Angelo Ninivaggi - Senior Vice President, Chief Administrative Officer, and General Counsel Dean Foate - Chairman, President and Chief Executive Officer Todd Kelsey - Executive Vice President and Chief Operating Officer Pat Jermain - Vice President and Chief Financial Officer.

Brian Alexander - Raymond James Shawn Harrison - Longbow Research Steven Fox - Cross Research Sherri Scribner - Deutsche Bank Matthew Sheerin - Stifel Sean Hannan - Needham & Company Mark Delaney - Goldman Sachs Jim Suva - Citi Todd Schwartzman - Sidoti & Company Amit Daryanani - RBC Capital Markets.

Good morning, ladies and gentleman and welcome to the Plexus Corp. Conference Call regarding its Fiscal Fourth Quarter 2014 Earnings Announcement. My name is Ellen and I will be your operator for today’s call. At this time, all participants are in a listen-only mode. After a brief discussion by management, we will open the conference call for questions.

The conference call is scheduled to last approximately one hour. I would now like to turn the call over to Mr. Angelo Ninivaggi, Plexus’ Senior Vice President, Chief Administrative Officer, and General Counsel.

Angelo?.

Thank you, Ellen. Good morning, everyone and thank you for joining us today.

Before we begin, I should remind everyone that statements made during the call today and information included in the supporting material that is not historical in nature, such as statements in the future tense and statements including believe, expect, intend, plan, anticipate and similar terms are forward-looking statements.

Forward-looking statements are not guarantees since there are inherent difficulties predicting future results and actual results could differ materially from those expressed or implied in the forward-looking statements.

For a list of factors that could cause actual results to differ materially from those discussed, please refer to the company’s periodic SEC filings, particularly the Risk Factors in our Form 10-K for the fiscal year ended September 28, 2013 and the Safe Harbor and Fair Disclosure Statement in yesterday’s press release.

Plexus provides non-GAAP supplemental information such as earnings or margin excluding special items as well as return on invested capital and free cash flow. We present information including special items, because it provides a better indication of core performance for purposes of period-to-period comparisons.

Return on invested capital and free cash flow are used for internal management assessment, because they provide additional insight into our financial performance.

In addition, we provide non-GAAP measures because we believe they offer insight into the metrics that are driving management decisions as well as management’s performance under the test that it sets for itself. For a full reconciliation of non-GAAP supplemental information, please refer to yesterday’s press release and our periodic SEC filings.

We encourage participants on the call this morning to access the live webcast and supporting materials at Plexus’ website at www.plexus.com by clicking the Investor Relations at the top of the page and then Events Calendar.

Joining me today are Dean Foate, Chairman, President and Chief Executive Officer; Todd Kelsey, Executive Vice President and Chief Operating Officer; and Pat Jermain, Vice President and Chief Financial Officer. Let me now turn the call over to Dean Foate.

Dean?.

Thank you, Angelo and good morning everyone. Please advance to Slide 3. Yesterday, after the close of the market, we reported results for our fiscal fourth quarter of 2014. Revenues were a record $666 million, an increase of 7.4% from the prior quarter. Fourth quarter diluted EPS of $0.77 was also strong.

Advancing to Slide 4 for a few comments about our fiscal fourth quarter and its highlights. Our go-to-market teams delivered $170 million of new manufacturing solutions wins well above our target of our $160 million and putting our trailing four quarter wins at $816 million.

Our Engineering Solutions group experienced another solid quarter of new project wins with the result at $20 million. Our operating performance improved quarter-over-quarter. Our operating margin advanced to 4.8%, a 10 basis point improvement.

Our cash cycle improved to 56 days and helped contribute to better than anticipated free cash flow of $23.8 million. Return on invested capital improved to 15.2%, a 60 basis point improvement, representing an economic return of 4.2%. During the quarter, we completed our fiscal 2014 $30 million share repurchase program.

And this month, we announced that our Engineering Solutions group has achieved AS9100 certification at our Neenah Design Center, an important requirement to support innovation in the aerospace and defense industries. Finally, Plexus has been accepted as an applicant member of the electronics industry citizenship coalition.

The largest non-profit coalition devoted to supporting the rights and well-being of employees and communities affected by the global electronics supply chain.

Advancing now to Slide 5 for a few comments about fiscal 2014, fiscal 2014 was a recovery year after a disappointing fiscal 2013 that included weak end market performance in combination with the loss of our largest customer, setting the stage for $284 million growth headwind. Despite the challenge, we grew revenues 6.7% to a record $2.4 billion.

Without the $284 million headwind our underlying growth rate was better than 22%, but unfortunately, we can’t ignore the bad stuff. Finally, we delivered an economic return of 4.2%, which is the spread between our return on invested capital and our weighted average cost of capital.

Considering where we started the year, I am very proud of the approximately 12,000 Plexus employees across the globe that pulled together delivered these strong results. Please advance to Slide 6 for a review of our full year sector performance.

During fiscal 2014, we achieved growth in three of our four market sectors with the strongest growth in Defense/Security/Aerospace and Healthcare/Life Sciences where we have a strong value proposition and the products have longer relative lifecycles.

Our Industrial/Commercial sector growth was less inspiring as a few customers experienced end market challenges and a couple of new opportunities were slow to develop. Networking/Communications did not achieve growth, but performed well considering the $284 million headwind.

Overall, we ended the year with a healthier sector portfolio mix and with our wins performance this past year, a strong portfolio of customers and growth opportunities. Advancing now to our guidance on Slide 7, we are establishing fiscal first quarter 2015 revenue guidance of $630 million to $660 million.

