CHAD Therapeutics' Third Quarter Net Income Advanced 21% on 23% Revenue Gain.CHATSWORTH Chatsworth, estate, Derbyshire, central England, near Chesterfield. It is the seat of the dukes of Devonshire. Begun in 1552, the present Classical-style Chatsworth House was rebuilt in 1686. , Calif. -- CHAD Therapeutics therapeutics Treatment and care to combat disease or alleviate pain or injury. Its tools include drugs, surgery, radiation therapy, mechanical devices, diet, and psychiatry. , Inc. (AMEX AMEX See: American Stock Exchange :CTU CTU Colorado Technical University CTU Czech Technical University in Prague CTU Counter Terrorist Unit CTU Clinical Trials Unit CTU Catholic Theological Union CTU Chicago Teachers Union CTU Computer Training Unit CTU Control Unit ): --Nine Month Net up 54% on 16% Increase in Revenue --Management Revises Fiscal 2005 Guidance and Provides Initial Guidance for Fiscal 2006 CHAD Therapeutics, Inc. (AMEX:CTU) today announced higher revenue and net income for the third quarter and first nine months of fiscal 2005, and provided revised revenue and earnings guidance for fiscal 2005 and initial guidance for fiscal 2006. "While we have scaled back our growth projection for fiscal 2005 to reflect currently anticipated product delivery schedules, we continue to expect significant top and bottom-line bot·tom-line adj. 1. Concerned exclusively with costs and profits: bottom-line issues. 2. Ruthlessly realistic; pragmatic: a bottom-line political strategy. growth in fiscal 2005 and again in fiscal 2006 based on the success of our new SAGE sage, any species of the large genus Salvia, aromatic herbs or shrubs of the family Labiatae (mint family). The common sage of herb gardens is S. officinalis, a strongly scented shrubby perennial, native from S Europe to Asia Minor. Therapeutic Device and the improved outlook for our TOTAL O(2)(R) Delivery System," said President and Chief Executive Officer Earl L. Yager. Third Quarter Results For the three months ended December 31, 2004, revenue increased 23% to $6,444,000, an eight-year high, from $5,237,000 for last year's third quarter. Net earnings increased 21% to $505,000, or $0.05 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share, from $418,000, or $0.04 per diluted share, a year earlier. "Sales of our SAGE Therapeutic Device are increasing, but were below our expectations for the third quarter because a customer that placed a large order earlier in the year is taking delivery of the devices at a slower rate than was originally planned. We are working with the customer on a revised delivery schedule that will likely stretch into fiscal 2006, and we are taking orders for this product from additional customers," Yager said. The SAGE device employs CHAD's proprietary technologies to sense an oxygen patient's movements and automatically adjusts the rate of oxygen delivery to reduce the risk of oxygen desaturation desaturation /de·sat·u·ra·tion/ (de-sach?ah-ra´shun) the process of converting a saturated compound to one that is unsaturated, such as the introduction of a double bond between carbon atoms of a fatty acid. as activity increases. "Shipments of our TOTAL O(2) Delivery System nearly tripled over last year's third quarter. A new customer has recently begun advertising this product, along with the SAGE device, on a national basis, which may stimulate additional interest in both products. We are pleased that our TOTAL O(2) Delivery System is beginning to gain traction Traction Definition Traction is the use of a pulling force to treat muscle and skeleton disorders. Purpose Traction is usually applied to the arms and legs, the neck, the backbone, or the pelvis. in the marketplace, as we have long believed that this proprietary system offers a cost-effective cost-effective, n the minimal expenditure of dollars, time, and other elements necessary to achieve the health care result deemed necessary and appropriate. way to serve home oxygen patients without compromising quality of care," Yager said. He added that lower sales of CHAD's OXYMATIC(R) 400 Series electronic conservers to a large customer partly offset higher sales of the SAGE Therapeutic Device and TOTAL O(2) Delivery System. Nine Month Results For the first nine months of fiscal 2005, revenue increased 16% to $18,852,000 