Cost reductions offset sales decline to move Allied Healthcare Products back into profitability

Feb 10 2010

Cost reductions offset a recession-driven sales decline to move Allied Healthcare Products (Nasdaq: AHPI) narrowly back into profitability in the second quarter of fiscal year 2010.

Sales for the quarter ended December 31, 2009 declined almost 9 percent, from approximately $12.5 million during the same quarter last year to $11.4 million in the current quarter. However, Allied's costs of sales were reduced even more sharply, from approximately $9.8 million to less than $8.5 million, or almost 14 percent.  Also, selling, general and administrative costs for the quarter were reduced to $2.9 million from $3.4 million, a reduction of almost 15 percent.  The result was a break-even quarter with net income of about $22,000, equating to zero cents per share, versus a loss of $436,000, or negative six cents per share, in the same quarter last year.

Cost reductions were achieved throughout the company, including operations, personnel and other overhead.  

Allied's sales in U.S. markets for hospital and emergency equipment have been particularly hard hit by recession-driven budget cuts by hospitals and municipalities.  "At some point, this basic equipment must be replaced, so sales in these markets are expected to return to normal levels.  What we do not, and cannot, know is when that will be," said Earl Refsland, Allied president and chief executive officer.    

In the meantime, Allied has made preparations to begin manufacturing a formerly outsourced product in the second half of fiscal 2010, realizing a significant new cost reduction, Refsland said.