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Biotech / Medical : GFIH Graham-Field Health Prod -- Ignore unavailable to you. Want to Upgrade?

To: Frank Perlmutter who wrote (34)	4/29/1998 3:11:00 PM
From: Steve Rolfe	Respond to of 84

Stephens Inc. Analysis Graham-Field Health Products, Inc. (GFI-NYSE) April 16, BUY Company Fundamentals: ú One stop supplier; broad product line ú Service to customer will allow for increased market share ú Only company of its kind-niche strategy ú Efficient distribution strategy offers value-added services like same-day shipping and "paper-less" ordering Industry Fundamentals: ú Managed care dominates healthcare industry ú Trends are to improve product movement efficiencies, order management efficiencies and information sharing ú Cost emphasis is driving vendor/provider/distributor partnerships and consolidation Valuation: ú We believe the stock is very cheap, currently selling at 58% of 1997 Fiscal Year end Book value per share, at 61% of our estimated 1998 sales per share and 9.6X our 1999 EPS estimate of $0.77. Earnings Outlook: ú We are confident that the Company is on track to hit our operating EPS estimate of $0.01 for 1Q. ú We expect a 221% increase in 1999 to $0.77 from our estimated $0.24 in 1998.Market Psychology: ú Stock was severely impacted by 4Q earnings miss including acquisition integration charges. ú Solid fundamentals lead to market regaining confidence. ú Continually watching acquisition integration. Recent Developments: ú Company filed 10K yesterday, including solid combined balance sheet (with Fuqua) for 1997 year end. ú GFI's banks amended financial covenants on its $100 million credit facility (waiving the covenants based on trailing 4Q EBIT levels that the Company was in default). ú The Company negatively surprised investors with lower than expected 4Q EPS, which were related to the integration of seven acquisitions made at end of 1996 and 1997.Considerations: ú Ability to build information systems to integrate seven acquisitions made in 1997. ú Ability to return to consistent profitability. ú Continued Medicare reimbursement cuts could lead to operating margin pressure. Catalyst: ú Hit or beat earnings expectations for the next several quarters. ú Visible integration improvements (i.e. a centralized information system installed as well as other distribution efficiencies completed). ú Return to growth strategy in 1999 (i.e. accelerated roll-out of GF Express and potential additional acquisition growth). Company Description: Graham-Field Health Products, Inc., headquartered in Hauppauge, New York, is a leading manufacturer and distributor in the healthcare industry, servicing both the medical/surgical and the home healthcare markets. GFI offers the most comprehensive line of healthcare products available from a single supplier. With the acquisition of Everest and Jennings, GFI has positioned itself as one of the leading manufacturers of durable medical equipment in North America.

To: Frank Perlmutter who wrote (34)	4/29/1998 3:12:00 PM
From: Steve Rolfe	Read Replies (1) \| Respond to of 84

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.