Gradco Reports $5-Million Loss in Late Filing

Largely because it scrapped its dealer network and moved much of its manufacturing operation to Korea, Gradco Systems Inc. of Santa Ana lost $5.49 million for its fiscal 1985, the company reported Tuesday in a delayed filing of its annual financial statement with the Securities and Exchange Commission.

Gradco, a major manufacturer of paper-handling equipment for printing and copying machines, also said in its annual report that it has renegotiated its $10-million loan and credit agreements with Union Bank and has obtained waivers from the bank for those items with which it cannot comply.

The company, which had net earnings of $2.7 million in fiscal 1984, announced last week that it expected its 1985 loss to top $5 million and that its annual report to the SEC would be filed late because of delays required to recompute operating results for the past five years.

In its earlier announcement, Gradco said its 1985 loss caused it to violate minimum net worth and debt-to-equity requirements specified in its loan agreements with Union Bank. The company reported shareholders’ equity of $10.2 million at the end of fiscal 1985, down 45% from $18.5 million a year earlier. Shareholder equity is a common measure of net worth for manufacturing companies.

Despite the size of its 1985 loss, Gradco officials said in the SEC filing that they believe the company will post a profit in fiscal 1986 because increased production from its new Korean manufacturing facility will enable it to boost shipments to meet its $51-million backlog of orders.