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Defense contract helps Plexus gain record profits

Neenah, Wis. - Thanks to a classified contract from the defense sector, Plexus Corp., a product realization company headquartered here, reported record revenues and earnings for its third fiscal quarter ended July 1, 2006, despite the closing of its manufacturing facility in England.

The company's financial picture is tempered, however, by forecasts of lower-than-expected earnings in the fourth quarter, which caused its stock price to fall by roughly one-third.

Revenues for the third quarter increased 27 percent to a record $397.4 million, compared to $313.7 million in the third quarter of 2005. Net income was a record $25.1 million, or the equivalent of 53 cents per diluted share, which included one cent per share for a stock-based compensation expense.

Dean Foate, president and CEO, said in a release that the revenue growth was driven by an important new program in the defense sector, and renewed strength in the wireline-networking sector.

When asked for details, CFO Gordon Bitter was reticent, simply stating that the defense program in question is confidential. "I can't tell you anything about it, really," Bitter said. "Sorry I can't be more responsive."
In the past nine months, Plexus recorded net sales of $1.06 billion, compared to $906 million in the same period of 2005. Gross profits for those periods were $113 million and $74.9 million, respectively, after subtracting cost of sales.

Plant closing

Bitter said the facility in Maldon, England will be closed to reduce manufacturing capacity in the U.K., and its programs will be transitioned to the company's facility in Kelso, Scotland by the end of calendar 2006 or early 2007.

Approximately 77 employees at the facility will be involved, costing Plexus $900,000 in cash payments for severance and retention bonuses. Another $100,000 will cover non-cash charges for asset impairments.

Foate said he expects revenues in the fourth fiscal quarter to be in the range of $390 million to $405 million, which is lower than expected.

As a result, Foate also anticipates diluted earnings per share, before any restructuring or special items, to be in the range of 46 cents to 50 cents - a downward adjustment from the expected high of 56 cents.

"Our slightly lower earnings outlook for the fourth quarter, compared to the third quarter, reflects an anticipated shift toward less favorable revenue mix," he said.

Plexus focuses on product realization services to original equipment manufacturers in the networking, medical, industrial, computer, and transportation industries. It offers electronics design, manufacturing, and testing services to customers with an emphasis on complex, high-end products.

The company operates through 18 manufacturing and engineering facilities located in North America, Europe, and Asia - serving more than 150 branded product companies on those continents.

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