CHAD THERAPEUTICS Innovative Respiratory Solutions
FOR IMMEDIATE RELEASE
21622 Plummer Street Chatsworth, CA 91311 Toll Free: 800.423.8870 Phone: 818.882.0883 Main Fax: 818.882.1809
Company Contact: Earl L. Yager President and CEO www.CHADtherapeutics.com
Investor Contact: Neil Berkman Associates (310) 277 — 5162 info@BerkmanAssociates.com
CHAD Therapeutics Reports Fourth Quarter and Fiscal 2005 Financial Results
Fourth Quarter Net Income Increased To $0.06 Per Share Versus $0.02 Per Share Fiscal 2005 Net Income Was $0.17 Per Share Versus $0.10 Per Share
CHATSWORTH, California,June 16, 2005 . . .CHAD Therapeutics, Inc. (ASE:CTU) today announced higher revenue and net income for the fourth quarter and fiscal 2005 compared to the same periods of fiscal 2004, and updated its progress on new product and distribution initiatives.
Fourth Quarter and Fiscal 2005 Financial Results
For the three months ended March 31, 2005, revenue increased 2% to $5,435,000 from $5,351,000 for the fourth quarter of the prior fiscal year. Net earnings for the fourth quarter of fiscal 2005 were $589,000, or $0.06 per diluted share. This compares to net earnings for the fourth quarter of fiscal 2004 of $209,000, or $0.02 per diluted share.
For the twelve months ended March 31, 2005, revenue increased 13% to $24,287,000 from $21,541,000 for fiscal 2004. Net earnings for fiscal 2005 were $1,811,000, or $0.17 per diluted share. This compares to net earnings for fiscal 2004 of $1,001,000, or $0.10 per diluted share.
Conserver Product Update
Sales of oxygen conservers to domestic customers increased 5% in fiscal 2005 compared to the prior year. Growth was restrained by increased pricing pressure in the domestic market and the previously announced reduction in sales of conservers to a large customer. International conserver sales increased 51%.
Earl L. Yager, President and Chief Executive Officer, said, “The international conserver market is emerging as an important growth opportunity for CHAD. We are taking advantage of this opportunity by offering the industry’s broadest conserver product line, and by modifying certain of our conservers to meet specific foreign market requirements. As a result, based on current trends and orders received to date, we expect another significant increase in international sales in fiscal 2006.
“Continued expansion of our oxygen conserver and therapeutic device product lines is an important element of CHAD’s strategic growth plan. The recent introduction of the LOTUSTM Electronic Oxygen Conserver represents another product innovation at CHAD that we believe will contribute to our growth in fiscal 2006.”
TOTAL O2 System Update
Yager added, “Sales of our TOTAL O2® home oxygen filling system increased 64% in fiscal 2005 compared to fiscal 2004. Recent changes in home oxygen reimbursement are encouraging homecare providers to evaluate their monthly operating costs more carefully and to seek more cost-effective ways to service their home oxygen patients. CHAD’s proprietary TOTAL O2 system can significantly reduce monthly operating costs while at the same time improving patient care. We have been approached by several distributors regarding our TOTAL O2 system. These new distribution opportunities have the potential to significantly expand TOTAL O2 sales, and may also have a positive impact on our conserver sales. We hope that we will be able to convert these opportunities into formal distribution agreements over the next few months. We remain convinced that the TOTAL O2 system can become a major contributor to CHAD’s growth, and that our new marketing initiatives will put us on the right track to build awareness and demand.”
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CHAD Therapeutics Reports Fourth Quarter and Fiscal 2005 Financial Results June 16, 2005 Page Two
CHAD’s TOTAL O2 home oxygen filling system produces unlimited oxygen just like a standard oxygen concentrator, while simultaneously allowing patients to easily and safely refill their portable oxygen cylinders at home.
Sleep Disorder Product Update
Yager continued, “The initial independent clinical trial of our first potential product for the sleep disorder market was recently completed. The trial confirmed that our sleep apnea therapeutic device, incorporating our proprietary sensor technology, achieved a significant reduction in the air pressure needed to treat sleep apnea patients, in addition to providing other therapeutic benefits. We believe this is why all of the patients tested preferred our device to the standard device that was used in the clinical trial for comparative purposes. This may translate into improved compliance by patients who use our device, which is a significant factor in sleep apnea therapy. We expect to make a decision this summer regarding our distribution options for our sleep apnea products.”
