<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
Commission File Number: 0-24416
ADFLEX SOLUTIONS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 04-3186513
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2001 W. CHANDLER BLVD., CHANDLER, AZ 85224
(602) 963-4584
(Address, including zip code, and telephone number,
including area code, of registrant's
principal executive offices)
The registrant (1) has filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to the filing requirements for the past 90 days.
Yes X No
--- ---
The number of shares outstanding of the issuer's common stock, as of September
30, 1996:
COMMON STOCK, $.01 PAR VALUE: 8,633,508 SHARES
<PAGE> 2
ADFLEX SOLUTIONS, INC.
INDEX
<TABLE>
<CAPTION>
Page
<S> <C> <C>
PART I FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets -
September 30, 1996 and December 31, 1995........................3
Condensed Consolidated Statements of Operations -
Three and Nine Months Ended September 30, 1996 and 1995 ........4
Condensed Consolidated Statements of Cash Flows -
Nine Months Ended September 30, 1996 and 1995...................5
Notes to Condensed Consolidated Financial Statements................6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.................7
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.............................11
SIGNATURES.......................................................................12
EXHIBITS
(11.1) Computation of Net Income per Share
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
ADFlex Solutions, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
----------- ----------
ASSETS (Unaudited)
<S> <C> <C>
Current assets:
Cash & cash equivalents $ 2,453 $ 15,699
Accounts receivable, net 26,534 15,592
Receivable for taxes - 6,269
Inventories 15,786 16,824
Deferred tax asset 2,392 -
Other current assets 2,547 1,294
----------- ----------
Total current assets 49,712 55,678
Property, plant & equipment, net 32,949 35,289
Deferred tax asset 8,047 -
Purchased intangibles, net - 15,937
Other assets 71 14
----------- ----------
$ 90,779 $106,918
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Line of credit $ 10,200 $ -
Acquisition payable - 12,375
Accounts payable 14,584 7,257
Accrued liabilities 11,519 5,996
Liability for taxes - 6,269
Accrued taxes - 513
Current portion of long-term debt and
capitalized leases 2,646 2,632
----------- ----------
Total current liabilities 38,949 35,042
Noncurrent liabilities 3,700 -
Deferred tax liabilities - 471
Long-term debt and capitalized leases 7,729 7,851
Minority interest in subsidiary 571 -
Stockholders' equity 39,830 63,554
----------- ----------
$ 90,779 $106,918
=========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements
3
<PAGE> 4
ADFlex Solutions, Inc.
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------- ----------------------
1996 1995 1996 1995
--------- ------- -------- -------
<S> <C> <C> <C> <C>
Net sales $ 36,898 $28,461 $110,011 $74,864
Cost of sales 37,193 20,777 97,864 53,912
--------- ------- -------- -------
Gross profit (295) 7,684 12,147 20,952
Operating expenses:
Engineering, research & development 1,983 1,140 5,376 3,327
Selling, general & administrative 3,500 2,346 10,135 6,424
Amortization of intangible assets 795 - 2,386 -
Restructuring charges 29,248 - 29,248 -
--------- ------- -------- -------
Total operating expenses 35,526 3,486 47,145 9,751
--------- ------- -------- -------
Operating income (loss) (35,821) 4,198 (34,998) 11,201
Other income (expense), net (229) 269 (734) 792
--------- ------- -------- -------
Income (loss) before income taxes (36,050) 4,467 (35,732) 11,993
Income taxes (10,387) 1,653 (10,248) 4,447
--------- ------- -------- -------
Net income (loss) $(25,663) $ 2,814 $(25,484) $ 7,546
========= ======= ======== =======
Net income (loss) per share $ (2.98) $ 0.38 $ (2.97) $ 1.04
========= ======= ======== =======
Number of shares used in computing net
income (loss) per share 8,617 7,384 8,576 7,221
========= ======= ======== =======
</TABLE>
See accompanying notes to condensed consolidated financial statements
4
<PAGE> 5
ADFlex Solutions, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
----------------------
1996 1995
-------- --------
<S> <C> <C>
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES
Net income (loss) $(25,484) $ 7,546
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 6,570 1,520
Write-off of intangible assets 13,523
Write-down of property, plant and equipment 8,775
Cost reduction charge 6,950
Deferred taxes (10,159) 703
Changes in operating assets and liabilities:
