UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, DC 20549
Form 10-K
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(Mark One)
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year June 30, 2008
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or
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the transition period
from to
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Commission File Number 0-19266
Allied Healthcare Products,
Inc.
[Exact name of registrant as
specified in its charter]
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Delaware
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25-1370721
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(State or other jurisdiction
of
Incorporation or organization)
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(I.R.S. employer
identification no.)
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1720 Sublette Avenue
St. Louis, Missouri
(Address of principal
executive offices)
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63110
(zip code)
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Registrants telephone
number, including area code
(314) 771-2400
Securities registered pursuant
to section 12(b) of the act:
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Name of
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each exchange
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on which
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Title of each class
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registered
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Common Stock, $.01
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The NASDAQ Stock Market LLC
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Securities registered pursuant
to section 12(g) of the act:
None
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes.
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No.
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Indicate by check mark whether the registrant is not required to
file reports pursuant to Section 13 or 15(d) of the
Act. Yes.
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No.
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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 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past
90 days. Yes.
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No.
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Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of
Regulation S-K
is not contained herein, and will not be contained, to the best
of Registrants knowledge, in definitive proxy or
information statements incorporated by reference in
Part III of this
Form 10-K
or any amendment to this
Form 10-K.
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Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in
Rule 12b-2
of the Exchange Act. (Check one):
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Large accelerated filer
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Accelerated filer
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Non-accelerated filer
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Smaller reporting company
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(Do not check if a smaller reporting company)
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Indicate by check mark whether the registrant is a shell company
(as defined in Exchange Act Rule 12
b-2). Yes.
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No.
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As of December 31, 2007, the last business day of the
registrants most recently completed second fiscal quarter;
the aggregate market value of the voting stock held by
non-affiliates of the Registrant was approximately $33,450,101.
As of September 19, 2008, there were 7,900,077 shares
of common stock, $0.01 par value (the Common
Stock), outstanding.
DOCUMENTS
INCORPORATED BY REFERENCE
Proxy Statement to be dated October 10, 2008 (portion)
(Part III)
ALLIED
HEALTHCARE PRODUCTS, INC.
INDEX TO
FORM 10-K
1
SAFE
HARBOR STATEMENT UNDER THE PRIVATE SECURITIES
LITIGATION
REFORM ACT OF 1995
Statements contained in this Report, which 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, which 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 Companys operations and properties
as discussed in Items 1, 1A, 3 and 7 in this Report. The
Company cautions that any forward-looking statements contained
in this report reflect 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.
PART I
General
Allied Healthcare Products, Inc. (Allied or the
Company) manufactures a variety of respiratory
products used in the health care industry in a wide range of
hospital and alternate site settings, including sub-acute care
facilities, home health care and emergency medical care. The
Companys product lines include respiratory care products,
medical gas equipment and emergency medical products. The
Company believes that it maintains significant market shares in
selected product lines.
The Companys products are marketed under well-recognized
and respected brand names to hospitals, hospital equipment
dealers, hospital construction contractors, home health care
dealers, emergency medical products dealers and others.
Allieds product lines include:
Respiratory
Care Products
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respiratory care/anesthesia products
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home respiratory care products
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Medical
Gas Equipment
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medical gas system construction products
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medical gas system regulation devices
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disposable oxygen and specialty gas cylinders
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portable suction equipment
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Emergency
Medical Products
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respiratory/resuscitation products
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trauma and patient handling products
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The Companys principal executive offices are located at
1720 Sublette Avenue, St. Louis, Missouri 63110, and its
telephone number is
(314) 771-2400.
2
Markets
and Products
In fiscal 2008, respiratory care products, medical gas equipment
and emergency medical products represented approximately 25%,
55% and 20%, respectively, of the Companys net sales. In
fiscal 2007, respiratory care products, medical gas equipment
and emergency medical products represented approximately 25%,
58%, and 17%, respectively, of the Companys net sales. The
Company operates in a single industry segment and its principal
products are described in the following table:
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Principal Brand
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Product
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Description
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Names
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Primary Users
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Respiratory Care Products
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Respiratory Care/Anesthesia Products
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Large volume compressors; ventilator calibrators; humidifiers
and mist tents; and
CO
2
absorbent
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Timeter
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Hospitals and sub-acute facilities
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Home Respiratory Care Products
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O
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cylinders; pressure regulators; nebulizers; portable large
volume compressors; portable suction equipment and disposable
respiratory products
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Timeter; B&F; Schuco
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Patients at home
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Medical Gas Equipment
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Construction Products
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In-wall medical gas system components; central station pumps and
compressors and headwalls
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Chemetron; Oxequip
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Hospitals and sub-acute facilities
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Regulation Devices
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Flowmeters; vacuum regulators; pressure regulators and related
products
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Chemetron; Oxequip; Timeter
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Hospitals and sub-acute facilities
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Disposable Cylinders
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Disposable oxygen and gas cylinders
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Lif-O-Gen
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First aid providers and specialty gas distributors
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Suction Equipment
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Portable suction equipment and disposable suction canisters
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Gomco; Allied; Schuco
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Hospitals, sub-acute facilities and homecare products
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Emergency Medical Products
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Respiratory/ Resuscitation
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Demand resuscitation valves; bag mask resuscitators; emergency
transport ventilators, oxygen regulators and SurgeX
surge suppressing post valve
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LSP; Omni-Tech
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Emergency service providers
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Trauma and
Patient Handling Products
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Spine immobilization products; pneumatic anti-shock garments,
trauma burn kits and Xtra backboards
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LSP
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Emergency service providers
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3
Respiratory
Care Products
Market.
Respiratory care products are
used in the treatment of acute and chronic respiratory disorders
such as asthma, emphysema, bronchitis and pneumonia. Respiratory
care products are used in both hospitals and alternate care
settings. Sales of respiratory care products are made through
distribution channels focusing on hospitals and other sub-acute
facilities. Sales of home respiratory care products are made
through durable medical equipment dealers through telemarketing,
and by contract sales with national chains.
Respiratory Care/Anesthesia
Products.
The Company manufactures and sells
a broad range of products for use in respiratory care and
anesthesia delivery. These products include large volume air
compressors, calibration equipment, humidifiers, croup tents,
equipment dryers and a complete line of respiratory disposable
products such as oxygen tubing, facemasks, cannulas and
ventilator circuits.
Home Respiratory Care Products.
Home
respiratory care products represent one of Allieds
potential growth areas. Allieds broad line of home
respiratory care products include aluminum oxygen cylinders,
oxygen regulators, pneumatic nebulizers, portable suction
equipment and the full line of respiratory disposable products.
Medical
Gas Equipment
Market.
The market for medical gas
equipment consists of hospitals, alternate care settings and
surgery centers. The medical gas equipment group is broken down
into three separate categories: construction products,
regulation devices and suction equipment, and disposable
cylinders.
Construction Products.
Allieds
medical gas system construction products consist of in-wall
medical system components, central station pumps and
compressors, and headwalls. These products are typically
installed during construction or renovation of a health care
facility and are built in as an integral part of the
facilitys physical plant. Typically, the contractor for
the facilitys construction or renovation purchases medical
gas system components from manufacturers and ensures that the
design specifications of the health care facility are met.
Allieds in-wall components, including outlets, manifolds,
alarms, ceiling columns and zone valves, serve a fundamental
role in medical gas delivery systems.
Central station pumps and compressors are individually
engineered systems consisting of compressors, reservoirs, valves
and controls designed to drive a hospitals medical gas and
suction systems. Each system is designed specifically for a
given hospital or facility, which purchases pumps and
compressors from suppliers. The Companys sales of pumps
and compressors are driven, in large part, by its share of the
in-wall components market.
The Companys construction products are sold primarily to
hospitals, alternate care settings and hospital construction
contractors. The Company believes that it holds a major share of
the U.S. market for its construction products, that these
products are installed in more than three thousand hospitals in
the United States and that its installed base of equipment in
this market will continue to generate follow-on sales. The
Company believes that most hospitals and sub-acute care facility
construction spending is for expansion or renovation of existing
facilities. Many hospital systems and individual hospitals
undertake major renovations to upgrade their operations to
improve the quality of care they provide, reduce costs and
attract patients and personnel.
Regulation Devices and Suction
Equipment.
The Companys medical gas
system regulation products include flowmeters, vacuum regulators
and pressure regulators, as well as related adapters, fittings
and hoses which measure, regulate, monitor and help transfer
medical gases from walled piping or equipment to patients in
hospital rooms, operating theaters or intensive care areas. The
Companys leadership position in the in-wall components
market provides a competitive advantage in marketing medical gas
system regulation devices that are compatible with those
components.
Portable suction equipment is typically used when in-wall
suction is not available or when medical protocol specifically
requires portable suction. The Company also manufactures
disposable suction canisters, which are clear containers used to
collect the fluids suctioned by in-wall or portable suction
systems. The containers have volume calibrations, which allow
the medical practitioner to measure the volume of fluids
suctioned.
4
The market for regulation devices and suction equipment includes
hospital and sub-acute care facilities. Sales of these products
are made through the same distribution channel as our
respiratory care products. The Company believes that it holds a
significant share of the U.S. market in both regulation
devices and suction equipment.
Disposable Cylinders.
Disposable oxygen
cylinders are designed to provide oxygen for short periods of
time in emergency situations. Since they are not subjected to
the same pressurization as standard containers, they are much
lighter and less expensive than standard gas cylinders. The
Company markets filled disposable oxygen cylinders through
industrial safety distributors and similar customers,
principally to first aid providers, restaurants, industrial
plants and other customers that require oxygen for infrequent
emergencies.
Emergency
Medical Products
Market.
Emergency medical products are
used in the treatment of trauma-induced injuries. The
Companys emergency medical products provide patient
resuscitation or ventilation during cardiopulmonary
resuscitation or respiratory distress as well as immobilization
and treatment for burns. The Company has seen growth in the
trauma care venue for health care services, as the trend
continues toward providing health care outside the traditional
hospital setting. The Company also expects that other countries
will develop trauma care systems in the future, although no
assurance can be given that such systems will develop or that
they will have a favorable impact on the Company. Sales of
emergency medical products are made through specialized
emergency medical products distributors to ambulance companies,
fire departments and emergency medical systems volunteer
organizations.
The emergency medical products are broken down into two
categories: respiratory/resuscitator products and trauma patient
handling products.
Respiratory/Resuscitation Products.
The
Companys respiratory/resuscitation products include demand
resuscitation valves, portable resuscitation systems, bag masks
and related products, emergency transport ventilators, precision
oxygen regulators, minilators, multilators and humidifiers.
Demand resuscitation valves are designed to provide 100% oxygen
to breathing or non-breathing patients. In an emergency
situation, they can be used with a mask or tracheotomy tubes and
operate from a standard regulated oxygen system. The
Companys portable resuscitation systems provide fast,
simple and effective means of ventilating a non-breathing
patient during cardiopulmonary resuscitation and 100% oxygen to
breathing patients on demand with minimal inspiratory effort.
The Company also markets a full line of disposable and reusable
bag mask resuscitators, which are available in a variety of
adult and child-size configurations. Disposable mouth-to-mask
resuscitation systems have the added advantage of reducing the
risk of transmission of communicable diseases.
The Companys autovent transport ventilator can meet a
variety of needs in different applications ranging from typical
emergency medical situations to more sophisticated air and
ground transport. Each autovent is accompanied by a patient
valve, which provides effective ventilation during
cardiopulmonary resuscitation or respiratory distress. When
administration of oxygen is required at the scene of a disaster,
in military field hospitals or in a multiple-victim incident,
Allieds minilators and multilators are capable of
providing oxygen to one or a large number of patients.
To complement the family of respiratory/resuscitation products,
the Company offers a full line of oxygen product accessories.
This line of accessory products includes reusable aspirators,
tru-fit masks, disposable cuffed masks and related accessories.
Trauma and Patient Handling
Products.
The Companys trauma and
patient handling products include spine immobilization products,
pneumatic anti-shock garments and trauma burn kits. Spine
immobilization products include a backboard that is designed for
safe immobilization of injury victims and provides a durable and
cost effective means of emergency patient transportation and
extrication. The infant/pediatric immobilization board is
durable and scaled for children. The half back extractor/rescue
vest is useful for both suspected cervical/spinal injuries and
for mountain and air rescues. The Companys pneumatic
anti-shock garments are used to treat victims experiencing
hypovolemic shock. Allieds trauma burn kits contain a
comprehensive line of products for the treatment of trauma and
burns.
5
Sales and
Marketing
Allied sells its products primarily to respiratory
care/anesthesia product distributors, hospital construction
contractors, emergency medical equipment dealers and directly to
hospitals. The Company maintains a sales force of 36 sales
professionals, all of whom are full-time employees of the
Company.
The sales force includes 11 domestic hospital specialists, 11
domestic construction specialists, 3 emergency specialists and 5
international sales representatives. A total of four sales
managers lead each of the sales groups. Two product managers are
responsible for the marketing activities of our product lines.
The domestic hospital specialists are responsible for sales of
all Allied products with the exception of construction products
within their territory. The domestic construction specialists
are responsible for sales of all Allied construction products
within their territory. Sales of products are accomplished
through respiratory care/anesthesia distributors for the
regulation devices, suction equipment, respiratory
care/anesthesia products and disposable cylinders. The homecare
products are sold primarily through our own in house
telemarketing. Construction products are sold direct to hospital
construction contractors and through distributors.
Emergency medical specialists are responsible for sales of
respiratory/resuscitation products, trauma and patient handling
products. These products are principally sold to ambulance
companies, fire departments and emergency medical systems
volunteer organizations through specialized emergency medical
products distributors.
The international specialists sell all Allied products within
their territory. Allieds net sales to foreign markets
totaled 19% of the Companys net sales in fiscal 2008, 18%
of the Companys net sales in fiscal 2007, and 18% of the
Companys net sales in fiscal 2006. International sales are
made through a network of dealers, agents and
U.S. exporters who distribute the Companys products
throughout the world. Allied has market presence in Canada,
Mexico, Central and South America, Europe, the Middle East and
the Far East.
Manufacturing
Allieds manufacturing processes include fabrication,
electro-mechanical assembly operations and plastics
manufacturing. A significant part of Allieds manufacturing
operations involves electro-mechanical assembly of proprietary
products and the Company is vertically integrated in most
elements of metal machining and fabrication. Most of
Allieds hourly employees are involved in machining, metal
fabrication, plastics manufacturing and product assembly.
Allied manufactures small metal components from bar stock in a
machine shop, which includes automatic screw machines,
horizontal lathes and drill presses and computer controlled
machining centers. The Company makes larger metal components
from sheet metal using computerized punch presses, brake presses
and shears. In its plastics manufacturing processes, the Company
utilizes both extrusion and injection molding. The Company
believes that its production facilities and equipment are in
good condition and sufficient to meet planned increases in
volume over the next few years and that the conditions in local
labor markets should permit the implementation of additional
shifts and days operated.
Research
and Development
Allieds research and development department group is
responsible for the development of new products. This group is
staffed with mechanical and electrical engineers.
During fiscal year 2008 the Autovent 4000 family of ventilators
were released for production. These ventilators add models with
new features to the existing Autovent line.
The research and development group has also completed the design
and released to production the EPV100 ventilator. This
ventilator has been designed to meet the needs of the mass
casualty and pandemic markets.
As part of the agreement relating to the withdrawal of the
Baralyme
®
product in August 2004, Abbott Laboratories agreed to pay to
Allied up to $2,150,000 in product development costs to pursue
development of a new carbon dioxide absorption product for use
in connection with inhalation anesthetics that does not contain
potassium hydroxide and does not produce a significant
exothermic reaction with currently available inhalation agents.
It is
6
Allieds intention to pursue development of a new carbon
dioxide absorption product. As of June 30, 2008 the Company
had spent $2,050,000 to pursue development of a new carbon
dioxide absorbent. As of June 30, 2008 the Company had been
reimbursed $1,525,000 by Abbott. More detailed information
concerning this agreement is included in Item 7
,
Managements Discussion and Analysis of Financial
Condition and Results of Operations.
Government
Regulation
The Companys products and its manufacturing activities are
subject to extensive and rigorous government regulation by
federal and state authorities in the United States and other
countries. In the United States, medical devices for human use
are subject to comprehensive review by the United States Food
and Drug Administration (the FDA). The Federal Food,
Drug, and Cosmetic Act (FDC Act), and other federal
statutes and regulations, govern or influence the research,
testing, manufacture, safety, labeling, storage, record keeping,
approval, advertising and promotion of such products.
Noncompliance with applicable requirements can result in warning
letters, fines, recall or seizure of products, injunction,
refusal to permit products to be imported into or exported out
of the United States, refusal of the government to clear or
approve marketing applications or to allow the Company to enter
into government supply contracts, or withdrawal of previously
approved marketing applications and criminal prosecution.
The Company is required to file a premarket notification in the
form of a premarket approval (PMA) with the FDA
before it begins marketing a new medical device that offers new
technology that is currently not on the market. The Company also
must file a premarket notification in the form of a 510(k) with
the FDA before it begins marketing a new medical device that
utilizes existing technology for devices that are currently on
the market. The 510(k) submission process is also required when
the Company makes a change or modifies an existing device in a
manner that could significantly affect the devices safety
or effectiveness.
Compliance with the regulatory approval process in order to
market a new or modified medical device can be uncertain,
lengthy and, in some cases, expensive. There can be no assurance
that necessary regulatory approvals will be obtained on a timely
basis, or at all. Delays in receipt or failure to receive such
approvals, the loss of previously received approvals, or failure
to comply with existing or future regulatory requirements could
have a material adverse effect on the Companys business,
financial condition and results of operations.
The Company manufactures and distributes a broad spectrum of
respiratory therapy equipment, emergency medical equipment and
medical gas equipment. To date, all of the Companys FDA
clearances have been obtained through the 510(k) clearance
process. These determinations are very fact specific and the FDA
has stated that, initially, the manufacturer is best qualified
to make these determinations, which should be based on adequate
supporting data and documentation. The FDA however, may disagree
with a manufacturers determination not to file a 510(k)
and require the submission of a new 510(k) notification for the
changed or modified device. Where the FDA believes that the
change or modification raises significant new questions of
safety or effectiveness, the agency may require a manufacturer
to cease distribution of the device pending clearance of a new
510(k) notification. Certain of the Companys medical
devices have been changed or modified subsequent to 510(k)
marketing clearance of the original device by the FDA. Certain
of the Companys medical devices, which were first marketed
prior to May 28, 1976, and therefore, grandfathered and
exempt from the 510(k) notification process, also have been
subsequently changed or modified. The Company believes that
these changes or modifications do not significantly affect the
devices safety or effectiveness, or make a major change or
modification in the devices intended uses and,
accordingly, submission of new 510(k) notification to the FDA is
not required. There can be no assurance, however, that the FDA
would agree with the Companys determinations.
In addition, commercial distribution in certain foreign
countries is subject to additional regulatory requirements and
receipt of approvals that vary widely from country to country.
The Company believes it is in compliance with regulatory
requirements of the countries in which it sells its products.
The Medical Device Reporting regulation requires that the
Company provide information to the FDA on deaths or serious
injuries alleged to have been associated with the use of its
devices, as well as product malfunctions that would likely cause
or contribute to death or serious injury if the malfunction were
to recur. The Medical Device Tracking regulation requires the
Company to adopt a method of device tracking of certain devices,
such as ventilators, which are life-supporting or
life-sustaining devices used outside of a device user facility,
some of which
7
are permanently implantable devices. The regulation requires
that the method adopted by the Company will ensure that the
tracked device can be traced from the device manufacturer to the
person for whom the device is indicated (i.e., the patient). In
addition, the FDA prohibits a company from promoting an approved
device for unapproved applications and reviews a companys
labeling for accuracy. Labeling and promotional activities also
are in certain instances, subject to scrutiny by the Federal
Trade Commission.
