Advanced Neuromodulation Systems Second Quarter Net Income Doubles on 79% Increase in Neuro Product Sales.

Business Editors

DALLAS--(BUSINESS WIRE)--July 28, 2003

First Half Net Income Increases 143%;

Management Increases Guidance for 2003

Advanced Neuromodulation Systems, Inc. (ANS) (Nasdaq:ANSI) announced today that revenue for the three months ended June 30, 2003, increased 66% to a record $22,324,000. This compares to revenue of $13,423,000 for the second quarter of 2002. Sales of ANS's neuromodulation products for the treatment of chronic pain increased 79% to a record $19,348,000 from $10,829,000 a year earlier. Net income for the second quarter of 2003 doubled to a record $2,923,000, or $0.14 per diluted share, from $1,448,000, or $0.09 per diluted share, for the second quarter of 2002.

For the six months ended June 30, 2003, revenue increased 69% to a record $41,995,000 from $24,896,000 for the same period of 2002. Net income increased 143% to a record $5,543,000, or $0.27 per diluted share, compared to $2,285,000, or $0.14 per diluted share, for last year's first half.

All per share amounts have been adjusted to reflect the 3-for-2 stock split that was effective on July 11, 2003.

Second Quarter Operations Review

Gross margin rose to 68.4% for this year's second quarter compared to 62.3% a year earlier. Pre-tax margin increased to 20.5% from 16.6%, despite an increase in sales and marketing expenses related to the acquisition of Sun Medical and continued investments in programs designed to improve ANS's market position. "We expect these investments in our sales and marketing capabilities to drive improved results in the future," said President and Chief Executive Officer Chris Chavez. Net margin improved to 13.1% for the 2003 second quarter from 10.8% last year.

At June 30, 2003, cash and equivalents and marketable securities totaled approximately $94 million. ANS has no debt.

Chavez said that sales of ANS's Genesis(R) and Genesis XP(TM) Totally Implantable Pulse Generator (IPG) Spinal Cord Stimulators and Renew(R) radio frequency (RF) neurostimulation system continued to gain acceptance from interventional pain physicians in the second quarter. "The integration of the pain management business of our largest distributor, Sun Medical, Inc., which we acquired in March 2003, was substantially completed during the second quarter. This acquisition will continue to positively impact ANS's ability to grow our business profitability. I am very proud of the entire ANS team for their tireless efforts in delivering another great quarter. We also want to thank our growing list of customers for the trust they place in ANS by prescribing our products for their patients."

Opportunity for Sustained Growth

"In addition to strong top line and bottom line performance, we continue to make important progress on product development pipeline initiatives. Product development is a crucial element of our strategy to strengthen our product offering to address current and emerging neuromodulation applications," Chavez said. "Neuromodulation has quickly developed into a significant market that will soon represent a $1 billion opportunity and is expected to continue to grow rapidly. ANS has grown to become an important participant in this exciting industry. By continuing to build and refine our high-performance organization and expand our product development pipeline, we are working to take full advantage of our opportunity to deliver sustained long-term growth."

Management Increases Guidance for 2003

ANS currently expects revenue for 2003 in the range of $84,000,000 to $87,000,000 and net income in the range of $0.59 to $0.61 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 after 1:00 PM ET at this same Internet address. For a telephone replay, dial 800-633-8284, reservation #21154215, 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 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. 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's 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" statement under the Private Securities Litigation Reform Act of 1995:

Statements contained in this document that are not based on historical facts are "forward-looking statements." 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 or less expensive alternatives; adverse changes in coverage or reimbursement amounts by Medicare, Medicaid, private insurers, managed care organizations or workers' comp programs; intellectual property protection and potential infringement issues; obtaining necessary government approvals for new products or applications and maintaining compliance with FDA 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, 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 after the date of this release.

