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What changed in PLEXUS CORP's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of PLEXUS CORP's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+325 added−321 removedSource: 10-K (2023-11-17) vs 10-K (2022-11-18)

Top changes in PLEXUS CORP's 2023 10-K

325 paragraphs added · 321 removed · 249 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

70 edited+36 added−34 removed18 unchanged
Biggest changeAlthough our current business development focus is based on our targeted market sectors of Industrial, Healthcare/Life Sciences and Aerospace/Defense, we evaluate our financial performance and allocate our resources geographically (see Note 11 "Reportable Segments, Geographic Information and Major Customers" in Notes to Consolidated Financial Statements regarding our reportable segments).
Biggest changeWe believe that in most cases our sales to any one such division, subsidiary, facility or location are independent of sales to others. 3 Table of Contents The distribution of our net sales by market sectors for the indicated fiscal years is shown in the following table: Industry 2023 2022 2021 Healthcare/Life Sciences 44% 41% 39% Industrial 42% 46% 46% Aerospace/Defense 14% 13% 15% Total net sales 100% 100% 100% Although our current business development focus is based on our targeted market sectors of Healthcare/Life Sciences, Industrial and Aerospace/Defense, we evaluate our financial performance and allocate our resources geographically (see Note 11 "Reportable Segments, Geographic Information and Major Customers" in Notes to Consolidated Financial Statements regarding our reportable segments).
We believe our capabilities and our culture position us to support the complex technology and regulatory needs of the industries we serve and to provide customers with innovative and dependable manufacturing services. • Sustaining Services – Plexus Sustaining Services is committed to protecting our customers' brand reputation, supporting the success of each customer's product in the marketplace and extending a product's end of life, while helping to minimize the impact of their products on the environment.
We believe our capabilities and our culture position us to support the complex technology and regulatory needs of the industries we serve and to provide customers with innovative and dependable manufacturing services. • Sustaining Services – Plexus Sustaining Services is committed to protecting our customers' brand reputation, supporting the success of each product in the marketplace and extending a product's end-of-life, while helping to minimize the impact of their products on the environment.
In addition, our SVP of Human Resources and other key leaders within our Human Resources organization provide a quarterly update to the Compensation and Leadership Development Committee of the Board of Directors on our strategy for talent development and retention, including succession planning for key talent. This includes assessing the diversity of successor candidates for key management roles.
In addition, our CHRO and other key leaders within our Human Resources organization provide a quarterly update to the Compensation and Leadership Development Committee of the Board of Directors on our strategy for talent development and retention, including succession planning for key talent. This includes assessing the diversity of successor candidates for key management roles.
These teams maintain expertise related to each market sector and execute sector strategies aligned to that market’s unique delivery, quality and regulatory requirements. Our market sector teams help define Plexus’ strategy for growth with a particular emphasis on expanding the value-add solutions we offer customers.
These teams maintain expertise related to each market sector and execute sector strategies aligned to that market’s unique delivery, quality and regulatory requirements. Our market sector teams help to develop Plexus’ strategy for growth with a particular emphasis on expanding the value-add solutions we offer customers.
Information Technology Our core solutions for manufacturing facilities include a single-instance enterprise resource planning ("ERP") system in addition to product data management and advanced planning and scheduling systems, along with consistent solutions for warehouse management and shop floor execution that support our global operations.
Information Technology Our core solutions for manufacturing facilities include a single-instance enterprise resource planning (“ERP”) system in addition to product data management and advanced planning and scheduling systems, along with consistent solutions for warehouse management and shop floor execution that support our global operations.
From influencing a product design, which creates early access for lifecycle extension services and repair, to spare parts management and distribution, depot repair and refurbishment services, Plexus’ Sustaining Services offers a full range of capabilities in all regions in which we operate.
From influencing a product design, which creates early access for lifecycle extension services and repair, to spare parts management and distribution, depot repair and refurbishment services, our Sustaining Services offers a full range of capabilities in all regions in which we operate.
A culture concentrated on each individual’s pledge that quality is critical to achieving our strategic goal of superior execution in delivering highly complex products in demanding regulatory environments. • 5Es of Customer Service Excellence – Through the 5Es of Customer Service Excellence, we describe for our employees what is required to exceed our customer’s expectations and enable growth through customer service excellence.
A culture concentrated on each individual’s pledge that quality is critical to achieving our strategic goal of superior execution in delivering highly complex products in demanding regulatory environments. • 5Es of Customer Service Excellence – Through the 5Es of Customer Service Excellence, we describe for our team members what is required to exceed our customer’s expectations and enable growth through customer service excellence.
In addition to prime technology advancements, key government and policy trends impact our business, including FDA approval of new medical devices, defense procurement practices and other government and regulatory processes. Plexus may benefit from increasing trends by original equipment manufacturers to outsource the design, manufacture and service of their products.
In addition to meaningful technology advancements, key government and policy trends impact our business, including approval of new medical devices, defense procurement practices and other government and regulatory processes. Plexus may benefit from increasing trends by original equipment manufacturers to outsource the design, manufacture and service of their products.
As technology solutions continue to evolve, so do the myriad of risks introduced to the organization. The delivery of business value through technology is highly dependent on the holistic identification and management of information technology risks.
As technology solutions continue to evolve, so do the myriad of risks introduced to the organization. The delivery of business value through technology is highly dependent on the holistic identification and management of IT risks.
In addition, our Compensation and Leadership Development Committee of our Board of Directors reviews the initiatives and results to cultivate a diverse workforce and inclusive culture. • Employee Resource Groups – Our Employee Resource Groups ("ERGs") are voluntary, employee-driven groups organized around common interests and legitimate business purposes.
In addition, our Compensation and Leadership Development Committee of our Board of Directors reviews our D&I initiatives and results to cultivate a diverse workforce and inclusive culture. • Employee Resource Groups – Our ERGs are voluntary, employee-driven groups organized around common interests and legitimate business purposes.
In building a great culture, we embrace four "non-negotiables": • Our Values and Leadership Behaviors – Our Values and Leadership Behaviors establish the foundation upon which our culture is built, representing key expectations we have of our employees and emblematic of the work environment we strive to create.
In building a great culture, we embrace four "non-negotiables": • Our Values and Leadership Behaviors – Our Values and Leadership Behaviors establish the foundation upon which our culture is built, representing key expectations we have of our team members and emblematic of the work environment we strive to create.
Economic return is the amount by which our ROIC exceeds our WACC, and we believe it is a fundamental driver of shareholder value. We review our internal calculation of WACC annually; for fiscal 2022, our WACC was 9.3%.
Economic return is the amount by which our ROIC exceeds our WACC, and we believe it is a fundamental driver of shareholder value. We review our internal calculation of WACC annually; for fiscal 2023, our WACC was 9.0%.
Short and long-term incentive pay is designed to be competitive, improve employee retention, reward employees for performance supporting our strategic objectives and align employees with the interests of shareholders to deliver both short-term and long-term results. Approximately 18% and 3% of our employees participate in our short and long-term incentive programs, respectively.
Short and long-term incentive pay is designed to be competitive, improve employee retention, reward team members for performance supporting our strategic objectives and align team members with the interests of shareholders to deliver both short-term and long-term results. Approximately 19% and 3% of our team members participate in our short and long-term incentive programs, respectively.
We aspire that all of our teammates reach their full potential and we encourage them to simply, BE YOU!" Our strategy to enhance diversity at Plexus and to foster an inclusive culture includes the following: • D&I Committee and Board Oversight – To oversee strategic objectives and to ensure appropriate accountabilities exist to support our diversity and inclusion efforts, our executive leadership committee structure includes a Diversity and Inclusion Committee, made up of key members of executive management, including our Chief Executive Officer.
We aspire that all of our teammates reach their full potential and we encourage them to simply, BE YOU!" Our strategy to enhance diversity at Plexus and to foster an inclusive culture includes the following: • D&I Committee and Board Oversight – To oversee strategic objectives and to ensure appropriate accountabilities exist to support our efforts, D&I is incorporated into our executive Sustainability Committee, made up of key members of executive management, including our Chief Executive Officer.
Commitment to Values and Ethics Along with our Values and Leadership Behaviors, we act in accordance with our Code of Conduct and Business Ethics ("Code of Conduct"), which creates expectations and provides guidance for all employees and representatives of Plexus to make the right decisions.
Commitment to Values and Ethical Business Practices Along with our Values and Leadership Behaviors, we act in accordance with our Code of Conduct and Business Ethics ("Code of Conduct"), which creates expectations and provides guidance for all team members and representatives of Plexus to make the right decisions.
In addition, by taking advantage of virtualization technology, we are able to realize gains in efficiency and up-time supporting our critical operations. 5 Table of Contents We strive to promote innovation technologies, solutions and processes within our information technology ("IT") infrastructure to enable Plexus to differentiate from our competition.
In addition, by taking advantage of virtualization technology, we are able to realize gains in efficiency and up-time supporting our critical operations. 8 Table of Contents We strive to promote innovative technologies, solutions and processes within our information technology (“IT”) infrastructure to enable Plexus to differentiate from our competition.
Our 10 Values and Leadership Behaviors are: Customer Focus, Relationships and Teamwork, Excellence, Open Communication, Integrity, Prioritize our People, Solve Problems, Be Courageous, Be Strategic and Innovate. • Quality Begins with Me – We instill personal responsibility for quality in our employees through our Quality Begins with Me culture, a commitment to delivering zero defects and continuous improvement.
Our 10 Values and Leadership Behaviors are: Customer Focus, Relationships and Teamwork, Excellence, Open Communication, Integrity, Prioritize our People, Solve Problems, Be Courageous, Be Strategic and Innovate. 5 Table of Contents • Quality Begins with Me – We instill personal responsibility for quality in our team members through our Quality Begins with Me culture, a commitment to delivering zero defects and continuous improvement.
Relative to our competition, overriding factors such as lower manufacturing volumes, production flexibility, unique fulfillment requirements and complex regulatory requirements typically result in higher investments in inventory and selling and administrative costs for us.
Relative to our competition, overriding factors such as lower manufacturing volumes, production flexibility, unique fulfillment requirements and complex regulatory and quality requirements typically result in 4 Table of Contents higher investments in inventory and selling and administrative costs for us.
Human Capital Management Governance As part of our governance structure, we have established an Organizational Performance Committee, an executive body comprised of the Chief Executive Officer, Senior Vice President ("SVP") of Human Resources and other executives that oversee our human capital strategy.
Human Capital Management Governance As part of our governance structure, we have established an Organizational Performance Committee, an executive body comprised of the Chief Executive Officer, Chief Human Resources Officer ("CHRO") and other executives that oversee our human capital strategy.
The Code of Conduct also emphasizes the importance of having an open, welcoming environment in which all employees feel empowered to do what is right and are encouraged to voice concerns should violations of the Code of Conduct be observed. All employees are required to complete the training on the Code of Conduct annually.
The Code of Conduct also emphasizes the importance of having an inclusive, welcoming environment in which all team members feel empowered to do what is right and are encouraged to voice concerns should violations of the Code of Conduct be observed. All team members are required to complete training on the Code of Conduct biennially.
This includes setting and reviewing environmental, health and safety goals. We are committed to providing a workplace that respects the health and safety of all those who work, visit or are contracted to provide a service in our facilities.
We are committed to providing a workplace that respects the health and safety of all those who work, visit or are contracted to provide a service in our facilities.
We take a unique approach. Our supply chain experts engage in all of Plexus’ integrated solutions, working closely with our engineers to identify opportunities for supply chain optimization early in the design stage.
We take a unique approach. Our supply chain experts engage in all of Plexus’ integrated solutions, working closely with our engineers to identify opportunities for supply chain optimization early in the design stage and 2 Table of Contents throughout the product lifecycle.
Plexus' facilities are strategically located to support the global supply chain, engineering, manufacturing and sustaining service needs of customers in our targeted market sectors. Go-to-Market Strategy We accomplish our go-to-market strategy through the three market sectors we serve, Industrial, Healthcare/Life Sciences and 2 Table of Contents Aerospace/Defense.
Plexus’ facilities are strategically located to support the global supply chain, engineering, manufacturing and sustaining service needs of customers in our targeted market sectors Go-to-Market Strategy We specialize in serving customers in the Healthcare/Life Sciences, Industrial and Aerospace/Defense market sectors.
Food and Drug Administration's ("FDA") Quality Systems Regulation requirements and similar regulatory requirements in other countries. 3 Table of Contents We have additional certifications and/or registrations held by certain facilities in the following regions: AMER APAC EMEA Medical Standard ISO 13485:2016 X X X 21 CFR Part 820 (FDA) (Finished Medical) X X X JMGP accreditation X X X GMP-Korea certification X X ANVISA accreditation X X X NPMA (National Medical Products Administration) registration X ISO 14001(environmental management) X X X ISO 45001 (occupational health and safety) X X ANSI/ESD (Electrostatic Discharge Control Program) S20.20 X X ITAR (International Traffic and Arms Regulation) self-declaration X Aerospace Standard AS9100 X X X NADCAP certification X X X FAR 145 certification (FAA repair station) X EASA repair approval X ATEX/IECEx certification X IRIS certification (Railway) X ISO 50001:2011 (energy management) X Customers and Market Sectors Served Our customers range from large multinational companies to smaller emerging technology companies.
Food and Drug Administration’s (“FDA”) Quality Systems Regulation requirements and similar regulatory requirements in other countries. 9 Table of Contents We have additional certifications and/or registrations held by certain facilities in the following regions: AMER APAC EMEA Medical Standard ISO 13485:2016 X X X 21 CFR Part 820 (FDA) (Finished Medical) X X X JMGP accreditation X X X GMP-Korea certification X ANVISA accreditation X X X NPMA (National Medical Products Administration) registration X ISO 14001(environmental management) X X X ISO 45001 (occupational health and safety) X X ANSI/ESD (Electrostatic Discharge Control Program) S20.20 X X ITAR (International Traffic and Arms Regulation) self-declaration X Aerospace Standard AS9100 X X X NADCAP certification X X X FAR 145 certification (FAA repair station) X EASA repair approval X ATEX/IECEx certification X IRIS certification (Railway) X ISO 50001:2011 (energy management) X Bureau of Indian Standards (BIS) X TL9000 (telecommunications) X Additional Information Our global headquarters is located at One Plexus Way, Neenah, Wisconsin, 54957.
It means encouraging engagement, inclusion of all employees’ ideas and perspectives and association among the global locations in which we operate—proudly representing approximately 15 countries our team members call home. We have adopted the following D&I mission statement at Plexus, which is directly incorporated into our Code of Conduct: "Our people create our best Plexus.
It means encouraging engagement, inclusion of all team members’ ideas and perspectives and driving meaningful connections among the global locations in which we operate. We have adopted the following D&I mission statement at Plexus, which is directly incorporated into our Code of Conduct: "Our people create our best Plexus.
Finally, we execute to customer-driven and sector-based go-to-market strategies. Financial Model Our financial model aligns with our business strategy. Our primary long-term focus is to achieve a 9-12% compounded annual revenue growth rate while earning a return on invested capital ("ROIC") of 15%, which would exceed our weighted average cost of capital ("WACC") and represent positive economic return.
Our primary long-term focus is to achieve a 9-12% compounded annual revenue growth rate while earning a return on invested capital ("ROIC") of 15%, which would exceed our weighted average cost of capital ("WACC") and represent positive economic return.
Employee Engagement At every facility, in every organization and at all levels, we strive to continuously improve the engagement of our teammates. We survey employee engagement annually through our employee net promotor score and we identify strengths and act on areas of opportunity to enhance our work environment and increase employee satisfaction.
We survey employee engagement annually through our employee net promotor score and we identify strengths and act on areas of opportunity to enhance our work environment and increase employee satisfaction.
We assign each role a pay range based on its job accountabilities and the pay practices for similar roles in the marketplace. Employees are compensated within their applicable pay range based on a number of factors, including the employee's education, experience, performance and potential. At least annually, we reevaluate employee pay based on these criteria.
Team members are compensated within their applicable pay range based on a number of factors, including the employee's education, experience, performance and potential. At least annually, we reevaluate employee pay based on these criteria.
For our employees, this includes access to our Employee Assistance Program (EAP), or similar program depending on country, which offers confidential support for managing stress and supporting mental health, including offering clinician, counselor, legal or financial resources to employees and members of their households. • Community Involvement & Volunteerism – Community involvement, volunteering and charitable giving are important to ensure we are investing and promoting positive impacts in the communities in which we operate and where our employees live.
For our team members, this includes access to our Employee Assistance Program ("EAP"), or similar program depending on country. • Community Involvement & Volunteerism – Community involvement, volunteering and charitable giving are important to ensure we are investing and promoting positive impacts in the communities in which we operate and where our team members live.
Approximately 3,000 and 170 of our respective employees in Mexico and the United Kingdom are covered by union agreements. These union agreements are typically renewed at the beginning of each year, although in a few cases these agreements may last two or more years.