The Companys medical device manufacturing facilities are
registered with the FDA, and have received ISO 9001
Certification for the St. Louis facility and certification
under the Medical Device Directive (MDD European)
for certain products in 1998. The Company is subject to audit by
the FDA, ISO, and European auditors for compliance with the Good
Manufacturing Practices (GMP), the ISO and MDD
regulations for medical devices. These regulations require the
Company to manufacture its products and maintain its products
and documentation in a prescribed manner with respect to design,
manufacturing, testing and control activities. The Company also
is subject to the registration and inspection requirements of
state regulatory agencies.
There can be no assurance that any required FDA or other
governmental approval will be granted, or, if granted, will not
be withdrawn. Governmental regulation may prevent or
substantially delay the marketing of the Companys proposed
products and cause the Company to undertake costly procedures.
In addition, the extent of potentially adverse government
regulation that might arise from future administrative action or
legislation cannot be predicted. Any failure to obtain, and
maintain, such approvals could adversely affect the
Companys ability to market its products.
Sales of medical devices outside the United States are subject
to foreign regulatory requirements that vary widely from country
to country. Medical products shipped to the European Community
generally require CE certification. The letters CE
are an abbreviation of Conformité Européenne, French
for European conformity. Whether or not FDA approval has been
obtained, approval of a device by a comparable regulatory
authority of a foreign country generally must be obtained prior
to the commencement of marketing in those countries. The time
required to obtain such approvals may be longer or shorter than
that required for FDA approval. In addition, FDA approval may be
required under certain circumstances to export certain medical
devices.
The Company is also subject to numerous federal, state and local
laws relating to such matters as safe working conditions,
manufacturing practices, environmental protections, fire hazard
control and disposal of hazardous or potentially hazardous
substances.
Patents,
Trademarks and Proprietary Technology
The company owns and maintains patents on several products it
believes is useful to the business and provides the company with
an advantage over its competitors. During fiscal 2008 the
company continued to pursue patents on the construction alarm,
Resuscitimer, Mask Restraint system and the EPV100 ventilator.
The company owns and maintains U.S. trademarks for Allied
Healthcare Products, Inc., Chemetron, Gomco, Oxequip, Lif-O-Gen,
Life Support Products, Timeter, Vacutron and Schuco, its
principal trademarks. Registrations for these trademarks are
also owned and maintained in countries where such products are
sold and such registrations are considered necessary to preserve
Companys proprietary rights therein.
Environmental
and Safety Regulation
The Company is subject to federal, state and local environmental
laws and regulations that impose limitations on the discharge of
pollutants into the environment and establish standards for the
treatment, storage and disposal of toxic and hazardous wastes.
The Company is also subject to the federal Occupational Safety
and Health Act and similar state statutes. From time to time the
Company has been involved in environmental proceedings involving
clean up of hazardous waste. There are no such material
proceedings currently pending. Costs of compliance with
environmental, health and safety requirements have not been
material to the Company. The Company believes it is in material
compliance with all applicable environmental laws and
regulations.
8
Competition
The Company has different competitors within each of its product
lines. Many of the Companys principal competitors are
larger than Allied and the Company believes that most of these
competitors have greater financial and other resources. The
Company competes primarily on the basis of price, quality and
service. The Company believes that it is well positioned with
respect to product cost, brand recognition, product reliability,
and customer service to compete effectively in each of its
markets.
Employees
At June 30, 2008, the Company had approximately
371 full-time employees. Approximately 244 employees
in the Companys principal manufacturing facility located
in St. Louis, Missouri, are covered by a collective
bargaining agreement that will expire on May 31, 2009.
Executive
Officers of the Registrant
This section provides information regarding the executive
officers of the Company who are appointed by and serve at the
pleasure of the Board of Directors:
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Name
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Age
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Position
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Earl R. Refsland
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65
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Director, President and Chief Executive Officer(1)
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Richard A. Setzer
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52
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|
|
Vice President of Sales & Marketing(2)
|
Eldon P. Rosentrater
|
|
|
54
|
|
|
Vice President of Administration & Corporate Planning(3)
|
Robert B. Harris
|
|
|
51
|
|
|
Vice President of Operations(4)
|
Daniel C. Dunn
|
|
|
49
|
|
|
Vice President of Finance, Chief Financial Officer, Secretary
& Treasurer(5)
|
|
|
|
(1)
|
|
Mr. Refsland has been Director, President and Chief
Executive Officer of the Company since September, 1999.
|
|
(2)
|
|
Mr. Setzer was Vice President Sales and
Marketing of the Company since November 1, 2005. He
previously held the position of Global Integration Manager for
the Health Imaging Division of Eastman Kodak from 2003 to 2005.
Prior to that time, Mr. Setzer held the position of Vice
President of Sales at Fuji Medical Systems USA from 2002 to
2003. Mr. Setzer resigned from his position with Allied
Healthcare Products, Inc. effective August 1, 2008.
|
|
(3)
|
|
Mr. Rosentrater has been Vice
President-Administration/Corporate Planning of the Company since
March, 2003. He previously held the position of Vice
President Operations from October 1999 to 2003.
Prior to that time, Mr. Rosentrater held the positions of
Assistant to the President from 1998 to 1999; Director of
Information Technologies from 1995 to 1998; Director of Business
Development from 1993 to 1995 and Group Product Manager from
1989 to 1993.
|
|
(4)
|
|
Mr. Harris has been Vice President Operations
since July, 2006. He previously held the positions for Command
Medical Products, Inc. of Vice President Operations
from January 2002 to January 2006 and Director of Operations
from October 1999 to December 2001. Prior to that time,
Mr. Harris held the position of Plant Manager for Sherwood
Medical, a subsidiary of Tyco Healthcare from 1997 to 1999.
|
|
(5)
|
|
Mr. Dunn has been Vice President Finance, Chief
Financial Officer, Secretary and Treasurer since July, 2001. He
previously held the position of Director of Finance at MetalTek
International from 1998 to 2001. Prior to that time,
Mr. Dunn held the position of Corporate Controller at
Allied Healthcare Products, Inc. from 1994 to 1998.
|
The Companys business, operations and financial condition
are subject to various risks and uncertainties. You should
carefully consider the risks and uncertainties described below,
together with all of the other information in this annual report
on
Form 10-K
and in the companys other filings with the SEC, before
making any investment decision with respect to the
companys securities. The risks and uncertainties described
below may not be the only
9
ones the company faces. Additional risks and uncertainties not
presently known by the company or that the company currently
deems immaterial may also affect the companys business. If
any of these known or unknown risks or uncertainties actually
occur or develop, the companys business, financial
condition, and results of operations could change.
The
Company participates in a highly competitive
environment.
The medical device industry is characterized by rapid
technological change, changing customer needs and frequent new
product introductions. Our products may be rendered obsolete as
a result of future innovations. We face intense competition from
other manufacturers. Some of our competitors may be larger than
we are and may have greater financial, technical, research,
marketing, sales, distribution and other resources than we do.
We believe that price competition will continue among products
developed in our markets. Our competitors may develop or market
technologies and products that are more effective or
commercially attractive than any we are developing or marketing.
Our competitors may succeed in obtaining regulatory approval and
introducing or commercializing products before we do. Such
developments could have a significant negative effect on our
business, financial condition and results of operations. Even if
we are able to compete successfully, we may not be able to do so
in a profitable manner.
Decreased
availability or increased costs of raw materials could increase
the companys costs of producing its
products.
The company purchases raw materials, fabricated components and
services from a variety of suppliers. Raw materials such as
brass and plastics are considered key raw materials. The Company
believes that its relationships with its suppliers are
satisfactory and that alternative sources of supply are readily
available. From time to time, however, the prices and
availability of these raw materials fluctuate due to global
market demands, which could impair the companys ability to
procure necessary materials, or increase the cost of such
materials. Inflationary and other increases in costs of these
raw materials have occurred in the past and may recur from time
to time. In addition, freight costs associated with shipping and
receiving product and sales are impacted by fluctuations in the
cost of oil and gas. A reduction in the supply or increase in
the cost of those raw materials could impact the companys
ability to manufacture its products and could increase the cost
of production.
Changes
in third party reimbursement could negatively impact the
Companys revenues and profitability.
The cost of a majority of medical care in the United States is
funded by the U.S. Government through the Medicare and
Medicaid programs and by private insurance programs, such as
corporate health insurance plans. Although the Company does not
receive payments for its products directly from these programs,
home respiratory care providers and durable medical equipment
suppliers, who are the primary customers for several of the
Companys products, depend heavily on payments from
Medicare, Medicaid and private insurers as a major source of
revenues. In addition, sales of certain of the Companys
products are affected by the extent of hospital and health care
facility construction and renovation at any given time. The
federal government indirectly funds a significant percentage of
such construction and renovation costs through Medicare and
Medicaid reimbursements. In recent years, governmentally imposed
limits on reimbursement to hospitals and other health care
providers have impacted spending for services, consumables and
capital goods. A material decrease from current reimbursement
levels or a material change in the method or basis of
reimbursing health care providers is likely to adversely affect
future sales of the Companys products.
Our
success depends upon the development of new products and product
enhancements, which entails considerable time and
expense.
We place a high priority on the development of new products to
add to our product portfolio and on the development of
enhancements to our existing products. Product development
involves substantial expense and we cannot be certain that a
completed product will generate sufficient revenue for our
business to justify the resources that we devote to research and
development related to such product. The time and expense
required to develop new products and product enhancements is
difficult to predict and we cannot assure you that we will
succeed in developing, introducing and marketing new products
and product enhancements. Our inability to successfully
10
develop and introduce new or enhanced products on a timely basis
or at all, or to achieve market acceptance of such products,
could materially impair our business.
We are
dependent on adequate protection of our patent and proprietary
rights.
We rely on patents, trade secrets, trademarks, copyrights,
know-how, license agreements and contractual provisions to
establish and protect our intellectual property rights. However,
these legal means afford us only limited protection and may not
adequately protect our rights or remedies to gain or keep any
advantages we may have over our competitors.
We cannot assure you that others may not independently develop
the same or similar technologies or otherwise obtain access to
our technology and trade secrets. Our competitors, many of which
have substantial resources and may make substantial investments
in competing technologies, may apply for and obtain patents that
will prevent, limit, or interfere with our ability to
manufacture or market our products. Further, while we do not
believe that any of our products or processes interfere with the
rights of others, third parties may nonetheless assert patent
infringement claims against us in the future.
Costly litigation may be necessary to enforce patents issued to
us, to protect trade secrets or know-how we own, to
defend us against claimed infringement of the rights of others
or to determine the ownership, scope, or validity of our
proprietary rights and the rights of others.
Any claim of infringement against us may involve significant
liabilities to third parties, could require us to seek licenses
from third parties, and could prevent us from manufacturing,
selling, or using our products. The occurrence of this
litigation or the effect of an adverse determination in any of
this type of litigation could have a material adverse effect on
our business, financial condition and results of operations.
Our
business of the manufacturing, marketing, and sale of medical
devices involves the risk of liability claims and such claims
could seriously harm our business, particularly if our insurance
coverage is inadequate.
Our business exposes us to potential product liability claims
that are inherent in the testing, production, marketing and sale
of medical devices. Like other participants in the medical
device market, we are from time to time involved in lawsuits,
claims and proceedings alleging product liability and related
claims such as negligence. If any current or future product
liability claims become substantial, our reputation could be
damaged significantly, thereby harming our business. We may be
required to pay substantial damage awards as a result of any
successful product liability claims. Any product liability claim
against us, whether with or without merit, could result in
costly litigation, and divert the time, attention, and resources
of our management.
As a result of our exposure to product liability claims, we
currently carry product liability insurance covering our
products with policy limits per occurrence and in the aggregate
that we have deemed to be sufficient. Our insurance may not
cover certain product liability claims or our liability for any
claims may exceed our coverage limits. Therefore, we cannot
predict whether this insurance is sufficient, or if not, whether
we will be able to obtain sufficient insurance to cover the
risks associated with our business or whether such insurance
will be available at premiums that are commercially reasonable.
In addition, these insurance policies must be renewed annually.
Although we have been able to obtain liability insurance, such
insurance may not be available in the future on acceptable
terms, if at all. A successful claim against us or settlement by
us with respect to uninsured liabilities or in excess of our
insurance coverage, or our inability to maintain insurance in
the future, or any claim that results in significant costs to or
adverse publicity against us, could have a material adverse
effect on our business, financial condition and results of
operations.
11
The
Company is subject to substantial domestic and international
government regulation, including regulatory quality standards
applicable to its manufacturing and quality processes. Failure
by the Company to comply with these standards could have an
adverse effect on the Companys business, financial
condition or results of operations.
The FDA regulates the approval, manufacturing, and sales and
marketing of many of the Companys products in the
U.S. Significant government regulation also exists in
Canada, Japan, Europe, and other countries in which the Company
conducts business. As a device manufacturer, the Company is
required to register with the FDA and is subject to periodic
inspection by the FDA for compliance with the FDAs Quality
System Regulation (QSR) requirements, which require
manufacturers of medical devices to adhere to certain
regulations, including testing, quality control and
documentation procedures. In addition, the federal Medical
Device Reporting regulations require the Company to provide
information to the FDA whenever there is evidence that
reasonably suggests that a device may have caused or contributed
to a death or serious injury or, if a malfunction were to occur,
could cause or contribute to a death or serious injury.
Compliance with applicable regulatory requirements is subject to
continual review and is rigorously monitored through periodic
inspections by the FDA. In the European Community, the Company
is required to maintain certain ISO certifications in order to
sell its products and must undergo periodic inspections by
notified bodies to obtain and maintain these certifications.
Failure to comply with current governmental regulations and
quality assurance guidelines could lead to temporary
manufacturing shutdowns, product recalls or related field
actions, product shortages or delays in product manufacturing.
Efficacy or safety concerns, an increase in trends of adverse
events in the marketplace,
and/or
manufacturing quality issues with respect to the Companys
products could lead to product recalls or related field actions,
withdrawals,
and/or
declining sales.
Our
products may be subject to product recalls even after receiving
FDA clearance or approval, which would harm our reputation and
our business.
The FDA and similar governmental authorities in other countries
in which our products are sold, have the authority to request
and, in some cases, require the recall of our products in the
event of material deficiencies or defects in design or
manufacture. A government-mandated or voluntary recall by us
could occur as a result of component failures, manufacturing
errors or design defects. Any recall of product would divert
managerial and financial resources, harm our reputation with our
customers and damage our business.
The
Company is exposed to certain credit risks, resulting primarily
from customer sales.
Substantially all of the Companys receivables are due from
homecare providers, distributors, hospitals, and contractors.
The Companys customers are located throughout the
U.S. and around the world. The Company records an estimated
allowance for uncollectible amounts based primarily on the
Companys evaluation of the payment pattern, financial
condition, cash flows, and credit history of its customers as
well as current industry and economic conditions. The
Companys inability to collect on its trade accounts
receivable could substantially reduce the Companys income
and have a material adverse effect on its financial condition
and results of operations.
The
market price of our common stock may fluctuate
widely.
The market price of our common stock could be subject to
significant fluctuations in response to quarter-to-quarter
variation in our operating results, announcements of new
products or services by us or our competitors, and other events
or factors. For example, a shortfall in net sales or net income,
or an increase in losses could have an immediate and significant
adverse effect on the market price and volume fluctuations that
have particularly affected the market prices of many micro and
small capitalization companies and that have often been
unrelated or disproportionate to the operating performance of
these companies. These fluctuations, as well as general economic
and market conditions, may adversely affect the market price for
our common stock.
12
If a
natural or man-made disaster strikes our manufacturing
facilities, we may be unable to manufacture certain products for
a substantial amount of time and our revenue could
decline.
The Company has one principal manufacturing operation. In the
event that this facility, located in St. Louis, Missouri,
were severely damaged or destroyed as a result of a natural or
man-made disaster, the Company would be forced to relocate
production to other facilities
and/or
rely
on third-party manufacturers. Such an event could have a
material adverse effect on the Companys business, results
of operations and financial condition. Although we have
insurance for damage to our property and the interruption of our
business, this insurance may not be sufficient in scope or
amount to cover all of our potential losses and may not continue
to be available to us on acceptable terms, or at all.
Requirements
associated with the evaluation of internal controls required by
Section 404 of the
Sarbanes-Oxley
Act of 2002 have required and will require significant company
resources and management attention.
The Company is subject to the reporting requirements of federal
securities laws, including the Sarbanes-Oxley Act of 2002. Among
other requirements, the Sarbanes-Oxley Act requires that the
Company maintain effective disclosure controls and procedures
and internal control over financial reporting. The Company has,
and expects to continue to, expend significant management time
and resources maintaining documentation and testing internal
control over financial reporting. While managements
evaluation as of June 30, 2008 resulted in the conclusion
that the Companys internal control over financial
reporting was effective as of that date, the Company cannot
predict the outcome of testing in future periods. If we are not
able to continue to comply with the requirements of
Section 404 in a timely manner, we could be subject to
scrutiny by regulatory authorities, such as the SEC or the
NASDAQ National Market, and the trading price of our stock could
decline. Moreover, effective internal controls are necessary for
us to produce reliable financial reports and are important in
helping us to prevent financial fraud. If we cannot provide
reliable financial reports or prevent fraud, our business and
operating results could be harmed, investors could lose
confidence in our reported financial information, and the
trading price of our stock could drop significantly.
If we
are unable to hire or retain key employees, it could have a
negative impact on our business.
Our failure to attract and retain skilled personnel could hinder
the management of our business, our research and development,
our sales and marketing efforts, and our manufacturing
capabilities. However, there is no assurance that we will
continue to be able to hire or retain key employees. We compete
to hire new employees, and then must train them and develop
their skills and competencies. Our operating results could be
adversely affected by increased costs due to increased
competition for employees, higher employee turnover or increased
employee benefit costs. Any unplanned turnover could deplete our
institutional knowledge base and erode our competitive advantage.
|
|
Item 1B.
|
Unresolved
Staff Comments
|
Not applicable.
The Companys headquarters are located in St. Louis,
Missouri and the Company maintains manufacturing facilities in
Missouri and New York. Set forth below is certain information
with respect to the Companys manufacturing facilities at
June 30, 2008.
|
|
|
|
|
|
|
|
|
|
|
|
|
Square Footage
|
|
|
|
|
|
|
Location
|
|
(Approximate)
|
|
|
Owned/Leased
|
|
|
Activities/Products
|
|
St. Louis, Missouri
|
|
|
270,000
|
|
|
|
Owned
|
|
|
Headquarters; medical gas equipment; respiratory care products;
emergency medical products
|
Stuyvesant Falls, New York
|
|
|
30,000
|
|
|
|
Owned
|
|
|
CO
2
absorbent
|
In addition, the Company owns a 16.8-acre parcel of undeveloped
land in Stuyvesant Falls, New York.
13
|
|
Item 3.
|
Legal
Proceedings
|
Product liability lawsuits are filed against the Company from
time to time for various injuries alleged to have resulted from
defects in the manufacture
and/or
design of the Companys products. . Several such
proceedings are currently pending, which are not expected to
have a material adverse effect on the Company. The Company
maintains comprehensive general liability insurance coverage
which it believes to be adequate for the continued operation of
its business, including coverage of product liability claims.
In addition, from time to time the Companys products may
be subject to product recalls in order to correct design or
manufacturing flaws in such products. The Company intends to
continue to conduct business in such a manner as to avert any
FDA action seeking to interrupt or suspend manufacturing or
require any recall or modification of products.
|
|
Item 4.
|
Submission
of Matters to a Vote of Security Holders
|
None
14
PART II
|
|
Item 5.
|
Market
for Registrants Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities
|
Allied Healthcare Products, Inc. trades on the NASDAQ National
Market under the symbol AHPI. As of September 12, 2008,
there were 185 record owners of the Companys Common Stock.
The following tables summarize information with respect to the
high and low closing prices for the Companys Common Stock
as listed on the NASDAQ National market for each quarter of
fiscal 2008 and 2007, respectively. The Company currently does
not pay any dividend on its Common Stock.
