Allied Healthcare fourth quarter 2010 sales decrease 7.9%

Recession-driven budget cuts by hospitals and governmental entities reduced sales for Allied Healthcare Products, Inc. (Nasdaq: AHPI) throughout fiscal 2010.  The company managed to offset much of the year's sales decline by cutting overhead and operating costs.  Still, the company reported a loss for the year.

For the fiscal year ending June 30, 2010, Allied sales fell about $6 million, or more than 11.7 percent, from about $52.1 million in 2009 to $46.0 million in the current fiscal year.  The cost of sales was reduced by 13.4 percent, from about $40.3 million to $34.9 million.  The company also cut its selling, general and administrative costs by about 8.5 percent, from about $13.0 million to $11.9 million in the current year.

The net loss for fiscal 2010 was $600,000, or a negative seven cents per basic and diluted share.  This compared to a loss of more than $16.8 million, or a negative $2.12 per basic and diluted share, for fiscal 2009.  The 2009 loss included the effect of a non-cash accounting charge of $16.0 million relating to the impairment of goodwill in the fourth quarter.  The 2009 goodwill impairment was caused by the decline of the Allied stock price in the year and a general downturn in orders caused by the recession.

Sales for the fourth quarter ending June 30, 2010, fell about 7.9 percent, from about $12.7 million to $11.7 million.  As it had throughout fiscal 2010, Allied reduced its cost of sales in the quarter by about 8.3 percent from approximately $9.6 million to less than $8.8 million.  The company also cut selling, general and administrative costs by about 18.2 percent, or $585,000, compared to the previous year.

Net income for the fourth quarter of fiscal 2010 was about $86,000, or one cent per basic and diluted share.  This compared to a loss in the prior year's fourth quarter of almost $16.1 million, or a negative $2.04 per basic and diluted share, reflecting the $16.0 million accounting charge for impairment of goodwill.

Despite the recession, Allied ended fiscal 2010 with an improved cash position, increasing cash on hand from $1.9 million last year to $5.3 million at the end of fiscal 2010.

"Strong execution by our operations team helped Allied offset much of the negative effects of sales declines," said Earl Refsland, president and chief executive officer. "Sales of mass casualty ventilators we introduced in the second half of fiscal 2009 also helped.  But we could not overcome the effects of unprecedented budget cuts by our customers."    

Surveys by Allied Healthcare Products indicate that sales declines throughout 2010 and latter 2009 were caused by the recession rather than losses of market share to competitors, Refsland said.

Sales of the new mass casualty ventilators, which cost a fraction of the price of traditional full-featured ventilators and are designed to be operated by non-professionals after brief instruction, totaled about $1.9 million for fiscal 2010, Refsland said.  As with the company's core products, sales of mass casualty ventilators were depressed by budget cuts by cash-strapped healthcare customers.