These union agreements are typically renewed at the beginning of each year, although in a few cases these agreements may last two or more years. Our team members in China, Germany, Malaysia, Mexico, Romania, Thailand and the United States are not covered by union agreements.
We discuss the risks relating to cybersecurity and their potential impact more fully in "Risk Factors" in Part I, Item 1A herein. Compliance with Laws and Regulations As a global public company that supports manufacturing, designing and servicing highly complex products in demanding regulatory environments, our operations are subject to a variety of laws, regulations and compliance obligations.
Compliance with Laws and Regulations As a global public company that supports manufacturing, designing and servicing highly complex products in demanding regulatory environments, our operations are subject to a variety of laws, regulations and compliance obligations.
We are proud of our culture and the recognition we have received over the years as a great place to work.
Purpose and Culture We recognize a great culture is foundational to the success of our vision to create the products that build a better world. We are proud of our culture and the recognition we have received over the years as a great place to work.
In 2022, we received responses from 95% of our team members through the survey. Compensation Our philosophy is to competitively compensate all employees for their contributions to Plexus and to appropriately motivate employees to provide value to Plexus' shareholders. To ensure compensation is competitive, performance-based and fair, we are disciplined in the way we establish and evaluate pay.
In 2023, we received responses from 97% of our team members through the survey. 7 Table of Contents Compensation Our philosophy is to competitively compensate all team members for their contributions to Plexus and to appropriately motivate team members to provide value to Plexus' shareholders.
Protecting our team members and those within our communities is essential. We strive to be the safest place for our employees away from home. Plexus takes an adaptive and proactive approach to ensure we conduct all of our operations across the globe safely and responsibly and we maintain a method of evaluating environmental, health and safety performance for continual improvement.
Plexus takes an adaptive and proactive approach to ensure we conduct all of our operations across the globe safely and responsibly and we maintain a method of evaluating environmental, health and safety performance for continual improvement. This includes setting and reviewing environmental, health and safety goals.
Guided by our values and leadership behaviors, we do the right thing to support our team members, communities and customers. • Discipline by Design – Finally, we are committed to delivering shareholder value over the long term through a consistent and disciplined financial model focused on driving industry-leading revenue growth and superior return on invested capital.
We are guided by our values and leadership behaviors. We do the right thing to support our team members, communities and customers. • Discipline by Design – We hold ourselves accountable to delivering shareholder value through consistent application of a disciplined financial model.
Our Vision, Mission and Strategy Our vision is to help create the products that build a better world. Our mission is to be the leader in highly complex products and demanding regulatory environments.
Our solutions are supported across our 28 facilities in the Americas ("AMER"), Asia-Pacific ("APAC") and Europe, Middle East and Africa ("EMEA") regions. Our Vision, Mission and Strategy Our vision is to help create the products that build a better world. Our mission is to be the leader in highly complex products and demanding regulatory environments.
To deliver on our strategy, we align our operations, processes, workforce and financial metrics to create a high performance, accountable organization with a talented and engaged workforce deeply passionate about driving growth through customer service excellence. We also promote a collaborative, customer-centric culture that continuously evaluates and optimizes our business processes with a goal of creating shareholder value.
To deliver on our strategy, we align our team members, operations, systems of oversight and financial metrics to create a high performance, accountable organization with an engaged workforce deeply passionate about driving growth through customer service excellence. Financial Model Our financial model aligns with our business strategy.
We also purchase non-electronic, typically custom engineered components such as molded/formed plastics, sheet metal fabrications, aluminum extrusions, robotics, motors, vision sensors, motion/actuation, fluidics, displays, die castings and various other hardware and fastener components. These components are sourced from Plexus preferred suppliers and customer directed suppliers.
We discuss the causes, implications, and potential implications of these shortages more fully in "Risk Factors" in Part I, Item 1A herein. We also purchase non-electronic, typically custom engineered components such as molded/formed plastics, sheet metal fabrications, aluminum extrusions, robotics, motors, vision sensors, motion/actuation, fluidics, displays, die castings and various other hardware and fastener components.
Plexus offers a uniform array of services for customers in each market sector and, aside from the specific go-to-market teams, generally we do not dedicate operational equipment, personnel, facilities or other resources to particular market sectors, nor do we internally track our costs and resources per market sector. 4 Table of Contents Plexus serves a diverse customer landscape that includes industry-leading, branded product companies, along with other technology pioneering start-ups and emerging companies that may or may not maintain manufacturing capabilities.
Plexus offers an array of services for customers in each market sector and, aside from the specific go-to-market teams, generally we do not dedicate operational equipment, personnel, facilities or other resources to particular market sectors, nor do we internally track our costs and resources per market sector.
Solutions With integrated design and development, supply chain solutions, new product introduction, manufacturing and sustaining services, we proactively tackle tough challenges throughout the product lifecycle.
With integrated design and development, supply chain solutions, new product introduction, manufacturing and sustaining services, we proactively tackle tough challenges throughout the product lifecycle. We provide most of our optimized solutions on a turnkey basis, and we typically procure all materials required for product assembly.
Amidst a highly dynamic set of supply markets, Plexus' global supply chain management organization works to mitigate potential risks and ensure a steady flow of components at competitive prices.
Through our engineering development engagements and through the quoting of new business, Plexus can influence the selection of new product components, and therefore the selection of suppliers who outperform their peers. Amidst a highly dynamic set of supply markets, Plexus' global supply chain management organization works to mitigate potential risks and ensure a steady flow of components at competitive prices.
With a global footprint and scalable operations, we aim to tailor our manufacturing environment to meet each customer’s needs worldwide. As we strive for zero defects, we empower all employees with the knowledge that exceptional quality begins with each individual member of our team.
As we strive for zero defects, we empower all team members with the knowledge that exceptional quality begins with each individual member of our team.
In addition, the Company has invested in D&I leadership training on the value of diversity and how best to foster an inclusive culture.
In addition, the Company has invested in D&I leadership training on the value of diversity and how best to foster an inclusive culture. • Gender & Underrepresented Minorities Recruitment Strategy – Our talent acquisition teams have a strategic initiative to widen the funnel of talent seeking to join Plexus.
Materials and Suppliers We typically purchase raw materials, including printed circuit boards and electronic components, from a wide variety of manufacturers and their authorized distributors. Under certain circumstances, we will purchase components from independent distributors, customers or competitors. Many of these raw materials are unique to the designed assembly.
Under certain circumstances, we will purchase components from independent distributors, customers or competitors. Many of these raw materials are unique to the designed assembly. By customer agreement, we purchase materials according to customer forecast and supplier lead-times.
Competency-based training, leadership development programs and online learning provide the foundation for a learning culture and ongoing development for team members at all levels. While our goal is to develop our own talent, we recruit technical, new graduate and experienced talent by valuing potential as well as experience and personality traits that align with our Values and Leadership Behaviors.
While our goal is to develop our own talent, we recruit new graduate and experienced talent by valuing potential and personality traits that align with our Values and Leadership Behaviors, as well as experience. Employee Engagement At every facility, in every organization and at all levels, we strive to continuously improve the engagement of our teammates.
Given the quick response times required by our customers, we seek to maintain flexibility to scale our operations as necessary to maximize efficiency. To do so, we use skilled temporary labor in addition to our full-time employees. 9 Table of Contents Additional Information Our global headquarters is located at One Plexus Way, Neenah, Wisconsin, 54957.
We have no history of labor disputes at any of our facilities, and we believe that our employee relationships are positive and stable. Given the quick response times required by our customers, we seek to maintain flexibility to scale our operations as necessary to maximize efficiency. To do so, we use skilled temporary labor in addition to our full-time employees.
These regulations are related to topics such as: monitoring, tracking and reporting of air and water emissions; handling and disposing of hazardous chemicals used during our manufacturing process; and evaluating and mitigating employee health and safety hazards in our facilities.
These regulations are related to topics such as: monitoring, tracking and reporting of air and water emissions; tracking and disposing of wastes generated from our manufacturing process; and evaluating and mitigating employee health and safety hazards in our facilities. See "Risk Factors" in Part I, Item 1A, herein, for more detail around risks pertaining to compliance with laws and regulations.
We provide most of our optimized solutions on a turnkey basis, and we typically procure all materials required for product assembly. We provide select services on a consignment basis, meaning the customer supplies the necessary materials and Plexus provides the labor and other services required for product assembly.
We provide select services on a consignment basis, meaning the customer supplies the necessary materials and Plexus provides the labor and other services required for product assembly. In addition to manufacturing, turnkey service requires material procurement and warehousing and involves greater resource investments than consignment services.
Plexus also utilizes an executive-level IT Steering Committee as well as an IT Cybersecurity Incident Response Team, and has a formal incident response plan in the event of a cyber incident. Continuously enhancing our environment to meet the increasing needs of cybersecurity and privacy regulations remains a top priority.
Plexus also utilizes executive-level IT and Security Steering Committee as well as an established IT Cybersecurity Incident Response Team with a formal incident response plan based on the National Institute of Standards and Technology (“NIST”) framework in the event of a cyber-incident.
Altogether, purchased components range from “off the shelf” to highly customized and vary widely in terms of market availability and price. Through our engineering development engagements and through the quoting of new business, Plexus can influence the selection of new product components, and therefore the selection of suppliers who outperform their peers.
These components are sourced from Plexus preferred suppliers and customer directed suppliers. Altogether, purchased components range from “off the shelf” to highly customized and vary widely in terms of market availability and price.
Plexus offers a dedicated team focused on decreasing time to market with a full suite of integrated new product introduction services.
Plexus offers a dedicated team focused on decreasing time to market with a full suite of integrated new product introduction services. Through early integration and collaboration, customers can take advantage of Plexus’ capabilities, such as design for excellence, specialized design of test solutions and rapid prototyping.
Our sales and marketing efforts focus on targeting new customers and expanding our engagements with existing customers. We believe our ability to provide a full range of services that complement the entire product lifecycle across a global footprint provides a business advantage.
Plexus maintains awareness and knowledge of our competitors' capabilities in order to remain highly competitive within our target markets. We believe our ability to provide a full range of services that complement the entire product lifecycle across a global footprint provides a business advantage.
How we manage our human capital is critical to how we deliver on our strategy and create sustained growth and value for our shareholders. Purpose and Culture We recognize that a great culture is foundational to the success of our vision to create the products that build a better world.
Human Capital Management We are driven to differentiate Plexus with our talent and by our culture. How we manage our human capital is critical to how we deliver on our strategy and create sustained growth and value for our shareholders.
By customer agreement, we purchase materials according to customer forecast and supplier lead-times. The key electronic components we purchase include: advanced semiconductors, diodes, power management modules, microcontrollers, memory modules, interconnects, inductors, resistors, capacitors, power supplies and cable and wire.
The key electronic components we purchase include: advanced semiconductors, diodes, power management modules, microcontrollers, memory modules, interconnects, inductors, resistors, capacitors, power supplies and cable and wire. Component shortages, extended lead-times and subsequent allocations by our suppliers are an inherent risk within the electronics industry and have particularly remained an issue for semiconductors during fiscal 2023.
We engage in regular talent reviews to calibrate on the performance and potential of our teammates, their development needs, career pathing and the strength of our 8 Table of Contents succession plans. During these reviews, we also assess retention rates and the diversity composition of our leaders.
Talent Development & Acquisition Our commitment to holistic talent management means that we expect and reward high performance and address underperformance with urgency, candor and empathy. We engage in regular talent reviews to calibrate on the performance and potential of our teammates, their development needs, career pathing and the strength of our succession plans.
The cost variance from our competitors is especially evident relative to those that provide EMS services for high-volume, less complex products, with less stringent requirements (e.g., consumer electronics). Intellectual Property We own various service marks that we use in our business, which are registered in the trademark offices of the United States and other countries.
The cost variance from our competitors is especially evident relative to those that provide EMS services for high-volume, less complex products, with less stringent requirements (e.g., consumer electronics). Sustainability Our ability to build a better world goes beyond the products we help create. We also strive to build a better world through how we innovate and operate.
During fiscal 2022, we served approximately 140 customers. General Electric Company ("GE") accounted for 12.9%, 11.2% and 11.7% of our net sales during fiscal 2022, 2021 and 2020, respectively. No other customer accounted for 10.0% or more of our net sales in any of the last three fiscal years.
During fiscal 2023, we served approximately 150 customers. GE Healthcare Technologies, Inc. ("GEHC") accounted for 10.3% of our net sales during fiscal 2023, while General Electric ("GE") accounted for 12.9% and 11.2% of our net sales during fiscal 2022 and 2021, respectively. During fiscal 2023, GE completed the separation of its healthcare business, GEHC, as a stand-alone company.
This includes partnerships with organizations such as Society of Women Engineering ("SWE"), universities with diverse student populations and minority groups supporting underrepresented minorities with leadership aspirations across many disciplines. • Employee Benefits & Programs – Plexus has a number of policies and benefits in place to support the unique needs and overall wellbeing of our team members and their families, including flexible workplace, paid parental leave and a Plexus Wellness Program to ensure our employees have access to the resources they need to lead healthy, balanced lives.
Further, as part of our efforts to expand diversity within our recruitment practices, we established a requirement that all interview panels for management job levels contain at least one diverse team member. • Employee Benefits & Programs – Plexus has a number of policies and benefits in place to support the unique needs and overall well-being of our team members and their families, including flexible workplace, paid parental leave and a Plexus Wellness Program to ensure our team members have access to the resources they need to lead healthy, balanced lives.
With integrated design and development, supply chain solutions, new product introduction, manufacturing and sustaining services, we proactively tackle tough challenges throughout the product lifecycle. A number of competitors may provide services similar to Plexus. Others may be more established in certain industry sectors, or have greater financial, manufacturing or marketing resources.
A number of competitors may provide services similar to Plexus. Others may be more established in certain industry sectors, or have greater financial, manufacturing or marketing resources. Smaller competitors compete mainly in specific sectors and within limited geographic areas. Plexus also competes with in-house capabilities of current and potential customers.
For a reconciliation of ROIC and economic return to our financial statements that were prepared using generally accepted accounting principles in the U.S. ("U.S. GAAP" or "GAAP"), see Exhibit 99.1 to this annual report on Form 10-K, which exhibit is incorporated herein by reference.
For additional information on non-GAAP financial measures, see Exhibit 99.1 to this annual report on Form 10-K, which exhibit is incorporated herein by reference.
These include prevention of excessive working hours and unfair wages, controls to prohibit child labor and human trafficking and bolstering workplace health and safety measures. We are one of several companies actively partnering with the RBA to abolish human trafficking by holding foreign labor agencies accountable to upholding sound recruiting processes.
We are one of several companies actively partnering with the RBA to abolish human trafficking by holding foreign labor agencies accountable for upholding sound recruiting processes. Protecting our team members and those within our communities is essential. We strive to be the safest place for our team members away from home.
Using the same tools and processes throughout our seven Design Centers worldwide, we leverage the latest technology and state-of-the-art design automation methodologies to provide comprehensive new product development and product commercialization solutions. • Supply Chain Solutions – Delivering an optimal supply chain solution is more than simply getting a product where it needs to be on time.
Solutions With integrated solutions throughout the product lifecycle, our team strives to create innovative and efficient paths to deliver products to market, keep products in the market longer and help manage the product lifecycle sustainably and responsibly. • Design and Development – Using the same tools and processes throughout our seven design centers worldwide, we leverage the latest technology and state-of-the-art design automation methodologies to provide comprehensive new product development and product commercialization solutions.
WiN has a mission to champion the advancement of women in their professional and personal development through various career and life changes. These groups are directly supported by executive-level leadership and management engages regularly in support of ERG programming.
This ERG aims to contribute to more women in elevated roles and increased diversity in leadership positions across Plexus. These groups are directly supported by executive-level leadership and management engages regularly in support of ERG programming.
Our Human Rights Policy formalizes Plexus' commitment to respect human rights and embodies principles reflected in the United Nations ("UN") Global Compact, the Universal Declaration of Human Rights, the UN Guiding Principles on Business and Human Rights, core International Labour to Organization Conventions, the Organization for Economic Co-operation and Development Guidelines for Multinational Enterprises, and the laws of the countries in which we operate.
Human Rights At the core of our value system is a fundamental respect for human rights. Our Human Rights Policy formalizes Plexus' commitment to respect human rights and embodies internationally-recognized principles and the laws of the countries in which we operate.
Through early integration and collaboration, customers can take advantage of Plexus’ capabilities, such as design for excellence, specialized design of test solutions and rapid prototyping, while the program is advanced by a dedicated Plexus team that supports a transition to volume manufacturing. • Manufacturing – Our approach to manufacturing focuses on innovation, continuous improvement and superior quality and delivery.
The program is advanced by a dedicated Plexus team that supports a transition to volume manufacturing. • Manufacturing – Our approach to manufacturing focuses on innovation, continuous improvement and superior quality and delivery. With a global footprint and scalable operations, we aim to tailor our manufacturing environment to meet each customer’s needs worldwide.
