• the risk of customer delays, changes or cancellations in both ongoing and new programs

• the poor visibility of future orders, particularly in view of current economic conditions

• the effects of the volume of revenue from certain sectors or programs on our margins in particular periods

• our ability to secure new customers and maintain our current customer base and deliver product on a timely basis

• the risks relative to new customers, including a recently announced customer in the Industrial/Commercial sector, which risks include customer delays, start-up costs, our potential inability to execute and lack of a track record of order volume and timing

• the risks of concentration of work for certain customers

• the risk that new program wins and/or customer demand may not result in the expected revenue or profitability

• the fact that customer orders may not lead to long-term relationships

• the weakness of the global economy and the continuing instability of the global financial markets and banking system, including the potential inability on our part or that of our customers or suppliers to access cash investments and credit facilities

• material cost fluctuations and the adequate availability of components and related parts for production

• the effect of changes in average selling prices

• the effect of start-up costs of new programs and facilities, including our recent and planned expansions, such as our new facilities in Hangzhou, China and Oradea, Romania

• the adequacy of restructuring and similar charges as compared to actual expenses

• the degree of success and the costs of efforts to improve the financial performance of our Mexican operations

• possible unexpected costs and operating disruption in transitioning programs

• the potential effect of world or local events (such as drug cartel-related violence in Juarez, Mexico, changes in oil prices, terrorism and war in the Middle East)

• the impact of increased competition and

• other risks detailed below in "Risk Factors", otherwise herein, and in our Securities and Exchange Commission filings.

OVERVIEW
The following information should be read in conjunction with our condensed consolidated financial statements included herein and the "Risk Factors" section in Item 1A of "Part II. Other Information." Plexus Corp. and its subsidiaries (together "Plexus," the "Company," or "we") participate in the Electronic Manufacturing Services ("EMS") industry. We provide product realization services to original equipment manufacturers ("OEMs") and other technology companies in the wireline/networking, wireless infrastructure, medical, industrial/commercial and defense/security/aerospace market sectors. We provide advanced electronics design, manufacturing and testing services to our customers with a focus on the mid-to-lower-volume, higher-mix segment of the EMS market. Our customers' products typically require exceptional production and supply-chain flexibility, necessitating an optimized demand-pull-based manufacturing and supply chain solution across an integrated global platform.

