2021 Annual Report
Plexus Profile
About Plexus Corp.
Since 1979, Plexus (Nasdaq: PLXS) has been partnering with leading companies to deliver customer service excellence and innovative,
comprehensive solutions throughout a product’s lifecycle. Plexus is a global leader in the Electronics Manufacturing Services ("EMS")
industry supported by a team of approximately 19,200 individuals. Our vision is to help create the products that build a better world. Our
mission is to be the leader in highly complex products and demanding regulatory environments. Our strategy to fulfill our vision and
mission remains consistent and can be summarized in four parts: market focus, superior execution, passion meets purpose and discipline
by design.
Plexus has partnerships with approximately 140 customers in the Industrial, Healthcare/Life Sciences and Aerospace/Defense
market sectors. We leverage our expertise to understand the unique needs of our customers' markets and have aligned our
processes to provide flexibility, create efficiency and deliver superior quality.
With integrated design and development, supply chain solutions, new product introduction, manufacturing and aftermarket services,
we proactively tackle tough challenges throughout a product's lifecycle. It is how our teams strive to create innovative and efficient paths
to get products to market.
Design and Development – Plexus was established with engineering as a core competency and has built a reputation for success. Our
customers are able to partner with a collaborative team of over 600 development engineers to create new products. Using the same
tools and processes throughout our seven Design Centers worldwide, we leverage the latest technology and state-of-the-art
design automation methodologies to provide comprehensive new product development and product commercialization solutions.
Supply Chain Solutions – Delivering an optimal supply chain solution is more than simply getting a product where it needs to be on time.
We take a unique approach. Our supply chain experts engage in all of Plexus’ integrated solutions, working closely with our engineers to
identify opportunities for supply chain optimization early in the design stage. At Plexus, we take pride in managing the full supply chain
to minimize cost, mitigate risk and provide a flexible, scalable solution for our customers.
New Product Introduction – When introducing a new product, customers need to move quickly. Plexus offers a dedicated team focused
on decreasing time to market with a full suite of integrated new product introduction services. Through early integration
and collaboration, customers can take advantage of Plexus’ capabilities, such as design for excellence (DFX), specialized design of
test solutions and rapid prototyping, while the program is advanced by a dedicated Plexus team that supports a transition to
volume manufacturing.
Manufacturing – Our approach to manufacturing focuses on innovation, continuous improvement and superior quality and delivery. With a
global footprint and scalable operations, we aim to tailor our manufacturing environment to meet each customer’s needs worldwide. As
we strive for zero defects, we empower all employees with the knowledge that exceptional quality begins with each individual member of
our team. We believe our capabilities and our culture position us to support the complex technology and regulatory needs of the
industries we serve and to provide customers with innovative and dependable manufacturing services.
Aftermarket Services – From product deployment through a product’s end of life, Plexus offers a full range of aftermarket services with
the ability to support customers in all regions in which we operate. With a focus on promoting sustainability, we help our
customers manage and extend the lifecycle of their products through an optimized level of service. With services such as
depot repair, service parts logistics management, order management, distribution and warehousing and recycling, we are
committed to protecting and supporting the success of each customer’s product in the marketplace.
To learn more about Plexus, please visit plexus.com.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
FORM 10-K
(Mark One)
☒
☐
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended October 2, 2021
OR
TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to ______
Commission File Number 001-14423
____________________________________________________________________________________________________________________________________
PLEXUS CORP.
(Exact name of registrant as specified in charter)
____________________________________________________________________________________________________________________________________
Wisconsin
(State or other jurisdiction of incorporation)
39-1344447
(I.R.S. Employer Identification No.)
One Plexus Way
Neenah, Wisconsin 54957
(Address of principal executive offices) (Zip Code)
Telephone Number (920) 969-6000
(Registrant’s telephone number, including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, $0.01 par value
Trading Symbol
PLXS
Name of each exchange on which registered
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 ý No ¨
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No x
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 x No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,”
and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Smaller reporting company
x
☐
Accelerated filer
☐
Emerging growth company ☐
Non-accelerated filer
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its
internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public
accounting firm that prepared or issued its audit report. ☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of April 3, 2021, 28,658,737, shares of common stock were outstanding, and the aggregate market value of the shares of common stock
(based upon the $93.47 closing price of the registrant's common stock on the last trading day of its fiscal second quarter, as reported on the
Nasdaq Global Select Market) held by non-affiliates (excludes 539,282 shares reported as beneficially owned by directors and executive
officers – does not constitute an admission as to affiliate status) was approximately $2.6 billion.
As of November 15, 2021, there were 27,998,920 shares of common stock outstanding.
Parts of Registrant’s Proxy Statement for the 2022 Annual Meeting of Shareholders are incorporated by reference into Part III of this Report.
DOCUMENTS INCORPORATED BY REFERENCE:
PLEXUS CORP.
TABLE OF CONTENTS
Form 10-K for the Fiscal Year Ended
October 2, 2021
PART I
ITEM 1. BUSINESS
ITEM 1A. RISK FACTORS
ITEM 1B. UNRESOLVED SEC STAFF COMMENTS
ITEM 2. PROPERTIES
ITEM 3. LEGAL PROCEEDINGS
ITEM 4. MINE SAFETY DISCLOSURES
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
ITEM 9A. CONTROLS AND PROCEDURES
ITEM 9B. OTHER INFORMATION
ITEM 9C. FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
ITEM 11. EXECUTIVE COMPENSATION
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
ITEM 16. FORM 10-K SUMMARY
SIGNATURES
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[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 are guidance or which 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.
These risks and uncertainties include the evolving effect, which may intensify, of COVID-19 on our employees, customers,
suppliers, and logistics providers, including the impact of governmental actions being taken to curtail the spread of the virus.
Other risks and uncertainties include, but are not limited to: the effects of shortages and delays in obtaining components as a
result of economic cycles, natural disasters or otherwise; the risk of customer delays, changes, cancellations or forecast
inaccuracies in both ongoing and new programs; the lack of visibility of future orders, particularly in view of changing
economic conditions; the economic performance of the industries, sectors and customers we serve; the effects of tariffs, trade
disputes, trade agreements and other trade protection measures; the effects of the volume of revenue from certain sectors or
programs on our margins in particular periods; our ability to secure new customers, maintain our current customer base and
deliver product on a timely basis; the risks of concentration of work for certain customers; the particular risks relative to new or
recent customers, programs or services, 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 start-up costs of new programs and facilities or the costs associated with the closure or consolidation of facilities;
possible unexpected costs and operating disruption in transitioning programs, including transitions between Company facilities;
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; our ability to manage successfully and execute a complex business
model characterized by high product mix and demanding quality, regulatory, and other requirements; the risks associated with
excess and obsolete inventory, including the risk that inventory purchased on behalf of our customers may not be consumed or
otherwise paid for by the customer, resulting in an inventory write-off; risks related to information technology systems and data
security; the ability to realize anticipated savings from restructuring or similar actions, as well as the adequacy of related
charges as compared to actual expenses; increasing regulatory and compliance requirements; the effects of U.S. Tax Reform,
any tax law changes as a result of change in U.S. presidential administration, and of related foreign jurisdiction tax
developments; current or potential future barriers to the repatriation of funds that are currently held outside of the United States
as a result of actions taken by other countries or otherwise; the potential effects of jurisdictional results on our taxes, tax rates,
and our ability to use deferred tax assets and net operating losses; the weakness of areas of the global economy; the effect of
changes in the pricing and margins of products; raw materials and component cost fluctuations; the potential effect of
fluctuations in the value of the currencies in which we transact business; the effects of changes in economic conditions, political
conditions and tax matters in the United States and in the other countries in which we do business (including as a result of the
United Kingdom’s exit from the European Union); the potential effect of other world or local events or other events outside our
control (such as changes in energy prices, terrorism, global health epidemics and weather events); the impact of increased
competition; an inability to successfully manage human capital; changes in financial accounting standards; and other risks
detailed herein and in our other 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. Since 1979, we have been partnering with companies to create the products that build a better
world. We are a team of approximately 19,200 individuals who are dedicated to providing global Design and Development,
Supply Chain Solutions, New Product Introduction, Manufacturing and Aftermarket Services. We are a global leader that
specializes in serving customers in industries with highly complex products and demanding regulatory environments. We
deliver customer service excellence to leading global companies in the Industrial, Healthcare/Life Sciences and Aerospace/
Defense market sectors by providing innovative, comprehensive solutions throughout the product’s lifecycle. We provide these
innovative solutions to customers in the Americas ("AMER"), Asia-Pacific ("APAC") and Europe, Middle East and Africa
("EMEA") regions.
Our Vision, Mission and Strategy
Our vision is to help create the products that build a better world. Our mission is to be the leader in highly complex products
and demanding regulatory environments. Our strategy to fulfill our vision and mission remains consistent and can be
summarized in four parts: market focus, superior execution, passion meets purpose and discipline by design.
• Market Focus – We engineer innovative solutions for customers in growth markets and focus on partnering with
leading as well as disruptive global companies in the Industrial, Healthcare/Life Sciences and Aerospace/Defense
sectors.
•
•
•
Superior Execution – Superior execution is foundational to our differentiation. We are dedicated partners to our
customers, committed to achieving zero defects and perfect delivery through operational excellence.
Passion Meets Purpose – Through our collective passion, we drive purpose to our actions and decisions in pursuit of
operational excellence. Guided by our values and leadership behaviors, we do the right thing to support our team
members, communities and customers.
Discipline by Design – Finally, we are committed to delivering shareholder value over the long term through a
consistent and disciplined financial model focused on driving industry-leading revenue growth and superior return on
invested capital.
To deliver on our strategy, we align our operations, processes, workforce and financial metrics to create a high performance,
accountable organization with a talented and engaged workforce deeply passionate about driving growth through customer
service excellence. We also promote a collaborative, customer-centric culture that continuously evaluates and optimizes our
business processes with a goal of creating shareholder value. Finally, we execute to customer-driven and sector-based go-to-
market strategies.
Financial Model
Our financial model aligns with our business strategy. Our primary long-term focus is to earn a return on invested capital
("ROIC") 500 basis points above our weighted average cost of capital ("WACC"), which we refer to as "economic return." We
review our internal calculation of WACC annually; for fiscal 2021, our WACC was 8.1%. We believe economic return is a
fundamental driver of shareholder value. By exercising discipline to generate an economic return, our goal is to ensure that we
create value for our shareholders. For more information regarding ROIC and economic return, which are non-GAAP financial
measures, refer to "Management’s Discussion and Analysis of Financial Condition - Results of Operations - Return on
Invested Capital ("ROIC") and economic return" in Part II, Item 7. For a reconciliation of ROIC and economic return to our
financial statements that were prepared using generally accepted accounting principles in the U.S. ("U.S. GAAP" or "GAAP"),
see Exhibit 99.1 to this annual report on Form 10-K, which exhibit is incorporated herein by reference.
Relative to our competition, overriding factors such as lower manufacturing volumes, production flexibility, unique fulfillment
requirements and complex regulatory requirements typically result in higher investments in inventory and selling and
administrative costs for us. The cost variance from our competitors is especially evident relative to those that provide EMS
services for high-volume, less complex products, with less stringent requirements (e.g., consumer electronics).
Operations
Plexus is a Wisconsin-headquartered corporation with approximately 19,200 employees, including over 4,400 engineers and
technologists dedicated to product development and design, test equipment development and design, and manufacturing process
2
development and control, all of whom operate from 26 active facilities, totaling approximately 4.5 million square feet. Plexus'
newest facility located in Bangkok, Thailand, opening in fiscal 2022, will expand Plexus' current capacity by approximately
400,000 square feet. Plexus' facilities are strategically located to support the global supply chain, engineering, manufacturing
and aftermarket service needs of customers in our targeted market sectors.
Go-to-Market Strategy
We accomplish our go-to-market strategy through the three market sectors we serve, Industrial, Healthcare/Life Sciences and
Aerospace/Defense. Each sector has a market sector vice president, as well as business development and customer management
leaders who together oversee and provide leadership to teams that include business development leaders, customer management
leaders, supply chain, engineering and manufacturing subject matter experts, and market sector analysts. These teams maintain
expertise related to each market sector and execute sector strategies aligned to that market’s unique delivery, quality and
regulatory requirements.
Our market sector teams help define Plexus’ strategy for growth with a particular emphasis on expanding the value-add
solutions we offer customers. Our sales and marketing efforts focus on targeting new customers and expanding our
engagements with existing customers. We believe our ability to provide a full range of services that complement the entire
product lifecycle across a global footprint provides a business advantage.
Solutions
With integrated design and development, supply chain solutions, new product introduction, manufacturing and aftermarket
services, we proactively tackle tough challenges throughout the product lifecycle. It is how our teams strive to create innovative
and efficient paths to get products to market.
•
•
•
Design and Development – Plexus was established with engineering as a core competency and has built a reputation
for success. Our customers are able to partner with a collaborative team of over 600 development engineers to create
new products. Using the same tools and processes throughout our seven Design Centers worldwide, we leverage the
latest technology and state-of-the-art design automation methodologies to provide comprehensive new product
development and product commercialization solutions.
Supply Chain Solutions – Delivering an optimal supply chain solution is more than simply getting a product where it
needs to be on time. We take a unique approach. Our supply chain experts engage in all of Plexus’ integrated solutions,
working closely with our engineers to identify opportunities for supply chain optimization early in the design stage. At
Plexus, we take pride in managing the full supply chain to minimize cost, mitigate risk and provide a flexible, scalable
solution for our customers.
New Product Introduction – When introducing a new product, customers need to move quickly. Plexus offers a
dedicated team focused on decreasing time to market with a full suite of integrated new product introduction services.
Through early integration and collaboration, customers can take advantage of Plexus’ capabilities, such as design for
excellence (DFX), specialized design of test solutions and rapid prototyping, while the program is advanced by a
dedicated Plexus team that supports a transition to volume manufacturing.
• Manufacturing – Our approach to manufacturing focuses on innovation, continuous improvement and superior
quality and delivery. With a global footprint and scalable operations, we aim to tailor our manufacturing environment
to meet each customer’s needs worldwide. As we strive for zero defects, we empower all employees with the
knowledge that exceptional quality begins with each individual member of our team. We believe our capabilities and
our culture position us to support the complex technology and regulatory needs of the industries we serve and to
provide customers with innovative and dependable manufacturing services.
•
Aftermarket Services – From product deployment through a product’s end of life, Plexus offers a full range of
aftermarket services with the ability to support customers in all regions in which we operate. We help our customers
manage and extend the lifecycle of their products through an optimized level of service. With services such as depot
repair, service parts logistics management, order management, distribution and warehousing and recycling, we are
committed to protecting and supporting the success of each customer’s product in the marketplace.
We provide most of our optimized solutions on a turnkey basis, and we typically procure all materials required for product
assembly. We provide select services on a consignment basis, meaning the customer supplies the necessary materials and
Plexus provides the labor and other services required for product assembly. In addition to manufacturing, turnkey service
requires material procurement and warehousing and involves greater resource investments than consignment services. Other
than certain test equipment, manufacturing equipment and software used for internal operations, we do not design or
manufacture our own proprietary products.
3
Regulatory Requirements
All Plexus manufacturing and engineering facilities are certified to a baseline Quality Management System standard per
ISO9001:2015. We have capabilities to assemble finished medical devices meeting FDA Quality Systems Regulation
requirements and similar regulatory requirements in other countries.
We have additional certifications and/or registrations held by certain facilities in the following regions:
Medical Standard ISO 13485:2016
21 CFR Part 820 (FDA) (Finished Medical)
JMGP accreditation
GMP-Korea certification
ANVISA accreditation
NPMA (National Medical Products Administration) registration
ISO 14001(environmental management)
ISO 45001 (occupational health and safety)
ANSI/ESD (Electrostatic Discharge Control Program) S20.20
ITAR (International Traffic and Arms Regulation) self-
declaration
Aerospace Standard AS9100
NADCAP certification
FAR 145 certification (FAA repair station)
EASA repair approval
ATEX/IECEx certification
IRIS certification (Railway)
ISO 50001:2011 (energy management)
Customers and Market Sectors Served
AMER
X
X
X
X
X
X
X
X
X
X
X
APAC
X
X
X
X
X
X
X
X
X
X
X
X
EMEA
X
X
X
X
X
X
X
X
X
X
X
Our customers range from large multinational companies to smaller emerging technology companies. During fiscal 2021, we
served approximately 140 customers. General Electric Company ("GE") accounted for 11.2%, 11.7% and 12.4% of our net
sales during fiscal 2021, 2020 and 2019, respectively. No other customer accounted for 10.0% or more of our net sales in any of
the last three fiscal years. 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 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. The loss of any major customer could have
a significant negative impact on our financial results. 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. Many of our large customers, including GE, contract with us through multiple independent divisions,
subsidiaries, production facilities or locations. We believe that in most cases our sales to any one such division, subsidiary,
facility or location are independent of sales to others.
The distribution of our net sales by market sectors for the indicated fiscal years is shown in the following table. In fiscal 2021,
we consolidated the prior Industrial/Commercial and Communications market sectors to form the Industrial market sector:
Industry
Industrial*
Healthcare/Life Sciences
Aerospace/Defense
Total net sales
2021
46%
39%
15%
100%
2020
45%
37%
18%
100%
2019
43%
38%
19%
100%
*Prior periods have been revised to reflect the consolidation of the Industrial/Commercial and Communications sector.
4
Although our current business development focus is based on our targeted market sectors of Industrial, Healthcare/Life
Sciences and Aerospace/Defense, we evaluate our financial performance and allocate our resources geographically (see Note 11
"Reportable Segments, Geographic Information and Major Customers" in Notes to Consolidated Financial Statements regarding
our reportable segments). Plexus offers a uniform array of services for customers in each market sector and, aside from the
specific go-to-market teams, generally we do not dedicate operational equipment, personnel, facilities or other resources to
particular market sectors, nor do we internally track our costs and resources per market sector.
Plexus serves a diverse customer landscape that includes industry-leading, branded product companies, along with other
technology pioneering start-ups and emerging companies that may or may not maintain manufacturing capabilities. In addition
to prime technology advancements, key government and policy trends impact our business, including the U.S. Food and Drug
Administration’s ("FDA") approval of new medical devices, defense procurement practices and other government and
regulatory processes. Plexus may benefit from increasing trends by original equipment manufacturers to outsource the design,
manufacture and service of their products.
Materials and Suppliers
We typically purchase raw materials, including printed circuit boards and electronic components, from manufacturers and
distributors. Under certain circumstances, we will purchase components from brokers, customers or competitors. The key
electronic components we purchase include: specialized components, semiconductors, interconnect products, electronic
subassemblies (including memory modules, power supply modules and cable and wire harnesses), inductors, resistors and
capacitors.
We also purchase non-electronic, typically custom engineered, 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. These
components are sourced from both Plexus preferred suppliers and customer directed suppliers. Components range from
standard to highly customized and vary widely in terms of market availability and price.
Component shortages and subsequent allocations by our suppliers are an inherent risk to the electronics industry and have
particularly been an issue for us and the industry during fiscal 2021. We discuss the causes of these shortages more fully in
"Risk Factors" in Part I, Item 1A herein.
Plexus' global supply chain management organization attempts to mitigate potential supply chain risks and ensure a steady flow
of components and products at competitive prices. We strive to achieve these goals through advanced supply chain solutions we
develop in partnership with our customers, a commitment to strong supplier partnerships, risk management tools, proprietary
supply chain risk algorithms and global expediting processes. Plexus can often influence the selection of new product
components, primarily when engaged to provide design and development solutions.
Competition
Plexus operates in a highly competitive market, with a goal to be best-in-class at meeting the unique needs of our customers.
With integrated design and development, supply chain solutions, new product introduction, manufacturing and aftermarket
services, we proactively tackle tough challenges throughout the product lifecycle. A number of competitors may provide
electronics manufacturing and engineering services similar to Plexus. Others may be more established in certain industry
sectors, or have greater financial, manufacturing or marketing resources. Smaller competitors compete mainly in specific
sectors and within limited geographic areas. Plexus also competes with in-house capabilities of current and potential
customers. Plexus maintains awareness and knowledge of our competitors' capabilities in order to remain highly competitive
within our target markets.
Intellectual Property
We own various service marks that we use in our business, which 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 core solutions for manufacturing facilities include a single-instance Enterprise Resource Planning ("ERP") system, as well
as Product Data Management and Advanced Planning and Scheduling systems, along with consistent solutions for warehouse
management and shop floor execution, that support our global operations. This consistency augments our other management
information systems, allowing us to standardize our ability to translate data from multiple production facilities into operational
and financial information required by the business. The related software licenses are of a general commercial character on terms
5
customary for these types of agreements. In addition, taking advantage of virtualization technology, we are able to see gains in
efficiency and up-time supporting our critical operations.
We strive to promote innovation technologies, solutions and processes within our information technology ("IT") infrastructure
to enable Plexus to differentiate from our competition. As technology solutions continue to evolve, so do the myriad of risks
introduced to the organization. The delivery of business value through technology is highly dependent on the holistic
identification and management of information technology risks. Plexus' IT Risk Management Program promotes data-driven
decision making through a collaborative effort to improve IT and cybersecurity resiliency, including a governance framework
that facilitates awareness, oversight accountabilities and risk management activities across the business. Continuously
enhancing our environment to meet the increasing needs of cybersecurity and privacy regulations remains a top priority. We
discuss the risks relating to cybersecurity and their potential impact on us more fully in "Risk Factors" in Part I, Item 1A herein.
Compliance with Laws and Regulations
As a global public company that supports manufacturing, designing and servicing highly complex products in demanding
regulatory environments, our operations are subject to a variety of laws, regulations and compliance obligations. We strive to
implement robust internal controls, quality management systems and management systems of compliance that govern our
internal actions and mitigate our risk of non-compliance. We also make efforts to identify non-compliance concerns through
internal and external audits, risk assessments as well as an ethics hotline reporting system.
We are also subject to a variety of regulations associated with environmental compliance, as well as those governing employee
health and safety. These regulations are related to topics such as: monitoring, tracking and reporting of air and water emissions;
handling and disposing of hazardous chemicals used during our manufacturing process; and evaluating and mitigating
employee health and safety hazards in our facilities.
We believe that we are in material compliance with all such applicable laws and regulations, and we do not anticipate any
significant additional expenditures related to maintaining our compliance. However, due to the sometimes rapidly evolving
nature of these laws and regulations (including as a result of COVID-19), geopolitical complexity and uncertainty and changing
requirements applicable to our environmental, social and governance ("ESG") program, there can be no assurance that current
expenditures will be adequate or that violations will not occur. Any violations could result in fines, penalties, customer
disengagements or reputational damage that may have a material impact on our financial performance. See “Risk Factors” in
Part I, Item 1A, herein, for more detail around risks pertaining to compliance with laws and regulations.
Environmental, Social and Governance
Consistent with our vision to help our customers create the products that build a better world, we are committed to building a
better world by the way in which we operate. Plexus' ESG program strives to build strong communities, protect our
environment, develop our team members in a culture that is both diverse and inclusive, embraces strong governance practices in
the interest of our shareholders and sets similar expectations of our supply chain partners. When we focus on improving
outcomes for all of our stakeholders, we maximize our ability to achieve our strategic objectives and deliver long-term financial
value for our shareholders. Plexus has established an ESG program that focuses on five key areas: (1) responsible employer; (2)
community partner; (3) global citizen; (4) industry steward; and (5) corporate governance.
•
•
Responsible Employer – We advocate for diversity, combat human trafficking, encourage and provide employee
development opportunities, strive to ensure safe and healthy working conditions, promote an appropriate work/life
balance for our employees, encourage wellness initiatives and reinforce responsible values in our culture.
Community Partner – We promote and financially contribute to science, technology, engineering and mathematics
("STEM") programs, as well as causes that make a meaningful impact to the communities in which we operate. We
encourage our employees’ involvement in community charitable organizations, as well as volunteerism, and we
partner with community organizations to promote local business.
• Global Citizen – We actively work to reduce waste, water use and greenhouse gas emissions from our operations and
work with suppliers to develop similar programs. We partner with customers to help design more efficient and
environmentally friendly products as well as limit product end of life environmental impact through our aftermarket
services solution.
•
Industry Steward – We take an active role in industry coalitions focused on reducing impacts to the environment,
maintaining strong ethical practices and establishing safe and healthy working conditions around the world. We train
our supply chain on important social initiatives, such as detecting and preventing forced labor, and we collaborate with
customers to advance sustainability efforts.
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•
Corporate Governance – Strong leadership and a culture of accountability are foundational at Plexus. Our executive
management, in collaboration with our Board of Directors, competently and ethically manage Plexus’ operations for
the long-term benefit of shareholders.
Plexus is committed to responsible business practices throughout our global operations. As a member of the Responsible
Business Alliance ("RBA"), we have taken an active role in improving not only our own practices, but influencing and holding
others accountable throughout our supply chain. In addition to RBA membership, we consider a variety of standards for
responsible practices, including, but not limited to, local and federal legal requirements in the jurisdictions where we operate,
the Sustainability Accounting Standards Board ("SASB") and the Carbon Disclosure Project.
Human Capital Management
We are driven to differentiate Plexus with our talent and by our culture. How we manage our human capital is critical to how
we deliver on our strategy and create sustained growth and value for our shareholders.
Purpose and Culture
We recognize that a great culture is foundational to the success of our vision to create the products that build a better world. We
are proud of our culture and the recognition we have received over the years as a great place to work. In building a great
culture, we embrace four "non-negotiables":
• Our Values and Leadership Behaviors – Our Values and Leadership Behaviors establish the foundation upon which
our culture is built, representing key expectations we have of our employees and emblematic of the work environment
we strive to create. Our 10 Values and Leadership Behaviors are: Customer Focus, Relationships and Teamwork,
Excellence, Open Communication, Integrity, Prioritize our People, Solve Problems, Be Courageous, Be Strategic and
Innovate.
• Quality Begins with Me – We instill personal responsibility for quality in our employees through our Quality Begins
with Me culture; a commitment to delivering zero defects and continuous improvement. A culture concentrated on
each individual’s pledge that quality is critical to achieving our strategic goal of superior execution in delivering highly
complex products in demanding regulatory environments.
•
5Es of Customer Service Excellence – Through the 5Es of Customer Service Excellence, we describe for our
employees what is required to exceed our customer’s expectations and enable growth through customer service
excellence. In all aspects of our engagements, with both internal and external customers, we reflect the 5Es: We are
Empathetic, Entrepreneurial, Empowered, Engaged, and we Ensure Accountability.
• One Plexus – One Plexus reflects our sentiment that we are stronger together than the sum of our parts. We embrace
the One Plexus mentality through collaboration to ensure consistent operations, globally, and leverage the strengths
and best practices of all facets of the organization to drive the best solutions for our customers.
Commitment to Values and Ethics
Along with our Values and Leadership Behaviors, we act in accordance with our Code of Conduct and Business Ethics ("Code
of Conduct"), which creates expectations and provides guidance for all employees to make the right decisions. Our Code of
Conduct includes topics such as anti-corruption, discrimination, harassment, privacy, appropriate use of company assets,
protecting confidential information and reporting Code of Conduct violations. It is used to reinforce our passion for operating in
a fair, honest, responsible and ethical manner and articulates our responsibilities as a trusted leader in the business community.
The Code of Conduct also emphasizes the importance of having an open, welcoming environment in which all employees feel
empowered to do what is right and are encouraged to voice concerns should violations of the Code of Conduct be observed. All
employees are required to complete the training on the Code of Conduct annually.
Diversity and Inclusion
At Plexus, diversity and inclusion ("D&I") does not simply mean representation. It means encouraging engagement, inclusion
of all employees’ ideas and perspectives and association among the global locations in which we operate—proudly representing
the more than 14 countries our team members call home. We have adopted the following D&I mission statement at Plexus,
which is directly incorporated into our Code of Conduct:
"Our people create our best Plexus. Ingrained in our culture of inclusion is the philosophy that each individual offers
diverse perspectives, backgrounds and experiences that create great outcomes when we are united as a team. We
respect our people and embrace our differences. We welcome everyone and value the ideas generated by our collective
uniqueness. We aspire that all of our teammates reach their full potential and we encourage them to simply, BE YOU!"
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Our strategy to enhance diversity at Plexus and to foster an inclusive culture includes the following:
•
•
D&I Committee and Board Oversight – To oversee strategic objectives and to ensure appropriate accountabilities
exist to support our diversity and inclusion efforts, our executive leadership committee structure includes a Diversity
and Inclusion Committee, made up of key members of executive management, including our Chief Executive Officer.
In addition, our Compensation and Leadership Development Committee of our Board of Directors reviews the
initiatives and results to cultivate a diverse workforce and inclusive culture.
Employee Resource Groups – Our Employee Resource Groups ("ERGs") are voluntary, employee-driven groups
organized around common interests and legitimate business purposes. Plexus current ERGs include Plexus Young
Professionals ("PYP"), UnusPlexus and Women in Network ("WiN"). The goal of PYP is to create an environment
that fosters collaboration and development for the young professionals at Plexus. UnusPlexus’ purpose is to celebrate
the different cultures and diversity existing within Plexus. WiN has a mission to champion the advancement of women
in their professional and personal development through various career and life changes. These groups are directly
supported by executive-level leadership and management engages regularly in support of ERG programming. Plexus
supports further expansion and enhancement efforts of existing ERGs as well as employee-driven creation of new
ERGs.
• Mentoring & Training – Plexus has established a formal mentoring program that aids in the development and
retention of diverse talent, with a specific focus on future leaders within our underrepresented populations. In addition,
the Company has invested in D&I leadership training on the value of diversity and how best to foster an inclusive
culture. This training focuses on enhancing understanding of unconscious bias and enhancing the skills to being an
inclusive leader.
• Gender & Underrepresented Minorities Recruitment Strategy – Our talent acquisition teams have a strategic
initiative to widen the funnel of talent seeking to join Plexus. Efforts in this space are customized by geography based
on the current workforce dynamic. This includes partnerships with organizations such as Society of Women
Engineering ("SWE"), universities with diverse student populations and minority groups supporting underrepresented
minorities with leadership aspirations across many disciplines.
•
•
Employee Benefits & Programs – Plexus has a number of policies and benefits in place to support the unique needs
and overall wellbeing of our team members and their families, including flexible workplace, paid parental leave and a
Plexus Wellness Program to ensure our employees have access to the resources they need to lead healthy, balanced
lives.
Community Involvement & Volunteerism – Community involvement, volunteering and charitable giving are
important to ensure we are investing and promoting positive impacts in the communities in which we operate and
where our employees live. We offer an employee charitable match program in our AMER region for employees to use,
and we plan to implement a similar program in our EMEA and APAC regions. Plexus also offers employees paid,
volunteer time off for team members who want to give back at qualified organizations or community events.
Talent Development & Acquisition
In the pursuit of excellence, we nurture and grow our people. Our commitment to holistic talent management means that we
expect and reward high performance and address underperformance with urgency, candor and empathy. Our team members
receive and provide feedback with humility and a sincere interest to continuously improve. We engage in regular talent reviews
to calibrate on the performance and potential of our teammates, their development needs, career pathing and the strength of our
succession plans. Competency-based training, leadership development programs and online learning provide the foundation for
a learning culture and ongoing development for team members at all levels. While our goal is to develop our own talent, we
recruit technical, new graduate and experienced talent by valuing potential as well as experience and personality traits that align
with our Values and Leadership Behaviors.
Employee Engagement
At every facility, in every organization and at all levels, we strive to continuously improve the engagement of our teammates.
We survey employee engagement annually through our employee net promotor score and we identify and act on areas of
opportunity to enhance our work environment and increase employee satisfaction.
Compensation
Our philosophy is to competitively compensate all employees for their contributions to Plexus and to appropriately motivate
employees to provide value to Plexus' shareholders. To ensure compensation is competitive, performance-based and fair, we are
disciplined in the way we establish and evaluate pay. We assign each role a pay range based on its job accountabilities and the
pay practices for similar roles in the marketplace. Employees are compensated within their applicable pay range based on a
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number of factors, including the employee's education, experience, performance and potential. At least annually, we reevaluate
employee pay based on these criteria. Short and long-term incentive pay is designed to be competitive, improve employee
retention, reward employees for performance supporting our strategic objectives and align employees with the interests of
shareholders to deliver both short-term and long-term results. Approximately 20.0% and 3.1% of our employees participate in
our short and long-term incentive programs, respectively.
Worker Rights, Health, and Safety
We are committed to complying with applicable laws, including those associated with labor and employment, across all areas of
our operations. In addition, as an active member of RBA, we abide by their global standards, irrespective of legal requirements,
regarding the treatment of workers. These include prevention of excessive working hours and unfair wages, controls to prohibit
child labor and human trafficking and bolstering workplace health and safety measures. We are one of several companies
actively partnering with the RBA to abolish human trafficking by holding foreign labor agencies accountable to upholding
sound recruiting processes.
To protect team members during the COVID-19 outbreak, Plexus has progressively implemented measures to safeguard our
employees from COVID-19 infection and exposure based on those established by the U.S. Centers for Disease Control, U.S.
Occupational Health and Safety as well as the World Health Organization. These safeguards consist of policies, procedures,
protocols and guidance related to, among other things, COVID-19 symptom awareness, effective hygiene practices, travel
restrictions, visitor vetting and screening, social distancing, face covering expectations, work-from-home requirements,
enhanced workplace cleaning and decontamination. In addition, we have hosted free on-site vaccination clinics at our facilities
and provided free transportation to vaccination sites for our employees in the United States, Mexico, Malaysia and Romania in
order to make it as easy as possible for employees to be vaccinated.
Human Capital Management Governance
As part of our governance structure, we have established an Organizational Performance Committee, an executive body
comprised of the Chief Executive Officer, VP of Human Resources and other executives that oversee our human capital
strategy. In addition, our VP of Human Resources and other key leaders within our Human Resources organization provide a
quarterly update to the Compensation and Leadership Development Committee of the Board of Directors on our strategy for
talent development and retention, including succession planning for key talent. Management also updates the Board of
Directors regularly on employee-related policies and efforts intended to protect our employees and to preserve our corporate
culture, such as the regular review of our Code of Conduct and Business Ethics, diversity and inclusion initiatives, employee
net promoter survey results and our ethics hotline activity. The Board of Directors also maintains regular visibility into our
COVID-19 response strategy.
Employee Data
We employ approximately 19,200 team members. Of these, 49.9% are female, 50.0% are male and 0.1% choose not to identify.
The majority of our workforce, 52.4%, is located in our APAC region, while 35.5% and 12.1% of our employees are located in
our AMER and EMEA regions, respectively. Approximately 2,050 and 190 of our respective employees in Mexico and the
United Kingdom 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 China, Germany, Malaysia,
Romania and the United States are not covered by union agreements. We have no history of labor disputes at any of our
facilities, and we believe that our employee relationships are positive and stable. 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.
Additional Information
Our global headquarters is located at One Plexus Way, Neenah, Wisconsin, 54957. Plexus maintains a website at
www.plexus.com. As soon as is reasonably practical, after we electronically file or furnish all reports to the Securities and
Exchange Commission ("SEC"), we provide online copies of such reports, free of charge. These reports include: Proxy
Statements, Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, Specialized
Disclosure Reports on Form SD and amendments to those reports. These reports are also accessible at the SEC's website at
www.sec.gov. 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 "Investors" at our website.
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ITEM 1A.
RISK FACTORS
Material risk factors to our business and financial performance are those that may impact our strategy, which is centered around
four strategic pillars: Market Focus, Superior Execution, Passion Meets Purpose and Discipline by Design. This section lays
out a number of material risks that may impact those strategic pillars. Other sections of this report also include risks that may
impact our strategic business objectives and affect our financial performance. The risks included herein and elsewhere in this
report are not exhaustive. In addition, due to the dynamic nature of our business, new risks may emerge from time to time and it
is not possible for management to predict or assess the impact of all such risks on our business.
Risks impacting our MARKET FOCUS – We engineer innovative solutions for customers in growth markets with highly
complex products and demanding regulatory environments.
The end markets we serve require technologically advanced products and such markets may be impacted by a number
of factors that could adversely impact our customers’ demand.
Factors affecting the technology-dependent end markets that we serve could adversely affect our customers and, as a result,
Plexus. These factors include:
•
•
•
customers’ ability or inability to adapt to rapidly changing technologies and evolving industry standards that can result
in short product life-cycles or product obsolescence
customers’ ability or inability to develop and market their products, some of which are new and untested, and
the potential 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, services offered, or to our operations, can affect our production cycles, inventory
management and results of operations.
Our customers do not make long-term commitments to us and may cancel or change their production requirements.
We generally do not obtain firm, long-term purchase commitments from our customers, and frequently do not have visibility as
to their future demand for our services. Customers also cancel, change or delay design, production or aftermarket service
quantities and schedules, or fail to meet their forecasts for a number of reasons beyond our control. Customer expectations can
change rapidly, requiring us to take on additional commitments or risks. In addition, customers may fail to meet their
commitments to us or our expectations. 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 from time to time and may continue to occur in the future. This risk continues to be
heightened by potential volatility in end market demand for our customers' products or our services likely as a result of the
ongoing COVID-19 pandemic.
In addition, we make significant decisions based on our estimates of customers’ demand, including determining the levels of
business that we will seek and accept, production schedules, component procurement commitments, working capital (including
inventory) management, facility and capacity 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 affect our ability to
accurately estimate their future requirements. Because certain of our operating expenses are fixed, a reduction in customer
demand can harm our operating results. The need for us to correctly anticipate component needs is amplified in times of
shortages. The current environment of tight component supply, which continues to be impacted by global pandemic-related
interruptions, can increase the difficulties and cost of anticipating changing demand. Moreover, because 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 demand may stress personnel and other capacity resources. We may not have sufficient resources,
including personnel and components, at any given time to meet all of our customers’ demands or to meet the requirements of a
specific program, which could result in a loss of business from such customers.
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The majority of our net sales come from a relatively small number of customers and a limited number of market
sectors; if we lose a major customer or program or if there are challenges in those market sectors, then our net sales and
operating results could decline significantly.
Net sales to our 10 largest customers have represented a majority of our net sales in recent periods. Our 10 largest customers
accounted for 55.2% of our net sales fiscal 2021 and 2020. During each of these periods there was one customer that
represented 10.0% or more of our net sales.
Our major customers may vary from period to period, and our major customers may not continue to purchase services from us
at current levels, or at all, particularly given the volatile or temporary nature of certain programs. In any given period, a higher
portion of our sales may be concentrated with customers or projects with relatively lower margins, which could adversely affect
our results. We have experienced from time to time, and in the future may experience, significant disengagements with
customers or of programs, adverse changes in customer supply chain strategies and the end of life of significant programs.
Especially given our discrete number of customers, the loss of, or significant reductions in net sales to, any of our major
customers or our failure to make appropriate choices as to the customers we serve could seriously harm our business and results
of operations.
In addition, we focus our sales efforts on customers in only a few market sectors, as identified in Part I, Item 1, herein. Each of
these sectors is subject to macroeconomic conditions, as well as trends and conditions that are sector specific. Any weakness in
our customers’ end markets could affect our business and results of operations. Economic, business or regulatory conditions
that affect the sector, or our failure to choose to do business in appropriate sectors, can particularly impact us. For instance,
sales in the Healthcare/Life Sciences sector are substantially affected by trends in the healthcare industry, such as government
reimbursement rates and uncertainties relating to the U.S. healthcare sector, generally. In addition, the Healthcare/Life Sciences
sector is affected by global health pandemics, such as COVID-19, which has created both opportunities and challenges for us.
For example, the pandemic initially caused an increase in sales specific to products supporting pandemic relief efforts and
critical care products, which demand has now leveled out or softened. More recently, sales related to elective procedures or
other non-critical care products, which weakened at the outset of the pandemic, have strengthened. Commercial aerospace
continues to be impacted by the COVID-19 pandemic, resulting in decreased demand from our commercial aerospace
customers. Additionally, the semiconductor industry has historically been subject to significant cyclicality and volatility.
Further, potential reductions in U.S. government agency spending, including those due to budget cuts or other political
developments or issues, could affect opportunities in all of our market sectors.
We rely on timely and regular payments from our customers, and the inability or failure of our major customers to meet their
obligations to us or their bankruptcy, insolvency or liquidation may adversely affect our business, financial condition and
results of operations. We also have receivables factoring agreements in place; therefore, deterioration in the payment experience
with or credit quality of our major customers we factor, or issues with the banking counterparties to our factoring agreements,
could have a material adverse effect on our financial condition and results of operations due to our inability to factor such
receivables.
From time to time, our customers have been affected by merger, acquisition, divestiture and spin-off activity. While these
transactions may present us with opportunities to capture new business, they also create the risk that these customers will
partially reduce their purchases or completely disengage from us as a result of transitioning such business to our competitors or
their internal operations.
We and our customers are subject to increasingly extensive government regulations, legal requirements and industry
standards; a failure to comply with current and future regulations, requirements and standards could have an adverse
effect on our business, customer relationships, reputation and profitability.
We are subject to extensive government regulation, legal requirements and industry standards (as well as customer-specific
standards) relating to the products we design, manufacture and service as well as how we conduct our business. This includes
regulations and standards relating to labor and employment practices, workplace health and safety, the environment, sourcing
and import/export practices, the market sectors we support and many other facets of our operations. The regulatory climate in
the U.S. and other countries has become increasingly complex and fragmented, and regulatory enforcement activity has
increased in recent periods. A failure to comply with laws, regulations or standards applicable to our business can result in,
among other consequences, fines, injunctions, civil penalties, criminal prosecution, recall or seizure of devices, total or partial
suspension of production, including debarment, and could have an adverse effect on our reputation, customer relationships,
profitability and results of operations.
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Our Healthcare/Life Sciences sector is subject to statutes and regulations covering the design, development, testing,
manufacturing, labeling and servicing of medical devices and the reporting of certain information regarding their safety,
including Food and Drug Administration regulations and similar regulations in other countries. We also design, manufacture
and service products for certain industries, including certain applications where the U.S. government is the end customer, that
face significant regulation by the Department of Defense, Department of State, Department of Commerce, Federal Aviation
Authority and other governmental agencies in the U.S. as well as in other countries, and also under the Federal Acquisition
Regulation. In addition, whenever we pursue business in new sectors and subsectors, or our customers pursue new technologies
or markets, we need to navigate the potentially heavy regulatory and legislative burdens of such sectors, as well as standards of
quality systems, technologies or markets.
The regulatory climate can itself affect the demand for our services. For example, government reimbursement rates and other
regulations, as well as the financial health of healthcare providers, and changes in how healthcare in the U.S. and other
countries 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 Healthcare/Life Sciences sector as well as impact our margins.
Our customers are also required to comply with various government regulations, legal requirements and industry standards,
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 we have in
place for these customers and create inefficiencies in our business. Failure of our customers to identify or flow down any such
requirements to Plexus could result in production of non-compliant product, which could restrict their ability to sell such
products, thus affecting our sales to them.
Increased competition may result in reduced demand or reduced prices for our services.
Our industry is highly competitive. We compete against numerous 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
designing, manufacturing and servicing products internally and may choose to design, manufacture or service products
(including products or product types that we currently design, manufacture or service for them) themselves rather than
outsource such activities. Consolidations and other changes in our industry may result in a changing competitive landscape.
Our competitors may:
•
•
•
•
•
•
•
•
respond more quickly than us 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
have lower internal cost structures
have greater direct buying power with component suppliers and distributors
devote greater resources to the development, promotion and sale of their services and execution of their strategy, and
be better positioned to compete on price for their services.
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 otherwise become increasingly competitive. Increased
competition could result in significant price reductions, reduced sales and margins, or loss of market share.
We may fail to successfully complete future acquisitions or strategic arrangements, and may not successfully integrate
acquired operations or recognize the anticipated benefits, which could adversely affect our operating results.
While we have primarily chosen an organic growth strategy in recent years, if we were to pursue future growth through
acquisitions, including the acquisition of operations divested by our customers, or similar transactions, this would involve
significant risks that could have a material adverse effect on us. These include operating risks such as the inability to
successfully integrate businesses, systems and personnel; impacts on customer programs and relationships; and an inability to
realize anticipated synergies or economies of scale. They also include financial risks such as the use of cash or incurrence of
additional debt and interest expense, the potential volatility or weakness in our stock price as a result of the announcement of
such transactions, the incurrence of large write-offs or write-downs and other potential financial impacts.
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Risks impacting our SUPERIOR EXECUTION – We are dedicated partners to our customers, committed to achieving
zero defects and perfect delivery through operational excellence.
We have a complex business model, and our failure to properly manage or execute on that model could adversely affect
our operations, financial results and reputation.
