Advanced Neuromodulation Systems Announces Record First Quarter Net Income of $0.20 Per Share Versus $0.08 Per Share As Neuro Sales Increase 85%.Business Editors DALLAS--(BUSINESS WIRE)--April 24, 2003 Management Increases Guidance for 2003 Advanced Neuromodulation Systems Advanced Neuromodulation System is a subsidiary of St. Jude Medical, Inc based in Plano, Texas. Among the products ANS makes and sells include spinal cord stimulators for intractable pain. , Inc. (ANS (ANS Communications, Inc, Purchase, NY) An ISP, Internet backbone and provider of private data network services, founded in 1990 as Advanced Network & Services, Inc., by IBM, MCI and Merit (consortium of Michigan universities). ) (Nasdaq:ANSI (American National Standards Institute, New York, www.ansi.org) A membership organization founded in 1918 that coordinates the development of U.S. voluntary national standards in both the private and public sectors. It is the U.S. member body to ISO and IEC. ) today announced record revenue and earnings for the first quarter of 2003. For the three months ended March 31, 2003, revenue increased 71% to $19,671,000 from $11,473,000, as sales of ANS' neuromodulation systems for the treatment of chronic pain increased 85% to $16,627,000 from $8,988,000 a year earlier. Net income more than tripled to $2,620,000, or $0.20 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 $837,000, or $0.08 per diluted share, for the first quarter of 2002. Gross margin rose to 65% for this year's first quarter compared to 61% for the same period of 2002. Pre-tax margin increased to 21% for the first quarter as compared to 11% for the same period last year. Net margin improved to 13% for the 2003 first quarter from 7% a year earlier. At March 31, 2003, cash and equivalents and marketable securities Marketable Securities Very liquid securities that can be converted into cash quickly at a reasonable price. Notes: Marketable securities are very liquid as they tend to have maturities less than one year, and the rate at which these securities can be bought or sold has totaled $90,830,000. ANS has no debt. President and Chief Executive Officer Chris Chavez attributed ANS' record first quarter performance to continued strong sales of the company's Genesis(R) and Genesis XP(TM) Totally Implantable Pulse Generator implantable pulse generator Cardiac pacing A pacemaker used for permanent pacing, which is placed inside a pocket under the skin; the leads are positioned in or on the heart (IPG IPG Implantable pulse generator, see there ) Spinal Cord Stimulators Spinal Cord Stimulator (SCS) or Dorsal Column Stimulator (DCS) is an implantable medical device used to treat chronic pain of neurologic origin. An electric impulse generated by the device near the dorsal surface of the spinal cord provides a paresthesia ("tingling") and its Renew(R) radio frequency (RF) neurostimulation system. "The spinal cord spinal cord, the part of the nervous system occupying the hollow interior (vertebral canal) of the series of vertebrae that form the spinal column, technically known as the vertebral column. stimulation market, which includes both the RF and IPG segments, has already reached approximately $300 million and is estimated to be growing 20% annually. The broader neuromodulation market is expected to grow from approximately $700 million in 2002 to $1.1 billion by 2005. With the solid market position ANS has established, we have the opportunity to deliver sustained long-term growth. We are continuing to build our high-performance operating platform and expand our product development pipeline to take full advantage of this opportunity," Chavez said. Management Increases Guidance for 2003 ANS currently expects revenue for 2003 in the range of $77,000,000 to $80,000,000 and net income in the range of $0.81 to $0.86 per diluted share. Sun Medical Acquisition During the first quarter, ANS completed the acquisition of the pain management business of its largest distributor, Sun Medical, Inc. Sun Medical is a specialty medical device distributor based in Arlington, Texas Arlington is a city in Tarrant County, Texas (USA) within the Dallas-Fort Worth-Arlington metropolitan area. According to a U.S Census Bureau release, as of July 1, 2006 Arlington has an estimated population of 367,197. , and has served as ANS' exclusive distributor in key territories throughout the Southwest and Upper Midwest The Upper Midwest is a region of the United States with no universally agreed-upon boundary, but it almost always lies within the US Census Bureau's definition of the Midwest and includes the states of Minnesota and Wisconsin, as well as at least the Upper Peninsula of Michigan. . Substantially all of Sun's pain management sales representatives have joined ANS' direct sales force. In 2002, Sun purchased $6.3 million of ANS products, accounting for approximately 14% of net revenue derived from neuromodulation products. Conference Call ANS has scheduled a conference call for today, Thursday, April 24, 2003, at 11:00 AM ET. The simultaneous webcast is available at www.ans-medical.com/investors/index.html. A replay will be available after 1:00 PM 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 #21141308, after 1:00 PM ET. About Advanced Neuromodulation Systems Advanced Neuromodulation Systems designs, develops, manufactures and markets implantable systems used to manage chronic intractable pain intractable pain Refractory pain Pain medicine Persistent pain which does not respond to at least 3 dosease of parenteral analgesics given over a 12-24 hr period; pain that does not respond to appropriate doses of opioid analgesics. and other disorders of the central nervous system. Forbes magazine recently recognized ANS as one of America's 200 Best Small Companies. Frost & Sullivan, an international strategic market research firm, also recently presented ANS with its Product Innovation Award, recognizing ANS as the technology innovation leader in the neurostimulation market and ANS' Genesis(R) Implantable Pulse Generator system as the most advanced fully implantable spinal cord stimulator on the market. Additional information is available at www.ans-medical.