SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
- ---- Act of 1934
For the quarterly period ended December 31, 1997
Transition report pursuant to Section 13 or 15(d) of the Securities
- ---- Exchange Action of 1934
For the transition period from _______________________ to ______________________
Commission File Number 0-19266
ALLIED HEALTHCARE PRODUCTS, INC.
1720 Sublette Avenue
St. Louis, Missouri 63110
314/771-2400
I.R.S. Employment I.D. 25-1370721
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve months (or for such shorter periods that the
registrant was required to file such reports, and (2) has been subject to such
filing requirements for the past ninety days.
Yes X No
-------- --------
The number of shares of common stock outstanding at February 17, 1998 is
7,806,682 shares.
<PAGE>
INDEX
Page
Number
Part I - Financial Information
Item 1. Financial Statements
Consolidated Statement
of Operations - three months and six months 3
ended December 31,
1997 and 1996 (Unaudited)
Consolidated Balance Sheets -
December 31, 1997 (Unaudited) and 4-5
June 30, 1997
Consolidated Statements of Cash
Flow - six months ended 6-7
December 31, 1997 and 1996 (Unaudited)
Consolidated Statement of Changes
in Stockholders' Equity - six months 8
ended December 31, 1997 (Unaudited)
Notes to Consolidated
Financial Statements 9-10
Item 2. Management's Discussion and
Analysis of Financial Condition 11-22
and Results of Operations
Part II - Other Information 22
Item 6. Exhibits and Reports on Form 8-K 22
Signature 23
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ALLIED HEALTHCARE PRODUCTS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<S> <C> <C> <C> <C>
Three months ended Six months ended
December 31, December 31,
-------------------------- ----------------------------
1997 1996 1997 1996
-------------------------- ----------------------------
Net sales $24,032,988 $28,388,652 $54,205,892 $57,522,375
Cost of sales 17,290,512 19,663,935 38,234,136 39,557,557
------------ ------------ ------------- -------------
Gross profit 6,742,476 8,724,717 15,971,756 17,964,818
Selling, general and
administrative expenses 6,322,144 8,233,434 13,574,731 16,611,268
Gain on sale of business (12,812,927) 0 (12,812,927) 0
Non-recurring impairment losses 9,778,259 0 9,778,259 0
------------ ------------ ------------- -------------
Income from operations 3,455,000 491,283 5,431,693 1,353,550
Other expenses:
Interest expense 1,212,581 1,408,745 3,072,400 2,524,175
Other, net 40,311 28,980 87,250 54,936
------------ ------------ ------------- -------------
1,252,892 1,437,725 3,159,650 2,579,111
------------ ------------ ------------- -------------
Income (loss) before provision
(benefit) for income taxes and
extraordinary loss 2,202,108 (946,442) 2,272,043 (1,225,561)
Provision (benefit) for income taxes 8,886,340 (390,000) 9,063,463 (491,850)
------------ ------------ ------------- -------------
Loss before extraordinary loss (6,684,232) (556,442) (6,791,420) (733,711)
Extraordinary loss on early
extinguishment of debt, net of
income tax benefit of $373,191 0 0 530,632 0
------------ ------------ ------------- -------------
Net Loss ($6,684,232) ($556,442) ($7,322,052) ($733,711)
============ ============ ============= =============
Basic and diluted loss per share:
Loss before extraordinary loss ($0.86) ($0.07) ($0.87) ($0.09)
Extraordinary loss --- --- ($0.07) ---
------------ ------------ ------------- -------------
Net Loss ($0.86) ($0.07) ($0.94) ($0.09)
============ ============ ============= =============
Weighted average shares 7,806,682 7,796,682 7,803,389 7,796,682
============ ============ ============= =============
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
ALLIED HEALTHCARE PRODUCTS, INC.
CONSOLIDATED BALANCE SHEET
ASSETS
<TABLE>
<S> <C> <C>
December 31, June 30,
1997 1997
------------- -------------
(Unaudited)
Current Assets:
Cash $1,374,532 $988,436
Accounts receivable, net of allowance for doubtful
accounts of $971,745 and $1,225,326, respectively 16,648,773 23,093,037
Inventories 21,240,163 26,052,991
Other current assets 275,335 1,544,811
------------- -------------
Total current assets 39,538,803 51,679,275
------------- -------------
Property, plant and equipment, net 18,817,351 20,848,870
Goodwill, net 28,434,770 50,763,511
Deferred income taxes-noncurrent 0 1,665,069
Other assets, net 709,731 1,386,291
------------- -------------
Total assets $87,500,655 $126,343,016
============= =============
See accompanying Notes To Consolidated Financial Statements.
(CONTINUED)
</TABLE>
<PAGE>
ALLIED HEALTHCARE PRODUCTS, INC.