Accounts receivable (10,943) (5,476)
Other receivables (934) -
Inventories 1,039 (3,511)
Other current assets (1,069) (421)
Accounts payable and accrued liabilities 9,087 5,355
-------- --------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (2,645) 5,716
CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES
Capital expenditures (10,620) (13,368)
Decrease in other assets (29) (1)
Decrease in acquisition payable (12,375) -
Investment in joint venture 571 -
Sales of available-for-sale securities - 97,352
Purchases of available-for-sale securities - (92,983)
-------- --------
NET CASH (USED IN) INVESTING ACTIVITIES (22,453) (9,000)
CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES
Net activity on line of credit 10,200 -
Payments on capitalized lease obligations (108) (89)
Issuance of common stock, net of expenses 1,760 6,191
-------- --------
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES 11,852 6,102
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (13,246) 2,818
Cash and cash equivalents at beginning of period 15,699 4,025
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 2,453 $ 6,843
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements
5
<PAGE> 6
ADFLEX SOLUTIONS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the nine month period
ended September 30, 1996 are not necessarily indicative of the results that may
be expected for the year ended December 31, 1996. For further information, refer
to the consolidated financial statements and footnotes thereto included in the
Company's annual report on Form 10-K for the year ended December 31, 1995.
The accompanying unaudited condensed consolidated financial statements include
the accounts of ADFlex Solutions Limited since the date of acquisition, December
31, 1995.
(2) SHORT-TERM INVESTMENTS
The Company held no short-term investments at September 30, 1996 or
December 31, 1995. Included in cash and cash equivalents at September 30, 1996
and December 31, 1995 are available-for-sale securities totaling $0.7 million
and $15.7 million, respectively, at cost, which approximates fair value. For the
nine month periods ending September 30, 1996 and 1995, there were no gross
realized gains or losses on sales of available-for-sale securities. There were
no net adjustments to unrealized holding gains (losses) on available-for-sale
securities during the same periods.
(3) ACCOUNTS RECEIVABLE, NET
Accounts receivable consists of the following (in thousands):
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
---------- ---------
<S> <C> <C>
Accounts receivable trade $ 27,323 $16,234
Allowance for doubtful accounts and returns (789) (642)
---------- ---------
$ 26,534 $15,592
========== =========
</TABLE>
(4) INVENTORIES
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
--------- ----------
<S> <C> <C>
Raw materials $ 9,141 $ 7,309
Work-in-process 6,109 9,153
Finished goods 536 362
--------- ----------
$15,786 $ 16,824
========= ==========
</TABLE>
6
<PAGE> 7
(5) RESTRUCTURING CHARGES
During 1996 the U.K. operations have experienced a reduction in sales
levels of nearly 40% over levels maintained in the later part of 1995. The lower
revenues have decreased capacity utilization thus creating a negative impact on
the Company's financial position. At the close of the third quarter the Company
announced that it will, over the next approximately six months, restructure its
assembly operation in the U.K., and during that time period transfer production
from the U.K. to the Company's manufacturing facility in Lamphun, Thailand. The
shifting of labor-intensive production from the U.K. to Thailand is expected to
reduce manufacturing costs and produce gains through efficiencies derived from
the Thailand facility's proximity to a number of existing and prospective
customers in Asia. As part of this restructuring the Company incurred the
following charges: $13.5 million write-off in intangible assets, $8.8 million
write-down of property, plant and equipment and $6.9 million in employee and
lease termination charges. The Company expects to pay out $3.2 million of the
employee and lease termination costs within the next six to nine month period
and has therefore classified the remaining $3.7 million obligation as a
noncurrent liability.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
RESULTS OF OPERATIONS
Net Sales
Net sales for the three and nine month periods ended September 30, 1996
increased 30% and 47%, respectively, over the same periods in 1995 due to the
inclusion of sales from the Company's U.K. operation acquired in December, 1995.