Our business model focuses on products and services that are highly complex and subject to demanding regulatory
requirements. Our customers’ products typically require significant production and supply-chain flexibility necessitating
optimized solutions across an integrated global platform. The products we design, manufacture and service are also typically
complex, heavily regulated and require complicated configuration management and direct order fulfillment capabilities to
global end customers.
Our business model requires a great degree of attention, flexibility and resources. These resources include working capital,
management and technical personnel, and the development and maintenance of systems and procedures to manage diverse
manufacturing, regulatory and service requirements for multiple programs of varying sizes simultaneously, including in
multiple locations and geographies. We also depend on securing and ramping new customers and programs as well as
transitioning production for new customers and programs, which creates added complexities related to managing the start-up
risks of such projects, especially for companies that did not previously outsource such activities.
The complexity of our model, which encompasses a broad range of services including design and development, supply chain
solutions, new product introduction, manufacturing and aftermarket services, often results in complex and challenging
contractual obligations and unique customer requirements. In addition, program complexity and associated customer
expectations have increased in recent years with respect to certain capabilities, commitments, allocation of risk and compliance
with third party standards, requiring extraordinary measures to ensure operational execution and compliance within unique,
non-standard engagements. This is especially relevant to our expanding aftermarket services business, where each customer
program presents unique logistical, operational and supply chain risks that differ from those found in our manufacturing or
engineering engagements. If we fail to meet those obligations, or are otherwise unable to execute on our commitments or
unsuccessfully mitigate such risks, then it could result in claims against us, regulatory violations, or adversely 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. A failure to adequately understand unique customer requirements may also impact our ability
to estimate and ultimately recover associated costs, adversely affecting our financial results.
Many of the markets for our manufacturing, engineering, aftermarket and other services are characterized by rapidly changing
technology and evolving process developments. Our internal processes are also subject to these factors. The sustained success
of our business will depend upon our continued ability to:
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•
retain qualified engineering and technical personnel, and attract additional qualified personnel, especially in times of
tight labor markets
choose, maintain and enhance appropriate technological and service capabilities
successfully manage the implementation and execution of information systems
develop and market services that meet changing customer needs
effectively execute our services and perform to our customers’ expectations, and
successfully anticipate, or respond to, technological changes on a cost-effective and timely basis.
Although we believe that our operations utilize the technologies, equipment and processes that are currently required by our
customers, we cannot be certain that we will maintain or develop the capabilities required by our customers in the future. The
emergence of new technologies, industry standards or customer requirements may render our technical personnel, equipment,
inventory or processes obsolete or noncompetitive. In addition, we may have to acquire new skills, technologies and equipment
to remain competitive, as well as offer new or additional services, all of which 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, or to perform to their expectations or standards, as well as our need
to maintain our personnel and other resources during times of fluctuating demand, could have an adverse effect on our business.
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There may be problems with the products we design, manufacture or service that could result in liability claims against
us, reduced demand for our services and damage to our reputation.
We design, manufacture and service products to our customers’ specifications, many of which are highly complex, for
industries such as healthcare, aerospace and defense that have higher risk profiles. Despite our quality control and quality
assurance efforts, problems may occur, or may be alleged, in the design, manufacturing or servicing of these products,
including as a result of business continuity issues. Whether or not we are responsible, problems in the products we manufacture,
whether real or alleged, whether caused by faulty customer specifications, the design or manufacturing processes, servicing or a
component defect, may result in delayed shipments to customers or reduced or canceled customer orders. If these problems
were to occur in large quantities or too frequently, our business reputation may also be tarnished. In addition, such 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 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 secure contractual protection and/or to
insure against many of these risks, we may not have practical recourse against certain suppliers, and contractual protections,
insurance coverage or supplier warranties, as well as our other risk mitigation efforts, may be inadequate, not cost effective or
unavailable, either in general or for particular types of products or issues. We occasionally incur costs defending claims, and
any such disputes could adversely affect our business relationships.
We experience component shortages, price fluctuations and supplier quality concerns.
We generally do not have long-term supply agreements. We have experienced from time to time and are currently experiencing
significant component shortages and longer lead times due to supplier capacity constraints or their failure to deliver. The delays
and shortages we experienced in fiscal 2021, and continue to experience, are the result of the global pandemic's impact on our
suppliers and logistics providers, exacerbated by the general improvement in worldwide economic conditions as economies
have emerged from the pandemic. Supply chain constraints can also be caused by world events, such as government policies,
tariffs, trade wars, trade disputes and trade protection measures, terrorism, armed conflict, natural disasters, economic recession,
increased demand due to economic growth, preferential allocations and other localized events. Further, we rely on a limited
number of suppliers for many of the components used in the assembly process and, in some cases, may be required to use
suppliers that are the sole provider of a particular component. Such suppliers may encounter quality problems, labor disputes,
financial difficulties or business continuity issues that could preclude them from delivering components timely or at all. Supply
shortages and delays in deliveries of components may result in delayed production of assemblies, which reduces our revenue
and operating profit for the periods affected. Additionally, a delay in obtaining a particular component may result in other
components for the related program being held for longer periods of time, increasing working capital, risking inventory
obsolescence and negatively impacting our cash flow. We are currently experiencing higher inventory levels as a result of
component shortages.
Due to the highly competitive nature of our industry, an inability to obtain sufficient inventory on a timely basis or successfully
execute on our business continuity processes, could also harm relationships with our customers and lead to loss of business to
our competitors.
In addition, components that are delivered to us may not meet our specifications or other quality criteria. Certain components
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. Further, the commitments made to us by our suppliers, and the terms applicable to such relationships,
may not match all the commitments we make to, and the terms of our arrangements with, our customers, and such variations
may lead us to incur additional expense or liability and/or cause other disruptions to our business.
Component supply shortages and delays in deliveries, along with other factors such as tariffs and trade disputes, can also result
in increased pricing. While many of our customers permit quarterly or other periodic adjustments to pricing based on changes in
component prices and other factors, we may 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, as a result of our
pricing strategies and practices, component 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.
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Our services involve other inventory risk.
Most of our services are provided on a turnkey basis, under which we purchase some, or all, of the required materials and
components based on customer forecasts or orders. Although, in general, our commercial contracts with our customers obligate
our customers to ultimately purchase inventory ordered to support their forecasts or orders, we generally finance these
purchases initially. In addition, 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 materials or
components. While we attempt to cancel, return or otherwise mitigate excess and obsolete inventory, require customers to
reimburse us for these items and/or price our services to address related risks, we may not actually be reimbursed timely or in
full, be able to collect on these obligations or adequately reflect such risks in our pricing. In addition to increasing inventory in
certain instances to support new program ramps, we may also increase inventory if we experience component shortages or
longer lead times for certain components in order to maintain a high level of customer service. In such situations, we may
procure components earlier, which has led to an increase in inventory in the short term and may lead to increased, excess, or
obsolete inventory in the future. Excess or obsolete inventory, the need to acquire increasing amounts of inventory due to
shortages, customer demand or otherwise, or other failures to manage our working capital, could adversely affect our operating
results, including our return on invested capital.
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 may result in higher inventory levels, further reduce
our inventory turns and increase our financial exposure with such customers. In addition, our inventory may be held at a
customer’s facility or warehouse, or elsewhere in a location outside of our control, which may increase the risk of loss. Even
though our customers generally have contractual obligations to purchase such inventories from us, we remain subject to
customers’ credit risks as well as the risk of potential customer default and the need to enforce those obligations.
An inability to successfully manage the procurement, development, implementation or execution of information systems,
or to adequately maintain these systems and their security, as well as to protect data and other confidential information,
may adversely affect our business and reputation.
As a global company with a complex business model, we are heavily dependent 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 and
data security, cybersecurity, privacy, reliability, compliance, 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 the ordinary course of business, we collect and store sensitive data and information, including our proprietary and regulated
business information and that of our customers, suppliers and business partners, as well as personally identifiable information
about our employees. Our information systems, like those of other companies, are susceptible to malicious damage, intrusions
and outages due to, among other events, viruses, cyber threats, industrial espionage (internal or external), hacking, break-ins
and similar events, other breaches of security, natural disasters, power loss or telecommunications failures. Due to the
intellectual property we maintain on our systems related to high technology components, sub-components, manufacturing
processes and our customers’ products, we are a likely target from various external and internal cyber threats, such as lone
attackers, competitors, our customers’ competitors and nation states seeking to gain access to such intellectual property, as well
as both unintentional and malicious internal threats. In addition, lone and organized crime elements have been known to extort
money by encrypting their victims’ data (ransomware) and utilize their victims’ resources for unauthorized mining of
cryptocurrency.
The increasing sophistication of cyberattacks requires us to continually evaluate the threat landscape and new technologies and
processes intended to detect and prevent these attacks. There can be no assurance that the security measures and systems
configurations we choose to implement will be sufficient to protect the data we manage. Any theft or misuse of information
resulting from a security breach could result in, among other things, loss of significant and/or sensitive information, litigation
by affected parties, financial obligations resulting from such theft or misuse, higher insurance premiums, governmental
investigations, fines and penalties, negative reactions from current and potential future customers, and reputational damage, any
of which could adversely affect our financial results. Also, the time and funds spent on monitoring and mitigating our exposure
and responding to breaches, including the training of employees, the purchase of protective technologies and the hiring of
additional employees and consultants to assist in these efforts could adversely affect our financial results. This risk is enhanced
as a result of an increase in our remote workforce due to the global pandemic and evolving flexible workplace practices, for
example by reason of utilizing home networks that may lack encryption or secure password protection, virtual meeting/
conference security concerns and increase of phishing/cyber-attacks around our remote workforce's digital resources.
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Moreover, we are subject to increasing expectations and data security requirements from our customers, generally, as well as
specific data handling requirements due to the nature of their end products, including those related to the Export Administration
Regulations/International Traffic in Arms, Federal Acquisition Regulation, Defense Federal Acquisition Regulation Supplement
and Cybersecurity Maturity Model Certification. Any operational failure or breach of security from increasingly sophisticated
cyber threats could lead to the loss or disclosure of our or our customers’ financial, product or other confidential information,
result in adverse regulatory or other legal actions and have a material adverse effect on our business and reputation. In addition,
we must comply with increasingly complex and rigorous regulatory standards enacted to protect business and personal data in
the U.S. and elsewhere. For example, the European Union’s General Data Protection Regulation (the “GDPR”) and similar
legislation in jurisdictions in which we operate impose additional obligations on companies regarding the handling of personal
data and provides certain individual privacy rights to persons whose data is stored. Compliance with existing, proposed and
recently enacted laws and regulations can be costly. Failure to comply with these regulatory standards could subject us to legal
and reputational risks. Misuse of or failure to secure personal information could also result in violation of data privacy laws and
regulations, proceedings against us by governmental entities or others, fines and penalties, damage to our reputation and
credibility and could have a negative impact on our business and results of operations.
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 represent a majority of our net sales and
operating income, with a particular concentration in Malaysia. In addition, although we have repatriated a substantial amount of
cash since the enactment of the U.S. Tax Cuts and Jobs Act (“U.S. Tax Reform”) in 2017, a significant amount of our cash
balances remain held outside of the U.S., with a particular concentration in Malaysia and China. We purchase a significant
number of components manufactured in various countries. These international aspects of our operations, which are likely to
increase over time, including with the introduction of a new manufacturing facility in Bangkok, Thailand, subject us to the
following risks that could materially impact our operations and operating results:
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economic, political or civil instability
transportation delays or interruptions
exchange rate fluctuations
potential disruptions or restrictions on our ability to access cash amounts held outside of the U.S.
changes in labor markets, such as government-mandated wage increases, increases to minimum wage requirements,
changes in union-related laws and regulations, limitations on immigration or the free movement of labor or restrictions
on the use of migrant workers, and difficulties in appropriately staffing and managing personnel in diverse cultures
compliance with laws, such as the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act and GDPR, applicable to
companies with global operations
changes in the taxation of earnings both in the U.S. and in other countries
reputational risks related to, among other factors, varying standards and practices among countries
changes in duty rates
significant natural disasters and other events or factors impacting local infrastructure
the impact of the United Kingdom’s exit from the European Union (“Brexit”)
the effects of other international political developments, such as tariffs, embargoes, sanctions, boycotts, trade wars,
energy disruptions, trade agreements and changes in trade policies, including those which may be effected by the U.S.
and other countries’ political reactions to those actions, and
regulatory requirements and potential changes to those requirements.
As our international operations continue to expand, our failure to appropriately address foreign currency transactions 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, developments affecting particular countries
can adversely affect our ability to access cash or other assets held in such countries.
A significant portion of our operations currently occurs in the APAC region, particularly in Malaysia. The concentration of our
operations, assets and profitability in that region exposes us to adverse developments, economic, political or otherwise, in those
countries.
Changes in policies by or changes in elected officials of the U.S. or other governments could negatively affect our operating
results due to trade wars, changes in duties, tariffs or taxes, currency exchange rate fluctuations, or limitations on currency or
fund transfers, as well as government-imposed restrictions on producing certain products in, or shipping them to, specific
countries. The United States-Mexico-Canada Agreement (the "USMCA"), became effective July 1, 2020. While certain aspects
of the USMCA may be positive, others, including potentially higher regulatory compliance costs, may have a negative impact
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on our business and adversely affect our operations in Mexico. Also, our current facilities in Mexico operate under the Mexican
Maquiladora (“IMMEX”) program. This program provides for reduced tariffs and eased import regulations. We could be
adversely affected by changes in the IMMEX program or our failure to comply with its requirements.
Additionally, continued uncertainty regarding commercial dealings, tariffs and other trade protection measures between the
U.S. and China may affect our ability to do business in China, may impact the cost of our products originating in China and
may impact the demand for our products manufactured in China in the event our customers reduce their operations in China.
These actions could also affect the cost and/or availability of components that we procure from suppliers in China.
Government-imposed restrictions on where we can produce certain types of products or source components or with whom we
can conduct business, such as named companies or industries identified in the 2021 National Defense Authorization Act, could
limit our ability to sell or manufacture products or services in China, or source components from certain companies or
geographies. These factors can negatively affect our revenues, costs and profitability as a result of having to minimize
engagements in China or requiring us to shift such production or the sourcing of components to the U.S. or other higher-cost
locations.
Given the lack of comparable precedent, the financial, trade and other legal implications of Brexit, or how such implications
might affect us (as we also have operations in Scotland), remain unclear. Brexit could, among other impacts, disrupt trade and
the movement of goods, services and people between the U.K. and the E.U. or other countries, disrupt the stability of the E.U.
generally and lead to a downturn in consumer sentiment. This could result in overall negative economic growth, as well as
create legal, political, regulatory and global economic uncertainty. These and other potential implications could adversely affect
our business and financial results.
Natural disasters, breaches of security 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 tornadoes, hurricanes,
earthquakes, water shortages, tsunamis and floods. All facilities are subject to other natural or man-made disasters such as those
related to weather events or global climate change, fires, acts of terrorism or war, breaches of security, theft or espionage,
workplace violence and failures of utilities. If such an event was to occur and we did not have an effective business continuity
plan in place, our business could be harmed due to the event itself or due to our inability to effectively manage the effects of the
particular event, with the impact of the event potentially magnified in areas where we have multiple facilities in close
proximity. For example, we maintain significant production capacity in Penang, Malaysia, and an isolated event in that
geography could materially hinder our production capabilities. 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 potentially have a
negative affect our relationships and financial results.
Although we have implemented policies and procedures with respect to physical security, we remain at risk of unauthorized
access to our facilities and the possible unauthorized use or theft of inventory, information or other physical assets. If
unauthorized persons gain physical access to our facilities, or our physical assets or information are stolen, damaged or used in
an unauthorized manner (whether through outside theft or industrial espionage), we could be subject to, among other
consequences, negative publicity, governmental inquiry and oversight, loss of government contracts, litigation by affected
parties or other future financial obligations related to the loss, misuse or theft of our or our customers’ data, inventory or
physical assets, any of which could have a material adverse effect on our reputation and results of operations.
A failure to comply with customer-driven policies and standards, and third-party certification requirements or
standards could adversely affect our business and reputation.
In addition to government regulations and industry standards, our customers may require us to comply with their own or third-
party quality standards, commercial terms, or other business policies or standards, which may be more restrictive than current
laws and regulations as well as our pre-existing policies and/or terms with our suppliers, before they commence, or continue,
doing business with us. Such policies or standards may be customer-driven, established by the industry sectors in which we
operate or imposed by third party organizations.
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Our compliance with these heightened and/or additional policies, standards and third-party certification requirements, and
managing a supply chain in accordance therewith, could be costly, and our failure to comply could adversely affect our
operations, customer relationships, reputation and profitability. In addition, our adoption of these standards could adversely
affect our cost competitiveness, ability to provide customers with required service levels and ability to attract and retain
employees in jurisdictions where these standards vary from prevailing local customs and practices. In certain circumstances, to
meet the requirements or standards of our customers we may be obligated to select certain suppliers or make other sourcing
choices, and we may bear responsibility for adverse outcomes even if these matters are as the result of third-party actions or
outside of our control.
Intellectual property infringement claims against our customers or us could harm our business.
Although our manufacturing processes are generally not subject to significant proprietary protection, our services may and the
products offered by our customers do 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, then 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 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.
Risks impacting our PASSION MEETS PURPOSE – We are united as a team. We are guided by our values and
leadership behaviors. We do the right thing to support our team members, communities and customers.
We depend on our workforce, and the inability to attract, develop and retain personnel or other personnel disruptions
may harm our business.
If we fail to attract, develop and retain sufficient qualified personnel, including key leadership positions and highly skilled
technical roles, our operations and, consequently, our financial results, could be adversely affected. A number of factors may
adversely affect labor availability in one or more of our locations, including local labor laws and practices or union activities,
wage pressure and changing wage requirements, increasing healthcare costs, restrictions on immigration or labor mobility, local
competition, high employment rates and high turnover rates. These labor-related issues and labor shortages have become more
pronounced likely as a result of the COVID-19 outbreak. We could also be subject to inflationary or other general labor cost
increases due to current economic condition, which may increase our costs. If we are unable to offset these labor costs increases
through price increases, growth or operational efficiencies, these inflationary or general labor cost increases could have a
material adverse effect on our operating results and cash flows. Further, our adoption of certain third-party health, safety and
other employment-related regulatory standards could adversely affect our ability to attract and retain employees in jurisdictions
where these standards vary from prevailing local customs and practices. Additionally, any of these factors could drive an
increase in turnover rates within our existing workforce, which could lead to decreased efficiency and increased costs, such as
increased over time to meet demand and increased wage rates to attract and retain employees.
We also depend on good relationships with our workforce, generally. Monitoring employee engagement and maintaining a
healthy workplace culture based on our values and leadership behaviors is important to developing these good relationships and
retaining a committed workforce. A failure to foster a strong, healthy culture, or a failure to adopt or maintain competitive
policies and practices that enhance our workplace culture, such as those related to diversity and inclusion, workplace flexibility
or other employee benefits, could adversely impact our ability to attract, develop and retain personnel and could substantially
affect our operations and financial results.
From time to time, there are changes and developments, such as retirements, promotions, transitions, disability, death and other
terminations of service that affect our executive officers and other key employees, including those that are unexpected.
Transitions or other changes in responsibilities among officers and key employees without having identified and ready
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successors for these critical roles, particularly when such changes are unanticipated, unplanned or not executed effectively,
inherently can cause disruptions to our business and operations, as well as harm our reputation, which could have an effect on
our results. Further, as we grow in size and complexity, a failure to continuously focus on the development of personnel and
plan for the succession of critical roles may result in shortfalls in the talent required to execute effectively and affect our
operations and financial results.
Global climate change and related emphasis on environmental, social and governance ("ESG") matters by various
stakeholders could negatively affect our business.
Customer, investor and employee expectations relating to ESG have been rapidly evolving and increasing. In addition,
government organizations are enhancing or advancing legal and regulatory requirements specific to ESG matters. The
heightened stakeholder focus on ESG issues related to our business requires the continuous monitoring of various and evolving
laws, regulations, standards and expectations and the associated reporting requirements. A failure to adequately meet
stakeholder expectations may result in noncompliance, the loss of business, reputational impacts, diluted market valuation, an
inability to attract customers and an inability to attract and retain top talent. In addition, our adoption of certain standards or
mandated compliance to certain requirements could necessitate additional investments that could impact our profitability.
Specifically, certain stakeholders are beginning to require that we provide information on our plans relating to certain climate-
related matters such as greenhouse gas emissions. Further, increased public awareness and concern regarding global climate
change may result in new or enhanced legal requirements to reduce or mitigate the effects of greenhouse gas emissions. There
continues to be a lack of consistent climate legislation, which creates economic and regulatory uncertainty. Such uncertainty
may have an impact on our business, from the demand for our customers’ products in various industries to our costs of
compliance in the manufacturing and servicing of our customers’ products, all of which may impact our results of operations.
Climate changes, such as extreme weather conditions, create financial risk to our business. Global physical climate changes,
including unseasonable weather conditions, could result in reduced demand or product obsolescence for certain of our
customers’ products and/or price modifications for our customers’ products and the resources needed to produce them. This
could in turn put pressure on our manufacturing costs and result in reduced profit margin associated with certain of our
customer programs, or loss of customer programs that we may not be able to replace.
Climate changes could also disrupt our operations by impacting the availability and cost of materials within our supply chain,
and could also increase insurance and other operating costs. These factors may impact our decisions to construct new facilities
or maintain existing facilities in areas most prone to physical climate risks, such as our facilities in Malaysia at or near sea level.
Risks impacting our DISCIPLINE BY DESIGN – We hold ourselves accountable to delivering shareholder value through
consistent application of a disciplined financial model.
Our financial condition and results of operations may be materially adversely affected by the ongoing coronavirus
(COVID-19) outbreak.
The full extent to which the COVID-19 outbreak will impact our business and operating results will depend on future
developments that are highly uncertain and cannot be accurately predicted, including new medical and other information that
may emerge concerning COVID-19 and the actions by governmental entities or others to contain it or treat its impact.
The continuing COVID-19 outbreak, including the spread of its variants, poses the risk that we or our employees, suppliers,
customers and others may be restricted or prevented from conducting business activities for indefinite or intermittent periods of
time, including as a result of employee health and safety concerns, shutdowns, shelter in place orders, travel restrictions and
other actions and restrictions that may be prudent or required by governmental authorities. For example, in fiscal 2021, our
operations across the globe were impacted at various times due to quarantines, travel restrictions, government-mandated
workforce limitations and other factors affecting us and our suppliers. In addition, we experienced a temporary reduction of our
operating capacity in Malaysia during our third and fourth quarters of fiscal 2021 as a result of government-mandated actions to
control the spread of COVID-19. Finally, while our facilities, and those of some of our suppliers, have been classified as
essential or otherwise permitted to operate in jurisdictions in which facility closures have been mandated, we can give no
assurance that this will not change in the future or that we or our suppliers will continue to be permitted to conduct business in
each of the jurisdictions in which we operate.
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In addition to government-imposed shutdowns or restrictions on our business activities due to COVID-19, governments may
impose vaccine or testing requirements on some or all of our employees. On September 9, 2021, President Biden issued an
executive order which requires U.S-based contractors and subcontractors that work on or in support of contracts with the U.S.
Government be fully vaccinated unless otherwise exempt for approved medical or religious exemptions. Further, on September
9, 2021, President Biden instructed the Occupational Safety and Health Administration ("OSHA") to develop an Emergency
Temporary Standard ("ETS") mandating either full vaccination or weekly testing of employees for employers with more than
100 employees. The ETS on vaccination and testing was officially filed in the Office of the Federal Register on November 4,
2021, and became effective when published on November 5, 2021. We have been assessing the applicability of these executive
actions to our business and are taking steps to prepare to comply, as required. Other jurisdictions in which we operate may also
mandate vaccinations or testing. Implementation of mandatory vaccinations or weekly testing requirements may result in
increased costs of compliance, labor attrition, including critically skilled labor, difficulty attracting and retaining future
employees and loss of revenues associated with U.S. government contracts or subcontracts, all of which could have a material
adverse effect on our business, financial condition and results of operations.
We also have modified our business practices for the continued health and safety of our employees. We may take further
actions, or be required to take further actions, that are in the best interests of our employees. Our suppliers and customers have
also implemented such measures, which has resulted in, and we expect it will continue to result in, disruptions or delays and
higher costs. The implementation of health and safety practices by us, our suppliers, or our customers could impact customer
demand, supplier deliveries, our productivity and costs, which could have a material adverse impact on our business, financial
condition, or results of operations.
While we currently believe we have ample liquidity to manage the financial impact of COVID-19, we can give no assurance
that this will continue to be the case if the impact of COVID-19 is prolonged or if there is an extended impact on us or the
economy generally. Further, the impacts of COVID-19 have caused significant uncertainty and volatility in the credit markets.
If our liquidity or access to capital becomes significantly constrained, or if costs of capital increase significantly due to the
impact of COVID-19 as result of volatility in the capital markets, a reduction in our creditworthiness or other factors, then our
financial condition, results of operations and cash flows could be materially adversely affected.
Our management of the impact of COVID-19 has and will continue to require significant investment of time from our
management and employees, as well as resources across our enterprise. The focus on managing and mitigating the impacts of
COVID-19 on our business may cause us to divert or delay the application of our resources toward existing or new initiatives or
investments, which could have a material adverse impact on our results of operations.
The foregoing and other continued disruptions to our business as a result of COVID-19 has had and could continue to have a
material adverse effect on our business, results of operations and financial condition.
Challenges associated with the engagement of new customers or programs, the provision of new services, or start-up
costs and inefficiencies related to new, recent or transferred programs could affect our operations and financial results.
Our engagement with new customers, as well as the addition of new programs or types of services 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, program or service, including evaluating whether the customer,
program or service fits with our value proposition as well as its potential 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
reflect the strategic nature of the customer, anticipated costs, risks and rewards. The failure to make prudent engagement
decisions 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 anticipated revenue from a new program or
service; these factors can sometimes extend for a significant period. Some new programs or services 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 or
services on a timely basis. Further, the success of new programs may depend heavily on factors such as product reliability,
market acceptance, regulatory approvals 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 or service’s requirements, could result in lost financial
opportunities and adversely affect our results of operations.
In recent years, ramping new programs has been a key contributor to our revenue growth. The management of resources in
connection with the establishment of new or recent programs and customer relationships, as well as program transfers between
facilities and geographies, and the need to estimate required resources in advance of production can adversely affect our gross
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and operating margins and level of working capital. These factors are particularly evident in the early stages of the life-cycle of
new programs, which typically lack a track record of order volume and timing as well as production efficiencies in the early
stages. We typically manage multiple new programs at any given time; therefore, we are exposed to these factors in varying
magnitudes.
The effects of these start-up costs and inefficiencies can also occur when we transfer programs between locations and
geographies. We conduct these transfers on a regular basis to meet customer needs, seek long-term efficiencies or respond to
market conditions, as well as due to facility openings and closures. We may also be required to transfer projects between
facilities due to tariffs and other trade measures impacting particular countries such as China. Although we try to recover costs
from our customers and minimize the potential losses arising from transitioning customer programs between our facilities and
geographies, we may not be successful and there are inherent risks that such transitions can result in operational inefficiencies
and the disruption of programs and customer relationships.
While these factors tend to affect new, recent or transferred programs, they can also impact more mature or maturing programs
and customer relationships, especially programs where end-market demand can be somewhat volatile.
Failure to manage periods of growth or contraction may seriously harm our business.
Our industry frequently sees periods of expansion and contraction. We regularly contend with these issues and must carefully
manage our business to meet changing customer and market requirements. If we fail to manage these growth and contraction
decisions effectively, as well as fail to realize the anticipated benefits of these decisions, we can find ourselves with either
excess or insufficient resources and our business, as well as our profitability, may suffer. Expansion and consolidation,
including the transfer of operations to new or other facilities or due to acquisitions, can inherently include additional costs and
start-up inefficiencies. For example, we are expanding our geographic locations and constructing a new manufacturing facility
in Bangkok, Thailand, to supplement our footprint in the Asia-Pacific region. In addition, we may expand our operations in new
geographical areas where currently we do not operate. If we are unable to effectively manage this or other expansions or
consolidations, or related anticipated net sales are not realized, our operating results could be adversely affected. Other risks of
current or future expansions, acquisitions and consolidations include:
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the inability to successfully integrate additional facilities or incremental capacity and to realize anticipated efficiencies,
economies of scale or other value
challenges faced as a result of transitioning programs
incurrence of restructuring costs or other charges that may be insufficient or may not have their intended effects
additional fixed or other costs, or selling and administrative expenses, 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, as well as the increased costs associated with opening 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 excess capacity or higher levels of employment entail short-term costs, reductions in
capacity or employment could impair our ability to respond to new opportunities and programs, 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 costs.
In addition, to meet our customers' needs, particularly when the production requirements of certain products are site-specific, to
achieve increased efficiencies, or to address factors affecting specific locations, such as tariffs and trade disputes, we sometimes
require additional capacity in one location while reducing capacity in another. 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. We may also encounter situations where our lack of a physical
presence in certain locations may limit or foreclose opportunities.
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Changes in tax laws, potential tax disputes, negative or unforeseen tax consequences or further developments affecting
our deferred tax assets could adversely affect our results.
Our effective tax rate is highly dependent upon the geographic mix of earnings across the jurisdictions where we operate.
Changes in tax laws or tax rates in those jurisdictions, including, but not limited to, as a result of actions by the U.S. (including
additional guidance and interpretations related to U.S. Tax Reform or potential passage of tax regulation changes under the U.S.
presidential administration) or other countries, could continue to have a material impact on our operating results. Among other
things, we have been, and are expected to continue to be, affected by the global intangible low-taxed income provisions added
by U.S. Tax Reform and related new tax legislation, interpretations and guidance. Our effective tax rate may also be impacted
by tax holidays and other various tax credits granted by local taxing authorities. In addition, the implementation of U.S. Tax
Reform has required the use of estimates, which may be refined in future periods. All incentives, including a tax holiday
granted to our Malaysian subsidiary, are subject to certain terms and conditions. While we expect to comply with these
conditions, we would experience adverse tax consequences if we are found to not be in compliance or if the terms and
conditions of the tax holiday are unfavorably altered by the local taxing authorities, changes to U.S. tax policy or the
establishment of a global minimum tax.
Our taxable income in any jurisdiction is dependent upon the local taxing authority’s acceptance of our operational and
intercompany transfer pricing practices as being at “arm’s length.” Due to inconsistencies among jurisdictions in the application
of the arm’s length standard, our transfer pricing methods may be challenged and, if not upheld, could increase our income tax
expense. Risks associated with transfer pricing adjustments are further highlighted by the global initiative from the
Organisation for Economic Cooperation and Development called the Base Erosion and Profit Shifting (“BEPS’) project. The
BEPS project is challenging longstanding international tax norms regarding the taxation of profits from cross-border business.
Given the scope of our international operations and the fluid and uncertain nature of how the BEPS project might ultimately
lead to future legislation, it is difficult to assess how any changes in tax laws would impact our income tax expense.
We review the probability of the realization of our net deferred tax assets each period based on forecasts of taxable income by
jurisdiction. 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 each of our jurisdictions may require the creation of an additional 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 may fail to secure or maintain necessary additional financing or capital.
Although we have credit facilities, we cannot be certain that our existing credit arrangements 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, to
accommodate changes or developments in our business and operations and/or increased working capital needs. In addition, if
we do not comply with the covenants under our credit facility, our ability to borrow under that facility would be adversely
affected. In addition, it is possible that counterparties to our financial agreements, including our credit facility and receivables
factoring programs, may not be willing or able to meet their obligations, either due to instability in the global financial markets
or otherwise, which could, among other impacts, increase the duration of our cash collection cycle. While we currently believe
we have ample liquidity to manage the financial impact of COVID-19, we can give no assurance that this will continue to be the
case if the impact of COVID-19 is prolonged or if there is an extended impact on us or the economy in general.
Our future success may depend on our ability to obtain additional financing and capital to support possible future growth and
future initiatives. In addition, we also have receivables factoring programs. Many of our borrowings are at variable interest rates
and therefore our interest expense is subject to increase if rates increase.
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 facilities, or through 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; we may not be able to offer our
securities on attractive or acceptable terms in the event of volatility or weakness in our stock price. 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 current or future 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.
22
The elimination of the London Interbank Offering Rate ("LIBOR") could adversely affect our business, results of
operations or financial condition.
Borrowings under our credit facilities use LIBOR as a benchmark for establishing the applicable interest rate. The U.K.’s
Financial Conduct Authority announced that after 2021 it would no longer persuade or compel panel banks to submit the rates
required to calculate LIBOR. The consequences of these developments with respect to LIBOR cannot be entirely predicted but
could result in an increase in the cost of our variable rate indebtedness causing a negative impact on our financial position,
liquidity and results of operations. Specifically, the use of an alternative reference rate could result in increased costs, including
increased interest expense on our borrowings, and increased borrowing costs in the future. Management continues to evaluate
the LIBOR exposure risks.
ITEM 1B.
UNRESOLVED SEC STAFF COMMENTS
None.
23
ITEM 2.
PROPERTIES
Our facilities are comprised of an integrated network of manufacturing and engineering centers with our corporate headquarters
located in Neenah, Wisconsin. We own or lease facilities with approximately 4.5 million square feet of active capacity. This
includes approximately 2.1 million square feet in AMER, approximately 2.0 million square feet in APAC and approximately
0.4 million square feet in EMEA. Our active facilities as of October 2, 2021 are described in the following table:
Location
AMER
Neenah, Wisconsin
Guadalajara, Mexico (1)
Nampa, Idaho
Appleton, Wisconsin
Buffalo Grove, Illinois (1)
Neenah, Wisconsin
Neenah, Wisconsin
Raleigh, North Carolina
Portland, Oregon
APAC
Penang, Malaysia (1)
Hangzhou, China (1)
Xiamen, China
Xiamen, China (1)
Kaki Bukit, Singapore
EMEA
Oradea, Romania
Livingston, Scotland
Kelso, Scotland
Darmstadt, Germany
Type
Size (sq. ft.)
Owned/Leased
Manufacturing
Manufacturing/Engineering
Manufacturing
Manufacturing
Manufacturing
Global Headquarters
Engineering
Engineering
Manufacturing
Manufacturing/Engineering
Manufacturing
Manufacturing
Manufacturing
Manufacturing
Manufacturing/Engineering
Manufacturing/Engineering
Manufacturing
Engineering
418,000 Owned
741,000 Leased
216,000 Owned
205,000 Owned
189,000 Leased
104,000 Owned
90,000 Leased
41,000 Leased
29,000 Leased
1,480,000 Owned
245,000 Leased
133,000 Owned
122,000 Leased
12,000 Leased
296,000 Owned
62,000 Leased
57,000 Owned
21,000 Leased
(1) The facilities in Guadalajara, Mexico, Buffalo Grove, Illinois, Penang, Malaysia, Hangzhou, China, and Xiamen, China
include more than one building.
In the second quarter of fiscal 2021, construction began on a new manufacturing facility in Bangkok, Thailand. Construction is
anticipated to be completed in the latter half of fiscal 2022. In the fourth quarter of fiscal 2021, we took possession of a leased
manufacturing facility in Haining, China. It is expected to become an active facility in the second quarter of fiscal 2022.
ITEM 3.
LEGAL PROCEEDINGS
We are party to certain lawsuits and legal proceedings 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 our consolidated financial position,
results of operations or cash flows.
ITEM 4.
MINE SAFETY DISCLOSURES
Not applicable.
24
PART II
ITEM 5.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES
Performance Graph
Our common stock trades on the Nasdaq Stock Market in the Nasdaq Global Select Market tier (symbol: PLXS).
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 30, 2016, in Plexus common
stock and in each of the indices as of the last business day of the respective fiscal year.
Comparison of Cumulative Total Return
2016
$100
100
100
2017
$120
126
116
2018
$125
134
130
2019
$134
138
124
2020
$152
148
123
2021
$195
200
173
Plexus
Nasdaq-Electronic Components
S&P 400
Shareholders of Record
As of November 15, 2021, we had 390 shareholders of record.
Dividends
We have not paid any cash dividends in the past. We currently anticipate that in the foreseeable future the majority of earnings
will be retained to finance the development of our business through capital expenditures and working capital requirements, as
well as execution upon our share repurchase authorizations as management deems appropriate and market conditions may
allow. However, our Board of Directors evaluates from time to time potential uses of excess cash, which in the future may
include additional 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 additional
discussion of our intentions regarding dividends as well as a description of loan covenants that could restrict our ability to make
future dividend payments.
25
Issuer Purchases of Equity Securities
The following table provides the specified information about the repurchases of shares by us during the three months ended
October 2, 2021:
Period
July 4, 2021 to July 31, 2021
August 1, 2021 to August 28, 2021
August 29, 2021 to October 2, 2021
Total number of
shares purchased
Average price
paid per share
126,637 $
144,212
60,072
330,921 $
87.36
88.40
90.55
88.39
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 (1)
126,637 $
144,212
60,072 $
330,921
15,064,154
2,316,330
46,876,967
(1) On August 13, 2020, the Board of Directors approved a new share repurchase plan under which we are authorized to
repurchase up to $50.0 million of our common stock (the "2021 Program"). On November 18, 2020, the Board of Directors
approved an additional $50.0 million in share repurchase authority under the existing 2021 Program such that there then existed
a total of $100.0 million in share repurchase authority under the program. On August 11, 2021, the Board of Directors approved
a new share repurchase program that authorizes the Company to repurchase up to $50.0 million of its common stock (the "2022
Program"). The 2022 Program commenced upon completion of the 2021 Program during the fourth quarter of fiscal 2021. The
2022 Program has no expiration. The table above reflects the maximum dollar amount remaining available for purchase under
the 2022 Program as of October 2, 2021.
26
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. Since 1979, we have been partnering with companies to create the products that build a better
world. We are a team of approximately 19,200 individuals who are dedicated to providing Design and Development, Supply
Chain Solutions, New Product Introduction, Manufacturing and Aftermarket Services. We are a global leader that specializes
in serving customers in industries with highly complex products and demanding regulatory environments. Plexus delivers
customer service excellence to leading companies by providing innovative, comprehensive solutions throughout a product’s
lifecycle. We engineer innovative solutions for customers in growth markets and focus on partnering with leading global
companies in the Industrial, Healthcare/Life Sciences and Aerospace/Defense market sectors. We deliver comprehensive end-
to-end solutions in the Americas ("AMER"), Asia-Pacific ("APAC") and Europe, Middle East and Africa ("EMEA") regions.
The following Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is intended
to provide an analysis of both short-term results and future prospects from management’s perspective, including an assessment
of the financial condition and results of operations, events and uncertainties that are not indicative of future operations and any
other financial or statistical data that we believe will enhance the understanding of our company’s financial condition, cash
flows and other changes in financial condition and results of operations. The information should be read in conjunction with our
consolidated financial statements included herein and "Risk Factors" included in Part I, Item 1A herein.
A discussion regarding our financial condition and results of operations for fiscal 2021 compared to fiscal 2020 is presented
below. A discussion regarding our financial condition and results of operations for fiscal 2020 compared to fiscal 2019 can be
found under Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations," in our
Annual Report on the Form 10-K for the fiscal year ended October 3, 2020, which was filed with the SEC on November 20,
2020, and is available on the SEC’s website at www.sec.gov as well as our Inventor Relations website at www.plexus.com.
COVID-19 Update
We continue to monitor the global outbreak and spread of COVID-19 and take steps to mitigate the potential risks to us posed
by its spread and related circumstances and impacts.
The health and safety of our employees is a top priority for us. We have progressively implemented measures to safeguard our
employees from the COVID-19 infection and exposure and have made significant efforts to mitigate the effects of regulatory
authority restrictions on our operations through a combination of adjustments in our shift patterns, flexible work arrangements,
productivity improvements, facility enhancements to support social distancing and optimizing employee capability to work
from home, if needed. These efforts will continue as requirements change, new risks are identified and infections impact us.
We have experienced labor shortages due to COVID-19 quarantines or workforce curtailments, particularly in Malaysia during
the latter half of fiscal 2021, as the virus spread. Due to high vaccination rates among our team in Malaysia recently achieved,
we do not expect the labor challenges in the region to persist. However, the spread and resurgence of the COVID-19 virus in
other jurisdictions we operate may make our ability to mitigate the impacts of the pandemic on our productivity more
challenging.
We remain in close contact with our suppliers to understand the impacts of COVID-19 on their businesses and operations. Our
suppliers may face challenges in maintaining an adequate workforce or securing materials from their own suppliers as a result
of COVID-19. We have experienced, and expect to continue to experience in fiscal 2022, an inability to procure certain
components and materials on a timely basis due to worsening supply chain shortages likely as a result of the COVID-19
pandemic. We continue to take steps to validate our suppliers’ ability to deliver to us on time, but anticipate that the extended
lead times will require us to make additional investments in inventory to satisfy customer demand.
The combination of labor reductions, particularly in Malaysia, and worsening supply chain constraints has impacted our ability
to meet customer demand, and as a result, negatively impacted revenue compared to expectations. The global supply chain
constraints will limit our ability to capture the robust demand from our customers entering fiscal 2022. We continue to maintain
additional resources to help mitigate component constraint challenges and the operating inefficiencies COVID-19 has created,
but note these inefficiencies place additional burden on operating results.
The global supply chain constraints have led to inflation in many of the components we acquire, as well as labor and operating
costs. While we have been largely able to mitigate the impacts of inflation through our contractual rights with customers on
27
pricing, the inability to offset these costs in future periods or the impacts of continued inflation on end markets and our
customers may affect our operating results.
We believe we are positioned with a strong balance sheet. As of the end of fiscal 2021, cash and cash equivalents and restricted
cash were $271 million, while debt, finance lease obligations and other financing were $253 million. Borrowings under our
Credit Facility as of October 2, 2021 were $55 million, leaving $295 million of our revolving commitment of $350 million
available for use as of October 2, 2021. Refer to Note 4, "Debt, Finance Lease Obligations and Other Financing," in Notes to
Consolidated Financial Statements and "Management’s Discussion and Analysis Liquidity and Capital Resources" in Part II,
Item 7 for further information.
RESULTS OF OPERATIONS
Consolidated Performance Summary. The following table presents selected consolidated financial data for the indicated fiscal
years (dollars in millions, except per share data):
Net sales
Cost of sales
Gross profit
Gross margin
Operating income
Operating margin
Other expense
Income tax expense
Net income
Diluted earnings per share
Return on invested capital*
Economic return*
$
2021
2020
$
3,368.9
3,045.6
323.3
3,390.4
3,077.7
312.7
9.6 %
176.3
5.2 %
15.9
21.5
138.9
$
4.76
$
15.4 %
7.3 %
9.2 %
153.4
4.5 %
18.0
17.9
117.5
3.93
14.0 %
5.2 %
*Non-GAAP metric; refer to "Return on Invested Capital ("ROIC") and economic return" below for more information and Exhibit 99.1
for a reconciliation.
Net sales. Fiscal 2021 net sales decreased $21.5 million, or 0.6%, as compared to fiscal 2020.
Net sales are analyzed by management by geographic segment, which reflects our reportable segments, and by market sector.
Management measures operational performance and allocates resources on a geographic segment basis. Our global business
development strategy is based on our targeted market sectors. Beginning in fiscal 2021, we consolidated the previously reported
Industrial/Commercial and Communications market sectors to form the Industrial market sector. Prior period amounts have
been reclassified to conform to the current period presentation.
As a percentage of consolidated net sales, net sales attributable to customers representing 10% or more of consolidated net sales
as well as the percentage of net sales attributable to our ten largest customers for the indicated fiscal years were as follows:
General Electric Company ("GE")
Top 10 customers
2021
2020
11.2 %
55.2 %
11.7 %
55.2 %
28
A discussion of net sales by reportable segment is presented below for the indicated fiscal years (in millions):
Net sales:
AMER
APAC
EMEA
Elimination of inter-segment sales
Total net sales
2021
2020
$
$
1,317.4 $
1,850.6
312.7
(111.8)
3,368.9 $
1,327.8
1,824.8
349.1
(111.3)
3,390.4
AMER. Net sales for fiscal 2021 in the AMER segment decreased $10.4 million, or 0.8%, as compared to fiscal 2020. The
decrease in net sales was driven by overall net decreased customer end-market demand, primarily within the Healthcare/Life
Sciences sector and with commercial aerospace customers in the Aerospace/Defense sector likely as a result of COVID-19. The
decrease was also driven by a reduction in net sales of $12.6 million due to disengagements with customers and a $14.1 million
decrease for end-of-life products. These decreases were partially offset by a $72.9 million increase in production ramps for
new customers, partially inclusive of increased demand likely as a result of COVID-19, and a $30.4 million increase in
production ramps of new products for existing customers.
