CHAD Therapeutics Reports Higher Revenue and Net Earnings for the Fourth Quarter and Fiscal 2004; Further Growth Expected in Fiscal 2005.Business Editors CHATSWORTH, Calif.--(BUSINESS WIRE)--May 26, 2004 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 ) today announced improved operating results for the fourth quarter and fiscal year ended March 31, 2004. For the fourth quarter, revenue increased 14% to $5,351,000 from $4,699,000 for the fourth quarter of fiscal 2003. Net earnings for the fourth quarter of fiscal 2004 were $209,000, or $0.02 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. This compares to a net loss for the fourth quarter of fiscal 2003 of $841,000, or $0.08 per share, which included a non-cash charge Non-Cash Charge A charge off, made by a company against earnings, that does not require an initial outlay of cash. Notes: Non-cash charges are typically against the depreciation, amortization, and depletion accounts on a company's balance sheet. of $934,000 for the write-off of an intangible license fee asset under FASB Statement FASB Statement A standard set by the Financial Accounting Standards Board regarding a financial accounting and reporting method. Essentially, FASB statements determine the acceptable accounting practices that Certified Public Accountants use in reporting No. 144, "Accounting for the Impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. of Long-Lived Assets and Long-Lived Assets to Be Disposed Of." For the twelve months ended March 31, 2004, revenue increased 10% to $21,541,000 from $19,541,000 for fiscal 2003. Net earnings for fiscal 2004 were $1,001,000, or $0.10 per diluted share. This compares to a net loss for fiscal 2003 of $433,000, or $0.04 per share, after the $934,000 non-cash charge mentioned above. Operating results for fiscal 2004 and 2003 also included $125,000 and $165,000, respectively, in expenses incurred in connection with proxy contests Proxy contest A battle for the control of a firm in which a dissident group seeks, from the firm's other shareholders, the right to vote those shareholders' shares in favor of the dissident group's slate of directors. Also called proxy fights. waged by a group of dissident shareholders dissident shareholders Shareholders who oppose a firm's management or management policy. For example, dissident shareholders of Hewlett-Packard opposed that firm's offer to purchase Compaq Computer. who attempted unsuccessfully to elect nominees to CHAD's Board. At March 31, 2004, CHAD had no long-term debt Long-Term Debt Loans and financial obligations lasting over one year. Notes: For example debts obligations such as bonds and notes which have maturities greater than one year would be considered long-term debt. and cash of $2,708,000, or 21% of total assets. Operations Review Earl L. Yager, President and Chief Executive Officer, said: "Higher sales of oxygen conservers drove the improvement in fiscal 2004 results. Domestic sales increased 14% compared to fiscal 2003, while international sales increased 16%. In the fourth quarter, international sales increased 40% versus prior year, again primarily the result of higher conserver sales. By giving homecare providers a choice to fit virtually every patient need, the success of our OXYMATIC(R) 400 Series and CYPRESS(TM) OXYPneumatic(R) conservers has allowed us to continue to gain share in the domestic conserver market and to expand our international position. "As we anticipated in our announcement of third quarter operating results, gross margin in the fourth quarter was affected by pricing pressures brought on by the recently enacted Medicare Improvement and Modernization modernization Transformation of a society from a rural and agrarian condition to a secular, urban, and industrial one. It is closely linked with industrialization. As societies modernize, the individual becomes increasingly important, gradually replacing the family, Act. The impact was partially offset by increased unit sales unit sales Sales measured in terms of physical units rather than dollars. Unit sales data are often used by financial analysts when evaluating the health of a company. and cost reductions associated with higher sales volume. We expect to achieve additional cost savings in the current quarter as cost reductions we have negotiated with our suppliers begin to take full effect. "The Medicare legislation has stimulated interest in our TOTAL O(2)(R) home oxygen filling system as homecare providers seek more cost-effective ways to service their home oxygen patients. Our TOTAL O(2) system was designed specifically for that purpose. The system produces unlimited oxygen just like a standard oxygen concentrator An oxygen concentrator, also called an oxygen generator, is a device used to provide oxygen therapy to a patient at substantially higher concentrations than those of ambient air, used as an alternative to tanks of compressed oxygen. , while simultaneously allowing patients to easily and safely refill refill noun A second allotment of a prescription agent obtained from a pharmacy, which is allowed by the original prescription verb Pharmacology To obtain more of a particular drug, after the initially prescribed amount of the agent has been used or their portable oxygen cylinders at home. This eliminates the costs of picking up, refilling and delivering portable oxygen cylinders to patients, costs that are becoming increasingly burdensome as reimbursement Reimbursement Payment made to someone for out-of-pocket expenses has incurred. drops. While it is still too soon to predict that our TOTAL O(2) system will become a significant contributor to CHAD's growth, we remain convinced that the opportunity is real and that our marketing initiatives put us on the right track to build awareness and demand." Outlook Yager continued: "We made substantial progress in implementing CHAD's strategic growth plan in fiscal 2004. The success of our conservers has restored CHAD's traditional leadership in this important market segment and we will continue to build on that platform. The recent introduction of the SAGE(TM) Oxygen Therapeutic Device, for which we announced receiving 