In addition, as our percentage of net sales to customers in a specific sector becomes larger relative to other sectors, we will become increasingly dependent upon the economic and business conditions affecting that sector. Many of our large customers, including GE, contract with us through multiple independent divisions, subsidiaries, production facilities or locations.
No other customer accounted for 10.0% or more of our net sales in any of the last three fiscal years. Many of our large customers, including GEHC and GE, contract with us through multiple independent divisions, subsidiaries, production facilities or locations.
Our strategy to fulfill our vision and mission remains consistent and can be summarized in four parts: market focus, superior execution, passion meets purpose and discipline by design. • Market Focus – We engineer innovative solutions for customers in growth markets and focus on partnering with leading as well as disruptive global companies in the Industrial, Healthcare/Life Sciences and Aerospace/Defense sectors. • Superior Execution – Superior execution is foundational to our differentiation.
Our strategy to fulfill our vision and mission is consistent and can be summarized in four parts: • Market Focus – We engineer innovative solutions for customers in growth markets featuring highly complex products and demanding regulatory environments. • Superior Execution – We are dedicated partners to our customers, committed to achieving zero defects and perfect delivery through operational excellence. • Passion Meets Purpose – We are united as a team.
Employee Data Of our nearly 25,000 team members, 49.9% are female, 50.0% are male and 0.1% choose not to identify. The majority of our workforce, 54.8%, is located in our APAC region, while 34.1% and 11.1% of our employees are located in our AMER and EMEA regions, respectively.
The majority of our workforce, 54.1%, is located in our APAC region, while 31.7% and 14.2% of our team members are located in our AMER and EMEA regions, respectively. Approximately 165 of our team members in the United Kingdom are covered by union agreements.
In addition to manufacturing, turnkey service requires material procurement and warehousing and involves greater resource investments than consignment services. Other than certain test equipment, manufacturing equipment and software used for internal operations, we do not design or manufacture our own proprietary products.
Other than certain test equipment, manufacturing equipment and software used for internal operations, we do not design or manufacture our own proprietary products. Operations Plexus is a Wisconsin-headquartered corporation operating from 28 active facilities, totaling approximately 5.1 million square feet.
Management also updates the Board of Directors regularly on employee-related policies and efforts intended to protect our employees and to preserve our corporate culture, such as the regular review of our Code of Conduct and Business Ethics, diversity and inclusion initiatives, employee net promoter survey results and our ethics hotline activity.
Management also updates the Board of Directors regularly on employee-related policies and efforts intended to protect our team members and to preserve our corporate culture. Employee Data Of our nearly 25,000 team members, 50.3% are female, 49.0% are male and 0.7% choose not to identify.
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ITEM 1. BUSINESS Overview Plexus Corp. and its subsidiaries (together "Plexus," the "Company," "our", or "we") participate in the Electronic Manufacturing Services ("EMS") industry. Since 1979, we have been partnering with companies to create the products that build a better world.
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ITEM 1. BUSINESS Overview Plexus partners with companies to help create the products that build a better world. Our global team of nearly 25,000 individuals provides innovative solutions across the product lifecycle, specializing in the design, manufacture and service of highly complex products in demanding regulatory environments.
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We are a global leader with a team of nearly 25,000 individuals focused on providing Design and Development, Supply Chain Solutions, New Product Introduction, Manufacturing and Sustaining Services. We specialize in serving customers in industries with highly complex products and demanding regulatory environments.
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Paired with our optimized and integrated global supply chain, we help our customers solve complex product challenges through a broad array of differentiated services—from product development and new product introduction through volume manufacturing, service and end-of-life. We provide these solutions to market-leading as well as disruptive global companies in the Healthcare/Life Sciences, Industrial and Aerospace/Defense sectors.
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We deliver customer service excellence to leading global companies in the Industrial, Healthcare/Life Sciences and Aerospace/Defense market sectors by providing innovative, comprehensive solutions throughout the product’s lifecycle. We provide these innovative solutions to customers in the Americas ("AMER"), Asia-Pacific ("APAC") and Europe, Middle East and Africa ("EMEA") regions.
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We are committed to strengthening our capabilities as it relates to sustainable product design, including the ability to assess the global warming potential of a product based on its design and bill of materials and embedding eco-design principles into standard work. • Supply Chain Solutions – Delivering an optimal supply chain solution is more than simply getting a product where it needs to be on time.
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We are dedicated partners to our customers, committed to achieving zero defects and perfect delivery through operational excellence. • Passion Meets Purpose – Through our collective passion, we drive purpose to our actions and decisions in pursuit of operational excellence.
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Our sales and marketing efforts focus on expanding our engagements with existing customers as well as targeting new customers. Customers and Market Sectors Served Plexus serves a diverse customer landscape that includes industry-leading, branded product companies, along with other technology pioneering start-ups and emerging companies that may or may not maintain manufacturing capabilities.
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Operations Plexus is a Wisconsin-headquartered corporation with nearly 25,000 employees, including over 4,700 engineers and technologists dedicated to product development and design, test equipment development and design, and manufacturing process development and control, all of whom operate from 28 active facilities, totaling approximately 5.1 million square feet.
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Economic, business or regulatory conditions that affect the sector, larger relative net sales associated with a certain sector or our failure to choose to do business in appropriate subsectors, can particularly impact us. Materials and Suppliers We typically purchase raw materials, including printed circuit boards and electronic components, from a wide variety of manufacturers and their authorized distributors.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThe implementation of health and safety practices by us, our suppliers, or our customers could impact customer demand, supplier deliveries, our productivity and costs, which could have a material adverse impact on our business, financial condition, or results of operations. 22 Table of Contents While we currently believe we have ample liquidity to manage the financial impact of a global health crisis, we can give no assurance that this will continue to be the case if the impact is prolonged or if there is an extended impact on us or the economy generally.
Biggest changeThe implementation of health and safety practices by us, our suppliers, or our customers could impact customer demand, supplier deliveries, our productivity and costs, which could have a material adverse impact on our business, financial condition, or results of operations.
The failure to make prudent engagement decisions or to establish appropriate terms of engagement could adversely affect our profitability and margins. 20 Table of Contents Also, there are inherent risks associated with the timing and ultimate realization of anticipated revenue from a new program or service; these factors can sometimes extend for a significant period.
The failure to make prudent engagement decisions or to establish appropriate terms of engagement could adversely affect our profitability and margins. 20 Table of Contents Also, there are inherent risks associated with the timing and ultimate realization of anticipated revenue and profitability from a new program or service; these factors can sometimes extend for a significant period.
If unauthorized persons gain physical access to our facilities, or our physical assets or information are stolen, damaged or used in an unauthorized manner (whether through outside theft or industrial espionage), we could be subject to, among other consequences, negative publicity, governmental inquiry and oversight, loss of government contracts, litigation by affected parties or other future financial obligations related to the loss, misuse or theft of our or our customers’ data, inventory or physical assets, any of which could have a material adverse effect on our reputation and results of operations.
If unauthorized persons gain physical access to our facilities, or our physical assets or information are stolen, damaged or used in an unauthorized manner (whether through outside theft or industrial espionage), we could be subject to, among other consequences, interruption in our operations, negative publicity, governmental inquiry and oversight, loss of government contracts, litigation by affected parties or other future financial obligations related to the loss, misuse or theft of our or our customers’ data, inventory or physical assets, any of which could have a material adverse effect on our reputation and results of operations.
Natural disasters including weather events caused by global climate change, breaches of security and other events outside our control, and the ineffective management of such events, may harm our business. Some of our facilities are located in areas that may be impacted by natural disasters including tornadoes, hurricanes, earthquakes, water shortages, tsunamis and floods.
Natural disasters including weather events caused by global climate change, breaches of security and other events outside our control, and the ineffective management of such events, may harm our business. Some of our facilities are located in areas that may be impacted by natural disasters including tornadoes, hurricanes, earthquakes, water shortages, tsunamis or floods.
Risks associated with transfer pricing adjustments are further highlighted by the global initiative from the Organisation for Economic Cooperation and Development called the Base Erosion and Profit Shifting (“BEPS’) project. The BEPS project is challenging longstanding international tax norms regarding the taxation of profits from cross-border business.
Risks associated with transfer pricing adjustments are further highlighted by the global initiative from the Organisation for Economic Cooperation and Development called the Base Erosion and Profit Shifting ("BEPS") project. The BEPS project is challenging longstanding international tax norms regarding the taxation of profits from cross-border business.
These transition risks could negatively impact our financial condition and results of operations including by means of carbon pricing mechanisms, required investments in lower greenhouse gas emissions technology, increased cost of raw materials and mandates on and regulation of existing products and services.
These transition risks could negatively impact our financial condition and results of operations including by means of carbon pricing mechanisms, investments in lower greenhouse gas emissions technology, increased cost of raw materials and mandates on and regulation of existing products and services.
If we issue additional equity securities or convertible securities to raise capital, it may be dilutive to shareholders’ ownership interests; we may not be able to offer our securities on attractive or acceptable terms in the event of volatility or weakness in our stock price.
If we issue additional equity securities or convertible securities to raise capital, it may be dilutive to shareholders’ ownership interests; we also may not be able to offer our securities on attractive or acceptable terms in the event of volatility or weakness in our stock price.
In addition, if our customers are required by regulation or other requirements to make changes in their product lines, these changes could significantly disrupt particular programs we have in place for these customers and create inefficiencies in our business.
In addition, if our customers are required by regulation or other requirements to make changes to their products or in their product lines, these changes could significantly disrupt particular programs we have in place for these customers and create inefficiencies in our business.
In addition, transition to low-carbon alternatives risks could result in reduced demand or product obsolescence for certain of our customers’ products and/or price modifications for our customers’ products and the resources needed to produce them.
In addition, transition to low-carbon alternatives could result in reduced demand or product obsolescence for certain of our customers’ products and/or price modifications for our customers’ products and the resources needed to produce them.
Government-imposed restrictions on where we or our customers can produce certain types of products or source components or with whom we can conduct business, such as named companies or industries identified in the 2021 National Defense Authorization Act and recent export regulations limiting advanced semiconductors and chip-manufacturing equipment, could limit our ability to sell or manufacture products or services in China, or source components from certain companies or geographies.
Government-imposed restrictions on where we or our customers can produce certain types of products or source components or with whom we can conduct business, such as named companies or industries identified in the 2021 National Defense Authorization Act, outbound investment restrictions, and recent export regulations limiting advanced semiconductors and chip-manufacturing equipment, could limit our ability to sell or manufacture products or services in China, or source components from certain companies or geographies.
Further, the extent to which the conflict between Russia and Ukraine or the escalating tensions between China and Taiwan or China and the U.S. may impact our business or results of operations will depend on future developments, including the severity and duration of any conflicts, their impact on global supply chains and their impact on regional and global economic conditions including the ability of our customers or suppliers to do business in those or surrounding countries and the inflationary effects of such conflicts on our profitability.
Further, the extent to which the conflict between Russia and Ukraine, conflict in the Middle East or the escalating tensions between China and Taiwan or China and the U.S. may impact our business or results of operations will depend on future developments, including the severity and duration of any conflicts, their impact on global supply chains and their impact on regional and global economic conditions including the ability of our customers or suppliers to do business in those or surrounding countries and the inflationary effects of such conflicts on our profitability.
In addition, we must comply with increasingly complex and rigorous regulatory standards enacted to protect business and personal data in the U.S. and elsewhere. For example, GDPR and similar legislation in jurisdictions in which we operate impose additional obligations on companies regarding the handling of personal data and provides certain individual privacy rights to persons whose data is stored.
In addition, we must comply with increasingly complex and rigorous regulatory standards enacted to protect business and personal data in the U.S. and elsewhere. For example, GDPR and similar legislation in jurisdictions in which we operate impose additional obligations on companies regarding the handling of personal data and provide certain individual privacy rights to persons whose data is stored.
Whether or not we are responsible, problems in the products we manufacture, whether real or alleged, whether caused by faulty customer specifications, the design or manufacturing processes, servicing or a component defect, may result in delayed shipments to customers or reduced or canceled customer orders.
Whether or not we are responsible, problems in the products we manufacture, whether real or alleged, whether caused by faulty customer specifications, product design, manufacturing processes, servicing, a component defect or otherwise, may result in delayed shipments to customers or reduced or canceled customer orders.
In addition, our adoption and the reporting of certain standards or mandated compliance to certain requirements could necessitate additional investments that could impact our profitability. There continues to be a lack of consistent climate legislation, which creates economic and regulatory uncertainty.
In addition, our adoption of certain standards, related reporting requirements, or mandated compliance to certain requirements could necessitate additional investments that could impact our profitability. There continues to be a lack of consistent climate legislation, which creates economic and regulatory uncertainty.
Also, the time and funds spent on monitoring and mitigating our exposure and responding to breaches, including the training of employees, the purchase of protective technologies and the hiring of additional employees and consultants to assist in these efforts could adversely affect our financial results.
Also, the time and funds spent on monitoring and mitigating our exposure and responding to breaches or attempted breaches, including the training of employees, the purchase of protective technologies and the hiring of additional employees and consultants to assist in these efforts could adversely affect our financial results.
Further, changing U.S. government export regulations including recent regulations relating to the export of advanced semiconductors and chip-manufacturing equipment that may limit our ability to ship certain components or customer products to China, or potential reductions in U.S. government agency spending, including those due to budget cuts or other political developments or issues, could affect opportunities in all of our market sectors.
Further, changing export regulations, including U.S. government regulations relating to the export of advanced semiconductors and chip-manufacturing equipment that may limit our ability to ship certain components or products to customers in China or potential reductions in U.S. government agency spending, including those due to budget cuts or other political developments or issues, could affect opportunities in all of our market sectors.
This risk is enhanced as a result of an increase in our remote workforce due to evolving flexible workplace practices, for example by reason of utilizing home networks that may lack encryption or secure password protection, virtual meeting/conference security concerns and increase of phishing/cyber-attacks around our remote workforce's digital resources.
This risk is enhanced as a result of an increase in our remote workforce due to evolving flexible workplace practices, for example by reason of utilizing home networks that may lack encryption or secure password protection, virtual meeting/conference security concerns and an increase of phishing/cyberattacks around our remote workforce's digital resources.
While we seek to secure contractual protection and/or to insure against many of these risks, we may not have practical recourse against certain suppliers, and contractual protections, insurance coverage or supplier warranties, as well as our other risk mitigation efforts, may be inadequate, not cost effective or unavailable, either in general or for particular types of products or issues.
While we seek to secure contractual protection and/or to insure against many of these risks, we may not have practical recourse against certain third parties, and contractual protections, insurance coverage or supplier warranties, as well as our other risk mitigation efforts, may be inadequate, not cost-effective or unavailable, either in general or for particular types of products or issues.
Thus, any disruption in operations at a facility possessing specialized certifications or equipment could adversely affect our ability to provide products and services to our customers, and potentially have a negative affect our relationships and financial results.
Thus, any disruption in operations at a facility possessing specialized certifications or equipment could adversely affect our ability to provide products and services to our customers, and potentially have a negative effect on our relationships and financial results.
Our competitors may: • respond more quickly than us to new or emerging technologies • be faster to develop new business models in response to evolving customer needs • have greater name recognition, critical mass and geographic and market presence • be better able to identify and take advantage of acquisition opportunities • adapt more quickly to changes in customer requirements • have lower internal cost structures • have greater direct buying power with component suppliers and distributors • devote greater resources to the development, promotion and sale of their services and execution of their strategy • be better positioned to compete on price for their services • have technological expertise, engineering capabilities and/or manufacturing resources that are greater than ours • have excess capacity, and be better able to utilize such excess capacity • be better positioned to add additional resources, and • be willing or able to make sales or provide services at lower margins than we do.
Our competitors may: • respond more quickly than us to new or emerging technologies • be faster to develop new business models or otherwise adapt to evolving customer requirements and needs • have greater name recognition, critical mass and geographic and market presence • be better able to identify and take advantage of acquisition opportunities • have lower internal cost structures • have greater direct buying power with component suppliers and distributors • devote greater resources to the development, promotion and sale of their services and execution of their strategy • be better positioned to compete on price for their services • have technological expertise, capabilities and/or resources that are greater than ours • have excess capacity, and be better able to utilize such excess capacity • be better positioned to add additional resources, and • be willing or able to make sales or provide services at lower margins than we do.
Failure of our customers to identify or flow down any such requirements to Plexus could result in production of non-compliant product, which could restrict their ability to sell such products, thus affecting our sales to them.
Failure of our customers to identify or flow down any such requirements to us could result in production of non-compliant product, which could restrict their ability to sell such products, thus affecting our sales to them.
In addition, lone and organized crime elements have been known to extort money by encrypting their victims’ data (ransomware) and utilize their victims’ resources for unauthorized mining of cryptocurrency. The increasing sophistication of cyberattacks requires us to continually evaluate the threat landscape and new technologies and processes intended to detect and prevent these attacks.
