Company Quick10K Filing
Plexus
Price64.76 EPS3
Shares31 P/E19
MCap2,012 P/FCF17
Net Debt62 EBIT139
TEV2,074 TEV/EBIT15
TTM 2019-09-28, in MM, except price, ratios
10-Q 2020-04-04 Filed 2020-05-08
10-Q 2020-01-04 Filed 2020-02-07
10-K 2019-09-28 Filed 2019-11-15
10-Q 2019-06-29 Filed 2019-08-02
10-Q 2019-03-30 Filed 2019-05-03
10-Q 2018-12-29 Filed 2019-02-01
10-K 2018-09-29 Filed 2018-11-16
10-Q 2018-06-30 Filed 2018-08-03
10-Q 2018-03-31 Filed 2018-05-04
10-Q 2017-12-30 Filed 2018-02-02
10-K 2017-09-30 Filed 2017-11-17
10-Q 2017-07-01 Filed 2017-08-04
10-Q 2017-04-01 Filed 2017-05-05
10-Q 2016-12-31 Filed 2017-02-03
10-K 2016-10-01 Filed 2016-11-18
10-Q 2016-07-02 Filed 2016-08-08
10-Q 2016-04-02 Filed 2016-05-06
10-Q 2016-01-02 Filed 2016-02-08
10-K 2015-10-03 Filed 2015-11-20
10-Q 2015-07-04 Filed 2015-08-07
10-Q 2015-04-04 Filed 2015-05-11
10-Q 2015-01-03 Filed 2015-02-11
10-K 2014-09-27 Filed 2014-11-17
10-Q 2014-06-28 Filed 2014-07-31
10-Q 2014-03-29 Filed 2014-05-01
10-Q 2013-12-28 Filed 2014-01-31
10-K 2013-09-28 Filed 2013-11-22
10-Q 2013-06-29 Filed 2013-08-01
10-Q 2013-03-30 Filed 2013-05-02
10-Q 2012-12-29 Filed 2013-02-01
10-K 2012-09-29 Filed 2012-11-19
10-Q 2012-06-30 Filed 2012-08-02
10-Q 2012-03-31 Filed 2012-05-03
10-Q 2011-12-31 Filed 2012-02-02
10-K 2011-10-01 Filed 2011-11-17
10-Q 2011-07-02 Filed 2011-08-05
10-Q 2011-04-02 Filed 2011-05-05
10-Q 2011-01-01 Filed 2011-02-04
10-K 2010-10-02 Filed 2010-11-19
10-Q 2010-07-03 Filed 2010-08-06
10-Q 2010-04-03 Filed 2010-05-04
10-Q 2010-01-02 Filed 2010-02-04
8-K 2020-04-29
8-K 2020-04-22
8-K 2020-04-02
8-K 2020-03-23
8-K 2020-03-02
8-K 2020-02-12
8-K 2020-01-22
8-K 2019-10-23
8-K 2019-08-20
8-K 2019-07-17
8-K 2019-05-15
8-K 2019-04-17
8-K 2019-02-13
8-K 2019-01-16
8-K 2018-10-24
8-K 2018-07-18
8-K 2018-06-15
8-K 2018-04-25
8-K 2018-03-13
8-K 2018-02-14
8-K 2018-01-17

PLXS 10Q Quarterly Report

Part I. Financial Information
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 6. Exhibits
EX-31.1 plxsq2f20exhibit311.htm
EX-31.2 plxsq2f20exhibit312.htm
EX-32.1 plxsq2f20exhibit321.htm
EX-32.2 plxsq2f20exhibit322.htm
EX-99.1 plxsq2f20exhibit991.htm

Plexus Earnings 2020-04-04

Balance SheetIncome StatementCash Flow
2.11.71.30.80.40.02012201420172020
Assets, Equity
0.90.70.50.30.1-0.12012201420172020
Rev, G Profit, Net Income
0.20.10.0-0.0-0.1-0.22012201420172020
Ops, Inv, Fin

Document
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________________________________________________________________________________________________________________
FORM 10-Q
____________________________________________________________________________________________________________________________________
(Mark One)
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 4, 2020
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
____________________________________________________________________________________________________________________________________
plxslogo10q.gif
PLEXUS CORP.
(Exact name of registrant as specified in charter)
____________________________________________________________________________________________________________________________________
Wisconsin
 
