Graham-Field sells LaBac Systems

Sunday, July 31, 2005

DENVER -- LaBac Systems, a one-time powerhouse in the power tilt-and-recline market that did a disappearing act as a division of Graham-Field, emerged from the eaves last week as an acquisition of a spin-off seating company here called Phoenix Seating Systems.

The move comes as Graham-Field returns to its roots as more of a distributor than manufacturer of home medical equipment.

"While the LaBac name remains one of the premier names in the rehabilitation market, the unique manufacturing required to produce the LaBac products does not fit into the business model that Graham-Field is implementing," said Lawrence de la Haba in a memo that started circulating among G-F employees last Wednesday.

In the meantime, G-F is weighed down by the fate its CEO, Irwin Selinger, who is appealing an 18-month prison sentence handed down by the federal court in May. Selinger was found guilty of fraudulently inflating the company's stock price in a stock-swap deal for Fuqua Enterprises, the parent company of Lumex.

G-F has also parted ways with Mike Norby, who worked as the company's senior vice president of sales and marketing until earlier this month.

The LaBac shift takes place Aug. 1. Phoenix is a new company that's reportedly been set up by the principals at Falcon Rahab. Neither company's Web site is currently active. G-F did not return calls for this story.

In the internal memo, G-F said that Phoenix will move its operation into the LaBac facility where the new company will make their own products and the Labac products. LaBac's customer service and fax info remain the same, and Phoenix plans to hire several LaBac employees to maintain an uninterrupted flow of service.

G-F and Phoenix will jointly make several specialized E&J chairs. Phoenix will make G-F's Premier Class Wheelchairs and parts.

Does this signal the end of rehabilitation products for Graham-Field? "Absolutely not," said the memo.

At Medtrade this fall, G-F and Valence Technology plan to debut a 9-lbs. lithium ion battery to replace the 24-lbs. lead-acid cell battery. G-F believes this battery will "obsolete" power technology currently in use.

Since LaBac was king, the world of power tilt and recline has become complicated. Manufacturers now own their own seating systems. Funding issues are dicey.

"More and more suppliers are going through Pride, through Quickie and through Invacare because the pricing is better, your dating is better, and they are more able to work within the allowables," said Anne Kieschnik, owner of Seating Profiles in Houston, Texas."

Today, allowables for power tilt-and-recline systems yield as much as $8,000 in reimbursement.

Graham-Field bought LaBac in the spring of 1997, one year after the company fired a shot across the bows of Invacare and Sunrise with the purchase of the one-time wheelchair giant, Everest & Jennings. E&J, like LaBac, is now a shadow of its former self.

At the time, LaBac controlled 50%-70% of the power seating market and was generating revenues of about $13 million annually.