Common
Stock Information
|
|
|
|
|
|
|
|
|
2008
|
|
High
|
|
|
Low
|
|
|
September quarter
|
|
$
|
6.76
|
|
|
$
|
5.05
|
|
December quarter
|
|
$
|
7.25
|
|
|
$
|
5.85
|
|
March quarter
|
|
$
|
7.25
|
|
|
$
|
6.00
|
|
June quarter
|
|
$
|
7.27
|
|
|
$
|
6.00
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
High
|
|
|
Low
|
|
|
September quarter
|
|
$
|
5.72
|
|
|
$
|
5.00
|
|
December quarter
|
|
$
|
5.37
|
|
|
$
|
5.07
|
|
March quarter
|
|
$
|
6.19
|
|
|
$
|
5.05
|
|
June quarter
|
|
$
|
6.95
|
|
|
$
|
6.05
|
|
15
|
|
Item 6.
|
Selected
Consolidated Financial Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended June 30,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(In thousands, except per share data)
|
|
|
Consolidated Statement of Operations Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
56,364
|
|
|
$
|
56,501
|
|
|
$
|
57,546
|
|
|
$
|
56,120
|
|
|
$
|
59,103
|
|
Cost of sales
|
|
|
43,006
|
|
|
|
42,028
|
|
|
|
43,293
|
|
|
|
41,669
|
|
|
|
42,748
|
|
Gross profit
|
|
|
13,358
|
|
|
|
14,473
|
|
|
|
14,253
|
|
|
|
14,451
|
|
|
|
16,355
|
|
Selling, general and administrative expenses
|
|
|
12,085
|
|
|
|
12,052
|
|
|
|
12,113
|
|
|
|
11,843
|
|
|
|
12,660
|
|
Income from operations
|
|
|
1,273
|
|
|
|
2,421
|
|
|
|
2,140
|
|
|
|
2,608
|
|
|
|
3,695
|
|
Interest expense
|
|
|
20
|
|
|
|
|
|
|
|
|
|
|
|
123
|
|
|
|
550
|
|
Interest income
|
|
|
(138
|
)
|
|
|
(111
|
)
|
|
|
(53
|
)
|
|
|
|
|
|
|
|
|
Other, net
|
|
|
60
|
|
|
|
(24
|
)
|
|
|
37
|
|
|
|
43
|
|
|
|
8
|
|
Income before provision for income taxes
|
|
|
1,331
|
|
|
|
2,556
|
|
|
|
2,156
|
|
|
|
2,442
|
|
|
|
3,136
|
|
Provision for income taxes(1)
|
|
|
449
|
|
|
|
914
|
|
|
|
507
|
|
|
|
101
|
|
|
|
1,261
|
|
Net income
|
|
$
|
882
|
|
|
$
|
1,642
|
|
|
$
|
1,649
|
|
|
$
|
2,341
|
|
|
$
|
1,875
|
|
Basic earnings per share
|
|
$
|
0.11
|
|
|
$
|
0.21
|
|
|
$
|
0.21
|
|
|
$
|
0.30
|
|
|
$
|
0.24
|
|
Diluted earnings per share
|
|
$
|
0.11
|
|
|
$
|
0.20
|
|
|
$
|
0.20
|
|
|
$
|
0.29
|
|
|
$
|
0.23
|
|
Basic weighted average common shares outstanding
|
|
|
7,884
|
|
|
|
7,876
|
|
|
|
7,841
|
|
|
|
7,822
|
|
|
|
7,816
|
|
Diluted weighted average common shares outstanding
|
|
|
8,120
|
|
|
|
8,085
|
|
|
|
8,066
|
|
|
|
8,081
|
|
|
|
7,985
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(In thousands)
|
|
|
Consolidated Balance Sheet Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Working capital
|
|
$
|
18,291
|
|
|
$
|
17,269
|
|
|
$
|
14,644
|
|
|
$
|
12,250
|
|
|
$
|
10,992
|
|
Total assets
|
|
|
52,258
|
|
|
|
51,318
|
|
|
|
49,330
|
|
|
|
46,097
|
|
|
|
47,029
|
|
Short-term debt(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,245
|
|
Long-term debt (net of current portion)(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,366
|
|
Stockholders equity
|
|
|
43,339
|
|
|
|
42,485
|
|
|
|
40,660
|
|
|
|
38,862
|
|
|
|
36,453
|
|
|
|
|
(1)
|
|
See Note 5 to the June 30, 2008 Consolidated Financial
Statements for further discussion of the Companys
effective tax rate.
|
|
(2)
|
|
See Note 3 to the June 30, 2008 Consolidated Financial
Statements for further discussion.
|
16
|
|
Item 7.
|
Managements
Discussion and Analysis of Financial Condition and Results of
Operations
|
Critical
Accounting Policies
In preparing financial statements, management is required to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and the disclosure of contingent
assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the
reporting period. The Company evaluates estimates and judgments
on an ongoing basis, including those related to bad debts,
inventory valuations, property, plant and equipment, intangible
assets, income taxes, and contingencies and litigation.
Estimates and judgments are based on historical experience and
on various other factors that may be reasonable under the
circumstances. Actual results may differ from these estimates.
The following areas are considered to be the Companys most
significant accounting policies:
Revenue
recognition:
Revenue is recognized for all sales, including sales to agents
and distributors, at the time products are shipped and title has
transferred, provided that a purchase order has been received or
a contract executed, there are not uncertainties regarding
customer acceptance, the sales price is fixed and determinable
and collectability is reasonably assured. Sales discounts,
returns and allowances are included in net sales, and the
provision for doubtful accounts is included in selling, general
and administrative expenses. Additionally, it is the
Companys practice to include revenues generated from
freight billed to customers in net sales with corresponding
freight expense included in cost of sales in the consolidated
statement of operations.
The sales price is fixed by Allieds acceptance of the
buyers firm purchase order. The sales price is not
contingent, or subject to additional discounts. Allieds
standard shipment terms are F.O.B. shipping point as
stated in Allieds Terms and Conditions of Sale. The
customer is responsible for obtaining insurance for and bears
the risk of loss for product in-transit. Additionally, sales to
customers do not include the right to return merchandise without
the prior consent of Allied. In those cases where returns are
accepted, product must be current and restocking fees must be
paid by the respective customer. A provision has been made for
estimated sales returns and allowances. These estimates are
based on historical analysis of credit memo data and returns.
Allied does not provide installation services for its products.
Most products shipped are ready for immediate use by the
customer. The Companys in-wall medical system components,
central station pumps and compressors, and headwalls do require
installation by the customer. These products are typically
purchased by a third-party contractor who is ultimately
responsible for installation services. Accordingly, the customer
purchase order or contract does not require customer acceptance
of the installation prior to completion of the sale transaction
and revenue recognition. Allieds standard payment terms
are net 30 days from the date of shipment, and payment
is specifically not subject to customer inspection of
acceptance, as stated in Allieds Terms and Conditions of
Sale. The buyer becomes obligated to pay Allied at the time of
shipment. Allied requires credit applications from its customers
and performs credit reviews to determine the creditworthiness of
new customers. Allied requires letters of credit, where
warranted, for international transactions. Allied also protects
its legal rights under mechanics lien laws when selling to
contractors.
Allied does offer limited warranties on its products. The
standard warranty period is one year; however, most claims occur
within the first six months. The Companys cost of
providing warranty service for its products for the years ended
June 30, 2008, June 30, 2007, and June 30, 2006
was $62,954, $118,967, and $114,181, respectively. The related
liability for warranty service amounted to $86,343 and $112,907
at June 30, 2008 and 2007, respectively.
Inventory
reserve for obsolete and excess inventory:
Inventory is recorded net of a reserve for obsolete and excess
inventory which is determined based on an analysis of inventory
items with no usage in the preceding year and for inventory
items for which there is greater than two years usage on
hand. This analysis considers those identified inventory items
to determine, in managements best estimate, if parts can
be used beyond one year, if there are alternate uses or at what
values
17
such parts may be disposed for. At June 30, 2008 and 2007,
inventory is recorded net of a reserve for obsolete and excess
inventory of $1.3 million and $1.1 million,
respectively.
Income
taxes:
The Company accounts for income taxes under
SFAS No. 109, Accounting for Income Taxes.
Under SFAS No. 109, the deferred tax provision is
determined using the liability method, whereby deferred tax
assets and liabilities are recognized based upon temporary
differences between the financial statement and income tax bases
of assets and liabilities using presently enacted tax rates.
Valuation allowances are established when necessary to reduce
deferred tax assets to the amounts expected to be realized.
Accounts
receivable net of allowances:
Accounts receivable are recorded net of an allowance for
doubtful accounts, which is determined based on an analysis of
past due accounts including accounts placed with collection
agencies, and an allowance for returns and credits, which is
based on historical analysis of credit memo data and returns. At
June 30, 2008 and 2007, accounts receivable is recorded net
of allowances of $0.3 and $0.5 million, respectively.
Goodwill:
At June 30, 2008 and 2007, the Company has goodwill of
$15,979,830, resulting from the excess of the purchase price
over the fair value of net assets acquired in business
combinations. During fiscal 2002, the Company adopted Statement
of Financial Accounting Standards (SFAS)
No. 142, Goodwill and Other Intangible Assets,
which establishes new accounting and reporting standards for
purchase business combinations and goodwill. As provided by
SFAS No. 142, the Company ceased amortizing goodwill
on July 1, 2001.
The Company conducts a formal impairment test of goodwill on an
annual basis and between annual tests if an event occurs or
circumstances change that would more likely than not reduce the
fair value of the Company below its carrying value. The annual
impairment test did not indicate an impairment of goodwill at
June 30, 2008 or June 30, 2007.
Allied operates as one reporting unit and prepares its annual
goodwill impairment test in that manner. None of our product
lines constitute a business, as that term is defined in
EITF 98-3.
Most of our products are produced in one facility, and we do not
produce separate financial statements for any part of our
business. The goodwill impairment test is performed at
June 30th of each year.
The results of these annual impairment reviews are highly
dependent on managements projection of future results of
the Company and there can be no assurance that at the time such
future reviews are completed a material impairment charge will
not be recorded.
Self-insurance:
The Company maintains a self-insurance program for a portion of
its health care costs. Self-insurance costs are accrued based
upon the aggregate of the liability for reported claims and the
estimated liability for claims incurred but not reported. As of
June 30, 2008 and 2007, the Company had $300,000 and
$325,000 respectively, of accrued liabilities related to health
care claims. In order to establish the self-insurance reserves,
the Company utilized actuarial estimates of expected claims
based on analyses of historical data.
Significant
Factors Affecting Past and Future Operating Results
On August 27, 2004, Allied Healthcare Products, Inc.
(Allied) entered into an agreement with Abbott
Laboratories (Abbott) pursuant to which Allied
agreed to cease production of its product
Baralyme
®
,
and to effect the withdrawal of
Baralyme
®
product held by distributors. The agreement permits Allied to
pursue the development of a new carbon dioxide absorbent
product.
Baralyme
®
,
a carbon dioxide absorbent product, has been used safely and
effectively in connection with inhalation anesthetics since its
introduction in the 1920s. In recent years, the number of
inhalation anesthetics has increased, giving rise to concerns
regarding the use of
Baralyme
®
in conjunction with these newer inhalation anesthetics if
Baralyme
®
has been allowed, contrary to recommended
18
practice, to become desiccated. The agreement also provides
that, for a period of eight years, Allied will not manufacture,
distribute, promote, market, sell, commercialize or donate any
Baralyme
®
product or similar product based upon potassium hydroxide and
will not develop or license any new carbon dioxide absorbent
product containing potassium hydroxide.
In consideration of the foregoing, Abbott agreed to pay Allied
an aggregate of $5,250,000 of which $1,530,000 was paid on
September 30, 2004 and the remainder payable in four equal
annual installments of $930,000 due on July 1, 2005 through
July 1, 2008. The installment due on July 1, 2008 was
received by Allied on June 19, 2008. Therefore, there are
no further payments due from Abbott as of June 30, 2008.
The payments received from Abbott are being recognized into
income, as net sales, over the eight-year term of the agreement.
Allied has no further obligations under this agreement which
would require the Company to repay these amounts or otherwise
impact this accounting treatment. During the year ended
June 30, 2008, $465,000 was recognized into income as net
sales.
A reconciliation of deferred revenue resulting from the
agreement with Abbott, with the amounts received under the
agreement, and amounts recognized as net sales for fiscal years
2008 and 2007 is as follows:
|
|
|
|
|
|
|
|
|
|
|
Twelve Months Ended
|
|
|
|
June 30,
|
|
|
|
2008
|
|
|
2007
|
|
|
Beginning balance
|
|
$
|
2,402,500
|
|
|
$
|
1,937,500
|
|
Payment Received from Abbott Laboratories
|
|
|
930,000
|
|
|
|
930,000
|
|
Revenue recognized as net sales
|
|
|
(465,000
|
)
|
|
|
(465,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
2,867,500
|
|
|
|
2,402,500
|
|
|
|
|
|
|
|
|
|
|
Less Current portion of deferred revenue
|
|
|
(690,000
|
)
|
|
|
(465,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,177,500
|
|
|
$
|
1,937,500
|
|
|
|
|
|
|
|
|
|
|
In 2004, Allieds sales of
Baralyme
®
were approximately $2.0 million and contributed
approximately $0.6 million in pre-tax earnings and cash
flow from operations. The majority of the $5,250,000 Allied has
received from Abbott will be recognized into income over the
eight-year term of the agreement. The net cash flow realized by
Allied under the agreement with Abbott is substantially
equivalent to the net cash flow Allied would have expected to
realize from continued manufacture and sales of
Baralyme
®
during the initial five years of the period.
Results
of Operations
Allied manufactures and markets respiratory products, including
respiratory care products, medical gas equipment and emergency
medical products. Set forth below is certain information with
respect to amounts and percentages of net sales attributable to
respiratory care products, medical gas equipment and emergency
medical products for the fiscal years ended June 30, 2008,
2007, and 2006.
|
|
|
|
|
|
|
|
|
|
|
Year ended
|
|
|
|
June 30, 2008
|
|
|
|
|
|
|
% of
|
|
|
|
|
|
|
Total Net
|
|
|
|
Net Sales
|
|
|
Sales
|
|
|
|
Dollars in thousands
|
|
|
Respiratory care products
|
|
$
|
14,248
|
|
|
|
25.3
|
%
|
Medical gas equipment
|
|
|
30,744
|
|
|
|
54.5
|
%
|
Emergency medical products
|
|
|
11,372
|
|
|
|
20.2
|
%
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
56,364
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
19
|
|
|
|
|
|
|
|
|
|
|
Year ended
|
|
|
|
June 30, 2007
|
|
|
|
|
|
|
% of
|
|
|
|
|
|
|
Total Net
|
|
|
|
Net Sales
|
|
|
Sales
|
|
|
|
Dollars in thousands
|
|
|
Respiratory care products
|
|
$
|
13,899
|
|
|
|
24.6
|
%
|
Medical gas equipment
|
|
|
32,775
|
|
|
|
58.0
|
%
|
Emergency medical products
|
|
|
9,827
|
|
|
|
17.4
|
%
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
56,501
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended
|
|
|
|
June 30, 2006
|
|
|
|
|
|
|
% of
|
|
|
|
|
|
|
Total Net
|
|
|
|
Net Sales
|
|
|
Sales
|
|
|
|
Dollars in thousands
|
|
|
Respiratory care products
|
|
$
|
14,242
|
|
|
|
24.7
|
%
|
Medical gas equipment
|
|
|
33,142
|
|
|
|
57.6
|
%
|
Emergency medical products
|
|
|
10,162
|
|
|
|
17.7
|
%
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
57,546
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
The following table sets forth, for the fiscal periods
indicated, the percentage of net sales represented by the
various income and expense categories reflected in the
Companys consolidated statement of operations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended June 30,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Net sales
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
Cost of sales
|
|
|
76.3
|
|
|
|
74.4
|
|
|
|
75.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
23.7
|
|
|
|
25.6
|
|
|
|
24.8
|
|
Selling, general and administrative expenses
|
|
|
21.4
|
|
|
|
21.3
|
|
|
|
21.0
|
|
Income from operations
|
|
|
2.3
|
|
|
|
4.3
|
|
|
|
3.8
|
|
Interest expense
|
|
|
0.0
|
|
|
|
0.0
|
|
|
|
0.0
|
|
Interest income
|
|
|
0.2
|
|
|
|
0.2
|
|
|
|
0.1
|
|
Other, net
|
|
|
0.1
|
|
|
|
0.0
|
|
|
|
0.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before provision for income taxes
|
|
|
2.4
|
|
|
|
4.5
|
|
|
|
3.8
|
|
Provision for income taxes
|
|
|
0.8
|
|
|
|
1.6
|
|
|
|
0.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
1.6
|
%
|
|
|
2.9
|
%
|
|
|
2.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
2008 Compared to Fiscal 2007
Net sales for fiscal 2008 of $56.4 million were
$0.1 million or 0.2% less than net sales of
$56.5 million in fiscal 2007. Domestically, sales decreased
by $0.7 million dollars. Internationally, sales increased
by $0.6 million dollars. International business is
dependent upon hospital construction projects, and the
development of medical facilities in those regions in which the
Company operates. Domestic sales for fiscal 2008 include
approximately $1.7 million for the recognition into sales
of payments resulting from the agreement with Abbott
Laboratories, as discussed below. For 2007, domestic sales
included approximately $1.0 million for the recognition
into sales of payments resulting from the agreement with Abbott
Laboratories.
The decrease in net sales for the year is primarily the result
of shipping performance. Orders for the Companys products
for the year ended June 30, 2008 of $54.4 million were
$0.4 million or 0.7% higher than orders for the year
20
ended June 30, 2007 of $54.0 million. Customer
purchase order releases of $53.8 million were unchanged
from fiscal 2007. However, slight delays in production did lead
to a slight decrease in sales for the year.
Sales for the year ended June 30, 2007 included $465,000
for the recognition into sales of payments resulting from the
agreement with Abbott Laboratories to cease production and
distribution of
Baralyme
®
.
Sales for the year ended June 30, 2007 also included
recognition as sales of $584,000 reimbursement by Abbott
Laboratories in product development cost to pursue development
of new carbon dioxide absorption product as a result of the
agreement to cease production and distribution of
Baralyme
®
.
In total, domestic sales for 2007 included approximately
$1,049,000 for recognition into sales of payments resulting from
the agreement with Abbott Laboratories.
Sales for the year ended June 30, 2008 included $465,000
for the recognition into sales of payments resulting from the
agreement with Abbott Laboratories to cease production and
distribution of
Baralyme
®
.
Sales for the year ended June 30, 2008 also included
recognition as sales of $1,196,000 reimbursement by Abbott
Laboratories in product development cost to pursue development
of new carbon dioxide absorption product as a result of the
agreement to cease production and distribution of
Baralyme
®
.
In total, domestic sales for 2008 included approximately
$1,661,000 for recognition into sales of payments resulting from
the agreement with Abbott Laboratories.
Allied continues to sell
Carbolime
®
,
a carbon dioxide absorbent with a different formulation than
Baralyme
®
.
For the year ended June 30, 2008 the Company had carbon
dioxide absorbent sales of
Carbolime
®
,
of $1.9 million dollars, compared with $2.0 million
for the year ended June 30, 2007 and $2.0 million for
the year ended June 30, 2006.
Respiratory care products sales in fiscal 2008 of
$14.2 million were $0.3 million, or 2.2% higher than
sales of $13.9 million in the prior year. Included in the
sales for respiratory care products is an approximately
$0.7 million increase in the amount recognized resulting
from the agreement to cease the production and distribution of
Baralyme
®
.
The amount recognized as sales increased to approximately
$1.7 million or $0.7 million more than in the prior
year. Respiratory care products also include the Companys
efforts in the Homecare market. The Company continues to develop
systems and personnel to improve our telemarketing efforts, has
increased inventory levels to improve customer service levels,
and continues to emphasize measures to reduce cost.