Excluding the additive effect of ADFlex U.K., sales for the three months ended
September 30, 1996 were negatively impacted by program delays among customers in
the hard disk segment involving new magneto-resistive (MR) recording technology,
a slow down for mature products and order cancellations from certain major
customers.
Gross Profit
Gross profit as a percentage of net sales (gross margin) for the three
and nine months ended September 30, 1996 was (1%) and 11% as compared to 27% and
28%, respectively, for the same periods in 1995. Overall gross margins for the
three month period ended September 30, 1996 were severely impacted by losses
sustained by the Company's U.K. operations.
The U.K. operations perform assembly of components on flexible circuits
primarily for high capacity hard disk drives. During 1996 the U.K. operations
have experienced a reduction in sales levels of nearly 40% over levels
maintained in the later part of 1995. The reduction in sales has been primarily
related to delays in the introduction of MR drives by certain customers of the
Company, the decision by one customer to exit the disk drive business, and the
decision by a hard disk drive manufacturer to cease manufacturing operations and
shift all production responsibility to Japan. The severe reduction in revenues
resulted in decreased capacity utilization. Additionally, manufacturing yields
on certain new parts were substantially lower than anticipated by the Company in
the third quarter of 1996. As a result of lower revenues and decreased
utilization and the resulting negative impact on the Company's financial
position, the Company decided to transfer assembly operations from the U.K. to
Mexico and Thailand. The transfer of assembly will take approximately six
months, during which time the U.K. operation will continue to fulfill the
requirements of the Company's customers. Given the transfer, cost structure and
the estimate that such transfer will take about six months, the Company expects
minimal gross margins from its assembly operations for the next several
quarters. The Company anticipates that the benefits associated with the transfer
to Thailand and Mexico will not be realized until the middle of 1997.
The Company's U.S. and Mexico operations, which perform primarily
circuit manufacturing and finishing, also experienced declines in gross margins
due to lower than expected revenues, product mix and certain inventory
provisions. Sales to hard disk drive manufacturers throughout 1996 have been
substantially lower than reported in 1995 due to delays in their new product
introductions and the restructuring of certain hard disk drive customers.
7
<PAGE> 8
While sales to hard disk drive customers increased in the third quarter of 1996
as compared to the previous quarters, such sales are substantially below that of
the prior year. The Company believes that demand for high volume HDD will
increase during the next quarter. Sales to notebook manufacturers increased
sequentially in the third quarter of 1996 but remain lower than that reported in
the comparable period one year ago due to significant declines in sales to two
notebook manufacturers. The Company's sales to communication and array
applications increased in the third quarter of 1996 as compared to the previous
quarter and prior year.
In response to projected increases in sales in the second half of 1995,
the Company increased its capital spending. As a result, depreciation expense
has increased during 1996. The reduction in sales from the Company's U.S. and
Mexico operations in 1996 have, however, resulted in operating inefficiencies,
decreased capacity utilization and resulted in inventory write-offs which have
adversely impacted the related gross margins in 1996.
The Company expects that near term gross margins will be adversely
affected by product mix, assembly versus bare flex circuit revenue mix, lower
yields on newer parts and the implications of transferring assembly operations
to Mexico and Thailand.
Operating Expenses
Engineering, research & development expenses and selling, general &
administrative expenses as a percentage of net sales for the three month period
ended September 30, 1996 were 5% and 9% compared with 4% and 8% for the same
period in 1995, respectively. The percentage increases are due to the additional
expenses associated with the U.K. operations compounded by lower than
anticipated revenues at this location for the three month period. Amortization
of intangibles purchased in the acquisition of ADFlex U.K. was $0.8 million, or
2% of net sales, for the three month period ended September 30, 1996.
For the nine month period ended September 30, 1996, engineering,
research & development expenses and selling, general & administrative expenses
as a percentage of net were 5% and 9% compared with 4% and 8% for the same
period in 1995, respectively.
Restructuring Charge
At the close of the third quarter the Company announced that it will,
over the next approximately six months, restructure its assembly operation in
the U.K., and during that time period transfer production from the U.K. to the
Company's manufacturing facility in Lamphun, Thailand. Following the
restructuring the Company will maintain a technology development center and a
sales and service organization in the U.K. to support its European customers.