Many of our customers' products require complex configuration management and direct order fulfillment to their customers across the globe. In such cases we provide global logistics management and after-market service and repair. Our customers' products may have stringent requirements for quality, reliability and regulatory compliance. We offer our customers the ability to outsource all phases of product realization, including product specifications; development, design and design validation; regulatory compliance support; prototyping and new product introduction; manufacturing test equipment development; materials sourcing, procurement and supply-chain management; product assembly/manufacturing, configuration and test; order fulfillment, logistics and service/repair.
Plexus is passionate about its goal to be the best EMS company in the world at providing services for customers that have mid-to-lower-volume requirements and a higher mix of products. We have tailored our engineering services, manufacturing operations, supply-chain management, workforce, business intelligence systems, financial goals and metrics specifically to support these types of programs. Our flexible manufacturing facilities and processes are designed to accommodate customers with multiple product-lines and configurations as well as unique quality and regulatory requirements. Each of these customers is supported by a multi-disciplinary customer team and one or more uniquely configured "focus factories" supported by a supply-chain and logistics solution specifically designed to meet the flexibility and responsiveness required to support that customer's fulfillment requirements.
Our go-to-market strategy is also tailored to our target market sectors and business strategy. We have business development and customer management teams that are dedicated to each of the five sectors we serve. These teams are accountable for understanding the sector participants, technology, unique quality and regulatory requirements and longer-term trends. Further, these teams help set our strategy for growth in their sectors with a particular focus on expanding the services and value-add that we provide to our current customers while strategically targeting select new customers to add to our portfolio.
Our financial model is aligned with our business strategy, with our primary focus to earn a return on invested capital ("ROIC") in excess of our weighted average cost of capital ("WACC"). The smaller volumes, flexibility requirements and fulfillment needs of our customers typically result in greater investments in inventory than many of our competitors, particularly those that provide EMS services for high-volume, less complex products with less stringent requirements (such as consumer electronics). In addition, our cost structure relative to these peers includes higher investments in selling and administrative costs as a percentage of sales to support our sector-based go-to-market strategy, smaller program sizes, flexibility, and complex quality and regulatory compliance requirements. By exercising discipline to generate a ROIC in excess of our WACC, our goal is to ensure that Plexus creates a value proposition for our shareholders as well as our customers.
Our customers include both industry-leading OEMs and other technology companies that have never manufactured products internally. As a result of our focus on serving market sectors that rely on advanced electronics technology, our business is influenced by technological trends such as the level and rate of development of telecommunications infrastructure, the expansion of networks and use of the Internet. In addition, the federal Food and Drug Administration's approval of new medical devices, defense procurement practices and other governmental approval and regulatory processes can affect our business. Our business has also benefited from the trend to increased outsourcing by OEMs.
We provide most of our contract manufacturing services on a turnkey basis, which means that we procure some or all of the materials required for product assembly. We provide some services on a consignment basis, which means that the customer supplies the necessary materials, and we provide the labor and other services required for product assembly. Turnkey services require material procurement and warehousing, in addition to manufacturing, and involve greater resource investments than consignment services. Other than certain test equipment and software used for internal operations, we do not design or manufacture our own proprietary products.
EXECUTIVE SUMMARY
As a consequence of the Company's use of a "4-4-5" weekly accounting system, periodically an additional week must be added to the fiscal year to re-align with a fiscal year end at the Saturday closest to September 30. In fiscal 2009, this requires an additional week, which was added to the first fiscal quarter. Therefore, the comparisons between the first three quarters of fiscal 2009 and fiscal 2008 reflect that the first three quarters of fiscal 2009 included 280 days while the first three quarters in fiscal 2008 included 273 days.

Three months ended July 4, 2009. Net sales for the three months ended July 4, 2009 decreased by $77.8 million, or 17.0 percent, as compared to the three months ended June 28, 2008 to $378.6 million. Net sales declined in each of our market sectors except defense/security/aerospace, which had a slight increase, as compared to the prior-year period due to decreased demand resulting from overall economic conditions.
The impact of overall economic conditions has significantly contributed to reduced revenue, gross margin and ROIC below our normal expectations for the business. As a result, we took action in the second fiscal quarter of 2009 to control costs, including reducing discretionary spending and workforce reductions, as described in Note 14 in Notes to Condensed Consolidated Financial Statements. In addition, we are taking what we believe are prudent steps to reduce capital expenditures and working capital investments to balance potential future growth with current results. New program wins in the last three quarters have exceeded our average for the prior fiscal year of approximately $135 million per quarter; as a result we believe we need to continue to invest cautiously to support these new customers and programs. We have also identified other cost-cutting measures that could be implemented quickly if forecasted revenues decline further or market conditions worsen.
Gross margins were 9.1 percent for the three months ended July 4, 2009, which compared unfavorably to 10.7 percent for the three months ended June 28, 2008. Gross margins in the current-year period were negatively impacted by the decline in net sales, particularly related to our largest customer and another significant customer, as well as unfavorable changes in customer mix. Fixed manufacturing costs remained fairly consistent across periods, although we began to experience some benefits from the cost cutting measures we initiated in the second fiscal quarter of 2009.
Selling and administrative expenses decreased $3.9 million, or 14.7 percent, to $22.5 million for the three months ended July 4, 2009 compared to the prior-year period. The decrease can be attributed primarily to lower compensation expenses associated with decreased accruals for variable incentive compensation as well as overall reductions as a result of the cost cutting measures we initiated in the second fiscal quarter of 2009.
Net income for the three months ended July 4, 2009 decreased to $9.2 million from $17.4 million in the prior-year period, and diluted earnings per share decreased to $0.23 from $0.41 in the prior-year period. In addition to the items noted above, net income was favorably impacted by a decrease in our effective tax rate to 10 percent in the current-year period as compared to 20 percent in the prior-year period. The benefit in income tax expense for the current-year period was the result of adjusting year-to-date income tax expense to the effective rate of 8 percent, excluding discrete events of $1.4 million. We currently expect the annual effective tax rate for fiscal 2009 to be approximately 8 percent, excluding the discrete events, which is 1 percentage point higher than we anticipated at the end of second fiscal quarter due to a larger proportion of the Company's projected fiscal 2009 pre-tax income in our North American sites, driven by customer and product mix.
Nine months ended July 4, 2009. Net sales for the nine months ended July 4, 2009 decreased by $142.1 million or 10.4 percent, over the nine months ended June 28, 2008 to $1,223.6 million. Net sales declined in all of our market sectors during the current-year period. The overall reduction in our net sales was driven primarily by overall poor economic conditions, in particular by customers in the industrial/commercial, defense/security/aerospace and wireline/networking sectors. Leading the decline in the defense/security/aerospace sector was decreased demand of $58.6 million from our unnamed defense customer.
Gross margins were 9.6 percent for the nine months ended July 4, 2009, which was less than the 11.4 percent for the nine months ended June 28, 2008. Gross margins in the current-year period were negatively impacted by the decline in net sales and unfavorable changes in customer mix, particularly related to our large unnamed defense customer.
Selling and administrative expenses decreased $3.9 million, or 5.2 percent, to $70.1 million for the nine months ended July 4, 2009. Decreases in lower variable incentive compensation and reductions related to cost-cutting measures were partially offset by increases attributable to an additional week in the current-year period, additional compensation expense for stock-based compensation and expenses related to expansions in our Asian facilities.
The Company also recorded restructuring and impairment charges of $8.6 million for the nine months ended July 4, 2009. These charges were mainly due to goodwill impairment and severance related to the reduction of workforce across our facilities. See "Restructuring and impairment actions" in "Results of Operations" below.

