Allion Healthcare Reports Third Quarter Results

 

ü  Net income of $1 million, or $0.06 per diluted share, including $0.02 impact of Oris legal expenses

ü  Net sales up 6% to $62 million

ü  A 26% increase in adjusted EBITDA to $2.9 million

ü  Year-to-date cash flow from operations up 50% to $5.6 million

ü  Signs exclusive five year distribution agreement with Galea Life Sciences for Nutraplete

 

MELVILLE, N.Y., November 8, 2007 – Allion Healthcare, Inc. (NASDAQ: ALLI), a national provider of specialty pharmacy and disease management services focused on HIV/AIDS patients, today announced financial results for the three months and nine months ended September 30, 2007.

 

Third Quarter 2007 Financial Results

 

Allion’s net sales for the quarter were $61.8 million, up 6.0% from $58.3 million for the third quarter of 2006.  Gross profit for the quarter increased 7.3% to $9.0 million, or 14.5% of net sales, from $8.4 million, or 14.4% of net sales, for the third quarter of 2006.

 

Selling, general and administrative expenses for the quarter of $7.6 million, or 12.3% of net sales, included $644,000, or 1.0% of net sales, of legal expenses related to the Oris litigation.  For the third quarter of 2006, selling, general and administrative expenses were $7.1 million, or 12.1% of net sales.

 

Net income for the third quarter of 2007 and 2006 was $1.0 million, or $0.06 per diluted share. Net income for the third quarter of 2007 included $644,000 in pre-tax Oris litigation expenses or $0.02 per diluted share. Earnings before interest, taxes, depreciation and amortization (EBITDA) were $2.3 million and $2.4 million for the third quarter of 2007 and 2006, respectively. Excluding legal expenses related to the Oris litigation, EBITDA would have been $2.9 million for the third quarter of 2007.  An explanation and reconciliation of net income under generally accepted accounting principles (GAAP) to EBITDA and Adjusted EBITDA is provided below. 

 

Michael Moran, Chairman, President and Chief Executive Officer of Allion Healthcare, Inc. commented, “Allion completed another quarter with solid financial performance.  Reported revenue and earnings per share were consistent with our expectations.  Increases in operating earnings and cash flow demonstrate the progress we have made in improving our leverage of fixed costs and operating efficiencies. 

 

“These operating results were achieved despite the disruption associated with the Oris litigation.  For the quarter, we will pay for nine slots that were subject to earn-out payments to the previous owners of Oris.  This compares to 287 that were subject to earn-out payments in the first six months of 2007.

“We are excited about the exclusive distribution agreement with Galea Life Sciences for Nutraplete. This is the first therapeutic dietary supplement designed specifically for people living with HIV/AIDS. We look forward to working with the team at Galea and helping to develop and expand the market for Nutraplete.”

 

Guidance

 

The Company today provided financial guidance for the fourth quarter of 2007.  This guidance assumes a 39% tax rate and does not include any future acquisitions. 

 

                                                                        Three Months Ending

                                                                                            December 31, 2007

                                                                                                   (Guidance)        

                        Net sales (millions)                                       $         62.5 – 63.5

                        Earnings per diluted share                             $         0.06 – 0.07

 

Operating Data

 

The following table sets forth the net sales and operating data for each of Allion’s distribution regions for the three months ended September 30, 2007 and 2006 (dollars in thousands):

  

Three Months Ended September 30,

 

2007

2006

Distribution Region

Net Sales

 

Prescriptions

 

Patient

Months (1)

 

Net Sales

 

Prescriptions

 

Patient

Months(1)

 

California

$           40,601

       164,335 

  34,578  

$            37,944

         161,963

    33,485

New York

              19,593

         73,447   

  11,102 

              18,843

            71,633

    10,940

Florida

                    549

           2,406

       349  

                    574

              2,861

         409

Seattle

                1,079

           5,362

       955  

                    988

              5,076

         910

Total

$            61,822

       245,550

  46,984  

$            58,349

         241,533

    45,744

 

(1)   Patient months represent a count of the number of months during a period that a patient received at least one prescription. If an individual patient received multiple medications during each month for a quarterly period, a count of three would be included in patient months irrespective of the number of prescriptions filled each month.