In addition, lone and organized crime elements have been known to extort money by encrypting their victims’ data (ransomware) and/or utilizing their victims’ resources for unauthorized mining of cryptocurrency. The increasing sophistication of cyberattacks requires us to continually evaluate the threat landscape and new technologies and processes intended to detect and prevent these attacks.
The impacts of a potential resurgence of COVID-19 or the possible impacts of a future and potentially more severe global health crisis could pose the risk that we or our employees, suppliers, customers and others may be restricted or prevented from conducting business activities for indefinite or intermittent periods of time, including as a result of employee health and safety concerns, shutdowns, shelter in place orders, travel restrictions and other actions and restrictions that may be prudent or required by governmental authorities.
The impacts of a potential resurgence of COVID-19 or other severe global health crisis could pose the risk that we or our employees, suppliers, customers and others may be restricted or prevented from conducting business activities for indefinite or intermittent periods of time, including as a result of employee health and safety concerns, shutdowns, shelter in place orders, travel restrictions and other actions and restrictions that may be prudent or required by governmental authorities.
A failure to adequately understand unique customer requirements may also impact our ability to estimate and ultimately recover associated costs, adversely affecting our financial results. 16 Table of Contents Many of our customers' markets are characterized by rapidly changing technology and evolving process developments. Our internal processes are also subject to these factors.
A failure to adequately understand unique customer requirements may also impact our ability to estimate and ultimately recover associated costs, adversely affecting our financial results. Many of our customers' markets are characterized by rapidly changing technology and evolving process developments. Our internal processes are also subject to these factors.
Our future success may depend on our ability to obtain additional financing and capital to support possible future growth and future initiatives. In addition, we also have receivables factoring programs. Many of our borrowings are at variable interest rates and therefore our interest expense is subject to increase if rates increase.
Our future success may depend on our ability to obtain additional financing and capital to support possible future growth and future initiatives including additional investments in our business. In addition, we also have receivables factoring programs. Many of our borrowings are at variable interest rates and therefore our interest expense is subject to increase if rates increase.
The heightened stakeholder focus on ESG issues related to our business requires the continuous monitoring of various and evolving laws, regulations, standards and expectations and the associated reporting requirements.
The heightened stakeholder focus on ESG issues related to our business requires the continuous monitoring of various and evolving laws, regulations, standards and expectations and associated voluntary and involuntary reporting requirements.
Any theft or misuse of information resulting from a security breach could result in, among other things, loss of significant and/or sensitive information, litigation by affected parties, financial obligations resulting from such theft or misuse, higher insurance premiums, governmental investigations, fines and penalties, negative reactions from current and potential future customers, and reputational damage, any of which could adversely affect our financial results.
Any theft or misuse of information resulting from a security breach or cyberattack could result in, among other things, interruption to our operations, loss of significant and/or sensitive information, litigation by affected parties, financial obligations resulting from such theft or misuse, higher insurance premiums, governmental investigations, fines and penalties, negative reactions from current and potential future customers, and reputational damage, any of which could adversely affect our financial results.
While maintaining excess capacity or higher levels of employment entail short-term costs, reductions in capacity or employment could impair our ability to respond to new opportunities and programs, market improvements or to 21 Table of Contents maintain customer relationships. Our decisions to reduce costs and capacity can affect our short-term and long-term results.
While maintaining excess capacity or higher levels of employment entail short-term costs, reductions in capacity or employment could impair our ability to respond to new opportunities and programs, market improvements or to maintain customer relationships. Our decisions to reduce costs and capacity can affect our short-term and long-term results.
If a resurgence of COVID-19 or a potentially more severe global health crisis occurs, we may be required to take further actions that are in the best interests of our employees, which could result in disruptions or delays and higher costs.
If a resurgence of COVID-19 or other severe global health crisis occurs, we may be required to take further actions that are in the best interests of our employees, which could result in disruptions or delays and higher costs.
Bribery Act and the European Union’s General Data Protection Regulation (the “GDPR”), applicable to companies with global operations • changing U.S. government export regulations, particularly relating to advanced semiconductors and chip-manufacturing equipment, may limit the ability to ship certain components or customer product to China, and source the components necessary to manufacture customer product in China • changes in the taxation of earnings both in the U.S. and in other countries • reputational risks related to, among other factors, varying standards and practices among countries • changes in duty rates • significant natural disasters and other events or factors impacting local infrastructure • the effects of other international political developments, such as tariffs, embargoes, sanctions, boycotts, trade wars, energy disruptions, trade agreements and changes in trade policies, including those which may be effected by the U.S. and other countries’ political reactions to those actions, and • regulatory requirements and potential changes to those requirements.
Bribery Act and the European Union’s General Data Protection Regulation (the “GDPR”), applicable to companies with global operations • changing U.S. government export regulations, particularly relating to advanced semiconductors and chip-manufacturing equipment, may limit the ability to ship certain components or product to customers in China, and source the components necessary to manufacture customer product in China • changes in the taxation of earnings in the U.S. and in other countries • reputational risks related to, among other factors, varying standards and practices among countries • changes in duty rates • significant natural disasters and other events or factors impacting local infrastructure • the effects of other international political developments, such as tariffs, embargoes, sanctions, boycotts, trade wars, energy disruptions, trade agreements and changes in trade policies, including those which may be affected by the U.S. and other countries’ political reactions to those actions, and • other regulatory and legal requirements and industry standards, and changes thereto.
Due to the intellectual property we maintain on our systems related to high technology components, sub-components, manufacturing processes and our customers’ products, we are a likely target from various external cyber threats, such as lone attackers, nation states seeking to gain access to such intellectual property, as well as both unintentional and malicious internal threats.
Due to the intellectual property we maintain on our systems related to high technology components, sub-components, manufacturing processes and our customers’ products, we are a likely target from various external cyber threats, such as lone attackers, nation 17 Table of Contents states seeking to gain access to such intellectual property, as well as both unintentional and malicious internal threats.
These actions could also affect the cost and/or availability of components that we procure from suppliers in China, as well as create disruptions, delays, shortages or increased costs within our global supply chain.
These actions could also affect the cost and/or availability of upstream source materials or components that we procure from suppliers in China, as well as create disruptions, delays, shortages or increased costs within our global supply chain.
Customers also cancel, change or delay design, production or sustaining service quantities and schedules, or fail to meet their forecasts for a number of reasons beyond our control. Customer expectations can change rapidly, requiring us to take on additional commitments or risks. In addition, customers may fail to meet their commitments to us or our expectations.
Customers also cancel, change or delay design, production or sustaining services demand and schedules, or fail to meet their forecasts for a number of reasons beyond our control. Customer expectations can change rapidly, requiring us to take on additional commitments or risks. In addition, customers may fail to meet their commitments to us or our expectations.
These factors can negatively affect operating results and financial position, including reducing our revenues, costs and profitability as a result of having to minimize engagements in China or requiring us to shift such production or the sourcing of components to the U.S. or other higher-cost locations.
These factors can negatively affect our operating results and financial position, including reducing our revenues and profitability as a result of having to minimize engagements in China or requiring us to shift such production or the sourcing of components to potentially other higher-cost locations.
These international aspects of our operations, which are likely to increase over time, including with the introduction of a new manufacturing facility in Bangkok, Thailand, subject us to the following risks that could materially impact our operations and operating results: • economic, political or civil instability • civil or international conflicts and war, including the risk of escalation in the Russia-Ukraine war, escalating tensions between China and Taiwan as well as China and the U.S. • transportation delays or interruptions • exchange rate fluctuations • potential disruptions or restrictions on our ability to access cash amounts held outside of the U.S. • changes in labor markets, such as government-mandated wage increases (which we are experiencing in Malaysia), increases to minimum wage requirements, changes in union-related laws and regulations, limitations on immigration or the free movement of labor or restrictions on the use of migrant workers, and difficulties in appropriately staffing and managing personnel in diverse cultures • customers shifting parts of their manufacturing and supply chains to different countries, often referred to as re-shoring, which may impact footprint needs and create operational disruption due to transition efforts • compliance with laws, such as the U.S.
These international aspects of our operations, which are likely to increase over time, including with any introduction of facilities in new locations, subject us to risks that could materially impact our operations and operating results, such as the following: • economic, political or civil instability • civil or international conflicts and war, including the risk of escalation in the Russia-Ukraine war, conflict in the Middle East, escalating tensions between China and Taiwan as well as China and the U.S. • transportation delays or interruptions • exchange rate fluctuations • potential disruptions or restrictions on our ability to access cash amounts held outside of the U.S. • changes in labor markets, such as government-mandated wage increases (which we are experiencing in Malaysia and Romania), increases to minimum wage requirements, changes in union-related laws, regulations or practices, limitations on immigration or the free movement of labor or restrictions on the use of migrant workers, and difficulties in appropriately staffing and managing personnel in diverse cultures • customers shifting parts of their manufacturing and supply chains to different countries, including re-shoring, which may impact footprint needs and create operational disruption due to transition efforts • compliance with laws, such as the U.S.
We have a complex business model, and our failure to properly manage or execute on that model could adversely affect our operations, financial results and reputation. Our business model focuses on products and services that are highly complex and subject to demanding regulatory requirements.
We have a complex business model and are subject to rapidly changing technology requirements; our failure to properly manage or execute on that model and those requirements could adversely affect our operations, financial results and reputation. Our business model focuses on products and services that are highly complex and subject to demanding regulatory requirements.
For example, government reimbursement rates and other regulations, as well as the financial health of healthcare providers, and changes in how healthcare in the U.S. and other countries is structured, and how medical devices are taxed, could affect the willingness and ability of end customers to purchase the products of our customers in the Healthcare/Life Sciences sector as well as impact our margins.
For example, government reimbursement rates and other regulations, the financial health of healthcare providers, and changes in how healthcare systems are structured, and how medical devices are taxed, could affect the willingness and ability of end customers to purchase the products of our customers in the Healthcare/Life Sciences sector as well as impact our margins.
In such situations, we may procure components earlier, which has led to an increase in inventory in the short term and may lead to increased, excess, or obsolete inventory in the future.
In such situations, we may procure components earlier, which leads to an increase in inventory in the short term and may lead to increased excess or obsolete inventory in the future.
A failure to foster a strong, healthy culture, or a failure to adopt or maintain competitive policies and practices that enhance our workplace culture, such as those related to diversity and inclusion, workplace flexibility or other employee benefits, could adversely impact our ability to attract, develop and retain personnel and could substantially affect our operations and financial results.
A failure to foster a strong, healthy culture, or a failure to adopt or maintain policies and practices that enhance our workplace culture or competitiveness, such as those related to diversity and inclusion, workplace 19 Table of Contents flexibility or other employee benefits, could adversely impact our ability to attract, develop and retain personnel and could substantially affect our operations and financial results.
Our Healthcare/Life Sciences sector is subject to statutes and regulations covering the design, development, testing, manufacturing, labeling and servicing of medical devices and the reporting of certain information regarding their safety, including FDA regulations and similar regulations in other countries.
Our Healthcare/Life Sciences sector is subject to statutes and regulations covering the design, development, testing, manufacturing, labeling and servicing of medical devices and the reporting of certain information regarding their safety, including regulations by the Food and Drug Administration and similar regulations in other countries.
Monitoring employee engagement and maintaining a healthy workplace culture based on our values and leadership behaviors is important to developing these good relationships and 19 Table of Contents retaining a committed workforce.
Monitoring employee engagement and maintaining a healthy workplace culture based on our values and leadership behaviors is important to developing these good relationships and retaining a committed workforce.
Our inability to continue to benefit from such reductions in the future could adversely affect our operating results, cash flows and inventory levels, which could increase as a result of higher component prices or the negative effects of inflation on customer end-market demand. 15 Table of Contents Our services involve other inventory risk.
Our inability to continue to benefit from such reductions in the future could adversely affect our operating results, cash flows and inventory levels, which could increase as a result of higher component prices or the negative effects of inflation on customer end-market demand.
This risk continues to be heightened by potential volatility in end market demand for our customers' products or our services as a result of COVID-19, the current inflationary environment, supply chain constraints, global conflicts and general economic uncertainty.
This risk continues to be heightened by potential volatility in end-market demand for our customers' products or our services as a result of external factors such as the current inflationary environment, supply chain constraints, global conflicts, regulatory change and general economic uncertainty.
We also have receivables factoring agreements in place; therefore, deterioration in the payment experience 12 Table of Contents with or credit quality of our major customers we factor, or issues with the banking counterparties to our factoring agreements, could have a material adverse effect on our financial condition and results of operations due to our inability to factor such receivables.
We also have receivables factoring agreements in place; therefore, deterioration in the payment experience with or credit quality of our customers with respect to which we factor receivables, or issues with the banking counterparties to 12 Table of Contents our factoring agreements, could have a material adverse effect on our financial condition and results of operations if we are unable to factor such receivables.
We occasionally incur costs defending claims, and any such disputes could adversely affect our business relationships. 18 Table of Contents A failure to comply with customer-driven policies and standards, and third-party certification requirements or standards could adversely affect our business and reputation.
We occasionally incur costs defending claims, we may be unsuccessful in defending against claims and incur financial liabilities, and any such disputes could adversely affect our business relationships. 18 Table of Contents A failure to comply with customer-driven policies and standards, and third-party certification requirements or standards could adversely affect our business and reputation.
There may be problems with the products we design, manufacture or service that could result in liability claims against us, reduced demand for our services and damage to our reputation. We design, manufacture and service products to our customers’ specifications, many of which are highly complex, for industries such as healthcare, aerospace and defense that have higher risk profiles.
There may be problems with the products we design, manufacture or service that could result in liability claims against us, reduced demand for our services and damage to our reputation. We design, manufacture and service products to our customers’ specifications, many of which are highly complex, for market sectors that generally have higher risk profiles.
Adverse changes in the profitability and financial outlook in each of our jurisdictions may require the creation of an additional valuation allowance to reduce our net deferred tax assets. Such changes could result in material non-cash expenses in the period in which the changes are made.
Adverse changes in the profitability and financial outlook in each of our jurisdictions may require the creation of an additional valuation allowance to reduce our net deferred tax assets. Such changes could result in material non-cash expenses in the period in which the changes are made. We may fail to secure or maintain necessary additional financing or capital.
We may fail to identify acquisition targets, or successfully complete future acquisitions, and may not successfully integrate acquired operations or recognize the anticipated benefits of an acquisition, which could adversely affect our operating results. If we were to pursue future growth through acquisitions, they would involve significant risks that could have a material adverse effect on us.
We may fail to identify acquisition targets, successfully complete future acquisitions, successfully integrate acquired operations or recognize the anticipated benefits of an acquisition, which could adversely affect our operating results. If we pursue new capabilities or geographies to enable growth through acquisitions, such activities would involve significant risks that could have a material adverse effect on us.
Our industry is highly competitive. We compete against numerous providers with global operations, as well as those which operate on only a local or regional basis.
We compete against numerous providers with global operations, as well as those which operate on only a local or regional basis.
We could be adversely affected by changes in the IMMEX program or our failure to comply with its requirements. 14 Table of Contents Additionally, continued uncertainty regarding commercial dealings, tariffs, export regulations and other trade protection measures between the U.S. and China, heightened by escalating geopolitical tensions, may affect our ability to do business in China, may impact the cost of our products originating in China and may impact the demand for our products manufactured in China in the event our customers reduce or eliminate their operations in China.
Additionally, continued uncertainty regarding commercial dealings, tariffs, export regulations and other trade protection measures between the U.S. and China, heightened by escalating geopolitical tensions, may affect our ability to do business in China, may impact the cost of our products originating in China and may impact the demand for our products manufactured in 14 Table of Contents China in the event our customers reduce or eliminate their operations in China.
Despite our quality control and quality assurance efforts, problems may occur, or may be alleged, in the design, manufacturing or servicing of these products.
These dynamics increase the risks inherent in those engagements. Despite our quality control and quality assurance efforts, problems may occur, or may be alleged, in the design, manufacturing or servicing of products.
In addition, to meet our customers' needs, particularly when the production requirements of certain products are site-specific, to achieve increased efficiencies, or to address factors affecting specific locations, such as tariffs and trade disputes, we sometimes require additional capacity in one location while reducing capacity in another.
When we make decisions to reduce capacity or to close facilities, we frequently incur restructuring costs. 21 Table of Contents In addition, to meet our customers' needs, particularly when the production requirements of certain products are site-specific, to achieve increased efficiencies or to address factors affecting specific locations, such as tariffs and trade disputes, we sometimes require additional capacity in one location while reducing capacity in another.
Further, as we grow in size and complexity, a failure to continuously focus on the development of personnel and plan for the succession of critical roles may result in shortfalls in the talent required to execute effectively and affect our operations and financial results.
Further, as we grow in size and complexity, a failure to effectively develop personnel and plan for the succession of critical roles may result in shortfalls in the talent and skills required to execute effectively and grow our business, which could affect our operations and financial results.
If we fail to manage these growth and contraction decisions effectively, as well as fail to realize the anticipated benefits of these decisions, we can find ourselves with either excess or insufficient resources and our business, as well as our profitability, may suffer.
