Committee–Overview of the Compensation
Decision-Making Process–Use of Consultants.” The effective date of any base salary adjustment for our
executive officers is generally targeted for January in order to be aligned with the Company’s other U.S.
salaried employees.
23
Factors Considered in Determining Base Salary. Prior to establishing base salary increases for the CEO
and approving salary levels for other executive officers, the Committee takes into consideration various
factors. These factors include compensation data from the proxies of our peer group, salary increase trends
for executive base pay and other information provided in published surveys. An in-depth total rewards
analysis, including base salary, is completed annually for each executive position using the peer group and
survey data as indicated above. The Committee also considers the individual executive officers’ duties and
responsibilities and their relative authority within Plexus.
With respect to increases in CEO base salary (as well as other compensation actions that impact our CEO),
the Committee uses this input and meets in executive session to discuss appropriate pay positioning and
pay mix based on the data gathered. With respect to the other executive officers, the CEO uses similar data
and submits his recommendations to the Committee for final determination. The data gathered in the
determination process helps the Committee to test for fairness, reasonableness and competitiveness.
However, taking into account the compensation policies and goals and a holistic approach to executive
compensation packages, the Committee’s final determination may incorporate the subjective judgments of
its members as well.
Executive officer base salary increases may include the following two components:
–
Competitive Adjustments. If executive officer salaries fall below the competitive median
range when we compare them to our peer group and survey data, we consider increasing the
salaries to a more competitive level. In some cases these competitive adjustments may take
place over a multi-year period and may depend on individual performance.
– Merit Increases. If executive officer salaries are found to be at an appropriate level when we
compare them to the peer group and general industry survey data for the position, then a
separate merit increase may be provided based on individual performance, if appropriate.
2011 Base Salary Adjustments. Base salary adjustments for fiscal 2011 were approved by the Committee
in December 2010. For fiscal 2011, the Committee approved a base salary adjustment of $25,000 for the
CEO, a 3.2% increase from his fiscal 2010 base salary, to $800,000. As a result of that adjustment, our
CEO’s salary is near the intended 50th percentile of peer group and market comparisons; the salary was
approximately 7% above the 50th percentile in the market comparison, but was 8% below the 50th
percentile in the peer group comparison. The Committee believed this increase to be appropriate,
particularly in view of the Company’s strong financial performance in fiscal 2010 and the fact that the
CEO’s total compensation is more heavily weighted toward performance-based compensation than the total
compensation of our other executive officers. Our CEO’s base salary is also higher than that of our other
executive officers because of his more extensive and challenging duties and responsibilities.
Increases for the other executive officers varied from 3.6% to 20.7% and reflected the factors discussed
above; the smaller adjustments reflected merit increases for performance over the past year when salaries
were otherwise in line with the market while larger increases represented a combination of competitive
adjustments, merit increases and, in certain cases, increases in responsibilities. In addition, Mr. Lim’s
compensation and benefits package also reflects regional survey data of the Asian markets. Other variations
between the executive officers reflect competitive conditions and the Committee’s view of the executive
officers’ duties, responsibilities and performance. Presented below are the fiscal 2011 base salaries and
percentage increases as compared to fiscal 2010 for our named executive officers:
24
Executive Officer
Mr. Foate…………………………………………
Ms. Jones…………………………………….......
Mr. Buseman…………………………………….
Mr. Kelsey………………………………………
Mr. Lim…………………………………………..
Fiscal 2011
Base Salary
$800,000
$380,000
$360,000
$330,000
$345,000
Percentage Increase
Compared to Fiscal 2010
3.2%
7.0%
9.1%
10.0%
16.9%*
* Mr. Lim is based in Malaysia and is paid in local currency, the Malaysian ringgit (“MYR”). While
Mr. Lim’s base salary increase as compared to fiscal 2010 in U.S. dollars was 16.9%, due to the
variation in currency exchange rates, the increase in base salary measured in MYR was 6.5%.
Annual Incentive
Plan Structure. The VICP provides annual cash incentives to approximately 3,200 participants, including
our CEO and other executive officers. For executive officers, beginning in fiscal 2011, the VICP is a sub-
plan of the 2008 Long-Term Plan. The award opportunity levels for each participant are expressed as a
percentage of base salary. For example, in fiscal 2011 the targeted award opportunity for the CEO was
100% of base salary, and the targeted award opportunities for other executive officers varied from 45% to
60% of base salaries; the award opportunities for non-executive officer participants varied from 3% to 45%
of base salaries. The targeted award opportunities for executive officers other than our CEO increased in
fiscal 2011, generally by ten percentage points, as a result of adjustments for market competitiveness and,
in certain cases, increases in responsibilities. In addition, offering a greater percentage of compensation at
risk was intended to further align executive compensation with Company performance and the interests of
shareholders. Our CEO and other executive officers also have the opportunity to earn above their targeted
award opportunities based on the achievement of corporate financial goals. Higher levels of duties and
responsibilities within Plexus lead to higher cash incentive opportunities under the VICP because the
Committee believes that the higher the level of responsibility, the more influence the individual can have
on corporate performance. In addition, competitive factors make relatively higher reward possibilities
important for those positions. For each executive officer, 80% of the targeted award is keyed to the
corporate financial goals; the remaining 20% of the targeted award is keyed to the achievement of
individual objectives. The table below lists the fiscal 2011 targeted VICP award opportunities for the
named executive officers, expressed as a percentage of base salary:
Executive Officer
Mr. Foate …………………………..........................
Ms. Jones…………………………………………...
Mr. Buseman……………………………………….
Mr. Kelsey………………………………………….
Mr. Lim…………………………………………….
Fiscal 2011
Targeted Award as a
Percentage of Base Salary
100%
60%
60%
60%
50%
The VICP provides for payments relating to corporate financial goals both below and over the targeted
awards by establishing specific “threshold levels” of corporate performance at which payments begin to be
earned and “maximum payout levels” beyond which no further payment is earned. The payout at the
“maximum payout level,” which is based solely on achieving the corporate financial goals, is 180% of the
targeted award for the CEO and the other executive officers. Payments to participants are not permitted
under the VICP unless the Company achieves net income for the plan year.
Under the VICP, the Committee has the authority to adjust results, for example, to reflect acquisitions or
unusual gains or charges. No such discretion was used by the Committee in fiscal 2011.
2011 Plan Design – Company Goals. The specific corporate financial goals for fiscal 2011, each of which
stood independently of the other with regard to award opportunities, were revenue and return on capital
employed (“ROCE”). The goals were chosen because they aligned performance-based compensation to the
25
key financial metrics that the Company used internally to measure its ongoing performance and that it used
in its financial plans. Our fiscal 2011 targets for these goals were set as part of the annual financial
planning process. For each of the corporate financial goals, we also established specific “threshold” and
“maximum payout” levels of achievement as part of that process.
For the purposes of the VICP, ROCE is defined as annual operating income before taxes excluding unusual
charges and equity-based compensation costs divided by the five-point quarterly average of Capital
Employed during the year. Capital Employed is defined as equity plus debt less cash, cash equivalents and
short-term investments. The Company excludes equity-based compensation costs because such costs can
influence results due to external market factors. Additionally, ROCE is calculated excluding the impact of
any restructuring and/or non-recurring charges because these factors do not reflect the operating
performance of the Company, which the VICP is intended to reward.
No award is paid for any component of the VICP if Plexus incurs a net loss for the fiscal year (excluding
non-recurring or restructuring charges and equity-based compensation costs). Awards for performance
between the “threshold” level and “target” level are calculated by straight-line interpolation, as are awards
between the “target” level and the “maximum payout” level.
For fiscal 2011, in accordance with Plexus’ strategic plan, the Committee set performance levels for each
metric with a focus on achieving our enduring financial goals—15% organic revenue growth and ROCE of
500 basis points above our weighted average cost of capital (“WACC”)—using the philosophy below:
Threshold
Target
Revenue
ROCE
Growth approximately
equal to inflation
Equal to Plexus’
WACC
Midpoint between threshold
and maximum payout
Consistent with target revenue
growth and planned
investments
Maximum Payout
(Enduring Goals)
15% revenue growth
Equal to Plexus’ WACC plus
500 basis points
We believe that setting the maximum payout levels for revenue and ROCE consistent with our enduring
financial goals fully aligns employees with the financial results that deliver value to our shareholders.
Threshold levels for both metrics were set at the minimum levels of performance at which Plexus believes
it begins generating value for our shareholders. Target levels for revenue and ROCE, which were set
between the threshold and maximum payout levels, were intended be aggressive, yet achievable, to
incentivize growth, but also deter inappropriate risk-taking. The 2011 revenue target represented
approximately 10% growth over 2010 revenue; the 2011 ROCE target was below the level achieved in
fiscal 2010 to recognize the higher levels of capital investment and working capital planned for fiscal 2011.
The Committee felt these performance levels were challenging, but achievable, based on industry
conditions and Plexus’ financial plan.
The following table sets forth the fiscal 2011 financial targets and potential VICP payout amounts (as a
percent of targeted VICP cash incentive) for the named executive officers, at the threshold, target and
maximum payout performance levels. In accordance with the VICP, the ROCE targets excluded the
impacts of restructuring charges and equity-based compensation costs.
Component
Revenue (in millions)
ROCE
Individual Objectives
Total Potential Incentive =
Revenue + ROCE + Individual
Objectives
Threshold
Target
Maximum Payout
Goal
$2,092
16.5%
Payout
0%
0%
up to 20%
Goal
$2,214
19.0%
Payout
40%
40%
up to 20%
Goal
$2,315
21.5%
Payout
90%
90%
up to 20%
up to 20%
up to 100%
up to 200%
26
In fiscal 2011, revenue was $2,231 million and ROCE was 17.9%. Therefore, the Company’s performance
was between the target and maximum payout levels for revenue and between the threshold and target levels
for ROCE; thus, Plexus paid awards to executive officers and other employees based on those two
components. As a consequence, total payments based on revenue and ROCE represented 70.6% versus the
target of 80% for corporate financial performance. Plexus’ actual performance in fiscal 2011 as compared
to these performance levels is illustrated by the following graph:
19.0%
$2,214
16.5%
$2,092
21.5%
$2,315
17.9%
$2,231
Revenue
ROCE
Threshold
Target
Maximum Payout Fiscal 2011 Actual
2011 Plan Design – Individual Objectives. Individual participants typically set several individual objectives
for the plan year, which are developed with, reviewed by and approved by the participant’s manager. Some
of the individual objectives are shared by multiple executives when they work as part of a team to focus on
an objective. Attainment of the individual objectives represents 20% of the potential targeted VICP award;
however, no such award may be earned based on individual objectives unless the Company achieves net
income for the plan year. The Committee determines and approves the individual objectives established for
the CEO. The Committee also reviews and approves, with input from the CEO, the individual objectives
established for the other executive officers. The Committee’s assessment of all executive officers’
individual objectives is based on their likely impact on the achievement of the annual financial plan and
other longer-term strategic priorities, their effect on shareholder value and their alignment with one
another.
Achievement of individual objectives, for which there was a potential payout equivalent to 20% of the
“targeted” award, varied among the other named executive officers from 72.8% to 75.1% of the
individual’s potential payout for personal objectives, with the CEO achieving 87.0%. These percentages
were based upon the Committee’s determination of the degree to which the executive achieved his or her
objectives. The CEO provided the Committee with an assessment of the performance of all of the
executive officers other than himself and recommended resultant award percentage levels based on the
achievement by each executive officer of his or her individual objectives.
The following are summaries of the individual objectives for our named executive officers in fiscal 2011:
– Dean A. Foate: Mr. Foate’s individual objectives related to: designing strategies to support
global expansion and to expand the Company’s engineering solutions business; implementing
branding strategies to more effectively communicate Plexus’ value proposition in the
marketplace; refining the Company’s crisis management strategies; and sharpening the
Company’s processes for effectively deploying strategies and initiatives.
27
– Ginger M. Jones: Ms. Jones’ individual objectives related to: designing strategies to support
global expansion; implementing a governance framework for identifying, assessing and
managing enterprise risk; implementing the Company’s branding strategy to more effectively
communicate Plexus’ value proposition in the marketplace; designing strategies for the
continued development and deployment of a global information technology (“IT”) platform;
implementing processes to enhance the effectiveness of trade and government contracting
compliance; refining internal forecasting processes; implementing internal decision-making
processes to evaluate, deploy and track strategic investments; designing strategies to ensure
ongoing leadership development throughout the Company; and optimizing the Company’s
overall cash cycle and improve return on invested capital.
– Michael D. Buseman: Mr. Buseman’s individual objectives related to: designing strategies to
support global expansion; developing and implementing strategies to differentiate the
Company in the marketplace through the expansion of service capabilities; implementing the
Company’s branding strategy to more effectively communicate Plexus’ value proposition;
implementing an internal decision-making process to evaluate, deploy and track strategic
investments; designing strategies for the continued development and deployment of a global
IT platform; designing strategies to ensure ongoing leadership development throughout the
Company; optimizing the Company’s overall cash cycle and improving return on invested
capital; implementing strategies and processes for the effective integration of customer
management, manufacturing and engineering operations; developing processes to enhance the
effectiveness of trade and government contracting compliance; sharpening the Company’s
processes for effectively deploying Company strategies and initiatives; refining internal
forecasting processes; and designing strategies to mitigate potential future risks associated
with manufacturing operations.
–
Todd P. Kelsey: Mr. Kelsey’s individual objectives related to: designing strategies to support
global expansion and to expand the Company’s engineering solutions business; developing
and implementing strategies to differentiate the Company in the marketplace through the
expansion of service capabilities; implementing the Company’s branding strategy to more
effectively communicate Plexus’ value proposition; designing strategies to ensure ongoing
leadership development throughout the Company; optimizing the Company’s overall cash
cycle and improving return on invested capital; implementing strategies and processes for the
effective integration of customer management, manufacturing and engineering operations;
refining internal forecasting processes; developing processes to enhance the effectiveness of
trade and government contracting compliance; and designing strategies to mitigate potential
future risks associated with manufacturing operations.
– Yong Jin Lim: Mr. Lim’s individual objectives related to: designing strategies to support
the expansion of operations in Asia; implementing strategies and processes for the effective
integration of customer management, manufacturing and engineering operations; designing
strategies for the continued development and deployment of a global IT platform; designing
strategies to ensure ongoing leadership development throughout the Company; developing
and implementing strategies to differentiate the Company in the marketplace through the
expansion of service capabilities; implementing the Company’s branding strategy to more
effectively communicate Plexus’ value proposition; optimizing the Company’s overall cash
cycle and improving return on invested capital; and refining internal forecasting processes.
Long-Term Incentives
Plan Structure. Total compensation, consistent with practices in our industry, places a particular emphasis
on equity-based compensation. The shareholder-approved 2008 Long-Term Plan allows for various award
types, including options, SARs, restricted stock, RSUs, unrestricted stock awards, performance stock
awards and cash incentive awards. Those awards are intended to provide incentives to enhance corporate
performance as well as to further align the interests of our executive officers with those of our shareholders.
The Committee’s policy is to not “back-date” equity grants and no equity grant was “back-dated” in fiscal
2011. The reported values of the long-term incentive opportunities under equity plans can vary
28
significantly from year to year as a percentage of total direct compensation because they are determined by
valuing the equity-based awards on the same basis that we use for financial statement purposes; that value
depends significantly on our stock price and its volatility at the time of the awards.
The Committee’s long-term incentive strategy allows for use of a portfolio approach when granting awards.
For fiscal 2011 the Committee used, and going forward the Committee intends to continue using, a
combination of stock options and RSUs. Prior to fiscal 2011, the Committee also granted long-term cash
awards, which served as a stable retention incentive of a known value. In order to more strongly align all
long-term incentives with the Company’s overall performance and the interests of shareholders, the
Committee discontinued the use of long-term cash awards beginning in fiscal 2011, and somewhat
increased the number of RSUs to provide equivalent value.
The Committee intends that each element of the portfolio addresses a different aspect of long-term
incentive compensation, as set forth below:
–
Stock options provide rewards based upon the appreciation in value to shareholders, as measured
by the increase in our share price, and there is no value to these awards if our share price does not
increase.
– RSUs provide an interest in the value of the Company’s shares, because, even though they vest
over time, they provide recipients with a certain equity interest, assuming continued employment.
RSUs further align executives’ interests with the interests of shareholders and provide a long-term
ownership mentality as well as motivation to succeed in the long-term because the value of RSUs
does not solely depend upon increases in the market price of our shares, which may occur over a
short period of time.
–
For non-executives and key employees who are eligible for equity awards, Plexus uses a
distribution weighted toward stock-settled stock appreciation rights (“SARs”). Stock-settled
SARs provide rewards based upon the appreciation in value to shareholders as measured by the
increase in our share price while promoting employee share ownership. Stock-settled SARs also
allow the Committee to preserve shares available under the plan and minimizes dilution.
The allocation formulas used in fiscal 2011 for executive officers and other non-executive employees
receiving equity grants are illustrated in the charts below:
Executive Officers
Senior Non-Executive Employees
Other Non-Executive Employees
RSUs
40%
RSUs
30%
Stock-settled
SARs
70%
Stock-settled
SARs
100%
Options
60%
Annual Award Determination and Allocation Process. Each year the Committee is presented a
recommended total pool of options, stock-settled SARs and RSUs to be awarded to eligible
participants. The Committee reviews the estimated cost of the pool and the recommended grant
guidelines prior to making grants. Pursuant to its portfolio approach, the Committee distributes the
entire value of each grant among the three types of awards—options, stock-settled SARs and RSUs—
as shown above. The awards are valued at their Black-Scholes fair-market value when making these
determinations. For current executive officers, the Committee uses a distribution formula weighted
toward stock options, so as to particularly promote increasing shareholder returns.
29
The Committee determines the grants for the CEO and other executive officers. The CEO provides the
Committee with initial grant recommendations for each executive officer other than himself. The
Committee determines the grant value for each executive officer by balancing the need to provide fair
compensation with the desire to keep related compensation expense relatively stable from period to
period. When making individual grants, the Committee considers each executive officer’s duties,
responsibilities and performance. Those in positions with more responsibility tend to receive larger
grants to reflect their role in the Company and the market comparisons for their compensation. Also, as
discussed above, for the CEO, the Committee uses the vested and unvested equity information, as well
as the accumulated value analysis, to balance the level of existing awards with the desire to reward
performance and to provide retention incentives.
For fiscal 2011, options for 82,000 shares and 32,800 RSUs were granted to the CEO, and options for
143,250 shares and 58,800 RSUs were granted to the other executive officers as a group.
Equity awards, consisting of stock-settled SARs and RSUs, are also allocated to high-performing key
employees based upon recommendations by executive officers in accordance with a grant range grid,
which assigns a range of grant sizes to each employee responsibility level.
Basis for Determination of Timing of Grants. The Committee makes quarterly stock option and stock-
settled SARs grants rather than annual grants due to the volatility of the stock market and of Plexus’ stock
in particular. Granting stock options and SARs all on one date in the year can make the strike price, its
related expense, and the opportunity it represents to employees vary significantly in ways that do not
necessarily reflect long-term performance of Plexus stock.
The Committee’s formula to support the quarterly grant strategy states that the grant dates will occur three
days subsequent to the release of quarterly earnings, not including the day of the release. The Committee
uses future dates, as is permitted by the 2008 Long-Term Plan, because that minimizes the opportunity to
choose a date based upon market performance known or knowable at the time of determination. The 2008
Long-Term Plan provides that the exercise price of a stock option is not permitted to be less than the fair
market value on the stock option grant date. New hire option and stock-settled SAR grant levels are
determined at or around the time of hire, and commence on the next quarterly grant date following the date
of hire.
Grants of RSUs are generally made once a year during the fiscal second quarter. The Committee did not
make any special retention-related grants of RSUs in fiscal 2011, as the Committee continued to believe
that the fiscal 2009 retention-related grants of RSUs had their intended retention effect and, therefore, no
additional special grants were necessary.
2011 Awards. Based on the Committee’s long-term incentive strategy as well as individual responsibility
and performance considerations, and reflecting all of the grants discussed above, in fiscal 2011, the
Committee made total grants of options and RSUs to the named executive officers as follows:
Executive
Officer
Options
(#)
RSUs
(#)
Mr. Foate
Ms. Jones
Mr. Buseman
Mr. Kelsey
Mr. Lim
82,000
20,000
25,000
25,000
20,000
32,800
8,000
10,000
10,000
8,000
Options vest in two annual increments and grants of RSUs vest on the third anniversary of the grant, all
subject to early vesting on a change in control.
30
Equity Ownership Guidelines. To complement the 2008 Long-Term Plan’s goal of increasing the alignment
between the interests of management and shareholders, the Committee adopted executive stock ownership
guidelines. These guidelines require our CEO to own Plexus stock with a market value equal to at least three times
his annual base salary; executive officers other than our CEO, including the named executive officers in the
“Summary Compensation Table” below, are required to own, at a minimum, Plexus stock with a market value equal
to one times their annual base salary. There is no specific time requirement to meet these guidelines. However, an
executive officer is generally not permitted to sell Plexus shares that were acquired or awarded while an executive
officer until the ownership requirement is met; there are exceptions, including financing the exercise of stock
options and any applicable taxes when the shares will be held or with prior approval under special circumstances.
All officers are in compliance with the procedural requirements of the guidelines, while five of our officers,
including our CEO, have met the ultimate ownership amounts required by the guidelines.
Clawback Policy. The board of directors adopted the Plexus Corp. Executive Compensation Clawback Policy,
effective November 2010. Pursuant to the policy, in the event of a material restatement of the Company’s financial
results as a result of significant non-compliance with financial reporting requirements, the Committee will review
incentive compensation that was paid to the Company’s executive officers under the VICP (or any successor plan
thereto) based solely on the achievement of specific corporate financial goals (“covered compensation”) during the
period of the restatement. If any covered compensation would have been lower had the covered compensation been
calculated based on the Company’s restated financial results, the Committee will, as and to the extent it deems
appropriate, recoup any portion of covered compensation paid in excess of what would have been paid based on the
restated financial results. The Committee may seek the recovery of covered compensation for up to three years
preceding the date on which the Company is required to restate its financial results.
This policy applies in addition to any right of recoupment against the Company’s Chief Executive Officer and Chief
Financial Officer pursuant to the Sarbanes-Oxley Act of 2002. The policy does not apply in any situation where a
restatement is not the result of significant non-compliance with financial reporting requirements, such as any
restatement due to a change in applicable accounting rules, standards or interpretations, a change in segment
designations or the discontinuance of an operation.
Anti-Hedging Policy. In August 2011, the Company revised its Insider Trading Policy to explicitly prohibit
directors, officers and employees from engaging in transactions designed to hedge or offset a decrease in the price of
the Company’s common stock. Short sales of the Company’s securities are also prohibited under the Insider
Trading Policy.
Elements and Analysis of Other Compensation
In addition to direct compensation, Plexus uses several other types of compensation, some of which are not
subject to annual Committee action. These include benefits, retirement plans and employment or change in control
agreements. These are intended to supplement the previously described compensation methodologies by focusing on
long-term employee security and retention. Certain of these plans allow employees to acquire Plexus stock.
Benefits
Structure. We generally provide health and welfare benefits to our executive officers on the same basis as
other salaried employees in the United States, although some benefit programs, as discussed elsewhere, are
specifically targeted to our executive officers’ specific circumstances. Consistent with competitive practice,
the Committee approves certain perquisites and other benefits for our CEO and the other executive officers
in addition to those received by all U.S. salaried employees. The other benefits for certain of our executive
officers are: a flexible perquisite benefit valued at up to $15,000 per calendar year to be used for expenses
such as personal financial planning, spouse travel costs in connection with business-related travel, club
memberships and/or tax and estate advice; a company car; and additional life and disability insurance due
to the dollar limits of the Company’s disability insurance policies. As a result of local law and custom,
different but comparable insurance programs and other benefits may apply to personnel, including Mr. Lim,
who are located in countries outside of the United States as well as to executive officers who may be
temporarily assigned outside of the United States.
31
Retirement Planning – 401(k) Plan
Structure. The 401(k) Plan, which is available to substantially all U.S. salaried employees, allows
employees to defer a portion of their annual salaries into their personal accounts maintained under the
401(k) Plan. In addition, Plexus matches a portion of each employee’s contributions, up to a maximum of
$9,800 per calendar year (increasing to $10,000 in calendar year 2012). Employees have a choice of
investment alternatives, including a Plexus stock fund, in which to invest those funds.
Retirement Planning – Supplemental Executive Retirement Plan
Structure. As a consequence of Internal Revenue Code limitations on compensation which may be
attributed to tax qualified retirement plans (such as the 401(k) Plan), we have also developed a
supplemental executive retirement plan for our executive officers to address their particular circumstances
and promote long term loyalty to Plexus until retirement. Plexus’ supplemental executive retirement plan
(the “SERP”) is a deferred compensation plan which allows participants to defer taxes on current income.
Under this plan, executive officers (other than Mr. Lim), may elect to defer some or all of their
compensation. Plexus may also make discretionary contributions. Additionally, Plexus has purchased
Company-owned life insurance on the lives of certain executives to meet the economic commitments
associated with this plan. The plan allows investment of deferred compensation amounts on behalf of the
participants into individual accounts and within these accounts, into one or more designated mutual funds
or investments. These investment choices do not include Plexus stock. Deferred amounts and any earnings
which may be credited become payable upon termination, retirement from Plexus, or in accordance with
the executive’s individual deferral election.
All executive officers, other than Mr. Lim, participate in this program. Additionally, the Company can
credit a participant’s account with a discretionary employer contribution. Any employer contributions to
the SERP require Board approval. The SERP provides a vehicle for the Company to restore the lost
deferral and matching opportunity caused by tax regulation limitations on such deferrals and matched
contributions for highly compensated individuals; the Committee believes these limitations make
supplemental retirement plans common practice in general industry. The Committee also believes that
further retirement compensation through the SERP is appropriate to meet the market for executive
compensation and to provide a stronger incentive for executives to remain with Plexus through retirement.
Fiscal 2011 Plan Activity.
– Contribution Formula. Under a funding plan adopted by the Committee, the SERP provides for an
annual discretionary contribution of the greater of (a) 7% of the executive’s total targeted cash
compensation (increased to 9% beginning in August 2011, as described below), minus Plexus’
permitted contributions to the executive officer’s account in the 401(k) Plan, or (b) $13,500. Total
targeted cash compensation is defined as base salary plus the targeted annual incentive plan cash
incentive at the time of the Company’s contribution.
The Committee adopted this approach for discretionary contributions to reflect competitive
practices based on the research, analysis and recommendations of Towers Watson, its
compensation consultant for that program. In fiscal 2011, at the request of the Committee, Towers
Watson conducted a competitive analysis of the contribution formula. While the contribution
formula was found to reasonable, it was determined to be slightly lower than current competitive
practice. Therefore, the Committee decided to increase the Company contribution from 7% to 9%
of the executive’s total targeted cash compensation, beginning in August 2011, in order to be more
in line with current market practice.
–
Employer Contributions. For fiscal 2011, the total employer contributions to the SERP accounts
was $280,534 for all participants as a group, including $108,768 for the CEO. See footnote 4 to
the “Summary Compensation Table.”
32
–
Special Contribution. The SERP also allows the Committee to make discretionary contributions
over and above the annual contribution noted above. In fiscal 2011, the Committee did not make
any such contributions to any of the executive officers, including the named executive officers.
Fiscal 2012 Payment Schedule. The annual contribution made by the Company will be paid throughout the
year on a bi-weekly basis. This schedule allows for dollar cost averaging and spreads the expense of the
contribution across the fiscal year. If necessary, a true-up payment will be made at the end of the fiscal
year if the Company contribution for any executive officer is less than $13,500.
Foreign Retirement Arrangements
Since Mr. Lim is not a United States resident, he does not participate in the SERP or the 401(k) Plan.
Rather, he participates in the Employees Provident Fund which is mandated by Malaysian law. Under law,
minimum contributions of 12% of an employee’s wages (salary plus bonus) are required to be made by an
employer; Plexus chose to make a contribution of 17% in fiscal 2011 in Mr. Lim’s case since it is Plexus’
practice in Malaysia to make higher contributions than the statutory minimum for personnel with relatively
high levels of seniority and responsibility.
Employment and Change in Control Agreements
Structure. We do not generally have employment agreements with our executive officers; however, Plexus
does maintain an employment agreement with our Chief Executive Officer in order to recognize the
importance of his position, to help assure Plexus of continuing availability of Mr. Foate’s services over a
period of time, and to protect the Company from competition post-employment. All executive officers and
certain other key employees have change in control agreements (with the exception of Mr. Foate, who has
change in control provisions as part of his employment agreement), to both help assure that executive
officers will not be distracted by personal interests in the case of a potential acquisition of Plexus as well as
to maintain their continuing loyalty. We also believe that competitive factors require us to provide these
protections to attract and retain talented executive officers and key employees.
Mr. Foate’s employment agreement is described below in “Executive Compensation – Employment
Agreements and Potential Payments Upon Termination or Change in Control – Mr. Foate’s Employment
Agreement.” The change in control agreements with our executive officers (with the exception of Mr.
Foate) are described below in “Executive Compensation – Employment Agreements and Potential
Payments upon Termination or Change in Control – Change in Control Arrangements.” Please refer to
those discussions for a further explanation of those agreements.
Determination of Benefit Levels.
In general, the change in control agreements with executive officers
provide that, upon termination in the event of a change in control, executive officers will receive
compensation equaling three times annual salary plus targeted bonus, a continuation of health and
retirement benefits for that period, and a gross-up payment for excise taxes. In addition, under the 2008
Long-Term Plan (and its predecessor) upon a change in control, all unvested awards will automatically vest
for all award holders. Certain other key employees also have change in control agreements on substantially
the same terms, although generally with only one or two years’ of coverage. In determining which
employees should have change in control agreements, the Committee utilizes its guidelines, which focus on
position, responsibilities and compensation level in order to minimize subjectivity.
The Committee originally set these benefit levels in 2008, when the agreements were updated and revised,
and reviews them annually. It is the Committee’s view that the level of benefits, combined with the
“double trigger” requiring both a change in control and a termination of employment, provides an
appropriate balancing of the interests of the Company, its shareholders and its executives. Benefit levels
are believed to be both in line with competitive standards and Plexus’ overall compensation policy and
level of other benefits, as well as necessary and appropriate to attract and retain executive talent. The
Committee believes it is general market practice to provide that unvested awards will vest on a change in
control, which is the case under the 2008 Long-Term Plan (and its predecessor), as approved by Plexus’
shareholders. Therefore, offering a package that is consistent with market practices, is appropriate to help
motivate executives to focus on the Company’s shareholders, even when the circumstance might jeopardize
33
their employment. The Committee also intends that the potential expense of the agreements is reasonable
as compared to total enterprise value. The Committee estimated that the agreements represented
approximately 3.0% of the average of fiscal 2007 and fiscal 2006 total enterprise value at the time they
were adopted; potential expense was estimated at 2.6% of total enterprise value as of the date of the
Committee’s most recent determination. As noted above, the agreements contain a “double trigger,” which
provides that benefits would only be paid to the executive officers in the event of a substantial impact upon
their employment and compensation.
The Committee periodically reviews the scope and context of the change in control agreements. The
Committee continues to believe, as noted above, that the change in control agreements will help motivate
the executive officers to respond appropriately, for the benefit of the Company and its shareholders, in the
case of a proposed acquisition of the Company which they might perceive would jeopardize their
employment.
Tax Aspects of Executive Compensation
The Committee generally attempts to preserve the tax deductibility under the Internal Revenue Code (the
“Code”) of all executive compensation. However, at times and under certain circumstances, it believes that it is
more important to provide appropriate incentives irrespective of tax consequences.
Section 162(m) of the Code generally limits the corporate tax deduction for compensation paid to the
executive officers that is not “performance-based” to $1 million annually per executive officer. Plexus has taken
action with respect to the provisions of Section 162(m) so that compensation income relating to stock options,
SARs, performance-based restricted stock and cash incentive awards, including those made to executive officers
pursuant to the VICP, under the 2008 Long-Term Plan (and predecessor plans) is exempt. Compensation under
these shareholder approved plans that is performance-based is generally not subject to the $1 million limitation;
however, the grant of restricted shares without performance goals would not be considered to be performance-based
and therefore would be subject to the limit along with cash salaries and bonuses. As a result of the shareholders’
approval of the 2008 Long-Term Plan (and its predecessor), the Committee believes that most compensation income
under these plans (other than any awards in the future of restricted stock or RSUs without performance goals, as is
the case for the time vested RSUs granted since fiscal 2008) would not be subject to the Code’s deduction limitation.
However, if such restricted stock awards are made, the covered compensation of some individuals could exceed $1
million and, in those cases, the excess would not currently be tax deductible. In some years, the Company has
foregone a portion of its tax deduction as a result of the size of VICP cash incentive payments. However, to
ameliorate those tax consequences, the Company sought and received shareholder approval of the amendment to,
and restatement of, the 2008 Long-Term Plan at the 2011 annual meeting so that VICP awards to executive officers
may be granted under that plan; therefore, in fiscal 2011, such deduction was not foregone.
Other provisions of the Code also can affect the decisions which we make. Section 280G of the Code
imposes a 20% excise tax upon executive officers who receive “excess” payments upon a change in control of a
publicly-held corporation to the extent the payments received by them exceed an amount approximating three times
their average annual compensation. The excise tax applies to all payments over one times average annual
compensation. Plexus would also lose its tax deduction for “excess” payments. Our change in control agreements
provide that benefits under them will be “grossed up” so that we also reimburse the executive officer for these tax
consequences. Although these gross-up provisions and loss of deductibility would increase Plexus’ tax expense, the
Committee believes it is important that the effects of this Code provision not negate the protections which it
provides by means of the agreements.
The Code also provides a surtax under Section 409A, relating to various features of deferred compensation
arrangements of publicly-held corporations for compensation deferred after December 31, 2004. Section 409A
became fully effective on January 1, 2009. We conducted an extensive review of our benefit plans and employment
arrangements to help assure they comply with Section 409A and that there are no adverse effects on Plexus or our
executive officers as a result of these Code amendments. We made various changes to some of these plans and
arrangements to ensure full compliance with the rules under Section 409A; however, we do not expect these changes
to have a material tax or financial consequence on Plexus.
34
COMPENSATION COMMITTEE REPORT
The duties and responsibilities of the Compensation and Leadership Development Committee of the board
of directors are set forth in a written charter adopted by the board, as set forth on the Company’s website as
described above under “Corporate Governance—Board Committees—Compensation and Leadership Development
Committee.” The Committee reviews and reassesses this charter annually and recommends any changes to the
board for approval.
As part of the exercise of its duties, the Committee has reviewed and discussed with management the above
“Compensation Discussion and Analysis” contained in this proxy statement. Based upon that review and those
discussions, the Committee recommended to the board of directors that the Compensation Discussion and Analysis
be incorporated by reference in Plexus’ annual report to shareholders on Form 10-K and included in this proxy
statement.
Members of the Compensation and Leadership Development Committee:
Stephen P. Cortinovis, Chair
Peter Kelly
Phil R. Martens
Michael V. Schrock
35
EXECUTIVE COMPENSATION
This section provides further information about the compensation paid to, and other compensatory
arrangements with, our executive officers.
SUMMARY COMPENSATION TABLE
The following table sets forth a summary of the compensation which we paid for fiscal 2011 to our Chief
Executive Officer, our Chief Financial Officer and the three executive officers who had the highest compensation of
our other executive officers (collectively, the “named executive officers”). More detailed information is presented
in the other tables and explanations which follow the following table.
Name and Principal Position Year
Salary
($)(1)
Bonus
($)(2)
Stock
Awards
($)(3)
Option
Awards
($)(3)
Non-Equity
Incentive
Plan
Compensation
($)(2)
All Other
Compensation
($)(4)
Total
($)
Dean A. Foate
President and Chief
Executive Officer
2011
$793,266
$0
$890,290 $1,138,695
$698,159
$160,805
$3,681,215
2010
766,632
144,742
696,980
1,201,993
1,382,885
140,508
4,333,740
2009
745,673
147,222
368,898
740,343
0
134,620
2,136,756
Ginger M. Jones
2011
373,269
0
217,144
277,731
183,168
Senior Vice President and
Chief Financial Officer
2010
349,537
32,654
169,995
293,169
314,654
2009
339,529
29,166
476,238
180,572
0
Michael D. Buseman
2011
351,923
0
271,430
347,163
172,946
Executive Vice President,
Global Manufacturing
Operations
2010
320,538
30,100
212,494
351,945
289,731
2009
303,654
26,467
604,993
180,572
0
Todd P. Kelsey
2011
321,922
0
271,430
347,163
158,982
92,217
63,284
55,343
72,073
59,083
59,373
62,673
1,143,529
1,223,293
1,080,848
1,215,535
1,263,891
1,175,059
1,162,170
Executive Vice President,
Global Customer Services
(5)
Yong Jin Lim
Regional President –
Plexus APAC
2010
291,807
27,616
212,494
351,945
262,731
51,828
1,198,421
2011
352,221
0
217,144
277,731
143,755
142,174
1,133,025
2010
301,413
22,642
169,995
293,169
217,018
2009
267,708
18,510
476,238
180,572
0
89,768
99,141
1,094,005
1,042,169
(1) Includes amounts voluntarily deferred by the named persons under the Plexus Corp. 401(k) Savings Plan (the
“401(k) Plan”), the Plexus supplemental executive retirement plan (the “SERP”) and, for Mr. Lim, the
Malaysian Employees Provident Fund. The amounts deferred under the SERP are also included in the
“Executive Contributions in Last FY” column of the “Nonqualified Deferred Compensation” table below.
