Gf Health Products, Inc. Business Information, Profile, and History

Company Perspectives

Since 1946, GF Health Products has been supplying the healthcare market with one of the broadest selections of high quality healthcare products and services. All of our products have been designed with a single objective--to enhance the quality of life of the people that use our products and their caregivers.

History of Gf Health Products, Inc.

GF Health Products, Inc., doing business as Graham-Field Health Products, Inc., is a manufacturer and distributor of healthcare products, primarily for the home healthcare, rehabilitation, long-term care, and medical-surgical markets in North America, Central and South America, Europe, and Asia. Customers include physicians, hospitals, nursing homes, government agencies, drug stores, pharmacies, and catalogers.

Graham-Field manufactures and distributes more than 4,000 products. Major brands include Lumex, maker of specialty chairs, beds, walkers, and lifts; Everest & Jennings, offering manual and power wheelchairs; Basic American Medical Products/Simmons, one of the world's largest bed manufacturers; John Bunn and its line of respirator products; Labtron, maker of stethoscopes and exam room supplies; Grafco, offering a wide variety of medical and surgical products, ranging from bandages to microscopes; and the Akros and Aquatherm lines of pressure management products.

Graham-Field is based in Atlanta, Georgia, and maintains distribution centers in New Jersey, Wisconsin, Denver, Missouri, California, and Mexico. Manufacturing plant are located in Denver, Wisconsin, and Rhode Island. Graham-Field has courted controversy since the late 1990s. The company's long-time chief executive, Irwin Selinger, has been indicted, tried, convicted, and sentenced to serve time in prison for securities fraud and conspiracy for inflating the value of Graham-Field's stock in connection to a merger. Nevertheless, Selinger continued to run the company well into the 2000s, pending an appeal.

Graham-Field Founded: 1946

Forty years before Selinger became involved in the company, Graham-Field was founded in 1946 in New York City as Graham-Field, Inc., by Samuel Graham Golub and Philip Field. They set up a medical equipment supply business in a loft on Pearl Street in a Manhattan neighborhood that is now known as TriBeCa (the "Triangle Below Canal"). A year after it opened, Graham-Field brought out its first product, Medicopaste, a bandage product the company still carries. It remained a relatively small, but well respected company, generating about $10 million in annual revenues when Selinger and his company, Patient Technology, Inc., bought it in 1986. Two years later Patient Technology adopted the Graham-Field name, becoming Graham-Field Health Products, Inc.

Selinger came to the medical supplies business with no experience in the healthcare field. In the mid-1960s he was marketing staplers for Swingline Inc. but was more interested in running his own company. Acting on the advice of a stockbroker who told him that the healthcare field held great potential, in 1966 he went to work for a small medical-supplies company as marketing director. Two years later he seized an opportunity to start his own business when he met a scientist who developed a way to measure sterilization levels in packages. Selinger bought the rights to the system and launched Surgicot, Inc., with little more than $3,000 and a garage. Over the next decade he built on the company, completing three acquisitions along the way. By the end of the 1970s Surgicot was generating $25 million in sales. It also caught the attention of healthcare giant Squibb Corporation, which made Selinger a offer too tempting to refuse: $28 million in stock and a position running Surgicot. Selinger soon grew disgruntled answering to his new corporate bosses, however. Having built his company on a shoestring budget, Selinger continued to fly coach, only to have his conduct criticized by a Squibb officer who told him that as an executive he was expected to fly first class. He ruffled feathers even more when he made an acquisition on his own. Such freewheeling put him at odds with Squibb management and he quit in 1980.

"I was an entrepreneur without a company to run," he told Nation's Business in a 1986 interview. It was a rude awakening. He began scouting for a new opportunity. During his time at Squibb he had learned about an electronic patient bedside monitor the company had turned down. Developed by a Long Island inventor, Survalent kept track of body temperatures. In April 1981, Selinger formed Patient Technology, Inc., (PTI) in Hauppauge, New York, and bought the device for $550,000 and a 38 percent stake in the company. He was able to sell 270,000 units in the first year.