At that level of revenue, we anticipate EPS of $0.68 to $0.74, excluding approximately $0.11 per share of stock-based compensation expense and excluding any special items. Our EPS guidance reflects near-term margin pressure associated with the accelerated ramp of our new facility in Guadalajara, Mexico.

The midpoint of our revenue guidance suggests that our fiscal first quarter will be down approximately 3% to the episodically strong fourth quarter. This anticipated contraction is consistent with the guidance we provided last quarter of returning to more normalized revenue levels as we enter fiscal 2015.

With that, I will turn the call over to Todd for some comments about our market sectors and operating performance.

Todd?.

Thank you, Dean. Good morning. Please advance to Slide 8 for insight into the performance of our market sectors during our fiscal fourth quarter of 2014 as well as our current expectations for Q1 of fiscal 2015.

Our Networking/Communications sector was up 15% sequentially in fiscal Q4, which was in line with our expectations, 8 of our top 10 customers achieved growth quarter-over-quarter. Within this customer group, most outperformed expectations, while one networking customer significantly underperformed the forecast.

As discussed last quarter, we anticipate our Networking/Communications sector to contract in the high-single digit percentage point range in fiscal Q1 as a large program we recently ramped hits more normalized revenue levels. This customer revenue reduction is partially offset by strong growth from another major customer due to new program launches.

The remainder of the sector is showing mix demand trends. Our Healthcare/Life Sciences sector was up 7% sequentially in Q4, above our expectations. This was driven by our top five customers, where three significantly outperformed earlier forecasts.

Looking ahead to fiscal Q1, we currently anticipate revenue growth in our Healthcare/Life Sciences sector in the mid-single digits. We see near-term improvements in end markets as 7 of our top 10 customers increased Q1 forecasts from earlier expectations.

Our Industrial/Commercial sector was down 2% sequentially in our fiscal Q4, slightly below our expectations of flat. Three of our top five customers weakened during the quarter. We currently anticipate that our Industrial/ Commercial sector will be flat in our fiscal Q1.

We are seeing weaker end markets in semiconductor capital equipment and near-term softening of several customer forecasts in the remainder of the sector, while longer term demand remains stable.

Our Defense/Security/Aerospace sector was up 7% sequentially in Q4, a result that was slightly below our expectations as shipments to a major aerospace customer were lower than anticipated and certain new program transitions were slightly delayed.

We currently expect Q1 to be down in the mid single-digit percentage point range as we are anticipating softer end markets and typical seasonal weakness in our security business. Next to new business wins on Slide 9.

During the quarter, we won 41 new programs in our Manufacturing Solutions group that we anticipate will generate approximately $170 million in annualized revenue when fully ramped in production. Our wins were balanced across our regions as each region had good wins performance relative to current quarterly regional revenue.

On a sector basis, our Manufacturing Solutions wins were well balanced, but particularly strong in Healthcare/Life Sciences and Defense/Security/Aerospace sectors. Our Defense/Security/Aerospace wins were highlighted by the addition of two meaningful new customers with strong growth potential.

In addition, we had another solid quarter in Engineering Solutions with new project wins totaling approximately $20 million. Our engineering wins in our Healthcare/Life Sciences sector, where we clearly differentiate in the marketplace continued to be strong.

Now, advancing to Slide 10, our manufacturing wins trend remains strong and our trailing four-quarter performance as shown by the blue bars improved to $816 million resulting in a trailing four-quarter win ratio of 34% relative to trailing four-quarter revenue.

Our wins performance in fiscal Q4 as shown by the overlay green bar was above our quarterly target of approximately $160 million. Our funnel of new business opportunities increased to $2.2 million versus the $2 billion funnel of last quarter. The funnel is at a three-quarter high and we view it as quite healthy.

Nest, I would like to highlight the progress of our operating performance on Slide 11. Our engineering solutions, manufacturing solutions, supply chain, and go-to-market organizations have made significant strides in margin enhancement initiatives.

As a result, we are able to expand operating margins from 4.0% to 4.8% over the course of the past two fiscal years, while investing in new capabilities. This includes an increase to 4.8% from 4.7% quarter-over-quarter.

In addition, our quarterly revenue increased sequentially throughout fiscal 2014 with record revenue in both Q3 and Q4 providing further evidence of the success of our go-to-market strategy and our focus on customer service excellence.

Please advance to Slide 12 for additional insight into our recent operating margin performance and future expectations. As shown in the chart, our operating margin goal remains 5%, although we consider performance from 4.7% to 5% to be a healthy range.

As Pat indicated last quarter, we anticipated a roughly 25 basis point drag to operating margin in Q4 of fiscal 2014 as a result of the Juarez closure coupled with the Guadalajara ramp.

In Q1 of fiscal 2015, we are accelerating program ramps at our Guadalajara site in our recently announced Aerospace and Defense Center of Excellence at our Neenah operations facility as a result of increased customer interest.

As these sites ramp revenue or new customers at a much faster rate than anticipated, we are committed to maintaining operational excellence and properly investing ahead of the revenue. As a result, we will see a near-term drag to operating margin impacting Q1.

The combined effect of these faster than anticipated ramps is expected to be approximately 25 basis points. As we move beyond Q1 into Q2, we face the typical seasonal headwinds due to U.S. payroll tax reset and compensation adjustments.

We expect most of the Guadalajara and Aerospace and Defense Center of Excellence ramp costs will be behind us as we enter Q3. In addition, we should see improved leverage from revenue growth in the EMEA region as we move through fiscal 2015.

With these improvements, we expect our operating margin to increase sequentially throughout fiscal 2015 and approach our goal in late 2015.

