Rich, Looks like a turnaround is at hand for AFLX...
Headlines Previous Story Next Story
ADFlex Announces Third Quarter 1998 Results
Business Wire - October 19, 1998 19:07
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 share, on net sales 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) 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 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 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 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 downturn.
Net cash remained essentially unchanged during the quarter, in part due to aggressive management of accounts receivables and inventories. Also during the period, the company completed the initial deployment of the SAP R/3 enterprise resource planning software system to all facilities, an important computer networking productivity upgrade for management information systems.
The construction of an integrated flex fabrication 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 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, pagers and personal communications systems.
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, 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 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 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 for the year ended Dec. 31, 1997 and Form 10-Q for the quarters ended March 31, 1998 and June 30, 1998, and other Securities and Exchange Commission filings. |