 

Summary

 

Mr. Moran concluded, “Because of improvements in medication therapies, we have increased our ability to manage HIV/AIDS similar to other chronic diseases, and patients’ adherence to their treatment regimen has become one of the most critical elements in determining successful outcomes and reduced healthcare costs.  With profitable operations, substantial cash flow and an unleveraged financial position, we believe we are uniquely positioned in our industry to continue to expand our patient base and implement this business model successfully in new markets where we can improve the lives of an even greater number of HIV/AIDS patients.”

 

Conference Call Information

 

A conference will be held today November 8, 2007 at 5:00 p.m. EST; 2:00 p.m. PST.  To join the call, please dial (913) 312-0962 from the U.S. or abroad.  The call will also be webcast on Allion’s website at www.allionhealthcare.com.  To join the webcast, please go to the website at least 15 minutes prior to the start of the conference call to register, download, and install any necessary audio software. An audio replay of the call will be available from 8:00 p.m. EST on Thursday, November 8, 2007 through November 15, 2007 by dialing (719) 457-0820 from the U.S. or abroad and entering confirmation code 6607940.  The audio webcast will also be available on the Company's website for one year. 

 

About Allion Healthcare, Inc.

 

Allion Healthcare, Inc. is a national provider of specialty pharmacy and disease management services focused on HIV/AIDS patients. Allion Healthcare sells HIV/AIDS medications, ancillary drugs and nutritional supplies under the trade name MOMS Pharmacy.  Allion offers nationwide pharmacy care from its pharmacies in California, New York, Washington, and Florida.  Allion Healthcare works closely with physicians, nurses, clinics, AIDS Service Organizations, and with government and private payors to improve clinical outcomes and reduce treatment costs.

 

Safe Harbor Statement

 

Certain statements included in this press release that are not historical facts are forward-looking statements, such as comments by our CEO and statements about our future growth and increased stockholder value, acquisitions, expansion into new markets, opening of new pharmacies, and guidance regarding our possible future financial performance.  Such forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements represent our expectations or beliefs and involve certain risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements.  Factors that could cause actual results to differ materially include those set forth in Item 1A.  Risk Factors in our most recent Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the fiscal year ended December 31, 2006; and also include, but are not limited to, competitive pressures and our ability to compete successfully, demand for our products and services, changes in reimbursement and other changes in customer mix, changes in third party reimbursement rates or our qualification for preferred reimbursement rates in California and New York, changes in government regulations or the interpretation of these regulations, our ability to manage growth successfully, our ability to effectively market our services, receipt of licensing and regulatory approvals, and our ability to successfully identify and integrate acquisitions, any or all of which could cause actual results to differ from those in the forward-looking statements.  Except to the extent required by applicable securities laws, we are under no obligation, and expressly disclaim any obligation, to update the forward-looking statements, whether as a result of new information, future events, or otherwise.  You are cautioned not to place undue reliance on these forward-looking statements that speak only as of the date herein.

 

Contact:

Allion Healthcare, Inc.                                                               Corporate Communications Inc.

Steve Maggio, Interim Chief Financial Officer                             Scott Brittain

(631) 870-5106                                                                       (615) 254-3376

scott.brittain@cci-ir.com

 

                                                                                                Galea Life Sciences

                                                                                                Paul Zuromski, President

                                                                                                (877) 576-8872


ALLION HEALTHCARE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

 

 

 

 

  

At September 30, 2007

(UNAUDITED)

 

At December 31, 2006

 

 

Assets

 

 

Current Assets:

 

 

Cash and cash equivalents...............................................................................................................................

$             20,391    

$                17,062

Short term investments......................................................................................................................................

                  8,075    

                    6,450

Accounts receivable (net of allowance for doubtful accounts of $135 in 2007 and $425 in 2006)..

                17,417    

                  18,297

Inventories...........................................................................................................................................................

                  7,194    

                    5,037

Prepaid expenses and other current assets.....................................................................................................

                      687    

                        634

Deferred tax asset...............................................................................................................................................

                      387

                        402

 

 

 

Total current assets............................................................................................................................................

                54,151    

                  47,882

 

 

 

Property and equipment, net............................................................................................................................

