Allied Healthcare Ends 2005 Fiscal Year With Increased Net Income, Zero Debt

ST. LOUIS, Aug. 23 /PRNewswire-FirstCall/ -- Allied Healthcare Products, Inc. reported today that it earned a net income of $1.5 million, or 19 cents per diluted share, during its fourth quarter ended June 30, 2005, versus $860,000, or 10 cents per diluted share, for the quarter ended June 30, 2004.

A one-time reduction in income tax expense resulting from the recognition of deferred tax assets related primarily to net operating loss carryforwards, arising in prior years, increased net income by about $1.0 million, or 12 cents per diluted share, in the fourth quarter. Without this impact, income for the fourth quarter would have been approximately $0.5 million, or 7 cents per diluted share.

Sales for the fourth quarter 2005 totaled $14.2 million compared to $15.3 million for the previous year's quarter. Customer orders remained relatively stable for the two periods. However, customer delays in releasing orders reduced sales for the fourth quarter of 2005 compared to 2004.

Reductions in interest expense and selling, general and administrative (SG&A) expenses versus 2004 helped offset lower sales in the quarter.

For the full fiscal year 2005, Allied increased its net income to $2.3 million, or 29 cents per diluted share, compared to about $1.9 million, or 23 cents per diluted share, for 2004.

Earnings for 2005 increased by about $1.0 million, or 12 cents per diluted share, from the one-time recognition of deferred tax assets related primarily to net operating loss carryforwards arising in previous years. Without this impact, income for the year would have been approximately $1.3 million, or 17 cents per diluted share.

For 2005, sales were $56.1 million versus $59.1 million for 2004. Customer orders for the two years, however, showed little change. For 2005, customer orders totaled $58.2 million versus $59.1 million for 2004. The difference in the two years is that customers deferred releases for orders to a greater extent in 2005 than 2004, reducing sales and increasing backlogs accordingly.

Reductions in 2005 SG&A expenses of more than $800,000 and more than $425,000 in reduced interest expenses helped offset the year's dip in sales. Allied used increased operating and working capital to pay off all its $3.6 million in debt and ended the fiscal year with a positive cash balance of $0.3 million.

"We are not happy with 2005 sales," said Earl R. Refsland, president and chief executive officer. "Correcting the situation will require different actions for different markets. For hospital equipment, we must build relationships with regional distributors. For homecare equipment, we have invested in telemarketing and E-commerce systems. For products that have lost share because of pricing, we must find lower-priced sources. All these corrective actions are underway."

Regarding the negative impact of releases on sales, Refsland said the problem was "not production delays but customers' deferrals of delivery request." He said the company expects a return to more normal release levels in 2006 and plans to introduce new products to stimulate new orders.

"Internally, we are pleased that we reduced SG&A expenses by more than $800,000 in 2005. We held the line on manufacturing costs, but we can do better than that and intend to realize cost reductions in 2006," Refsland said. "We also are pleased with the discipline we showed in 2005 in eliminating all our debt."

Allied Healthcare Products, Inc. is a leading manufacturer of respiratory care products, medical gas equipment and emergency medical products used in a wide range of hospital and alternate care settings.

"SAFE HARBOR" STATEMENT: Statements contained in this release that 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 that 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 Company's operations and properties as discussed in its periodic filings with the Securities and Exchange Commission. The Company cautions that any forward-looking statement contained in this report reflects 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.

ALLIED HEALTHCARE PRODUCTS, INC. CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED) Three months ended June 30, Twelve months ended June 30, 2005 2004 2005 2004 Net sales $14,184,419 $15,261,579 $56,120,150 $59,103,313 Cost of sales 10,285,548 10,623,337 41,669,290 42,748,342 Gross profit 3,898,871 4,638,242 14,450,860 16,354,971 Selling, general and administrative expenses 2,844,236 3,091,390 11,843,037 12,660,358 Income from operations 1,054,635 1,546,852 2,607,823 3,694,613 Interest expense 4,849 96,873 123,076 550,158 Other expense 10,041 6,312 42,604 8,378 Other, net 14,890 103,185 165,680 558,536 Income before provision (benefit) for income taxes 1,039,745 1,443,667 2,442,143 3,136,077 Provision (benefit) for income taxes (473,644) 583,829 100,779 1,261,424 Net income $1,513,389 $859,838 $2,341,364 $1,874,653 Net income per share - Basic $0.19 $0.11 $0.30 $0.24 Net income per share - Diluted $0.19 $0.10 $0.29 $0.23 Weighted average common shares Outstanding - Basic 7,829,577 7,818,432 7,821,943 7,816,416 Weighed average common shares Outstanding - Diluted 8,085,599 8,053,677 8,080,890 7,984,761 ALLIED HEALTHCARE PRODUCTS, INC. CONSOLIDATED BALANCE SHEET (UNAUDITED) June 30, 2005 June 30, 2004 ASSETS Current assets: Cash $317,775 $8,256 Accounts receivable, net of allowances of $565,000 and $585,000, respectively 7,215,799 7,598,969 Inventories, net 10,775,550 11,095,171 Income tax receivable - 130,548 Other current assets 168,431 127,127 Total current assets $18,477,555 $18,960,071 Property, plant and equipment, net 11,308,866 11,999,927 Goodwill 15,979,830 15,979,830 Other assets, net 330,969 88,867 Total assets $46,097,220 $47,028,695 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable 2,110,599 3,125,593 Current portion of long-term debt - 1,245,484 Deferred income taxes 711,416 389,644 Deferred revenue 465,000 - Other accrued liabilities 2,940,763 3,206,603 Total current liabilities $6,227,778 $7,967,324 Deferred income taxes - 242,478 Deferred revenue 1,007,500 - Long-term debt - 2,366,076 Commitments and contingencies 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; 7,829,577 and 7,818,432 shares issued and outstanding at June 30, 2005 and 2004, respectively 101,332 101,220 Additional paid-in capital 47,109,142 47,041,493 Common stock in treasury, at cost (20,731,428) (20,731,428) Retained earnings 12,382,896 10,041,532 Total stockholders' equity 38,861,942 36,452,817 Total liabilities and stockholders' equity 46,097,220 47,028,695

Allied Healthcare Products, Inc.

CONTACT: Daniel C. Dunn, Chief Financial Officer, of Allied HealthcareProducts, +1-314-771-2400

Web site: http://www.alliedhpi.com/