Advanced Neuromodulation Systems Third Quarter Revenue Increases 21% to a New Record.Business Editors DALLAS--(BUSINESS WIRE)--Oct. 25, 2001 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 ended Sept. 30, 2001 increased 21% to a record $9,900,000, reflecting a 22% increase in 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 an 18% increase in revenue from 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 ), which was acquired in January 2001. This compares with revenue of $8,176,000 for the third quarter of 2000 and $9,205,000 for the second quarter of 2001. Net earnings for this year's third quarter more than doubled to $475,000, or $0.05 per diluted share, from $198,000, or $0.02 per diluted share, for the same period last year. 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 nine months ended Sept. 30, 2001, revenue increased 15% to a record $27,446,000 from $23,962,000 for the first nine months of 2000. 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 nine months of 2001, before acquisition-related costs incurred in connection with the HDI transaction, were $1,181,000, or $0.12 per diluted share. Including acquisition-related costs of $484,000 before taxes, net earnings for the period were $837,000 or $0.08 per diluted share. This compares with net earnings for last year's first nine months of $737,000, or $0.08 per diluted share. ANS President and Chief Executive Officer Chris Chavez said, "Net income for the third quarter more than doubled in spite of sharp increases in R&D and marketing expenses. This speaks to the underlying strength of our business and the quality of our long-term growth opportunity. R&D expenses increased because we accelerated the development of several products in our pipeline and expanded our clinical activities. As for marketing, in addition to higher commission expenses associated with the higher revenue, we also continued to expand our support infrastructure and our training and education program for new implanters in anticipation of future growth. "During the past few years we have built an operating platform that can support far higher revenue. As is evident from the increase in gross margin for the third quarter to 59% from 53% a year ago, this 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. will become increasingly important to ANS' performance 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. Based on our performance to date, we now expect revenue for 2001 in the range of $37 million to $38 million, and earnings in the range of $0.17 to $0.20 per diluted share (before acquisition-related costs)." 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 eight times larger than the RF market we participate in today. Industry observers expect global sales of neuromodulation products to increase from approximately $575 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." 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. On Sept. 14, 2001, approximately 100 days from the date the FDA received the PMA application, the Company met with the FDA to discuss in detail the status of the application. "The meeting on September 14th 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. ," said Chavez. By law, the FDA has up to 180 days from May 29th to review and respond to ANS' PMA filing. "ANS and the FDA are continuing to work cooperatively regarding ANS' PMA filing," added Chavez. Conference Call ANS has scheduled a conference call 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 today. A simultaneous WebCast of the conference call may be accessed online at www.CompanyBoardroom.com or at www.ANS-medical.com. A replay will be available approximately one hour after the WebCast 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 No. 19829896 beginning at approximately 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.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 Nine Months Ended
September 30, September 30,
2001 2000 2001 2000
Net revenue $ 9,899,973 $ 8,176,084 $ 27,445,504 $ 23,961,696
Cost of revenue 4,069,017 3,869,060 11,576,461 11,041,544
Gross profit 5,830,956 4,307,024 15,869,043 12,920,152
Costs and expenses:
Research and
development 1,268,681 908,232 3,649,493 2,832,805
Marketing 2,409,820 1,738,141 6,546,649 5,063,777
Amortization of
goodwill 139,151 139,151 417,452 417,452
Amortization of
other intangibles 243,612 169,217 659,714 505,016
General and
administrative 986,371 1,121,746 2,948,714 3,174,973
5,047,635 4,076,487 14,222,022 11,994,203
Earnings from
operations 783,321 230,537 1,647,021 925,949
Other income
(expenses):
Acquisition
related costs --- --- (483,766) ---
Interest expense (5,739) (12,474) (22,411) (45,188)
Interest and other
income 85,797 136,368 388,078 439,828
80,058 123,894 (118,099) 394,640
Earnings before
income taxes 863,379 354,431 1,528,922 1,320,589
Income taxes 388,135 156,541 691,425 583,264
Net earnings $ 475,244 $ 197,890 $ 837,497 $ 737,325
Basic earnings
per share:
Net earnings $ 0.05 $ 0.02 $ 0.09 $ 0.09
Number of basic
shares 8,932,417 8,497,674 8,915,479 8,467,913
Diluted earnings
per share:
Net earnings $ 0.05 $ 0.02 $ 0.08 $ 0.08
Number of diluted
shares 9,996,558 9,438,899 9,874,111 9,354,923
ADVANCED NEUROMODULATION SYSTEMS, INC. and SUBSIDIARIES
Condensed Consolidated Balance Sheets (Unaudited)
September 30, December 31,
2001 2000
ASSETS
Current assets:
Cash and short-term investments $ 10,467,993 $ 11,607,038
Accounts receivable, net 5,951,480 5,898,781
Inventories 9,295,793 7,087,639
Deferred income taxes 1,376,794 1,282,072
Refundable income taxes -- 359,953
Prepaid expenses and other
current assets 915,793 1,064,850
Total current assets 28,007,853 27,300,333
Net equipment and fixtures 6,892,824 6,621,352
Patents, trademarks, purchased
technology & other assets, net 17,509,355 15,642,881
Total assets $ 52,410,032 $ 49,564,566
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,489,531 $ 1,375,122
Customer deposits 1,017,271 543,885
Accrued salary and employee
benefit costs 1,424,853 1,293,065
Warranty reserve 471,557 422,182
Accrued tax abatement liability 969,204 969,204
Income taxes payable -- 67,240
Other accrued expenses 438,465 410,811
Total current liabilities 5,810,881 5,081,509
Deferred income taxes 2,254,294 2,354,170
Long-term notes payable 150,888 211,681
Non-current customer deposits -- 1,475,393
Stockholders' equity 44,193,969 40,441,813
Total liabilities and
stockholders' equity $ 52,410,032 $ 49,564,566
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