Advanced Neuromodulation Systems Third Quarter Net Income Per Diluted Share Increases to $0.15 From $0.05.Business Editors & Health/Medical Writers DALLAS--(BUSINESS WIRE)--Oct. 24, 2002 As Neuro Revenue Increases 65% to $11.6 Million and Total Revenue Increases 45% to $14.3 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: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 third quarter of 2002 increased 45% to $14,327,000 from $9,900,000 a year earlier. Net income quadrupled to $1,942,000, or $0.15 per diluted share, compared to $475,000, or $0.05 per diluted share, for the third quarter of 2001. 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 65% to $11,604,000 for this year's third quarter compared to neuro sales of $7,047,000 a year earlier. As planned, 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. HDI is 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 that ANS acquired in January 2001 to expand its neuromodulation technology development and manufacturing capabilities. For the first nine months of 2002, revenue increased 43% to $39,224,000 from $27,446,000 for the same period last year. Net income quintupled to $4,228,000, or $0.36 per diluted share, from $837,000, or $0.08 per diluted share, for the first nine months of 2001. Third Quarter Operations Review Gross margin rose to 66% for this year's third quarter from 59% 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 17.7% for this year's third quarter from 7.9% a year earlier, while pre-tax income as a percentage of revenue (pre-tax margin) increased to 20.2% from 8.7% last year. Net income as a percentage of revenue (net margin) increased to 13.6% from 4.8%. The Company's tax rate was 33% for this year's third quarter compared to 45% a year earlier. This is because goodwill amortized for financial reporting purposes in last year's third quarter was not deductible That which may be taken away or subtracted. In taxation, an item that may be subtracted from gross income or adjusted gross income in determining taxable income (e.g., interest expenses, charitable contributions, certain taxes). for tax purposes, and also reflects tax-free investment income in this year's third quarter. At September 30, 2002, 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 $98,540,000 compared to $11,937,000 at December 31, 2001. ANS has no funded debt Funded Debt Long-term debt that matures after more than one year. Notes: This is usually issued as a bond or a long-term note. See also: Bond, Debt, Maturity, Note Funded debt Debt maturing after more than one year. . "We are delighted that 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 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") is winning the confidence and trust of a steadily growing base of implanters and their patients. Our customers have a choice, and we thank them for choosing ANS. We also thank our selling organization and employees for their outstanding efforts and accomplishments in support of ANS and the physicians and patients we serve," said President and Chief Executive Officer Chris Chavez. "Our product development program also made excellent progress during the third quarter as we focused on further broadening and strengthening our product platforms." 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. Approves ANS' New Genesis XP Chavez continued, "We are pleased to announce that the FDA recently approved ANS' 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 supplement to market an enhanced version of our IPG. The Genesis XP(TM) will offer substantially more battery capacity than our current Genesis IPG, resulting in enhanced longevity and/or additional power to treat more complex pain. We expect to launch Genesis XP later this quarter. "The launch of our Genesis IPG in January 2002 dramatically increased ANS' 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. The 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 market, which includes both RF and IPG systems, currently is estimated to amount to approximately $300 million and to be growing at 20% annually. The broader neuromodulation market itself is also growing rapidly: industry analysts expect sales of neuromodulation products to increase from approximately $700 million in 2002 to $1.1 billion by 2005. We believe that our new Genesis XP will help us further penetrate this market." Revenue and Earnings Guidance Increased For 2002, the Company currently expects revenue in the range of $53,700,000 to $54,500,000 and net income of approximately $0.52 to $0.53 per diluted share. For 2001, ANS reported revenue of $37,916,000 and net income of $0.15 per diluted share. Chavez added that ANS currently expects revenue for 2003 in the range of $69,000,000 to $72,000,000 and net income in the range of $0.75 to $0.79 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 third quarter of 2001 would have been $614,000, or $0.06 per diluted share, and net income for the first nine months of 2001 would have been $1,255,000, or $0.13 per diluted share. Conference Call ANS has scheduled a conference call for today, Thursday, October 24, 2002 at 11:00 AM ET. A simultaneous WebCast of the conference call may be accessed online at http://www.companyboardroom.com/company.asp?client=cb&ticker=ansi or at www.ANSmedical.com/investors/index.html. A replay will be available after 1:00 PM ET 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 #20956097, 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. 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.
ADVANCED NEUROMODULATION SYSTEMS, INC. and SUBSIDIARIES
Condensed Consolidated Statements of Operations (Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2002 2001 2002 2001
Net revenue $14,327,505 $9,899,973 $39,223,522 $27,445,504
Cost of revenue 4,853,409 4,069,017 14,430,996 11,576,461
Gross profit 9,474,096 5,830,956 24,792,526 15,869,043
Operating expenses:
Research and
development 1,518,610 1,268,681 4,186,833 3,649,493
Marketing 3,802,840 2,409,820 10,091,204 6,546,649
Amortization of
goodwill --- 139,151 --- 417,452
Amortization of
other intangibles 229,464 243,612 686,094 659,714
General and
administrative 1,390,308 986,371 3,971,617 2,948,714
6,941,222 5,047,635 18,935,748 14,222,022
Income from
operations 2,532,874 783,321 5,856,778 1,647,021
Other income
(expenses):
Acquisition
related costs --- --- --- (483,766)
Interest expense (2,514) (5,739) (10,759) (22,411)
Interest and
other income 374,991 85,797 595,685 388,078
372,477 80,058 584,926 (118,099)
Income before
income taxes 2,905,351 863,379 6,441,704 1,528,922
Income taxes 963,048 388,135 2,213,984 691,425
Net income $1,942,303 $475,244 $4,227,720 $837,497
Basic income per
share:
Net income $0.16 $0.05 $0.40 $0.09
Number of basic
shares 12,093,394 8,932,417 10,455,043 8,915,479
Diluted income per
share:
Net income $0.15 $0.05 $0.36 $0.08
Number of diluted
shares 13,176,099 9,996,558 11,586,023 9,874,111
ADVANCED NEUROMODULATION SYSTEMS, INC. and SUBSIDIARIES
Condensed Consolidated Balance Sheets (Unaudited)
Sept. 30, Dec. 31,
2002 2001
Assets
Current assets:
Cash, certificates of deposit and
short-term investments $98,539,910 $11,937,047
Receivable, trade net 9,095,487 6,493,772
Receivable, other 236,574 235,594
Inventories 12,358,307 9,748,845
Deferred income taxes 1,201,063 1,726,517
Current tax receivable 503,111 678,341
Prepaid expenses and other current assets 872,248 685,169
Total current assets 122,806,700 31,505,285
Net property, plant and equipment 7,048,648 7,208,303
Patents, trademarks, purchased technology
& other assets, net 16,686,894 17,151,497
Total assets $146,542,242 $55,865,085
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $1,633,882 $1,835,037
Accrued salary and employee benefit costs 1,983,650 1,826,423
Accrued tax abatement liability 969,204 969,204
Customer deposits/deferred revenue 987,991 1,042,690
Income taxes payable --- ---
Commissions payable 557,703 285,704
Warranty reserve 364,647 383,477
Current maturities of long-term note
payable --- 52,325
Other accrued expenses 441,230 204,151
Total current liabilities 6,938,307 6,599,011
Deferred income taxes 2,216,921 2,316,796
Long-term notes payable --- 137,397
Total stockholders' equity 137,387,014 46,811,881
Total liabilities and stockholders'
equity $146,542,242 $55,865,085
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