Specially, with regards to Mexico, we anticipate approximately 40 basis points of operating margin drag in Q1 of fiscal 2015 as we complete the transition of business from Juarez, cease operations in that facility, and plan for the accelerated ramp of additional customers in Guadalajara.

We expect our Guadalajara site drag to reduce substantially in Q2 due to the projected rapid revenue ramp. We expect the facility to be profitable in Q3 and approach corporate profitability expectations in Q4 as we exit the year at a $200 million to $250 million annualized run rate.

Moreover, our funnel of new business opportunities at the Guadalajara site, which is not included in these revenue projections, is very strong. With that, I will turn the call to Pat for a more detailed review of our financial performance.

Pat?.

Thank you, Todd and good morning everyone. Our fiscal fourth quarter results are summarized on Slide 13. Fourth quarter revenue was a record $666 million, above the midpoint of our guidance range for the quarter. Gross margin was 9.4% for the fiscal fourth quarter.

This was in line with our expectations and consistent with the fiscal third quarter result of 9.4%. Gross margin was impacted approximately 25 basis points by the continued ramp up of our Guadalajara, Mexico facility.

Selling and administrative expenses are $30.6 million, slightly above the high end of our expectations for the quarter, was a result of higher equity compensation expense. While SG&A dollars increased compared to the fiscal third quarter, we continue to see a meaningful reduction in SG&A as a percentage of revenue.

This percentage has improved from 5% in the fiscal second quarter to 4.7% in the fiscal third quarter and now down to 4.6% in the fiscal fourth quarter, a level we feel we can maintain as we experience better leverage with a revenue growth.

Operating margin of 4.8% before special charges was in line with our guidance range and a continued improvement from the 4.7% in the fiscal third quarter. This reflects the benefits of our operational initiatives and focused cost management.

We are mindful that we set a goal earlier in fiscal 2014 to exit the year at 5% operating margin having made the subsequent decision to exit and consolidate our Juarez facility into Guadalajara. The 5% goal has proven overly optimistic given the 25 basis point drag to execute the project.

Diluted earnings per share of $0.77 was at the midpoint of our guidance. For the fiscal fourth quarter, we have recorded $0.11 per share of stock-based compensation expense, which was $0.01 higher than guidance. During the fiscal fourth quarter, our Board of Directors authorized the acceleration of stock-based awards for retiring long-term executive.

Diluted earnings per share also includes the detriment of $0.01 per share as a result of restructuring charges in the amount of $400,000. These restructuring charges were lower than anticipated for the fiscal fourth quarter and related primarily to the closure of our manufacturing facility in Juarez that was announced in our fiscal second quarter.

Turning now to the balance sheet on Slide 14, return on invested capital was 15.2% for the fiscal fourth quarter, a 60 basis point improvement from the prior quarter and generating an economic return of 420 basis points above our 11% weighted average cost of capital for fiscal 2014.

This year’s return improved to 120 basis points compared to 14% return on invested capital for fiscal 2013. This was a result of operating profit improving 16% on a modest 4% increase in our invested capital base.

During the quarter, we repurchased 188,000 of our shares for approximately $7.7 million at a weighted average price of $40.96 per share, which completed the $30 million stock repurchase program authorized last year. For fiscal 2014, we purchased $30 million of our shares under this program at an average price of $40.90 per share.

The Plexus Board of Directors authorized a $30 million stock repurchase program for fiscal 2015, which the company expects to complete on a relatively consistent basis over fiscal 2015.

During the quarter, we generated $32 million in cash from operations and spent $8 million in capital expenditures with approximately half of that capital for footprint expansion in Guadalajara. Resulting free cash flow during the quarter was $24 million.

Given the increase we saw in this year’s working capital to support new program ramps we are pleased to finish the full fiscal year with $23 million in free cash flow. I will now turn to our recent cash cycle performance on Slide 15.

Our cash cycle days for Q4 ended at 56 days at the low end of our guidance range of 56 days to 58 days, as a result of meaningful improvement in inventory management and unusually strong accounts receivable performance.

We are focused on continued improvement in inventory days and accounts payable and anticipate our cash cycle remaining under 60 days throughout fiscal 2015. As Dean has already provided revenue and earnings per share guidance, I will now turn to some additional details on the fiscal first quarter of 2015 which are summarized on Slide 16.

During the fiscal first quarter, we expect to complete our restructuring activities related to the Juarez closure and transition to Guadalajara. We anticipate restructuring costs of approximately $1.5 million to $1.8 million during the current quarter. These costs are excluded from the guidance discussed today.

Gross margin is expected to be in the range of 9.1% to 9.4%. At the midpoint of our guidance range, gross margin will be below the 9.4% for the fiscal fourth quarter of 2014. As Todd has shown, this is primarily a result of our investment in the Guadalajara startup and Aerospace and Defense Center of Excellence.

We expect SG&A cost to be slightly lower than in fiscal fourth quarter in the range of $29.5 million to $30.5 million. At the midpoint of our revenue guidance range, SG&A will be approximately 4.6% of revenue consistent with the fiscal fourth quarter. This results in expected operating margin of approximately 4.4% to 4.7% for the fiscal first quarter.

A few other notes, depreciation and amortization expense is expected to be approximately $13.1 million in the fiscal first quarter, up from $11.9 million in the fiscal fourth quarter. This increase is primarily related to a full quarter of depreciation expense for the Guadalajara facility.

We are expecting the tax rate for both the fiscal first quarter and full fiscal year 2015 of 8% to 10%. This is above our fiscal 2014 tax rate of 7%, which had included approximately $4 million of discrete tax benefits. Our expectation for the balance sheet is for working capital dollars to be up from the fiscal fourth quarter.

