CHAD Therapeutics Second Quarter Net Earnings Tripled On 19% Revenue Gain; Net Earnings For The First Half Increased 92%.CHATSWORTH, 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 ) announced today that net earnings for the second quarter of fiscal 2005 tripled versus the same period last year on a 19% increase in net sales Net Sales The amount a seller receives from the buyer after costs associated with the sale are deducted. Notes: This amount is calculated by subtracting the following items from gross sales: merchandise returned for credit, allowances for damaged or missing goods, freight . For the first six months of fiscal 2005, net earnings increased 92% compared to the same period of fiscal 2004. For the three months ended September 30, 2004, revenue increased 19% to $6,309,000, an eight-year high, from $5,284,000 for last year's second quarter. Net earnings increased 203% to $455,000, or $0.04 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 $150,000, or $0.02 per diluted share, a year earlier. For the first six months of fiscal 2005, revenue increased 13% to $12,408,000 from $10,953,000 for the first six months of fiscal 2004. Net earnings increased 92% to $717,000, or $0.07 per diluted share, from $374,000, or $0.04 per diluted share, for the first half of fiscal 2004. At September 30, 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 $3,007,000, or 21% of total assets. At March 31, 2004, cash was $2,708,000. Operations Review Earl L. Yager, Chief Executive Officer and President, said that domestic sales for the second quarter grew 15% as CHAD began shipping significant numbers of its new SAGE Therapeutic Device in September. "Introduced earlier this year, our new SAGE device employs our proprietary technologies to sense an oxygen patient's movements and automatically adjust 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. The SAGE device, along with CHAD's OXYMATIC(R) 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 continued, "We also 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. 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 and lightweight addition to our electronic conserver line. It contains several enhancements to our popular OXYMATIC 400 series conservers and will be offered with or without a breath sensing alarm. The LOTUS conservers are powered by two AA-size batteries that will provide up to four months of normal usage and an optional rechargeable battery A rechargeable battery, also known as a storage battery, is a group of two or more secondary cells. These batteries can be restored to full charge by the application of electrical energy. pack will also be available for these devices." Outlook for Growth Yager added, "The introduction of the LOTUS conserver represents another step in the enhancement of our oxygen conserving and therapeutic device product lines, which is an important element of our strategic growth plan. Our success in this area is creating the resources to pursue the other elements of our growth plan -- to expand usage of the TOTAL O2(R) Delivery System and continue work 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 and related markets. "We continue to make progress with the initial products we are developing for the sleep disorder market, and are currently evaluating alternative distribution models for these new products. We have developed engineering prototypes for several devices and are pleased with the results of preliminary testing we have done on these devices. Our next steps will be to make a decision on distribution and clinical testing that will likely begin after the first of the year. We will provide more information on our progress as it becomes available." Management Reiterates Guidance Yager concluded, "Based on these factors, and assuming that current sales and expense trends continue, we continue to believe CHAD will generate net earnings of between $2,500,000 and $2,700,000, or $0.24 to $0.26 per diluted share, for the fiscal year ending March 31, 2005." For fiscal 2004, CHAD reported net earnings of $1,001,000, or $0.10 per diluted share. 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 September 30, 2004, the company had fully utilized its net operating loss carrybacks Net operating loss carrybacks The application of losses to offset earnings in previous years. and Federal net operating loss carryforwards Net operating loss carryforwards Application of losses to offset earnings in future years. and had approximately $2,013,000 in California net operating loss carryforwards 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. . The Company also has approximately $793,000 in net deferred tax assets, upon which a valuation allowance has been placed, that will be available to offset future income tax expense. In September of 2002, the State of California enacted legislation that suspended sus·pend v. sus·pend·ed, sus·pend·ing, sus·pends v.tr. 1. To bar for a period from a privilege, office, or position, usually as a punishment: suspend a student from school. 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 carry forwards until the tax year that began April 1, 2004. 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 #21211115 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)
Six Months Ended Three Months Ended
September 30, September 30,
------------------------ -----------------------
2004 2003 2004 2003
----------- ----------- ----------- -----------
Net sales $12,408,000 $10,953,000 $6,309,000 $5,284,000
Cost of sales 7,375,000 6,591,000 3,696,000 3,190,000
----------- ----------- ----------- -----------
Gross profit 5,033,000 4,362,000 2,613,000 2,094,000
Costs and expenses:
Selling, general
and administrative 3,448,000 3,311,000 1,712,000 1,596,000
Research and
development 827,000 668,000 417,000 345,000
----------- ----------- ----------- -----------
Total costs and
expenses 4,275,000 3,979,000 2,129,000 1,941,000
----------- ----------- ----------- -----------
Operating income 758,000 383,000 484,000 153,000
Other income,net 14,000 9,000 6,000 4,000
----------- ----------- ----------- -----------
Earnings before
income taxes 772,000 392,000 490,000 157,000
Income tax expense 55,000 18,000 35,000 7,000
----------- ----------- ----------- -----------
Net earnings $717,000 $374,000 $455,000 $150,000
=========== =========== =========== ===========
Earnings per share:
Basic $0.07 $0.04 $0.04 $0.02
Diluted $0.07 $0.04 $0.04 $0.02
=========== =========== =========== ===========
Weighted shares
outstanding:
Basic 10,116,000 10,076,000 10,122,000 10,076,000
Diluted 10,609,000 10,297,000 10,598,000 10,313,000
CHAD THERAPEUTICS, INC.
CONDENSED BALANCE SHEETS
(unaudited)
September 30,
2004 2003
------------ ------------
Assets
Current assets:
Cash $3,007,000 $1,083,000
Accounts receivable, net 3,458,000 2,760,000
Income taxes refundable -- 4,000
Inventories, net 5,362,000 5,994,000
Prepaid expenses 382,000 428,000
Deferred income taxes 434,000 --
------------ ------------
Total current assets 12,643,000 10,269,000
------------ ------------
Property, plant and equipment, net 1,132,000 1,153,000
Other assets, net 764,000 643,000
------------ ------------
Total Assets $14,539,000 $12,065,000
============ ============
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $1,252,000 $597,000
Accrued expenses 1,151,000 976,000
Income taxes payable 228,000 16,000
------------ ------------
Total current liabilities 2,631,000 1,589,000
------------ ------------
Shareholders' equity:
Common shares, no par value, authorized
40,000,000 shares,10,122,000 and
10,078,000 issued and outstanding 13,347,000 13,259,000
Retained earnings (accumulated deficit) (1,439,000) (2,783,000)
------------ ------------
Net shareholders' equity 11,908,000 10,476,000
------------ ------------
Total Liabilities and Shareholders'
Equity $14,539,000 $12,065,000
============ ============
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