<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 March 31, 1997
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 March 31,
1997:
COMMON STOCK, $.01 PAR VALUE: 8,680,952 SHARES
<PAGE> 2
ADFLEX SOLUTIONS, INC.
INDEX
Page
----
PART I FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets -
March 31, 1997 and December 31, 1996............................3
Condensed Consolidated Statements of Operations -
Three Months Ended March 31, 1997 and 1996......................4
Condensed Consolidated Statements of Cash Flows -
Three Months Ended March 31, 1997 and 1996......................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..........................12
SIGNATURES.................................................................13
EXHIBITS
(11.1) Computation of Net Income per Share
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
ADFlex Solutions, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
--------- ------------
ASSETS (Unaudited)
<S> <C> <C>
Current assets:
Cash & cash equivalents $ 3,195 $ 6,097
Accounts receivable, net 30,129 25,149
Other receivables 1,128 1,475
Inventories 14,011 14,990
Deferred tax assets 2,510 2,505
Prepaid taxes 831 795
Other current assets 1,752 303
------- -------
Total current assets 53,556 51,314
Property, plant & equipment, net 34,335 34,297
Deferred tax assets 7,206 7,546
Other assets 25 24
------- -------
$95,122 $93,181
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Line of credit $10,900 $10,000
Accounts payable 18,839 19,882
Accrued liabilities 12,933 9,679
Current portion of long-term debt and
capitalized leases 2,657 2,651
------- -------
Total current liabilities 45,329 42,212
Accrued restructuring charges, non-current 2,500 2,500
Long-term debt and capitalized leases 5,148 7,689
Minority interest in consolidated joint venture 509 491
Stockholders' equity 41,636 40,289
------- -------
$95,122 $93,181
======= =======
</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
March 31,
---------------------
1997 1996
-------- --------
<S> <C> <C>
Net sales $ 48,221 $ 38,082
Cost of sales 40,789 30,884
-------- --------
Gross profit 7,432 7,198
Operating expenses:
Engineering, research & development 2,218 1,666
Selling, general & administrative 3,367 3,189
Amortization of intangible assets -- 795
-------- --------
Total operating expenses 5,585 5,650
-------- --------
Operating income 1,847 1,548
Interest income 28 74
Interest expense (433) (234)
Other income (expense), net (212) (37)
Minority interest in earnings of consolidated
joint venture (18) --
-------- --------
Income before income taxes 1,212 1,351
Income taxes 339 511
-------- --------
Net income $ 873 $ 840
======== ========
Net income per share $ 0.10 $ 0.10
======== ========
Common and common equivalent shares used
in the calculation of net income per share 8,767 8,612
======== ========
</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>
Three Months Ended
March 31,
--------------------
1997 1996
------- --------
<S> <C> <C>
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES
Net income $ 873 $ 840
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Depreciation and amortization 1,490 2,118
Deferred taxes 335 171
Changes in operating assets and liabilities:
Accounts receivable (4,980) (12,034)
Other receivables 347 (1,534)
Inventories 979 143
Other current assets (1,485) (375)
Accounts payable and accrued liabilities 2,211 6,749
------- --------
NET CASH USED IN OPERATING ACTIVITIES (230) (3,922)
CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES
Capital expenditures (1,528) (6,514)
Decrease in other assets (1) 27
Decrease in acquisition payable -- (12,375)
Investment in joint venture 18 --
------- --------
NET CASH USED IN INVESTING ACTIVITIES (1,511) (18,862)
CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES
Net activity on line of credit 900 7,600
Payments on capitalized lease obligations (35) (41)
Payments on long-term debt (2,500) --
Issuance of common stock, net of expenses 474 673
------- --------
NET CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES (1,161) 8,232
------- --------
NET DECREASE IN CASH AND CASH EQUIVALENTS (2,902) (14,552)
Cash and cash equivalents at beginning of period 6,097 15,699
------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 3,195 $ 1,147
======= ========
</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 three month period
ended March 31, 1997 are not necessarily indicative of the results that may be
expected for the year ended December 31, 1997. 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, 1996.
The accompanying unaudited condensed consolidated financial statements include
the accounts of the Company and its subsidiaries. All intercompany accounts and
transactions have been eliminated in consolidation.
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, Earnings per Share (SFAS No. 128), which
is required to be adopted on December 31, 1997. At that time, the Company will
be required to change the method currently used to compute earnings per share
and to restate all prior periods. Under the new requirements for calculating
primary earnings per share, the dilutive effect of stock options will be
excluded. The impact is expected to result in an immaterial increase in primary
earnings per share for the quarters ended March 31, 1997 and March 31, 1996. The
impact of SFAS No. 128 on the calculation of fully diluted earnings per share
for these quarters also is not expected to be material.
