Plexus(PLXS) - 2023 Q4 - Annual Report

Financial Performance - Net sales for fiscal year 2023 were $4.21 billion, compared to$3.81 billion in 2022 and $3.37 billion in 2021[264] - Gross profit for fiscal year 2023 was$394.55 million, up from $347.23 million in 2022 and$323.30 million in 2021[264] - Net income for fiscal year 2023 was $139.09 million, slightly higher than$138.24 million in 2022 and $138.91 million in 2021[264] - Earnings per share (diluted) for fiscal year 2023 were$4.95, compared to $4.86 in 2022 and$4.76 in 2021[264] - Net income for 2023 was $139.1 million, slightly higher than$138.2 million in 2022[270] - Net sales for fiscal 2023 were $4,210.3 million, a 10.5$3,811.4 million in 2022[354] - Operating income for fiscal 2023 was $195.8 million, up 9.9$178.2 million in 2022[354] - Net income for fiscal 2023 was $139.1 million, with basic earnings per share of$5.04 and diluted earnings per share of $4.95[332] Currency and Foreign Exchange - 8$1.8 million in 2023, compared to $0.7 million in 2022 and$1.1 million in 2021[291] - The fair value of foreign currency forward contracts increased from $5.7 million in 2022 to$6.3 million in 2023[315] Interest Rates and Borrowing - The borrowing rate under the Credit Facility as of September 30, 2023 was SOFR plus 1.10%[244] - A 10% change in interest rates would not have a material effect on the company's financial position as of September 30, 2023[244] - The Company borrowed $748.5 million and repaid$778.5 million under its Credit Facility during fiscal 2023, with the highest daily borrowing at $412.0 million and average daily balance at$338.1 million[307] Internal Controls and Reporting - The company's internal control over financial reporting was effective as of September 30, 2023, based on COSO criteria[252] Assets and Liabilities - Total assets decreased from $3,393.2 million in 2022 to$3,321.2 million in 2023, a decline of 2.1%[267] - Cash and cash equivalents decreased from $274.8 million in 2022 to$256.2 million in 2023, a decline of 6.8%[267] - Total current liabilities decreased from $2,006.2 million in 2022 to$1,812.7 million in 2023, a decline of 9.6%[267] - Retained earnings increased from $1,572.2 million in 2022 to$1,711.3 million in 2023, a growth of 8.8%[268] - Total stockholders' equity increased from $1,095.7 million in 2022 to$1,214.4 million in 2023, a growth of 10.8%[268] - Accounts receivable decreased from $737.7 million in 2022 to$661.5 million in 2023, a decline of 10.3%[267] - Inventories decreased from $1,602.8 million in 2022 to$1,562.0 million in 2023, a decline of 2.5%[267] - Total property, plant and equipment, net increased by 10.6% to $492,036 thousand as of September 30, 2023 from$444,705 thousand as of October 1, 2022[304] - The Company's total debt and finance lease obligations decreased by 6.6% to $431,058 thousand as of September 30, 2023 from$461,747 thousand as of October 1, 2022[306] - Long-lived assets as of September 30, 2023 were $561.4 million, up 10.1$509.8 million in 2022[355] - Total assets as of September 30, 2023 were $3,321.2 million, a 2.1$3,393.2 million in 2022[354] Cash Flow and Capital Expenditures - Cash flows from operating activities improved significantly from a negative $26.2 million in 2022 to a positive$165.8 million in 2023[270] - Payments for property, plant and equipment increased from $101.6 million in 2022 to$104.0 million in 2023, a growth of 2.4%[270] - Capital expenditures in fiscal 2023 totaled $104.0 million, with APAC region accounting for$45.9 million[354] - The company sold $834.5 million of trade accounts receivable in fiscal 2023, a 6.0$142.3 million at the end of fiscal 2023, up from $138.5 million at the beginning of the period[382] - Deferred revenue decreased to$158.7 million as of September 30, 2023, compared to $298.8 million as of October 1, 2022[382] Taxes and Tax Benefits - The effective income tax rate for fiscal 2023 was 13.6$5.7 million increase in valuation allowance in 2023 due to continuing losses in various jurisdictions[319] - Net deferred income tax assets increased from $32.7 million in 2022 to$58.2 million in 2023, with a $6.4 million increase in valuation allowance[323] - The company has$184.2 million in pre-tax state net operating loss carryforwards expiring between 2024 and 2044, and $61.9 million in foreign net operating loss carryforwards[324] - A tax holiday for a foreign subsidiary in the APAC segment resulted in tax reductions of$25.9 million in 2023, $35.3 million in 2022, and$34.4 million in 2021[325] - The company has $14.0 million of uncertain tax benefits as of September 30, 2023, with$13.6 million classified as non-current liabilities[327] - The company recognized a tax benefit of $1.9 million related to restructuring and other charges in fiscal 2023[386] Leases and Lease Obligations - The company's lease portfolio includes real estate and non-real estate leases with terms ranging from less than 1 year to 37 years[333] - Total lease expense for fiscal years 2023, 2022, and 2021 was$31.1 million, $28.9 million, and$27.0 million respectively, with finance lease amortization, interest, operating lease expense, and other lease expense contributing to the total[335] - Total lease assets as of 2023 and 2022 were $106.8 million and$105.2 million respectively, with finance lease assets at $37.4 million and operating lease assets at$69.4 million in 2023[336] - Total lease liabilities as of 2023 and 2022 were $90.2 million and$85.9 million respectively, with current finance lease liabilities at $4.0 