"SAFE HARBOR" CAUTIONARY STATEMENT:
The statements contained in this Form 10-Q which are guidance or which are not historical facts (such as statements in the future tense and statements including "believe," "expect," "intend," "plan," "anticipate," "goal," "target" and similar terms and concepts), including all discussions of periods which are not yet completed, are forward-looking statements that involve risks and uncertainties. These risks and uncertainties include, but are not limited to:
the risk of customer delays, changes, cancellations or forecast inaccuracies in both ongoing and new programs; the poor visibility of future orders, particularly in view of current economic conditions; the effects on Plexus of Juniper Network, Inc.'s ("Juniper's") intended disengagement, including limited visibility as to Juniper's demand during the transition and the timing of disengagement; the economic performance of the industries, sectors and customers we serve; the effects of the volume of revenue from certain sectors or programs on our margins in particular periods; our ability to secure new customers, maintain our current customer base and deliver product on a timely basis; the particular risks relative to new or recent customers or programs, which risks include customer and other delays, start-up costs, potential inability to execute, the establishment of appropriate terms of agreements, and the lack of a track record of order volume and timing; the risks of concentration of work for certain customers; our ability to manage successfully a complex business model characterized by high customer and product mix, low volumes and demanding quality, regulatory, and other requirements; 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 effects of shortages and delays in obtaining components as a result of economic cycles or natural disasters; the risks associated with excess and obsolete inventory, including the risk that inventory purchased on behalf of our customers may not be consumed or otherwise paid for by the customer, resulting in an inventory write-off; the weakness of areas of the global economy and the continuing instability of the global financial markets and banking system, including the potential inability of our customers or suppliers to access credit facilities; the effect of changes in the pricing and margins of products; the effect of start-up costs of new programs and facilities, such as our announced plans to replace facilities in Romania and the United States, and other recent, planned and potential future expansions; increasing regulatory and compliance requirements; possible unexpected costs and operating disruption in transitioning programs; raw materials and component cost fluctuations; the potential effect of fluctuations in the value of the currencies in which we transact business; the potential effects of regional results on our taxes and ability to use deferred tax assets; the potential effect of world or local events or other events outside our control (such as drug cartel-related violence in Mexico, changes in oil prices, terrorism and weather events); the impact of increased competition; and other risks detailed in the Company's Securities and Exchange Commission filings (particularly in Part I, Item 1A of our annual report on Form 10-K for the fiscal year ended September 29, 2012).

OVERVIEW
Plexus Corp. and its subsidiaries (together "Plexus," the "Company," or "we") participate in the Electronic Manufacturing Services ("EMS") industry. We deliver optimized Product Realization solutions through a unique Product Realization Value Stream services model. This customer focused services model seamlessly integrates innovative product conceptualization, design, commercialization, manufacturing, fulfillment and sustaining services to deliver comprehensive end-to-end solutions for customers in the Americas ("AMER"), Europe, Middle East and Africa ("EMEA") and Asia-Pacific ("APAC") regions. Customer service is provided to over 140 branded product companies in the Networking/Communications, Healthcare/Life Sciences, Industrial/Commercial and Defense/Security/Aerospace market sectors. 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 verification; 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.
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.

As previously disclosed, on November 5, 2012, Juniper Networks, Inc. ("Juniper")., the Company's largest customer, notified the Company of its intent to disengage from Plexus. As a consequence, later in our fiscal first quarter, the Company and Juniper reached an understanding regarding the timing and other aspects of Juniper's disengagement. Production for Juniper is expected to continue through our third fiscal quarter and will be comprised of both base demand to support Juniper's customer base as well as demand for buffer inventory to facilitate Juniper's transition to other suppliers. We believe that this plan helps mitigate our balance sheet risk as Juniper has agreed to provide cash deposits against related inventory obligations; therefore, we do not expect to incur any material inventory adjustments related to this inventory. We expect to redeploy substantially all standard equipment that we use in manufacturing for Juniper to other customers' projects, with the possibility of up to $0.3 million in impairment costs related to equipment specific to Juniper. We also believe that we will be able to redeploy most of our employees who have supported Juniper; however, as we may need to adjust staffing levels, we currently estimate that we may incur up to $1.0 million of severance and retention costs in the second half of fiscal 2013. Sales to Juniper were 12% of our net sales in the first quarter of fiscal 2013 as compared to 22% in the same period of fiscal 2012.

The following information should be read in conjunction with our Condensed Consolidated Financial Statements included herein and the "Risk Factors" section in Part I, Item 1A of our annual report on Form 10-K for the fiscal year ended September 29, 2012 and our "Safe Harbor" Cautionary Statement included above.

