Sapphire maker GT Advanced Technologies files for Chapter 11 bankruptcy
GT Advanced Technologies (Merrimack, NH; Nasdaq:GTAT), which makes sapphire optical windows for Apple (Cupertino, CA), filed for Chapter 11 bankruptcy on October 6, 2014. GT expects to be authorized by the courts to continue to conduct business as usual while it tries resolve its current issues and develops a reorganization plan.
GT Advanced Technologies (Merrimack, NH; Nasdaq:GTAT), which makes sapphire optical windows for Apple (Cupertino, CA), filed for Chapter 11 bankruptcy on October 6, 2014. GT expects to be authorized by the courts to continue to conduct business as usual while it tries to resolve its current issues and develops a reorganization plan.
Last year, GT Advanced Technologies signed a five-year contract with Apple to supply sapphire windows for Apple's iPhones; in the agreement, GT is to produce the sapphire at an Apple-owned facility in Mesa, AZ, and was expecting to have around 700 GT employees there.
Back then, GT said about the deal, via a press release: "Gross margins from this new materials business are expected to be substantially lower than GT's historical equipment margins. However, the company believes the strategic nature of this agreement and the benefits associated with building a recurring revenue stream are important to its continued diversification."
Apple proceeds slowly on sapphire screens
While the deal covers components like the iPhone's camera-lens cover window ad the transparent fingerprint-ID button on the lower front of the phone, the excitement was (and still is) centered around the possibility of full-screen sapphire touchscreen. Many expected the iPhone 6, unveiled last month, to have a sapphire touchscreen; the fact that it didn't resulted in a substantial drop in the price of GT stock.
However, sapphire screens for the iPhone supplied by GT can still come to pass.
"GT has a strong and fundamentally sound underlying business," says Tom Gutierrez, president and chief executive officer of GT. "Today's filing does not mean we are going out of business; rather, it provides us with the opportunity to continue to execute our business plan on a stronger footing, maintain operations of our diversified business, and improve our balance sheet."
Details of filing
GT said that as of September 29, 2014 it had approximately $85 million of cash. In addition, it is now seeking debtor-in-possession financing, which, once obtained, would provide the company with an immediate source of additional funds. These funding sources will enable GT to satisfy the customary obligations associated with the daily operation of its business, including the timely payment of employee wages and other obligations.
As a result of the filing, and as is customary with public companies, NASDAQ may temporarily halt trading in the company's stock pending the receipt of additional information on the company's financial condition. The company is cooperating with NASDAQ and will be providing any requested information as promptly as possible, says GT.