Net income for the nine months ended July 4, 2009 decreased to $31.3 million from $66.8 million in the prior-year period, and diluted earnings per share decreased to $0.79 from $1.48 in the prior-year period.
We currently expect the annual effective tax rate for fiscal 2009, excluding discrete events, to be approximately 8 percent, as explained above, which is 1 percentage point higher than earlier anticipated.
Fiscal 2009 outlook. We currently expect net sales in the fourth quarter of fiscal 2009 to be in the range of $380 million to $405 million; however, our results will ultimately depend upon the actual level of customer orders and production, which could vary, and may be affected further by the weakened economy. Assuming that net sales are in the range noted above, we would currently expect to earn, before any restructuring and impairment costs, between $0.27 to $0.32 per diluted share in the fourth quarter of fiscal 2009.

REPORTABLE SEGMENTS
   A further discussion of financial performance by reportable segment is
presented below (dollars in millions):

                                           Three Months Ended           Nine Months Ended
                                          July 4,      June 28,       July 4,      June 28,
                                           2009          2008          2009          2008
   Net sales:
   United States                        $   226.4     $   312.2     $   771.5     $   964.2
   Asia                                     147.7         153.1         434.3         398.1
   Mexico                                    19.4          22.0          57.5          55.2
   Europe                                    13.1          17.1          38.0          53.4
   Elimination of inter-segment sales       (28.0 )       (48.0 )       (77.7 )      (105.2 )

                                        $   378.6     $   456.4     $ 1,223.6     $ 1,365.7


   Operating income (loss):
   United States                        $    13.5     $    24.6     $    51.6     $    92.2
   Asia                                      15.3          16.8          44.9          42.2
   Mexico                                    (1.0 )        (1.0 )        (2.7 )        (2.2 )
   Europe                                       -           2.1           1.9           6.3
   Corporate and other costs                (15.7 )       (20.0 )       (57.4 )       (56.5 )

                                        $    12.1     $    22.5     $    38.3     $    82.0

• United States: Net sales for the three months ended July 4, 2009 decreased $85.8 million, or 27.5 percent, from the three months ended June 28, 2008, to $226.4 million. This reportable segment experienced significant net sales decline due to decreased demand mainly from our largest customer. The decrease from this customer was due in part to the economic pullback as well as from the transfer of some production from the United States reportable segment to the Asia reportable segment. Decreased demand was also noted from a significant defense/security/aerospace customer and a significant medical customer. Operating income for the three months ended July 4, 2009 decreased $11.1 million from the three months ended June 28, 2008. Operating income in the current-year period was negatively impacted by the decline in net sales.

