Advanced Neuromodulation Systems Reports Record Fourth Quarter and 2003 Results; Neuro Sales Increase 53% for the Fourth Quarter and 71% for 2003.Business Editors/Health/Medical Writers DALLAS--(BUSINESS WIRE)--Feb. 19, 2004 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 net income for the fourth quarter and 2003, driven by continued strong sales of ANS' neuromodulation products for the treatment of chronic pain. Fourth Quarter Results For the three months ended December 31, 2003, revenue increased 41% to a record $25,668,000 from $18,148,000 for the fourth quarter of 2002. Sales of neuro products increased 53% to a record $23,413,000 from $15,290,000 a year earlier. Net income for this year's fourth quarter increased 51% to $3,721,000, or $0.18 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 net income of $2,457,000, or $0.12 per diluted share, for the fourth quarter of 2002. Full Year Results For the twelve months ended December 31, 2003, revenue increased 59% to a record $91,082,000 from $57,372,000 for the same period last year. Neuro product revenue increased 71% to a record $80,001,000 from $46,712,000 for 2002. Net income for 2003 increased 98% to a record $13,217,000, or $0.64 per diluted share, which included other income of $969,000 pre-tax, or $0.03 per diluted share after tax, from the reversal of an accrued ac·crue v. ac·crued, ac·cru·ing, ac·crues v.intr. 1. To come to one as a gain, addition, or increment: interest accruing in my savings account. 2. tax abatement A reduction, a decrease, or a diminution. The suspension or cessation, in whole or in part, of a continuing charge, such as rent. With respect to estates, an abatement is a proportional diminution or reduction of the monetary legacies, a disposition of property by will, when liability. This compares to net income of $6,684,000, or $0.37 per diluted share, for 2002. At December 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 approximately $94.8 million. ANS has no debt. Operations Review "Working together, the ANS team delivered another outstanding performance in 2003. Revenue and net income increased to new all-time highs. We reached a significant milestone with the 4,000th implant implant /im·plant/ (im-plant´) to insert or to graft (tissue, or inert or radioactive material) into intact tissues or a body cavity. of our Genesis(R) and GenesisXP(TM) implantable 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 (SCS) systems for the treatment of chronic pain. Our Renew(R) radio frequency (RF) SCS system also continued to perform well in the marketplace. We expanded our sales and marketing capabilities with the acquisitions of the pain management businesses of our U.S. distributors, and made important progress in the development of new products to support our continued growth in the future," said Chief Executive Officer Chris Chavez. Gross margin rose to a record 70.2% for 2003 compared to 64.0% for 2002. "This improvement reflects the increase in sales volume as well as the positive impact of the transition to a direct sales force in our former distributors' territories," Chavez explained. He added that operating margin Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: increased to a record 20.2% from 16.1%, even after substantial increases in R&D and marketing expenses to support the planned expansion of ANS' product portfolio and the continued enhancement of its market position. Chavez said, "We are dedicated to expanding ANS' product offerings to address current and emerging neuromodulation applications. Our track record shows that this is the right formula for ANS to achieve sustained long-term growth in the neuromodulation industry, a market that we expect will soon reach $1 billion and will continue growing rapidly. We are proud of our team's accomplishments in 2003, and look forward to continued progress in 2004. Our success in large part is due to a growing list of interventional pain physicians who trust ANS' products and people to help them care for chronic pain patients in need of advanced solutions. We appreciate and thank our customers for their support." Management Reiterates Guidance for 2004 As announced on January 13, 2004, ANS' management currently expects revenue for 2004 in the range of $116 million to $121 million, and net income in the range of $0.87 to $0.91 per diluted share. Conference Call ANS has scheduled a conference call today at 11:00 AM ET. The simultaneous webcast is available at www.ANS-medical.com/investors/index.html. A replay will be available 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. , or at 800-633-8284, reservation #21180415, 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, and Fortune magazine recently recognized ANS as one of Fortune's Top 100 Fastest-Growing Small Companies in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. . 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 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 system as the most advanced fully implantable spinal cord stimulator 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") 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 IPG Implantable pulse generator, see there and GenesisXP(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 GenesisXP 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 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; 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. Such forward-looking statements speak only as of the date on which they are made and the company does not undertake any obligation to update any forward-looking statement to reflect events or circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or after the date of this release.
ADVANCED NEUROMODULATION SYSTEMS, INC. and SUBSIDIARIES
Condensed Consolidated Statements of Income (Unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31,
2003 2002 2003 2002
Net revenue $ 25,668,412 $ 18,148,491 $ 91,081,969 $ 57,372,013
Cost of
revenue 6,817,905 6,227,802 27,135,320 20,658,798
Gross profit 18,850,507 11,920,689 63,946,649 36,713,215
Operating expenses:
Research and
development 2,927,561 1,655,743 9,525,411 5,842,576
Sales and
marketing 8,091,880 4,840,622 26,552,873 14,931,826
Amortization of
intangibles 553,551 266,120 1,831,644 952,214
General and
administrative 2,124,043 1,766,775 7,628,127 5,738,392
13,697,035 8,529,260 45,538,055 27,465,008
Income from
operations 5,153,472 3,391,429 18,408,594 9,248,207
Other income (expenses):
Interest
expense -- -- -- (10,759)
Other income 5,642 -- 974,846 --
Interest income 218,948 337,983 995,318 933,668
224,590 337,983 1,970,164 922,909
Income before
income taxes 5,378,062 3,729,412 20,378,758 10,171,116
Income taxes 1,656,589 1,272,674 7,161,504 3,486,658
Net income $ 3,721,473 $ 2,456,738 $ 13,217,254 $ 6,684,458
Basic income per share:
Net income $ 0.19 $ 0.13 $ 0.69 $ 0.41
Number of basic
shares 19,599,846 18,352,544 19,180,041 16,350,060
Diluted income per share:
Net income $ 0.18 $ 0.12 $ 0.64 $ 0.37
Number of
diluted
shares 21,035,493 19,810,487 20,589,887 17,837,456
ADVANCED NEUROMODULATION SYSTEMS, INC. and SUBSIDIARIES
Condensed Consolidated Balance Sheets (Unaudited)
December 31, December 31,
2003 2002
Assets
Current assets:
Cash and marketable securities $ 94,802,122 $ 96,769,918
Receivable, trade net 17,892,416 10,847,237
Receivable, interest and other 259,687 189,017
Inventories 22,113,159 13,722,946
Deferred income taxes 1,423,228 1,122,617
Income tax receivable 1,324,001 --
Prepaid expenses and other current assets 1,007,244 1,032,883
Total current assets 138,821,857 123,684,618
Net property, plant and equipment 21,150,010 10,607,991
Patents, trademarks, purchased technology
& other assets, net 34,834,420 24,051,518
Total assets $ 194,806,287 $ 158,344,127
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 5,717,222 $ 2,392,579
Accrued salary and employee benefit costs 4,045,361 3,077,603
Deferred revenue 503,093 646,577
Commissions payable 1,424,471 794,521
Accrued tax abatement liability -- 969,204
Income taxes payable -- 822,228
Warranty reserve 294,290 402,259
Other accrued expenses 400,159 299,905
Total current liabilities 12,384,596 9,404,876
Deferred income taxes 3,389,255 3,731,939
Non-current deferred revenue 907,513 162,504
Total stockholders' equity 178,124,923 145,044,808
Total liabilities and stockholders'
equity $ 194,806,287 $ 158,344,127
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