(2) Both the “Bonus” and the “Non-Equity Incentive Plan Compensation” columns represent amounts that were
earned during fiscal 2011, fiscal 2010 and fiscal 2009, respectively, under our Variable Incentive Compensation
Plan (“VICP”). Under the VICP, annual cash incentives for executive officers are determined by a combination
of the degree to which Plexus achieves specific pre-set corporate financial goals during the fiscal year and
individual objectives. To the extent a payment was based on individual objectives in fiscal 2010 and fiscal
2009, it is in the “Bonus” column. To the extent that the cash incentive resulted from corporate financial
performance, and, for fiscal 2011, individual objectives, that portion of the cash incentive is included under the
“Non-Equity Incentive Plan Compensation” column. We include more information about the VICP under
“Grants of Plan-Based Awards” below. The amounts shown in the “2011” row were earned in fiscal 2011 but
will be paid in fiscal 2012, the amounts shown in the “2010” row were earned in fiscal 2010 and were paid in
fiscal 2011, and the amounts shown in the “2009” row were earned in fiscal 2009 and were paid in fiscal 2010.
The amounts in the “Non-Equity Incentive Plan Compensation” column for fiscal 2010 and 2009 also include
the value of long-term cash awards granted in those years, which vest on the third anniversary of their
respective grant dates; no equivalent grants were made for fiscal 2011.
36
(3) This column represents the grant date fair value computed in accordance with Accounting Standards
Codification Topic 718 (“ASC 718”) of stock and option awards granted in fiscal 2011, fiscal 2010 and fiscal
2009 under the 2008 Long-Term Plan, which are explained further below under “Grants of Plan-Based
Awards.” These awards are not subject to performance conditions. Generally accepted accounting principles
(“GAAP”) require us to recognize compensation expense for stock options and other stock-related awards
granted to our employees and directors based on the estimated fair value of the equity instrument at the time of
grant. Compensation expense is recognized over the vesting period. The assumptions which we used to
determine the valuation of the awards are discussed in footnote 11 to our consolidated financial statements.
Please also see the “Grants of Plan-Based Awards” table below for further information about the stock and
option awards granted in fiscal 2011, and the “Outstanding Equity Awards at Fiscal Year End” table below
relating to all outstanding stock and option awards at the end of fiscal 2011.
(4) The amounts listed under the column entitled “All Other Compensation” in the table include Company
contributions to the 401(k) Plan and the SERP (for Mr. Lim, this represents the Company’s contribution to the
Malaysian Employees Provident Fund), reimbursement made by Plexus under its executive flexible perquisite
benefit, the value of the company car benefit provided to the executive, additional life and disability insurance
coverage and benefits related to an overseas assignment. Per person detail is listed in the table below:
Company
Matching
Contribution
to 401(k)
Plan
Company
Contribution
to SERP
Executive
Flexible
Perquisite
Benefit
$9,800
9,800
6,125
9,800
10,111
8,761
9,800
8,423
5,414
10,723
10,660
--
--
--
$108,768
96,894
98,875
33,907
27,341
29,050
31,411
24,489
25,375
27,868
21,397
107,516
57,559
66,589
$19,320
12,482
17,219
11,026
14,294
13,302
19,131
15,002
16,931
12,206
8,728
--
--
--
Year
2011
2010
2009
2011
2010
2009
2011
2010
2009
2011
2010
2011
2010
2009
Company
Car
Benefit
$10,581
10,936
2,101
9,340
10,515
3,311
10,484
10,242
10,861
10,788
10,284
19,724
18,112
17,330
Additional
Life and
Disability
Insurance
$12,336
10,396
10,300
1,252
1,023
919
1,247
927
792
1,088
759
14,934
14,097
15,222
Overseas
Assignment
--
--
--
$26,892
--
--
--
--
--
--
--
--
--
--
Total
$160,805
140,508
134,620
92,217
63,284
55,343
72,073
59,083
59,373
62,673
51,828
142,174
89,768
99,141
Mr. Foate
Ms. Jones
Mr. Buseman
Mr. Kelsey
Mr. Lim
In fiscal 2009 and essentially all of the first quarter of fiscal 2010, under the executive flexible perquisite
benefit, executive officers could be reimbursed for expenses up to $10,000 (plus a gross-up for taxes) in a
calendar year for miscellaneous expenses such as personal financial planning, spouse travel costs in connection
with business-related travel, club memberships and/or tax and estate advice. Beginning January 1, 2010, the
executive flexible perquisite benefit was valued at up to $15,000 per calendar year, but the gross-up for taxes
was eliminated. The amounts in the “Executive Flexible Perquisite Benefit” column above include the
reimbursements under that program in the fiscal years listed, including the related tax gross-up amounts; these
amounts may exceed the calendar year limits due to the tax gross-up and the difference between the fiscal and
calendar year.
Ms. Jones was on a temporary assignment for Plexus in Malaysia for a portion of fiscal 2011. The amount
reported above in the “Overseas Assignment” column reflects benefits related to this assignment beyond those
that were integral and necessary to the business purpose of the assignment, including expenses for a rental car
for her spouse, as well as the related tax gross-up, and a $15,000 overseas allowance, which amount was not
grossed up for taxes.
(5) Although Mr. Kelsey has been an executive officer since 2007, he was a named executive officer for the first
time in fiscal 2010. In accordance with SEC rules, information for fiscal 2009 is not required to be presented.
37
GRANTS OF PLAN-BASED AWARDS
2011
The following table sets forth information about stock and option awards that were granted to the named
executive officers in fiscal 2011 under the 2008 Long-Term Plan, as well as information about the potential cash
incentive awards dependent on quantifiable corporate performance and individual goals that those executive officers
could earn for fiscal 2011 performance (to be paid in fiscal 2012) under the VICP. As a result of fiscal 2011
corporate performance, cash incentive awards based on these criteria were earned in 2011, as set forth under the
“Non-Equity Incentive Compensation” column in the “Summary Compensation Table” above. We provide further
information about both potential compensation under the VICP and awards under the 2008 Long-Term Plan in fiscal
2011 in the table below, and additional information about those plans following the table.
Name
Mr. Foate
Ms. Jones
Award
Type
VICP*
RSUs (3)
Options
VICP*
RSUs (3)
Options
Mr. Buseman VICP*
RSUs (3)
Options
VICP*
RSUs (3)
Options
VICP*
RSUs (3)
Options
Mr. Kelsey
Mr. Lim
Estimated Future Payouts Under Non-
Equity Incentive Plan Awards
Grant
Date
Threshold
($)(1)
12/22/10
01/24/11
11/01/10
01/24/11
04/25/11
07/25/11
12/22/10
01/24/11
11/01/10
01/24/11
04/25/11
07/25/11
12/22/10
01/24/11
11/01/10
01/24/11
04/25/11
07/25/11
12/22/10
01/24/11
11/01/10
01/24/11
04/25/11
07/25/11
12/22/10
01/24/11
11/01/10
01/24/11
04/25/11
07/25/11
$1
--
--
--
--
--
1
--
--
--
--
--
1
--
--
--
--
--
1
--
--
--
--
--
1
--
--
--
--
--
Target
($)(1)
$793,269
--
--
--
--
--
215,087
--
--
--
--
--
202,904
--
--
--
--
--
185,654
--
--
--
--
--
167,918
--
--
--
--
--
Maximum*
($)(1)
$1,586,538
--
--
--
--
--
430,173
--
--
--
--
--
405,808
--
--
--
--
--
371,308
--
--
--
--
--
335,836
--
--
--
--
--
All Other
Stock Awards:
Number of
Shares of
Stocks or
Units (#)
--
32,800 (3)
--
--
--
--
--
8,000 (3)
--
--
--
--
--
10,000 (3)
--
--
--
--
--
10,000 (3)
--
--
--
--
--
8,000 (3)
--
--
--
--
All Other
Option
Awards:
Number of
Securities
Underlying
Options (#)
--
--
20,500
20,500
20,500
20,500
Exercise
or
Base Price
of Option
Awards
($/sh) (2)
--
--
$29.798
27.143
36.955
30.19
Closing
Market
Price on
Grant
Date
($/sh) (2)
--
--
$29.39
27.27
36.42
29.78
--
--
5,000
5,000
5,000
5,000
--
--
6,250
6,250
6,250
6,250
--
--
6,250
6,250
6,250
6,250
--
--
5,000
5,000
5,000
5,000
--
--
29.798
27.143
36.955
30.19
--
--
29.798
27.143
36.955
30.19
--
--
29.798
27.143
36.955
30.19
--
--
29.798
27.143
36.955
30.19
--
--
29.39
27.27
36.42
29.78
--
--
29.39
27.27
36.42
29.78
--
--
29.39
27.27
36.42
29.78
--
--
29.39
27.27
36.42
29.78
Grant Date
Fair Value
of Stock
and Option
Awards ($)
--
$890,290
269,514
252,380
344,578
272,224
--
217,144
65,735
61,556
84,044
66,396
--
271,430
82,169
76,945
105,054
82,995
--
271,430
82,169
76,945
105,054
82,995
--
217,144
65,735
61,556
84,044
66,396
* Represents a potential cash incentive payment for fiscal 2011 at various performance levels under the VICP
(amounts in the “Maximum” column correspond to the “maximum payout level” under the VICP); other grants
are stock options and restricted stock units (“RSUs”) under the 2008 Long-Term Plan. As a result of Plexus’
actual performance in fiscal 2011, overall cash incentive awards were earned based on corporate financial
performance between the threshold and target levels, as reflected in the “Summary Compensation Table” and
discussed in “Compensation Discussion and Analysis” above.
(1) Amounts in the rows labeled “VICP*” reflect potential cash incentive payments that depend on Plexus meeting
corporate financial goals and the named executive officers achieving individual objectives (assuming such
officers do not meet any of their individual objectives at “Threshold” and meet them fully at both “Target” and
38
the “maximum payout level”). The amounts in the “Threshold” column indicate a payment for performance just
above the threshold; there is no minimum payment once the threshold has been exceeded.
(2) Options were granted at the average of the high and low trading prices on the date of grant. Under the 2008
Long-Term Plan, fair market value may be determined as the average of the high and low trading prices on the
date of grant or as an average for a short period of time prior to the grant. The stock options that were granted in
fiscal 2011 under the 2008 Long-Term Plan vest over a two year period, with 50% of the options vesting on the
first anniversary of their grant date and the remainder vesting on the second anniversary.
(3) The RSUs vest on January 24, 2014, assuming continued employment. See the discussions below under the
caption “2008 Long-Term Plan.”
VICP
Beginning in fiscal 2011, the VICP (as it applies to our executive officers) is now a sub-plan of the 2008
Long-Term Plan. Under the VICP, our executive officers may earn cash incentive awards that depend in substantial
part upon the degree to which Plexus achieves corporate financial goals, which are set by our Compensation and
Leadership Development Committee (the “Committee”) shortly after the beginning of our fiscal year. As long as
Plexus achieves net income for the plan year, each executive officer also may earn a portion of his or her cash
incentive award by accomplishing the individual objectives set for that executive officer. These awards are intended
to reflect, in each instance, an individual’s performance that may not be reflected in the financial performance of the
entire Company. The amounts included in the table are potential future payouts under non-equity incentive awards
that could be earned pursuant to both corporate financial and individual goals under the VICP. The amounts in the
columns represent, respectively, the amount which could be earned in the event minimum results were achieved so
as to result in a threshold payment to the executive officer, the amounts which could be received if each
performance target was met exactly at the targeted level and the maximum amount that could be earned under the
VICP, which is known as the “maximum payout level.” As noted above, the potential payouts reported in the table
assume that the named executive officers do not meet any of their individual objectives at threshold and achieve
them fully at both target and the maximum payout level.
Actual Company performance in fiscal 2011 was between the target and the maximum payout levels for
revenue and was between the threshold and target levels for return on capital employed (“ROCE”); thus, total cash
incentives based on corporate financial goals were paid between the threshold and target levels, as reported in the
“Non-Equity Incentive Compensation” column in the “Summary Compensation Table” above.
The maximum amount that could be earned based on individual performance was $158,654 for Mr. Foate
(which would have been 20% of his cash incentive award at the targeted levels) and varied from $33,584 to $43,017
for the other named executive officers (also representing 20%).
2008 Long-Term Plan
Under the 2008 Long-Term Plan, the Committee may grant directors, executive officers and other officers
and key employees of Plexus stock options, stock-settled SARs, restricted stock, which may be designated as
restricted stock awards or RSUs, unrestricted stock awards, performance stock awards (which may be settled in cash
or stock) and cash incentive awards in periodic grants. In fiscal 2007, as a result of the volatility of the stock
market, particularly for Plexus stock, the Committee began the practice of making quarterly option grants. This
grant schedule facilitates overall compensation planning near the beginning of the fiscal year, as the total target
amounts for grants for a year are set at that time. The Committee continues to make quarterly option grants; the
specific dates of each grant are determined in advance. Option grants must be at the fair market value of the
underlying shares when the grant is made.
The Committee grants RSUs under the 2008 Long-Term Plan. In fiscal 2011, annual grants were made in
January 2011, and vest three years from the date of the grant, assuming continued employment. Going forward, the
Committee anticipates continuing to make grants of RSUs in the second quarter of each fiscal year.
39
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
October 1, 2011
The following table sets forth information about Plexus stock and option awards held by the named
executive officers that were outstanding at the end of fiscal 2011.
Option Awards
Stock Awards
Name
Mr. Foate
Number of
Securities
Underlying
Unexercised
Options
(#) (1)
Exercisable
Number of
Securities
Underlying
Unexercised
Options
(#) (1)
Unexercisable
96,046
45,000
75,000
75,000
100,000
37,500
37,500
18,750
18,750
18,750
18,750
20,500
20,500
20,500
20,500
10,250
10,250
10,250
10,250
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
10,250
10,250
10,250
10,250
20,500
20,500
20,500
20,500
Option
Exercise
Price
($)
25.285
14.015
15.825
12.94
42.515
21.41
23.83
30.54
22.17
24.21
29.71
18.085
14.625
20.953
25.751
25.335
33.999
38.24
30.475
29.798
27.143
36.955
30.19
Option
Expiration
Date
04/22/12
08/14/13
04/28/14
05/18/15
05/17/16
05/17/17
08/01/17
11/05/17
01/28/18
04/28/18
07/29/18
10/31/18
02/02/19
05/04/19
08/03/19
11/02/19
01/25/20
04/23/20
07/26/20
11/01/20
01/24/21
04/25/21
07/25/21
Equity Incentive
Plan Awards:
Number of
Unearned
Shares, Units or
Other Rights
That Have Not
Vested
(#)
Equity Incentive Plan
Awards: Market or
Payout Value of
Unearned Shares, Units
or Other Rights That
Have Not Vested
($) (2)
20,398 (3)
20,500 (4)
32,800 (5)
$461,403
463,710
741,936
40
Option Awards
Stock Awards
Equity Incentive
Plan Awards:
Number of
Unearned
Shares, Units or
Other Rights
That Have Not
Vested
(#)
Equity Incentive Plan
Awards: Market or
Payout Value of
Unearned Shares, Units
or Other Rights That
Have Not Vested
($) (2)
4,975 (3)
15,000 (6)
5,000 (4)
8,000 (5)
112,535
339,300
113,100
180,960
4,975 (3)
20,000 (6)
6,250 (4)
10,000 (5)
112,535
452,400
141,375
226,200
Name
Ms. Jones
Mr. Buseman
Number of
Securities
Underlying
Unexercised
Options
(#) (1)
Exercisable
Number of
Securities
Underlying
Unexercised
Options
(#) (1)
Unexercisable
10,000
4,000
4,000
4,000
4,000
5,000
5,000
5,000
5,000
2,500
2,500
2,500
2,500
--
--
--
--
5,000
2,500
2,500
3,000
3,000
3,000
3,000
5,000
5,000
5,000
5,000
2,500
3,125
3,125
3,125
--
--
--
--
--
--
--
--
--
--
--
--
--
2,500
2,500
2,500
2,500
5,000
5,000
5,000
5,000
--
--
--
--
--
--
--
--
--
--
--
2,500
3,125
3,125
3,125
6,250
6,250
6,250
6,250
Option
Expiration
Date
04/09/17
11/05/17
01/28/18
04/28/18
07/29/18
10/31/18
02/02/19
05/04/19
08/03/19
11/02/19
01/25/20
04/23/20
07/26/20
11/01/20
01/24/21
04/25/21
07/25/21
05/24/16
05/17/17
08/01/17
11/05/17
01/28/18
04/28/18
07/29/18
10/31/18
02/02/19
05/04/19
08/03/19
11/02/19
01/25/20
04/23/20
07/26/20
11/01/20
01/24/21
04/25/21
07/25/21
Option
Exercise
Price
($)
18.185
30.54
22.17
24.21
29.71
18.085
14.625
20.953
25.751
25.335
33.999
38.24
30.475
29.798
27.143
36.955
30.19
39.00
21.41
23.83
30.54
22.17
24.21
29.71
18.085
14.625
20.953
25.751
25.335
33.999
38.24
30.475
29.798
27.143
36.955
30.19
41
Option Awards
Stock Awards
Name
Mr. Kelsey
Mr. Lim
Number of
Securities
Underlying
Unexercised
Options
(#) (1)
Exercisable
Number of
Securities
Underlying
Unexercised
Options
(#) (1)
Unexercisable
3,600
5,000
3,000
5,000
2,500
2,500
3,000
3,000
3,000
3,000
5,000
5,000
5,000
5,000
2,500
3,125
3,125
3,125
--
--
--
--
5,500
7,500
2,500
2,500
3,000
3,000
3,000
3,000
5,000
5,000
5,000
5,000
2,500
2,500
2,500
2,500
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
2,500
3,125
3,125
3,125
6,250
6,250
6,250
6,250
--
--
--
--
--
--
--
--
--
--
--
--
2,500
2,500
2,500
2,500
5,000
5,000
5,000
5,000
Option
Expiration
Date
04/22/12
04/28/14
05/18/15
05/17/16
05/17/17
08/01/17
11/05/17
01/28/18
04/28/18
07/29/18
10/31/18
02/02/19
05/04/19
08/03/19
11/02/19
01/25/20
04/23/20
07/26/20
11/01/20
01/24/21
04/25/21
07/25/21
05/18/15
05/17/16
05/17/17
08/01/17
11/05/17
01/28/18
04/28/18
07/29/18
10/31/18
02/02/19
05/04/19
08/03/19
11/02/19
01/25/20
04/23/20
07/26/20
11/01/20
01/24/21
04/25/21
07/25/21
Option
Exercise
Price
($)
25.285
15.825
12.94
42.515
21.41
23.83
30.54
22.17
24.21
29.71
18.085
14.625
20.953
25.751
25.335
33.999
38.24
30.475
29.798
27.143
36.955
30.19
12.94
42.515
21.41
23.83
30.54
22.17
24.21
29.71
18.085
14.625
20.953
25.751
25.335
33.999
38.24
30.475
29.798
27.143
36.955
30.19
42
Equity Incentive
Plan Awards:
Number of
Unearned
Shares, Units or
Other Rights
That Have Not
Vested
(#)
Equity Incentive Plan
Awards: Market or
Payout Value of
Unearned Shares, Units
or Other Rights That
Have Not Vested
($) (2)
4,975 (3)
20,000 (6)
6,250 (4)
10,000 (5)
112,535
452,400
141,375
226,200
4,975 (3)
15,000 (6)
5,000 (4)
8,000 (5)
112,535
339,300
113,100
180,960
(1) Option award under the 2008 Long-Term Plan or a predecessor plan. All options have an exercise price equal
to the market price of our common stock on the date of grant. Since 2005, the market price has been
determined using the average of the high and low trading prices on the grant date. Prior to that date, the market
price was determined by an average of the high and low trading prices over a period of five to ten trading days
prior to the grant date. Options granted in fiscal 2005 vested immediately. Options granted in fiscal 2006 (and
to Ms. Jones in April 2007) vested one-third on each of the first three anniversaries of the grant date. Options
granted in fiscal 2007 and after vest one-half on each of the first two anniversaries of the grant date.
(2) Based on the $22.62 per share closing price of a share of our common stock on September 30, 2011, the last
trading day of fiscal 2011.
(3) Consists of RSUs awarded in fiscal 2009 under the 2008 Long-Term Plan. The RSUs vested on October 31,
2011, based on continued service through that date. See “Compensation Discussion and Analysis—Elements
and Analysis of Direct Compensation—Long-Term Incentives” for additional information regarding awards.
(4) Consists of RSUs awarded in fiscal 2010 under the 2008 Long-Term Plan. The RSUs vest on January 25, 2013,
based on continued service through that date. See “Compensation Discussion and Analysis—Elements and
Analysis of Direct Compensation—Long-Term Incentives” for additional information regarding awards.
(5) Consists of RSUs awarded in fiscal 2011 under the 2008 Long-Term Plan. The RSUs vest on January 24, 2014,
based on continued service through that date. See “Compensation Discussion and Analysis—Elements and
Analysis of Direct Compensation—Long-Term Incentives” for additional information regarding awards.
(6) Consists of RSUs awarded in fiscal 2009 under the 2008 Long-Term Plan. The RSUs vest on August 3, 2012,
based on continued service through that date. See “Compensation Discussion and Analysis—Elements and
Analysis of Direct Compensation—Long-Term Incentives” for additional information regarding awards.
OPTION EXERCISES AND STOCK VESTED
2011
The following table sets forth information about the Plexus stock options that were exercised by the named
executive officers and the RSUs that vested in fiscal 2011.
Option Awards
Stock Awards
Number of Shares
Acquired on
Exercise (#)
13,954
--
--
4,000
--
Value Realized on
Exercise ($) (1)
$151,422
--
--
83,740
--
Number of Shares
Acquired on
Vesting (#)
21,375
4,560
3,420
3,420
3,420
Value Realized on
Vesting ($) (2)
$671,068
143,161
107,371
107,371
107,371
Name
Mr. Foate
Ms. Jones
Mr. Buseman
Mr. Kelsey
Mr. Lim
(1) Based on the difference between the exercise prices and sale prices on the date of exercise.
(2) Based on the average of the high and low trading prices of the Company’s common stock on the Nasdaq Global
Select Stock Market on the date of vesting, November 5, 2010.
43
NONQUALIFIED DEFERRED COMPENSATION
2011
Plexus does not maintain any defined benefit pension plans. Plexus’ only retirement savings plans are
defined contribution plans: the 401(k) Savings Plan (the “401(k) Plan”) for all qualifying U.S. employees; and the
supplemental executive retirement plan (the “SERP”) for executive officers. Because these are defined contribution
plans, Plexus’ obligations are fixed at the time contributions are made, rather than Plexus being liable for future
potential shortfalls in plan assets to cover the fixed benefits that are promised in defined benefit plans.
The 401(k) Plan is open to all U.S. Plexus employees meeting specified service and related requirements.
Under the plan, employees may voluntarily contribute up to 75% of their annual compensation, up to a maximum
tax code mandated limit of $16,500 ($22,000 if age 50 or older) in calendar year 2011 (increasing to up to $17,000
and $22,500, respectively, in calendar year 2012); Plexus will match 100% of the first 4.0% of salary which an
employee defers, up to $9,800 in calendar year 2011 (increasing to up to $10,000 in calendar year 2012). There are
several investment options available to participants under the 401(k) Plan, including a Plexus stock fund.
Plexus maintains the SERP as an additional deferred compensation mechanism for its executive officers;
the individuals covered in fiscal 2011 include Ms. Jones and Messrs. Foate, Buseman and Kelsey. Mr. Lim does not
participate because he is not a United States resident. Under the SERP, an executive may elect to defer some or all
of his or her compensation through the plan, and Plexus may credit the participant’s account with a discretionary
employer contribution. Participants are entitled to the payment of deferred amounts and any earnings which may be
credited thereon upon termination or retirement from Plexus, subject to the participants’ deferral elections and
Section 409A of the Code. The plan allows investment of deferred compensation held on behalf of the participants
into individual accounts and, within these accounts, into one or more designated mutual funds or investments.
These investment choices do not include Plexus stock.
Executive officers, including the named executive officers, did not make any personal voluntary deferrals
to the SERP for fiscal year 2011. The plan also allows for discretionary Plexus contributions. As discussed in
“Compensation Discussion and Analysis—-Elements and Analysis of Other Compensation—Retirement Planning -
Supplemental Executive Retirement Plan,” in fiscal 2011, the Committee approved an increase in the Company
contribution to the SERP after reviewing a competitive analysis prepared by Towers Watson. As a result, beginning
in August 2011, the discretionary contribution is the greater of (a) 9% of the executive’s total targeted cash
compensation (increased from 7%), minus Plexus’ permitted contributions to the executive officer’s account in the
401(k) Plan, or (b) $13,500. The Committee may also choose to make additional or special contributions; no such
contributions were made in fiscal 2011.
Mr. Lim does not participate in these plans because he is a resident of Malaysia and is covered by a
different system. Under Malaysian law, an employer must make a contribution to the fund of at least 12% of every
employee’s salary during the year to the Employees Provident Fund, which is a retirement savings program
established under Malaysian law. In accordance with its practice in Malaysia, Plexus made a contribution of 17%
for Mr. Lim to reflect his seniority and responsibilities.
The following table includes information as to contributions under the SERP or, in the case of Mr. Lim, the
Malaysian Employees Provident Fund. Since the 401(k) Plan is a tax-qualified plan generally available to all
employees, contributions on behalf of the executive officers and earnings in that plan are not included in this table;
however, company contributions under both are among the items included in the “All Other Compensation” column
in the “Summary Compensation Table” above.
44
Executive
Contributions
in Last FY
($) (1)
--
Registrant
Contributions
in Last FY
($)
$108,768
Aggregate
Earnings
(Loss)
in Last FY
($)
$3,027
Aggregate
Withdrawals/
Distributions
($)
--
Aggregate
Balance at
Last FYE
($)
$1,792,238
--
--
--
33,907
615
31,411
(4,701)
27,868
(3,316)
--
--
--
183,944
130,607
86,782
Name
Mr. Foate
Ms. Jones
Mr. Buseman
Mr. Kelsey
Mr. Lim (2)
$66,964
107,516
26,698 (3)
$208,107
541,205 (4)
(1) Includes contributions by the named executive officers that are included in the “Salary” column in the
“Summary Compensation Table” above, as follows: Mr. Lim – $36,311.
(2) Mr. Lim’s information relates to the Malaysian Employees Provident Fund.
(3) “Aggregate Earnings in Last FY” represent dividends declared by the Malaysian Employees Provident Fund
Board for calendar year 2010. This information is not yet available to Mr. Lim or the Company from the
Malaysian Employees Provident Fund for calendar year 2011.
(4) Mr. Lim’s fund account also includes contributions prior to his employment with Plexus and related earnings
since the Malaysian Employees Provident Fund is not an employer-sponsored plan. The balance also reflects
changes in currency exchange rates between the MYR and the U.S. dollar.
EMPLOYMENT AGREEMENTS AND POTENTIAL PAYMENTS UPON TERMINATION OR
CHANGE IN CONTROL
In this section, we are providing information about specific agreements with our executive officers relating
to employment and their post-employment compensation. As discussed further below, only Mr. Foate has an
employment agreement. All of our executive officers have change in control agreements which will provide, in
certain circumstances, for payments to the executive officers in the event of a change in control of Plexus.
Mr. Foate’s Employment Agreement
Plexus does not generally have employment agreements with its executive officers. However, when Mr.
Foate became Plexus’ Chief Executive Officer in 2002, the Committee and the board believed it was important to
enter into an employment agreement with Mr. Foate to set forth the terms of his employment and to provide
incentives for him to continue with the Company over the long term. The Company entered into a new employment
agreement with Mr. Foate in 2008. The new employment agreement, which was approved by the Committee and
the board, amended and superseded Mr. Foate’s previous employment agreement with the Company. Changes were
made in order to more fully comply with changes made to Internal Revenue Code (the “Code”) Section 409A and to
integrate the change in control provisions into the employment agreement; however, the benefits payable under the
new agreement are substantially unchanged from those under the previous agreements.
Mr. Foate’s employment agreement is for an initial term of three years and automatically extends (unless
terminated) by one year every year, so that it maintains a rolling three-year term. The agreement specifies when
Plexus may terminate Mr. Foate for cause, or when Mr. Foate may leave the Company for good reason, and
determines the compensation payable upon termination. The definition of “cause” and “good reason” are
substantially similar to those under the change in control agreements, as described below, although “good reason”
would also include a failure of Plexus to renew the employment agreement. If Mr. Foate is terminated for cause or
voluntarily leaves without good reason, dies or becomes disabled, or the agreement is not renewed, Plexus is not
45
required to make any further payments to Mr. Foate other than with respect to obligations accrued on the date of
termination. If Plexus terminates Mr. Foate without cause, or he resigns with good reason, Mr. Foate is entitled to
receive compensation including his base salary for a three year period following his separation date, a pro-rated
VICP cash incentive award keyed to the actual attainment of performance targets for the year in which Mr. Foate is
involuntarily terminated, and certain lump sum payments designed to ensure that his benefits approximate those
provided under the previous employment agreement. The lump sum payments are equal to the sum of one hundred
percent (100%) of Mr. Foate’s annual base salary prior to his separation date and the maximum amount of Company
contributions for a full plan year under the 401(k) Plan and the Company’s deferred compensation plans. Mr. Foate
would also be eligible to participate in the Company’s medical, dental and vision plans, subject to his payment of
any premiums required by such plans, for a three year period following his separation from Plexus. Any payments
triggered by a termination of employment are to be delayed until six months after termination, as required by
Section 409A of the Code.
Change in control provisions are included in Mr. Foate’s current employment agreement and are
substantially identical to those provided in the change in control agreements described below under the caption
“Change in Control Agreements,” with Mr. Foate’s payment amount being three times the relevant salary plus
benefits.
Under Mr. Foate’s employment agreement, Plexus is also protected from competition by Mr. Foate after his
employment with Plexus would cease. Upon termination, Mr. Foate agrees to not interfere with the relationships
between the customers, suppliers or employees of Plexus for two years, and that he will not compete with Plexus
over the same period and in geographical locations proximate to Plexus’ operations. Further, Mr. Foate has agreed
to related confidentiality requirements after the termination of his employment.
Under the 2008 Long-Term Plan and predecessor plans, optionholders (or their representatives) have a
period of time in which they may exercise vested stock options after death, disability, retirement or other termination
of employment, except in the case of termination with cause. Options do not continue to vest after termination
except for full vesting upon a change in control or, when provided in related option agreements, upon death or
disability. See “Outstanding Equity Awards at Fiscal Year End” above for information as to Mr. Foate’s
outstanding stock options at October 1, 2011. Mr. Foate would also receive accrued and vested benefits under the
401(k) Plan and the SERP, and payment for accrued but unused vacation, upon a termination of employment for any
reason; those amounts are not included in “Potential Benefits Table” below. See “Nonqualified Deferred
Compensation” above for further information.
Change in Control Agreements
Plexus has change in control agreements with Ms. Jones and Messrs. Buseman, Kelsey and Lim, and its
other executive officers (with the exception of Mr. Foate as described above under the caption “Mr. Foate’s
Employment Agreement”) and certain other key employees. Under the terms of these agreements, if there is a
change in control of Plexus, as defined in the agreement, the executive officers’ authorities, duties and
responsibilities shall remain at least commensurate in all material respects with those prior to the change in control.
Their compensation may not be reduced. Their benefits must be commensurate with those of similarly situated
executives of the acquiring firm, and their location of employment must not be changed significantly as a result of
the change in control.
Within 24 months after a change in control, in the event that any covered executive officer is terminated
other than for cause, death or disability, or an executive officer terminates his or her employment with good reason,
Plexus is obligated to pay the executive officer, in a cash lump sum, an amount equal to three times (one to two
times for other key employees) the executive officer’s base salary plus targeted cash incentive payment, and to
continue retirement payments and certain other benefits. The change in control agreements designate three times
salary plus benefits for each of Ms. Jones and Messrs. Buseman, Kelsey and Lim. The agreements further provide
for payment of additional amounts which may be necessary to “gross-up” the amounts due to such executive officer
in the event of the imposition of an excise tax upon the payments. The agreements do not preclude termination of
the executive officer, or require payment of any benefit, if there has not been a change in control of Plexus, nor do
they limit the ability of Plexus to terminate these persons thereafter for cause. It is the Committee’s view that the
level of benefits, combined with the “double trigger” requiring both a change in control and a termination of
employment, provides an appropriate balancing of the interests of the Company, its shareholders and its executives.
46
Under our change in control agreements:
•
•
•
A termination for a “cause” would occur if the executive officer willfully and continually fails to
perform substantial duties or willfully engages in illegal conduct or gross misconduct which
injures Plexus.
After a change in control, an executive may terminate for “good reason” which would include:
requiring the executive to perform duties inconsistent with the duties provided under his or her
agreement; Plexus not complying with provisions of the agreement; the Company requiring the
executive to move; or any attempted termination of employment which is not permitted by the
agreement.
A change in control would occur in the event of a successful tender offer for Plexus, other
specified acquisitions of a substantial portion of the Company’s outstanding stock, a merger or
other business combination involving the Company, a sale of substantial assets of the Company, a
contested director’s election or a combination of these actions followed by any or all of the
following actions: change in management or a majority of the board of the Company or a
declaration of a “change in control” by the board of directors.
Also, under the 2008 Long-Term Plan and predecessor plans, award holders (or their representatives) have
a period of time in which they may exercise vested awards after death, disability, retirement or other termination of
employment, except in the case of termination with cause. Awards do not continue to vest after termination, except
for full vesting upon death or permanent disability when provided in the related award agreements or upon a change
in control. See “Outstanding Equity Awards at Fiscal Year End” above for information as to executive officers’
outstanding stock options at October 1, 2011 (the named executive officers do not hold any stock-settled SARs).
Executives would also receive accrued and vested benefits under the 401(k) Plan and the SERP, and payment for
accrued but unused vacation, upon a termination of employment for any reason; those amounts are not included in
the table. See “Nonqualified Deferred Compensation” above for further information.
Plexus does not have employment agreements with its executive officers other than Mr. Foate. It also does
not have a formal severance plan for other types of employment termination, except in the event of a change in
control as described above. Although Plexus has a general practice of providing U.S. salaried employees with two
weeks’ severance pay for every year worked (generally to a maximum of 13 weeks) in the case of termination
without cause, actual determinations are made on a case-by-case basis. Therefore, whether and to what extent
Plexus would provide severance benefits to the named executive officers, or other executive officers, upon
termination (other than due to death, permanent disability or a change in control) would depend upon the facts and
circumstances at that time. As such, we are unable to estimate the potential payouts under other employment
termination scenarios.
Potential Benefits Table
The following table provides information as to the amounts which will be payable (a) to Mr. Foate under
his employment agreement if he is terminated by Plexus for cause or without cause, (b) to the named executive
officers in the event of death or permanent disability, and (c) to the named executive officers in the event they were
terminated without cause, or the executive terminated with good reason, in the event of a change in control. The
payments are calculated assuming a termination as of October 1, 2011, the last day of our previous fiscal year. The
table includes only benefits that would result from death or permanent disability, a termination or a change in
control, not vested benefits that are payable irrespective of a change.
47
Executive Officer;
Context of
Termination
Cash
Payments
(1)
Early Vesting
of Stock
Options (2)
Early Vesting
of RSUs
(and long-term
cash) (3)
Additional
Retirement
Benefits
(4)
Other Benefits
(5)
Tax
Gross-up (6)
Total
Mr. Foate –
Termination by
Plexus for Cause
Mr. Foate – Death or
Disability
Mr. Foate –
Termination by
Plexus without
Cause
Mr. Foate – Change
in Control
Ms. Jones – Death or
Disability
Ms. Jones – Change
in Control
Mr. Buseman –
Death or
Disability
Mr. Buseman –
Change in
Control
Mr. Kelsey – Death
or Disability
Mr. Kelsey – Change
in Control
Mr. Lim – Death or
Disability
Mr. Lim – Change in
Control
--
-- (7)
$4,800,000
4,800,000
-- (7)
1,824,000
-- (7)
1,728,000
-- (7)
1,584,000
-- (7)
1,639,618
--
--
--
--
--
--
--
--
--
--
--
--
--
$2,433,708
--
--
$2,154
2,154
--
--
$2,154
2,435,862
--
$344,337
212,176
--
5,356,513
2,433,708
344,337
212,176
932,885
--
210
--
--
7,790,221
933,095
932,885
127,924
177,334
900,600
3,962,743
1,140,875
--
24,220
--
1,165,095
1,140,875
120,761
200,748
919,670
4,110,054
1,140,875
--
22,624
--
1,163,499
1,140,875
113,264
191,091
816,133
3,845,363
932,885
932,885
--
--
44,377
44,377
--
--
977,262
2,616,880
(1) This amount represents payments relating to the executives’ base salary and VICP cash incentive awards to the
extent they would be paid after termination, based on the salary in effect at the end of fiscal 2011 and the target
VICP cash incentive payment for 2011. Under the change in control agreements, this payment equals three
years salary, as it was in effect at the time of termination, plus three times the targeted VICP compensation for
the year of termination. There are similar provisions for a termination without cause in Mr. Foate’s employment
agreement.
(2) All outstanding unvested stock options would become vested upon a change in control, and the unvested options
also would vest upon death or disability. Outstanding unvested stock options had no immediately realizable
value because the respective exercise prices were higher than $22.62, the closing price of Plexus’ common stock
on September 30, 2011, the last trading day of fiscal 2011. See “Outstanding Equity Awards at Fiscal Year End”
for further information regarding all stock options owned by the named executive officers, including those that
have already fully vested.
(3) All outstanding RSUs and long-term cash awards would become vested upon a change in control. The amount
shown represents the difference in value of the unvested RSUs and long-term cash awards between their grant
price and market price, based on Plexus’ closing stock price of $22.62 per share on September 30, 2011, the last
trading date of fiscal 2011. As previously discussed, grants of long-term cash awards were discontinued after
fiscal 2010.