CONSOLIDATED BALANCE SHEET
(CONTINUED)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<S> <C> <C>
December 31, June 30,
1997 1997
------------- -------------
(Unaudited)
Current liabilities:
Accounts payable $9,659,203 $14,048,235
Current portion of long-term debt 2,043,278 12,890,772
Other current liabilities 9,791,475 5,997,670
------------- -------------
Total current liabilities 21,493,956 32,936,677
------------- -------------
Long-term debt 13,260,113 34,041,300
Deferred income tax liability-noncurrent 634,849 0
Commitments and contingencies
Stockholders' equity:
Preferred stock; $.01 par value; 1,500,000 shares authorized; no shares
issued and outstanding; which includes Series A preferred stock; $.01 par
value; 200,000 shares authorized; no shares issued and outstanding
Common stock; $.01 par value; 30,000,000 shares authorized; 7,806,682 and
7,796,682 shares issued and outstanding at December 31, 1997 and
June 30, 1997, respectively 101,102 101,002
Additional paid-in capital 47,014,621 46,945,971
Common stock in treasury, at cost (20,731,428) (20,731,428)
Retained earnings 25,727,442 33,049,494
------------- -------------
Total stockholders' equity 52,111,737 59,365,039
------------- -------------
Total liabilities and stockholders' equity $87,500,655 $126,343,016
============= =============
See accompanying Notes To Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
ALLIED HEALTHCARE PRODUCTS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<S> <C> <C>
Six months ended
December 31,
-----------------------------
1997 1996
Cash flows from operating activities: ------------- -------------
Net loss ($7,322,052) ($733,711)
Adjustments to reconcile net loss to net cash provided by (used in) operating
activities:
Depreciation and amortization 2,891,467 2,662,639
Gain on sale of Bear Medical (12,812,927) 0
Loss on refinancing of long-term debt 903,823 0
Noncash portion of non-recurring impairment losses 9,528,398 0
Decrease (increase) in accounts receivable, net 465,885 (543,304)
Decrease (increase) in inventories (486,272) 6,438
Decrease in income taxes receivable 0 1,267,791
Decrease in deferred income taxes - asset 2,001,014 0
Decrease (increase) in other current assets 358,608 (652,368)
Decrease in accounts payable (2,906,836) (884,760)
Increase in accrued income taxes 5,530,512 0
Increase (decrease) in other current liabilities (1,490,204) 142,914
Increase in deferred income taxes - liability 634,849 0
------------- -------------
Net cash provided by (used in) operating activities (2,703,735) 1,265,639
------------- -------------
Cash flows from investing activities:
Capital expenditures, net (468,856) (1,300,761)
Proceeds on sale of Bear Medical, net of disposal costs 36,001,160 0
------------- -------------
Net cash provided by (used in) investing activities 35,532,304 (1,300,761)
------------- -------------
(CONTINUED)
</TABLE>
<PAGE>
ALLIED HEALTHCARE PRODUCTS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(CONTINUED)
(UNAUDITED)
<TABLE>
<S> <C> <C>
Six months ended
December 31,
-----------------------------
1997 1996
------------- -------------
Cash flows from financing activities:
Proceeds from issuance of long-term debt 26,000,000 5,000,000
Payments of long-term debt (35,642,061) (839,791)
Borrowings under revolving credit agreement 74,751,622 12,609,715
Payments under revolving credit agreement (96,659,252) (15,720,794)
Issuance of common stock 68,750 0
Debt issuance costs (961,532) (551,161)
Dividends paid on common stock 0 (545,768)
------------- -------------
Net cash used in financing activities (32,442,473) (47,799)
------------- -------------
Net increase (decrease) in cash and equivalents 386,096 (82,921)
Cash and equivalents at beginning of period 988,436 1,489,133
------------- -------------
Cash and equivalents at end of period $1,374,532 $1,406,212
============= =============
Supplemental disclosures of cash flow information: Cash paid during the period
for:
Interest $3,668,177 $2,604,221
Income taxes $77,118 $72,500
See accompanying Notes To Consolidated Financial Statements.
</TABLE>
<PAGE>
ALLIED HEALTHCARE PRODUCTS, INC.
CONSOLIDATED STATEMENT OF CHANGES IN
STOCKHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<S> <C> <C> <C> <C> <C>
Additional
Preferred Common paid-in Treasury Retained
stock stock capital stock earnings
---------- ---------- ------------ ------------- ------------
Balance, June 30, 1997 $0 $101,002 $46,945,971 ($20,731,428) $33,049,494
Issuance of common stock 100 68,650
Net loss for the
six months ended
December 31, 1997 (7,322,052)
---------- ---------- ------------ ------------- ------------
Balance,
December 31, 1997 $0 $101,102 $47,014,621 ($20,731,428) $25,727,442
========== ========== ============ ============= ============
See accompanying Notes To Consolidated Financial Statements.
</TABLE>
<PAGE>
ALLIED HEALTHCARE PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Unaudited Financial Statements
The accompanying unaudited financial statements have been prepared in
accordance with the instructions for Form 10-Q and do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments, consisting only of normal recurring adjustments considered
necessary for a fair presentation, have been included. Operating results for any
quarter are not necessarily indicative of the results for any other quarter or
for the full year. These statements should be read in conjunction with the
financial statements and notes to the consolidated financial statements thereto
included in the Company's Form 10-K for the year ended June 30, 1997.
2. Inventories
Inventories are comprised as follows:
December 31, June 30,
1997 1997
(Unaudited)
Work-in-progress $ 1,524,522 $ 2,726,585
Component Parts 15,812,672 $ 18,679,482
Finished Goods 3,902,969 $ 4,646,924
$ 21,240,163 $ 26,052,991
=========== ============
The above amounts are net of a reserve for obsolete and excess inventory of
approximately $2.1 million and $1.7 million at December 31, 1997 and June 30,
1997, respectively.
3. Debt Refinancing
On August 8, 1997 the Company refinanced its existing debt through a new
$46.0 million credit facility with Foothill Capital Corporation (Foothill), a
division of Norwest Bank. The Foothill credit facility, with a blended average
interest rate of 10.2%, is comprised of a $25.0 million three-year revolving
line of credit, three-year term loans of $10.0 million and $7.0 million,
respectively, and a $4.0 million loan maturing in February 1998. In conjunction
with the new financing agreement, Allied placed an additional $5.0 million in
subordinated debt financing, which matures in February 1998, with several
related parties to
<PAGE>
the Company. In addition, the Company issued 112,500 warrants with an exercise
price of $7.025 per share, 62,500 of which were issued to the holders of the
subordinated debt and the remaining warrants were issued to Foothill. In
conjunction with the debt refinancing, the Company recorded a $0.5 million, net
of taxes, extraordinary expense to write off the unamortized loan costs of the
previous credit facility.
4. Sale of Bear Medical Systems and BiCore Monitoring Systems
On October 31, 1997, the Company sold the assets of Bear Medical Systems
and its subsidiary BiCore Monitoring Systems, to Thermo Electron Corporation for
approximately $35.7 million, net of transaction costs, plus the assumption of
certain liabilities, resulting in a one-time, pre-tax gain of approximately
$12.8 million.
The net proceeds of approximately $29.5 million after taxes were utilized
to repay a significant portion of its term notes and repay all of its
subordinated debt, $16.0 million, of which had a coupon rate of 14.0% per annum.
5. Non-Recurring Items
In the second quarter of fiscal 1997, non-recurring items of $9,778,259
were charged to operations. These items included a $8,874,729 reduction in
goodwill for certain subsidiaries to reflect their current value, $403,530 in
connection with discontinuing operations in its Mt. Vernon, Ohio facility, and
$500,000 in connection with the early termination of a consulting agreement.