APAC. Net sales for fiscal 2021 in the APAC segment increased $25.8 million, or 1.4%, as compared to fiscal 2020. The
increase in net sales was driven by a $19.5 million increase in production ramps of new products for existing customers and
overall net increased customer end-market demand, partially inclusive of decreased demand likely as a result of COVID-19.
These increases were partially offset by a $6.0 million decrease in the partial loss of a program with an existing customer, a
$5.4 million decrease for an end-of-life product as well as reduced operating capacity due to mandated workforce curtailments
for manufacturers in certain parts of the region.
EMEA. Net sales for fiscal 2021 in the EMEA segment decreased $36.4 million, or 10.4%, as compared to fiscal 2020. The
decrease in net sales was driven by overall net decreased customer end-market demand, inclusive of decreased demand likely as
a result of COVID-19, and a $14.0 million decrease for an end-of-life product likely as a result of COVID-19.
Our net sales by market sector for the indicated fiscal years were as follows (in millions):
Net sales:
Industrial
Healthcare/Life Sciences
Aerospace/Defense
Total net sales
2021
2020
$
$
1,549.0 $
1,326.9
493.0
3,368.9 $
1,520.4
1,258.4
611.6
3,390.4
Industrial. Net sales for fiscal 2021 in the Industrial sector increased $28.6 million, or 1.9%, as compared to fiscal 2020. The
increase was driven by overall net increased customer end-market demand, a $23.8 million increase in production ramps for
new customers and a $6.6 million increase in production ramps of new products for existing customers. The increase was
partially offset by a decrease of $16.1 million due to disengagements with customers, a $5.4 million decrease for end-of-life
products as well as reduced operating capacity due to mandated workforce curtailments for manufacturers in certain parts of the
APAC region.
Healthcare/Life Sciences. Net sales for fiscal 2021 in the Healthcare/Life Sciences sector increased $68.5 million, or 5.4%, as
compared to fiscal 2020. The increase in net sales was driven by a $40.2 million increase in production ramps of new products
for existing customers. The increase was also due to a $37.8 million increase in production ramps for a new customer and
overall net increased customer end-market demand, both inclusive of increased demand likely as a result of COVID-19. The
increase was partially offset by a $28.1 million decrease for end-of-life products, partially as a result decreased demand in
critical care products likely due to COVID-19, a $6.0 million decrease due to the partial loss of a program with an existing
customer as well as reduced operating capacity due to mandated workforce curtailments for manufacturers in certain parts of
the APAC region.
Aerospace/Defense. Net sales for fiscal 2021 in the Aerospace/Defense sector decreased $118.6 million, or 19.4%, as compared
to fiscal 2020. The decrease was driven by net decreased customer end-market demand, primarily with commercial aerospace
customers likely due to COVID-19. The decrease was partially offset by a $20.0 million increase in production ramps for new
customers.
29
Cost of sales. Cost of sales for fiscal 2021 decreased $32.1 million, or 1.0%, as compared to fiscal 2020. Cost of sales is
comprised primarily of material and component costs, labor costs and overhead. In fiscal 2021 and 2020, approximately 89% of
the total cost of sales was variable in nature and fluctuated with sales volumes. Approximately 88% of these costs in fiscal 2021
and 87% of these costs in 2020 were related to material and component costs.
As compared to fiscal 2020, the decrease in cost of sales in fiscal 2021 was primarily driven by the decrease in net sales,
favorable customer mix and decreased costs associated with COVID-19. These decreases were partially offset by an increase in
fixed costs.
Gross profit. Gross profit for fiscal 2021 increased $10.6 million, or 3.4%, as compared to fiscal 2020. Gross margin of 9.6%
increased 40 basis points compared to fiscal 2020. The primary driver of the increase in gross profit and gross margin as
compared to fiscal 2020 was the favorable customer mix as well as decreased employee compensation and supplies costs
associated with COVID-19. This was partially offset by the decrease in net sales and an increase in fixed costs.
Operating income. Operating income for fiscal 2021 increased $22.9 million, or 14.9%, as compared to fiscal 2020 as a result
of the increase in gross profit, a $9.6 million decrease in selling and administrative expenses ("S&A") and a $2.7 million
decrease in restructuring and impairment charges. The decrease in S&A was primarily due to a decrease in bad debt expense
and a decrease in incentive compensation expenses. Operating margin of 5.2% increased 70 basis points compared to fiscal
2020, primarily due to the increase in gross margin and reduction of S&A as a result of factors previously discussed.
A discussion of operating income by reportable segment for the indicated fiscal years is presented below (in millions):
Operating income (loss):
AMER
APAC
EMEA
Corporate and other costs
Total operating income
2021
2020
$
$
62.3 $
238.8
(0.9)
(123.9)
176.3 $
38.1
246.6
1.5
(132.8)
153.4
AMER. Operating income increased $24.2 million in fiscal 2021 as compared to fiscal 2020, primarily as a result of a positive
shift in customer mix, improvements in labor productivity, reduced fixed costs and decreased costs associated with COVID-19.
In addition, there was a decrease in S&A primarily due to a decrease in bad debt expense. This was partially offset by a
decrease in net sales.
APAC. Operating income decreased $7.8 million in fiscal 2021 as compared to fiscal 2020, primarily as a result of reductions in
labor productivity, an increase in fixed costs to support new program ramps and a negative shift in customer mix. This was
partially offset by an increase in net sales and a decrease in S&A.
EMEA. Operating income decreased $2.4 million in fiscal 2021 as compared to fiscal 2020 primarily as a result of decreased
net sales, a decrease in labor productivity and an increase in S&A. This was partially offset by a positive shift in customer mix.
Other expense. Other expense for fiscal 2021 decreased $2.1 million as compared to fiscal 2020. The decrease in other expense
for fiscal 2021 was primarily due to the decrease in interest expense of $1.9 million and factoring fees of $1.2 million. The
decrease was partially offset by an increase of $0.6 million in foreign exchange losses as well as a decrease of $0.5 million in
interest income.
Income taxes. Income tax expense for fiscal 2021 was $21.5 million compared to $17.9 million for fiscal 2020. The increase is
primarily due to the geographic distribution of worldwide earnings and an increase in pre-tax income.
Our annual effective tax rate varies from the U.S. statutory rate of 21.0% primarily due to the geographic distribution of
worldwide earnings as well as a tax holiday granted to a subsidiary located in the APAC segment where we derive a significant
portion of our earnings. Our effective tax rate may also be impacted by disputes with taxing authorities, tax planning activities,
adjustments to uncertain tax positions and changes in valuation allowances.
We have been granted a tax holiday for a foreign subsidiary operating in the APAC segment. This tax holiday will expire on
December 31, 2034, and is subject to certain conditions with which we expect to continue to comply. In fiscal 2021 and 2020,
the holiday resulted in tax reductions, net of the impact of the global intangible low-taxed income ("GILTI") provisions of the
U.S. Tax Cuts and Jobs Act ("U.S. Tax Reform"), of approximately $34.4 million ($1.20 per basic share, $1.18 per diluted
share) and $28.3 million ($0.97 per basic share, $0.95 per diluted share), respectively.
30
See also Note 6, "Income Taxes," in Notes to Consolidated Financial Statements for additional information regarding our tax
rate.
The annual effective tax rate for fiscal 2022 is expected to be approximately 13.0% to 15.0% assuming no changes to tax laws.
Net Income. Net income for fiscal 2021 increased $21.4 million, or 18.2%, from fiscal 2020 to $138.9 million. Net income
increased primarily as a result of the increase in operating income, partially offset by the increase in tax expense as previously
discussed.
Diluted earnings per share. Diluted earnings per share increased to $4.76 in fiscal 2021 from $3.93 in fiscal 2020 primarily as
a result of increased net income due to the factors discussed above and a reduction in diluted shares outstanding due to
repurchase activity under our share repurchase plans.
Return on Invested Capital ("ROIC") and economic return. We use a financial model that is aligned with our business
strategy and includes a ROIC goal of 500 basis points over our weighted average cost of capital ("WACC"), which we refer to
as "economic return."
Non-GAAP financial measures, including ROIC and economic return, are used for internal management goals and decision
making because such measures provide management and investors additional insight into financial performance. In particular,
we provide ROIC and economic return because we believe they offer insight into the metrics that are driving management
decisions because we view ROIC and economic return as important measures in evaluating the efficiency and effectiveness of
our long-term capital requirements. We also use ROIC as a performance criteria in determining certain elements of
compensation and certain compensation incentives are based on economic return performance.
We define ROIC as tax-effected operating income before restructuring and other special items divided by average invested
capital over a rolling five-quarter period for the fiscal year. Invested capital is defined as equity plus debt and operating lease
liabilities, less cash and cash equivalents. Other companies may not define or calculate ROIC in the same way. ROIC and other
non-GAAP financial measures should be considered in addition to, not as a substitute for, measures of our financial
performance prepared in accordance with U.S. generally accepted accounting principles ("GAAP").
We review our internal calculation of WACC annually. Our WACC was 8.1% for fiscal 2021 and 8.8% for fiscal 2020. By
exercising discipline to generate ROIC in excess of our WACC, our goal is to create value for our shareholders. Fiscal 2021
ROIC of 15.4% reflects an economic return of 7.3%, based on our weighted average cost of capital of 8.1%, and fiscal 2020
ROIC of 14.0% reflects an economic return of 5.2%, based on our weighted average cost of capital of 8.8% for that fiscal year.
For a reconciliation of ROIC, economic return and adjusted operating income (tax effected) 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.
Refer to the table below, which includes the calculation of ROIC and economic return for the indicated fiscal years (dollars in
millions):
Adjusted operating income (tax effected)
Average invested capital
After-tax ROIC
WACC
Economic return
2021
2020
$
156.2
1,014.7
$
15.4 %
8.1 %
7.3 %
137.1
980.0
14.0 %
8.8 %
5.2 %
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents and restricted cash were $270.5 million as of October 2, 2021, as compared to $387.9 million as of
October 3, 2020.
As of October 2, 2021, 88% of our cash and cash equivalents balance was held outside of the U.S. by our foreign subsidiaries.
With the enactment of U.S. Tax Reform, we believe that our offshore cash can be accessed in a more tax efficient manner than
before U.S. Tax Reform. Currently, we believe that our cash balance, together with cash available under our Credit Facility,
31
will be sufficient to meet our liquidity needs and potential share repurchases, if any, for the next twelve months and for the
foreseeable future.
Our future cash flows from operating activities will be reduced by $53.6 million due to cash payments for U.S. federal taxes on
the deemed repatriation of undistributed foreign earnings that are payable over an eight year period that began in fiscal 2019
with the first payment. The table below provides the expected timing of these future cash outflows, in accordance with the
following installment schedule for the remaining five years (in millions):
2022
2023
2024
2025
2026
Total
$
$
Cash Flows. The following table provides a summary of cash flows for fiscal 2021 and 2020 (in millions):
Cash provided by operating activities
Cash used in investing activities
Cash used in financing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents and restricted cash
2021
2020
$
$
142.6 $
(57.0)
(203.9)
0.9
(117.4) $
5.6
5.6
10.6
14.2
17.6
53.6
210.4
(49.9)
(1.5)
2.6
161.6
Operating Activities. Cash flows provided by operating activities were $142.6 million for fiscal 2021, as compared to $210.4
million for fiscal 2020. The decrease was primarily due to cash flow (reductions) improvements of:
•
•
•
•
•
•
•
•
$21.4 million increase in net income.
$(150.1) million in inventory cash flows driven by increased inventory levels to support the ramp of customer
programs and longer lead times for certain components as a result of supply chain constraints heightened by the
COVID-19 outbreak.
$(42.3) million in accounts receivable cash flows, which resulted from decreased factoring activity, the timing of
customer shipments and payments as well as the mix of customer payment terms.
$(29.4) million in other current and non-current asset cash flows, driven by an increase in prepaid expenses and
miscellaneous receivables.
$40.8 million in other current and non-current liabilities cash flows driven by an increase in advance payments from
customers.
$46.7 million in accounts payables cash flows driven by increased purchasing activity to support the ramp of customer
programs and supply chain constraints to obtain certain components heightened by the COVID-19 outbreak.
$25.5 million in customer deposit cash flows driven by significant deposits received from two customers in the current
year to cover certain inventory balances, partially offset by three significant deposits received in the prior year.
$21.1 million in contract assets cash flows, driven by consistent demand from customers who recognized revenue over
time in the current year compared to growing demand in the prior year.
32
The following table provides a summary of cash cycle days for the periods indicated (in days):
Days in accounts receivable
Days in contract assets
Days in inventory
Days in accounts payable
Days in cash deposits
Annualized cash cycle
Three Months Ended
October 2,
2021
October 3,
2020
56
13
116
(76)
(24)
85
48
11
85
(57)
(18)
69
We calculate days in accounts receivable and contract assets as each balance sheet item for the respective quarter divided by
annualized sales for the respective quarter by day. We calculate days in inventory, accounts payable and cash deposits as each
balance sheet line item for the respective quarter divided by annualized cost of sales for the respective quarter by day. We
calculate annualized cash cycle as the sum of days in accounts receivable, days in contract assets and days in inventory, less
days in accounts payable and days in cash deposits.
As of October 2, 2021, annualized cash cycle days increased sixteen days compared to October 3, 2020 due to the following:
Days in accounts receivable for the three months ended October 2, 2021 increased eight days compared to the three months
ended October 3, 2020. The increase is primarily attributable to the timing of customer shipments and payments, mix of
customer payment terms and a decrease in factored receivables.
Days in contract assets for the three months ended October 2, 2021 increased two days compared to the three months ended
October 3, 2020. The increase is primarily attributable to overall decreased net sales.
Days in inventory for the three months ended October 2, 2021 increased thirty-one days compared to the three months ended
October 3, 2020. The increase is due to increased inventory levels to support the ramp of customer programs and longer lead
times for certain components as a result of supply chain constraints heightened by the COVID-19 outbreak, as well as the
decrease in net sales.
Days in accounts payable for the three months ended October 2, 2021 increased nineteen days compared to the three months
ended October 3, 2020. The increase is due to increased purchasing activity and supply chain constraints to obtain certain
components heightened by the COVID-19 outbreak, as well as the decrease in net sales.
Days in cash deposits for the three months ended October 2, 2021 increased six days compared to the three months ended
October 3, 2020. The increase was primarily attributable to significant deposits received from three customers to cover certain
inventory balances.
Free Cash Flow. We define free cash flow ("FCF"), a non-GAAP financial measure, as cash flow provided by operations less
capital expenditures. FCF was $85.5 million for fiscal 2021 compared to $160.3 million for fiscal 2020, a decrease of $74.8
million.
Non-GAAP financial measures, including FCF, are used for internal management assessments because such measures provide
additional insight to investors into ongoing financial performance. In particular, we provide FCF because we believe it offers
insight into the metrics that are driving management decisions. We view FCF as an important financial metric as it
demonstrates our ability to generate cash and can allow us to pursue opportunities that enhance shareholder value. FCF is a
non-GAAP financial measure that should be considered in addition to, not as a substitute for, measures of our financial
performance prepared in accordance with GAAP.
A reconciliation of FCF to our financial statements that were prepared using GAAP follows (in millions):
Cash flows provided by operating activities
Payments for property, plant and equipment
Free cash flow
2021
2020
$
$
142.6 $
(57.1)
85.5 $
210.4
(50.1)
160.3
33
Investing Activities. Cash flows used in investing activities were $57.0 million for fiscal 2021 compared to $49.9 million for
fiscal 2020. The increase in cash used in investing activities was due to a $7.0 million increase in capital expenditures, primarily
due to our manufacturing footprint expansion in Bangkok, Thailand.
We utilized available cash and operating cash flows as the sources for funding our operating requirements during fiscal 2021.
We currently estimate capital expenditures for fiscal 2022 will be approximately $100.0 million to $120.0 million, with
manufacturing footprint expansion in Bangkok, Thailand, being the primary use of our capital expenditures. The remainder is
expected to be used to support new program ramps and replace older equipment.
Financing Activities. Cash flows used in financing activities were $203.9 million for fiscal 2021 compared to $1.5 million for
fiscal 2020. The increase was primarily attributable to an increase in net payments on the Credit Facility of $126.0 million, an
increase of $67.1 million in cash used to repurchase our common stock and a $9.3 million decrease in proceeds from the
exercise of stock options.
On August 20, 2019, the Board of Directors approved a share repurchase program under which we were authorized to
repurchase $50.0 million of our common stock (the "2019 Program"). The 2019 Program commenced upon completion of share
repurchase programs. During fiscal 2021 and 2020, the Company repurchased 73,560 and 609,935 shares under this program
for $5.3 million and $41.4 million at an average price of $72.44 and $67.86 per share, respectively.
On August 13, 2020, the Board of Directors approved a share repurchase program under which we were authorized to
repurchase up to $50.0 million of our common stock (the "2021 Program"). On November 18, 2020, the Board of Directors
approved an additional $50.0 million in share repurchase authority under the existing 2021 Program such that there then existed
a total of $100.0 million in share repurchase authority under the program. The 2021 program commenced upon completion of
the 2019 Program during the first quarter of fiscal 2021. During fiscal 2021, the Company repurchased 1,171,246 shares under
this program for $100.0 million at an average price of $85.40 per share.
On August 11, 2021, the Board of Directors approved a new share repurchase program under which we were authorized to
repurchase up to $50.0 million of its common stock (the "2022 Program"). The 2022 Program commenced upon completion of
the 2021 Program. The 2022 Program has no expiration. During fiscal 2021, the Company repurchased 34,381 shares under this
program for $3.1 million at an average price of $90.16 per share. As of October 2, 2021, $46.9 million of authority remained
under the 2022 Program.
All shares repurchased under the aforementioned programs were recorded as treasury stock.
On June 15, 2018, we entered into a Note Purchase Agreement (the “2018 NPA”) pursuant to which we issued an aggregate
of $150.0 million in principal amount of unsecured senior notes, consisting of $100.0 million in principal amount 4.05% Series
A Senior Notes, due on June 15, 2025, and $50.0 million in principal amount of 4.22% Series B Senior Notes, due on June 15,
2028 (collectively, the “2018 Notes”), in a private placement. The 2018 NPA includes customary operational and financial
covenants with which we are required to comply, including, among others, maintenance of certain financial ratios such as a
total leverage ratio and a minimum interest coverage ratio. The 2018 Notes may be prepaid in whole or in part at any time,
subject to payment of a make-whole amount; interest on the 2018 Notes is payable semiannually. As of October 2, 2021, we
were in compliance with the covenants under the 2018 NPA.
On May 15, 2019, we refinanced our then-existing senior unsecured revolving credit facility by entering into a new five-year
senior unsecured revolving credit facility (referred to as the "Credit Facility"), which expanded the maximum commitment from
$300.0 million to $350.0 million and extended the maturity from July 5, 2021 to May 15, 2024. The maximum commitment
under the Credit Facility may be further increased to $600.0 million, generally by mutual agreement of the lenders and us,
subject to certain customary conditions. During fiscal 2021, the highest daily borrowing was $148.0 million; the average daily
borrowings were $70.0 million. We borrowed $376.0 million and repaid $321.0 million of revolving borrowings ("revolving
commitment") under the Credit Facility during fiscal 2021. As of October 2, 2021, we were in compliance with all financial
covenants relating to the Credit Facility, which are generally consistent with those in the 2018 NPA discussed above. We are
required to pay a commitment fee on the daily unused revolving commitment based on our leverage ratio; the fee was 0.10% as
of October 2, 2021.
To further ensure our ability to meet our working capital and fixed capital requirements, on April 29, 2020, we entered into
Amendment No. 1 to the Credit Facility (the "Amendment") in response to the COVID-19 outbreak, which amended the Credit
Facility, dated as of May 15, 2019. The Amendment modified certain provisions of the Credit Facility to, among other things,
provide Term Loans for $138.0 million. Term Loans borrowed under the new facility were funded in a single draw on May 4,
2020 and were scheduled to mature on April 28, 2021. On January 29, 2021, we terminated the Term Loans through repayment
of the $138.0 million outstanding using borrowings from the revolving commitment under the Credit Facility. Outstanding
34
Term Loans bore interest, at our option, at a eurocurrency rate (subject to a floor of 1.0%) plus a margin of 1.75% per annum or
at a base rate (subject to a floor of 2.0%) plus a margin of 0.75% per annum.
The Credit Facility and the 2018 NPA allow for the future payment of cash dividends or the repurchase 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. We have not paid cash dividends in the past. However, we evaluate from time to
time potential uses of excess cash, which in the future may include share repurchases above those already authorized, a special
dividend or recurring dividends.
We have Master Accounts Receivable Purchase Agreements with MUFG Bank, New York Branch (formerly known as The
Bank of Tokyo-Mitsubishi UFJ, Ltd.) (the "MUFG RPA"), HSBC Bank (China) Company Limited, Xiamen branch (the
"HSBC RPA") and other agreements with banks, under which we may elect to sell receivables, at a discount, on an ongoing
basis. These facilities are uncommitted facilities. The maximum facility amount under the MUFG RPA as of October 2, 2021 is
$340.0 million. The maximum facility amount under the HSBC RPA as of October 2, 2021 is $60.0 million. The MUFG RPA
will be automatically extended each year unless any party gives no less than 10 days prior notice that the agreement should not
be extended. The terms of the HSBC RPA are generally consistent with the terms of the MUFG RPA previously discussed.
We sold $730.5 million and $834.4 million of trade accounts receivable under these programs during fiscal 2021 and 2020,
respectively, in exchange for cash proceeds of $728.4 million and $831.2 million, respectively. As of October 2, 2021 and
October 3, 2020, $176.0 million and $244.3 million, respectively, of accounts receivables sold under trade accounts receivable
programs and subject to servicing by us remained outstanding and had not yet been collected.
In all cases, the sale discount was recorded within "Miscellaneous, net" in the Consolidated Statements of Comprehensive
Income in the period of the sale. For further information regarding the receivable sale programs, see Note 14, "Trade Accounts
Receivable Sale Programs," in Notes to Consolidated Financial Statements.
Based on current expectations, we believe that our projected cash flows provided by operations, available cash and cash
equivalents, potential borrowings under the Credit Facility and our leasing capabilities should be sufficient to meet our working
capital and fixed capital requirements, as well as execution upon our share repurchase authorizations as management deems
appropriate, for the next twelve months. We believe we are positioned with a strong balance sheet as we face the future
challenges presented by COVID-19. As of the end of the fourth quarter of fiscal 2021, cash and cash equivalents and restricted
cash were $271 million, while debt, finance lease obligations and other financing were $253 million. In addition to our strong
balance sheet, we have significant funding availability through our Credit Facility, should future needs arise. If our future
financing needs increase, then 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, we cannot be assured
that we will be able to make any such arrangements on acceptable terms.
35
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 2, 2021 (dollars in millions):
Contractual Obligations
Debt Obligations (1)
Finance Lease Obligations
Operating Lease Obligations
Purchase Obligations (2)
Repatriation Tax on Undistributed Foreign Earnings (3)
Other Liabilities on the Balance Sheet (4)
Other Liabilities not on the Balance Sheet (5)
Payments Due by Fiscal Year
Total
2022
2023-2024
2025-2026
2027 and
thereafter
$
236.0 $
61.2 $
12.3 $
108.3 $
120.9
55.3
9.4
10.8
1,619.1
1,424.1
53.6
18.8
8.3
5.6
4.5
3.8
12.8
16.2
192.8
16.2
3.1
1.2
10.4
10.3
1.5
31.8
0.2
—
54.2
88.3
18.0
0.7
—
11.0
3.3
Total Contractual Cash Obligations
$ 2,112.0 $ 1,519.4 $
254.6 $
162.5 $
175.5
1)
2)
3)
4)
5)
Debt obligations includes $150.0 million in principal amount of 2018 Notes and $55.0 million of borrowings on the
revolving commitment of the Credit Facility, as well as interest.
Purchase obligations consist primarily of purchases of inventory and equipment in the ordinary course of business.
Repatriation tax on undistributed foreign earnings consists of U.S. federal income taxes on the deemed repatriation of
undistributed foreign earnings due to U.S. Tax Reform. Refer to "Liquidity and Capital Resources" above for further
detail.
Other obligations on the balance sheet included deferred compensation obligations to certain of our former and current
executive officers, as well as other key employees, other financing obligations arising from information technology
maintenance agreements and asset retirement obligations related to our buildings. We have excluded from the above
table the impact of approximately $4.6 million, as of October 2, 2021, related to unrecognized income tax benefits. We
cannot make reliable estimates of the future cash flows by period related to these obligations.
Other obligations not on the balance sheet consist of guarantees and a commitment for salary continuation and certain
benefits in the event employment of one executive officer is terminated without cause. Excluded from the amounts
disclosed are certain bonus and incentive compensation amounts, which would be paid on a prorated basis in the year
of termination.
36
DISCLOSURE ABOUT CRITICAL ACCOUNTING ESTIMATES
Our accounting policies are disclosed in Note 1 "Description of Business and Significant Accounting Policies" of Notes to
Consolidated Financial Statements. During fiscal 2021 there were no material changes to these policies. Our more critical
accounting estimates are described below:
Revenue Recognition: Revenue is recognized over time for arrangements with customers for which: (i) our performance does
not create an asset with an alternative use to us, and (ii) we have an enforceable right to payment, including reasonable profit
margin, for performance completed to date. If either of the two conditions noted above are not met to recognize revenue over
time, revenue is recognized following the transfer of control of such products to the customer, which typically occurs upon
shipment or delivery depending on the terms of the underlying arrangement.
For contracts requiring over time revenue recognition, we calculate the revenue to recognize using the costs incurred to date
plus a reasonable profit margin. We use historical information to estimate the profit margin associated with the performance
obligation that is satisfied over time. We reevaluate our estimate of profit margins on a quarterly basis. While experience has
shown that trends in profit margins are not volatile, changes in pricing or cost efficiencies could create significant fluctuations
for certain performance obligations. As actual experience becomes available, we use the data to update the historical averages
and compare the results to estimates. Based on review of profits margins we update our estimate to the model as necessary.
See Note 15 "Revenue from Contracts with Customers" of Notes to Consolidated Financial Statements for further information
on our revenue recognition policies.
Income Taxes: Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences
between the 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. We maintain 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, we take into account such factors as:
•
•
•
Prior earnings history. A pattern of recent financial reporting losses in a jurisdiction is heavily weighted as a source of
negative evidence. We also consider the strength and trend of earnings, as well as other relevant factors. In certain
circumstances, historical earnings may not be as relevant due to changes in our business operations;
Expected future earnings. Future reversals of existing temporary differences are heavily weighted sources of
objectively verifiable positive evidence. Projections of future taxable income exclusive of reversing temporary
differences are an additional source of positive evidence;
Tax planning strategies. If necessary and available, tax planning strategies would be implemented to accelerate taxable
amounts to utilize expiring carryforwards. These strategies would be a source of additional positive evidence.
See Note 6 "Income Taxes" of Notes to Consolidated Financial Statements for further information on our income tax policies.
NEW ACCOUNTING PRONOUNCEMENTS
See Note 1, "Description of Business and Significant Accounting Policies," in Notes to Consolidated Financial Statements
regarding recent accounting pronouncements.
37
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. We do not use derivative financial instruments for speculative purposes.
Foreign Currency Risk
Our international operations create potential foreign exchange risk. 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. We cannot predict changes in currency rates, nor the degree to which we will
be able to manage the impacts of currency exchange rate changes, including the impacts on currency exchange rates related to
the COVID-19 outbreak. Such changes could have a material effect on our business, results of operations and financial
condition.
Our percentages of transactions denominated in currencies other than the U.S. dollar for the indicated fiscal years were as
follows:
Net Sales
Total Costs
2021
10%
16%
2020
10%
16%
We have 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 our overall currency exposure, as of October 2, 2021, a 10.0% change in
the value of the U.S. dollar relative to our other transactional currencies would not have a material effect on our financial
position, results of operations, or cash flows.
Interest Rate Risk
We have financial instruments, including cash equivalents and debt, which are sensitive to changes in interest rates. The
primary objective of our investment activities is to preserve principal, while maximizing yields without significantly increasing
market risk. To achieve this, we limit the amount of principal exposure to any one issuer. We cannot predict changes in interest
rates, including the impacts on interest rates related to the COVID-19 outbreak.
As of October 2, 2021, our only material interest rate risk is associated with our Credit Facility. Revolving commitments under
the Credit Facility bear interest, at our option, at a eurocurrency or base rate plus, in each case, an applicable interest rate
margin based on our then-current leverage ratio (as defined in the Credit Facility). As of October 2, 2021, the borrowing rate
under the Credit Facility was LIBOR plus 1.00%. Borrowings under the 2018 NPA are based on a fixed interest rate, thus
mitigating much of our interest rate risk. Based on our overall interest rate exposure, as of October 2, 2021, a 10.0% change in
interest rates would not have a material effect on our financial position, results of operations, or cash flows.
38
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
PLEXUS CORP.
List of Financial Statements and Financial Statement Schedule
October 2, 2021
Contents
Pages
Report of Independent Registered Public Accounting Firm
Consolidated Financial Statements:
Consolidated Statements of Comprehensive Income for the fiscal years ended October 2, 2021,
October 3, 2020 and September 28, 2019
Consolidated Balance Sheets as of October 2, 2021 and October 3, 2020
Consolidated Statements of Shareholders’ Equity for the fiscal years ended October 2, 2021,
October 3, 2020 and September 28, 2019
Consolidated Statements of Cash Flows for the fiscal years ended October 2, 2021, October 3,
2020 and September 28, 2019
Notes to Consolidated Financial Statements
Financial Statement Schedule:
Schedule II - Valuation and Qualifying Accounts for the fiscal years ended October 2, 2021,
October 3, 2020 and September 28, 2019
40
42
43
44
45
46
77
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 Board of Directors and Shareholders of Plexus Corp.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the consolidated financial statements, including the related notes, of Plexus Corp. and its subsidiaries (the
“Company”) as listed in the accompanying index (collectively referred to as the “consolidated financial statements”). We also
have audited the Company's internal control over financial reporting as of October 2, 2021, based on criteria established in
Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position of the Company as of October 2, 2021 and October 3, 2020, and the results of its operations and its cash flows for each
of the three years in the period ended October 2, 2021 in conformity with accounting principles generally accepted in the
United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over
financial reporting as of October 2, 2021, based on criteria established in Internal Control - Integrated Framework (2013)
issued by the COSO.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, 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 the Company’s consolidated financial statements and on the Company's internal control over financial
reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight
Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.
federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement,
whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material
respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement
of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.
Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated
financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements. 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.
Definition and Limitations of Internal Control over Financial Reporting
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.
40
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial
statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or
disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or
complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated
financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate
opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Arrangements with customers for which revenue is recognized over time
As described in Note 15 to the consolidated financial statements, approximately 91% of the Company’s revenue for the year
ended October 2, 2021 was recognized as products were produced or services were rendered over time. Revenue is recognized
over time for arrangements with customers for which (i) the Company’s performance does not create an asset with an
alternative use to the Company and (ii) the Company has an enforceable right to payment, including a reasonable profit margin,
for performance completed to date. Determining if an enforceable right to payment includes a reasonable profit margin requires
judgment and is assessed on a contract by contract basis. If either of these two conditions are not met to recognize revenue over
time, revenue is recognized following the transfer of control of such products to the customer, which typically occurs upon
shipment or delivery depending on the terms of the underlying arrangement. Management recognizes revenue over time using a
cost-based input measurement of progress. Under this method, the extent of progress towards completion is measured based on
the costs incurred to date. Revenue recognized over time is estimated based on costs incurred to date plus a reasonable profit
margin.
The principal considerations for our determination that performing procedures relating to arrangements with customers for
which revenue is recognized over time is a critical audit matter are the significant judgment by management in (i) determining
which arrangements with customers meet the criteria for revenue to be recognized over time and (ii) estimating a reasonable
profit margin related to the amount of revenue to be recognized for in-progress performance obligations. This in turn led to
significant auditor judgment, subjectivity, and effort in performing procedures to evaluate which arrangements meet the criteria
for revenue to be recognized over time, management’s estimate of reasonable profit margins, and management’s determination
of costs incurred to date.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall
opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the
revenue recognition process, including controls relating to management’s determination of which arrangements with customers
met the criteria for revenue to be recognized over time and estimating the amount of revenue recognized for these
arrangements. These procedures also included, among others, (i) testing management’s process for determining which
arrangements with customers met the criteria for revenue to be recognized over time, (ii) testing the accuracy and completeness
of costs incurred to date for selected arrangements, (iii) evaluating the reasonableness of management’s estimate of profit
margins, and (iv) testing the appropriateness of the timing and amount of revenue recognized based on the underlying inputs
and estimates for selected arrangements.
/s/ PricewaterhouseCoopers LLP
Milwaukee, Wisconsin
November 19, 2021
We have served as the Company’s auditor since at least 1985. We have not been able to determine the specific year we began
serving as auditor of the Company.
41
PLEXUS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
for the fiscal years ended October 2, 2021, October 3, 2020 and September 28, 2019
(in thousands, except per share data)
Net sales
Cost of sales
Gross profit
Selling and administrative expenses
Restructuring and impairment charges
Operating income
Other income (expense):
Interest expense
Interest income
Miscellaneous, net
Income before income taxes
Income tax expense
Net income
Earnings per share:
Basic
Diluted
Weighted average shares outstanding:
Basic
Diluted
Comprehensive income:
Net income
Other comprehensive income (loss):
$
$
$
$
2021
3,368,865 $
3,045,569
323,296
143,761
3,267
176,268
2020
3,390,394 $
3,077,688
312,706
153,331
6,003
153,372
2019
3,164,434
2,872,596
291,838
148,105
1,678
142,055
(14,253)
1,372
(2,976)
160,411
21,499
138,912 $
(16,162)
1,878
(3,691)
135,397
17,918
117,479 $
(12,853)
1,949
(5,196)
125,955
17,339
108,616
4.86 $
4.76 $
4.02 $
3.93 $
3.59
3.50
28,575
29,167
29,195
29,916
30,271
31,074
$
138,912 $
117,479 $
108,616
Derivative instrument and other fair value adjustments
Foreign currency translation adjustments
Other comprehensive income (loss)
Total comprehensive income
(1,165)
3,240
2,075
1,831
10,894
12,725
1,050
(6,855)
(5,805)
$
140,987 $
130,204 $
102,811
The accompanying notes are an integral part of these consolidated financial statements.
42
PLEXUS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
as of October 2, 2021 and October 3, 2020
(in thousands, except per share data)
ASSETS
Current assets:
Cash and cash equivalents
Restricted cash
Accounts receivable, net of allowances of $1,188 and $3,597, respectively
Contract assets
Inventories, net
Prepaid expenses and other
Total current assets
Property, plant and equipment, net
Operating lease right-of-use assets
Deferred income taxes
Other assets
Total non-current assets
Total assets
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt and finance lease obligations
Accounts payable
Customer deposits
Accrued salaries and wages
Other accrued liabilities
Total current liabilities
Long-term debt and finance lease obligations, net of current portion
Long-term accrued income taxes payable
Long-term operating lease liabilities
Deferred income taxes payable
Other liabilities
Total non-current liabilities
Total liabilities
Commitments and contingencies
Shareholders’ equity:
$
$
$
2021
2020
270,172 $
341
519,684
115,283
972,312
53,094
1,930,886
395,094
72,087
27,385
36,441
531,007
2,461,893 $
66,313 $
634,969
204,985
75,394
147,042
1,128,703
187,033
47,974
37,970
5,677
26,304
304,958
1,433,661
385,807
2,087
482,086
113,946
763,461
31,772
1,779,159
383,661
69,879
21,422
35,727
510,689
2,289,848
146,829
516,297
159,972
76,927
103,492
1,003,517
187,975
53,899
36,779
6,433
23,765
308,851
1,312,368
Preferred stock, $0.01 par value, 5,000 shares authorized, none issued or outstanding
Common stock, $0.01 par value, 200,000 shares authorized, 53,849 and 53,525 shares
issued, respectively, and 28,047 and 29,002 shares outstanding, respectively
Additional paid-in capital
Common stock held in treasury, at cost, 25,802 and 24,523 shares, respectively
Retained earnings
Accumulated other comprehensive loss
Total shareholders’ equity
Total liabilities and shareholders’ equity
—
—
538
639,778
(1,043,091)
1,433,991
(2,984)
1,028,232
2,461,893 $
$
535
621,564
(934,639)
1,295,079
(5,059)
977,480
2,289,848
The accompanying notes are an integral part of these consolidated financial statements.
43
PLEXUS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
for the fiscal years ended October 2, 2021, October 3, 2020 and September 28, 2019
(in thousands)
Common stock - shares outstanding
Beginning of period
Exercise of stock options and vesting of other share-based awards
Treasury shares purchased
End of period
Total stockholders' equity, beginning of period
Common stock - par value
Beginning of period
Exercise of stock options and vesting of other share-based awards
End of period
Additional paid-in capital
Beginning of period
Share-based compensation expense
Exercise of stock options and vesting of other share-based awards,
including tax withholding
End of period
Treasury stock
Beginning of period
Treasury shares purchased
End of period
Retained earnings
Beginning of period
Net income
Cumulative effect adjustment for adoption of new accounting
pronouncements (1)
End of period
Accumulated other comprehensive loss
Beginning of period
Other comprehensive income (loss)
End of period
2021
2020
2019
29,002
323
(1,278)
28,047
29,004
608
(610)
29,002
31,838
350
(3,184)
29,004
$
977,480 $
865,576 $
921,143
535
3
538
529
6
535
621,564
24,326
597,401
24,280
(6,112)
(117)
639,778
621,564
526
3
529
581,488
21,335
(5,422)
597,401
(934,639)
(108,452)
(1,043,091)
(893,247)
(41,392)
(934,639)
(711,138)
(182,109)
(893,247)
1,295,079
138,912
1,178,677
117,479
1,062,246
108,616
—
(1,077)
7,815
1,433,991
1,295,079
1,178,677
(5,059)
(17,784)
2,075
12,725
(2,984)
(5,059)
(11,979)
(5,805)
(17,784)
Total stockholders' equity, end of period
$
1,028,232 $
977,480 $
865,576
(1) See Note 1, "Description of Business and Significant Accounting Policies," for a discussion of recently adopted
accounting pronouncements.
The accompanying notes are an integral part of these consolidated financial statements.
44
PLEXUS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the fiscal years ended October 2, 2021, October 3, 2020 and September 28, 2019
(in thousands)
Cash flows from operating activities
Net income
Adjustments to reconcile net income to net cash flows from operating
activities:
Depreciation and amortization
Deferred income taxes
Share-based compensation expense and related charges
Provision for allowance for doubtful accounts
Asset impairment charges
Other, net
Changes in operating assets and liabilities, excluding impacts of
acquisition:
Accounts receivable
Contract assets
Inventories
Other current and non-current assets
Accrued income taxes payable
Accounts payable
Customer deposits
Other current and non-current liabilities
Cash flows provided by operating activities
Cash flows from investing activities
Payments for property, plant and equipment
Other, net
Cash flows used in investing activities
Cash flows from financing activities
Borrowings under debt agreements
Payments on debt and finance lease obligations
Debt issuance costs
Repurchases of common stock
Proceeds from exercise of stock options
Payments related to tax withholding for share-based compensation
Cash flows used in financing activities
Effect of exchange rate changes on cash and cash equivalents
Net (decrease) increase in cash and cash equivalents and restricted cash
Cash and cash equivalents and restricted cash:
Beginning of period
End of period
Supplemental disclosure information:
Interest paid
Income taxes paid
2021
2020
2019
$
138,912 $
117,479 $
108,616
61,014
(3,388)
24,763
(2,405)
—
1,855
(33,477)
(1,385)
(206,510)
(26,028)
(8,746)
111,781
44,359
41,832
142,577
(57,099)
126
(56,973)
376,739
(466,063)
—
(108,452)
3,555
(9,664)
(203,885)
900
(117,381)
56,690
(3,583)
24,280
2,405
3,052
1,358
8,796
(22,488)
(56,420)
3,343
(9,570)
65,097
18,864
1,065
210,368
(50,088)
237
(49,851)
679,042
(638,298)
(699)
(41,392)
12,827
(12,938)
(1,458)
2,581
161,640
52,206
(9,764)
21,335
—
—
204
(96,694)
(14,526)
18,798
(3,728)
4,125
(56,724)
49,652
41,800
115,300
(90,600)
1,241
(89,359)
1,084,500
(993,588)
(603)
(182,109)
2,614
(8,033)
(97,219)
(154)
(71,432)
387,894
270,513 $
226,254
387,894 $
297,686
226,254
14,116 $
39,932 $
14,885 $
31,458 $
15,701
26,277
$
$
$
The accompanying notes are an integral part of these consolidated financial statements.
45
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. Since 1979, we have been a dedicated partner to companies by providing
Design and Development, Supply Chain Solutions, New Product Introduction, Manufacturing, and Aftermarket Services. We
offer advanced design and production capabilities, allowing our customers to concentrate on their core competencies. We help
accelerate our customers' time to market, streamline supply chain engagements, reduce their investment in engineering and
manufacturing capacity, and optimize total product cost. We are a global leader with approximately 19,200 individuals that
specializes in serving customers in the Industrial, Healthcare/Life Sciences, and Aerospace/Defense market sectors with highly
complex products and demanding regulatory environments. We deliver comprehensive end-to-end solutions in the Americas
("AMER"), Asia-Pacific ("APAC") and Europe, Middle East, and Africa ("EMEA") regions.
Significant Accounting Policies
Consolidation Principles and Basis of Presentation: The consolidated financial statements have been prepared in accordance
with generally accepted accounting principles in the United States of America ("GAAP") and include the accounts of Plexus
Corp. and its subsidiaries. All intercompany transactions have been eliminated. Certain prior period amounts have been
reclassified to conform to the current period presentation.
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
2020 included 53 weeks; therefore, the first quarter of fiscal 2020 included 14 weeks while all other fiscal quarters presented
herein included 13 weeks. Fiscal 2021 and fiscal 2019 each included 52 weeks.
The preparation of financial statements requires management to make estimates and assumptions that affect the amounts
reported in the Consolidated Financial Statements and notes thereto. The full extent to which the COVID-19 outbreak will
impact the Company's business and operating results will depend on future developments that are highly uncertain and cannot
be accurately predicted. The Company has considered information available as of the date of issuance of these financial
statements and is not aware of any specific events or circumstances that would require an update to its estimates or judgments,
or a revision of the carrying value of its assets or liabilities. These estimates may change as new events occur and additional
information becomes available. Actual results could differ materially from these estimates.
Cash and Cash Equivalents and Restricted Cash: Cash equivalents include short-term highly liquid investments and are
classified as Level 1 in the fair value hierarchy described below. Restricted cash represents cash received from customers to
settle invoices sold under accounts receivable purchase agreements that the Company continues servicing and is contractually
required to be set aside. The restrictions will lapse when the cash is remitted to the purchaser of the receivables. Restricted cash
is also classified as Level 1 in the fair value hierarchy described below.
As of October 2, 2021 and October 3, 2020, cash and cash equivalents and restricted cash consisted of the following (in
thousands):
Cash
Money market demand accounts and other
Restricted cash
Total cash and cash equivalents and restricted cash
2021
2020
173,018 $
97,154
341
270,513 $
121,320
264,487
2,087
387,894
$
$
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.
In certain instances, in accordance with contractual terms, the Company receives customer deposits to offset inventory risks.
46
Plexus Corp.
Notes to Consolidated Financial Statements
Property, Plant and Equipment and Depreciation: Property, plant and equipment is stated at cost and depreciated using the
straight-line method over the estimated useful lives of the respective assets. Estimated useful lives for major classes of
depreciable assets are generally as follows:
Buildings and improvements
Machinery and equipment
Computer hardware and software
5-39 years
3-7 years
3-10 years
Certain facilities and equipment held under finance leases are classified as property, plant and equipment and amortized using
the straight-line method over the term of the lease and the related obligations are recorded as liabilities. Amortization of assets
held under finance leases is included in depreciation expense (see Note 3, "Property, Plant and Equipment") and the financing
component of the lease payments is classified as interest expense. Maintenance and repairs are expensed as incurred.
The Company capitalizes significant costs incurred in the acquisition or development of software for internal use. This includes
costs of the software, consulting services and compensation costs for employees directly involved in developing internal use
computer software.