48
(4) Under the change in control agreements, the Company would be required to continue payments to the 401(k)
Plan and SERP for three years at the same level during the year preceding the change in control. There are
similar provisions for a termination without cause in Mr. Foate’s employment agreement. This column
represents the total amount of those payments. The executive officers would also receive accrued and vested
benefits under the 401(k) Plan and the SERP, and payment for accrued but unused vacation, upon a termination
of employment for any reason; those amounts are not included in the table. See “Nonqualified Deferred
Compensation” for further information.
(5) These amounts include continuing payments of health and welfare benefits, accrued vacation, executive
reimbursement plan expenses, company car and other benefits for three years, as provided in the agreement.
(6) In the event of a change in control in Plexus, the change in control agreements with our executive officers
provide that we will pay them an additional benefit to reimburse the “golden parachute” excise taxes which they
would owe pursuant to Internal Revenue Code Section 280G. This column provides an estimate of these
payments, reflecting each executive’s base compensation under Section 280G. Based on Mr. Foate’s average
annual compensation and the manner in which Section 280G operates, he would have not qualified for such
payments had there been a change in control on October 1, 2011, but could be eligible to receive these payments
in future years.
(7) Excludes life or disability insurance payments from third party insurers.
COMPENSATION AND RISK
During fiscal 2011, the Company reviewed its compensation policies, programs and procedures, including
the incentives they create and mitigating factors that may reduce the likelihood of excessive risk taking, to determine
whether they present a significant risk to the Company. Management assessed risk factors associated with specific
compensation programs, as well as enterprise-level compensation risk factors, and a risk rating was assigned to each
factor. The program-specific risk factors assessed included payout potential, payout as a percentage of total
compensation, risk of manipulation, discretion to modify awards, overall plan design and market appropriateness.
Enterprise-level risk factors evaluated included the balance between performance rewarded and the sustainability of
that performance, the overall compensation mix, consistency between annual and long-term objectives as well as
metrics, achievability of performance goals without undue risk-taking, the relationship of long-term awards to the
Company’s pay philosophy, stock ownership requirements, the weighting and duration of performance metrics, the
value of severance packages, the degree to which pay programs (including retirement benefits) and/or grants may be
considered disproportionate, and the interaction of compensation plans with the Company’s financial performance
and strategy. The Compensation and Leadership Development Committee reviewed management’s evaluation
process as well as its results, and determined that both the process and conclusions reached were reasonable.
Based on this review, the Company has concluded that its compensation policies, programs and procedures
are not reasonably likely to have a material adverse effect on the Company.
49
ADVISORY VOTE ON EXECUTIVE COMPENSATION
Under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”),
publicly-traded companies like Plexus are required to hold an advisory vote of their shareholders at least once every
three years to approve the compensation of named executive officers, as disclosed in the company’s proxy statement
pursuant to the SEC's Regulation S-K Item 402; Plexus discloses those items in “Compensation Discussion and
Analysis” and “Executive Compensation” herein. Plexus currently holds these votes annually.
As described in “Compensation Discussion and Analysis” above, we design our executive compensation
programs to attract, motivate and retain the talent needed to lead a strong global organization, to drive global
financial and operational success, to create an ownership mindset and to appropriately balance Company
performance and individual contributions towards the achievement of success. A meaningful portion of our
executive officers’ compensation is at risk, reflecting the Company’s emphasis on pay that reflects performance and
drives long-term shareholder value. We believe the Company’s compensation program as a whole is well suited to
promote the Company’s objectives in both the short and long term.
Accordingly, the following resolution will be submitted to our shareholders for approval at the annual
meeting:
“RESOLVED, that the compensation paid to the Company’s named executive officers, as
disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and
Analysis, compensation tables and narrative discussion, is hereby approved.”
As an advisory vote, this proposal is not binding on the Company. However, the Compensation and
Leadership Development Committee, which is responsible for designing and administering the Company’s
executive compensation programs, values the opinions expressed by our shareholders, and will consider the outcome
of the vote when making future compensation decisions on the Company’s executive compensation programs.
The board unanimously recommends that shareholders vote FOR approval of the compensation of
the Company’s executive officers as described in this proxy statement.
CERTAIN TRANSACTIONS
Plexus has a written policy requiring that transactions, if any, between Plexus and its executive officers,
directors or employees (or related parties) must be on a basis that is fair and reasonable to the Company and in
accordance with Plexus’ Code of Conduct and Business Ethics and other policies. Plexus’ policy focuses on related
party transactions in which its insiders or their families have a significant economic interest; while the policy
requires disclosure of all transactions, it recognizes that there may be situations where Plexus has ordinary business
dealings with other large companies in which insiders may have some role but little if any stake in a particular
transaction. Although these transactions are not prohibited, any such transaction must be approved by either a
disinterested majority of the board of directors or by the Audit Committee.
Please see “Corporate Governance–Director Independence” for certain transactions and relationships
between Plexus and two directors which the board considered when determining the independence of the directors.
See also “Corporate Governance–Directors’ Compensation–Compensation of Current and Former Executive
Officers who Serve on the Board” regarding agreements with two directors. There were no other transactions in an
amount or of a nature that were reportable under applicable SEC rules in fiscal 2011.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee of
the board of directors, which was established in accordance with
Section 3(a)(58)(A) of the Securities Exchange Act, oversees and monitors the participation of Plexus’ management
and independent auditors throughout the financial reporting process and approves the hiring and retention of and
fees paid to the independent auditors. The Audit Committee also generally reviews other transactions between the
Company and interested parties which may involve a potential conflict of interest. No member of the Audit
Committee is employed or has any other material relationship with Plexus. The members are “independent
directors” as defined in Rule 5605(a)(2) of the NASD listing standards applicable to the Nasdaq Global Select Stock
50
Market and relevant SEC rules. The Plexus board of directors has adopted a written charter for the Audit
Committee, and the current version is available on Plexus’ website.
In connection with its function to oversee and monitor the financial reporting process of Plexus and in
addition to its quarterly review of interim unaudited financial statements, the Audit Committee has done the
following:
•
•
•
reviewed and discussed the audited financial statements for the fiscal year ended October 1, 2011,
with Plexus management;
discussed with PricewaterhouseCoopers LLP, Plexus’ independent auditors, those matters which
are required to be discussed by Statement on Auditing Standards No. 114, “The Auditor’s
Communication with Those Charged with Governance” and SEC Regulation S-X, Rule 2-07
“Communication with Audit Committees”; and
received the written disclosure and the letter from PricewaterhouseCoopers LLP required by the
applicable standards of the Public Company Accounting Oversight Board regarding the
independent accountant’s communications with the Audit Committee concerning independence,
and has discussed with PricewaterhouseCoopers LLP its independence.
Based on the foregoing, the Audit Committee recommended to the board of directors that the audited
financial statements be included in Plexus’ annual report on Form 10-K for the fiscal year ended October 1, 2011.
The Audit Committee further confirmed the independence of PricewaterhouseCoopers LLP.
Members of the Audit Committee: David J. Drury, Chair
Peter Kelly
AUDITORS
Stephen P. Cortinovis
Mary A. Winston
Subject to ratification by shareholders, the Audit Committee intends to reappoint the firm of
PricewaterhouseCoopers LLP as independent auditors to audit the financial statements of Plexus for fiscal 2012.
Representatives of PricewaterhouseCoopers LLP are expected to be present at the annual meeting of shareholders to
respond to questions and make a statement if they desire to do so.
Fees and Services
Fees (including reimbursements for out-of-pocket expenses) paid to PricewaterhouseCoopers LLP for
services in fiscal 2011 and 2010 were as follows:
Audit fees:
Audit-related fees:
Tax fees:
All other fees:
2011
2010
$1,017,965
--
47,475
--
$952,300
--
49,990
--
The above amounts relate to services provided in the indicated fiscal years, irrespective of when they were billed.
Audit fees related to Plexus’ annual audit and quarterly professional reviews; audit fees also included substantial
work related to the certification of Plexus’ internal controls as required by the Sarbanes-Oxley Act. Tax services
consisted primarily of tax compliance and other tax advice regarding special Plexus projects. The Audit Committee
considered the compatibility of the non-audit services provided by PricewaterhouseCoopers LLP with the
maintenance of that firm’s independence.
The Audit Committee generally approves all engagements of the independent auditor in advance, including
approval of the related fees. The Audit Committee approves an annual budget (and may from time to time approve
amendments thereto), which specifies projects and the approved levels of fees for each. To the extent that items are
not covered in the annual budget or fees exceed the budget, management must have such items approved by the
Audit Committee or, if necessary between Audit Committee meetings, by the Audit Committee chairman on behalf
of the Audit Committee. There were no services in fiscal 2011 or 2010 that were not approved in advance by the
Audit Committee under this policy.
51
* * * * *
By order of the Board of Directors
Angelo M. Ninivaggi
Senior Vice President, General Counsel,
Corporate Compliance Officer and Secretary
Neenah, Wisconsin
December 14, 2011
A copy (without exhibits) of Plexus’ annual report to the Securities and Exchange Commission on
Form 10-K for the fiscal year ended October 1, 2011, will be provided without charge to each record or
beneficial owner of shares of Plexus’ common stock as of December 8, 2011, on the written request of that
person directed to: Kristie Johnson, Executive Support Specialist, Plexus Corp., One Plexus Way, P.O. Box
156, Neenah, Wisconsin 54957-0156. See also page 1 of this proxy statement. In addition, copies are available
on Plexus’ website at www.plexus.com, following the links at “Investor Relations,” then “SEC Filings,” then
“Plexus’ SEC Reports” (or http://www.plexus.com/annualreport.php).
To save printing and mailing costs, in some cases only one notice, annual report and/or proxy statement
will be delivered to multiple holders of securities sharing an address unless Plexus has received contrary instructions
from one or more of those security holders. Upon written or oral request, we will promptly deliver a separate copy
of the annual report or proxy statement, as applicable, to any security holder at a shared address to which a single
copy of the document was delivered. You may request additional copies by written request to the address set forth
in the paragraph above or as set forth on page 1 of this proxy statement. You may also contact Ms. Johnson at that
address or at 1-920-722-3451 if you wish to receive a separate annual report and/or proxy statement in the future, or
if you share an address with another security holder and wish for delivery of only a single copy of the annual report
and/or proxy statement if you are currently receiving multiple copies.
52
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10–K
(mark one)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended October 1, 2011
OR
_____ TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 001-14423
PLEXUS CORP.
(Exact Name of Registrant as Specified in its Charter)
Wisconsin
(State or other jurisdiction of
incorporation or organization)
One Plexus Way
39-1344447
(I.R.S. Employer Identification No.)
Neenah, Wisconsin 54956
(920) 722-3451
(Address, including zip code, of principal executive offices and Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Common Stock, $.01 par value
Preferred Share Purchase Rights
Name of Each Exchange on Which Registered
The NASDAQ Global Select Market
The NASDAQ Global Select Market
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes (cid:12) No__
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes___ No (cid:12)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes (cid:12) No ____
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding
12 months (or for such shorter period that the registrant was required to submit and post such files). Yes (cid:12) No ___
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not
contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated
by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer (cid:12)
Non-accelerated filer ____
(Do not check if a smaller reporting company)
Accelerated filer
Smaller reporting company _____
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ___ No (cid:12)
As of April 2, 2011, 37,928,077 shares of common stock were outstanding, and the aggregate market value of the shares of common
stock (based upon the $34.80 closing sale price on that date, as reported on the NASDAQ Global Select Market) held by non-affiliates (excludes
349,975 shares reported as beneficially owned by directors and executive officers – does not constitute an admission as to affiliate status) was
approximately $1,307.7million.
As of November 11, 2011, there were 34,620,493 shares of common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Document
Proxy Statement for 2012 Annual
Meeting of Shareholders
Part of Form 10-K Into Which
Portions of Document are Incorporated
Part III
[THIS PAGE INTENTIONALLY LEFT BLANK]
“SAFE HARBOR” CAUTIONARY STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995:
The statements contained in this Form 10-K that provide guidance or are not historical facts (such as
statements in the future tense and statements including “believe,” “expect,” “intend,” “plan,” “anticipate,” “goal,”
“target” and similar terms and concepts), including all discussions of periods which are not yet completed, are forward-
looking statements that involve risks and uncertainties, including, but not limited to:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
the risk of customer delays, changes, cancellations or forecast inaccuracies in both ongoing and new
programs
the poor visibility of future orders, particularly in view of current economic conditions
the economic performance of the industries, sectors and customers we serve
the effects of the volume of revenue from certain sectors or programs on our margins in particular periods,
as well as varying margins across different programs
our ability to secure new customers, maintain our current customer base and deliver product on a timely
basis
the risk that our revenue and/or profits associated with customers who are acquired by third parties will be
negatively affected
the particular risks relative to new or recent customers and/or programs, which risks include customer and
other delays, start-up costs, potential inability to execute, the establishment of appropriate terms of
agreements and the lack of a track record of order volume and timing
the effects of a constrained supply environment, which has led and may lead to periods of shortages and
delays in obtaining components, or result in our inability to secure raw materials required to complete
product assemblies
raw materials and component cost fluctuations
the risks of concentration of work for certain customers and in a limited number of market sectors
our ability to successfully manage a complex business model characterized by high customer and product
mix, low volumes and demanding quality, regulatory and other requirements
the risks of operating as a multinational corporation, including adverse local developments and currency
risks
the risk that new program wins and/or customer demand may not result in the expected revenue or
profitability
the fact that customer orders may not lead to long-term relationships
the risks associated with excess and obsolete inventory, including failures by customers to meet their
related obligations
the weakness of the global economy and the continuing instability of the global financial markets and
banking system, including the potential inability of our customers or suppliers to access credit facilities
the effect of changes in the pricing and margins of products
the effect of start-up costs of new programs and facilities, including our recent, planned and potential
future expansions
the effects of increasingly extensive government regulation and third party certification requirements, and
changes in tax laws
the risk of unanticipated costs, unpaid duties and penalties related to an ongoing audit of our import
compliance by U.S. Customs and Border Protection
possible unexpected costs and operating disruptions in transitioning programs
the potential effect of fluctuations in the value of the currencies in which we transact business
the potential effect of world or local events or other events outside our control (such as drug cartel-related
violence in Mexico, terrorism, war in the Middle East, and the continuing effects of the earthquake and
tsunami in Japan and the floods in Thailand)
the challenges associated with managing information systems
the potential loss of key personnel or other personnel disruptions
the impact of increased competition, and
other risks detailed below in “Risk Factors”, otherwise herein, and in our Securities and Exchange
Commission filings.
In addition, see Risk Factors in Part I, Item 1A and Management’s Discussion and Analysis of Financial
Condition and Results of Operations in Part II, Item 7 for a further discussion of some of the factors that could affect
future results.
* * *
1
ITEM 1.
BUSINESS
Overview
PART I
Plexus Corp. and its subsidiaries (together “Plexus,” the “Company,” or “we”) participate in the Electronic
Manufacturing Services (“EMS”) industry. We deliver optimized Product Realization solutions through a unique
Product Realization Value Stream services model. This customer focused services model seamlessly integrates
innovative product conceptualization, design, commercialization, manufacturing, fulfillment and sustaining services to
deliver comprehensive end-to-end solutions for customers in the Americas (“AMER”), European (“EMEA”) and Asia-
Pacific (“APAC”) regions. Award-winning customer service is provided to over 130 branded product companies in the
Wireline/Networking, Wireless Infrastructure, Medical, Industrial/Commercial and Defense/Security/Aerospace market
sectors. Our customers’ products typically require exceptional production and supply-chain flexibility, necessitating an
optimized demand-pull-based manufacturing and supply chain solution across an integrated global platform. Many of
our customers’ products require complex configuration management and direct order fulfillment to their customers
across the globe. In such cases we provide global logistics management and after-market service and repair. Our
customers’ products may have stringent requirements for quality, reliability and regulatory compliance. We offer our
customers the ability to outsource all phases of product realization, including product specifications; development,
design and design verification; regulatory compliance support; prototyping and new product introduction;
manufacturing test equipment development; materials sourcing, procurement and supply-chain management; product
assembly/manufacturing, configuration and test; order fulfillment, logistics and service/repair.
Plexus is passionate about its goal to be the leading EMS company in the world at servicing mid-to-low
volume, higher complexity customer programs characterized by unique flexibility, technology, quality and regulatory
requirements. We have aligned our business operations, processes, workforce and financial metrics to support this
strategy.
We operate flexible manufacturing facilities and processes designed to accommodate customers with multiple
product-lines and configurations. Each of our customers are supported by a multi-disciplinary customer team and one
or more uniquely configured “focus factories” supported by a supply-chain and logistics solution specifically designed
to meet the flexibility and responsiveness required to support that customer’s fulfillment requirements.
Our go-to-market strategy is also tailored to our target market sectors and business strategy, with business
development and customer management teams dedicated to each of the five sectors we serve. These teams are
accountable to understand sector participants, technology, unique quality and regulatory requirements and longer-term
trends in these sectors. These teams also help set our strategy for growth in these sectors with a particular focus on
expanding the services and value-add that we provide customers.
In addition, our financial model is aligned with our business strategy, with our primary focus to earn a return
on invested capital (“ROIC”) 500 basis points in excess of our weighted average cost of capital (“WACC”). We review
our internal calculation of WACC annually, and at the end of fiscal 2011 reduced our estimated WACC to 12.5%.
Lower manufacturing volumes, flexibility and fulfillment requirements, our sector-based go-to-market strategy, and
complex quality and regulatory compliance requirements typically result in higher investments in inventory and selling
and administrative costs relative to our competitors, particularly those that provide EMS services for high-volume, less
complex products with less stringent requirements (such as consumer electronics). By exercising discipline to generate
a ROIC in excess of our WACC, our goal is to ensure that Plexus creates value for our shareholders.
Our customers include both industry-leading original equipment manufacturers (“OEMs”) and other
technology companies that have never manufactured products internally. As a result of our focus on serving market
sectors that rely on advanced electronics technology, our business is influenced by technological trends such as the level
and rate of development of telecommunications infrastructure, the expansion of networks and use of the Internet. In
addition, the federal Food and Drug Administration’s approval of new medical devices, defense procurement practices
and other governmental approval and regulatory processes can affect our business. Our business has also benefited
from the trend to increased outsourcing by OEMs.
We provide most of our contract manufacturing services on a turnkey basis, which means that we procure
some or all of the materials required for product assembly. We provide some services on a consignment basis, which
means that the customer supplies the necessary materials, and we provide the labor and other services required for
2
product assembly. Turnkey services require material procurement and warehousing, in addition to manufacturing, and
involve greater resource investments than consignment services. Other than certain test equipment and software used
for internal operations, we do not design or manufacture our own proprietary products.
Established in 1979 as a Wisconsin corporation, we have approximately 9,000 full-time employees, including
approximately 1,700 engineers and technologists dedicated to product development and design, test equipment
development and design, and manufacturing process development and control, all of whom operate from 24 active
facilities in 15 locations, totaling approximately 2.6 million square feet. These facilities are strategically located to
support the global supply chain, manufacturing and engineering needs of customers in our targeted market sectors.
We maintain a website at www.plexus.com. We make available through that website, free of charge, copies of
our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Reports on Form 8-K, and amendments to those
reports, as soon as reasonably practical after we electronically file those materials with, or furnish them to, the
Securities and Exchange Commission (“SEC”). Our Code of Conduct and Business Ethics is also posted on our
website. You may access these SEC reports and the Code of Conduct and Business Ethics by following the links under
“Investor Relations” at our website.
Services
Plexus offers a broad range of integrated services as more fully described below; our customers may utilize
any, or all, of the following services and tend to use more of these services as their outsourcing strategies mature:
Product development and design. We provide comprehensive conceptual design and value-engineering
services. These product design services include program management, feasibility studies, product conceptualization,
specification development for product features and functionality, circuit design (including digital, microprocessor,
power, analog, radio frequency (RF), optical and micro-electronics), field programmable gate array design (FPGA),
printed circuit board layout, embedded software design, mechanical design (including thermal analysis, fluidics,
robotics, plastic components, sheet metal enclosures, and castings), development of test specifications and product
verification testing. We invest in the latest design automation tools and technology. We also provide comprehensive
value-engineering services for our customers that extend the life cycles of their products. These value-added services
include engineering change-order management, cost reduction redesign, component obsolescence management, product
feature expansion, test enhancement and component re-sourcing.
Prototyping and new product introduction services. We provide assembly of prototype products within our
operating sites. We supplement our prototype assembly services with other value-added services, including materials
management, analysis of the manufacturability and testability of a design, test implementation and pilot production runs
leading to volume production. These services link our engineering and our customers’ engineering to our volume
manufacturing facilities. These links facilitate an efficient transition from engineering to manufacturing. We believe
that these services provide significant value to our customers by accelerating their products’ time-to-market schedule,
reducing change activity and providing a robust product set.
Test equipment development. Enhanced product functionality has led to increasingly complex components and
assembly techniques; consequently, there is a need to design and assemble increasingly complex in-circuit and
functional test equipment for electronic products and assemblies. Our internal development of this test equipment
allows us to rapidly specify, implement, maintain and enhance test solutions that efficiently test printed circuit
assemblies, subassemblies, system assemblies and finished products. We also develop specialized equipment that
allows us to environmentally stress-test products during functional testing to assure reliability. We believe that the
internal design and production of test equipment is an important factor in our ability to provide technology-driven
products of consistently high quality.
Material sourcing and procurement. We provide contract manufacturing services on either a “turnkey” basis,
which means we source and procure the materials required for product assembly, or on a “consignment” basis, which
means the customer supplies the materials necessary for product assembly. Turnkey services include materials
procurement and warehousing in addition to manufacturing and involve greater resource investment and potential
inventory risk than consignment services. Substantially all of our manufacturing services are currently on a turnkey
basis.
Agile manufacturing services. We have the manufacturing services expertise required to assemble very
complex electronic products that utilize multiple printed circuit boards and subassemblies. These manufacturing
services, which we endeavor to provide on an agile and rapid basis, are typically configured to fulfill unique end-
3
customer requirements and many are shipped directly to our customers’ end users. We provide a range of higher level
assembly services to our customers; these products typically fall into one of the following categories in our assembly
spectrum:
•
•
•
Printed circuit board assembly – a printed circuit board (“PCB”) populated with electronic components.
Basic assembly – a sub-assembly that includes PCBs and other components.
System integration – a finished product or sub-system assembly that includes more complex components
such as PCB’s, basic assemblies, custom engineered components, displays, optics, metering and
measurement or thermal management.
• Mechatronic integration – more complex system integration that combines electronic controls with
mechanical systems and processes such as motion control, robotics, drive systems, fluidics, hydraulics or
pneumatics.
System integration and mechatronic integration products can be very large and could include products such as
kiosks, finished medical products and complex electro-mechanical assemblies. These products often combine many of
the other integrated services we provide and may require more unique facility configurations as well as supply chain
solutions than we typically employ.
Fulfillment and logistic services. We provide fulfillment and logistic services to many of our customers.
Direct Order Fulfillment (“DOF”) entails receiving orders from our customers that provide the final specifications
required by the end-customer. We then Build to Order (“BTO”) and Configure to Order (“CTO”) and deliver the
product directly to the end-customer. The DOF process relies on Enterprise Resource Planning (“ERP”) systems
integrated with those of our customers to manage the overall supply chain from parts procurement through
manufacturing and logistics.
After-market support. We provide service support for manufactured products requiring repair and/or upgrades,
which may or may not be under a customer's warranty. In support of certain customers, we provide these services for
some products which we did not originally manufacture. We provide in and out bound logistics required to support
fulfillment and service.
Regulatory requirements. In addition, we have developed certain processes and tools to meet industry-specific
requirements. Among these are the tools and processes to assemble finished medical devices that meet U.S. Food and
Drug Administration Quality Systems Regulation requirements and similar regulatory requirements in other countries.
Our manufacturing and engineering facilities are ISO certified to 9001:2008 standards. We have additional
certifications and/or registrations held by certain of our facilities in the following regions:
Environmental Standard ISO – 14001 – AMER, APAC, EMEA
Environmental Standard OSHAS 18001 – APAC, EMEA
21 CFR Part 820 (FDA) (Medical) – AMER, APAC
Telecommunications Standard TL 9000 – AMER, APAC
• Medical Standard ISO 13485:2003 – AMER, APAC, EMEA
•
•
•
•
• Aerospace Standard AS9100 – AMER, APAC, EMEA
• NADCAP certification – AMER, APAC
•
FAR 145 certification (FAA repair station) – AMER
•
ITAR (International Traffic and Arms Regulation) self-declaration – AMER
• ANSI/ESD (Electrostatic Discharge Control Program) S20.20 – AMER, APAC
• ATEX/IECEx certification – APAC, EMEA
•
•
SFDA (Medical) – APAC
JMGP accreditation – APAC, AMER, EMEA
Customers and Market Sectors Served
We provide services to a wide variety of customers, ranging from large multinational companies to smaller
emerging technology companies. During fiscal 2011, we served approximately 130 customers. For many customers,
we provide design and production capabilities, thereby allowing these customers to concentrate on research and
development, concept development, distribution, marketing and sales. This helps accelerate their time to market,
reduce their investment in engineering and manufacturing capacity and optimize total product cost.
4
Juniper Networks, Inc. (“Juniper”) accounted for 17 percent of our net sales in fiscal 2011, 16 percent in fiscal
2010 and 20 percent in fiscal 2009. No other customer accounted for 10 percent or more of our net sales in fiscal 2011,
2010 or 2009. The loss of any of our major customers could have a significant negative impact on our financial results.
Many of our large customers contract with us through independent multiple divisions, subsidiaries, production
facilities or locations. We believe that in most cases our sales to any one such division, subsidiary, facility or location
are not dependent on sales to others.
The distribution of our net sales by market sectors is shown in the following table:
Industry
Wireline/Networking
Wireless Infrastructure
Medical
Industrial/Commercial
Defense/Security/Aerospace
October 1,
2011
39%
7%
21%
24%
9%
100%
Fiscal years ended
October 2,
2010
43%
12%
20%
18%
7%
100%
October 3,
2009
44%
11%
22%
13%
10%
100%
Although our current business development focus is based on the end-market sectors noted above, we evaluate
our financial performance and allocate our resources on a geographic basis (see Note 13 in Notes to Consolidated
Financial Statements regarding our reportable segments). Our array of services for customers in each of these end
markets is essentially the same and we do not dedicate operational equipment, personnel, facilities or other resources to
particular end markets, nor do we internally track our costs and resources on this basis.
Materials and Suppliers
We typically purchase raw materials, including printed circuit boards and electronic components, from
manufacturers and distributors. In addition, under certain circumstances, we will purchase components from brokers,
customers or competitors. The key electronic components we purchase include specialized components such as
application-specific integrated circuits, semiconductors, interconnect products, electronic subassemblies (including
memory modules, power supply modules and cable and wire harnesses), inductors, resistors and capacitors. Along with
these electronic components, we also purchase components used in manufacturing and higher-level assembly. These
components include molded/formed plastics, sheet metal fabrications, aluminum extrusions, robotics, motors, vision
sensors, motion/actuation, fluidics, displays, die castings and various other hardware and fastener components. All of
these components range from standard to highly customized and vary widely in terms of market availability and price.
Occasional component shortages and subsequent allocations by suppliers are an inherent risk of the electronics
industry. Components shortages have been an issue for the industry and for us in fiscal 2011 and fiscal 2010; these
shortages are discussed more fully in “Risk Factors” in Part I, Item 1A herein. We actively manage our business to try
to minimize our exposure to material and component shortages. We have a corporate sourcing and procurement
organization whose primary purpose is to develop supply-chain sources and create strong supplier alliances to ensure,
as much as possible, a steady flow of components at competitive prices. We also have a global expediting and
escalation process that we believe provides Plexus the ability to effectively track and manage component shortages.
Since we design products and therefore can influence the selection of components used in some new products,
component manufacturers often provide us with priority access to materials and components, even during times of
shortages. We have undertaken a series of initiatives, including the use of advanced supply chain solutions to improve
continuity of supply and supply chain flexibility.
New Business Development
Our new business development is organized around end markets, or market sectors. Each market sector has a
team of dedicated resources including a business development vice president, a customer management vice president,
sales account executives, customer directors, customer managers, engineering and manufacturing subject matter
experts, and market sector analysts. Our sales and marketing efforts focus on both targeting new customers and
expanding business with existing customers. We believe our ability to provide a full range of product realization
services is a marketing advantage; our sector teams participate in marketing through direct customer contact and
participation in industry events and seminars.
5
Competition
The market for the services we provide is highly competitive. We compete primarily on the basis of meeting
the unique needs of our customers, and providing flexible solutions, timely order fulfillment and strong engineering,
testing and production capabilities. We have many competitors in the EMS industry. Larger and more geographically
diverse competitors have substantially more resources than we do. Other, smaller competitors primarily compete only
in specific sectors, typically within limited geographical areas. We also compete against companies that design or
manufacture items in-house. In addition, we compete against foreign, low-labor cost manufacturers. This foreign, low-
labor cost competition tends to focus on commodity and consumer-related products, which is not our focus.
Intellectual Property
We own various service marks that we use in our business; these marks are registered in the trademark offices
of the United States and other countries. Although we own certain patents, they are not currently material to our
business. We do not have any material copyrights.
Information Technology
Our integrated ERP platform serves all of our manufacturing sites. This ERP platform augments our other
management information systems and includes various software systems to enhance and standardize our ability to
translate information from multiple production facilities into operational and financial information as well as create a
consistent set of core business applications at our facilities worldwide. We believe the related software licenses are of a
general commercial character on terms customary for these types of agreements.
Environmental Compliance
We are subject to a variety of environmental regulations relating to air emission standards and the use, storage,
discharge and disposal of hazardous chemicals used during our manufacturing process. We believe that we are in
compliance with all federal, state and foreign environmental laws and do not anticipate any significant expenditures in
maintaining our compliance; however, there can be no assurance that violations will not occur which could have a
material adverse effect on our financial results.
Employees
Our employees are one of our primary strengths, and we make a considerable effort to maintain a well-
qualified and motivated work force. We have been able to offer enhanced career opportunities to many of our
employees. Our human resources department identifies career objectives and monitors specific skill developments for
employees with potential for advancement. We invest at all levels of the organization to ensure that employees are well
trained. We have a policy of involvement and consultation with employees at every facility and strive for continuous
improvement at all levels.
We employ approximately 9,000 full-time employees. Given the quick response times required by our
customers, we seek to maintain flexibility to scale our operations as necessary to maximize efficiency. To do so, we
use skilled temporary labor in addition to our full-time employees. In the United Kingdom, approximately 140 of our
employees are covered by union agreements. These union agreements are typically renewed at the beginning of each
year, although in a few cases these agreements may last two or more years. Our employees in the United States,
Romania, Germany, Malaysia, China and Mexico are not covered by union agreements. We have no history of labor
disputes at any of our facilities. We believe that our employee relationships are good.
6
ITEM 1A.
RISK FACTORS
Our net sales and operating results may vary significantly from period to period.
Our quarterly and annual results may vary significantly depending on various factors, many of which are
beyond our control. These factors include:
•
•
•
•
•
•
•
•
•
•
•
•
the volume and timing of customer demand relative to our capacity
the typical short life-cycle of our customers’ products
customers’ operating results and business conditions
changes in our, and our customers’, sales mix
varying gross margins among different programs
failures of our customers to pay amounts due to us
volatility of customer demand for certain programs and sectors
challenges associated with the engagement of new customers or additional work from existing customers
the timing of our expenditures in anticipation of future orders
our effectiveness in planning production and managing inventory, fixed assets and manufacturing
processes
changes in cost and availability of labor and components and
changes in U.S. and global economic and political conditions and world events.
The majority of our net sales come from a relatively small number of customers and a limited number of market
sectors; if we lose any of these customers or if there are problems in those market sectors, our net sales and
operating results could decline significantly.
Net sales to our ten largest customers have represented a majority of our net sales in recent periods. Our ten
largest customers accounted for approximately 55 percent of our net sales for the fiscal year ended October 1, 2011, and
57 percent of our net sales for the fiscal year ended October 2, 2010. For the fiscal year ended October 1, 2011, there
was one customer that represented 10 percent or more of our net sales. Our principal customers may vary from period
to period, and our principal customers may not continue to purchase services from us at current levels, or at all.
Especially given our discrete number of customers, significant reductions in net sales to any of these customers, the loss
of major customers or our failure to make appropriate choices as to the customers we serve could seriously harm our
business.
In addition, we focus our net sales to customers in only a few market sectors, and we endeavor to carefully
choose those sectors. Each of these sectors is subject to macroeconomic conditions as well as trends and conditions that
are sector specific. Shifts in the performance of a sector served by Plexus, as well as the economic and business
conditions that affect the sector, or our failure to choose appropriate sectors can particularly impact Plexus. For
instance, sales in the medical sector are substantially affected by trends in that industry, such as government
reimbursement rates and uncertainties relating to the financial health of, and pending changes in the structure of, the
U.S. health care sector generally. Further, potential reductions in U.S. defense spending could substantially affect our
opportunities in our Defense/Security/Aerospace sector. Any weakness in the market sectors in which our customers
are concentrated could affect our business and results of operations.
In the current economic environment, we are seeing increased merger and acquisition activity that has already
affected, and may continue to impact, our customers. Specifically, two of our significant customers were acquired in the
first quarter of fiscal 2010 and substantially disengaged in fiscal 2011.
Instability in the global credit markets and continuing economic weakness may adversely affect our earnings,
liquidity and financial condition.
Global financial and credit markets have been, and continue to be, unstable and unpredictable. Worldwide
economic conditions have been weak and may deteriorate further. For example, substantial credit issues have arisen in
the European Union as a result of the sovereign debt crisis and other factors affecting economies worldwide. The
instability of the markets and weakness of the economy could continue to affect the demand for our customers'
products, the amount, timing and stability of their product demand from us, the financial strength of our customers and
suppliers, their ability or willingness to do business with us, our willingness to do business with them, and/or our
suppliers' and customers' ability to fulfill their obligations to us and/or the ability of us, our customers or our suppliers
to obtain credit. Further, global credit market and economic challenges may affect the ability of counterparties to our
agreements, including our credit agreement and interest rate swap agreements, to perform their obligations under those
agreements. These factors could adversely affect our operations, earnings and financial condition.
7
We may experience raw material and component parts shortages and price fluctuations.
We do not have any long-term supply agreements. At various times, including fiscal 2011, we have
experienced raw material and component parts shortages due to supplier capacity constraints or their failure to deliver.
Part shortages were prevalent during portions of fiscal 2011 and fiscal 2010 across the EMS industry, based on the
relatively quick recovery of the demand for technological equipment and the resulting capacity constraints at suppliers;
shortages have continued into, and are expected to persist in the future. Such constraints can also be caused by world
events, such as government policies, terrorism, armed conflict and economic recession. In addition, the March 2011
earthquake and tsunami in Japan disrupted the global supply chain for certain components manufactured in Japan that
are incorporated in the products we manufacture and the flooding in Thailand during our fiscal fourth quarter of 2011
had a similar impact. While we have yet to experience material adverse effects resulting from these events, the
magnitude and duration of the impact on us resulting from these events are not yet known. We rely on a limited
number of suppliers for many of the raw materials and component parts used in the assembly process and, in some
cases, may be required to use suppliers that are the sole provider of a particular raw material or component part. Such
suppliers may encounter quality problems or financial difficulties which could preclude them from delivering raw
materials or component parts timely or at all. Some suppliers have ceased doing business due to economic or other
circumstances, and more may do so in the future. Supply shortages and delays in deliveries of raw materials or
component parts have in some cases resulted in delayed production of assemblies, which have increased our inventory
levels and adversely affected our operating results in certain periods. An inability to obtain sufficient inventory on a
timely basis could also harm relationships with our customers.
In addition, raw material and component parts that are delivered to us may not meet our specifications or other
quality criteria. Certain materials provided to us may be counterfeit or violate the intellectual property rights of others.
The need to obtain replacement materials and parts may negatively affect our manufacturing operations. The
inadvertent use of any such parts or products may also give rise to liability claims.
Raw material and component part supply shortages and delays in deliveries can also result in increased pricing.
While many of our customers permit quarterly or other periodic adjustments to pricing based on changes in raw
material or component part prices and other factors, we typically bear the risk of price increases that occur between any
such repricing or, if such repricing is not permitted, during the balance of the term of the particular customer contract.
Conversely, raw material and component part price reductions have contributed positively to our operating results in the
past. Our inability to continue to benefit from such reductions in the future could adversely affect our operating results.
Plexus is a multinational corporation and operating in multiple countries exposes us to increased risks, including
adverse local developments and currency risks.
We have operations in many countries; operations outside of the U.S. in the aggregate now represent a
majority of our revenues. We also purchase a significant number of components manufactured in various countries.
These international aspects of our operations, which are likely to increase over time, subject us to the following risks
that could materially impact our operations and operating results:
•
•
•
•
•
•
•
•
economic, political or civil instability, including significant drug cartel-related violence in Juarez, Mexico
transportation delays or interruptions
exchange rate fluctuations
difficulties in staffing and managing personnel in diverse cultures
compliance with laws, such as the U.S. Foreign Corrupt Practices Act and the U.K. Anti-Bribery Act,
applicable to companies with global operations
significant natural disasters
the effects of international political developments and
regulatory requirements and potential changes to those requirements.
We continue to monitor our risk associated with foreign currency translation and have entered into limited
forward contracts to address this risk. As our international operations expand, our failure to adequately hedge foreign
currency transactions and/or the currency exposures associated with assets and liabilities denominated in non-functional
currencies could adversely affect our consolidated financial condition, results of operations and cash flows.