The goodwill impairment provisions reflect the Company's evaluation of the
carrying value of its remaining business subsequent to the sale of Bear and
BiCore in the second quarter of fiscal 1998. Such goodwill writedowns, which
were determined pursuant to the Company's impairment accounting policy described
in Notes 2 to the June 30, 1997 financial statements, primarily related to the
Company's headwall and disposable products businesses, which continue to
experience weakness in financial results due to a variety of market conditions.
Due to the non-deductible nature of these goodwill writedowns for income tax
reporting purposes, the Company's effective income rate is substantially higher
in the three and six months ended December 31, 1997.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
GENERAL
The following discussion summarizes the significant factors affecting the
consolidated operating results and financial condition of Allied Healthcare
Products, Inc. ("Allied" or the "Company") for the three month and six month
periods ended December 31, 1997 compared to the three month and six month
periods ended December 31, 1996. This discussion should be read in conjunction
with the December 31, and June 30, 1997 consolidated financial statements and
accompanying notes thereto included in the Annual Report on Form 10-K for the
year ended June 30, 1997 and this Quarterly Report on Form 10-Q for the quarter
ended December 31, 1997.
Certain statements contained herein are forward-looking statements. Actual
results could differ materially from those anticipated as a result of various
factors, including cyclical and other industry downturns, the effect of currency
devaluations and recessionary conditions in Asian markets, the effects of
federal and state legislation on health care reform, including Medicare and
Medicaid financing, the ability to realize the full benefit of recent capital
expenditures or consolidation and rationalization activities, difficulties or
delays in the introduction of new products or disruptions in selling,
manufacturing and/or shipping efforts.
The results of operations for the second quarter of fiscal 1998 were effected by
several one time items. During the quarter, the Company sold the assets of its
ventilation products division for a gain. The proceeds from this sale were used
to significantly pay down debt and to provide additional liquidity. The Company
also recorded several non-recurring items and other charges to operations in the
second quarter of fiscal 1998. Such non-recurring items reflect changes in
business conditions resulting from the sale of the ventilation products division
and other changes in market conditions. In addition, reserves for inventories
and bad debts were increased during the quarter. The result of these activities
is that the Company strengthened its balance sheet by reducing debt, reducing
intangible assets, and increasing reserves.
Further complicating the review of operations is the year to year comparisons
resulting from the sale of the ventilation products division on October 31,
1997. The fiscal 1998 results include ventilation products division operations
for one month and four months in the three month and six month periods ended
December 31, 1997 while the fiscal 1997 results include ventilation products
division operations for the full three month and six month in the periods ended
December 31, 1996.
Each of these components and their impact on the operating results are as
follows:
SALE OF VENTILATION PRODUCTS DIVISION
On October 31, 1997, the Company sold the assets of Bear Medical Systems, Inc.
("Bear") and its subsidiary BiCore Monitoring Systems, Inc. ("BiCore") to Thermo
Electron Corporation for $36.6 million plus the assumption of certain
liabilities. The net proceeds of $29.5 million, after expenses as well as
federal and state taxes payable of approximately $6.1 million due in March 1998,
were utilized to repay a significant portion of its term notes and to repay all
of its subordinated debt, $15.8 million of which had a coupon rate of 14.0% per
annum. Of the debt which was repaid, $9.0 million would have matured in February
1998.
<PAGE>
The sale of these assets resulted in an estimated gain before taxes for
financial reporting purposes of $12.8 million, which is recorded in the
Company's results of operations for the three months ended December 31, 1997.
The gain on sale of the ventilation products division, as a discrete item,
resulted in a tax provision of $9.4 million. The relatively higher effective tax
rate on this transaction reflected the fact that approximately $12.7 million of
goodwill associated with these businesses is not deductible for income tax
purposes. The net income effect of the gain on sale of business is income of
approximately $3.4 million, or $0.43 per share.
DEBT REDUCTION
The proceeds from the gain on the sale of the ventilation products division were
used to significantly pay down the Company's debt during the second quarter of
fiscal 1998. The $36.6 million received from the sale of this business was used
to reduce the Company's commercial debt by $35.6 million and to pay the $1.0
million of expenses associated with such sale.
Prior to the sale of the business the Company had $45.6 million in outstanding
commercial and subordinated debt. On November 3, 1997 , the Company repaid two
term notes totaling $10.8 million, which had a coupon rate of 14.0% per annum,
and significantly reduced the outstanding balance of its revolving line of
credit and on November 4, 1997 repaid $5.0 million of subordinated debt, which
also had a coupon rate of 14.0% per annum, from the proceeds obtained from the
sale of business.
NON-RECURRING CHARGES
During the second quarter of fiscal 1998 the Company reevaluated the carrying
value of its various businesses and recorded $9.8 million of non-recurring
charges to reflect the changes in business conditions resulting from the sale of
the ventilation and due to other changes in market conditions discussed below,
which culminated during the second quarter of fiscal 1998. The elements
comprising the $9.8 million of non-recurring charges are:
Goodwill writedowns, which were determined pursuant to the Company's impairment
policy as described in Note 2 to the June 30, 1997 financial statements, totaled
$8.9 million for the four following businesses:
$4.4 million associated with the partial goodwill writedown related to the B&F
disposable products business. Continuing weakness in financial results of
the business due to market condition changes in the home healthcare market,
pressures on pricing, and overall weakness in financial results of the
national home health care chains caused Allied to re-evaluate and adjust
the carrying value of this business.
$2.4 million associated with the writedown of goodwill for Allied's headwall
business which continues to experience weakness in financial results due to
market conditions.
$1.6 million associated with the writedown of Omni-Tech Medical, Inc. goodwill.
This transportation ventilator business is directly related to the Bear
ventilation products division which was recently sold and is not
anticipated to contribute to the ongoing operations of the Company.
<PAGE>
$0.5 million associated with the write-down of goodwill for the Design
Principles, Inc. backboard business. Increased costs have significantly
eroded the margins of this business necessitating a re-evaluation of the
value of the goodwill related to the business.
In addition to the non-cash goodwill write-downs the other non-recurring items
include:
$0.5 million of consulting fees related to a co-operative purchasing study. The
Company's participation in the study has been formally terminated.