We regularly contend with these issues and must carefully manage our business to meet changing customer and market requirements. If we fail to manage these growth and contraction decisions effectively, or fail to realize the anticipated benefits of these decisions, we can find ourselves with either excess or insufficient resources and our business, as well as our profitability, may suffer.
The sustained success of our business will depend upon our continued ability to: • attract and retain qualified engineering and technical personnel, especially in times of tight labor markets • choose, maintain and enhance appropriate technological and service capabilities • successfully manage the implementation and execution of information systems • develop and market services that meet changing customer needs • effectively execute our services and perform to our customers’ expectations, and • successfully anticipate, or respond to, technological changes on a cost-effective and timely basis.
The sustained success of our business will depend upon our continued ability to: • attract and retain qualified engineering and technical personnel, especially in times of tight labor markets • choose, maintain and enhance appropriate technological and service capabilities • successfully manage the implementation and execution of information systems • develop and market services that meet changing customer needs • effectively and efficiently execute our services and perform to our customers’ expectations, and • successfully anticipate, or respond to, technological changes on a cost-effective and timely basis. 16 Table of Contents Although we believe that our operations utilize the technologies, equipment and processes that are currently required by our customers, we cannot be certain that we will maintain or develop the capabilities required by our customers in the future.
Net sales to our 10 largest customers have represented a majority of our net sales in recent periods. Our 10 largest customers accounted for 56.2% and 55.2% of our net sales in fiscal 2022 and 2021, respectively. During each of these periods there was one customer that represented 10.0% or more of our net sales.
Our 10 largest customers accounted for 49.6% and 56.2% of our net sales in fiscal 2023 and 2022, respectively. During each of these periods there was one customer that represented 10.0% or more of our net sales.
They also include strategic risks such as the diversion of management time and attention from other business activities and opportunities and financial risks such as the use of cash or incurrence of additional debt and interest expense as consideration for the acquisition and to fund the activities required to pursue acquisitions, the potential volatility or weakness in our stock price as a 13 Table of Contents result of the announcement of such transactions, the incurrence of large write-offs or write-downs if the acquisition is not successful and other potential financial impacts.
They also include strategic risks such as the diversion of management time and attention from other business activities and opportunities and financial risks such as the use of cash or incurrence of additional debt and interest expense as consideration for the acquisition and to fund the activities required to pursue acquisitions, the potential volatility or weakness in our stock price as a result of the announcement of such transactions, the incurrence of large write-offs or write-downs as a result of the acquisition and other potential financial impacts. 13 Table of Contents Risks impacting our Superior Execution Plexus is a multinational corporation and operating in multiple countries exposes us to increased risks, including adverse local developments and currency risks.
A number of factors may adversely affect labor availability in one or more of our locations, including local labor laws and practices or union activities, wage pressure and changing wage requirements, increasing healthcare costs, restrictions on immigration or labor mobility, local competition, high employment rates and high turnover rates. These labor-related issues and labor shortages have become more pronounced.
A number of factors may adversely affect labor availability in one or more of our locations, including wage pressure and changing wage requirements, restrictions on immigration or labor mobility, local competition, high employment rates, high turnover rates and local labor laws. These labor-related issues and labor shortages are pronounced, and we expect these conditions to persist.
All facilities are subject to other natural or man-made disasters such as those related to weather events or global climate change, fires, acts of terrorism or war, breaches of security, theft or espionage, workplace violence and failures of utilities.
Further, there continues to be concern that global climate change is impacting the frequency and severity of these natural disasters. All facilities are subject to other potential natural or man-made disasters such as those related to weather events or global climate change, fires, acts of terrorism or war, breaches of security, theft or espionage, workplace violence and failures of utilities.
Our compliance with these heightened and/or additional policies, standards and third-party certification requirements, and managing a supply chain in accordance therewith, could be costly, and our failure to comply could adversely affect our operations, customer relationships, reputation and profitability.
Such policies or standards may be customer-driven, established by the market sectors in which we operate or imposed by third-party organizations. Our compliance with these heightened and/or additional policies, standards and third-party certification requirements, and managing a supply chain in accordance therewith, could be costly, and our failure to comply could adversely affect our operations, customer relationships, reputation and profitability.
If these problems were to occur in large quantities or too frequently, our business reputation may also be tarnished. In addition, such problems may result in liability claims against us, whether or not we are responsible. These potential claims may include damages for the recall of a product or injury to person or property.
If these problems were to occur in large quantities or too frequently, our business reputation may also be tarnished. In addition, such problems may result in liability claims against us, whether or not we are responsible.
A failure to adequately meet stakeholder expectations and reporting requirements may result in noncompliance with any imposed regulations, the loss of business, reputational impacts, diluted market valuation, an inability to attract and retain customers, and an inability to attract and retain top talent.
Securities and Exchange Commission ("SEC") regulations relating to climate change disclosure. A failure to adequately meet stakeholder expectations and reporting requirements may result in noncompliance with any imposed regulations, the loss of business, reputational impacts, an inability to attract and retain customers, and an inability to attract and retain talent.
While we currently believe we have ample liquidity to manage the financial impact of COVID-19 or current economic conditions we can give no assurance that this will continue to be the case if the impact of COVID-19 or current economic conditions are prolonged or if there is an extended impact on us or the economy in general.
While we currently believe we have ample liquidity to manage the financial impact of current economic conditions, we can give no assurance that this will continue to be the case if the impact of current or worsening economic conditions is prolonged.
We may not have sufficient resources, including personnel and components, at any given time to meet all of our customers’ demands or to meet the requirements of a specific program, which could result in a loss of business from such customers. 11 Table of Contents Increased competition may result in reduced demand or reduced prices for our services.
Rapid increases in customer demand may stress personnel and other capacity resources. We may not have sufficient resources, including personnel and components, at any given time to meet all of our customers’ demands or to meet the requirements of a specific program, which could result in a loss of business from such customers.
We may seek to raise capital by issuing additional common stock, other equity securities or debt securities, modifying our existing credit facilities or obtaining new facilities, or through a combination of these methods. We may not be able to obtain capital when we want or need it, and capital may not be available on satisfactory terms.
We may seek to raise capital by issuing additional common stock, other equity securities or debt securities, modifying our existing credit facilities or obtaining new facilities, or through a combination of these methods.
Any inability to successfully manage the procurement, development, implementation, execution or maintenance of our information systems, including matters related to system and data security, cybersecurity, privacy, reliability, compliance, performance and access, as well as any inability of these systems to fulfill their intended purpose within our business, could have an adverse effect on our business. 17 Table of Contents In the ordinary course of business, we collect and store sensitive data and information, including our proprietary and regulated business information and that of our customers, suppliers and business partners, as well as personally identifiable information about our employees.
Any inability to successfully manage the procurement, development, implementation, execution or maintenance of our information systems, including matters related to system and data security, cybersecurity, privacy, reliability, compliance, performance and access, as well as any inability of these systems to fulfill their intended purpose within our business, could have an adverse effect on our business.
In addition, although we have repatriated a substantial amount of cash since the enactment of the U.S. Tax Cuts and Jobs Act (“U.S. Tax Reform”) in 2017, a significant amount of our cash balances remain held outside of the U.S., with a particular concentration in Malaysia and China. We purchase a significant number of components manufactured in various countries.
Tax Reform”) in 2017, a significant amount of our cash balances remain held outside of the U.S., with a particular concentration in Malaysia and China. We support customers operating in various countries and purchase a significant number of components manufactured in various countries.
In addition, developments affecting particular countries can adversely affect our ability to access cash or other assets held in such countries. A significant portion of our operations currently occurs in the APAC region, particularly in Malaysia. The concentration of our operations, workforce, assets and profitability in that region exposes us to adverse developments, economic, political or otherwise, in those countries.
In addition, developments affecting particular countries can adversely affect our ability to access cash or other assets held in such countries. A significant portion of our operations is currently located in the APAC region, particularly in Malaysia.
All incentives, including a tax holiday granted to our Malaysian subsidiary, are subject to certain terms and conditions, which could be unfavorably altered by the local taxing authorities, changes to U.S. tax policy or the establishment of a global minimum tax.
In addition, the implementation of U.S. Tax Reform has required the use of estimates, which may be refined in future periods. All incentives, including a tax holiday granted to our Malaysian subsidiary, are subject to certain terms and conditions, which could be unfavorably altered by the local taxing authorities, changes to U.S. tax policy.
The management of resources in connection with the establishment of new or recent programs and customer relationships, as well as program transfers between facilities and geographies, and the need to estimate required resources in advance of production can adversely affect our gross and operating margins and level of working capital.
In recent years, ramping new programs has been a key contributor to our revenue growth. The management of resources in connection with the establishment of new or recent programs and customer relationships and the need to estimate required resources in advance of production can adversely affect our gross and operating margins and level of working capital.
In addition, suppliers may require us to purchase materials and components in minimum order quantities that may exceed customer requirements. A customer’s cancellation, delay or reduction of forecasts or orders can also result in excess inventory or additional expense to us. Engineering changes by a customer may result in obsolete materials or components.
A customer’s cancellation, delay or reduction of forecasts or orders can also result in excess inventory or additional expense to us. Engineering changes by a customer or a product’s end-of-life may result in obsolete materials or components.
Specifically, certain stakeholders are beginning to require that we provide information on our plans relating to certain climate-related matters such as greenhouse gas emissions, and we expect this trend to continue and be amplified by the potential adoption of the proposed U.S. Securities and Exchange Commission ("SEC") regulations relating to climate change disclosure.
Specifically, certain stakeholders are beginning to request or require that we provide information on our plans relating to certain climate-related matters such as greenhouse gas emissions, and we expect this trend to continue and be amplified by existing and potential legislation, such as the Corporate Sustainability Reporting Directive in the European Union and the proposed U.S.
Risks impacting our Passion Meets Purpose We depend on our workforce, and the inability to attract, develop and retain personnel or other personnel disruptions may harm our business. If we fail to attract, develop and retain sufficient qualified personnel, including key leadership positions and highly skilled technical roles, our operations and, consequently, our financial results, could be adversely affected.
If we fail to attract, develop and retain sufficient qualified personnel, including key leadership positions and highly skilled technical roles, our operations and, consequently, our financial results, could be adversely affected.
The foregoing and other disruptions to our business as a result of a global health crisis has had and could continue to have a material adverse effect on our business, results of operations and financial condition. We may fail to secure or maintain necessary additional financing or capital.
The foregoing and other disruptions to our business as a result of a global health crisis has had and could continue to have a material adverse effect on our business, results of operations and financial condition. ITEM 1B. UNRESOLVED SEC STAFF COMMENTS None.
We have been subject to inflationary or other general labor cost increases due to current economic conditions, which have increased our costs. If we are unable to offset these labor cost increases through price increases, growth or operational efficiencies, these inflationary or general labor cost increases could have a material adverse effect on our operating results and cash flows.
If we are unable to offset these labor cost increases through price increases, growth or operational efficiencies, labor cost increases could have a material adverse effect on our operating results and cash flows. We also depend on good relationships with our workforce.
Due to the highly competitive nature of our industry, an inability to obtain sufficient inventory on a timely basis or successfully execute on our business continuity processes, could also harm relationships with our customers and lead to loss of business to our competitors. In addition, components that are delivered to us may not meet our specifications or other quality criteria.
Due to the highly competitive nature of our industry, an inability to obtain sufficient inventory of quality components on a timely basis and for a reasonable price, could also harm relationships with our customers and lead to loss of business to our competitors. Our services involve other inventory risk.
We have experienced from time to time, and in the future may experience, significant disengagements with customers or of programs, adverse changes in customer supply chain strategies and the end of life of significant programs.
In any given period, a higher portion of our sales may be concentrated with customers or projects with relatively lower margins, which could adversely affect our results. We have experienced from time to time, and in the future may experience, significant disengagements with customers or of programs, adverse changes in customer supply chain strategies and the end-of-life of significant programs.
Our current facilities in Mexico operate under the Mexican Maquiladora (“IMMEX”) program. This program provides for reduced tariffs and eased import regulations.
Our current facilities in Mexico operate under the Mexican Maquiladora (“IMMEX”) program. This program provides for reduced tariffs and eased import regulations. We could be adversely affected by changes in the IMMEX program or our failure to comply with its requirements.
Most of our services are provided on a turnkey basis, under which we purchase some, or all, of the required materials and components based on customer forecasts or orders. Although, in general, our commercial contracts with our customers obligate our customers to ultimately purchase inventory ordered to support their forecasts or orders, we generally finance these purchases initially.
Most of our services are provided on a turnkey basis, under which we purchase some, or all, of the required materials and components based on customer forecasts or orders.
Moreover, because our margins vary across customers and specific programs, a reduction in revenue with higher margin customers or programs will have a more significant adverse effect on our operating results. Rapid increases in customer demand may stress personnel and other capacity resources.
Moreover, because our margins vary across customers and specific programs, a reduction in revenue with higher margin customers or programs will have a more significant adverse effect on our operating results. 11 Table of Contents Increased competition may result in reduced demand or reduced prices for our services. Our industry is highly competitive.

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Item 2. Properties

Properties — owned and leased real estate

2 edited+1 added−1 removed1 unchanged
Biggest changeOur active facilities as of October 1, 2022 are described in the following table: Location Type Size (sq. ft.) Owned/Leased AMER Neenah, Wisconsin Manufacturing 418,000 Owned Guadalajara, Mexico (1) Manufacturing/Engineering 741,000 Leased Nampa, Idaho Manufacturing 216,000 Owned Appleton, Wisconsin Manufacturing 205,000 Owned Buffalo Grove, Illinois (1) Manufacturing 189,000 Leased Neenah, Wisconsin Global Headquarters 104,000 Owned Neenah, Wisconsin Engineering 90,000 Leased Raleigh, North Carolina Engineering 41,000 Leased Portland, Oregon Manufacturing 29,000 Leased APAC Penang, Malaysia (1) Manufacturing/Engineering 1,530,000 Owned Bangkok, Thailand Manufacturing 400,000 Owned Hangzhou, China (1) Manufacturing 245,000 Leased Haining, China Manufacturing 202,000 Leased Xiamen, China Manufacturing 133,000 Owned Xiamen, China (1) Manufacturing 122,000 Leased EMEA Oradea, Romania Manufacturing/Engineering 296,000 Owned Livingston, Scotland Manufacturing/Engineering 62,000 Leased Kelso, Scotland Manufacturing 57,000 Owned Darmstadt, Germany Engineering 21,000 Leased (1) The facilities in Guadalajara, Mexico; Buffalo Grove, Illinois; Penang, Malaysia; Hangzhou, China; and Xiamen, China include more than one building.
Biggest changeOur active facilities as of September 30, 2023 are described in the following table: Location Type Size (sq. ft.) Owned/Leased AMER Neenah, Wisconsin Manufacturing 418,000 Owned Guadalajara, Mexico (1) Manufacturing/Engineering 741,000 Leased Nampa, Idaho Manufacturing 216,000 Owned Appleton, Wisconsin Manufacturing 205,000 Owned Buffalo Grove, Illinois (1) Manufacturing 189,000 Leased Neenah, Wisconsin Global Headquarters 104,000 Owned Portland, Oregon Manufacturing 91,000 Leased Neenah, Wisconsin Engineering 90,000 Leased Raleigh, North Carolina Engineering 41,000 Leased APAC Penang, Malaysia (1) Manufacturing/Engineering 1,530,000 Owned Bangkok, Thailand Manufacturing 389,000 Owned Haining, China (1) Manufacturing 264,000 Leased Xiamen, China Manufacturing 133,000 Owned Xiamen, China (1) Manufacturing 120,000 Leased EMEA Oradea, Romania Manufacturing/Engineering 296,000 Owned Oradea, Romania Manufacturing 108,000 Leased Livingston, Scotland Manufacturing/Engineering 62,000 Leased Kelso, Scotland Manufacturing 57,000 Owned Darmstadt, Germany Engineering 21,000 Leased (1) The facilities in Guadalajara, Mexico; Buffalo Grove, Illinois; Penang, Malaysia; Haining, China; and Xiamen, China include more than one building.
This includes approximately 2.1 million square feet in AMER, approximately 2.6 million square feet in APAC and approximately 0.4 million square feet in EMEA.
This includes approximately 2.1 million square feet in AMER, approximately 2.4 million square feet in APAC and approximately 0.6 million square feet in EMEA.
Removed
In the fourth quarter of fiscal 2022, we took possession of a new leased manufacturing facility in Portland, Oregon. It is expected to become an active facility in fiscal 2023.