In addition, changes in policies by the U.S. or other governments could negatively affect our operating results
due to changes in duties, tariffs, taxes or limitations on currency or fund transfers. For example, our facility in Mexico
operates under the Mexican Maquiladora program, which provides for reduced tariffs and eased import regulations; we
could be adversely affected by changes in that program or our failure to comply with its requirements.
8
Our customers do not make long-term commitments and may cancel or change their production requirements.
EMS companies must respond quickly to the requirements of their customers. We generally do not obtain
firm, long-term purchase commitments from our customers, and frequently do not have visibility as to their future
demand. Customers also cancel requirements, change production quantities, delay production or revise their forecasts
for a number of reasons that are beyond our control. The success of our customers’ products in the market and the
strength of the markets themselves affect our business. Cancellations, reductions or delays by a significant customer, or
by a group of customers, could seriously harm our operating results and negatively affect our working capital levels.
Such cancellations, reductions or delays have occurred and may continue to occur.
In addition, we make significant decisions based on our estimates of customers’ requirements, including
determining the levels of business that we will seek and accept, production schedules, component procurement
commitments, working capital management, facility requirements, personnel needs and other resource requirements.
The short-term nature of our customers’ commitments and the possibility of rapid changes in demand for their products
reduce our ability to accurately estimate the future requirements of those customers. Since many of our operating
expenses are fixed, a reduction in customer demand can harm our operating results. Moreover, since our margins vary
across customers and specific programs, a reduction in demand with higher margin customers or programs will have a
more significant adverse effect on our operating results.
Rapid increases in customer requirements may stress personnel and other capacity resources. We may not
have sufficient resources at any given time to meet all of our customers’ demands or to meet the requirements of a
specific program.
Defense contracting can be subject to extensive procurement processes and other factors that can affect the
timing and duration of contracts as well as product demand. For example, defense procurement is subject to continued
Congressional appropriations for these programs, as well as continued determinations by the Department of Defense
regarding whether to continue them. Products for the military are also subject to continued testing of their operations in
the field and changing military operational needs, which could affect the possibility and timing of future orders. While
those arrangements may result in a significant amount of net sales in a short period of time, they may or may not result
in continuing long-term programs or relationships. Even in the case of continuing long-term programs or relationships,
orders in the defense sector can be episodic, can vary significantly from period to period, and are subject to termination.
We have a complex business model, and our failure to properly manage that model could affect our operations
and financial results.
Our business model focuses on products and services in the mid-to-lower-volume, higher-mix segment of the
EMS market. Our customers’ products typically require significant production and supply-chain flexibility,
necessitating optimized demand-pull-based manufacturing and supply chain solutions across an integrated global
platform. The products we manufacture are also typically complex, highly regulated, and require complicated
configuration management and direct order fulfillment capabilities to global end customers. Relative to many of our
competitors that manufacture more standardized products with larger production runs, our business model requires a
greater degree of attention and resources, including working capital, management and technical personnel, and the
development and maintenance of systems and procedures to manage diverse manufacturing, regulatory, and service
requirements. If we fail to effectively manage our business model, we may lose customer confidence and our reputation
may suffer. The Company’s reputation is the foundation of our relationships with key stakeholders. If we are unable to
effectively manage real or perceived issues, which could negatively impact sentiments toward the Company, our ability
to maintain or expand business opportunities could be impaired and our financial results could suffer on a going-
forward basis.
In addition, the complexity of our service model often results in complex and challenging contractual
obligations as well as commitments from us to our customers. If we fail to meet those obligations, it could affect our
reputation and our ability to obtain future business, as well as impair our ability to enforce our rights (including those
related to payment) under those contracts.
Challenges associated with the engagement of new customers or programs could affect our operations and
financial results.
Our engagement with new customers, as well as the addition of new work for existing customers, can present
challenges in addition to opportunities. We must initially determine whether it would be in our interests from a
business perspective to pursue a particular potential new customer or program, including evaluating the customer’s
and/or program’s fit with our value proposition as well as their end market success. If we make the decision to proceed,
we need to ensure that our terms of engagement, including our pricing and other contractual provisions, appropriately
9
reflect the anticipated costs, risks, and rewards of an opportunity. The failure to make prudent engagement decisions
and/or to establish appropriate terms of engagement could adversely affect our profitability and margins.
Also, there are inherent risks associated with the timing and ultimate realization of a new program’s
anticipated revenue; these factors can sometimes extend for a significant period. Some new programs require us to
devote significant capital and personnel resources to new technologies and competencies. We may not meet customer
expectations, which could damage our relationships with the affected customers and impact our ability to deliver
conforming product on a timely basis. Further, the success of new programs may depend heavily on factors such as
product reliability, market acceptance, regulatory approvals and/or economic conditions. The failure of a new program
to meet expectations on these factors, or our inability to effectively execute on a new program’s requirements, could
result in lost financial opportunities and adversely affect our results of operations.
Our manufacturing services involve inventory risk.
Most of our contract manufacturing services are provided on a turnkey basis, under which we purchase some,
or all, of the required raw materials and component parts. Excess or obsolete inventory, or other failures to manage our
working capital, could adversely affect our operating results, including our return on invested capital.
In our turnkey operations, we order materials and components based on customer forecasts and/or orders.
Suppliers may require us to purchase materials and components in minimum order quantities that may exceed customer
requirements. A customer’s cancellation, delay or reduction of forecasts or orders can also result in excess inventory or
additional expense to us. Engineering changes by a customer may result in obsolete raw materials or component parts.
While we attempt to cancel, return or otherwise mitigate excess and obsolete materials and components and require
customers to reimburse us for excess and obsolete inventory, we may not actually be reimbursed timely or be able to
collect on these obligations.
In addition, we provide managed inventory programs for some of our customers under which we hold and
manage finished goods or work-in-process inventories. These managed inventory programs result in higher inventory
levels, further reduce our inventory turns and increase our financial exposure with such customers. Even though our
customers generally have contractual obligations to purchase such inventories from us, we remain subject to the risk of
enforcing those obligations.
Failure to manage periods of growth or contraction, if any, may seriously harm our business.
Our industry frequently sees periods of expansion and contraction to adjust to customers’ needs and market
demands. Plexus regularly contends with these issues and must carefully manage its business to meet customer and
market requirements. If we fail to manage these growth and contraction decisions effectively, we can find ourselves
with either excess or insufficient resources and our business, as well as our profitability, may suffer.
Expansion can inherently include additional costs and start-up inefficiencies. We expect to open a new
manufacturing facility in Malaysia (Penang) during the first quarter of fiscal 2012 and anticipate completing a new
manufacturing facility in China (Xiamen) in the second half of fiscal 2012. We have also announced our intention to
construct a facility in Romania (Oradea) to replace a leased facility and further expand employment in Germany
(Darmstadt). If we are unable to effectively manage our currently anticipated growth, or related anticipated net sales
are not realized, our operating results could be adversely affected. In addition, we may expand our operations in new
geographical areas where currently we do not operate. Other risks of current or future expansion include:
•
•
•
•
•
•
•
the inability to successfully integrate additional facilities or incremental capacity and to realize anticipated
synergies, economies of scale or other value
additional fixed costs which may not be fully absorbed by new business
a reduction of our return on invested capital, including as a result of excess inventory or excess capacity at
new facilities
difficulties in the timing of expansions, including delays in the implementation of construction and
manufacturing plans
diversion of management’s attention from other business areas during the planning and
implementation of expansions
strain placed on our operational, financial and other systems and resources and
inability to locate sufficient customers, employees or management talent to support the expansion.
Periods of contraction or reduced net sales, or other factors affecting particular sites, create other challenges.
We must determine whether facilities remain viable, whether staffing levels need to be reduced, and how to respond to
changing levels of customer demand. While maintaining multiple facilities or higher levels of employment entail short-
10
term costs, reductions in facilities and/or employment could impair our ability to respond to market improvements or to
maintain customer relationships. Our decisions to reduce costs and capacity can affect our short-term and long-term
results. When we make decisions to reduce capacity or to close facilities, we frequently incur restructuring charges.
In addition, to meet our customers’ needs, or to achieve increased efficiencies, we sometimes require
additional capacity in one location while reducing capacity in another. For example, in early fiscal 2009 we ceased
operations at our former Ayer, Massachusetts facility and reduced headcount in Juarez, Mexico and other North
American facilities, even though we continued to expand in other areas. Since customers’ needs and market conditions
can vary and change rapidly, we may find ourselves in a situation where we simultaneously experience the effects of
contraction in one location and expansion in another location, such as those noted above.
Changes in tax laws, and potential tax disputes, could affect our results.
The Company has been granted tax holidays for its Malaysian and Xiamen, China subsidiaries. These tax
holidays expire in 2024 and 2013, respectively, and are subject to certain conditions with which the Company expects
to comply and would risk adverse tax consequences if we do not. The Malaysian Investment Development Authority
granted approval to extend our tax holiday in Malaysia for a period of five years through December 31, 2024, subject to
certain conditions. Mexico adopted tax reform legislation that took effect on January 1, 2010, and provides for a
temporary increase in its income tax and value added tax rates from 28% to 30% and 15% to 16%, respectively, along
with certain other changes. While we continue to analyze the impact of this legislation, we do not currently believe it
will have a material impact on our effective income tax rate in future periods. Given the scope of our international
operations and our international tax arrangements, proposed changes to the manner in which U.S. based multinational
companies are taxed in the U.S. could have a material impact on our operating results and competitiveness.
We may experience negative or unforeseen tax consequences.
The Company reviews the probability of the realization of our net deferred tax assets each period based on
forecasts of taxable income in both the U.S. and foreign jurisdictions. This review uses historical results, projected
future operating results based upon approved business plans, eligible carryforward periods, tax planning opportunities
and other relevant considerations. Adverse changes in the profitability and financial outlook in the U.S. or foreign
jurisdictions may require the creation of a valuation allowance to reduce our net deferred tax assets. Such changes
could result in material non-cash expenses in the period in which the changes are made.
We and our customers are subject to increasingly extensive government regulations and third party certification
requirements.
We are subject to extensive government regulation relating to the products we design and manufacture and as
to how we conduct our business. These regulations affect the sectors we serve and every aspect of our, and our
customers', business, including our labor, employment, workplace safety, environmental and import/export practices, as
well as many other facets of our operations. In addition, as a result of customer requirements and the need to enhance
our competitive position, we seek to obtain and maintain various certifications from third parties relating to our quality
systems and standards. The regulatory climate in the U.S. and other countries has become increasingly complex and
regulatory activity has increased in recent periods, which can affect both our operations as well as the opportunities in
the markets we serve due to the effects on our customers and their end users. The regulatory climate can itself affect
the demand for our services, and our failure to comply with regulations and certifications could seriously affect our
operations, customer relationships, reputation and profitability.
Our medical sector business is subject to substantial government regulation, primarily from the federal Food
and Drug Administration (“FDA”) and similar regulatory bodies in other countries. We must comply with statutes and
regulations covering the design, development, testing, manufacturing and labeling of medical devices and the reporting
of certain information regarding their safety. Failure to comply with these regulations can result in, among other things,
fines, injunctions, civil penalties, criminal prosecution, recall or seizure of devices, or total or partial suspension of
production. The FDA also has the authority to require repair or replacement of equipment, or the refund of the cost of a
device manufactured or distributed by our customers. Violations may lead to penalties or shutdowns of a program or a
facility. Failure or noncompliance could have an adverse effect on our reputation as well as our results of operations.
In addition, government reimbursement rates and other regulations, as well as the financial health of health care
providers, and pending changes in how health care in the U.S. is structured and how medical devices are taxed, could
affect the willingness and ability of end customers to purchase the products of our customers in the medical sector.
We also design and manufacture products for customers in the defense and aerospace industries. Companies
that design and manufacture products for these industries face significant regulation by the Department of Defense,
Department of State, Federal Aviation Authority, and other governmental agencies in the U.S. as well as in other
11
countries. Failure to comply with related requirements and regulations, including the International Traffic in Arms
Regulation, could result in fines, penalties, injunctions, criminal prosecution, and an inability to participate in contracts
with the government or their contractors, any of which could materially affect our financial condition and results of
operations.
The end markets for most of our customers in the wireline/networking and wireless infrastructure sectors are
subject to regulation by the Federal Communications Commission, as well as by various governmental agencies. The
policies of these agencies can directly affect both the near-term and long-term demand and profitability of the sector
and therefore directly impact the demand for products that we manufacture.
At the corporate level, as a publicly-held company, we are subject to increasingly stringent laws, regulation
and other requirements, including the Dodd-Frank Wall Street Reform and Consumer Protection Act, affecting, among
other areas, our accounting, corporate governance practices and securities disclosures. Our failure to comply with these
requirements could materially affect our financial condition and results of operations.
Governments worldwide are becoming increasingly aggressive in enforcing and adopting anti-corruption laws.
The U.S. Foreign Corrupt Practices Act, the U.K. Anti-Bribery Act, and the China Anti-Unfair Competition Law,
among others, apply to us and our operations. These requirements result in compliance costs, and the failure to comply
with these requirements could result in substantial further costs to us as well as affect our reputation.
The growth and changing requirements of our business are imposing a heightened level of activity involving
import and export compliance requirements on us. We were notified in April 2009 by U.S. Customs and Border
Protection (“CBP”) of its intention to conduct a customary Focused Assessment of our import activities during fiscal
2008 and of our processes and procedures to comply with U.S. Customs laws and regulations. During September 2010
the Company reported errors relating to import trade activity from July 2004 to the date of Plexus’ report. CBP has
indicated that on-site fieldwork for the audit was completed as of June 2011 and the Company is currently awaiting
final determination of CBP duties and fees. Plexus has agreed that it will implement improved processes and
procedures and review these corrective measures with CBP. We recorded an accrual in other current accrued liabilities
in the first quarter of fiscal 2010 when the amount became estimable and probable, which was not material to the
financial statements. At this time, we do not believe that any deficiencies in processes or controls or unanticipated
costs, unpaid duties or penalties associated with this matter will have a material adverse effect on Plexus or the
Company’s consolidated financial position, results of operations or cash flows.
Our operations are subject to federal, state, and local environmental regulations pertaining to air, water, and
hazardous waste and the health and safety of our workplace. If we fail to comply with present and future regulations,
we could be subject to liabilities or the suspension of business. These regulations could restrict our ability to expand
our facilities or require us to acquire costly equipment or incur significant expense associated with the ongoing
operation of our business or remediation efforts.
Our customers are also required to comply with various government regulations, legal requirements, and
certification requirements, including many of the industry-specific regulations discussed above. Our customers' failure
to comply could affect their businesses, which in turn would affect our sales to them. In addition, if our customers are
required by regulation or other requirements to make changes in their product lines, these changes could significantly
disrupt particular programs for these customers and create inefficiencies in our business.
If we are unable to maintain our engineering, technological and manufacturing process expertise, our results
may be adversely affected.
The markets for our manufacturing, engineering and other services are characterized by rapidly changing
technology and evolving process developments. Our internal processes are also subject to these factors. The continued
success of our business will depend upon our continued ability to:
retain our qualified engineering and technical personnel, and attract additional such personnel
•
• maintain and enhance our technological capabilities
•
•
•
•
choose and maintain appropriate technological and service capabilities
successfully manage the implementation and execution of information systems
develop and market manufacturing services which meet changing customer needs and
successfully anticipate, or respond to, technological changes on a cost-effective and timely basis.
Although we believe that our operations utilize the assembly and testing technologies, equipment and
processes that are currently required by our customers, we cannot be certain that we will develop the capabilities
required by our customers in the future. The emergence of new technology, industry standards or customer
requirements may render our equipment, inventory or processes obsolete or noncompetitive. In addition, we may have
12
to acquire new design, assembly and testing technologies and equipment to remain competitive. The acquisition and
implementation of new technologies and equipment may require significant expense or capital investment that could
reduce our liquidity and negatively affect our operating results. Our failure to anticipate and adapt to our customers’
changing technological needs and requirements could have an adverse effect on our business.
An inability to successfully manage the procurement, development, implementation, or execution of information
systems, or to adequately maintain these systems and their security, may adversely affect our business.
As a global company with a complex business model, we heavily depend on our information systems to
support our customers’ requirements and to successfully manage our business. Any inability to successfully manage
the procurement, development, implementation, execution or maintenance of our information systems, including
matters related to system security, reliability, performance and access, as well as any inability of these systems to fulfill
their intended purpose within our business, could have an adverse effect on our business. In addition, our failure to
maintain adequate data security for both our and our customers’ financial, product and other information, could
substantially affect our business, compliance with regulations and reputation in the industry.
Start-up costs and inefficiencies related to new, recent or transferred programs can adversely affect our
operating results.
The management of labor and production capacity in connection with the establishment of new or recent
programs and customer relationships, such as our arrangements with The Coca-Cola Company, and the need to estimate
required resources in advance of production can adversely affect our gross and operating margins. These factors are
particularly evident in the early stages of the life-cycle of new products and programs, which lack a track record of
order volume and timing, as well as in program transfers between facilities. We are managing a number of new
programs at any given time. Consequently, we are exposed to these factors. In addition, if any of these programs or
customer relationships were terminated, our operating results could worsen, particularly in the short term.
The effects of these start-up costs and inefficiencies can also occur when we transfer programs between
locations. We conduct these transfers on a regular basis to address factors such as meeting customer needs, seeking
long-term efficiencies or responding to market conditions, as well as due to facility openings and closures. Although
we try to minimize the potential losses arising from transitioning customer programs between Plexus facilities, there are
inherent risks that such transitions can result in operational inefficiencies and the disruption of programs and customer
relationships.
There may be problems with the products we design or manufacture that could result in liability claims against
us and reduced demand for our services.
The products that we design and/or manufacture may be subject to liability or claims in the event that defects
are discovered or alleged. We design and manufacture products to our customers’ specifications, many of which are
highly complex. Despite our quality control and quality assurance efforts, problems may occur, or may be alleged, in
the design and/or manufacturing of these products. Problems in the products we manufacture, whether real or alleged,
whether caused by faulty customer specifications or in the design or manufacturing processes or by a component defect,
and whether or not we are responsible, may result in delayed shipments to customers and/or reduced or cancelled
customer orders. If these problems were to occur in large quantities or too frequently, our business reputation may also
be tarnished. In addition, problems may result in liability claims against us, whether or not we are responsible. These
potential claims may include damages for the recall of a product and/or injury to person or property.
Even if customers or third parties, such as component suppliers, are responsible for defects, they may not, or
may not be able to, assume responsibility for any such costs or required payments to us. While we seek to insure
against many of these risks, insurance coverage may be either inadequate or unavailable, either in general or for
particular types of products. We occasionally incur costs defending claims, and any such disputes could affect our
business relationships.
Intellectual property infringement claims against our customers or us could harm our business.
Our design and manufacturing services and the products offered by our customers involve the creation and use
of intellectual property rights, which subject us and our customers to the risk of claims of intellectual property
infringement from third parties. In addition, our customers may require that we indemnify them against the risk of
intellectual property infringement. If any claims are brought against us or our customers for infringement, whether or
not these have merit, we could be required to expend significant resources in defense of those claims. In the event of an
infringement claim, we may be required to spend a significant amount of money to develop non-infringing alternatives
or obtain licenses. We may not be successful in developing alternatives or obtaining licenses on reasonable terms or at
13
all. Infringement by our customers could cause them to discontinue production of some of their products, potentially
with little or no notice, which may reduce our net sales to them and disrupt our production.
Additionally, if third parties on whom we rely for products or services, such as component suppliers, are
responsible for an infringement (including through the supply of counterfeit parts), we may or may not be able to hold
them responsible and we may incur costs in defending claims or providing remedies. Such infringements may also
cause our customers to abruptly discontinue selling the impacted products, which would adversely affect our net sales
of those products, and could affect our customer relationships more broadly. Similarly, claims affecting our suppliers
could cause those suppliers to discontinue selling materials and components upon which we rely.
Our products are for end markets that require technologically advanced products with relatively short life-
cycles.
Factors affecting the technology-dependent end markets that we serve, in particular short product life-cycles,
could seriously affect our customers and, as a result, Plexus. These factors include:
•
•
•
the inability of our customers to adapt to rapidly changing technology and evolving industry standards that
result in short product life-cycles
the inability of our customers to develop and market their products, some of which are new and untested
and
the potential that our customers’ products may become obsolete or the failure of our customers’ products
to gain widespread commercial acceptance.
Even if our customers successfully respond to these market challenges, their responses, including any
consequential changes we must make in our business relationships with them and our production for them, can affect
our production cycles, inventory management and results of operations.
Increased competition may result in reduced demand or reduced prices for our services.
The EMS industry is highly competitive and has become more so as a result of excess capacity in the industry.
We compete against numerous EMS providers with global operations, as well as those which operate on only a local or
regional basis. In addition, current and prospective customers continually evaluate the merits of manufacturing
products internally and may choose to manufacture products themselves rather than outsource that process.
Consolidations and other changes in the EMS industry result in a changing competitive landscape.
Some of our competitors have substantially greater managerial, manufacturing, engineering, technical,
financial, systems, sales and marketing resources than ourselves. These competitors may:
•
•
•
•
•
•
respond more quickly to new or emerging technologies
have greater name recognition, critical mass and geographic and market presence
be better able to take advantage of acquisition opportunities
adapt more quickly to changes in customer requirements
devote greater resources to the development, promotion and sale of their services and
be better positioned to compete on price for their services.
We may operate at a cost disadvantage compared to other EMS providers that have lower internal cost
structures or greater direct buying power with component suppliers, distributors and raw material suppliers. Our
manufacturing processes are generally not subject to significant proprietary protection, and companies with greater
resources or a greater market presence may enter our market or become increasingly competitive. Increased
competition could result in significant price reductions, reduced sales and margins, or loss of market share.
We depend on our workforce, including certain key personnel, and the loss of key personnel or other personnel
disruptions may harm our business.
Our success depends in large part on the continued services of our key technical and management personnel,
and on our ability to attract, develop and retain qualified employees, particularly highly skilled design, process and test
engineers involved in the development of new products and processes and the manufacture of products. The
competition for these individuals is significant, and the loss of key employees could harm our business.
From time to time, there are changes and developments, such as retirements, disability, death and other
terminations of service that affect our executive officers and other key employees. Transitions of responsibilities
among officers and key employees, particularly those that are unplanned, inherently can cause disruptions to our
business and operations, which could have an effect on our results.
14
We also depend on good relationships with our workforce generally. Any disruption in our relationships with
our personnel, including as a result of potential union organizing activities, work actions or other labor issues, could
substantially affect our operations and results.
In addition, when we expand operations in either existing areas or new locations, we need to retain the services
of sufficient qualified personnel to conduct those operations. If we fail to retain and maintain sufficient qualified
personnel, the operations at those locations, and consequently our financial results, could be adversely affected. In new
or existing facilities we may be subject to local labor practices or union activities, differing employment laws and
regulations in various countries, and other issues affecting our workforce, all of which could affect operations at
particular locations, which also could have adverse effects on our operational results.
Natural disasters and other events outside our control, and the ineffective management of such events, may harm
our business.
Some of our facilities are located in areas that may be impacted by natural disasters, including hurricanes,
earthquakes, water shortages, tsunamis and floods. All facilities are subject to other natural or man-made disasters such
as those related to global climate change, fires, acts of terrorism, breaches of security and failures of utilities. If such an
event was to occur, our business could be harmed due to the event itself or due to our inability to effectively manage the
effects of the particular event; potential harms include the loss of business continuity, the loss of business data and
damage to infrastructure.
In addition, some of our facilities possess certifications necessary to work on specialized products that our
other locations lack. If work is disrupted at one of these facilities, it may be impractical or we may be unable to transfer
such specialized work to another facility without significant costs and delays. Thus, any disruption in operations at a
facility possessing specialized certifications could adversely affect our ability to provide products and services to our
customers, and thus negatively affect our relationships and financial results.
We have increased our borrowings, and we may fail to secure or maintain necessary financing.
Under our credit agreement (the “Credit Facility”) and Note Purchase Agreement , over the past several years
we have borrowed $325 million in term loans and notes, of which $273 million was outstanding at October 1, 2011, and
can borrow up to $200 million in revolving loans, of which $100 million is currently available, depending upon
compliance with its defined covenants and conditions. The Credit Facility may be increased by an additional $100
million to a total of $200 million if we have not previously terminated all or any portion of the Credit Facility, there is
no event of default existing under the Credit Facility and both we and the administrative agent consent to the increase.
However, we cannot be certain that the credit facilities will provide all of the financing capacity that we will need in the
future or that we will be able to change the credit facilities or revise covenants, if necessary or appropriate in the future,
to accommodate changes or developments in our business and operations. In addition, as a consequence of the turmoil
in the global financial markets and banking systems, it is possible that counterparties to our financial agreements,
including our credit agreement and our interest rate swap agreements, may not be willing or able to meet their
obligations.
Our future success may depend on our ability to obtain additional financing and capital to support possible
future growth and future initiatives. For example, in fiscal 2011 we issued $175 million in principal amount of 5.20%
senior notes, due in 2018, to support our share repurchase program. We may seek to raise capital by issuing additional
common stock, other equity securities or debt securities, modifying our existing credit facilities or obtaining new credit
facilities or a combination of these methods.
We may not be able to obtain capital when we want or need it, and capital may not be available on satisfactory
terms. If we issue additional equity securities or convertible securities to raise capital, it may be dilutive to
shareholders’ ownership interests. Furthermore, any additional financing may have terms and conditions that adversely
affect our business, such as restrictive financial or operating covenants, and our ability to meet any financing covenants
will largely depend on our financial performance, which in turn will be subject to general economic conditions and
financial, business and other factors.
We may fail to successfully complete future acquisitions and may not successfully integrate acquired businesses,
which could adversely affect our operating results.
We have previously grown, in part, through acquisitions. If we were to pursue future growth through
acquisitions, this would involve significant risks that could have a material adverse effect on us. These risks include:
15
Operating risks, such as:
•
•
•
•
•
•
the inability to integrate successfully our acquired operations’ businesses, systems and personnel
the inability to realize anticipated synergies, economies of scale or other value
the difficulties in scaling up production and coordinating management of operations at new sites
the strain placed on our personnel, systems and resources
the possible modification or termination of an acquired business’ customer programs, including the loss of
customers and the cancellation of current or anticipated programs and
the loss of key employees of acquired businesses.
Financial risks, such as:
•
•
•
•
•
•
the use of cash resources, or incurrence of additional debt and related interest expense
the dilutive effect of the issuance of additional equity securities
the inability to achieve expected operating margins to offset the increased fixed costs associated with
acquisitions, and/or inability to increase margins of acquired businesses to our desired levels
the incurrence of large write-offs or write-downs
the impairment of goodwill and other intangible assets and
the unforeseen liabilities of the acquired businesses.
If we are unable to maintain effective internal control over our financial reporting investors could lose
confidence in the reliability of our financial statements, which could result in a reduction in the value of our
common stock.
As required by Section 404 of the Sarbanes-Oxley Act, the SEC adopted rules requiring public companies to
include a report of management on the company’s internal control over financial reporting in their annual reports on
Form 10-K; that report must contain an assessment by management of the effectiveness of our internal control over
financial reporting. In addition, the independent registered public accounting firm auditing a company’s financial
statements must attest to and report on the effectiveness of the company’s internal control over financial reporting.
We are continuing our comprehensive efforts to comply with Section 404 of the Sarbanes-Oxley Act. If we
are unable to maintain effective internal control over financial reporting, this could lead to a failure to meet our
reporting obligations to the SEC, which in turn could result in an adverse reaction in the financial markets due to a loss
of confidence in the reliability of our financial statements.
The price of our common stock has been and may continue to be volatile.
Our stock price has fluctuated significantly in recent periods. The price of our common stock may fluctuate in
response to a number of events and factors relating to us, our competitors and the market for our services, many of
which are beyond our control.
In addition, the stock market in general, and share prices for technology companies in particular, have from
time to time experienced extreme volatility, including weakness, that sometimes has been unrelated to the operating
performance of these companies. These broad market and industry fluctuations, and concerns affecting the economy
generally, may adversely affect the market price of our common stock, regardless of our operating results.
Among other things, volatility and weakness in our stock price could mean that investors may not be able to
sell their shares at or above the prices that they paid. Volatility and weakness could also impair our ability in the future
to offer common stock or convertible securities as a source of additional capital and/or as consideration in the
acquisition of other businesses.
ITEM 1B.
UNRESOLVED SEC STAFF COMMENTS
None.
16
ITEM 2.
PROPERTIES
Our facilities comprise an integrated network of engineering and manufacturing centers with our corporate
headquarters located in Neenah, Wisconsin. We own or lease facilities with approximately 2.8 million square feet of
capacity. This includes approximately 1.8 million square feet in the Americas region (“AMER”), approximately 0.9
million square feet in the Asia-Pacific region (“APAC”) and approximately 0.1 million square feet in the Europe,
Middle East, and Africa region (“EMEA”). Approximately 0.2 million square feet of this capacity is subleased. Our
facilities as of October 1, 2011, are described in the following table:
Location
Penang, Malaysia (1)
Neenah, Wisconsin (1)
Appleton, Wisconsin (1)
Nampa, Idaho
Juarez, Mexico
Buffalo Grove, Illinois (1)
Xiamen, China (1)
Hangzhou, China
Kelso, Scotland
Fremont, California
Galashiels, Scottland (1) (2)
Oradea, Romania (1) (3)
Type
Manufacturing/Engineering
Manufacturing
Manufacturing
Manufacturing
Manufacturing
Manufacturing/Warehouse
Manufacturing/Office
Manufacturing
Manufacturing
Manufacturing
Manufacturing/Warehouse/Office
Manufacturing/Office
Size (sq. ft.)
671,000
277,000
272,000
216,000
210,000
189,000
124,000
106,000
57,000
46,000
43,000
20,000
Neenah, Wisconsin
Louisville, Colorado (1)
Raleigh, North Carolina
Darmstadt, Germany
Livingston, Scotland
Engineering/Office
Engineering
Engineering
Engineering
Engineering
Neenah, Wisconsin
Neenah, Wisconsin (1)
Neenah, Wisconsin
Global Headquarters
Office/Warehouse
Warehouse
105,000
29,000
25,000
16,000
4,000
104,000
84,000
39,000
Owned/Leased
Owned
Leased
Owned
Owned
Leased
Leased
Leased
Leased
Owned
Leased
Leased
Leased
Owned
Leased
Leased
Leased
Leased
Owned
Owned
Leased
San Diego, California (4)
Inactive/Other
198,000
Leased
(1) Includes more than one building.
(2) Lease renewal was signed in March 2011 and runs through March 2012.
(3) Lease renewal was signed in January 2011 and runs through January 2012.
(4) This building is subleased and no longer used in our operations.
In fiscal 2011, we purchased land in Xiamen, China and began construction of an additional manufacturing
facility, which is expected to be complete during the second half of fiscal 2012.
The Company began construction of an additional manufacturing facility in Penang, Malaysia during early
fiscal 2011 and anticipates completing the facility in the first quarter of fiscal 2012.
During the first half of fiscal 2012, we anticipate announcing the construction of a larger facility in Oradea,
Romania to replace the leased buildings.
17
ITEM 3.
LEGAL PROCEEDINGS
We were notified in April 2009 by U.S. Customs and Border Protection (“CBP”) of its intention to conduct a
customary Focused Assessment of our import activities during fiscal 2008 and of our processes and procedures to
comply with U.S. Customs laws and regulations. During September 2010 the Company reported errors relating to
import trade activity from July 2004 to the date of Plexus’ report. CBP has indicated that on-site fieldwork for the audit
was completed as of June 2011 and the Company is currently awaiting final determination of CBP duties and fees.
Plexus has agreed that it will implement improved processes and procedures and review these corrective measures with
CBP. We recorded an accrual in other current accrued liabilities in the first quarter of fiscal 2010 when the amount
became estimable and probable, which was not material to the financial statements. At this time, we do not believe that
any deficiencies in processes or controls or unanticipated costs, unpaid duties or penalties associated with this matter
will have a material adverse effect on Plexus or the Company’s consolidated financial position, results of operations or
cash flows.
The Company is party to certain other lawsuits in the ordinary course of business. Management does not
believe that these proceedings, individually or in the aggregate, will have a material adverse effect on the Company's
consolidated financial position, results of operations or cash flows.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth our executive officers, their ages and the positions currently held by each person:
Name
Dean A. Foate
Ginger M. Jones
Michael D. Buseman
Steven J. Frisch
Todd P. Kelsey
Yong Jin Lim
Joseph E. Mauthe
Angelo M. Ninivaggi
Michael T. Verstegen
Age
53
47
50
45
46
51
49
44
53
Position
President, Chief Executive Officer and Director
Senior Vice President and Chief Financial Officer
Executive Vice President - Global Manufacturing Operations
Regional President - Plexus EMEA and Senior Vice President -
Global Engineering Solutions
Executive Vice President - Global Customer Services
Regional President - Plexus APAC
Senior Vice President - Global Human Resources
Senior Vice President, General Counsel, Corporate Compliance
Officer and Secretary
Senior Vice President - Global Market Development
Dean A. Foate joined Plexus in 1984 and has served as President and Chief Executive Officer since 2002, and as a
director since 2000.
Ginger M. Jones has served as Plexus’ Vice President and Chief Financial Officer since 2007, and became a Senior
Vice President in 2011. Prior to joining Plexus, Ms. Jones served as the Vice President and Corporate Controller for
Banta Corporation from 2002 to 2007.
Michael D. Buseman joined Plexus in 2006 and began serving as Senior Vice President – Global Manufacturing
Operations in 2007 and became Executive Vice President in 2011. Previously, he held various management roles in the
Company including Vice President for Plexus Electronic Assembly – North American Operations and Vice President
Manufacturing Technology and Quality.
Steven J. Frisch joined Plexus in 1990 and began serving as Regional President – Plexus EMEA in October 2010,
while retaining his responsibilities as Senior Vice President – Global Engineering Solutions, which began in 2007.
Previously, Mr. Frisch served as Vice President of Plexus Technology Group’s Raleigh and Livingston Design Centers
from 2002 to 2007.
Todd P. Kelsey joined Plexus in 1994 and began serving as Senior Vice President – Global Customer Services in 2007
and was named Executive Vice President in 2011. Previously, Mr. Kelsey served as Vice President and then Senior
Vice President of Plexus Technology Group from 2001 to 2007.
Yong Jin Lim joined Plexus in 2002 and began serving as Regional President – Plexus APAC in 2007. From 2003 to
2007 he served as Vice President of Operations – Asia.
18
Joseph E. Mauthe joined Plexus in 2007, began serving as Vice President – Global Human Resources in 2008 and was
named a Senior Vice President in 2011. Prior to joining Plexus, Mr. Mauthe served as Senior Director, Human
Resources and various other positions for Kimberly-Clark Corporation from 1985 to 2007.
Angelo M. Ninivaggi joined Plexus in 2002 and has served as Vice President, General Counsel and Secretary since
2006. Since 2007, Mr. Ninivaggi has also served as Corporate Compliance Officer and was named a Senior Vice
President in 2011.
Michael T. Verstegen joined Plexus in 1983, serving in various engineering positions, and has served as Senior Vice
President, Global Market Development since 2006. Prior thereto, Mr. Verstegen served as Vice President from 2002 to
2006.
PART II
ITEM 5.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Price per Share
For the fiscal years ended October 1, 2011 and October 2, 2010, the Company’s common stock has traded on
the Nasdaq Stock Market, in the Nasdaq Global Select Market tier. The price information below represents high and
low sale prices of our common stock for each quarterly period.
Fiscal Year Ended October 1, 2011
Fiscal Year Ended October 2, 2010
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
High
$33.75
$35.25
$38.71
$35.03
Low
$26.70
$26.50
$30.53
$21.34
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
High
$29.67
$38.00
$39.66
$31.69
Low
$23.96
$27.42
$25.58
$21.08
Performance Graph
The following graph compares the cumulative total return on Plexus common stock with the Nasdaq Stock
Market Index for U.S. Companies and the Nasdaq Stock Market Index for Electronic Components Companies, both of
which include Plexus. The values on the graph show the relative performance of an investment of $100 made on
September 29, 2006, in Plexus common stock and in each of the indices as of the last business day of the respective
fiscal year.
19
Comparison of Cumulative Total Return
S
R
A
L
L
O
D
180
160
140
120
100
80
60
40
20
0
Plexus
Nasdaq-US
Nasdaq-Electronics
2006
2007
2008
2009
2010
2011
2006
2007
2008
2009
2010
2011
Plexus
Nasdaq-US
Nasdaq-Electronics
100
100
100
143
118
130
113
97
94
133
92
92
157
108
98
118
112
88
Shareholders of Record; Dividends
As of November 11, 2011, there were approximately 630 shareholders of record. We have not paid any cash
dividends. We currently anticipate that the majority of earnings in the foreseeable future will be retained to finance the
development of our business. However, the Company evaluates from time to time potential uses of excess cash, which
in the future may include share repurchases, a special dividend or recurring dividends. See also Part II, Item 7,
“Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital
Resources”, for a discussion of the Company’s intentions regarding dividends, and loan covenants which could restrict
dividend payments.
20
Issuer Purchases of Equity Securities
The following table provides the specified information about the repurchases of shares by the Company during
the three months ended October 1, 2011.
Period
Total number
of shares
purchased
Average
price paid
per share
Total number
of shares purchased
as part of publicly
announced plans or
programs
Maximum
approximate dollar
value of shares that
may yet be
purchased under the
plans or programs*
July 3 to
July 30, 2011
July 31 to
August 27, 2011
August 28 to
October 1, 2011
133,870
$ 34.32
133,870
$ 25,000,000
890,970
28.04
890,970
$ -
-
-
-
$ -
Total
1,024,840
$ 28.86
1,024,840
* On February 16, 2011 the Company’s Board of Directors approved a share repurchase program that
authorized the Company to repurchase up to $200 million of common stock. The share purchases made during the
fourth quarter of fiscal 2011 completed the repurchase program; a total of 6.3 million shares were purchased during
fiscal 2011 at a volume-weighted average of $31.69 per share.
