Gradco Reports $1.4-Million Loss in Third Quarter

IRVINE —  Gradco Systems Inc., a maker of paper-handling devices for copying machines and printers, said Monday it lost $1.4 million during the third quarter ended Dec. 31, compared to a profit of $1.4 million in 1988. It was the company’s first quarterly loss in years.

For the first three quarters of the fiscal year, Gradco earned $550,000, compared to $3.9 million in the same 1988 period.

The company blamed the loss on what it called the “premature” termination of a major contract to supply a big customer. That contributed to a drop in sales of $10 million during the third quarter, to $20.5 million, from $30.4 million in 1988.

Sales of $71 million during the latest nine months were also down from 1988’s $86.3 million.

Gradco said the downturn was temporary. The problems that caused the losses “might extend into the fourth quarter,” the company said, adding that they “will not have a lasting effect into next year.”

Also contributing to the loss, the company said, was the decline of the Japanese yen against the dollar, which makes U.S. products more expensive in Japan, and delays by other big customers in bringing out new copying machines.

Gradco is the world’s largest supplier of paper-handling devices such as sorters and feeders for office automation equipment.

The company didn’t say whether the loss contributed to the failure of a leveraged buyout by management in December. At the time, management blamed the growing unpopularity of leveraged buyouts for its inability to find a lender to finance the deal.

Management is still pondering a buyout, Chairman Keith B. Stewart said in a statement.

Meanwhile, the company said it is expecting a major restructuring of its manufacturing operations that would benefit it in the long run but which could result in a writedown next quarter.

The company said it has also been contacted recently by several interested buyers, but “no serious negotiations” are going on at this time.