Gradco Systems Inc. Reports $28.6-Million Quarterly Loss

Gradco Systems Inc., battered by the loss of its largest customer, reported a $28.6-million loss for the fourth quarter ended March 31. It also said a group of Japanese investors had agreed to buy a 27% stake in its pivotal Japanese subsidiary.

The Irvine-based manufacturer of sorters for copying machines and printers also disclosed that it had filed a patent infringement lawsuit against Xerox Corp., which with its two foreign affiliates had accounted for more than a third of Gradco’s business. Xerox now manufactures its own sorters.

Gradco’s poor fourth-quarter performance resulted in a $28.1-million loss on revenue of $89.5 million for the fiscal year, contrasted with $5.6 million in net earnings on revenue of $115.1 million in the previous year. The loss was due largely to a one-time, $23-million fourth-quarter charge from a major restructuring.

The reorganization, which followed a failed effort by Gradco Chairman Keith Stewart to take the company private in a leveraged buyout, resulted in the shutdown of a Santa Ana manufacturing facility and the transfer of all responsibility for copier products--which account for 70% of the company’s business--to Gradco Japan. Gradco said the $26.5-million investment in Gradco Japan would come from a group of Japanese institutional investors led by Japan Associated Finance Co. (JAFCO).

Stewart called the deal “another step in the process of taking Gradco Japan public on the Japanese over-the-counter market.”