ADFlex Announces Third Quarter 1998 Results.CHANDLER, Ariz.--(BUSINESS WIRE)--Oct. 19, 1998--ADFlex Solutions Inc. (NASDAQ/NM:AFLX) Monday announced results from operations for its third-quarter and nine-month periods ended Sept. 30, 1998. For the quarter, the company reported a net loss of $2.6 million, or $0.29 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share, on net sales Net Sales The amount a seller receives from the buyer after costs associated with the sale are deducted. Notes: This amount is calculated by subtracting the following items from gross sales: merchandise returned for credit, allowances for damaged or missing goods, freight of $36.1 million. For the 1997 third quarter, net income was $2.6 million, or $0.29 per diluted share, on net sales of $55.1 million. For the nine months ended Sept. 30, 1998, ADFlex recorded a net loss of $3.6 million, or $0.40 per diluted share, on net sales of $130.5 million, compared to net income of $5.3 million, or $0.60 per diluted share, on net sales of $159.5 million for the first nine months of 1997. ADFlex Chairman and Chief Executive Officer Rolando C. Esteverena commented: "The results for the third quarter and nine months are primarily attributable to the weakened demand experienced by certain customers -- in particular those supplying the personal computer markets and the hard disk drive (HDD (Hard Disk Drive) See hard disk and HDD caddy. HDD - hard disk drive ) segment -- and to pricing pressures from Asian manufacturers that combined and resulted in under-utilization of factory capacity. "Looking to positive signs, our backlog at the end of the third quarter reached $36.7 million, a 29.7% sequential increase over the prior quarter. We believe this reflects improving demand as customers reduce excess inventories and new programs go into volume production." New design activity reached 172 designs for the third quarter, a 22.0% sequential increase from the prior quarter. During the period, ADFlex began production ramps on 91 new programs, including recent design wins from Dell Computer Corp., Overland o·ver·land adj. Accomplished, traversing, or passing over the land instead of the ocean: an overland journey; an overland route. adv. Data Inc., Samsung Corp. and Xerox Corp. Esteverena continued, "Looking ahead, our improved backlog and new product design activity is reason for optimism and suggests that a recovery for the industry may be at hand." During the quarter, ADFlex took aggressive steps to reduce costs, increase productivity and improve the company's long-term competitiveness. The measures taken included a consolidation of administrative functions, a workforce reduction of 18%, closure of two manufacturing plants in Mexico, and transfer of selected manufacturing programs from Mexico to Thailand. The transferred programs are expected to result in additional benefits for customers located in Southeast Asia Southeast Asia, region of Asia (1990 est. pop. 442,500,000), c.1,740,000 sq mi (4,506,600 sq km), bounded roughly by the Indian subcontinent on the west, China on the north, and the Pacific Ocean on the east. from the integrated single-source supplier capabilities that ADFlex offers. Gross margins for the quarter were 4.4% compared to 18.4% for the third quarter of 1997, primarily reflecting the under-utilization of factory capacity that was aggravated ag·gra·vate tr.v. ag·gra·vat·ed, ag·gra·vat·ing, ag·gra·vates 1. To make worse or more troublesome. 2. To rouse to exasperation or anger; provoke. See Synonyms at annoy. by price competition from Asian suppliers. The company believes that its actions in the second and third quarters to reduce costs and improve productivity should mitigate the gross margin erosion experienced during this cyclical cyclical Of or relating to a variable, such as housing starts, car sales, or the price of a certain stock, that is subject to regular or irregular up-and-down movements. downturn. Net cash remained essentially unchanged during the quarter, in part due to aggressive management of accounts receivables accounts receivable n. the amounts of money due or owed to a business or professional by customers or clients. Generally, accounts receivable refers to the total amount due and is considered in calculating the value of a business or the business' problems in paying and inventories. Also during the period, the company completed the initial deployment of the SAP R/3 enterprise resource planning See ERP. (application, business) Enterprise Resource Planning - (ERP) Any software system designed to support and automate the business processes of medium and large businesses. software system to all facilities, an important computer networking