Impairment of Long-Lived Assets: Long-lived assets, including property, plant and equipment, operating lease right-of-use
assets 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 or asset groups 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, operating lease right-of-use assets and intangible assets with finite lives include reduced expectations for future
performance or industry demand and possible further restructurings, among others.
Revenue Recognition: Revenue is recognized over time for arrangements with customers for which: (i) the Company's
performance does not create an asset with an alternative use to the Company, and (ii) the Company has an enforceable right to
payment, including reasonable profit margin, for performance completed to date. Revenue recognized over time is estimated
based on costs incurred to date plus a reasonable profit margin. If either of the two conditions noted above are not met to
recognize revenue over time, revenue is recognized following the transfer of control of such products to the customer, which
typically occurs upon shipment or delivery depending on the terms of the underlying arrangement.
The Company recognizes revenue when a contract exists and when, or as, it satisfies a performance obligation by transferring
control of a product or service to a customer. Contracts are accounted for when they have approval and commitment from both
parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and
collectability of consideration is probable. A performance obligation is a promise in a contract to transfer a distinct good or
service to the customer.
The Company generally enters into a master services arrangement that establishes the framework under which business will be
conducted. These arrangements represent the master terms and conditions of the Company's services that apply to individual
orders, but they do not commit the customer to work with, or to continue to work with, the Company nor do they obligate the
customer to any specific volume or pricing of purchases. Moreover, these terms can be amended in appropriate situations.
Customer purchase orders are received for specific quantities with predominantly fixed pricing and delivery requirements.
Thus, for the majority of our contracts, there is no guarantee of any revenue to the Company until a customer submits a
purchase order. As a result, the Company generally considers its arrangement with a customer to be the combination of the
master services arrangement and the purchase order. Most of the Company's arrangements with customers create a single
performance obligation as the promise to transfer the individual manufactured product or service is capable of being distinct.
The Company’s performance obligations are satisfied over time as work progresses or at a point in time. A performance
obligation is satisfied over time if the Company has an enforceable right to payment, including a reasonable profit margin.
Determining if an enforceable right to payment includes a reasonable profit margin requires judgment and is assessed on a
contract by contract basis.
If an enforceable right to payment for work-in-process does not exist, revenue is recognized following the transfer of control of
such products to the customer, which typically occurs upon shipment or delivery depending on the terms of the underlying
contract.
47
Plexus Corp.
Notes to Consolidated Financial Statements
For contracts requiring over time revenue recognition, the selection of the method to measure progress towards completion
requires judgment and is based on the nature of the products or services to be provided. The Company uses a cost-based input
measurement of progress because it best depicts the transfer of assets to the customer, which occurs as costs are incurred during
the manufacturing process or as services are rendered. Under the cost-based measure of progress, the extent of progress towards
completion is measured based on the costs incurred to date.
Generally, there are no subjective customer acceptance requirements or further obligations related to goods or services
provided; if such requirements or obligations exist, then a sale is recognized at the time when such requirements are completed
and such obligations are fulfilled.
The Company does not allow for a general right of return. Net sales include amounts billed to customers for shipping and
handling and out-of-pocket expenses. The corresponding shipping and handling costs and out-of-pocket expenses are included
in cost of sales. Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-
producing transaction, that are collected by the Company from a customer, are excluded from net sales.
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 by 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 5.0% of consolidated net sales for each
of fiscal 2021, 2020 and 2019.
Income Taxes: Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences
between the 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. 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 potentially enhance the likelihood of
the realization of a deferred tax asset.
Foreign Currency Translation & Transactions: The Company translates 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 the relevant
balance sheet date and net sales, expenses and cash flows at the average exchange rates during the respective periods.
Adjustments resulting from translation of the financial statements are recorded as a component of "Accumulated other
comprehensive loss." 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 the Consolidated Statements of Comprehensive Income as a component of "Miscellaneous, net."
Exchange (losses) gains on foreign currency transactions were $(1.1) million, $(0.4) million and $0.5 million for fiscal 2021,
2020 and 2019, respectively. These amounts include the amount of gain recognized in income during each fiscal year due to
forward currency exchange contracts entered into to hedge recognized assets or liabilities ("non-designated hedges") the
Company entered into during each respective year. Refer to Note 5, "Derivatives and Fair Value Measurements," for further
details on derivatives.
Derivatives: All derivatives are recognized on the balance sheets at fair value. The Company periodically enters into forward
currency exchange contracts and interest rate swaps. On the date a derivative contract is entered into, the Company designates
the derivative as a non-designated hedge or 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). The Company does not enter into derivatives for
speculative purposes. Changes in the fair value of non-designated derivatives are recorded in earnings as are the gains or losses
related to 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 loss" within shareholders' equity, until earnings are affected by the variability of cash
flows. Certain forward currency exchange contracts are treated as cash flow hedges and, therefore, $(2.2) million, $1.8 million
and $1.1 million was recorded in "Accumulated other comprehensive loss" for fiscal 2021, 2020 and 2019, respectively. See
Note 5, "Derivatives and Fair Value Measurements," for further information.
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 share-based awards, excluding any with an antidilutive effect. See Note 7, "Earnings Per Share," for further information.
48
Plexus Corp.
Notes to Consolidated Financial Statements
Share-based Compensation: The Company measures all grants of share-based payments to employees, including grants of
employee stock options, at fair value and expenses them in the Consolidated Statements of Comprehensive Income over the
service period (generally the vesting period) of the grant. See Note 9, "Benefit Plans," for further information.
Comprehensive Income (Loss): The Company follows the established standards for reporting comprehensive income (loss),
which is defined as the changes in equity of an enterprise except those resulting from shareholder transactions.
Accumulated other comprehensive loss consists of the following as of October 2, 2021 and October 3, 2020 (in thousands):
Foreign currency translation adjustments
Cumulative derivative instrument and other fair value adjustments
Accumulated other comprehensive loss
2021
2020
$
$
(3,261) $
277
(2,984) $
(6,501)
1,442
(5,059)
Refer to Note 5, "Derivatives and Fair Value Measurements," for further explanation regarding the change in fair value of
derivative instruments that is recorded to "Accumulated other comprehensive loss."
Use of Estimates: The preparation of financial statements in conformity with GAAP 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: The Company holds financial instruments consisting of cash and cash equivalents,
restricted cash, accounts receivable, certain deferred compensation assets held under trust arrangements, accounts payable, debt,
derivatives and finance and operating lease obligations. The carrying values of cash and cash equivalents, restricted cash,
accounts receivable, accounts payable and finance and operating lease obligations as reported in the consolidated financial
statements approximate fair value. Derivatives and certain deferred compensation assets held under trust arrangements are
recorded at fair value. Accounts receivable are reflected at net realizable value based on anticipated losses due to potentially
uncollectible balances. Anticipated losses are based on management’s analysis of historical losses and changes in customers’
credit status. The fair value of the Company’s debt excluding finance lease and other financing obligations was $217.1 million
and $299.3 million as of October 2, 2021 and October 3, 2020, respectively. The carrying value of the Company's debt was
$205.0 million and $288.0 million as of October 2, 2021 and October 3, 2020, respectively. The Company uses quoted market
prices when available or discounted cash flows to calculate fair value. If measured at fair value in the financial statements, long-
term debt (including the current portion) would be classified as Level 2 in the fair value hierarchy described below. The fair
values of the Company’s derivatives are disclosed in Note 5, "Derivatives and Fair Value Measurements." The fair values of the
deferred compensation assets held under trust arrangements are discussed in Note 9, "Benefit Plans."
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 11,
"Reportable Segments, Geographic Information and Major Customers". The Company, at times, requires cash deposits for
services performed. The Company also closely monitors extensions of credit.
49
Plexus Corp.
Notes to Consolidated Financial Statements
Recently Adopted Accounting Pronouncements:
In May 2014, the FASB issued ASU 2014-09, which requires an entity to recognize revenue relating to contracts with
customers that depicts the transfer of promised goods or services to customers in an amount reflecting the consideration to
which the entity expects to be entitled in exchange for such goods or services ("Topic 606"). On September 30, 2018, the
Company adopted and applied Topic 606 to all contracts using the modified retrospective method of adoption. Upon adoption,
the Company recognized an increase to its fiscal 2019 beginning retained earnings balance of $7.8 million.
In February 2016, the FASB issued ASU 2016-02 (“Topic 842”), which is intended to improve financial reporting of lease
transactions by requiring lessees to recognize most leases as a right-of-use (“ROU”) asset and lease liability on their balance
sheets for the rights and obligations created by leases, but record expenses on their income statements in a similar manner.
Topic 842 also requires disclosures regarding the amount, timing and judgments related to accounting for an entity's leases and
related cash flows. On September, 29, 2019, the Company adopted Topic 842 using the modified retrospective method of
adoption, which allows financial information for comparative periods prior to adoption not to be updated. Upon adoption, the
Company recognized a $1.1 million reduction in retained earnings as a result of two existing build-to-suit arrangements for
facilities in Guadalajara, Mexico that were reassessed to be finance leases under the new standard.
In June 2016, the FASB issued ASU 2016-13, which replaces the current incurred loss impairment methodology with a
methodology that reflects expected credit losses and required consideration of a broader range of reasonable and supportable
information to inform credit loss estimates. The Company adopted this guidance during the first quarter of fiscal 2021 with no
material impact to the Company's Consolidated Financial Statements.
Recently Issued Accounting Pronouncements Not Yet Adopted:
The Company believes that no other recently issued accounting standards will have a material impact on its Consolidated
Financial Statements, or apply to its operations.
2.
Inventories
Inventories as of October 2, 2021 and October 3, 2020 consisted of the following (in thousands):
Raw materials
Work-in-process
Finished goods
Total inventories, net
2021
2020
$
$
860,538 $
48,356
63,418
972,312 $
630,833
53,602
79,026
763,461
In certain circumstances, per contractual terms, customer deposits are received by the Company to offset inventory risks. The
total amount of customer deposits related to inventory and included within current liabilities on the accompanying Consolidated
Balance Sheets as of October 2, 2021 and October 3, 2020 was $200.6 million and $154.6 million, respectively.
3.
Property, Plant and Equipment
Property, plant and equipment as of October 2, 2021 and October 3, 2020 consisted of the following (in thousands):
Land, buildings and improvements
Machinery and equipment
Computer hardware and software
Capital assets in progress
Total property, plant and equipment, gross
Less: accumulated depreciation
Total property, plant and equipment, net
50
2021
2020
336,939 $
420,172
167,584
28,085
952,780
(557,686)
395,094 $
334,083
403,894
147,723
16,279
901,979
(518,318)
383,661
$
$
Plexus Corp.
Notes to Consolidated Financial Statements
Assets held under finance leases and included in property, plant and equipment as of October 2, 2021 and October 3, 2020
consisted of the following (in thousands):
Buildings and improvements
Machinery and equipment
Total property, plant and equipment held under finance leases, gross
Less: accumulated amortization
Total property, plant and equipment held under finance leases, net
$
2021
2020
35,360 $
26,657
62,017
(23,360)
38,657 $
35,360
11,374
46,734
(10,326)
36,408
As of October 2, 2021, October 3, 2020 and September 28, 2019, accounts payable included approximately $17.3 million, $6.7
million and $10.0 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, Finance Lease Obligations and Other Financing
Debt and finance lease obligations as of October 2, 2021 and October 3, 2020, consisted of the following (in thousands):
2021
2020
4.05% Senior Notes, due June 15, 2025
4.22% Senior Notes, due June 15, 2028
Borrowings under the revolving commitment
Term loans, due April 28, 2021
Finance lease and other financing obligations
Unamortized deferred financing fees
Total obligations
Less: current portion
$
100,000 $
50,000
55,000
—
49,279
(933)
253,346
(66,313)
187,033 $
100,000
50,000
—
138,000
48,435
(1,631)
334,804
(146,829)
187,975
Long-term debt and finance lease obligations, net of current portion
$
On June 15, 2018, the Company entered into a Note Purchase Agreement (the “2018 NPA”) pursuant to which it issued an
aggregate of $150.0 million in principal amount of unsecured senior notes, consisting of $100.0 million in principal amount
of 4.05% Series A Senior Notes, due on June 15, 2025, and $50.0 million in principal amount of 4.22% Series B Senior Notes,
due on June 15, 2028 (collectively, the “2018 Notes”), in a private placement. The 2018 NPA includes customary operational
and financial covenants with which the Company is required to comply, including, among others, maintenance of certain
financial ratios such as a total leverage ratio and a minimum interest coverage ratio. The 2018 Notes may be prepaid in whole or
in part at any time, subject to payment of a make-whole amount; interest on the 2018 Notes is payable semiannually. As
of October 2, 2021, the Company was in compliance with the covenants under the 2018 NPA.
On May 15, 2019, the Company refinanced its then-existing senior unsecured revolving credit facility by entering into a new 5-
year senior unsecured revolving credit facility (referred to as the "Credit Facility"), which expanded the maximum commitment
from $300.0 million to $350.0 million and extended the maturity from July 5, 2021 to May 15, 2024. The maximum
commitment under the Credit Facility may be further increased to $600.0 million, generally by mutual agreement of the
Company and the lenders, subject to certain customary conditions. During fiscal 2021, the highest daily borrowing was $148.0
million; the average daily borrowings were $70.0 million. The Company borrowed $376.0 million and repaid $321.0 million of
revolving borrowings ("revolving commitment") under the Credit Facility during fiscal 2021. As of October 2, 2021, the
Company was in compliance with all financial covenants relating to the Credit Facility, which are generally consistent with
those in the 2018 NPA discussed above. The Company is required to pay a commitment fee on the daily unused revolving
commitment based on the Company's leverage ratio; the fee was 0.125% as of October 2, 2021.
To further ensure our ability to meet our working capital and fixed capital requirements, on April 29, 2020, the Company
entered into Amendment No. 1 to the Credit Facility (the "Amendment") in response to the COVID-19 outbreak, which
amended the Credit Facility, dated as of May 15, 2019. The Amendment modified certain provisions of the Credit Facility to,
among other things, provide for a 364 day unsecured delayed draw term loans ("Term Loans") for $138.0 million. Term Loans
borrowed under the new facility were funded in a single draw on May 4, 2020 and were scheduled to mature on April 28, 2021.
51
Plexus Corp.
Notes to Consolidated Financial Statements
On January 29, 2021, the Company terminated the Term Loans through repayment of the $138.0 million outstanding using
borrowings from the revolving commitment under the Credit Facility. Outstanding Term Loans bore interest, at the Company’s
option, at a eurocurrency rate (subject to a floor of 1.0%) plus a margin of 1.75% per annum or at a base rate (subject to a floor
of 2.0%) plus a margin of 0.75% per annum.
The aggregate scheduled maturities of the Company’s debt obligations as of October 2, 2021, are as follows (in thousands):
2022
2023
2024
2025
2026
Thereafter
Total
$
$
55,000
—
—
100,000
—
50,000
205,000
The aggregate scheduled maturities of the Company’s finance leases and other financing obligations as of October 2, 2021, are
as follows (in thousands):
2022
2023
2024
2025
2026
Thereafter
Total
$
$
11,313
4,118
943
609
664
31,632
49,279
The Company's weighted average interest rate on finance lease obligations was 17.4% and 17.7% as of October 2, 2021 and
October 3, 2020, respectively.
5.
Derivatives and Fair Value Measurements
All derivatives are recognized in the accompanying Consolidated Balance Sheets at their estimated fair value. The Company
uses derivatives to manage the variability of foreign currency obligations. The Company has cash flow hedges related to
forecasted foreign currency obligations, in addition to non-designated hedges to manage foreign currency exposures associated
with certain foreign currency denominated assets and liabilities. The Company does not enter into derivatives for speculative
purposes.
The Company designates some foreign currency exchange contracts as cash flow hedges of forecasted foreign currency
expenses. Changes in the fair value of the derivatives that qualify as cash flow hedges are recorded in "Accumulated other
comprehensive loss" in the accompanying Consolidated Balance Sheets until earnings are affected by the variability of the cash
flows. In the next twelve months, the Company estimates that $1.0 million of unrealized losses, net of tax, related to cash flow
hedges will be reclassified from other comprehensive income (loss) into earnings. Changes in the fair value of the non-
designated derivatives related to recognized foreign currency denominated assets and liabilities are recorded in "Miscellaneous,
net" in the accompanying Consolidated Statements of Comprehensive Income.
The Company enters into forward currency exchange contracts for its operations in Malaysia and Mexico on a rolling basis. The
Company had cash flow hedges outstanding with a notional value of $107.4 million as of October 2, 2021, and a notional value
of $96.8 million as of October 3, 2020. These forward currency contracts fix the exchange rates for the settlement of future
foreign currency obligations that have yet to be realized. The total fair value of the forward currency exchange contracts was a
$1.0 million liability as of October 2, 2021, and a $1.2 million asset as of October 3, 2020.
The Company had additional forward currency exchange contracts outstanding as of October 2, 2021, with a notional value of
$38.6 million; there were $15.8 million such contracts outstanding as of October 3, 2020. The Company did not designate these
derivative instruments as hedging instruments. The net settlement amount (fair value) related to these contracts is recorded on
the Consolidated Balance Sheets as either a current or long-term asset or liability, depending on the term, and as an element of
52
Plexus Corp.
Notes to Consolidated Financial Statements
"Miscellaneous, net" in the Consolidated Statements of Comprehensive income. The total fair value of these derivatives was a
$0.2 million liability as of October 2, 2021, and a less than $0.1 million asset as of October 3, 2020.
The tables below present information regarding the fair values of derivative instruments (as defined in Note 1, "Description of
Business and Significant Accounting Policies") and the effects of derivative instruments on the Company’s Consolidated
Financial Statements:
Fair Values of Derivative Instruments (in thousands)
Derivative Assets
Derivative Liabilities
Derivatives designated
as hedging instruments
Balance sheet
classification
Foreign currency forward
contracts
Prepaid expenses and
other
$
October 2,
2021
October 3,
2020
Fair Value
Fair Value
76 $
1,830
Balance sheet
classification
Other accrued
liabilities
October 2,
2021
October 3,
2020
Fair Value
Fair Value
$
1,119 $
641
Fair Values of Derivative Instruments (in thousands)
Derivative Assets
Derivative Liabilities
Derivatives not designated
as hedging instruments
Balance sheet
classification
Foreign currency forward
contracts
Prepaid expenses and
other
$
October 2,
2021
October 3,
2020
Fair Value
Fair Value
133 $
70
Balance sheet
classification
Other accrued
liabilities
October 2,
2021
October 3,
2020
Fair Value
Fair Value
$
356 $
58
The Effect of Cash Flow Hedge Accounting on Accumulated Other Comprehensive Loss ("OCL") (in thousands)
for the Twelve Months Ended
Derivatives in cash flow hedging relationships
Foreign currency forward contracts
Amount of Gain (Loss) Recognized in OCL on Derivatives
October 2, 2021
October 3, 2020
September 28, 2019
$
1,238 $
446 $
(629)
Derivative Impact on Gain (Loss) Recognized in Consolidated Statements of Comprehensive Income (in thousands)
for the Twelve Months Ended
Derivatives in cash flow hedging
relationships
Classification of Gain (Loss)
Reclassified from Accumulated OCL
into Income
Amount of Gain (Loss) Reclassified from Accumulated OCL into
Income
October 2, 2021
October 3, 2020
September 28, 2019
Foreign currency forward contracts
Cost of sales
Foreign currency forward contracts
Selling and administrative expenses
Derivatives not designated as hedging
instruments
Location of Gain (Loss) Recognized
on Derivatives in Income
Foreign currency forward contracts
Miscellaneous, net
$
$
$
3,205 $
265 $
(1,278) $
(107) $
(1,506)
(173)
Amount of Gain (Loss) on Derivatives Recognized in Income
October 2, 2021
October 3, 2020
September 28, 2019
98 $
(330) $
2,098
Fair Value Measurements:
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 Company uses quoted market prices when available or discounted cash flows to calculate
fair value. 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.
53
Plexus Corp.
Notes to Consolidated Financial Statements
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.
The following table lists the fair values of assets of the Company’s derivatives as of October 2, 2021 and October 3, 2020, by
input level:
Fiscal year ended October 2, 2021
Level 1
Level 2
Level 3
Total
Fair Value Measurements Using Input Levels (Liability)/Asset (in thousands)
Derivatives
Foreign currency forward contracts
Fiscal year ended October 3, 2020
Derivatives
Foreign currency forward contracts
$
$
— $
(1,266) $
— $
(1,266)
— $
1,201 $
— $
1,201
The fair value of 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. Inputs in the fair value of the foreign currency
forward contracts include prevailing forward and spot prices for currency.
6.
Income Taxes
The domestic and foreign components of income (loss) before income tax expense for fiscal 2021, 2020 and 2019 were as
follows (in thousands):
U.S. (1)
Foreign (1)
2021
2020
2019
$
$
(33,409) $
193,820
160,411 $
(69,102) $
204,499
135,397 $
(42,806)
168,761
125,955
(1) The U.S. and Foreign components of income (loss) before income tax expense include the elimination of intercompany foreign
dividends paid to the Company's U.S. operations.
Income tax expense (benefit) for fiscal 2021, 2020 and 2019 were as follows (in thousands):
Current:
Federal
State
Foreign
Deferred:
Federal
State
Foreign
2021
2020
2019
$
$
9,217 $
524
15,146
24,887
(1,153)
1
(2,236)
(3,388)
21,499 $
8,779 $
23
12,699
21,501
(6,498)
3
2,912
(3,583)
17,918 $
15,160
—
11,943
27,103
(3,498)
827
(7,093)
(9,764)
17,339
54
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 Comprehensive Income for fiscal 2021, 2020 and 2019:
Federal statutory income tax rate
(Decrease) increase resulting from:
Foreign tax rate differences
Withholding tax on dividends
Permanent differences
Excess tax benefits related to share-based compensation
Global intangible low-taxed income ("GILTI")
Audit settlements
Non-deductible compensation
Valuation allowances
Deemed repatriation tax
Other, net
2021
2020
2019
21.0 %
21.0 %
21.0 %
(20.3)
2.9
(0.6)
(0.9)
6.4
5.0
3.8
(3.7)
—
(0.2)
(24.0)
1.9
(2.6)
(3.0)
13.8
—
2.2
3.6
—
0.3
(21.0)
(5.4)
(1.3)
(1.3)
11.7
—
1.5
1.5
5.6
1.5
Effective income tax rate
13.4 %
13.2 %
13.8 %
The effective tax rate for fiscal 2021 was relatively consistent compared to the effective tax rate for fiscal 2020. The effective
tax rate for fiscal 2020 was lower than the effective tax rate for fiscal 2019 primarily due to the geographic distribution of
worldwide earnings. During fiscal 2019, the Company reasserted that certain historical undistributed earnings of two foreign
subsidiaries would be permanently reinvested, which provided a $10.5 million benefit to the effective tax rate. The impact of
the changes in the Company's assertion has been included in "Withholding tax on dividends" in the effective income tax
reconciliation above.
During fiscal 2021, the Company recorded a $5.9 million decrease to its valuation allowance primarily due to a net decrease of
the valuation allowance in the EMEA segment driven by the release of the valuation allowance against the net deferred tax
assets of a foreign subsidiary. This is partially offset by continuing losses in certain jurisdictions within the AMER segment.
During fiscal 2020, the Company recorded a $4.8 million increase to its valuation allowance due to continuing losses in certain
jurisdictions within the AMER and EMEA segments, partially offset by an expiration of net operating losses that had a
valuation allowance recorded.
During fiscal 2019, the Company recorded a $1.9 million increase to its valuation allowance due to continuing losses in certain
jurisdictions within the AMER and EMEA segments, partially offset by an expiration of net operating losses that had a
valuation allowance recorded.
55
Plexus Corp.
Notes to Consolidated Financial Statements
The components of the net deferred income tax assets as of October 2, 2021 and October 3, 2020, were as follows (in
thousands):
Deferred income tax assets:
Loss/credit carryforwards
Inventories
Accrued employee benefits
Accrued liabilities
Lease obligation
Other
Total gross deferred income tax assets
Less valuation allowances
Deferred income tax assets
Deferred income tax liabilities:
Property, plant and equipment
Right-of-use asset
Tax on unremitted earnings
Acceleration of revenue under Topic 606
Deferred income tax liabilities
Net deferred income tax assets/(liabilities)
2021
2020
28,234 $
15,231
14,488
6,410
18,977
6,719
90,059
(30,321)
59,738
19,055
12,279
4,654
2,042
38,030
21,708 $
31,854
14,450
14,833
7,015
17,854
5,434
91,440
(34,948)
56,492
20,923
11,213
5,339
4,028
41,503
14,989
$
$
During fiscal 2021, the Company’s valuation allowance decreased by $4.6 million. This decrease is the result of decreases to
the valuation allowances against the net deferred tax assets in the EMEA region of $5.6 million, partially offset by increases to
the valuation allowances in the AMER region of $1.0 million.
As of October 2, 2021, the Company had approximately $206.1 million of pre-tax state net operating loss carryforwards that
expire between fiscal 2022 and 2042. Certain state net operating losses have a full valuation allowance against them. The
Company also had approximately $71.3 million of pre-tax foreign net operating loss carryforwards that expire between fiscal
2022 and 2028 or are indefinitely carried forward. Certain foreign net operating losses have a full valuation allowance against
them.
The Company has been granted a tax holiday for a foreign subsidiary in the APAC segment. This tax holiday will expire on
December 31, 2034, and is subject to certain conditions with which the Company expects to continue to comply. During fiscal
2021, 2020 and 2019, the tax holiday resulted in tax reductions, net of the impact of the GILTI provisions of U.S. Tax Reform,
of approximately $34.4 million ($1.20 per basic share, $1.18 per diluted share), $28.3 million ($0.97 per basic share, $0.95 per
diluted share) and $23.9 million ($0.79 per basic share, $0.77 per diluted share), respectively.
The Company does not provide for taxes that would be payable if certain undistributed earnings of foreign subsidiaries were
remitted because the Company considers these earnings to be permanently reinvested. The deferred tax liability that has not
been recorded for these earnings was approximately $10.3 million as of October 2, 2021.
The Company has approximately $4.6 million of uncertain tax benefits as of October 2, 2021. The Company has classified
these amounts in the Consolidated Balance Sheets as "Other liabilities" (non-current) in the amount of $3.9 million and an
offset to "Deferred income taxes" (non-current asset) in the amount of $0.7 million as the payment is not anticipated within one
year.
56
Plexus Corp.
Notes to Consolidated Financial Statements
The following is a reconciliation of the beginning and ending amounts of unrecognized income tax benefits for the indicated
fiscal years (in thousands):
Balance at beginning of fiscal year
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
Balance at end of fiscal year
2021
2020
2019
2,096 $
623
2,161
(245)
4,635 $
2,270 $
509
465
(1,148)
2,096 $
5,841
62
39
(3,672)
2,270
$
$
The amount of unrecognized tax benefits that, if recognized, would impact the effective tax rate is $3.9 million and $1.3 million
for the fiscal years ended October 2, 2021 and October 3, 2020, respectively.
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 $0.1 million for fiscal 2021 and
2020, and approximately $0.2 million for fiscal 2019. The Company recognized less than $0.1 million of expense for accrued
penalties and net accrued interest in the Consolidated Statements of Comprehensive Income for fiscal 2021, 2020 and 2019.
It is possible that a number of uncertain 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.
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
Malaysia
Mexico
Romania
United Kingdom
United States
Federal
State
Fiscal Years
2016-2021
2019-2021
2017-2021
2016-2021
2014-2021
2018-2021
2015, 2017-2021
2003-2006, 2009-2021
7.
Earnings Per Share
The following is a reconciliation of the amounts utilized in the computation of basic and diluted earnings per share for fiscal
2021, 2020 and 2019 (in thousands, except per share amounts):
Net income
Basic weighted average common shares outstanding
Dilutive effect of share-based awards and options outstanding
Diluted weighted average shares outstanding
Earnings per share:
Basic
Diluted
2021
2020
2019
138,912 $
28,575
592
29,167
117,479 $
29,195
721
29,916
4.86 $
4.76 $
4.02 $
3.93 $
108,616
30,271
803
31,074
3.59
3.50
$
$
$
In each of the fiscal 2021, 2020 and 2019, share-based awards for less than 0.1 million shares were not included in the
computation of diluted earnings per share as they were antidilutive.
57
Plexus Corp.
Notes to Consolidated Financial Statements
8.
Leases
The Company’s lease portfolio includes both real estate and non-real estate type leases which are accounted for as either
finance or operating leases. Real estate leases generally include office, warehouse and manufacturing facilities and non-real
estate leases generally include office equipment and vehicles. The Company determines if a contract is or contains a lease at
inception. The Company’s leases have remaining lease terms of less than 1 year to 39 years. Renewal options that are deemed
reasonably certain are included as part of the lease term for purposes of calculating the right-of-use (“ROU”) asset and lease
liability. Variable lease payments are generally expensed as incurred and include certain index-based changes in rent, certain
nonlease components, such as maintenance and other services provided by the lessor, and other charges included in the lease.
The Company elected the practical expedient to not separate lease and nonlease components, as such nonlease components are
included in the calculation of the ROU asset and lease liability and included in the lease expense over the term of the lease. The
Company uses a discount rate to calculate the ROU asset and lease liability. When the implicit rate is known or provided in the
lease documents, the Company is required to use this rate. In cases in which the implicit rate is not known, the Company uses
an estimated incremental borrowing rate.
Operating lease ROU assets and lease liabilities are recorded on the date the Company takes possession of the leased assets with
expense recognized on a straight-line basis over the lease term. Leases with an estimated total term of 12 months or less are not
recorded on the balance sheet and the lease expense is recognized on a straight-line basis over the lease term. Generally, the
Company's lease agreements do not contain material residual value guarantees or material restrictive covenants.
The components of lease expense for fiscal years indicated were as follows (in thousands):
Finance lease expense:
Amortization of right-of-use assets
Interest on lease liabilities
Operating lease expense
Other lease expense
Total
2021
2020
$
6,290 $
4,888
11,034
4,794
$
27,006 $
4,380
4,956
11,707
3,401
24,444
Based on the nature of the ROU asset, amortization of finance right-of-use assets, operating lease expense and other lease
expense are recorded within either cost of goods sold or selling and administrative expenses and interest on finance lease
liabilities is recorded within interest expense on the Consolidated Statements of Comprehensive Income. Other lease expense
includes lease expense for leases with an estimated total term of twelve months or less and variable lease expense related to
variations in lease payments as a result of a change in factors or circumstances occurring after the lease possession date.
Amortization of assets held under capital leases totaled $3.8 million for fiscal 2019. Capital lease additions totaled $6.7 million
for fiscal 2019. Rent expense under all operating leases for fiscal 2019 was approximately $12.9 million.
58
Plexus Corp.
Notes to Consolidated Financial Statements
The following tables sets forth the amount of lease assets and lease liabilities included in the Company’s Consolidated Balance
Sheets (in thousands):
Financial Statement Line Item
2021
2020
ASSETS
Finance lease assets
Property, plant and equipment, net
Operating lease assets
Operating lease right-of-use assets
Total lease assets
LIABILITIES AND SHAREHOLDERS' EQUITY
Current
$
38,657 $
36,408
72,087
69,879
$ 110,744 $ 106,287
Finance lease liabilities
Current portion of long-term debt and finance lease obligations
$
4,616 $
Operating lease liabilities Other accrued liabilities
Non-current
Finance lease liabilities
Long-term debt and finance lease obligations, net of current portion
Operating lease liabilities Long-term operating lease liabilities
Total lease liabilities
Other information related to the Company’s leases was as follows:
Weighted-average remaining lease term (in years)
Finance leases
Operating leases
Weighted-average discount rate
Finance leases
Operating leases
9,877
36,919
37,970
2,700
7,724
37,033
36,779
$
89,382 $
84,236
2021
2020
11.6
17.4
17.4 %
2.5 %
12.8
18.5
17.7 %
3.0 %
2021
2020
Cash paid for amounts included in the measurement of lease liabilities (in
thousands)
Operating cash flows used in finance leases
Operating cash flows used in operating leases
Finance cash flows used in finance leases
ROU assets obtained in exchange for lease liabilities (in thousands)
Operating leases
Finance leases
$
4,571 $
10,667
5,734
$
11,897 $
4,253
4,539
10,907
3,321
7,692
2,835
59
Plexus Corp.
Notes to Consolidated Financial Statements
Future minimum lease payments required under finance and operating leases as of October 2, 2021, were as follows (in
thousands):
2022
2023
2024
2025
2026
Thereafter
Total minimum lease payments
Less: imputed interest
Present value of lease liabilities
Operating leases
Finance leases
$
10,850 $
9,112
7,108
5,541
4,820
17,889
55,320
(7,473)
47,847 $
$
9,421
7,398
5,360
5,137
5,235
88,307
120,858
(79,323)
41,535
As of October 2, 2021, the Company’s future operating leases that have not yet commenced are immaterial.
9.
Benefit Plans
Share-based Compensation Plans: The Plexus Corp. 2016 Omnibus Incentive Plan (the "2016 Plan"), which was approved by
shareholders, is a stock and cash-based incentive plan, and includes provisions by which the Company may grant executive
officers, employees and directors stock options, stock appreciation rights ("SARs"), restricted stock (including restricted stock
units ("RSUs"), performance stock awards (including performance stock units ("PSUs"), other stock awards and cash incentive
awards.
The maximum number of shares of Plexus common stock that may be issued pursuant to the 2016 Plan is 3.2 million shares; in
addition, cash incentive awards of up to $4.0 million per employee 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 awards under
the 2016 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. RSUs granted to executive
officers, other officers and key employees generally vest on the 3 year anniversary of the grant date (assuming continued
employment), which is also the date as of which the underlying shares will be issued. Beginning for fiscal 2017 grants, 50% of
PSUs vest based on the relative total shareholder return ("TSR") of the Company's common stock as compared to the
companies in the Russell 3000 Index for grants issued from fiscal 2017 through fiscal 2020 and the S&P 400 Index for grants
issued in fiscal 2021. Both are a market condition. The remaining 50% of PSUs vest based upon a three-point annual average of
the Company's absolute economic return, a performance condition, each during a performance period of three years with the
fiscal 2021 grants being subject to an individual year minimum and maximum absolute economic return. The vesting and
payout of awards will range between 0% and 200% of the shares granted based upon performance on the metrics during a
performance period for PSUs based on economic return and PSUs based on TSR compared to the Russell 3000 Index. The
vesting and payout of awards will range between 0% and 150% of shared granted for PSUs based on TSR compared to the S&P
400 Index. Payout at target, 100% of the shares granted, will occur if the TSR of Plexus stock is at the 50th percentile of
companies in the Russell 3000 Index or S&P 400 Index during the performance period and if a 2.5% average economic return is
achieved over the performance period of three years. The number of shares that may be issued pursuant to PSUs ranges from
zero to 0.4 million. The Committee also grants RSUs to non-employee directors, which generally fully vest on the first
anniversary of the grant date, which is also the date the underlying shares are issued (unless further deferred).
The Company recognized $24.8 million, $24.3 million and $21.3 million of compensation expense associated with share-based
awards in fiscal 2021, 2020 and 2019, respectively. Deferred tax benefits related to equity awards of $7.0 million, $8.2 million
and $9.2 million were recognized in fiscal 2021, 2020 and 2019, respectively.
60
Plexus Corp.
Notes to Consolidated Financial Statements
A summary of the Company’s stock option and SAR activity follows:
Outstanding as of September 29, 2018
Granted
Canceled
Exercised
Outstanding as of September 28, 2019
Granted
Canceled
Exercised
Outstanding as of October 3, 2020
Granted
Canceled
Exercised
Outstanding as of October 2, 2021
Exercisable as of:
September 28, 2019
October 3, 2020
October 2, 2021
Number of
Options/SARs
(in thousands)
Weighted
Average Exercise
Price
Aggregate
Intrinsic Value
(in thousands)
554 $
—
(2)
(88)
464 $
—
(16)
(325)
123 $
—
—
(106)
17 $
37.18
—
26.96
31.55
38.28
—
31.74
39.78
35.12
—
—
34.12
41.40 $
837
Number of
Options/SARs
(in thousands)
Weighted
Average Exercise
Price
Weighted
Average
Remaining Life
(years)
Aggregate
Intrinsic Value
(in thousands)
464 $
123 $
17 $
38.28
35.12
41.40
4.41
$
837
The following table summarizes outstanding stock option and SAR information as of October 2, 2021 (Options/SARs in
thousands):
Range of
Exercise Prices
$33.06 - $36.79
$36.80 - $41.84
$41.85 - $45.35
$45.36 - $45.45
$33.06 - $45.45
Number
of Options/
SARs Outstanding
(in thousands)
Weighted Average
Exercise Price
Weighted Average
Remaining Life
(years)
Number of
Options /
SARs Exercisable
(in thousands)
Weighted Average
Exercise Price
5 $
5 $
4 $
3 $
17 $
34.45
41.54
45.31
45.45
41.40
3.75
4.23
4.71
5.08
4.41
5 $
5 $
4 $
3 $
17 $
34.45
41.54
45.31
45.45
41.40
The Company uses 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 options and SARs lives represent the period
of time that the options and SARs granted are expected to be outstanding and were based on historical experience.
There were no options or SARs granted for fiscal 2021, 2020 or 2019.
There were no options and SARs vested for fiscal 2021 or 2020. The fair value of options and SARs vested for fiscal 2019 was
$0.3 million.
For fiscal 2021, 2020 and 2019, the total intrinsic value of options and SARs exercised was $5.4 million, $10.9 million and $2.4
million, respectively.
As of October 2, 2021, all previously granted options and SARS have vested.
61
Plexus Corp.
Notes to Consolidated Financial Statements
A summary of the Company’s PSU and RSU activity follows:
Units outstanding as of September 29, 2018
Granted
Canceled
Vested
Units outstanding as of September 28, 2019
Granted
Canceled
Vested
Units outstanding as of October 3, 2020
Granted
Canceled
Vested
Units outstanding as of October 2, 2021
Number of
Shares
(in thousands)
Weighted
Average Fair
Value at Date of
Grant
Aggregate
Intrinsic Value
(in thousands)
1,033 $
375
(38)
(408)
962 $
377
(37)
(451)
851 $
360
(10)
(340)
861 $
51.19
55.76
54.03
41.51
56.97
75.91
60.95
54.85
66.33
81.15
70.12
64.00
72.38 $
78,464
The Company uses the fair value at the date of grant to value RSUs. As of October 2, 2021, there was $18.9 million of
unrecognized compensation expense related to RSUs that is expected to be recognized over a weighted average period of 1.3
years.
The Company recognizes share-based compensation expense over the vesting period of PSUs. During the fiscal year ended
October 2, 2021, the 0.1 million PSUs granted in fiscal 2018 vested at a 150% payout based upon the TSR performance
achieved during the performance period. There were 0.1 million PSUs granted during each of fiscal years 2021, 2020 and 2019.
As of October 2, 2021, at the target achievement level, there was $8.4 million of unrecognized compensation expense related to
PSUs that is expected to be recognized over a weighted average period of 1.8 years.
401(k) Savings Plan: The Company’s 401(k) Retirement Plan covers all eligible U.S. employees. The Company matches
employee contributions up to 4.0% of eligible earnings. The Company’s contributions for fiscal 2021, 2020 and 2019 totaled
$9.3 million, $9.8 million and $9.3 million, respectively.
Supplemental Executive Retirement Plan (Deferred Compensation Arrangement): The Company maintains a supplemental
executive retirement plan (the "SERP") as a deferred compensation plan for executive officers. 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 allows investment of deferred compensation into individual accounts and, within these accounts, into one or more
designated investments. Investment choices do not include Plexus stock. During fiscal 2021, 2020 and 2019, the Company
made contributions to the participants’ SERP accounts in the amount of $0.7 million, $0.7 million and $0.6 million,
respectively.
As of October 2, 2021 and October 3, 2020, the SERP assets held in the trust totaled $14.1 million and $12.6 million,
respectively, and the related liability to the participants totaled approximately $14.1 million and $12.6 million, respectively. As
of October 2, 2021 and October 3, 2020, the SERP assets held in the trust were recorded at fair value on a recurring basis, and
were classified as Level 2 in the fair value hierarchy discussed in Note 1, "Description of Business and Significant Accounting
Policies."
The trust assets are subject to the 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.
62
Plexus Corp.
Notes to Consolidated Financial Statements
10.
Litigation
The Company is party to lawsuits in the ordinary course of business. Management does not believe that these proceedings,
individually or in the aggregate, will have a material positive or adverse effect on the Company’s consolidated financial
position, results of operations or cash flows.
11.
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. 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 the segments are attributed to the region in which the
product is manufactured or the 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 expenses. Corporate and other expenses
primarily represent corporate selling and administrative expenses, and restructuring costs and other charges, if any, such as the
$3.3 million, $6.0 million and $1.7 million of restructuring and impairment costs in fiscal 2021, 2020 and 2019, respectively.
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 segments are the same as for the Company taken as a whole.
Information about the Company’s three reportable segments for fiscal 2021, 2020 and 2019 is as follows (in thousands):
Net sales:
AMER
APAC
EMEA
Elimination of inter-segment sales
Operating income (loss):
AMER
APAC
EMEA
Corporate and other costs
Other income (expense):
Interest expense
Interest income
Miscellaneous, net
Income before income taxes
2021
2020
2019
1,317,404 $
1,850,603
312,669
(111,811)
3,368,865 $
1,327,849 $
1,824,831
349,102
(111,388)
3,390,394 $
1,429,308
1,557,205
309,933
(132,012)
3,164,434
62,338 $
238,800
(895)
(123,975)
176,268 $
(14,253) $
1,372
(2,976)
160,411 $
38,126 $
246,636
1,492
(132,882)
153,372 $
(16,162) $
1,878
(3,691)
135,397 $
57,780
208,178
4,475
(128,378)
142,055
(12,853)
1,949
(5,196)
125,955
$
$
$
$
$
$
63
Plexus Corp.
Notes to Consolidated Financial Statements
Depreciation:
AMER
APAC
EMEA
Corporate
Capital expenditures:
AMER
APAC
EMEA
Corporate
Total assets:
AMER
APAC
EMEA
Corporate and eliminations
2021
2020
2019
$
$
$
$
24,325 $
19,924
7,189
8,390
59,828 $
16,114 $
31,774
2,504
6,707
57,099 $
24,217 $
17,912
6,938
6,437
55,504 $
13,361 $
18,902
8,577
9,248
50,088 $
22,531
16,905
6,105
5,344
50,885
42,459
33,454
5,186
9,501
90,600
October 2,
2021
October 3,
2020
$
789,385 $
1,283,124
275,122
114,262
2,461,893 $
$
759,030
1,073,951
279,757
177,110
2,289,848
The following information is provided in accordance with the required segment disclosures for fiscal 2021, 2020 and 2019. Net
sales were based on the Company’s location providing the product or service (in thousands):
Net sales:
United States
Malaysia
China
Mexico
Romania
United Kingdom
Germany
Elimination of inter-country sales
2021
2020
2019
$
914,360 $
989,888 $
1,495,049
355,554
403,044
202,649
99,365
10,655
(111,811)
3,368,865 $
1,432,154
392,677
337,961
217,295
118,463
13,344
(111,388)
3,390,394 $
$
1,197,665
1,138,380
418,825
231,643
195,837
99,825
14,271
(132,012)
3,164,434
64
Plexus Corp.
Notes to Consolidated Financial Statements
Long-lived assets:
United States
Malaysia
Mexico
Romania
Thailand
China
United Kingdom
Other Foreign
Corporate
October 2,
2021
October 3,
2020
$
$
106,577 $
139,614
75,774
29,474
19,394
35,969
9,073
3,840
47,466
467,181 $
113,961
135,132
77,460
33,801
5,413
29,701
9,112
4,798
44,162
453,540
As the Company operates flexible manufacturing facilities and processes designed to accommodate customers with multiple
product lines and configurations, it is impracticable to report net sales for individual products or services or groups of similar
products and services.
Long-lived assets as of October 2, 2021 and October 3, 2020 exclude other long-term assets, deferred income tax assets and
intangible assets, which totaled $63.8 million and $57.1 million, respectively.
As a percentage of consolidated net sales, net sales attributable to customers representing 10.0% or more of consolidated net
sales for fiscal 2021, 2020 and 2019 were as follows:
General Electric Company ("GE")
2021
11.2%
2020
11.7%
2019
12.4%
During fiscal 2021, 2020 and 2019, net sales attributable to GE were reported in all three reportable segments.
GE represented 12.1% and 15.7% of total accounts receivable as of October 2, 2021 and October 3, 2020, respectively.
12.
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. 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 the Company's accompanying Consolidated
Balance Sheets in "other 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
65
Plexus Corp.
