Advanced Neuromodulation Systems Reports Record Second Quarter Revenue.Business Editors DALLAS--(BUSINESS WIRE)--July 26, 2001 Reflecting continued strong sales of its advanced Renew(R) radio frequency (RF) neuromodulation system for the treatment of 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 the acquisition in January 2001 of Hi-tronics Designs, Inc. (HDI HDI Human Development Index (UNDP yardstick of human welfare) HDI Help Desk Institute HDI Humpty Dumpty Institute (New York, New York) HDI High Density Interconnect ), 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. ) announced today that revenue for the second quarter ended June 30, 2001, increased 10% to a record $9,205,000 from $8,358,000 for the second quarter of 2000 and $8,341,000 for the 2001 first quarter. Net earnings were $369,000, or $0.04 per diluted share. This compares to net earnings of $384,000, or $0.04 per diluted share, for the second quarter of 2000. The acquisition of HDI, a contract developer and original equipment manufacturer (OEM (Original Equipment Manufacturer) The rebranding of equipment and selling it. The term initially referred to the company that made the products (the "original" manufacturer), but eventually became widely used to refer to the organization that buys the products and ) of electro-mechanical devices, was accounted for as a pooling of interests Pooling of Interests An accounting method, used in mergers and acquisitions, where the balance sheet items of the two companies are simply added together. Notes: The opposite of pooling of interests is the purchase acquisition method. , and prior periods have been restated accordingly. For the six months ended June 30, 2001, revenue increased 11% to a record $17,546,000 from $15,786,000 for last year's first half. Pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma net earnings for the first six months of 2001, before acquisition-related costs incurred in connection with the HDI transaction, were $673,000, or $0.07 per diluted share. Including acquisition-related costs of $484,000, net earnings for the period were $362,000 or $0.04 per diluted share. This compares to net earnings for last year's first half of $539,000, or $0.06 per diluted share. President and Chief Executive Officer Chris Chavez said, "ANS is in the fortunate position of being able to sustain modest profitability while increasing spending on both R&D and marketing to expand and refine our operating platform. The returns on these investments are within reach. We expect to begin to benefit from our operating leverage Operating Leverage A measurement of the degree to which a firm or project relies on fixed rather than variable costs. Notes: The higher the degree of operating leverage, the greater the potential danger from forecasting risk. as our expanded line of approved products begins to contribute to ANS' revenue and we gain regulatory approval for the additional neuromodulation products currently in our pipeline." On July 9, 2001, ANS announced that the 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. had accepted for review the Company's premarket approval premarket approval Medical devices A scientific and regulatory review by the FDA to ensure the safety and effectiveness of a Class III device, before its approval for marketing. See Advisory panel, Medical device. (PMA PMA (papillary-marginal-attached), n a system of epidemiologic scoring of periodontal disease devised by Schour and Massler in which the symbols denote the areas involved in gingival inflammation. PMA Progressive muscular atrophy ) application for ANS' 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 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") for relief of chronic pain of the trunk and/or limbs. "This was an important step toward our goal of receiving approval from the FDA to market our IPG 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. . The acceptance signaled that major sub-sections of ANS' PMA application met the initial filing requirements for a detailed PMA review. Our next milestone will be a meeting with the FDA to discuss in detail the status of the application 100 days from the date the FDA received the PMA application (May 29, 2001). By law, the FDA has up to 180 days from May 29 to review and respond to ANS' PMA filing. ANS and the FDA are continuing to work cooperatively regarding ANS' PMA filing," Chavez said. Chavez added that on a parallel path, ANS is continuing to seek administrative review of the FDA's February 23, 2001, reclassification Reclassification The process of changing the class of mutual funds once certain requirements have been met. These requirements are generally placed on load mutual funds. Reclassification is not considered to be a taxable event. petition denial letter as a prelude to ANS' continuing effort to appeal the denial of its reclassification petition. On July 11, 2001, ANS was represented by Chairman of the Board Hugh Morrison Hugh Morrison may refer to:
