EXHIBIT 99.1
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| | | | | 21622 Plummer Street |
| | | | | Chatsworth, CA 91311 |
 | | | | Toll Free: 800.432.8870
Phone: 818.882.0883 |
| THERAPEUTICS | | | | Main Fax: 818.882.1809 |
| The Ambulatory O2 Specialists! | | FOR IMMEDIATE RELEASE | |
| | | | | Investor Contact: |
| Company Contact: | | | | Neil Berkman Associates |
| Earl L. Yager | | | | (310)277-5162 |
| President | | | | info@BerkmanAssociates.com |
| www.CHADtherapeutics.com | | | | |
CHAD Therapeutics Reports Higher Revenue and Net Earnings
For The Third Quarter and First Nine Months of Fiscal 2004
Management Updates Guidance to Reflect Impact of Recent Medicare Legislation
CHATSWORTH, California,February 12, 2004 . . .CHAD Therapeutics, Inc. (ASE:CTU)today announced higher revenue and net earnings for the third quarter and first nine months of fiscal 2004.
For the third quarter ended December 31, 2003, revenue increased 5% to $5,237,000 from $4,980,000 for last year’s third quarter. Net earnings increased 83% to $418,000, or $0.04 per diluted share, from $228,000, or $0.02 per diluted share, for the third quarter of fiscal 2003.
For the first nine months of fiscal 2004, revenue increased 9% to $16,190,000 from $14,842,000 for the same period of fiscal 2003. Net earnings nearly doubled to $792,000, or $0.08 per diluted share, from $408,000, or $0.04 per diluted share, for the same period of the prior year.
Operations Review
“These earnings gains for the third quarter and first nine months of fiscal 2004 demonstrate the success of our business model,” said Thomas E. Jones, Chief Executive Officer and Chairman. “Especially noteworthy is that we achieved sharply higher profitability even after a substantial increase R&D spending to support our new product initiatives.” For the third quarter and first nine months of fiscal 2004, R&D spending increased $136,000 and $316,000, respectively, compared to the comparable periods of fiscal 2003.
“Higher domestic and international sales of oxygen conservers drove the increase in third quarter revenue,” Jones continued. “We are gaining traction in international markets as a result of our strategy to provide a variety of models to meet the specific requirements of our foreign customers. The performance capabilities, reliability, cost-effectiveness and selection afforded by our OXYMATIC® 400 Series electronic conservers and CYPRESS OXYPneumatic® conservers give us a sound platform for growth, and we plan to expand our platform in the new year.”
Medicare Improvement and Modernization Act
The CEO continued, “We expect the recently enacted Medicare Improvement and Modernization Act to exert continued pressure on homecare providers to reduce the overall cost of providing home oxygen services. In the short run, this is likely to affect CHAD’s profit margin on domestic conserver sales, although it also has created opportunities for us to increase our market share and offset the price pressure with cost reductions in our products. Longer term, we believe the impact of the new Medicare legislation may accelerate the move to more cost-effective technologies such as CHAD’s proprietary technology contained in our TOTAL O2 home oxygen system. Interest in this product has increased since the enactment of the legislation, and a number of product evaluations are underway with potential customers. We also are seeing an increase in international interest in this product. While it is still too soon to predict that our TOTAL O2 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.”
(more)
CHAD, OXYMATIC, OXYMIZER, OXYLITE, and TOTAL O2 are Registered Trademarks of Chad Therapeutics, Inc.
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WWW.CHADTHERAPEUTICS.COM
CHAD Therapeutics Third Quarter and Nine Month Results
February 12, 2004
Page Two
Additional Growth Initiatives
“We also are on track with our development programs related to our recently licensed technologies. We are pursuing these technologies to help us expand our home oxygen product lines and potentially allow us to enter the high-growth sleep disorder market,” Jones said. He noted that the increases in R&D spending in this year’s third quarter and first nine months are primarily related to these development programs.
Outlook
“While we expect that positive revenue comparisons will continue in the fourth quarter of fiscal 2004, gross margins for the period will be reduced by the Medicare legislation. If current sales trends continue, we now expect net earnings for fiscal 2004 of between $1,100,000 and $1,200,000, or $0.11 to $0.12 per diluted share,” Jones concluded.
Operating Loss Carryforwards
At December 31, 2003, the company had fully utilized its net operating loss carrybacks and Federal net operating loss carryforwards and had approximately $2,785,000 in California net operating loss carryforwards available to offset future taxable income. The Company also has approximately $1,040,000 in net deferred tax assets, upon which a full 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 the utilization of net operating loss carryforwards during tax years starting in 2002 and 2003 effective retroactively to January 1, 2002. As a result, CHAD will be unable to use its California net operating loss carry forwards until the tax year beginning April 1, 2004.