Medical gas equipment sales, which include construction
products, of $30.7 million in fiscal 2008 were
$2.1 million, or 6.4% lower than prior year levels of
$32.8 million. Internationally, sales of Medical gas
equipment in fiscal 2008 were $0.3 million more than in the
prior year. The decrease in sales, of $2.3 million, took
place in the domestic market. Price competition in this market
is significant, however, the Company does not believe this
represents a loss of market share.
Emergency medical product sales in fiscal 2008 of
$11.4 million were $1.6 million or 16.3% higher than
fiscal 2007 sales of $9.8 million. International sales of
Emergency medical products increased by $0.5 million, while
domestic sales increased by $1.1 million. Also, orders for
the Companys Emergency Products were $1.1 million
higher than the prior year. The Company believes that demand for
these products have been favorably impacted by emergency
preparedness, including Federal Homeland Security funding for
emergency responders.
International sales, which are included in the product lines
discussed above, increased $0.6 million, or 5.9%, to
$10.8 million in fiscal 2008 compared to sales of
$10.2 million in fiscal 2007. As discussed above, the
Companys international shipments are dependent on hospital
construction projects and the expansion of medical care in those
regions. In fiscal 2008, international shipments of Medical Gas
equipment, including construction products, increased by
$0.3 million dollars. The increase in international sales
also included a $0.5 million increase in the sale of
Emergency care products. These increases were offset by a
$0.2 million decrease in the sale of Respiratory care
products.
Gross profit in fiscal 2008 was $13.4 million, or 23.7% of
sales, compared to a gross profit of $14.5 million, or
25.6% of sales in fiscal 2007. Increases in material cost
negatively impacted gross margins during fiscal 2008. Material
cost was approximately 2.0% higher than in the prior year. Labor
costs are approximately 3.8% higher than in the prior year due
to contractual increases with the bargaining unit. The decrease
in gross profit as a percent of sales is also partially due to
lower production levels versus the prior year related to a
decrease in inventory levels for the year. Lower production
levels result in less effective utilization of the
Companys manufacturing capacity and the fixed expenses
associated with that capacity. Cost of sales for the year ended
June 30, 2007 includes
21
approximately $0.6 million in cost incurred in product
development cost to pursue development of a new carbon dioxide
absorption product as a result of the agreement with Abbott
Laboratories to cease production and distribution of
Baralyme
®
.
Cost of sales for the year ended June 30, 2008 includes
approximately $1.0 million in cost incurred in product
development cost to pursue development of a new carbon dioxide
absorption product.
The Company invested $1.1 million in capital expenditures
in fiscal 2008, $0.6 million in fiscal 2007, and
$1.0 million in fiscal 2006 for manufacturing equipment and
computer systems, which continue to decrease production costs
and improve efficiencies for several product lines. The Company
continues to control cost and actively pursue methods to reduce
its cost.
Selling, General, and Administrative (SG&A)
expenses for fiscal 2008 were $12.1 million, unchanged from
SG&A expenses of $12.1 million in fiscal 2007. Legal
expenses decreased by approximately $0.2 million, as open
product liability claims were settled in the prior year. This
decrease has been offset by a $0.2 million increase in
auditing and accounting professional fees from the prior year as
a result of the IRS examination of the Companys
U.S. income tax returns for the fiscal years ended
June 30, 2005 and 2006, and the increased cost of
Sarbanes-Oxley compliance.
Interest income in fiscal 2008 was $0.1 million, unchanged
from fiscal 2007.
The Company had income of $1.3 million before taxes for
fiscal 2008, compared to income of $2.6 million before
taxes for fiscal 2007. The Company recorded an income tax
provision of $0.4 million in fiscal 2008, compared to an
income tax provision of $0.9 million in fiscal 2007.
For further discussion of the Companys income tax
calculation please refer to Note 5 of the Notes to
Consolidated Financial Statements section included in this
Form 10-K.
Net income in fiscal 2008 was $0.9 million or $0.11 per
basic and diluted earnings per share, down from net income of
$1.6 million, or $0.21 per basic and $0.20 per diluted
earnings per share in fiscal 2007. In 2008, the weighted number
of shares used in the calculation of basic earnings per share
was 7,883,659 and the weighted number of shares used in the
calculation of diluted earnings per share was 8,119,776. In
2007, the weighted number of shares used in the calculation of
basic earnings per share was 7,875,982 and the weighted number
of shares used in the calculation of diluted earnings per share
was 8,085,375.
Fiscal
2007 Compared to Fiscal 2006
Net sales for fiscal 2007 of $56.5 million were
$1.0 million or 1.7% less than net sales of
$57.5 million in fiscal 2006. Domestically, sales decreased
by $0.7 million dollars. Internationally, sales decreased
by $0.3 million dollars. International business is
dependent upon hospital construction projects, and the
development of medical facilities in those regions in which the
Company operates. Domestic sales for fiscal 2007 include
approximately $1.0 million for the recognition into sales
of payments resulting from the agreement with Abbott
Laboratories, as discussed below. For 2006, domestic sales
included approximately $0.7 million for the recognition
into sales of payments resulting from the agreement with Abbott
Laboratories.
The overall decrease in net sales for the year is primarily the
result of lower customer orders than in the prior year. Orders
for the Companys products for the year ended June 30,
2007 of $54.0 million were $0.8 million or 1.5% lower
than orders for the year ended June 30, 2006 of
$54.8 million. However, customer purchase order releases
were $1.3 million lower than in fiscal 2006, leading to the
majority of the decrease in sales for the year. Purchase order
release lead times depend on the scheduling practices of the
individual customers. Orders during 2007 were negatively
impacted by price competition.
Sales for the year ended June 30, 2006 included $465,000
for the recognition into sales of payments resulting from the
agreement with Abbott Laboratories to cease production and
distribution of
Baralyme
®
.
Sales for the year ended June 30, 2006 also included
recognition as sales of $271,000 reimbursement by Abbott
Laboratories in product development cost to pursue development
of new carbon dioxide absorption product as a result of the
agreement to cease production and distribution of
Baralyme
®
.
In total, domestic sales for 2006 included approximately
$736,000 for recognition into sales of payments resulting from
the agreement with Abbott Laboratories.
22
Sales for the year ended June 30, 2007 included $465,000
for the recognition into sales of payments resulting from the
agreement with Abbott Laboratories to cease production and
distribution of
Baralyme
®
.
Sales for the year ended June 30, 2007 also included
recognition as sales of $584,000 reimbursement by Abbott
Laboratories in product development cost to pursue development
of new carbon dioxide absorption product as a result of the
agreement to cease production and distribution of
Baralyme
®
.
In total, domestic sales for 2007 included approximately
$1,049,000 for recognition into sales of payments resulting from
the agreement with Abbott Laboratories.
Allied continues to sell
Carbolime
®
,
a carbon dioxide absorbent with a different formulation than
Baralyme
®
.
For the year ended June 30, 2007 the Company had carbon
dioxide absorbent sales of
Carbolime
®
,
of $2.0 million dollars, compared with $2.0 million
for the year ended June 30, 2006 and $2.0 million for
the year ended June 30, 2005.
Respiratory care products sales in fiscal 2007 of
$13.9 million were $0.3 million, or 2.1% less than
sales of $14.2 million in the prior year. The decline in
sales is attributable to the companys line of homecare
products. The Company continues to develop systems and personnel
to improve our telemarketing efforts, has increased inventory
levels to improve customer service levels, and continues to
emphasize measures to reduce cost. Also included in the sales
for respiratory care products is an approximately
$0.3 million increase in the amount recognized resulting
from the agreement to cease the production and distribution of
Baralyme
®
.
The amount recognized as sales increased to approximately
$1.0 million or $0.3 million more than in the prior
year.
Medical gas equipment sales of $32.8 million in fiscal 2007
were $0.3 million, or 0.9% lower than prior year levels of
$33.1 million. Internationally, sales of Medical gas
equipment in fiscal 2007 were $0.2 million less than in the
prior year. The remainder of the decrease in sales, or
$0.1 million, took place in the domestic market.
Emergency medical product sales in fiscal 2007 of
$9.8 million were $0.4 million or 3.9% less than
fiscal 2006 sales of $10.2 million. International sales of
Emergency medical products increased by $0.1 million, while
domestic sales decreased by $0.5 million. However, orders
for the Companys Emergency Products were $0.5 million
higher than the prior year. The Company believes that demand for
these products have been favorably impacted by emergency
preparedness, including Federal Homeland Security funding for
emergency responders.
International sales, which are included in the product lines
discussed above, decreased $0.3 million, or 2.9%, to
$10.2 million in fiscal 2007 compared to sales of
$10.5 million in fiscal 2006. As discussed above, the
Companys international shipments are dependent on hospital
construction projects and the expansion of medical care in those
regions. In fiscal 2007, international shipments of Medical Gas
equipment, including construction products, decreased by
$0.2 million dollars. In fiscal 2007, international
shipments of Respiratory care decreased by $0.2 million
dollars. These decreases were offset by a $0.1 million
increase in the sale of Emergency care products.
Gross profit in fiscal 2007 was $14.5 million, or 25.6% of
sales, compared to a gross profit of $14.3 million, or
24.8% of sales in fiscal 2006. Despite competitive pricing
pressures, Allied was able to selectively increase prices during
2007. These increases, combined with programs to cut costs,
resulted in improved margins for Allied. The Companys
gross profit was also favorably impacted by a decrease in the
cost of providing medical insurance to its employees. Employee
medical cost included in the cost of sales decreased by
approximately $0.5 million over the prior year. The
Companys gross profit also did benefit from an
approximately $0.1 million decrease in workers
compensation and property insurance expense due to the improved
safety performance of the Company. Cost of sales for the year
ended June 30, 2006 includes approximately
$0.3 million in cost incurred in product development cost
to pursue development of a new carbon dioxide absorption product
as a result of the agreement with Abbott Laboratories to cease
production and distribution of
Baralyme
®
.
Cost of sales for the year ended June 30, 2007 includes
approximately $0.6 million in cost incurred in product
development cost to pursue development of a new carbon dioxide
absorption product.
The Company invested $0.4 million in capital expenditures
in fiscal 2005, $1.0 million in fiscal 2006, and
$0.6 million in fiscal 2007 for manufacturing equipment and
computer systems, which continue to decrease production costs
and improve efficiencies for several product lines. The Company
continues to control cost and actively pursue methods to reduce
its cost.
Selling, General, and Administrative (SG&A)
expenses for fiscal 2007 were $12.1 million, unchanged from
SG&A expenses of $12.1 million in fiscal 2006.
Personnel cost, including salaries and benefits, were
approximately
23
$0.2 million lower in fiscal 2007 than in the prior year.
This decrease is due to employee turnover and a decrease in
medical cost, staffing has not been changed. This decrease was
partially offset by a $0.1 million increase in legal cost
and a $0.1 million increase in research and development
cost.
Interest income in fiscal 2007 was $0.1 million, unchanged
from fiscal 2006.
The Company had income of $2.6 million before taxes for
fiscal 2007, compared to income of $2.2 million before
taxes for fiscal 2006. The Company recorded an income tax
provision of $0.9 million in fiscal 2007, compared to an
income tax provision of $0.5 million in fiscal 2006. During
the fourth quarter of 2006 the Company recorded a favorable tax
adjustment of $0.3 million resulting from the favorable
settlement of prior year state tax contingencies.
For further discussion of the Companys income tax
calculation please refer to Note 5 of the Notes to
Consolidated Financial Statements section included in this
Form 10-K.
Net income in fiscal 2007 was $1.6 million or $0.21 per
basic and $0.20 per diluted earnings per share, unchanged from
net income of $1.6 million, or $0.21 per basic and $0.20
per diluted earnings per share in fiscal 2006. In 2007, the
weighted number of shares used in the calculation of basic
earnings per share was 7,875,982 and the weighted number of
shares used in the calculation of diluted earnings per share was
8,085,375. In 2006, the weighted number of shares used in the
calculation of basic earnings per share was 7,840,858 and the
weighted number of shares used in the calculation of diluted
earnings per share was 8,066,311.
Financial
Condition, Liquidity and Capital Resources
The following table sets forth selected information concerning
Allieds financial condition at June 30:
|
|
|
|
|
|
|
|
|
|
|
|
|
Dollars in thousands
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Cash & cash equivalents
|
|
$
|
6,149
|
|
|
$
|
3,639
|
|
|
$
|
2,696
|
|
Working Capital
|
|
$
|
18,291
|
|
|
$
|
17,269
|
|
|
$
|
14,644
|
|
Total Debt
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Current Ratio
|
|
|
3.71:1
|
|
|
|
3.50:1
|
|
|
|
3.03:1
|
|
The Companys working capital was $18.3 million at
June 30, 2008 compared to $17.3 million at
June 30, 2007. Cash and cash equivalents increased by
$2.5 million and other current assets increased
$0.1 million. Accounts payable decreased $0.4 million
and deferred income taxes decreased $0.4 million. During
fiscal 2008, these increases in working capital were offset by a
decrease in accounts receivable. Accounts receivable decreased
to $6.4 million at June 30, 2008, down
$0.9 million from $7.3 million at June 30, 2007.
Accounts receivable as measured in days sales outstanding
(DSO) decreased to 34 DSO down from 45 DSO in the
prior year. Inventory decreased by $1.0 million, deferred
revenue increased $0.2 million and accrued liabilities
increased $0.5 million.
The Companys working capital was $17.3 million at
June 30, 2007 compared to $14.6 million at
June 30, 2006. Cash and cash equivalents increased by
$0.9 million. Inventory increased by $1.5 million as a
result of an effort by the Company to increase inventory levels
of key items to improve customer service levels. Other current
assets increased $0.1 million and accrued liabilities
decreased $0.3 million. During fiscal 2007, these increases
in working capital were offset by a decrease in accounts
receivable. Accounts receivable decreased to $7.3 million
at June 30, 2007, down $0.1 million from
$7.4 million at June 30, 2006. This decrease is due to
a decrease in sales. Accounts receivable as measured in days
sales outstanding (DSO) decreased to 45 DSO down
from 46 DSO in the prior year.
The net increase in cash for the fiscal year ended June 30,
2008 was $2.5 million. The net increase in cash for the
fiscal year ended June 30, 2007 was $0.9 million. The
net increase in cash for the fiscal year ended June 30,
2006 was $2.4 million. Net cash provided by operating
activities was $3.7 million for fiscal 2008. Net cash
provided by operating activities was $1.5 million and
$3.3 million for fiscal 2007 and 2006, respectively.
Cash flows provided by operating activities for the fiscal year
ended June 30, 2008 consisted of a net income of
$0.9 million, supplemented by $1.2 million in non-cash
charges to operations for amortization and depreciation.
24
Changes in working capital and deferred tax accounts favorably
impacted cash flow from operations by $1.6 million. Cash
flow was used to make capital expenditures of $1.1 million.
Cash flows provided by operating activities for the fiscal year
ended June 30, 2007 consisted of a net income of
$1.6 million, supplemented by $1.2 million in non-cash
charges to operations for amortization and depreciation. Changes
in working capital and deferred tax accounts, primarily
inventory, unfavorably impacted cash flow from operations by
$1.4 million. Cash flow was used to make capital
expenditures of $0.6 million.
Cash flows provided by operating activities for the fiscal year
ended June 30, 2006 consisted of a net income of
$1.6 million, supplemented by $1.1 million in non-cash
charges to operations for amortization and depreciation. Changes
in working capital and deferred tax accounts favorably impacted
cash flow from operations by $0.6 million. Cash flow was
used to make capital expenditures of $1.0 million.
On April 24, 2002, the Company entered into a credit
facility arrangement with LaSalle Bank National Association (the
Bank). The credit facility was amended on
September 26, 2002, September 26, 2003,
August 25, 2004, and September 1, 2005.
The revolving credit facility provides for a borrowing base of
80% of eligible accounts receivable plus the lesser of 50% of
eligible inventory or $7.0 million, subject to reserves as
established by the Bank. The maximum borrowing under the
revolving credit facility is $10 million. At June 30,
2008, $9.5 million was available under the revolving credit
facility. The credit facility calls for a 0.25% commitment fee
payable quarterly based on the average daily unused portion of
the revolving credit facility. The revolving credit facility
also provides for a commitment guaranty of up to
$5.0 million for letters of credit and requires a per annum
fee of 2.50% on outstanding letters of credit. At June 30,
2008, the Company had no letters of credit outstanding. Any
outstanding letters of credit decreases the amount available for
borrowing under the revolving credit facility.
On September 1, 2005, the Bank and the Company agreed to an
amendment of the credit facility. In conjunction with these
amendments to the Companys credit facility, the Bank
extended the maturity on the Companys revolving credit
facility from April 24, 2007 to September 1, 2008. The
amendment allowed for automatic renewals and the maturity of the
facility is now September 1, 2009. The entire credit
facility continues to accrue interest at the Banks prime
rate. The prime rate was 5.00% on June 30, 2008. The
interest rate on prime rate loans may increase from prime to
prime plus 0.75% if the ratio of the Companys funded debt
to EBITDA exceeds 2.5. The amended credit facility also provides
the Company with a rate of LIBOR plus 1.75%, at the
Companys option. The optional LIBOR rate may increase from
LIBOR plus 1.75% to LIBOR plus 2.75% based on the Companys
fixed charge coverage ratio. The
90-day
LIBOR
rate was 2.79% at June 30, 2008.
The credit facility requires lockbox arrangement, which provide
for all receipts to be swept daily to reduce borrowings
outstanding under the credit facility. This arrangement,
combined with the existence of a Material Adverse Effect (MAE)
clause in the credit facility, cause the revolving credit
facility to be classified as a current liability, per guidance
in the FASBs Emerging Issues Task Force Issue
95-22,
Balance Sheet Classification of Borrowings Outstanding
under Revolving Credit Agreements that Include Both a Subjective
Acceleration Clause and a Lock-Box Arrangement. However,
the Company does not expect to repay, or be required to repay,
within one year, the balance of the revolving credit facility
classified as a current liability. The MAE clause, which is a
typical requirement in commercial credit agreements, allows the
lender to require the loan to become due if it determines there
has been a material adverse effect on the Companys
operations, business, properties, assets, liabilities, condition
or prospects. The classification of the revolving credit
facility as a current liability is a result only of the
combination of the two aforementioned factors: the lockbox
arrangement and the MAE clause. However, the revolving credit
facility does not expire or have a maturity date within one
year. Additionally, the Bank has not notified the Company of any
indication of a MAE at June 30, 2008.
At June 30, 2008 the Company had no aggregate indebtedness,
including capital lease obligations, short-term debt and
long-term debt.
Under the terms of the credit facility, the Company is required
to be in compliance with certain financial covenants pertaining
to stockholders equity, capital expenditures and net
income. Additionally, the terms of the credit facility restrict
the Company from the payment of dividends on any class of its
stock. The Company was in compliance with all of the financial
covenants associated with its credit facility at June 30,
2008.
25
The following table summarizes the Companys contractual
obligations at June 30, 2008:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due By Period
|
|
|
|
|
|
|
Less than
|
|
|
|
|
|
|
|
|
More than
|
|
Contractual Obligations
|
|
Total
|
|
|
1 year
|
|
|
1-3 years
|
|
|
3-5 years
|
|
|
5 years
|
|
|
Long-Term Debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Lease Obligations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Leases
|
|
$
|
462,867
|
|
|
$
|
174,325
|
|
|
$
|
278,546
|
|
|
$
|
9,996
|
|
|
|
|
|
Unconditional Purchase Obligations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Long-Term
Obligations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Contractual Cash Obligations
|
|
$
|
462,867
|
|
|
$
|
174,325
|
|
|
$
|
278,546
|
|
|
$
|
9,996
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures, net of capital leases, were
$1.1 million, $0.6 million and $1.0 million in
fiscal 2008, 2007, and 2006, respectively. The Company believes
that cash flows from operations and available borrowings under
its credit facilities will be sufficient to finance fixed
payments and planned capital expenditures of $3.4 million
in 2009. Cash flows from operations may be negatively impacted
by decreases in sales, market conditions, and adverse changes in
working capital.