Net sales for the nine months ended July 4, 2009 decreased $192.7 million, or 20.0 percent, over the nine months ended June 28, 2008 to $771.5 million. Net sales decreased in the current-year period due to decreased demand mainly from our unnamed defense/security/aerospace customer, as well as the transfer of production for a wireline/networking customer's product to our Asia reportable segment and the decrease in the demand for this customer as well. Decreased demand was also noted from another wireline/networking customer and another defense/security/aerospace customer. Operating income for the nine months ended July 4, 2009 decreased $40.6 million from the nine months ended June 28, 2008. Operating income in the current-year period was negatively impacted by the decline in net sales and unfavorable changes in customer mix, particularly related to our unnamed defense customer.

• Asia: Net sales for the three months ended July 4, 2009 decreased $5.4 million, or 3.5 percent, over the three months ended June 28, 2008 to $147.7 million. This decline reflected decreased demand from an industrial/commercial customer as well as overall decreased demand from several other customers across all sectors, partially offset by the transfer of production for a wireline/networking customer's product from the United States reportable segment to the Asian reportable segment. Operating income for the three months ended July 4, 2009 decreased $1.5 million over the three months ended June 28, 2008, as a result of decreased net sales and changes in customer mix.

Net sales for the nine months ended July 4, 2009 increased $36.2 million, or 9.1 percent, over the nine months ended June 28, 2008 to $434.3 million. This growth reflected increased net sales to several customers with the most significant customer growth coming from the transfer of production of a wireline/networking customer's product from the United States reportable segment to the Asian reportable segment as well as increased net sales from two additional customers in the wireline/networking sector and a customer in the medical sector. Operating income for the nine months ended July 4, 2009 improved $2.7 million over the nine months ended June 28, 2008, primarily as a result of higher net sales in the first quarter of fiscal 2009.

• Mexico: Net sales for the three months ended July 4, 2009 decreased $2.6 million or 11.8 percent, from the three months ended June 28, 2008, to $19.4 million. The net sales decrease was primarily driven by decreased demand from an industrial/commercial customer and a medical customer. These losses were offset, in part, by increased demand from another industrial/commercial customer. Operating loss for the three months ended July 4, 2009 was comparable to the prior-year period.

Net sales for the nine months ended July 4, 2009 increased $2.3 million, or 4.2 percent, from the nine months ended June 28, 2008, to $57.5 million. The net sales increase was primarily attributable to the addition of a new customer in the wireline/networking sector. In addition, there was increased demand from an industrial/commercial customer, offset by decreased demand from another wireline/networking customer and another industrial/commercial customer. Operating loss for the nine months ended July 4, 2009 increased $0.5 million over the nine months ended June 28, 2008 to $2.7 million due to reduced gross margin, resulting from changes in customer mix, as well as restructuring charges.

• Europe: Net sales for the three months ended July 4, 2009 decreased $4.0 million, or 23.4 percent, to $13.1 million, from the three months ended June 28, 2008. The net sales decline was primarily due to decreased demand from an industrial/commercial customer. Operating income for the three months ended July 4, 2009 decreased by $2.1 million from the prior-year period due primarily to decreased net sales.

Net sales for the nine months ended July 4, 2009 decreased $15.4 million, or 28.8 percent, to $38.0 million, from the nine months ended June 28, 2008. The change in net sales can be attributed to a decrease in the exchange rate as well as decreased demand from one customer in the industrial/commercial sector. Operating income for the nine months ended July 4, 2009 decreased $4.4 million from the nine months ended June 28, 2008 primarily as a result of decreased net sales as well as unfavorable change in customer mix.