21
ITEM 6.
SELECTED FINANCIAL DATA
Financial Highlights (dollars in thousands, except per share amounts)
Operating Statement Data
Net sales
Gross profit
Gross margin percentage
Operating income
Fiscal Years Ended
October 1,
2011
October 2,
2010
October 3,
2009
September 27,
2008
September 29,
2007
$ 2,231,232
$ 2,013,393
$ 1,616,622
$ 1,841,622
$ 1,546,264
214,742
206,922
154,776
205,761
163,539
9.6%
10.3%
9.6%
11.2%
10.6%
101,179
99,652
53,067(1)
102,827(2)
79,438(3)
Operating margin percentage
4.5%
4.9%
3.3%
5.6%
5.1%
Net income
89,256
89,533
46,327(1)
84,144(2)
65,718(3)
Earnings per share (diluted)
$ 2.30
$ 2.19
$
1.17(1) $
1.92(2) $
1.41(3)
Cash Flow Statement Data
Cash flows provided by operations
$ 161,683
$
1,962
$ 170,296
$
64,181
$
38,513
Capital equipment additions
74,051
74,674
57,427
54,329
47,837
Balance Sheet Data
Working capital
Total assets
$ 553,893
$ 523,472
$ 459,113
$ 439,077
$ 427,116
1,304,525
1,290,379
1,022,672
992,230
916,516
Long-term debt and capital lease obligations
270,292
112,466
133,163
154,532
25,082
Shareholders’ equity
Return on average assets
Return on average equity
Inventory turnover ratio
558,882
651,855
527,446
473,945
573,265
6.9%
16.0%
4.3x
7.7%
15.2%
4.1x
4.6%
9.3%
4.4x
8.8%
16.1%
5.3x
7.7%
12.5%
5.5x
1)
2)
3)
In fiscal 2009, we recorded goodwill impairment charges related to our United Kingdom operations of $5.7
million. In addition, we recorded pre-tax restructuring costs totaling $2.8 million which related primarily to
the reduction of workforce in the United States and Mexico as well as fixed assets written down related to the
closure of our Ayer, Massachusetts (“Ayer”) facility. A favorable tax adjustment of approximately $1.4
million, primarily related to the conclusion of federal and state audits, was also recorded.
In fiscal 2008, we recorded pre-tax restructuring costs totaling $2.1 million which related primarily to the
closure of our Ayer facility and the reduction of our workforce in Juarez, Mexico (“Juarez”).
In fiscal 2007, we recorded pre-tax restructuring and asset impairment costs totaling $1.8 million which related
primarily to the closure of our Maldon, England (“Maldon”) facility and the reduction of our workforces in
Juarez and Kelso, Scotland (“Kelso”).
We have not paid cash dividends in the past and do not currently anticipate paying them in the future.
However, the Company evaluates from time to time potential uses of excess cash, which in the future may include share
repurchases, a special dividend or recurring dividends.
22
ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
Plexus Corp. and its subsidiaries (together “Plexus,” the “Company,” or “we”) participate in the Electronic
Manufacturing Services (“EMS”) industry. We deliver optimized Product Realization solutions through a unique
Product Realization Value Stream services model. This customer focused services model seamlessly integrates
innovative product conceptualization, design, commercialization, manufacturing, fulfillment and sustaining services to
deliver comprehensive end-to-end solutions for customers in the Americas, European and Asia-Pacific regions.
Customer service is provided to over 130 branded product companies in the Wireline/Networking, Wireless
Infrastructure, Medical, Industrial/Commercial and Defense/Security/Aerospace market sectors. Our customers’
products typically require exceptional production and supply-chain flexibility, necessitating an optimized demand-pull-
based manufacturing and supply chain solution across an integrated global platform. Many of our customers’ products
require complex configuration management and direct order fulfillment to their customers across the globe. In such
cases we provide global logistics management and after-market service and repair. Our customers’ products may have
stringent requirements for quality, reliability and regulatory compliance. We offer our customers the ability to
outsource all phases of product realization, including product specifications; development, design and design
verification; regulatory compliance support; prototyping and new product introduction; manufacturing test equipment
development; materials sourcing, procurement and supply-chain management; product assembly/manufacturing,
configuration and test; order fulfillment, logistics and service/repair.
We provide most of our contract manufacturing services on a turnkey basis, which means that we procure
some or all of the materials required for product assembly. We provide some services on a consignment basis, which
means that the customer supplies the necessary materials, and we provide the labor and other services required for
product assembly. Turnkey services require material procurement and warehousing, in addition to manufacturing, and
involve greater resource investments than consignment services. Other than certain test equipment and software used
for internal operations, we do not design or manufacture our own proprietary products.
In response to the evolving markets and to better reflect our customers’ end markets, we have decided to
combine our Wireline/Networking and Wireless Infrastructure market sectors and rename them as our
Networking/Communications market sector, beginning with our fiscal 2012 reporting.
The following information should be read in conjunction with our consolidated financial statements included
herein and “Risk Factors” included in Part I, Item 1A herein.
EXECUTIVE SUMMARY
Fiscal 2011. Net sales for fiscal 2011 increased by $217.8 million, or 10.8 percent, from fiscal year 2010 to
$2,231.2 million. Net sales increased in all of our market sectors during fiscal 2011, except for a decrease in the
wireless infrastructure sector. The overall higher net sales were from both new and existing customers, such as the
ramp of production for our newer industrial commercial sector customer, as well as an increase in net sales to Juniper
Networks, Inc. (“Juniper”), our largest customer, as a result of improved end-market demand for the mix of Juniper
products we produce as well as new product launches. We also experienced strong demand from a medical customer
and a defense/security/aerospace customer during the year as a result of increased end market demand for the products
they produce. These increases were partially offset by decreased net sales to two significant customers, one in the
wireline/networking sector and one in the wireless infrastructure sector, related to previously announced
disengagements as a result of acquisitions, and decreased sales from one additional wireless infrastructure customer as a
result of a drop in end-market demand for the mix of its products that we produce.
Gross margin was 9.6 percent for fiscal 2011, which compared unfavorably to 10.3 percent for fiscal 2010.
Gross margins in fiscal 2011 were lower as a result changes in our customer mix, higher fixed expenses related to
higher headcount to support the revenue growth and increased depreciation expense. The prior year also included
proceeds from a litigation settlement (see Note 12).
Selling and administrative expenses were $113.6 million for fiscal 2011, an increase of $6.3 million, or 5.9
percent, from the $107.3 million for fiscal 2010. The majority of the increase was due to higher employee
compensation and relocation expense as a result of higher headcount to support revenue growth as well as higher stock
based compensation expense. This was partially offset by lower variable incentive compensation in fiscal 2011 as
23
compared to fiscal 2010. Selling and administrative expenses were 5.1 percent of sales for fiscal 2011, as compared to
5.3 percent in fiscal 2010.
Other expense for fiscal 2011 decreased slightly from 2010, driven primarily by the favorable fluctuation in
foreign currency translation, partially offset by increased interest expense.
Net income for fiscal 2011 was $89.3 million and diluted earnings per share were $2.30, which compared to
net income of $89.5 million, or $2.19 per diluted share, for fiscal 2010. Net income decreased slightly from the prior
year period due to changes in customer mix and higher fixed and selling and administrative expenses, partially offset by
increased sales. Diluted earnings per share increased from the prior year period due to lower average shares
outstanding related to our share repurchase program. The effective tax rate in the current year period was
approximately 3 percent, which compares unfavorably to the 1 percent tax rate in the prior year period primarily due to
the mix of the Company’s fiscal 2011 pre-tax income.
Fiscal 2010. Net sales for fiscal 2010 increased by $396.8 million, or 24.5 percent, from fiscal year 2009 to
$2,013.4 million. Net sales increased in all of our market sectors during fiscal 2010, except for a slight decrease in the
defense/security/aerospace sector. The overall higher net sales were driven primarily by stronger end-market
conditions, as well as the ramp of production for new customer programs in the wireless infrastructure,
wireline/networking, industrial/commercial, and medical sectors. These increases were partially offset by decreased net
sales from two defense/security/aerospace sector customers, as well as decreased net sales to Juniper. Net sales to
Juniper declined slightly as a result of decreased end-market demand for the mix of Juniper products produced by us.
Gross margin was 10.3 percent for fiscal 2010, which compared favorably to 9.6 percent for fiscal 2009.
Gross margins in fiscal 2010 were higher due to the increased net sales, changes in customer mix and proceeds from a
litigation settlement (see Note 12), partially offset by increases in variable incentive compensation expense due to
strong financial performance as well as fixed expenses as a result of higher headcount.
Selling and administrative expenses were $107.3 million for fiscal 2010, an increase of $14.2 million, or 15.3
percent, from the $93.1 million for fiscal 2009. Sixty percent of the increase was due to higher variable incentive
compensation in fiscal 2010 as compared to fiscal 2009. The remainder of the increase was driven primarily by
increased employee compensation expense as a result of higher headcount to support revenue growth.
For fiscal 2010, the Company did not incur any restructuring or impairment charges as compared to charges of
$8.6 million in fiscal 2009.
Net income for fiscal 2010 was $89.5 million and diluted earnings per share were $2.19, which compared
favorably to net income of $46.3 million, or $1.17 per diluted share, for fiscal 2009. Net income increased from fiscal
2009 due to overall increased sales and higher gross margins and the absence of restructuring charges, offset by
increased fixed expenses and selling and administrative expenses. The effective tax rate in fiscal 2010 was 1 percent,
which compares unfavorably to the 2 percent tax benefit in fiscal 2009. The increase in effective tax rate from fiscal
2009 was primarily due to the mix of the Company’s fiscal 2010 pre-tax income and the absence in 2010 of a net $1.4
million tax benefit resulting from a discrete event that occurred in fiscal 2009.
Other. The effective income tax rates (benefits) for fiscal 2011, 2010 and 2009 were 3 percent, 1 percent and
(2) percent, respectively. The increase in effective tax rate from fiscal 2009 to fiscal 2010 was primarily due to the mix
of the Company’s fiscal 2010 pre-tax income and the absence in 2010 of a net $1.4 million tax benefit resulting from a
discrete event that occurred in fiscal 2009. The change in our effective tax rate from fiscal 2010 to fiscal 2011 is
primarily due to changes in the mix of income in the tax jurisdictions in which we operate.
ROIC. One of our metrics for measuring financial performance is after-tax ROIC. We define after-tax ROIC
as tax-effected operating income, excluding unusual charges, divided by average capital employed over a rolling five
quarter period. Capital employed is defined as equity plus debt, less cash and cash equivalents and short-term
investments. ROIC was 15.6 percent, 19.5 percent and 13.2 percent for fiscal 2011, 2010 and 2009, respectively. See
the table below for our calculation of ROIC (dollars in millions):
24
Operating income (tax effected), excluding unusual charges
Average invested capital
After-tax ROIC
Fiscal years ended
October 1,
2011
$ 98.1
October 2,
2010
$ 98.7
October 3,
2009
$ 59.9
627.6
506.6
453.6
15.6%
19.5%
13.2%
ROIC is a non-GAAP financial measure which should be considered in addition to, not as a substitute for,
measures of the Company’s financial performance prepared in accordance with United States generally accepted
accounting principles (“GAAP”). Non-GAAP financial measures, including ROIC, are used for internal management
assessments because such measures provide additional insight into ongoing financial performance. In particular, we
provide ROIC because we believe it offers insight into the metrics that are driving management decisions as well as
management’s performance under the tests which it sets for itself.
For a reconciliation of ROIC to our financial statements that were prepared using GAAP, see Exhibit 99.1 to
this annual report on Form 10-K, which exhibit is incorporated herein by reference.
RESULTS OF OPERATIONS
Net sales. Net sales for the indicated periods were as follows (dollars in millions):
Fiscal years ended
Variance
Fiscal years ended
Variance
October 1,
2011
October 2,
2010
Increase/
(Decrease)
October 2,
2010
October 3,
2009
Increase/
(Decrease)
Net sales
$2,231.2
$2,013.4
$217.8 10.8%
$2,013.4
$1,616.6
$396.8
24.5%
Net sales for fiscal 2011 increased $217.8 million, or 10.8 percent, as compared to fiscal 2010. The net sales
increase resulted from higher net sales in all of our market sectors, except for a decrease in the wireless infrastructure
sector. The net sales increase primarily related to the ramp of production for a newer industrial commercial sector
customer. Net sales to Juniper increased as a result of improved end-market demand for the mix of Juniper products we
produce as well as new product launches. Overall, we had net sales increases spread across new and existing customers
in both the industrial commercial and medical sectors during fiscal 2011, which were partially offset by the two
previously announced disengagements as a result of acquisitions (with one each in the wireline/networking and the
wireless infrastructure market sectors), as well as decreased sales from one additional wireless infrastructure customer
as a result of a drop in end-market demand for the mix of its products that we produce.
Net sales for fiscal 2010 increased $396.8 million, or 24.5 percent, as compared to fiscal 2009. The net sales
increase resulted from higher net sales in all of our market sectors, except for the defense/security/aerospace sector.
The overall higher net sales were driven primarily by strong end-market conditions, as well as the addition of new
customers in the wireless infrastructure, wireline/networking, industrial/commercial and medical sectors. These net
sales increases were offset in part by decreased net sales to two defense/security/aerospace customers, as well as lower
net sales to Juniper as a result of a decline in end-market demand for the mix of Juniper products produced by us.
Our net sales percentages by market sector for the indicated periods were as follows:
Wireline/Networking
Wireless Infrastructure
Medical
Industrial/Commercial
Defense/Security/Aerospace
Fiscal years ended
October 2,
2010
43%
12%
20%
18%
7%
100%
October 3,
2009
44%
11%
22%
13%
10%
100%
October 1,
2011
39%
7%
21%
24%
9%
100%
25
The percentages of net sales to customers representing 10 percent or more of net sales and net sales to our ten
largest customers for the indicated periods were as follows:
Juniper
Top 10 customers
October 1,
2011
17%
55%
Fiscal years ended
October 2,
2010
16%
57%
October 3,
2009
20%
57%
Net sales to our largest customers may vary from time to time depending on the size and timing of customer
program commencements, terminations, delays, modifications and transitions. We remain dependent on continued net
sales to our significant customers, and our customer concentration with our top 10 customers remained at or above 53
percent during the year. We generally do not obtain firm, long-term purchase commitments from our customers.
Customers’ forecasts can and do change as a result of changes in their end-market demand and other factors, including
global economic conditions. Any material change in forecasts or orders from these major accounts, or other customers,
could materially affect our results of operations. In addition, as our percentage of net sales to customers in a specific
sector becomes larger relative to other sectors, we will become increasingly dependent upon the economic and business
conditions affecting that sector.
In the current economic environment, we are seeing increased merger and acquisition activity that has
impacted our customers. Specifically, we previously announced that two of our customers were acquired in the first
quarter of fiscal 2010. The customer in the Wireline/Networking sector began to reduce orders to us at the end of fiscal
2010 and substantially disengaged in fiscal 2011. The customer in the Wireless Infrastructure sector began
disengagement in fiscal 2011 and also substantially disengaged in fiscal 2011.
Gross profit. Gross profit and gross margin for the indicated periods were as follows (dollars in millions):
Fiscal years ended
Variance
Fiscal years ended
Variance
October 1,
2011
October 2,
2010
Increase/
(Decrease)
October 2,
2010
October 3,
2009
Increase/
(Decrease)
Gross Profit
$214.7
Gross Margin
9.6%
$206.9
10.3%
$7.8
3.8%
$206.9
$154.8
$52.1
33.7%
10.3%
9.6%
For fiscal 2011, gross profit and gross margin were impacted by the following factors:
•
•
•
•
increased net sales in all of our market sectors except wireless infrastructure, driven by demand from new and
existing customers across the majority of our market sectors, partially offset by unfavorable changes in
customer mix, which together accounted for approximately $32.4 million of the net increase in gross profit
partially offset by an increase in fixed manufacturing costs due to increased headcount expenses to support
revenue growth of approximately $15.5 million. Fixed costs also grew as a percentage of sales as a result of
expansion in our APAC and EMEA regions as they ramp to capacity, as well as the underutilization of two
AMER facilities, due to the disengagement of a significant customer and the slower ramp of a significant
customer
increased depreciation expense of $5.5 million due to the expansions mentioned above, and
the effect of the non-recurrence of a $3.2 million benefit in the first quarter of fiscal 2010 from a litigation
settlement.
For fiscal 2010, gross profit and gross margin were impacted by the following factors:
•
increased net sales in all of our reportable segments, driven by strong end-market conditions, as well as the
addition of new customers in the wireless infrastructure, wireline/networking, industrial/commercial and
medical sectors, as well as favorable changes in customer mix, which together accounted for approximately
$38.8 million of the increase in gross profit
26
•
•
•
increased capacity utilization from the higher revenue levels
proceeds of $3.2 million received from a litigation settlement, which was recorded as a reduction to cost of
sales, and
partially offset by increased variable compensation expense of approximately $6.6 million as a result of
improved financial performance and fixed expenses, primarily in the AMER and APAC reportable segments,
due to increased headcount to support the revenue growth.
Design work performed by the Company is not the proprietary property of Plexus and substantially all costs
incurred with this work are considered reimbursable by our customers. We do not track research and development costs
that are not reimbursed by our customers and we consider these amounts immaterial.
Operating expenses. Selling and administrative (“S&A”) expenses for the indicated periods were as follows
(dollars in millions):
Fiscal years ended
Variance
Fiscal years ended
Variance
October 1,
2011
October 2,
2010
Increase/
(Decrease)
October 2,
2010
October 3,
2009
Increase/
(Decrease)
S&A
Percent of net
sales
$113.6
$107.3
$6.3
5.9%
$107.3
$93.1
$14.2 15.3%
5.1%
5.3%
5.3%
5.8%
For fiscal 2011, the increase in S&A expenses was due to increased employee compensation and relocation
expense of approximately $8.1 million as a result of higher headcount to support revenue growth, as well as higher
stock-based compensation expense of approximately $1.1 million. This was partially offset by lower variable incentive
compensation in fiscal 2011 as compared to fiscal 2010 of approximately $4.1 million. S&A expenses as a percentage
of net sales decreased during fiscal 2011 as a result of net sales expanding more quickly than these cost increases.
For fiscal 2010, sixty percent of the increase in S&A expenses was due to higher variable incentive
compensation expense as a result of strong financial performance. The remainder of the increase was driven primarily
by an increase in headcount to support our revenue growth. S&A expenses as a percentage of net sales decreased
during fiscal 2010 as a result of net sales expanding more quickly than these cost increases.
Restructuring and asset impairment charges. For both fiscal 2011 and fiscal 2010, we did not incur any
restructuring or asset impairment charges. Our restructuring and asset impairment costs for fiscal 2009 were as follows
(dollars in millions):
Goodwill impairment
Severance costs
Adjustments to lease exit costs/other
Total restructuring and asset impairment charges
October 1,
2011
$ -
-
-
$ -
Fiscal years ended
October 2,
2010
$ -
-
-
$ -
October 3,
2009
$ 5.7
2.0
0.9
$ 8.6
The restructuring and asset impairment charges for fiscal 2009 were associated with various reportable
segments. Management excludes such charges when analyzing the performance of the reportable segments. See Note 13
in Notes to Consolidated Financial Statements for certain financial information regarding our reportable segments,
including a summary of restructuring and asset impairment charges by reportable segment.
27
Other income (expense). Other income (expense) for the indicated periods were as follows (dollars in
millions):
Fiscal years ended
Variance
Fiscal years ended
Variance
October 1,
2011
October 2,
2010
Increase/
(Decrease)
October 2,
2010
October 3,
2009
Increase/
(Decrease)
Other income
(expense)
Percent of net
sales
$(9.1)
$(9.2)
$(0.1)
(1.1)%
$(9.2)
$(7.7)
$1.5
19.5%
(0.4)%
(0.5)%
(0.5)%
(0.5)%
Other income (expense) for fiscal 2011 decreased $0.1 million, to $9.1 million of expense from $9.2 million of
expense in fiscal 2010. This change was driven by the favorable fluctuation in foreign currency translation and
transaction adjustments of $2.4 million, partially offset by increased interest expense of $2.1 million, primarily related
to our private placement debt, which we entered into during the third quarter of fiscal 2011 as discussed in “Liquidity
and Capital Resources” below.
Other income (expense) for fiscal 2010 increased $1.5 million, to $9.2 million of expense from $7.7 million of
expense in fiscal 2009. This change was driven by the unfavorable fluctuation in foreign currency translation and
transaction adjustments of $2.1 million and reduced interest income of $0.9 million due to lower effective interest rates,
partially offset by decreased interest expense of $1.3 million, primarily related to servicing the $150 million term loan
drawn in April 2008.
Income taxes. Income taxes for the indicated periods were as follows (dollars in millions):
Income tax expense (benefit)
October 1,
2011
$2.8
Fiscal years ended
October 2,
2010
$0.9
October 3,
2009
$(0.9)
Effective annual tax rate (benefit)
3.1%
1.0%
(2.0)%
The change in our effective tax rate from fiscal 2009 to fiscal 2011 is primarily due to change in mix in the tax
jurisdictions in which we operate.
As a result of using the with-and-without method under the requirements for accounting for stock-based
compensation, the Company recorded a valuation allowance for federal and state taxes against the amount of net
operating loss and credit carryforwards related to tax deductions in excess of compensation expense for stock options
until such time as the related deductions actually reduce income taxes payable. As of the end of fiscal 2010 there was a
valuation allowance of $1.0 million for federal and state taxes against the amount of net operating loss and credit
carryforwards related to tax deductions in excess of compensation expense for stock options. During fiscal 2011 the
Company recorded an additional valuation allowance $1.3 million. As a result, we had a remaining valuation allowance
of approximately $2.3 million related to tax deductions associated with stock-based compensation as of October 1,
2011.
During the preparation of the Company’s fiscal 2011 consolidated financial statements, the Company
performed an analysis of all available evidence, both positive and negative, regarding the need for a valuation
allowance against our deferred tax assets, consistent with the provisions of ASC Topic 740, “Income Taxes.” The
Company’s U.S. operations generated losses during the fiscal 2009, 2010 and 2011 years. While we believe these
losses could be a significant factor in establishing such an allowance, we believe that based on the weight of all the
evidence, both positive and negative, it is more likely than not that the Company will be able to utilize its U.S. net
deferred tax assets of approximately $21.7 million. See Note 6 – Income Taxes for further details.
In addition, there was a remaining valuation allowance of $1.6 million as of October 2, 2010, related to various
state deferred income tax assets for which utilization was uncertain due to a lack of sustained profitability and limited
carryforward periods in those states. There was no change in the valuation allowance during fiscal 2011. If the U.S.
operations continue to generate losses, there may be a need to provide a valuation allowance on our net U.S. deferred
tax assets, which totaled $21.7 million as of October 1, 2011.
28
During fiscal 2011 the Company added a valuation allowance of $0.3 million and $0.9 million in the United
Kingdom and Romania, respectively, to offset the increase in net deferred tax assets in those jurisdictions which more
likely than not will not be realized.
We currently expect the annual effective tax rate for fiscal 2012 to be approximately 8 to 10 percent. The rate
increase is due mainly to the increase in projected income in the United States and lower projected income in low tax
Malaysia and China jurisdictions.
The Company has been granted tax holidays for its Malaysian and Xiamen, China subsidiaries. These tax
holidays expire in 2024 and 2013, respectively, and are subject to certain conditions with which the Company expects
to comply. In fiscal 2011, 2010 and 2009, these subsidiaries generated income, which resulted in tax reductions of
approximately $21.7 million ($0.57 per basic share), $23.0 million ($0.58 per basic share) and $15.2 million ($0.38 per
basic share), respectively.
Net Income. As a result of the above factors, our net income decreased by $0.3 million, or (0.3) percent, in
fiscal 2011 as compared to fiscal 2010. Diluted earnings per share increased by 5.0 percent due to the effects of our
fiscal 2011 stock repurchases. Net income increased by $43.2 million, or 93.3 percent, in fiscal 2010 compared to fiscal
2009; diluted earnings per share increased 87.2 percent.
REPORTABLE SEGMENTS
In the first quarter of fiscal 2011, we completed our migration to a regional reporting structure, and as a result,
modified our reportable segments. See Note 1 – Description of Business and Significant Accounting Policies for
further information.
A further discussion of our fiscal 2011 and 2010 financial performance by reportable segment is presented
below (dollars in millions):
October 1,
2011
Fiscal Years Ended
October 2,
2010
October 3,
2009
$ 1,304.9
1,063.1
92.2
(229.0)
$ 2,231.2
$ 1,244.7
925.4
72.5
(229.2)
$ 2,013.4
$ 1,084.3
588.1
55.6
(111.4)
$ 1,616.6
$
68.7
118.1
(3.0)
(82.6)
101.2
$
$
74.4
114.8
(1.8)
(87.7)
99.7
$
$
$
61.2
63.7
1.4
(73.2)
53.1
Net sales:
AMER
APAC
EMEA
Elimination of inter-segment sales
Operating income (loss):
AMER
APAC
EMEA
Corporate and other costs
Americas (AMER):
Net sales for fiscal 2011 increased $60.2 million, or 4.8 percent, from fiscal 2010, which reflected the ramp of
production for our newer industrial commercial sector customer. Net sales to Juniper also increased as a result
of improved end-market demand for the mix of Juniper products we produce in the region as well as new
product launches. These increases were offset by reduced net sales to two significant wireless infrastructure
customers, one as a result of a previously announced disengagement and the other as a result of a drop in end-
market demand for the mix of products we produce for that customer. Operating income for fiscal 2011
decreased $5.7 million from fiscal 2010 due to the prior year period benefitting from a $3.2 million litigation
settlement, as well as changes in customer mix in the current year.
Net sales for fiscal 2010 increased $160.4 million, or 14.8 percent, from fiscal 2009. This increase reflected
higher end-market demand from numerous existing customers in each of our market sectors and the ramp of
29
production for new customers in the wireline/networking, wireless infrastructure, industrial/commercial and
medical sectors. These increases were partially offset by reduced net sales to our largest customer, Juniper,
due to the transfer of manufacturing of some products to our APAC reportable segment, as well as decreased
end-market demand for the mix of Juniper products produced by us. Operating income for fiscal 2010
increased $13.2 million from fiscal 2009 primarily as a result of higher revenues from the customers noted
above, improved operating efficiencies resulting from higher production levels and proceeds received from a
litigation settlement.
Asia-Pacific (APAC):
Net sales for fiscal 2011 increased $137.7 million, or 14.9 percent, over fiscal 2010. This growth reflected
higher net sales to multiple customers across our market sectors as well as increased demand from a new
customer in the industrial/commercial sector. These increases were partially offset by decreases in net sales
from the previously announced disengagement of one customer in the wireline/networking sector as well as a
drop in end-market demand for the mix of products we produce for a wireless infrastructure customer.
Operating income improved $3.3 million in fiscal 2011 as compared to fiscal 2010, primarily as a result of the
net sales growth, partially offset by changes in customer mix and higher fixed expenses.
Net sales for fiscal 2010 increased $337.3 million, or 57.4 percent, over fiscal 2009. This growth reflected
higher net sales to multiple customers across our market sectors, increased demand from a new customer in the
industrial/commercial sector and the transfer of the manufacturing of some Juniper products to the APAC
reportable segment from the AMER reportable segment, partially offset by the decrease in demand from
Juniper described above. Operating income improved $51.1 million in fiscal 2010 as compared to fiscal 2009,
primarily as a result of the net sales growth and operating efficiencies resulting from higher production levels.
Europe, Middle East and Africa (EMEA):
Net sales for fiscal 2011 increased $19.7 million, or 27.2 percent, from fiscal 2010. The change in net sales
was driven by higher demand from two existing customer programs as well as the ramp of production for two
new customers. Operating results were lower in the current year as compared to the prior year due to increased
operating costs from our Romania facility and our new engineering facility in Darmstadt, Germany.
Net sales for fiscal 2010 increased $16.9 million, or 30.4 percent, from fiscal 2009. The change in net sales
can be attributed to higher demand from the ramp of production for two existing customer programs in the
industrial/commercial sector. Operating results were lower in the current year as compared to the prior year
due to operating costs from our new Romania facility.
For our significant customers, we generally manufacture products in more than one location. For example,
sales to Juniper occur in AMER and APAC. See Note 13 in Notes to Consolidated Financial Statements for certain
financial information regarding our reportable segments, including a detail of net sales by reportable segment.
LIQUIDITY AND CAPITAL RESOURCES
Cash flows provided by operating activities were $161.7 million for fiscal 2011, compared to cash flows
provided by operating activities of $2.0 million and $170.3 million for fiscal 2010 and 2009, respectively. During fiscal
2011, the increase in cash flows provided by operating activities was primarily the result of improvements in working
capital.
Inventory decreased by $36.6 million during fiscal 2011 as compared to fiscal 2010. Inventory turns increased
to 4.3 turns in fiscal 2011 from 4.1 turns in fiscal 2010. Days in inventory changed favorably as of October 1, 2011 to
85 days as compared to 90 days at October 2, 2010. The decrease in inventory, both in dollars and days of cash cycle,
was the result of our efforts to actively manage our inventory levels down with the assistance of our customers, while
continuing to meet our customers’ needs for flexibility and agility. As part of our continued efforts to mitigate
inventory risk, we have collected approximately $29.8 million in cash deposits from our customers, which are classified
as customer deposits on the Consolidated Balance Sheets, and have also continued to work with customers that have
excess inventory issues in accordance with contractual obligations.
The overall decrease in accounts receivable of $27.2 million during fiscal 2011 as compared to fiscal 2010 was
mainly due to two customers, one in each of the industrial/commercial and the wireline/networking sectors, prepaying
30
their respective accounts in fiscal 2011. Our annualized days sales outstanding in accounts receivable for fiscal 2011
decreased favorably from 51 days in fiscal 2010 to 48 days in fiscal 2011.
Cash flows used in investing activities totaled $71.9 million for fiscal 2011. The primary investments included
$74.1 million for purchases of property, plant and equipment, mainly in our APAC region, partially offset by proceeds
from the sale of property, plant, and equipment. Investments were for new equipment to support customer demand in
all of our regions as well as investments in new facilities in Penang, Malaysia and Xiamen, China to increase capacity.
We expect our fourth Penang, Malaysia facility to be operational in our first quarter of fiscal 2012 and our second
Xiamen, China facility to be operational in the second half of fiscal 2012. See Note 13 in Notes to Consolidated
Financial Statements for further information regarding our capital expenditures by reportable segment. Fiscal 2011
purchases of property, plant and equipment included $48.1 million, $15.7 million, and $10.3 million related to our
APAC, AMER, and EMEA reportable segments, respectively.
We utilized available cash and operating cash flows as the principal sources for funding our operating
requirements during fiscal 2011. We currently estimate capital expenditures for fiscal 2012 to be approximately $90-95
million. A significant portion of the fiscal 2012 capital expenditures is anticipated to be used for the completion of the
two facilities mentioned above (Penang, Malaysia and Xiamen, China). We also anticipate announcing, during the first
half of fiscal 2012, the construction of a larger facility in Oradea, Romania to replace leased buildings that served as our
start-up solution in lower-cost Europe.
Cash flows used in financing activities totaled $37.0 million for fiscal 2011, primarily due to purchases of
common stock related to our stock repurchase program as well as payments on our term note and capital leases, offset
by proceeds from our private placement debt issuance and proceeds from the exercise of stock options.
On February 16, 2011 the Company’s Board of Directors approved a share repurchase program that authorized
the Company to repurchase up to $200 million of common stock. On August 15, 2011, the Company completed its
share repurchase program with a total of 6.3 million shares purchased at a volume-weighted average of $31.69 per
share. The Company did not repurchase any shares in fiscal 2010.
To support our new share repurchase program, we entered into a Note Purchase Agreement (the “Agreement”)
for $175 million in principal amount of 5.20% Senior Notes, due June 15, 2018 (the “Notes”) during the third quarter of
fiscal 2011. We issued $100 million in principal amount of the Notes on April 21, 2011, and the remaining $75 million
on June 15, 2011. The Agreement includes operational and financial covenants which include a maximum total
leverage ratio, a minimum interest coverage ratio and restrictions on additional indebtedness, liens and dispositions, all
as defined in the Agreement. We are currently in compliance with all such covenants. Origination fees and expenses
associated with the private placement totaled approximately $0.9 million and have been deferred. These origination
fees and expenses are being amortized over the seven-year term of the Notes. Semi-annual interest payments began on
June 15, 2011 and end on June 15, 2018 with full repayment of the total principal of the Notes.
During the second quarter of fiscal 2011, we entered into two separate treasury rate lock hedge contracts to
hedge the variability of the fixed interest rate on the then forecasted issuance of $175 million of fixed rate debt using a
treasury lock transaction. The fixed interest rates for each of these contracts are 2.77% and 2.72%, respectively, with a
notional value of $150 million. On April 4, 2011, we entered into a final treasury rate lock hedge transaction for the
remaining $25 million of exposure at a rate of 2.88%. On April 8, 2011, when the fixed interest rate for the debt
issuance was determined, all three treasury rate lock contracts were settled and we received proceeds of $2.3 million,
which is being amortized over the seven year term of the related debt.
On April 4, 2008, we entered into our credit agreement (the “Credit Facility”) with a group of banks which
allows us to borrow $150 million in term loans and $100 million in revolving loans. The $150 million in term loans
was immediately funded and the $100 million revolving credit facility is currently available. The Credit Facility is
unsecured and may be increased by an additional $100 million to a total of $200 million (the “accordion feature”). This
is possible if we have not previously terminated all or any portion of the Credit Facility, there is no event of default
existing under the credit agreement and both we and the administrative agent consent to the increase. The Credit
Facility expires on April 4, 2013. Borrowings under the Credit Facility may be either through term loans or revolving
or swing loans or letter of credit obligations. As of October 1, 2011, we had term loan borrowings of $97.5 million
outstanding and no revolving borrowings under the Credit Facility.
The Credit Facility contains certain financial covenants, which include a maximum total leverage ratio,
maximum value of fixed rentals and operating lease obligations, a minimum interest coverage ratio and a minimum net
worth test, all as defined in the agreement. As of October 1, 2011, we were in compliance with all debt covenants. If
31
we incur an event of default, as defined in the Credit Facility (including any failure to comply with a financial
covenant), the group of banks has the right to terminate the Credit Facility and all other obligations, and demand
immediate repayment of all outstanding sums (principal and accrued interest). The interest rate on the borrowing varies
depending upon our then-current total leverage ratio; as of October 1, 2011, the Company could elect to pay interest at a
defined base rate or the LIBOR rate plus 1.50%. Rates would increase upon negative changes in specified Company
financial metrics and would decrease upon reduction in the current total leverage ratio to no less than LIBOR plus
1.00%. We are also required to pay an annual commitment fee on the unused credit commitment based on our leverage
ratio; the current fee is 0.375%. Unless the accordion feature is exercised, this fee applies only to the initial $100
million of availability (excluding the $150 million of term borrowings). Origination fees and expenses associated with
the Credit Facility totaled approximately $1.3 million and have been deferred. These origination fees and expenses will
be amortized over the five-year term of the Credit Facility. Quarterly principal repayments on the term loan of $3.75
million each began June 30, 2008, and end on April 4, 2013, with a final balloon repayment of $75.0 million.
The Credit Facility allows for the future payment of cash dividends or the future repurchases of shares provided
that no event of default (including any failure to comply with a financial covenant) exists at the time of, or would be caused
by, the dividend payment or the share repurchases.
Additionally, the Company enters interest rate swaps and foreign currency derivatives to hedge against
variable cash flows. All derivatives are recognized on the balance sheet at their estimated fair value. On the date a
derivative contract is entered into, the Company designates the derivative as a hedge of a recognized asset or liability (a
“fair value” hedge), a hedge of a forecasted transaction or of the variability of cash flows to be received or paid related
to a recognized asset or liability (a “cash flow” hedge), or a hedge of the net investment in a foreign operation. The
Company does not enter into derivatives for speculative purposes. Changes in the fair value of a derivative that qualify
as a fair value hedge are recorded in earnings along with the gain or loss on the hedged asset or liability. Changes in the
fair value of a derivative that qualifies as a cash flow hedge are recorded in “Accumulated other comprehensive
income”, until earnings are affected by the variability of cash flows. Changes in the fair value of a derivative used to
hedge the net investment in a foreign operation are recorded in the “Accumulated other comprehensive income”
accounts within shareholders’ equity. See Note 5 – Derivatives and Fair Value Measurements for further details.
In February 2010, the Company negotiated the settlement of a capital lease in Kelso, Scotland. The termination of
this capital lease obligation and acquisition of the property was effected through a cash payment by Plexus of $3.9 million.
Based on current expectations, we believe that our projected cash flows from operations, available cash and
short-term investments, the Credit Facility, and our leasing capabilities should be sufficient to meet our working capital
and fixed capital requirements for the next twelve months. $100 million of committed credit is currently available
under the Credit Facility, with another $100 million available in an “accordion” facility, which is contingent upon
compliance with the Credit Agreement and lender approval. If our future financing needs increase, we may need to
arrange additional debt or equity financing. Accordingly, we evaluate and consider from time to time various financing
alternatives to supplement our financial resources. However, particularly due to the current instability of the credit and
financial markets, we cannot be certain that we will be able to make any such arrangements on acceptable terms.
We have not paid cash dividends in the past and do not currently anticipate paying them in the future.
However, the Company evaluates from time to time potential uses of excess cash, which in the future may include share
repurchases, a special dividend or recurring dividends.