In the event that economic conditions were to severely worsen
for a protracted period of time, we believe that our borrowing
capacity under our credit facilities will provide sufficient
financial flexibility. The Company would have options available
to ensure liquidity in addition to increased borrowing. Capital
expenditures, which are budgeted at $3.4 million for the
fiscal year ended June 30, 2009, could be postponed. At
June 30, 2008, the Company had no bank debt. Based on the
Companys current level of debt, and performance, debt
would bear interest at the Banks prime rate. The
Companys agreement with the Bank does include provisions
for higher interest rates at higher debt levels and different
levels of Company performance.
During 2006, 2007 and 2008, increases in raw material cost had a
negative impact on the Companys earnings. These increases
resulted in fourth quarter of 2006 material cost being 7.3%
higher than in the prior year. This increase was led by a 77%
jump in the price of copper during that period. Copper is a
major component of brass, which is used in many Allied products.
Since 2006, copper prices have stabilized, but have not returned
to historical levels.
The Company makes its foreign sales in dollars and, accordingly,
sales proceeds are not affected by exchange rate fluctuations,
although the effect on its customers does impact the pace of
incoming orders.
Seasonality
and Quarterly Results
In past fiscal years, the Company has experienced moderate
seasonal increases in net sales during its second and third
fiscal quarters (October 1 through March 31) which in turn
have affected net income. Such seasonal variations were likely
attributable to an increase in hospital equipment purchases at
the beginning of each calendar year (which coincides with many
hospitals fiscal years) and an increase in the severity of
influenza during winter months.
The following table sets forth selected operating results for
the eight quarters ended June 30, 2008. The information for
each of these quarters is unaudited, but includes all normal
recurring adjustments which the Company considers necessary for
a fair presentation thereof. These operating results, however,
are not necessarily indicative of results for any future period.
Further, operating results may fluctuate as a result of the
timing of orders, the Companys product and customer mix,
the introduction of new products by the Company and its
competitors,
26
and overall trends in the health care industry and the economy.
While these patterns have an impact on the Companys
quarterly operations, the Company is unable to predict the
extent of this impact in any particular period.
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended,
|
|
|
|
June 30,
|
|
|
March 31,
|
|
|
Dec. 31,
|
|
|
Sept. 30,
|
|
|
June 30,
|
|
|
March 31,
|
|
|
Dec. 31,
|
|
|
Sept. 30,
|
|
|
|
2008
|
|
|
2008
|
|
|
2007
|
|
|
2007
|
|
|
2007
|
|
|
2007
|
|
|
2006
|
|
|
2006
|
|
|
|
Dollars in thousands, except per share data
|
|
|
Net sales
|
|
$
|
14,692
|
|
|
$
|
13,944
|
|
|
$
|
13,626
|
|
|
$
|
14,102
|
|
|
$
|
14,046
|
|
|
$
|
13,704
|
|
|
$
|
14,274
|
|
|
$
|
14,477
|
|
Gross profit
|
|
|
4,115
|
|
|
|
3,164
|
|
|
|
2,912
|
|
|
|
3,167
|
|
|
|
3,984
|
|
|
|
3,452
|
|
|
|
3,517
|
|
|
|
3,520
|
|
Income from operations
|
|
|
1,019
|
|
|
|
151
|
|
|
|
(21
|
)
|
|
|
124
|
|
|
|
1,219
|
|
|
|
448
|
|
|
|
425
|
|
|
|
329
|
|
Net income
|
|
|
689
|
|
|
|
100
|
|
|
|
6
|
|
|
|
87
|
|
|
|
869
|
|
|
|
278
|
|
|
|
293
|
|
|
|
202
|
|
Basic earnings per share
|
|
|
0.09
|
|
|
|
0.01
|
|
|
|
|
|
|
|
0.01
|
|
|
|
0.11
|
|
|
|
0.04
|
|
|
|
0.04
|
|
|
|
0.03
|
|
Diluted earnings per share
|
|
|
0.08
|
|
|
|
0.01
|
|
|
|
|
|
|
|
0.01
|
|
|
|
0.11
|
|
|
|
0.03
|
|
|
|
0.04
|
|
|
|
0.03
|
|
Earnings per share is computed independently for each of the
quarters presented. Therefore, the sum of the quarterly amounts
will not necessarily equal the total for the year.
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. The Company believes that any potential judgments
resulting from such claims over its self-insured retention will
be covered by the Companys product liability insurance.
Off
Balance Sheet Arrangements
Allied does not have any off balance sheet arrangements.
Recent
Accounting Pronouncements
In December 2007, the FASB issued SFAS No. 141
(revised 2007), Business Combinations (FAS 141(R)).
FAS 141(R) requires that the fair value of the purchase
price of an acquisition including the issuance of equity
securities be determined on the acquisition date; requires that
all assets, liabilities, noncontrolling interests, contingent
consideration, contingencies, and in-process research and
development costs of an acquired business be recorded at fair
value at the acquisition date; requires that acquisition costs
generally be expensed as incurred; requires that restructuring
costs generally be expensed in periods subsequent to the
acquisition date; and requires that changes in deferred tax
asset valuation allowances and acquired income tax uncertainties
after the measurement period impact income tax expense.
FAS 141(R) also broadens the definition of a business
combination and expands disclosures related to business
combinations. FAS 141(R) will be applied prospectively to
business combinations occurring after the beginning of the
Companys fiscal year 2010, except that business
combinations consummated prior to the effective date must apply
FAS 141(R) income tax requirements immediately upon
adoption. The Company is currently evaluating the impact of
FAS 141(R) on its financial position, results of
operations, and cash flows, and does not anticipate any material
effect on the Companys consolidated financial statements.
In June 2006, the FASB issued FASB Interpretation No. 48,
Accounting for Uncertainty in Income Taxes (FIN 48), which
clarifies the accounting for uncertainty in tax positions.
FIN 48 requires financial statement recognition of the
impact of a tax position if a position is more likely than not
of being sustained on audit, based on the technical merits of
the position. Additionally, FIN 48 provides guidance on
measurement, derecognition, classification, interest and
penalties, accounting in interim periods, transition, and
disclosure requirements for uncertain tax positions. In May
2007, the FASB issued FASB Staff Position
FIN No. 48-1,
Definition of Settlement in FASB Interpretation No. 48 (FSP
FIN 48-1).
This FSP provides guidance on how a company should determine
whether a tax position is effectively settled for the purpose of
recognizing previously unrecognized tax benefits. The provisions
of FIN 48 and FSP
FIN 48-1
were effective on July 1, 2007. See
Note 5 Income Taxes
of Notes to
Consolidated Financial Statements for information on the
adoption of these pronouncements.
27
In November 2004, the FASB issued SFAS No. 151,
Inventory Costs. SFAS No. 151 requires the
allocation of fixed production overhead costs be based on the
normal capacity of the production facilities and unallocated
overhead costs recognized as an expense in the period incurred.
In addition, other items such as abnormal freight, handling
costs and wasted materials require treatment as current period
charges rather than a portion of the inventory cost.
SFAS No. 151 is effective for inventory costs incurred
during periods beginning after June 15, 2005. Adoption of
SFAS No. 151 did not have a material impact on the
Companys results of operations, financial position or cash
flows.
In September 2006, the FASB issued SFAS No. 157,
Fair Value Measurements, which defines fair value,
establishes a framework for measuring fair value in generally
accepted accounting principles, and expands disclosures about
fair value measurements. SFAS No. 157 does not require
any new fair value measurements, but provides guidance on how to
measure fair value by providing a fair value hierarchy used to
classify the source of the information. This statement is
effective for us beginning July 1, 2008. We are currently
assessing the potential impact that adoption of
SFAS No. 157 will have on our financial statements.
|
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Item 7A.
|
Quantitative
and Qualitative Disclosures about Market Risk
|
At June 30, 2008, the Company did not have any debt
outstanding. The revolving credit facility bears an interest
rate using the commercial banks floating reference
rate or LIBOR as the basis, as defined in the loan
agreement, and therefore is subject to additional expense should
there be an increase in market interest rates.
The Company had no holdings of derivative financial or commodity
instruments at June 30, 2008. Allied Healthcare Products
has international sales; however these sales are denominated in
U.S. dollars, mitigating foreign exchange rate fluctuation
risk.
|
|
Item 8.
|
Financial
Statements and Supplementary Data
|
The following described consolidated financial statements of
Allied Healthcare Products, Inc. are included in response to
this item:
Report of Independent Registered Public Accounting Firm.
Consolidated Statement of Operations for the fiscal years ended
June 30, 2008, 2007 and 2006.
Consolidated Balance Sheet for the fiscal years ended
June 30, 2008 and 2007.
Consolidated Statement of Changes in Stockholders Equity
for the fiscal years ended June 30, 2008, 2007 and 2006.
Consolidated Statement of Cash Flows for the fiscal years ended
June 30, 2008, 2007 and 2006.
Notes to Consolidated Financial Statements.
Schedule of Valuation and Qualifying Accounts and Reserves for
the years ended June 30, 2008, 2007 and 2006.
All other schedules are omitted because they are not applicable
or the required information is shown in the financial statements
or notes thereto.
28
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
Allied Healthcare Products, Inc.
We have audited the accompanying consolidated balance sheet of
Allied Healthcare Products, Inc. and subsidiaries (collectively,
the Company) as of June 30, 2008 and 2007, and the related
consolidated statements of operations, changes in
stockholders equity and cash flows for each of the three
years in the period ended June 30, 2008. In connection with
our audit of the consolidated financial statements, we also have
audited the related financial statement schedule of valuation
and qualifying accounts and reserves for the years ended
June 30, 2008, 2007 and 2006. These consolidated financial
statements and the financial statement schedule are the
responsibility of the Companys management. Our
responsibility is to express an opinion on these consolidated
financial statements and financial statement schedule based on
our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial
statements are free of material misstatement. The Company is not
required to have, nor were we engaged to perform, an audit of
its internal controls over financial reporting. Our audit
included consideration of internal control over financial
reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Companys
internal control over financial reporting. Accordingly, we
express no such opinion. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial
position of Allied Healthcare Products, Inc. and subsidiaries as
of June 30, 2008 and 2007, and the results of their
operations and their cash flows for each of the three years in
the period ended June 30, 2008, in conformity with
accounting principles generally accepted in the United States of
America. Also in our opinion, the related financial statement
schedule referred to above, when considered in relation to the
consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth
therein.
As discussed in Note 5 to the consolidated financial
statements, on July 1, 2007, the Company adopted FASB
Interpretation No. 48 related to accounting for uncertainty
in income taxes.
/s/ RubinBrown LLP
St. Louis, Missouri
September 26, 2008
29
ALLIED
HEALTHCARE PRODUCTS, INC.
CONSOLIDATED
STATEMENT OF OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended June 30,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Net sales
|
|
$
|
56,364,111
|
|
|
$
|
56,500,974
|
|
|
$
|
57,545,589
|
|
Cost of sales
|
|
|
43,006,007
|
|
|
|
42,028,125
|
|
|
|
43,292,746
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
13,358,104
|
|
|
|
14,472,849
|
|
|
|
14,252,843
|
|
Selling, general and administrative expenses
|
|
|
12,084,971
|
|
|
|
12,051,500
|
|
|
|
12,112,624
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
1,273,133
|
|
|
|
2,421,349
|
|
|
|
2,140,219
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (income) expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
20,150
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
(138,269
|
)
|
|
|
(110,790
|
)
|
|
|
(52,988
|
)
|
Other, net
|
|
|
60,005
|
|
|
|
(23,841
|
)
|
|
|
37,758
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(58,114
|
)
|
|
|
(134,631
|
)
|
|
|
(15,230
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before provision for income taxes
|
|
|
1,331,247
|
|
|
|
2,555,980
|
|
|
|
2,155,449
|
|
Provision for income taxes
|
|
|
448,748
|
|
|
|
914,400
|
|
|
|
506,845
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
882,499
|
|
|
$
|
1,641,580
|
|
|
$
|
1,648,604
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic income per share:
|
|
$
|
0.11
|
|
|
$
|
0.21
|
|
|
$
|
0.21
|
|
Diluted income per share:
|
|
$
|
0.11
|
|
|
$
|
0.20
|
|
|
$
|
0.20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding Basic
|
|
|
7,883,659
|
|
|
|
7,875,982
|
|
|
|
7,840,858
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding Diluted
|
|
|
8,119,776
|
|
|
|
8,085,375
|
|
|
|
8,066,311
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying Notes to Consolidated Financial Statements.
30
ALLIED
HEALTHCARE PRODUCTS, INC.
CONSOLIDATED
BALANCE SHEET
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
|
2008
|
|
|
2007
|
|
|
ASSETS
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
6,149,015
|
|
|
$
|
3,638,870
|
|
Accounts receivable, net of allowances of $300,000 and $460,000,
respectively
|
|
|
6,441,683
|
|
|
|
7,251,767
|
|
Inventories, net
|
|
|
12,046,450
|
|
|
|
12,999,472
|
|
Other current assets
|
|
|
394,975
|
|
|
|
275,254
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
25,032,123
|
|
|
|
24,165,363
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
|
10,542,573
|
|
|
|
10,677,000
|
|
Goodwill
|
|
|
15,979,830
|
|
|
|
15,979,830
|
|
Other assets, net
|
|
|
703,328
|
|
|
|
496,127
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
52,257,854
|
|
|
$
|
51,318,320
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
2,590,804
|
|
|
$
|
3,040,313
|
|
Other accrued liabilities
|
|
|
2,960,334
|
|
|
|
2,508,820
|
|
Deferred income taxes
|
|
|
500,238
|
|
|
|
882,001
|
|
Deferred revenue
|
|
|
690,000
|
|
|
|
465,000
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
6,741,376
|
|
|
|
6,896,134
|
|
|
|
|
|
|
|
|
|
|
Deferred revenue
|
|
|
2,177,500
|
|
|
|
1,937,500
|
|
Commitments and contingencies (Notes 4 and 9)
|
|
|
|
|
|
|
|
|
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; 10,188,569 and 10,187,069 shares issued at
June 30, 2008 and June 30, 2007, respectively;
7,885,077 and 7,883,577 shares outstanding at June 30,
2008 and June 30, 2007, respectively
|
|
|
101,886
|
|
|
|
101,871
|
|
Additional paid-in capital
|
|
|
47,524,084
|
|
|
|
47,441,163
|
|
Retained earnings
|
|
|
16,444,436
|
|
|
|
15,673,080
|
|
Less: treasury stock, at cost; 2,303,492 shares at
June 30, 2008 and 2007
|
|
|
(20,731,428
|
)
|
|
|
(20,731,428
|
)
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
43,338,978
|
|
|
|
42,484,686
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
52,257,854
|
|
|
$
|
51,318,320
|
|
|
|
|
|
|
|
|
|
|
See accompanying Notes to Consolidated Financial Statements.
31
ALLIED
HEALTHCARE PRODUCTS, INC.
CONSOLIDATED
STATEMENT OF CHANGES IN STOCKHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
|
|
|
Paid-in
|
|
|
Retained
|
|
|
Treasury
|
|
|
|
|
|
|
Stock
|
|
|
Capital
|
|
|
Earnings
|
|
|
Stock
|
|
|
Total
|
|
|
Balance, July 1, 2005
|
|
$
|
101,331
|
|
|
$
|
47,109,143
|
|
|
$
|
12,382,896
|
|
|
$
|
(20,731,428
|
)
|
|
$
|
38,861,942
|
|
Issuance of common stock
|
|
|
225
|
|
|
|
87,675
|
|
|
|
|
|
|
|
|
|
|
|
87,900
|
|
Stock based compensation
|
|
|
|
|
|
|
61,364
|
|
|
|
|
|
|
|
|
|
|
|
61,364
|
|
Net income for the year ended
June 30, 2006
|
|
|
|
|
|
|
|
|
|
|
1,648,604
|
|
|
|
|
|
|
|
1,648,604
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2006
|
|
|
101,556
|
|
|
|
47,258,182
|
|
|
|
14,031,500
|
|
|
|
(20,731,428
|
)
|
|
|
40,659,810
|
|
Issuance of common stock
|
|
|
315
|
|
|
|
109,199
|
|
|
|
|
|
|
|
|
|
|
|
109,514
|
|
Stock based compensation
|
|
|
|
|
|
|
73,782
|
|
|
|
|
|
|
|
|
|
|
|
73,782
|
|
Net income for the year ended
June 30, 2007
|
|
|
|
|
|
|
|
|
|
|
1,641,580
|
|
|
|
|
|
|
|
1,641,580
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2007
|
|
|
101,871
|
|
|
|
47,441,163
|
|
|
|
15,673,080
|
|
|
|
(20,731,428
|
)
|
|
|
42,484,686
|
|
Issuance of common stock
|
|
|
15
|
|
|
|
6,098
|
|
|
|
|
|
|
|
|
|
|
|
6,113
|
|
Stock based compensation
|
|
|
|
|
|
|
76,823
|
|
|
|
|
|
|
|
|
|
|
|
76,823
|
|
Cumulative effect of adoption of FIN 48, Accounting for
Uncertainty in Income Taxes
|
|
|
|
|
|
|
|
|
|
|
(111,143
|
)
|
|
|
|
|
|
|
(111,143
|
)
|
Net income for the year ended
June 30, 2008
|
|
|
|
|
|
|
|
|
|
|
882,499
|
|
|
|
|
|
|
|
882,499
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2008
|
|
$
|
101,886
|
|
|
$
|
47,524,084
|
|
|
$
|
16,444,436
|
|
|
$
|
(20,731,428
|
)
|
|
$
|
43,338,978
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying Notes to Consolidated Financial Statements.
32
ALLIED
HEALTHCARE PRODUCTS, INC.
CONSOLIDATED
STATEMENT OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended June 30,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
882,499
|
|
|
$
|
1,641,580
|
|
|
$
|
1,648,604
|
|
Adjustments to reconcile net income to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
1,229,753
|
|
|
|
1,230,775
|
|
|
|
1,060,241
|
|
Stock based compensation
|
|
|
76,823
|
|
|
|
73,782
|
|
|
|
61,364
|
|
Provision for doubtful accounts and sales returns and allowances
|
|
|
(212,278
|
)
|
|
|
(376
|
)
|
|
|
(61,945
|
)
|
Deferred tax provision (benefit)
|
|
|
(389,052
|
)
|
|
|
(53,467
|
)
|
|
|
48,406
|
|
Loss (gain) on disposition of equipment
|
|
|
42,915
|
|
|
|
(307
|
)
|
|
|
15,904
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
1,030,061
|
|
|
|
177,964
|
|
|
|
(151,611
|
)
|
Inventories
|
|
|
953,022
|
|
|
|
(1,508,167
|
)
|
|
|
(715,755
|
)
|
Other current assets
|
|
|
(119,721
|
)
|
|
|
(50,401
|
)
|
|
|
(56,422
|
)
|
Accounts payable
|
|
|
(449,509
|
)
|
|
|
(168,386
|
)
|
|
|
1,098,100
|
|
Deferred revenue
|
|
|
465,000
|
|
|
|
465,000
|
|
|
|
465,000
|
|
Other accrued liabilities
|
|
|
164,966
|
|
|
|
(325,675
|
)
|
|
|
(106,268
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
3,674,479
|
|
|
|
1,482,322
|
|
|
|
3,305,618
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
(1,135,447
|
)
|
|
|
(649,290
|
)
|
|
|
(1,014,969
|
)
|
Purchase of intangible asset
|
|
|
(35,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(1,170,447
|
)
|
|
|
(649,290
|
)
|
|
|
(1,014,969
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings under revolving credit agreements
|
|
|
|
|
|
|
|
|
|
|
346,000
|
|
Payments under revolving credit agreements
|
|
|
|
|
|
|
|
|
|
|
(346,000
|
)
|
Stock options exercised
|
|
|
3,438
|
|
|
|
81,090
|
|
|
|
64,125
|
|
Excess tax benefit from exercise of stock options
|
|
|
2,675
|
|
|
|
28,424
|
|
|
|
23,775
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
6,113
|
|
|
|
109,514
|
|
|
|
87,900
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash and equivalents
|
|
|
2,510,145
|
|
|
|
942,546
|
|
|
|
2,378,549
|
|
Cash and cash equivalents at beginning of year
|
|
|
3,638,870
|
|
|
|
2,696,324
|
|
|
|
317,775
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of year
|
|
$
|
6,149,015
|
|
|
$
|
3,638,870
|
|
|
$
|
2,696,324
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of cash flow information:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid during the year for:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
8,934
|
|
|
$
|
|
|
|
$
|
|
|
Income taxes
|
|
$
|
616,382
|
|
|
$
|
917,126
|
|
|
$
|
575,943
|
|
See accompanying Notes to Consolidated Financial Statements.