from $16,190,000 for the first nine months of fiscal 2004. Net earnings increased 54% to $1,222,000, or $0.12 per diluted share, from $792,000, or $0.08 per diluted share, for the first nine months of fiscal 2004. Management Revises Guidance "Based on these factors," Yager continued, "and assuming that current sales and expense trends continue, we are revising our estimate of net earnings for the fiscal year ending March 31, 2005, to the range of $1,800,000 and $2,000,000, or $0.17 to $0.19 per diluted share, on revenue of about $25,000,000." Estimated net earnings for fiscal 2005 would represent an increase of at least 80% over fiscal 2004 net earnings of $1,001,000, or $0.10 per diluted share, on revenue of $21,541,000. "We expect further growth in revenue and net earnings in fiscal 2006 compared to fiscal 2005," Yager continued, "even after giving effect to the higher tax rate we expect in fiscal 2006." The company expects earnings to be taxed at a combined Federal and California California (kăl'ĭfôr`nyə), most populous state in the United States, located in the Far West; bordered by Oregon (N), Nevada and, across the Colorado River, Arizona (E), Mexico (S), and the Pacific Ocean (W). income tax rate of approximately 40% beginning in fiscal 2006. New Product Update "We introduced our new LOTUS electronic oxygen conserver con·serve v. con·served, con·serv·ing, con·serves v.tr. 1. a. To protect from loss or harm; preserve: at the 25th annual Medtrade show for the home health care industry held in Orlando in October, and we currently expect to begin shipping this product later this month. Earlier, we announced the receipt of FDA FDA abbr. Food and Drug Administration FDA, n.pr See Food and Drug Administration. FDA, n.pr the abbreviation for the Food and Drug Administration. clearance to market this sleek In the Dungeons and Dragons fantasy role-playing game, the Sleek is a Magical Beast. It resembles an Ermine. It seems to have no other desire aside from biting victims and running off. and lightweight addition to our electronic conserver line," Yager said. LOTUS offers several enhancements to CHAD's OXYMATIC 400 series conservers. "The SAGE device, along with CHAD's OXYMATIC 400 Series electronic conservers and CYPRESS Cypress, city, United States Cypress (sī`prəs), city (1990 pop. 42,655), Orange co., S Calif. near Long Beach; inc. 1956. Forest Lawn–Cypress, a branch of the famous cemetery in Glendale, Calif. OXYPneumatic(R) conservers, provide the industry's widest range of cost-effective choices for homecare providers to satisfy individual patient requirements and preferences for ambulatory Movable; revocable; subject to change; capable of alteration. An ambulatory court was the former name of the Court of King's Bench in England. It would convene wherever the king who presided over it could be found, moving its location as the king moved. oxygen products," Yager added. "We also are making progress with the initial products we are developing for the sleep disorder Sleep disorder Any condition that interferes with sleep. At least 84 have been identified, according to the American Sleep Disorders Association. Mentioned in: Insomnia, Night Terrors market and with our evaluation of alternative distribution models for these new products. We plan to conduct the first formal clinical trial on these products in the next few weeks, and the results of this test should allow us to move forward on our distribution options. We will provide more information on our progress as it becomes available," Yager concluded. Conference Call CHAD has scheduled a conference call today at 11:00 a.m. ET. A simultaneous webcast will be available from the Investor Relations Investor relations The process by which the corporation communicates with its investors. link at www.CHADtherapeutics.com. A replay will be available after 1:00 p.m. ET at this same Internet address There are two kinds of addresses that are widely used on the Internet. One is a person's e-mail address, and the other is the address of a Web site, which is known as a URL. Following is an explanation of Internet e-mail addresses only. For more on URLs, see URL and Internet domain name. . For a telephone replay, dial 800-633-8284, reservation #21230105 after 1:00 p.m. ET. About CHAD Therapeutics CHAD Therapeutics, Inc. is in the business of developing, producing and marketing respiratory care devices designed to improve the efficiency of oxygen delivery systems for home health care and hospital treatment of patients suffering from pulmonary pulmonary /pul·mo·nary/ (pool´mo-nar?e) 1. pertaining to the lungs. 