Based on the forecasted levels of revenue, we expect these changes will result in cash cycle days, net of deposits of 58 to 60 days in the fiscal first quarter. This increase in days largely reflects a change in customer mix resulting in less favorable receivable terms. We are forecasting capital spending at approximately $50 million for fiscal 2015.

The majority of this capital is for equipment to support new program ramps. I will now turn the call back to Dean for some wrap up comments.

Dean?.

Alright, thank you, Patrick. Could we advance to Slide 17 please for some comments on fiscal 2015? I will begin my comments with a reality check on our environment. Uncertainty due to macroeconomic geopolitical and other risks is apparently impacting customer forecast that currently appear muted in later quarters.

In my view, customers see little incentive in driving optimistic forecasts. Our operations have become increasingly agile and our supply chain is generally responsive. In this environment, customers tend to keep forecast conservative to mitigate inventory risks and they drive near-term forecast upside to fulfill their requirements.

As a consequence, I expect forecast volatility to increase unless we see stabilization or strengthening in the macro environment. Now, having pointed out the challenges, we have cause for optimism. Our new wins performance throughout fiscal 2014 was solid strengthening our portfolio of customers and improving our sector mix.

Revenue opportunities in our EMEA region developed slower than expectations during fiscal 2014 delaying a return to profitability in that region. The revenue ramps are finally underway and we now anticipate profitability in our EMEA region in Q3 fiscal 2015.

We made the decision to consolidate our Juarez facility into our Guadalajara facility during fiscal 2014. While the right decision for the long-term performance of the company, the consolidation project resulted in a drag on margins late in fiscal 2014 that will continue to the first quarter of fiscal 2015.

Further, our Guadalajara facility continues to attract new opportunities and is ramping programs at an aggressive rate. We believe our Guadalajara facility will swing to profitability in our fiscal third quarter. Our APAC region is well-positioned to support growth with minimal incremental investment.

We continue to invest in higher margin value stream solutions that are attractive to our customers and drive greater customer stickiness. And finally, as previously announced, our Board of Directors authorized a $30 million share repurchase program for fiscal 2015.

So, overall, we are mindful that macro could derail us, but we feel pretty good about our position coming into fiscal 2015. And with that, we will take questions..

Thank you. We will now begin the question-and-answer session. (Operator Instructions) The first question is from Brian Alexander with Raymond James. Please go ahead..

Thanks and good morning guys..

Good morning..

Dean, maybe just to pick up on your macro comments, I just wanted to see what may have changed in the last 90 days in terms of customer forecasts and booking patterns. If I look at your revenue guidance for December, it actually looks in line with where the Street was.

So, are you seeing any change currently in order patterns or are those comments that you just made really more anticipatory?.

Yes, I would say that the change has been supportive of my comments. So, let me just characterize it a little bit. As we look out further in our forecast and I think as you know we roll a six-quarter forecast, so that we can plan better. We are seeing very little attentiveness to out quarters by customers.

So, the adjustments that they make to their forecast are in the current quarter we are operating in or the next quarter and they just leave the out quarters set, which is bit of an unusual pattern for customers.

And I think it’s just generally a sense that they don’t know what to think about the longer term demand environment considering all the various moving pieces in the macro overall..

So, did that – was that a change in the last 90 days in terms of the lack of attentiveness to out quarters or is that something that’s been with us through kind of this macro malaise that we have seen for several quarters and then I just have one more follow-up?.

I think it’s been consistent with the last several quarters..

Okay, alright, so not a big departure. On the communications side, you guys have done a great job recovering from Juniper. I think your revenue in that segment was around $160 million a quarter after the Juniper exit and now you are above $200 million even in the December quarter.

So, I guess my question is, is the December quarter estimate that you are giving today call it $210 million to $215 million for that segment is that a good baseline to model off or are you expecting further normalization from the strength that you have been seeing I think primarily from your cable customers?.

So, Brian, this is Todd, I will take this question. So, with respect to networking communications, if we look at year-over-year ‘15 to ‘14 we would expect growth within the sector. What we came up a lot during the course of the fiscal year from Q1 to Q4, certainly you can think of Q4 as bit of a near-term peak quarter though.

I mean, we will see – obviously, we are projecting softening into Q1. And I think you need to think of that as being a likely landing point for the sector and potentially given depending on the demand patterns and the volatility within the sector, it could even be a little bit softer beyond that..

Great, okay. Thanks very much..

The next question is from Shawn Harrison with Longbow Research. Please go ahead..

Hi.

I guess following in on that vain, but looking out at the entire fiscal year considering the volatility along with the significant amount of program, which you have had over the past 12 to 18 months, could you talk about what you could potentially see in terms of year-over-year growth rates by sector for ‘15, not holding you the numbers, but just it looks like you should be above double-digits top line growth overall for our company, but maybe how the sectors layout?.

Yes, I think let’s just talk about the full company just for a moment. We are in an interesting position, because of the kind of ramp up over the quarter-to-quarter improvement that we have seen late in ‘14. So, we are in a – if you just take an annualized midpoint of our guidance, the first quarter guidance, we would be at 8.5% roughly growth.

So obviously that we wouldn’t consider that to be a grand victory, because we want to grow quarter-to-quarter as we moved through the year. So, we are in a pretty good position just from a full year growth standpoint in terms of a baseline set of revenue.

I think relative to the sector, I guess if I am not mistaken, I think we anticipate growth in all of the sectors for the full year. And so we feel obviously good about that, which is of course what the goal is here with our go-to-market teams across the various sectors.

