Advanced Neuromodulation Systems Reports Record Third Quarter Sales and Net Income; Neuro Sales Increase 37%.DALLAS -- 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 NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on :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 financial results for the third quarter and first nine months of 2004, highlighted by continued rapid growth in sales of neuromodulation products for the treatment of chronic pain. Third Quarter Results For the three months ended September 30, 2004, revenue increased 34% to a record $31,330,000 from $23,419,000 for the third quarter of 2003. Sales of neuro products increased 37% to a record $28,223,000 from $20,612,000 for the same period last year. Gross margin was approximately 73% for both periods. Net income for this year's third quarter increased 20% to a record $4,742,000, or $0.23 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 for the third quarter of 2003 of $3,953,000, or $0.19 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. Nine Month Results For the nine months ended September 30, 2004, revenue increased 35% to a record $88,451,000 from $65,414,000 for the first nine months of 2003. Neuro sales increased 42% to a record $80,084,000 from $56,587,000 last year. Gross margin increased to 73% from 69%. Net income increased 37% to a record $13,034,000, or $0.62 per diluted share, from $9,496,000, or $0.46 per diluted share, for the first nine months of 2003. Operations Review Noting that sales of ANS' 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 and its Renew(R) radio frequency (RF) SCS system continued to meet management's expectations in the third quarter, Chief Executive Officer Chris Chavez said, "The primary mission of the ANS team is to create, manufacture and market neuromodulation products that provide real help to people who suffer from chronic pain and other neurological disorders This is a list of major and frequently observed neurological disorders (e.g. Alzheimer's disease), symptoms (e.g.back pain), signs (e.g. aphasia) and syndromes (e.g. Aicardi syndrome). . Our strong financial performance is one sign that we are on the right track. Another important indicator of our progress is the steady growth in the number of interventional pain practitioners and their patients who put their trust in ANS' products." Chavez continued, "Our strategy to develop our direct sales team and invest in our corporate infrastructure, technology platforms and product pipeline is delivering the growth we anticipated in what is now close to a billion dollar industry. We see exciting opportunities for continued growth as we pursue the expanding list of clinical applications for implantable neurostimulation devices to address a variety of intractable intractable /in·trac·ta·ble/ (in-trak´tah-b'l) resistant to cure, relief, or control. in·trac·ta·ble adj. 1. Difficult to manage or govern; stubborn. 2. conditions for which few effective treatments currently are available." Chavez said that ANS continues to expect to receive 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. approval of its first generation rechargeable re·charge tr.v. re·charged, re·charg·ing, re·charg·es To charge again, especially to reenergize a storage battery. re IPG IPG Implantable pulse generator, see there and to file for approval of a second rechargeable IPG in the fourth quarter. "Pain practitioners want the flexibility to apply the right product to the right indication -- one size does not fit all. ANS will offer a full array of SCS devices, including RF, nonrechargeable IPGs and rechargeable IPGs to meet this demand," he said. He added that ANS plans to expand the launch of its very thin and steerable Axxess lead in the fourth quarter, following the recent launch of its line of C-Series Lamitrode(R) leads, the market's first set of leads to mimic the curve of the spinal cord. ANS has also received FDA approval and a CE mark for a significant upgrade to its MTS (1) See Microsoft Transaction Server. (2) (Modular TV System) The stereo channel added to the NTSC standard, which includes the SAP audio channel for special use. 1. MTS - Message Transport System. 2. (R) trial system that it will launch in the fourth quarter. Management Updates Guidance for 2004 and Provides Initial Guidance for 2005 ANS' management currently expects revenue for the fourth quarter 2004 in the range of $32 to $33 million, and net income of $0.25 per diluted share, after litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. expenses. ANS also provided initial guidance for 2005. Management currently expects revenue for 2005 of approximately $145 million, and net income of approximately $1.15 per diluted share. Conference Call ANS has scheduled a conference call today at 11:00 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 . 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 #21209796, after 1:00 p.m. EDT. 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. Fortune magazine recently ranked ANS as the 8th fastest growing small company in its annual list of the Top 200 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. . 