Stephens Inc. Intra-day Research Notes
April 1, 1998 Rev. Mkt. Cap. GRAHAM-FIELD HEALTH PRODUCTS, INC.
FYDec. ($ Mil) EPS P/E ($ Mil) GFI - $7.63 Rating: BUY 97A $262.0 $0.25 30.5x $162.5 Price Target (12 mo.): $19.25 98E 447.0 $0.24 31.8x Robin R. Young, CFA; 501-377-2621 99E 580.5 $0.77 9.9x
Conversation with New President and COO Reinforces Our Belief In GFI's Ability to Successfully Integrate Operations in 1998.
ú We recently had a conversation with Andrew Giordano, Graham-Field's newly appointed President and COO. Mr. Giordano has served as board member for GFI over the past four years. After a year as a systems consultant for the Company, he decided that he could better utilize his talents to contribute to the Company's overall operations as a member of senior management.
ú What happened in 1997? 1997 was a year of very aggressive growth and many challenges. Each task on its own was not as challenging, but put together the tasks were too much of a hurdle. The infrastructure was not set for the incredible amount of growth that occurred at the Company in 1997, and the result was "indigestion" from the seven acquisitions made during the year, particularly in the area of information systems.
ú How is GFI going to "digest" these acquisitions to allow the Company to return to its growth strategy in 1999? 1998 is the year of integration and the first step is to create/deliver a very viable, credible information system that "talks" to all of the business units. To date the Company has installed a new system for the general ledger, accounts receivable and accounts payable. Next on the list is to install the all-important information systems involving order entry, purchasing and inventory control.
ú The second step in the integration process is to "rationalize" Graham-Field's distribution system to make it more efficient. This process involves integrating facilities that fit into the distribution strategy and closing the redundant locations as well as any other distribution facility that does not create efficiencies. Thus, in the end we believe GFI will have the right amount of distribution facilities at the right locations.
ú Additionally, the Company is in the process of consolidating its corporate headquarters. GFI will move its headquarters to the Lumex building in Bay Shore, New York, and will sell its Hauppauge, New York, building.
ú We are confident in Andrew Giordano's ability to utilize his strong information systems and logistics expertise to help complete the integration this year. We believe that since he has worked with GFI's systems for over a year, he knows what the Company needs to succeed and is extremely committed to and focused on that effort. |