RESULTS OF OPERATIONS
Consolidated Performance Summary
The following table presents selected consolidated financial data (dollars in
millions, except per share data):

                                    Three Months Ended
                              December 29,      December 31,
                                  2012              2011
Net sales                    $      530.5      $      529.7
Gross profit                         51.2              51.7
Gross margin                          9.6 %             9.8 %
Operating income                     21.5              23.8
Operating margin                      4.1 %             4.5 %
Net income                           16.6              17.9
Earnings per share (diluted) $       0.47      $       0.51
Return on invested capital           12.6 %            14.2 %

Net sales. For the three months ended December 29, 2012, our net sales increased by 0.2 percent compared to the three months ended December 31, 2011 as a result of approximately $17.8 million of incremental revenue from the Kontron strategic arrangement (the "Kontron arrangement"), as well as the ramp of new programs with existing customers in the healthcare/life sciences and defense/security/aerospace sectors. These increases in net sales were partially offset by soft end-market demand across all sectors, particularly in our networking/communications sector.
Our net sales by market sector for the indicated periods were as follows (in millions):

                                  Three Months Ended
                             December 29,      December 31,
Market Sector                    2012              2011
Networking/Communications  $    198.8         $       229.7
Industrial/Commercial           131.0                 135.4
Healthcare/Life Sciences        133.0                 114.0
Defense/Security/Aerospace       67.7                  50.6
                           $    530.5         $       529.7

Networking/Communications. Net sales for the networking/communications sector decreased $30.9 million for the three months ended December 29, 2012 compared to the three months ended December 31, 2011. The decline in the sector was a

result of softened end-market demand which resulted in lower product demand-pull in the final weeks of the quarter, as well as a drop in demand from our largest customer.
Industrial/Commercial. Net sales for the industrial/commercial sector decreased $4.4 million for the three months ended December 29, 2012 compared to the three months ended December 31, 2011. The decrease was primarily attributable to weaker demand from a significant customer, partially offset by approximately $17.8 million of incremental revenue related to the Kontron arrangement. Healthcare/Life Sciences. Net sales for the healthcare/life sciences sector increased $19.0 million for the three months ended December 29, 2012 compared to the three months ended December 31, 2011. The increase was primarily due to market share gains as well as new program ramps.
Defense/Security/Aerospace. Net sales for the defense/security/aerospace sector increased $17.1 million for the three months ended December 29, 2012 compared to the three months ended December 31, 2011. The increase was primarily due to growth in new programs for an existing customer.
Gross profit. For the three months ended December 29, 2012, gross profit decreased $0.5 million compared to the three months ended December 31, 2011 primarily due to $2.2 million of higher fixed expenses related to site expansions in Penang, Malaysia, Xiamen, China and Oradea, Romania. The decrease was partially offset by the sale of certain inventory that had previously been written down and a favorable change in customer mix. These factors led to the reduction in gross margin to 9.6 percent for the three months ended December 29, 2012 from 9.8 percent for the three months ended December 31, 2011.
Operating income. For the three months ended December 29, 2012, operating income decreased $2.3 million compared to the three months ended December 31, 2011. The operating income decrease reflected the $0.5 million decrease in gross profit described above, as well as a $1.8 million increase in selling and administrative expenses ("S&A"). The dollar increase in S&A is primarily due to $0.5 million of amortization expense in the current period related to the Kontron arrangement, bad debt expense of $0.4 million and a $0.2 million increase in stock option expense. As a result of the factors discussed above, operating margin was 4.1 percent for the three months ended December 29, 2012 compared to 4.5 percent for the three months ended December 31, 2011.

Other income (expense). Other income (expense) decreased to $3.8 million of expense for the three months ended December 29, 2012 from $4.1 million of expense for the three months ended December 31, 2011. The decrease in expense was primarily due to $0.3 million of lower interest expense related to our term loan.
Income taxes. Effective annual income tax rates for the indicated periods were as follows:

                              Three Months Ended
                          December 29,   December 31,
                              2012           2011
Effective annual tax rate      6%             9%

Income tax expense decreased to $1.1 million for the three months ended December 29, 2012, as compared to $1.8 million for the three months ended December 31, 2011, as a result of the decrease in our effective tax rate. Our effective tax rate varies from the U.S. statutory rate of 35 percent primarily as a result of the amount of earnings from different U.S. and foreign jurisdictions, and tax holidays granted to our subsidiaries in China and Malaysia, where we derive a significant portion of our earnings. The effective tax rate for the three months ended December 29, 2012 is lower than the effective rate for the three months ended December 31, 2011 primarily as a result of increased income in the APAC segment that benefits from reduced taxes due to tax holidays. Our effective tax rate could fluctuate in the future depending on the geographic distribution of our worldwide earnings.
The estimated annual effective tax rate for all of fiscal 2013 is expected to be between 6 percent and 8 percent.
Net income. Primarily as a result of lower gross profit and higher selling and administrative expenses, net income for the three months ended December 29, 2012 decreased by $1.3 million, or 7.3 percent, to $16.6 million from $17.9 million for the three months ended December 31, 2011.
Diluted earnings per share. Diluted earnings per share decreased to $0.47 for the three months ended December 29, 2012, from $0.51 for the three months ended December 31, 2011. The decrease in diluted earnings per share was primarily due to the decrease in net income previously noted.