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. " statement 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: Statements contained in this document that are not based on historical facts 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. ." Terms such as "plan," "should," "would," "anticipate," "believe," "intend," "estimate," "expect," "predict," "scheduled," "new market," "potential market applications" and similar expressions are intended to identify forward-looking statements. Such statements are by nature subject to uncertainties and risks, including but not limited to: continued market acceptance of the Genesis(R) IPG and Genesis XP(TM) IPG; competition from Medtronic, Inc. and future competitors; continued market acceptance of our Renew(R) system following the launches of the Genesis IPG and Genesis XP IPG; patient or physician selection of less invasive invasive /in·va·sive/ (-siv) 1. having the quality of invasiveness. 2. involving puncture of the skin or insertion of an instrument or foreign material into the body; said of diagnostic techniques. or less expensive alternatives; adverse changes in coverage or reimbursement Reimbursement Payment made to someone for out-of-pocket expenses has incurred. amounts by Medicare, Medicaid, private insurers, managed care organizations or workers' comp comp See comparison. programs; intellectual property protection and potential infringement The encroachment, breach, or violation of a right, law, regulation, or contract. The term is most frequently used in reference to the invasion of rights secured by Copyright, patent, or trademark. issues; obtaining necessary government approvals for new products or applications and maintaining compliance with 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. product and manufacturing requirements; product liability; reliance on single suppliers for certain components; reliance on key distributors; completion of research and development projects in an efficient and timely manner; the satisfactory completion of clinical trials and/or market tests prior to the introduction of new products; successful integration of acquired businesses, products and technologies; international trade risks; and other risks detailed from time to time in the Company's SEC filings. Consequently, if such management assumptions prove to be incorrect or such risks or uncertainties materialize ma·te·ri·al·ize v. ma·te·ri·al·ized, ma·te·ri·al·iz·ing, ma·te·ri·al·iz·es v.tr. 1. To cause to become real or actual: By building the house, we materialized a dream. , anticipated results could differ materially from those forecast in forward-looking statements.
Advanced Neuromodulation Systems, Inc. and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
Three Months Ended
March 31,
2003 2002
Net revenue $ 19,670,591 $ 11,472,646
Cost of revenue 6,881,691 4,514,160
Gross profit 12,788,900 6,958,486
Operating expenses:
Research and development 1,692,431 1,292,703
Sales and marketing 5,159,908 2,895,890
Amortization of other intangibles 354,934 227,796
General and administrative 1,765,918 1,302,872
8,973,191 5,719,261
Income from operations 3,815,709 1,239,225
Other income (expenses):
Interest expense --- (4,306)
Interest and other income 281,655 73,506
281,655 69,200
Income before income taxes 4,097,364 1,308,425
Income taxes 1,477,550 471,449
Net income $ 2,619,814 $ 836,976
Basic income per share:
Net income $ .21 $ .09
Number of basic shares 12,412,607 9,107,985
Diluted income per share:
Net income $ .20 $ .08
Number of diluted shares 13,328,098 10,292,947
Advanced Neuromodulation Systems, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)
March 31, December 31,
2003 2002
Assets
------
Current assets:
Cash, certificates of deposit and short-
term investments $ 90,830,175 $ 96,769,918
Receivable, trade net 13,007,224 10,847,237
Receivable, other 163,839 189,017
Inventories 15,973,859 13,722,946
Deferred income taxes 1,128,463 1,122,617
Prepaid expenses and other current assets 1,984,225 1,032,883
Total current assets 123,087,785 123,684,618
Net property, plant and equipment 10,773,855 10,607,991
Patents, trademarks, purchased technology
& other assets, net 29,813,836 24,051,518
Total assets $ 163,675,476 $ 158,344,127
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Accounts payable $ 3,643,888 $ 2,392,579
Accrued salary and employee benefit costs 1,155,140 3,077,603
Accrued tax abatement liability 969,204 969,204
Income taxes payable --- 822,228
Commissions payable 867,729 794,521
Deferred revenue 661,314 646,577
Warranty reserve 378,144 402,259
Other accrued expenses 402,481 299,905
Total current liabilities 8,077,900 9,404,876
Deferred income taxes 3,698,647 3,731,939
Non-current deferred revenue 87,595 162,504
Total stockholders' equity 151,811,334 145,044,808
Total liabilities and stockholders'
equity $ 163,675,476 $ 158,344,127
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