<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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 September 30, 2000
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
IRS Employment ID 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 November 4, 2000 is
7,806,682 shares.
<PAGE> 2
INDEX
<TABLE>
<CAPTION>
Page
Part I - Financial Information Number
<S> <C>
Item 1. Financial Statements
Consolidated Statement of Operations - 3
three months ended September 30, 2000 and 1999
(Unaudited)
Consolidated Balance Sheet - 4-5
September 30, 2000 (Unaudited) and
June 30, 2000
Consolidated Statement of Cash Flows - 6
three months ended September 30, 2000 and 1999
(Unaudited)
Notes to Consolidated Financial Statements 7-8
Item 2. Management's Discussion and Analysis of 9-11
Financial Condition and Results of Operations
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K 11
Signature 12
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ALLIED HEALTHCARE PRODUCTS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended
September 30,
-----------------------------------------
2000 1999
------------------- ------------------
<S> <C> <C>
Net sales $14,618,119 $16,067,519
Cost of sales 10,845,915 12,041,291
------------------- ------------------
Gross profit 3,772,204 4,026,228
Selling, general and administrative expenses 3,792,915 4,642,783
Provision for product recall 0 300,000
------------------- ------------------
Loss from operations (20,711) (916,555)
Other expenses:
Interest expense 400,746 439,143
Other, net 20,208 14,329
------------------- ------------------
420,954 453,472
------------------- ------------------
Loss before benefit for income taxes (441,665) (1,370,027)
Benefit for income taxes (95,125) (466,469)
------------------- ------------------
Net loss $ (346,540) $ (903,558)
=================== ==================
Basic and diluted loss per share $ (0.04) $ (0.12)
=================== ==================
Weighted average shares 7,806,682 7,806,682
=================== ==================
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
3
<PAGE> 4
ALLIED HEALTHCARE PRODUCTS, INC.
CONSOLIDATED BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
September 30, June 30,
2000 2000
---------------- ---------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash $ 303,116 $ 568,197
Accounts receivable, net of allowance for doubtful
accounts of $831,411 and $882,874 respectively 11,621,331 10,542,264
Inventories 16,670,505 16,742,178
Other current assets 630,732 358,407
---------------- --------------
Total current assets 29,225,684 28,211,046
---------------- --------------
Property, plant and equipment, net 11,547,588 12,176,616
Deferred income taxes 218,671 218,671
Goodwill, net 26,191,389 26,395,241
Other assets, net 184,420 210,503
---------------- --------------
Total assets $67,367,752 $67,212,077
================ ==============
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
(CONTINUED)
4
<PAGE> 5
ALLIED HEALTHCARE PRODUCTS, INC.
CONSOLIDATED BALANCE SHEET
(CONTINUED)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
September 30, June 30,
2000 2000
---------------- --------------
(Unaudited)
<S> <C> <C>
Current liabilities:
Accounts payable $ 4,408,464 $ 4,055,739
Current portion of long-term debt 1,037,387 1,016,611
Accrual for product recall 155,441 185,241
Other current liabilities 3,028,514 2,692,901
---------------- --------------
Total current liabilities 8,629,806 7,950,492
---------------- --------------
Long-term debt 12,878,881 13,055,980
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
shares issued and outstanding at September 30, and June 30, 2000,
respectively 101,102 101,102
Additional paid-in capital 47,014,621 47,014,621
Common stock in treasury, at cost (20,731,428) (20,731,428)
Retained earnings 19,474,770 19,821,310
---------------- --------------
Total stockholders' equity 45,859,065 46,205,605
---------------- --------------
Total liabilities and stockholders' equity $67,367,752 $67,212,077
================ ==============
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
5
<PAGE> 6
ALLIED HEALTHCARE PRODUCTS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended
September 30,
-------------------------------------
2000 1999
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (346,540) $ (903,558)
Adjustments to reconcile net loss to net
cash (used in) provided by operating activities:
Depreciation and amortization 884,827 884,825
Provision for product recall (29,800) 156,633
Decrease/(Increase) in accounts receivable, net (1,079,067) 1,419,680
Decrease/(Increase) in inventories 71,673 (888,940)
Increase in income taxes receivable 0 (466,469)
Decrease in other current assets (272,325) (355,629)
Increase/(Decrease) in accounts payable 352,725 (607,572)
Increase in accrued taxes 0 186,424
Increase in other current liabilities 335,613 173,274
------------ -----------
Net cash used in operating activities (82,894) (401,332)
------------ -----------
Cash flows from investing activities:
Capital expenditures, net (25,863) (85,851)
------------ -----------
Net cash used in investing activities (25,863) (85,851)
------------ -----------
Cash flows from financing activities:
Payments of long-term debt (231,619) (224,160)
Borrowings under revolving credit agreement 14,016,625 19,427,295
Payments under revolving credit agreement (13,941,330) (18,830,452)
------------ -----------
Net cash provided by (used in) financing activities (156,324) 372,683
------------ -----------
Net decrease in cash and equivalents (265,081) (114,500)
Cash and equivalents at beginning of period 568,197 587,457
------------ -----------
Cash and equivalents at end of period $ 303,116 $ 472,957
============ ===========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 422,424 $ 465,754
Income taxes $ 0 $ 54,050
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
6
<PAGE> 7
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 disclosures 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, 2000.
