Plexus (PLXS) 8-K Results of Operations and Financial Condition

PLEXUS ANNOUNCES...

• ANOTHER QUARTER OF RECORD REVENUES AND EARNINGS

— Revenues of $397.4 Million

— Net Income of $25.1 Million

— Diluted EPS of $0.53

• PLANNED CLOSURE OF MANUFACTURING SITE IN MALDON, ENGLAND

• GUIDANCE FOR FOURTH FISCAL QUARTER

NEENAH, WI. July 26, 2006-Plexus Corp. (NASDAQ:PLXS) today announced that revenues in its third fiscal quarter ended July 1, 2006 increased 27% to a record $397.4 million from $313.7 million in the comparable prior-year period, which ended July 2, 2005. Net income in the third fiscal quarter of 2006 was a record $25.1 million, or the equivalent of $0.53 per diluted share, which included $0.01 per share for stock-based compensation expense. The prior-year period’s net loss was $21.5 million, or $0.50 per diluted share, which included the impairment of goodwill and restructuring costs of $27.6 million ($27.5 million after tax), or the equivalent of $0.66 per diluted share. Although there were no net restructuring costs in the current quarter, a reconciliation of the GAAP net income and EPS to the non-GAAP statements for the prior-year period is attached.

Dean Foate, President and CEO commented, “As we anticipated, sequential revenue growth in the third quarter was exceptionally strong, driven by production for an important new program in the Defense sector and renewed strength in the Wireline/Networking sector. Gross margins expanded 50 basis points from the previous quarter to 11.5% of revenues, and operating margins expanded an even greater 75 basis points to 6.0% of revenues. Third quarter’s annualized after-tax return on capital employed advanced to 34.0 % from the prior quarter’s 26.9%.”

Mr. Foate added, “We currently expect revenues in the fourth fiscal quarter to be in the range of $390 million to $405 million, which would give us top-line growth for the full year of 18.3 to 19.5

percent. We anticipate diluted earnings per share, before any restructuring or special items, to be in the range of $0.46 to $0.50, including about $0.03 for stock-based compensation and $0.02 for the initial impact of FASB Interpretation No.47 “FIN 47” concerning conditional asset retirement obligations. Our slightly lower earnings outlook for the fourth quarter, compared to the third quarter, reflects an anticipated shift toward a less favorable revenue mix, only partially offset by lower SG&A expense, as well as the higher stock-based compensation expense and the charge for FIN 47, noted above.”

Gordon Bitter, Chief Financial Officer, commented on the third quarter’s restructuring action, “The Maldon, England facility will be closed to reduce manufacturing capacity in the U.K. Programs currently manufactured in Maldon will be transitioned to the company’s facility in Kelso, Scotland by the end of calendar 2006 or early in 2007. The total cost of this action is estimated at $1.0 million of which approximately $0.9 million will be cash payments for severance and retention bonuses, and the remaining $0.1 million will be a non-cash charge for asset impairments. Approximately 77 employees are involved. The initial $0.4 million of this restructuring charge for severance was recognized in the third fiscal quarter, but the charge was offset by favorable adjustments of estimates for earlier restructuring actions.”

Turning to the balance sheet, Bitter added, “The cash conversion cycle improved by three days, despite a two-day extension in average days in receivables due to the back-ending of sales within the quarter. Cash and investments increased $20.1 million over the prior quarter-end to $169.8 million.”

Plexus provides non-GAAP supplemental information. These non-GAAP income statements exclude transactions that are not expected to have an effect on future operations. Such transactions include restructuring and asset impairment costs, as well as the establishment of valuation allowances for deferred tax assets. These non-GAAP financial data are provided to facilitate meaningful period-to-period comparisons of underlying operational performance by eliminating infrequent or unusual charges. Similar non-GAAP financial measures are used for internal management assessments because such measures provide additional insight into ongoing financial

performance. Please refer to the attached accompanying reconciliations of the GAAP net income and EPS to the non-GAAP supplemental data.

