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Plexus Corp. announced that recent U.S. tax reform will enable it to tax-efficiently repatriate approximately $500 million of offshore cash into the United States. As a result, Plexus has established a revised capital allocation plan that is intended to fund growth investments, reduce debt, reward our employees and enhance shareholder value. A summary of the capital allocation plan is summarized below:
Plexus expects to pay down its existing debt balance held under its revolving credit facility. Eliminating the current debt balance will provide Plexus the full capacity of the revolving credit facility to support future growth investments.
Plexus has $175 million of senior notes that mature in June 2018. To further reduce debt, Plexus intends to refinance up to $150 million of the senior notes in an effort to lower interest expense while maintaining leverage on the balance sheet.
In June 2016, Plexus announced a three year, $150 million share repurchase authorization (referred to as the “2016 Share Repurchase Plan”). Under this authorization, Plexus has purchased approximately $44 million of shares through its fiscal first quarter 2018. Under Plexus’ revised capital allocation plan, Plexus intends to accelerate the repurchases under the 2016 Share Repurchase Plan and complete the remaining $106 million of authorized purchases in fiscal 2018 through open market purchases.
Plexus’ Board of Directors has approved a new share repurchase authorization, commencing upon completion of the 2016 Share Repurchase Plan, in the amount of $200 million. Shares would be purchased through the open market, on a relatively consistent basis, with the intent to complete the repurchases in fiscal 2019.
In order to reward employees for their contributions towards Plexus’ success, Plexus will provide existing, full-time, non-executive employees a one-time cash bonus. This bonus will be provided in the fiscal second quarter to nearly 16,000 employees, totaling approximately $13 million.
Todd Kelsey, president and CEO, commented, “We view the recent U.S. tax reform as immensely beneficial for Plexus. Through the reform, Plexus now has the ability to repatriate our current and future offshore cash in a significantly more tax-efficient manner. Access to this cash will enable us to support our growth prospects, improve our capital structure and reward our shareholders. Further, I am pleased to share this benefit with our employees. It is their commitment to Customer Service Excellence that has enabled Plexus to be an industry leader.”
Patrick Jermain, senior vice president and CFO, commented, “We believe that our new capital allocation plan provides the opportunity to create significant value for our shareholders by allowing us to reduce debt while returning cash to our shareholders. As a result of our ability to better access our cash in an ongoing manner, we will be in a position to regularly return a targeted amount of our free cash flow to shareholders.”
Mr. Kelsey concluded, “Investing in the company to meet the growing demands of our customers is a top priority for us. Over the past year we have announced investments in our engineering business, including new facilities in Neenah, Wisconsin and Boulder, Colorado and an expanded space within our Oradea, Romania facility. Further, we announced the acquisition of a new manufacturing facility adjacent to our Riverside facility in Penang, Malaysia. Given our current revenue growth expectations, we are optimistic that there will be additional opportunities, in the U.S. and across the globe, to support customer needs and further expand our business.”
Since 1979, Plexus has been partnering with companies to create the products that build a better world. We are a team of over 16,000, providing global Design and Development, Supply Chain Solutions, New Product Introduction, Manufacturing, and Aftermarket Services. Plexus is an industry leader that specializes in serving customers with complex products used in demanding regulatory environments. With a culture built around innovation and customer service, Plexus’ teams create customized end-to-end solutions to assure the realization of the most intricate products. For more information about Plexus, click here.