Now, would you want to calibrate Todd on where you see the strongest?.

Sure. So, I would say we expect the strongest growth certainly in a percentage basis in the Defense/Security/Aerospace sector. We are really getting a lot of traction within that sector. We talked about the investments in the Aerospace and Defense Center of Excellence that’s really helping us.

We are doing something similar as well in the Asia-Pacific region, which is further along than where we are at in the Americas. So, we are seeing strong growth there. If we look at our Healthcare/Life Sciences, they had a great fiscal 2014.

I wouldn’t expect it to be quite as good in ‘14 or in ‘15, I should say, but I would expect growth and decent growth within that sector. Our industrial, commercial sector though should have a much better year than they had in this past year.

We are seeing the impacts of some program ramps and some later in the year upside demand from certain customers. And then networking communications again, we are expecting growth, but we went up quite a bit during the latter part of the year. So, we wouldn’t expect it to be the base of business to grow at the same rate as it did in ‘14.

Again, that’s excluding the $284 million headwind when I say the base growth..

Got it. Very helpful, Todd. And then Pat just on the operating expenses as we move into the March quarter, maybe I missed it, I thought it was maybe highlighted in that seasonal costs, but typically you see something like a $1 million to $1.5 million seasonal increase.

Is that the number you would expect to see this year in terms of operating expense inflation?.

Yes, I think it’s usually a $1.5 million to $2 million. So, that’s the range I would use..

And that would all fall into the March quarter?.

Yes..

Okay, perfect. Thanks so much and congrats on the results..

Thank you..

Thank you..

The next question is from Steven Fox with Cross Research. Please go ahead..

Thanks. Good morning. First question, just could we dive a little bit deeper into the success you are having here at Guadalajara.

What is attracting new business there? And if you could remind us how the revenue run-rate has changed with this update that you are providing now, it seems like target is a little higher by the end of the year? That would be helpful. Thanks..

Yes, I think the first comment on Guadalajara is it turns out that it was the absolutely right decision.

Unfortunately, we should have made it several years ago as we kept trying to get a value proposition in Mexico that was attractive to customers, but of course we just couldn’t make that worked on in Juarez because of the broader security and safety concerns in that marketplace.

So, the first piece obviously is to pay attention to is we have got business that is coming into Guadalajara from other sites. And so a big piece of it obviously is the startup customers that are coming out of Juarez, but we also are rotating some business out of another U.S. facility, at least a portion of business out of another U.S. facility.

That makes a lot more sense for our customer.

In addition, I am going to let Todd just maybe give you a little color on how it’s attracting new customers and what’s happening with the funnel, which is I wouldn’t say surprisingly strong, but it certainly is exceeding what I would consider my expectations for a brand new site, which usually takes us some time for the customers to get comfortable with the new site and to consider it.

They like to see it up and running for a period of time before they are willing to commit. And we are seeing a much more assertive stance relative to customers in that facility. So, we are trying to manage expectations accordingly on execution. So, go ahead Todd..

Sure. And I think Steve you also asked about the change in run rate as we are seeing it and if you look at the quarterly run rate as we step through fiscal ‘15, it’s about a 50% increase in each of the quarters in essence.

So, I mean, we talked about it being $150 million to $200 million run rate as we exited fiscal ’15 when we had the call last quarter. We are now looking at more like a $200 million to $250 million run-rate and that’s without taking into account any additional business we made went into the facility.

Now, if we look at the funnel, I would say it’s one of the strongest funnels of any of the sites that we have within Plexus. I mean, this site shows great. They are off to an excellent start from an execution standpoint with the business that’s transitioned in from Juarez.

So right now we are at a point (with nearly) all the business is in from Juarez, but we are not ramping any of the new business yet. That starts this quarter, but really gets underway in earnest in Q2 as we continue to ramp.

But as we look at across our market sectors our Healthcare/Life Sciences and our Defense/Security/Aerospace sector really have strong funnels for our Guadalajara site and we would expect to land new customers in there I would say over the course of the next quarter or two.

So that’s about – I guess characterizes how we are looking at the new business going into the site, but the site will be capable of all the same sectors and the same capabilities as any of our Plexus sites..

Great.

And then just one quick follow-up is the new Defense/Aerospace customer that you are ramping in Neenah is that related to success in Guadalajara, in other words is that eventually going to move – volume going to transfer into Guadalajara?.

No at this point, it’s unrelated.

Okay, great. Thank you very much..

Thank you..

And the next question is from Sherri Scribner with Deutsche Bank. Please go ahead..

Hi. Thanks. I just wanted to dig a little more deeply into some of your comments Dean about the uncertainty in the environment.

And I am just curious in terms of the Industrial and the Defense segments, you are a little more cautious on those, but for the full year you seem to be very bullish, so I am trying to understand your cautious comments in terms of the near-term, is that primarily macro or is it more related to Industrial and Defense programs taking a bit longer to ramp but you expect them to be strong for the full year?.

Yes.

I think my comments about the macro are just really primarily related Sherri to the out quarters in the year where like I try to characterize the customers are just not attentive to forecast later in the year even though we try to get them to make adjustments basically because the sentiment is that they don’t know which way things are going to go because of the you got concerns about Europe tilting back into recession, you got China slowing down, you got all kinds of other political issues and of course the scare of Ebola and all these kinds of things going on.

And I think because if you are a customer or you are responsible to forecast that a customer – I don’t think there is a lot of incentive to take a lot of risk, we have a lot of credibility to talk bullish about the second half. So I think the stance from the customer perspective is just leave it the way it is and focus on a quarter or two.