SECTOR BREAKOUT

Plexus reports revenues based on the industry sector breakout set forth in the table below, which reflects the Company’s sales and marketing focus.

Industry	Q3 - Fiscal 2006			Q2 - Fiscal 2006
Wireline/Networking		38	%		37	%
Wireless Infrastructure		6	%		11	%
Medical		25	%		26	%
Industrial/Commercial		17	%		20	%
Defense/Security/Aerospace		14	%		6	%

Fiscal Q3 Highlights

• Top 10 customers comprised 63% of sales during the quarter, up 5 percentage points from the previous quarter.

• Juniper Networks Inc., with 19% of sales, General Electric Corp., with 11% of sales, and an unnamed defense customer with 10% of sales were the only customers representing 10% or more of revenues for the third quarter.

• Cash flow provided by operations was approximately $7.0 million for the quarter.

• Capital expenditures for the quarter were $4.8 million.

• Cash Conversion Cycle:

Cash Conversion Cycle	Q3 – Fiscal 2006	Q2– Fiscal 2006
Days in Accounts Receivable	50 Days	48 Days
Days in Inventory	60 Days	63 Days
Days in Accounts Payable	(60) Days	(58) Days
Annualized Cash Cycle	50 Days	53 Days

Conference Call/Webcast and Replay Information

What:	Plexus Corp.’s Fiscal Q3 Earnings Conference Call
When:	Thursday, July 27, 2006 at 8:30 a.m. Eastern Time
Where:	866-406-5369 or 973-582-2822 with conference ID: Plexus http://www.videonewswire.com/PLXS/072706/ (requires Windows Media Player)
Replay:	The call will be archived until August 3, 2006 at noon Eastern Time http://www.videonewswire.com/PLXS/072706/or via telephone replay at 877-519-4471 or 973-341-3080 PIN: 7564992

For further information, please contact:
Gordon Bitter, CFO
920-722-3451 or email at gordon.bitter@plexus.com

(more)

About Plexus Corp. — The Product Realization Company

Plexus (www.plexus.com) is an award-winning participant in the Electronics Manufacturing Services (EMS) industry, providing product design, test, manufacturing and fulfillment and aftermarket solutions to branded product companies in the Wireline/Networking, Wireless Infrastructure, Medical, Industrial/Commercial and Defense/Security/Aerospace industries.

The Company’s unique Focused Factory manufacturing model and global supply chain solutions are strategically enhanced by value-added product design and engineering services. Plexus specializes in customer programs that require flexibility, scalability, technology and quality.

Plexus provides award-winning customer service to more than 150 branded product companies in North America, Europe and Asia.

Safe Harbor and Fair Disclosure Statement

The statements contained in this release which are guidance or which are not historical facts (such as statements in the future tense and statements including “believe,” “expect,” “intend,” “anticipate,” “target” and similar terms and concepts), including all discussions of periods which are not yet completed, are forward-looking statements that involve risks and uncertainties, including, but not limited to: the economic performance of the electronics, technology and defense industries; the risk of customer delays, changes or cancellations in both ongoing and new programs; the Company’s ability to secure new customers and maintain its current customer base; material cost fluctuations and the adequate availability of components and related parts for production; the effect of changes in average selling prices; the effect of start-up costs of new programs and facilities; the adequacy of restructuring and similar charges as compared to actual expenses; possible unexpected costs and operating disruption in transitioning programs; the effect of general economic conditions and world events (such as terrorism and war in the Middle East); the impact of increased competition; and other risks detailed in the Company’s Securities and Exchange Commission filings.

