Allion Healthcare Reports First Quarter 2008 Results

Allion Healthcare (NASDAQ: ALLI) today announced financial results for the three months ended March 31, 2008. Financial Summary of Results Net sales for the first quarter 2008 increased 10.7% to a record $65.3 million, compared to $59 million reported during the first quarter of 2007. The strong net sales were primarily driven by higher prescription sales in California, which increased 14% over the same period in 2007. Gross profit for the period was $9.7 million, or 14.8% of sales, compared to $8.4 million, or 14.3% of sales, for the same period in 2007. Selling, general and administrative expenses increased slightly for the first quarter of 2008 to $7.9 million, or 12.2% of net sales, compared to $7.7 million, or 13.0% of net sales, reported during the first quarter of 2007. The increase was primarily due to increased legal expenses related to Allion Healthcare’s litigation with Oris Medical Systems, Inc., or Oris, of $456,000 for the first quarter of 2008, compared to $170,000 for the first quarter of 2007. The Company reported a net loss for the period of $1.3 million compared to net income of $185,000 reported during the first quarter of 2007. Results for the first quarter of 2008 included a $3.9 million pre-tax charge associated with settling the Oris litigation and $456,000 in related legal expenses and, for the first quarter of 2007, included a $599,000 pre-tax impairment charge associated with the termination of the Labtracker license agreement and $170,000 in Oris-related legal expenses (the "Non-recurring Charges”). Adjusted net income, which excludes the impact of the Non-recurring Charges, more than doubled in the first quarter of 2008 to $1.5 million from $652,000 in the first quarter of 2007. An explanation and reconciliation of Net (loss) income under generally accepted accounting principles (GAAP) to Adjusted net income is provided below. Adjusted earnings per diluted share for the first quarter of 2008, which excludes the impact of the Non-recurring Charges, would have been $0.09 as compared to the Adjusted earnings per diluted share of $0.04 for the first quarter of 2007. An explanation and reconciliation of Diluted loss per share under GAAP to Adjusted earnings per diluted share is provided below. Adjusted EBITDA, which excludes the impact of the Non-recurring Charges, increased 63% to $3.1 million for the first quarter of 2008, from $1.9 million for the first quarter of 2007. An explanation and reconciliation of Net (loss) income under GAAP to EBITDA and adjusted EBITDA are provided below. "The Company continues to execute well on its operational and strategic plan while delivering solid results,” said Mike Moran, Chairman and Chief Executive Officer of Allion Healthcare. "Excluding the impact of the Oris litigation settlement, we more than doubled our earnings for the period, which exceeded our expectations. We are pleased that the Oris litigation is now behind us. We are also pleased with the performance and effort by all our senior management team and field managers as they continued to execute on our operating plan while the Company completed the Biomed acquisition which closed on April 4, 2008,” added Mr. Moran. The Company also announced that it is opening a new pharmacy with Lifelong AIDS Alliance, a leading provider of practical support services and advocacy for those with HIV/AIDS in Washington State, where it services over 3,000 clients annually. Mike Moran added, "We are excited to work with such a quality organization as Lifelong and look forward to developing an enhanced service model for Lifelong’s clients in Washington State.” Second Quarter Guidance The Company today provided financial guidance for the second quarter of 2008. This guidance assumes a 41% effective tax rate and includes the fully diluted effect of the proposed conversion into common of the preferred shares issued with the Biomed acquisition. Three Months Ending June 30, 2008 (Guidance) Net sales (millions) $ 82.0 – 84.0 Earnings per diluted share $ 0.09 – 0.10 Operating Data   Three Months Ended March 31, 2008   2007 Distribution Region Net Sales ($000’s)   Prescriptions   Patient Months (1) Net Sales ($000’s)   Prescriptions   Patient Months (1) California (2) $ 43,043 174,113 36,633 $ 37,630 156,288 34,019 New York 20,673 74,414 11,199 19,824 74,118 11,208 Seattle 1,048 5,168 942 975 5,177 969 Florida   494 2,184 290   538 2,448 393   Total $ 65,258 255,879 49,064 $ 58,967 238,031 46,589   (1) "Patient months” represents 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 of a three month period, a count of three would be included in patient months irrespective of the number of medications filled in each month.   (2) In the second quarter of 2007, we identified an error in the reporting of Gardena prescriptions and patient months and corrected the previously reported number of prescriptions of 155,903 and patient months of 34,037 in California for the three month period ended March 31, 2007. Conference Call Information A conference call to discuss the results will be held at 5:00 p.m. ET; on Thursday, May 8, 2008. To join the call, please dial (913) 312-0863 from the U.S. or abroad. The conference call will also be webcast on Allion Healthcare’s website at www.allionhealthcare.com. To join the webcast, please go to Allion Healthcare’s web site 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 conference call will be available from 8:00 p.m. ET on Thursday, May 8, 2008, through 8:00 p.m. ET on Thursday, May 15, 2008, by dialing (719) 457-0820 from the U.S. or abroad and entering confirmation code 8255945. The audio webcast will also be available on the company's website, www.allionhealthcare.com, for one year. Questions during the live call will be reserved for investment professionals only. About Allion Healthcare Allion Healthcare, Inc. is a national provider of specialty pharmacy and disease management services focused on HIV/AIDS patients as well as specialized biopharmaceutical medications and services to chronically ill patients. Allion Healthcare sells HIV/AIDS medications, ancillary drugs and nutritional supplies under the trade name MOMS Pharmacy. Allion Healthcare provides services for the intravenous immunoglobulin, Blood Clotting Factor and other chronic therapies through its Biomed division. 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 This press release contains certain "forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995, such as statements about the opening of a new pharmacy, development of an enhanced service model, future effective tax rate, and future financial performance. Words such as "look forward," "will," "assume," and similar expressions identify forward-looking statements. Such forward-looking statements represent Allion Healthcare’s expectations and beliefs and involve a number of known and unknown risks, uncertainties and other factors that may cause actual results to differ materially from those expressed or implied by such forward-looking statements. These factors include, but are not limited to, successful integration of the Biomed acquisition, competitive pressures, demand for Allion Healthcare’s products and services, changes in reimbursement and other changes in customer mix, changes in third party reimbursement rates or Allion Healthcare’s qualification for preferred reimbursement rates in California and New York, changes in government regulations or the interpretation of these regulations, Allion Healthcare’s ability to manage growth successfully, Allion Healthcare’s ability to effectively market its services, receipt of licensing and regulatory approvals, successful identification of acquisitions, and other risks set forth in Item 1A. Risk Factors in Allion Healthcare’s Annual Report on Form 10-K for the fiscal year ended December 31, 2007. You are cautioned not to place undue reliance on those forward-looking statements, which speak only as of the date the statement was made. Except to the extent required by applicable securities laws, Allion Healthcare undertakes no obligation to update any forward-looking statement contained herein, whether as a result of new information, future events, or otherwise. ALLION HEALTHCARE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)     (in thousands) At March 31,2008 At December 31,2007 Assets Current Assets: Cash and cash equivalents $ 28,969 $ 19,557 Short term investments and securities held for sale — 9,283 Accounts receivable, (net of allowance for doubtful accounts of $136 in 2008 and $149 in 2007) 17,895 18,492 Inventories 8,793 8,179 Prepaid expenses and other current assets 1,449 767 Deferred tax asset 344 344 Total Current assets 57,450 56,622   Property and equipment, net 751 790 Goodwill 41,893 41,893 Intangible assets, net 26,471 27,228 Marketable securities, non-current 2,228 — Other assets 85 83 Total Assets $ 128,878 $ 126,616   Liabilities and Stockholders’ Equity Current Liabilities: Accounts payable $ 16,382 $ 15,832 Accrued expenses 6,078 2,319 Current portion of capital lease obligations 36 47 Total Current Liabilities 22,496 18,198   Long Term Liabilities: Deferred tax liability 753 2,212 Other 37 44 Total Liabilities 23,286 20,454   Commitments & Contingencies   Stockholders’ Equity: Convertible preferred stock, $.001 par value, shares authorized 20,000; issued and outstanding -0- in 2008 and 2007 — — Common stock, $.001 par value, shares authorized 80,000; issued and outstanding 16,204 in 2008 and 2007 16 16 Additional paid-in capital 113,333 112,636 Accumulated deficit (7,757) (6,487) Accumulated other comprehensive loss — (3) Total stockholders’ equity 105,592 106,162 Total Liabilities and Stockholders’ Equity $ 128,878 $ 126,616 ALLION