The shifting of labor-intensive production from the U.K. to Thailand is expected
to reduce manufacturing costs and produce gains through efficiencies derived
from the Thailand facility's proximity to a number of existing and prospective
customers in Asia. As part of this restructuring the Company incurred the
following charges: $13.5 million write-off in intangible assets, $8.8 million
write-down of property, plant and equipment and $6.9 million in employee and
lease termination charges. The Company expects to pay out $3.2 million of the
employee and lease termination costs within the next six to nine month period.
Other Income (Expense)
For the three month period ended September 30, 1996, other income
(expense) includes $207,000 of interest expense on the $10 million subordinated
debenture, $177,000 of interest expense related to borrowings under the line of
credit, the impact of bank fees and translation gains or (losses) offset by
interest income. Other income (expense) for the same period in 1995 represents
principally net interest income on available-for-sale securities.
For the nine month period ended September 30, 1996, other income
(expense) includes $587,000 of interest expense on the $10 million subordinated
debenture, $485,000 of interest expense related to borrowing on the line of
credit, the impact of bank fees and translation gains or (losses) offset by
interest income and gains on the sale of assets compared with net interest
income generated on investments for the same period in 1995.
8
<PAGE> 9
LIQUIDITY AND CAPITAL RESOURCES
For the nine month period ended September 30, 1996, the Company has
funded its cash needs from $10.2 million in proceeds from its available line of
credit and from $1.8 million generated from issuance of common stock. For the
comparable period in 1995, the Company funded its cash needs from $5.7 million
in cash generated by operations, $4.4 million in sales of available-for-sale
securities and $6.2 million generated from issuance of common stock.
Net cash used by operating activities for the nine month period ended
September 30, 1996 was $2.6 million compared with $5.7 million provided by
operating activities for the same period in 1995. The Company experienced a net
loss of $25.5 million in the third quarter of 1996 principally due to a $20.8
million after-tax charge related to the restructuring of its U.K. operations.
This charge consisted of write-downs in intangible assets and plant and
equipment as well as the recognition of future obligations for employee and
lease termination charges. The charge did not, therefore, impact current period
operating cash flows. The net loss in the period was compounded by a $5.0
million increase in depreciation and amortization expense as compared to 1995.
During the nine month period ended September 30, 1996 the Company experienced
increased working capital requirements of $11.8 million primarily
for funding of accounts receivable associated with its U.K. operations as
receivables were not purchased in the acquisition. These working capital
requirements were funded in part through the generation of accounts payable and
accrued liability balances with the remainder financed from borrowings under the
existing bank line of credit.
Net cash used in investing activities was $22.5 million for the nine
months ended September 30, 1996 compared with $9.0 million for the same period
in 1995. Late in the first quarter of 1995, the Company began a capacity
expansion plan in response to increasing sales levels. This expansion continued
into 1996 resulting in capital expenditures for the nine months ended September
30, 1996 of $10.6 million versus $13.4 million for the same period in 1995.
Capital expenditures under the 1995 expansion plan were substantially complete
by the end of the second quarter thus, capital expenditures slowed in the third
quarter of 1996 and were $1.7 million as compared to $6.3 million in 1995. In
January, 1996 the Company paid $12.4 million in connection with its acquisition
of the ADFlex U.K. operations. This payment was financed from existing cash and
cash equivalent balances. Capital expenditures during the period were financed
from existing cash balances and from borrowing under the Company's bank line of
credit.
Net cash provided by financing activities for the nine months ended
September 30, 1996 was $11.9 million compared with $6.1 million for the same
period in 1995. The Company generated $1.8 million and $6.2 million in the nine
months ended September 30, 1996 and 1995, respectively, through sales of its
common stock. Additionally, the Company borrowed $10.2 million on its bank line
of credit during the nine months ended September 30, 1996 to finance working
capital requirements and capital expenditures as discussed above.