Patient Technology Acquires Graham-Field: 1985

PTI also began developing a patient bedside monitor, MedTake, which Selinger believed would be a high-tech way to cut down on nurses' paperwork. After spending $3.5 million to develop the product and still unable to get the product to market, Selinger sold the MedTake line in 1986. Along the way, in order to support the development of this and other high-tech devices, PTI went public, completing an initial public offering of stock in late 1983, and subsequently acquired numerous medical supply companies and other healthcare businesses, seven in all between March 1983 and October 1985. They included the 1983 acquisitions of Medical Specialists in Packaging, Inc.; Scientek Instrumentation, Inc,; and Labtron Scientific Corp. A year later PTI added Bio-Med Devices Inc. and generic drug manufacturer Newtron Pharmaceuticals, Inc. Selinger became disenchanted with Newtron and unloaded the property in 1985. At the same time he added sundries manufacturer Medisco Federal, Inc., as well as Graham-Field, for which PTI paid about $9.2 million in cash, stock, and notes. Coming over from Graham-Field was Peter Galambos, who became PTI's president and chief operating officer. Less than three years later, however, he quit, citing difficulties working at a public company.

PTI originally consisted of two divisions, medical devices and sundries, but company leadership soon elected to exit the medical device field and concentrate on the medical supply business. In keeping with this new strategy, PTI in May 1988 assumed the Graham-Field name, which was recognized in the field. Two months later the company resumed a growth-through-acquisitions approach when it acquired Bristoline Inc., importer and distributor of medical instruments and microscopes. In 1990 Graham-Field completed a pair of deals. In March of that year it spent nearly $3 million for M.E. Team, Inc., a distributor of medical and health care products for home use that had strong ties to retailers, in particular cable television home-shopping networks. Then, in November 1990, Graham-Field paid about $1.6 million in cash for the John Bunn Division of Omnicare, Inc., to add a line of respiratory aid products. Two more acquisitions followed in 1991. For approximately $2.4 million in cash International Health Care, Inc., was added. Formerly known as AquaTherm Products Corporation, the company manufactured and distributed pressure control products and deodorizers. TEMCO National Corp was bought in October 1991 for $5.8 million in cash. It made and distributed a variety of medical supply products, including geriatric seating units, ambulatory aids, and bath and shower accessories. Graham-Field then paid $369,000 in 1992 to add the bandage division of a Squibb subsidiary, ConvaTec, a deal that brought with it a manufacturing facility in Rhode Island. Also in that year, Graham-Field paid $11.5 million for Diamond Medical Equipment Corp. and National Health Care Equipment Inc., manufacturers of patient aids and distributors of nutritional supplements, adult incontinence products, and other home healthcare products. To support its growing business, Graham-Field also opened a distribution center in Los Angeles in 1992.

In 1992 Graham-Field was generating $84 million (a marked increase over 1991's $57.1 million) on sales from 20,000 medical products, making it one of Long Island's largest public companies. The company was on the rise and able to secure a coveted listing on the New York Stock Exchange, moving over from the American Stock Exchange. However, as had been the case in the past, the company had trouble digesting its acquisitions. While sales continued to rise, to $92.5 million in 1993 and $94.5 million in 1994, the company lost money, $2.9 million in 1993 and $2.4 million in 1994. The company finally returned to profitability in 1995, netting $738,000 as sales topped the $100 million mark.

Graham-Field was quite active in 1996 and 1997, especially in the field of durable medical equipment, jump-started by the November 1996 acquisition of wheelchair manufacturer Everest & Jennings International Ltd. Selinger then fleshed out the new unit with the March 1997 acquisition of a pediatric wheelchair manufacturer, Kuschall of America, Inc., which also produced high-performance adult wheelchairs and other rehabilitation products. On another front in 1996, Graham-Field rolled out the Graham-Field Express program, which offered same-day and next-day delivery of certain products to home healthcare dealers. The company then beefed up the program through acquisitions, buying V.C. Medical Distributors Inc. in 1996 to add a distribution operation in Puerto Rico, and Bobeck Medical to gain an express facility in Dallas in early 1997. More facilities were opened in Baltimore, Cleveland, and Bowling Green, Kentucky, in 1997.

Fuqua Enterprises Acquired: 1997

Sales reached $127.2 million in 1996 and then soared to $263.1 million a year, due mostly to the largest acquisition in Graham-Field's history, one that held a great deal of promise but led to years of trouble. In the fall of 1997 Graham-Field agreed to acquire Fuqua Enterprises Inc. for $166 million in stock. Based in Atlanta, Fuqua designed and furnished the interior of nursing facilities, a business that was expected to benefit nicely when combined with Graham-Field's distribution network, which was already selling to Fuqua's customer base. Three months after the deal was completed in December 1998, Graham-Field reported its fourth-quarter and year-end earnings: a pretax loss of $43.9 million in the fourth quarter and a $22.9 million net loss for 1997. The numbers were not at all what Fuqua's founder, J.B. Fuqua, an experienced deal-maker and Graham-Field's second-largest shareholder, had been led to expect. The price of Graham-Field stock quickly lost half of its value. Fuqua was not hesitant to express his displeasure about the turn of events, telling the Atlanta Journal-Constitution, "We just got snookered." He stopped short of claiming he was the victim of fraud, but added, "The fact is that we and our consultants and advisers and what-not depended on figures as of the end of last September, which was the third quarter, and all of these things couldn't have happened in the fourth quarter. And we were not told that the fourth quarter would be a disaster; we were told it would be profitable."