HEALTHCARE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)   Three months ended March 31, (in thousands except per share data) 2008     2007   Net sales $ 65,258 $ 58,967 Cost of goods sold 55,604   50,539 Gross profit 9,654 8,428   Operating expenses: Selling, general and administrative expenses 7,935 7,690 Litigation settlement 3,950 — Impairment of long-lived asset —   599 Operating (loss) income (2,231 ) 139   Interest income 215   166 (Loss) Income before taxes (2,016 ) 305   Income Tax (benefit) provision (746 ) 120 Net (loss) income $ (1,270 ) $ 185   Basic (loss) earnings per common share $ (0.08 ) $ 0.01 Diluted (loss) earnings per common share $ (0.08 ) $ 0.01   Basic weighted average of common shares outstanding 16,204 16,204 Diluted weighted average of common shares outstanding 16,204 17,003 ALLION HEALTHCARE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)     (in thousands) Three months ended March 31, CASH FLOWS FROM OPERATING ACTIVITIES 2008     2007   Net (Loss) Income $ (1,270 ) $ 185 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 875 965 Impairment of long-lived asset — 599 Deferred rent (7 ) (4 ) Provision for doubtful accounts 44 50 Non-cash stock compensation expense 59 93 Deferred income taxes (1,459 ) 52 Changes in operating assets and liabilities: Accounts receivable 553 571 Inventories (614 ) (1,471 ) Prepaid expenses and other assets 162 188 Accounts payable and accrued expenses 3,578   941   Net cash provided by operating activities 1,921   2,169     CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment (78 ) (20 ) Purchases of short term securities (300 ) (18,028 ) Sales of short term securities 7,359 16,160 Payments for investment in Oris Medical’s Assets — (26 ) Payments for acquisition of Whittier — (1 ) Payments for acquisition of Biomed (117 ) —   Net cash provided by (used in) investing activities 6,864   (1,915 )   CASH FLOWS FROM FINANCING ACTIVITIES Tax benefit from exercise of employee stock options 638 54 Repayment of notes payable and capital leases (11 ) (711 ) Net cash provided by (used in) financing activities 627   (657 )   NET CASH INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 9,412 (403 ) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 19,557   17,062   CASH AND CASH EQUIVALENTS, END OF PERIOD $ 28,969   $ 16,659   Allion Healthcare, Inc. Reconciliation of Net (loss) income to Adjusted Net Income, Excluding Litigation Settlement and expense and Impairment of long-lived asset (UNAUDITED)       Three months ended (in thousands) March 31,   2008     2007   Net (loss) income $ (1,270 ) $ 185 Oris litigation settlement 3,950 - Oris litigation expense 456 170 Impairment of long-lived asset - 599 Income Tax adjustment   (1,630 )   (302 ) Adjusted Net Income $ 1,506   $ 652   Adjusted Net Income excludes the litigation settlement and expenses related to the Oris litigation and the impairment of long-lived asset to reflect comparable year over year Net Income performance and provide investors with supplemental information to assess recurring Net Income performance. Allion Healthcare, Inc. Reconciliation of Diluted EPS and Adjusted Diluted EPS, Excluding Litigation Settlement and expense and Impairment of long-lived asset (UNAUDITED)       Three months ended (in thousands except per share data) March 31,   2008     2007   Diluted (loss) earnings per common share $ (0.08 ) $ 0.01 Diluted weighted average of common shares outstanding 16,204 17,003   Net (loss) income $ (1,270 ) $ 185 Oris litigation settlement 3,950 - Oris litigation expense 456 170 Impairment of long-lived asset - 599 Income Tax adjustment   (1,630 )   (302 ) Adjusted Net Income $ 1,506   $ 652     Adjusted Diluted earnings per common share $ 0.09   $ 0.04   Diluted weighted average of common shares outstanding 16,995 17,003   Adjusted Diluted EPS excludes the litigation settlement and expenses related to Oris and the impairment of long-lived asset to reflect comparable year over year EPS and provide investors with supplemental information to assess recurring EPS performance. Allion Healthcare, Inc. Reconciliation of Net Income to EBITDA, Excluding Litigation Settlement and expense and Impairment of long-lived asset (UNAUDITED)       Three months ended (in thousands) March 31,   2008     2007   Net (loss) income $ (1,270 ) $ 185 Income Tax (Benefit) Provision (746 ) 120 Interest income (215 ) (166 ) Depreciation and amortization   875     965   EBITDA (1,356 ) 1,104   Oris litigation settlement 3,950 - Oris litigation expense 456 170 Impairment of long-lived asset   -     599   Adjusted EBITDA $ 3,050   $ 1,873     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 the litigation settlement and expenses related to the Oris litigation, and the impairment of long-lived assets to reflect comparable year over year EBITDA performance and provide investors with supplemental information to assess recurring EBITDA performance.