(2) ACCOUNTS RECEIVABLE, NET
Accounts receivable consists of the following (in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
--------- ------------
<S> <C> <C>
Accounts receivable trade $ 30,545 $ 25,760
Allowance for doubtful accounts and returns (416) (611)
-------- --------
$ 30,129 $ 25,149
======== ========
</TABLE>
(4) INVENTORIES
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
--------- ------------
<S> <C> <C>
Raw materials $ 5,472 $ 8,152
Work-in-process 8,117 6,690
Finished goods 422 148
------- -------
$14,011 $14,990
======= =======
</TABLE>
6
<PAGE> 7
(5) ACCRUED LIABILITIES
Accrued liabilities consist of the following (in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
--------- ------------
<S> <C> <C>
Salaries and benefits $ 3,200 $2,830
Income taxes payable 1,314 170
Accrued interest 229 864
Accrued restructuring
charges, current 4,187 4,187
Other 4,003 1,628
------- ------
$12,933 $9,679
======= ======
</TABLE>
(6) RESTRUCTURING CHARGES
At the close of the third quarter of 1996, the Company's Board of
Directors approved a plan to restructure its assembly operation in the U.K. and
transfer production from the U.K. to the Company's manufacturing facility in
Lamphun, Thailand. As part of this restructuring, the Company recorded 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. To date, the Company has paid out $0.3 million in
employee termination costs. The Company expects to pay out $4.1 million of the
employee and lease termination costs in 1997 and an additional $2.5 million in
1998.
(7) SUBSEQUENT EVENT
Subsequent to March 31, 1997, the Company was notified by the Internal
Revenue Service that they would be issuing an audit report relating to the 1993
tax year. The service, together with certain minor issues, has raised questions
involving the Company's tax treatment of the original purchase price allocation
following the 1993 management buy-out from Rogers Corporation. As the Company
has not yet received the Internal Revenue Service report detailing their
findings, it is not able, at this time, to assess the potential outcome or the
related financial statement impact that the audit findings, if prevailing, would
have. The Company does not believe, however, based on currently available
information, that the resolution of the matters would have a material adverse
effect on the overall financial condition of the Company. The Company expects to
receive this report no later than May 30, 1997.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
RESULTS OF OPERATIONS
Net Sales
Net sales for the three month period ended March 31, 1997 increased 26.6%
over the same period in 1996. Net sales for the three months ended March 31,
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. For
the three month period ending March 31, 1997, the Company experienced a strong
demand for its products, especially in flex circuits provided to the
communications and storage array markets. The Company furthered its plan of
transitioning production from its U.K. facility to its Thailand facility during
the quarter. Shipments from the Company's Thailand facility, which began initial
shipments late in the fourth quarter of 1996, totaled $2.0 million for the three
months ended March 31, 1997.
Gross Profit
7
<PAGE> 8
Gross profit as a percentage of net sales (gross margin) for the three
months ended March 31, 1997 was 15.4% as compared to 18.9% for the same period
in 1996. The Company's gross margin for the three month period ended March 31,
1997 was negatively impacted by several factors including overhead and capacity
utilization, process yields and product mix.
During 1996, the U.K. operations experienced a reduction in sales levels
of nearly 40% over levels maintained in the later part of 1995. The severe
reduction in revenues resulted in decreased capacity utilization. As a result of
lower revenues and decreased utilization and the resulting negative impact on
the Company's financial position, the Company announced in the third quarter of
1996 its intention to transfer assembly operations from the U.K. to Thailand.
The transfer is currently in process and is expected to be complete by the end
of 1997.
For the three month period ending March 31, 1997, the Company's assembly
operations contributed essentially no gross margin due, in large part, to the
decreased overhead and capacity utilization discussed previously. Additionally,
as production is transferred to the Thailand facility, the Company is
anticipating initially lower process yields than those it expects to obtain once
volume production levels are achieved. The Company anticipates that the benefits
associated with the transfer will not be fully realized until the end of 1997,
at which time gross margins should improve due to the lower cost structure
associated with Thailand operations.
The Company's flex fabrication operations experienced a decline in gross
margins for the first quarter of 1997 as compared to the first quarter of 1996.
As a result of the Company's product diversification and growth strategies, the
product mix between Hard Disk Drive (HDD) and non-HDD products, as well as
individual products within these groups, is constantly shifting. The material
content of products varies significantly due to the complexity of the design,
plating requirements, component content and a variety of other factors. Whereas
the Company competes in the HDD market based on design expertise and
technological advantages, the market for non-HDD products tends to be subject to
intense price competition, particularly for communications products, an area
where the Company experienced significant growth for the period ended March 31,
1997 as compared with the same period in 1996. As such, the material and labor
content for non-HDD products relative to the selling price tends to run higher
than that of the Company's HDD products. For the quarter ended March 31, 1997,
sales to the Company's non-HDD customers were 48.0% of sales, compared with
29.9% for the same period in 1996.