       ADVANCED NEUROMODULATION SYSTEMS, INC. and SUBSIDIARIES
     Condensed Consolidated Statements of Operations (Unaudited)

                                              Three Months Ended
                                                   June 30,
                                              2003           2002

Net revenue                               $ 22,324,461   $ 13,423,371
Cost of revenue                              7,051,279      5,063,427
  Gross profit                              15,273,182      8,359,944

Operating expenses:
  Research and development                   2,352,468      1,375,520
  Sales and marketing                        6,330,144      3,392,474
  Amortization of intangibles                  450,338        228,834
  General and administrative                 1,866,333      1,278,437
                                            10,999,283      6,275,265

   Income from operations                    4,273,899      2,084,679

Other income (expenses):
  Interest expense                                 ---         (3,939)
  Interest and other income                    294,472        147,188
                                               294,472        143,249

   Income before income taxes                4,568,371      2,227,928

Income taxes                                 1,645,256        779,487
  Net income                               $ 2,923,115    $ 1,448,441

Basic income per share:
  Net income                                    $ 0.15         $ 0.10

Number of basic shares                      19,118,414     15,245,627

Diluted income per share:
  Net income                                    $ 0.14         $ 0.09

Number of diluted shares                    20,471,865     16,933,533


                                               Six Months Ended
                                                   June 30,
                                              2003           2002

Net revenue                               $ 41,995,052   $ 24,896,017
Cost of revenue                             13,932,970      9,577,587
  Gross profit                              28,062,082     15,318,430

Operating expenses:
  Research and development                   4,044,899      2,668,223
  Sales and marketing                       11,490,052      6,288,364
  Amortization of intangibles                  805,272        456,630
  General and administrative                 3,632,251      2,581,309
                                            19,972,474     11,994,526

   Income from operations                    8,089,608      3,323,904

Other income (expenses):
  Interest expense                                 ---         (8,245)
  Interest and other income                    576,127        220,694
                                               576,127        212,449

   Income before income taxes                8,665,735      3,536,353

Income taxes                                 3,122,806      1,250,936
  Net income                               $ 5,542,929    $ 2,285,417

Basic income per share:
  Net income                                    $ 0.29         $ 0.16

Number of basic shares                      18,868,663     14,453,802

Diluted income per share:
  Net income                                    $ 0.27         $ 0.14

Number of diluted shares                    20,232,006     16,186,478



       ADVANCED NEUROMODULATION SYSTEMS, INC. and SUBSIDIARIES
          Condensed Consolidated Balance Sheets (Unaudited)

                                            June 30,     December 31,
                                              2003           2002
Assets

Current assets:
Cash, certificates of deposit and short-
 term investments                        $  94,358,236  $  96,769,918
Receivable, trade net                       15,575,968     10,847,237
Receivable, other                              297,589        189,017
Inventories                                 17,821,126     13,722,946
Deferred income taxes                        2,820,810      1,122,617
Prepaid expenses and other current assets      837,052      1,032,883
Total current assets                       131,710,781    123,684,618

Net property, plant and equipment           12,605,813     10,607,991
Patents, trademarks, purchased technology
 & other assets, net                        30,025,255     24,051,518
Total assets                             $ 174,341,849  $ 158,344,127

Liabilities and Stockholders' Equity

Current liabilities:
Accounts payable                         $   3,032,220  $   2,392,579
Accrued salary and employee benefit costs    2,014,879      3,077,603
Deferred revenue                             1,762,617        646,577
Commissions payable                          1,132,802        794,521
Accrued tax abatement liability                969,204        969,204
Income taxes payable                               ---        822,228
Warranty reserve                               365,159        402,259
Other accrued expenses                         623,593        299,905
Total current liabilities                    9,900,474      9,404,876

Deferred income taxes                        4,214,657      3,731,939
Non-current deferred revenue                    15,623        162,504

Total stockholders' equity                 160,211,095    145,044,808
Total liabilities and stockholders'
 equity                                  $ 174,341,849  $ 158,344,127