Conference Call
A simultaneous webcast of the conference call will be available at www.fulldisclosure.com/company.asp?client=cb&ticker=chad or from theInvestor Relationslink at www.CHADtherapeutics.com. A replay will be available after 1:00 p.m. ET at these same Internet addresses. For a telephone replay, dial (800) 633-8284, reservation #21185456 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 Statements under the Private Securities Litigation Reform Act 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 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.”
(tables attached)
#3514
CHAD THERAPEUTICS, INC.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
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| | | | | Nine Months Ended | | Three Months Ended |
| | | | | December 31, | | December 31, |
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| | | | | 2003 | | 2002 | | 2003 | | 2002 |
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| Net sales | | $ | 16,190,000 | | | $ | 14,842,000 | | | $ | 5,237,000 | | | $ | 4,980,000 | |
| Cost of sales | | | 8,959,000 | | | | 8,527,000 | | | | 2,890,000 | | | | 2,848,000 | |
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| | | Gross profit | | | 7,231,000 | | | | 6,315,000 | | | | 2,347,000 | | | | 2,132,000 | |
| Costs and expenses: | | | | | | | | | | | | | | | | |
| | Selling, general and administrative | | | 5,420,000 | | | | 5,189,000 | | | | 1,587,000 | | | | 1,681,000 | |
| | Research and development | | | 1,011,000 | | | | 695,000 | | | | 343,000 | | | | 207,000 | |
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| | | Total costs and expenses | | | 6,431,000 | | | | 5,884,000 | | | | 1,930,000 | | | | 1,888,000 | |
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| Operating income | | | 800,000 | | | | 431,000 | | | | 417,000 | | | | 244,000 | |
| Other income | | | 29,000 | | | | 15,000 | | | | 20,000 | | | | 6,000 | |
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| Earnings before income taxes | | | 829,000 | | | | 446,000 | | | | 437,000 | | | | 250,000 | |
| Income tax expense | | | 37,000 | | | | 38,000 | | | | 19,000 | | | | 22,000 | |
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| | | Net earnings | | $ | 792,000 | | | $ | 408,000 | | | $ | 418,000 | | | $ | 228,000 | |
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| Basic earnings per share | | $ | 0.08 | | | $ | 0.04 | | | $ | 0.04 | | | $ | 0.02 | |
| Diluted earnings per share | | $ | 0.08 | | | $ | 0.04 | | | $ | 0.04 | | | $ | 0.02 | |
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| Weighted shares outstanding: | | | | | | | | | | | | | | | | |
| | | Basic | | | 10,080,000 | | | | 10,070,000 | | | | 10,088,000 | | | | 10,073,000 | |
| | | Diluted | | | 10,331,000 | | | | 10,398,000 | | | | 10,401,000 | | | | 10,364,000 | |
CHAD THEREAPEUTICS, INC.
CONDENSED BALANCE SHEETS
(unaudited)
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| | | | | December 31, |
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| | | | | 2003 | | 2002 |
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Assets | | | | | | | | |
| Current assets: | | | | | | | | |
| | Cash | | $ | 1,374,000 | | | $ | 1,538,000 | |
| | Accounts receivable | | | 3,004,000 | | | | 2,825,000 | |
| | Income taxes refundable | | | 4,000 | | | | — | |
| | Inventories, net | | | 5,713,000 | | | | 5,178,000 | |
| | Prepaid expenses | | | 377,000 | | | | 770,000 | |
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| | | Total current assets | | | 10,472,000 | | | | 10,311,000 | |
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| Property, plant and equipment, net | | | 1,122,000 | | | | 1,349,000 | |
| Other assets | | | 737,000 | | | | 1,156,000 | |
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| |
| | | Total Assets | | $ | 12,331,000 | | | $ | 12,816,000 | |
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Liabilities and Shareholders’ Equity | | | | | | | | |
| Current liabilities: | | | | | | | | |
| | Accounts payable | | $ | 353,000 | | | $ | 780,000 | |
| | Accrued expenses | | | 1,006,000 | | | | 1,204,000 | |
| | Income taxes payable | | | 35,000 | | | | 31,000 | |
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| | | Total current liabilities | | | 1,394,000 | | | | 2,015,000 | |
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| Shareholders’ equity: | | | | | | | | |
| | Common shares, no par value, authorized 40,000,000 Shares, 10,091,000 and 10,076,000 issued and outstanding | | | 13,302,000 | | | | 13,117,000 | |
| | Retained earnings (accumulated deficit) | | | (2,365,000 | ) | | | (2,316,000 | ) |
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| | | Net shareholders’ equity | | | 10,937,000 | | | | 10,801,000 | |
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| | | Total Liabilities and Shareholders’ Equity | | $ | 12,331,000 | | | $ | 12,816,000 | |
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