Allied Healthcare International Inc. Increases Revenues 6.4% and Gross Profit 8.9%...

Allied Healthcare International Inc. Increases Revenues 6.4% and Gross Profit 8.9% for the Third Fiscal Quarter of 2008

NEW YORK--(Business Wire)--
Allied Healthcare International Inc. (Nasdaq: AHCI; AIM: AHI,
http://www.alliedhealthcare.com):

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(In millions except EPS) Fiscal 2008 Fiscal 2007
Third Quarter Third Quarter
June 30, 2008 June 30, 2007
Revenues $75.0 $70.5
Gross Profit $23.1 $21.2
Gross Margin % 30.8% 30.1%
Diluted EPS, Continuing operations $0.05 ($0.01)
Diluted EPS, Discontinuing
operations - $0.03
----------------------------------------------------------------------
*T

Allied Healthcare International Inc. (Nasdaq: AHCI; AIM: AHI,
http://www.alliedhealthcare.com), a leading provider of flexible
healthcare staffing services in the United Kingdom, announces the
financial results of its fiscal 2008 third quarter and nine months for
the period ended June 30, 2008.

To provide investors with an increased understanding of the
Company's staffing business, Allied is providing the following
breakdown of its revenues and gross profits.

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Fiscal Third Quarter Results:
-----------------------------

Quarter Ending June 30, 2008
------------------------------------
Gross Gross
Margin
Revenue % Margin % %
------------------------------------

(Amounts in thousands)
Homecare $57,803 76.6% $18,435 79.3% 31.9%
Nursing Homes 9,859 13.1% 3,036 13.1% 30.8%
Hospital Staffing 7,790 10.3% 1,760 7.6% 22.6%
-------- --------
75,452 $23,231 30.8%
Effect of foreign exchange (428) (111)
-------- --------
Total $75,024 $23,120
======== --------

SG&A $19,558
Effect of foreign exchange (121)
--------
Total SG&A $19,437
--------

--------
Operating Income $ 3,683
========

Quarter Ending June 30, 2007
----------------------------------
Gross Gross
Margin
Revenue % Margin % %
----------------------------------

(Amounts in thousands)
Homecare $50,480 71.6% $16,209 76.3% 32.1%
Nursing Homes 10,078 14.3% 2,875 13.5% 28.5%
Hospital Staffing 9,945 14.1% 2,156 10.2% 21.7%
------- -------
$70,503 $21,240 30.1%
Effect of foreign exchange - -
------- -------
Total $70,503 $21,240
======= -------

SG&A $20,317
Effect of foreign exchange -
-------
Total SG&A $20,317
-------

-------
Operating Income $ 923
=======
*T

For the third quarter of fiscal 2008, before the unfavorable
impact of exchange rates, revenues increased by $4.9 million, or 7.0%,
to $75.4 million, compared with $70.5 million reported during the same
period in fiscal 2007. Contributing to the increase in revenues was
Allied's Homecare staffing which grew by 14.5% to $57.8 million.
Nursing Home staffing revenues declined by 2.2% to $9.8 million.
Hospital staffing declined by 21.7% to $7.8 million due to changes in
government policies which have been previously reported. After the
unfavorable impact of exchange of $0.4 million, revenues decreased to
$75.0 million.

Before the unfavorable impact of exchange rates, total gross
profit for the third fiscal quarter increased 9.4% to $23.2 million,
compared with $21.2 million reported for the comparable quarter in
fiscal 2007. Gross profit margins for the third quarter improved
slightly due to the benefits received from annual price reviews which
was partially adversely impacted by the costs of additional holiday
entitlement for care workers. It should be noted that there is a lag
before care workers pay is increased in subsequent quarters. Foreign
exchange slightly impacted the quarter and decreased gross profit by
$0.1 million to $23.1 million.

