Advanced Neuromodulation Systems Second Quarter Revenue Increases 46% to $13.4 Million; Net Income Per Diluted Share Increases 225% to $0.13.Business Editors DALLAS--(BUSINESS WIRE)--July 25, 2002 Second Quarter Neuro Revenue Increases 65% to $10.8 Million 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. ) announced today that revenue for the second quarter of 2002 increased 46% to $13,423,000. Net income nearly quadrupled to $1,448,000, or $0.13 per diluted share. For the second quarter of 2001, net income was $369,000, or $0.04 per diluted share, on revenue of $9,205,000. For the first half of 2002, revenue increased 42% to $24,899,000 from $17,545,000 for the same period last year. Net income increased to $2,285,000, or $0.21 per diluted share, from $362,000, or $0.04 per diluted share, for the first half of 2001. Second Quarter Operations Review Sales of ANS' neuromodulation systems 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. increased to $10,830,000 for the 2002 second quarter, 65% ahead of neuro sales for the second quarter of 2001. As anticipated, second quarter revenue for the Company's 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 subsidiary was essentially unchanged compared to the prior year at approximately $2,600,000. 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 acquired in January 2001 as part of ANS' vertical integration strategy to gain stronger control of IPG IPG Implantable pulse generator, see there development and manufacturing. Gross margin rose to 62% for this year's second quarter from 57% a year ago. Income from operations as a percentage of revenue (operating margin Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: ) increased to 15.5% for this year's second quarter from 5.8% a year earlier, while pre-tax income as a percentage of revenue (pre-tax margin) increased to 16.6% from 7.4% last year. Net income as a percentage of revenue (net margin) increased to 10.8% from 4.0%. Because goodwill expense reported for last year's second quarter was not deductible for tax purposes, the tax rate declined to 35% for this year's second quarter from 45.6% a year earlier. At June 30, 2002, cash and equivalents totaled $96,114,000 compared to $11,937,000 at December 31, 2001. In June, ANS announced the completion of its public offering of 2,875,000 shares of common stock for net proceeds Net Proceeds The amount received after all costs are deducted from the sale of a piece of property or security. Notes: In the case of an investor selling a security, net proceeds represent the proceeds from the sale minus any trading costs (i.e. commissions). of approximately $83.2 million. ANS intends to use the proceeds from the offering for general corporate purposes, including expanding its worldwide sales and marketing resources, funding product development, pursuing regulatory approvals and pursuing strategic acquisitions of products, technologies and businesses. "ANS' new Genesis New Genesis is a fictional planet in the DC Comics Universe Use This template is for use as a shortcut when editing DC Comics-related articles. It provides links to both the DC Comics and DC Universe articles. (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) 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") continues to be well-received by our growing base of implanters and their patients," said President and Chief Executive Officer Chris Chavez. ANS' Genesis system received 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 ) from 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. in November 2001. ANS completed the training of its sales organization in December 2001 and formally launched the Genesis IPG in the U.S. in January 2002. "We also were pleased by modest revenue growth related to our Renew(R) RF neuromodulation system during the second quarter," Mr. Chavez said. "The launch of our Genesis IPG dramatically increased our addressable Reachable. When something is addressable, it can be identified and manipulated independently of its surroundings. For example, screen pixels and RAM memory are addressable. Each of the screen's picture elements can be individually turned on and off, and each of the memory's bytes can be market. ANS estimates the 2002 SCS market, which includes both RF and IPG systems, is approximately $294 million and growing at 20%. The broader neuromodulation market itself is also growing rapidly: industry analysts expect sales of neuromodulation products to increase from approximately $704 million in 2002 to $1.1 billion by 2005. ANS' market potential should continue to expand as additional neuromodulation products currently in our development pipeline gain regulatory approval. So we are confident that ANS has the opportunity to continue to grow substantially in the years ahead. With the investments we have made to establish ANS as a leader in neuromodulation technology and to refine our operating platform, we also believe that there is room for further margin improvement as sales increase," Chavez said. Revenue and Earnings Guidance Increased Reflecting these positive trends, Chavez said that the Company is increasing its guidance for revenue and earnings for 2002. He said that ANS currently expects revenue for 2002 in the range of $52,000,000 to $54,000,000 and net income in the range of $0.48 to $0.52 per diluted share. For 2001, ANS reported revenue of $37,916,000 and net income of $0.15 per diluted share. Impact of FASB FASB See: Financial Accounting Standards Board FASB See Financial Accounting Standards Board (FASB). 