Notes to Consolidated Financial Statements
experience and future expectations, the Company assesses the adequacy of its recorded warranty liabilities and adjusts the
amounts as necessary.
Below is a table summarizing the activity related to the Company’s limited warranty liability for fiscal 2021, 2020 and 2019 (in
thousands):
Limited warranty liability, as of September 29, 2018
Accruals for warranties issued during the period
Settlements (in cash or in kind) during the period
Limited warranty liability, as of September 28, 2019
Accruals for warranties issued during the period
Settlements (in cash or in kind) during the period
Limited warranty liability, as of October 3, 2020
Accruals for warranties issued during the period
Settlements (in cash or in kind) during the period
Limited warranty liability, as of October 2, 2021
13.
Shareholders' Equity
$
$
6,646
3,254
(3,624)
6,276
2,852
(2,742)
6,386
3,277
(3,018)
6,645
On February 14, 2018, the Board of Directors approved a share repurchase program under which the Company was authorized
to repurchase $200.0 million of its common stock (the "2018 Program"). During fiscal 2019, the Company completed the 2018
Program by repurchasing 3,129,059 shares under this program for $178.8 million, at an average price of $57.15 per share.
On August 20, 2019, the Board of Directors approved a share repurchase program under which the Company is authorized to
repurchase $50.0 million of its common stock (the "2019 Program"). The 2019 Program commenced upon completion of the
2018 Program. During fiscal 2021, 2020 and 2019, the Company completed the 2019 Program by repurchasing 73,560, 609,935
and 54,965 shares under this program for $5.3 million, $41.4 million and $3.3 million at an average price of $72.44, $67.86 and
$59.66 per share, respectively.
On August 13, 2020, the Board of Directors approved a share repurchase program under which the Company is authorized to
repurchase up to $50.0 million of its common stock (the "2021 Program"). On November 18, 2020, the Board of Directors
approved an additional $50.0 million in share repurchase authority under the existing 2021 Program such that there then existed
a total of $100.0 million in share repurchase authority under the program. The 2021 Program commenced upon completion of
the 2019 Program. During fiscal 2021, the Company completed the 2021 Program by repurchasing 1,171,246 shares under this
program for $100.0 million at an average price of $85.40 per share.
On August 11, 2021, the Board of Directors approved a new share repurchase program that authorizes the Company to
repurchase up to $50.0 million of its common stock (the "2022 Program"). The 2022 Program commenced upon completion of
the 2021 Program. The 2022 Program has no expiration. During fiscal 2021, the Company repurchased 34,381 shares under this
program for $3.1 million at an average price of $90.16 per share. As of October 2, 2021, $46.9 million of authority remained
under the 2022 Program.
All shares repurchased under the aforementioned programs were recorded as treasury stock.
14.
Trade Accounts Receivable Sale Programs
The Company has Master Accounts Receivable Purchase Agreements with MUFG Bank, New York Branch (formerly known
as The Bank of Tokyo-Mitsubishi UFJ, Ltd.) (the "MUFG RPA"), HSBC Bank (China) Company Limited, Xiamen branch (the
"HSBC RPA") and other unaffiliated financial institutions, under which the Company may elect to sell receivables; at a
discount. All facilities are uncommitted facilities. The maximum facility amount under the MUFG RPA as of October 2, 2021
is $340.0 million. The maximum facility amount under the HSBC RPA as of October 2, 2021 is $60.0 million. The MUFG
RPA will be automatically extended each year unless any party gives no less than 10 days prior notice that the agreement
should not be extended. The terms of the HSBC RPA are generally consistent with the terms of the MUFG RPA previously
discussed.
66
Plexus Corp.
Notes to Consolidated Financial Statements
Transfers of receivables under the programs are accounted for as sales and, accordingly, receivables sold under the programs
are excluded from accounts receivable on the Consolidated Balance Sheets and are reflected as cash provided by operating
activities on the Consolidated Statements of Cash Flows. Proceeds from the transfer reflect the face value of the receivables less
a discount. The sale discount is recorded within "Miscellaneous, net" in the Consolidated Statements of Comprehensive Income
in the period of the sale. The Company continues servicing receivables sold and performing all accounts receivable
administrative functions, in exchange receives a servicing fee, under both the MUFG RPA and HSBC RPA. Servicing fees
related to trade accounts receivable programs recognized during fiscal 2021, 2020 and 2019 were not material.
The Company sold $730.5 million, $834.4 million and $919.3 million of trade accounts receivable under these programs, or
their predecessors, during fiscal 2021, 2020 and 2019, respectively, in exchange for cash proceeds of $728.4 million, $831.2
million and $913.6 million, respectively. As of October 2, 2021 and October 3, 2020, $176.0 million and $244.3 million,
respectively, of accounts receivables sold under trade accounts receivable programs and subject to servicing by the Company
remained outstanding and had not yet been collected.
15.
Revenue from Contracts with Customers
Significant Judgments
Revenue is recognized over time for arrangements with customers for which: (i) the Company's performance does not create an
asset with an alternative use to the Company, and (ii) the Company has an enforceable right to payment, including reasonable
profit margin, for performance completed to date. Revenue recognized over time is estimated based on costs incurred to date
plus a reasonable profit margin. If either of the two conditions noted above are not met to recognize revenue over time, revenue
is recognized following the transfer of control of such products to the customer, which typically occurs upon shipment or
delivery depending on the terms of the underlying arrangement.
The Company recognizes revenue when a contract exists and when, or as, it satisfies a performance obligation by transferring
control of a product or service to a customer. Contracts are accounted for when they have approval and commitment from both
parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and
collectability of consideration is probable. A performance obligation is a promise in a contract to transfer a distinct good or
service to the customer.
The Company generally enters into a master services arrangement that establishes the framework under which business will be
conducted. These arrangements represent the master terms and conditions of the Company's services that apply to individual
orders, but they do not commit the customer to work with, or to continue to work with, the Company nor do they obligate the
customer to any specific volume or pricing of purchases. Moreover, these terms can be amended in appropriate situations.
Customer purchase orders are received for specific quantities with predominantly fixed pricing and delivery requirements.
Thus, for the majority of our contracts, there is no guarantee of any revenue to the Company until a customer submits a
purchase order. As a result, the Company generally considers its arrangement with a customer to be the combination of the
master services arrangement and the purchase order. Most of the Company's arrangements with customers create a single
performance obligation as the promise to transfer the individual manufactured product or service is capable of being distinct.
The Company’s performance obligations are satisfied over time as work progresses or at a point in time. A performance
obligation is satisfied over time if the Company has an enforceable right to payment, including a reasonable profit margin.
Determining if an enforceable right to payment includes a reasonable profit margin requires judgment and is assessed on a
contract by contract basis.
Generally, there are no subjective customer acceptance requirements or further obligations related to goods or services
provided; if such requirements or obligations exist, then a sale is recognized at the time when such requirements are completed
and such obligations are fulfilled.
The Company does not allow for a general right of return. Net sales include amounts billed to customers for shipping and
handling and out-of-pocket expenses. The corresponding shipping and handling costs and out-of-pocket expenses are included
in cost of sales. Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-
producing transaction, that are collected by the Company from a customer, are excluded from net sales.
Contract Costs
For contracts requiring over time revenue recognition, the selection of the method to measure progress towards completion
requires judgment and is based on the nature of the products or services to be provided. The Company uses a cost-based input
measurement of progress because it best depicts the transfer of assets to the customer, which occurs as costs are incurred during
67
Plexus Corp.
Notes to Consolidated Financial Statements
the manufacturing process or as services are rendered. Under the cost-based measure of progress, the extent of progress towards
completion is measured based on the costs incurred to date.
There were no other costs to obtain or fulfill customer contracts.
Disaggregated Revenue
The table below includes the Company’s revenue for the fiscal years indicated disaggregated by geographic reportable segment
and market sector (in thousands):
Market Sector:
Industrial
Healthcare/Life Sciences
Aerospace/Defense
External revenue
Inter-segment sales
Segment revenue
Market Sector (1):
Industrial
Healthcare/Life Sciences
Aerospace/Defense
External revenue
Inter-segment sales
Segment revenue
Market Sector (1):
Industrial
Healthcare/Life Sciences
Aerospace/Defense
External revenue
Inter-segment sales
Segment revenue
2021
Reportable Segment:
AMER
APAC
EMEA
Total
$
462,789 $
1,010,833 $
75,353 $
1,548,975
566,693
277,870
1,307,352
10,052
605,249
134,842
1,750,924
99,679
154,830
80,406
310,589
2,080
1,326,772
493,118
3,368,865
111,811
$
1,317,404 $
1,850,603 $
312,669 $
3,480,676
2020
Reportable Segment:
AMER
APAC
EMEA
Total
$
481,301 $
954,925 $
84,215 $
1,520,441
464,134
371,685
1,317,120
10,729
618,250
157,301
1,730,476
94,355
176,001
82,582
342,798
6,304
1,258,385
611,568
3,390,394
111,388
$
1,327,849 $
1,824,831 $
349,102 $
3,501,782
2019
Reportable Segment:
AMER
APAC
EMEA
Total
$
615,904 $
648,300 $
91,632 $
1,355,836
488,851
317,558
1,422,313
6,995
602,922
186,486
1,437,708
119,497
128,225
84,556
304,413
5,520
1,219,998
588,600
3,164,434
132,012
$
1,429,308 $
1,557,205 $
309,933 $
3,296,446
(1) During fiscal 2021, the Company consolidated the previously reported Industrial/Commercial and Communications
market sectors to form the Industrial market sector. Prior period amounts have been reclassified to conform to the current
period presentation.
For fiscal 2021 and 2020 approximately 91% and for fiscal 2019 approximately 90% of the Company's revenue was recognized
as products and services were transferred over time.
Contract Balances
The timing of revenue recognition, billings and cash collections results in billed accounts receivable, contract assets and
deferred revenue on the Company’s accompanying Consolidated Balance Sheets.
68
Plexus Corp.
Notes to Consolidated Financial Statements
Contract Assets: For performance obligations satisfied at a point in time, billing occurs subsequent to revenue recognition, at
which point the customer has been billed and the resulting asset is recorded within accounts receivable. For performance
obligations satisfied over time as work progresses, the Company has an unconditional right to payment, which results in the
recognition of contract assets. The following table summarizes the activity in the Company's contract assets during fiscal 2021
and 2020 (in thousands):
Contract assets, beginning of period
Revenue recognized during the period
Amounts collected or invoiced during the period
Contract assets, end of period
2021
2020
113,946 $
3,048,875
90,841
3,073,465
(3,047,538)
(3,050,360)
115,283 $
113,946
$
$
Deferred Revenue: Deferred revenue is recorded when consideration is received from a customer prior to transferring goods or
services to the customer under the terms of the contract, which is included in other accrued liabilities on Consolidated Balance
Sheets. As of October 2, 2021 and October 3, 2020 the balance of advance payments from customers that remained in other
accrued liabilities was $101.1 million and $55.6 million, respectively. The advance payment is not considered a significant
financing component because it is used to meet working capital demands that can be higher in the early stages of a contract and
to protect the company from the other party failing to adequately complete some or all of its obligations under the contract.
Deferred revenue is recognized into revenue when all revenue recognition criteria are met. For performance obligations
satisfied over time, recognition will occur as work progresses; otherwise deferred revenue will be recognized based upon
shipping terms.
16.
Restructuring and Impairment Charges
During fiscal 2021, the Company recorded $3.3 million of restructuring and impairment charges in the Company's EMEA and
AMER segments primarily related to the reductions-in-force. During fiscal 2020, the Company recorded $6.0 million of
restructuring and impairment charges in the Company's AMER segment primarily related to the closure of our Boulder Design
Center. During fiscal 2019, the Company recorded $1.7 million of restructuring and impairment charges in the Company's
AMER segment. These charges are recorded within restructuring and impairment charges on the Consolidated Statements of
Comprehensive Income. Restructuring liabilities are recorded within other accrued liabilities on the Consolidated Balance
Sheets.
The Company recognized a tax benefit of $0.3 million, $0.6 million and $0.2 million related to restructuring and impairment
charges in fiscal 2021, 2020 and 2019, respectively.
The Company's restructuring accrual activity for fiscal 2021, 2020 and 2019 is included in the table below (in thousands):
Fixed Asset and
Operating Right-
of-Use Asset
Impairment
Employee
Termination and
Severance Costs
Total
Accrual balance, as of September 29, 2018
Restructuring and impairment costs
Amounts utilized
Accrual balance, as of September 28, 2019
Restructuring and impairment costs
Amounts utilized
Accrual balance, as of October 3, 2020
Restructuring and impairment costs
Amounts utilized
Accrual balance, as of October 2, 2021
— $
—
—
— $
3,054
(3,054)
— $
—
—
— $
— $
1,678
(381)
1,297 $
2,949
(4,210)
36 $
3,267
(3,232)
71 $
—
1,678
(381)
1,297
6,003
(7,264)
36
3,267
(3,232)
71
$
$
$
$
69
ITEM 9.
None.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
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 Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO") 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. Based on such evaluation, the CEO and CFO have concluded that, as of October 2, 2021, the
Company’s disclosure controls and procedures are effective, at the reasonable assurance level, (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 CEO and CFO, 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 CEO and
CFO, has assessed the effectiveness of its internal control over financial reporting as of October 2, 2021, based on the criteria
established in "Internal Control - Integrated Framework" issued by the Committee of Sponsoring Organizations of the
Treadway Commission ("COSO") (2013). Based on its assessment and those criteria, management has reached the conclusion
that 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 2, 2021, as stated in its report included herein.
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 CEO and CFO, 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 the Company's disclosure controls and procedures and internal control over
financial reporting are effective.
ITEM 9B.
OTHER INFORMATION
None.
ITEM 9C.
DISCLOSURES REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
70
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 2022 Annual Meeting of Shareholders ("2022 Proxy Statement").
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 "Investors" and then "Corporate Governance" at our website. Plexus’ Code of
Conduct and Business Ethics applies to all members of the board of directors, officers and employees; and includes provisions
related to accounting and financial matters that apply to the Principal Executive Officer, Principal Financial Officer, Principal
Accounting Officer and Controller.
Information about our Executive Officers
The following table sets forth our executive officers, their ages as of November 19, 2021, and the positions held by each person:
Name
Todd P. Kelsey
Steven J. Frisch
Patrick J. Jermain
Angelo M. Ninivaggi
Ronnie Darroch
Scott Theune
Victor Tan
Age
Position
56
55
55
54
56
57
57
President and Chief Executive Officer
Executive Vice President and Chief Operating Officer
Executive Vice President and Chief Financial Officer
Executive Vice President, Chief Administrative Officer, General Counsel and Secretary
Executive Vice President and Regional President – EMEA
Regional President – AMER
Regional President – APAC
Todd P. Kelsey joined Plexus in 1994 and has served as President and Chief Executive Officer since 2016; prior thereto, he
served as Executive Vice President and Chief Operating Officer since 2013. Previously, Mr. Kelsey served as Executive Vice
President – Global Customer Services since 2011 and as Senior Vice President prior thereto.
Steven J. Frisch joined Plexus in 1990 and has served as Executive Vice President and Chief Operating Officer since 2016.
Prior thereto, he served as Executive Vice President and Chief Customer Officer since 2014. Previously, Mr. Frisch served as
Executive Vice President – Global Customer Services from 2013 to 2014. Mr. Frisch was Regional President – Plexus EMEA
from 2010 to 2013. Mr. Frisch also served as Senior Vice President – Global Engineering Solutions from 2007 to 2013.
Patrick J. Jermain joined Plexus in 2010 and has served as Chief Financial Officer since 2014; he was named a Senior Vice
President in 2015 and Executive Vice President in 2019. Previously, Mr. Jermain served as Treasurer and Vice President of
Finance since 2013 and as Corporate Controller since 2010.
Angelo M. Ninivaggi joined Plexus in 2002 and has served as Chief Administrative Officer since 2013. Mr. Ninivaggi has also
served as Vice President, General Counsel and Secretary since 2006, was named a Senior Vice President in 2011 and Executive
Vice President in 2019. Mr. Ninivaggi also served as Corporate Compliance Officer from 2007 to 2013.
Ronnie Darroch joined Plexus in 2012 and has served as Executive Vice President and Regional President – EMEA since May
2019. Previously, Mr. Darroch served as Regional President – AMER from 2016 to 2019, Senior Vice President – Global
Manufacturing Solutions from 2014 to 2019, was named an Executive Vice President in 2016, Regional President – EMEA
from 2013 to 2014 and Vice President of Operations – EMEA prior thereto.
Scott Theune joined Plexus in 1993 and has served as Regional President – AMER since May 2019. Previously, Mr. Theune
served as Senior Vice President of Global Supply Chain from 2016 to 2019, Vice President of Supply Chain from 2005 to 2016,
and General Manager and Global Director of Manufacturing Process and Technology prior thereto.
Victor Tan joined Plexus in 2007 and has served as Regional President – APAC since 2020. Previously, Mr. Tan served as
Senior Vice President of Global Operations since 2019. In 2010, he was promoted to Vice President of Customer Management
in APAC, later appointed to lead all Penang operations and support functions in the region in 2013 and further expanded to lead
APAC operations in 2018. Prior thereto, he served as the General Manager for Plexus' Penang-Hillside site in Malaysia.
71
ITEM 11.
EXECUTIVE COMPENSATION
Incorporated herein by reference to "Corporate Governance – Board and Committee Responsibilities – Compensation &
Leadership Development Committee," "Director Compensation for Fiscal 2021," "Compensation Discussion & Analysis,"
"Executive Compensation" and "Compensation Committee Report" in the 2022 Proxy Statement.
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
Incorporated herein by reference to "Security Ownership of Certain Beneficial Owners and Management" in the 2022 Proxy
Statement.
Equity Compensation Plan Information
The following table chart gives aggregate information regarding grants under all Plexus equity compensation plans through
October 2, 2021:
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 (2)
Number of securities remaining
available for future issuance
under equity compensation
plans (excluding securities
reflected in 1st column)
878,324 $
41.40 $
1,259,064
—
878,324 $
n/a
41.40 $
—
1,259,064
Plan category
Equity compensation
plans approved by
security holders
Equity compensation
plans not approved by
security holders
Total
(1) Represents options, stock-settled SARs, PSUs and RSUs granted under the 2016 Omnibus Incentive Plan and the 2008 Long-Term
Incentive Plan, both of which were approved by shareholders. No further awards may be made under the 2008 Long-Term Incentive Plan.
(2) The weighted average exercise prices exclude PSUs and RSUs.
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
Incorporated herein by reference to "Corporate Governance – Director Independence" and "Certain Transactions" in the 2022
Proxy Statement.
ITEM 14.
PRINCIPAL ACCOUNTING FEES AND SERVICES
Incorporated herein by reference to the subheading "Ratify Independent Auditors - Fees and Services" in the 2022 Proxy
Statement.
72
ITEM 15.
EXHIBITS, FINANCIAL STATEMENT SCHEDULES
PART IV
(a)
Documents filed
Financial Statements and Financial Statement Schedule. See the list of Financial Statements and Financial Statement
Schedule in Item 8.
(b)
Exhibits. The list of exhibits is included below:
Exhibit
No.
3(i)
3(ii)
4.1
4.2
Restated Articles of Incorporation of Plexus Corp.
Exhibit
Amended and Restated Bylaws of Plexus Corp., as amended through
November 18, 2020
Restated Articles of Incorporation of Plexus Corp.
Amended and Restated Bylaws of Plexus Corp., as amended through
November 18, 2020
4.3**
Description of Common Stock
Credit Agreement, dated as of May 15, 2019, among Plexus Corp., the
banks, financial institutions and other institutional lenders listed on the
signature pages thereto, JPMorgan Chase Bank, N.A., as administrative
agent, U.S. Bank National Association, as syndication agent, PNC
Bank, National Association, Bank of America, N.A., MUFG Bank,
Ltd., HSBC Bank USA, N.A., Bank of the West and Wells Fargo Bank,
National Association, as co-documentation agents, and JPMorgan
Chase Bank, N.A. and U.S. Bank National Association, as joint lead
arrangers and joint book runners (including the related subsidiary
guaranty).
Incorporate by Reference Herein
Form
10-Q
8-K
10-Q
8-K
Exhibit
3.1
3.1
3.1
3.1
Filing Date
5/14/2004
11/19/2020
5/14/2004
11/19/2020
8-K
10.1
5/15/2019
Amendment No. 1 to Credit Agreement, dated as of April 29, 2020,
among Plexus Corp., the lenders party thereto and JPMorgan Chase
Bank, N.A., as administrative agent.
8-K
10.1
4/30/2020
Note Purchase Agreement, dated as of June 15, 2018, between Plexus
Corp. and the Purchasers named therein relating to an aggregate of
$150,000,000 in principal amount of 4.05% Series A Senior Notes, due
June 15, 2025, and 4.22% Series B Senior Notes, due June 15, 2028.
First Amendment, dated as of June 25, 2019, to the Note Purchase
Agreement, dated as of June 15, 2018, between Plexus Corp. and the
Noteholders named therein relating to an aggregate of $150,000,000 in
principal amount of 4.05% Series A Senior Notes, due June 15, 2025,
and 4.22% Series B Senior Notes, due June 15, 2028.
Master Accounts Receivable Purchase Agreement between Plexus
Corp. and Plexus Manufacturing Sdn. Bhd., and each additional seller
party thereto from time to time as the Sellers, Plexus Corp., as Seller
Representative, and The Bank of Tokyo-Mitsubishi UFJ, Ltd., New
York Branch, as the Purchaser, dated as of October 4, 2016.
Amended and Restated Master Accounts Receivable Purchase
Agreement between Plexus Corp. and Plexus Manufacturing Sdn. Bhd.,
Plexus Intl. Sales & Logistics, LLC, and each additional seller party
thereto from time to time as the Sellers, Plexus Corp., as Seller
Representative, and The Bank of Tokyo-Mitsubishi UFJ, Ltd., New
York Branch, as the Purchaser, dated as of December 14, 2016.
73
8-K
10.1
6/18/2018
10-Q
10.1
8/2/2019
8-K
10.1
10/7/2016
10-Q
10.2
2/3/2017
10.1 (a)
10.1 (b)
10.2 (a)
10.2 (b)
10.3 (a)
10.3 (b)
10-Q
10.1
5/5/2017
10-K
10.3(d)
11/16/2018
10-K
10.3(d)
11/17/2017
10-Q
10.1
8/3/2018
10-K
10.3(g)
11/16/2018
10-Q
10.1
5/3/2019
10-Q
10.2
8/2/2019
10.3 (c)
10.3 (d)
10.3 (e)
10.3 (f)
10.3 (g)
10.3 (h)
10.3 (i)
Amendment No. 3 to Amended and Restated Master Accounts
Receivable Purchase Agreement between Plexus Corp. and Plexus
Manufacturing Sdn. Bhd., Plexus Intl. Sales & Logistics, LLC, Plexus
Services Ro SRL, Plexus Corp. (UK) Limited and each additional seller
party thereto from time to time as the Sellers, Plexus Corp., as Seller
Representative, and The Bank of Tokyo-Mitsubishi UFJ, Ltd., New
York Branch, as the Purchaser, dated as of March 28, 2017.
Amendment No. 4 to Amended and Restated Master Accounts
Receivable Purchase Agreement between Plexus Corp. and Plexus
Manufacturing Sdn. Bhd., Plexus Intl. Sales & Logistics, LLC, Plexus
Services Ro SRL, Plexus Corp. (UK) Limited and each additional seller
party thereto from time to time as the Sellers, Plexus Corp., as Seller
Representative, and The Bank of Tokyo-Mitsubishi UFJ, Ltd., New
York Branch, as the Purchaser, dated as of September 11, 2017.
Amendment No. 5 to Amended and Restated Master Accounts
Receivable Purchase Agreement between Plexus Corp. and Plexus
Manufacturing Sdn. Bhd., Plexus Intl. Sales & Logistics, LLC, Plexus
Services Ro SRL, Plexus Corp. (UK) Limited and each additional seller
party thereto from time to time as the Sellers, Plexus Corp., as Seller
Representative, and The Bank of Tokyo-Mitsubishi UFJ, Ltd., New
York Branch, as the Purchaser, dated as of October 19, 2017.
Amendment No. 6 to Amended and Restated Master Accounts
Receivable Purchase Agreement between Plexus Corp. and Plexus
Manufacturing Sdn. Bhd., Plexus Intl. Sales & Logistics, LLC, Plexus
Services Ro SRL, Plexus Corp. (UK) Limited and each additional seller
party thereto from time to time as the Sellers, Plexus Corp., as Seller
Representative, and MUFG Bank Ltd. (f/k/a The Bank of Tokyo-
Mitsubishi UFJ, Ltd., New York Branch), as the Purchaser, dated as of
May 4, 2018.
Amendment No. 7 to Amended and Restated Master Accounts
Receivable Purchase Agreement between Plexus Corp. and Plexus
Manufacturing Sdn. Bhd., Plexus Intl. Sales & Logistics, LLC, Plexus
Services Ro SRL, Plexus Corp. (UK) Limited and each additional seller
party thereto from time to time as the Sellers, Plexus Corp., as Seller
Representative, and MUFG Bank Ltd. (f/k/a The Bank of Tokyo-
Mitsubishi UFJ, Ltd., New York Branch), as the Purchaser, dated as of
September 19, 2018.
Amendment No. 8 to Amended and Restated Master Accounts
Receivable Purchase Agreement between Plexus Corp. and Plexus
Manufacturing Sdn. Bhd., Plexus Intl. Sales & Logistics, LLC, Plexus
Services Ro SRL, Plexus Corp. (UK) Limited and each additional seller
party thereto from time to time as the Sellers, Plexus Corp., as Seller
Representative, and MUFG Bank Ltd. (f/k/a The Bank of Tokyo-
Mitsubishi UFJ, Ltd., New York Branch), as the Purchaser, dated as of
March 20, 2019.
Amendment No.9 to Amended and Restated Master Accounts
Receivable Purchase Agreement between Plexus Corp. and Plexus
Manufacturing Sdn. Bhd., Plexus Intl. Sales & Logistics, LLC, Plexus
Services Ro SRL, Plexus Corp. (UK) Limited and each additional seller
party thereto from time to time as the Sellers, Plexus Corp., as Seller
Representative, and MUFG Bank Ltd. (f/k/a The Bank of Tokyo-
Mitsubishi UFJ, Ltd., New York Branch), as the Purchaser, dated as of
June 21, 2019.
74
10.3 (j)
10.3 (k)
10.4
10.5
10.6
10.7
Amendment No.10 to Amended and Restated Master Accounts
Receivable Purchase Agreement between Plexus Corp. and Plexus
Manufacturing Sdn. Bhd., Plexus Intl. Sales & Logistics, LLC, Plexus
Services Ro SRL, Plexus Corp. (UK) Limited and each additional seller
party thereto from time to time as the Sellers, Plexus Corp., as Seller
Representative, and MUFG Bank Ltd. (f/k/a The Bank of Tokyo-
Mitsubishi UFJ, Ltd., New York Branch), as the Purchaser, dated as of
December 23, 2019.
Amendment No.11 to Amended and Restated Master Accounts
Receivable Purchase Agreement between Plexus Corp. and Plexus
Manufacturing Sdn. Bhd., Plexus Intl. Sales & Logistics, LLC, Plexus
Services Ro SRL, Plexus Corp. (UK) Limited and each additional seller
party thereto from time to time as the Sellers, Plexus Corp., as Seller
Representative, and MUFG Bank Ltd. (f/k/a The Bank of Tokyo-
Mitsubishi UFJ, Ltd., New York Branch), as the Purchaser, dated as of
September 10, 2020.
10-Q
10.1
2/7/2020
10-K
10.3(k)
11/20/2020
Retirement and Transition Agreement, dated August 17, 2016, by and
between Plexus Corp. and Dean A. Foate.*.
8-K
10.1
8/19/2016
Employment Agreement, dated August 17, 2016, by and between
Plexus Corp. and Todd P. Kelsey.*
8-K
10.2
8/19/2016
Form of Change of Control Agreement with executive officers.*
8-K
10.2
5/21/2008
Summary of Directors' Compensation (11/18).*
10-K
10.7(a)
11/16/2018
10.8 (a)
Plexus Corp. Executive Deferred Compensation Plan.*
10-K
10.17
12/19/2000
10.8 (b)
Plexus Corp Executive Deferred Compensation Plan Trust dated April
1, 2003 between Plexus Corp. and Bankers Trust Company.*
10-K
10.14
12/15/2003
10.9
Plexus Corp. Non-employee Directors Deferred Compensation Plan.*
10-K
10.10
11/19/2012
10.10 (a)
Amended and Restated Plexus Corp. 2016 Omnibus Incentive Plan.*
10-Q
10.2
5/5/2017
10.10 (b)
Forms of award agreements thereunder*
(i) Form of Stock Option Agreement.
(ii) Form of Restricted Stock Unit Award.
(iii) Form of Performance Stock Unit Agreement.
(iv) Form of Stock Appreciation Rights Agreement.
(v) Form of Restricted Stock Unit Award Agreement for Directors.
10-Q
10-Q
10-Q
10-Q
10-Q
10.1
10.2
10.1
10.3
10.1
8/8/2016
8/8/2016
2/5/2021
8/8/2016
2/3/2017
(vi) Form of Plexus Corp. Variable Incentive Compensation Plan -
Plexus Leadership Team.
10-K
10.1(b)(vi)
11/17/2017
10.11 (a)
Amended and Restated Plexus Corp. 2008 Long-Term Incentive Plan*
(superseded except as to outstanding awards).
10-Q
10.3
5/5/2017
10.11(b)
Forms of award agreements thereunder*
(i) Form of Stock Option Agreement.
10-Q
10.2
2/4/2010
75
(ii) Form of Restricted Stock Unit Award.
10-Q
10.5(b)
5/8/2008
(iii) Form of Stock Appreciation Rights Agreement.
10-Q
10.5(c)
5/8/2008
21**
23**
24**
31.1**
31.2**
32.1**
32.2**
99.1**
101
List of Subsidiaries.
Consent of PricewaterhouseCoopers LLP.
Powers of Attorney (see signature page).
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 and Economic Return Financial
Statements.
The following materials from Plexus Corp.’s Annual Report on Form
10-K for the fiscal year ended October 2, 2021, formatted in Inline
Extensible Business Reporting Language ("XBRL"): (i) the
Consolidated Statements of Comprehensive Income, (ii) the
Consolidated Balance Sheets, (iii) the Consolidated Statements of
Shareholders’ Equity, (iv) the Consolidated Statements of Cash Flows,
and (v) Notes to Consolidated Financial Statements.
101.INS
Inline XBRL Instance Document (the instance document does not
appear in the interactive data file because its XBRL tags are embedded
within the inline XBRL document).
101.SCH
Inline XBRL Taxonomy Extension Schema Document.
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document.
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document.
104
*
**
The cover page from the Company’s Annual Report on Form 10-K for
the fiscal year ended October 2, 2021, formatted in Inline XBRL and
contained in Exhibit 101.
Designates management compensatory plans or agreements.
Filed or furnished herewith.
ITEM 16.
FORM 10-K SUMMARY
None.
76
Plexus Corp. and Subsidiaries
Schedule II – Valuation and Qualifying Accounts
For fiscal 2021, 2020 and 2019 (in thousands):
Descriptions
Fiscal Year 2021:
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 2020:
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 2019:
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)
Balance at
beginning of
period
Additions
charged to
costs and
expenses
Additions
charged to
other accounts Deductions
Balance at end
of period
$
$
$
$
$
$
3,597 $
1,232 $
— $
(3,641) $
1,188
34,948 $
4,499 $
— $
(9,126) $
30,321
1,537 $
4,051 $
— $
(1,991) $
3,597
29,170 $
5,778 $
— $
— $
34,948
885 $
1,189 $
— $
(537) $
1,537
28,369 $
2,213 $
— $
(1,412) $
29,170
77
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
Date: November 19, 2021
Plexus Corp.
Registrant
/s/ Todd P. Kelsey
Todd P. Kelsey
President and Chief Executive Officer
78
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints
Todd P. Kelsey, Patrick J. Jermain 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/ Todd P. Kelsey
Todd P. Kelsey, President and Chief Executive Officer
(Principal Executive Officer) and Director
/s/ Patrick J. Jermain
Patrick J. Jermain, Executive Vice President and Chief
Financial Officer (Principal Financial Officer and
Principal Accounting Officer)
/s/ Dean A. Foate
Dean A. Foate, Chairman
/s/ Stephen P. Cortinovis
Stephen P. Cortinovis, Director
/s/ Joann M. Eisenhart
Joann M. Eisenhart, Director
/s/ Rainer Jueckstock
Rainer Jueckstock, Director
*Each of the above signatures is affixed as of November 19, 2021.
/s/ Peter Kelly
Peter Kelly, Director
/s/ Randy J. Martinez
Randy J. Martinez, Director
/s/ Joel Quadracci
Joel Quadracci, Director
/s/ Karen M. Rapp
Karen M. Rapp, Director
/s/ Paul A. Rooke
Paul A. Rooke, Director
/s/ Michael V. Schrock
Michael V. Schrock, Director
79
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Executive Officers
Todd P. Kelsey
President and Chief Executive Officer
Steven J. Frisch
Executive Vice President and Chief Operating Officer
Patrick J. Jermain
Executive Vice President and Chief Financial Officer
Angelo M. Ninivaggi
Executive Vice President, Chief Administrative Officer,
General Counsel and Secretary
Ronnie Darroch
Executive Vice President
and Regional President - EMEA
Victor Tan
Regional President - APAC
Scott L. Theune
Regional President - AMER
Board of Directors
Dean A. Foate
Chairman, Plexus Corp.
Stephen P. Cortinovis
Private Equity Investor
Joann M. Eisenhart, Ph.D.
Retired Executive Vice President and Chief People
Officer, The Northwestern Mutual Life
Insurance Company
Rainer Jueckstock
Executive Vice President, Tenneco Inc.
Peter Kelly
Retired Executive Vice President and Chief Financial
Officer, NXP Semiconductors N.V.
Todd P. Kelsey
President and Chief Executive Officer, Plexus Corp.
Randy J. Martinez
Retired President and Chief Executive Officer, MTS
Systems Corp.
Joel Quadracci
President and Chief Executive Officer,
Quad/Graphics Inc.
Karen Rapp
Executive Vice President, Chief Financial Officer
and Treasurer, National Instruments Corp.
Paul A. Rooke
Retired Chairman and Chief Executive Officer, Lexmark
International, Inc.
Michael V. Schrock
Senior Advisor and Operating Consultant, Oak Hill
Capital Partners, and Lead Director, Plexus Corp.
Investor Information
Direct all inquiries for investor relations information, including copies of Plexus’ Form 10-K
and other reports filed with the SEC, to:
Investor Relations
Plexus Corp.
One Plexus Way
P.O. Box 156
Neenah, WI 54957-0156
+1 888 208 9005
shawn.harrison@plexus.com
www.plexus.com
For common stock market information, see Part II, Item 5 in the Form 10-K.
Transfer Agent & Registrar
AST Financial
6201 15th Avenue
Brooklyn, NY 11219
+1 800 937 5449
Auditors
PricewaterhouseCoopers LLP
Milwaukee, WI
Virtual Annual Meeting
February 16, 2022: 8:00 a.m. CST
Participate by logging in at the following address and providing the control number found on the proxy card:
http://www.virtualshareholdermeeting.com/PLXS2022
AMERICAS
+1 877 733 7260
EUROPE
+44 (0)1506 637 997
ASIA PACIFIC
+604 632 5252
PLEXUS.COM
©2021 PLEXUS CORP. | Plexus and the Plexus logo are registered trademarks of Plexus Corp., Neenah, WI, USA.
PLEXUS CORP.
2022 NOTICE OF
ANNUAL MEETING
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
December 17, 2021
To the Shareholders of Plexus Corp.
You are invited to the Annual Meeting of Shareholders of Plexus Corp., a Wisconsin corporation:
DATE AND TIME
February 16, 2022
8:00 a.m. CST
ACCESS THE VIRTUAL ANNUAL MEETING
This year’s annual meeting will be held virtually.
Shareholders may participate in the virtual annual
meeting by logging in at the following link and providing
the control number found in the Notice of Internet
Availability of Proxy Materials:
http://www.virtualshareholdermeeting.com/PLXS2022
RECORD DATE
Shareholders of record at the close of business on
December 13, 2021, are entitled to attend and vote at
the annual meeting by virtual presence online. As of the
Record Date, Plexus had 28,009,600 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 at the
virtual meeting or by duly authorized proxy.
ITEMS OF
BUSINESS
1 Elect 10 Directors (pg. 9)
2
3
Approve executive
compensation by an
advisory vote (pg. 68)
Ratify the selection of
PricewaterhouseCoopers
LLP as our independent
auditors (pg. 71)
4
Transact such other
business as may properly
come before the meeting
We call your attention to the proxy statement accompanying this notice, which contains important
information about the matters to be acted upon at the meeting.
By Order of the Board of Directors,
Angelo M. Ninivaggi
Executive Vice President, Chief Administrative Officer,
General Counsel and Secretary
Important notice regarding the availability of proxy materials for the shareholder meeting to be
held on February 16, 2022. The proxy statement and the Company’s 2021 annual report are
available at www.proxyvote.com. At www.proxyvote.com, shareholders can view the proxy
material, vote and request to receive paper copies of the proxy materials by mail.
Table of Contents
Who We Are. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Meeting & Voting Information . . . . . . . . . . . . . . . . . . . . . . . . .
Items of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Security Ownership of Certain Beneficial Owners &
Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proposal 1 – Election of Directors . . . . . . . . . . . . . . . . . . . . . .
1
3
5
7
9
Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Plexus Corp. Board of Directors . . . . . . . . . . . . . . . . 18
Shareholder Protections & Corporate Governance
Best Practices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Board Composition & Structure. . . . . . . . . . . . . . . . . 19
Board & Committee Responsibilities . . . . . . . . . . . . . 21
Board Governance Processes . . . . . . . . . . . . . . . . . . 23
Index of frequently
accessed information
Director Compensation for Fiscal 2021 . . . . . . . . . . . . . . . . . . 25
Beneficial Owners. . . . . . . . . . . . . . . . . .
7
Director Fees & Arrangements . . . . . . . . . . . . . . . . . 26
Stock Ownership Guidelines & Stock Compensation
for Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Director Participation in Deferred Compensation
Plan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Board’s Role in Risk Oversight . . . . . . . . . . . . . . . . . . . . . . . . 28
Board’s Role in Risk Oversight . . . . . . . . . . 28
Certain Transactions . . . . . . . . . . . . . . . . 69
Compensation & Risk . . . . . . . . . . . . . . . . 67
Compensation Committee Report . . . . . . . . 51
Compensation Discussion & Analysis . . . . . . 31
Corporate Governance . . . . . . . . . . . . . . . 18
Environmental, Social & Governance (ESG) . . . . . . . . . . . . . . . 29
Director Compensation for Fiscal 2021 . . . . . 25
Compensation Discussion & Analysis . . . . . . . . . . . . . . . . . . . . 31
Environmental, Social & Governance . . . . . . 29
Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . 31
Executive Compensation . . . . . . . . . . . . . 52
Executive Compensation Philosophy, Goals & Process . 33
Elements & Analysis of Direct Compensation . . . . . . . 36
Elements & Analysis of Other Compensation . . . . . . . 48
Compensation Committee Report . . . . . . . . . . . . . . . . . . . . . . 51
Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Summary Compensation Table for Fiscal 2021 . . . . . . 52
Householding & Solicitation. . . . . . . . . . . . 72
Items of Business . . . . . . . . . . . . . . . . . .
Meeting & Voting Information . . . . . . . . . .
5
3
Pay Ratio Disclosure . . . . . . . . . . . . . . . . 66
Proposal 1 . . . . . . . . . . . . . . . . . . . . . .
9
Proposal 2 . . . . . . . . . . . . . . . . . . . . . . 68
Proposal 3 . . . . . . . . . . . . . . . . . . . . . . 71
Grants of Plan-Based Awards for Fiscal 2021 . . . . . . . 55
Report of the Audit Committee . . . . . . . . . 70
Outstanding Equity Awards at Fiscal 2021 Year-End . . 56
Who We Are . . . . . . . . . . . . . . . . . . . . .
1
Option Exercises & Stock Vested in Fiscal 2021 . . . . . 58
Nonqualified Deferred Compensation in Fiscal 2021 . . 58
Employment Agreements & Potential Payments . . . . . 60
Pay Ratio Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Compensation & Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Proposal 2 – Advisory Vote on Executive Compensation . . . . . . 68
Certain Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Report of the Audit Committee. . . . . . . . . . . . . . . . . . . . . . . . 70
Proposal 3 – Ratify Independent Auditors . . . . . . . . . . . . . . . . 71
Fees & Services. . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Householding & Solicitation . . . . . . . . . . . . . . . . . . . . . . . . . . 72
WHO WE ARE
Our Vision
Our Mission
We’ll help you create the products that build a
better world.
The leader in highly complex products and
demanding regulatory environments.
From idea to aftermarket and everything in between.
Plexus participants in the Electronic Manufacturing Services (“EMS”) Industry. Since 1979, Plexus has been partnering with
companies to transform concepts into branded products and deliver them to the market. From idea to aftermarket and
everything in between, Plexus is a global leader in providing support for all facets of the product lifecycle-design and
development, supply chain solutions, new product information, manufacturing and aftermarket services.
DESIGN AND
DEVELOPMENT
SUPPLY CHAIN
SOLUTIONS
NEW PRODUCT
INTRODUCTION
MANUFACTURING
AFTERMARKET
SERVICES
Plexus by the Numbers
$3.37B
2021 Revenue
15.4%
2021 ROIC
$4.76
2021 Earnings per share
$1.2M
Planned investment in
energy use reduction
technology and initiatives
in F22
19,200
Employees
600
Development Engineers
26/7
Facilities / Countries
4.5M
Square Feet
Plexus Market Sectors & Subsectors
INDUSTRIAL
HEALTHCARE / LIFE SCIENCES
AEROSPACE / DEFENSE
Automation and Robotics
Medical Devices and Equipment
Aerospace
Transportation and Energy Management
Life Sciences and Diagnostics
Semiconductor and Test and
Measurement
Advanced Surgical Systems and Medical
Robotics
Defense
Security
Space
Communications
1
WHO WE ARE
Our People
We recognize that a great culture is foundational to the success of our vision to create the products
that build a better world. We are proud of our culture and the recognition we have received over the
years as a great place to work. In building a great culture, we embrace four ‘‘non-negotiables:’’
Our Values and Leadership Behaviors - Our Values and Leadership Behaviors establish the
foundation upon which our culture is built; Customer Focus, Relationships and Teamwork,
Excellence, Open Communications, Integrity, Prioritize our People, Solve Problems, Be
Courageous, Be Strategic and Innovate.
Quality Begins with Me - We instill personal responsibility for quality in our employees through
our Quality Begins with Me culture; a commitment to delivering zero defects and continuous
improvement.
5E’s of Customer Service Excellence - In all aspects of our engagements with both internal and
external customers, we reflect the 5E’s. We are Empathetic, Entrepeneurial, Empowered,
Engaged and we Ensure Accountability.
One Plexus - One Plexus reflects our sentiment that we are stronger together than the sum of
our parts. We embrace the One Plexus mentality through collaboration to ensure consistent
operations, globally, and leverage the strengths and best practices of all facets of the
organization to drive the best solutions for our customers.
Committed to a diverse and inclusive workplace
Diversity and
Inclusion
(‘‘D&I’’)
Statement
Be you. Our people create our best Plexus. Ingrained in our culture of inclusion is the philosophy that each
individual offers diverse perspectives, backgrounds and experiences that create great outcomes when we
are united as a team. We respect our people and embrace our differences. We welcome everyone and
value the ideas generated by our collective uniqueness. We aspire that all of our people reach their full
potential.
Employee
Resource Groups
Plexus Young Professionals (PyP)
Fosters development
and collaboration
for young professionals.
Women in Network (WiN)
Champions the advancement
of women in professional
and personal development.
UnusPlexus
Created to celebrate
different cultures
and diversity at Plexus.
• D&I Committee (including the CEO) and Board Oversight of D&I initiatives and results
• Formal mentorship program with a specific focus on future leaders within underrepresented
populations and D&I leadership training provided
UnusPlexus
D&I Highlights
• Gender & underrepresented minorities recruitment strategy
• Flexible workplace policy, paid parental leave & equitable pay practices
• Community involvement, charitable match program & paid volunteer time off
Diversity by the Numbers
14
different home
countries represented
in our global workforce
49.9%
of our global
workforce is female
2
of 16 of our Plexus
Leadership Team
members are female
3
of 10 directors are
female or
underrepresented
minorities
2
PROXY STATEMENT
Plexus Corp.