Computer networking is the engineering discipline concerned with communication between computer systems or devices. productivity upgrade for management information systems. The construction of an integrated flex fabrication fabrication (fab´rikā´sh  n),n the construction or making of a restoration. and assembly facility in Thailand is on schedule for early 1999 occupancy. ADFlex believes that it will emerge from the current difficulties impacting the industry as a stronger competitor and better supplier to its customers. ADFlex Solutions is a leading supplier of flexible circuit-based interconnect (1) To attach one device to another. (2) A physical port (plug, socket) or wireless port (transmitter, receiver) used to attach one device to another. solutions to the computer, computer peripheral, communication and other industries. Applications for flex-based interconnects include cellular telephones, hard disk drives and other storage systems, high-end consumer products, notebook computers A laptop computer that weighs in a range from five to seven pounds. The term originated when laptops were routinely more than 10 pounds, and those that became lighter were placed in a special "notebook" category. In practice, notebook computer and laptop computer are synonymous. , pagers and personal communications systems In telecommunication, a communications system is a collection of individual communications networks, transmission systems, relay stations, tributary stations, and data terminal equipment (DTE) usually capable of interconnection and interoperation to form an integrated whole. . Safe Harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. Statement under the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995: The statements contained in this release which are not historical facts may contain forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. that involve risks and uncertainties, including, but not limited to, continuing risk related to concentration of sales, customers and markets, and the ability of the company to achieve and maintain broad-based customer demand and growth and to mitigate demand variations in the hard disk drive industry; risk associated with the increased competition from Asian flex manufacturers, including pricing pressures; risks of order cancellations or postponements; risk related to manufacturing processes and efficiency; risk that cost reduction measures instituted in the second and third quarters may not enable the company to avoid operating losses operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. in the future; risks that new programs awarded to the company will be cancelled or delayed and will not contribute to the company's profitability; risk that the company's single-source provider strategy will not result in the increased market share; risks relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the deployment and integration of new operating software systems; risks that completion of the Thailand manufacturing plant will be delayed; and other risks detailed in the company's Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the year ended Dec. 31, 1997 and Form 10-Q Form 10-Q See 10-Q. for the quarters ended March 31, 1998 and June 30, 1998, and other Securities and Exchange Commission filings. -0-
ADFlex Solutions Inc.
Summary Consolidated Statements of Operations
(in thousands, except per share data)
Three Months Ended Nine Months Ended
Sept. 30, Sept. 30,
1998 1997 1998 1997
Net sales $ 36,142 $ 55,058 $ 130,469 $ 159,524
Cost of sales 34,556 44,913 117,212 132,857
Gross profit 1,586 10,145 13,257 26,667
Operating expenses
Engineering, selling
& administrative 4,436 5,652 15,573 17,270
Amortization of intangible
assets 129 - 387 -
Total operating expenses 4,565 5,652 15,960 17,270
Operating income (loss) (2,979) 4,493 (2,703) 9,397
Other income (expense), net (647) (674) (2,234) (1,756)
Income (loss) before income
taxes (3,626) 3,819 (4,937) 7,641
Income taxes (1,016) 1,222 (1,384) 2,292
Net income (loss) $ (2,610) $ 2,597 $ (3,553) $ 5,349
Net income (loss) per share:
Basic $ (0.29) $ 0.30 $ (0.40) $ 0.62
Diluted $ (0.29) $ 0.29 $ (0.40) $ 0.60
Number of shares used in
computing net income (loss) per share:
Basic 8,901 8,732 8,847 8,693
Diluted 8,901 9,022 8,847 8,863
ADFlex Solutions Inc.
Summary Consolidated Balance Sheets
(in thousands)
Sept. 30, Dec. 31,
1998 1997
Assets
Current assets:
Cash & short-term investments $ 3,719 $ 9,092
Accounts receivable, net 20,617 31,581
Inventories 11,271 19,297
Prepaid taxes 2,846 2,951
Other current assets 2,621 2,567
Total current assets 41,074 65,488
Property, plant & equipment, net 53,176 42,257
Intangible assets 2,062 2,449
Deferred tax assets 6,509 5,481
Other assets 15 24
$ 102,836 $ 115,699
Liabilities and Stockholders' Equity
Current liabilities:
Line of credit $ 3,500 $ 7,000
Notes payable 1,188 2,250
Accounts payable 10,878 22,692
Accrued liabilities 8,007 6,548
Current portion of long-term debt and
capitalized leases 13,061 1,959
Total current liabilities 36,634 40,449
Deferred tax liabilities 678 1,113
Long-term debt and capitalized leases,
less current portion 17,000 23,230
Stockholders' equity 48,524 50,907
$ 102,836 $ 115,699
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