The loss for the quarter caused the Company to be out of compliance at
September 30, 1996 with certain financial covenants under its $20.0 million
revolving line of credit with the First National Bank of Boston and Wells Fargo
Bank (the FNBB line). The Company has reached an agreement in principle with its
banks to amend the FNBB Line to provide additional flexibility with respect to
certain covenants which will allow the Company to more adequately meet its
working capital requirements. At September 30, 1996, the Company had $19.3
million available for borrowing with an outstanding balance of $10.2 million.
The FNBB line requires the Company to maintain certain covenants on a quarterly
basis based on leverage and profitability and prohibits the payment of dividends
and certain types of merger transactions without the prior approval of the
banks.
OTHER MATTERS
Mexico Operations
The Mexican Peso experienced significant devaluation relative to the
U.S. Dollar in December 1994 and early 1995. Peso-based operating costs are
primarily wages and benefits for the Company's Mexican hourly union
9
<PAGE> 10
employees. The initial devaluation had the effect of reducing Mexican labor cost
by nearly 40%. Since that time however , savings have been partially offset by a
series of four wage increases averaging 7-10% each. The Peso has experienced
further devaluation over the past six month period prompting the Mexican
government to mandate a 17% increase in the minimum wage effective December 1,
1996. It is expected that the Company will continue to respond proportionately
to minimum wage increases. The Company does not believe that future wage
increases will exceed the benefit of the devaluation. However, there can be no
assurance that future currency fluctuations and government-mandated wage
increases will not have a material effect on the Company's business, financial
condition and results of operations.
Thailand Operations
On August 27, 1996, the Company announced the establishment of a joint
venture with Hana Microelectronics, a diversified electronics manufacturer
headquartered in Thailand, to produce and test advanced chip-on-flex and surface
mount technology assemblies. The venture, ADFlex Thailand Limited, is 80% owned
by the Company. The Company is in the process of transferring equipment and
technical expertise from its existing operations and anticipates beginning
initial shipments in the fourth quarter of 1996.
Foreign Operations
The Company's primary finishing and assembly facilities are located in
Agua Prieta, Mexico and Havant, United Kingdom. While the Company believes that
it has established good relationships with its labor force and the local
governments, the spread of the manufacturing process over multiple countries
subjects the Company to risks inherent in international operations. In light of
the Company's increased international presence, the Company is in the process of
developing and implementing a foreign exchange policy to mitigate against the
risk of foreign currency fluctuations in its operations. All of the Company's
sales for the three and nine months ended September 30, 1996 were in United
States dollars.
Future Operations
The Company conducted environmental studies of its facility in
Chandler, Arizona which discovered a limited amount of soil contamination that
may require remediation. While the investigation of the extent of this
contamination has not been completed, based on the preliminary information
currently available to it, the Company believes that the costs associated with
the investigation and remediation of this situation will not have a material
adverse effect on its operations or financial condition; however, given the
uncertainties associated with environmental contamination, until a full
investigation is completed there can be no assurance that such costs will not
have a material adverse impact on the Company. Pursuant to the agreements with
Rogers Corporation (Rogers) through which the Company acquired its U.S. and
Mexico flex business, Rogers has retained all environmental liabilities existing
prior to the date of the transaction. While Rogers currently has sufficient
assets to fulfill its obligations under the acquisition agreements, if
pre-closing environmental liabilities requiring remediation are discovered and
the Company was unable to enforce the acquisition agreement against Rogers, the
Company could become subject to costs and damages relating to such environmental
liabilities. Any such costs and damages imposed on the Company could materially
adversely affect the Company's business, financial condition and results of
operations.
In mid 1995, the Company acquired a manufacturing facility located in
Agua Prieta, Mexico. In connection with this acquisition, the Company conducted
an environmental study of the facility which indicated the contamination by
hazardous materials in the soil and groundwater. Pursuant to the purchase
agreement, the sellers have submitted a remediation plan to the appropriate
Mexican authorities and are currently awaiting approval. The sellers' obligation
for cost of remediation is limited to $2,500,000. A total of $975,000 is being
held in escrow pending sellers' performance of their environmental obligations
under the agreement.
The Company is subject to a variety of environmental laws relating to
the storage, discharge, handling, emission, generation, manufacture, use and
disposal of hazardous material used to manufacture the Company's flex products.
