Irvine’s Gradco Systems Posts Earnings of $1.55 Million for 3rd Quarter, Up 15%

Gradco Systems Inc., continuing to savor its virtual stranglehold on the exploding markets for paper-handling equipment for copiers and computer printers, posted earnings of $1.55 million for the third quarter of its 1989 fiscal year, up 15.7% from the $1.34 million reported a year earlier.

The Irvine firm said sales for the 3-month period ended Dec. 31, 1988, totaled $30.4 million, a 22.6% increase from the third quarter of its fiscal 1988.

For the first 9 months of its current fiscal year, Gradco reported net income of $4.4 million, a 52% increase from the $2.9 million reported a year earlier and nearly equal to the company’s record $4.6 million annual income for its fiscal 1988.

Nine-month revenue of $86.3 million was up 36% from $63.3 million.

Included in both the third-quarter and 9-month earnings are so-called extraordinary items--unearned income from tax credits for the $5.4-million loss posted for Gradco’s fiscal 1985. The tax credits added $216,000 to Gradco’s third-quarter earnings and $660,000 to the 9-month total.

Gradco’s 1985 loss was caused largely by the costs of scrapping an independent dealer network and relocating much of its manufacturing to South Korea. Since then, however, Gradco has booked an unbroken string of profitable quarters.

Because of the U.S. and foreign patents it holds on its paper-sorter technology, Gradco has captured about 70% of the sorter market, and sorters account for about two-thirds of Gradco’s sales. The company makes sorters for every major domestic and foreign copier manufacturer. Gradco entered the computer printer market in 1987 by acquiring a New Jersey manufacturer of automatic paper feeders.

Gradco officials were meeting with securities analysts in New York on Tuesday and could not be reached for comment on the company’s latest financial report.

But in a prepared statement, Keith B. Stewart, chairman and chief executive officer, said the company is meeting financial projections, with “strong growth in our primary markets and . . . exceptional growth in revenues and operating profits by our Japanese subsidiary.”