                      811    

                        890

Goodwill...............................................................................................................................................................

                41,893    

                  42,067

Intangible assets, net..........................................................................................................................................

                27,984    

                  30,683

Other assets..........................................................................................................................................................

                        83    

                          81

 

 

 

Total assets

$           124,922    

$             121,603

 

 

 

Liabilities and Stockholders’ Equity

 

 

Current Liabilities:

 

 

Accounts payable...............................................................................................................................................

$              15,799

$                16,339

Accrued expenses...............................................................................................................................................

                  2,203    

                    1,262

Notes payable-subordinated............................................................................................................................

              

                        700

Current portion of capital lease obligations...................................................................................................

                        46    

                          46

 

 

 

Total current liabilities

                18,048    

                  18,347

 

 

 

Long Term Liabilities:

 

 

Capital lease obligations...................................................................................................................................

                        12    

                          47

Deferred tax liability..........................................................................................................................................

                  2,052    

                    1,343

Other.....................................................................................................................................................................

                        48    

                          59

 

 

 

Total liabilities.....................................................................................................................................................

                20,160    

                  19,796

 

 

 

Commitments & Contingencies

 

 

Stockholders’ Equity:

 

 

Preferred stock, $.001 par value, shares authorized 20,000; issued and outstanding –0- at September 30, 2007 and December 31, 2006..............................................................................................................

                      —                                   

                        —  

Common stock, $.001 par value; shares authorized 80,000; issued and outstanding 16,204 at September 30, 2007 and December 31, 2006.........................................................................................

                        16    

                          16

Additional paid-in capital.................................................................................................................................

              112,307    

                111,549

Accumulated deficit...........................................................................................................................................

               (7,556)

                   (9,747 )

Accumulated other comprehensive loss.........................................................................................................

                      (5)

                         (11 )

 

 

 

Total stockholders’ equity................................................................................................................................

              104,762    

                101,807

 

 

 

Total liabilities and stockholders’ equity

$           124,922    

$             121,603

 

 

 

 


ALLION HEALTHCARE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(in thousands except per share data)

 

 

Three months ended

 

Nine months ended

 

September 30,

 

September 30,

 

2007

 

2006

 

2007

 

2006

 

 

 

 

 

 

 

 

Net sales………………………………………………..

$       61,822   

 

$      58,349    

 

$    183,075    

 

$      151,606

Cost of goods sold.……………………………………..

52,830

 

         49,971

 

156,774

 

129,268

Gross profit..………………………………………….

8,992

 

          8,378

 

26,301

 

22,338

Operating expenses:

 

 

 

 

 

 

 

  Selling, general and administrative expenses.……...

7,604

 

          7,086

 

22,695

 

19,639

  Impairment of long-lived asset…………………......

— 

 

            — 

 

599

 

Operating income..…………………………………......

 1,388

 

          1,292

 

3,007

 

2,699

Interest income…………………………………………

214

 

             168

 

556

 

946

Income from operations before taxes ………………….

1,602

 

          1,460

 

3,563

 

3,645

Provision for taxes……………………………………...

569

 

             445

 

1,372

 

835

Net income……………………………………………..

$         1,033           

 

$         1,015

 

$       2,191       

 

$       2,810

 

 

 

 

 

 

 

 

Basic earnings per common share….....………………..

$           0.06

 

$       0.06

 

$         0.14         

 

$        0.18

Diluted earnings per common share.…………………...

$           0.06        

 

$       0.06

 

$         0.13        

 

$        0.17

 

 

 

 

 

 

 

 

Basic weighted average of common shares         outstanding …………………………………………….

16,204

 

16,204

 

16,204

 

15,866

Diluted weighted average of common shares outstanding……………………………………………..

17,026

 

17,024

 

17,002

 

16,954

 


ALLION HEALTHCARE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)

 

 

 

 

  

Nine months ended

September 30,

 

 

2007

 

2006

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

Net income..................................................................................................................................................................

$              2,191

$               2,810

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

Depreciation and amortization.....................................................................................................................

                  2,702

                  2,733

Impairment of long-lived asset.....................................................................................................................

                     599

                       

Deferred rent....................................................................................................................................................