32
CONTRACTUAL OBLIGATIONS, COMMITMENTS AND OFF-BALANCE SHEET OBLIGATIONS
Our disclosures regarding contractual obligations and commercial commitments are located in various parts of
our regulatory filings. Information in the following table provides a summary of our contractual obligations and
commercial commitments as of October 1, 2011 (dollars in millions):
Contractual Obligations
Total
2012
2013-2014
2015-2016
2017 and
thereafter
Payments Due by Fiscal Year
Long-Term Debt Obligations (1,2)
$
338.5
$
28.6
$
102.3
$
17.7
$
189.9
Capital Lease Obligations
Operating Lease Obligations
Purchase Obligations (3)
Other Long-Term Liabilities on the
Balance Sheet (4)
Other Long-Term Liabilities not on
19.4
41.2
336.9
8.4
the Balance Sheet (5)
Total Contractual Cash Obligations
$
3.0
747.4
$
3.8
11.6
335.1
1.0
1.0
381.1
7.9
17.6
1.4
1.5
7.1
9.1
0.4
1.3
0.6
2.9
-
4.6
2.0
132.7
$
$
-
35.6
-
198.0
$
1)
2)
3)
4)
5)
As of April 4, 2008, we entered into the Credit Facility and immediately funded a term loan for $150 million.
As of October 1, 2011, the outstanding balance was $97.5 million. The amounts listed above include interest,
as we intend to hold the loan to maturity. See Note 4 in Notes to Consolidated Financial Statements for further
information.
As of April 21, 2011, we entered into the Note Purchase Agreement and immediately issued $100 million in
principal amount and another $75 million in principal amount of notes on June 15, 2011. The amounts listed
above include interest, as we intend to hold the notes to maturity. See Note 4 in Notes to Consolidated
Financial Statements for further information.
As of October 1, 2011, purchase obligations consist of purchases of inventory and equipment in the ordinary
course of business.
As of October 1, 2011, other long-term obligations on the balance sheet included deferred compensation
obligations to certain of our former and current executive officers, as well as other key employees, and an asset
retirement obligation. We have excluded from the above table the impact of approximately $7.4 million, as of
October 1, 2011, related to unrecognized income tax benefits. The Company cannot make reliable estimates of
the future cash flows by period related to this obligation.
As of October 1, 2011, other long-term obligations not on the balance sheet consisted of a commitment for
salary continuation in the event employment of one executive officer of the Company is terminated without
cause. We did not have, and were not subject to, any lines of credit, standby letters of credit, guarantees,
standby repurchase obligations, other off-balance sheet arrangements or other commercial commitments that
are material.
DISCLOSURE ABOUT CRITICAL ACCOUNTING POLICIES
Our accounting policies are disclosed in Note 1 of Notes to the Consolidated Financial Statements. During
fiscal 2011, there were no material changes to these policies. Our more critical accounting policies are noted below:
Stock-Based Compensation – The Financial Accounting Standard Board (“FASB”) requires all share-based
payments to employees, including grants of employee stock options, to be measured at fair value and expensed in the
consolidated statements of operations over the service period (generally the vesting period) of the grant. We used the
modified prospective application, under which compensation expense is only recognized in the consolidated statements
of operations beginning with the first period that we adopted the FASB regulation and continuing to be expensed
thereafter. We continue to use the Black-Scholes valuation model to value stock options. See Note 1 in Notes to
Consolidated Financial Statements for further information.
33
Impairment of Long-Lived Assets – We review property, plant and equipment for impairment whenever events
or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of
property, plant and equipment is measured by comparing its carrying value to the projected cash flows the property,
plant and equipment are expected to generate. If such assets are considered to be impaired, the impairment to be
recognized is measured as the amount by which the carrying value of the property exceeds its fair market value. The
impairment analysis is based on management’s assumptions, including future revenue and cash flow projections.
Circumstances that may lead to impairment of property, plant and equipment include reduced expectations for future
performance or industry demand and possible further restructurings.
Intangible Assets – During the second quarter of fiscal 2009, we recorded a goodwill impairment charge of
$5.7 million, related to the Company’s sole goodwill asset. The impairment wrote off the entire carrying value of our
goodwill related to our Kelso facility, which was the sole reporting unit in the EMEA reportable segment. The
impairment charge was driven by adverse macroeconomic conditions that contributed to an overall reduction in demand
for the Company’s offerings from the Kelso facility. These conditions led to an “interim triggering event”, leading
management to perform an interim goodwill impairment test. This test resulted in the determination that the carrying
value of the goodwill relating to Kelso was fully impaired and therefore an impairment charge of $5.7 million was
taken.
Should we have goodwill and intangible assets with indefinite useful lives in the future, we would test those
assets for impairment, at least annually, and recognize any related losses when incurred.
Revenue – Net sales from manufacturing services are recognized when the product has been shipped, the risk
of ownership has transferred to the customer, the price to the buyer is fixed or determinable, and recoverability is
reasonably assured. This point depends on contractual terms and generally occurs upon shipment of the goods from
Plexus. Generally, there are no formal customer acceptance requirements or further obligations related to
manufacturing services; if such requirements or obligations exist, then a sale is recognized at the time when such
requirements are completed and such obligations fulfilled.
Net sales from engineering design and development services, which are generally performed under contracts
with durations of twelve months or less, are typically recognized as costs are incurred utilizing the proportional
performance model. The completed performance model is used if certain customer acceptance criteria exist. Any
losses are recognized when anticipated.
Sales are recorded net of estimated returns of manufactured product based on management’s analysis of
historical rates of returns, current economic trends and changes in customer demand. Net sales also include amounts
billed to customers for shipping and handling, if applicable. The corresponding shipping and handling costs are
included in cost of sales.
Derivatives and Hedging Activities – All derivatives are recognized on the balance sheet at their estimated fair
value. On the date a derivative contract is entered into, the Company designates the derivative as a hedge of a
recognized asset or liability (a “fair value” hedge), a hedge of a forecasted transaction or of the variability of cash flows
to be received or paid related to a recognized asset or liability (a “cash flow” hedge), or a hedge of the net investment in
a foreign operation. The Company does not enter into derivatives for speculative purposes. Changes in the fair value of
a derivative that qualify as a fair value hedge are recorded in earnings along with the gain or loss on the hedged asset or
liability. Changes in the fair value of a derivative that qualifies as a cash flow hedge are recorded in “Accumulated
other comprehensive income”, until earnings are affected by the variability of cash flows. Changes in the fair value of a
derivative used to hedge the net investment in a foreign operation are recorded in the “Accumulated other
comprehensive income” accounts within shareholders’ equity. See Note 5 – Derivatives and Fair Value Measurements
for further details.
Income Taxes – The Company accounts for income taxes in accordance with ASC Topic 740, “Income
Taxes.” Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences
between financial statement carrying amounts of existing assets and liabilities and their respective tax bases and
operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or
settled. Accordingly, the Company does not currently provide for additional U.S. and foreign income taxes which
would become payable upon repatriation of undistributed earnings of certain foreign subsidiaries. The Company
maintains valuation allowances when it is more likely than not that all or a portion of a deferred tax asset will not be
realized. In determining whether a valuation allowance is required, the Company takes into account such factors as
prior earnings history, expected future earnings, carryback and carryforward periods, and tax strategies that could
34
potentially enhance the likelihood of realization of a deferred tax asset. If the U.S. operations continue to generate
losses, there may be a need to provide a valuation allowance on our net U.S. deferred tax assets, which totaled $21.7
million as of October 1, 2011.
NEW ACCOUNTING PRONOUNCEMENTS
See Note 1 in Notes to Consolidated Financial Statements regarding recent accounting pronouncements.
ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risk from changes in foreign exchange and interest rates. We selectively use
financial instruments to reduce such risks.
Foreign Currency Risk
We do not use derivative financial instruments for speculative purposes. Our policy is to selectively hedge our
foreign currency denominated transactions in a manner that partially offsets the effects of changes in foreign currency
exchange rates. We typically use foreign currency contracts to hedge only those currency exposures associated with
certain assets and liabilities denominated in non-functional currencies. Corresponding gains and losses on the
underlying transaction generally offset the gains and losses on these foreign currency hedges. Our international
operations create potential foreign exchange risk. Beginning in July 2009, we entered into forward contracts to hedge a
portion of our foreign currency denominated transactions in our APAC reportable segment and beginning in July 2011,
we entered into forward contracts to hedge a portion of our foreign currency denominated transactions in Mexico, as
described in Note 5 to Notes to Consolidated Financial Statements.
Our percentages of transactions denominated in currencies other than the U.S. dollar for the indicated periods
were as follows:
Net Sales
Total Costs
Fiscal year
2010
5%
13%
2009
4%
11%
2011
6%
14%
The Company has evaluated the potential foreign currency exchange rate risk on transactions denominated in
currencies other than the U.S. dollar for the periods presented above. Based on the Company’s overall currency
exposure, as of October 1, 2011, a 10 percent change in the value of the U.S. dollar relative to our other transactional
currencies would not have a material effect on the Company’s financial position, results of operations, or cash flows.
Interest Rate Risk
We have financial instruments, including cash equivalents and short-term investments as well as debt, which
are sensitive to changes in interest rates. We consider the use of interest-rate swaps and treasury rate locks based on
existing market conditions. We have entered into interest rate swaps for $97.5 million in term loans, as described in
Note 5 in Notes to Consolidated Financial Statements. As is common with these types of agreements, our interest rate
swap and treasury rate lock agreements are subject to the further risk that the counterparties to these agreements may
fail to comply with their obligations thereunder.
The primary objective of our investment activities is to preserve principal, while maximizing yields without
significantly increasing market risk. To achieve this, we maintain our portfolio of cash equivalents and short-term
investments in a variety of highly rated securities, money market funds and certificates of deposit and limit the amount
of principal exposure to any one issuer.
Our only material interest rate risk as of October 1, 2011, is associated with our Credit Facility under which we
borrowed $150 million. Through the use of interest rate swaps, as described above, we have fixed the basis on which
we pay interest, thus eliminating much of our interest rate risk. A 10 percent change in the weighted average interest
rate on our average long-term borrowings would have had only a nominal impact on interest expense.
35
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Part IV, Item 15 on page 38.
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures: The Company maintains disclosure controls and procedures designed to
ensure that the information the Company must disclose in its filings with the Securities and Exchange Commission
(“SEC”) is recorded, processed, summarized and reported on a timely basis. The Company’s principal executive officer
and principal financial officer have reviewed and evaluated, with the participation of the Company’s management, the
Company’s disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”) as of the end of the period covered by this report (the
“Evaluation Date”). Based on such evaluation, the chief executive officer and chief financial officer have concluded
that, as of the Evaluation Date, the Company’s disclosure controls and procedures are effective (a) in recording,
processing, summarizing and reporting, on a timely basis, information required to be disclosed by the Company in the
reports the Company files or submits under the Exchange Act, and (b) in assuring that information is accumulated and
communicated to the Company’s management, including the chief executive officer and chief financial officer, as
appropriate to allow timely decisions regarding required disclosure.
Management’s Annual Report on Internal Control Over Financial Reporting: Management of the Company is
responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined
in Exchange Act Rules 13a-15(f) and 15d-15(f). Management of the Company, including its chief executive officer and
chief financial officer, has assessed the effectiveness of its internal control over financial reporting as of October 1,
2011, based on the criteria established in “Internal Control – Integrated Framework” issued by the Committee of
Sponsoring Organizations of the Treadway Commission (“COSO”). Based on its assessment and those criteria,
management of the Company has concluded that, as of October 1, 2011, the Company’s internal control over financial
reporting was effective.
The independent registered public accounting firm of PricewaterhouseCoopers LLP has audited the
Company’s internal control over financial reporting as of October 1, 2011, as stated in their report included herein on
page 41.
Changes in Internal Control Over Financial Reporting: There have been no changes in the Company’s
internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that
occurred during the Company’s most recent fiscal quarter that have materially affected, or are reasonably likely to
materially affect, the Company’s internal control over financial reporting.
Limitations on the Effectiveness of Controls: Our management, including our chief executive officer and chief
financial officer, does not expect that our disclosure controls and internal controls will prevent all errors and all fraud. A
control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that
the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are
resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent
limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and
instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that
judgments in decision-making can be faulty, and that breakdowns can occur because of simple errors or mistakes.
Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people,
or by management override of the control. The design of any system of controls also is based in part upon certain
assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in
achieving its stated goals under all potential future conditions; over time, a control may become inadequate because of
changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the
inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be
detected.
Notwithstanding the foregoing limitations on the effectiveness of controls, we have nonetheless reached the
conclusion that our disclosure controls and procedures and our internal control over financial reporting are effective at
the reasonable assurance level.
36
ITEM 9B.
OTHER INFORMATION
None.
PART III
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Information in response to this item is incorporated herein by reference to “Election of Directors” and
“Corporate Governance” in the Company’s Proxy Statement for its 2012 Annual Meeting of Shareholders (“2012 Proxy
Statement”) and “Executive Officers of the Registrant” in Part I hereof.
Our Code of Conduct and Business Ethics is posted on our website at www.plexus.com. You may access the
Code of Conduct and Business Ethics by following the links under “Investor Relations, Corporate Governance” at our
website. Plexus’ Code of Conduct and Business Ethics applies to all members of the board of directors, officers and
employees.
ITEM 11.
EXECUTIVE COMPENSATION
Incorporated herein by reference to “Corporate Governance – Board Committees – Compensation and
Leadership Development Committee,” “Corporate Governance – Directors’ Compensation,” “Compensation Discussion
and Analysis,” “Executive Compensation” and “Compensation Committee Report” in the 2012 Proxy Statement.
ITEM 12.
AND RELATED STOCKHOLDER MATTERS
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated herein by reference to “Security Ownership of Certain Beneficial Owners and Management” in
the 2012 Proxy Statement.
Equity Compensation Plan Information
The following table chart gives aggregate information regarding grants under all Plexus equity compensation
plans through October 1, 2011:
Number of securities
to be issued upon
exercise of
outstanding options,
warrants and rights (1)
Weighted-average
exercise price of
outstanding options,
warrants and rights
Number of securities
remaining available
for future issuance under
equity compensation
plans (excluding
securities reflected
in 1st column)
3,642,883
$ 27.69
3,146,516
-0-
$
n/a
-0-
3,642,883
$ 27.69
3,146,516
Plan category
Equity compensation plans
approved by securityholders
Equity compensation plans not
approved by securityholders
Total
(1)
Represents options or stock-settled stock appreciation rights (“SARs”) granted under the Plexus Corp. 2008
Long-Term Incentive Plan, or its predecessors, the 2005 Equity Incentive Plan, the 1998 Stock Option Plan
and the 1995 Directors’ Stock Option Plan, all of which were approved by shareholders. No further awards
may be made under the predecessor plans.
ITEM 13.
INDEPENDENCE
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
Incorporated herein by reference to “Corporate Governance – Director Independence” and “Certain
Transactions” in the 2012 Proxy Statement.
37
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Incorporated herein by reference to the subheading “Auditors - Fees and Services” in the 2012 Proxy
Statement.
ITEM 15.
EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a) Documents filed
PART IV
Financial Statements and Financial Statement Schedule. See the following list of Financial Statements and
Financial Statement Schedule on page 39.
(b) Exhibits. See Exhibit Index included as the last page of this report, which index is incorporated herein by
reference.
38
PLEXUS CORP.
List of Financial Statements and Financial Statement Schedule
October 1, 2011
Contents
Pages
Report of Independent Registered Public Accounting Firm .......................................................
40
Consolidated Financial Statements:
Consolidated Statements of Operations for the fiscal years ended
October 1, 2011, October 2, 2010, and October 3, 2009 ...............................................
Consolidated Balance Sheets as of October 1, 2011 and October 2, 2010 ....................
Consolidated Statements of Shareholders’ Equity and Comprehensive Income
for the fiscal years ended October 1, 2011, October 2, 2010, and October 3, 2009 ......
Consolidated Statements of Cash Flows for the fiscal years ended
October 1, 2011, October 2, 2010, and October 3, 2009 ...............................................
Notes to Consolidated Financial Statements ...............................................................................
Financial Statement Schedule:
41
42
43
44
45
Schedule II - Valuation and Qualifying Accounts for the fiscal years ended
October 1, 2011, October 2, 2010, and October 3, 2009 ...............................................
70
NOTE: All other financial statement schedules are omitted because they are not applicable or the required information
is included in the Consolidated Financial Statements or notes thereto.
39
Report of Independent Registered Public Accounting Firm
To the Shareholders
and Board of Directors
of Plexus Corp.:
In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material
respects, the financial position of Plexus Corp. and its subsidiaries at October 1, 2011 and October 2, 2010, and the
results of their operations and their cash flows for each of the three years in the period ended October 1, 2011 in
conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion,
the financial statement schedule listed in the accompanying index presents fairly, in all material respects, the
information set forth therein when read in conjunction with the related consolidated financial statements. Also in our
opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of
October 1, 2011, based on criteria established in Internal Control - Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO). The Company's management is responsible for these
financial statements and financial statement schedule, for maintaining effective internal control over financial reporting
and for its assessment of the effectiveness of internal control over financial reporting, included in Management's Annual
Report on Internal Control Over Financial Reporting appearing under Item 9A. Our responsibility is to express
opinions on these financial statements, on the financial statement schedule, and on the Company's internal control over
financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and
whether effective internal control over financial reporting was maintained in all material respects. Our audits of the
financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included
obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness
exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.
Our audits also included performing such other procedures as we considered necessary in the circumstances. We
believe that our audits provide a reasonable basis for our opinions.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. A company’s internal control over financial reporting includes those policies
and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of
management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on
the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
/s/ PricewaterhouseCoopers LLP
Milwaukee, Wisconsin
November 17, 2011
40
PLEXUS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
for the fiscal years ended October 1, 2011, October 2, 2010, and October 3, 2009
(in thousands, except per share data)
Net sales
Cost of sales
2011
2010
2009
$ 2,231,232
2,016,490
$ 2,013,393
1,806,471
$ 1,616,622
1,461,846
Gross profit
214,742
206,922
154,776
Operating expenses:
Selling and administrative expenses
Goodwill impairment charges
Restructuring charges
Operating income
Other income (expense):
Interest expense
Interest income
Miscellaneous income (expense)
113,563
-
-
107,270
-
-
93,138
5,748
2,823
113,563
101,179
107,270
101,709
99,652
53,067
(11,649)
1,367
1,206
(9,589)
1,436
(1,062)
(10,875)
2,323
904
Income before income taxes
92,103
90,437
45,419
Income tax expense (benefit)
2,847
904
(908)
Net income
$
89,256
$
89,533
$
46,327
Earnings per share:
Basic
Diluted
Weighted average shares outstanding:
Basic
Diluted
$
$
2.34
2.30
$
$
2.24
2.19
$
$
1.18
1.17
38,063
38,800
40,051
40,831
39,411
39,654
The accompanying notes are an integral part of these consolidated financial statements.
41
PLEXUS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
as of October 1, 2011 and October 2, 2010
(in thousands, except per share data)
ASSETS
Current assets:
Cash and cash equivalents
Accounts receivable, net of allowances of $3,256 and $1,400,
respectively
Inventories
Deferred income taxes
Prepaid expenses and other
2011
2010
$ 242,107
284,019
$ 188,244
311,205
455,836
15,750
10,858
492,430
18,959
15,153
Total current assets
1,008,570
1,025,991
Property, plant and equipment, net
Deferred income taxes
Other
265,505
12,470
17,980
235,714
11,787
16,887
Total assets
$ 1,304,525
$ 1,290,379
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt and capital lease obligations
Accounts payable
Customer deposits
Accrued liabilities:
Salaries and wages
Other
Total current liabilities
$
17,350
307,152
30,739
$
17,409
360,686
27,301
42,101
57,335
46,639
50,484
454,677
502,519
Long-term debt and capital lease obligations, net of current portion
Other liabilities
270,292
20,674
112,466
23,539
Total non-current liabilities
290,966
136,005
Commitments and contingencies
Shareholders’ equity:
Preferred stock, $.01 par value, 5,000 shares authorized, none issued
or outstanding
Common stock, $.01 par value, 200,000 shares authorized,
48,298 and 47,849 shares issued, respectively, and 34,544 and
40,403 shares outstanding, respectively
-
483
Additional paid-in capital
Common stock held in treasury, at cost, 13,754 and 7,446 shares,
415,556
(400,110)
respectively
Retained earnings
Accumulated other comprehensive income
534,824
8,129
558,882
-
478
399,054
(200,110)
445,568
6,865
651,855
Total liabilities and shareholders’ equity
$ 1,304,525
$ 1,290,379
The accompanying notes are an integral part of these consolidated financial statements.
42
5
4
9
,
3
7
4
$
l
a
t
o
T
d
e
t
a
l
u
m
u
c
c
A
r
e
h
t
O
e
v
i
s
n
e
h
e
r
p
m
o
C
)
s
s
o
L
(
e
m
o
c
n
I
4
7
7
,
0
1
$
d
e
n
i
a
t
e
R
s
g
n
i
n
r
a
E
y
r
u
s
a
e
r
T
k
c
o
t
S
l
a
n
o
i
t
i
d
d
A
l
a
t
i
p
a
C
n
I
-
d
i
a
P
k
c
o
t
S
n
o
m
m
o
C
t
n
u
o
m
A
s
e
r
a
h
S
S
E
I
R
A
I
D
I
S
B
U
S
D
N
A
.
P
R
O
C
S
U
X
E
L
P
E
M
O
C
N
I
E
V
I
S
N
E
H
E
R
P
M
O
C
D
N
A
Y
T
I
U
Q
E
’
S
R
E
D
L
O
H
E
R
A
H
S
F
O
S
T
N
E
M
E
T
A
T
S
D
E
T
A
D
I
L
O
S
N
O
C
)
s
d
n
a
s
u
o
h
t
n
i
(
9
0
0
2
,
3
r
e
b
o
t
c
O
d
n
a
,
0
1
0
2
,
2
r
e
b
o
t
c
O
,
1
1
0
2
,
1
r
e
b
o
t
c
O
d
e
d
n
e
s
r
a
e
y
l
a
c
s
i
f
e
h
t
r
o
f
8
0
7
,
9
0
3
$
)
0
1
1
,
0
0
2
(
$
5
0
1
,
3
5
3
$
8
6
4
$
6
2
3
,
9
3
8
0
0
2
,
7
2
r
e
b
m
e
t
p
e
S
,
s
e
c
n
a
l
a
B
7
2
3
,
6
4
)
7
1
9
,
2
(
)
7
7
1
,
3
(
3
3
2
,
0
4
1
2
4
,
9
7
4
8
,
3
-
)
7
1
9
,
2
(
)
7
7
1
,
3
(
-
-
-
-
-
-
7
2
3
,
6
4
-
-
-
-
-
-
-
-
1
2
4
,
9
5
4
8
,
3
-
-
-
-
2
6
4
4
,
7
2
5
0
8
6
,
4
5
3
0
,
6
5
3
)
0
1
1
,
0
0
2
(
1
7
3
,
6
6
3
0
7
4
2
1
2
3
7
9
,
1
3
3
5
,
9
8
6
3
5
,
9
8
1
7
,
1
9
5
5
1
,
3
2
-
-
-
2
1
2
3
7
9
,
1
-
-
-
-
3
3
5
,
9
8
-
-
-
-
-
-
-
-
6
3
5
,
9
7
4
1
,
3
2
-
-
-
-
8
5
5
8
,
1
5
6
5
6
8
,
6
8
6
5
,
5
4
4
)
0
1
1
,
0
0
2
(
4
5
0
,
9
9
3
8
7
4
1
7
6
,
1
)
7
0
4
(
6
5
2
,
9
8
0
2
5
,
0
9
6
6
4
,
5
1
4
0
,
1
1
)
0
0
0
,
0
0
2
(
-
)
7
0
4
(
1
7
6
,
1
-
-
-
-
-
-
-
-
6
5
2
,
9
8
-
-
-
-
-
)
0
0
0
,
0
0
2
(
-
-
-
-
1
6
4
,
5
1
4
0
,
1
1
-
-
-
-
-
5
-
-
-
-
2
2
2
8
4
5
,
9
3
-
-
-
-
5
5
8
3
0
4
,
0
4
-
-
-
-
9
4
4
)
8
0
3
,
6
(
x
a
t
f
o
t
e
n
,
s
t
n
e
m
u
r
t
s
n
i
e
v
i
t
a
v
i
r
e
d
f
o
e
u
l
a
v
t
e
k
r
a
m
r
i
a
f
n
i
s
t
n
e
m
t
s
u
j
d
a
n
o
i
t
a
l
s
n
a
r
t
y
c
n
e
r
r
u
c
n
g
i
e
r
o
F
e
g
n
a
h
C
s
t
i
f
e
n
e
b
x
a
t
g
n
i
d
u
l
c
n
i
,
s
n
o
i
t
p
o
k
c
o
t
s
f
o
e
s
i
c
r
e
x
E
e
m
o
c
n
i
e
v
i
s
n
e
h
e
r
p
m
o
c
l
a
t
o
T
e
s
n
e
p
x
e
n
o
i
t
a
s
n
e
p
m
o
c
d
e
s
a
b
-
k
c
o
t
S
:
e
m
o
c
n
i
e
v
i
s
n
e
h
e
r
p
m
o
C
e
m
o
c
n
i
t
e
N
x
a
t
f
o
t
e
n
,
s
t
n
e
m
u
r
t
s
n
i
e
v
i
t
a
v
i
r
e
d
f
o
e
u
l
a
v
t
e
k
r
a
m
r
i
a
f
n
i
e
g
n
a
h
C
s
t
n
e
m
t
s
u
j
d
a
n
o
i
t
a
l
s
n
a
r
t
y
c
n
e
r
r
u
c
n
g
i
e
r
o
F
s
t
i
f
e
n
e
b
x
a
t
g
n
i
d
u
l
c
n
i
,
s
n
o
i
t
p
o
k
c
o
t
s
f
o
e
s
i
c
r
e
x
E
e
m
o
c
n
i
e
v
i
s
n
e
h
e
r
p
m
o
c
l
a
t
o
T
e
s
n
e
p
x
e
n
o
i
t
a
s
n
e
p
m
o
c
d
e
s
a
b
-
k
c
o
t
S
x
a
t
f
o
t
e
n
,
s
t
n
e
m
u
r
t
s
n
i
e
v
i
t
a
v
i
r
e
d
f
o
e
u
l
a
v
t
e
k
r
a
m
r
i
a
f
n
i
e
g
n
a
h
C
s
t
n
e
m
t
s
u
j
d
a
n
o
i
t
a
l
s
n
a
r
t
y
c
n
e
r
r
u
c
n
g
i
e
r
o
F
s
t
i
f
e
n
e
b
x
a
t
g
n
i
d
u
l
c
n
i
,
s
n
o
i
t
p
o
k
c
o
t
s
f
o
e
s
i
c
r
e
x
E
e
m
o
c
n
i
e
v
i
s
n
e
h
e
r
p
m
o
c
l
a
t
o
T
e
s
n
e
p
x
e
n
o
i
t
a
s
n
e
p
m
o
c
d
e
s
a
b
-
k
c
o
t
S
d
e
s
a
h
c
r
u
p
s
e
r
a
h
s
y
r
u
s
a
e
r
T
0
1
0
2
,
2
r
e
b
o
t
c
O
,
s
e
c
n
a
l
a
B
:
e
m
o
c
n
i
e
v
i
s
n
e
h
e
r
p
m
o
C
e
m
o
c
n
i
t
e
N
9
0
0
2
,
3
r
e
b
o
t
c
O
,
s
e
c
n
a
l
a
B
:
e
m
o
c
n
i
e
v
i
s
n
e
h
e
r
p
m
o
C
e
m
o
c
n
i
t
e
N
2
8
8
,
8
5
5
$
9
2
1
,
8
$
4
2
8
,
4
3
5
$
)
0
1
1
,
0
0
4
(
$
6
5
5
,
5
1
4
$
3
8
4
$
4
4
5
,
4
3
1
1
0
2
,
1
r
e
b
o
t
c
O
,
s
e
c
n
a
l
a
B
.
s
t
n
e
m
e
t
a
t
s
l
a
i
c
n
a
n
i
f
d
e
t
a
d
i
l
o
s
n
o
c
e
s
e
h
t
f
o
t
r
a
p
l
a
r
g
e
t
n
i
n
a
e
r
a
s
e
t
o
n
g
n
i
y
n
a
p
m
o
c
c
a
e
h
T
3
4
PLEXUS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the fiscal years ended October 1, 2011, October 2, 2010, and October 3, 2009
(in thousands)
Cash flows from operating activities
Net income
Adjustments to reconcile net income to net cash flows
from operating activities:
Depreciation
Non-cash goodwill impairment
Gain on sale of property, plant and equipment
Stock-based compensation expense
Deferred income taxes
Changes in operating assets and liabilities:
Accounts receivable
Inventories
Prepaid expenses and other
Accounts payable
Customer deposits
Accrued liabilities and other
2011
2010
2009
$
89,256
$
89,533
$
46,327
47,026
-
(175)
11,041
(3,028)
28,551
38,152
3,162
(60,705)
3,332
5,071
40,152
-
(236)
9,536
(3,189)
(117,449)
(169,469)
(5,108)
122,226
(911)
36,877
34,468
5,748
(54)
9,421
(1,172)
59,137
16,904
2,086
4,630
1,568
(8,767)
Cash flows provided by operating activities
161,683
1,962
170,296
Cash flows from investing activities
Payments for property, plant and equipment
Proceeds from sales of property, plant and equipment
(74,051)
2,145
(74,674)
280
(57,427)
342
Cash flows used in investing activities
(71,906)
(74,394)
(57,085)
Cash flows from financing activities
Proceeds from debt issuance
Purchases of common stock
Payments on debt and capital lease obligations
Proceeds from exercise of stock options
Income tax benefit of stock option exercises
175,000
(200,000)
(17,420)
5,466
-
-
-
(20,899)
21,040
2,115
-
-
(20,726)
3,402
445
Cash flows (used in) provided by financing activities
(36,954)
2,256
(16,879)
Effect of foreign currency translation on cash and cash equivalents
1,040
38
(3,920)
Net increase (decrease) in cash and cash equivalents
53,863
(70,138)
Cash and cash equivalents, beginning of year
188,244
258,382
92,412
165,970
Cash and cash equivalents, end of year
$ 242,107
$ 188,244
$ 258,382
The accompanying notes are an integral part of these consolidated financial statements.
44
Plexus Corp.
Notes to Consolidated Financial Statements
1.
Description of Business and Significant Accounting Policies
Description of Business: Plexus Corp. and its subsidiaries (together “Plexus,” the “Company,” or
“we”) participate in the Electronic Manufacturing Services (“EMS”) industry. We deliver optimized Product
Realization solutions through a unique Product Realization Value Stream services model. This customer
focused services model seamlessly integrates innovative product conceptualization, design,
commercialization, manufacturing, fulfillment and sustaining services to deliver comprehensive end-to-end
solutions for customers in the Americas, European, and Asia-Pacific regions. Customer service is provided to
over 130 branded product companies in the Wireline/Networking, Wireless Infrastructure, Medical,
Industrial/Commercial and Defense/Security/Aerospace market sectors. Our customers’ products typically
require exceptional production and supply-chain flexibility, necessitating an optimized demand-pull-based
manufacturing and supply chain solution across an integrated global platform. Many of our customers’
products require complex configuration management and direct order fulfillment to their customers across the
globe. In such cases we provide global logistics management and after-market service and repair. Our
customers’ products may have stringent requirements for quality, reliability and regulatory compliance. We
offer our customers the ability to outsource all phases of product realization, including product specifications;
development, design and design verification; regulatory compliance support; prototyping and new product
introduction; manufacturing test equipment development; materials sourcing, procurement and supply-chain
management; product assembly/manufacturing, configuration and test; order fulfillment, logistics and
service/repair.
Consolidation Principles and Basis of Presentation: The consolidated financial statements have
been prepared in accordance with generally accepted accounting principles and include the accounts of
Plexus Corp. and its subsidiaries. All intercompany transactions have been eliminated.
The Company’s fiscal year ends on the Saturday closest to September 30. The Company also uses a
“4-4-5” weekly accounting system for the interim periods in each quarter. Each quarter, therefore, ends on a
Saturday at the end of the 4-4-5 period. Periodically, an additional week must be added to the fiscal year to
re-align with the Saturday closest to September 30. Fiscal 2009 included this additional week and the fiscal
year ended on October 3, 2009. Therefore fiscal 2009 included 371 days. The additional week was added to
the first fiscal quarter, ended January 3, 2009, which included 98 days. The accounting years for fiscal 2011
and 2010 each included 364 days.
In the first quarter of fiscal 2011, as previously announced, we completed our migration to a regional
reporting structure. This change included establishing regional targets for various financial metrics,
delegating additional authority to the regions to manage their business, and changing our related internal
reporting. Given this change to regional reporting and management, as well as in the information used by
management for assessing performance and allocating Company resources, we modified our reporting
segments. Prior to fiscal 2011, the Company’s reportable segments consisted of the United States, Asia,
Europe and Mexico. During the first quarter of fiscal 2011, we combined our United States and Mexico
segments into the “Americas” (“AMER”) segment and renamed our Asia segment “Asia-Pacific” (“APAC”)
and our Europe segment “Europe, Middle East and Africa” (“EMEA”) to better represent our long-range
regional focus. As a result, we have conformed all prior period segment presentations to be consistent with
our current reportable segments. See Note 13 - Reportable Segments, Geographic Information and Major
Customers for further information.
45
Plexus Corp.
Notes to Consolidated Financial Statements
Cash and Cash Equivalents: Cash equivalents are highly liquid investments purchased with an
original maturity of less than three months (in thousands):
Cash
Money market funds and other
2011
$ 93,587
148,520
$ 242,107
2010
$ 121,976
66,268
$ 188,244
Inventories: Inventories are valued at the lower of cost or market. Cost is determined by the first-in,
first-out (“FIFO”) method. Valuing inventories at the lower of cost or market requires the use of estimates
and judgment. Customers may cancel their orders, change production quantities or delay production for a
number of reasons that are beyond the Company’s control. Any of these, or certain additional actions, could
impact the valuation of inventory. Any actions taken by the Company’s customers that could impact the
value of its inventory are considered when determining the lower of cost or market valuations.
Per contractual terms, customer deposits are received by the Company to offset obsolete and excess
inventory risks.
Property, Plant and Equipment and Depreciation: These assets are stated at cost. Depreciation,
determined on the straight-line method, is based on lives assigned to the major classes of depreciable assets as
follows:
Buildings and improvements
Machinery and equipment
Computer hardware and software
15-50 years
3-10 years
2-10 years
Certain facilities and equipment held under capital leases are classified as property, plant and
equipment and amortized using the straight-line method over the lease terms and the related obligations are
recorded as liabilities. Lease amortization is included in depreciation expense (see Note 3) and the financing
component of the lease payments is classified as interest expense.
For the capitalization of software costs, the Company capitalizes significant costs incurred in the
acquisition or development of software for internal use, including the costs of the software, consultants as
well as payroll and payroll-related costs for employees directly involved in developing internal use computer
software once the final selection of the software is made. Costs incurred prior to the final selection of
software and costs not qualifying for capitalization are expensed as incurred.
Expenditures for maintenance and repairs are expensed as incurred.
Goodwill and Other Intangible Assets: During fiscal 2009, the Company recorded a goodwill
impairment charge of $5.7 million, writing off the entire carrying value of its goodwill related to its Kelso,
Scotland (“Kelso”) facility. The impairment charge was driven by macroeconomic conditions that
contributed to an overall reduction in demand for the Company’s offerings from the Kelso facility. These
conditions led to an “interim triggering event,” leading management to perform an interim goodwill
impairment test. This test resulted in the determination that the carrying value of the goodwill relating to
Kelso, the Company’s sole remaining goodwill asset, was fully impaired and therefore an impairment charge
of $5.7 million was recorded.
Should the Company have goodwill and intangible assets with indefinite useful lives in the future,
the Company would test those assets for impairment at least annually, and recognize any related losses when
incurred. Recoverability of goodwill would be measured at the reporting unit level. The Company would
measure the recoverability of goodwill under the annual impairment test by comparing the reporting unit’s
carrying amount, including goodwill, to the reporting unit’s estimated fair market value, which would be
primarily estimated using the present value of expected future cash flows, although market valuations may
also be employed. If the carrying amount of the reporting unit exceeds its fair value, goodwill would be
46
Plexus Corp.
Notes to Consolidated Financial Statements
considered impaired and a second test is performed to measure the amount of impairment. Circumstances
that may lead to impairment of goodwill include, but are not limited to, the loss of a significant customer or
customers and unforeseen reductions in customer demand, future operating performance or industry demand.
Impairment of Long-Lived Assets: Long-lived assets, including property, plant and equipment and
intangible assets with finite lives are reviewed for impairment and written down to fair value when facts and
circumstances indicate that the carrying value of long-lived assets may not be recoverable through estimated
future undiscounted cash flows. If an impairment has occurred, a write-down to estimated fair value is made
and the impairment loss is recognized as a charge against current operations. The impairment analysis is
based on management’s assumptions, including future revenue and cash flow projections. Circumstances that
may lead to impairment of property, plant and equipment include reduced expectations for future
performance or industry demand and possible further restructurings, among others.
Revenue Recognition: Net sales from manufacturing services are recognized when the product has
been shipped, the risk of ownership has transferred to the customer, the price to the buyer is fixed or
determinable, and recoverability is reasonably assured. This point depends on contractual terms and
generally occurs upon shipment of the goods from Plexus. Generally, there are no formal customer
acceptance requirements or further obligations related to manufacturing services; if such requirements or
obligations exist, then a sale is recognized at the time when such requirements are completed and such
obligations are fulfilled.