39-1344447
(State or other jurisdiction of incorporation)
 
(I.R.S. Employer Identification No.)
One Plexus Way
Neenah, Wisconsin 54957
(Address of principal executive offices) (Zip Code)
Telephone Number (920969-6000
(Registrant’s telephone number, including Area Code) 
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol
Name of each exchange on which registered
Common Stock, $0.01 par value
PLXS
The Nasdaq Global Select Market
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
x
Accelerated filer
Non-accelerated filer  
Smaller reporting company
Emerging growth company
 
 
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 is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  
As of May 5, 2020, there were 29,186,367 shares of common stock outstanding.    



PLEXUS CORP.
TABLE OF CONTENTS
April 4, 2020
 
 
 



PART I.     FINANCIAL INFORMATION
ITEM 1.    FINANCIAL STATEMENTS

PLEXUS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(in thousands, except per share data)
Unaudited

 
 
Three Months Ended
 
Six Months Ended
 
 
April 4,
2020
 
March 30,
2019
 
April 4,
2020
 
March 30,
2019
Net sales
 
$
767,364

 
$
789,051

 
$
1,619,773

 
$
1,554,595

Cost of sales
 
705,919

 
718,415

 
1,479,138

 
1,411,576

Gross profit
 
61,445

 
70,636

 
140,635

 
143,019

Selling and administrative expenses
 
38,233

 
37,462

 
77,489

 
72,894

Restructuring and impairment charges
 
6,003

 

 
6,003

 

Operating income
 
17,209

 
33,174

 
57,143

 
70,125

Other income (expense):
 
 
 
 
 
 
 
 
Interest expense
 
(3,814
)
 
(3,145
)
 
(7,946
)
 
(5,394
)
Interest income
 
533

 
440

 
1,178

 
965

Miscellaneous, net
 
154

 
(1,773
)
 
(2,019
)
 
(2,885
)
Income before income taxes
 
14,082

 
28,696

 
48,356

 
62,811

Income tax expense
 
1,156

 
3,938

 
4,424

 
15,827

Net income
 
$
12,926

 
$
24,758

 
$
43,932

 
$
46,984

Earnings per share:
 
 
 
 
 
 
 
 
Basic
 
$
0.44

 
$
0.81

 
$
1.50

 
$
1.52

Diluted
 
$
0.43

 
$
0.79

 
$
1.46

 
$
1.48

Weighted average shares outstanding:
 
 
 
 
 
 
 
 
Basic
 
29,291

 
30,603

 
29,216

 
31,003

Diluted
 
29,925

 
31,385

 
29,999

 
31,836

Comprehensive (loss) income:
 
 
 
 
 
 
 
 
Net income
 
$
12,926

 
$
24,758

 
$
43,932

 
$
46,984

Other comprehensive (loss) income :
 
 
 
 
 
 
 
 
Derivative instrument fair value adjustment
 
(6,539
)
 
1,984

 
(4,316
)
 
2,362

     Foreign currency translation adjustments
 
(7,327
)
 
515

 
(2,123
)
 
(1,356
)
          Other comprehensive (loss) income :
 
(13,866
)
 
2,499

 
(6,439
)
 
1,006

Total comprehensive (loss) income
 
$
(940
)
 
$
27,257

 
$
37,493

 
$
47,990

The accompanying notes are an integral part of these condensed consolidated financial statements.


3


PLEXUS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
Unaudited

 
 
April 4,
2020
 
September 28,
2019
ASSETS
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
225,830

 
$
223,761

Restricted cash
 
1,458

 
2,493

Accounts receivable, net of allowances of $4,642 and $1,537, respectively
 
462,812

 
488,284

Contract assets
 
111,277

 
90,841

Inventories, net
 
765,818

 
700,938

Prepaid expenses and other
 
27,537

 
31,974

Total current assets
 
1,594,732

 
1,538,291

Property, plant and equipment, net
 
381,668

 
384,224

Operating lease right-of-use assets
 
74,371

 