Operating Loss Carryforwards
At March 31, 2005, the Company had approximately $1,846,000 in California net operating loss carryforwards available to offset future income taxes payable. Based on earnings performance and future earnings projections, the Company released the valuation allowance that had been placed on its deferred tax assets, resulting in a net income tax benefit of $513,000 for the fourth quarter and $484,000 for fiscal 2005. The effective combined Federal and California income tax rate in fiscal 2006 and future years is currently expected to be approximately 40%.
Outlook
“A number of significant factors affect the outlook for revenue and earnings for fiscal 2006. These include the wide range of outcomes that could result from the distribution options we are pursuing for our TOTAL O2 system and our sleep apnea products, the emerging opportunities for our conserver products in international markets and continued uncertainty with respect to the domestic conserver market, and our expectation of a significantly higher tax rate beginning this year. As a result, while we expect CHAD to report higher revenue and pre-tax income in fiscal 2006 than in fiscal 2005, at this time we are unable to quantify more precisely the outlook for fiscal 2006,” Yager concluded.
Conference Call
CHAD will host a conference call today at 11:00 a.m. EDT. A simultaneous webcast will be available atwww.fulldisclosure.com/company.asp?client=cb&ticker=ctu or from theInvestor Relations link atwww.CHADtherapeutics.com. A replay will be available after 1:00 p.m. EDT at these same Internet addresses. For a telephone replay, dial (800) 633-8284, reservation #21248637 after 1:00 p.m. EDT.
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, visitwww.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 potential loss of one of our major customers upon whom we depend for a material portion of our business, increased competition and continuing downward pressure on prices for certain of our products, the potential 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, the terms of any distribution agreement which may be negotiated with respect to our TOTAL O2 system or our sleep products, 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) #3898
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CHAD THERAPEUTICS, INC.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
Twelve Months Ended
Three Months Ended
March 31,
March 31,
2005
2004
2005
2004
Net sales
$
24,287,000
$
21,541,000
$
5,435,000
$
5,351,000
Cost of sales
14,581,000
12,846,000
3,465,000
3,238,000
Gross profit
9,706,000
8,695,000
1,970,000
2,113,000
Costs and expenses:
Selling, general and administrative
6,947,000
6,436,000
1,641,000
1,666,000
Research and development
1,473,000
1,292,000
266,000
280,000
Total costs and expenses
8,420,000
7,728,000
1,907,000
1,946,000
Operating income
1,286,000
967,000
63,000
167,000
Interest income
39,000
22,000
10,000
4,000
Other income
2,000
12,000
3,000
1,000
Earnings before income taxes
1,327,000
1,001,000
76,000
172,000
Income tax (benefit)
(484,000
)
—
(513,000
)
(37,000
)
Net earnings
$
1,811,000
$
1,001,000
$
589,000
$
209,000
Basic earnings per share
$
0.18
$
0.10
$
0.06
$
0.02
Diluted earnings per share
$
0.17
$
0.10
$
0.06
$
0.02
Weighted shares outstanding:
Basic
10,122,000
10,084,000
10,131,000
10,094,000
Diluted
10,625,000
10,362,000
10,636,000
10,467,000
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CHAD THERAPEUTICS, INC.
CONDENSED BALANCE SHEETS
(unaudited)
March 31,
2005
2004
Assets
Current assets:
Cash
$
177,000
$
2,708,000
Accounts receivable, net
3,745,000
2,911,000
Inventories, net
8,512,000
4,989,000
Prepaid expenses
264,000
233,000
Deferred income taxes
461,000
224,000
Total current assets
13,159,000
11,065,000
Property, plant and equipment, net
1,191,000
1,218,000
Intangible assets
802,000
729,000
Deferred income taxes
568,000
B
Other assets
70,000
31,000
Total Assets
$
15,790,000
$
13,043,000
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable
$
1,196,000
$
502,000
Accrued expenses
1,370,000
1,185,000
Income taxes payable
200,000
203,000
Total current liabilities
2,766,000
1,890,000
Shareholders’ equity:
Common shares, $.01 par value, authorized 40,000,000
shares, 10,134,000 and 10,096,000 issued and outstanding
13,369,000
13,309,000
Accumulated deficit
(345,000
)
(2,156,000
)
Net shareholders’ equity
13,024,000
11,153,000
Total Liabilities and Shareholders’ Equity
$
15,790,000
$
13,043,000
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