Operating Expenses
Engineering, research & development expenses and selling, general &
administrative expenses as a percentage of net sales for the three month period
ended March 31, 1997 were 4.6% and 7.0% compared with 4.4% and 8.4% for the same
period in 1996, respectively. The percentage increase in engineering, research
and development is primarily due to the temporary duplication of engineering
resources associated with the transfer of the U.K. operations to Thailand. The
decrease in selling, general & administrative for the same period reflects the
Company's ability to obtain increased leverage of such expenses in periods of
increasing sales. Amortization of intangible assets purchased in the acquisition
of ADFlex U.K. was $0.8 million, or 2% of net sales, for the three month period
ended March 31, 1996. The intangible assets were written off in 1996 as part of
the U.K. restructuring.
Interest and Other Income (Expense)
For the three month period ended March 31, 1997, interest expense
includes $0.2 million of interest expense on the subordinated debenture and
$0.2 million of interest expense related to borrowings under the line of credit
and capital lease obligations. Interest expense for the same period in 1996
represents $0.2 million of interest expense on the subordinated debenture and
$0.1 million of interest expense related to borrowing on the line of credit and
capital lease obligations. Other income (expense) for both periods represents
the net impact of bank fees and exchange gains and losses realized on the
settlement of transactions associated with the Company's foreign subsidiaries.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its liquidity needs to date primarily through
cash generated from operations, the use of bank credit lines and through
proceeds from the sale of its Common Stock. The primary uses of cash
8
<PAGE> 9
have been for increased working capital, funding of capital expenditures and
investment in ADFlex U.K. and ADFlex Thailand. At March 31, 1997, cash and cash
equivalents totaled $3.2 million, compared with $1.1 million as of March 31,
1996.
Net cash used by operating activities for the three month period ended
March 31, 1997 was $0.2 million compared with $3.9 million for the same period
in 1996. During these same periods net income was $0.9 million and $0.8 million,
respectively. Increased sales levels for the three month period ended March 31,
1997 resulted in the Company maintaining a high level of working capital,
primarily an increased level of accounts receivable. During the three month
period ended March 31, 1996, the Company experienced increased working capital
requirements of $12.0 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. The 1996
results reflect $0.8 million of amortization expense for intangible assets
related to the ADFlex U.K. acquisition. The intangible assets were written off
in 1996 as part of the U. K. restructuring.
Net cash used in investing activities was $1.5 million for the three
months ended March 31, 1997 compared with $18.9 million for the same period in
1996. Capital expenditures for the three months ended March 31, 1997 were $1.5
million compared with $6.5 million for the same period in 1996. Late in the
first quarter of 1995, the Company began a capacity expansion plan in response
to increasing sales levels which was complete in 1996. Capital expenditures
during the periods were financed from existing cash balances and from borrowings
under the Company's bank line of credit. 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.
Net cash used in financing activities for the three months ended March 31,
1997 was $1.2 million compared with cash provided by financing operations of
$8.2 million for the same period in 1996. As required in the terms of the
subordinated debenture issued in the ADFlex U.K. acquisition, the Company
remitted $2.5 million in principal plus $0.8 million in accrued interest during
the three months ended March 31, 1997. Funding for this payment came from the
Company's line of credit. The Company generated $0.5 million and $0.7 million in
the three months ended March 31, 1997 and 1996, respectively, through sales of
its Common Stock. Net activity on the Company's bank line of credit totaled $0.9
million during the three months ended March 31, 1997 compared to $7.6 million
for the same period in 1996. Borrowings on the line were used to finance working
capital requirements and capital expenditures as discussed above.
On October 31, 1995, the Company replaced its existing line of credit with
a two-year, $20 million revolving line of credit with The First National Bank of
Boston and First Interstate Bank of Arizona (the FNBB line) which was later
amended on June 18, 1996 and February 18, 1997. Under the amended FNBB line, all
Company assets are pledged as collateral and borrowing is limited to 80% of the
aggregate value of all eligible domestic accounts plus 70% of the aggregate
value of all eligible foreign accounts. Any outstanding balance bears interest
at the bank's prime interest rate, or at the Company's option, LIBOR plus 1.5%.
In addition to leverage and profitability covenants, the FNBB line prohibits the
payment of dividends and certain types of merger transactions without the prior
approval of the banks. The Company was in compliance with all covenants of the
amended FNBB line at March 31, 1997. At March 31, 1997, the Company had $19.9
million available for borrowing under the FNBB line with an outstanding balance
of $10.9 million. At December 31, 1996, the Company had $17.1 million available
for borrowing under the FNBB line with an outstanding balance of $10.0 million.