Global Headquarters
One Plexus Way
Neenah, WI 54957-0156
MEETING AND VOTING INFORMATION
Plexus Corp. will hold its annual meeting of shareholders virtually on February 16, 2022 at 8 a.m. CST.
How to Access Your Proxy Materials
On or about December 20, 2021, we mailed to shareholders a Notice of Internet Availability of Proxy
Materials (‘‘Notice’’) containing instructions on how to access our proxy materials, including our proxy
statement and annual report, and how to vote via the internet. Shareholders will not receive printed
copies of the proxy materials unless requested via the procedures described in the Notice. To assure
timely delivery of printed copies of the proxy materials before the annual meeting, shareholders need
to request a copy no later than January 26, 2022.
How to Vote
Shareholders of record at the close of business on December 13, 2021 (the ‘‘Record Date’’), are
entitled to participate and vote at the virtual annual meeting. As of the Record Date, Plexus had
28,009,600 shares of common stock outstanding. If you are a shareholder of record as of the Record
Date, then you may vote either at the virtual annual meeting or in advance of the meeting by
authorizing—by internet, telephone or mail—the persons named as proxies on the proxy card, Dean A.
Foate, Todd P. Kelsey, Patrick J. Jermain and Angelo M. Ninivaggi, to vote your shares in accordance
with your directions. We encourage you to vote as soon as possible, even if you are planning to attend
the virtual annual meeting (by virtual presence online), so that the vote count will not be delayed.
By internet
Go to www.proxyvote.com. You will need your 16-digit control number
included on the Notice in order to vote by Internet.
By telephone
On a touch-tone telephone, call 1-800-690-6903. You will need your 16-
digit control number included on the Notice in order to vote by
telephone.
By mail
Virtually
Please request written materials by following the instructions in the
Notice. Complete, sign and date the proxy card, and return it to the
address indicated on the proxy card.
If you attend the virtual annual meeting, you will be able to cast your
vote via the online meeting platform during a designated portion of the
meeting. Have your Notice, proxy card or proxy form with your 16-digit
control number available when you access the virtual annual meeting.
3
If for any reason you desire to revoke your proxy, you may do so at any time before it is voted, either
by written notice filed with the Secretary, or Acting Secretary, of the meeting. Questions may be asked
during the virtual meeting by submitting such questions in writing via the online platform.
For those investors whose shares are held by a broker or other nominee, you must complete and return
the voting instruction form provided by your broker, bank or nominee to provide instruction on how to
cast your vote. In the absence of your voting instructions, brokers or other nominees may or may not be
able to vote your shares at their discretion depending upon the particular proposal. For example,
brokers may not vote your shares at their 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
not permitted to vote your shares at its discretion regarding matters related to executive
compensation, including the advisory vote to approve named executive officer compensation. If a
broker or other nominee holds your shares and you wish to change your proxy prior to the voting
thereof, please contact the broker or other nominee.
Shareholders who own shares as part of Plexus’ 401(k) Retirement Plan (the ‘‘401(k) Plan’’) will receive
a separate means for voting the 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 upon the shares for which
voting directions have been received from participants in the 401(k) Plan.
Shareholder Proposals
The Secretary must receive a shareholder proposal no later than August 18, 2022 for the proposal to be
considered for inclusion in our proxy materials for the 2023 annual meeting pursuant to Rule 14a-8 of
the rules of the Securities and Exchange Commission. The 2023 annual meeting of shareholders is
tentatively scheduled for February 15, 2023. To bring a proposal or nomination before the 2023 annual
meeting, you must comply with our bylaws, which require written notice to the Secretary between
October 7, 2022 and November 1, 2022. 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, 2022, then your proposal or nomination would be untimely and it
will not be presented to shareholders for action at the 2023 annual meeting of shareholders.
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.
4
ITEMS OF BUSINESS
Board
Recommendation
Proposal 1
The election of 10 directors named in the proxy statement to serve on Plexus’
board of directors for a one-year term.
FOR
Proposal 2
An advisory proposal to approve the compensation of the Company’s named
executive officers, as disclosed under the headings ‘‘Compensation Discussion
and Analysis’’ and ‘‘Executive Compensation.’’
Proposal 3
Ratify the selection of PricewaterhouseCoopers LLP as our independent
auditors for fiscal 2022.
FOR
FOR
Voting Procedures & Votes Required
To conduct the annual meeting, more than 50% of Plexus’ outstanding shares entitled to vote must be
present at the virtual meeting 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. Each outstanding share of common stock is
entitled to one vote on each matter presented.
If you own shares as a registered holder and you do not vote, your shares 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.
Assuming a quorum is present, directors are elected by a plurality of the votes cast at the virtual
meeting or by proxy by the holders of Plexus common stock entitled to vote in the election at the
meeting. ‘‘Plurality’’ means that the individuals who receive the highest number of votes are elected
as directors, up to the maximum 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.
Our bylaws provide that if any nominee for director does not receive, in an uncontested election, a
majority of the votes cast for his or her election, the board will determine whether to accept the
individual’s irrevocable, contingent resignation from the board (which must be submitted to, or on file
with, the Company in order for that person to be nominated for board service).
5
Assuming a quorum is present, the results of the non-binding, advisory vote to approve the
compensation of our named executive officers will also be determined by a majority of shares voting on
such matter. In addition, ratification of PricewaterhouseCoopers LLP as our independent auditors for
2022 will be determined by a majority of the shares voting on such matter, assuming a quorum is
present. Abstentions and broker non-votes will not affect these votes, except insofar as they reduce
the number of shares that are voted.
Broadridge Financial Solutions, Inc. will use an automated system to tabulate the votes and its
representative(s) will also serve as the election inspector(s).
6
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table presents certain information as of the Record Date (December 13, 2021), regarding
the beneficial ownership of Plexus common stock by each current director or nominee for director,
each named executive officer appearing in the ‘‘Summary Compensation Table’’ included in ‘‘Executive
Compensation’’ herein, all directors and current named executive officers as a group, and each known
5%-or-greater beneficial owner of Plexus common stock. The specified individuals and entities have sole
voting and sole dispositive powers as to all shares, except as otherwise indicated.
Stephen P. Cortinovis
Ronnie Darroch
Joann M. Eisenhart
Dean A. Foate
Steven J. Frisch
Patrick J. Jermain
Rainer Jueckstock
Peter Kelly
Todd P. Kelsey
Randy J. Martinez
Angelo M. Ninivaggi
Joel Quadracci
Karen M. Rapp
Paul A. Rooke
Michael V. Schrock
All directors and current named executive
officers as a group (15 persons)
BlackRock, Inc.2
The Vanguard Group, Inc.3
Disciplined Growth Investors, Inc.4
Dimensional Fund Advisors LP5
SHARES BENEFICIALLY
OWNED1
27,970
11,750
14,617
112,341
64,534
55,122
22,652
31,032
172,456
0
36,856
4,909
6,847
8,903
37,241
607,230
4,190,089
3,103,314
2,195,197
1,831,304
PERCENTAGE OF
SHARES OUTSTANDING
*
*
*
*
*
*
*
*
*
*
*
*
*
*
2.17%
14.96%
11.08%
7.84%
6.54%
* Less than 1%
1
2
3
The amounts reported in the table include shares subject to acquisition within 60 days of the Record Date,
upon the vesting of restricted stock units (‘‘RSUs’’) granted under Plexus’ equity plans as follows:
Mr. Cortinovis (2,069), Mr. Darroch (6,150), Dr. Eisenhart (2,069), Mr. Foate (2,069), Mr. Frisch (11,960),
Mr. Jermain (8,970), Mr. Jueckstock (2,069), Mr. Kelly (2,069), Mr. Kelsey (31,600), Mr. Ninivaggi (7,260),
Mr. Quadracci (2,069), Ms. Rapp (2,069), Mr. Rooke (2,069) and Mr. Schrock (2,069), and all directors and
current named executive officers as a group (84,561).
The amounts reported in the table for Mr. Kelsey include 35,451 shares transferred to a limited liability
company jointly owned by Mr. Kelsey and his spouse.
BlackRock, Inc. filed a report on Schedule 13G/A on December 31, 2020, reporting sole voting power as to
4,313,661 shares and sole dispositive power as to 4,349,886 shares of common stock. BlackRock subsequently
filed a report on Form 13F for the quarter ended on September 30, 2021, showing sole voting power as to
4,146,433 shares and sole investment power as to 4,190,089 shares. The address of BlackRock, a parent
holding company of certain institutional investment managers, is 55 East 52nd Street, New York, New York
10055.
The Vanguard Group, Inc. filed a report on Schedule 13G/A on December 31, 2020, reporting shared voting
power as to 59,052 shares, sole dispositive power as to 2,953,460 shares and shared dispositive power as to
82,057 shares of common stock. Vanguard Group subsequently filed a report on Form 13F for the quarter
7
ended on September 30, 2021, showing shared voting power as to 54,315 shares, sole investment power as to
3,025,240 shares and shared investment power (along with Vanguard Fiduciary Trust Co., Vanguard
Investment Australia, Ltd., Vanguard Advisers Inc., Vanguard Global Advisers, LLC and Vanguard Asset
Management, Ltd.) as to 78,074 shares of common stock. The address of Vanguard Group, an investment
adviser, is 100 Vanguard Boulevard, Malvern, Pennsylvania 19355.
Disciplined Growth Investors, Inc. filed a report on Schedule 13G on June 30, 2008, reporting that it held sole
voting power as to 1,899,904 shares, shared voting power as to 268,950 shares and sole dispositive power as
to 1,268,854 shares of common stock. Disciplined Growth Investors, Inc. filed a report on Form 13F for the
quarter ended on September 30, 2021, showing sole voting power as to 1,829,407 shares and sole investment
power as to 2,195,197 shares. The address of Disciplined Growth Investors, an investment advisor, is 150
South Fifth Street, Suite 2550, Minneapolis, MN 55402.
Dimensional Fund Advisors LP filed a report on Schedule 13G/A on December 31, 2020, reporting sole voting
power as to 1,882,395 shares and sole dispositive power as to 1,944,510 shares of common stock. Dimensional
Fund Advisors subsequently filed a report on Form 13F for the quarter ended on September 30, 2021, showing
sole voting power as to 1,796,255 shares and sole dispositive power as to 1,831,304 shares. The address of
Dimensional Fund Advisors, an investment advisor, is Building One, 6300 Bee Cave Road, Austin, Texas 78746.
4
5
8
PROPOSAL 1 –
ELECTION OF DIRECTORS
Board
Recommendation
The election of 10 directors named in the proxy statement to serve on Plexus’
board of directors for a one-year term.
FOR
Plexus currently has 11 directors, listed below, as of the Record Date. Plexus’ bylaws currently
authorize up to 12 directors, as determined by the board. The Plexus board may elect directors to fill
empty seats, including those created by an expansion, between meetings of shareholders.
PLEXUS’ BOARD OF DIRECTORS (AS OF RECORD DATE)
Stephen P. Cortinovis
Joann M. Eisenhart
Dean A. Foate
Rainer Jueckstock
Peter Kelly
Todd Kelsey
Randy J. Martinez
Joel Quadracci
Karen Rapp
Paul Rooke
Michael Schrock
We would like to give special thanks to Mr. Stephen Cortinovis, who will be retiring from the board
immediately following the annual meeting. Mr. Cortinovis has served on Plexus’ board for 18 years,
leveraging his global business experience to provide invaluable advice and leadership to management
over the course of his tenure.
Board Nominees
In accordance with Plexus’ bylaws, the board has set the size of the board to be 10 directors, reduced
from the current board size of 11 directors, immediately following the annual meeting of shareholders,
with such directors to serve until their successors are duly elected and qualified. The individuals 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 unforeseen, the proxies will be voted with discretionary authority for a substitute nominee
designated by the board of directors.
Each of the director nominees named below was elected at the 2021 annual meeting except for
Mr. Martinez, who was first identified as a possible director candidate by a non-management director.
After a thorough review, our Governance and Sustainability Committee (‘‘Governance Committee’’)
recommended Mr. Martinez as a nominee to the board, and he was appointed by the board on August 2,
2021.
9
Board Nominee Overview
Diversity
Average Tenure
Independence
Age
8 years
0-4 years
5-9 years
10-14 years
— —
15+ years
61
Average Age
Female: 20%
Ethnic minority: 10%
Non-diverse: 70%
Not Independent: 20%
Independent: 80%
50-59 years: 30%
60-69 years: 70%
The composition of the board of directors is reviewed annually to ensure 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. Your board nominees offer a diverse range of skills and
experience in relevant areas, as set forth in the matrix below. Unless otherwise noted, all directors
have been employed in their principal occupation listed for the past five years or more. Each of the
attributes identified, which together with the directors’ principal occupations and business experience,
as well as the Company’s board member selection criteria, outlined in the next section, provide the
reasons that each individual has been nominated to serve on the board.
10
BOARD QUALIFICATIONS, ATTRIBUTES,
SKILLS AND EXPERIENCE
Public Company CEO/COO Experience (8/10)
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.
Z
E
TIN
R
A
M
Financial and Accounting Experience (9/10)
Financial and accounting skills as well as experience preparing,
auditing, analyzing or evaluating public company financial
statements and an understanding of a public company’s internal
controls and procedures for financial reporting, preferably with
experience as a controller and/or chief financial officer.
Global Business Experience (10/10)
International experience with an understanding of
conducting business on a global scale.
Sales, Marketing or Innovation Experience (10/10)
In-depth knowledge and significant practical experience
in sales, marketing or innovation at a company positioned
in one or more of our key markets.
Manufacturing Management Background (9/10)
A manufacturing management background, including as
an engineer, from a large, well-respected,
manufacturing-based company.
Supply Chain Management Experience (10/10)
A background in supply chain management, specifically from
a company that relies on supply chain management as a
competitive advantage.
Technology and Cybersecurity (10/10)
Experience in the technology sector and/or with
managing cybersecurity practices in a
multi-national organization.
11
Z
E
TIN
R
A
M
BOARD QUALIFICATIONS, ATTRIBUTES,
SKILLS AND EXPERIENCE (CONT.)
Human Capital Development
and Compensation Experience (10/10)
Considerable experience in human capital development to
fulfill talent and succession needs and to inform the design of
both short- and long-term compensation and rewards programs.
Environmental, Social & Governance (“ESG”) (10/10)
Considerable experience in the oversight of corporate policy,
programs and goals relating to ESG matters.
Demographics
RACE/ETHNICITY
African American
Asian/Pacific Islander
White/Caucasion
Hispanic/Latino
Native American
GENDER
Male
Female
Non-Binary
Prefer Not to Disclose
LGBQ+
12
DR. JOANN M. EISENHART
Independent
Executive VP & Chief People Officer,
The Northwestern Mutual Life Insurance Company (retired)
Age: 62
Tenure: 6 years
Other Public Boards: 0
Committee Assignment:
Compensation &
Leadership Development
(Chair)
Skills and Experience:
Global Business
Supply Chain Management
Technology and Cybersecurity
experience
Human Capital Development
and Compensation
Manufacturing Management
Sales, Marketing or Innovation
Environmental, Social
& Governance
Dr. Eisenhart retired as Executive Vice President and Chief People Officer at The Northwestern Mutual
Life Insurance Company, a financial services and insurance provider, in 2019. Prior thereto, she served
as Senior Vice President – Human Resources, Facilities and Philanthropy at Northwestern Mutual from
2013 until 2018, and as Senior Vice President – Human Resources since 2011. Dr. Eisenhart previously
served as Senior Vice President – Human Resources at Pfizer Inc., a global biopharmaceutical company,
and held various leadership positions at Rohm and Haas Company, a manufacturer of specialty
chemicals. She earned a B.S. in Chemistry from the University of Illinois at Urbana-Champaign and a
Ph.D. in Inorganic Chemistry from the University of Wisconsin-Madison. She also earned an M.A. and a
Ph.D. in Human and Organizational Development from Fielding Graduate University.
DEAN A. FOATE
Chairman of the Board
President & CEO Plexus Corp. (retired)
Age: 63
Tenure: 21 years
(8 as Chairman)
Other Public Boards: 1
Skills and Experience:
Public Company CEO/COO
Manufacturing Management
Financial and Accounting
Supply Chain Management
Global Business
Technology and Cybersecurity
experience
Environmental, Social
& Governance
Human Capital Development
and Compensation
Sales, Marketing or Innovation
Mr. Foate is not an independent director and therefore is not eligible for membership on a Board
committee under Nasdaq rules or the committees’ charters.
Mr. Foate has served as Plexus’ Chairman of the Board since 2013. Mr. Foate retired as President and
Chief Executive Officer of Plexus in 2016 after serving in such roles since 2002. He joined Plexus in 1984
and held various other executive roles, including prior service as its Chief Operating Officer. Mr. Foate
is also a director of Regal Beloit Corporation, a manufacturer of electric motors, electrical motion
controls, power generation and power transmission products, as well as a member of its Corporate
Governance & Director Affairs Committee. Mr. Foate earned a B.S. in Electrical and Computer
Engineering from the University of Wisconsin-Madison and a Master of Science in Engineering
Management from the Milwaukee School of Engineering.
13
RAINER JUECKSTOCK
Independent
Executive VP, Tenneco Inc.
Age: 62
Tenure: 8 years
Other Public Boards: 0
Committee Assignment:
Audit (Chair)
Skills and Experience:
Public Company CEO/COO
Manufacturing Management
Financial and Accounting
Supply Chain Management
Global Business
Technology and Cybersecurity
experience
Environmental, Social
& Governance
Human Capital Development
and Compensation
Sales, Marketing or Innovation
Mr. Jueckstock has served as an Executive Vice President of Tenneco Inc., a producer of automotive
emission control and ride control products and systems, since 2018, when Tenneco acquired Federal-
Mogul LLC, an automotive and industrial equipment supplier. Mr. Jueckstock has also served as
President of Federal-Mogul Powertrain since 2018, after having served as its Chief Executive Officer
since 2012. Prior to the acquisition of Federal-Mogul, he also served as its co-Chief Executive Officer
and as a director since 2012, and as co-Chairman of the Board since 2015. Before joining Federal-
Mogul, he was a member of the German Military. Mr. Jueckstock earned a degree in Engineering from
the Military College at Zittau, Germany.
PETER KELLY
Independent
Executive VP, NXP Semiconductors N.V.
Age: 64
Tenure: 16 years
Other Public Boards: 0
Committee Assignment:
Audit
Governance &
Sustainability
Skills and Experience:
Public Company CEO/COO
Manufacturing Management
Financial and Accounting
Supply Chain Management
Global Business
Technology and Cybersecurity
experience
Environmental, Social
& Governance
Human Capital Development
and Compensation
Sales, Marketing or Innovation
Mr. Kelly will serve as Executive Vice President of NXP Semiconductors N.V., a global semiconductor
company and a long-standing supplier in the industry, until February 2022, when he plans to retire.
Prior to announcing his retirement, he also served as the Chief Financial Officer. Mr. Kelly also
previously served as Executive Vice President – Strategy and Mergers & Acquisitions since 2015,
Executive Vice President and Chief Financial Officer since 2012 and Executive Vice President and
General Manager of Operations prior thereto. He was a director of Graphic Packaging Holding Company,
a provider of paper-based packaging solutions, as well as a member of its Audit Committee and
Compensation and Benefits Committee, until 2018. 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.
14
TODD P. KELSEY
President & CEO Plexus Corp.
Age: 56
Tenure: 5 years
Other Public Boards: 1
Skills and Experience:
Public Company CEO/COO
Manufacturing Management
Financial and Accounting
Supply Chain Management
Global Business
Technology and Cybersecurity
experience
Environmental, Social
& Governance
Human Capital Development
and Compensation
Sales, Marketing or Innovation
Mr. Kelsey is not an independent director and therefore is not eligible for membership on a Board
committee under Nasdaq rules or the committees’ charters.
Mr. Kelsey has served as President and Chief Executive Officer of Plexus since 2016. He was previously
Plexus’ Executive Vice President and Chief Operating Officer from 2013 until 2016, and its Executive
Vice President – Global Customer Services prior thereto. Mr. Kelsey joined Plexus in 1994 as a Design
Engineer in the Company’s Engineering Solutions Group, and has held various other positions with
increasing responsibility since that time, including Senior Vice President – Global Customer Services and
Senior Vice President – Engineering Solutions. He is also a director of Steelcase Inc., a global provider
of workplace products, furnishings and services, as well as the chair of its Audit Committee. Mr. Kelsey
earned a B.S. and a M.S. in electrical engineering from the University of Wisconsin-Madison and an
M.B.A. from the University of Wisconsin-Oshkosh.
RANDY J. MARTINEZ
Independent
President & CEO, MTS Systems Corp. (retired)
Age: 66
Tenure: <1 year
Other Public Boards: 0
Committee Assignment:
Audit
Governance &
Sustainability
Skills and Experience:
Public Company CEO/COO
Manufacturing Management
Financial and Accounting
Supply Chain Management
Global Business
Technology and Cybersecurity
experience
Environmental, Social
& Governance
Human Capital Development
and Compensation
Sales, Marketing or Innovation
Mr. Martinez served as President and Chief Executive Officer of MTS Systems Corporation, a leading
global supplier of advanced test systems, motion simulators and precision sensors, until 2021. Prior
thereto, Mr. Martinez served in several leadership roles at AAR Corporation, a provider of aviation
services to the worldwide commercial aviation and aerospace & defense industries, including President
& CEO of the Airlift Group and Group Vice President, Aviation Services. Mr. Martinez served with
distinction in the U.S. Air Force for 21 years, retiring as a Colonel and Command Pilot and having held a
wide variety of leadership roles, including command and senior staff positions. Mr. Martinez also holds
Master of Science degrees from the University of Arkansas and the National Defense University.
15
JOEL QUADRACCI
Independent
Chairman, President & CEO, Quad/Graphics Inc.
Age: 52
Tenure: 1 year
Other Public Boards: 1
Committee Assignment:
Compensation &
Leadership Development
Government &
Sustainability
Skills and Experience:
Public Company CEO/COO
Manufacturing Management
Financial and Accounting
Supply Chain Management
Global Business
Technology and Cybersecurity
experience
Environmental, Social
& Governance
Human Capital Development
and Compensation
Sales, Marketing or Innovation
Mr. Quadracci has served as the Chairman, President and Chief Executive Officer of Quad/Graphics,
Inc., a worldwide marketing solutions partner, since 2010. Mr. Quadracci joined Quad in 1991 and,
prior to assuming his current role, served in various other positions with increasing responsibility
including Senior Vice President of Sales & Administration and President and Chief Operating Officer.
Mr. Quadracci received a B.A. in Philosophy from Skidmore College in 1991.
KAREN M. RAPP
Independent
Executive VP, CFO & Treasurer, National Instruments Corp.
Age: 54
Tenure: 3 years
Other Public Boards: 1
Committee Assignment:
Audit
Compensation &
Leadership Development
Skills and Experience:
Financial and Accounting
Supply Chain Management
Global Business
Sales, Marketing or Innovation
Human Capital Development
and Compensation
Technology and Cybersecurity
experience
Environmental, Social
& Governance
Ms. Rapp has served as Executive Vice President and Chief Financial Officer, of National Instruments
Corp., a producer of automated test equipment and virtual instrumentation software, since 2017.
Ms. Rapp also previously served as National Instruments' Treasurer. Prior thereto, she served as the
Senior Vice President of Corporate Development at NXP Semiconductors N.V., a global semiconductor
company and a long-standing supplier in the industry, where she led the integration efforts for the
NXP/Freescale Semiconductor, Ltd. merger, from 2015 to 2017. Prior to the merger, Ms. Rapp held
several leadership positions at Freescale with increasing responsibility, including Vice President and
Chief Information Officer, Director of Operations and Finance, Global Sales and Marketing, Director of
Finance, Supply Chain, and Director of Finance, Continuous Development. Ms. Rapp is also a director of
Microchip Technology Incorporated, a leading provider of smart, connected and secure embedded
control solutions, as well as a member of its Audit Committee. Ms. Rapp holds an M.B.A from The
University of Texas at Austin and a B.S. in Finance from Northern Illinois University.
16
PAUL A. ROOKE
Independent
Chairman & CEO Lexmark International, Inc. (retired)
Age: 63
Tenure: 4 years
Other Public Boards: 0
Committee Assignment:
Governance &
Sustainability (Chair)
Skills and Experience:
Public Company CEO/COO
Manufacturing Management
Financial and Accounting
Supply Chain Management
Global Business
Technology and Cybersecurity
experience
Environmental, Social
& Governance
Human Capital Development
and Compensation
Sales, Marketing or Innovation
Mr. Rooke retired as Chairman and Chief Executive Officer, as well as a director, of Lexmark
International, Inc., a provider of document imaging and enterprise software solutions, in 2016.
Mr. Rooke also previously served as President of Lexmark. Prior to becoming President and CEO of
Lexmark in 2010, he held several leadership positions with increasing responsibility, including Executive
Vice President and President, Imaging Solutions, Executive Vice President and President, Printing
Solutions and Services, and Vice President and President, Business Printer. Mr. Rooke holds an M.B.A.
from the University of Kentucky and a B.S. in Mechanical Engineering from the University of Michigan.
MICHAEL V. SCHROCK
Independent Lead Director
Senior Advisor & Operating Consultant, Oak Hill Capital Partners
Age: 68
Tenure: 15 years
(8 as Lead Director)
Other Public Boards: 1
Committee Assignment:
Compensation &
Leadership Development
Skills and Experience:
Public Company CEO/COO
Manufacturing Management
Financial and Accounting
Supply Chain Management
Global Business
Technology and Cybersecurity
experience
Environmental, Social
& Governance
Human Capital Development
and Compensation
Sales, Marketing or Innovation
Mr. Schrock, who has served as the Lead Director of Plexus’ board since 2013, has served as a Senior
Advisor and Operating Consultant to Oak Hill Capital Partners, a private equity firm, since 2014. Prior
thereto, he served as President and Chief Operating Officer at Pentair LLC, a global water, fluid,
thermal management, and equipment protection company. Mr. Schrock also serves as Chairman of the
Board of Directors of Atkore International Group Inc., a manufacturer of electrical raceway products
and mechanical products and solutions; he is also the chair of Atkore’s Executive Committee.
Mr. Schrock earned a B.S. from Bradley University and an M.B.A. from Northwestern University, Kellogg
School of Management. Mr. Schrock served as a director of MTS Systems Corporation, a global supplier
of high-performance test systems and position sensors, from 2014 to 2021.
17
CORPORATE GOVERNANCE
Plexus Corp. Board of Directors
Plexus believes that it needs to attract and retain talented, focused and motivated leadership to
develop and execute the Company’s long-term strategy and to deliver shareholder value. For Plexus,
the concept of leadership is not limited to leadership within the Company; leadership also includes the
individuals who serve on Plexus’ board of directors. 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, and conduct in accordance with the Company’s values.
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 general criteria for each Board member, the diversity of the Board should endeavor
to include those board qualifications, attributes, skills and experience set forth in the matrix above. In
the selection of board members, the Governance Committee also considers the demographic diversity
among members in identifying areas that could be augmented by new members.
Shareholder Protections & Corporate Governance Best Practices
We are committed to governance structures and practices that drive shareholder value and protect
important shareholder rights, which are regularly reviewed and include the following:
INDEPENDENCE
BEST PRACTICES
ACCOUNTABILITY
✓ 8 of 10 director nominees
✓ Strategy & risk oversight by
✓ Annual election of all
are independent
✓ Strong independent Lead
Director with clearly
delineated duties
✓ All standing board
committees composed
entirely of independent
directors
✓ Regular executive sessions
of independent directors
without management
present
✓ Periodic rotation of
committee members
the full board and its
committees
✓ Full board and committee
oversight of ESG issues
✓ Stock ownership guidelines
for executive officers and
non-employee directors
✓ Overboarding limits
✓ No poison pill
✓ No dual class shares
directors
✓ Annual election of Chair
and Independent Lead
Director by independent
directors
✓ Majority voting with
director resignation policy
(plurality voting in
contested elections)
✓ Annual self-evaluation
process for directors
✓ Director education and
✓ Strong investor outreach
onboarding
program
18
Board Composition & Structure
BOARD OF DIRECTORS MEETINGS
5
2021 board meetings
100%
Directors then serving attended
each 2021 board meeting
100%
Directors then serving attended
the 2021 Annual Meeting
Our independent directors have the opportunity to meet in executive session, without management
present, as part of each regular board and committee meeting. Mr. Schrock, the board’s Lead Director,
presides at board executive sessions. 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.
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 Market rules, at least a majority of our directors must be
‘‘independent directors.’’
When the board of directors makes its determinations regarding which directors are independent, it
first considers and follows the Nasdaq Global Select Market rules. The board also reviews other
transactions and relationships, if any, involving Plexus and its 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 disclose any transaction, whether direct or indirect, such
as through an immediate family member or an affiliated business entity, involving Plexus and 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.
Based on the applicable standards and the board’s review and consideration, the board of directors has
determined that, of the director nominees, Dr. Eisenhart and Ms. Rapp, as well as Messrs. Jueckstock,
Kelly, Martinez, Quadracci, Rooke and Schrock, are each ‘‘independent’’ under applicable Nasdaq rules
and guidelines. In reaching its determinations regarding the independence of Mr. Kelly and Ms. Rapp,
the board considered that Mr. Kelly served as an executive officer of NXP Semiconductors N.V., which
is a supplier to Plexus, until October 12, 2021, and that Ms. Rapp is an executive officer of National
Instruments Corp. and a director of Microchip Technology, Inc., both of which are also suppliers to
Plexus. The board determined that these relationships did not affect the independence of Mr. Kelly or
Ms. Rapp.
Mr. Foate, our Non-Executive Chair and former Chief Executive Officer, and Mr. Kelsey, our current
Chief Executive Officer, are not considered to be ‘‘independent’’ under applicable Nasdaq rules.
BOARD LEADERSHIP STRUCTURE
Mr. Foate has served as Chair of the Board since 2013. Pursuant to a retirement and transition
agreement (the ‘‘Transition Agreement’’), which is described in ‘‘Directors’ Compensation’’ below,
Mr. Foate began serving as Non-Executive Chair (which is not an executive officer position) in fiscal
year 2018.
19
Mr. Foate serves as the Chair of the Board primarily due to his in-depth knowledge of the Company and
EMS industry, keen understanding of the Company’s operations and strategies, and proven leadership
of, as well as vision for, Plexus, all of which position him to provide strong and effective leadership of
the board. Mr. Foate joined Plexus in 1984 and served as CEO from 2002 until his retirement in 2016. In
addition to his experience and long service with Plexus, the board currently believes that Mr. Foate is
in the best position as Chair to lead board discussions regarding the Company’s business and strategy,
and to help the board respond quickly and effectively to any challenges faced by the Company.
While currently the roles of Chair and CEO are held by Mr. Foate and Mr. Kelsey, respectively, the
board does not have a policy that requires the separation of these roles and believes the Company
should adopt the board leadership structure that best serves its needs at any particular time. Pursuant
to the Company’s Corporate Governance Guidelines, since Mr. Foate is not an independent director,
the independent directors, meeting in executive session, elected a Lead Director from among the
independent directors.
THE DUTIES OF THE BOARD’S LEAD DIRECTOR
The Company believes that the designation of an independent Lead Director, whose duties are
described below, provides essentially the same benefits as having an independent chair in terms of
oversight, access and an independent voice with significant input into corporate governance.
Mr. Schrock currently serves as the board’s Lead Director.
• Preside at all meetings of the board at
which the Chair is not present
• Serve as a liaison between the Chair and
independent directors
• Together with the Chair, approve agendas
for board meetings and approve meeting
schedules to ensure sufficient time
allocation per topic
• Provide input to the Chair as to the
content, quality, quantity and timeliness
of information from Company management
to the board
• Authority to call meetings of the independent
directors and develop the agendas for such
meetings with input from other independent
directors
• Serve as a liaison for consultation and direct
communication with major shareholders
• Perform such other duties as the board or
Chair may from time to time delegate
20
Board and Committee Responsibilities
AUDIT COMMITTEE
MEMBERS
Rainer Jueckstock, Chair
Peter Kelly
Randy Martinez
Karen Rapp
Meetings in 2021: 8
Attendance: 100%
Report page: 70
*Reflects directors
then serving
The Audit Committee’s duties and responsibilities include the following:
• chooses and makes retention decisions related to the Company’s independent
auditors,
• reviews the Company’s general policies and procedures to reasonably assure
the adequacy and effectiveness of internal controls over financial reporting,
• discusses the Company’s material financial risk exposures and the steps
management has taken to monitor and control such exposures,
• reviews the annual audited financial statements and quarterly financial
statements of the company,
• generally oversees the Company’s audit process as well as the accounting,
finance and tax functions,
• reviews the effectiveness of the Company’s governance and management of
information technology risks, including those relating to business continuity,
cybersecurity, regulatory compliance and data management, and
• oversees the Company’s ethics and whistle-blowing reporting programs in
conjunction with the Nominating and Corporate Governance Committee.
All of the members of the Audit Committee are ‘‘independent’’ of Plexus under SEC and Nasdaq rules.
The board has determined that Mr. Kelly and Ms. Rapp are ‘‘audit committee financial experts’’ based
on a review of each individual’s educational background and business experience. All members of the
Audit Committee are ‘‘financially literate’’ and meet the other SEC and Nasdaq requirements for Audit
Committee membership.
COMPENSATION & LEADERSHIP DEVELOPMENT COMMITTEE
MEMBERS
Joann Eisenhart, Chair
Stephen Cortinovis
Joel Quadracci
Karen Rapp
Michael Schrock
Meetings in 2021: 6
Attendance: 100%
Report page: 51
*Reflects directors
then serving
The Compensation & Leadership Development Committee’s duties and
responsibilities include the following:
• reviews Plexus’ leadership structure, talent management, diversity and
inclusion efforts, leadership development strategies and programs, and the
Company’s succession planning efforts, including executive succession plans,
• establishes the general compensation philosophies and plans for Plexus,
• reviews and determines the compensation of the CEO, and approves the
compensation of the other executive officers as well as equity grants and
awards under Plexus’ incentive compensation plans,
• oversees how compensation programs may incentivize risk taking and whether
such risk taking is aligned with the Company’s business objectives and risk
tolerance,
• considers and makes recommendations to the board with respect to other
compensatory plans and arrangements, and
• reviews Plexus’ human capital management strategy, including organizational
structure and leadership development.
All of the members of the Committee are ‘‘independent’’ under SEC and Nasdaq rules. The Committee
may, in its sole discretion, retain or obtain the advice of compensation consultants, legal counsel or
other advisers. The Committee is directly responsible for the appointment, termination, compensation
and oversight of the work of any compensation consultant, and considers the independence of any such
consultant prior to retention.
21
GOVERNANCE & SUSTAINABILITY COMMITTEE
MEMBERS
Paul Rooke, Chair
Stephen Cortinovis
Peter Kelly
Randy Martinez
Joel Quadracci
Meetings in 2021: 6
Attendance: 100%
*Reflects directors
then serving
The Governance & Sustainability Committee’s duties and responsibilities include
the following:
• maintains oversight over the operations, structure and effectiveness of the
Board and its committees,
• develops and maintains criteria and procedures for the identification and
recruitment of candidates for election to serve as directors of the Company,
• reviews the structure of the Board to assure proper skills, experience, and
diversity of backgrounds are represented,
• reviews the effectiveness of management’s enterprise risk management
program that identifies, prioritizes, monitors and manages key risks facing the
Company,
• reviews ethics and compliance risk assessments conducted by management and
assesses the efficacy of the ethics and compliance program in place to monitor
and control such exposures,
• makes recommendations to the board regarding directors’ compensation, and
• evaluates as well as oversees corporate governance and related issues, and
• oversees the Company's environmental, social and governance (‘‘ESG’’)
program, including policies and initiatives, sustainability reporting and trends
that could impact the Company.
All of the members of the Committee are ‘‘independent’’ under SEC and Nasdaq rules.
22
Board Governance Processes
DIRECTOR RECRUITMENT & THE NOMINATION PROCESS
The Governance Committee engages in a continuous process of identifying and assessing potential
director candidates in light of the board’s collective set of skills and the future needs of the Company.
In addition to the board member selection criteria listed above, the Governance Committee considers
the diversity of backgrounds, skills and experiences among board members in identifying areas that
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 Governance Committee may utilize a director search firm to identify candidates, but, if so, it
evaluates those individuals on its own; the Governance Committee would also consider candidates
suggested by outside directors, management and/or shareholders. If a qualified individual expresses a
serious interest and there is a position available, the Governance Committee would review that
person’s background and experience to determine whether that individual may be an appropriate
addition to the board, and, if appropriate, would meet with the individual. A decision would then be
made whether to nominate that person to the board. The Governance Committee’s policy is not to
evaluate proposed nominees differently depending upon who has proposed the potential nominee. In
addition, the Governance Committee is committed to prioritizing the inclusion of racially and ethnically
diverse candidates in the pool from which director nominees are selected.
If a shareholder wishes to propose someone as a director for the Governance Committee’s
consideration, the name of that nominee and related personal information should be forwarded to the
Governance 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 Governance Committee. In 2021,
Plexus did not receive any candidates put forward by any shareholders.
BOARD AND COMMITTEE SELF-EVALUATION PROCESS
The Plexus board of directors conducts an annual self-evaluation, which focuses on the performance of
each individual director, the board’s committees and the board as a whole, as well as the composition
of each of the board’s committees. The annual self-evaluation process provides an opportunity for
anonymous peer review and specific feedback, which is intended to strengthen board leadership. The
Chair of the Board is responsible for providing feedback to individual directors, while the Lead Director
may also provide feedback and serve as a liaison between independent directors and the Chair. We
believe this process encourages actionable feedback, which provides context for decisions about board
composition, committee member rotation and succession planning processes.
BOARD REFRESHMENT & SUCCESSION
The Governance Committee supervises a comprehensive, ongoing board refreshment and succession
planning process to best position the board for continued success in alignment with the Company’s
strategic objectives. This includes regularly assessing director skills and qualifications, reviewing
director tenure, evaluating board diversity and board size, and performing annual board, committee
and individual director assessments, as detailed above. In addition, the Governance Committee, with
input from the Chair of the Board, reviews committee membership at least biennially and recommends
committee assignments and committee rotation for approval by the entire board to ensure director
skillsets are applied appropriately and to avoid director entrenchment.
The Governance Committee believes board refreshment is crucial to aligning board expertise with the
Company’s evolving corporate strategy, but recognizes new directors need time to become familiar
with the Company’s business and to develop relationships with other board members and management
over time. As a result, the Governance Committee believes a continuum of tenure is required to enable
23
the success of the board, with new members offering fresh perspectives while longer-serving directors
offer necessary continuity and a deep understanding of the Company’s business. As applied in practice,
50% of our independent director nominees have been on the board fewer than 5 years.
In furtherance of this philosophy, the Company deploys a new director onboarding process and
encourages continuing education to help augment and expedite the effectiveness of its newest board
members. The Company also maintains a mandatory retirement policy, which states any individual
age 72 or above is not eligible for election or re-election to the board of directors, unless such
candidate is also a full-time employee of Plexus at the time or the board of directors, by majority vote,
waives the restriction for a particular individual prior to such person’s election or re-election.
The board’s succession oversight extends to management, as well. The board has developed and
maintains an appropriate succession plan with respect to the position of CEO and other key executive
positions. In addition, the Compensation and Leadership Development Committee (‘‘Compensation
Committee’’) reviews and recommends to the board development plans for the CEO and other members
of senior management.
COMMUNICATIONS WITH THE BOARD
Any communications to the board of directors should be sent to Plexus’ Global Headquarters 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 also 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.
CORPORATE GOVERNANCE WEBSITE
Information related to our corporate governance practices, in addition to any new or proposed changes
to procedures, are posted on our Corporate Governance page of our website at www.plexus.com under
the link titled ‘‘Investors,’’ then ‘‘Corporate Governance’’ including:
•
Plexus Leadership Team
•
Board of Directors
• Committee Composition
• Committee Charters
• Corporate Governance Guidelines
Executive Officer Stock Ownership Guidelines
• Director Stock Ownership Guidelines
•
• Clawback Policy
•
Plexus Code of Conduct & Business Ethics
24
DIRECTOR COMPENSATION FOR FISCAL 2021
Ralf R. Böer
Stephen P. Cortinovis
David J. Drury
Joann M. Eisenhart
Dean A. Foate
Rainer Jueckstock
Peter Kelly
Randy J. Martinez
Joel Quadracci
Karen M. Rapp
Paul A. Rooke
Michael V. Schrock
Fees Earned
or Paid in
Cash1
$40,625
$81,250
$43,750
$86,500
$240,000
$92,000
$83,750
$16,250
$77,188
$87,500
$82,250
$105,000
Stock
Awards2
$165,417
$165,417
$165,417
$165,417
$165,417
$165,417
$165,417
—
$165,417
$165,417
$165,417
$165,417
Other
Benefits3
—
—
—
—
$26,439
—
—
—
—
—
—
—
Total
$206,042
$246,667
$209,167
$251,917
$431,856
$257,417
$249,167
$16,250
$242,604
$252,917
$247,667
$270,417
1
2
3
Includes annual retainer, committee and chair fees and, in the case of Mr. Schrock, his fee for serving as Lead
Director of the board. For Mr. Foate, this amount reflects his retainer for serving as Non-Executive Chair.
Mr. Martinez was elected to the board of directors on August 2, 2021, and fees earned represent fees paid
beginning in the fourth fiscal quarter. Mr. Böer and Mr. Drury retired from the board of directors following the
annual meeting on February 17, 2021, and fees earned represent fees paid through the end of the fiscal
second quarter.
The amounts shown represent the grant date fair value of RSUs granted in fiscal 2021 computed in accordance
with Accounting Standards Codification Topic 718. Generally accepted accounting principles (‘‘GAAP’’) require
us to determine compensation expense for stock related awards granted to our 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 9
to our consolidated financial statements.
On January 25, 2021, each then-serving non-employee director was granted RSUs for 2,069 shares, with a
grant date fair value of $165,417. These RSUs vested for Messrs. Böer and Drury upon their retirement from
the Board following the 2021 annual meeting. For all other non-employee directors, these RSUs remained
unvested as of October 2, 2021. The number of RSUs granted was determined by dividing $150,000 by the
average closing price of our shares on the Nasdaq Global Select Market during the 90 calendar day period
ended December 1, 2020, which was $72.507. The grant date fair value is above $150,000 because the closing
price of our shares on the grant date was $79.95.
As a result of Mr. Martinez joining the board near the end of the fiscal year, he did not receive a pro-rated
grant of RSUs for fiscal year 2021.
Includes the following amounts paid to Mr. Foate: $25,764 for the Company car benefit and $675 for the
phone benefit, each as offered to Mr. Foate as a part of the Transition Agreement discussed below. The other
non-employee directors do not generally receive any additional benefits, although they are reimbursed for
their actual expenses of attending board, committee and shareholder meetings, as well as one external
educational seminar per year.
25
Director Fees and Arrangements
The Governance Committee of the board of directors recommends, subject to board approval,
compensation paid to non-employee directors, including equity awards under Company plans. In
determining the compensation paid to the non-employee directors, the Governance Committee
considers similar types of factors, including comparisons with the peer companies discussed below and
Company performance that are considered by the Compensation Committee when determining
executive compensation. The Governance Committee aims to set the compensation level of our
directors and the Non-Executive Chair near the median of peer and market comparisons. Non-employee
director compensation is reviewed at least biennially.
As part of the most recent review of the non-employee director compensation program in fiscal 2021,
the Governance Committee approved an increase in director base compensation upon review of peer
and market data and in consultation with Exequity. In addition, director retainers for individual
committees were eliminated and the director retainers for committee chairs were reduced. As a result,
beginning January 1, 2022, each non-employee director will be compensated per the tables below.
Board Retainer1
Non-Executive Chair Retainer
Lead Director Retainer
RSU Grant
2021
$65,000
$240,000
$105,000
$150,000
2022
$90,000
$250,000
$120,000
$175,000
1Mr. Foate and Mr. Schrock do not receive the Board Retainer.
AUDIT
COMMITTEE
2021
2022
COMPENSATION
COMMITTEE
2021
2022
GOVERNANCE
COMMITTEE
2021
2022
Committee Chair Retainer $27,000
$10,000
$21,500
$10,000
$17,250
$10,000
Committee Member
Retainer
$12,500
$0
$10,000
$0
$6,250
$0
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. Directors do not receive board or
committee meeting attendance fees.