142 Effective January 1, 2002, the Company adopted Statement of Financial Accounting Standards No. 142, Accounting for Goodwill and Other Intangible Assets Intangible Asset An asset that is not physical in nature. Notes: Examples are things like copyrights, patents, intellectual property, and goodwill. These are the opposite of tangible assets. . The new FASB standard eliminates the amortization of goodwill and requires an annual review for impairment. Had the standard been implemented at the beginning of 2001, net income for the second quarter of 2001 would have been $508,000, or $0.05 per diluted share, and net income for the first half of 2001 would have been $641,000, or $0.07 per diluted share. Conference Call ANS has scheduled a conference call for today, Thursday, July 25, 2002 at 11:00 AM EDT EDT abbr. Eastern Daylight Time EDT Eastern Daylight Time EDT n abbr (US) (= Eastern Daylight Time) → hora de verano de Nueva York EDT . A simultaneous WebCast of the conference call may be accessed online at www.CompanyBoardroom.com or at www.ANSmedical.com. A replay will be available after 1:00 PM EDT at these same Internet addresses 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 #20724515, after 1:00 PM 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.ANSmedical.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(TM) IPG; continued market acceptance of our Renew(R) system following the launch of the Genesis IPG; 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 Reimbursement Payment made to someone for out-of-pocket expenses has incurred. 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; attracting interest from potential partners to develop other applications for our neuromodulation technology platforms; competition; 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. -0-
ADVANCED NEUROMODULATION SYSTEMS, INC. and SUBSIDIARIES
Condensed Consolidated Statements of Income (Unaudited)
Three Months Ended Six Months Ended
June 30 June 30
2002 2001 2002 2001
Net revenue $ 13,423,371 $ 9,204,721 $ 24,896,017 $ 17,545,531
Cost of revenue 5,063,427 3,934,655 9,577,587 7,507,444
Gross profit 8,359,944 5,270,066 15,318,430 10,038,087
Operating expenses:
Research and
development 1,375,520 1,233,282 2,668,223 2,380,812
Marketing 3,392,474 2,079,851 6,288,364 4,136,829
Amortization of
goodwill -- 139,151 -- 278,302
Amortization of
other
intangibles 228,834 242,932 456,630 416,101
General and
administrative 1,278,437 1,043,914 2,581,309 1,962,343
6,275,265 4,739,130 11,994,526 9,174,387
Income from operations 2,084,679 530,936 3,323,904 863,700
Other income
(expenses):
Acquisition-related
costs -- -- -- (483,766)
Interest expense (3,939) (6,212) (8,245) (16,672)
Interest and other
income 147,188 153,979 220,694 302,281
143,249 147,767 212,449 (198,157)
Income before income
taxes 2,227,928 678,703 3,536,353 665,543
Income taxes 779,487 310,189 1,250,936 303,290
Net income $ 1,448,441 $ 368,514 $ 2,285,417 $ 362,253
Basic income per share:
Net income $ 0.14 $ 0.04 $ 0.24 $ 0.04
Number of basic
shares 10,163,751 8,919,235 9,635,868 8,907,010
Diluted income per
share:
Net income $ 0.13 $ 0.04 $ 0.21 $ 0.04
Number of diluted
shares 11,289,022 9,836,830 10,790,985 9,812,888
ADVANCED NEUROMODULATION SYSTEMS, INC.
Condensed Consolidated Balance Sheets
June 30, December 31,
Assets 2002 2001
Current assets:
Cash, certificates of deposit and
short-term investments $ 96,114,862 $ 11,937,047
Receivable - trade net 8,400,359 6,493,772
Receivable - other 58,362 235,594
Inventories 11,419,668 9,748,845
Deferred income taxes 1,047,549 1,726,517
Refundable income taxes 866,818 678,341
Prepaid expenses and other current
assets 375,266 685,169
Total current assets 118,282,884 31,505,285
Net property, plant and equipment 6,769,613 7,208,303
Patents, trademarks, purchased
technology and other assets, net 16,793,072 17,151,497
Total assets $ 141,845,569 $ 55,865,085
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 1,305,040 $ 1,835,037
Accrued salary and employee
benefit costs 1,281,816 1,826,423
Accrued tax abatement liability 969,204 969,204
Customer deposits 657,584 1,042,690
Income taxes payable 621,849 --
Commissions payable 474,364 285,704
Warranty reserve 304,201 383,477
Current maturities of long-term
note payable -- 52,325
Other accrued expenses 388,820 204,151
Total current liabilities 6,002,878 6,599,011
Deferred income taxes 2,250,213 2,316,796
Long-term notes payable -- 137,397
Total stockholders' equity 133,592,478 46,811,881
Total liabilities and stockholders'
equity $ 141,845,569 $ 55,865,085
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