$0.4 million for the writedown of leasehold improvements and a reserve of the
remaining lease payments for the Mt. Vernon, Ohio facility which was closed
as part of the Company's rationalization initiatives. The tenant subletting
this facility is operating under Chapter 11 reorganization protection.
The combined tax impact of these non-recurring charges, resulted in a $0.4
million tax benefit. This minimal tax benefit resulted from the
non-deductibility for tax purposes of the $8.9 million of goodwill writedowns.
The non-recurring charges, as a discrete item, resulted in a net loss of
approximately $9.4 million or a loss of $1.21 per share.
As a result of the writedown of the carrying value of goodwill for certain
businesses described above the Company expects to reduce its annual amortization
charges by $0.3 million or $0.04 per share.
Financial Information:
The following table sets forth, for the fiscal period indicated, the percentage
of net sales represented by certain items reflected in the Company's
consolidated statement of operations.
<TABLE>
<S> <C> <C> <C> <C>
Three Months Ended Six Months Ended
December 31, December 31,
1997 1996 1997 1996
Net Sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 71.9 69.3 70.5 68.8
Gross profit 28.1 30.7 29.5 31.2
Total SG&A expenses 26.3 29.0 25.0 28.8
Gain on sale of business (53.3) 0.0 (23.6) 0.0
Non-recurring charges 40.7 0.0 18.0 0.0
Income from operations 14.4 1.7 10.0 2.4
Interest/other expense 5.2 5.1 5.8 4.5
Income (loss) before provision
(benefit) for income taxes 9.2 (3.4) 4.2 (2.1)
Provision (benefit) for income taxes 37.0 (1.4) 16.7 (0.8)
Net income (loss) before
extraordinary item (27.8) (2.0) (12.5) (1.3)
Extraordinary (loss) 0.0 0.0 (1.0) 0.0
Net (loss) (27.8)% (2.0)% (13.5)% (1.3)%
</TABLE>
<PAGE>
RESULTS OF OPERATIONS
Allied manufactures and markets medical gas equipment, respiratory therapy
equipment and emergency medical products. Set forth below is certain information
with respect to amounts (dollars in thousands) and percentages of net sales
attributable to medical gas equipment respiratory therapy equipment, and
emergency medical products for the three months and six months ended December
31, 1997 compared to the three months and six months ended December 31, 1996.
Three Months Ended
December 31, 1997 December 31, 1996
% of % of
total total
Net net Net net
sales sales sales sales
Medical Gas Equipment $10,691 44.5% $10,144 35.7%
Respiratory Therapy Equipment 10,764 44.8% 15,627 55.1%
Emergency Medical Products 2,579 10.7% 2,617 9.2%
Total $24,034 100.0% $28,388 100.0%
Six Months Ended
December 31, 1997 December 31, 1996
%of %of
total total
Net net Net net
sales sales sales sales
Medical Gas Equipment $22,827 42.1% $20,240 35.2%
Respiratory Therapy Equipment 25,822 47.6% 31,559 54.9%
Emergency Medical Products 5,558 10.3% 5,723 9.9%
Total $54,207 100.0% $57,522 100.0%
Three months ended December 31, 1997 compared to three months ended December 31,
1996
Net sales for the three months ended December 31, 1997 of $24.0 million were
$4.4 million below sales of $28.4 million for the three months ended December
31, 1996. Of the $4.4 million decline in sales, $3.7 million of the decline was
attributable to the previously discussed sale of the ventilation products
division and $0.7 million of the decline relates to the remaining product lines.
The $0.7 million decline in remaining business sales represents a 3.2% decline
of these sales from year to year. Factors impacting sales in the second quarter
include external and internal issues. External, or macro economic issues
impacting the Company include the continued pricing pressures in the home health
care market, the Asian currency devaluations and changes in Medicaid and
Medicare reimbursement rates, some of which are in effect and
<PAGE>
some of which have been proposed. Certain internal issues also have impacted
Company operations. The sale of the ventilation products division caused some
short term disruptions in the field sales force which needed to be realigned to
provide sufficient coverage in the domestic markets. Certain geographic sales
territories had to be realigned or supplemented as the field sales force
previously sold both ventilators and the remaining core products of the Company.
The capital expenditure project in the Company's Toledo, Ohio facility,
described in the Company's June 30, 1997 Form 10-K and Form 10-Q for the quarter
ended September 30, 1997, made significant progress but, to date, has not been
completed.
New orders, or the pace of incoming business, of $23.7 million for the three
months ended December 31, 1997 were $8.0 million below orders of $31.7 million
in the prior year same period. Of the $8.0 million decline in orders, $5.2
million was attributable to the sale of the ventilation products division while
$2.8 million of the decline relates to the remaining businesses. This 12.2%
decline in remaining business sales were attributable to the external and
internal factors previously discussed combined with the volatility in order
patterns for the headwall business and the absence of several large emergency
products orders, which exceeded $1.0 million in the prior year.
Medical gas equipment sales in the second quarter of fiscal 1998 of $10.7
million were $0.6 million, or 5.4%, in excess of same period prior year of $10.1
million. Medical gas construction sales and headwall sales had sales increases
of 24.1% and 38.7%, respectively, in the second quarter of fiscal 1998 compared
to the same period prior year sales. These products are generally ordered in a
period or periods prior to the actual shipment date. The increase in shipments
of these products in the second quarter of fiscal 1998 reflect the strong order
trend experienced during the past three to five quarters. Medical gas suction
and regulation device sales declined by 12.1% in the second quarter of fiscal
1998 compared to the same period prior year sales. These products, which are
generally shipped in the same quarter in which they are ordered, declined in
sales as a result of soft Asian demand and because of a reduction in stocking
levels of the Company's domestic distributors. Orders for medical gas equipment
products in the second quarter of fiscal 1998 of $9.1 million were $1.0 million,
or 9.7%, under orders of $10.1 million in the second quarter of fiscal 1997.
Both headwall orders, which are subject to frequent fluctuations from period to
period because of the large dollar, infrequent order patterns of this product,
and medical gas suction and regulation device orders, which experienced softness
as previously discussed, were both below prior year comparable period orders.
Medical gas construction product orders increased from period to period in spite
of a decline in orders from Asian markets.