For Mr. Foate’s service as Non-Executive Chair, he currently receives an annual retainer as reflected
above, which was determined based upon a review of market and peer group practices, and he is
eligible to receive an annual equity grant at least equal to the grants made to the Company’s other
non-employee directors. In accordance with the Transition Agreement, Mr. Foate is eligible to
participate in the Company’s executive car and phone programs, and he and his dependents are also
eligible to participate in the Company’s health plan until he reaches age 65, subject to his payment of
the required premiums. Mr. Foate is otherwise compensated in accordance with Plexus’ policies for
non-employee directors.
Stock Ownership Guidelines & Stock Compensation for Directors
Plexus believes that it is important for directors to maintain an equity stake in Plexus to further align
their interests with those of our shareholders. Therefore, directors must comply with stock ownership
guidelines as determined by the board. The ownership guidelines currently require each director to
own and maintain shares of common stock with a value equal to at least five times the director’s
annual base cash retainer. The required ownership must be achieved within five years from the
26
director’s initial election or appointment. Restricted stock (including RSUs) that has yet to vest does
not count toward a director’s ownership for purposes of these guidelines. Eight of our ten non-
employee directors are currently in compliance with the ownership requirements of the guidelines.
Mr. Quadracci has until 2025 and Mr. Martinez has until 2026 to meet these requirements.
Stock ownership guidelines for executives are discussed in ‘‘Compensation Discussion and
Analysis—Elements and Analysis of Direct Compensation—Equity Ownership Guidelines.’’
For information regarding the Company’s anti-hedging and anti-pledging policy, which is applicable to
directors as well as executive officers and other employees, see ‘‘Compensation Discussion and
Analysis—Elements and Analysis of Director Compensation—Anti-Hedging and Anti-Pledging Policy.’’
Directors participate in the 2016 Omnibus Incentive Plan (the ‘‘Incentive Plan’’), which permits the
grant of stock options, stock appreciation rights (‘‘SARs’’), restricted stock, which may be designated
as restricted stock shares or RSUs, performance stock awards (which may be settled in cash or stock
and designated as performance stock shares or performance stock units (‘‘PSUs’’)), other stock awards
and cash incentive awards. The Incentive Plan provides for an annual cap on the amount of awards to
individual non-employee directors. The use of equity awards is designed to align directors’ interests
with the long-term ownership interests of our shareholders. In the second quarter of fiscal 2021, each
non-employee director serving on the grant date received a grant of RSUs worth approximately
$150,000. The number of RSUs granted was determined based on the average closing price of the
Company’s stock during the 90 calendar day period ended December 1, 2020. The restrictions on the
RSUs generally lapse on the first anniversary of the grant date, except for Messrs. Böer and Drury,
whose RSUs vested upon their retirement from the board following the 2021 annual meeting.
Director Participation in Deferred Compensation Plan
Directors are eligible to defer their cash fees, as well as stock awards (excluding options), through the
Non-Employee Directors Deferred Compensation Plan. Amounts in deferred cash accounts are credited
with interest, compounded monthly, at the prime rate of interest, which is determined quarterly.
Directors were previously eligible to defer their cash fees through Plexus’ supplemental executive
retirement plan, which is described in ‘‘Compensation Discussion and Analysis’’ below.
27
BOARD’S ROLE IN RISK OVERSIGHT
The Company has established a robust enterprise risk management (‘‘ERM’’) program to facilitate the
identification, assessment, mitigation, monitoring and strategic integration of risks to, from or of the
Company’s strategic priorities. This framework combines the organizational structure described below
with the establishment of risk management policies and controls to manage the most significant risks
impacting the Company’s strategic objectives. The Company also employs independent internal and
external audit procedures to help validate key controls related to identified risks, the results of which
are reported to the board regularly. In addition to ongoing monitoring of key risk areas, each of the
functional teams completes an annual risk assessment designed to identify top enterprise risks to help
management prioritize the risks that should be brought before the board.
Assesses the effectiveness of Plexus’ ERM program and oversees identified enterprise risks.
Board of Directors
Audit Committee
Compensation Committee
Governance Committee
ü Oversees major financial risk
exposures.
ü Discusses steps management has
taken to identify, monitor and
mitigate such risks.
ü Assesses effectiveness of the
Company’s governance and
management of information
technology.
ü Oversees Company’s management
of cybersecurity risks.
ü Oversees risks related to
compensation, leadership
development and succession
planning.
ü Oversees compensation programs
to ensure alignment with strategic
objectives and to incentivize
appropriate risk taking.
ü Monitors opportunities and risks to
our human capital management
strategy.
ü Oversees the effectiveness of the
ERM program.
ü Oversees risks associated with
ethics and compliance.
ü Oversees risks associated with the
Company’s environmental, social
and governance program.
Management
ü Establishes enterprise risk
ü Assists in identification,
ü Reviews and monitors progress for
appetite and tolerance consistent
with corporate strategy.
calibration and prioritization of
risks, and validates enterprise
risks identified by the Risk
Oversight Council.
enterprise risk mitigation
strategies.
Risk Oversight Council
ü Calibrates and aligns on the
ü Collaborates on risk mitigation
highest risks warranting escalation
to management.
strategies and efforts.
ü Makes recommendations to, and
integrates strategic direction
from, management and the board
of directors.
This framework establishes an effective risk oversight program that successfully integrates risk
management practices throughout the organization, enables open communication between
management and directors and ensures all directors are actively involved in the risk oversight function.
In addition, our board oversight structure expressly provides committee oversight over top areas of
enterprise risk, including cybersecurity, human capital risks and ESG matters.
28
ENVIRONMENTAL, SOCIAL & GOVERNANCE (‘‘ESG’’)
Our commitment to building a better world.
Consistent with our vision to help customers create the products that build a better world, we are
committed to building a better world by the way we operate. Plexus’ ESG program strives to build
strong communities, develop our team members in an inclusive and diverse culture, protect our
environment, embrace strong governance practices, and set similar expectations on our partners. We
recognize that by improving outcomes for society and all of our stakeholders, we maximize our ability
to achieve our strategic objectives and deliver long-term value for our shareholders. We have
demonstrated this commitment since our founding in 1979; it is authentic and core to our culture and
long-term success. Plexus has established an ESG program that is defined by five pillars that reinforce
our pledge to build a better world by being a responsible employer, a community partner, a global
citizen, an industry steward and a promoter of corporate governance.
E
L
B
I
S
N
O
P
S
E
R
R
E
Y
O
L
P
M
E
We advocate for diversity, combat human trafficking, encourage and provide employee
development opportunities, strive to ensure safe and healthy working conditions,
promote an appropriate work/life balance for our employees, encourage wellness
initiatives and reinforce responsible values in our culture.
I
Y
T
N
U
M
M
O
C
We promote and financially contribute to programs involving education in science,
R
E
N
T
R
A
P
technology, engineering and mathematics, as well as causes that make a meaningful
impact to the communities in which we operate. We encourage our employees'
involvement in community charitable organizations, as well as volunteerism, and we
partner with community organizations to promote local business.
L
A
B
O
L
G
N
E
Z
I
T
C
I
We actively work to reduce waste, water use and greenhouse gas emissions from our
operations and work with suppliers to develop similar programs. We partner with
customers to help design more efficient and environmentally friendly products.
Y
R
T
S
U
D
N
I
We take an active role in industry coalitions focused on reducing impacts to the
D
R
A
W
E
T
S
environment, maintaining strong ethical practices and establishing safe and healthful
working conditions around the world. We train our supply chain on important social
initiatives, such as detecting and preventing forced labor, and we collaborate with
customers to advance sustainability efforts.
E
T
A
R
O
P
R
O
C
E
C
N
A
N
R
E
V
O
G
Strong leadership and a culture of accountability is foundational at Plexus. Our
executive management, in collaboration with our board of directors, competently,
ethically and responsibly manage Plexus’ operations for the long-term benefit of
shareholders.
Our ESG program is governed by a Plexus leadership committee chaired by our CAO, which includes
membership by our CEO, CFO and COO. Our board is also highly engaged on our ESG efforts and
strategy. The Governance Committee of the board oversees the effectiveness of our ESG program,
including ESG policies and initiatives, sustainability reporting, and trends that could impact the
Company’s business operations, performance, reputation and sustainable growth. In addition, our
Compensation Committee oversees our human capital strategy, including D&I efforts and global
compensation policies and philosophies, while our Audit Committee ensures the effectiveness of our
internal controls, oversees our whistle-blowing reporting program and oversees the effectiveness of IT
governance and management.
29
ESG & Plexus’
Circular Economy
Product life extension
Global solutions: repair,
refurbishment and asset recovery
Recycling and
reduction of waste
Managed and reverse logistics
Striving for eco-efficient
operations to reduce
carbon footprint
Innovative and sustainable
new product design
Design for excellence
Product packaging design
Environmental
Supplier accountability
and compliance program
Bill of materials optimization
Material localization
Optimizing product
commercialization
and transition into production
Rapid prototyping for
design validation
ESG F21 Highlights
✓ Planned investment of ~$300K
in energy sub-metering system
to help track and reduce
energy usage across Plexus’
manufacturing sites in F22
✓ Planned investment of ~$800K
in LED lighting & technology in
manufacturing facilities in F22
✓ Comprehensive waste
assessment in progress to
enhance reduction and
recycling strategy
✓ Team member health & safety,
including enhancements of
Plexus Wellness Program
✓ Expanded Employee Resource
Groups, including creation of
an ERG focused on diversity at
Plexus
✓ Over $750K in charitable giving
from Plexus Charitable
Foundation and implementation
of volunteer time-off program
✓ ESG performance
accountability, including
F22 executive variable
incentive compensation
specifically tied to ESG
initiatives
✓ Disclosure &
communication
enhancements
30
COMPENSATION DISCUSSION & ANALYSIS
Our continued success depends on our ability to
attract, motivate, and retain critical talent dedicated
to our long-term strategy. The Compensation
Committee (in this section, the ‘‘Committee’’) of the
board of directors sets the general compensation
philosophy for Plexus and ensures appropriate controls
are in place to govern its application. The Committee
makes decisions with respect to the compensation of
the Chief Executive Officer (the ‘‘CEO’’) and the
Company’s other executive officers, and grants equity
and other awards.
NAMED EXECUTIVE OFFICERS
FOR FISCAL 2021
Todd P. Kelsey
President & Chief Executive Officer
Patrick J. Jermain
Executive VP & Chief Financial Officer
Steven J. Frisch
Executive VP & Chief Operating Officer
Angelo M. Ninivaggi
Executive VP, Chief Administrative
Officer, General Counsel & Secretary
This section discusses the Committee’s executive
compensation philosophy and key decisions designed to
align pay to performance that drives shareholder value,
in each case as they relate to the Company’s named
executive officers. Plexus provides further detail regarding executive compensation in the tables and
other information included in the ‘‘Executive Compensation’’ section of this proxy statement.
Ronnie Darroch
Executive VP & Regional President - EMEA
Executive Summary
FISCAL 2021 COMPENSATION ACTIONS
•
•
•
•
•
The Committee reviewed the Company’s ESG initiatives during 2021 and has established ESG
goals for executive officers in fiscal 2022 that will comprise a portion of their personal
objectives under the Variable Incentive Compensation Plan (the ‘‘VICP’’), as further detailed
in the ‘‘Annual Incentive Compensation (At Risk)’’ section of this proxy statement.
In fiscal 2021, we continued to take steps to safeguard our employees from the COVID-19
pandemic. While these measures impacted our financial performance, as did the effects of
employee infection, employee quarantine, regulatory workforce restrictions and similar
impacts on our suppliers that curtailed supplier deliveries, the Committee did not adjust
incentive compensation goals from original targets set at the beginning of fiscal 2021.
As a result of our performance peer group review, we made the following two adjustments to
the plan: (1) the Committee reduced the maximum payout for PSUs based on the total
shareholder return (‘‘TSR’’) of Plexus stock to 150% from 200%; and (2) for purposes of
calculating the vesting for PSUs based on economic return and granted in fiscal 2021, the
Committee adjusted the economic return threshold to be a minimum of 0% and a maximum of
5% for any individual fiscal year during the performance period.
Under the Committee’s equity allocation formula for fiscal 2021, annual equity awards to
executive officers were granted as 50% PSUs and 50% RSUs. The equity grant allocation formula
is intended to further strengthen the alignment of shareholders’ and executives’ interests,
retain executive talent, and motivate our executives to succeed long-term. Consistent with
prior years, PSUs granted in 2021 are weighted 50% on TSR and 50% on average economic
return, which we define as the difference between return on invested capital (‘‘ROIC’’) and
weighted average cost of capital (‘‘WACC’’). In 2020, the Committee reviewed the
performance peer group used to benchmark relative TSR and the S&P 400 Index was chosen to
replace the Russell 3000 Index starting with fiscal 2021 grants.
The TSR of Plexus stock during the three year performance period that ended January 2021
was at the 62.5 percentile of companies in the Russell 3000 Index. Consequently, the portion
of the PSUs granted in 2018 that vested based on TSR performance paid out at 150.0% of
target.
31
•
•
Average economic return for the three year performance period that ended at the conclusion
of fiscal 2021 was 5.3%. As a result, the portion of the PSUs granted in 2018 that vested based
on economic return performance paid out at 200% of target.
Based on fiscal 2021 performance, total payments to named executive officers under all
components of the VICP represented 104-107% of the target payout, with corporate financial
performance representing 90% as compared to the target payout of 80% for such performance.
EXECUTIVE COMPENSATION GOVERNANCE BEST PRACTICES
WHAT WE DO
WHAT WE DON’T DO
✘ Have excise tax gross-up provisions in any
change in control agreements or
compensation programs
✘ Enter into employment contracts with
executives other than our CEO
✘ Permit hedging transactions, pledging and
short sales by our executive officers
✓ Base a majority of total compensation on
compensation that is at risk through our
annual and long-term performance-based
and retention incentives
✓ Set annual and long-term incentive targets
based on clearly disclosed, objective
performance measures
✓ Conduct annual assessments of risk
associated with our executive compensation
programs, policies and procedures
✓ Mitigate undue risk associated with our
compensation programs through a Clawback
Policy
✓ Enter into ‘‘double trigger’’ change in
control agreements with executive officers
OTHER COMPENSATION AND GOVERNANCE PRACTICES & POLICIES
Practices Relating to Compensation 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 Company provides appropriate funding, as determined by the Committee, for the payment
of compensation to any compensation consultant employed by the Committee.
During fiscal 2021, the Committee retained Exequity LLP (‘‘Exequity’’) as its compensation
consultant. After considering the factors set forth in SEC and Nasdaq rules, in accordance with
its charter, the Committee concluded that its relationships with Exequity has not given rise to
any conflict of interest.
Exequity’s services to the Committee relating to fiscal 2021 included, among other things,
providing perspective on current trends and developments in executive and director
compensation as well as analysis of benchmarking data and confirmation of our peer group
composition. All executive compensation services provided by Exequity were conducted under
the direction or authority of the Committee, and all work performed by Exequity was pre-
approved by the Committee.
Management Involvement
•
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
32
•
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 Exequity to review competitive practices and overall
compensation expense; the CEO and management are not present for these discussions. The
sessions generally focus on the CEO’s performance achievement and the elements of CEO
compensation. The Committee discusses and reviews materials comparing the CEO’s
compensation to peer group and survey data as well as Plexus’ overall performance relative to
competitors and 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.
Executive Compensation Philosophy, Goals & Process
The Committee’s philosophy is to competitively compensate all employees, including executives, for
their contributions to Plexus, to appropriately motivate employees to provide value to Plexus’
shareholders and to consider the ability of Plexus to fund any compensation decisions, plans or
programs. Competitive compensation must balance both short-term and long-term considerations and
take into account external 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 excessive
risk. Finally, the Committee considers Plexus’ financial condition, the conditions in Plexus’ industry and
end markets, Plexus’ performance compared to its competitors, and the effects of those conditions on
Plexus’ sales and profitability in making compensation decisions.
PERFORMANCE MEASURES INTENDED TO MAXIMIZE SHAREHOLDER VALUE
The Company continues to emphasize annual and long-term incentive opportunities as a portion of total
compensation since they are performance-based, represent compensation that is at risk, promote the
creation of shareholder value and are intended to align the interests of executive officers with those of
our shareholders.
The Committee and the Company believe that shareholder value is maximized through revenue growth
and generating a ROIC that exceeds the Company’s WACC. We refer to the amount of excess return
when comparing these measures as economic return. The importance of achieving revenue growth and
economic return goals has been emphasized by making a substantial component of each executive
officer’s compensation dependent on the Company’s achievement of these goals, with executives
maximizing their annual incentive compensation opportunity if the Company achieves its organic
revenue growth and economic return goals.
Within our long term incentive plan we use economic return as a performance measure for PSUs.
Relative TSR is also used as a performance measure for PSUs. The Committee believes it is important to
balance absolute and relative measures in an effort to account for both internal and external
influences on Company performance. The performance measures used by the Company’s annual and
long-term incentive plans are described further within the ‘‘Elements and Analysis of Direct
Compensation.’’
33
MEASURE
PLAN
PAYMENT
PURPOSE
Revenue Growth
Annual – VICP
Cash
ROIC
Annual – VICP
Cash
Economic Return
Long-term PSU
Equity
Relative TSR
Long-term PSU
Equity
Revenue growth is the result of a sound
strategy effectively executed and increases
shareholder value when combined with
economic return.
We deliver economic return by driving
improvements in ROIC through a combination
of operating margin performance and prudent
capital investment.
Delivering economic return over the long-term
generates shareholder wealth and mitigates
short-termism.
Relative TSR is an appropriate performance
metric primarily because it is objectively
determinable, provides rewards that are
aligned to relative performance through
varying economic cycles and reflects the
delivery of value to shareholders.
Finally, the Committee recognizes that certain non-financial goals are important to position the
Company for sustainable long-term success. The Committee works with management to identify these
goals and they often comprise personal objectives under the VICP. These goals could include important
system and process improvements, talent development priorities, and ESG initiatives, amongst others.
34
PROGRAM COMPONENTS & LINK TO BUSINESS STRATEGY AND PERFORMANCE
Below are illustrations of the performance of our compensation program measures and their
relationship to creating shareholder value. To drive value, both growth and economic return are
critical.
Growth and Value Creation
$100.00
$90.00
$80.00
$70.00
$60.00
$50.00
$40.00
$30.00
$20.00
$10.00
$-
F17
F18
F19
F20
F21
AVERAGE CLOSE STOCK PRICE
REVENUE IN USD MM
Economic Return and Value Creation
Revenue ($M)
$4,000
$3,500
$3,000
$2,500
$2,000
$1,500
$1,000
$500
$-
$100.00
$90.00
$80.00
$70.00
$60.00
$50.00
$40.00
$30.00
$20.00
$10.00
$-
Economic Return
10.0%
5.0%
0.0%
-5.0%
F17
F18
F19
F20
F21
AVERAGE CLOSE STOCK PRICE
ECONOMIC RETURN
RETURN THRESHOLD
35
Plexus uses the following compensation reward components, which work together to create
competitive compensation arrangements for our executive officers. Greater detail is described in
‘‘Elements and Analysis of Direct Compensation.’’
PAY
ELEMENT
Base Salary
(Fixed)
Annual
Incentive
(Variable)
Long-Term
Incentive
(Variable)
DESCRIPTION
PAYOUT
MEDIUM, TIMING AND AMOUNT
Market competitive base salary reflecting
knowledge, skills, experience, responsibility,
potential, and performance
Paid in Cash
Paid Currently
Fixed Amount
Cash incentive based on the achievement of
annual Company financial metrics (40% revenue
growth, 40% ROIC) and personal objectives (20%)
Paid in Cash
Paid Annually
0%-200% of Target
25% PSUs based on TSR
25% PSUs based on economic return
50% Restricted Stock Units
Paid in Equity
Paid After Three Year Performance Vesting
0%-200% of Target (for grants prior to fiscal
2021) or 0%-150% of Target (for grants in
fiscal 2021 and ongoing)
Paid in Equity
Paid After Three Year Vesting Period
0%-200% of Target
Paid in Equity
Paid After Three Year Vesting Period
Plexus also offers other reward components to competitively compensate our employees:
•
•
•
Health and Welfare Benefits: to promote the health and well-being of our employees and
families, such as health and life insurance.
Retirement Plans: to help our employees plan for their retirement. In addition to a
401(k) Plan, the Company also provides a supplemental executive retirement plan under which
certain executives may elect to defer compensation; the Company also makes additional
contributions on their behalf.
Agreements: Only our current 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. The change in control agreements utilize a
double trigger and do not include excise tax gross-up provisions.
Elements & Analysis of Direct Compensation
OVERVIEW OF DIRECT COMPENSATION
Total direct compensation for executive officers at Plexus consists of three primary
components—salary, annual cash incentive payments under the VICP and long-term equity-based
awards. 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 reviews the total compensation package of each executive officer to determine
whether it is reasonable.
36
Setting Compensation Levels
The Committee uses a combination of peer company data and several published general industry and
electronics industry surveys to provide insight into the competitiveness of each component of
compensation offered to Plexus’ executive officers. This data is compiled and analyzed by Plexus
human resources leaders, who then meet with the Committee’s compensation consultant to help the
consultants understand Plexus’ business model, organizational structure and compensation philosophy.
The compensation consultant, Plexus human resources personnel, and our CEO discuss the analysis,
rationale and methodology, and make recommendations to the Committee. Our CEO is excluded from
CEO compensation discussions.
When assessing the competitiveness of compensation and making compensation determinations, the
Committee’s process includes a review and analysis of various factors, including:
•
•
•
•
•
•
•
Company financial results;
An internal calibration of base compensation as well as short-term and long-term award levels;
Individual stock ownership and grant practices for the CEO and other officers;
The proportion of pay between the CEO compared to those at other levels in the organization;
Pay-for-performance and retention incentives;
Deferred compensation arrangements and accumulated value; and
Reasonableness of compensation as a whole.
In performing these analyses, the Committee uses tally sheets, which incorporate these factors to
provide a comprehensive view of Plexus’ total compensation for each executive and payout exposure
under various performance scenarios.
When determining the competitive target compensation for each executive, the Committee uses
comparable pay information as a point for reference. Through this form of benchmarking, the
Committee does not aim for any particular numerical or percentage tests as compared to peer company
data or surveys; however, it generally views the 50th percentile of market data as a reasonable
comparison and uses its judgment following the review of multiple data points to arrive at individual
pay determinations. 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 properly position the
total target direct compensation of the Company’s executive officers and to balance different types of
compensation (including equity) 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.
Use of Peer Companies
For compensation planning purposes, the Committee has constructed a peer group in order to compare
the compensation of Plexus’ executive officers with that paid by other companies. Companies were
chosen for the peer group using filtering criteria such as:
•
•
•
•
Company size and performance (revenue, assets, market capitalization, performance criteria);
Companies identified as competitors and/or in the same industry;
Geographic footprint;
Company image;
37
•
•
Organizational complexity; and
Financial structure.
The Committee has established a group of peer companies for comparison purposes using the selection
criteria discussed above. The Committee conducts reviews of the peer group and selection criteria on a
periodic basis to ensure that both are appropriate. The peer group is reviewed and adjusted by the
Committee annually. KYOCERA AVX Components Corp. was approved as a peer but was subsequently
acquired; as such, peer compensation from that entity was not included in the analysis the Committee
reviewed when determining fiscal 2021 pay or for fiscal 2022 executive compensation planning.
PEER GROUP FOR SETTING 2021 PAY
Amkor Technology, Inc.
KYOCERA AVX Components Corp.
Benchmark Electronics, Inc.
Fabrinet
Flex Ltd.
Jabil Inc.
Sanmina Corporation
Teledyne Technologies Inc.
Trimble Navigation Limited
Bruker Corporation
Celestica Inc.
Keysight Technologies, Inc.
Triumph Group, Inc.
Moog Inc.
TTM Technologies, Inc.
CommScope Holding Company, Inc.
PerkinElmer, Inc.
Vishay Intertechnology, Inc.
Curtiss-Wright Corporation
Regal Rexnord Corporation
Waters Corporation
DISTRIBUTION OF PAY COMPONENTS
The Committee believes that a majority of executive compensation should be at risk and that the CEO’s
percentage at risk should be the highest. VICP targets for the named executive officers other than
Mr. Kelsey ranged from 70% to 85% of base salary in fiscal 2021, with the opportunity to earn cash
incentives beyond those levels if Plexus exceeded its targeted financial goals. In the case of Mr. Kelsey,
the potential target compensation at risk as a percentage of base salary was 125% in fiscal 2021,
reflecting his overall greater responsibility for the Company. In fiscal 2021, long-term incentives for
executive officers were granted in the form of: (i) RSUs that vest based on continued service, which
promotes a long-term ownership mentality; and (ii) PSUs, which represent compensation that is at risk
since these awards will be forfeited if performance is below a threshold level.
Except in the case of promotions or other special circumstances, compensation adjustments and equity
awards for executive officers are targeted for implementation in the second quarter of each fiscal year
to align with the Company’s internal performance management cycle and changes to the compensation
of its other non-executive employees. The Committee considers both individual and Company
performance in making these determinations, and believes that this timing forges a strong link between
performance and pay.
The resulting total targeted direct compensation mix used for fiscal 2021 for Mr. Kelsey and the
average for the other named executive officers is illustrated in the charts below:
Mr. Kelsey
85% of Pay is At-Risk
Other Named Executive Officers
74% of Pay is At-Risk
$6.9M
14.5%
Base Salary
18.1%
Target Annual Incentive
67.4%
Target Long-Term Incentive
$8.3M
25.7%
Base Salary
19.7%
Target Annual Incentive
54.6%
Target Long-Term Incentive
38
BASE SALARY
Factors Considered In Determining Base Salary
Prior to establishing the base salary level for the CEO and approving salary levels for other executive
officers, the Committee takes into consideration various factors. These factors include:
•
•
•
•
Compensation data from our peer group;
Salary increase trends for executive base pay and other information provided in published
surveys;
An in-depth total rewards analysis with comparisons to peer group and survey data; and
Individual executive officers’ performance, duties and responsibilities, and their relative
authority within Plexus.
The Committee uses this information and meets in executive session to discuss appropriate pay
positioning and pay mix based on the data gathered. The data gathered in the determination process
help the Committee to test for fairness, reasonableness and competitiveness. While the Committee
takes into account the Company’s compensation philosophy and goals and follows a holistic approach to
executive compensation packages, its final determination may incorporate the subjective judgment of
its members, as well.
Executive officer base salary changes may include the following two components:
•
•
Competitive Adjustments. If executive officer salaries fall out of alignment with the
competitive median range of our peer group and survey data, we consider changing the
salaries to a more competitive level. Competitive adjustments may take place over a multi-
year period and may depend on individual performance.
Performance-Based Merit Increases. Separate merit increase may be provided based on
individual performance, if appropriate.
2021 Base Salary Adjustments
Base salary adjustments for 2021 were approved by the Committee in December 2020 for all executive
officers. When considering compensation adjustments, the Company has placed a greater emphasis on
annual and long-term incentive opportunities, as opposed to base salary, since they are performance-
based, represent compensation that is at risk, promote the creation of shareholder value and are
intended to further align the interests of executive officers with those of our shareholders. Our CEO’s
base salary is higher than those of our other executive officers because of the more extensive and
challenging duties and responsibilities associated with that position. In addition, the CEO’s total
compensation is more heavily weighted toward performance-based compensation when compared to
the total compensation of our other executive officers.
For 2021, Mr. Kelsey’s base salary was set at $1,000,000, which was unchanged from his previous
salary. As a result, the base salary for Mr. Kelsey is positioned near the median of peer group and
market comparisons.
Increases for our other named executive officers varied from 0.9% to 7.6%. Base salary increases
for 2021 for these named executive officers were due to merit increases. Variations between these
named executive officers reflected competitive conditions and the Committee’s view of the named
executive officers’ duties, responsibilities and performance. The Committee believed that base salaries
for those named executive officers were appropriately aligned with peer group and market
comparisons, and were awarded based on individual performance.
39
Presented below are the 2021 base salaries and percentage increases as compared to the prior year for
our named executive officers:
EXECUTIVE OFFICER
Mr. Kelsey
Mr. Frisch
Mr. Jermain
Mr. Ninivaggi
Mr. Darroch
2021
BASE SALARY
$1,000,000
$605,000
$565,000
$490,000
$465,498
PERCENTAGE INCREASE
COMPARED TO 2020*
0%
4.3%
7.6%
4.3%
0.9%
*
Percentage increase for Mr. Darroch represents the merit increase in the currency in which he is paid (GBP).
Fiscal 2021 Base Salary for Mr. Darroch is represented in U.S. dollars exchanged at the spot rate of 1.3671 on
the effective date of the merit increase.
ANNUAL INCENTIVE COMPENSATION (AT RISK)
The VICP provides annual cash incentives to approximately 3,850 participants, including all of our
executive officers. The award opportunity levels for each participant are expressed as a percentage of
base salary.
BASE SALARY
TARGET AWARD
PERCENTAGE
PERFORMANCE GOAL
ACHIEVEMENT
VICP AWARD EARNED
% of Base Salary
(varies by pay grade)
40% Revenue Target +
40% ROIC Target +
20% Personal Objectives
For executive officers, the VICP is a sub-plan of the Incentive Plan with 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 heightened responsibility leads to more influence on corporate
performance. 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.
Offering a greater percentage of compensation tied to performance measures is intended to more
strongly link executive compensation with Company performance and shareholder returns.
The table below lists the fiscal 2021 VICP award opportunities for the named executive officers,
expressed as a percentage of base salary:
EXECUTIVE OFFICER
2021 THRESHOLD
AWARD (%)
2021 TARGETED
AWARD (%)
2021 MAXIMUM
AWARD (%)
Mr. Kelsey
Mr. Frisch
Mr. Jermain
Mr. Ninivaggi
Mr. Darroch
0%
0%
0%
0%
0%
250%
170%
160%
140%
140%
125%
85%
80%
70%
70%
40
The VICP provides for payments relating to corporate financial goals both below and above 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 for our
executive officers at the maximum payout level is 200% of the targeted award. The Committee believes
that the opportunity to receive a payout above target should be based solely on achieving corporate
financial goals. Therefore, to achieve the maximum payout of 200% of the targeted award, executive
officers must achieve 90% payouts for each of the revenue and ROIC components of the VICP, with the
individual objectives component comprising the balance at a maximum of 20%. Payments to
participants are not permitted under the VICP unless the Company achieves net income for the plan
year.
The VICP provides that extraordinary items or charges should be excluded from fiscal year results. In
addition, the Committee has the authority to exclude non-recurring charges, when determining the
achievement of the corporate financial goals. In 2021, the Company incurred restructuring charges and,
in addition, COVID-19 had an impact on the Company’s financial results; however, the Committee made
no adjustments to financial goals under the VICP.
2021 Plan Design – Company Financial Goals
Our financial and compensation models align with our business strategy. The specific corporate
financial goals for fiscal 2021, each of which stood independently of the other with regard to award
opportunities, were revenue and ROIC. The goals were chosen because they aligned performance-based
compensation to the key financial metrics that the Company used internally to measure its ongoing
performance and that it used in its financial plans. The fiscal 2021 targets for these goals were set as
part of our annual financial planning process and continue to align with our enduring financial goals.
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, ROIC is defined as tax-effected annual operating income divided by the
average invested capital over a five quarter period for the fiscal year and the prior fiscal year fourth
quarter. Invested capital is defined as equity plus debt and operating lease liabilities, less cash and
cash equivalents. Revenue is defined as the fiscal 2021 net recognized sales of the Company for
financial statement purposes. The Committee has discretion to adjust ROIC to account for the effects
of extraordinary items. No award is payable to any participant under the VICP unless we have net
income for the fiscal year. In the event of results that are below the revenue and the ROIC threshold
levels, the VICP may pay out only in respect to the portion based on individual objectives. When
determining ROIC for VICP awards, extraordinary items or charges, and non-recurring charges, are
disregarded, except as otherwise determined by the Committee in its discretion. Discretion was not
exercised by the Committee in fiscal 2021.
For fiscal 2021, in accordance with Plexus’ strategic plan and the Committee’s philosophy of aligning
compensation with the Company’s enduring goals, the Committee established the performance goals
described below:
Threshold
Target
Maximum Payout
Revenue
Equal to prior year revenue
ROIC
Equal to Plexus’ WACC
Midpoint between threshold and
maximum payout
Equal to 12% revenue growth
Midpoint between threshold and
maximum payout
Equal to Plexus’ WACC plus 500
basis points
41
The Committee believes that setting the maximum payout levels for revenue and ROIC consistent with
our financial goals fully aligns employees with financial results that maximize value to our
shareholders, without encouraging excessive risk-taking. 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 ROIC, which were set between the threshold and maximum
payout levels, were intended to be challenging, but achievable, based on industry conditions and
Plexus’ financial plan. Awards for performance between the threshold and target level, and between
the target and maximum levels, are calculated by straight-line interpolation.
The following table sets forth the fiscal 2021 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:
Component
Revenue (in millions)
ROIC
THRESHOLD
Goal
Payout
$3,390
8.1%
0%
0%
TARGET
Goal
$3,593
10.6%
Individual Objectives
up to 20%
Payout
40%
40%
up to 20%
MAXIMUM PAYOUT
Payout
Goal
$3,797
13.1%
90%
90%
up to 20%
Total Potential Incentive =
Revenue + ROIC + Individual
Objectives
up to 20%
up to 100%
up to 200%
In fiscal 2021, revenue was $3,369 million and ROIC was 15.4%. Therefore, the Company’s performance
was below the threshold payout for revenue and was above the maximum payout level for ROIC. As a
result, Plexus paid awards for corporate financial performance to executive officers and other
employees based only on ROIC performance; total payments to executives represented 90% versus the
target of 80% for corporate financial performance.
2021 Plan Design – Individual Objectives
The Committee determines and approves the individual objectives established for the CEO and the
other executive officers. For fiscal 2021, common individual objectives were shared by all executive
officers, including Mr. Kelsey and the other named executive officers. 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 positive net income for the plan
year. The Committee’s assessment of individual objectives is based on their likely impact on the
achievement of the Company’s annual financial plan and other longer-term strategic priorities, their
effect on shareholder value and their alignment with one another.
The fiscal 2021 shared individual objectives for all of our named executive officers concentrated on
(a) reduction in transformation cost, which are the costs required to convert raw inventory into
finished goods; (b) continued pursuit of the Company’s ‘‘zero defects’’ cultural journey, focused on
quality improvement initiatives and goals; (c) enterprise resource planning (ERP) system enhancements
and process improvements; and (d) enterprise risk management regarding business continuity.
Mr. Kelsey provided the Committee with an assessment of the executive team’s performance on each
shared individual objective and the Committee determined the ultimate award percentage level for
each objective. Actual achievement of individual objectives for fiscal 2021 was based upon the
Committee’s determination of the degree to which the objectives were completed by each member of
the executive team. As a result, all named executive officers were awarded a 70-85% payout of the
personal objectives portion of the VICP, or a 14-17% payout versus the target of 20% for individual
objectives.
42
2021 Annual Incentive Compensation (At Risk) – Actual Payout
The following table sets forth the fiscal 2021 VICP total payout as a percentage of each named
executive officer’s target award, capturing the fiscal 2021 results for the Company’s revenue and ROIC
goals combined with the individual objectives payout.
Component
Revenue (in millions)
ROIC
ACTUAL PAYOUT
Results
Payout
$3,369
15.4%
0%
90%
Individual Objectives
70-85 %
14-17%
Total Payout as a Percent of Target
104-107%
2022 – Individual Objectives
A portion of the fiscal 2022 shared individual objectives for all of our named executive officers will
include goals associated with the Company’s ESG program, specifically: (a) global reduction targets in
energy usage in furtherance of the Company’s environmental sustainability activities; (b) creation of a
new Employee Resource Group and expansion and enhancement goals related to the Company’s
existing Employee Resource Groups to support the Company’s diversity and inclusion efforts;
and (c) enhancement of the Company’s cybersecurity incident response plan to address evolving
cybersecurity risks and to assess the Company’s governance and oversight structure in light of the
changing cybersecurity landscape.
LONG-TERM INCENTIVES
Plan Structure
Total compensation, consistent with practices in our industry, places a particular emphasis on equity-
based compensation for executive officers. The shareholder-approved Incentive Plan allows, and its
predecessor allowed, for various award types, including options, SARs, restricted stock awards
(including RSUs), performance stock awards (including PSUs), other stock awards and cash incentive
awards. Equity-based 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
reported values of the long-term incentive opportunities under equity plans can vary 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.
For fiscal 2021 grants, and in furtherance of its emphasis on at-risk performance-based compensation,
the Committee’s annual equity grant allocation formula for named executive officers consisted of
50% PSUs and 50% RSUs. The Committee believes that this equity grant allocation formula promotes a
strong pay-for-performance link and further enhances the alignment of the interests of our executives
with those of our shareholders. The equity grant allocation formula also is intended to promote share
ownership (along with our equity ownership guidelines) and motivate our executives to succeed in the
long-term. The Committee intends to continue to emphasize the use of performance-based awards for
executive officers in future years.
43
The Committee’s long-term incentive strategy allows for use of a portfolio approach when granting
awards. Each element of the portfolio for fiscal 2021 was intended to address a different aspect of
long-term incentive compensation, as set forth below:
•
•
•
PSUs provide an additional incentive for executive officers to create shareholder value. 50% of
the PSUs granted vest over a three year period based on average economic return
performance. Economic return, which is calculated as a three-point annual average, is used as
a performance measure for the PSUs because it is a key focus of the Company’s financial
model and is a metric that the Committee believes, when combined with revenue growth, is
highly correlated with driving shareholder value. For any individual fiscal year, the economic
return performance measure will be a minimum of 0% and a maximum of 5%.
The other 50% of PSUs granted vest based on the relative TSR performance of Plexus common
stock as compared to companies in the S&P 400 Index over a three year performance period.
The Committee believes that measuring TSR on a relative, rather than on an absolute, basis
provides a more relevant measure of the performance of the Company’s stock. By mitigating
the impact of macroeconomic factors (both positive and negative) that are beyond the control
of the Company and its executives, relative TSR provides rewards that are better aligned to
relative performance through varying economic cycles. PSUs also provide a retention incentive
since these awards generally do not vest until the end of the three year performance period.
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. In addition to promoting retention, RSUs align the interests of executives and
other employees who receive RSU grants with the interests of shareholders by building a long-
term ownership mentality and providing motivation to succeed in the long term.
Annual Award Determination and Allocation Process
Each year the Committee reviews market data, individual performance and the estimated value of the
entire pool of equity awards prior to making grants to executive officers, including when making grants
in connection with promotions or other increases in responsibilities. Pursuant to its portfolio approach,
in fiscal 2021, the Committee distributed awards in the form of PSUs and RSUs to eligible participants,
as discussed above. When making these determinations, PSUs that vest based on the relative TSR of
Plexus common stock are valued using a Monte Carlo simulation model, while the values of PSUs that
vest based on economic return performance and RSUs are determined based on the fair market value of
Plexus common stock.
The Committee determines the grant for the CEO and approves grants for all other executive officers.
The CEO provides the Committee with initial grant recommendations for each executive officer other
than himself by balancing the need to provide competitive compensation with the desire to keep
related compensation value and expense relatively stable from period to period. The Committee
considers each executive officer’s duties, responsibilities and performance, as well as internal and
external comparisons (for example, peer group comparisons and other third-party market surveys, as
described above), when approving the grant value for each executive officer. 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.
The Committee continues its focus on increasing incentive award opportunities for our executive
officers as a portion of total potential compensation in order to more strongly link executive
compensation with Company performance and shareholder returns.
44
Timing of Grants
Grants of PSUs are made in the fiscal second quarter; however, the performance goals for the PSUs are
set in the fiscal first quarter. Grants of RSUs are generally made once a year during the fiscal
second quarter, but may also be made in connection with new hires, promotions, other increases in
responsibilities or in special situations. The Committee anticipates continuing to follow this grant
schedule and practice for future grants.
Fiscal 2021 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, the Committee granted
the following equity awards to Mr. Kelsey and the other named executive officers in fiscal 2021.
Executive Officer
PSUs (#)
RSUs (#)
Mr. Kelsey
Mr. Frisch
Mr. Jermain
Mr. Ninivaggi
Mr. Darroch
29,800
10,900
7,690
5,770
4,610
32,070
11,720
8,280
6,210
4,970
Vesting of 50% of the PSUs granted in fiscal 2021 is based on a three-point annual average of the
Company’s absolute economic return performance during the performance period; vesting of the other
50% is based on the relative TSR of Plexus stock as compared to the companies in the S&P 400 Index.
Performance on these metrics will be determined following the conclusion of the relevant three year
performance period.
In order to further align the Company’s financial model and business strategy to the payout of long-
term incentives, the maximum payout on 50% of the PSUs is achieved when the three-point annual
average economic return is at or above 5.0% over the three year performance period. If the maximum
payout level is achieved, 200% of this portion of the PSUs will be earned. A target payout on this
portion of the award will be achieved if the three-point annual average economic return is 2.5%; the
Committee believes that this target is meaningfully difficult, but is achievable and appropriate for our
industry. The Committee believes it is appropriate for a portion of these awards to vest when the
three-point annual average economic return exceeds 0.0% because any positive level of economic
return generates shareholder value. If the Company does not achieve a positive three-point annual
average economic return, this portion of the PSUs will not pay out. Below is the payout matrix for the
portion of the PSUs that may be earned based on economic return performance (if performance is
between the specified levels, the payout will be interpolated):
AVERAGE ECONOMIC
RETURN
0% (Threshold)
2.5% (Target)
5.0% (Maximum)
PAYOUT
PERFORMANCE
FACTOR
0%
100%
200%
45
The TSR calculations will be based on the percentage change from the initial price to the final price
during the performance period, which is three years from the date of grant, and will reflect the
reinvestment of dividends, if any. The initial price is calculated using the average closing price of
common stock over the 30 calendar day period ending on the trading day immediately preceding the
first day of the three year performance period. The final price is the average closing price of common
stock over the 30 calendar day period ending on the last day of the three year performance period. The
TSR calculations will be adjusted to reflect stock splits, recapitalizations and other similar events.
The portion of the PSUs that may be earned based on relative TSR performance will vest at target if the
TSR of Plexus stock is at the 50th percentile of companies in the S&P 400 Index. A payout at maximum,
which is 150% of the target award for this portion, may be achieved if the relative TSR of Plexus stock
is at or above the 75th percentile of companies in the S&P 400 Index. The Committee believes that a
relative TSR at or above this level would be reflective of significant achievement during the
performance period. In order to receive a payout at threshold, which is 50% of the target award for this
portion, the relative TSR of Plexus stock must be at or above the 25th percentile of companies in the
S&P 400 Index. If the relative TSR of Plexus stock is below the 25th percentile, none of the PSUs will be
earned and the awards will be forfeited.
The payout matrix for the portion of the PSUs granted in fiscal 2021 that may be earned based on
relative TSR performance is presented in the table below (if performance is between the specified
levels, the payout will be interpolated):
RELATIVE TSR
PERCENTILE RANK
Below 25th
25th (Threshold)
50th (Target)
75th and above
(Maximum)
PAYOUT
PERFORMANCE
FACTOR
0%
50%
100%
150%
For information regarding the performance of PSUs granted in fiscal 2021 and prior fiscal years as of
October 2, 2021, see the ‘‘Outstanding Equity Awards at Fiscal Year-End’’ table below.
Annual awards of RSUs generally vest on the third anniversary of the grant, subject to early vesting on a
change in control.
Fiscal 2018 PSUs
The TSR of Plexus stock during the three year performance period for the fiscal 2018 PSUs that ended
in fiscal 2021 was at the 62.5 percentile of companies in the Russell 3000 Index. As a result, and
according to the payout matrix applicable to this grant, this portion of the PSUs vested and paid out at
approximately 150.0% of target after certification by the Committee.
46
Fiscal 2019 PSUs
The performance period with respect to the portion of the fiscal 2019 PSUs that vested based on a
three-point annual average of the Company’s absolute economic return concluded at the end of fiscal
2021. Average economic return for the three year performance period was 5.3%. The three-year
average for the 2019 PSUs was determined using Return on Capital Employed (ROCE), which was
replaced by ROIC in the economic return calculation for the fiscal 2020 and 2021 PSU grants. ROCE is
calculated by taking operating profit plus stock-based compensation and then dividing this total by
average capital employed. As a result, and according to the matrix established for the fiscal 2019 PSUs,
this portion of the PSUs vested and paid out at 200% of target after certification by the Committee. The
Committee plans to evaluate the performance of the portion of the fiscal 2019 PSUs that vests based on
relative TSR at its February 2022 meeting.