For our significant customers, we generally manufacture products in more than one location. Net sales to Juniper Networks, Inc. ("Juniper"), our largest customer, occur in the United States and Asia. Net sales to General Electric Company ("GE"), a significant customer, occur in the United States, Asia and Mexico. See Note 11 in Notes to Condensed Consolidated Financial Statements for certain financial information regarding our reportable segments, including a detail of net sales by reportable segment.

RESULTS OF OPERATIONS
   Net sales. Net sales for the indicated periods were as follows (dollars in
millions):

                        Three Months Ended                  Variance                  Nine Months Ended                   Variance
                      July 4,        June 28,              Increase/               July 4,         June 28,               Increase/
                        2009           2008                (Decrease)               2009             2008                (Decrease)
Net Sales            $  378.6        $ 456.4         $ (77.8 )        (17 )%     $ 1,223.6        $ 1,365.7        $ (142.1 )        (10 )%

For the three months ended July 4, 2009, we experienced net sales decline in each of our market sectors, except for a small increase in defense/security/aerospace. Our net sales decline in the wireline/networking sector was driven by decreased demand from our largest customer.

The net sales decline in the industrial/commercial sector was spread across many customers and was primarily a result of decreased demand. Our net sales decline in the medical sector was primarily due to decreased demand from two customers. Our wireless infrastructure sector declined as a result of decreased demand primarily from two customers and our defense/security/aerospace sector increased net sales slightly over the prior-year period.
For the nine months ended July 4, 2009, net sales declined in all of our market sectors as compared to the prior-year period, due primarily to decreased demand by customers in the industrial/commercial, defense/security/aerospace and wireline/networking sectors. Our industrial/commercial sector was unfavorably impacted by decreased demand from many existing customers. Leading the decline in the defense/security/aerospace sector was decreased demand of $58.6 million from our unnamed defense customer. Our net sales decline in our wireline/networking sector was primarily due to decreased demand from our largest customer, partially offset by increased demand from a new customer. Offsetting these net sales declines was an increase in demand from a medical customer.
Our net sales by market sector for the indicated periods were as follows:

                                        Three Months Ended         Nine Months Ended
                                      July 4,       June 28,     July 4,       June 28,
        Industry                        2009          2008         2009          2008
        Wireline/Networking               48 %          47 %         46 %           43 %
        Wireless Infrastructure            9 %           9 %          9 %            9 %
        Medical                           21 %          22 %         23 %           21 %
        Industrial/Commercial             12 %          16 %         12 %           16 %
        Defense/Security/Aerospace        10 %           6 %         10 %           11 %

The percentages of net sales to customers representing 10 percent or more of net sales and net sales to our ten largest customers for the indicated periods were as follows:

                                   Three Months Ended         Nine Months Ended
                                 July 4,       June 28,     July 4,       June 28,
                                   2009          2008         2009          2008
             Juniper                 23 %          23 %         21 %           21 %
             Top 10 customers        57 %          62 %         59 %           62 %

Net sales to our largest customers may vary from time to time depending on the size and timing of customer program commencements, terminations, delays, modifications and transitions. We remain dependent on continued sales to our significant customers, and we generally do not obtain firm, long-term purchase commitments from our customers. Customers' forecasts can and do change as a result of changes in their end-market demand and other factors, including global economic conditions. Any material change in forecasts or orders from these major accounts, or other customers, could materially affect our results of operations. 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 economic and business conditions affecting that sector.
Gross profit and gross margin. Gross profit and gross margins for the indicated periods were as follows (dollars in millions):

                          Three Months Ended                    Variance                    Nine Months Ended                     Variance
                       July 4,         June 28,                Increase/                 July 4,         June 28,                Increase/
                         2009            2008                  (Decrease)                 2009             2008                  (Decrease)
Gross Profit          $   34.6        $   48.8         $   (14.2 )          (29 )%     $   117.0        $   155.9        $   (38.9 )          (25 )%
Gross Margin               9.1 %          10.7 %                                             9.6 %           11.4 %

For the three months ended July 4, 2009, gross profit and gross margin were impacted by the following: . . .