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 earlier this month, represents another product innovation at CHAD that we believe will contribute to our growth in fiscal 2005. Progress also continues on the 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 under licenses we acquired in 2003, and we believe these products may provide additional growth opportunities as we seek to expand our product platform beyond the home oxygen market. It is noteworthy that we have financed our growth and product development programs entirely from internal sources and expect to be able to continue to do so. "If these current sales and expense trends continue, we currently expect CHAD to generate net earnings of between $1,900,000 and $2,100,000, or $0.18 to $0.20 per diluted share, for the fiscal year ending March 31, 2005." Non-GAAP Financial Measures The following non-GAAP measures may be useful in assessing the Company's financial results: For the fourth quarter of fiscal 2003, pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma net earnings before the non-cash charge were $93,000, or $0.01 per diluted share. For fiscal 2003, pro forma net earnings before the non-cash charge were $501,000, or $0.05 per diluted share. The following table reconciles these items:
Twelve Months Ended Three Months Ended
March 31, March 31,
Reconciliation to GAAP 2004 2003 2004 2003
Earnings:
GAAP net earnings (loss) $1,001,000 $(433,000) $209,000 $(841,000)
Non-cash charge for
intangible license fee
write-off -- 934,000 -- 934,000
Pro forma net earnings
before non-cash charges
and income tax benefits 1,001,000 501,000 209,000 93,000
Reconciliation to Diluted
Earnings Per Share:
GAAP net earnings (loss)
per share 0.10 (0.04) 0.02 (0.08)
Non-cash charge for
intangible license fee
write-off -- 0.09 -- 0.09
Pro forma diluted earnings
per share before non-cash
charges $0.10 $0.05 $0.02 $0.01
Operating Loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. Carryforwards At March 31, 2004, the Company had approximately $2,785,000 in California net operating loss carryforwards Net operating loss carryforwards Application of losses to offset earnings in future years. available to offset future taxable income Under the federal tax law, gross income reduced by adjustments and allowable deductions. It is the income against which tax rates are applied to compute an individual or entity's tax liability. The essence of taxable income is the accrual of some gain, profit, or benefit to a taxpayer. . In September of 2002, the State of California enacted legislation that suspended the utilization of net operating loss carryforwards during tax years starting in 2002 and 2003 effective retroactively ret·ro·ac·tive adj. Influencing or applying to a period prior to enactment: a retroactive pay increase. [French rétroactif, from Latin to January 1, 2002. As a result, CHAD has been unable to use its California net operating loss carryforwards until the tax year that began April 1, 2004. The Company also has approximately $1,004,000 in deferred tax assets upon which a valuation allowance has been placed that will be available to offset future income tax expense. Conference Call CHAD will host a conference call today at 11:00 a.m. ET. A simultaneous webcast of the conference call will be available at www.fulldisclosure.com/company.asp?client=cb&ticker ticker An automated quotation system on which security transactions are reported after they occur on an exchange floor. Even though the newer systems are electronic and no longer actually tick, the name of the old mechanical device has stuck. =ctu or 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 these same Internet addresses 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 #21196139 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 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, increased competition, the introduction of new products with perceived competitive advantages over the Company's products, changes or proposed changes in health care reimbursement 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)
Twelve Months Ended Three Months Ended
March 31, March 31,
2004 2003 2004 2003
Net sales $21,541,000 $19,541,000 $5,351,000 $4,699,000
Cost of sales 12,070,000 11,190,000 3,112,000 2,663,000
Gross profit 9,471,000 8,351,000 2,239,000 2,036,000
Costs and expenses:
Selling,
general and
administrative 7,212,000 7,810,000 1,792,000 2,621,000
Research and
development 1,292,000 989,000 280,000 294,000
Total costs
and expenses 8,504,000 8,799,000 2,072,000 2,915,000
Operating income
(loss) 967,000 (448,000) 167,000 (879,000)
Interest income 22,000 20,000 4,000 5,000
Other income 12,000 -- 1,000 --
Earnings (loss)
before income
taxes 1,001,000 (428,000) 172,000 (874,000)
Income tax
(benefit)
expense -- 5,000 (37,000) (33,000)
Net earnings
(loss) $ 1,001,000 $ (433,000) $ 209,000 $ (841,000)
Basic earnings
(loss) per
share $ 0.10 $ (0.04) $ 0.02 $ (0.08)
Diluted earnings
(loss) per
share $ 0.10 $ (0.04) $ 0.02 $ (0.08)
Weighted shares
outstanding:
Basic 10,084,000 10,071,000 10,094,000 10,076,000
Diluted 10,362,000 10,071,000 10,467,000 10,076,000
CHAD THERAPEUTICS, INC.
CONDENSED BALANCE SHEETS
(unaudited)
March 31, March 31,
2004 2003
Assets
Current assets:
Cash $ 2,708,000 $ 1,596,000
Accounts receivable, net 2,911,000 2,517,000
Income taxes refundable -- 4,000
Inventories, net 4,989,000 5,511,000
Prepaid expenses 233,000 601,000
Deferred income taxes 224,000 --
Total current assets 11,065,000 10,229,000
Property, plant and equipment, net 1,218,000 1,236,000
Other assets 760,000 640,000
Total Assets $13,043,000 $12,105,000
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 502,000 $ 741,000
Accrued expenses 1,185,000 1,263,000
Income taxes payable 203,000 1,000
Total current liabilities 1,890,000 2,005,000
Shareholders' equity:
Common shares, no par value, authorized
40,000,000 shares, 10,096,000 and
10,076,000 issued and outstanding 13,309,000 13,257,000
Retained earnings (accumulated deficit) (2,156,000) (3,157,000)
Net shareholders' equity 11,153,000 10,100,000
Total Liabilities and Shareholders'
Equity $13,043,000 $12,105,000
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