Deferred income taxes
 
14,071

 
13,654

Other assets
 
30,356

 
64,714

Total non-current assets
 
500,466

 
462,592

Total assets
 
$
2,095,198

 
$
2,000,883

 
 
 
 
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
 
Current liabilities:
 
 
 
 
Current portion of long-term debt and finance lease obligations
 
$
107,880

 
$
100,702

Accounts payable
 
483,441

 
444,944

Customer deposits
 
136,545

 
139,841

Accrued salaries and wages
 
53,199

 
73,555

Other accrued liabilities
 
119,792

 
106,461

Total current liabilities
 
900,857

 
865,503

Long-term debt and finance lease obligations, net of current portion
 
186,327

 
187,278

Long-term accrued income taxes payable
 
53,899

 
59,572

Long-term operating lease liabilities
 
39,617

 

Deferred income taxes payable
 
6,363

 
5,305

Other liabilities
 
15,577

 
17,649

Total non-current liabilities
 
301,783

 
269,804

Total liabilities
 
1,202,640

 
1,135,307

Commitments and contingencies
 

 

Shareholders’ equity:
 
 
 
 
Preferred stock, $.01 par value, 5,000 shares authorized, none issued or outstanding
 

 

Common stock, $.01 par value, 200,000 shares authorized, 53,414 and 52,917 shares issued, respectively, and 29,186 and 29,004 shares outstanding, respectively
 
534

 
529

Additional paid-in capital
 
607,446

 
597,401

Common stock held in treasury, at cost, 24,228 and 23,913 shares, respectively
 
(912,731
)
 
(893,247
)
Retained earnings
 
1,221,532

 
1,178,677

Accumulated other comprehensive loss
 
(24,223
)
 
(17,784
)
Total shareholders’ equity
 
892,558

 
865,576

Total liabilities and shareholders’ equity
 
$
2,095,198

 
$
2,000,883

The accompanying notes are an integral part of these condensed consolidated financial statements.

4


PLEXUS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(in thousands)
Unaudited

 
 
Three Months Ended
 
Six Months Ended
 
 
April 4,
2020
 
March 30,
2019
 
April 4,
2020
 
March 30,
2019
Common stock - shares outstanding
 
 
 
 
 
 
 
 
Beginning of period
 
29,222

 
30,992

 
29,004

 
31,838

Exercise of stock options and vesting of other stock awards
 
189

 
241

 
498

 
265

Treasury shares purchased
 
(225
)
 
(992
)
 
(316
)
 
(1,862
)
End of period
 
29,186

 
30,241

 
29,186

 
30,241

 
 
 
 
 
 
 
 
 
Total stockholders' equity, beginning of period
 
$
908,372

 
$
905,163

 
$
865,576

 
$
921,143

Common stock - par value
 
 
 
 
 
 
 
 
Beginning of period
 
532

 
526

 
529

 
526

Exercise of stock options and vesting of other stock awards
 
2

 
2

 
5

 
2

End of period
 
534

 
528

 
534

 
528

Additional paid-in capital
 
 
 
 
 
 
 
 
Beginning of period
 
609,168

 
587,011

 
597,401

 
581,488

Stock-based compensation expense
 
5,779

 
5,176

 
10,825

 
9,929

Exercise of stock options and vesting of other stock awards, including tax benefits
 
(7,501
)
 
(5,908
)
 
(780
)
 
(5,138
)
End of period
 
607,446

 
586,279

 
607,446

 
586,279

Treasury stock
 
 
 
 
 
 
 
 
Beginning of period
 
(899,577
)
 
(761,189
)
 
(893,247
)
 
(711,138
)
Treasury shares purchased
 
(13,154
)
 
(56,246
)
 
(19,484
)
 
(106,297
)
End of period
 
(912,731
)
 
(817,435
)
 
(912,731
)
 
(817,435
)
Retained earnings
 
 
 
 
 
 
 
 
Beginning of period
 
1,208,606

 
1,092,287

 
1,178,677

 
1,062,246

Net income
 
12,926

 
24,758

 
43,932

 
46,984

Cumulative effect adjustment for adoption of new accounting pronouncements (1)
 

 

 
(1,077
)
 
