SCIENCE / TECHNOLOGY : Gradco Restructuring Will Affect Earnings

When Gradco Systems Inc., the Irvine supplier of paper-handling equipment for office copiers, earlier this month disclosed details of a major restructuring that included closing its Santa Ana factory, it did not mention that it would be taking a major charge against earnings as part of the realignment.

As it turns out, the charge will be nearly double the $5.6 million the company earned in its best year ever. One source said the charge will total $10 million. Gradco Chief Financial Officer Steve Nabor, although he would not name a specific figure, confirmed that it would be in that range.

Nabor said the charge, mentioned briefly as a possibility in a February earnings announcement, will be disclosed when the company reports its fiscal fourth quarter financial results in mid-May. No matter how large the final figure, the earnings are not likely to be pretty: Gradco in February announced an unexpected loss of $1.4 million for its third quarter on a sharp decline in revenue.

The restructuring charge guarantees a large loss for the year, and shareholders can only hope that Gradco’s plan to shift its core paper-sorter business to the Far East will produce better results next time around.