(Financial tables follow)

PLEXUS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)

	Three Months Ended						Nine Months Ended
	July 1,			July 2,			July 1,			July 2,
	2006			2005			2006			2005
Net sales	$	397,398		$	313,709		$	1,063,615		$	906,675
Cost of sales		351,894			286,572			949,796			831,698
Gross profit		45,504			27,137			113,819			74,977
Operating expenses:
Selling and administrative expenses		21,554			19,298			58,084			56,615
Goodwill impairment		—			26,915			—			26,915
Restructuring and asset impairment costs		—			729			—			12,247
		21,554			46,942			58,084			95,777
Operating income (loss)		23,950			(19,805	)		55,735			(20,800	)
Other income (expense):
Interest expense		(821	)		(878	)		(2,652	)		(2,640	)
Interest income		1,654			698			4,226			1,702
Miscellaneous income (expense)		637			(491	)		656			(299	)
Income (loss) before income taxes		25,420			(20,476	)		57,965			(22,037	)
Income tax expense		328			1,022			579			897
Net income (loss)	$	25,092		$	(21,498	)	$	57,386		$	(22,934	)
Earnings per share:
Basic	$	0.55		$	(0.50	)	$	1.28		$	(0.53	)
Diluted	$	0.53		$	(0.50	)	$	1.24		$	(0.53	)
Weighted average shares outstanding:
Basic		45,848			43,369			44,793			43,291
Diluted		47,274			43,369			46,391			43,291

PLEXUS CORP.
NON-GAAP SUPPLEMENTAL INFORMATION
(in thousands, except per share data)

	Three Months Ended					Nine Months Ended
	July 1,		July 2,			July 1,		July 2,
	2006		2005			2006		2005
	(unaudited)
Net income (loss) — GAAP	$	25,092	$	(21,498	)	$	57,386	$	(22,934	)
Add income tax expense		328		1,022			579		897
Income (loss) before income taxes — GAAP		25,420		(20,476	)		57,965		(22,037	)
Add: Restructuring and impairment costs*		—		27,644			—		39,162
Income (loss) before income taxes and excluding restructuring and impairment costs — Non-GAAP		25,420		7,168			57,965		17,125
Income tax expense — Non-GAAP		328		146			579		942
Net income — Non-GAAP	$	25,092	$	7,022		$	57,386	$	16,183
Earnings per share — Non-GAAP:
Basic	$	0.55	$	0.16		$	1.28	$	0.37
Diluted	$	0.53	$	0.16		$	1.24	$	0.37
Weighted average shares outstanding:
Basic		45,848		43,369			44,793		43,291
Diluted		47,274		43,881			46,391		43,788
* Summary of restructuring and impairment costs
Restructuring and impairment costs:
Goodwill impairment	$	—	$	26,915		$	—	$	26,915
Lease exit costs and other		—		65			—		5,754
Asset impairments		—		11			—		4,303
Severance costs		—		653			—		2,190
Total restructuring and impairment costs	$	—	$	27,644		$	—	$	39,162

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

	July 1,		October 1,
	2006		2005
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	139,750	$	98,727
Short-term investments		30,000		10,000
Accounts receivable		218,128		167,345
Inventories		232,824		180,098
Deferred income taxes		58		127
Prepaid expenses and other		6,260		5,693
Total current assets		627,020		461,990
Property, plant and equipment, net		129,755		123,140
Goodwill, net		7,312		6,995
Other		9,226		8,343
Total assets	$	773,313	$	600,468
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt and capital lease obligations	$	1,245	$	770
Accounts payable		230,303		159,068
Customer deposits		8,787		7,707
Accrued liabilities:
Salaries and wages		32,965		24,052
Other		31,594		31,001
Total current liabilities		304,894		222,598
Long-term debt and capital lease obligations		21,666		22,310
Other liabilities		6,770		13,499
Deferred income taxes		2,945		2,046
Shareholders’ equity:
Common stock, $.01 par value, 200,000 shares authorized, 46,195 and 43,752 shares issued and outstanding, respectively		462		438
Additional paid-in-capital		311,236		273,419
Retained earnings		116,229		58,843
Accumulated other comprehensive income		9,111		7,315
Total shareholders’ equity		437,038		340,015
Total liabilities and shareholders’ equity	$	773,313	$	600,468