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Allion Healthcare, Inc. Announces Intention to Restate Financial Statements for Interim Periods of 2005
Announces Financial Results of Fourth Quarter
Exceeds Guidance with Reported Fourth Quarter 2005 Revenue of $37.8 million
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MELVILLE, N.Y., March 9, 2006
Allion Healthcare, Inc. (“Allion” or the “Company”) (NASDAQ: ALLI), a national provider of specialty pharmacy and disease management services focused on HIV/AIDS patients, today announced that it expects to restate its financial results for the quarter ended June 30, 2005 and the nine-months ended September 30, 2005. The restatement will correct the omission of a non-cash interest expense (below the “operating income” line) relating to warrants to purchase 100,000 shares of the Company’s common stock that were issued to an outside director of the Company, in April 2005 in connection with the extension of a guarantee on the Company’s West Bank credit facility. The Company previously disclosed the existence of the guarantee and the issuance of the warrants in its public filings with the Securities and Exchange Commission. Accordingly, after discussion with its independent registered public accounting firm, BDO Seidman, LLP and consultation with management and the Board of Directors, the Company concluded that the Company's financial statements for the three and six months ended June 30, 2005 and nine-months ended September 30, 2005 should be restated. The Company expects that the restatement will result in a non-cash interest expense of approximately $700,000-$900,000 recorded only in the second quarter of 2005. This is a one-time charge to the income statement and does not affect the Company’s operational results.
The Company’s Board of Directors is currently conducting its review of these matters. As a result of the restatement discussed above, the Company’s Chief Executive Officer and Chief Financial Officer, with the assistance of other members of management, are reviewing the effectiveness of the Company’s internal control over financial reporting. The Company expects that as a result of its review and the restatements described above, it will conclude that a material weakness, in its internal control over financial reporting, existed as of December 31, 2005.
Because these matters do not affect the Company’s fourth quarter results or expectations regarding future operating results, the Company also announced its financial results for the fourth quarter 2005, and is providing guidance for 2006. The Company has elected to defer the release of its fiscal year 2005 financial information until it has finalized the amount of the charge required to be included in the second quarter financial results. The Company will work diligently to finalize its financial statements and, at this time, expects to timely file its Form 10-K.
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Highlights:
- Completed and successfully integrated four pharmacy acquisitions
- Completed the acquisition of Oris Medical Systems, Inc. (“Oris”)
- 297 patients on service from LabTracker clinics in December 2005
- Patient months increased 183% to 102,951 in 2005 from 36,417 in 2004
- Raised over $53.0 million dollars in public equity market from initial public offering (“IPO”)
- Completed follow-on equity offering in January 2006
- Added to Russell 3000®, 2000® and Microcap® Indexes
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Fourth Quarter 2005 Results
Before adjustments, net sales for the fourth quarter of 2005 increased 131% to $37.8 million from $16.4 million in the fourth quarter of 2004. Gross profit for the quarter was $6.3 million or 16.6% of net sales. Operating income for the fourth quarter 2005 increased to $519,000 from a loss of $506,000 in the fourth quarter of 2004. The income from continuing operations, and diluted earnings per common share for the fourth quarter of 2005 was approximately $396,000 and $0.03, respectively.
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Fourth Quarter 2005 Adjustments
During the three months ended December 31, 2005, the following non-recurring items were recognized in Allion’s financial results:
- $388,000 of additional expenses for consulting fees and external accounting costs related to compliance with Section 404 of the Sarbanes-Oxley Act.
- $433,000 of revenue related to reimbursement earned in prior periods.
- Booked $153,000 of tax expense in the fourth quarter of 2005 related to an increase in the valuation allowance against deferred taxes. This resulted in a tax rate that was in excess of Allion’s normalized tax rate
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Guidance
Allion is providing the following range of revenue and earnings estimates for first quarter and fiscal year 2006:
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Q1 2006
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FY 2006
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Net Sales (in
millions)
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$38.0 – $40.0
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$220 -$240
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EPS
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$0.03 – $0.05
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$0.54 – $0.60
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The low end of the Company’s 2006 estimates include the following assumptions: the full integration of Priority Pharmacy, Inc. (which Allion acquired in December 2005) and no reductions in reimbursement rates. This guidance assumes the acquisition of new patients from increased sales to clinics and patients of Allion’s Oris interface to use the LabTracker software during 2006 and additional patient list acquisitions. Allion does not provide guidance on the specific number of new patients that it expects from sales to clinics and patients of Allion’s Oris interface to use the LabTracker software or from patient list acquisitions. The high end of the Company’s estimates for 2006 is based on an increase in the number of patients served. In addition, Allion’s estimates assume additional operating efficiencies.
Both the low and high end of the Company’s 2006 estimates include internal growth in existing facilities similar to reported historical growth in Allion’s business. EPS is based on fully taxed net income and does not include Sarbanes-Oxley 404 compliance expense in the first quarter of 2006 relating to our compliance with our 2005 evaluation of internal controls. First quarter 2006 guidance range includes the anticipated effects of Medicare Part D. Estimated fully diluted shares for FY2006 is approximately 17.6 million.
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Operating Data
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Three Months Ended
December 31, (2)
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2005
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2004
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Distribution Region
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Net Sales
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Prescriptions
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Patient Months
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Net Sales
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Prescriptions
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Patient Months
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California (1)
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$25,508,192
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(3)
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114,471
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22,778
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$5,828,263
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24,779
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3,548
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New York
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10,986,395
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41,054
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5,854
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10,060,772
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39,658
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5,702
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Florida
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435,048
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2,641
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322
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471,540
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3,373
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378
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Seattle
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916,596
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5,068
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881
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0
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-
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Total
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$37,846,231
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163,234
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29,835
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$16,360,575
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67,810
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9,628
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(1) California operations for the three months ended December 31, 2005 included contribution from Specialty Pharmacies, Inc.,
contribution from Frontier Pharmacies, Inc. (d/b/a PMW) and one month of contribution from Priority Pharmacy, Inc.
(2) As required by generally accepted accounting principles, we have restated current and prior periods to reflect the presentation of
the Austin, Texas facility as discontinued operations, so that period-to-period results are comparable.
(3) California includes retroactive payments of $433,000 for periods prior to the 3 months ended December 31, 2005. |
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Company Contact:
Allion Healthcare, Inc.
Jim Spencer, Chief Financial Officer
(631) 870-5126
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