Return on Invested Capital ("ROIC"). We use a 5-10-5 financial model which is aligned with our business strategy, and includes a ROIC goal of 500 basis points over our weighted average cost of capital ("WACC"), a 10 percent gross margin target and a 5 percent operating margin target. Our primary focus is our ROIC goal, which is designed to create shareholder value and generate enough cash to self-fund our targeted organic revenue growth rate of 15 percent.
We review our internal calculation of WACC annually, and our estimated WACC is 12 percent for fiscal 2013. By exercising discipline to generate ROIC in excess of our WACC, our goal is to create value for our shareholders. ROIC was 12.6 percent and 14.2 percent for the three months ended December 29, 2012 and December 31, 2011, respectively. This decrease was due to lower annualized operating income and higher average invested capital (as defined below). We define ROIC as tax-effected annualized operating income divided by average invested capital over a rolling two-quarter period for the first quarter. Invested capital is defined as equity plus debt, less cash and cash equivalents. Other companies may not define or calculate ROIC in the same way. ROIC is a non-GAAP financial measure which should be considered in addition to, not as a substitute for, measures of our financial performance prepared in accordance with United States generally accepted accounting principles ("GAAP").

Non-GAAP financial measures, including ROIC, are used for internal management assessments because such measures provide additional insight into ongoing financial performance. In particular, we provide ROIC because we believe it offers insight into the metrics that are driving management decisions. We view ROIC as an important measure in evaluating the efficiency and effectiveness of our long-term capital requirements. We also use ROIC as a performance criteria in determining certain elements of compensation.
For a reconciliation of ROIC to our financial statements that were prepared using GAAP, see exhibit 99.1 to this quarterly report on Form 10-Q, which exhibit is incorporated herein by reference.

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

                                          Three Months Ended
                                    December 29,      December 31,
                                        2012              2011
Net sales:
AMER                               $      259.0      $      320.9
APAC                                      272.4             234.7
EMEA                                       28.2              19.5
Elimination of inter-segment sales        (29.1 )           (45.4 )
                                   $      530.5      $      529.7
Operating income (loss):
AMER                               $       19.3      $       23.0
APAC                                       25.2              23.0
EMEA                                       (0.2 )            (0.9 )
Corporate and other costs                 (22.8 )           (21.3 )
                                   $       21.5      $       23.8

Americas (AMER): Net sales for the three months ended December 29, 2012 decreased $61.9 million, or 19.3 percent, as compared to the prior year period due to soft demand across all sectors, particularly in the networking/communications and industrial/commercial sectors. Net sales in the networking/communications sector also decreased due to a drop in demand from Juniper. Operating income for the three months ended December 29, 2012 decreased $3.7 million, or 16.1 percent, as compared to the prior year period, consistent with the decrease in net sales.
Asia Pacific (APAC): Net sales for the three months ended December 29, 2012 increased $37.7 million, or 16.1 percent, as compared to the prior year period primarily due to $17.8 million of incremental revenue from the Kontron arrangement and increased demand from several existing customers in our industrial/commercial and healthcare/life sciences sectors, partially offset by a decrease in the networking/communications sector due to a drop in demand from Juniper. Operating income for the three months ended December 29, 2012 increased $2.2 million, or 9.6 percent, as compared to the prior year period due to increased net sales as described above, partially offset by escalated pricing pressure.

Europe, Middle East, Africa (EMEA): Net sales for the three months ended December 29, 2012 increased $8.7 million, or 44.6 percent, as compared to the prior year period due primarily to a new customer in the networking/communications sector and increased demand in the defense/security/aerospace and healthcare/life sciences sectors. Operating loss for the three months ended December 29, 2012 decreased $0.7 million, or 77.8 percent, as compared to the prior year period due to increased utilization of our Romania facility, as well as increased net sales from our United Kingdom ("UK") facility.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents were $274.2 million as of December 29, 2012 compared to $297.6 million as of September 29, 2012. The decrease in the balance of our cash and cash equivalents was due primarily to a decrease in cash generated from operations as a result of increased working capital.
As of December 29, 2012, approximately two-thirds of our cash balance was held outside of the U.S. by our foreign subsidiaries. Certain foreign countries impose taxes and overall penalties on transfers of cash; however, our intent is to permanently reinvest funds held in these countries. If this cash were remitted to the U.S., additional tax obligations may result that would reduce the amount of cash ultimately available to us in the U.S. Currently, we believe that cash held in the U.S., together with cash available under U.S. credit facilities and cash from foreign subsidiaries that could be remitted to the U.S. without tax consequences, will be sufficient to meet our U.S. liquidity needs for the next twelve months and for the foreseeable future.
Cash Flows. The table below shows a summary of cash flows for the periods presented (dollars in millions):