Excluding the favorable effects of foreign exchange, SG&A for the
third fiscal quarter was $19.5 million, compared with $20.3 million
reported last year. The decrease was a result of nonrecurring costs of
$1.6 million incurred in the third quarter of fiscal 2007 related to
severance and warrant expenses. On a comparable basis SG&A increased
by $1.3 million due to additional branch costs associated with the
growth of the Company's business; increased by $0.3 million in
training costs from the investment in recruitment and retention of the
Company's care workers; and decreased IT cost by $0.6 million from
infrastructure efficiencies. Foreign exchange slightly impacted the
quarter and decreased costs by $0.1 million to $19.4 million.

Management notes that SG&A costs, as a percent of revenues, in the
third quarter of fiscal 2008 were 25.9% compared to 26.4% in the
second quarter of fiscal 2008 and 27.0% in the first quarter of fiscal
2008.

Income from continuing operations for the third quarter of fiscal
2008 increased to $2.5 million as compared with a loss of $0.3 million
reported during the 2007 third fiscal quarter. Diluted earnings per
share from continuing operations was $0.05 for the quarter, compared
to a loss of ($0.01) per diluted share last year.

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Fiscal 2008 Nine-Month Results:
-------------------------------

Nine Months Ending June 30, 2008
-----------------------------------
Gross Gross
Margin
Revenue % Margin % %
-----------------------------------

(Amounts in thousands)
Homecare $164,040 75.1% $51,258 77.8% 31.2%
Nursing Homes 31,369 14.4% 9,432 14.3% 30.1%
Hospital Staffing 22,942 10.5% 5,197 7.9% 22.7%
-------- -------
$218,351 $65,887 30.2%
Effect of foreign exchange 5,258 1,587
-------- -------
Total $223,609 $67,474
======== -------

SG&A $57,758
Effect of foreign exchange 1,327
-------
Total SG&A $59,085
-------

-------
Operating Income $ 8,389
=======

Nine Months Ending June 30, 2007
-----------------------------------
Gross Gross
Margin
Revenue % Margin % %
-----------------------------------

(Amounts in thousands)
Homecare $147,052 71.9% $46,720 76.3% 31.8%
Nursing Homes 28,916 14.1% 8,506 13.9% 29.4%
Hospital Staffing 28,599 14.0% 6,034 9.8% 21.1%
-------- -------
$204,567 $61,260 29.9%
Effect of foreign exchange - -
-------- -------
Total $204,567 $61,260
======== -------

SG&A $55,577
Effect of foreign exchange -
-------
Total SG&A $55,577
-------

-------
Operating Income $ 5,683
=======
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For the nine months ended June 30, 2008 before the favorable
impact of foreign exchange rates, revenues increased $13.8 million, or
6.7%, to $218.3 million, compared with $204.6 million reported during
the same fiscal period in 2007. Contributing to the increase in
revenues was Allied's Homecare staffing, which grew by 11.6% to $164.0
million. Nursing Home staffing achieved 8.5% growth in revenues
totalling $31.4 million. Revenues generated in Hospital staffing
decreased 19.8% to $22.9 million due to changes in government policies
which have been previously reported. Foreign exchange increased
revenues by $5.2 million to $223.6 million.

Before the favorable impact of foreign exchange, gross profit for
the fiscal nine months increased 7.6% to $65.9 million, compared to
$61.3 million reported for the comparable period in fiscal 2007. Gross
profit margins for the nine-month period improved slightly as a result
of the benefits received from the annual price reviews which was
partially adversely impacted by the costs of additional holiday
entitlement for care workers. Foreign exchange benefited reported
results by $1.6 million to $67.5 million.

Excluding the unfavorable effects of foreign exchange, SG&A for
the nine-month period was $57.8 million, compared with $55.6 million
reported last year. The increase in SG&A was mainly due to additional
branch costs of $3.6 million associated with the growth of the
Company's business, increased training costs of $1.4 million from the
Company's investment in recruitment and retention of its care workers,
and decreased IT costs of $1.1 million from infrastructure
efficiencies. The increase in SG&A costs was partially offset by one
off costs of $1.6 million incurred in fiscal 2007 related to severance
and warrant costs. Foreign exchange further increased costs by $1.3
million to $59.1 million.