Net sales from engineering design and development services, which are generally performed under
contracts with a duration of twelve months or less, are typically recognized as program costs are incurred
utilizing the proportional performance model. The completed performance model is used if certain customer
acceptance criteria exist. Any losses are recognized when anticipated. Net sales from engineering design and
development services were less than five percent of total sales in fiscal 2011, 2010 and 2009.
Sales are recorded net of estimated returns of manufactured products based on management’s
analysis of historical returns, current economic trends and changes in customer demand. Net sales also
include amounts billed to customers for shipping and handling. The corresponding shipping and handling
costs are included in cost of sales.
Income Taxes: Deferred income taxes are provided for the difference between the financial
statement balance of assets and liabilities and their respective tax basis. The Company records a valuation
allowance against deferred income tax assets when management believes it is more likely than not that some
portion or all of the deferred income tax assets will not be realized (see Note 6). Realization of deferred
income tax assets is dependent on the Company’s ability to generate future taxable income. Recognition of
deferred income tax assets is evaluated and tax reserves are recorded to address potential exposures related to
income tax positions taken by the Company. These reserves are based on the assumptions and past
experiences of the Company and provide for the uncertainty surrounding the application of statutes, rules,
regulations, and interpretations to its income tax filings. It is possible that the actual costs or benefits relating
to these matters may be materially more or less than the amount the Company estimated.
Foreign Currency Translation: We translate assets and liabilities of subsidiaries operating outside
of the U.S. with a functional currency other than the U.S. dollar into U.S. dollars using exchange rates in
effect at year-end. We translate net sales, expenses and cash flows at the average monthly exchange rates
during the respective periods. Adjustments resulting from translation of the financial statements are recorded
as a component of “Accumulated other comprehensive income”. Exchange gains and losses arising from
transactions denominated in a currency other than the functional currency of the entity involved and
remeasurement adjustments for foreign operations where the U.S. dollar is the functional currency are
included in our Statements of Operations as a component of miscellaneous income (expense). Exchange
gains (losses) on foreign currency transactions were $1.0 million, $(1.5) million, and $0.7 million for the
fiscal years ended October 1, 2011, October 2, 2010, and October 3, 2009, respectively.
Derivatives: The Company periodically enters into derivative contracts such as foreign currency
forwards and interest rate swaps, which are designated as cash flow hedges. All derivatives are recognized
on the balance sheet at their estimated fair value. On the date a derivative contract is entered into, the
47
Plexus Corp.
Notes to Consolidated Financial Statements
Company designates the derivative as a hedge of a recognized asset or liability (a “fair value” hedge), a hedge
of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized
asset or liability (a “cash flow” hedge), or a hedge of the net investment in a foreign operation. The Company
does not enter into derivatives for speculative purposes. Changes in the fair value of a derivative that qualifies
as a fair value hedge are recorded in earnings along with the gain or loss on the hedged asset or liability.
Changes in the fair value of a derivative that qualifies as a cash flow hedge are recorded in “Accumulated
other comprehensive income” within shareholders’ equity, until earnings are affected by the variability of
cash flows. Changes in the fair value of a derivative used to hedge the net investment in a foreign operation
are recorded in “Accumulated other comprehensive income” within shareholders’ equity. Our interest rate
swaps and forward contracts are treated as cash flow hedges and, therefore, $(0.4) million, $2.0 million and
$(3.2) million were recorded in “Accumulated other comprehensive income” for fiscal 2011, 2010 and 2009,
respectively.
Earnings Per Share: The computation of basic earnings per common share is based upon the
weighted average number of common shares outstanding and net income. The computation of diluted
earnings per common share reflects additional dilution from stock options and restricted stock, excluding any
with an antidilutive effect.
Stock-based Compensation: The Company measures all share-based payments to employees,
including grants of employee stock options, at fair value and expenses them in the Consolidated Statements
of Operations over the service period (generally the vesting period) of the grant.
Comprehensive Income: The Company follows the established standards for reporting
comprehensive income, which is defined as the changes in equity of an enterprise except those resulting from
shareholder transactions.
Accumulated other comprehensive income consists of the following as of October 1, 2011 and
October 2, 2010 (in thousands):
Foreign currency translation adjustment
Cumulative change in fair market value of derivative instruments, net
of tax
Accumulated other comprehensive income
$ 11,460
$ 9,789
(3,331)
$ 8,129
(2,924)
$ 6,865
2011
2010
The change in fair market value of derivative instruments, net of tax adjustment that is recorded to
“Accumulated other comprehensive income” is more fully explained in Note 5 – Derivatives and Fair Value
Measurements.
Conditional Asset Retirement Obligations: We recognize a liability for the fair value of a
conditional asset retirement obligation if the fair value can be reasonably estimated even though uncertainty
exists about the timing and/or method of settlement. The liability is adjusted for any additions or deletions of
related property, plant and equipment.
Use of Estimates: The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make estimates and assumptions
that affect the amounts reported in the financial statements and accompanying notes. Actual results could
differ from those estimates.
Fair Value of Financial Instruments: Accounts payable and accrued liabilities are reflected in the
consolidated financial statements at cost because of the short-term duration of these instruments. Accounts
receivable are reflected at net realizable value based on anticipated losses due to potentially uncollectible
balances. Anticipated losses were based on management’s analysis of historical losses and changes in
customers’ credit status. The fair value of capital lease obligations was approximately $15.8 million and
$18.3 million as of October 1, 2011 and October 2, 2010, respectively. The fair value of the Company’s
48
Plexus Corp.
Notes to Consolidated Financial Statements
long-term debt was $274.3 million and $105.2 million as of October 1, 2011 and October 2, 2010,
respectively. The fair values of the Company’s derivatives are disclosed in Note 5. The Company uses
quoted market prices when available or discounted cash flows to calculate fair value.
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a
liability (or exit price) in the principal or most advantageous market for the asset or liability in an orderly
transaction between market participants on the measurement date. Valuation techniques used to measure fair
value must maximize the use of observable inputs and minimize the use of unobservable inputs. The
accounting guidance establishes a fair value hierarchy based on three levels of inputs that may be used to
measure fair value. The input levels are:
Level 1: Quoted (observable) market prices in active markets for identical assets or liabilities.
Level 2: Inputs other than Level 1 that are observable, such as quoted prices for similar assets or
liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be
corroborated by observable market data for substantially the full term of the asset or liability.
Level 3: Unobservable inputs that are supported by little or no market activity and that are
significant to the fair value of the asset or liability.
Business and Credit Concentrations: Financial instruments that potentially subject the Company to
concentrations of credit risk consist of cash, cash equivalents, trade accounts receivable and derivative
instruments, specifically related to counterparties. In accordance with the Company’s investment policy, the
Company’s cash, cash equivalents and derivative instruments were placed with recognized financial
institutions. The Company’s investment policy limits the amount of credit exposure in any one issue and the
maturity date of the investment securities that typically comprise investment grade short-term debt
instruments. Concentrations of credit risk in accounts receivable resulting from sales to major customers are
discussed in Note 13. The Company, at times, requires advanced cash deposits for services performed. The
Company also closely monitors extensions of credit.
New Accounting Pronouncements: In June 2011, the Financial Accounting Standards Board
(“FASB”) issued an amendment to comprehensive income guidance, which eliminates the option to present
other comprehensive income (“OCI”) and its components in the statement of shareholders’ equity. The
Company can elect to report components of comprehensive income in either (1) a continuous statement of
comprehensive income or (2) two separate but consecutive statements. Under the two-statement approach,
the first statement would include the components of net income, and the second statement would include the
components of OCI. This guidance is effective for financial statements issued for fiscal years, and interim
periods within those years, beginning after December 15, 2011. The adoption of this guidance is not
anticipated to have a material impact on our consolidated results of operations, financial position and cash
flows.
In May 2011, the FASB issued an amendment regarding common fair value measurement and
disclosure requirements in U.S. GAAP and international financial reporting standards (“IFRS”). The
amendments change the wording used to describe many of the requirements in U.S. GAAP for measuring fair
value and for disclosing information about fair value measurements. To improve consistency in application
across jurisdictions some changes in wording are necessary to ensure that U.S. GAAP and IFRS fair value
measurement and disclosure requirements are described in the same way. The amendment also provides for
additional accounting guidance and disclosures related to fair value measurements. This guidance is effective
for financial statements issued for fiscal years, and interim periods within those years, beginning after
December 15, 2011. The adoption of this guidance is not anticipated to have a material impact on our
consolidated financial position, results of operations and cash flows.
In October 2009, the FASB issued new accounting guidance for Multiple-Deliverable Revenue
Arrangements, which establishes a selling price hierarchy for determining the selling price of a deliverable,
replaces the term “fair value” in the revenue allocation guidance with “selling price,” eliminates the residual
method of allocation by requiring that arrangement consideration be allocated at the inception of the
arrangement to all deliverables using the relative selling price method and requires that a vendor determine its
49
Plexus Corp.
Notes to Consolidated Financial Statements
best estimate of selling price in a manner that is consistent with that used to determine the price to sell the
deliverable on a stand-alone basis. This guidance is effective for financial statements issued for fiscal years
beginning after June 15, 2010. The Company adopted this guidance beginning October 3, 2010, and the
adoption did not have a material effect on the Company’s consolidated results of operations, financial
position, and cash flows.
2.
Inventories
Inventories as of October 1, 2011 and October 2, 2010 consisted of (in thousands):
Raw materials
Work-in-process
Finished goods
2011
2010
$ 337,136
46,330
72,370
$ 455,836
$ 365,883
56,036
70,511
$ 492,430
Per contractual terms, customer deposits are received by the Company to offset obsolete and excess
inventory risks. The total amount of deposits related to inventory and included within current liabilities on the
accompanying Consolidated Balance Sheets as of October 1, 2011 and October 2, 2010 were $29.8 million and
$25.8 million, respectively.
3.
Property, Plant and Equipment
Property, plant and equipment as of October 1, 2011 and October 2, 2010, consisted of (in thousands):
Land, buildings and improvements
Machinery and equipment
Computer hardware and software
Construction in progress
Less: accumulated depreciation
2011
2010
$ 161,820
278,807
83,373
40,553
564,553
$ 138,230
255,138
79,108
22,145
494,621
299,048
$ 265,505
258,907
$ 235,714
Assets held under capital leases and included in property, plant and equipment as of October 1, 2011
and October 2, 2010 consisted of (in thousands):
Buildings and improvements
Machinery and equipment
Less: accumulated amortization
2011
2010
$
$
22,934
1,802
24,736
11,345
13,391
$
$
22,700
1,803
24,503
8,905
15,598
The building and improvements category in the above table includes a manufacturing facility in San
Diego, California, which was closed during fiscal 2003 and is no longer used by the Company. The
Company has subleased the facility. The San Diego facility is recorded at the net present value of the
sublease income, net of cash outflows for broker commissions and building improvements associated with the
subleases. The net book value of the San Diego facility is reduced on a monthly basis by the amortization of
the sublease cash receipts, net of certain cash outflows associated with the subleases. The net book value of
the San Diego facility is approximately $10.2 million as of October 1, 2011.
50
Plexus Corp.
Notes to Consolidated Financial Statements
Amortization of assets held under capital leases totaled $0.9 million, $1.0 million, and $0.9 million
for fiscal 2011, 2010 and 2009, respectively. There were no capital lease additions in fiscal 2011; additions
were $0.9 million and $0.3 million for fiscal 2010 and 2009, respectively.
As of October 1, 2011 and October 2, 2010, accounts payable included approximately $12.3 million
and $6.3 million, respectively, related to the purchase of property, plant and equipment, which have been
treated as non-cash transactions for purposes of the Consolidated Statements of Cash Flows.
4.
Debt, Capital Lease Obligations and Other Financing
Debt and capital lease obligations as of October 1, 2011 and October 2, 2010, consisted of (in
thousands):
Debt:
Borrowings under term loan, expiring on April 4,
2013, interest rate of base rate or LIBOR rate plus
1.50%. See also Note 5, Derivatives and Fair Value
Measurements.
Borrowings under senior notes, expiring on June 15,
2018, interest rate of 5.20%. See also Note 5,
Derivatives and Fair Value Measurements.
Capital lease:
Capital lease obligations for equipment and facilities
located in San Diego and Xiamen, China, expiring on
various dates through 2017; weighted average
interest rates of 10.3% and 10.2% for fiscal 2011 and
2010, respectively.
Less: current portion
Long-term debt and capital lease obligations, net of
current portion
2011
2010
$
97,500
$ 112,500
175,000
-
15,142
17,375
(17,350)
(17,409)
$ 270,292
$ 112,466
In February 2010, the Company negotiated the settlement of a capital lease in Kelso, Scotland. The
termination of this capital lease obligation and acquisition of the property was effected through a cash payment by
Plexus of $3.9 million.
The aggregate scheduled maturities of the Company’s debt obligations as of October 1, 2011, are as
follows (in thousands):
2012
2013
2014
2015
2016
Thereafter
Total
$
15,000
82,500
-
-
-
175,000
$ 272,500
51
Plexus Corp.
Notes to Consolidated Financial Statements
The aggregate scheduled maturities of the Company’s obligations under capital leases as of October
1, 2011, are as follows (in thousands):
2012
2013
2014
2015
2016
Thereafter
Less: interest portion of capital leases
Total
$
3,800
3,894
3,984
4,078
3,055
622
19,433
4,291
15,142
$
On April 4, 2008, the Company entered into its Credit Facility with a group of banks which allows
the Company to borrow $150 million in term loans and $100 million in revolving loans. The $150 million in
term loans was immediately funded and the $100 million revolving credit facility is currently available. The
Credit Facility is unsecured and may be increased by an additional $100 million to a total of $200 million (the
“accordion feature”). This is possible if the Company has not previously terminated all or any portion of the
Credit Facility, there is no event of default existing under the credit agreement and both the Company and the
administrative agent consent to the increase. The Credit Facility expires on April 4, 2013. Borrowings under
the Credit Facility may be either through term loans, revolving or swing loans or letter of credit obligations.
As of October 1, 2011, the Company has term loan borrowings of $97.5 million outstanding and no revolving
borrowings under the Credit Facility. Average outstanding revolving borrowings for the fiscal year ended
October 1, 2011 were $6.6 million, and there were no draws against the revolving credit facility during the
fiscal year ended October 2, 2010.
The Credit Facility contains certain financial covenants, which include a maximum total leverage
ratio, maximum value of fixed rentals and operating lease obligations, a minimum interest coverage ratio and
a minimum net worth test, all as defined in the agreement. As of October 1, 2011, the Company was in
compliance with all debt covenants. If the Company incurs an event of default, as defined in the Credit
Facility (including any failure to comply with a financial covenant), the group of banks has the right to
terminate the remaining Credit Facility and all other obligations, and demand immediate repayment of all
outstanding sums (principal and accrued interest). The interest rate on borrowing varies depending upon the
Company’s then-current total leverage ratio; as of October 1, 2011, the Company could elect to pay interest at
a defined base rate or the LIBOR rate plus 1.50%. Rates would increase upon negative changes in specified
Company financial metrics and would decrease upon reduction in the current total leverage ratio to no less
than LIBOR plus 1.00%. The Company is also required to pay an annual commitment fee on the unused
credit commitment based on its leverage ratio; the current fee is 0.375%. Unless the accordion feature is
exercised, this fee applies only to the initial $100 million of availability (excluding the $150 million of term
borrowings). Origination fees and expenses associated with the Credit Facility totaled approximately $1.3
million and have been deferred. These origination fees and expenses will be amortized over the five-year term
of the Credit Facility. Quarterly principal repayments of the term loan of $3.75 million per quarter began June
30, 2008 and end on April 4, 2013 with a balloon repayment of $75.0 million.
The Credit Facility allows for the future payment of cash dividends or the future repurchases of shares
provided that no event of default (including any failure to comply with a financial covenant) is existing at the time
of, or would be caused by, a dividend payment or a share repurchase.
On April 21, 2011, the Company entered into a Note Purchase Agreement (the “Agreement”) with
certain institutional investors related to $175 million in principal amount of 5.20% Senior Notes, due on June
15, 2018 (the “Notes”). The Company issued $100 million in principal amount of the Notes on April 21,
2011, and the remaining $75 million on June 15, 2011. The Agreement includes operational and financial
covenants which include a maximum total leverage ratio, a minimum interest coverage ratio and restrictions
on additional indebtedness, liens and dispositions, all as defined in the Agreement. As of October 1, 2011, the
Company was in compliance with all debt covenants. The Notes are unsecured and rank at least equally and
ratably in point and security with the other unsecured and unsubordinated financing facilities of the Company.
52
Plexus Corp.
Notes to Consolidated Financial Statements
Our effective interest rate on the Notes after the treasury rate lock agreement discussed in Note 5 –
Derivatives and Fair Value Measurements is 4.97%. Origination fees and expenses associated with the
Agreement totaled approximately $0.9 million and have been deferred. These origination fees and expenses
are being amortized over the seven-year term of the Notes. Semi-annual interest payments began on June 15,
2011, and end on June 15, 2018, with full repayment of the total principal of the Notes.
Interest expense related to the commitment fee and amortization of the deferred origination fees and
expenses for the Credit Facility and Agreement totaled approximately $0.7 million in each of fiscal 2011,
2010 and 2009.
Cash paid for interest in fiscal 2011, 2010 and 2009 was $8.6 million, $9.2 million and $10.5 million,
respectively.
5.
Derivatives and Fair Value Measurements
All derivatives are recognized in the accompanying Consolidated Balance Sheets at their estimated
fair values. On the date a derivative contract is entered into, the Company designates the derivative as a
hedge of a recognized asset or liability (a “fair value” hedge), a hedge of a forecasted transaction or of the
variability of cash flows to be received or paid related to a recognized asset or liability (a “cash flow” hedge),
or a hedge of the net investment in a foreign operation. The Company currently has cash flow hedges related
to variable rate debt and forecasted foreign currency payments. The Company does not enter into derivatives
for speculative purposes. Changes in the fair value of the derivatives that qualify as cash flow hedges are
recorded in “Accumulated other comprehensive income” in the accompanying Consolidated Balance Sheets
until earnings are affected by the variability of the cash flows.
During the fourth quarter of fiscal 2011, the Company’s Mexican operations entered into forward
exchange contracts on a rolling basis with a total notional value of $5.9 million as of October 1, 2011. These
forward contracts will fix the exchange rates on foreign currency cash used to pay a portion of local currency
expenses. The total fair value of these forward contracts was a $1.0 million liability as of October 1, 2011.
During the second quarter of fiscal 2011, the Company entered into forward exchange contracts to
fix the exchange rates on foreign currency cash used to pay for capital expenditures related to the
construction of our fourth facility in Malaysia. As of October 1, 2011, the total notional value of the forward
contracts was $2.5 million and the total fair value of these forward contracts was a $0.1 million liability.
The Company’s Malaysian operations have also entered into forward exchange contracts on a rolling
basis with a total notional value of $57.2 million as of October 1, 2011. These forward contracts will fix the
exchange rates on foreign currency cash used to pay a portion of local currency expenses. The total fair value
of these forward contracts was a $1.5 million liability as of October 1, 2011 and a $2.6 million asset as of
October 2, 2010.
During the second quarter of fiscal 2011, the Company entered into two separate treasury rate lock
contracts to hedge the variability of the fixed interest rate on the then forecasted issuance of $175 million of
fixed rate debt using a treasury lock transaction. The fixed interest rates for each of these contracts were
2.77% and 2.72%, respectively, with a combined notional value of $150 million. On April 4, 2011, the
Company entered into a final treasury rate lock transaction for the remaining $25 million of exposure at a rate
of 2.88%. On April 8, 2011, when the fixed interest rate for the debt issuance was determined, all three
treasury rate lock contracts were settled and the Company received proceeds of $2.3 million, which is being
amortized over the seven year term of the related debt.
In June 2008, the Company entered into three interest rate swap contracts related to the $150 million
in term loans under the Credit Facility that had an initial total notional value of $150 million and mature on
April 4, 2013. These interest rate swap contracts will pay the Company variable interest at the three month
LIBOR rate, and the Company will pay the counterparties a fixed interest rate. The fixed interest rates for
each of these contracts are 4.415%, 4.490% and 4.435%, respectively. These interest rate swap contracts
were entered into to convert $150 million of the variable rate term loan under the Credit Facility into fixed
53
Plexus Corp.
Notes to Consolidated Financial Statements
rate debt. Based on the terms of the interest rate swap contracts and the underlying debt, these interest rate
contracts were determined to be effective, and thus qualify as a cash flow hedge. The total fair value of these
interest rate swap contracts was a $5.2 million liability as of October 1, 2011 and a $9.0 million liability as of
October 2, 2010. As of October 1, 2011, the total remaining combined notional amount of the Company’s
three interest rate swaps was $97.5 million.
The tables below present information regarding the fair values of derivative instruments (as defined
in Note 1 – Basis of Presentation and Accounting Policies) and the effects of derivative instruments on the
Company’s Consolidated Financial Statements:
In thousands of dollars
Fair Values of Derivative Instruments
Asset Derivatives
October 1,
2011
October 2,
2010
Derivatives designated
as hedging instruments
Interest rate swaps
Balance Sheet
Location
Interest rate swaps
Forward contracts
Prepaid expenses
and other
Fair Value Fair Value
$ -
$ -
$ -
$ -
$ -
$ 2,612
Balance Sheet
Location
Current liabilities –
Other
Other liabilities
Current liabilities –
Other
The Effect of Derivative Instruments on the Statements of Operations
for the Twelve Months Ended
In thousands of dollars
Liability Derivatives
October 1,
2011
October 2,
2010
Fair Value
Fair Value
$ 3,493
$ 1,746
$ 3,616
$ 5,423
$ 2,544
$ -
Location of
Gain or (Loss)
Recognized in
Income on
Derivative
(Ineffective
Portion and
Amount
Excluded from
Effectiveness
Testing)
Other income
(expense)
Other income
(expense)
Amount of Gain or
(Loss) Recognized in
Income on Derivative
(Ineffective Portion and
Amount Excluded from
Effectiveness Testing)
October 1, October 2,
2011
$ -
2010
$ -
$ -
$ -
$ 125
$ -
Interest income
(expense)
$ -
$ -
Amount of Gain or
(Loss) Recognized in
Other Comprehensive
Income (“OCI”) on
Derivative (Effective
Portion)
October 1, October 2,
2011
$ (510)
2010
$ (4,622)
Location of Gain or
(Loss) Reclassified
from Accumulated
OCI into Income
(Effective Portion)
Interest income
(expense)
Amount of Gain or
(Loss) Reclassified from
Accumulated OCI into
Income (Effective
Portion)
October 1, October 2,
2011
$ (4,310)
2010
$ (4,908)
$ (1,468)
$ 4,110
Selling and
$ 3,423
$ 2,028
Derivatives
in Cash Flow
Hedging
Relationships
Interest rate
swaps
Forward
contracts
Treasury
Rate Locks
$ 2,281
$ -
administrative
expenses
Interest income
(expense)
54
Plexus Corp.
Notes to Consolidated Financial Statements
The following table lists the fair values of the Company’s derivatives as of October 1, 2011, by input
level as defined in Note 1 – Basis of Presentation and Accounting Policies:
Fair Value Measurements Using Input Levels Asset/(Liability) (in thousands):
Level 1
Level 2
Level 3
Total
Derivatives
Interest rate swaps
$ -
Forward currency forward contracts $ -
$ (5,239)
$ (2,544)
$ -
$ -
$ (5,239)
$ (2,544)
The fair value of interest rate swaps and foreign currency forward contracts is determined using a
market approach, which includes obtaining directly or indirectly observable values from third parties active in
the relevant markets. The primary input in the fair value of the interest rate swaps is the relevant LIBOR
forward curve. Inputs in the fair value of the foreign currency forward contracts include prevailing forward
and spot prices for currency and interest rate forward curves.
6.
Income Taxes
The domestic and foreign components of income (loss) before income taxes for fiscal 2011, 2010
and 2009 consisted of (in thousands):
U.S.
Foreign
2011
2010
2009
$ (9,449)
$ (7,742)
$ (5,380)
101,552
92,103
$
98,179
90,437
$
50,799
45,419
$
Income tax expense (benefit) for fiscal 2011, 2010 and 2009 consisted of (in thousands):
Current:
Federal
State
Foreign
Deferred:
Federal
State
Foreign
2011
2010
2009
$
-
3
5,872
5,875
$
-
74
4,019
4,093
$ (1,666)
121
1,809
264
(1,649)
(484)
(895)
(3,028)
$ 2,847
(1,029)
(459)
(1,701)
(3,189)
$ 904
(622)
954
(1,504)
(1,172)
$ (908)
55
Plexus Corp.
Notes to Consolidated Financial Statements
The following is a reconciliation of the federal statutory income tax rate to the effective income tax
rates reflected in the Consolidated Statements of Operations for fiscal 2011, 2010 and 2009:
Federal statutory income tax rate
Increase (decrease) resulting from:
Permanent differences
State income taxes, net of federal
income tax
Foreign tax rate differences
Valuation reserve for deferred tax assets
Other, net
Effective income tax rate
2011
35.0%
-
2010
35.0%
0.6
2009
35.0%
2.0
(0.3)
(34.5)
1.4
1.5
3.1%
(0.3)
(35.4)
-
1.1
1.0%
(0.2)
(40.1)
-
1.3
(2.0)%
The Company recorded income tax expense of $2.8 million and $0.9 million for fiscal 2011 and
fiscal 2010, respectively. The Company recorded income tax benefit of $(0.9) million for fiscal 2009. The
increase to the income tax expense recorded in fiscal 2011 as compared to fiscal 2010 and fiscal 2009 is
primarily due to the change in the mix of income in the tax jurisdictions in which we operate. The difference
in our effective income tax rate as compared to our normal statutory rate is primarily due to the effect of pre-
tax income in Malaysia and Xiamen, China, where we benefit from reduced effective tax rates due to tax
holidays.
The components of the net deferred income tax asset as of October 1, 2011 and October 2, 2010,
consisted of (in thousands):
Deferred income tax assets:
Loss/credit carryforwards
Goodwill
Inventories
Accrued benefits
Allowance for bad debts
Interest rate swaps
Other
Total gross deferred income tax assets
Less valuation allowance
Deferred income tax assets
Deferred income tax liabilities:
Property, plant and equipment
Other
2011
2010
$
10,263
2,787
6,961
16,001
1,149
2,031
4,406
43,598
(5,116)
38,482
$
10,904
3,550
7,936
14,473
383
3,504
3,917
44,667
(2,547)
42,120
9,552
710
10,262
10,346
1,028
11,374
Net deferred income tax asset
$
28,220
$
30,746
During the preparation of the Company’s fiscal 2011 consolidated financial statements, the
Company performed an analysis of all available evidence, both positive and negative, regarding the need for a
valuation allowance against our deferred tax assets, consistent with the provisions of ASC Topic 740,
“Income Taxes.” The Company’s U.S. operations generated losses during the fiscal 2009, 2010 and 2011
years. While we believe these losses could be a significant factor in establishing such an allowance, we
believe that based on the weight of all the evidence, both positive and negative, it is more likely than not that
the Company will be able to utilize its U.S. net deferred tax assets of approximately $21.7 million.
56
Plexus Corp.
Notes to Consolidated Financial Statements
The positive evidence relied upon is as follows: 1) orders for a new large U.S. industrial/commercial
customer are currently projected to significantly increase in fiscal 2012, which we believe would result in
income for the Company’s U.S. operations in fiscal 2012 and beyond; 2) the effect of the deep U.S. recession
during this period was considered atypical; 3) the Company’s U.S. operations created cumulative pretax
income for fiscal years 2006 through 2008 of more than $150 million; 4) the federal tax losses in fiscal 2009
and 2010 were able to be fully utilized through loss carrybacks to prior years; and 5) the federal loss
carryforward at the end of fiscal 2011 has a 20 year carryforward period.
As a result of using the with-and-without method under the requirements for accounting for stock-
based compensation, the Company recorded a valuation allowance for state taxes against the amount of net
operating loss and credit carryforwards related to tax deductions in excess of compensation expense for stock
options until such time as the related deductions actually reduce income taxes payable. The Company
reversed approximately $0.1 million of this valuation allowance with corresponding credits to additional
paid-in capital in fiscal 2009. As of the end of fiscal 2010 there was a valuation allowance of $1.0 million for
federal and state taxes against the amount of net operating loss and credit carryforwards related to tax
deductions in excess of compensation expense for stock options. During fiscal 2011 the Company recorded
an additional valuation allowance of $1.3 million. As a result, we had a remaining valuation allowance of
approximately $2.3 million related to tax deductions associated with stock-based compensation as of October
1, 2011.
In addition, there is a remaining valuation allowance of $1.6 million as of October 1, 2011, related to
various state deferred income tax assets where it is more likely than not that the asset will not be realized due
to a lack of sustained profitability and limited carryforward periods in these states.
During fiscal 2011 the Company added a valuation allowance of $0.3 million and $0.9 million in the
United Kingdom and Romania, respectively to offset the increase in net deferred tax assets in those
jurisdictions which, more likely than not, will not be realized.
On November 1, 2009, Mexico adopted tax reform legislation that took effect January 1, 2010, and
provides for a temporary increase in its income tax and value added tax rates from 28% to 30% and 15% to
16%, respectively, along with certain other changes. These laws did not have a material impact on our
effective income tax rate in fiscal 2011, 2010 or 2009; however, they could have a material effect on future
periods. On November 5, 2009, the United States adopted the “Worker, Homeownership, and Business
Assistance Act of 2009”, which provides for an increase in the net operating loss carryback period from two
years to five years for tax periods beginning or ending in calendar years 2008 and 2009, along with certain
other tax law changes. This law did not have a material impact on our effective tax rate in fiscal 2011, 2010
or 2009 and we do not currently believe that it will create a material impact on our effective income tax rate
in future periods.
In March 2007, the Chinese government made significant changes to its tax law with a bias toward a
unified tax rate for domestic and foreign enterprises of 25 percent. The law was effective on January 1, 2008.
The effect of the law on enterprises with agreed-upon incentives requires that their China federal taxes will be
increased to the new unified tax rate over a five-year period that began in calendar 2008. This law did not
have a material effect on our income taxes for our fiscal 2011, 2010 or 2009 tax years. However, depending
upon the relative amount of income earned in China in the future, the increased tax rates on our China income
could have a material effect.
On July 19, 2011, the United Kingdom enacted The Finance (No. 3) Act 2011, which reduced its
corporate income tax rate from 28% to 26% effective April 1, 2011 and to 25% effective April 1, 2012. This
law did not have a material impact on our effective income tax rate in fiscal 2011; however, it could have a
material effect on future periods. In July 2005, the United Kingdom enacted the Finance Act (the “Finance
Act”), which limits the deduction of interest expense incurred in the United Kingdom when the corresponding
interest income earned by the other party is not taxable to such party. The Company currently extends loans
from a U.S. subsidiary to a United Kingdom subsidiary, which is affected by the Finance Act. For fiscal
years 2011, 2010 and 2009, management provided income tax expense for the effect of the Finance Act on
the non-deductibility of this interest expense based on the current agreement with the tax authorities in the
United Kingdom regarding the application of the Finance Act to the Company’s circumstances.
57
Plexus Corp.
Notes to Consolidated Financial Statements
The Company has been granted tax holidays for its Malaysian and Xiamen, China subsidiaries.
These tax holidays expire in 2024 and 2013, respectively, and are subject to certain conditions with which the
Company expects to comply. In fiscal 2011, 2010 and 2009, these subsidiaries generated income, which
resulted in tax reductions of approximately $21.7 million ($0.57 per basic share), $23.0 million ($0.58 per
basic share) and $15.2 million ($0.38 per basic share), respectively.
The Company does not provide for taxes that would be payable if undistributed earnings of foreign
subsidiaries were remitted because the Company considers these earnings to be invested for an indefinite
period. The aggregate undistributed earnings of the Company’s foreign subsidiaries for which a deferred
income tax liability has not been recorded was approximately $406.8 million as of October 1, 2011. If such
earnings were repatriated, additional tax expense may result, although the calculation of such additional taxes
is not practicable at this time.
As of October 1, 2011, the Company had approximately $75.6 million of state net operating loss
carryforwards that expire between fiscal 2012 and 2029.
Cash refund for income taxes in fiscal 2011 was $2.2 million, and cash paid for income taxes in
fiscal 2010 and 2009 was $3.5 million and $2.9 million, respectively.
The Company has approximately $7.4 million of uncertain tax benefits as of October 1, 2011. The
Company has classified these amounts in the Consolidated Balance Sheets as “Other liabilities” (noncurrent)
to the extent that payment is not anticipated within one year. Presented below is a reconciliation of the
beginning and ending amounts of unrecognized income tax benefits (in thousands):
Balance at beginning of fiscal 2010
Gross increases for tax positions of prior years
Gross increases for tax positions of the current year
Gross decreases for tax positions of prior years
Settlements
Balance at beginning of fiscal 2011
Gross increases for tax positions of prior years
Gross increases for tax positions of the current year
Gross decreases for tax positions of prior years
Settlements
Balance at October 1, 2011
$ 4,849
131
964
-
-
$ 5,944
191
1,225
-
-
$ 7,360
Approximately $6.3 million and $4.8 million, respectively of the balance as of October 1, 2011, and
October 2, 2010 would reduce the Company’s effective tax rate if recognized.
The Company recognizes accrued interest and penalties related to unrecognized tax benefits in
income tax expense. The total accrued penalties and net accrued interest with respect to income taxes was
approximately $0.7 million, $0.5 million and $0.3 million as of October 1, 2011, October 2, 2010 and October
3, 2009, respectively. The Company recognized $0.2 million of expense for accrued penalties and net accrued
interest in the Consolidated Statements of Operations for the fiscal year ended October 1, 2011.
During the second quarter of fiscal 2009, tax expense decreased by approximately $1.4 million,
consisting of approximately $1.6 million, including interest, related to the conclusion of federal and state
audits, which resulted in a reduction of the liability related to uncertainty in income taxes, offset by an
additional provision of $0.2 million for changes in state tax laws.
It is reasonably possible that a number of uncertain tax positions related to federal and state tax
positions may be settled within the next 12 months. Settlement of these matters is not expected to have a
material effect on the Company’s consolidated results of operations, financial position and cash flows.
58
Plexus Corp.
Notes to Consolidated Financial Statements
The Company files income tax returns, including returns for its subsidiaries, with federal, state, local
and foreign taxing jurisdictions. The following tax years remain subject to examination by the respective major
tax jurisdictions:
Jurisdiction
China
Germany
Mexico
Romania
United Kingdom
United States
Federal
State
Fiscal Years
2008 – 2011
2009 – 2011
2006 – 2011
2009 – 2011
2007 – 2011
2007 – 2011
2001 – 2011
7.
Shareholders’ Equity
On February 16, 2011 the Company’s Board of Directors approved a share repurchase program that
authorized the Company to repurchase up to $200 million of common stock. On August 15, 2011, the
Company completed its share repurchase program; a total of 6.3 million shares were purchased at a volume-
weighted average of $31.69 per share.
Pursuant to the Company's Rights Agreement, each preferred share purchase right (a "Right")
entitles the registered holder to purchase from the Company one one-hundredth of a share of the Company's
Series B Junior Participating Preferred Stock, $0.01 par value per share (“Preferred Share"), at a price of
$125.00 per one one-hundredth of a Preferred Share, subject to adjustment. The Rights are exercisable only
if a person or group acquires beneficial ownership of more than 20% of the Company's outstanding common
stock or commences, or announces an intention to make, a tender offer or exchange offer that would result
in such person or group acquiring the beneficial ownership of more than 20% of the Company's common
stock. The Rights expire on August 28, 2018, subject to extension.
8.
Earnings Per Share
The following is a reconciliation of the amounts utilized in the computation of basic and diluted earnings
per share (in thousands, except per share amounts):
Earnings:
Net income
October 1,
2011
Fiscal Years Ended
October 2,
2010
October 3,
2009
$
89,256
$
89,533
$
46,327
Basic weighted average common shares outstanding
Dilutive effect of stock options
Diluted weighted average shares outstanding
38,063
737
38,800
40,051
780
40,831
39,411
243
39,654
Earnings per share:
Basic
Diluted
$
$
2.34
2.30
$
$
2.24
2.19
$
$
1.18
1.17
In fiscal 2011, 2010 and 2009, stock options and stock-settled stock appreciation rights (‘SARs”) to
purchase approximately 1.3 million, 1.2 million and 2.7 million shares, respectively, were outstanding but
were not included in the computation of diluted earnings per share because the options’ and SARs’ exercise
prices were greater than the average market price of our common shares and, therefore, their effect would be
antidilutive. In fiscal 2009, restricted stock units (“RSUs”) of approximately 20,000 were outstanding but
59
Plexus Corp.
Notes to Consolidated Financial Statements
were not included in the computation of diluted earnings per share because their effect would have been anti-
dilutive. In fiscal 2011 and fiscal 2010 there were no anti-dilutive RSUs outstanding.
9.
Operating Lease Commitments
The Company has a number of operating lease agreements primarily involving manufacturing
facilities, manufacturing equipment and computerized design equipment. These leases are non-cancelable
and expire on various dates through 2021. Rent expense under all operating leases for fiscal 2011, 2010 and
2009 was approximately $12.8 million, $11.8 million and $11.9 million, respectively. Renewal and purchase
options are available on certain of these leases.
Future minimum annual payments on operating leases are as follows (in thousands):
2012
2013
2014
2015
2016
Thereafter
$
$
11,574
9,589
8,015
5,724
3,456
2,868
41,226
10.
Restructuring and Asset Impairment Charges
Fiscal 2011 and fiscal 2010 restructuring and asset impairment charges: For fiscal 2011 and fiscal
2010, the Company did not incur any restructuring or impairment charges.