So near-term what we are seeing is more activity around, okay just base level forecast and the customers will come in and upside those forecasts. And we saw some of that activity actually as we are coming and setting guidance for this quarter. So I think we are just going to see this increase in volatility across our markets.

Now with respect directly to Industrial/Commercial here there were just some unique issues with the individual customers and some challenges in the end markets and combination with some things that just took a little bit longer to develop than it was anticipated.

And of course Todd talked about Industrial/Commercial is doing better in ‘15 and it’s second behind the Defense/Security/Aerospace in terms of its growth rate at least as we see it right now in fiscal ’15. So we think that some of the individual customer challenges are largely behind us..

Okay..

Did I miss anything?.

No, that is helpful.

It sounds like on the Industrial side and the Defense/Aerospace side less about impacts from the economic issues and more customer-specific related to programs ramping in different end markets?.

Yes, I think that’s true..

Okay.

And then can I just ask a question on the CapEx guidance of $50 million for the year, I am surprised the number is so low, I think that’s the lowest CapEx spending you have had since 2007 considering how strongly you guys are projecting to grow in the December quarter and extrapolating that I would think that you guys would need to spend more on facilities, so just trying to understand do you have a lot of extra capacity at this point, why is the CapEx number so low? Thanks..

Yes. Sherri I can take that. We have got capacity in all three of our regions with Guadalajara coming on board this year. We have got availability there in Neenah and then Europe in Oradea. And we have got capacity available in Asia as well. So there is no site expansions needed.

It’s really just based on equipment upgrades that we will be expanding this year..

Great. If you….

Yes. It probably is the first time in a few years now that we haven’t had a major expansion going in during the year..

Okay, great. Thanks, Todd..

Yes..

The next question is from Matthew Sheerin with Stifel. Please go ahead..

Yes, thanks. Good morning.

I just want to ask this question regarding the margin targets, because I know you are being a little bit more cautious in terms of timetable for hitting the 5% number and I know that Guadalajara and the shift in Mexico has a lot to do with that, but once you get past that, what are the obstacles, is it more of a sort of a volume game or a mix of business that keeps you or gets you to that 5% number?.

Yes, I think this is Dean – I think just a couple of levers, one is obviously we are focusing a lot on Mexico, because we are seeing a lot of business activity, but it’s also important to be mindful that our EMEA region has been an investment region for us over the last several years.

We have added a facility in Livingston, Scotland and of course added a significant facility in Oradea, Romania. So that region has been operating at a loss and we have been working hard to develop a brand position in that marketplace and get the word out about, Plexus.

We won a number of opportunities as we came through fiscal – early fiscal ‘14 but they were as I characterize a little bit slower, I guess a couple of quarters slower to develop than we thought. So, we are sitting here a year ago or maybe 9 months ago, I would have said we might start to swing into profitability in EMEA maybe in this quarter.

The reality is we are going to see that in the third quarter of ‘15. So, that’s another important lever in terms of bringing the margins up for the company overall..

Okay, that’s helpful. And then looking at your communications area, where you have got every quarter, you seem to have one quarter or one customer you are ramping good numbers and then you have got some lowered expectations and it sounds like within those eight core customers, you have got a very diversified portfolio of customers and end markets.

Could you just talk about the strategy going forward in terms of trying to keep that diversified not relying on one big customer obviously as you had a couple of years ago?.

Yes, I think it’s important to recognize that we are very sensitive to changes in the network communications, because it was 45% or so of our revenue. I think it was significantly more than that at one point in time.

And of course with – our strategy a number of years ago was to try to more aggressively grow our other sectors to bring our portfolio more into balance.

Now, of course, with the loss of our largest customer that happened in a little bit more of a step function, then we would have ideally liked it to happen, but in any case now, our portfolio is coming, I think more into balance and we are somewhat less sensitive to volatility in that sector than we were before, but it is still a volatile sector.

And I think it’s important to be mindful that the characteristics of this sector is that product lifecycles are relatively short compared to the other sectors that we keep compete in. And the average program sizes of individual products are relatively larger, in other words, the volumes are relatively larger.

So, when a product does well or it reaches end of life or doesn’t do well, the impact is more dramatic than it be in other sectors.

And so our strategy has been to try to partner with the right kinds of customers, not get overly concentrated in that sector with any individual customer or if we have a reasonably significant customer to be mindful that we want to have a good mix of products that provide different value in the sub-sectors that, that customer might compete in.

And so we are just trying to say be a little bit more cautious about not just taking on anything in that sector, I should say a little – much more cautious about that and making sure that we are positioned with products that we think are more complex, more difficult to manufacture, have a little bit longer lifecycles and we are not just – not generating $100 million from a single product line..

Got it, that’s very helpful. Thanks a lot..

You’re welcome..

The next question is from Sean Hannan with Needham & Company. Please go ahead..

Yes, good morning.

Can you hear me?.

Yes..

Okay, thanks for taking my question here. So, just want to ask a little bit about the trailing 12 months of wins that you have in basically in preparation for some of that ramping, I think some of that slightly might be ramping little bit today.

But when you look at $816 million, can you talk about whether there is anything notable in there for the ramp plans whether there is any outsized influence that could be on that $816 million whether it’s going to have an impact of a longer or shorter time frame for you to generate revenues on, any sense we could get Dean on, how this ultimately translates over to the top line and whether it’s been different?.

Alright. Let me ask Todd to take that because he is closest to these characteristics of the programs that we have won..

Yes. So, in the $816 million, I mean, one thing keep in mind is we did announced the large Networking/Communications win last quarter that ramped relatively quickly.