Certain amounts in the fiscal 2000 financial statements have been
reclassified to conform with the fiscal 2001 presentation.
2. Inventories
Inventories are comprised as follows:
<TABLE>
<CAPTION>
September 30, June 30, 2000
2000
(Unaudited)
<S> <C> <C>
Work-in progress $ 1,171,353 $ 1,237,534
Component Parts 11,954,817 11,909,086
Finished Goods 3,544,335 3,595,558
-------------- ---------------
$ 16,670,505 $ 16,742,178
============== ===============
</TABLE>
The above amounts are net of a reserve for obsolete and excess
inventory of approximately $2.9 million at September 30, 2000 and June 30,
2000.
3. Oxygen Regulator Recall
On February 4, 1999, Allied announced a voluntary trade-in program for aluminum
oxygen regulators marketed under its Life Support Products label. These products
are used to regulate pressure of bottled oxygen for administration to patients
under emergency situations. Based upon U. S. Food and Drug Administration
("FDA") recommendations that all manufacturers cease the use of aluminum in
oxygen regulators, the Company introduced new brass regulators and also offered
a trade-in program to existing users pursuant to which units with aluminum
regulators could be exchanged for new units with brass regulators at a reduced
price. In connection with this program, the Company recorded a charge of $1.5
million pre-tax in the second quarter of fiscal 1999.
7
<PAGE> 8
An additional $.3 million charge was added to this regulator program
in the first quarter of fiscal 2000.
A reconciliation of activity with respect to the Company's regulator
program for the three months ended September 30, 2000, is as follows:
<TABLE>
<S> <C>
Balance, June 30, 2000 $185,241
Provision for recall 0
Costs incurred related to product retrofitting
and replacement 29,800
--------
Balance, September 30, 2000 $155,441
========
</TABLE>
The Company has incurred various legal expenses related to other claims
associated with the LSP oxygen regulators. Accordingly, the Company recorded a
$0.5 million charge to operations during fiscal 2000 for amounts estimated to be
payable by the company under its self-insurance retention for legal costs
associated with defending these claims. These amounts are included along with
other legal expenses of the Company as selling, general and administrative
expenses. At September 30, 2000, the Company has a litigation cost accrual
balance of $0.2 million for legal expense associated to the LSP regulator
recall.
4. Commitments and Contingencies
The Company is subject to various investigations, claims and legal proceedings
covering a wide range of matters that arise in the ordinary course of its
business activities. In fiscal 2000, the FDA conducted an inspection of the
Company's St. Louis facility and provided a written report citing FDA
observations concerning Good Manufacturing Practices ("GMP") compliance and
quality control issues. The Company has provided written responses to the FDA
and is taking corrective action to mitigate any further FDA inquiry or action.
The Company believes that its responses to date and its continuing attention to
the matters raised by the FDA will avert any FDA action seeking to interrupt or
suspend manufacturing, or to require any recall or modification of products.
Based upon currently available information, the Company does not believe that
the FDA investigation will have a material adverse impact on the Company's
consolidated results of operations, financial position or cash flows.
The Company has recognized the costs and associated liabilities only for those
investigations, claims and legal proceedings for which, in its view, it is
probable that liabilities have been incurred and the related amounts are
estimable. Based upon information currently available, management believes that
existing accrued liabilities are sufficient and that it is not reasonably
possible at this time that any additional liabilities will result from the
resolution of these matters that would have a material adverse effect on the
Company's consolidated results of operations, financial position or cash flows.
8
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The following discussion may contain statements that constitute
"forward-looking statements" as that term is used in the Securities Litigation
Reform Act of 1995. Such forward-looking statements involve risks and
uncertainties as further discussed in the Company's 2000 Annual Report filed on
Form 10-K. Actual results in future periods could differ significantly from
results discussed in or anticipated by such forward looking statements. This
discussion should be read in conjunction with the June 30, 2000 consolidated
financial statements and accompanying notes thereto included in the Company's
Form 10-K for the year ended June 30, 2000.
RESULTS OF OPERATIONS
Allied manufactures and markets medical gas equipment, respiratory care
products, and emergency medical products.
Allied had net sales of $14.6 million for the three months ended September 30,
2000, down $1.5 million, or 9.0%, from net sales of $16.1 million in the prior
year same quarter. The $1.5 million decline in sales relates primarily to
medical gas products and is attributable primarily to a strike by production
workers at the Company's St. Louis Plant. Although the strike was settled on
July 30, 2000 with a new three year contract, the Company did not return to
adequate production and shipment levels until the end of the quarter. Overall
backlog for unshipped orders at September 30, 2000, exceeded backlog at June 30,
2000 by approximately $1.6 million.
