Allied Healthcare's Net Suffers on Flat Sales, Performance Issues

ST. LOUIS, Feb. 8 /PRNewswire-FirstCall/ -- Allied Healthcare Products,
Inc. (Nasdaq: AHPI) reported today that its net income in the second quarter
ending December 31 fell almost 98 percent from $293,000 last year, or 4 cents
per share, to about $6,500 in the current quarter, or zero cents per share.
For the first half of the 2008 fiscal year ending December 31, net income
fell about 81 percent, from about $495,000 last year, or six cents per share,
to about $93,500, or one cent per share, in the current fiscal year.
Customer orders for the first two quarters of fiscal 2008 were consistent
with those of the prior year, declining only about $235,000. Sales, however,
which depend on customer purchase order releases, declined about $1,000,000 or
3.6 percent, for the first two quarters of this fiscal year. Customer release
rates are expected to return to more normal levels in the second half of the
year, Allied said.
The sharp decline in net income resulted from gross margins that fell by
about $960,000 compared to last year. Low production levels, caused by lower
sales, combined with decreases in inventory to result in lower absorption of
fixed costs. Also, cost reduction programs to offset higher labor and
material costs did not take effect as planned in the first two quarters.
Material costs increased by 2.2 percent and labor costs by 4.5 percent
compared to the previous year, Allied said. "Those increases should have been
offset by cost reduction efforts, but we failed to execute in the first two
quarters," said Earl Refsland, Allied president and chief executive officer.
Difficulties in introducing a new product contributed to production delays,
Refsland said.
"We know what we have to do to correct problems we encountered," Refsland
said. "We just have to focus on the basics and execute."
Despite difficulties, Allied once again improved its cash position,
Refsland said. The company had a cash balance of about $4.7 million at the
end of the first half of the fiscal year, an increase of more than 17 percent
over the previous quarter and 30 percent over the previous year end.
Allied Healthcare Products, Inc. is a leading manufacturer of respiratory
care products, medical gas equipment and emergency medical products used in a
wide range of alternate care settings.
"SAFE HARBOR" STATEMENT: Statements contained in this release that are not
historical facts or information are "forward-looking statements." Words such
as "believe," "expect," "intend," "will," "should," and other expressions that
indicate future events and trends identify such forward-looking statements.
These forward-looking statements involve risks and uncertainties that could
cause the outcome and future results of operations and financial condition to
be materially different than stated or anticipated based on the
forward-looking statements. Such risks and uncertainties include both general
economic risks and uncertainties, risks and uncertainties affecting the demand
for and economic factors affecting the delivery of health care services, and
specific matters which relate directly to the Company's operations and
properties as discussed in its periodic filings with the Securities and
Exchange Commission. The Company cautions that any forward-looking statement
contained in this report reflects only the belief of the Company or its
management at the time the statement was made. Although the Company believes
such forward-looking statements are based upon reasonable assumptions, such
assumptions may ultimately prove inaccurate or incomplete. The Company
undertakes no obligation to update any forward-looking statement to reflect
events or circumstances after the date on which the statement was made.

ALLIED HEALTHCARE PRODUCTS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)

Three months ended, Six months ended,
December 31, December 31,
2007 2006 2007 2006

Net sales $13,626,016 $14,273,950 $27,727,634 $28,751,392
Cost of sales 10,714,172 10,757,222 21,648,777 21,715,111
Gross profit 2,911,844 3,516,728 6,078,857 7,036,281

Selling General and
administrative
expenses 2,932,428 3,091,418 5,975,398 6,282,415
Income (loss) from
operations (20,584) 425,310 103,459 753,866

Interest income (38,177) (28,059) (78,946) (56,228)
Other, net 11,113 (53,182) 26,263 (43,878)
(27,064) (81,241) (52,683) (100,106)

Income before provision
for income taxes 6,480 506,551 156,142 853,972

Provision for income
taxes - 213,395 62,597 359,183
Net income $6,480 $293,156 $93,545 $494,789

Net income per share
- Basic and diluted $0.00 $0.04 $0.01 $0.06

Weighted average common
shares
Outstanding -
Basic 7,883,577 7,877,120 7,883,577 7,868,512

Weighted average common
shares
Outstanding -
Diluted 8,130,901 8,059,573 8,122,607 8,064,650

ALLIED HEALTHCARE PRODUCTS, INC.
CONSOLIDATED BALANCE SHEET
(UNAUDITED)

December 31, 2007 June 30, 2007
ASSETS
Current assets:
Cash and cash equivalents $4,732,692 $3,638,870
Accounts receivable, net of
allowances of $325,000 and
$460,000, respectively 6,190,756 7,251,767
Inventories, net 11,810,149 12,999,472
Other current assets 523,486 275,254
Total current assets 23,257,083 24,165,363
Property, plant and equipment, net 10,267,716 10,677,000
Goodwill 15,979,830 15,979,830
Other assets, net 562,161 496,127
Total assets $50,066,790 $51,318,320

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $2,719,389 $3,040,313
Other accrued liabilities 1,945,603 2,508,820
Deferred income taxes 726,861 882,001
Deferred revenue 465,000 465,000
Total current liabilities 5,856,853 6,896,134

Deferred revenue 1,705,000 1,937,500

Commitments and contingencies

Stockholders' equity:
Preferred stock; $0.01 par value;
1,500,000 shares authorized; no
shares issued and outstanding - -
Series A preferred stock; $0.01 par
value; 200,000 shares authorized; no
shares issued and outstanding - -
Common stock; $0.01 par value; 30,000,000
shares authorized; 10,187,069 shares
issued at December 31, 2007 and June 30,
2007; 7,883,577 shares outstanding at
December 31, 2007 and June 30, 2007 101,871 101,871
Additional paid-in capital 47,479,012 47,441,163
Retained earnings 15,655,482 15,673,080
Less treasury stock, at cost;
2,303,492 shares at December 31, 2007
and June 30, 2007, respectively (20,731,428) (20,731,428)
Total stockholders' equity 42,504,937 42,484,686
Total liabilities and
stockholders' equity $50,066,790 $51,318,320

SOURCE Allied Healthcare Products, Inc.

Daniel C. Dunn, Chief Financial Officer of Allied Healthcare Products, Inc.,
+1-314-771-2400