2. pertaining to the pulmonary artery. pul·mo·nar·y adj. Of, relating to, or affecting the lungs. diseases. For more information, visit www.CHADtherapeutics.com. Safe Harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. Statements under the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. The foregoing statements regarding prospects for future earnings and revenues, future sales trends and the introduction of products under development are forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. that involve certain risks and uncertainties. A number of important factors could cause actual results to differ materially from those contemplated by such forward-looking statements. These include the loss of one or more major customers, unexpected difficulties encountered in ramping up our manufacturing capabilities to meet increased customer demand, increased competition, the introduction of new products with perceived competitive advantages over the Company's products, changes or proposed changes in health care reimbursement Reimbursement Payment made to someone for out-of-pocket expenses has incurred. which affect home care providers and CHAD's ability to anticipate and respond to technological and economic changes in the home oxygen market. Moreover, the success of the Company's products and products under development will depend on their efficacy, reliability and the health care community's perception of the products' capabilities and benefits, the degree of acceptance the products achieve among homecare providers and, with respect to products under development, obtaining timely regulatory approval. Additional factors that could cause actual results to differ materially from those contemplated in this press release can be found in the Company's annual and quarterly reports filed with the Securities and Exchange Commission under the caption "Outlook: Issues and Risks."
CHAD THERAPEUTICS, INC.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
Nine Months Ended Three Months Ended
December 31, December 31,
2004 2003 2004 2003
Net sales $18,852,000 $16,190,000 $6,444,000 $5,237,000
Cost of sales 11,116,000 9,608,000 3,741,000 3,017,000
Gross profit 7,736,000 6,582,000 2,703,000 2,220,000
Costs and expenses:
Selling, general
and administrative 5,306,000 4,771,000 1,858,000 1,460,000
Research and
development 1,207,000 1,011,000 380,000 343,000
Total costs and
expenses 6,513,000 5,782,000 2,238,000 1,803,000
Operating income 1,223,000 800,000 465,000 417,000
Other income, net 28,000 29,000 14,000 20,000
Earnings before
income taxes 1,251,000 829,000 479,000 437,000
Income tax expense
(benefit) 29,000 37,000 (26,000) 19,000
Net earnings $1,222,000 $792,000 $505,000 $418,000
Earnings per share:
Basic $0.12 $0.08 $0.05 $0.04
Diluted $0.12 $0.08 $0.05 $0.04
Weighted shares
outstanding:
Basic 10,119,000 10,080,000 10,124,000 10,088,000
Diluted 10,622,000 10,331,000 10,647,000 10,401,000
CHAD THERAPEUTICS, INC.
CONDENSED BALANCE SHEETS
(unaudited)
December 31,
2004 2003
Assets
Current assets:
Cash $2,021,000 $1,374,000
Accounts receivable, net 3,628,000 3,004,000
Income taxes refundable -- 4,000
Inventories, net 7,357,000 5,713,000
Prepaid expenses 349,000 377,000
Deferred income taxes 691,000 --
Total current assets 14,046,000 10,472,000
Property, plant and equipment, net 1,140,000 1,122,000
Other assets, net 787,000 737,000
Total Assets $15,973,000 $12,331,000
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $1,839,000 $353,000
Accrued expenses 1,290,000 1,006,000
Income taxes payable 418,000 35,000
Total current liabilities 3,547,000 1,394,000
Shareholders' equity:
Common shares, no par value, authorized
40,000,000 shares, 10,126,000 and
10,078,000 issued and outstanding
13,360,000 13,302,000
Retained earnings (accumulated deficit) (934,000) (2,365,000)
Net shareholders' equity 12,426,000 10,937,000
Total Liabilities and Shareholders' Equity $15,973,000 $12,331,000
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