Income from continuing operations for the nine-month period
increased $5.9 million, or $0.13 per diluted share from continuing
operations as compared with $2.2 million, or $0.05 per diluted share
from continuing operations reported in the nine-month period of 2007.

Allied's cash balance at the end of the quarter was $23.9 million.
During the quarter, the cumulative cash inflow increased by $3.4
million, compared with last quarter and $3.6 million for the
year-to-date June 30, 2008. For the year-to-date, depreciation and
amortization was $3.7 million and capital expenditure was $2.1
million.

Day Sales Outstanding (DSO) were 25 days for the month of June,
compared with 28 days in the same period in 2007.

Management Discussion:

"It is encouraging to see the continued revenue growth Allied has
made in the homecare business during the third quarter," commented
Sandy Young, Chief Executive Officer of Allied. "We are fortunate that
our market has not been affected by economic problems impacting the
wider economy."

Mr. Young continued: "In the second quarter earnings release we
indicated that we would like to see increased gross margins reflected
in our operating income, a goal we have achieved in the third quarter.
Our SG&A costs are relatively flat compared with earlier quarters this
year, and have grown at a lower rate year-over-year than was
previously the case. This is an area that is receiving continued
focus."

Mr. Young concluded: "This has been an eventful quarter for our
staff with a particular focus placed on increasing our internal
quality benchmarks. We believe this emphasis will put us in a better
position to win future business. I am proud of our company's
performance from care workers to trainers to the corporate staff and I
look forward to future improvements in our operations."

Conference Call Information- August 5, 2008 at 11:00 AM EST:

Allied invites all those interested in listening to management's
discussion of the third quarter results to join the call by dialing
866-585-6398 for domestic participants, and 416-849-9626 for
international participants today, August 5, 2008 at 11:00 AM EST.
Participants may also access a live webcast of the conference call
through the "Investors" section of Allied Healthcare's Website:
www.alliedhealthcare.com. A replay will be available for one week
following the call by dialing 866-245-6755 for domestic participants,
and 416-915-1035 for international participants. When prompted, please
enter passcode 164690. The presentation will be available and archived
on the Company's website for ninety days.

In addition to disclosing results of operations that are
determined in accordance with generally accepted accounting principles
("GAAP"), this press release also discloses non-GAAP results of
operations that exclude or include certain charges. These non-GAAP
measures adjust for foreign exchange effects. Management believes that
the presentation of these non-GAAP measures provides useful
information to investors regarding the Company's results of
operations, as these non-GAAP measures allow investors to better
evaluate ongoing business performance. Investors should consider
non-GAAP measures in addition to, and not as a substitute for,
financial measures prepared in accordance with GAAP. A reconciliation
of the non-GAAP measures disclosed in this press release with the most
comparable GAAP measures are included in the financial tables included
in this press release.

ABOUT ALLIED HEALTHCARE INTERNATIONAL INC.

Allied Healthcare International Inc.
(http://www.alliedhealthcare.com) is a leading provider of flexible
healthcare staffing services in the United Kingdom. Allied operates a
community-based network of approximately one hundred branches with the
capacity to provide carers (known as home health aides in the U.S.),
nurses, and specialized medical personnel to locations covering
approximately 90% of the U.K. population. Allied meets the needs of
private patients, community care, nursing homes, and hospitals.