33
ALLIED
HEALTHCARE PRODUCTS, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
Allied Healthcare Products, Inc. (the Company or
Allied) is a manufacturer of respiratory products
used in the health care industry in a wide range of hospital and
alternate site settings, including post-acute care facilities,
home health care and trauma care. The Companys product
lines include respiratory care products, medical gas equipment
and emergency medical products.
|
|
2.
|
Summary
of Significant Accounting Policies
|
The significant accounting policies followed by Allied are
described below.
Use of
estimates
The policies utilized by the Company in the preparation of the
consolidated financial statements conform to accounting
principles generally accepted in the United States of America,
and require management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the
date of the consolidated financial statements and the reported
amounts of revenues and expenses during the reporting period.
Actual amounts could differ from those estimates.
Principles
of consolidation
The consolidated financial statements include the accounts of
the Company and its wholly owned subsidiaries. All significant
intercompany transactions and intercompany balances are
eliminated.
Revenue
recognition
Revenue is recognized for all sales, including sales to agents
and distributors, at the time products are shipped and title has
transferred, provided that a purchase order has been received or
a contract executed, there are not uncertainties regarding
customer acceptance, the sales price is fixed and determinable
and collectibility is reasonably assured. Sales discounts,
returns and allowances are included in net sales, and the
provision for doubtful accounts is included in selling, general
and administrative expenses. Additionally, it is the
Companys practice to include revenues generated from
freight billed to customers in net sales with corresponding
freight expense included in cost of sales in the consolidated
statement of operations.
The sales price is fixed by Allieds acceptance of the
buyers firm purchase order. The sales price is not
contingent, or subject to additional discounts. Allieds
standard shipment terms are F.O.B. shipping point as
stated in Allieds Terms and Conditions of Sale. The
customer is responsible for obtaining insurance for and bears
the risk of loss for product in-transit. Additionally, sales to
customers do not include the right to return merchandise without
the prior consent of Allied. In those cases where returns are
accepted, product must be current and restocking fees must be
paid by the respective customer. A provision has been made for
estimated sales returns and allowances. These estimates are
based on historical analysis of credit memo data and returns.
Allied does not provide installation services for its products.
Most products shipped are ready for immediate use by the
customer. The Companys in-wall medical system components,
central station pumps and compressors, and headwalls do require
installation by the customer. These products are typically
purchased by a third-party contractor who is ultimately
responsible for installation services. Accordingly, the customer
purchase order or contract does not require customer acceptance
of the installation prior to completion of the sale transaction
and revenue recognition. Allieds standard payment terms
are net 30 days from the date of shipment, and payment
is specifically not subject to customer inspection or
acceptance, as stated in Allieds Terms and Conditions of
Sale. The buyer becomes obligated to pay Allied at the time of
shipment. Allied requires credit applications from its customers
and performs credit reviews to determine the creditworthiness of
new customers. Allied requires letters of credit, where
warranted, for international transactions. Allied also protects
its legal rights under mechanics lien laws when selling to
contractors.
34
ALLIED
HEALTHCARE PRODUCTS, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Allied does offer limited warranties on its products. The
standard warranty period is one year; however, most claims occur
within the first six months. The Companys cost of
providing warranty service for its products for the years ended
June 30, 2008, June 30, 2007, and June 30, 2006
was $62,954, $118,967, and $114,181, respectively. The related
liability for warranty service amounted to $86,343 and $112,907
at June 30, 2008 and 2007, respectively.
Cash
and cash equivalents
For purposes of the statement of cash flows, the Company
considers all highly liquid investments with a maturity of three
months or less when acquired to be cash equivalents.
Foreign
currency transactions
Allied has international sales which are denominated in
U.S. dollars, the functional currency for these
transactions.
Accounts
receivable and concentrations of credit risk
Accounts receivable are recorded at the invoiced amount. The
Company performs ongoing credit evaluations of its customers and
generally does not require collateral. The Company maintains
reserves for potential credit losses based on past experience
and an analysis of current amounts due, and historically such
losses have been within managements expectations. The
Companys customers can be grouped into three main
categories: medical equipment distributors, construction
contractors and health care institutions. At June 30, 2008
the Company believes that it has no significant concentration of
credit risk.
Inventories
Inventories are stated at the lower of cost, determined using
the
last-in,
first-out (LIFO) method, or market. If the
first-in,
first-out method (which approximates replacement cost) had been
used in determining cost, inventories would have been $2,404,262
and $2,376,958 higher at June 30, 2008 and 2007,
respectively. Changes in the LIFO reserve are included in cost
of sales. Cost of sales were reduced by $23,299, $0, and $0 in
fiscal 2008, 2007, and 2006 respectively, as a result of LIFO
liquidations. Costs in inventory include raw materials, direct
labor and manufacturing overhead.
Inventory is recorded net of a reserve for obsolete and excess
inventory which is determined based on an analysis of inventory
items with no usage in the preceding year and for inventory
items for which there is greater than two years usage on
hand. The reserve for obsolete and excess inventory was
$1,299,483 and $1,099,864 at June 30, 2008 and 2007,
respectively.
Property,
plant and equipment
Property, plant and equipment are recorded at cost and are
depreciated using the straight-line method over the estimated
useful lives of the assets, which range from 5 to 35 years.
Properties held under capital leases are recorded at the present
value of the non-cancelable lease payments over the term of the
lease and are amortized over the shorter of the lease term or
the estimated useful lives of the assets. Expenditures for
repairs, maintenance and renewals are charged to income as
incurred. Expenditures, which improve an asset or extend its
estimated useful life, are capitalized. When properties are
retired or otherwise disposed of, the related cost and
accumulated depreciation are removed from the accounts and any
gain or loss is included in income.
35
ALLIED
HEALTHCARE PRODUCTS, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Goodwill
At June 30, 2008 and 2007, the Company has goodwill of
$15,979,830, resulting from the excess of the purchase price
over the fair value of net assets acquired in business
combinations. The Company does not amortize goodwill.
The Company conducts a formal impairment test of goodwill on an
annual basis and between annual tests if an event occurs or
circumstances change that would more likely than not reduce the
fair value of the Company below its carrying value. The annual
impairment test did not indicate an impairment of goodwill at
June 30, 2008, 2007, or 2006.
Allied operates as one reporting unit and prepares its annual
goodwill impairment test in that manner. None of the
Companys product lines constitute a business, as that term
is defined in Emerging Issues Task Force (EITF) Issue
98-3.
Most
of its products are produced in one facility, and Allied does
not produce separate financial statements for any part of its
business. The goodwill impairment test is performed at
June 30
th
of
each year.
The results of these annual impairment reviews are highly
dependent on managements projection of future results of
the Company and there can be no assurance that at the time such
future reviews are completed a material impairment charge will
not be recorded.
Impairment
of long-lived assets
The Company evaluates impairment of long-lived assets under the
provisions of SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets.
SFAS No. 144 provides a single accounting model for
long-lived assets to be disposed of and reviewed for impairment
whenever events or changes in circumstances indicate that the
carrying amount of the assets may not be recoverable. Under
SFAS No. 144, if the sum of the expected future cash
flows (undiscounted and without interest charges) of the
long-lived assets is less than the carrying amount of such
assets, an impairment loss will be recognized. No impairment
losses of long-lived assets or identifiable intangibles were
recorded by the Company for fiscal years ended June 30,
2008, 2007, and 2006.
Self-insurance
The Company maintains a self-insurance program for a portion of
its health care costs. Self-insurance costs are accrued based
upon the aggregate of the liability for reported claims and the
estimated liability for claims incurred but not reported. As of
June 30, 2008 and 2007, the Company had $300,000 and
$325,000 respectively, of accrued liabilities related to health
care claims. In order to establish the self-insurance reserves,
the Company utilized actuarial estimates of expected claims
based on analyses of historical data.
Fair
value of financial instruments
The Companys financial instruments consist of cash,
accounts receivable and accounts payable. The carrying amounts
for cash, accounts receivable and accounts payable approximate
their fair value due to the short maturity of these instruments.
Income
taxes
The Company accounts for income taxes under
SFAS No. 109, Accounting for Income Taxes.
Under SFAS No. 109, the deferred tax provision is
determined using the liability method, whereby deferred tax
assets and liabilities are recognized based upon temporary
differences between the financial statement and income tax bases
of assets and liabilities using presently enacted tax rates.
Valuation allowances are established when necessary to reduce
deferred tax assets to the amounts expected to be realized.
The Company recognizes tax liabilities when, despite the
Companys belief that its tax return positions are
supportable, the Company believes that certain positions may not
be fully sustained upon review by tax authorities. Benefits from
tax positions are measured at the largest amount of benefit that
is greater than 50 percent likely of
36
ALLIED
HEALTHCARE PRODUCTS, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
being realized upon settlement. To the extent the Company deems
it necessary to record a liability for its tax positions, the
current portion of the liability is included in income taxes
payable and the noncurrent portion is included in other
liabilities in consolidated balance sheet. If upon the final tax
outcome of these matters the ultimate liability is different
than the amounts recorded, such differences are reflected in
income tax expense in the period in which such determination is
made. The Companys federal tax return for the fiscal year
2007 remains subject to examination. The various states in which
the Company is subject to income tax are generally open for the
tax fiscal years 2004 and after.
The Company classifies interest expenses on taxes payable as
interest expense. Penalties are classified as a component of
other expenses.
Research
and development costs
Research and development costs are expensed as incurred and are
included in selling, general and administrative expenses.
Research and development expenses for the years ended
June 30, 2008, 2007 and 2006 were $799,925, $844,890 and
$693,627 respectively.
Earnings
per share
Basic earnings per share are based on the weighted average
number of shares of common stock outstanding during the year.
Diluted earnings per share are based on the sum of the weighted
averaged number of shares of common stock and common stock
equivalents outstanding during the year. The weighted average
number of basic shares outstanding for the years ended
June 30, 2008, 2007 and 2006 was 7,883,659, 7,875,982 and
7,840,858 shares, respectively. The weighted average number
of diluted shares outstanding for the years ended June 30,
2008, 2007 and 2006 was 8,119,776, 8,085,375 and
8,066,311 shares, respectively. The dilutive effect of the
Companys employee and director stock option plans are
determined by use of the treasury stock method.
Employee
stock-based compensation
On July 1, 2005 the company adopted the provisions of
Financial Accounting Standards Board Statement No. 123R,
Share-Based Payment (SFAS 123R), using the
modified prospective transition method which does not require
prior periods to be restated. Statement 123R sets accounting
requirements for share-based compensation to
employees, including employee stock purchase plans, and requires
companies to recognize in the statement of operations the
grant-date fair value of the stock options and other
equity-based compensation.
The fair value of options granted is estimated on the date of
grant using the Black-Scholes option-pricing model. The
following table summarizes the weighted average assumptions
utilized in the Black-Scholes option pricing model for options
granted during the fiscal years ended June 30, 2008, 2007
and 2006.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Weighted-average fair value
|
|
$
|
3.00
|
|
|
$
|
2.53
|
|
|
$
|
3.48
|
|
Weighted-average volatility
|
|
|
40
|
%
|
|
|
41
|
%
|
|
|
51
|
%
|
Weighted-average expected life (in years)
|
|
|
6.0
|
|
|
|
6.2
|
|
|
|
10.0
|
|
Weighted-average risk-free interest rate
|
|
|
3.91
|
%
|
|
|
4.69
|
%
|
|
|
4.45
|
%
|
Dividend yield
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
0
|
%
|
Share-based compensation expense included in the statement of
operations for the fiscal years ended June 30, 2008, 2007
and 2006 was approximately $77,000, $74,000 and $61,000
respectively. Unrecognized shared-based compensation cost
related to unvested stock options for the fiscal year ended
June 30, 2008 amounts to approximately $104,000. The cost
is expected to be recognized over the next four fiscal years.
37
ALLIED
HEALTHCARE PRODUCTS, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The following table summarizes stock option exercises for the
fiscal years ended June 30, 2008, 2007 and 2006.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Stock options exercised
|
|
|
1,500
|
|
|
|
31,500
|
|
|
|
22,500
|
|
Total intrinsic value of stock options exercised
|
|
$
|
6,688
|
|
|
$
|
78,210
|
|
|
$
|
65,850
|
|
Cash received from stock option exercises
|
|
$
|
3,438
|
|
|
$
|
81,090
|
|
|
$
|
64,125
|
|
Tax benefit from stock options exercised
|
|
$
|
2,675
|
|
|
$
|
28,424
|
|
|
$
|
23,775
|
|
Prior to July 1, 2005, the Company accounted for employee
stock options in accordance with Accounting Principles Board No.
(APB) 25, Accounting for Stock Issued to Employees.
Under APB 25, the Company applies the intrinsic value method of
accounting. The Company did not recognize compensation expense
at the grant date for options granted because the Company grants
options at a price equal to the market value at the time of
grant.
New
accounting standards
In December 2007, the FASB issued SFAS No. 141
(revised 2007), Business Combinations (FAS 141(R)).
FAS 141(R) requires that the fair value of the purchase
price of an acquisition including the issuance of equity
securities be determined on the acquisition date; requires that
all assets, liabilities, noncontrolling interests, contingent
consideration, contingencies, and in-process research and
development costs of an acquired business be recorded at fair
value at the acquisition date; requires that acquisition costs
generally be expensed as incurred; requires that restructuring
costs generally be expensed in periods subsequent to the
acquisition date; and requires that changes in deferred tax
asset valuation allowances and acquired income tax uncertainties
after the measurement period impact income tax expense.
FAS 141(R) also broadens the definition of a business
combination and expands disclosures related to business
combinations. FAS 141(R) will be applied prospectively to
business combinations occurring after the beginning of the
Companys fiscal year 2010, except that business
combinations consummated prior to the effective date must apply
FAS 141(R) income tax requirements immediately upon
adoption. The Company is currently evaluating the impact of
FAS 141(R) on its financial position, results of
operations, and cash flows, and does not anticipate any material
effect on the Companys consolidated financial statements.
In June 2006, the FASB issued FASB Interpretation No. 48,
Accounting for Uncertainty in Income Taxes (FIN 48), which
clarifies the accounting for uncertainty in tax positions.
FIN 48 requires financial statement recognition of the
impact of a tax position if a position is more likely than not
of being sustained on audit, based on the technical merits of
the position. Additionally, FIN 48 provides guidance on
measurement, derecognition, classification, interest and
penalties, accounting in interim periods, transition, and
disclosure requirements for uncertain tax positions. In May
2007, the FASB issued FASB Staff Position
FIN No. 48-1,
Definition of Settlement in FASB Interpretation No. 48 (FSP
FIN 48-1).
This FSP provides guidance on how a company should determine
whether a tax position is effectively settled for the purpose of
recognizing previously unrecognized tax benefits. The provisions
of FIN 48 and FSP
FIN 48-1
were effective on July 1, 2007. See
Note 5 Income Taxes
of Notes to
Consolidated Financial Statements for information on the
adoption of these pronouncements.
In November 2004, the FASB issued SFAS No. 151,
Inventory Costs. SFAS No. 151 requires the
allocation of fixed production overhead costs be based on the
normal capacity of the production facilities and unallocated
overhead costs recognized as an expense in the period incurred.
In addition, other items such as abnormal freight, handling
costs and wasted materials require treatment as current period
charges rather than a portion of the inventory cost.
SFAS No. 151 is effective for inventory costs incurred
during periods beginning after June 15, 2005. Adoption of
SFAS No. 151 did not have a material impact on the
Companys results of operations, financial position or cash
flows.
In September 2006, the FASB issued SFAS No. 157,
Fair Value Measurements, which defines fair value,
establishes a framework for measuring fair value in generally
accepted accounting principles, and expands disclosures about
fair value measurements. SFAS No. 157 does not require
any new fair value measurements, but provides guidance on how to
measure fair value by providing a fair value hierarchy used to
classify the source of
38
ALLIED
HEALTHCARE PRODUCTS, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
the information. This statement is effective for us beginning
July 1, 2008. We are currently assessing the potential
impact that adoption of SFAS No. 157 will have on our
financial statements.
On April 24, 2002, the Company entered into a credit
facility arrangement with LaSalle Bank National Association (the
Bank). The credit facility was amended on
September 26, 2002, September 26, 2003,
August 25, 2004, and September 1, 2005.
The revolving credit facility provides for a borrowing base of
80% of eligible accounts receivable plus the lesser of 50% of
eligible inventory or $7.0 million, subject to reserves as
established by the Bank. The maximum borrowing under the
revolving credit facility is $10 million. At June 30,
2008, $9.5 million was available under the revolving credit
facility. The credit facility calls for a 0.25% commitment fee
payable quarterly based on the average daily unused portion of
the revolving credit facility. The revolving credit facility
also provides for a commitment guaranty of up to
$5.0 million for letters of credit and requires a per annum
fee of 2.50% on outstanding letters of credit. At June 30,
2008, the Company had no letters of credit outstanding. Any
outstanding letters of credit decreases the amount available for
borrowing under the revolving credit facility.
On September 1, 2005, the Bank and the Company agreed to an
amendment of the credit facility. In conjunction with these
amendments to the Companys credit facility, the Bank
extended the maturity on the Companys revolving credit
facility from April 24, 2007 to September 1, 2008. The
amendment allowed for automatic renewals and the maturity of the
facility is now September 1, 2009. The entire credit
facility continues to accrue interest at the Banks prime
rate. The prime rate was 5.00% on June 30, 2008. The
interest rate on prime rate loans may increase from prime to
prime plus 0.75% if the ratio of the Companys funded debt
to EBITDA exceeds 2.5. The amended credit facility also provides
the Company with a rate of LIBOR plus 1.75%, at the
Companys option. The optional LIBOR rate may increase from
LIBOR plus 1.75% to LIBOR plus 2.75% based on the Companys
fixed charge coverage ratio. The
90-day
LIBOR
rate was 2.79% at June 30, 2008.
The credit facility requires lockbox arrangement, which provide
for all receipts to be swept daily to reduce borrowings
outstanding under the credit facility. This arrangement,
combined with the existence of a Material Adverse Effect (MAE)
clause in the credit facility, cause the revolving credit
facility to be classified as a current liability, per guidance
in the FASBs Emerging Issues Task Force Issue
95-22,
Balance Sheet Classification of Borrowings Outstanding
under Revolving Credit Agreements that Include Both a Subjective
Acceleration Clause and a Lock-Box Arrangement. However,
the Company does not expect to repay, or be required to repay,
within one year, the balance of the revolving credit facility
classified as a current liability. The MAE clause, which is a
typical requirement in commercial credit agreements, allows the
lender to require the loan to become due if it determines there
has been a material adverse effect on the Companys
operations, business, properties, assets, liabilities, condition
or prospects. The classification of the revolving credit
facility as a current liability is a result only of the
combination of the two aforementioned factors: the lockbox
arrangement and the MAE clause. However, the revolving credit
facility does not expire or have a maturity date within one
year. Additionally, the Bank has not notified the Company of any
indication of a MAE at June 30, 2008.
At June 30, 2008 the Company had no aggregate indebtedness,
including capital lease obligations, short-term debt and
long-term debt.