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 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: the launch of new competitive products by Medtronic, Advanced Bionics/Boston Scientific or others, as well as other market factors, could impede im·pede tr.v. im·ped·ed, im·ped·ing, im·pedes To retard or obstruct the progress of. See Synonyms at hinder1. [Latin imped growth in or reduce sales of our IPG and RF systems, which could adversely affect our revenues and profitability; continued market acceptance of the Genesis(R) IPG and GenesisXP(TM) IPG; competition from Medtronic, Advanced Bionics/Boston Scientific and future competitors; continued market acceptance of our Renew(R) system; the risk of adverse changes in the value or marketability of Cyberonics securities that the Company owns; Cyberonics growth potential and future prospects; 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; the cost, uncertainty and other risks inherent in our intellectual property litigation against Advanced Bionics; obtaining necessary government approvals for our rechargeable IPGs and other new products or applications and maintaining compliance with FDA 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; the cost, uncertainty and other risks inherent in patent and intellectual property litigation; 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 Nine Months Ended
September 30, September 30,
------------------------ ------------------------
2004 2003 2004 2003
----------- ----------- ----------- -----------
Net revenue $31,330,408 $23,418,505 $88,451,122 $65,413,557
Cost of revenue 8,414,174 6,384,445 23,751,017 20,317,415
----------- ----------- ----------- -----------
Gross profit 22,916,234 17,034,060 64,700,105 45,096,142
----------- ----------- ----------- -----------
Operating expenses:
Sales and
marketing 9,791,838 6,970,941 27,810,611 18,460,993
Research and
development 2,911,698 2,552,951 8,096,308 6,597,850
General and
administrative 2,974,620 1,871,833 7,998,316 5,504,084
Amortization of
intangibles 626,191 472,821 1,824,838 1,278,093
----------- ----------- ----------- -----------
16,304,347 11,868,546 45,730,073 31,841,020
----------- ----------- ----------- -----------
Income from
operations 6,611,887 5,165,514 18,970,032 13,255,122
----------- ----------- ----------- -----------
Other income
(expense):
Foreign currency
transaction gain 81,009 -- 26,156 --
Other income -- 969,204 -- 969,204
Investment income 482,850 200,243 964,021 776,370
----------- ----------- ----------- -----------
563,859 1,169,447 990,177 1,745,574
----------- ----------- ----------- -----------
Income before
income taxes 7,175,746 6,334,961 19,960,209 15,000,696
Income taxes 2,433,791 2,382,109 6,926,251 5,504,915
----------- ----------- ----------- -----------
Net income $4,741,955 $3,952,852 $13,033,958 $9,495,781
=========== =========== =========== ===========
Basic income per
share:
Net income $0.23 $0.20 $0.65 $0.50
=========== =========== =========== ===========
Number of basic
shares 20,189,242 19,382,991 20,075,223 19,040,105
=========== =========== =========== ===========
Diluted income per
share:
Net income $0.23 $0.19 $0.62 $0.46
=========== =========== =========== ===========
Number of diluted
shares 21,032,695 20,860,041 21,116,735 20,441,351
=========== =========== =========== ===========
ADVANCED NEUROMODULATION SYSTEMS, INC. and SUBSIDIARIES
Condensed Consolidated Balance Sheets (Unaudited)
September 30, December 31,
2004 2003
------------- -------------
Assets
------
Current assets:
Cash and marketable securities $121,793,391 $ 94,802,122
Receivable, trade net 24,954,560 17,892,416
Receivable, interest and other 517,704 259,687
Inventories 23,299,266 22,113,159
Deferred income taxes 971,088 1,423,228
Income taxes receivable -- 1,324,001
Prepaid expenses and other current assets 2,378,893 1,007,244
------------- -------------
Total current assets 173,914,902 138,821,857
Net property, equipment and fixtures 32,456,397 21,150,010
Minority equity investments in preferred
stock 1,104,000 1,104,000
Goodwill, patents, trademarks,
purchased technology & other assets, net 35,586,029 33,730,420
------------- -------------
Total assets $243,061,328 $194,806,287
------------- -------------
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Accounts payable $ 4,446,320 $ 5,717,222
Accrued salary and employee benefit costs 2,507,214 4,045,361
Accrued commissions 2,134,442 1,424,471
Short-term obligation 5,020,708 --
Deferred revenue 205,826 503,093
Warranty reserve 95,480 294,290
Other accrued expenses 558,033 400,159
------------- -------------
Total current liabilities 14,968,023 12,384,596
Deferred income taxes 12,576,608 3,389,255
Non-current deferred revenue 802,703 907,513
Total stockholders' equity 214,713,994 178,124,923
------------- -------------
Total liabilities and stockholders' equity $243,061,328 $194,806,287
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