Added
ITEM 3. LEGAL PROCEEDINGS Refer to Note 10, "Litigation," for information regarding legal proceedings in which we are involved. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 24 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

5 edited+1 added−1 removed3 unchanged
Biggest changeIssuer Purchases of Equity Securities The following table provides the specified information about the repurchases of shares by us during the three months ended October 1, 2022: Period Total number of shares purchased Average price paid per share Total number of shares purchased as part of publicly announced plans or programs Maximum approximate dollar value of shares that may yet be purchased under the plans or programs (1) July 3, 2022 to July 30, 2022 — $ — — $ — July 31, 2022 to August 27, 2022 — — — 50,000,000 August 28, 2022 to October 1, 2022 38,397 90.63 38,397 $ 46,520,133 38,397 $ 90.63 38,397 (1) On August 18, 2022, the Board of Directors approved a new share repurchase program that authorizes the Company to repurchase up to $50.0 million of its common stock (the "2023 Program").
Biggest changeSee also Part II, Item 7, "Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources," for additional discussion of our intentions regarding dividends as well as a description of loan covenants that could restrict our ability to make future dividend payments. 25 Table of Contents Issuer Purchases of Equity Securities The following table provides the specified information about the repurchases of shares by us during the three months ended September 30, 2023: Period Total number of shares purchased Average price paid per share Total number of shares purchased as part of publicly announced plans or programs Maximum approximate dollar value of shares that may yet be purchased under the plans or programs (1) July 2, 2023 to July 29, 2023 18,827 $ 99.95 18,827 $ 7,207,069 July 30, 2023 to August 26, 2023 15,774 97.66 15,774 5,666,612 August 27, 2023 to September 30, 2023 — — — $ 5,666,612 34,601 $ 98.91 34,601 (1) Amounts exclude excise tax on share repurchases of $92,175 incurred during the quarter.
The following graph compares the cumulative total return on Plexus common stock with the Standard & Poor's ("S&P") MidCap 400 Index and the Nasdaq Stock Market Index for Electronic Components Companies.
The following graph compares the cumulative total return on Plexus common stock with the Standard & Poor's MidCap 400 Index ("S&P 400") and the Nasdaq Stock Market Index for Electronic Components Companies ("Nasdaq-Electronic Components").
The values on the graph show the relative performance of an investment of $100 made on September 29, 2017 in Plexus common stock and in each of the indices as of the last business day of the respective fiscal year.
The values on the graph show the relative performance of an investment of $100 made on September 28, 2018 in Plexus common stock and in each of the indices as of the last business day of the respective fiscal year.
The 2023 Program became effective immediately and has no expiration. The table above reflects the maximum dollar amount remaining available for purchase under the 2023 Program as of October 1, 2022. 26 Table of Contents
The table above reflects the maximum dollar amount remaining available for purchase under the 2023 Program as of September 30, 2023. 26 Table of Contents
Comparison of Cumulative Total Return 2017 2018 2019 2020 2021 2022 Plexus $100 $104 $112 $127 $162 $156 Nasdaq-Electronic Components 100 106 110 117 158 132 S&P 400 100 112 107 106 149 123 Shareholders of Record As of November 14, 2022, we had 376 shareholders of record. Dividends We have not paid any cash dividends in the past.
Comparison of Cumulative Total Return 2018 2019 2020 2021 2022 2023 Plexus $100 $107 $121 $156 $150 $159 Nasdaq-Electronic Components 100 103 110 149 125 152 S&P 400 100 95 94 133 109 124 Shareholders of Record As of November 13, 2023, we had 358 shareholders of record. Dividends We have not paid any cash dividends in the past.
Removed
See also Part II, Item 7, "Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources," for additional 25 Table of Contents discussion of our intentions regarding dividends as well as a description of loan covenants that could restrict our ability to make future dividend payments.
Added
On August 18, 2022, the Board of Directors approved a new share repurchase program under which we are authorized to repurchase up to $50.0 million of our common stock (the "2023 Program"). The 2023 Program became effective immediately and has no expiration.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

80 edited+24 added−23 removed29 unchanged
Biggest changeIn addition, inventory levels have increased to support the ramp of customer programs. • $(196.5) million in accounts receivable cash flows driven by increased net sales as well as timing of customer shipments and payments. • $(22.1) million in contract assets cash flows, driven by increased demand from customers who recognize revenue over time in the current year compared to consistent demand in the prior year. • $24.8 million in other current and non-current asset cash flows, driven by a greater increase in prepaid expenses and miscellaneous receivables in the prior year. • $64.3 million in accounts payables cash flows driven by increased purchasing activity to support the ramp of customer programs as well as supply chain constraints leading to inflation in some of the components we acquire. • $167.8 million in other current and non-current liabilities cash flows driven by an increase in advance payments from customers to cover inflated component prices driven by supply chain constraints. • $237.7 million in customer deposit cash flows driven by significant deposits received from customers in the current year to cover certain inventory balances associated with longer lead-times and inflation in some of the components we acquire as a result of supply chain constraints.
Biggest changeInventory level increases in the prior fiscal year were also driven by supply chain constraints which led to inflation in some of the components we acquire. • $311.6 million in accounts receivable cash flows driven by timing of shipments and payments as well as a mix of customer payment terms. • $20.3 million in contract assets cash flows, driven by increases in advanced payments received from customers who recognize revenue over time. • $10.4 million in other current and non-current asset cash flows, primarily driven by the timing of receipt of refund for indirect taxes. • $(501.5) million in advanced payments from customers cash flows driven by a decrease in advanced payments in fiscal 2023 as compared to an increase in fiscal 2022, consistent with inventory cash flows.
We deliver customer service excellence to leading global companies in the Industrial, Healthcare/Life Sciences and Aerospace/Defense market sectors by providing innovative, comprehensive solutions throughout the product's lifecycle. We provide these innovative solutions to customers in the Americas ("AMER"), Asia-Pacific ("APAC") and Europe, Middle East and Africa ("EMEA") regions.
We deliver customer service excellence to leading global companies in the Healthcare/Life Sciences, Industrial and Aerospace/Defense market sectors by providing innovative, comprehensive solutions throughout the product's lifecycle. We provide these innovative solutions to customers in the Americas ("AMER"), Asia-Pacific ("APAC") and Europe, Middle East and Africa ("EMEA") regions.
Refer to Note 4, "Debt, Finance Lease Obligations and Other Financing," in Notes to Consolidated Financial Statements and "Management’s Discussion and Analysis Liquidity and Capital Resources" in Part II, Item 7 for further information. RESULTS OF OPERATIONS Consolidated Performance Summary.
Refer to Note 4, "Debt, Finance Lease and Other Financing Obligations," in Notes to Consolidated Financial Statements and "Management’s Discussion and Analysis of Liquidity and Capital Resources" in Part II, Item 7 for further information. RESULTS OF OPERATIONS Consolidated Performance Summary.
For a reconciliation of ROIC, economic return and adjusted operating income (tax effected) to our financial statements that were prepared using GAAP, see Exhibit 99.1 to this annual report on Form 10-K, which exhibit is incorporated herein by reference.
For a reconciliation of ROIC, economic return and adjusted operating income (tax-effected) to our financial statements that were prepared using U.S. GAAP, see Exhibit 99.1 to this annual report on Form 10-K, which exhibit is incorporated herein by reference.
The information should be read in conjunction with our consolidated financial statements included herein and "Risk Factors" included in Part I, Item 1A herein. A discussion regarding our financial condition and results of operations for fiscal 2022 compared to fiscal 2021 is presented below.
The information should be read in conjunction with our consolidated financial statements included herein and "Risk Factors" included in Part I, Item 1A herein. A discussion regarding our financial condition and results of operations for fiscal 2023 compared to fiscal 2022 is presented below.
The 2022 Program commenced upon completion of the 2021 Program. During fiscal 2022 and 2021, we completed the 2022 Program by repurchasing 564,718 and 34,381 shares under this program for $46.9 million and $3.1 million at an average price of $83.07 and $90.16 per share, respectively.
During fiscal 2022 and 2021, we completed the 2022 Program by repurchasing 564,718 and 34,381 shares under this program for $46.9 million and $3.1 million at an average price of $83.07 and $90.16 per share, respectively.
Our future cash flows from operating activities will be reduced by $47.7 million due to cash payments for U.S. federal taxes on the deemed repatriation of undistributed foreign earnings that are payable over an eight year period that began in fiscal 2019 with the first payment.
Our future cash flows from operating activities will be reduced by $42.0 million due to cash payments for U.S. federal taxes on the deemed repatriation of undistributed foreign earnings that are payable over an eight year period that began in fiscal 2019 with the first payment.
A discussion regarding our financial condition and results of operations for fiscal 2021 compared to fiscal 2020 is incorporated herein by reference from Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations," in our Annual Report on the Form 10-K for the fiscal year ended October 2, 2021, which was filed with the SEC on November 19, 2021, and is available on the SEC’s website at www.sec.gov as well as our Investor Relations website at www.plexus.com.
A discussion regarding our financial condition and results of operations for fiscal 2022 compared to fiscal 2021 is incorporated herein by reference from Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations," in our Annual Report on the Form 10-K for the fiscal year ended October 1, 2022, which was filed with the SEC on November 18, 2022, and is available on the SEC’s website at www.sec.gov as well as our Investor Relations website at www.plexus.com.
Research & Development tax credit and the geographic distribution of worldwide earnings. Our annual effective tax rate varies from the U.S. statutory rate of 21.0% primarily due to the geographic distribution of worldwide earnings as well as a tax holiday granted to a subsidiary located in the APAC segment where we derive a significant portion of our earnings.
Our annual effective tax rate varies from the U.S. statutory rate of 21.0% primarily due to the geographic distribution of worldwide earnings as well as a tax holiday granted to a subsidiary located in the APAC segment where we derive a significant portion of our earnings.
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 October 1, 2022, we were in compliance with the covenants under the 2018 NPA.
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 September 30, 2023, we were in compliance with the covenants under the 2018 NPA.
We believe our balance sheet is positioned to support the potential future challenges presented by macro-economic factors including increased working capital requirements associated with longer lead-times for components, increased component and labor costs, and operating inefficiencies due to supply chain constraints or workplace safety restrictions.
We believe our balance sheet is positioned to support the potential future challenges presented by macroeconomic factors including increased working capital requirements associated with longer lead-times for components, increased component and labor costs, and operating inefficiencies due to supply chain constraints.
We utilized available cash and financing cash flows as the sources for funding our operating requirements during fiscal 2022. We currently estimate capital expenditures for fiscal 2023 will be approximately $110.0 million to $130.0 million to support new program ramps and replace older equipment. This estimate does not contemplate any site expansions. Financing Activities.
We utilized available cash and financing cash flows as the sources for funding our operating requirements during fiscal 2023. We currently estimate capital expenditures for fiscal 2024 will be approximately $100.0 million to $120.0 million to support new program ramps and replace older equipment. This estimate does not include any site expansions. Financing Activities.
Net sales. Fiscal 2022 net sales increased $442.5 million, or 13.1%, as compared to fiscal 2021. Net sales are analyzed by management by geographic segment, which reflects our reportable segments, and by market sector. Management measures operational performance and allocates resources on a geographic segment basis. Our global business development strategy is based on our targeted market sectors.
Net sales. Fiscal 2023 net sales increased $398.9 million, or 10.5%, as compared to fiscal 2022. Net sales are analyzed by management by geographic segment, which reflects our reportable segments, and by market sector. Management measures operational performance and allocates resources on a geographic segment basis. Our global business development strategy is based on our targeted market sectors.
During fiscal 2022 there were no material changes to these policies.
During fiscal 2023 there were no material changes to these policies.
Diluted earnings per share increased to $4.86 in fiscal 2022 from $4.76 in fiscal 2021, primarily as a result of a reduction in diluted shares outstanding due to repurchase activity under our share repurchase plans, partially offset by decreased net income due to the factors discussed above. Return on Invested Capital ("ROIC") and economic return.
Diluted earnings per share increased to $4.95 in fiscal 2023 from $4.86 in fiscal 2022, primarily as a result of increased net income due to the factors discussed above and a reduction in diluted shares outstanding due to repurchase activity under our share repurchase plans. Return on Invested Capital ("ROIC") and economic return.
Net income decreased primarily as a result of the increase in other expense, partially offset by the increase in operating income and decrease in tax expense as previously discussed. Diluted earnings per share.
Net income increased primarily as a result of the increase in operating income, substantially offset by the increase in other expense and tax expense as previously discussed. Diluted earnings per share.
Fiscal 2022 ROIC of 13.0% reflects an economic return of 3.7%, based on our weighted average cost of capital of 9.3%, and fiscal 2021 ROIC of 15.4% reflects an economic return of 7.3%, based on our weighted average cost of capital of 8.1%.
Fiscal 2023 ROIC of 13.4% reflects an economic return of 4.4%, based on our weighted average cost of capital of 9.0%, and fiscal 2022 ROIC of 13.0% reflects an economic return of 3.7%, based on our weighted average cost of capital of 9.3%.
Tax Cuts and Jobs Act, of approximately $35.3 million ($1.27 per basic share, $1.24 per diluted share) and $34.4 million ($1.20 per basic share, $1.18 per diluted share), respectively. See also Note 6, "Income Taxes," in Notes to Consolidated Financial Statements for additional information regarding our tax rate.
Tax Cuts and Jobs Act, of approximately $25.9 million ($0.94 per basic share, $0.92 per diluted share) and $35.3 million ($1.27 per basic share, $1.24 per diluted share), respectively. See also Note 6, "Income Taxes," in Notes to Consolidated Financial Statements for additional information regarding our tax rate.
We are required to pay a commitment fee on the daily unused credit facility based on our leverage ratio; the fee was 0.125% as of October 1, 2022.
We are required to pay a commitment fee on the daily unused credit facility based on our leverage ratio; the fee was 0.125% as of September 30, 2023.
Refer to the table below, which includes the calculation of ROIC and economic return for the indicated fiscal years (dollars in millions): 2022 2021 Adjusted operating income (tax-effected) $ 156.8 $ 156.2 Average invested capital 1,207.4 1,014.7 After-tax ROIC 13.0 % 15.4 % WACC 9.3 % 8.1 % Economic return 3.7 % 7.3 % LIQUIDITY AND CAPITAL RESOURCES Cash and cash equivalents and restricted cash were $275.5 million as of October 1, 2022, as compared to $270.5 million as of October 2, 2021.
Refer to the table below, which includes the calculation of ROIC and economic return for the indicated fiscal years (dollars in millions): 2023 2022 Adjusted operating income (tax-effected) $ 190.5 $ 156.8 Average invested capital 1,425.6 1,207.4 After-tax ROIC 13.4 % 13.0 % WACC 9.0 % 9.3 % Economic return 4.4 % 3.7 % 31 Table of Contents LIQUIDITY AND CAPITAL RESOURCES Cash and cash equivalents and restricted cash were $256.7 million as of September 30, 2023, as compared to $275.5 million as of October 1, 2022.
The maximum commitment under the Credit Facility may be further increased to $750.0 million, generally by mutual agreement of the lenders and us, subject to certain customary conditions. During fiscal 2022, the highest daily borrowing was $385.0 million; the average daily borrowings were $232.1 million.
The maximum commitment under the Credit Facility may be further increased to $750.0 million, generally by mutual agreement of the lenders and us, subject to certain customary conditions. During fiscal 2023, the highest daily borrowing was $412.0 million; the average daily balance was $338.1 million.
The following table presents selected consolidated financial data for the indicated fiscal years (dollars in millions, except per share data): 2022 2021 Net sales $ 3,811.4 $ 3,368.9 Cost of sales 3,464.1 3,045.6 Gross profit 347.2 323.3 Gross margin 9.1 % 9.6 % Operating income 178.2 176.3 Operating margin 4.7 % 5.2 % Other expense 19.9 15.9 Income tax expense 20.1 21.5 Net income 138.2 138.9 Diluted earnings per share $ 4.86 $ 4.76 Return on invested capital* 13.0 % 15.4 % Economic return* 3.7 % 7.3 % *Non-GAAP metric; refer to "Return on Invested Capital ("ROIC") and economic return" below for more information and Exhibit 99.1 for a reconciliation.
The following table presents selected consolidated financial data for the indicated fiscal years (dollars in millions, except per share data): 2023 2022 Net sales $ 4,210.3 $ 3,811.4 Cost of sales 3,815.8 3,464.1 Gross profit 394.6 347.2 Gross margin 9.4 % 9.1 % Operating income 195.8 178.2 Operating margin 4.7 % 4.7 % Other expense 34.8 19.9 Income tax expense 21.9 20.1 Net income 139.1 138.2 Diluted earnings per share $ 4.95 $ 4.86 Return on invested capital* 13.4 % 13.0 % Economic return* 4.4 % 3.7 % *Non-GAAP metric; refer to "Return on Invested Capital ("ROIC") and economic return" below and Exhibit 99.1 for more information.
We calculate days in inventory, accounts payable and cash deposits as each balance sheet line item for the respective quarter divided by annualized cost of sales for the respective quarter by day.
We calculate days in accounts receivable and contract assets as each balance sheet item for the respective quarter divided by annualized sales for the respective quarter by day. We calculate days in inventory, accounts payable and advanced payments as each balance sheet line item for the respective quarter divided by annualized cost of sales for the respective quarter by day.
We use a financial model that is aligned with our business strategy and includes an ROIC goal of 15% which would exceed our weighted average cost of capital ("WACC") and represent positive economic return.