Fiscal 2009 restructuring and asset impairment charges: For fiscal 2009, we recorded pre-tax
restructuring and asset impairment charges of $8.6 million, related to goodwill impairment in our EMEA
reportable segment, the closure of our Ayer, Massachusetts (“Ayer”) facility and the reduction of our
workforce across our facilities in the United States and Juarez, Mexico (“Juarez”). The details of these fiscal
2009 restructuring actions are listed below:
Goodwill Impairment: During the second quarter of fiscal 2009, the Company recorded a goodwill
impairment charge of $5.7 million, writing off the entire carrying value of our goodwill related to our Kelso,
Scotland (“Kelso”) facility. The impairment charge was driven by macroeconomic conditions that
contributed to an overall reduction in demand for the Company’s offerings from the Kelso facility. These
conditions led to an “interim triggering event”, leading management to perform an interim goodwill
impairment test. This test resulted in the determination that the carrying value of the goodwill relating to
Kelso was fully impaired and therefore an impairment charge of $5.7 million was recorded.
Ayer Facility Closure: During the third quarter of fiscal 2009, we closed our Ayer facility. In fiscal
2009, we recorded pre-tax restructuring charges of $0.4 million, related to the disposal of certain assets and
costs to exit this leased facility.
Other Restructuring Charges. In fiscal 2009, we recorded pre-tax restructuring charges of $2.0
million related to severance at facilities in the United States as well as Juarez. These workforce reductions
affected approximately 450 employees. We also recorded approximately $0.5 million of asset impairment
charges at Corporate.
60
Plexus Corp.
Notes to Consolidated Financial Statements
A detail of restructuring and asset impairment charges are provided below (in thousands):
Employee
Termination and
Severance Costs
Lease
Obligations and
Other Exit Costs
Non-cash Asset
Impairments
Total
Accrued balance, September 27, 2008
$
2,038
$
-
$
-
$
2,038
Restructuring and asset impairments
charges
Adjustment to provisions
Amount utilized
Accrued balance, October 3, 2009
2,196
(249)
(3,941)
44
876
-
(790)
86
$
5,748
-
(5,748)
-
$
8,820
(249)
(10,479)
130
$
$
The remaining balance as of October 3, 2009 of $0.1 million was utilized in fiscal 2010 and no
further accruals were recorded in fiscal 2011 or 2010.
For a detail of restructuring and asset impairment charges by reportable segment, see Note 13 –
Reportable Segments, Geographic Information and Major Customers.
11.
Benefit Plans
401(k) Savings Plan: The Company’s 401(k) Savings Plan covers all eligible U.S. employees.
Effective January 1, 2010, the Company began matching employee contributions up to 4 percent of eligible
earnings. Previously, the Company matched employee contributions up to 2.5 percent of eligible earnings.
The Company’s contributions for fiscal 2011, 2010 and 2009 totaled $5.8 million, $4.9 million and $2.9
million, respectively.
Stock-based Compensation Plans: The Company’s shareholders approved the Plexus Corp. 2008
Long-Term Incentive Plan (the “2008 Plan”), which was last approved by shareholders in February 2011, is a
stock-based incentive plan for officers, key employees and directors; the 2008 Plan includes provisions by
which the Company may grant stock-based awards, including stock options, stock-settled stock appreciation
rights (“SARs”), restricted stock, restricted stock units (“RSUs”), unrestricted stock awards (“SAs”) and
performance stock awards, in addition to cash incentive awards, to directors, executive officers and other
officers and key employees. The maximum number of shares of Plexus common stock which may be issued
pursuant to the 2008 Plan is 5,500,000 shares; in addition, cash incentive awards of up to $4.0 million may be
granted annually. The exercise price of each stock option and SAR granted must not be less than the fair
market value on the date of grant. The Compensation and Leadership Development Committee (the
“Committee”) of the Board of Directors may establish a term and vesting period for stock options, SARs,
RSUs and other awards under the 2008 Plan as well as accelerate the vesting of such awards. Generally,
stock options vest in two annual installments and have a term of ten years, SARs vest in two annual
installments and have a term of seven years, and RSUs fully vest on the third anniversary of the grant date
(assuming continued employment), which is also the date as of which the underlying shares will be issued.
The 2008 Plan replaced the shareholder-approved 2005 Equity Incentive Plan (the “2005 Plan”).
The 2005 Plan constituted a stock-based incentive plan for the Company and included provisions by which
the Company could grant stock-based awards to directors, executive officers and other officers and key
employees. The exercise price of each stock option granted must not have been less than the fair market value
on the date of grant. The 2005 Plan terminated upon the approval of the 2008 Plan, except that outstanding
awards continue until expiration.
Individual stock option and SARs grants are determined annually, but granted on a quarterly basis.
However, grants of RSUs are generally made only on an annual basis. Beginning in fiscal 2011, the
Company discontinued the use of long-term cash awards and increased the number of RSUs to provide
equivalent value. In fiscal 2009, the Company made a special grant consisting solely of RSUs to certain key
61
Plexus Corp.
Notes to Consolidated Financial Statements
employees (excluding our Chief Executive Officer) to encourage retention, but did not make similar special
grants in fiscal 2011 or fiscal 2010.
For options issued to the members of the Board of Directors in fiscal 2009, 50 percent of their stock
options vested immediately at the date of grant and their remaining stock options vested on the first
anniversary of the grant date. Options issued to the members of the Board of Directors in fiscal 2011 and
2010 vested immediately on the date of grant. In fiscal 2011 and fiscal 2010, the Company granted members
of the board of directors SAs, which vested immediately on grant.
In fiscal 2011, under the 2008 Plan, the Company granted options, which had a term of ten years, to
purchase 0.3 million shares of the Company’s common stock and 0.3 million stock-settled SARs, which had a
term of seven years. Additionally, the Committee made awards of RSUs for 0.1 million shares of common
stock, all of which vest on the third anniversary of grant, and the Committee granted SAs for 0.1 million
shares of common stock.
In fiscal 2010, under the 2008 Plan, the Company granted options, which had a term of ten years, to
purchase 0.3 million shares of the Company’s common stock and 0.3 million stock-settled SARs, which had a
term of seven years. Additionally, the Committee made awards of RSUs for 0.1 million shares of common
stock and long-term cash awards that totaled $0.9 million, all of which vest on the third anniversary of grant.
In addition, in fiscal 2010, the Committee granted SAs for 0.1 million shares of common stock.
In fiscal 2009, under the 2008 Plan, the Company granted options, which had a term of ten years, to
purchase 0.3 million shares of the Company’s common stock and 0.3 million stock-settled SARs, which had a
term of seven years. Additionally, the Committee made awards of RSUs for 0.2 million shares of common
stock and long-term cash awards that totaled $1.0 million, all of which vest on the third anniversary of grant.
The Company recognized $11.0 million, $9.5 million, and $9.4 million of compensation expense
associated with stock options, SARs, RSUs and SAs for the fiscal years ended October 1, 2011, October 2,
2010 and October 3, 2009, respectively. The related deferred tax benefit recognized was $3.7 million, $3.2
million, and $2.4 million for the fiscal years ended October 1, 2011, October 2, 2010, and October 3, 2009,
respectively.
A summary of the Company’s stock option and SAR activity follows:
Outstanding as of September 27, 2008
3,393
$
25.88
Number of
Options/SARs
(in thousands)
Weighted Average
Exercise Price
Aggregate
Intrinsic Value
(in thousands)
Granted
Cancelled
Exercised
Outstanding as of October 3, 2009
Granted
Cancelled
Exercised
Outstanding as of October 2, 2010
Granted
Cancelled
Exercised
Outstanding as of October 1, 2011
614
(166)
(223)
3,618
603
(122)
(910)
3,189
641
(110)
(501)
3,219
19.71
28.75
15.43
25.34
32.29
34.18
25.80
26.18
31.01
34.87
20.78
27.69
$
$
$
$
5,637
62
Plexus Corp.
Notes to Consolidated Financial Statements
Exercisable as of:
October 3, 2009
October 2, 2010
October 1, 2011
Number of
Options/SARs
(in thousands)
Weighted Average
Exercise Price
Aggregate
Intrinsic Value
(in thousands)
2,815
2,365
2,383
$
$
$
26.36
25.37
26.38
$
5,637
Included in the table above are 344,920, 335,022, and 310,071 SARs, which were granted in fiscal
2011, 2010 and 2009, respectively.
The following table summarizes outstanding stock option and SAR information as of October 1,
2011 (Options/SARs in thousands):
Range of
Exercise Prices
$ 8.97 - $14.63
$14.64 - $20.95
$20.96 - $29.84
$29.85 - $42.52
372
362
1,231
1,254
$ 8.97 - $42.52
3,219
Number of
Options/SARs
Outstanding
Weighted
Average
Exercise Price
Weighted
Average
Remaining Life
Number of
Options/SARs
Exercisable
Weighted
Average
Exercise Price
$ 13.34
$ 18.06
$ 25.68
$ 36.69
$ 27.69
4.0
4.7
5.6
6.3
5.6
372
362
891
758
$ 13.34
$ 18.06
$ 24.84
$ 38.56
2,383
$ 26.38
The Company continues to use the Black-Scholes valuation model to value options and SARs. The
Company used its historical stock prices as the basis for its volatility assumptions. The assumed risk-free
rates were based on U.S. Treasury rates in effect at the time of grant with a term consistent with the expected
option and SAR lives. The expected option and SAR lives represent the period of time that the options and
SARs granted are expected to be outstanding and were based on historical experience.
The weighted average fair value per share of options and SARs issued for the fiscal years ended
October 1, 2011, October 2, 2010 and October 3, 2009 were $13.40, $14.25 and $8.72, respectively. The fair
value of each option and SAR grant was estimated at the date of grant using the Black-Scholes option-pricing
model based on the assumption ranges below:
Fiscal Years Ended
October 1,
2011
October 2,
2010
October 3,
2009
Expected life (years)
Risk-free interest rate
Expected volatility
Dividend yield
4.40 – 5.00
1.03 – 2.17%
49 – 50%
-
4.40 – 5.00
1.61 – 2.71%
50%
-
4.40 – 4.90
1.76 – 2.84%
48 – 51%
-
The fair value of options and SARs vested for fiscal years ended October 1, 2011, October 2, 2010
and October 3, 2009 were $3.6 million, $3.1 million and $6.3 million, respectively.
For the fiscal years ended October 1, 2011, October 2, 2010, and October 3, 2009, the total intrinsic
value of options and SARs exercised was $6.5 million, $8.5 million and $1.2 million, respectively.
As of October 1, 2011, there was $7.7 million of unrecognized compensation cost related to non-
vested options and SARs that is expected to be recognized over a weighted average period of 1.29 years.
63
Plexus Corp.
Notes to Consolidated Financial Statements
A summary of the Company’s RSUs and SAs activity follows:
Number of Shares
(in thousands)
Weighted Average
Fair Value at Date
of Grant
Aggregate
Intrinsic Value
(in thousands)
Units outstanding as of September 27, 2008
99
$
30.54
Granted
Cancelled
Vested
Units outstanding as of October 2, 2009
Granted
Cancelled
Vested
Units outstanding as of October 2, 2010
Granted
Cancelled
Vested
Units outstanding as of October 1, 2011
210
(11)
-
298
115
(12)
(16)
385
155
(18)
(98)
424
21.73
24.86
-
24.54
$
33.99
26.95
33.99
26.90
$
27.14
25.92
31.27
26.02
$
$ 9,749
The Company uses the fair value at the date of grant to value RSUs and SAs. The fair value of
RSUs and SAs that vested for the fiscal year ended October 1, 2011 was $0.6 million. There was 88,112
RSUs and 10,000 SAs that vested during the fiscal year ended October 1, 2011. There were not any RSUs
and 16,000 SAs that vested during the fiscal year ended October 2, 2010 and there were not any RSUs or SAs
that vested during the fiscal year ended October 3, 2009.
As of October 1, 2011, there was $5.1 million of unrecognized compensation cost related to RSU
awards that is expected to be recognized over a weighted average period of 1.8 years.
Deferred Compensation Arrangements: The Company has agreements with certain of its former
executive officers to provide nonqualified deferred compensation. Under those agreements, the Company
agreed to pay to these former executives, or their designated beneficiaries upon such executives’ deaths,
certain amounts annually for the first 15 years subsequent to their retirements. In August 2009, amendments
were entered into in order to align the provisions regarding the determination of payment amounts to a fixed
15-year annual installment payment stream. The amendments were consistent with the intent of the original
agreements and with the manner in which the agreements had operated in practice.
The Company has a supplemental executive retirement plan (the “SERP”) as an additional deferred
compensation plan for executive officers and other key employees. Under the SERP, a covered executive
may elect to defer some or all of the participant’s compensation into the plan, and the Company may credit
the participant’s account with a discretionary employer contribution. Participants are entitled to payment of
deferred amounts and any related earnings upon termination or retirement from Plexus.
The SERP operates under a rabbi trust arrangement (the “Trust”). The Trust allows investment of
deferred compensation held on behalf of the participants into individual accounts and, within these accounts,
into one or more designated investments. Investment choices do not include Plexus stock. In fiscal 2011,
2010 and 2009, the Company made contributions to the participants’ SERP accounts in the amount of $0.3
million, $0.2 million and $0.2 million, respectively.
As of October 1, 2011 and October 2, 2010, the SERP assets held in the Trust totaled $6.2 million
and $6.0 million, respectively, and the related liability to the participants totaled approximately $3.9 million
and $4.0 million as of October 1, 2011 and October 2, 2010, respectively. The Trust assets are subject to the
64
Plexus Corp.
Notes to Consolidated Financial Statements
claims of the Company’s creditors. The Trust assets and the related liabilities to the participants are included
in non-current “Other assets” and non-current “Other liabilities”, respectively, in the accompanying
Consolidated Balance Sheets.
Other: The Company currently does not and is not obligated to provide any postretirement medical
or life insurance benefits to employees.
12.
Litigation
In fiscal 2010, the Company incurred approximately $1.1 million of costs relating to non-
conforming inventory received from a supplier. The Company reached a settlement with the supplier during
the first quarter of fiscal 2011 for $0.9 million, which was received and recorded in selling and administrative
expenses in fiscal 2011.
We were notified in April 2009 by U.S. Customs and Border Protection (“CBP”) of its intention to
conduct a customary Focused Assessment of our import activities during fiscal 2008 and of our processes and
procedures to comply with U.S. Customs laws and regulations. During September 2010 the Company
reported errors relating to import trade activity from July 2004 to the date of Plexus’ report. CBP has
indicated that on-site fieldwork for the audit was completed as of June 2011 and the Company is currently
awaiting final determination of CBP duties and fees. Plexus has agreed that it will implement improved
processes and procedures and review these corrective measures with CBP. We recorded an accrual in other
current accrued liabilities in the first quarter of fiscal 2010 when the amount became estimable and probable,
which was not material to the financial statements. At this time, we do not believe that any deficiencies in
processes or controls or unanticipated costs, unpaid duties or penalties associated with this matter will have a
material adverse effect on Plexus or the Company’s consolidated financial position, results of operations or
cash flows.
In December 2009, the Company received settlement funds of approximately $3.2 million related to
a court case in which the Company was a plaintiff. The settlement related to prior purchases of inventory and
therefore was recorded as a reduction of cost of sales.
The Company is party to certain other lawsuits in the ordinary course of business. Management
does not believe that these proceedings, individually or in the aggregate, will have a material adverse effect
on the Company's consolidated financial position, results of operations or cash flows.
13.
Reportable Segments, Geographic Information and Major Customers
Reportable segments are defined as components of an enterprise about which separate financial
information is available that is evaluated regularly by the chief operating decision maker, or group, in
assessing performance and allocating resources.
In the first quarter of fiscal 2011, we completed our migration to a regional reporting structure, and
as a result, modified our reportable segments. See Note 1 – Description of Business and Significant
Accounting Policies for further information.
The Company uses an internal management reporting system, which provides important financial
data to evaluate performance and allocate the Company's resources on a regional basis. Net sales for
segments are attributed to the region in which the product is manufactured or service is performed. The
services provided, manufacturing processes used, class of customers serviced and order fulfillment processes
used are similar and generally interchangeable across the segments. A segment’s performance is evaluated
based upon its operating income (loss). A segment’s operating income (loss) includes its net sales less cost of
sales and selling and administrative expenses, but excludes corporate and other costs, interest expense, other
income (loss), and income taxes. Corporate and other costs primarily represent corporate selling and
administrative expenses, and restructuring and impairment costs, if any. These costs are not allocated to the
segments, as management excludes such costs when assessing the performance of the segments. Inter-
segment transactions are generally recorded at amounts that approximate arm's length transactions. The
accounting policies for the regions are the same as for the Company taken as a whole.(cid:3)(cid:3)
65
Plexus Corp.
Notes to Consolidated Financial Statements
Information about the Company’s three reportable segments in fiscal 2011, 2010 and 2009 were as
follows (in thousands):
Net sales:
AMER
APAC
EMEA
Elimination of inter-segment sales
October 1,
2011
Fiscal Years Ended
October 2,
2010
October 3,
2009
$1,304,885
1,063,079
92,269
(229,001)
$2,231,232
$ 1,244,720
925,391
72,627
(229,345)
$2,013,393
$ 1,084,346
588,129
55,587
(111,440)
$1,616,622
Depreciation:
AMER
APAC
EMEA
Corporate
Operating income (loss):
AMER
APAC
EMEA
Corporate and other costs
Capital expenditures:
AMER
APAC
EMEA
Corporate
Total assets:
AMER
APAC
EMEA
Corporate
$
$
15,045
21,115
2,947
7,919
47,026
$
$
13,658
18,536
1,957
6,001
40,152
$
68,725
118,063
(2,955)
(82,654)
$ 101,179
$
74,409
114,760
(1,806)
(87,711)
99,652
$
$
$
$
$
12,445
16,154
782
5,087
34,468
61,223
63,662
1,352
(73,170)
53,067
$ 12,578
48,122
10,233
3,118
74,051
$
$ 16,483
37,909
1,884
18,398
74,674
$
$ 19,864
23,052
5,587
8,924
57,427
$
October 1,
2011
October 2,
2010
$ 451,044
631,054
76,365
146,062
$ 1,304,525
$ 495,639
539,543
84,786
170,411
$ 1,290,379
66
Plexus Corp.
Notes to Consolidated Financial Statements
The following enterprise-wide information is provided in accordance with the required segment
disclosures. Net sales to unaffiliated customers were based on the Company’s location providing product or
services (in thousands):
Net sales:
United States
Malaysia
China
United Kingdom
Mexico
Romania
Elimination of inter-segment sales
Long-lived assets:
United States
Malaysia
China
United Kingdom
Mexico
Romania
Corporate
October 1,
2011
Fiscal Years ended
October 2,
2010
October 3,
2009
$ 1,192,389
836,808
226,271
75,771
112,496
16,498
(229,001)
$ 2,231,232
$ 1,150,207
788,189
137,202
71,519
94,513
1,108
(229,345)
$ 2,013,393
$ 1,007,087
512,656
75,473
55,577
77,259
10
(111,440)
$ 1,616,622
October 1,
2011
October 2,
2010
$
55,580
112,489
29,803
9,902
9,762
7,101
40,868
$ 265,505
$
59,233
86,387
21,920
7,248
8,655
4,484
47,787
$ 235,714
Long-lived assets as of October 1, 2011 and October 2, 2010 exclude other long-term assets and
deferred income tax assets which totaled $30.5 million and $28.7 million, respectively.
Restructuring and asset impairment charges are not allocated to reportable segments, as management
excludes such charges when assessing the performance of the reportable segments, but rather includes such
charges within the “Corporate and other costs” section of the above table of operating income (loss). In fiscal
2011 and fiscal 2010 the Company did not incur any restructuring or asset impairment charges. In fiscal
2009, the Company incurred restructuring and asset impairment charges, as described in Note 10. The
following table presents restructuring and asset impairment charges by segment for the years indicated (in
thousands):
Restructuring and asset impairment charges:
AMER
EMEA
Corporate
October 1,
2011
Fiscal Years Ended
October 2,
2010
October 3,
2009
$
$
-
-
-
-
$
$
-
-
-
-
$
$
1,830
5,748
993
8,571
67
Plexus Corp.
Notes to Consolidated Financial Statements
The percentages of net sales to customers representing 10 percent or more of total net sales for the
indicated periods were as follows:
Juniper Networks, Inc. (“Juniper”)
October 1,
2011
17%
Fiscal Years Ended
October 2,
2010
16%
October 3,
2009
20%
For our significant customers, we generally manufacture products in more than one location. For
example, net sales to Juniper, our largest customer, occur in the AMER and APAC reportable segments.
The percentages of accounts receivable from customers representing 10 percent or more of total
accounts receivable for the indicated periods were as follows:
Juniper
General Electric Company
_____________________
*Represents less than 10 percent of total accounts receivable.
October 1,
2011
23%
*
October 2,
2010
17%
10%
No other customers represented 10 percent or more of the Company’s total net sales or total trade
receivable balances as of October 1, 2011 and October 2, 2010.
14.
Guarantees
The Company offers certain indemnifications under its customer manufacturing agreements. In the
normal course of business, the Company may from time to time be obligated to indemnify its customers or its
customers’ customers against damages or liabilities arising out of the Company’s negligence, misconduct,
breach of contract, or infringement of third party intellectual property rights. Certain agreements have
extended broader indemnification, and while most agreements have contractual limits, some do not.
However, the Company generally does not provide for such indemnities and seeks indemnification from its
customers for damages or liabilities arising out of the Company’s adherence to customers’ specifications or
designs or use of materials furnished, or directed to be used, by its customers. The Company does not believe
its obligations under such indemnities are material.
In the normal course of business, the Company also provides its customers a limited warranty
covering workmanship, and in some cases materials, on products manufactured by the Company. Such
warranty generally provides that products will be free from defects in the Company’s workmanship and meet
mutually agreed-upon specifications for periods generally ranging from 12 months to 24 months. If a product
fails to comply with the Company’s limited warranty, the Company’s obligation is generally limited to
correcting, at its expense, any defect by repairing or replacing such defective product. The Company’s
warranty generally excludes defects resulting from faulty customer-supplied components, design defects or
damage caused by any party or cause other than the Company.
The Company provides for an estimate of costs that may be incurred under its limited warranty at the
time product revenue is recognized and establishes additional reserves for specifically identified product
issues. These costs primarily include labor and materials, as necessary, associated with repair or replacement
and are included in our Consolidated Balance Sheets in other current accrued liabilities. The primary factors
that affect the Company’s warranty liability include the value and the number of shipped units and historical
and anticipated rates of warranty claims. As these factors are impacted by actual experience and future
expectations, the Company assesses the adequacy of its recorded warranty liabilities and adjusts the amounts
as necessary.
68
Plexus Corp.
Notes to Consolidated Financial Statements
Below is a table summarizing the activity related to the Company’s limited warranty liability for the
fiscal years 2011 and 2010 (in thousands):
Limited warranty liability, as of October 3, 2009
Accruals for warranties issued during the period
Settlements (in cash or in kind) during the period
$
Limited warranty liability, as of October 2, 2010
Accruals for warranties issued during the period
Settlements (in cash or in kind) during the period
4,470
557
(972)
4,055
1,714
(316)
Limited warranty liability, as of October 1, 2011
$
5,453
15.
Quarterly Financial Data (Unaudited)
Summarized quarterly financial data for fiscal 2011 and 2010 consisted of (in thousands, except per
share amounts):
2011
Net sales
Gross profit
Net income
Earnings per share:
Basic
Diluted
2010
Net sales
Gross profit
Net income
Earnings per share:
Basic
Diluted
First
Quarter
$ 565,774
54,910
25,033
Second
Quarter
$ 568,145
55,470
23,860
Third
Quarter
$ 559,183
54,074
22,040
Fourth
Quarter
$ 538,130
50,288
18,323
Total
$2,231,232
214,742
89,256
$
$
0.62
0.61
$
$
0.60
0.59
$
$
0.60
0.58
$
$
0.53
0.52
$
$
2.34
2.30
First
Quarter
$ 430,399
44,541
17,844
Second
Quarter
$ 490,978
50,471
20,714
Third
Quarter
$ 536,384
55,548
24,368
Fourth
Quarter
$ 555,632
56,362
26,607
Total
$2,013,393
206,922
89,533
$
$
0.45
0.44
$
$
0.52
0.51
$
$
0.60
0.59
$
$
0.66
0.65
$
$
2.24
2.19
The annual total amounts may not equal the sum of the quarterly amounts due to rounding. Earnings
per share is computed independently for each quarter.
* * * * *
69
Plexus Corp. and Subsidiaries
Schedule II – Valuation and Qualifying Accounts
For the fiscal years ended October 1, 2011, October 2, 2010 and October 3, 2009 (in thousands):
Descriptions
Balance at
beginning of
period
Additions
charged to costs
and expenses
Additions
charged to other
accounts
Deductions
Balance at end
of period
Fiscal Year 2011:
Allowance for losses on accounts receivable
(deducted from the asset to which it relates)
Valuation allowance on deferred income tax assets
(deducted from the asset to which it relates)
Fiscal Year 2010:
Allowance for losses on accounts receivable
(deducted from the asset to which it relates)
Valuation allowance on deferred income tax assets
(deducted from the asset to which it relates)
Fiscal Year 2009:
Allowance for losses on accounts receivable
(deducted from the asset to which it relates)
Valuation allowance on deferred income tax assets
(deducted from the asset to which it relates)
$
1,400
$
1,863
$
-
$
$
2,548
$
1,238
$
1,330
$
7
-
$
3,256
$
5,116
$
1,000
$
550
$
$
2,548
$
-
$
$
2,500
$
942
$
$
2,607
$
61
$
-
-
-
-
$
$
150
$
1,400
-
$
2,548
$
2,442
$
1,000
$
120
$
2,548
70
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
PLEXUS CORP. (Registrant)
By:
/s/ Dean A. Foate
Dean A. Foate, President and Chief Executive Officer
November 17, 2011
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and
appoints Dean A. Foate, Ginger M. Jones and Angelo M. Ninivaggi, and each of them, his or her true and lawful
attorneys-in-fact and agents, with full power of substitution and resubstitution, for him or her and in his or her name,
place and stead, in any and all capacities, to sign any and all amendments to this report, and to file the same with all
exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, and any
other regulatory authority, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-
fact and agents or any of them, or their substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirement of the Securities Exchange Act of 1934, this report has been signed by the
following persons on behalf of the registrant and in the capacities and on the date indicated.*
SIGNATURE AND TITLE
/s/ Dean A. Foate
Dean A. Foate, President, Chief Executive Officer and
Director (Principal Executive Officer)
/s/ Ginger M. Jones
Ginger M. Jones, Senior Vice President and Chief
Financial Officer (Principal Financial Officer and
Principal Accounting Officer)
/s/ John L. Nussbaum
John L. Nussbaum, Chairman and Director
/s/ Ralf R. Böer
Ralf R. Böer, Director
/s/ Stephen P. Cortinovis
Stephen P. Cortinovis, Director
/s/ David J. Drury
David J. Drury, Director
/s/ Peter Kelly
Peter Kelly, Director
/s/ Philip R. Martens
Philip R. Martens, Director
/s/ Michael V. Schrock
Michael V. Schrock, Director
/s/ Mary A. Winston
Mary A. Winston, Director
*Each of the above signatures is affixed as of November 17, 2011.
71
EXHIBIT INDEX
PLEXUS CORP.
Form 10-K for Fiscal Year Ended October 1, 2011
Exhibit No.
Exhibit
Incorporated By
Reference To
Filed
Herewith
3(i)
3(ii)
4.1
4.2
4.3
10.1
10.2
10.3
10.4
(a) Restated Articles of Incorporation of
Plexus Corp., as amended through August
28, 2008
(b) Articles of Amendment, dated August
28, 2008, to the Restated Articles of
Incorporation
Bylaws of Plexus Corp., adopted February
13, 2008, amended as of September 23,
2010
Restated Articles of Incorporation of
Plexus Corp., as amended through August
28, 2008
Bylaws of Plexus Corp., adopted February
13, 2008, amended as of September 23,
2010
Rights Agreement, dated as of August 28,
2008, between Plexus Corp. and American
Stock Transfer & Trust Company, LLC
Second Amended and Restated Credit
Agreement dated as of April 4, 2008
among Plexus Corp., the Guarantors from
time to time parties thereto, the Lenders
from time to time parties thereto, and Bank
of Montreal, as Administrative Agent
Note Purchase Agreement, dated as of
April 21, 2011, between Plexus Corp. and
the Purchasers named therein relating to
$175,000,000 5.20% Senior Notes, due
June 15, 2018
Composite Form of Supplemental
Executive Retirement Agreement between
Plexus and John Nussbaum, as amended
through August 7, 2009*
Exhibit 3(i) to Plexus’ Report on Form 10-Q
for the quarter ended March 31, 2004
Exhibit 3.1 to Plexus’ Report on Form 8-K
dated August 28, 2008
Exhibit 3.1 to Plexus’ Report on Form 8-K
dated September 23, 2010
Exhibit 3(i) above
Exhibit 3(ii) above
Exhibit 4.1 to Plexus’ Report on Form 8-A
dated August 28, 2008
Exhibit 10.1 to Plexus’ Report on Form 8-K
dated April 4, 2008
Exhibit 10.1 to Plexus’ Report on Form 8-K
dated April 21, 2011
Exhibit 10.5 to Plexus’ Report on Form 10-K for
the year ended October 3, 2009
Employment Agreement, dated May 15,
2008, by and between Plexus Corp. and Dean
A. Foate*
Exhibit 10.1 to Plexus’ Report on Form 8-K dated
May 15, 2008
10.5
10.6
10.7
10.8
10.9
10.10
10.11 (a)
Form of Change of Control Agreement with
each of the executive officers (other than
Dean A. Foate)*
Exhibit 10.2 to Plexus’ Report on Form 8-K
dated May 15, 2008
Amended and Restated Plexus Corp. 1998
Option Plan* [superseded]
Exhibit 10.1 to Plexus’ Report on Form 10-Q for
the quarter ended January 3, 2009
(a) Summary of Directors’ Compensation
(11/11)*
X
(b) Summary of Directors’ Compensation
(11/10)* [superseded]
Exhibit 10.7(a) to Plexus’ Report on Form 10-K
for the year ended October 2, 2010
(c) Summary of Directors’ Compensation
(11/08)*[superseded]
Exhibit 10.9(a) to Plexus Report on Form 10-K
for the year ended September 27, 2008
(d) Plexus Corp. 1995 Directors’ Stock
Option Plan*[superseded]
Exhibit 10.10 to Plexus’ Report on Form 10-K
for the year ended September 30, 1994
Plexus Corp. Variable Incentive
Compensation Plan – Plexus Leadership
Team (as amended and restated as of
September 29, 2010)* [superseded]
Exhibit 10.8 to Plexus’s Report on Form 10-K
for the year ended October 2, 2010
(a) Plexus Corp. Executive Deferred
Compensation Plan*
Exhibit 10.17 to Plexus’ Report on Form 10-K
for the fiscal year ended September 30, 2000
(b) Plexus Corp Executive Deferred
Compensation Plan Trust dated April 1, 2003
between Plexus Corp. and Bankers Trust
Company*
Exhibit 10.14 to Plexus’ Report on Form 10-K
for the fiscal year ended September 30, 2003
Plexus Corp. Non-employee Directors
Deferred Compensation Plan*
Exhibit 10.4 to Plexus’ Report on Form 10-Q for
the quarter ended January 2, 2010
Amended and Restated Plexus Corp. 2008
Long-Term Incentive Plan*
Appendix A to Plexus’ Definitive Proxy
Statement for its 2011 Annual Meeting of
Shareholders, filed on December 15, 2010
10.11(b)
Forms of award agreements thereunder*
(i)(A) Form of Stock Option Agreement
Exhibit 10.2 to Plexus’ Report on Form 10-Q for
the quarter ended January 2, 2010
(i)(B) Form of Stock Option Agreement
[superseded]
Exhibit 10.5(a) to Plexus’ Report on Form 10-Q
for the quarter ended March 29, 2008
(ii) Form of Restricted Stock Unit Award
Exhibit 10.5(b) to Plexus’ Report on Form 10-Q
for the quarter ended March 29, 2008
(iii) Form of Stock Appreciation Rights
Agreement
Exhibit 10.5(c) to Plexus’ Report on Form 10-Q
for the quarter ended March 29, 2008
(iv) Form of Unrestricted Stock Award
Exhibit 10.3 to Plexus’ Report on Form 10-Q for
the quarter ended January 2, 2010
(v) Form of Plexus Corp. Variable Incentive
Compensation Plan — Plexus Leadership
Team
Exhibit 10.1 to Plexus’ Report on Form 10-Q for
the quarter ended April 2, 2011
Form of Plexus Corp. Long-Term Cash
Agreement*
Exhibit 10.1 to Plexus’ Report on Form 10-Q for
the quarter ended December 29, 2007
Amended and Restated Plexus Corp. 2005
Equity Incentive Plan* [superseded]
Exhibit 10.2 to Plexus’ Report on Form 10-Q for
the quarter ended January 3, 2009
Forms of award agreements thereunder*
[superseded]
(i) Form of Option Grant (Officer or
Employee)
Exhibit 10.1 to Plexus’ Report on Form 8-K
dated April 1, 2005
(ii) Form of Option Grant (Director)
Exhibit 10.2 to Plexus’ Report on Form 8-K
dated November 17, 2005
(iii) Form of Restricted Stock Unit Award
with Time Vesting
Exhibit 10.4 to Plexus’ Report on Form 8-K
dated April 1, 2005
(iv) Form of Stock Appreciation Right Award
Exhibit 10.1 to Plexus’ Report on Form 8-K
dated August 29, 2007
List of Subsidiaries
Consent of PricewaterhouseCoopers LLP
Powers of Attorney
(Signature Page Hereto)
Certification of Chief Executive Officer
pursuant to Section 302(a) of the Sarbanes-
Oxley Act of 2002.
Certification of Chief Financial Officer
pursuant to Section 302(a) of the Sarbanes-
Oxley Act of 2002.
Certification of the CEO pursuant to 18
U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of
2002
Certification of the CFO pursuant to 18
U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of
2002
Reconciliation of ROIC to GAAP Financial
Statements
10.12
10.13(a)
10.13(b)
21
23
24
31.1
31.2
32.1
32.2
99.1
X
X
X
X
X
X
X
101
The following materials from Plexus Corp.’s
Annual Report on Form 10-K for the fiscal
year ended October 1, 2011, formatted in
XBRL (Extensible Business Reporting
Language): (i) the Consolidated Statements
of Operations, (ii) the Consolidated Balance
Sheets, (iii) the Consolidated Statements of
Shareholders’ Equity and Comprehensive
Income, (iv) the Consolidated Statements of
Cash Flows, and (v) Notes to Consolidated
Financial Statements.
101.INS
XBRL Instance Document
101.SCH
101.CAL
101.LAB
101.PRE
101.DEF
XBRL Taxonomy Extension Schema
Document
XBRL Taxonomy Extension Calculation
Linkbase Document
XBRL Taxonomy Extension Label Linkbase
Document
XBRL Taxonomy Extension Presentation
Linkbase Document
XBRL Taxonomy Extension Definition
Linkbase Document
____________________
*
Designates management compensatory plans or agreements.
Furnished
Furnished
Furnished
Furnished
Furnished
Furnished
Furnished
[THIS PAGE INTENTIONALLY LEFT BLANK]
[THIS PAGE INTENTIONALLY LEFT BLANK]
[THIS PAGE INTENTIONALLY LEFT BLANK]
BOARD OF DIRECTORS
John L. Nussbaum – Chairman of the Board
Dean A. Foate – President and Chief Executive Officer
Ralf R. Böer – Partner, Foley & Lardner LLP
Stephen P. Cortinovis – Private Equity Investor
David J. Drury – Chairman and Chief Executive Officer, Poblocki Sign
Company LLC
Peter Kelly – Executive Vice President and General Manager of
Operations, NXP Semiconductors N.V.
Phil R. Martens – President and Chief Executive Officer, Novelis Inc.
EXECUTIVE OFFICERS
Dean A. Foate
President, Chief Executive Officer and Director
Ginger M. Jones
Senior Vice President and Chief Financial Officer
Michael D. Buseman
Executive Vice President – Global Manufacturing Operations
Steven J. Frisch
Regional President – Plexus EMEA and Senior Vice President – Global
Engineering Solutions
Todd P. Kelsey
Executive Vice President – Global Customer Services
Michael V. Schrock – President and Chief Operating Officer,
Pentair, Inc.
Yong Jin Lim
Regional President – Plexus APAC
Mary A. Winston – Senior Vice President and
Chief Financial Officer, Giant Eagle, Inc.
Joseph E. Mauthe
Senior Vice President – Global Human Resources
Angelo M. Ninivaggi
Senior Vice President, General Counsel, Corporate Compliance Officer
and Secretary
Michael T. Verstegen
Senior Vice President – Global Market Development
Investor Information
Direct all inquiries for investor relations information,
including copies of the Company’s Form 10-K and other reports
filed with the SEC, to:
Investor Relations
Plexus Corp.
One Plexus Way
P.O. Box 156
Neenah, Wisconsin 54957-0156
920-722-3451
Kristie.Johnson@plexus.com
www.plexus.com
For common stock market information, see Part II, Item 5 in the
Form 10-K.
The Form 10-K is an integral part of this Annual Report.
Transfer Agent and Registrar
American Stock Transfer & Trust Company
59 Maiden Lane
Plaza Level
New York, New York 10038
1-800-937-5449
Auditors
PricewaterhouseCoopers LLP
Milwaukee, Wisconsin
Annual Meeting
February 15, 2012: 8:00 a.m.
The Pfister Hotel
424 East Wisconsin Avenue
Milwaukee, Wisconsin 53202