7,815

End of period
 
1,221,532

 
1,117,045

 
1,221,532

 
1,117,045

Accumulated other comprehensive (loss) income
 
 
 
 
 
 
 
 
Beginning of period
 
(10,357
)
 
(13,472
)
 
(17,784
)
 
(11,979
)
Other comprehensive (loss) income
 
(13,866
)
 
2,499

 
(6,439
)
 
1,006

End of period
 
(24,223
)
 
(10,973
)
 
(24,223
)
 
(10,973
)
Total stockholders' equity, end of period
 
$
892,558

 
$
875,444

 
$
892,558

 
$
875,444

(1) See Note 1, "Basis of Presentation," for a discussion of recently adopted accounting pronouncements.
The accompanying notes are an integral part of these condensed consolidated financial statements.

5


PLEXUS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Unaudited

 
 
Six Months Ended
 
 
April 4,
2020
 
March 30,
2019
Cash flows from operating activities
 
 
 
 
Net income
 
$
43,932

 
$
46,984

Adjustments to reconcile net income to net cash flows from operating activities:
 
 
 
 
Depreciation and amortization
 
27,938

 
25,468

Deferred income taxes
 
2,226

 
1,622

Share-based compensation expense
 
10,825

 
9,929

Provision for allowance for doubtful accounts
 
3,402

 

Asset impairment charges
 
3,054

 

Other, net
 
(13
)
 
92

Changes in operating assets and liabilities, excluding impacts of acquisition:
 
 
 
 
Accounts receivable
 
21,671

 
(50,717
)
Contract assets
 
(20,300
)
 
(10,298
)
Inventories
 
(65,662
)
 
(77,917
)
Other current and noncurrent assets
 
7,619

 
(4,367
)
Accrued income taxes payable
 
(17,050
)
 
(824
)
Accounts payable
 
41,595

 
(28,187
)
Customer deposits
 
(3,049
)
 
38,197

Other current and noncurrent liabilities
 
(10,780
)
 
15,486

Cash flows provided by (used in) operating activities
 
45,408

 
(34,532
)
Cash flows from investing activities
 
 
 
 
Payments for property, plant and equipment
 
(30,679
)
 
(54,556
)
Proceeds from sales of property, plant and equipment
 
694

 
93

Business acquisition
 

 
1,180

Cash flows used in investing activities
 
(29,985
)
 
(53,283
)
Cash flows from financing activities
 
 
 
 
Borrowings under debt agreements
 
335,694

 
667,025

Payments on debt and finance lease obligations
 
(329,756
)
 
(581,360
)
Repurchases of common stock
 
(19,484
)
 
(106,297
)
Proceeds from exercise of stock options
 
9,850

 
1,264

Payments related to tax withholding for share-based compensation
 
(10,625
)
 
(6,400
)
Cash flows used in financing activities
 
(14,321
)
 
(25,768
)
Effect of exchange rate changes on cash and cash equivalents
 
(68
)
 
256

Net increase (decrease) in cash and cash equivalents and restricted cash
 
1,034

 
(113,327
)
Cash and cash equivalents and restricted cash:
 
 
 
 
Beginning of period
 
226,254

 
297,686

End of period
 
$
227,288

 
$
184,359

The accompanying notes are an integral part of these condensed consolidated financial statements.


6


PLEXUS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED APRIL 4, 2020 AND MARCH 30, 2019
Unaudited