Gross profit for the three months ended September 30, 2000 was $3.8 million, or
25.8% of net sales compared to $4.0 million, or 25.1% of net sales for the three
months ended September 30, 1999. The increase in gross profit as a percent of
sales is attributable to the oxygen regulator recall in the first quarter of FY
2000, cost reductions and a tighter control of operations. The Company will
continue to review operations to improve efficiencies and lower manufacturing
and product costs.
Selling, General and Administrative expenses for the three months ended
September 30, 2000 were $3.8 million, a net decrease of $0.8 million, or 18.3%,
from $4.6 million for the three months ended September 30, 1999. The decrease
was primarily due to cost reduction efforts that were not initiated until the
second quarter of last year, primarily a 15% staff reduction. Expense in the
prior year quarter also included a $.4 million charge for product liability
litigation expenses.
In the first quarter of fiscal 2000, the Company recorded a $.3 million
additional charge for expenses related to the LSP oxygen regulators program.
Please see Note 3 to Consolidated Financial Statements for additional
information.
9
<PAGE> 10
Loss from operations was $.02 million for the three months ended September 30,
2000 compared to a $.9 million loss for the three months ended September 30,
1999. Interest expense was $0.4 million in both comparable periods. Allied had a
loss before benefit for income taxes in the first quarter of fiscal 2001 of $.4
million compared to a loss before benefit for income taxes of $1.4 million for
the first quarter of fiscal 2000. The Company recorded a tax benefit of $0.1
million and $0.5 million for the three month periods ended September 30, 2000
and 1999, respectively.
In fiscal 2001, the net loss for the first quarter was $0.3 million, or $0.04
per basic and diluted share compared to a net loss of $.9 million, or $0.12 per
basic and diluted share, for the first quarter of fiscal 2000. The weighted
average number of common shares outstanding used in the calculation of earnings
per share for the first quarters of fiscal 2001 and fiscal 2000 was 7,806,682.
LIQUIDITY AND CAPITAL RESOURCES
We believe that available resources and anticipated cash flows from operations
are sufficient to meet our operating requirements in the coming year.
Working capital increased to $20.6 million at September 30, 2000 compared to
$20.3 million at June 30, 2000. The small increase was primarily due to an
increase in accounts receivable and other current assets offset by decreases in
cash, accounts payable and other current liabilities.
The Company maintains a $25 million revolving credit facility. At September
30, 2000, $8.5 million was outstanding against this facility and $3.5 million
was available to borrow from the line based on collateral requirements.
Inflation has not had a material effect on the Company's business or results of
operations.
LITIGATION AND CONTINGENCIES
The Company becomes, from time to time, a party to personal injury litigation
arising out of incidents involving the use of its products. More specifically
there have been a number of lawsuits filed against the Company alleging that its
aluminum oxygen pressure regulator, marketed under its Life Support Products
label, has caused fires that have led to personal injury. The Company believes,
based on preliminary findings, that its products did not cause the fires.
However, the Company intends to defend these claims in cooperation with its
insurers. Based on the progression of certain cases the Company recorded a $0.5
million charge to operations during fiscal 2000 for amounts estimated to be
payable by the Company under its self-insurance retention for legal costs
associated with defending these claims. The Company believes that any potential
judgments resulting from these claims over its self-insured retention will be
covered by the Company's product liability insurance.
The Company is subject to various investigations, claims and legal proceedings
covering
10
<PAGE> 11
a wide range of matters that arise in the ordinary course of its business
activities. In fiscal 2000, the FDA conducted an inspection of the Company's St.
Louis facility and provided a written report citing FDA observations concerning
Good Manufacturing Practices ("GMP") compliance and quality control issues. The
Company has provided written responses to the FDA and is taking corrective
action to mitigate any further FDA inquiry or action. The Company believes that
its responses to date and its continuing attention to the matters raised by the
FDA will avert any FDA action seeking to interrupt or suspend manufacturing, or
to require any recall or modification of products. Based upon currently
available information, the Company does not believe that the FDA investigation
will have a material adverse impact on the Company's results of operations,
financial position or cash flows.
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
Form 8-K dated as of July 31, 2000 (announcing the Company has reached an
agreement on a new three-year contract with its employees who are members of
District No. 9 International Association of Machinists and Aerospace Workers.
Allied continued to ship products during the union work stoppage.)
Form 8-K dated as of August 23, 2000 (announcing the appointment of Gregory C.
Kowert as Vice President Finance, Chief Financial Officer and Secretary and the
Company also announced that Thomas A. Jenuleson had resigned as Vice President
Finance, Chief Financial Officer and Secretary.)
Exhibits:
(27) Financial Data Schedule
11
<PAGE> 12
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.
/s/ Earl R. Refsland
------------------------------------------
Earl R. Refsland
President and Chief Executive Officer
------------------------------------------
12