million and long-term finance lease liabilities at$39.3 million in 2023[336] - Weighted-average remaining lease terms for finance and operating leases in 2023 were 10.6 years and 16.0 years respectively, with weighted-average discount rates of 16.7% for finance leases and 3.7% for operating leases[336] - Future minimum lease payments as of September 30, 2023, totaled $54.5 million for operating leases and$114.7 million for finance leases, with present values of $47.1 million and$43.3 million respectively[337] Share-Based Compensation and Retirement Plans - The company recognized $21.3 million,$23.3 million, and $24.8 million in share-based compensation expense for fiscal years 2023, 2022, and 2021 respectively[341] - As of September 30, 2023, the company had$21.1 million of unrecognized compensation expense related to RSUs, expected to be recognized over a weighted average period of 1.4 years[342] - The company's 401(k) Retirement Plan contributions for fiscal 2023, 2022, and 2021 totaled $9.8 million,$9.3 million, and $9.3 million respectively[344] - As of September 30, 2023, the company's SERP assets held in trust totaled$12.4 million, with a related liability to participants of approximately $12.4 million[347] Restructuring and Other Charges - The company made a one-time, non-recurring payment of$15.8 million in fiscal 2023 related to an arbitration decision in Norway, resulting in a $14.2 million charge net of insurance recoveries[350] - Restructuring and other charges for fiscal 2023 totaled$23.1 million, including $14.2 million related to an arbitration decision in Norway[384][387] - The company incurred$8.9 million in restructuring charges in fiscal 2023, primarily due to workforce reduction and lease termination[384] Segment Performance - APAC region contributed the highest net sales at $2,358.4 million in 2023, a 2.5$1,558.2 million in fiscal 2023, up from $1,310.7 million in fiscal 2022[377] - The APAC segment generated$2,358.4 million in revenue for fiscal 2023, compared to $2,300.6 million in fiscal 2022[377] - Inter-segment sales for fiscal 2023 were$109.4 million, with APAC contributing the majority at $88.9 million[377] Derivatives and Hedging - The Company had cash flow hedges outstanding with a notional value of$215.4 million as of September 30, 2023, an increase of 50.4% from $143.2 million as of October 1, 2022[311] - The total fair value of forward currency exchange contracts was a$5.0 million liability as of September 30, 2023, compared to a $6.0 million liability as of October 1, 2022[311] - The Company had additional forward currency exchange contracts outstanding with a notional value of$145.5 million as of September 30, 2023, an increase of 142.1% from $60.1 million as of October 1, 2022[312] - The total fair value of non-designated derivatives was a$1.3 million liability as of September 30, 2023, compared to a $0.3 million asset as of October 1, 2022[312] - The Company estimates that$5.0 million of unrealized losses, net of tax, related to cash flow hedges will be reclassified from other comprehensive income into earnings in the next twelve months[310] Warranty and Share Repurchase - Limited warranty liability decreased to $5.8 million in fiscal 2023 from$6.9 million in 2022[361] - The company repurchased 425,746 shares for $40.9 million under the 2023 share repurchase program[363] Comprehensive Income and Loss - Accumulated other comprehensive loss improved to$(24,330) thousand in 2023 from $(36,028) thousand in 2022, driven by foreign currency translation adjustments and derivative instrument fair value adjustments[295] Software and Internal Use Costs - The company capitalizes significant costs related to the acquisition or development of software for internal use, including software costs, consulting services, and employee compensation[279] Depreciation and Useful Lives - Property, plant, and equipment are depreciated over estimated useful lives, with buildings and improvements at 5-39 years, machinery and equipment at 3-7 years, and computer hardware and software at 3-10 years[278] Customer Deposits and Advanced Payments - Customer deposits increased to$601,644 thousand in 2023 from $480,486 thousand in 2022, while deferred revenue decreased to$158,707 thousand from $298,800 thousand, resulting in a combined "Advanced payments from customers" of$760,351 thousand in 2023 compared to $779,286 thousand in 2022[275] - Customer deposits related to inventory increased by 27.4$590.2 million as of September 30, 2023 from $463.2 million as of October 1, 2022[303] Cash Equivalents and Short-Term Deposits - Cash equivalents decreased to$33.5 million in 2023 from $88.7 million in 2022, primarily consisting of short-term time deposits with maturities of less than three months[275] Fair Value of Debt - The fair value of the company's debt was$374.3 million in 2023, compared to $401.6 million in 2022, with carrying values of$383.0 million and $413.0 million, respectively[296] U.S. Income Before Tax - The company's U.S. income before tax was a loss of$84.6 million in 2023, compared to a loss of $64.3 million in 2022[316] External Revenue by Segment - Total external revenue for fiscal 2023 was$4,210.3 million, with Healthcare/Life Sciences contributing $1,874.8 million, Industrial$1,756.5 million, and Aerospace/Defense $579.0 million[377] Net Sales from Engineering Design - Net sales from engineering design and development services were less than 5.0$1,562,037 thousand, a decrease of 2.5% compared to $1,602,783 thousand as of October 1, 2022[303]