Optimistic Over Reorganization Prospects : Dense-Pac Records First-Quarter Loss
Dense-Pac Microsystems, a Garden Grove technology firm that filed for protection from creditors a year after going public, said Tuesday it lost $102,000 during the three months ended May 30 but expects to emerge from bankruptcy reorganization within the next three months.
Dense-Pac, a manufacturer of electronic memory modules for the aerospace and defense industries, said the loss for the first quarter of its 1988 fiscal year compares with a loss of $293,000 a year earlier.
Sales were $1.3 million during the latest quarter, more than double the $520,000 recorded during the same period a year ago.
After becoming a public company in early 1986, Dense-Pac encountered overwhelming financial problems caused by a costly overseas expansion, accompanied by an unexpected decline in sales. Dense-Pac filed for protection from creditors under Chapter 11 of the federal bankruptcy code in February, 1987.
Chairman James Turner said results for the first quarter included expenses associated with the closing of a Puerto Rico manufacturing plant built during Dense-Pac’s expansion program, as well as expenses resulting from the bankruptcy filing.
Excluding those costs, Dense-Pac broke even on continuing operations, Turner said, and the company’s backlog of orders is at a record high of $3.4 million, up from $1.8 million at the end of February.
New Profits Expected
“I feel very comfortable about the prospects,” Turner said. “I expect a return to profitability during this fiscal year and (expect) emergence from Chapter 11 in September.”
Dense-Pac has been operating under an interim reorganization plan filed in February. The company intends to submit a final plan to the bankruptcy court later this month. Turner said the final plan was approved Monday by the company’s unsecured creditors.
Under the proposed reorganization, Electronic Memories Ltd., a British electronics firm, will acquire up to 49% of Dense-Pac in exchange for contributing new capital to the company. Turner said Electronic Memories has already invested about $700,000 in Dense-Pac.
The plan would provide Dense-Pac’s unsecured creditors with about 40 cents in cash for each $1 in claims against the company, plus a prorated share of 200,000 newly issued shares of Dense-Pac stock.
The cash portion will total about $600,000, the company said. The company owes its unsecured creditors about $1.5 million.
Turner said the company’s secured creditors already have been paid.
Under the reorganization, Dense-Pac’s existing shareholders will retain their stock, but their stake in the company will be reduced to about 38% as a result of the additional shares issued to Electronic Memories and the unsecured creditors.