                    (11)

                       30

Provision for doubtful accounts...................................................................................................................

                     451

                     483

Amortization of debt discount on acquisition notes.................................................................................

                       

                       13

Non-cash stock compensation expense......................................................................................................

                     280

                     211

Deferred income taxes...................................................................................................................................

                   724 

                     533

Changes in operating assets and liabilities:

 

 

Accounts receivable........................................................................................................................................

                     429 

                (5,156 )

Inventories........................................................................................................................................................

               (2,157)

                    (88)

Prepaid expenses and other assets...............................................................................................................

                    (55)

                    (195 )

Accounts payable and accrued expenses...................................................................................................

                     487

                  2,377

 

 

 

Net cash provided by operating activities:............................................................................................................

                  5,640

                  3,751

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

Purchase of property and equipment..........................................................................................................

                  (234)

                    (506 )

Purchases of short term securities................................................................................................................

             (49,485)

              (73,847 )

Sales of short term securities.........................................................................................................................

               47,867

               91,184

Payments for acquisition of North American............................................................................................

                       

                      (17 )

Payments for acquisition of Oris Medical’s Assets...................................................................................

                  (201)

                  (326)

Payments for acquisition of Priority’s Assets.............................................................................................

                       

                (1,394 )

Payments for acquisition of Maiman’s Assets..........................................................................................

                       

                (5,810 )

Payments for acquisition of H&H’s Assets................................................................................................

                       

                (4,737 )

Payments for acquisition of Whittier’s Assets...........................................................................................

                      (1)

              (15,821 )

Payments for acquisition of St. Jude’s Assets............................................................................................

                       

                (9,382 )

 

 

 

Net cash used in investing activities.......................................................................................................................

               (2,054)

             (20,656)

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

Net proceeds from secondary public offering............................................................................................

            

               28,852

Proceeds from exercise of employee stock options and warrants.........................................................

                     

                  2,153

Tax benefit realized from non-cash compensation related to employee stock options....................

                   478

                   303

Repayment of notes payable and capital leases......................................................................................

                  (735)

                    (763 )

 

 

 

Net cash (used in) provided by financing activities.............................................................................................

                  (257)

               30,545

 

 

 

NET INCREASE IN CASH AND CASH EQUIVALENTS................................................................................

                  3,329

               13,640

 

 

 

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD.....................................................................

               17,062

                  3,845

 

 

 

CASH AND CASH EQUIVALENTS, END OF PERIOD....................................................................................

$             20,391

$             17,485

 

 

 

 


 

 

ALLION HEALTHCARE, INC.

Reconciliation of Net Income to EBITDA and Adjusted EBITDA

 (excluding Oris legal expense, impairment of long-lived asset and retroactive premium reimbursement) (UNAUDITED)

 (in thousands)

 

 

 

 

 

 

 

 

 

Three months ended

 

Nine months ended

 

September 30,

 

September 30,

 

2007

 

2006

 

2007

 

2006

Net income

$        1,033

 

$        1,015

 

$       2,191

 

$       2,810

Provision for taxes

            569

 

             445

 

       1,372

 

          835

Interest income

          (214)

 

           (168)

 

        (556)

 

         (946)

Depreciation and amortization

            874

 

           1,060

 

      2,702

 

       2,733

EBITDA

 $       2,262

 

 $       2,352

 

 $       5,709

 

 $       5,432

Oris Litigation expense

644

 

 

1,119

 

Impairment of long-lived asset

 

 

             599

 

  

Retroactive Premium Reimbursement

 

(71)

 

 

(917)

Adjusted EBITDA

$       2,906

 

$       2,281

 

$       7,427

 

$       4,515

 

EBITDA refers to net income before interest, income tax expense, and depreciation and amortization.  Allion considers EBITDA to be a good indication of the Company’s ability to generate cash flow in order to liquidate liabilities and reinvest in the Company.  EBITDA is not a measurement of financial performance under GAAP and should not be considered a substitute for net income as a measure of performance.  Adjusted EBITDA excludes legal expenses related to the Oris litigation, impairment of long-lived assets and retroactive premium reimbursement to reflect comparable year over year EBITDA performance and provide investors with supplemental information to assess recurring EBITDA performance. 

 

 

 

 


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