ADFlex Solutions reports significant revenue improvement resulting in fourth-quarter return to profitability.

CHANDLER, Ariz.--(BUSINESS WIRE)--Jan. 22, 1997--ADFlex Solutions Inc. (NASDAQ/NM:AFLX) Wednesday reported, for the fourth-quarter ended Dec. 31, 1996, revenues of $46.8 million and net income of $407,000, or 5 cents per share.

This compares with revenues of $26.3 million and a net loss of $11.3 million, or $1.60 per share, for the same quarter of 1995.

Rolando C. Esteverena, ADFlex chairman and chief executive officer, said: "Our improved fourth-quarter results represent a continuation of the business upturn that began during the third quarter. During the fourth quarter, revenues increased sequentially by 27 percent over the third quarter and gross margins improved to 14 percent, enabling the company to return to profitability.

"Importantly, the revenue growth was broad-based, as the communication, notebook computer, hard disk drive and storage array application segments all posted higher sales than the previous quarter. Further, we made improvements in the key areas of collections and inventory management that produced positive cash flow for the period."

Esteverena continued: "We continue to be encouraged about the business opportunities for ADFlex in the year ahead. We remain confident in the strength of our core flex business and that the `one-stop-shop' integrated supplier strategy will contribute to growth in the future.

"Also, our recently established Thailand facility will, upon reaching full-volume production during 1997, provide us with a lower overall cost structure. The outlook for 1997 is positive as we begin the year, with a first-quarter backlog of $43.4 million and had, as of Dec. 31, 1996, a pipeline of new product designs that remained strong, with 168 projects in process, up 20 percent from the previous year.

"In October, we announced the intention to transfer assembly operations to Thailand, and we are pleased to report that our Thailand facility began, as expected, shipping product during the fourth quarter.

"The U.K. facility had a high level of activity, with revenues comparable to those reported in the third quarter of 1996, reflecting the organization's success in supporting existing customers during the 1997 transition period," Esteverena concluded.

ADFlex Solutions is a leading supplier of flexible circuit-based interconnect solutions to the computer, computer peripheral and communication industries. Applications for flex-based interconnects include cellular telephones, hard disk drives and other storage systems, high-end consumer products, notebook computers, pagers and personal communications systems. -0- Note: "Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: The statements contained in this release which are not historical facts may contain forward-looking statements that involve risks and uncertainties, including, but not limited to, the concentration of sales in customers and markets and particularly the hard disk drive market, fluctuating demand by existing customers, the success of the company's "one-stop-shop" strategy to become a single-source supplier of flex solutions, risks of cancellations and delays of orders that cause fluctuating operating margins, fluctuating operating results, and prices of the company's common stock, the ability to maintain operating efficiencies in the United Kingdom and Thailand, turning backlog and design activity into revenues, and other risks detailed in the company's annual report on Form 10-K for the year ended Dec. 31, 1995, quarterly report on Form 10-Q for the quarter ended Sept. 30, 1996, 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        Twelve Months Ended
                          Dec. 31,                    Dec. 31,
                      1996      1995              1996      1995
Net sales          $ 46,825  $ 26,299          $ 156,836  $ 101,163
Cost of sales        40,410    19,196            138,273     73,108
  Gross profit        6,415     7,103             18,563     28,055

Operating Expenses:
  Engineering,
   selling &
   administrative     5,108     3,916             20,620     13,667
  Amortization of
   intangible assets   --        --               2,385       --
  Write-off of
   in-process
   technology           --     13,920                --      13,920
  Restructuring
   charges              --        --              29,248       --
Total operating
 expenses             5,108    17,836             52,253     27,587


  Operating income
    (loss)            1,307   (10,733)           (33,690)       468
Other income
 (expense), net        (308)      144             (1,043)       936
Income (loss) before
 income taxes           999   (10,589)           (34,733)     1,404
Income taxes            592       680             (9,656)     5,127
Net income (loss)  $    407  $(11,269)         $ (25,077) $  (3,723)

Net income (loss)
 per share         $    .05  $  (1.60)         $   (2.92) $   (0.54)

Number of shares
 used in computing
 net income (loss)
 per share            8,694     7,071              8,590      6,855

-0-

                         ADFlex Solutions Inc.
                  Summary Consolidated Balance Sheets
                            (in thousands)

                                           Dec. 31,
                                    1996                1995
Assets:
Current assets:
  Cash & short-term investments   $ 6,097            $ 15,699
  Accounts receivable, net         25,409              15,592
  Receivable for taxes due           --                 6,269
  Inventories                      14,990              16,824
  Deferred tax asset                2,505                --
  Other current assets              2,312               1,294
    Total current assets           51,313              55,678
Property & equipment, net          34,297              35,289
Deferred tax assets                 7,546                --
Other assets                           25              15,951
                                  $93,181            $106,918

Liabilities and Stockholders' Equity:
Current liabilities:
  Line of credit                  $10,000            $   --
  Acquisition amount payable         --                12,375
  Accounts payable and accrued
   liabilities                     29,407              13,253
  Accrued taxes                       170               6,782
  Current portion long-term debt    2,651               2,632
    Total current liabilities      42,228              35,042
Noncurrent liabilities              2,500                --
Capitalized leases & deferred tax
 liabilities                          189                 822
Subordinated note, less current
 portion                            7,500               7,500
Minority interest in subsidiary       491                --
Stockholders' equity               40,273              63,554
                                  $93,181            $106,918

CONTACT: ADFlex Solutions Inc., Chandler

Rolando C. Esteverena, 602/963-4584

or

Silverman Heller Associates, Los Angeles 

Eugene G. Heller, 310/208-2550