1.    Basis of Presentation
Basis of Presentation: 
The accompanying Condensed Consolidated Financial Statements included herein have been prepared by Plexus Corp. and its subsidiaries (together “Plexus” or the “Company”) without audit and pursuant to the rules and regulations of the United States (“U.S.”) Securities and Exchange Commission (“SEC”). The accompanying Condensed Consolidated Financial Statements reflect all adjustments, which include normal recurring adjustments necessary for the fair statement of the consolidated financial position of the Company as of April 4, 2020 and September 28, 2019, the results of operations and shareholders' equity for the three and six months ended April 4, 2020 and March 30, 2019, and the cash flows for the same six month periods.
The Company’s fiscal year ends on the Saturday closest to September 30. The Company 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 includes 53 weeks; therefore, the first quarter of fiscal 2020 included 14 weeks while all other fiscal quarters presented herein included 13 weeks.
Certain information and footnote disclosures, normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States of America ("U.S. GAAP"), have been condensed or omitted pursuant to the SEC’s rules and regulations dealing with interim financial statements. However, the Company believes that the disclosures made in the Condensed Consolidated Financial Statements included herein are adequate to make the information presented not misleading. It is suggested that these Condensed Consolidated Financial Statements be read in conjunction with the Consolidated Financial Statements and notes thereto included in the Company’s 2019 Annual Report on Form 10-K.
The preparation of financial statements requires management to make estimates and assumptions that affect the amounts reported in the Condensed 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.
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. For lessors, the guidance modifies the classification criteria and the accounting for sales-type and direct financing leases. ASU 2016-02 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. The Company recognized right-of-use assets and operating lease liabilities on its Consolidated Balance Sheets, but the standard did not have a material impact on its Consolidated Statements of Comprehensive Income or Consolidated Statements of Cash Flows.
ASC 842 provides optional practical expedients to assist with transition to the new standard. Management elected the package of practical expedients offered, which allows entities to not reassess: (i) whether any contracts prior to the adoption date are or contain leases, (ii) lease classification, and (iii) whether capitalized initial direct costs continue to meet the definition of initial

7


direct costs under the new guidance.  For all new and modified leases after adoption, management elected the short-term lease recognition exemption for all of the Company’s leases that qualify, in addition to the practical expedient to not separate lease and nonlease components. Refer to Note 7, "Leases," for further information.
In August 2017, the FASB issued ASU 2017-12 related to the accounting for hedging activities. The pronouncement expands and refines hedge accounting, aligns the recognition and presentation of the effects of hedging instruments and hedge items in the financial statements, and includes certain targeted improvements to ease the application of current guidance related to the assessment of hedge effectiveness. The Company adopted this guidance during the first quarter of fiscal 2020 with no material impact to the Company's Consolidated Financial Statements; however, the impact of the new standard on future periods will depend on the facts and circumstances of future transactions.
Recently Issued Accounting Pronouncements Not Yet Adopted:
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. This guidance is effective for the Company beginning in the first quarter of fiscal year 2021. Early adoption is permitted. The Company is currently in the process of assessing the impact of the adoption of the new standard on its Consolidated Financial Statements.
In March 2020, the FASB issued ASU 2020-04, which provides guidance in accounting for contracts, hedging relationships, and other transactions that are affected by reference rate reform. The optional expedients and exceptions in this guidance are allowed to be applied by the Company starting with the second quarter of fiscal year 2020. The Company is currently in the process of assessing the impacts of the adoption on its Consolidated Financial Statements.
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 April 4, 2020 and September 28, 2019 consisted of the following (in thousands):
 
 
April 4,
2020
 
September 28,
2019
Raw materials
 
$
634,357

 
$
577,545

Work-in-process
 
59,021

 
49,315

Finished goods
 
72,440

 
74,078

Total inventories, net
 
$
765,818

 
$
700,938


In certain circumstances, per contractual terms, customer deposits are received by the Company to offset obsolete and excess inventory risks. The total amount of customer deposits related to inventory and included within current liabilities on the accompanying Condensed Consolidated Balance Sheets as of April 4, 2020 and September 28, 2019 was $131.7 million and $136.5 million, respectively.









8


3.    Debt, Finance Lease Obligations and Other Financing
Debt, finance lease obligations and other financing as of April 4, 2020 and September 28, 2019 consisted of the following (in thousands):
 
 
April 4,
2020
 
September 28,
2019
4.05% Senior Notes, due June 15, 2025
 
$
100,000

 
$
100,000

4.22% Senior Notes, due June 15, 2028
 
50,000

 
50,000

Borrowings under the credit facility
 
101,000

 
95,000

Finance lease and other financing obligations
 
44,574

 
44,492

Unamortized deferred financing fees
 
(1,367
)
 
(1,512
)
Total obligations
 
294,207


287,980

Less: current portion
 
(107,880
)
 
