Gradco Systems Inc.
As earlier predicted, Gradco Systems Inc., a supplier of copy machine sorters, reported a $1.6-million loss in the third quarter of its current fiscal year. The loss for the period ended Jan. 5 was a sharp decline from earnings of $523,000 in the comparable year-ago quarter.
Officials at the Santa Ana-based firm said the loss was temporary and attributed it primarily to the expense of shifting the manufacture of new product lines to Korea.
Third-quarter revenues were $5.2 million, down 17% from $6.3 million in the year-ago quarter.
For the first nine months of fiscal 1985, the company lost $456,000, compared to earnings of $1.39 million in the same period of fiscal 1984. Revenues for the first three quarters of fiscal 1985 were $22 million, up 25% from revenues of $17.6 million for the same period a year before.
Horst Sieben, senior vice president of operations, said in the third quarter Gradco took a $1.1-million one-time charge against earnings, representing the value of parts and tooling in the company’s Santa Ana plant that won’t be used in overseas manufacturing.
In addition, Sieben said, the company sustained an operating loss during the quarter of about $500,000. He blamed the operating loss on the delivery of defective parts from local suppliers. Also, he said, Gradco in some cases intentionally delayed the scheduling of sales contracts to take advantage of lower-cost Korean production, anticipated to begin in April.
Keith B. Stewart, Gradco chairman and president, said that after the initial cost of restructuring is absorbed, the savings from Korean manufacture will boost Gradco’s profits.
Because Gradco has well-protected patents and little competition, Stewart said, the company will not pass any of the savings on to customers by lowering the price of its products.
“Production in Korea is scheduled to begin in April and is expected to result in major cost reductions and substantially higher margins,” Stewart said.
“We are forgoing short-term performance in order to secure our long-term objectives.”