Under the terms of the credit facility, the Company is required
to be in compliance with certain financial covenants pertaining
to stockholders equity, capital expenditures and net
income. Additionally, the terms of the credit facility restrict
the Company from the payment of dividends on any class of its
stock. The Company was in compliance with all of the financial
covenants associated with its credit facility at June 30,
2008.
39
ALLIED
HEALTHCARE PRODUCTS, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The Company leases certain of its equipment under non-cancelable
operating lease agreements. Minimum lease payments under
operating leases at June 30, 2008 are as follows:
|
|
|
|
|
Fiscal Year
|
|
Operating Leases
|
|
|
2009
|
|
$
|
174,325
|
|
2010
|
|
|
160,261
|
|
2011
|
|
|
118,285
|
|
2012
|
|
|
9,996
|
|
2013
|
|
|
|
|
|
|
|
|
|
Total minimum lease payments
|
|
$
|
462,867
|
|
|
|
|
|
|
Rental expense incurred on operating leases in fiscal 2008,
2007, and 2006 totaled $303,158, $295,446 and $305,734
respectively.
The provision for income taxes consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
720,838
|
|
|
$
|
794,900
|
|
|
$
|
695,218
|
|
State
|
|
|
116,962
|
|
|
|
172,967
|
|
|
|
(236,779
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current
|
|
|
837,800
|
|
|
|
967,867
|
|
|
|
458,439
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
(299,045
|
)
|
|
|
(45,016
|
)
|
|
|
62,346
|
|
State
|
|
|
(90,007
|
)
|
|
|
(8,451
|
)
|
|
|
(13,940
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred
|
|
|
(389,052
|
)
|
|
|
(53,467
|
)
|
|
|
48,406
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
448,748
|
|
|
$
|
914,400
|
|
|
$
|
506,845
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In 2006, the Company realized a tax benefit of $0.3 million
from the favorable settlement of state tax contingencies.
A reconciliation of income taxes, with the amounts computed at
the statutory federal rate is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Computed tax at federal statutory rate
|
|
$
|
452,624
|
|
|
$
|
869,033
|
|
|
$
|
732,853
|
|
State income taxes, net of federal tax benefit
|
|
|
17,791
|
|
|
|
108,581
|
|
|
|
89,671
|
|
Favorable settlement of state tax contingencies
|
|
|
|
|
|
|
|
|
|
|
(351,434
|
)
|
Other, net
|
|
|
(21,667
|
)
|
|
|
(63,214
|
)
|
|
|
35,755
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
448,748
|
|
|
$
|
914,400
|
|
|
$
|
506,845
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40
ALLIED
HEALTHCARE PRODUCTS, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The deferred tax assets and deferred tax liabilities recorded on
the balance sheet as of June 30, 2008 and 2007 are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
|
Deferred Tax
|
|
|
Deferred Tax
|
|
|
Deferred Tax
|
|
|
Deferred Tax
|
|
|
|
Assets
|
|
|
Liabilities
|
|
|
Assets
|
|
|
Liabilities
|
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bad debts
|
|
$
|
40,000
|
|
|
$
|
|
|
|
$
|
60,000
|
|
|
$
|
|
|
Prepaid expenses
|
|
|
|
|
|
|
47,310
|
|
|
|
|
|
|
|
28,364
|
|
Deferred revenue
|
|
|
276,000
|
|
|
|
|
|
|
|
186,000
|
|
|
|
|
|
Accrued liabilities
|
|
|
380,599
|
|
|
|
|
|
|
|
396,589
|
|
|
|
|
|
Inventory
|
|
|
|
|
|
|
1,149,528
|
|
|
|
|
|
|
|
1,496,226
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
696,599
|
|
|
|
1,196,838
|
|
|
|
642,589
|
|
|
|
1,524,590
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
|
|
|
|
425,332
|
|
|
|
|
|
|
|
461,924
|
|
Other property basis
|
|
|
|
|
|
|
13,758
|
|
|
|
|
|
|
|
29,305
|
|
Intangible assets
|
|
|
16,383
|
|
|
|
|
|
|
|
30,790
|
|
|
|
|
|
Deferred revenue
|
|
|
871,000
|
|
|
|
|
|
|
|
775,000
|
|
|
|
|
|
Accrued pension liability
|
|
|
95,308
|
|
|
|
|
|
|
|
76,062
|
|
|
|
|
|
Stock options
|
|
|
79,363
|
|
|
|
|
|
|
|
48,634
|
|
|
|
|
|
Other
|
|
|
3,164
|
|
|
|
|
|
|
|
4,176
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,065,218
|
|
|
|
439,090
|
|
|
|
934,662
|
|
|
|
491,229
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Valuation Allowance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred taxes
|
|
$
|
1,761,817
|
|
|
$
|
1,635,928
|
|
|
$
|
1,577,251
|
|
|
$
|
2,015,819
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The net long term deferred tax asset of $626,128 and $443,433 is
included in other assets in the June 30, 2008 and 2007
consolidated balance sheet, respectively.
In 2006, the FASB issued FIN 48, which clarifies the
accounting for uncertainty in tax positions. FIN 48
requires that the Company recognize in its financial statements
the impact of a tax position, if that position is more likely
than not of being sustained on audit, based on the technical
merits of the position. The Company adopted the provisions of
FIN 48 on July 1, 2007, the beginning of the
Companys fiscal year. Upon the adoption of FIN 48 on
July 1, 2007, the Company recognized a $286,549 increase in
the liability for unrecognized tax benefits including interest
and penalties. The increase was accounted for as a reduction to
the July 1, 2007 balance of retained earnings in the amount
of $111,143 and an increase to deferred tax assets of $175,406.
The total liability for unrecognized tax benefits totaled
$286,549 as of July 1, 2007.
41
ALLIED
HEALTHCARE PRODUCTS, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Changes in the unrecognized tax benefit during fiscal year 2008
were as follows:
|
|
|
|
|
|
|
Unrecognized
|
|
|
|
Tax Benefit
|
|
|
Beginning balance July 1, 2007
|
|
$
|
286,549
|
|
Tax positions related to prior years:
|
|
|
|
|
Additions
|
|
|
120,708
|
|
Settlements
|
|
|
(407,257
|
)
|
Tax positions related to current year:
|
|
|
|
|
Additions
|
|
|
0
|
|
Reductions
|
|
|
0
|
|
Lapses in statue of limitations
|
|
|
0
|
|
|
|
|
|
|
Ending balance June 30, 2008
|
|
$
|
0
|
|
|
|
|
|
|
The addition of $120,708 and settlement of $407,257 for prior
year tax positions relate to the IRS examination for fiscal
years 2005 and 2006. The examination was settled in fiscal 2008
and the Company paid additional federal taxes of $266,472 and
interest of $53,132. Amended state income tax returns for fiscal
2005 and 2006 will be filed to report the IRS adjustments. State
taxes and interest expense related to the amended returns are
estimated to be $64,334, and are included in current liabilities
at June 30, 2008. IRS adjustments resulted in an additional
liability for unrecognized tax benefits of $120,708, and an
increase to deferred tax assets of $133,878.
The Company recognizes interest on taxes payable as interest
expense and penalties accrued related to unrecognized tax
benefits as a component of other expenses. Interest expense
recognized for the period ended June 30, 2008 was $34,023.
No penalties were incurred in the settlement of the IRS
examination. As a result accrued penalties in the amount of
$34,035 were eliminated during the period ended June 30,
2008.
The Company files a federal and multiple state income tax
returns. The Companys federal income tax returns are open
for fiscal years ending after June 30, 2006. State income
tax returns are open for years ending after June 30, 2004.
Management of the Company is not aware of any additional needed
liability for unrecognized tax benefits at June 30, 2008.
The Company offers a retirement savings plan under
Section 401(k) of the Internal Revenue Code to certain
eligible salaried employees. Each employee may elect to enter a
written salary deferral agreement under which a portion of such
employees pre-tax earnings may be contributed to the plan.
During the fiscal years ended June 30, 2008, 2007 and 2006,
the Company made contributions of $257,309, $255,377 and
$251,802 respectively.
The Company has established a 1994 Employee Stock Option Plan
and a 1999 Incentive Stock Plan (collectively the Employee
Plans). The Employee Plans provide for the granting of
options to the Companys executive officers and key
employees to purchase shares of common stock at prices equal to
the fair market value of the stock on the date of grant. Options
to purchase up to 1,550,000 shares of common stock may be
granted under the Employee Plans. Options generally become
exercisable ratably over a four year period or one-fourth of the
shares covered thereby on each anniversary of the date of grant,
commencing on the first or second anniversary of the date
granted. The right to exercise the options expires in ten years
from the date of grant, or earlier if an option holder ceases to
be employed by the Company.
42
ALLIED
HEALTHCARE PRODUCTS, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
In addition, the Company has established a 1995 Directors
Non-Qualified Stock Option Plan and a 2005 Directors
Non-Qualified Stock Option Plan (collectively the
Directors Plans). The Directors Plans provide for
the granting of options to the Companys directors who are
not employees of the Company to purchase shares of common stock
at prices equal to the fair market value of the stock on the
date of grant. Options to purchase up to 225,000 shares of
common stock may be granted under the Directors Plans. Options
shall become exercisable with respect to one-fourth of the
shares covered thereby on each anniversary of the date of grant,
commencing on the second anniversary of the date granted, except
for certain options which become exercisable with respect to all
of the shares covered thereby one year after the grant date. The
right to exercise the options expires in ten years from the date
of grant, or earlier if an option holder ceases to be a director
of the Company.
A summary of stock option transactions in 2006, 2007 and 2008,
respectively, pursuant to the Employee Plans and the Directors
Plans is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
|
|
|
Average
|
|
|
Contractual
|
|
|
Intrinsic
|
|
|
|
Shares
|
|
|
Exercise Price
|
|
|
Term (years)
|
|
|
Value
|
|
|
June 30, 2005
|
|
|
741,750
|
|
|
$
|
2.64
|
|
|
|
|
|
|
|
|
|
Options Granted
|
|
|
35,000
|
|
|
$
|
5.19
|
|
|
|
|
|
|
|
|
|
Options Exercised
|
|
|
(22,500
|
)
|
|
$
|
2.85
|
|
|
|
|
|
|
|
|
|
Options Forfeited or Expired
|
|
|
(12,500
|
)
|
|
$
|
8.09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2006
|
|
|
741,750
|
|
|
$
|
2.66
|
|
|
|
3.8
|
|
|
$
|
2,392,005
|
|
June 30, 2006
|
|
|
741,750
|
|
|
$
|
2.66
|
|
|
|
|
|
|
|
|
|
Options Granted
|
|
|
51,500
|
|
|
$
|
5.26
|
|
|
|
|
|
|
|
|
|
Options Exercised
|
|
|
(31,500
|
)
|
|
$
|
2.57
|
|
|
|
|
|
|
|
|
|
Options Forfeited or Expired
|
|
|
(29,000
|
)
|
|
$
|
5.77
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2007
|
|
|
732,750
|
|
|
$
|
2.72
|
|
|
|
3.2
|
|
|
$
|
2,886,479
|
|
June 30, 2007
|
|
|
732,750
|
|
|
$
|
2.72
|
|
|
|
|
|
|
|
|
|
Options Granted
|
|
|
6,000
|
|
|
$
|
6.73
|
|
|
|
|
|
|
|
|
|
Options Exercised
|
|
|
(1,500
|
)
|
|
$
|
2.29
|
|
|
|
|
|
|
|
|
|
Options Forfeited or Expired
|
|
|
(21,500
|
)
|
|
$
|
7.35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2008
|
|
|
715,750
|
|
|
$
|
2.62
|
|
|
|
2.3
|
|
|
$
|
3,172,070
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at June 30, 2008
|
|
|
657,250
|
|
|
$
|
2.37
|
|
|
|
1.8
|
|
|
$
|
3,073,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table provides additional information for options
outstanding and exercisable at June 30, 2008:
Options
Outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average
|
|
|
Weighted Average
|
|
Range of Exercise Prices
|
|
Number
|
|
|
Remaining Life
|
|
|
Exercise Price
|
|
|
$1.88
|
|
|
1,250
|
|
|
|
0.8 years
|
|
|
$
|
1.88
|
|
2.00
|
|
|
542,000
|
|
|
|
1.2 years
|
|
|
$
|
2.00
|
|
2.01-4.00
|
|
|
67,500
|
|
|
|
3.1 years
|
|
|
$
|
3.35
|
|
4.01-6.99
|
|
|
105,000
|
|
|
|
7.7 years
|
|
|
$
|
5.35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$1.88-6.99
|
|
|
715,750
|
|
|
|
2.3 years
|
|
|
$
|
2.62
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
43
ALLIED
HEALTHCARE PRODUCTS, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Options
Exercisable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average
|
|
Range of Exercise Prices
|
|
Number
|
|
|
Exercise Price
|
|
|
$1.88
|
|
|
1,250
|
|
|
$
|
1.88
|
|
2.00
|
|
|
542,000
|
|
|
$
|
2.00
|
|
2.01-4.00
|
|
|
67,500
|
|
|
$
|
3.35
|
|
4.01-6.99
|
|
|
46,500
|
|
|
$
|
5.33
|
|
|
|
|
|
|
|
|
|
|
$4.01-6.99
|
|
|
657,250
|
|
|
$
|
2.37
|
|
|
|
|
|
|
|
|
|
|
See Note 2 for discussion of accounting for stock awards
and related fair value disclosures.
|
|
8.
|
Supplemental
Balance Sheet Information
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
|
2008
|
|
|
2007
|
|
|
Inventories
|
|
|
|
|
|
|
|
|
Work in progress
|
|
$
|
807,358
|
|
|
$
|
742,890
|
|
Component parts
|
|
|
8,072,976
|
|
|
|
8,544,226
|
|
Finished goods
|
|
|
4,465,599
|
|
|
|
4,812,220
|
|
Reserve for obsolete and excess inventory
|
|
|
(1,299,483
|
)
|
|
|
(1,099,864
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
12,046,450
|
|
|
$
|
12,999,472
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Useful
|
|
|
|
|
|
|
|
|
|
Life (years)
|
|
|
|
|
|
|
|
|
Property, plant and equipment
|
|
|
|
|
|
|
|
|
|
|
|
|
Machinery and equipment
|
|
|
5-10
|
|
|
$
|
9,697,215
|
|
|
$
|
8,800,972
|
|
Buildings
|
|
|
28-35
|
|
|
|
12,203,870
|
|
|
|
12,116,193
|
|
Land and land improvements
|
|
|
5-7
|
|
|
|
934,216
|
|
|
|
934,216
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total property, plant and equipment at cost
|
|
|
|
|
|
|
22,835,301
|
|
|
|
21,851,381
|
|
Less accumulated depreciation and amortization
|
|
|
|
|
|
|
(12,292,728
|
)
|
|
|
(11,174,381
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
10,542,573
|
|
|
$
|
10,677,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other accrued liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued compensation expense
|
|
|
|
|
|
$
|
1,589,637
|
|
|
$
|
1,446,247
|
|
Accrued income tax
|
|
|
|
|
|
|
374,741
|
|
|
|
185,651
|
|
Customer deposits
|
|
|
|
|
|
|
676,178
|
|
|
|
595,223
|
|
Other
|
|
|
|
|
|
|
319,778
|
|
|
|
281,699
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,960,334
|
|
|
$
|
2,508,820
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9.
|
Commitments
and Contingencies
|
Legal
Claims
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. The Company
intends to continue to conduct
44
ALLIED
HEALTHCARE PRODUCTS, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
business in such a manner as to avert any FDA action seeking to
interrupt or suspend manufacturing or require any recall or
modification of products.
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 Companys consolidated
results of operations, financial position, or cash flows.
Employment
Contract
In March 2007, the Company entered into an employment contract
with its chief executive officer. The contract is initially for
a three-year term, after which point it is subject to annual
renewals. The contract includes termination without cause and
change of control provisions, under which the employee is
entitled to receive specified severance payments generally equal
to two times ending annual salary if terminated without cause or
within thirty days after a change in control.
The Company operates in one segment consisting of the
manufacturing, marketing and distribution of a variety of
respiratory products used in the health care industry to
hospitals, hospital equipment dealers, hospital construction
contractors, home health care dealers and emergency medical
product dealers. The Companys product lines include
respiratory care products, medical gas equipment and emergency
medical products. The Company does not have any one single
customer that represents more than 10 percent of total
sales. Sales by region, and by product, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales by Region
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Domestic United States
|
|
$
|
45,592,686
|
|
|
$
|
46,265,621
|
|
|
$
|
47,011,877
|
|
Europe
|
|
|
1,390,788
|
|
|
|
1,404,099
|
|
|
|
1,206,546
|
|
Canada
|
|
|
1,144,070
|
|
|
|
1,271,561
|
|
|
|
1,169,090
|
|
Latin America
|
|
|
4,923,096
|
|
|
|
4,420,697
|
|
|
|
4,378,910
|
|
Middle East
|
|
|
397,871
|
|
|
|
1,016,756
|
|
|
|
730,094
|
|
Far East
|
|
|
2,491,820
|
|
|
|
2,011,521
|
|
|
|
2,481,858
|
|
Other International
|
|
|
423,780
|
|
|
|
110,719
|
|
|
|
567,214
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
56,364,111
|
|
|
$
|
56,500,974
|
|
|
$
|
57,545,589
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales by Product
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Respiratory care products
|
|
$
|
14,248,031
|
|
|
$
|
13,899,027
|
|
|
$
|
14,241,999
|
|
Medical gas equipment
|
|
|
30,744,058
|
|
|
|
32,774,962
|
|
|
|
33,141,636
|
|
Emergency medical products
|
|
|
11,372,022
|
|
|
|
9,826,985
|
|
|
|
10,161,954
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
56,364,111
|
|
|
$
|
56,500,974
|
|
|
$
|
57,545,589
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45
ALLIED
HEALTHCARE PRODUCTS, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
11.
|
Quarterly
Financial Data (unaudited)
|
Summarized quarterly financial data for fiscal 2008 and 2007
appears below (all amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended,
|
|
|
|
June 30,
|
|
|
March 31,
|
|
|
Dec. 31,
|
|
|
Sept. 30,
|
|
|
June 30,
|
|
|
March 31,
|
|
|
Dec. 31,
|
|
|
Sept. 30,
|
|
|
|
2008
|
|
|
2008
|
|
|
2007
|
|
|
2007
|
|
|
2007
|
|
|
2007
|
|
|
2006
|
|
|
2006
|
|
|
Net sales
|
|
$
|
14,692
|
|
|
$
|
13,944
|
|
|
$
|
13,626
|
|
|
$
|
14,102
|
|
|
$
|
14,046
|
|
|
$
|
13,704
|
|
|
$
|
14,274
|
|
|
$
|
14,477
|
|
Gross profit
|
|
|
4,115
|
|
|
|
3,164
|
|
|
|
2,912
|
|
|
|
3,167
|
|
|
|
3,984
|
|
|
|
3,452
|
|
|
|
3,517
|
|
|
|
3,520
|
|
Income from operations
|
|
|
1,019
|
|
|
|
151
|
|
|
|
(21
|
)
|
|
|
124
|
|
|
|
1,219
|
|
|
|
448
|
|
|
|
425
|
|
|
|
329
|
|
Net income
|
|
|
689
|
|
|
|
100
|
|
|
|
6
|
|
|
|
87
|
|
|
|
869
|
|
|
|
278
|
|
|
|
293
|
|
|
|
202
|
|
Basic earnings per share
|
|
|
0.09
|
|
|
|
0.01
|
|
|
|
|
|
|
|
0.01
|
|
|
|
0.11
|
|
|
|
0.04
|
|
|
|
0.04
|
|
|
|
0.03
|
|
Diluted earnings per share
|
|
|
0.08
|
|
|
|
0.01
|
|
|
|
|
|
|
|
0.01
|
|
|
|
0.11
|
|
|
|
0.03
|
|
|
|
0.04
|
|
|
|
0.03
|
|
Earnings per share is computed independently for each of the
quarters presented. Therefore, the sum of the quarterly amounts
will not necessarily equal the total for the year.