(100,702
)
Long-term debt and finance lease obligations, net of current portion
 
$
186,327

 
$
187,278


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 April 4, 2020, 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 (the "Prior Credit Facility") by entering into a new 5-year senior unsecured revolving credit facility (collectively with the Prior 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 the six months ended April 4, 2020, the highest daily borrowing was $164.5 million; the average daily borrowings were $122.2 million. The Company borrowed $333.7 million and repaid $327.7 million of revolving borrowings under the Credit Facility during the six months ended April 4, 2020. As of April 4, 2020, the Company was in compliance with all financial covenants relating to the Credit Facility, which are generally consistent with those in the 2018 NPA previously discussed. The Company is required to pay a commitment fee on the daily unused revolver credit commitment based on the Company's leverage ratio; the fee was 0.125% as of April 4, 2020. To further ensure our ability to meet our working capital and fixed capital requirements, the Company entered into Amendment No. 1 to the Credit Facility on April 29, 2020, among the Company, the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent (the “Agent”) in response to the COVID-19 outbreak. The agreement amended the Credit Facility among the Company, the other subsidiary borrowers from time to time party thereto, the lenders from time to time party thereto and the Agent (the “Existing Credit Facility”; the Existing Credit Facility as amended by the Amendment, the “Credit Facility”). Refer to Note 17, "Subsequent Event," for further information regarding the Amendment.
The fair value of the Company’s debt, excluding finance leases, was $249.5 million and $252.3 million as of April 4, 2020 and September 28, 2019, respectively. The carrying value of the Company's debt, excluding finance leases and other financing obligations, was $251.0 million and $245.0 million as of April 4, 2020 and September 28, 2019, respectively. If measured at fair value in the financial statements, the Company's debt would be classified as Level 2 in the fair value hierarchy. Refer to Note 4, "Derivatives," for further information regarding the Company's fair value calculations and classifications.

4.    Derivatives
All derivatives are recognized in the accompanying Condensed 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

9


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 Condensed Consolidated Balance Sheets until earnings are affected by the variability of the cash flows. In the next twelve months, the Company estimates that $4.9 million of unrealized losses, net of tax, related to cash flow hedges will be reclassified from other comprehensive (loss) income 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 Condensed Consolidated Statements of Comprehensive (Loss) 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 $79.8 million as of April 4, 2020, and $80.0 million as of September 28, 2019. 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 $4.9 million liability as of April 4, 2020, and a $0.6 million liability as of September 28, 2019.
The Company had additional forward currency exchange contracts outstanding as of April 4, 2020, with a notional value of $23.8 million; there were $34.4 million such contracts outstanding as of September 28, 2019. 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 Condensed Consolidated Balance Sheets as either a current or long-term asset or liability, depending on the term, and as an element of "Miscellaneous, net." The total fair value of these derivatives was a $0.4 million liability as of April 4, 2020, and a $0.9 million asset as of September 28, 2019.
The tables below present information regarding the fair values of derivative instruments and the effects of derivative instruments on the Company’s Condensed Consolidated Financial Statements:
Fair Values of Derivative Instruments (in thousands)
  
 
Derivative Assets
 
Derivative Liabilities
  
 
  
 
April 4,
2020
 
September 28,
2019
 
  
 
April 4,
2020
 
September 28,
2019
Derivatives designated as hedging instruments
 
Balance sheet
classification
 
Fair Value
 
Fair Value
 
Balance sheet
classification
 
Fair Value
 
Fair Value
Foreign currency forward contracts
 
Prepaid expenses and other
 
$

 
$
156

 
Other accrued liabilities
 
$
4,902

 
$
798


Fair Values of Derivative Instruments (in thousands)
  
 
Derivative Assets
 
Derivative Liabilities
  
 
  
 
April 4,
2020
 
September 28,
2019
 
  
 
April 4,
2020
 
September 28,
2019
Derivatives not designated as hedging instruments
 
Balance sheet
classification
 
Fair Value
 
Fair Value
 
Balance sheet
classification
 
Fair Value
 
Fair Value
Foreign currency forward contracts
 
Prepaid expenses and other
 
$
119

 
$
912

 
Other accrued liabilities
 
$
512

 
$
54


The Effect of Cash Flow Hedge Accounting on Accumulated Other Comprehensive (Loss) Income ("OCL") (in thousands)
for the Three Months Ended
Derivatives in cash flow hedging relationships
 