Respiratory therapy equipment sales in the second quarter of fiscal 1998 of
$10.8 million were $4.9 million below the prior year same period sales of $15.6
million. Of the $4.9 million decline in respiratory therapy equipment sales,
$3.7 million of the decline was attributable to the previously discussed sale of
the ventilation products division and $1.2 million of the decline relate to
remaining product lines. Sales to the home healthcare market declined by 16.4%.
Reduction in sales of low margin aluminum cylinders, competitive pressures, and
manufacturing inefficiencies in the Toledo, Ohio facility contributed to this
decline. Additionally, pricing pressures caused by the consolidation of home
health care dealers and continued concerns over potential reductions in home
oxygen therapy reimbursement rates continued to impact sales of home health care
products. While the Company is unable to predict when these latter two
macroeconomic factors will be resolved, until there is a resolution of these
issues, current customer patterns are likely to continue. The Company has
continued to experience capacity limitations at its Toledo, Ohio facility
although late in the quarter improvements in direct labor constraints and plant
layout changes have begun to improve efficiencies and throughput of disposable
products. Sales to the hospital market declined by 4.5% in the three months
ended December 31, 1997 compared to the prior year same period. The new tooling
for the disposable canister units has now been completed which the Company hopes
will result in
<PAGE>
improved fiscal 1998 third quarter hospital sales. In addition, the new Respical
calibration device has been introduced in the third quarter of fiscal 1998.
Orders of respiratory therapy products in the second quarter of fiscal 1998 for
the Company's core products declined by 3.1% as a result of factors discussed
above.
Emergency medical product sales in the second quarter of fiscal 1998 of $2.6
million were unchanged from the comparable prior year period. Orders for
emergency medical products, however, decreased to $2.5 million in the second
quarter of fiscal 1998 from $4.0 million in the second quarter of fiscal 1997.
The decline is attributable to the absence of several large orders for the same
prior year period, which exceeded $1.0 million, and the softness in demand from
Asian markets.
The impact of the Asian currency devaluation combined with the sale of the
ventilation products division affected the Company's international sales in the
second quarter of fiscal 1998. International sales, which are included in the
product line sales discussed above, were $6.4 million for the three months ended
December 31, 1997, a decline of $1.5 million from sales of $7.9 million for the
three months ended December 31, 1996. The decline in international sales of
which $2.0 million resulted from the previously discussed sale of the
ventilation products division was partially offset by a year to year increase in
core business sales of $0.5 million, principally from prior quarter orders.
International orders of core business products in the second quarter of fiscal
1998 were 25.2% below the prior year same period international orders because of
the same factors previously discussed. As a result of the sale of the
ventilation products division the percent of the total net sales represented by
the Company's international sales are expected to approximate 20% in future
periods.
Gross profit for the second quarter of fiscal 1998 of $6.7 million was $2.0
million below the gross profit of $8.7 million in the second quarter of fiscal
1997. Gross profit as a percent to net sales was 28.1% and 30.7% for the second
quarter fiscal 1998 and fiscal 1997, respectively. The sale of higher margin
ventilator business impacted the decline in gross margin as these products were
part of the Company's business for one month of fiscal 1998 compared to the full
three months in fiscal 1997. Continued pricing pressures brought on by the
consolidations and cost containment initiatives of healthcare providers combined
with the Company's planned reductions in inventories led to reduced
manufacturing throughput and absorption of plant overhead. Both of these factors
also reduced margins as a percent to net sales. Finally, the Company increased
inventory reserves in excess of $0.5 million in the second quarter of fiscal
1998.
Selling, General, and Administrative ("SG&A") expenses for the second quarter of
fiscal 1998 were $6.3 million, a decline of $2.0 million from SG&A expenses of
$8.3 million in the second quarter of fiscal 1997. This decline is attributable
to the sale of the ventilation products division. In addition, certain
investments in field sales force training and other consulting expenses made in
the prior year did not repeat in the second quarter of fiscal 1998. In the
current year, the Company installed its computer systems in the Toledo, Ohio
operations and also incurred recruitment costs to fill several key positions. As
a percent to net sales, SG&A expenses declined to 26.3% in the second quarter of
fiscal 1998 compared to 29.0% in the second quarter of fiscal 1997.
As previously discussed, the Company recorded in operating income a
non-recurring gain on sale of the ventilation products division of $12.8 million
and recorded several non-recurring impairment losses and other charges totaling
$9.8 million in the second quarter of fiscal 1998.
Income from operations in the second quarter of fiscal 1998 of $3.5 million was
$3.0 million above income from operations of $0.5 million in the second quarter
of fiscal 1997. The increase was attributable to the net effects of the
non-recurring items described above. Exclusive of the previously discussed one
time items, income from operations would have been $0.5 million for both
periods.
<PAGE>
Interest expense for the second quarter of fiscal 1998 was $1.2 million, a
decrease of $0.2 million from interest expense of $1.4 million in the prior
year. The Company reduced its outstanding debt in early November 1997 by $35.7
million dollars by applying the net proceeds from the sale of the ventilation
products division. Taxes due on the gain, of approximately $6.1 million, will be
paid in March, 1998. Accordingly debt levels will be lower until such payment is
made. Interest expense during the second quarter of fiscal 1998 included $0.4
million for the full amortization of loan costs related to the portion of debt
that was paid down with the proceeds from the gain. Such amortization of loan
costs partially offset the reduction in interest expense resulting from lower
average debt levels in the second quarter of fiscal 1998 compared to the same
period in fiscal 1997.
Allied had income before provision for income taxes of $2.2 million in the
second quarter of fiscal 1998 compared to a loss before provision for income
taxes of $0.9 million in the prior year comparable period, an increase of $3.1
million based on the factors described above.
The provision for income taxes of $8.9 million in the second quarter of fiscal
1998 as compared to income before taxes of $2.2 million, resulted in an unusual
effective tax rate of 403%, which primarily reflected the tax effects relative
to the non-recurring items recorded in the quarter as previously discussed. In
the second quarter of fiscal 1997 Allied recorded a tax benefit of $0.4 million,
for an effective tax rate of 41% on a loss before taxes of $0.9 million.
The net loss for the second quarter of fiscal 1998 is $6.7 million, or $0.86 per
basic share. Exclusive of the gain on the sale of the business and non-recurring
charge the net loss for the second quarter of fiscal 1998 would have been $0.7
million or $0.08 per basic share. Earnings per share amounts reported are basic
earnings per share, which are substantially the same as fully diluted earnings
per share. The number of common shares used in the calculation of earnings per
share was 7,806,682 and 7,796,682 for the second quarter of fiscal 1998 and
fiscal 1997, respectively.