12. Baralyme
®
Agreement
On August 27, 2004, Allied entered into an agreement with
Abbott Laboratories (Abbott) pursuant to which
Allied agreed to cease production of its product
Baralyme
®
,
and to affect the withdrawal of
Baralyme
®
product held by distributors. The agreement permits Allied to
pursue the development of a new carbon dioxide absorbent
product.
Baralyme
®
,
a carbon dioxide absorbent product, has been used safely and
effectively in connection with inhalation anesthetics since its
introduction in the 1920s. In recent years, the number of
inhalation anesthetics has increased, giving rise to concerns
regarding the use of
Baralyme
®
in conjunction with these newer inhalation anesthetics if
Baralyme
®
has been allowed, contrary to recommended practice, to become
desiccated. The agreement also provides that, for a period of
eight years, Allied will not manufacture, distribute, promote,
market, sell, commercialize or donate any
Baralyme
®
product or similar product based upon potassium hydroxide and
will not develop or license any new carbon dioxide absorbent
product containing potassium hydroxide.
In consideration of the foregoing, Abbott agreed to pay Allied
an aggregate of $5,250,000 of which $1,530,000 was paid on
September 30, 2004 and the remainder payable in four equal
annual installments of $930,000 due on July 1, 2005 through
July 1, 2008. The installment due on July 1, 2008 was
received by Allied on June 19, 2008. Therefore, there are
no further payments due from Abbott as of June 30, 2008.
The initial payment of $1,530,000 from Abbott was received on
September 30, 2004. The agreement required Abbott to pay
Allied $600,000 for reimbursement of Allieds cost incurred
in connection with withdrawal of
Baralyme
®
from the market, the disposal of such product, and severance
payments payable as a result of such withdrawal. This payment by
Abbott of $600,000 has been included in net sales during the
year ended June 30, 2005, in accordance with the
FASBs EITF Issue
No. 99-19,
Reporting Revenue Gross as a Principal versus Net as an
Agent. The Company is the primary obligor in the
arrangement. It has sole authority to determine the method of
withdrawal of
Baralyme
®
and discretion in such matters as employee layoffs, disposal
methods, and customer communications regarding the sale of
replacement products. The costs of executing the withdrawal are
the sole responsibility of the Company.
The payments received from Abbott are being recognized into
income, as net sales, over the eight-year term of the agreement.
Allied has no further obligations under this agreement which
would require the Company to repay these amounts or otherwise
impact this accounting treatment. During the year ended
June 30, 2008, $465,000 was recognized into income as net
sales.
46
ALLIED
HEALTHCARE PRODUCTS, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
A reconciliation of deferred revenue resulting from the
agreement with Abbott, with the amounts received under the
agreement, and amounts recognized as net sales is as follows:
|
|
|
|
|
|
|
|
|
|
|
Twelve Months Ended
|
|
|
|
June 30,
|
|
|
|
2008
|
|
|
2007
|
|
|
Beginning balance
|
|
$
|
2,402,500
|
|
|
$
|
1,937,500
|
|
Payment Received from Abbott Laboratories
|
|
|
930,000
|
|
|
|
930,000
|
|
Revenue recognized as net sales
|
|
|
(465,000
|
)
|
|
|
(465,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
2,867,500
|
|
|
|
2,402,500
|
|
|
|
|
|
|
|
|
|
|
Less Current portion of deferred revenue
|
|
|
(690,000
|
)
|
|
|
(465,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,177,500
|
|
|
$
|
1,937,500
|
|
|
|
|
|
|
|
|
|
|
As a result of the agreement with Abbott, Allied has suspended
manufacturing operations at its Stuyvesant Falls, New York
facility. Costs associated with the withdrawal and suspension of
operations at that location, including severance and benefit
payments due union employees, have been and will be recorded in
accordance with SFAS 146, Accounting for the Costs
Associated with Exit or Disposal Activities.
On September 9, 2004 Allied entered into a Closedown
Agreement with the International Chemical Union representing the
employees at the Stuyvesant Falls, New York facility. The
Company had advised the Union that the plant will be closed and
all bargaining unit employees related to such operation would be
permanently laid off, no later than October 15, 2004. The
collective bargaining agreement expired and was terminated as of
the closing date. The Company paid severance to those 12
bargaining unit employees on the active payroll as of
August 27, 2004.
During the first quarter of fiscal 2005, the Company recorded a
charge to cost of sales of $600,000. This charge included
$216,000 for severance payments and fringe benefits for the 12
bargaining unit employees. The charge included $200,000 for the
value of
Baralyme
®
inventory in stock and the time of the withdrawal, and
associated disposal cost. The charge also included $184,000 for
replacement of
Baralyme
®
inventory which was returned by our customers as a result of the
withdrawal. The Company has replaced
Baralyme
®
returned by its customers with
Carbolime
®
,
a carbon dioxide absorption product which continues to be
offered for sale by Allied.
During the second quarter of fiscal 2005, the Company recorded
an adjustment of $127,912 to reflect an increase in the
estimated product withdrawal cost and disposal cost, as more
inventory was returned by customers than originally estimated.
During the fourth quarter of fiscal 2005, the Company recorded
an adjustment of $1,444 to reflect an increase in the estimated
product withdrawal cost and disposal cost, as disposal costs
were more than originally estimated. Management does not expect
further cash expenditures to be paid.
In addition to the provisions of the agreement relating to the
withdrawal of the
Baralyme
®
product, Abbott has agreed to pay Allied up to $2,150,000 in
product development costs to pursue development of a new carbon
dioxide absorption product for use in connection with inhalation
anesthetics that does not contain potassium hydroxide and does
not produce a significant exothermic reaction with currently
available inhalation agents. As of June 30, 2008,
$1,525,000 has been received, and $525,000 is receivable, as a
result of product development activities.
In 2004, Allieds sales of
Baralyme
®
were approximately $2.0 million and contributed
approximately $0.6 million in pre-tax earnings and cash
flow from operations. The majority of the $5,250,000 Allied has
received from Abbott will be recognized into income over the
eight-year term of the agreement. The net cash flow realized by
Allied under the agreement with Abbott is substantially
equivalent to the net cash flow Allied would have expected to
realize from continued manufacture and sales of
Baralyme
®
during the initial five years of the period.
47
|
|
Item 9.
|
Changes
in and Disagreements with Accountants on Accounting and
Financial Disclosure
|
None.
|
|
Item 9A(T).
|
Controls
and Procedures
|
(a) Managements annual report on internal control
over financial reporting.
The Company maintains controls and procedures designed to ensure
that information required to be disclosed in the reports that
the Company files or submits under the Securities Exchange Act
of 1934 is recorded, processed, summarized, and reported within
the time periods specified in the rules and forms of the
Securities and Exchange Commission and that such information is
accumulated and communicated to the Companys management,
including its Chief Executive Officer and Chief Financial
Officer, as appropriate, to allow timely decisions regarding
required disclosure. Based upon their evaluation of those
controls and procedures performed as of June 30, 2008, the
Chief Executive Officer and Chief Financial Officer of the
Company concluded that its disclosure controls and procedures
were effective.
The management of Allied Healthcare Products, Inc. is
responsible for establishing and maintaining adequate internal
control over financial reporting and for the preparation and
integrity of the accompanying financial statements and other
related information in this report. The Audit Committee of the
Board of Directors, which is comprised of directors who are not
employees of the Company, meets regularly with management, the
Companys internal control outside consultants, and the
independent registered public accounting firm. The internal
control consultants and the independent registered public
accounting firm have free and direct access to the Audit
Committee, and they meet periodically, without management
present, to discuss appropriate matters. Based on
managements evaluation, conducted under the criteria
established in Internal Control Integrated Framework
issued by the Committee of Sponsoring Organizations of the
Treadway Commission, management concluded that its internal
control over financial reporting was effective as of
June 30, 2008.
This annual report does not include an attestation report of the
Companys registered public accounting firm regarding
internal control over financial reporting. Managements
report was not subject to attestation by the Companys
registered public accounting firm pursuant to temporary rules of
the Securities and Exchange Commission that permit the Company
to provide only managements report in this annual report
(b) Changes in internal control over financial reporting
There were no changes in the Companys internal controls
for financial reporting or other factors during the fourth
quarter of the most recent fiscal year that could significantly
affect such internal controls. However, the Company has been
engaged in the process of further reviewing and documenting its
disclosure controls and procedures, including its internal
accounting controls. The company may from time to time make
changes aimed at enhancing the effectiveness of its disclosure
controls and procedures, including its internal controls, to
ensure that the Companys systems evolve with its business.
|
|
Item 9B.
|
Other
Information
|
None.
PART III
|
|
Item 10.
|
Directors,
Executive Officers and Corporate Governance
|
A list of our executive officers and biographical information
appears at the end of Item 1, in Part I of this
report. A definitive proxy statement is expected to be filed
with the Securities and Exchange Commission on or about
October 10, 2008. The information required by this item is
set forth under the caption Election of Directors,
under the caption Executive Officers, and under the
caption Section 16(a) Beneficial Ownership Reporting
Compliance in the definitive proxy statement, which information
is incorporated herein by reference thereto.
48
|
|
Item 11.
|
Executive
Compensation
|
The information required by this item is set forth under the
caption Executive Compensation in the definitive
proxy statement, which information is incorporated herein by
reference thereto.
|
|
Item 12.
|
Security
Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
|
The information required by this item is set forth under the
caption Security Ownership of Certain Beneficial Owners
and Management in the definitive proxy statement, which
information is incorporated herein by reference thereto.
|
|
Item 13.
|
Certain
Relationships and Related Transactions, and Director
Independence
|
None
|
|
Item 14.
|
Principal
Accounting Fees and Services
|
The information by this item will appear in the section entitled
Audit Fees included in the Companys definitive
Proxy Statement to be filed on or about October 10, 2008,
relating to the 2008 Annual Meeting of Shareowners and such
information is incorporated herein by reference.
PART IV
|
|
Item 15.
|
Exhibits
and Financial Statement Schedules
|
The following consolidated financial statements of the Company
and its subsidiaries are included in response to Item 8:
Consolidated Statement of Operations for the years ended
June 30, 2008, 2007, and 2006
Consolidated Balance Sheet at June 30, 2008 and 2007
Consolidated Statement of Changes in Stockholders Equity
for the years ended June 30, 2008, 2007 and 2006
Consolidated Statement of Cash Flows for the years ended
June 30, 2008, 2007 and 2006
Notes to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
|
|
2.
|
Financial
Statement Schedule
|
Valuation and Qualifying Accounts and Reserves for the Years
Ended June 30, 2008, 2007 and 2006
All other schedules are omitted because they are not applicable
or the required information is shown in the financial statements
or notes thereto.
The exhibits listed on the accompanying Index to Exhibits are
filed as part of this Report.
49
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
By:
Earl R. Refsland
President and Chief Executive Officer
Daniel C. Dunn
Vice President, Chief Financial Officer, and Secretary
Dated: September 26, 2008
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities indicated on
September 26th, 2008.
|
|
|
|
|
Signatures
|
|
Title
|
|
|
|
|
*
John
D. Weil
|
|
Chairman of the Board
|
|
|
|
*
Earl
R. Refsland
|
|
President, Chief Executive Officer and Director (principal
Executive Officer)
|
|
|
|
*
William
A. Peck
|
|
Director
|
|
|
|
*
Joseph
Root
|
|
Director
|
|
|
|
*
Judy
Graves.
|
|
Director
|
|
|
|
|
|
*By:
|
|
/s/
Earl
R. Refsland
Earl
R. Refsland
Attorney-in-Fact
|
|
|
|
|
|
*
|
|
Such signature has been affixed pursuant to the following Power
of Attorney.
|
50
ALLIED
HEALTHCARE PRODUCTS, INC.
RULE 12-09
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COLUMN B
|
|
|
COLUMN C
|
|
|
COLUMN D
|
|
|
COLUMN E
|
|
|
|
Balance
|
|
|
Charged
|
|
|
Charged
|
|
|
|
|
|
Balance
|
|
|
|
at
|
|
|
to
|
|
|
to
|
|
|
|
|
|
at
|
|
|
|
Beginning
|
|
|
costs
|
|
|
other
|
|
|
|
|
|
end
|
|
COLUMN A
|
|
of
|
|
|
and
|
|
|
accounts
|
|
|
Deductions
|
|
|
of
|
|
Description
|
|
period
|
|
|
expenses
|
|
|
describe
|
|
|
describe
|
|
|
period
|
|
|
For the Year Ended June 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts Receivable Allowances
|
|
$
|
(460,000
|
)
|
|
$
|
212,278
|
|
|
|
|
|
|
$
|
(52,278
|
)(1)
|
|
$
|
(300,000
|
)
|
Inventory Allowance For Obsolescence And Excess Quantities
|
|
$
|
(1,099,864
|
)
|
|
$
|
(110,000
|
)
|
|
$
|
(169,491
|
)(3)
|
|
$
|
79,872
|
(2)
|
|
$
|
(1,299,483
|
)
|
For the Year Ended June 30, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts Receivable Allowances
|
|
$
|
(430,000
|
)
|
|
$
|
376
|
|
|
|
|
|
|
$
|
(30,376
|
)(1)
|
|
$
|
(460,000
|
)
|
Inventory Allowance For Obsolescence And Excess Quantities
|
|
$
|
(1,168,395
|
)
|
|
$
|
(125,000
|
)
|
|
$
|
(12,160
|
)(3)
|
|
$
|
205,691
|
(2)
|
|
$
|
(1,099,864
|
)
|
For the Year Ended June 30, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts Receivable Allowances
|
|
$
|
(565,000
|
)
|
|
$
|
61,945
|
|
|
|
|
|
|
$
|
73,055
|
(1)
|
|
$
|
(430,000
|
)
|
Inventory Allowance For Obsolescence And Excess Quantities
|
|
$
|
(1,253,853
|
)
|
|
|
|
|
|
$
|
(122,889
|
)(3)
|
|
$
|
208,347
|
(2)
|
|
$
|
(1,168,395
|
)
|
|
|
|
(1)
|
|
Decrease (Increase) due to bad debt write-offs and recoveries.
|
|
(2)
|
|
Decrease due to disposal of obsolete inventory.
|
|
(3)
|
|
Increase due to inventory revaluation. The other account charged
as a result of this revaluation was inventory before reserves.
This did not result in a change to our net inventory or net
income.
|
|
(4)
|
|
See Note 5 to the consolidated financial statements.
|
51
INDEX TO
EXHIBITS
|
|
|
|
|
Exhibit No.
|
|
Description
|
|
|
3
|
.1
|
|
Amended and Restated Certificate of Incorporation of the
Registrant (filed as Exhibit 3(1) to the Companys
Registration Statement on Form S-1, as amended, Registration No.
33-40128, filed with the Commission on May 8, 1991 (the
Registration Statement) and incorporated herein by
reference)
|
|
3
|
.2
|
|
By-Laws of the Registrant (filed as Exhibit 3(2) to the
Registration Statement and incorporated herein by reference)
|
|
10
|
.1
|
|
NCG Trademark License Agreement, dated April 16, 1982, between
Liquid Air Corporation and Allied Healthcare Products, Inc.
(filed as Exhibit 10(24) to the Registration Statement and
incorporated herein by reference)
|
|
10
|
.2
|
|
Allied Healthcare Products, Inc. 1991 Employee Non-Qualified
Stock Option Plan (filed as Exhibit 10(26) to the Registration
Statement and incorporated herein by reference)
|
|
10
|
.3
|
|
Employee Stock Purchase Plan (filed as Exhibit 10(3) to the
Companys Annual Report on Form 10-K for the year ended
June 30, 1998 (the 1998 Form 10-K) and incorporated
by reference)
|
|
10
|
.4
|
|
Allied Healthcare Products, Inc. 1994 Employee Stock Option Plan
(filed with the Commission as Exhibit 10(39) to the
Companys Annual Report on Form 10-K for the year ended
June 30, 1994 (the 1994 Form 10-K) and incorporated
herein by reference)
|
|
10
|
.5
|
|
Allied Healthcare Products, Inc. 1995 Directors
Non-Qualified Stock Option Plan (filed with the Commission as
Exhibit 10(25) to the Companys Annual Report on Form 10-K
for the fiscal year ended June 30, 1995 (the 1995 Form
10-K) and incorporated herein by reference)
|
|
10
|
.6
|
|
Allied Healthcare Products, Inc. Amended 1994 Employee Stock
Option Plan (filed with the Commission as Exhibit 10(28) to the
Companys Annual Report on Form 10-K for the fiscal year
ended June 30, 1996 (the 1996 Form 10-K) and
incorporated herein by reference)
|
|
10
|
.22
|
|
Form of Indemnification Agreement with officers and directors
(filed with the Commission as Exhibit 10.22 to the 2002 Form
10-K and incorporated herein by reference).
|
|
10
|
.25
|
|
Employment Agreement dated February 28, 2007 by and between
Allied Healthcare Products, Inc. and Earl Refsland (incorporated
by reference to 8-K filed March 16, 2007 with event date of
February 28, 2007)
|
|
10
|
.25.1
|
|
Change of Control Agreement Employment Agreement dated March 16,
2007 by and between Allied Healthcare Products, Inc. and certain
executive officers (incorporated by reference to 8-K filed
March 16, 2007 with event date of March 16, 2007)
|
|
10
|
.26
|
|
Allied Healthcare Products, Inc. 1999 Incentive Stock Plan
(filed with the Commission as Exhibit 10(26) to the 1999 Form
10-K and incorporated herein by reference)
|
|
10
|
.28
|
|
Agreement between Allied Healthcare Products, Inc. Medical
Products Division and District No. 9 International Association
of Machinists and Aerospace Workers dated August 1, 2000 through
May 31, 2003 (filed with the Commission as Exhibit 10.28 to the
2002 Form 10-K)
|
|
10
|
.30
|
|
Loan and security agreement dated April 24, 2002 between the
Company and LaSalle Bank National Association, including form of
notes (filed with the Commission as Exhibit 10.1 to the
Quarterly Report on Form 10-Q filed May 15, 2002)
|
|
10
|
.30.1
|
|
Amendment to Loan and security agreement dated September 26,2002
(filed with the Commission as an exhibit to Current Report on
Form 8-K on October 1, 2002)
|
|
10
|
.30.2
|
|
Amendment to Loan and security agreement dated September 26, 2003
|
|
10
|
.30.3
|
|
Amendment to Loan and Security Agreement dated August 27, 2004
(filed with the Commission as Exhibit 10(26) to the 1999 Form
10-K and incorporated herein by reference)
|
|
10
|
.31
|
|
Agreement dated August 27, 2004 between Allied Healthcare
Products, Inc and Abbott Laboratories, Inc. (incorporated by
reference to 8-K filed August 30, 2004 with event date of August
27, 2004)
|
|
21
|
|
|
Subsidiaries of the Registrant (filed with the Commission as
Exhibit 21 to the 2000 Form 10-K)
|
|
|
|
|
|
Exhibit No.
|
|
Description
|
|
|
23
|
.1
|
|
Consent of RubinBrown LLP (filed herewith)
|
|
24
|
|
|
Form of Power of Attorney (filed herewith)
|
|
31
|
.1
|
|
Certification of Chief Executive Officer (filed herewith)
|
|
31
|
.2
|
|
Certification of Chief Financial Officer (filed herewith)
|
|
32
|
.1
|
|
Sarbanes-Oxley
Certification of Chief Executive Officer (provided herewith)*
|
|
32
|
.2
|
|
Sarbanes-Oxley
Certification of Chief Financial Officer (provided herewith)*
|
* Notwithstanding any incorporation of this Annual Report
on
Form 10-K
in any other filing by the Registrant, Exhibits designated with
an asterisk (*) shall not be deemed incorporated by reference to
any other filing under the Securities Act of 1933 or the
Securities Exchange Act of 1934 unless specifically otherwise
set forth therein.
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