The Company is currently in the process of negotiating a credit facility with
its lenders which would replace the FNBB line. The proceeds of the new facility
would be used to repay the subordinated debenture and for working capital
requirements.
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 in the later part of 1996, prompting the Mexican government
to mandate a 17% increase in the minimum wage effective in December 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
During 1996, the Company invested $2.4 million in its Thailand joint
venture with Hana Microelectronics. The Company is in the process of
transferring equipment and technical expertise from its existing operations to
Thailand. Initial shipments from Thailand began in the fourth quarter of 1996
and totaled $2.0 million for the first quarter of 1997; however, the Company
does not expect to reach volume production until the second half of 1997. The
Company invested an additional $1.0 million in the joint venture during the
quarter ended March 31, 1997 and anticipates an additional $1.5 million will be
invested in 1997, primarily for the purchase of manufacturing equipment. No
assurances can be given that the transition of operations to Thailand will occur
as scheduled or that the Company will realize the benefits anticipated due to
the lower cost structure of the Thailand operations.
Foreign Operations
The Company's primary finishing and assembly facilities are located in
Agua Prieta, Mexico; Havant, United Kingdom and Lamphun, Thailand. 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.
All of the Company's sales for the three months ended March 31, 1997 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 acquisition agreements pertaining to the initial
formation of the Company, Rogers Corporation (Rogers) retained all environmental
liabilities existing prior to the acquisition. 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 $2.5 million. A total of $1.0 million 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 respects 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.
New Accounting Standards
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, Earnings per Share (SFAS
No. 128), which is required to be adopted on December 31, 1997. At that time,
the Company will be required to change the method currently used to compute
earnings per share and to restate all prior periods. Under the new requirements
for calculating primary earnings per share, the dilutive effect of stock options
will be excluded. The impact is expected to result in an immaterial increase in
primary earnings per share for the quarters ended March 31, 1997 and March 31,
1996. The impact of SFAS No. 128 on the calculation of fully diluted earnings
per share for these quarters is also not expected to be material.
Subsequent Event
Subsequent to March 31, 1997, the Company was notified by the Internal
Revenue Service that they would be issuing an audit report relating to the 1993
tax year. The service, together with certain minor issues, has raised questions
involving the Company's tax treatment of the original purchase price allocation
following the 1993 management buy-out from Rogers Corporation. As the Company
has not yet received the IRS report detailing their findings, it is not able, at
this time, to assess the potential outcome or the related financial statement
impact that the audit findings, if prevailing, would have. The Company does not
believe, however, based on currently available information, that the resolution
of the matters would have a material adverse effect on the overall financial
condition of the Company. The Company expects to receive this report no later
than May 30, 1997.
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; the risk of customer
concentration and dependence on the hard disk drive industry; the risk that the
Company's transition of manufacturing to Thailand will be delayed or disrupted,
or that such transfer will not result in increased efficiencies, cost savings,
or improved margins as anticipated or at the time anticipated; the risk that
margins will continue to be negatively impacted by higher material content of
flex products, especially related to non-HDD products; general risks inherent in
international operations, including currency fluctuations and
government-mandated wage increases; general manufacturing risks, including
environmental risks related to manufacturing operations and the clean-up of the
Mexican manufacturing facility; uncertainty with respect to the Internal Revenue
Service report on the Company's 1993 tax return and the ultimate financial
impact, if any, thereof; the risk that all of the foregoing factors or other
factors could cause fluctuations in the price of the Company's Common Stock; and
other risks detailed herein and in the Company's Annual Report on Form 10-K for
the year ended December 31, 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
11
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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.
The registrant did not file any reports on Form 8-K during the
quarter ended March 31, 1997.
12
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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: May 15, 1997 By /s/ Margaret M. Sleeper
-------------------- -----------------------
Margaret M. Sleeper
Vice President Finance, Secretary and Interim
Chief Financial Officer
(Duly Authorized Officer and
Principal Financial and Accounting Officer)
13
<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 March 31,
----------------
1997 1996
------ ------
<S> <C> <C>
Net income $ 873 $ 840
====== ======
WEIGHTED AVERAGE SHARES:
Common shares outstanding 8,665 8,530
Common equivalent shares representing
shares issuable upon exercise of stock
options (1) 102 82
------ ------
Total weighted average shares -
primary 8,767 8,612
====== ======
Total weighted average shares -
fully diluted 8,767 8,612
====== ======
Primary net income per common and
common equivalent share $ .10 $ .10
====== ======
Fully diluted net income per common
and common equivalent share $ .10 $ .10
====== ======
</TABLE>
- --------
(1)Amount calculated using the treasury stock method and fair market values for
stock.
14
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 3,195
<SECURITIES> 0
<RECEIVABLES> 30,545
<ALLOWANCES> 416
<INVENTORY> 14,011
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86
0
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</TABLE>