EQUITY OWNERSHIP GUIDELINES
The Company’s executive stock ownership guidelines are intended to increase the alignment between
the interests of management and our shareholders. To accomplish these objectives, we require our CEO
to own Plexus stock with a minimum market value equal to five times their annual base salary, our COO
and CFO to own three times their annual base salary and other executive officers, including those
named in the ‘‘Summary Compensation Table,’’ to own Plexus stock with a minimum market value
equal to two times their annual base salary. Other Plexus leadership team members are required to
own a value of Plexus common stock as determined by the CEO. Stock options and unvested PSUs do not
count toward the satisfaction of the guidelines. Unvested RSUs will count toward the satisfaction of
these guidelines. These guidelines were augmented in early fiscal 2022 based upon a review of the
market and specifically our peer group.
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
unless the applicable ownership requirement has been met; there are exceptions, including financing
the exercise of stock options and any applicable taxes when the shares will be held, in connection with
any applicable tax consequence related to the vesting of an equity award or with prior approval under
special circumstances. All of our named executive officers, including Mr. Kelsey, have met the
ownership amounts required by the guidelines and are in compliance with the procedural requirements
of the guidelines.
CLAWBACK POLICY
Pursuant to the Plexus Corp. Executive Compensation Clawback 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
47
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 AND ANTI-PLEDGING POLICY
The Company’s Insider Trading Policy explicitly prohibits directors, officers and employees from
engaging in transactions designed to hedge or offset a decrease in the price of the Company’s common
stock, including, but not limited to, prepaid variable forward contracts, equity swaps, collars and
exchange funds. Pledges and short sales of the Company’s securities are also prohibited under the
Insider Trading Policy.
Elements & 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
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. On January 1, 2020, the
executive flexible perquisite benefit, valued up to $15,000 per calendar year, was eliminated; however
there may be some benefit showing in the Summary Compensation Table due to the difference between
the fiscal and calendar years. The flexible perquisite benefit was intended to be used for expenses such
as personal financial planning, spouse travel costs in connection with business-related travel, club
membership and/or tax and estate advice. The Committee also approved additional perquisites and
other benefits for our CEO and the other executive officers in addition to those received by all U.S.
salaried employees. The additional perquisites and other benefits for certain of our executive officers
are: 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 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, if any.
RETIREMENT PLANNING - 401(K) PLAN
The 401(k) Plan, which is available to substantially all U.S. 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 $11,600 per
calendar year. Employees have a choice of investment alternatives, including a Plexus stock fund.
RETIREMENT PLANNING – SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
In response to Internal Revenue Code (the ‘‘Code’’) limitations on compensation that may be attributed
to tax qualified retirement plans (such as the 401(k) Plan), we have also developed a supplemental
executive retirement plan. Plexus’ supplemental executive retirement plan (the ‘‘SERP’’) is a deferred
compensation plan that allows participants to defer taxes on current income. The SERP covers our
executive officers and certain other executives, and provides a retirement savings alternative to
address their particular circumstances and promote a long-term commitment to Plexus until
48
retirement. All U.S.-based executive officers participate in the SERP. Under the SERP, those executive
officers may elect to defer compensation and Plexus may also make discretionary contributions. The
SERP allows the 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 other
investments. These investment choices do not include Plexus stock. Deferred amounts and any earnings
that may be credited become payable upon termination, retirement from Plexus or in accordance with
the executive’s individual deferral election.
Additionally, the Company may credit a participant’s account with a discretionary employer
contribution. Any employer contributions to the SERP require approval of the Committee. 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 based on the market for executive compensation and its desire to provide an incentive
for executives to remain with Plexus through retirement.
FISCAL 2021 PLAN ACTIVITY
•
•
•
Contribution Formula. The SERP provides for an annual discretionary contribution of 9% of the
executive’s total targeted cash compensation, and we made such a contribution in fiscal 2021.
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.
Employer Contributions. For fiscal 2021, the total employer contributions to the SERP accounts
was $466,025 for all named executive officer participants as a group, including $202,500 for
Mr. Kelsey. See footnote 6 to the ‘‘Summary Compensation Table.’’
Special Contributions. The SERP also allows the Committee to make discretionary contributions
over and above the annual contribution noted above, and such contributions have been made
in individual cases from time to time. However, in fiscal 2021, the Committee did not make
any such contributions on behalf of the named executive officers.
EMPLOYMENT AND CHANGE IN CONTROL AGREEMENTS
We do not generally have employment agreements with our executive officers other than our Chief
Executive Officer. All executive officers, including Mr. Kelsey, have change in control agreements to
help assure that these individuals will not be distracted by personal interests and will maintain their
focus on shareholders in the case of a potential acquisition of Plexus, as well as to maintain their
continuing loyalty.
Mr. Kelsey’s employment agreement and the change in control agreements for Mr. Kelsey and our other
executive officers are described below in ‘‘Executive Compensation–Employment Agreements and
Potential Payments Upon Termination or Change in Control.’’ Please refer to the discussions therein for
a further explanation of those agreements.
49
TAX ASPECTS OF EXECUTIVE COMPENSATION
The Committee considers the potential tax deductibility under the Code for 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 280G of the Code imposes a 20% excise tax upon executive officers who receive ‘‘excess
parachute payments’’ upon a change in control to the extent the payments received by them meet or
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 the ‘‘excess’’ payments. Excise tax gross-up provisions have been eliminated from all
change in control agreements, and our agreements use a ‘‘best net’’ approach to minimize the
possibility that an excise tax might be due or that a loss of the tax deduction might occur.
The Code also provides a surtax under Section 409A relating to various features of deferred
compensation arrangements that do not comply with the requirements of Section 409A. We generally
seek to structure our compensation arrangements either to comply with Section 409A or qualify for an
exemption from Section 409A.
50
COMPENSATION COMMITTEE REPORT
The duties and responsibilities of the Compensation Committee of the board of directors are described
above under ‘‘Corporate Governance—Board Committees—Compensation and Leadership Development
Committee’’ and are set forth in a written charter adopted by the board, which is available on the
Company’s website. 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:
Joann M. Eisenhart, Chair
Stephen P. Cortinovis
Joel Quadracci
Karen M. Rapp
Michael V. Schrock
51
EXECUTIVE COMPENSATION
This section provides further information about the compensation paid to, and other compensatory
arrangements with, our named executive officers.
Summary Compensation Table for Fiscal 2021
The following table sets forth a summary of the compensation of our named executive officers. More
detailed information is presented in the other tables and explanations that follow.
Name
Year
Salary ($)1 Bonus($)2
Option
Awards
($)4
Non-Equity
Incentive Plan
Compensation
($)5
All Other
Compensation
($)6
Total ($)
Stock
Awards ($)3
Todd P.
Kelsey
President
& CEO
Patrick J.
Jermain
Executive
VP & CFO
Steven J.
Frisch
Executive
VP & COO
Angelo M.
Ninivaggi
Executive
VP, CAO,
GC &
Secretary
Ronnie
Darroch
Executive
VP &
Regional
President -
EMEA
2021
$1,000,000 —
$5,078,974
2020
$1,010,481 —
$4,977,568
2019
$958,750
2021
$555,769
2020
$531,346
2019
$505,000
2021
$599,231
2020
$586,779
2019
$556,875
2021
$485,385
2020
$475,288
2019
$450,000
2021
$463,083
2020
$437,369
2019
$427,500
—
—
—
—
—
—
—
—
—
—
—
—
—
$3,459,586
$1,310,953
$1,272,295
$981,894
$1,856,954
$1,810,030
$1,309,549
$983,486
$989,848
$794,856
$786,412
$814,517
$672,920
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
$1,309,375
$234,872
$7,623,221
$1,979,778
$234,696
$8,202,523
$1,870,892
$230,253
$6,519,481
$469,296
$120,815
$2,456,833
$624,622
$117,584
$2,545,847
$597,157
$112,720
$2,196,771
$533,554
$133,447
$3,123,186
$781,757
$129,079
$3,307,645
$735,566
$124,552
$2,726,542
$363,563
$106,666
$1,939,100
$521,475
$100,211
$2,086,822
$496,640
$113,701
$1,855,197
$335,038
$79,051
$1,663,584
$485,291
$521,385
$2,258,562
$471,829
$106,031
$1,678,280
1
2
Includes amounts voluntarily deferred by the named persons under the Company’s retirement plans. The
amounts deferred under the SERP are also included in the ‘‘Executive Contributions in Last FY’’ column of the
‘‘Nonqualified Deferred Compensation’’ table below.
The ‘‘Bonus’’ column, in accordance with SEC regulations, would include only discretionary bonus payments
apart from VICP. Payments under the VICP, including payments for achieving individual objectives, are set
forth in the ‘‘Non-Equity Incentive Plan Compensation’’ column. Since our named executive officers’
individual objectives are specific and performance against them is measured, we believe that payments under
the VICP that relate to the achievement of individual objectives are properly reflected in the ‘‘Non-Equity
Incentive Plan Compensation’’ column.
52
3
4
5
6
These columns represent the grant date fair value computed in accordance with Accounting Standards
Codification Topic 718 (‘‘ASC 718’’) of equity awards granted under the Incentive Plan and its predecessor,
which are explained further below under ‘‘Grants of Plan-Based Awards.’’ GAAP requires us to determine
compensation expense for stock options and other stock-related awards granted to our employees 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 that we used to determine the valuation of the awards are discussed
in footnote 9 to our consolidated financial statements.
Grants of stock options and RSUs are not subject to performance conditions, although the ultimate value of
stock options depend on the appreciation in the Company’s stock price. The Company has not granted stock
options to its executive officers since fiscal 2017. For 2019 and 2020, vesting of 50% of the PSUs reported in
each fiscal year above is based on a three-point annual average of the Company’s absolute economic return
performance and vesting of the other 50% depends on the relative TSR of Plexus stock as compared to
companies in the Russell 3000 Index, each over a three year performance period. The 2019 and 2020 PSUs are
reported in the ‘‘Stock Awards’’ column at ‘‘target’’ performance; participants can earn twice the number of
PSUs granted for performance at ‘‘maximum.’’ For 2021, vesting of 50% of the PSUs reported in each fiscal
year above is based on a three-point annual average of the Company’s absolute economic return performance
and vesting of the other 50% depends on the relative TSR of Plexus stock as compared to companies in the
S&P 400 Index, each over a three year performance period. The 2021 PSUs are reported in the ‘‘Stock
Awards’’ column at ‘‘target’’ performance; participants can earn twice the number of PSUs granted for
performance at ‘‘maximum’’ for the economic return portion and one and a half times the number of PSUs
granted for performance at ‘‘maximum’’ for the TSR portion.
The value of the fiscal 2021 PSUs at the maximum performance level would be as follows for each named
executive officer: Mr. Kelsey—$4,413,265; Mr. Jermain—$1,138,946; Mr. Frisch—$1,614,163;
Mr. Ninivaggi—$854,418; and Mr. Darroch—$682,728.
Please also see the ‘‘Grants of Plan-Based Awards’’ table below for further information about equity awards
granted in fiscal 2021, and the ‘‘Outstanding Equity Awards at Fiscal Year End’’ table below for information
regarding all outstanding equity awards at the end of fiscal 2021.
No stock options were granted to named executive officers in fiscal 2021.
The ‘‘Non-Equity Incentive Plan Compensation’’ column represents amounts that were earned during each
fiscal year under the 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 the executive officer’s performance on individual objectives. We include more information about the
VICP under ‘‘Compensation Discussion and Analysis—Elements and Analysis of Direct Compensation—Annual
Incentive’’ above, as well as under ‘‘Grants of Plan-Based Awards’’ below.
The amounts shown in the ‘‘2021’’ row were earned in fiscal 2021 and were paid in fiscal 2022, the amounts
shown in the ‘‘2020’’ row were earned in fiscal 2020 and were paid in fiscal 2021, and the amounts shown in
the ‘‘2019’’ row were earned in fiscal 2019 and were paid in fiscal 2020.
There were no deferrals of the amounts payable in fiscal 2022 related to the VICP award earned based on
fiscal 2021 performance. Mr. Frisch deferred $156,351 of the amount payable in fiscal 2021 related to the
VICP award earned based on fiscal 2020 performance; Messrs. Frisch and Darroch deferred $183,892 and
$47,183, respectively, of the amounts payable in fiscal 2020 related to the VICP award earned based on fiscal
2019 performance.
The amounts listed under the column entitled ‘‘All Other Compensation’’ in the table include Company
contributions to the 401(k) Plan and the SERP, reimbursements made by Plexus under its executive flexible
perquisite benefit (which was eliminated January 1, 2020), the value of the company car benefit provided to
the executive, additional life and disability insurance coverage and relocation. Per person detail is listed in
the table below:
53
Company
Matching
Contribution
to 401(k)
Plan
Company
Contribution
to SERP
Executive
Flexible
Perquisite
Benefit
Company
Car
Benefit
Additional
Life and
Disability
Insurance
Name
Year
Relocation
Total ($)
Todd P.
Kelsey
Patrick J.
Jermain
Steven J.
Frisch
Angelo M.
Ninivaggi
Ronnie
Darroch
2021
$11,600
2020
$11,400
$202,500
$201,822
—
—
2019
$11,200
$181,939
$15,000
2021
$11,600
2020
$11,400
2019
$11,200
2021
$11,600
2020
$11,400
2019
$11,200
2021
$11,600
2020
$11,400
2019
$11,200
$89,489
$80,887
$68,387
$99,772
$94,899
$80,962
$74,264
$69,919
$57,700
2021
$75,725
—
2020
$50,758
2019
$11,200
$13,648
$54,258
—
$8,819
$13,751
—
$4,431
$14,069
—
$520
$25,974
—
$13,474
$14,852
$20,383
$21,085
$21,702
$19,337
$16,089
$18,970
$21,686
$17,779
$17,708
$20,430
$17,843
$18,255
$3,326
$14,064
$18,154
$389
$389
$412
$389
$389
$412
$389
$570
$613
$372
$529
$572
—
$77
$353
—
—
—
—
—
—
—
—
—
—
—
—
—
$234,872
$234,696
$230,253
$120,815
$117,584
$112,720
$133,447
$129,079
$124,552
$106,666
$100,211
$113,701
$79,051
$429,364
$521,385
$7,214
$106,031
The amounts in the ‘‘Executive Flexible Perquisite Benefit’’ column, above, include the
reimbursements under that program prior to the cessation date of the executive flexible perquisite on
January 1, 2020.
In connection with Mr. Darroch’s relocation to Wisconsin during fiscal 2015, Plexus purchased his
former residence in the United Kingdom. The amount reported above in the ‘‘Relocation’’ column for
fiscal 2019 reflects Plexus’ costs for tax adjustments related to such sale. The amount for fiscal 2020
reflects relocation benefits for Mr. Darroch’s return to the United Kingdom in 2020.
The amount reported in the ‘‘Company Matching Contribution to 401(k) Plan’’ for Mr. Darroch for 2020
and 2021 represent Plexus’ contribution to both the 401(k) plan and his UK Pension.
54
Grants of Plan-Based Awards for Fiscal 2021
The table below sets forth information about equity awards that were granted to the named executive
officers in fiscal 2021 under the Incentive Plan, as well as information about potential cash incentive
awards dependent on quantifiable corporate performance and individual goals that those executive
officers could have earned for fiscal 2021 performance under the VICP. As a result of corporate
performance, cash incentive awards based on these criteria were earned under the VICP for fiscal 2021,
as set forth under the ‘‘Non-Equity Incentive Compensation’’ column in the ‘‘Summary Compensation
Table’’ above. We provide further information about potential compensation under the VICP and
awards under the Incentive Plan in fiscal 2021, as well as additional information about those plans,
following the table.
Name &
Principal
Position
Todd P.
Kelsey
Patrick J.
Jermain
Steven J.
Frisch
Angelo M.
Ninivaggi
Ronnie
Darroch
1
2
3
Estimated Future Payouts Under
Non-Equity Incentive Plan
Awards
Estimated Future Payouts
Under Equity Incentive Plan
Awards
Award
Type Grant Date
Thre-
shold
($)1
Target ($)1
Maximum
($)1
Thre-
shold
(#)1
Target
(#)1
Maximum
(#)1
VICP
12/17/2020 $0
$1,250,000
$2,500,000 —
—
—
PSUs2
RSUs3
1/25/2021 —
1/25/2021 —
—
—
—
—
VICP
12/17/2020 $0
$438,595
$877,189
PSUs2
RSUs3
1/25/2021 —
1/25/2021 —
—
—
—
—
VICP
12/17/2020 $0
$509,360
$1,018,719 —
PSUs2
RSUs3
1/25/2021 —
1/25/2021 —
—
—
—
—
VICP
12/17/2020 $0
$339,778
$679,556
PSUs2
RSUs3
1/25/2021 —
1/25/2021 —
—
—
—
—
VICP
12/17/2020 $0
$322,151
$644,303
PSUs2
RSUs3
1/25/2021 —
1/25/2021 —
—
—
—
—
6,885
29,800
52,715
—
—
—
—
—
—
1,775
7,690
13,605
—
—
—
—
—
2,520
10,900
19,280
—
—
—
—
—
—
1,335
5,770
10,205
—
—
—
—
—
—
1,065
4,610
8,155
All Other
Stock
Awards:
Number of
Shares of
Stocks or
Units (#)
—
—
Grant Date
Fair Value
of Stock
and Option
Awards ($)
—
$2,514,977
32,070
$2,563,997
—
—
8,280
—
—
—
$648,967
$661,986
—
$919,940
11,720
$937,014
—
—
6,210
—
—
—
$486,997
$496,490
—
$389,060
$397,352
—
—
—
4,970
Amounts in the rows labeled ‘‘VICP’’ reflect potential cash incentive payments for fiscal 2021.
As a result of Plexus’ actual performance in fiscal 2021, overall cash incentive awards were earned based on
corporate financial performance between the target and maximum payout levels, as reflected in the
‘‘Summary Compensation Table’’ and discussed in ‘‘Compensation Discussion and Analysis.’’
For more information regarding these awards, see the discussion below under the caption ‘‘Equity Plans,’’ as
well as ‘‘Compensation Discussion and Analysis—Total Direct Compensation—Long-Term Incentives.’’
The RSUs vest on January 25, 2024, assuming continued employment. See the discussion below under the
caption ‘‘Equity Plans.’’
55
Outstanding Equity Awards at Fiscal 2021 Year-End
The following table sets forth information about Plexus stock awards held by the named executive
officers that were outstanding as of October 2, 2021. No named executive officers held stock options at
the end of fiscal 2021.
Name
Mr. Kelsey
Mr. Jermain
Mr. Frisch
Mr. Ninivaggi
Mr. Darroch
Number of Shares
or Units of Stock
That Have Not
Vested (#)
31,6002
32,5003
32,0704
—
—
—
8,9702
8,3103
8,2804
—
—
—
11,9602
11,8203
11,7204
—
—
—
7,2602
6,4603
6,2104
—
—
—
6,1502
5,3203
4,9704
—
—
—
Market Value of Shares or
Units of Stock That Have
Not Vested ($)1
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 ($)1
$2,878,128
$2,960,100
$2,920,936
—
—
—
$816,988
$756,875
$754,142
—
—
—
$1,089,317
$1,076,566
$1,067,458
—
—
—
$661,241
$588,377
$565,607
—
—
—
$560,142
$484,546
$452,668
—
—
—
—
—
—
54,8405
44,0006
45,8307
—
—
—
15,5605
11,2406
11,8307
—
—
—
20,760 5
16,0006
16,7607
—
—
—
12,6005
8,7506
8,8707
—
—
—
10,6605
7,2006
7,0907
—
—
—
$4,994,827
$4,007,520
$4,174,196
—
—
—
$1,417,205
$1,023,739
$1,077,476
—
—
—
$1,890,821
$1,457,280
$1,526,501
—
—
—
$1,147,608
$796,950
$807,880
—
—
—
$970,913
$655,776
$645,757
1
2
Based on the $91.08 per share closing price of our common stock on October 1, 2021, the last trading day of
fiscal 2021.
Consists of RSUs awarded in fiscal 2019 under the Incentive Plan. The RSUs vest on January 21, 2022, based on
continued service through that date.
56
3
4
5
6
7
Consists of RSUs awarded in fiscal 2020 under the Incentive Plan. The RSUs vest on January 27, 2023, based on
continued service through that date.
Consists of RSUs awarded in fiscal 2021 under the Incentive Plan. The RSUs vest on January 25, 2024, based on
continued service through that date.
Consists of PSUs awarded in fiscal 2019 under the Incentive Plan. Vesting of 50% of the PSUs is based on a
three-point annual average of the Company’s absolute economic return performance during the three year
performance period, and vesting of the other 50% of the PSUs depends on the relative TSR of our common
stock as compared to the Russell 3000 Index over a three year performance period that concludes on
January 21, 2022. As of the end of fiscal 2021, the Company’s economic return performance was between the
target and maximum levels; therefore, this portion of the award is reflected in the aggregate amount
reported above for the fiscal 2019 PSUs at the maximum achievement level. The relative TSR of our common
stock was between the target and maximum levels; therefore, this portion of the award is reflected in the
aggregate amount reported above for the fiscal 2019 PSUs at the maximum achievement level.
Consists of PSUs awarded in fiscal 2020 under the Incentive Plan. Vesting of 50% of the PSUs is based on a
three-point annual average of the Company’s absolute economic return performance during the three year
performance period, and vesting of the other 50% of the PSUs depends on the relative TSR of our common
stock as compared to the Russell 3000 Index over a three year performance period that concludes on
January 21, 2023. As of the end of fiscal 2021, the Company’s economic return performance was between the
target and maximum levels; therefore, this portion of the award is reflected in the aggregate amount
reported above for the fiscal 2020 PSUs at the maximum achievement level. The relative TSR of our common
stock was near the target level; therefore, this portion of the award is reflected in the aggregate amount
reported above for the fiscal 2020 PSUs at the target achievement level.
Consists of PSUs awarded in fiscal 2021 under the Incentive Plan. Vesting of 50% of the PSUs is based on a
three-point annual average of the Company’s absolute economic return performance during the three year
performance period, and vesting of the other 50% of the PSUs depends on the relative TSR of our common
stock as compared to the S&P 400 Index over a three year performance period that concludes on January 21,
2024. As of the end of fiscal 2021, the Company’s economic return performance was between the target and
maximum levels; therefore, this portion of the award is reflected in the aggregate amount reported above for
the fiscal 2021 PSUs at the maximum achievement level. The relative TSR of our common stock was near the
target level; therefore, this portion of the award is reflected in the aggregate amount reported above for the
fiscal 2021 PSUs at the target achievement level.
See ‘‘Compensation Discussion and Analysis—Elements and Analysis of Direct Compensation—Long-Term
Incentives’’ for additional information regarding awards.
57
Option Exercises & Stock Vested in Fiscal 2021
The following table sets forth information about the Plexus stock options that were exercised by the
named executive officers as well as the PSUs and RSUs that vested in fiscal 2021.
Option Awards
Stock Awards
Number of Shares
Acquired on Exercise
(#)
Value Realized
on Exercise ($)1
Number of Shares
Acquired on Vesting
(#)
Value Realized
on Vesting ($)2
0
0
0
0
0
$0
$0
$0
$0
$0
73,555
21,630
28,115
17,310
15,570
$5,780,053
$1,699,772
$2,209,303
$1,360,230
$1,223,564
Name
Mr. Kelsey
Mr. Jermain
Mr. Frisch
Mr. Ninivaggi
Mr. Darroch
1
2
Based on the difference between the exercise prices and sale prices on the date of exercise for stock options
with the exception of shares that were held upon the exercise of options; in such case, the value realized on
exercise is based on the difference between the exercise prices and the average of the high and low trading
prices of the Company’s common stock on the Nasdaq Global Select Market on the exercise date.
Based on the average of the high and low trading prices of the Company’s common stock on the Nasdaq Global
Select Market on the vesting dates for PSUs and RSUs.
Nonqualified Deferred Compensation in Fiscal 2021
Plexus does not maintain any defined benefit pension plans. Plexus’ only retirement savings plans are
defined contribution plans—the 401(k) Plan for all qualifying U.S. employees, the SERP for executive
officers (and certain other executives) and certain foreign plans. Since 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 Code mandated limit of $19,500 ($26,000 if age 50 or older) in
calendar year 2021; Plexus will match 100% of the first 4.0% of salary which an employee defers, up to
$11,600 in calendar year 2021. 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 executives. Under
the SERP, an executive may elect to defer 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 SERP allows the 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, which are intended to mirror the options available under the 401(k) Plan; however, the
investment choices in the SERP do not include Plexus stock.
58
The SERP 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,’’ the Committee determined the current Company contribution to the SERP
after reviewing a competitive analysis prepared by Willis Towers Watson. As a result, the discretionary
contribution is 9% of the executive’s total targeted cash compensation. The Committee may also
choose to make additional or special contributions from time to time; no such contributions were made
in fiscal 2021 to the named executive officers.
The following table includes information regarding contributions under the SERP. Since the 401(k) Plan
is a tax-qualified plan generally available to all qualified U.S. employees, contributions on behalf of the
executive officers and earnings in that plan are not included in this table; however, Company
contributions under both the SERP and the 401(k) plan are among the items included in the ‘‘All Other
Compensation’’ column in the ‘‘Summary Compensation Table’’ above. Mr. Darroch participates in the
Plexus Corp. (UK) Ltd. Group Life Assurance Scheme (the ‘‘U.K. Plan’’) and no longer receives SERP
contributions. Contributions on his behalf and earnings in the U.K. Plan are not included in this table;
however Company contributions under the U.K. Plan are included in the ‘‘All Other Compensation’’
column in the ‘‘Summary Compensation Table’’ above.
Name
Executive
Contributions in
Last FY ($)1
Registrant
Contributions in
Last FY ($)
Aggregate
Earnings in
Last FY ($)
Aggregate
Withdrawals/
Distributions ($)
Aggregate
Balance at
Last FYE ($)2
Mr. Kelsey
Mr. Jermain
—
—
Mr. Frisch
$156,351
Mr. Ninivaggi
Mr. Darroch
—
—
$202,500
$89,489
$99,772
$74,264
—
$442,031
$352,518
$364,493
$246,835
$187,897
—
—
—
—
—
$2,312,231
$1,764,792
$1,885,540
$1,194,255
$923,556
1
2
Includes contributions by the named executive officers related to incentive compensation related to fiscal
2020 VICP awards that was payable in fiscal 2021, but was deferred, and that are included in the ‘‘Non-Equity
Incentive Plan Compensation’’ column in ‘‘Summary Compensation Table’’ for fiscal 2020 as follows:
Mr. Frisch—$156,351. There were no contributions included from the ‘‘Salary’’ column in the ‘‘Summary
Compensation Table.’’
Of the amounts reported in the ‘‘Aggregate Balance at Last Fiscal Year End’’ column, the following amounts
were previously reported in the Summary Compensation Tables in the Company’s Proxy Statements for its
prior annual meetings of shareholders: Mr. Kelsey—$1,104,673; Mr. Jermain—$1,103,714;
Mr. Frisch—$1,230,325; Mr. Ninivaggi—$315,818; and Mr. Darroch—$585,823.
59
Employment Agreements & Potential Payments
UPON TERMINATION OR CHANGE IN CONTROL
This section provides information about specific agreements with our named executive officers relating
to employment and post-employment compensation.
Plexus does not generally have employment agreements with its executive officers. However, the
Committee and the board continue to believe that it is important to have an employment agreement
with our CEO to set forth the terms of their employment, to provide incentives for him to continue with
the Company over the long term and to protect the Company from competition post-employment. The
Company entered into an employment agreement with Mr. Kelsey in 2016 in connection with his
appointment as our President and CEO (the ‘‘Employment Agreement’’).
All of our executive officers have change in control agreements that provide, in certain circumstances,
for payments to the executive officers in the event of a change in control of Plexus.
Employment Agreement with Mr. Kelsey
The Employment Agreement between the Company and Mr. Kelsey specifies when the Company may
terminate Mr. Kelsey for cause, as well as when Mr. Kelsey may leave the Company for good reason,
and determines the compensation payable upon termination. The definitions of ‘‘cause’’ and ‘‘good
reason’’ are substantially similar to those under the Company’s change in control agreements.
If Mr. Kelsey is terminated for cause or voluntarily leaves without good reason, dies or becomes
disabled, the Company is not required to make any further payments to Mr. Kelsey other than with
respect to obligations accrued on the date of termination. If Mr. Kelsey’s termination is due to his
death or disability, any previously granted equity awards without performance goals, such as RSUs,
would automatically vest and any performance stock units would vest pro rata based on his length of
service during the performance period and actual Company performance.
If the Company terminates Mr. Kelsey without cause, or he resigns with good reason, Mr. Kelsey is
entitled to receive his base salary for a two year period following his separation date (the ‘‘Separation
Period’’), a VICP cash incentive award keyed to the actual attainment of performance targets for the
year in which Mr. Kelsey is involuntarily terminated, prorated based on the number of the days in the
period in which he was employed, and a payment equal to 100% of his target annual VICP cash
incentive award as in effect prior to the separation date on each December 15 during the Separation
Period. In addition, Mr. Kelsey would also receive an amount equal to the maximum allowable Company
contributions for a full plan year under the 401(k) Plan and the Company’s deferred compensation plans
during the Separation Period. Mr. Kelsey 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
two year period following his separation; if a non-active employee is not eligible to participate in such
plans, the Company will instead provide Mr. Kelsey with the cost of premium continuation coverage. In
addition, Mr. Kelsey would receive a lump-sum payment equal to the value of continued participation
in the Company’s other welfare plans, company car and other similar plans and arrangements for
two years. 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 (except if such payment(s) qualify for an
exception thereto). The Employment Agreement does not provide for any tax gross-up payments.
60
Mr. Kelsey 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.
If Mr. Kelsey is terminated by Plexus without cause or he resigns with good reason, his equity awards
would be treated in accordance with the terms of the Incentive Plan and predecessor plans, with
Mr. Kelsey being deemed a continuing employee for purposes of applying the vesting and exercisability
provisions of any equity awards held by him on his separation date that were granted more than one
year prior to such date; see ‘‘Treatment of Equity Awards’’ below for more information.
Under Mr. Kelsey’s Employment Agreement, the Company is protected from competition by Mr. Kelsey
after the termination of his employment. Upon termination, Mr. Kelsey agrees to not interfere with the
relationships between the active customers and suppliers, as well as employees, of the Company for
two years, and to not compete with the Company over the same period. Further, Mr. Kelsey has agreed
to related confidentiality requirements after the termination of his employment.
Pursuant to his change in control agreement, Mr. Kelsey is eligible to receive three times salary plus
benefits in the event of a termination of his employment in connection with a change in control. If both
the Employment Agreement and the change in control agreement apply to a particular termination,
Mr. Kelsey will receive benefits under whichever agreement provides the higher amount of benefits in
the aggregate. As discussed below, the Company’s change in control agreements with its executive
officers, including Mr. Kelsey, do not contain excise tax gross-up provisions.
CHANGE IN CONTROL AGREEMENTS
Plexus has change in control agreements with its executive officers 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.
Determination of Benefit Levels
In general, the change in control agreements with our executive officers provide that, upon
termination in the event of a change in control, executive officers will receive compensation equaling
three times annual base salary plus targeted bonus, and an amount equal to a continuation of health
and retirement benefits for that period. Certain other key employees also have change in control
agreements on substantially the same terms, although generally with multipliers of one or two times
annual base salary plus targeted bonus. 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.
There are not any excise tax gross-up provisions in any of the change in control agreements. As
discussed below, the change in control agreements with all participants allow for a reduction in
payments under a ‘‘best net’’ approach, providing either the full amount of the total payment or an
amount equal to the total payment reduced by an amount necessary to avoid adverse excise tax
consequences to the executive officer.
61
In addition, under the Incentive Plan and its predecessor, upon a change in control, unvested awards
will generally automatically vest for all award holders (for PSUs, the performance period will be
deemed to have concluded as of the date of the change in control, performance will be calculated and
vesting will be determined).
The Committee reviews the benefit levels under these agreements 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, as well as the elimination of excise tax gross-up provisions, provides an
appropriate balancing of the interests of the Company, its shareholders and its executives. Benefit
levels are believed to be 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.
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
their employment.
The Committee periodically reviews the scope and context of the change in control agreements. The
Committee continues to believe that the change in control agreements will help motivate executive
officers to respond appropriately, for the benefit of the Company and its shareholders, in the case of a
proposed acquisition of the Company that they might perceive would jeopardize their employment.
Operation of Change in Control Agreements
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 if 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. There are not any excise tax gross-up provisions in any of the change in control agreements.
The agreements provide that a cap may apply if the total potential payments would be subject to any
excise taxes imposed by Section 4999 of the Code because such potential payments would exceed three
times base compensation determined under that section. In that case, total potential payments would
be capped just below the excise tax threshold if the net uncapped amount that otherwise would have
been retained by the executive officer (after such individual would pay the excise tax) would be less
than the capped amount (with no imposed excise tax).
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.
Under our change in control agreements:
•
•
A termination for ‘‘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 or requiring the
executive to move; or any attempted termination of employment which is not permitted by
the agreement.
62
•
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.
TREATMENT OF EQUITY AWARDS
None of the named executive officers’ held outstanding stock options as of the end of fiscal 2021. RSUs
that have yet to vest are generally forfeited on termination of employment, but immediately vest upon
a change in control. PSUs that have yet to vest are also generally forfeited on a termination of
employment, but are prorated following the conclusion of the performance period on death or
retirement prior to the end of such period; on a change in control, the performance period is deemed
over and any PSUs earned based on performance during such period vest at that time. See ‘‘Outstanding
Equity Awards at Fiscal Year End’’ above for information as to the named executive officers’
outstanding equity awards at October 2, 2021.
SEVERANCE
Plexus does not have employment agreements with its executive officers other than Mr. Kelsey. 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. Kelsey
under his Employment Agreement if he is terminated by Plexus or if he resigns, (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 2, 2021, the last day of our previous fiscal year. The table includes only benefits that would
result from the stated event, not vested benefits that are payable irrespective of the reason for
termination.
63
Executive Officer;
Context of
Termination
Mr. Kelsey –
Termination by
Plexus for Cause or
Resignation
without Good
Reason
Mr. Kelsey –
Termination by
Plexus without
Cause or
Resignation with
Good Reason
Cash
Payments1
Early
Vesting of
Stock
Options2
Early
Vesting of
RSUs3
Early
Vesting of
PSUs4
Additional
Retirement
Benefits5
Other
Benefits6
Total
—
—
$5,750,000
—
—
—
—
—
—
—
—
$428,200
$26,566
$6,204,766
Mr. Kelsey – Death or
Disability
—7
Mr. Kelsey – Change
in Control
$6,750,000
Mr. Jermain – Death
or Disability
—7
Mr. Jermain – Change
in Control
$3,051,000
Mr. Frisch – Death or
Disability
—7
Mr. Frisch – Change in
Control
$3,357,750
Mr. Ninivaggi – Death
or Disability
—7
Mr. Ninivaggi –
Change in Control
$2,499,000
Mr. Darroch – Death
or Disability
—7
Mr. Darroch – Change
in Control
$2,352,157
—
—
—
—
—
—
—
—
—
—
$8,759,164
$3,300,136
—
—
$12,059,300
$8,759,164
$6,300,004
$642,300
$235,229
$22,686,697
$2,328,005
$872,236
—
—
$3,200,241
$2,328,005
$1,646,726
$297,152
$257,066
$7,579,949
$3,233,340
$1,215,898
—
—
$4,449,238
$3,233,340
$2,312,521
$334,116
$269,736
$9,507,463
$1,815,224
$681,640
—
—
$2,496,864
$1,815,224
$1,271,477
$257,592
$254,913
$6,098,206
$1,497,355
$562,416
—
—
$2,059,771
$1,497,355
$1,039,223
$212,556
$992,802
$6,094,093
1
2
3
Cash payments in the context of a termination in connection with change in control represent 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 2021 and the target VICP cash incentive
payment for fiscal 2021. 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.
As discussed above, pursuant to Mr. Kelsey’s employment agreement, if he is terminated without cause, or he
resigns with good reason, he is entitled to receive his base salary for a two year period following his
separation date and a pro-rated VICP cash incentive award for the year of involuntary termination. In
addition, Mr. Kelsey would also receive two annual payments following his termination each equal to 100% of
his target annual VICP cash incentive award as in effect prior to the separation date.
All outstanding unvested stock options would become vested upon a change in control, as well as upon death
or disability. No stock options are currently outstanding for the named executive officers.
All outstanding unvested RSUs would become vested upon a change in control. The amount shown is the value
of the unvested RSUs based on Plexus’ closing stock price of $91.08 per share on the last trading date of fiscal
2021.
64
4
5
6
7
The performance period for outstanding PSUs would be deemed to end upon a change in control and vesting
would be determined at that time. The amount shown is the value of all outstanding unvested PSUs, assuming
target payout for fiscal year 2019 (TSR-based PSUs only), fiscal year 2020 and fiscal year 2021 performance as
of the change in control date. Amounts reported for the Death and Disability scenario are pro-rated at target
performance for the portions of the cycles unearned at the end of fiscal year 2021. The amounts above were
calculated using Plexus’ closing stock price of $91.08 per share on the last trading day of fiscal 2021.
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.
Similar provisions for a termination without cause apply with respect to Mr. Kelsey’s Employment Agreement,
with such obligations continuing for two years. 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.
The amounts in the context of a termination in connection with a change in control include continuing
payments of health and welfare benefits, company car and other benefits for three years, as provided in the
agreements. Mr. Kelsey would receive similar benefits for two years in the event he is terminated without
cause, or he resigns with good reason, as described above.
Excludes life or disability insurance payments from third party insurers.
65
PAY RATIO DISCLOSURE
Pursuant to Item 402(u) of Regulation S-K, we are providing the following information for fiscal 2021,
which includes a ratio of the total annual compensation of Mr. Kelsey to the median annual total
compensation of all employees other than our CEO (the ‘‘Pay Ratio’’):
CEO total annual compensation:
•
• Median employee total annual compensation:
•
Ratio of CEO to median employee compensation
$7,623,221
$15,087
505:1
In determining our median employee, a list was prepared of all of our global employees (excluding the
CEO) and their annual compensation as of October 2, 2021. Annual compensation included base pay,
which was determined via payroll records and annualized for those employees who were not employed
for a full year at the time of the calculation. For foreign employees, we used the then-current
exchange rate in order to convert such amounts into U.S. dollars. For purposes of the Pay Ratio
disclosed above, the total compensation of both the CEO and the median employee for fiscal 2021 were
calculated based on the definition of total compensation for purposes of the Summary Compensation
Table.
SEC rules for identifying the median employee and calculating the pay ratio allow companies to adopt a
variety of methodologies, to apply certain exclusions and to make reasonable estimates and
assumptions. No employees were excluded when constructing the list of our global employees, but the
Pay Ratio reported above may not be comparable to the pay ratio calculated by other companies, as
other companies have different circumstances, employee populations and compensation practices, and
may utilize different methodologies, exclusions, estimates and assumptions.
66
COMPENSATION & RISK
During fiscal 2021, 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
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.
67
PROPOSAL 2 –
ADVISORY VOTE TO APPROVE NAMED
EXECUTIVE OFFICER COMPENSATION
Board
Recommendation
An advisory proposal to approve the compensation of the Company’s named
executive officers, as disclosed under the headings ‘‘Compensation Discussion
and Analysis’’ and ‘‘Executive Compensation’’
FOR
SEC rules require publicly-traded companies like Plexus to hold an advisory vote of their shareholders
at least once every three years to approve the named executive officer compensation, as disclosed in
the company’s proxy statement pursuant to Item 402 of Regulation S-K; Plexus discloses this
information 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 complex 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
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 named executive officers as described in this proxy statement.
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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 involving an executive officer, director or related
party must be approved by either a disinterested majority of the board of directors or by the Audit
Committee.
Jacob Foate, the adult son of Mr. Foate, Plexus’ Non-Executive Chair, began working for Plexus in
fiscal 2019 and is currently the Director – IT Security & Data Management. His annual base salary is
$170,000. Andy Kelsey, the adult son of Todd Kelsey, Plexus’ President and Chief Executive Officer,
began working for Plexus in 2015 and is currently serving as the Sr. Site Director for our Livingston
Design Center. His annual base salary is $175,000. Both Jacob and Andy participate in the Company’s
incentive plans, as well as its other benefit plans, on the same basis as other salaried employees.
Please see ‘‘Corporate Governance–Director Independence’’ for a discussion of certain transactions and
relationships that the board considered when determining the independence of Plexus’ directors. There
were no other transactions in an amount or of a nature that were reportable under applicable SEC rules
in fiscal 2021.
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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 of 1934, 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 that may involve a
potential conflict of interest. No member of the Audit Committee is employed by, or has any other
material relationship with, Plexus. The members are all ‘‘independent directors’’ as defined in
Rule 5605(a)(2) of the listing standards applicable to the Nasdaq Global Select 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 2,
2021, with Plexus management;
Discussed with PwC, Plexus’ independent auditors, those matters which are required to be
discussed by the applicable requirements of the Public Company Accounting Oversight Board
and the SEC; and
Received the written disclosure and the letter from PwC 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
PwC 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 2, 2021. The Audit Committee further confirmed the independence of PwC.
MEMBERS OF THE AUDIT COMMITTEE:
Rainer Jueckstock, Chair
Randy J. Martinez
Peter Kelly
Karen M. Rapp
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PROPOSAL 3 –
RATIFY INDEPENDENT AUDITORS
Board
Recommendation
Ratify the selection of PricewaterhouseCoopers LLP as our independent
auditors for fiscal 2022.
FOR
PwC has served as Plexus’ independent auditors since at least 1985. Subject to ratification by
shareholders, the Audit Committee intends to reappoint the firm of PwC as independent auditors to
audit the financial statements of Plexus for fiscal 2022. In making its decision to reappoint PwC for
fiscal 2022, the Audit Committee considered the qualifications, performance and independence of PwC
and the audit engagement team, the quality of its discussions with PwC and the fees charged for the
services provided. Although shareholder ratification of the independent auditors is not required by our
bylaws or otherwise, we are submitting this matter for ratification to permit shareholders to
participate in this important decision. If shareholders fail to ratify the selection of PwC as the
Company’s independent auditors for fiscal 2022, the Audit Committee will reconsider the selection,
although it will not be required to select a different independent auditor. Representatives of PwC are
expected to participate at the virtual 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 PwC for services in the last
two fiscal years were as follows:
Audit fees:
$1,591,263
$1,644,964
2020
2021
Audit-related fees:
Tax fees:
All other fees:
—
—
—
—
—
—
The above amounts relate to services provided in the indicated fiscal years, irrespective of when they
were billed. Audit fees relate to Plexus’ annual integrated audit and quarterly professional reviews.
The Audit Committee considered the compatibility of the non-audit services provided by PwC 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 chair on behalf of the Audit Committee. There were no
services in fiscal 2020 or 2021 that were not approved in advance by the Audit Committee under this
policy.
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Householding & Solicitation
A copy (without exhibits) of Plexus’ annual report to the SEC on Form 10-K for the fiscal year ended
October 2, 2021, will be provided without charge to each record or beneficial owner of shares of
Plexus’ common stock as of December 13, 2021, on the written request of that person directed to:
Shawn Harrison, VP – Communications and Investor Relations, Plexus Corp., One Plexus Way, P.O. Box
156, Neenah, Wisconsin 54957-0156. See also the Notice page of this proxy statement. In addition,
copies are available on Plexus’ website at www.plexus.com under the link titled ‘‘Investors,’’ then
‘‘Financial Info.’’
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 the first page of this proxy statement. You may also contact Mr. Harrison at that address or at
1.920.969.6000 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.
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 materials 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 materials 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 facsimile, by officers and regular
employees of Plexus who will not be separately compensated for those services.
SAFE HARBOR AND FAIR DISCLOSURE STATEMENT
The statements contained in this proxy statement that 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. These risks and uncertainties include
the evolving effect, which may intensify, of COVID-19 on our employees, customers, suppliers, and
logistics providers, including the impact of governmental actions being taken to curtail the spread of
the virus. Other risks and uncertainties are described in our other SEC filings, particularly within Risk
Factors in our fiscal 2021 Form 10-K and any subsequently filed Form 10-Q.
By order of the Board of Directors
Neenah, Wisconsin
December 17, 2021
Angelo M. Ninivaggi
Executive Vice President, Chief Administrative
Officer, General Counsel and Secretary
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