06 Jul 2010
The laser sources and systems company anticipates exiting Chapter 11 proceedings in July.
GSI Group, the US manufacturer of lasers and laser systems that filed for Chapter 11 bankruptcy protection in November 2009, expects to post revenues of around $85 million for the second quarter of 2010.
Coupled with adjusted earnings before interest, tax, depreciation and amortization (EBITDA), of between $13 million and $17 million, the financial guidance suggests that the group of companies remains on track to emerge from bankruptcy proceedings before the end of this month.
In a statement filed with the US Securities & Exchange Commission (SEC) June 30, GSI Group added that it now expected to have enough operating capital to emerge from Chapter 11 on or before July 23 without the need to borrow more money to provide working capital.
Although market conditions have improved in general, particularly in key market sectors such as semiconductor processing and photovoltaics, GSI remains cautious.
Citing “continued uncertainties surrounding the longer-term global economic environment”, GSI said that it had not updated the financial projections for 2010 outlined in its rights offering earlier this year.
That rights offering is designed to raise up to $85 million as part of a wider plan to restructure the group’s $210 million debt and reduce it to $110 million, maturing in 2014.
Other parts of the debt restructuring plan include the sale of GSI Group’s auction rate securities. In the first two quarters of 2010, GSI raised $11.4 million through the sale of those securities.
Chief restructuring officer
Announced by GSI on May 11, the restructuring plan included the replacement of its CEO with Michael Katzenstein, appointed as a “chief restructuring officer” to oversee the final phase of the re-financing.
Under the terms of the rights offering, the company’s shareholders can buy common shares at a price of $1.80 each, with the proceeds and a $10 million cash payment being used to partly pay off the principal debt. GSI’s senior creditors have agreed to exchange some of the debt for equity in GSI, with the amount depending on the number of shares sold in the rights offering.
Update July 14: GSI received subscriptions for around 80 percent of the total shares offered via the rights offering, equivalent to approximately $68 million. The total means that the "backstop investors" will now exchange the prinicpal amount of senior loan notes for new shares in the company. The offering will be consummated upon GSI's exit from bankruptcy.
According to its latest, unaudited, accounts, GSI Group had long-term debt totalling $189 million in 2009. The debt restructuring plan provides for that debt being reduced to a projected $111 million in 2010, and to just $26 million by 2014.
While the first part of that debt reduction relies on raising cash through the offering, the long-term plan depends on a significant upturn in GSI Group’s revenue and profitability.
In 2009 and 2010, the company’s own projections suggest a combined net loss totalling just over $100 million, but from 2011 onwards GSI will need to begin posting a net profit.
Revenue projections suggest an anticipated 9% compound annual growth rate between 2009 and 2014, with a sharp increase from the $228 million sales registered in 2009 to a projected $284 million in 2010.
At the second-quarter run-rate of between $81 million and $87 million now confirmed by GSI, that projection looks realistic, and in its latest statement to the SEC the company hinted that the revenue projections might be exceeded.
“There are indications that the trend suggested by the preliminary results for the first quarter of 2010 and the expected results for the second quarter will continue into the third quarter of 2010,” stated the company’s latest update.
“If this is the case, the estimated revenues and adjusted EBITDA for fiscal year 2010 included in the projections would be exceeded.”
About the Author
Mike Hatcher is the Editor in Chief of optics.org