Open PLXS Sept $20 Puts- Gross margin pressure and new plant start up costs plus high inventories weigh on outlook IMTO
* "However," continued CEO Foate, "this better than anticipated growth (20-25) brings with it certain execution challenges. Our inventories have grown by 22% in the quarter and our margin expansion has temporarily slowed from expectations as we integrate new program wins."
* Gordon Bitter, CFO, commented, "Manufacturing inefficiencies associated with rapid growth limited gross margin expansion to 8.3% compared to 8.2% in the prior quarter. However, this will be partially offset by start-up expenses for the new Asian (Penang, Malaysia) facility in the 3rd and 4th quarters of fiscal 2004."
* "SG&A expense was lower than expected in the second quarter," Bitter continued, "mainly due to recoveries of previously written-off accounts receivable and lower spending for outside consultants. We expect SG&A to increase modestly in the latter half of 2004, reflecting additional investment in Sales and Marketing and elsewhere in the organization to drive growth into 2005."
* "Turning to the balance sheet, cash and short-term investments remained at the first quarter level of about $59 million, but we used approximately $15 million of our $100 million credit facility to finance higher working capital. We anticipate positive cash flow from reductions in inventory plus improvements in margins in the third quarter," Bitter concluded. (Big assumption)
"Considering these factors," added Foate, "we are initiating revenue guidance for the fiscal third quarter of $255 to $265 million and EPS of $0.08 to $0.10."
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