FORWARD-LOOKING STATEMENTS

Certain statements contained in this news release may be
forward-looking statements. These forward-looking statements are based
on current expectations and projections about future events. Actual
results could differ materially from those discussed in, or implied
by, these forward-looking statements. Factors that could cause actual
results to differ from those implied by the forward-looking statements
include: Allied's ability to continue to recruit and retain qualified
flexible healthcare staff; Allied's ability to enter into contracts
with local government social services departments, other healthcare
facility customers and hospitals on terms attractive to Allied; the
general level of patient occupancy at hospital and healthcare
facilities of Allied's customers; dependence on the proper functioning
of Allied's information systems; the effect of existing or future
government regulation of the healthcare industry, and Allied's ability
to comply with these regulations; the impact of medical malpractice
and other claims asserted against Allied; the effect of regulatory
change that may apply to Allied and that may increase costs and reduce
revenues and profitability; Allied's ability to use net operating loss
carry forwards to offset net income; the effect that fluctuations in
foreign currency exchange rates may have on our dollar-denominated
results of operations; and the impairment of goodwill, of which Allied
has a substantial amount on the balance sheet, may have the effect of
decreasing earnings or increasing losses. Other factors that could
cause actual results to differ from those implied by the
forward-looking statements in this press release include those
described in Allied's most recently filed SEC documents, such as its
most recent annual report on Form 10-K, all quarterly reports on Form
10-Q and any current reports on Form 8-K filed since the date of the
last Form 10-K. Allied undertakes no obligation to publicly update or
revise any forward-looking statements, whether as a result of new
information, future events, or otherwise.

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ALLIED HEALTHCARE INTERNATIONAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)

Three Months Ended Nine Months Ended
-------------------- ---------------------
June 30, June 30, June 30, June 30,
2008 2007 2008 2007
-------------------- ---------------------
Revenues:
Net patient services $ 75,024 $ 70,503 $ 223,609 $ 204,567
-------- -------- --------- ---------

Cost of revenues:
Patient services 51,904 49,263 156,135 143,307
-------- -------- --------- ---------

Gross profit 23,120 21,240 67,474 61,260

Selling, general and
administrative expenses 19,437 20,317 59,085 55,577
-------- -------- --------- ---------

Operating income 3,683 923 8,389 5,683

Interest income 216 20 620 91
Interest expense ( 388) ( 791) ( 491) ( 2,413)
Foreign exchange (loss)
income ( 2) 94 ( 151) 231
Other income - 68 - 91
-------- -------- --------- ---------

Income before income
taxes and
discontinued
operations 3,509 314 8,367 3,683

Provision for income taxes 1,056 617 2,472 1,517
-------- -------- --------- ---------

Income (loss) from
continuing
operations 2,453 ( 303) 5,895 2,166
-------- ------- --------- --------

Discontinued operations:
Income from discontinued
operations, net of taxes - 1,418 - 2,867
-------- -------- --------- ---------

Net income $ 2,453 $ 1,115 $ 5,895 $ 5,033
======== ======== ========= =========

Basic and diluted net income
(loss) per share of common
stock
Income (loss) from
continuing
operations $ 0.05 $( 0.01) $ 0.13 $ 0.05
Income from
discontinued
operations - 0.03 - 0.06
-------- -------- --------- ---------
Net income per share of
common stock $ 0.05 $ 0.02 $ 0.13 $ 0.11
======== ======== ========= =========

Weighted average number of
common shares outstanding:
Basic 44,986 44,957 44,986 44,957
======== ======== ========= =========
Diluted 44,993 45,211 45,075 45,145
======== ======== ========= =========
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ALLIED HEALTHCARE INTERNATIONAL INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)

June 30, September
30,
2008 2007
(Unaudited)
------------ ----------
ASSETS

Current assets:
Cash and cash equivalents $ 23,877 $ 20,241
Restricted cash 150 55,819
Accounts receivable, less allowance for
doubtful
accounts of $951 and $1,570, respectively 20,851 21,490
Unbilled accounts receivable 16,082 14,375
Deferred income taxes 416 182
Derivative asset - 640
Prepaid expenses and other assets 1,557 1,448
Assets of discontinued operations 200 205
----------- --------

Total current assets 63,133 114,400

Property and equipment, net 9,168 9,767
Goodwill 119,765 122,843
Other intangible assets, net 4,075 5,465
Deferred income taxes 105 304
----------- ---------