                                             Three Months Ended
                                       December 29,       December 31,
                                           2012               2011
Cash provided by operating activities $        8.5       $      29.8
Cash used in investing activities            (25.8 )           (20.0 )
Cash used in financing activities     $       (6.7 )     $      (4.0 )

Operating Activities. Cash flows provided by operating activities were $8.5 million for the three months ended December 29, 2012, as compared to cash flows provided by operating activities of $29.8 million for the three months ended December 31, 2011. Cash flows provided by operating activities decreased primarily due to working capital challenges.

The following table shows a summary of cash cycle days for the periods indicated (in days):

                                  Three Months Ended
                            December 29,     December 31,
                                2012             2011
Days in accounts receivable        50               46
Days in inventory                  92               87
Days in accounts payable          (61 )            (57 )
Days in cash deposits              (7 )             (6 )
Annualized cash cycle              74               70

We calculate days in accounts receivable as accounts receivable for the respective quarter divided by annualized sales for the respective quarter by day. 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.
Days in accounts receivable for the three months ended December 29, 2012 increased by four days compared to the three months ended December 31, 2011, primarily due to a change in mix to customers with less favorable receivables terms.
Days in inventory for the three months ended December 29, 2012 increased by five days compared to the three months ended December 31, 2011, due to additional inventory on hand as a result of lower customer demand in the first fiscal quarter. We are also ramping new customer manufacturing programs in several sites and have increased inventory to support these ramps.
Days in accounts payable for the three months ended December 29, 2012 increased by four days compared to the three months ended December 31, 2011, primarily due to timing and larger balances related to facility expansions.

Days in cash deposits for the three months ended December 29, 2012 increased by one day compared to the three months ended December 31, 2011.
We calculate annualized cash cycle as the sum of days in accounts receivable and days in inventory, less days in accounts payable and days in cash deposits. For the three months ended December 29, 2012 annualized cash cycle days increased by four days compared to the three months ended December 31, 2011 due to the factors noted above.
Free Cash Flow. Free cash flow ("FCF"), which we define as cash flow provided by (used in) operations less capital expenditures, decreased for the three months ended December 29, 2012, to a utilization of $17.3 million, as compared to FCF provided of $7.6 million for the three months ended December 31, 2011. Increased working capital needs and capital expenditures for footprint expansion in Neenah, Wisconsin and Oradea, Romania were the primary uses of cash. Non-GAAP financial measures, including FCF, are used for internal management assessments because such measures provide additional insight into ongoing financial performance. 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 allows us to pursue opportunities that enhance shareholder value. FCF is a non-GAAP financial measure which should be considered in addition to, not as a substitute for, measures of our financial performance prepared in accordance with U.S. GAAP.

For a reconciliation of FCF to our financial statements that were prepared using GAAP, see below (in millions):

                                            Three Months Ended
                                       December 29,     December 31,
                                           2012             2011
Cash provided by operating activities $       8.5      $      29.8
Capital expenditures                        (25.8 )          (22.2 )
Free cash flow                        $     (17.3 )    $       7.6

Investing Activities. Cash flows used in investing activities totaled $25.8 million for the three months ended December 29, 2012 as compared to cash flows used in investing activities of $20.0 million for the three months ended December 31, 2011. Cash flows used in investing activities increased primarily due to the footprint expansions noted above.
We utilized available cash and operating cash flows as the sources for funding our operating requirements. We currently estimate capital expenditures for fiscal 2013 to be approximately $100 million of which $25.8 million of expenditures were made in the first quarter of fiscal 2013. A significant portion of the remaining fiscal 2013 capital expenditures is anticipated to be used for the completion of our previously announced manufacturing facilities in Neenah, Wisconsin and Oradea, Romania to replace leased buildings in both locations. We believe the estimated capital expenditures will continue to be funded from operations, and may be supplemented by short-term borrowings, if required.
Financing Activities. Cash flows used in financing activities totaled $6.7 million for the three months ended December 29, 2012, as compared to cash flows used in financing activities of $4.0 million for the three months ended December 31, 2011. Cash flows used in financing activities for the three months ended December 29, 2012 were comprised primarily of purchases of common stock as part of our stock repurchase program. Cash flows used in financing activities for the three months ended December 31, 2011 were comprised primarily of payments on debt and capital leases.

On May 15, 2012, the Company entered into a five-year, $250 million senior unsecured credit facility that terminates on May 15, 2017 (the "Credit . . .