The Company believes that it has been operating its facilities in substantial
compliance in all material respected with existing environmental laws. However,
the Company cannot predict the nature, scope or effect of legislation or
regulatory requirements that could be imposed or how existing or future laws or
regulations will be administered or interpreted with respect to products or
activities to which they have not previously been applied.
10
<PAGE> 11
Compliance with more stringent environmental laws, as well as more vigorous
enforcement policies of regulatory agencies, could require substantial
expenditures by the Company and could adversely affect the results of operations
of the Company.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This report contains forward-looking statements that involve risks and
uncertainties, including but not limited to fluctuating net sales and margins
and their effect on the company's profitability, risks of customer concentration
and dependence on the hard disk drive industry, risks of foreign operations,
risks of future order cancellations and delays, magneto-resistive technology
issues, environmental matters and other risks detailed herein and in the
Company's Annual Report on Form 10-K for the year ended December 31, 1995,
Quarterly Report on Form 10-Q for the periods ended March 31, 1996 and June 30,
1996, and other Securities and Exchange Commission filings.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
(11.1) Computation of Net Income Per Share
(b) Reports on Form 8-K.
One report on Form 8-K was filed by the Company for the three
months ended September 30, 1996. The report, dated July 10, 1996 and filed July
12, 1996, covered the Company's adoption of a Preferred Share Rights Agreement,
pursuant to which the Board of Directors declared of a dividend of one Preferred
Share purchase right for each outstanding share of $0.01 Common Stock of the
Company. The description and terms of the Rights are set forth in the Preferred
Shares Rights Agreement, dated July 10, 1996, between the Company and First
National Bank Boston, N.A. as Rights Agent.
11
<PAGE> 12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ADFlex Solutions, Inc.
Date: 11/13/96 By /s/ Dale J. Bartos
---------------- -------------------------------------------
Dale J. Bartos
Chief Financial Officer, Treasurer
(Duly Authorized Officer, and
Principal Financial and Accounting Officer)
12
<PAGE> 1
EXHIBIT 11.1
ADFLEX SOLUTIONS, INC.
EXHIBIT (11.1) - COMPUTATION OF NET INCOME (LOSS) PER SHARE
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------- ----------------------
1996 1995 1996 1995
---------- -------- ---------- -------
<S> <C> <C> <C> <C>
Net income (loss) $(25,663) $2,814 $(25,484) $7,546
========== ======== ========== =======
WEIGHTED AVERAGE SHARES:
Common shares outstanding 8,617 6,985 8,576 6,796
Common equivalent shares representing
shares issuable upon exercise of stock
options (1) - 399 - 425
---------- -------- ---------- -------
Total weighted average shares -
primary 8,617 7,384 8,576 7,221
========== ======== ========== =======
Total weighted average shares -
fully diluted 8,617 7,384 8,576 7,221
========== ======== ========== =======
Primary net income (loss) per common and
common equivalent share $ (2.98) $ .38 $ (2.97) $ 1.04
========== ======== ========== =======
Fully diluted net income(loss) per common
and common equivalent share $ (2.98) $ .38 $ (2.97) $ 1.04
========== ======== ========== =======
</TABLE>
- --------
1(1) Amount calculated using the treasury stock method and fair market values
for stock.
13
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 2,453
<SECURITIES> 0
<RECEIVABLES> 27,323
<ALLOWANCES> 789
<INVENTORY> 15,786
<CURRENT-ASSETS> 49,712
<PP&E> 39,996
<DEPRECIATION> 7,047
<TOTAL-ASSETS> 90,779
<CURRENT-LIABILITIES> 38,949
<BONDS> 0
0
0
<COMMON> 86
<OTHER-SE> 39,744
<TOTAL-LIABILITY-AND-EQUITY> 90,779
<SALES> 110,011
<TOTAL-REVENUES> 110,011
<CGS> 97,864
<TOTAL-COSTS> 97,864
<OTHER-EXPENSES> 47,145
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 734
<INCOME-PRETAX> (35,732)
<INCOME-TAX> (10,248)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (25,484)
<EPS-PRIMARY> (2.97)
<EPS-DILUTED> (2.97)
</TABLE>