SIX MONTHS ENDED DECEMBER 31, 1997 COMPARED TO SIX MONTHS ENDED DECEMBER 31,
1996
Net sales for the six months ended December 31, 1997 were $54.2 million, a
decrease of $3.3 million from net sales of $57.5 million in the same period in
the prior year. Of the $3.3 million decline in net sales, $3.7 million related
to the sale of the ventilation products division, in the second quarter of
fiscal 1998 which was partially offset by an increase in sales of core business
products of $0.4 million. Certain external and internal factors, as previously
discussed, impacted sales in the first six months of fiscal 1998. Of the $0.4
million increase in core product sales for the six months ended December 31,
1997, an increase of $1.1 million occurred in the first quarter which was
partially offset by a decline of $0.7 million in the second quarter. Orders for
the six months ended December 31, 1997 of $54.7 million was $6.9 million less
than orders of $61.6 million for the six months ended December 31, 1996. Of the
$6.9 million decline in orders, $4.6 million related to the sale of the
ventilation products division while $2.3 million related to the Company's core
business. The decline in core business orders consisted of a decrease in the
second quarter orders of $2.7 million which was partially offset by a $0.4
million increase in the first quarter year to year order comparison. Management
can not predict when the ramifications of the previously discussed macroeconomic
conditions will be resolved, particularly the decline in the Asian market and
pressures from the home healthcare market. Internal operational issues, as
previously discussed, are being addressed and have been improving, however,
there can be no assurance to the extent that these issues will be resolved.
<PAGE>
Medical gas equipment sales for the six months ended December 31, 1997 of $22.8
million were $2.4 million, or 12.8% above same period prior year sales of $20.2
million. Medical gas system construction sales, headwall sales, medical gas
suction and regulation device sales experienced increases of 20.1%, 39.8% and
2.2%, respectively, for the six months ended December 31, 1997 compared to the
same period prior year sales. The increase in shipments of these products for
the six months ended December 31, 1997 reflected the strong order trend
experienced during the past three to five quarters; however, order patterns for
these products, particularly medical gas suction and regulation devices
experienced market softness, as previously discussed, during the second quarter
of fiscal 1998.
Orders for medical gas equipment of $19.8 million for the six months ended
December 31, 1997 were $1.4 million, or 6.6% less than orders of $21.2 million
for the six months ended December 31, 1996. Medical gas construction orders have
increased by 5.7% while headwall orders, which are subject to frequent
fluctuations in order patterns, declined 44.5%, and orders for medical gas
suction and regulation devices, which experienced soft second quarter demand, as
previously discussed, have declined 9.5% as compared to the prior year same
period orders.
Respiratory therapy equipment sales for the six months ended December 31, 1997
of $25.8 million were $5.7 million below the prior year same period sales of
$31.5 million. Of the decline, $3.7 million was attributable to the previously
discussed sale of the ventilator business and $2.0 million of the decline
relates to the Company's remaining product lines. Sales to the home healthcare
market declined by 16.2% attributable to external factors in the market as
previously discussed. In addition, pricing pressures caused by the consolidation
of home health care dealers and continued concerns over potential Medicare and
Medicaid reductions in home oxygen therapy reimbursement rates continued to
impact sales of home health care products. The Company has continued to
experience capacity limitations at the Toledo, Ohio facility although recent
improvements in direct labor constraints and plant layout changes have begun to
improve efficiencies and throughput of disposable products. Sales to the
hospital market increased by 9.5% in the six months ended December 31, 1997
compared to the prior year same period but had declined by 4.5% in the second
quarter of fiscal 1998, as previously discussed. The new tooling for the
disposable canister units has now been completed which the Company hopes will
improve fiscal 1998 third quarter sales. In addition, the new Respical
calibration device has been introduced in the third quarter of fiscal 1998.
Orders of respiratory therapy products for the six months ended December 31,
1997 for the remaining products declined by 3.6% as a result of factors
discussed above.
Emergency medical product sales of $5.6 million for the six months ended
December 31, 1997 were $0.1 million, or 2.9% under sales of $5.7 million in the
comparable prior year period. Orders for emergency medical products decreased to
$6.3 million for the six months ended December 31, 1997 from $6.5 million for
the six months ended December 31, 1996. The decline was attributable to the
absence of several large orders booked in the second quarter of fiscal 1997,
which exceeded $1.0 million, that did not repeat in the current year and due to
softness in demand from Asian markets.
The impact of the Asian currency devaluations combined with the sale of the
ventilation products division, both events occurring in the second quarter of
fiscal 1998, affected the Company's international sales for the six months ended
December 31, 1997. International sales, which are included in the product line
sales discussed above, were $16.0 million for the six months ended December 31,
1997, a decline of $0.1 million from international sales of $16.1 million for
the six months ended December 31, 1996. A $2.0 million decline in sales
resulting from the previously discussed sale of the ventilation products
division was partially
<PAGE>
offset by a year to year increase in core business sales of $1.9 million. Core
business international sales increased by 21.2% from year to year, however, the
shipments primarily related to prior quarter orders. International orders of
core business products were 3.3% ended December 31, 1997 below the prior year
same period international orders. As a result of the sale of the ventilation
products division the percent of total net sales represented by the Company's
international sales is expected to approximate 20%.
Gross profit for the six months ended December 31, 1997 of $16.0 million was
$2.0 million below the gross profit of $18.0 million for the six months ended
December 31, 1996. Gross profit as a percent to net sales was 29.5% and 31.2%
for the six months ended December 31, 1997 and December 31, 1996, respectively.
The sale of the high margin ventilation products division impacted the decline
in gross margin as these products were part of the Company's business for only
four months of fiscal 1998 compared to the full six months in fiscal 1997.
Continued pricing pressures brought on by the consolidations and cost
containment initiatives of healthcare providers and the Company's planned
reductions in inventories led to reduced manufacturing throughput resulting in
lower absorption of plant overhead which also reduced margins as a percent to
net sales. Finally, the Company increased inventory reserves in excess of $0.8
million in the six months ended December 31, 1997.
