Allied Healthcare Products Inc. Reports Operating Results (10-Q)
Allied Healthcare Products Inc. manufactures respiratory products used in the health care industry in a wide range of hospital and alternate site settings including sub-acute care facilities home health care and emergency medical care. Their product lines include respiratory care products medical gas equipment and emergency medical products. Their products are marketed under well-recognized and respected brand names to hospitals hospital equipment dealers hospital construction contractors home health care dealers emergency medical products dealers and others. Allied Healthcare Products Inc. has a market cap of $41.9 million; its shares were traded at around $5.18 with and P/S ratio of 0.7. Highlight of Business Operations:Allied had net sales of $11.3 million for the three months ended September 30, 2009, down $3.1 million, or 21.5%, from net sales of $14.4 million in the prior year same quarter. Customer orders of $11.6 million were $1.7 million lower than the prior year same quarter. Purchase order releases were $3.2 million lower than in the prior year same quarter. Purchase order release times depend on the scheduling practices of individual customers, and do vary over time.
Selling, general and administrative expenses for the three months ended September 30, 2009 were $3.6 million compared to selling, general and administrative expenses of $3.2 million for the three months ended September 30 2008. Stock option expense increased approximately $0.6 million due to the grant of immediately vested stock options to the Company s President and CEO. This increase was partially offset by a decrease of approximately $103,000 for compensation expense and a decrease of approximately $47,000 for recruiting expense compared to the same quarter of the prior year. Due to the low level of sales for the first quarter of fiscal 2010, sales commissions decreased $57,000 compared to the same quarter of the prior year.
Loss from operations was $1.2 million for the three months ended September 30, 2009 compared to income from operations of $0.3 million for the three months ended September 30, 2008. Interest income was $984 for the three months ended September 30, 2009 compared to interest income of $30,659 for the three months ended September 30, 2008. Allied had loss before benefit from income taxes in the first quarter of fiscal 2010 of $1.2 million, compared to income before provision for income taxes in the first quarter of fiscal 2009 of $0.3 million. The Company recorded a tax benefit of $0.5 million for the three-months ended September 30, 2009 compared to a tax provision of $0.1 million for the three months ended September 30, 2008.
Net loss for the first quarter of fiscal 2010 was $0.7 million or $0.09 per basic and diluted share compared to net income of $0.2 million or $0.03 per basic and diluted share for the first quarter of fiscal 2009. The weighted average number of common shares outstanding, used in the calculation of basic earnings per share for the first quarters of fiscal 2010 and 2009 were 7,988,321 and 7,891,232 shares, respectively. The weighted average number of common shares outstanding used in the calculation of diluted earnings per share for the first quarters of fiscal 2010 and fiscal 2009 were 7,988,321 and 8,132,931 shares, respectively.
The Company s working capital was $17.1 million at September 30, 2009 compared to $17.0 million at June 30, 2009. Income taxes receivable increased $0.7 million and cash increased $0.4 million. Deferred income taxes decreased $0.2 million and accrued liabilities decreased $0.1 million. At September 30, 2009 these increases in working capital were offset by a $0.5 million increase in accounts payable, and a $0.1 million decrease in inventories. Accounts receivable decreased $0.8 million to $5.3 million at September 30, 2009. Accounts receivable as measured in days of sales outstanding (“DSO”) was 43 DSO at September 30, 2009; unchanged from June 30, 2009.
The revolving credit facility provides for a borrowing base of 80% of eligible accounts receivable plus the lesser of 50% of eligible inventory or $7.0 million, subject to reserves as established by the Bank. The maximum borrowing under the revolving credit facility is $10 million. At June 30, 2009, $10 million was available under the revolving credit facility. However, the Company does not have any availability under the revolving credit facility due to the financial covenant violations discussed above. As a result of an amendment made on September 30, 2008, the credit facility matures on September 1, 2010. Borrowings under the facility accrue interest at a variable rate equal to the Bank s prime rate. The credit facility calls for a commitment fee payable quarterly based on the average daily unused portion of the revolving credit facility. This commitment fee is 0.25% if the Company s ratio of funded debt to EBITDA is greater than or equal to 1.5. The commitment fee reduces to 0.20% if this ratio is less than 1.5 but greater than or equal to 1.0, and the fee reduces to 0.15% if this ratio is less than 1.0. The revolving credit facility also provides for a commitment guaranty of up to $5.0 million for letters of credit and requires a per annum fee of 2.50% on outstanding letters of credit. At September 30, 2009, the Company had no letters of credit outstanding. Any outstanding letters of credit decrease the amount available for borrowing under the revolving credit facility.
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