We use a financial model that is aligned with our business strategy and includes an ROIC goal of 15% which would exceed our weighted average cost of capital ("WACC") by more than 500 basis points and represent positive economic return. Economic return is the amount our ROIC exceeds our WACC.
Cost of sales for fiscal 2022 increased $418.5 million, or 13.7%, as compared to fiscal 2021. Cost of sales is comprised primarily of material and component costs, labor costs and overhead. In fiscal 2022 and 2021, approximately 89% to 90% of the total cost of sales was variable in nature and fluctuated with sales volumes.
Cost of sales for fiscal 2023 increased $351.7 million, or 10.2%, as compared to fiscal 2022. Cost of sales is comprised primarily of material and component costs, labor costs and overhead. In both fiscal 2023 and 2022, approximately 90% of the total cost of sales was variable in nature and fluctuated with sales volumes.
The table below provides the expected timing of these future cash outflows, in accordance with the following installment schedule for the remaining four years (in millions): 2023 $ 5.7 2024 10.6 2025 14.1 2026 17.3 Total $ 47.7 31 Table of Contents Cash Flows.
The table below provides the expected timing of these future cash outflows, in accordance with the following installment schedule for the remaining three years (in millions): 2024 $ 10.6 2025 14.1 2026 17.3 Total $ 42.0 Cash Flows.
Cash flows used in operating activities were $26.2 million for fiscal 2022, as compared to cash flows provided by operating activities of $142.6 million for fiscal 2021.
Cash flows provided by operating activities were $165.8 million for fiscal 2023, as compared to cash flows used in operating activities of $26.2 million for fiscal 2022.
This tax holiday will expire on December 31, 2034, and is subject to certain conditions with which we expect to continue to comply. In fiscal 2022 and 2021, the holiday resulted in tax reductions, net of the impact of the global intangible low-taxed income provisions of the U.S.
This tax holiday will expire on December 31, 2034, and is subject to certain conditions with which we expect to continue to comply. In fiscal 2023 and 2022, 30 Table of Contents the holiday resulted in tax reductions, net of the impact of the GILTI provisions of the U.S.
The following table provides a summary of cash flows for fiscal 2022 and 2021 (in millions): 2022 2021 Cash (used in) provided by operating activities $ (26.2) $ 142.6 Cash used in investing activities (101.6) (57.0) Cash provided by (used in) financing activities 139.3 (203.9) Effect of exchange rate changes on cash and cash equivalents (6.5) 0.9 Net increase (decrease) in cash and cash equivalents and restricted cash $ 5.0 $ (117.4) Operating Activities.
The following table provides a summary of cash flows for fiscal 2023 and 2022 (in millions): 2023 2022 Cash flows provided by (used in) operating activities $ 165.8 $ (26.2) Cash flows used in investing activities (93.3) (101.6) Cash flows (used in) provided by financing activities (92.7) 139.3 Effect of exchange rate changes on cash and cash equivalents 1.4 (6.5) Net (decrease) increase in cash and cash equivalents and restricted cash $ (18.8) $ 5.0 Operating Activities.
During fiscal 2022, we purchased 38,397 shares under this program for $3.5 million at an average price of $90.63 per share. As of October 1, 2022, $46.5 million of authority remained under the 2023 Program. All shares repurchased under the aforementioned programs were recorded as treasury stock.
During fiscal 2023 and 2022, we purchased 425,746 and 38,397 shares under this program for $40.9 million and $3.5 million at an average price of $95.96 and $90.63 per share. As of September 30, 2023, $5.7 million of authority remained under the 2023 Program. All shares repurchased under the aforementioned programs were recorded as treasury stock.
This was partially offset by a positive shift in customer mix. APAC. Operating income increased $28.5 million in fiscal 2022 as compared to fiscal 2021, primarily as a result of an increase in net sales, partially offset by inflated component costs, increased fixed costs, increased labor costs and an increase in S&A. EMEA.
Operating income increased $22.3 million in fiscal 2023 as compared to fiscal 2022, primarily as a result of an increase in net sales, a positive shift in customer mix and a reduction in inflated component costs. This was partially offset by reduced operational efficiencies, increased fixed costs and increased labor costs. EMEA.
We borrowed $758.0 million and repaid $550.0 million of revolving borrowings ("revolving commitment") under the Credit Facility during fiscal 2022. As of October 1, 2022, we were in compliance with all financial covenants relating to the Credit Facility, which are generally consistent with those in the 2018 NPA discussed above.
We borrowed $748.5 million and repaid $778.5 million of revolving borrowings ("revolving commitment") under the Credit Facility during fiscal 2023. As of September 30, 2023, we were in compliance with all financial covenants relating to the Credit Facility, which are generally consistent with those in the 2018 NPA discussed above.
The annual effective tax rate for fiscal 2023 is expected to be approximately 14.0% to 16.0% assuming no changes to tax laws. Net Income. Net income for fiscal 2022 decreased $0.7 million, or 0.5%, from fiscal 2021 to $138.2 million.
The annual effective tax rate for fiscal 2024 is expected to be approximately 14.0% to 16.0% assuming no changes to tax laws. Net Income. Net income for fiscal 2023 increased $0.9 million, or 0.7%, from fiscal 2022 to $139.1 million.
A discussion of operating income by reportable segment for the indicated fiscal years is presented below (in millions): 2022 2021 Operating income (loss): AMER $ 44.7 $ 62.3 APAC 267.3 238.8 EMEA 8.0 (0.9) Corporate and other costs (141.8) (123.9) Total operating income $ 178.2 $ 176.3 AMER.
A discussion of operating income by reportable segment for the indicated fiscal years is presented below (in millions): 2023 2022 Operating income: AMER $ 79.7 $ 44.7 APAC 289.6 267.3 EMEA 1.6 8.0 Corporate and other costs (175.1) (141.8) Total operating income $ 195.8 $ 178.2 AMER.
Market Pressures Update We have experienced, and expect to continue to experience, an inability to procure certain components on a timely basis due to global supply chain constraints. These constraints have impacted our ability to meet customer demand and may inhibit our ability to capture the demand from our customers.
Market Pressures Update We have experienced an inability to procure certain components on a timely basis due to global supply chain constraints. These constraints have impacted our ability to meet customer demand and may inhibit our ability to capture the demand from our customers. The extended lead-times have required us to make additional investments in inventory to satisfy customer demand.
On August 20, 2019, the Board of Directors approved a share repurchase program under which we were authorized to repurchase $50.0 million of our common stock (the "2019 Program"). The 2019 Program commenced upon completion of previous share repurchase programs.
On August 11, 2021, the Board of Directors approved a share repurchase program under which we were authorized to repurchase up to $50.0 million of its common stock (the "2022 Program"). The 2022 Program commenced upon completion of the 2021 Program.
Other companies may not define or calculate ROIC in the same way. ROIC and other non-GAAP financial measures should be considered in addition to, not as a substitute for, measures of our financial performance prepared in accordance with U.S. generally accepted accounting principles ("GAAP"). We review our internal calculation of WACC annually.
ROIC and other non-GAAP financial measures should be considered in addition to, not as a substitute for, measures of our financial performance prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP"). We review our internal calculation of WACC annually. Our WACC was 9.0% for fiscal 2023 and 9.3% for fiscal 2022.
We have excluded from the above table the impact of approximately $9.0 million, as of October 1, 2022, related to unrecognized income tax benefits.
We have excluded from the above table the impact of approximately $14.0 million, as of September 30, 2023, related to unrecognized income tax benefits.
The decrease is primarily attributable to increased net sales, partially offset by increased demand from customers with arrangements requiring revenue to be recognized over time as products are produced. Days in inventory for the three months ended October 1, 2022 increased twenty-eight days compared to the three months ended October 2, 2021.
The increase is primarily attributable to increased demand, partially offset by an increase in advanced payments from customers with arrangements requiring revenue to be recognized over time as products are produced. Days in inventory for the three months ended September 30, 2023 increased ten days compared to the three months ended October 1, 2022.
Borrowings under our Credit Facility as of October 1, 2022 were $263 million, leaving $237 million of our revolving commitment of $500 million available for use as of October 1, 2022 as well as the ability to expand our revolving commitment to $750 million upon mutual agreement with the bank.
Borrowings under our credit facility as of September 30, 2023 were $233 million, leaving $267 million of our revolving commitment of $500 million available for use as of September 30, 2023 as well as the ability to expand our revolving commitment to $750 million upon mutual agreement with our banks.
Information in the following table provides a summary of our contractual obligations and commercial commitments as of October 1, 2022 (dollars in millions): Payments Due by Fiscal Year Contractual Obligations Total 2023 2024-2025 2026-2027 2028 and thereafter Debt Obligations (1) $ 437.9 $ 269.2 $ 112.4 $ 4.2 $ 52.1 Finance Lease Obligations 119.5 10.2 14.5 10.3 84.5 Operating Lease Obligations 48.1 9.5 14.0 10.1 14.5 Purchase Obligations (2) 1,992.5 1,609.3 370.3 5.4 7.5 Repatriation Tax on Undistributed Foreign Earnings (3) 47.7 5.7 24.7 17.3 — Other Liabilities on the Balance Sheet (4) 12.9 1.7 1.3 0.1 9.8 Other Liabilities not on the Balance Sheet (5) 11.1 6.5 — 1.2 3.4 Total Contractual Cash Obligations $ 2,669.7 $ 1,912.1 $ 537.2 $ 48.6 $ 171.8 1) Debt obligations includes $150.0 million in principal amount of 2018 Notes and $263.0 million of borrowings on the revolving commitment of the Credit Facility, as well as interest. 2) Purchase obligations consist primarily of purchases of inventory and equipment in the ordinary course of business. 3) Repatriation tax on undistributed foreign earnings consists of U.S. federal income taxes on the deemed repatriation of undistributed foreign earnings due to U.S.
Information in the following table provides a summary of our contractual obligations and commercial commitments as of September 30, 2023 (dollars in millions): Payments Due by Fiscal Year Contractual Obligations Total 2024 2025-2026 2027-2028 2029 and thereafter Debt Obligations (1) $ 435.7 $ 273.2 $ 108.3 $ 54.2 $ — Finance Lease Obligations 114.7 9.1 14.4 21.2 70.0 Operating Lease Obligations 54.5 10.1 17.3 11.9 15.2 Purchase Obligations (2) 1,428.7 1,266.0 158.1 2.1 2.5 Repatriation Tax on Undistributed Foreign Earnings (3) 42.0 10.6 31.4 — — Other Liabilities on the Balance Sheet (4) 19.0 2.5 1.8 1.7 13.0 Other Liabilities not on the Balance Sheet (5) 10.8 5.3 0.6 1.3 3.6 Total Contractual Cash Obligations $ 2,105.4 $ 1,576.8 $ 331.9 $ 92.4 $ 104.3 1) Debt obligations includes $150.0 million in principal amount of 2018 Notes and $233.0 million of borrowings on the revolving commitment of the Credit Facility, as well as interest. 2) Purchase obligations consist primarily of purchases of inventory and equipment in the ordinary course of business. 3) Repatriation tax on undistributed foreign earnings consists of U.S. federal income taxes on the deemed repatriation of undistributed foreign earnings due to U.S.
Gross profit for fiscal 2022 increased $23.9 million, or 7.4%, as compared to fiscal 2021. Gross margin of 9.1% decreased 50 basis points compared to fiscal 2021.
Gross profit for fiscal 2023 increased $47.4 million, or 13.7%, as compared to fiscal 2022. Gross margin of 9.4% increased 30 basis points compared to fiscal 2022.
As of October 1, 2022, 78% of our cash and cash equivalents balance was held outside of the U.S. by our foreign subsidiaries.
As of September 30, 2023, 87% of our cash and cash equivalents balance was held outside of the U.S. by our foreign subsidiaries.
Our WACC was 9.3% for fiscal 2022 and 8.1% for fiscal 2021. By exercising discipline to generate ROIC in excess of our WACC, our goal is to create value for our shareholders.
By exercising discipline to generate ROIC in excess of our WACC, our goal is to create value for our shareholders.
Operating income increased $8.9 million in fiscal 2022 as compared to fiscal 2021 primarily as a result of an increase in net sales, positive shift in customer mix, and a reduction in fixed costs. This was partially offset by an increase in S&A. Other expense. Other expense for fiscal 2022 increased $4.0 million as compared to fiscal 2021.
Operating income decreased $6.4 million in fiscal 2023 as compared to fiscal 2022 primarily as a result of a negative shift in customer mix, increased fixed costs, increased labor costs and reduced operational efficiencies, partially offset by an increase in net sales. Other expense. Other expense for fiscal 2023 increased $14.9 million as compared to fiscal 2022.
Our net sales by market sector for the indicated fiscal years were as follows (in millions): 2022 2021 Net sales: Industrial $ 1,752.7 $ 1,549.0 Healthcare/Life Sciences 1,565.8 1,326.9 Aerospace/Defense 492.9 493.0 Total net sales $ 3,811.4 $ 3,368.9 Industrial. Net sales for fiscal 2022 in the Industrial sector increased $203.7 million, or 13.2%, as compared to fiscal 2021.
Our net sales by market sector for the indicated fiscal years were as follows (in millions): 2023 2022 Net sales: Healthcare/Life Sciences $ 1,874.8 $ 1,565.8 Industrial 1,756.5 1,752.7 Aerospace/Defense 579.0 492.9 Total net sales $ 4,210.3 $ 3,811.4 Healthcare/Life Sciences .
We also use ROIC as a performance criteria in determining certain elements of compensation as well as economic return performance. We define ROIC as tax-effected operating income before restructuring and other special items divided by average invested capital over a rolling five-quarter period. Invested capital is defined as equity plus debt and operating lease liabilities, less cash and cash equivalents.
We define ROIC as tax-effected operating income before restructuring and other special items divided by average invested capital over a rolling five-quarter period. Invested capital is defined as equity plus debt and operating lease liabilities, less cash and cash equivalents. Other companies may not define or calculate ROIC in the same way.
Non-GAAP financial measures, including FCF, are used for internal management assessments because such measures provide additional insight to investors into ongoing financial performance. In particular, we provide FCF because we believe it offers insight into the metrics that are driving management decisions.
Non-GAAP financial measures, including ROIC and economic return, are used for internal management goals and decision making because such measures provide management and investors additional insight into financial performance. In particular, we provide ROIC and economic return because we believe they offer insight into the metrics that are driving management decisions.
The increase is primarily attributable to the timing of customer shipments and payments and mix of customer payment terms, partially offset by an increase in factored receivables. Days in contract assets for the three months ended October 1, 2022 decreased two days compared to the three months ended October 2, 2021.
The decrease is primarily attributable to the timing of customer shipments and payments as well as the mix of customer payment terms. Days in contract assets for the three months ended September 30, 2023 increased two days compared to the three months ended October 1, 2022.
For further information regarding the receivable sale programs, see Note 14, "Trade Accounts Receivable Sale Programs," in Notes to Consolidated Financial Statements.
In all cases, the sale discount was recorded within "Miscellaneous, net" in the Consolidated Statements of Comprehensive Income in the period of the sale. For further information regarding the receivable sale programs, see Note 14, "Trade Accounts Receivable Sale Programs," in Notes to Consolidated Financial Statements.
As of October 1, 2022, cash and cash equivalents and restricted cash were $275 million, while debt, finance lease obligations and other financing were $462 million.
As of September 30, 2023, cash and cash equivalents and restricted cash were $257 million, while debt, finance lease and other financing obligations were $431 million.
We have Master Accounts Receivable Purchase Agreements with MUFG Bank, New York Branch (formerly known as The Bank of Tokyo-Mitsubishi UFJ, Ltd.) (the "MUFG RPA"), HSBC Bank (China) Company Limited, Xiamen branch (the "HSBC RPA") and other unaffiliated financial institutions, under which we may elect to sell receivables, at a discount. These facilities are uncommitted facilities.
However, we evaluate from time to time potential uses of excess cash, which in the future may include share repurchases above those already authorized, a special dividend or recurring dividends. 34 Table of Contents We have Master Accounts Receivable Purchase Agreements with MUFG Bank, New York Branch (formerly known as The Bank of Tokyo-Mitsubishi UFJ, Ltd.) (the "MUFG RPA"), HSBC Bank (China) Company Limited, Xiamen branch (the "HSBC RPA") and other unaffiliated financial institutions, under which we may elect to sell receivables, at a discount.
A reconciliation of FCF to our financial statements that were prepared using GAAP as follows (in millions): 2022 2021 Cash flows (used in) provided by operating activities $ (26.3) $ 142.6 Payments for property, plant and equipment (101.6) (57.1) Free cash flow $ (127.9) $ 85.5 Investing Activities.