Selling, General, and Administrative ("SG&A") expenses for the six months ended
December 31, 1997 were $13.6 million, a decline of $3.0 million from SG&A
expenses of $16.6 million for the six months ended December 31, 1996. The
decline in SG&A primarily relates to the sale of the ventilation products
division. In addition, certain investments in field sales force training,
product literature expenditures, and other consulting expenses made in the prior
year did not repeat in fiscal 1998. In the current year, the Company installed
to its computer systems at its Toledo, Ohio operations and also incurred
recruitment costs to fill several key positions. As a percent to net sales, SG&A
expenses declined to 25.0% for the six months ended December 31, 1997 compared
to 28.9% for the six months ended December 31, 1996.
As previously discussed, the Company recorded a non-recurring gain on sale of
the ventilation products division of $12.8 million in operating income and
recorded several non-recurring charges totaling $9.8 million in the second
quarter of fiscal 1998.
Income from operations for the six months ended December 31, 1997 of $5.4
million was $4.0 million above income from operations of $1.4 million for the
six months ended December 31, 1996. The increase was primarily attributable to
the net effects of the non-recurring items described above combined with
operational improvements noted in the first quarter of fiscal 1998. Without the
non-recurring items discussed above, income from operations would have been $2.4
million for the six months ended December 31, 1997 compared to $1.4 million for
the prior year same period.
Interest expense for the six months ended December 31, 1997 was $3.1 million, an
increase of $0.5 million over interest expense of $2.5 million in the prior
year. This increase was attributable to the significant fees the Company paid to
its previous bank syndicate in the first quarter of fiscal 1998 to obtain
covenant waivers. On August 8, 1997, the Company refinanced its commercial debt
and entered into a $46.0 million credit facility with Foothill Capital
Corporation and the Company also obtained $5.0 million of subordinated debt. The
refinancing arrangement eliminated the requirement of making significant
quarterly fee payments to obtain covenant waivers. The Company reduced its
outstanding debt in early November by $35.7 million dollars by applying the net
proceeds of the sale of the ventilation products division. Taxes due on the
gain, of approximately $6.1 million, will be paid in March, 1998. Accordingly,
debt levels will be lower until such payment is made. Interest expense during
the six months ended December 31, 1997 also included $0.4
<PAGE>
million for the full amortization of loan costs related to the portion of debt
that was paid down with the proceeds from the gain.
Allied had income before provision for income taxes of $2.3 million in the six
months ended December 31, 1997 compared to a loss before provision for income
taxes of $1.2 million in the prior year comparable period, an increase of $3.5
million, based on the factors described above.
The provision for income taxes of $9.1 million for the six months ended December
31, 1997 as compared to income before taxes and extraordinary loss of $2.3
million, resulted in an unusual effective tax rate of 399% which primarily
reflected the tax effects relative to the non-recurring items recorded in the
second quarter of fiscal 1998. In the six months ended December 31, 1996, Allied
recorded a tax benefit of $0.5 million, for an effective tax rate of 40% on a
loss before taxes of $1.2 million.
Allied recorded an extraordinary loss on the early extinguishment of debt, which
is discussed further below, of $0.5 million, or $0.07 basic per share, in the
first quarter of fiscal 1998. This extraordinary loss is net of a tax benefit of
$0.4 million. The net loss for the six months ended December 31, 1997 was $7.3
million, or $0.94 per basic share. Exclusive of the extraordinary loss, the
non-recurring gain on the sale of the ventilation products division business,
and the other non-recurring charges, the net loss for the six months ended
December 31, 1997 would have been $0.8 million or $0.09 per basic share.
Earnings per share amounts reported are basic earnings per share, which are
substantially the same as diluted earnings per share. The number of common
shares used in the calculation of earnings per share was 7,803,389 and 7,796,682
for the first six months of fiscal 1998 and fiscal 1997, respectively.
FINANCIAL CONDITION
The following table sets forth selected information concerning Allied's
financial condition:
Dollars in thousands December 31, 1997 June 30, 1997
-------------------- ----------------- -------------
Cash $1,375 $988
Working Capital $18,045 $18,743
Total Debt $15,303 $46,932
Current Ratio 1.84:1 1.57:1
The Company's working capital was $18.0 million at December 31, 1997 compared to
$18.7 million at June 30, 1997. Inventories, other current assets, and accounts
payable all decreased as a result of the previously discussed sale of the
ventilation products division. Proceeds from such sale were utilized to
significantly reduce debt during the second quarter, which is discussed further
below. Accounts receivables declined to $16.6 million at December 31, 1997, or
$6.5 million from $23.1 million at June 30, 1997. Of this decline, $7.3 million
are receivables attributable to the ventilator business which was partially
offset by an increase in receivables of $0.8 million for the Company's core
business. Accounts receivables as measured in days sales outstanding ("DSO")
increased to 74 DSO from 71 DSO in this period, primarily as a result of the
slow down in customers payments during the winter holiday season. The amount of
receivables over 90 days from date of invoice declined by $0.5 million and
related reserves as a percentage of receivables increased by one half of a
percentage point. Inventories declined to $21.2 million, at December 31, 1997 or
$4.8 million, from $26.0 million at June 30, 1997. Of this decline, $4.7 million
is attributable to the ventilator business which was combined with a decline of
$0.1 million in inventories related to the core business. The Company has
focused on improving the mix of inventories and has been increasing stocking
levels of high sales volume products while simultaneously reducing the stocking
levels of low sales volume products. Inventories, as
<PAGE>
measured in days on hand ("DOH") increased to 131 DOH at December 31, 1997 from
124 DOH at June 30, 1997. Accounts payable decreased to $9.7 million at December
31, 1997, down $4.3 million from the June 30, 1997 balance of $14.0 million. Of
this decline, $1.2 million of payables related to the ventilation products
division. The Company experienced limited liquidity during fiscal 1997 due to a
reduction in borrowing availability related to principal payments made on its
term loans combined with the high level of fees paid to the Company's previous
commercial bank group, as previously discussed. Consequently, payments to
vendors and other obligations were extended, causing some disruption in vendor
deliveries and services. The Company's limited liquidity situation was
alleviated with the completion of its debt refinancing, on August 8, 1997, which
is discussed further below. The Company is current on all its obligations and
disruptions of vendor deliveries and services have been eliminated. The current
portion of long term debt at December 31, 1997 was $2.0 million compared to
$12.9 million at June 30, 1997. The June 30, 1997 current portion of long term
debt included $4.0 million of term notes and $5.0 million of subordinated debt
which were due to mature on February 1, 1998, but were repaid on November 3,
1997 and November 4, 1997, respectively, in conjunction with the sale of the
ventilation products division.