Other than that, though I would say that the business is a lot more traditional for Plexus and tends be longer ramp cycles, particularly Healthcare/Life Sciences where we had a really good fiscal 2014 and then Defense/Security/Aerospace, I mean if you look at a quarter in Defense/Security/Aerospace I believe it’s a high point over several quarters and that is traditionally a very long ramp cycle as well too.

So, I think you can look at Healthcare/Life Sciences and DSA is tending to be longer ramps. When we showed Networking/Communications wins that tends to be a shorter ramp and Industrial/Commercial is a bit of a mix bag, it can go either direction..

Okay. But outside, it was typical for those segments.

There aren’t necessarily unique outsized programs that would be different from what you would typically experience?.

No. I wouldn’t say unique outsized. One of the things – two, I mean did mention about the ramp time for Healthcare/Life Sciences and Defense/Security/Aerospace, but I think it’s also important that you keep in mind the product lifecycles of those products.

They are significantly longer than Networking/Communications for certain and depending on Industrial/Commercial - certain Industrial/Commercial products as well..

Sure. That’s appreciated. And then next question here.

In terms of the components of your top 10 customers we are not really in the scenario these days we were in the past with a 10% or like Juniper, but can you talk a little bit about whether at this point, we should expect or could expect another 10% to emerge consistently here who in the segments represented and where we are having the most moving whether up or down, I am not sure how much that’s actually reflecting the broader trends we are just seeing at a segment performance level? Thanks..

Yes. I think it’s reasonably probable here that we are going to have a couple of customers that are going to be over 10%. I didn’t look at the numbers just yet, but one of course is relative to GE overall. We have had substantial amount of business with GE Healthcare over the years.

And so, they have been a big customer, but generally they have been under 10% for the whole year. And I think we have been working very hard to diversify our business with GE until we have managed to build a fairly good size position with other parts of GE.

Now, I don’t see the GE parts as, even though it could overall be over 10% as necessarily changing the risk profile of the business because GE operates – all these parts of GE operates so independently and in fact even within the healthcare parts as a certain level of independent among the different modalities or divisions of GE.

The other we have is in the Networking/Communications sector. It’s conceivable because of the strong end finish to the year that could bring the full year revenues could tick up over 10% for the full year.

If I were to predict through fiscal 2015 however, I suspect that GE would likely be the sole customer if maybe not, but we will see how it turns out in terms of our 10% customer for the full year looking forward..

Okay, very helpful color. Thanks so much..

You’re welcome..

The next question is from Mark Delaney with Goldman Sachs. Please go ahead..

Good morning and thanks very much for taking the question. I had a follow-up question on the margins.

And I understand the cost headwinds that you laid out this morning and Plexus certainly has much better operating margins than most of the peer group, but it sounds like the target margin range is shifting more to 4.7% to 5% for this year instead of 5%.

And I am just trying to get an understanding I mean, when we think beyond fiscal ‘15 is 4.7%, to 5% more of a new target range and 5% is now more of a stretch goal or is this just more of some near-term issues?.

Yes. I think 5% remains our goal. I think it’s important to understand as we are not going to make poor decisions just to deliver 5%.

And I think again even in this quarter, if we would have made the decision, stuck with the 5% commitment, that would have forced us to a decision not to consolidate Juarez into Guadalajara and that would have been a poor decision.

And so we should have backed off of the 5% as we exit the year when we made the decision to consolidate Juarez back in fiscal Q2 of ‘14, because like I said that’s the better decision for the business over the long-term.

So, I think what we are trying to say is look we are going to make intelligent decisions if that results in us, operating in this kind of 4.7%, 4.8% range then we think that’s still a good performance range and we should be somewhat unapologetic considering where we are at relative to our peer set.

But again, we are trying – when you look at how we plan and how we look at the business longer term, 5% is always the kind of the line that we draw in terms of trying to drive the business on a go forward basis..

Got it. That makes a lot of sense.

As a follow-up question, maybe you can just talk a little bit about the competitive environment and there is always talk from some of your larger competitors about trying to do more in some of the lower volume, higher mix markets that Plexus has done well in focusing on? And maybe you can just characterize have you seen any increase in the competitive environment from a pricing perspective and if any of the near-term margin headwinds that you have seen are because of pricing?.

Yes, the margin issue is not a pricing issue. I can absolutely tell you that. I think that the competitive marketplace is certainly prevalent, but I don’t think that we have seen kind of over the last fiscal year anything unique or new relative to competitiveness or the behaviors of our – the other EMS companies in the marketplace.

And I would just say relative to Plexus’ overall value proposition, again I would – again, if we ignore the bad stuff and take out the $284 million headwind, we grew north of 22% this year in the business.

So, I think that suggests that our value proposition is alive and well and quite strong and you look at our 4.8% operating margin here as we exit the year, I think that it’s supportive of the notion that the pricing and the business model Plexus works in the marketplace..

Thank you very much..

You are welcome..

The next question is from Jim Suva with Citi. Please go ahead..

Thank you very much and congratulations to you and your team. Win rate as I have commented for many quarters is just absolutely phenomenal.

And Dean, if we were to take your commentary as well as the market commentary about uncertainty in the future and stuff, is it fair to say or maybe you can answer this or not, the business wins, are those adjusted for at all any volatility or uncertainty or is that kind of like best in case or most likely to hit revenues or should we take that revenue run-rate just simply say that’s likely maybe less, 10% fall through that’s not going to come through, that’s likely the Plexus go forward sales rate or do we also need to layer on some additional macros uncertainty on top of those new business wins?.

Yes. I think, Jim, I mean there is a few components to this. One is if you go back several quarters, I mean, every time we announced these wins, this is the best number from an annualized revenue standpoint that we believe we can project. So, we don’t just take the customer what they tell us.