Amount of (Loss) Gain Recognized in OCL on Derivatives
 
April 4, 2020
 
March 30, 2019
Foreign currency forward contracts
 
$
(6,325
)
 
$
1,241



10


Derivative Impact on Gain (Loss) Recognized in Condensed Consolidated Statements of Comprehensive (Loss) Income (in thousands)
for the Three 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
 
 
April 4, 2020
 
March 30, 2019
Foreign currency forward contracts
 
Cost of sales
 
$
204

 
$
(670
)
Foreign currency forward contracts
 
Selling and administrative expenses
 
$
10

 
$
(73
)

Derivatives not designated as hedging instruments
 
Location of (Loss) Gain Recognized on Derivatives in Income
 
Amount of (Loss) Gain on Derivatives Recognized in Income
 
 
April 4, 2020
 
March 30, 2019
Foreign currency forward contracts
 
Miscellaneous, net
 
$
(223
)
 
$
843


The Effect of Cash Flow Hedge Accounting on Accumulated Other Comprehensive (Loss) Income ("OCL") (in thousands)
for the Six Months Ended
Derivatives in cash flow hedging relationships
 
Amount of (Loss) Gain Recognized in OCL on Derivatives
 
April 4, 2020
 
March 30, 2019
Foreign currency forward contracts
 
$
(4,140
)
 
$
853


Derivative Impact on Gain (Loss) Recognized in Condensed Consolidated Statements of Comprehensive (Loss) Income (in thousands)
for the Six 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
 
 
April 4, 2020
 
March 30, 2019
Foreign currency forward contracts
 
Cost of sales
 
$
177

 
$
(1,354
)
Foreign currency forward contracts
 
Selling and administrative expenses
 
$
(1
)
 
$
(155
)

Derivatives not designated as hedging instruments
 
Location of (Loss) Gain Recognized on Derivatives in Income
 
Amount of (Loss) Gain on Derivatives Recognized in Income
 
 
April 4, 2020
 
March 30, 2019
Foreign currency forward contracts
 
Miscellaneous, net
 
$
(633
)
 
$
1,630


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.
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.




11


The following table lists the fair values of liabilities of the Company’s derivatives as of April 4, 2020 and September 28, 2019, by input level:
Fair Value Measurements Using Input Levels (Liability)/Asset (in thousands)
April 4, 2020
 
Level 1
 
Level 2
 
Level 3
 
Total
Derivatives
 
 
 
 
 
 
 
 
Foreign currency forward contracts
 
$

 
$
(5,295
)
 
$

 
$
(5,295
)
 
 
 
 
 
 
 
 
 
September 28, 2019
 
 
 
 
 
 
 
 
Derivatives
 
 
 
 
 
 
 
 
Foreign currency forward contracts
 
$

 
$
216

 
$

 
$
216


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 and interest rate forward curves.

5.    Income Taxes
Income tax expense for the three and six months ended April 4, 2020 was $1.2 million and $4.4 million, respectively, compared to $3.9 million and $15.8 million for the three and six months ended March 30, 2019, respectively.
The effective tax rate for the three and six months ended April 4, 2020 was 8.2% and 9.1%, respectively, compared to the effective tax rates of 13.7% and 25.2% for the three and six months ended March 30, 2019, respectively. The effective tax rate for the three and six months ended April 4, 2020 decreased from the effective tax rate for the three and six months ended March 30, 2019, primarily due to the geographic distribution of pre-tax book income, the additional impact of the U.S. Tax Cuts & Jobs Act of $7.0 million recorded during the three months ended December 29, 2018, the $0.6 million tax benefit related to restructuring recorded during the three months ended April 4, 2020 and the $0.8 million benefit for special tax items recorded during the three months ended January 4, 2020. The $0.8 million benefit during the three months ended January 4, 2020 was comprised of a $1.9 million benefit related to guidance issued by the U.S. Department of the Treasury regarding foreign tax credits partially offset by $1.1 million of special tax items.
The Coronavirus Aid, Relief, and Economic Security Act was signed into law on March 27, 2020. The Company does not expect a material impact from the law.
There were no material additions to the amount of unrecognized tax benefits recorded for uncertain tax positions as of April 4, 2020. The Company recognizes accrued interest and penalties on uncertain tax positions as a component of income tax expense. The amount of interest and penalties recorded for the three and six months ended April 4, 2020 was not material.
One or more 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 is not currently under examination by taxing authorities in the U.S. The Company is under audit in various foreign jurisdictions but settlement is not expected to have a material impact.
The Company maintains valuation allowances when it is more likely than not that all or a portion of a net deferred tax asset will not be realized. During the three months ended April 4, 2020, the Company continued to record a full valuation allowance against its net deferred tax assets in certain jurisdictions within the EMEA segment and a partial valuation against its net deferred tax assets in certain jurisdictions within the AMER segment, as it was more likely than not that these assets would not be fully realized based primarily on historical performance. The Company will continue to provide a valuation allowance against its net deferred tax assets in each of the applicable jurisdictions going forward until it determines it is more likely than not that the deferred tax assets will be realized.