The net increase/(decrease) in cash for the six months ended December 31, 1997
and 1996 was $0.4 million and $(0.1) million, respectively. Net cash provided by
(used by) operations was $(2.7) million and $1.3 million for the same periods.
Cash used by operations for the six months ended December 31, 1997 consisted of
a net loss of $7.3 million which was partially offset by $2.9 million in
non-cash charges to operations for amortization and depreciation, a non-cash
loss on refinancing charges of $0.9 million and changes in working capital and
defined tax accounts of $5.1 million. In addition, the Company reported a $12.8
million gain on sale the ventilation products division and also recorded
non-recurring charges, for which the non-cash portion is $9.5 million, in the
six months ended December 31, 1997. The Company received pre-tax proceeds of
$36.0 million on the sale the ventilation products division, reduced total debt
by $32.4 million, and made capital expenditures of $1.0 million which resulted
in net increase in cash of $0.4 million in the six months ended December 31,
1997. Cash provided by operations for the comparable prior year period consisted
of a net loss of $0.7 million which was offset by the non-cash charges of $2.7
million for depreciation and amortization, as well as cash generated by changes
in working capital accounts, which included a tax refund of $1.8 million, of
$2.6 million. The cash provided by operations was used for capital expenditures
of $1.3 million results in a net decrease in cash of $0.1 million for the six
months ended December 31, 1996. The adverse results of operations during the
latter half of fiscal 1996 and during fiscal 1997 impacted the Company's
liquidity and the ability of the Company to continue historical levels of fixed
payments. Accordingly, on August 21, 1996 the Company's Board of Directors voted
to suspend quarterly dividends effective immediately subsequent to the payment
of dividends for the fourth quarter of fiscal 1996. In addition, to improve the
liquidity of the Company and to reduce interest expense, on August 8, 1997 the
Company refinanced its existing debt, which is discussed further below.
At December 31, 1997, the Company had aggregate indebtedness of $15.3 million,
including $2.0 million of short-term debt and $13.3 million of long-term debt.
At June 30, 1997, the Company had aggregate indebtedness of $46.9 million,
including $12.9 million of short-term debt and $34.0 million of long-term debt.
Throughout fiscal 1996 the Company entered into a series of amendments and
waiver negotiations with its previous bank syndicate. During fiscal 1997, the
Company paid waiver fees totaling approximately $2.2 million for the September
1996 amendment to its credit facilities, to obtain waivers for technical
covenant violations at December 31, 1996 and March 31, 1997 and paid additional
fees of $0.4 million in the first quarter of fiscal 1998. The Company was
unsuccessful in its attempts to negotiate a long-term agreement with its
previous bank syndicate. Accordingly, on August 8, 1997 the Company refinanced
its existing debt through a new $46.0 million credit facility with Foothill
Capital Corporation. The new credit facility, with a blended average interest
rate of 10.2%, was comprised of a $25.0 million three-year revolving
<PAGE>
line of credit, three-year term loans of $10.0 million and $7.0 million,
respectively, and a $4.0 million term loan maturing in February 1998. In
conjunction with its new credit facilities, Allied placed an additional $5.0
million in subordinated debt , with several related parties to the Company
maturing in February 1998 In addition, the Company issued 112,500 warrants at an
exercise price of $7.025 per share, 62,500 of which were issued to the
subordinated debt holders and the balance were issued to Foothill Capital
Corporation. Such warrants are exerciseable at the option of the holder
beginning February 8, 1998. The proceeds from the August 8, 1997 refinancing
were used to replace the Company's outstanding debt with the previous commercial
bank syndicate, and to provide additional liquidity. On October 31, 1997 the
Company completed the sale of its ventilation products division. On November 3,
1997 the Company repaid two term notes and a significant portion of its
revolving credit facility to Foothill. On November 4, 1997 the Company repaid
its $5.0 million subordinated debt. Amendments to the Foothill credit facility
are expected to be completed in the fiscal 1998 third quarter to reflect the
impact of the significant reductions in the Company's outstanding debt and the
sale of the ventilation products division. The Company believes that cash flow
from operations and available borrowings under its credit facilities will be
sufficient to finance fixed payments and planned capital expenditures in fiscal
1998.
As of December 31, 1997, the Company had a backlog of $19.2 million compared to
a backlog of $24.9 million at June 30, 1997. The Company's backlog, a
significant portion of which is attributable to the Company's medical gas
equipment products, consists of firm customer purchase orders which may be
subject to cancellation by the customer. The sale of the ventilation products
division reduced the Company's backlog by $3.7 million as compared to June 30,
1997. The Company's backlog increased in emergency medical products and
respiratory therapy products in the six months ended December 31, 1997 such
increase was being partially offset by a decline in backlog for medical gas
equipment products.
Inflation has not had a material effect on the Company's business or results of
operations.
Part II. OTHER INFORMATION
Item 5. Other Information
On February 9, 1998 the Company announced the appointment of James B. Hickey,
Jr. to its board of directors. The Company also reduced its board size from nine
to seven members by accepting the resignation of board members Samuel A.
Hamacher, James C. Janning, and Donald E. Nickelson.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
(i) Form 8-k dated as of October 7, 1997 (announcing that the Company
had entered into a definitive agreement with Thermo-Electron
Corporation regarding the sale of substantially all of the assets
of the Company's ventilation products division).
(ii) Form 8-k dated as of October 31, 1997 (reporting the disposition
of substantially all of the assets of the Company's ventilation
products division).
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ALLIED HEALTHCARE PRODUCTS, INC.
Date: February 17, 1998 /Barry F. Baker/
-----------------------------------------
Barry F. Baker
Vice President - Finance and Chief Financial
Officer
(Principal Accounting and Financial Officer)
<TABLE> <S> <C>
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<LEGEND>
ALLIED HEALTHCARE PRODUCTS, INC.
Financial Data Schedule for Second Quarter
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