Total assets $ 196,246 $ 252,779
=========== =========

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
Current portion of long-term debt $ - $ 54,795
Accounts payable 1,163 3,950
Accrued expenses, inclusive of payroll and
related expenses 30,886 30,614
Taxes payable 1,207 3,375
Liabilities of discontinued operations 685 1,286
----------- ---------

Total liabilities 33,941 94,020
----------- ---------

Commitments and contingencies

Shareholders' equity:
Preferred stock, $.01 par value; authorized
10,000 shares,
issued and outstanding - none - -
Common stock, $.01 par value; authorized
80,000 shares,
issued 45,571 shares 456 456
Additional paid-in capital 240,875 240,206
Accumulated other comprehensive income 14,488 18,018
Accumulated deficit ( 91,220) ( 97,627)
----------- ---------

164,599 161,053
Less cost of treasury stock (585 shares) ( 2,294) ( 2,294)
----------- ---------

Total shareholders' equity 162,305 158,759
----------- ---------
Total liabilities and shareholders'
equity $ 196,246 $ 252,779
=========== =========
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ALLIED HEALTHCARE INTERNATIONAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

Nine Months Ended
June 30, June 30,
2008 2007
-------- --------
Cash flows from operating activities:
Net income $ 5,895 $ 5,033
Adjustments to reconcile net income to net
cash provided by operating activities:
Income from discontinued operations - ( 2,867)
Depreciation and amortization 2,470 2,545
Amortization of intangible assets 1,252 1,302
Amortization of debt issuance costs - 265
(Decrease) increase in provision for
allowance for doubtful accounts ( 580) 230
Gain on sale of fixed assets ( 22) -
Stock based compensation 669 522
Deferred income taxes ( 42) 166
Warrant costs - 435
Changes in operating assets and liabilities,
excluding
the effect of businesses acquired and sold:
Decrease in accounts receivable 670 6,303
Increase in prepaid expenses and other
assets ( 2,221) ( 1,550)
(Decrease) increase in accounts payable and
other liabilities ( 3,264) 3,979
------- -------

Net cash provided by continuing
operations 4,827 16,363
Net cash (used in) provided by
discontinued operations ( 569) 7,377
------- -------
Net cash provided by operating
activities 4,258 23,740
------- -------

Cash flows from investing activities:
Capital expenditures ( 2,146) ( 299)
Proceeds from sale of business 54,334 -
Proceeds from sale of property and equipment 48 -
Payments on acquisitions payable - ( 2,561)
-------- -------

Net cash provided by (used in)
continuing operations investing
activities 52,236 ( 2,860)
Net cash used in discontinued
operations investing activities - ( 1,538)
------- -------
Net cash provided by (used in)
investing activities 52,236 ( 4,398)
------- -------

Cash flows from financing activities:
Payments for financing fees - ( 528)
Payments on revolving loan (24,984) (14,638)
Borrowings under invoice discounting facility 615
Payments on invoice discounting facility ( 4,516)
Payments on long-term debt (23,984) ( 5,855)
Proceeds from sale of interest rate swap agreements 625 -
------- -------

Net cash used in financing activities (52,859) (20,406)
------- -------

Effect of exchange rate on cash 1 ( 1,182)
------- -------

Increase (decrease) in cash 3,636 ( 2,246)

Cash and cash equivalents, beginning of period 20,241 3,938
------- -------

Cash and cash equivalents, end of period $23,877 $ 1,692
======= =======

Supplemental cash flow information:
Cash paid for interest $ 1,149 $ 2,355
======= =======

Cash paid for income taxes, net $ 4,036 $ 1,532
======= =======
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Allied Healthcare International Inc.
Sandy Young, Chief Executive Officer
David Moffatt, Chief Financial Officer
UK 00-44-1785 810-600
sandyyoung@alliedhealthcare.com
davidmoffatt@alliedhealthcare.com
paulweston@alliedhealthcare.com
or
The Investor Relations Group
Adam Holdsworth / Rachel Colgate
212-825-3210
or
Cenkos Securities plc (Nominated Advisor)
Ian Soanes
London: 00-44-20-7397-8924

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