FCF is a non-GAAP financial measure that should be considered in addition to, not as a substitute for, measures of our financial performance prepared in accordance with GAAP. 33 Table of Contents A reconciliation of FCF to our financial statements that were prepared using GAAP as follows (in millions): 2023 2022 Cash flows provided by (used in) by operating activities $ 165.8 $ (26.3) Payments for property, plant and equipment (104.0) (101.6) Free cash flow $ 61.8 $ (127.9) Investing Activities.
Approximately 88% of these costs in fiscal 2022 and 2021 were related to material and component costs. As compared to fiscal 2021, the increase in cost of sales in fiscal 2022 was primarily driven by the increase in net sales, inflated component costs, an increase in fixed costs, reduced operational efficiencies and increased labor costs. Gross profit.
As compared to fiscal 2022, the increase in cost of sales in fiscal 2023 was primarily driven by the increase in net sales, an increase in fixed costs, reductions in operational efficiencies and increased labor costs, partially offset by a positive shift in customer mix. Gross profit.
The maximum facility amount under the MUFG RPA as of October 1, 2022 is $340.0 million. The maximum facility amount under the HSBC RPA as of October 1, 2022 is $60.0 million. The MUFG RPA will be automatically extended each year unless any party gives no less than 10 days prior notice that the agreement should not be extended.
The MUFG RPA will be automatically extended each year unless any party gives no less than 10 days prior notice that the agreement should not be extended. The terms of the HSBC RPA are generally consistent with the terms of the MUFG RPA previously discussed.
The terms of the HSBC RPA are generally consistent with the terms of the MUFG RPA previously discussed. We sold $787.5 million and $730.5 million of trade accounts receivable under these programs during fiscal 2022 and 2021, respectively, in exchange for cash proceeds of $783.1 million and $728.4 million, respectively.
We sold $834.5 million and $787.5 million of trade accounts receivable under these programs during fiscal 2023 and 2022, respectively, in exchange for cash proceeds of $824.6 million and $783.1 million, respectively.
Over the past few quarters, the global supply chain constraints have led to inflation in some of the components we acquire, as well as labor and operating costs. We expect the increase in costs, including labor-related issues which have become more pronounced, to continue in the near future.
Over the past year, the global supply chain constraints have led to inflation in some of the components we acquire, as well as labor and operating costs. We have also been, and expect to continue to be, subject to such inflationary and general labor cost increases.
The increase in other expense for fiscal 2022 was primarily due to the increase in factoring fees of $2.4 million and interest expense of $1.6 million. Income taxes. Income tax expense for fiscal 2022 was $20.1 million compared to $21.5 million for fiscal 2021. The decrease is primarily due to claiming a U.S.
The increase was also due to an increase in factoring fees of $5.4 million and foreign exchange losses of $1.1 million, partially offset by increases in other miscellaneous income of $5.4 million and interest income of $1.8 million. Income taxes. Income tax expense for fiscal 2023 was $21.9 million compared to $20.1 million for fiscal 2022.
The primary driver of the increase in operating income as compared to fiscal 2021 was the result of the increase in gross profit along with a $1.2 million decrease in restructuring and impairment charges, partially offset by a $22.0 million increase in selling and administrative expenses ("S&A"). The increase in S&A was primarily due to an increase in compensation costs.
The primary driver of the increase in operating income as compared to fiscal 2022 was the result of the increase in gross profit, partially offset by a $21.1 million increase in restructuring and other charges primarily due to an arbitration decision in Norway regarding a contractual matter as well as an increase in severance charges.
Cash flows provided by financing activities were $139.3 million for fiscal 2022 compared to cash flows used in financing activities of $203.9 million for fiscal 2021. The increase was primarily attributable to an increase of $291.0 million in net borrowings on the credit facility and a decrease of $58.1 million in cash used to repurchase our common stock.
The decrease was primarily attributable to net repayments on the credit facility in fiscal 2023 of $30.0 million compared to net borrowings on the credit facility in 2022 of $208.0 million as well as a decrease of $9.4 million in cash used to repurchase our common stock.
As of October 1, 2022 and October 2, 2021, $222.5 million and $176.0 million, respectively, of accounts receivables sold under trade accounts receivable programs and subject to servicing by us remained outstanding and had not yet been collected. 34 Table of Contents In all cases, the sale discount was recorded within "Miscellaneous, net" in the Consolidated Statements of Comprehensive Income in the period of the sale.
As of September 30, 2023 and October 1, 2022, $220.5 million and $222.5 million, respectively, of accounts receivables sold under trade accounts receivable programs and subject to servicing by us remained outstanding and had not yet been collected.
In addition, inventory levels have increased to support the ramp of customer programs. Days in accounts payable for the three months ended October 1, 2022 decreased four days compared to the three months ended October 2, 2021. The decrease is primarily attributable to timing of materials procurement and payments to suppliers, as well as increased net sales.
The decrease is primarily attributable to timing of materials procurement and payments to suppliers. Days in advanced payments for the three months ended September 30, 2023 increased five days compared to the three months ended October 1, 2022.
The decrease was driven by net decreased customer end-market demand and a $9.1 million decrease due to end-of-life products. These decreases were substantially offset by a $37.2 million increase due to production ramps of new products for existing customers and an $8.2 million increase in production ramps for new customers. Cost of sales.
The increase was also driven by a $6.9 million increase due to production ramps of new products for existing customers and a $6.7 million increase in production ramps for a new customer. The increase was partially offset by a $17.9 million decrease due to the discontinuation of a program with an existing customer. 29 Table of Contents Cost of sales.
The increase in net sales was driven by overall net increased customer end-market demand and increased pricing associated with inflated component prices, a $73.8 million increase due to production ramps of new products for existing customers and a $41.1 million increase in production ramps for new customers, partially offset by the impact of supply chain constraints that have created limitations with meeting available customer demand.
The increase was also driven by higher pricing associated with inflated component prices and a $24.1 million increase in production ramps for new customers. The increase was partially offset by an $17.9 million decrease due to the discontinuation of a program with an existing customer and an $11.1 million decrease for end-of-life products. APAC.
Operating income decreased $17.6 million in fiscal 2022 as compared to fiscal 2021, primarily as a result of a decrease in net sales, inflated component costs, increased fixed costs, reductions in operational efficiencies and increased labor costs. There was also an increase in bad debt expense compared to recovery of a previously reserved customer receivable in fiscal 2021.
Operating income increased $35.0 million in fiscal 2023 as compared to fiscal 2022, primarily as a result of an increase in net sales and improvements in operational efficiencies, partially offset by increased labor costs, a negative shift in customer mix, increased fixed costs, inflated component costs and an increase in S&A. APAC.
The increase was further offset by a $41.7 million decrease due to the discontinuation of programs with existing customers and an $18.6 million decrease for end-of-life products. Healthcare/Life Sciences . Net sales for fiscal 2022 in the Healthcare/Life Sciences sector increased $238.9 million, or 18.0%, as compared to fiscal 2021.
Net sales for fiscal 2023 in the Healthcare/Life Sciences sector increased $309.0 million, or 19.7%, as compared to fiscal 2022. The increase in net sales was driven by a $187.4 million increase due to production ramps of new products for existing customers and overall net increased customer end-market demand, inclusive of a partial easing of supply chain constraints.
The primary driver of the increase in gross profit as compared to fiscal 2021 was the increase in net sales and reduced employee compensation and supplies costs associated with COVID-19, partially offset by inflated component costs, increased fixed costs, reduced operational efficiencies and increased labor costs.
The primary drivers of the increase in gross profit and gross margin as compared to fiscal 2022 were the increase in net sales and positive shift in customer mix, partially offset by an increase in fixed costs, reductions in operational efficiencies and increased labor costs. Operating income.
We calculate annualized cash cycle as the sum of days in accounts receivable, days in contract assets and days in inventory, less days in accounts payable and days in cash deposits. 32 Table of Contents As of October 1, 2022, annualized cash cycle days increased fifteen days compared to October 2, 2021 due to the following: Days in accounts receivable for the three months ended October 1, 2022 increased four days compared to the three months ended October 2, 2021.
As of September 30, 2023, annualized cash cycle days increased fourteen days compared to October 1, 2022 due to the following: Days in accounts receivable for the three months ended September 30, 2023 decreased one day compared to the three months ended October 1, 2022.
As a percentage of consolidated net sales, net sales attributable to customers representing 10% or more of consolidated net sales as well as the percentage of net sales attributable to our ten largest customers for the indicated fiscal years were as follows: 2022 2021 General Electric Company ("GE") 12.9 % 11.2 % Top 10 customers 56.2 % 55.2 % A discussion of net sales by reportable segment is presented below for the indicated fiscal years (in millions): 2022 2021 Net sales: AMER $ 1,310.7 $ 1,317.4 APAC 2,300.6 1,850.6 EMEA 316.3 312.7 Elimination of inter-segment sales (116.2) (111.8) Total net sales $ 3,811.4 $ 3,368.9 28 Table of Contents AMER.
During fiscal 2023, GE completed the separation of its healthcare business, GEHC, as a stand-alone company. 28 Table of Contents A discussion of net sales by reportable segment is presented below for the indicated fiscal years (in millions): 2023 2022 Net sales: AMER $ 1,558.2 $ 1,310.7 APAC 2,358.4 2,300.6 EMEA 403.0 316.3 Elimination of inter-segment sales (109.3) (116.2) Total net sales $ 4,210.3 $ 3,811.4 AMER.
The increase in net sales was driven by overall net increased customer end-market demand and increased pricing associated with inflated component prices, a $115.2 million increase due to production ramps of new products for existing customers and a partial recovery of supply chain constraints that had previously created limitations with meeting available customer demand.
Net sales for fiscal 2023 in the AMER segment increased $247.5 million, or 18.9%, as compared to fiscal 2022. The increase in net sales was driven by a $219.1 million increase in production ramps of new products for existing customers and overall net increased customer end-market demand, inclusive of a partial easing of supply chain constraints.
We define free cash flow ("FCF"), a non-GAAP financial measure, as cash flow (used in) provided by operations less capital expenditures. FCF was $(127.9) million for fiscal 2022 compared to $85.5 million for fiscal 2021, a decrease of $213.4 million. The decrease in FCF was primarily due to working capital investments, particularly in inventory, to support our customers.
The increase was primarily attributable to lower sales in the fiscal fourth quarter of 2023 compared to the prior year, partially offset by a decrease in advanced payments received from customers to cover certain inventory balances. Free Cash Flow. We define free cash flow ("FCF"), a non-GAAP financial measure, as cash flow provided by (used in) operations less capital expenditures.
These decreases were substantially offset by a $118.4 million increase in production ramps of new products for existing customers and a $43.8 million increase in production ramps for new customers, as well as increased pricing associated with inflated component prices. APAC. Net sales for fiscal 2022 in the APAC segment increased $450.0 million, or 24.3%, as compared to fiscal 2021.
Net sales for fiscal 2023 in the APAC segment increased $57.8 million, or 2.5%, as compared to fiscal 2022. The increase in net sales was driven by a partial easing of supply chain constraints, a $40.0 million increase in production ramps of new products for existing customers and a $19.8 million increase in production ramps for new customers.
Cash flows used in investing activities were $101.6 million for fiscal 2022 compared to $57.0 million for fiscal 2021. The increase in cash used in investing activities was due to a $44.5 million increase in capital expenditures, primarily due to our manufacturing footprint expansion in Bangkok, Thailand.
Cash flows used in investing activities were $93.3 million for fiscal 2023 compared to $101.6 million for fiscal 2022. The decrease in cash used in investing activities was due to $10.8 million from insurance proceeds, partially offset by a $2.4 million increase in capital expenditures.
We view FCF as an important financial metric as it demonstrates our ability to generate cash and can allow us to pursue opportunities that enhance shareholder value. FCF is a non-GAAP financial measure that should be considered in addition to, not as a substitute for, measures of our financial performance prepared in accordance with GAAP.
In particular, we provide FCF because we believe it offers insight into the metrics that are driving management decisions. We view FCF as an important financial metric as it demonstrates our ability to generate cash and can allow us to pursue opportunities that enhance shareholder value.
In particular, we provide ROIC and economic return because we believe they offer insight into the metrics that are driving management decisions. We view ROIC and economic return as important measures in evaluating the efficiency and effectiveness of our long-term capital investments.
We view ROIC and economic return as important measures in evaluating the efficiency and effectiveness of our long-term capital investments. We also use ROIC as a performance criteria in determining certain elements of compensation as well as economic return performance.
As of the end of the fourth quarter of fiscal 2022, cash and cash equivalents and restricted cash were $275 million, while debt, finance lease obligations and other financing were $462 million.
As of the end of fiscal 2023, cash and cash equivalents and restricted cash were $257 million, while debt, finance lease and other financing obligations were $431 million. If our future financing needs increase, then we may need to arrange additional debt or equity financing.
The increase in net sales was driven by overall net increased customer end-market demand and increased pricing associated with inflated component prices, a $97.8 million increase in production ramps of new products for existing customers, an $8.8 million increase in production ramps for new customers and a partial recovery of supply chain constraints that had previously created limitations with meeting available customer demand.
The increase was also driven by higher pricing associated with inflated component prices and a $10.8 million increase in production ramps for new customers. The increase was partially offset by a $5.2 million decrease due to the discontinuation of a program with an existing customer. Industrial.
The increase in net sales was driven by a $10.0 million increase in production ramps of new products for existing customers, partially offset by overall net decreased customer end-market demand.
Net sales for fiscal 2023 in the EMEA segment increased $86.7 million, or 27.4%, as compared to fiscal 2022. The increase in net sales was driven by overall net increased customer end-market demand, inclusive of a partial easing of supply chain constraints as well as a $15.5 million increase in production ramps for new customers.
These increases were partially offset by a $33.1 million decrease for end-of-life products and a $6.9 million decrease due to the discontinuation of a program with an existing customer. EMEA. Net sales for fiscal 2022 in the EMEA segment increased $3.6 million, or 1.2%, as compared to fiscal 2021.
Net sales for fiscal 2023 in the Industrial sector increased $3.8 million, or 0.2%, as compared to fiscal 2022. The increase in net sales was driven by a $63.4 million increase due to production ramps of new products for existing customers, a $42.4 million increase in production ramps for new customers and a partial easing of supply chain constraints.
The following table provides a summary of cash cycle days for the periods indicated (in days): Three Months Ended October 1, 2022 October 2, 2021 Days in accounts receivable 60 56 Days in contract assets 11 13 Days in inventory 144 116 Days in accounts payable (72) (76) Days in cash deposits (43) (24) Annualized cash cycle 100 85 We calculate days in accounts receivable and contract assets as each balance sheet item for the respective quarter divided by annualized sales for the respective quarter by day.
Advanced payments increases in fiscal 2022 were primarily to cover certain inventory balances. • $(346.7) million in accounts payables cash flows primarily driven by the timing of materials procurement and payments to suppliers. 32 Table of Contents The following table provides a summary of cash cycle days for the periods indicated (in days): Three Months Ended September 30, 2023 October 1, 2022 Days in accounts receivable 59 60 Days in contract assets 13 11 Days in inventory 154 144 Days in accounts payable (64) (72) Days in advanced payments (1) (75) (70) Annualized cash cycle 87 73 (1) Includes a reclassification in the presentation of advanced payments from customers reflected in prior period amounts.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeOur percentages of transactions denominated in currencies other than the U.S. dollar for the indicated fiscal years were as follows: 2022 2021 Net Sales 9% 10% Total Costs 16% 16% We have evaluated the potential foreign currency exchange rate risk on transactions denominated in currencies other than the U.S. dollar for the periods presented above.
Biggest changeOur percentages of transactions denominated in currencies other than the U.S. dollar for the indicated fiscal years were as follows: 2023 2022 Net Sales 8% 9% Total Costs 16% 16% We have evaluated the potential foreign currency exchange rate risk on transactions denominated in currencies other than the U.S. dollar for the periods presented above.
Based on our overall currency exposure, as of October 1, 2022, a 10.0% change in the value of the U.S. dollar relative to our other transactional currencies would not have a material effect on our financial position, results of operations, or cash flows.
Based on our overall currency exposure, as of September 30, 2023, a 10.0% change in the value of the U.S. dollar relative to our other transactional currencies would not have a material effect on our financial position, results of operations, or cash flows.
As of October 1, 2022, the borrowing rate under the Credit Facility was SOFR plus 1.10%. Borrowings under the 2018 NPA are based on a fixed interest rate, thus mitigating much of our interest rate risk.
As of September 30, 2023, the borrowing rate under the Credit Facility was SOFR plus 1.10%. Borrowings under the 2018 NPA are based on a fixed interest rate, thus mitigating much of our interest rate risk.
Based on our overall interest rate exposure, as of October 1, 2022, a 10.0% change in interest rates would not have a material effect on our financial position, results of operations, or cash flows. 38 Table of Contents
Based on our overall interest rate exposure, as of September 30, 2023, a 10.0% change in interest rates would not have a material effect on our financial position, results of operations, or cash flows. 38 Table of Contents
As of October 1, 2022, our only material interest rate risk was associated with our Credit Facility.
As of September 30, 2023, our only material interest rate risk was associated with our Credit Facility.

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