Fuqua was not alone in his concerns about the dealings at Graham-Field, which was immediately hit with shareholder lawsuits alleging a failure to disclose material information. Although these suits would be settled for $20 million in 1999, the company was engulfed in turmoil that would be difficult to escape, and the price of its shares tumbled to penny stock levels. Selinger resigned as chairman and CEO in July 1998, replaced by Rodney F. Price, chairman of Thistle Hotels who owned nearly one-quarter of Graham-Field's voting stock. He would stay until February 1999, when Graham-Field's chief financial officer and interim president, Paul Bellamy, replaced him as chairman and CEO. A month later an internal audit revealed a number of accounting irregularities, resulting in the reporting of a further $10 million in losses for 1997 and 1998. As the CFO during this time, Bellamy, along with the new CFO, was now replaced by a turnaround expert, John McGregor. The company explored the possibility of a sale, and as the losses mounted, it was delisted by the New York Stock Exchange and had to resort to trading on the NASDAQ Over-the-Counter Bulletin Board. By the end of the year McGregor resigned and Graham-Field and each of its 24 subsidiaries filed for Chapter 11 bankruptcy protection from creditors. The company reported $182 million in assets and more than $201 million in debts.

While Graham-Field underwent restructuring, the corporate headquarters was relocated to Atlanta to the Fuqua offices. It also experienced further changes in the top ranks of management before finally emerging from bankruptcy in April 2003 following an auction of the company in which bondholders outbid Invacare Corp, a Cleveland wheelchair manufacturer, agreeing to pay $28 million. To make the acquisitions, GF Health Products, Inc., was formed. The following month Selinger was reinstalled as the company's chief executive, a move made more noteworthy given that several months earlier he had been indicted by the U.S. Attorney for the Eastern District of New York for propping up the price of the Graham-Field's stock prior to the Fuqua acquisition. He was accused of conspiring with an independent medical distributor, Marc Chapman, to create a phony contract and other documents that appeared to provide Graham-Field with $450,000 in cash and $700,000 in credit. The resulting inflated numbers on the company's balance sheet helped to increase the price of Graham-Field's stock, important because the acquisition agreement with Fuqua was based on a target price: Were the Graham-Field shares to fall below that price, Fuqua would receive more Graham-Field stock.

Chapman pleaded guilty but Selinger went to trial in 2004 while continuing to run Graham-Field. After a five-week trial, he was found guilty of securities fraud and conspiracy, and faced as many as ten years in prison. He told Long Island's Newsday that the jury's verdict was "an absolute outrage," adding, "There was zero evidence presented to the jury. I believe that over time I will be vindicated and I will be found innocent." In April 2005 Selinger was sentenced to 18 months in prison and three years of probation. However, at mid-year in 2006, he had not yet served any time and he continued to hold the top spot in the company. Despite the uncertainty surrounding the future of its chief executive, Graham-Field continued to operate, reintroducing the Everest & Jennings, LaBac, Simmons Healthcare, John Bunn, Grafco, Labtron, and Lumex product lines. Three new distribution centers, located in Atlanta, Los Angeles, and East Rutherford, New Jersey, opened in late 2004, and Graham-Field continued to introduce new products on a regular basis. But with its financial results no longer available to the public, it was difficult to determine the health of the restructured company.

Principal Subsidiaries

Graham-Field, Inc.; AquaTherm Corp.; Everst & Jennings International Ltd.; Kuschall of America, Inc.; Medical Supplies of America, Inc.; Basic American Medical Products, Inc.

Principal Competitors

Invacare Corporation; Medline Industries, Inc.; Sunrise Medical Inc.

Chronology

• Key Dates
• 1946 Graham-Field, Inc., is founded.
• 1981 Patient Technology, Inc., is established.
• 1985 Patient Technology acquires Graham-Field.
• 1988 Patient Technology takes the Graham-Field name.
• 1997 Fuqua Enterprises, Inc., is acquired.
• 1999 Graham-Field files for Chapter 11 bankruptcy protection.
• 2003 Graham-Field assets are sold to GF Health Products, Inc.