12


6.    Earnings Per Share
The following is a reconciliation of the amounts utilized in the computation of basic and diluted earnings per share for the three and six months ended April 4, 2020 and March 30, 2019 (in thousands, except per share amounts):
 
 
Three Months Ended
 
Six Months Ended
 
 
April 4,
2020
 
March 30,
2019
 
April 4,
2020
 
March 30,
2019
Net income
 
$
12,926

 
$
24,758

 
$
43,932

 
$
46,984

Basic weighted average common shares outstanding
 
29,291

 
30,603

 
29,216

 
31,003

Dilutive effect of share-based awards and options outstanding
 
634

 
782

 
783

 
833

Diluted weighted average shares outstanding
 
29,925

 
31,385

 
29,999

 
31,836

Earnings per share:
 
 
 
 
 
 
 
 
Basic
 
$
0.44

 
$
0.81

 
$
1.50

 
$
1.52

Diluted
 
$
0.43

 
$
0.79

 
$
1.46

 
$
1.48


For the three and six months ended April 4, 2020, share-based awards for approximately 0.3 million and 0.1 million shares were not included in the computation of diluted earnings per share as they were antidilutive.
For both the three and six months ended March 30, 2019, share-based awards for approximately 0.1 million shares were not included in the computation of diluted earnings per share as they were antidilutive.
See also Note 12, "Shareholders' Equity," for information regarding the Company's share repurchase plans.

7.    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 41 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”) assets 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.

Upon adoption of ASU 2016-02, the Company recorded $45.5 million of right-of-use assets and lease liabilities, related to its existing operating lease portfolio. The Company also reclassified amounts previously held on the balance sheet to operating right-of-use assets and operating lease liabilities upon adoption due to existing arrangements subject to the new standard, including $30.2 million of prepaid leases in other non-current assets. The accounting for the Company’s finance leases remained substantially unchanged. In addition, the company recognized a $1.1 million reduction to retained earnings as a result of two existing build-to-suit arrangements for the facilities in Guadalajara, Mexico that were reassessed to be finance leases under the new standard. The adoption of this new standard did not have a material impact on the Condensed Consolidated Statements of Cash Flows or Condensed Consolidated Statements of Comprehensive (Loss) Income.




13


As a result of the adoption, the following adjustments were made to the opening balances of the Company's Condensed Consolidated Balance Sheets (in thousands):
 
September 28, 2019
 
Impacts due to adoption of Topic 842
 
September 29, 2019
ASSETS
 
 
 
 
 
   Prepaid expenses and other
$
31,974

 
$
(170
)
 
$
31,804

   Operating right-of-use assets

 
75,790

 
75,790

   Property, plant and equipment, net
384,224

 
(1,833
)
 
382,391

   Deferred income taxes
13,654

 
432

 
14,086

   Other non-current assets
64,714

 
(30,193
)
 
34,521

LIABILITIES AND SHAREHOLDERS' EQUITY
   Other accrued liabilities
$
106,461

 
$
7,939

 
$
114,400

   Long-term debt and finance lease obligations, net of current portion
187,278

 
(207
)
 
187,071

   Long-term operating lease liabilities

 
37,371

 
37,371

   Retained earnings
1,178,677

 
(1,077
)
 
1,177,600