We try to apply some intelligence to that and put a number out there that we think is consistent with how we think the product is going to ramp up and how it’s going to perform in the marketplace the best that we can.

Now, again when you look at I think the trailing four quarter $816 million, if I got that number right, I mean, we don’t go back and adjust prior quarters when the macro may have looked differently than it looks today.

And so that was three, four quarters ago that was the best number looking forward and the wins that we are announcing this quarter are the best that we can do predicting what we think the yield of those programs is going to be looking forward from now.

I think that it’s also important to keep in mind that we overdrive the wins to 25% of our trailing four quarter number. And embedded in that 25% goal is an expectation for end-of-life of existing programs is an expectation for some underperformance of new wins relative to our projections.

And so we think there is adequate and reasonable cushion built into that that kind of 25% spread of trailing four quarters versus the 12% growth rate that we endeavor to achieve on a long-term basis. So, I don’t know that you need to necessarily try to gain those numbers. I think we just try to or discount them I think that’s embedded in our math.

And I think it’s been proven to hold up reasonably well going backward to predict how we are going to perform going forward other than periods where we have disruptive event like we had when we lost a really big customer..

Great. Again, congratulations to you and your team..

Thank you, Jim..

The next question is from Todd Schwartzman with Sidoti & Company. Please go ahead..

Good morning everybody.

I hope you could maybe parse your Q1 expectations for gross margin contraction year-over-year and sequentially maybe a little more you called out Guadalajara and I am just wondering is the balance maybe if you could allocate the rest of it, is the balance kind of evenly split between IC and DSA or are there other factors going on there as well that we should know about?.

And so Todd, this is Todd. I will take that question. One of the things – I think first of all it’s important to note that we are much more focused on operating margin than gross margin.

But one of the shifts in our gross margin performance has really been about investing in new capabilities, investing in our sites, investing in our regions which are closer to the customer and really balancing that of by more effectively managing SG&A.

So we don’t necessarily think of it as a sector issue, we think of it as putting in place the right capabilities and the right services and the right people to service our customers..

Got it. Thanks.

What was the impact of FX in the quarter, can you maybe speak to the strength of the dollar in Q4?.

Yes. Todd this Pat I can that. Pretty minimal, our European facilities did experience some impact, negative impact from foreign exchange losses. But it was less than $0.5 million on revenue..

And Pat was it a benefit in any other companies in which you operate or not really?.

Not really, we didn’t see that. We do hedge certain transactions to mitigate the loss or gain for that matter. So it was pretty minimal..

Got it.

And it looks as though interest expense crept up a little bit in the quarter what’s baked into your guidance for the quarter as far as that line item?.

Yes. Look Todd the reason that’s up to as with Guadalajara coming online that’s a capital lease so we are incurring interest expense for that facility so that’s….

Is that Q4 number, a good number to use going forward?.

It is, yes, because we will see that continuing,.

Great. Thank you very much..

Thank you. You’re welcome..

The next question is from Amit Daryanani with RBC Capital Markets. Please go ahead..

Thanks. Good morning guys.

I guess two questions, one just talk about your free cash flow expectations in ‘15 given the fact CapEx is going to be lower and I think you mentioned (indiscernible) so could you see north of $100 million consistent free cash flow next year from your perspective?.

Yes. Amit this is Pat. Yes, we could see that for the full year..

And then I guess Dean just on your comments about fiscal ’15 and the macro challenges I am curious if – did you see things decelerate or get worse from a linearity basis in the quarter, are you seeing some extra inventory at your customer levels that gives you some time a concern, so I am kind of looking at December quarter guidance actually what you guys sort of have said which you had initially said all the way back in July, so it doesn’t seem like business has changed that much maybe things that you read or something else that’s concerning I just want to get more sense on what you think is worrisome about macro from your perspective?.

No, I will just say I don’t know that incrementally you have a different view than they would have had a quarter or two ago, I think it’s just how we come into the fiscal year and we start thinking about what are we going to see in the coming fiscal year.

I mean, the last several years, there was maybe muted or challenged demand early in the year and then a miracle happens and all the forecast kind of tilt north and everything is wonderful.

And we are just not seeing this sort of end of the year hockey stick enthusiasm optimism in the back half of the year forecast from customers, which is a little atypical than what you see normally.

And so from my perspective, I think – like I said I think it’s just a question of the customers don’t know what to think about next year, because I think there just generally is more stuff going on in the world that they are having a hard time interpreting.

And so I just wanted to call attention to that, but overall, I think barring that sort of backdrop, I feel really optimistic about our business. We have done a great job getting ourselves repositioned. I really like the customer portfolio we have and our opportunity to really develop, expand those relationships with those customers.

So, I just felt like to be balanced. I thought it was appropriate to just say there is something about the macro backdrop here that definitely has customers as I keep saying less attentive to their longer term forecasts..

Fair enough. Thank you..

Okay. And with that, I think we are at our 1-hour timeframe or just a little bit past.

So, are there any other customers in the queue at the moment?.

We have no further questions..

I am sorry, customers, customer-focused. Alright, with that, I want to thank everyone for their questions. As always, they are excellent and they keep us on our toes. And then finally, I just want to again shout-out to the Plexus folks across the world that just did an outstanding job this past year.

And I know Pat and Todd both wanted to get the shout-outs in their scripts as well, but we thought it might be just a bit too much, but we all feel really strongly about the year that we came through and the great work that we saw from people across the globe at Plexus. So, thank you very much..

Thank you ladies and gentlemen. This concludes today’s conference. Thank you for participating. You may now disconnect..