"This is especially important as ANS moves to expand its business on a global basis," Morrison said. Chavez continued, "ANS is a world leader in 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 technology with an expanding line of products that address major segments of the neuromodulation market. When all appropriate regulatory approvals are received, these products will enable us to participate in markets that are at least eight times larger than the RF market we participate in today. Industry observers expect global sales of neuromodulation products to increase from approximately $500 million in 2001 to $1 billion by 2003. Based on our success in building ANS' position in the RF segment of the neuromodulation industry, we are optimistic op·ti·mist n. 1. One who usually expects a favorable outcome. 2. A believer in philosophical optimism. op that our new products ultimately will be as well-received among physicians and their patients as our Renew(R) system." Adjusts Guidance for 2001 Chavez said that the Company now expects revenue for 2001 in the range of $36 million to $38 million, reflecting higher product sales and the acquisition of HDI. He said that the Company expects earnings for 2001 in the range of $0.16 to $0.20 per diluted share (before acquisition-related costs). Conference Call ANS has scheduled a conference call at 11 a.m. EDT EDT abbr. Eastern Daylight Time EDT Eastern Daylight Time EDT n abbr (US) (= Eastern Daylight Time) → hora de verano de Nueva York EDT today. A simultaneous WebCast of the conference call may be accessed online at www.StreetFusion.com or at www.ans-medical.com. A replay will be available approximately one hour after the WebCast at these same Internet addresses. For a telephone replay, dial 800/633-8284, reservation No. 19327164 beginning at approximately 1 p.m. EDT. About Advanced Neuromodulation Systems Advanced Neuromodulation Systems designs, develops, manufactures and markets implantable systems used to manage chronic intractable pain and other disorders of the central nervous system. 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: completion of research and development projects in an efficient and timely manner; obtaining regulatory approvals on a timely and cost-efficient basis to permit the introduction of new products; the satisfactory completion of clinical trials and/or market tests prior to the introduction of new products; the adequacy, acceptability and timeliness of component supply; the approval of new products by reimbursement agencies like insurance companies, HMOs, Medicare and Medicaid Medicare and Medicaid U.S. government programs in effect since 1966. Medicare covers most people 65 or older and those with long-term disabilities. Part A, a hospital insurance plan, also pays for home health visits and hospice care. ; the efficacy of the Company's products for new applications; and other risks detailed from time to time in the Company's Securities and Exchange Commission filings. Consequently, if such management assumptions prove to be incorrect or such risks or uncertainties materialize, anticipated results could differ materially from those forecast in forward-looking statements.
ADVANCED NEUROMODULATION SYSTEMS, INC. and SUBSIDIARIES
Condensed Consolidated Statements of Operations (Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2001 2000 2001 2000
Net revenue-product
sales $9,204,721 $8,357,988 $17,545,531 $15,785,612
Cost of product
sales 3,934,655 3,727,959 7,507,444 7,172,484
Gross profit 5,270,066 4,630,029 10,038,087 8,613,128
Costs and expenses:
Research and
development 1,233,282 943,905 2,380,812 1,924,573
Marketing 2,079,851 1,695,805 4,136,829 3,325,636
Amortization of
intangibles 382,083 307,409 694,403 614,280
General and
administrative 1,043,914 1,112,550 1,962,343 2,053,227
4,739,130 4,059,669 9,174,387 7,917,716
Earnings from
operations 530,936 570,360 863,700 695,412
Other income
(expenses):
Acquisition-
related costs -- -- (483,766) --
Interest expense (6,212) (21,241) (16,672) (32,714)
Interest and
other income 153,979 138,432 302,281 303,460
147,767 117,191 (198,157) 270,746
Earnings before
income taxes 678,703 687,551 665,543 966,158
Income taxes 310,189 303,671 303,290 426,723
Net earnings $368,514 $383,880 $362,253 $539,435
Basic earnings per
share:
Net earnings $0.04 $0.05 $0.04 $0.06
Number of basic
shares 8,919,235 8,470,494 8,907,010 8,453,032
Diluted earnings
per share:
Net earnings $0.04 $0.04 $0.04 $0.06
Number of diluted
shares 9,836,830 9,316,769 9,812,888 9,312,936
ADVANCED NEUROMODULATION SYSTEMS, INC. and SUBSIDIARIES
Condensed Consolidated Balance Sheets (Unaudited)
June 30, December 31,
2001 2000
Assets
Current assets:
Cash and short-term investments $ 10,527,262 $ 11,607,038
Accounts receivable, net 5,881,517 5,898,781
Inventories 9,030,268 7,087,639
Deferred income taxes 1,375,441 1,282,072
Refundable income taxes -- 359,953
Prepaid expenses and other
current assets 753,339 1,064,850
Total current assets 27,567,827 27,300,333
Net equipment and fixtures 6,720,752 6,621,352
Patents, trademarks, purchased
technology & other assets, net 17,834,772 15,642,881
Total assets $ 52,123,351 $ 49,564,566
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 1,669,941 $ 1,375,122
Customer deposits 1,486,928 543,885
Accrued salary and employee
benefit costs 1,027,863 1,293,065
Warranty reserve 594,557 422,182
Accrued tax abatement liability 969,204 969,204
Income taxes payable -- 67,240
Other accrued expenses 416,771 410,811
Total current liabilities 6,165,264 5,081,509
Deferred income taxes 2,287,586 2,354,170
Long-term notes payable 163,815 211,681
Non-current customer deposits -- 1,475,393
Stockholders' equity 43,506,686 40,441,813
Total liabilities and
stockholders' equity $ 52,123,351 $ 49,564,566
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