Advanced Neuromodulation Systems Reports Third Quarter Results

DALLAS, Oct. 27 /PRNewswire-FirstCall/ -- Advanced Neuromodulation Systems, Inc. (ANS) today announced operating results for the third quarter and first nine months of 2005.

Third Quarter Results

For the three months ended September 30, 2005, revenue increased 25.6% to a record $39,337,000 from $31,330,000 for the third quarter of 2004. Sales of neuro products increased 28.3% to a record $36,199,000 for this year's third quarter compared to $28,223,000 for last year's third quarter, reflecting higher sales of ANS' Eon(TM), Genesis(TM), and GenesisXP(TM) implantable spinal cord stimulation (SCS) systems for the treatment of chronic pain. Gross margin for this year's third quarter was 74.6% compared to 73.1% for the third quarter of 2004.

Net income for the third quarter of 2005 increased 12.9% to $5,353,000, or $0.26 per diluted share, from $4,742,000, or $0.23 per diluted share, for the third quarter of 2004.

At September 30, 2005, ANS had total cash and marketable securities of approximately $158.9 million. ANS has no debt.

Nine Month Results

For the nine months ended September 30, 2005, revenue increased 24.8% to a record $110,366,000 from $88,451,000 for the first nine months of 2004. Neuro sales increased 24.6% to a record $99,771,000 compared to $80,084,000 for the same period last year. Net income for the first nine months of 2005 was a record $69,007,000, or $3.31 per diluted share. This compares to net income for the first nine months of 2004 of $13,034,000, or $0.62 per diluted share. Net income for this year's first nine months included a pre-tax gain of $85,244,000 from the sale of Cyberonics, Inc. common stock acquired in August 2004.

St. Jude Medical Tender Offer

On October 16, 2005, St. Jude Medical, Inc. and ANS announced that the Boards of Directors of both companies have unanimously approved a definitive agreement whereby St. Jude Medical will acquire ANS for $61.25 per ANS share in cash, for a total of approximately $1.3 billion. St. Jude Medical has commenced a tender offer for all of the outstanding shares of ANS common stock. The transaction is subject to customary closing conditions and regulatory approvals, as well as the valid tender of a majority of the outstanding shares of ANS common stock, on a fully-diluted basis. The transaction is expected to close by the end of the year.

About Advanced Neuromodulation Systems

ANS (http://www.ANS-medical.com ) designs, develops, manufactures and markets implantable systems used to manage chronic intractable pain and other disorders of the central nervous system.

Forward-Looking Statements

Any statements made regarding the proposed transaction between St. Jude Medical, Inc. and Advanced Neuromodulation Systems, Inc. are forward-looking statements, which are subject to risks and uncertainties, such as those described under or incorporated by reference in Item 8.01 of St. Jude Medical's Current Report on Form 8-K filed on October 17, 2005, and in Item 8.01 of ANS' Current Report on Form 8-K filed on October 17, 2005, and in the Outlook and Uncertainties section in ANS' Quarterly Report on Form 10-Q for the quarter ended June 30, 2005 (see page 25) and ANS' Annual Report on Form 10-K for the year ended December 31, 2004 (see page 26). Actual results may differ materially from anticipated results.

Additional Information

This press release constitutes neither an offer to purchase nor a solicitation of an offer to sell shares of ANS. St. Jude Medical has filed a tender offer statement with the Securities and Exchange Commission (SEC) and ANS has filed a solicitation/recommendation statement with respect to the offer. ANS shareholders are advised to read the tender offer statement regarding the acquisition of ANS referenced in this news release, and the related solicitation/recommendation statement. The tender offer statement and the solicitation/recommendation statement contain important information that should be read carefully before any decision is made with respect to the offer. These documents are available to all shareholders of ANS at no expense to them. These documents are also available at no charge on the SEC's web site at http://www.sec.gov . Shareholders may also obtain copies of these documents without charge by requesting them from ANS in writing at 6901 Preston Road, Plano, Texas 75024, or by phone at 972-309-8000.

ADVANCED NEUROMODULATION SYSTEMS, INC. and SUBSIDIARIES Condensed Consolidated Statements of Income (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, 2005 2004 2005 2004 Net revenue $39,337,376 $31,330,408 $110,366,066 $88,451,122 Cost of revenue 10,003,026 8,414,174 28,925,278 23,751,017 Gross profit 29,334,350 22,916,234 81,440,788 64,700,105 Operating expenses: Sales and marketing 12,411,385 9,791,838 34,553,480 27,810,611 Research and development 4,524,520 2,911,698 12,314,218 8,096,308 General and administrative 4,258,188 2,974,620 11,609,568 7,998,316 Amortization of other intangibles 662,773 626,191 1,960,300 1,824,838 21,856,866 16,304,347 60,437,566 45,730,073 Income from operations 7,477,484 6,611,887 21,003,222 18,970,032 Other income (expense): Gain on sale of investment in common stock of Cyberonics, Inc. --- --- 85,244,301 --- Foreign currency transaction gain (loss) (5,793) 81,009 (170,608) 26,156 Investment income 957,473 482,850 2,595,591 964,021 951,680 563,859 87,669,284 990,177 Income before income taxes 8,429,164 7,175,746 108,672,506 19,960,209 Income taxes 3,076,645 2,433,791 39,665,465 6,926,251 Net income $5,352,519 $4,741,955 $69,007,041 $13,033,958 Basic income per share: Net income $0.27 $0.23 $3.46 $0.65 Number of basic shares 19,800,456 20,189,242 19,948,489 20,075,233 Diluted income per share: Net income $0.26 $0.23 $3.31 $0.62 Number of diluted shares 20,938,453 21,032,695 20,857,866 21,116,735 ADVANCED NEUROMODULATION SYSTEMS, INC. and SUBSIDIARIES Condensed Consolidated Balance Sheets (Unaudited) September 30, December 31, 2005 2004 Assets Current assets: Cash and marketable securities $158,882,578 $124,016,064 Receivable, trade net 29,791,124 25,322,813 Receivable, investment income and other 1,722,025 638,987 Inventories 25,362,383 23,923,851 Deferred income taxes 2,072,228 2,029,091 Prepaid expenses and other current assets 1,967,525 1,888,957 Total current assets 219,797,863 177,819,763 Net property, equipment and fixtures 35,149,222 33,175,329 Minority equity investments in preferred stock 1,104,000 1,104,000 Goodwill, patents, tradenames, purchased technology & other assets, net 34,709,388 35,388,049 Total assets $290,760,473 $247,487,141 Liabilities and Stockholders' Equity Current liabilities: Accounts payable $3,237,598 $3,206,516 Accrued salary and employee benefit costs 3,732,694 2,390,721 Accrued commissions 3,060,412 2,656,112 Income taxes payable 8,299,711 708,412 Deferred revenue 107,028 165,861 Other accrued expenses 1,043,682 342,075 Total current liabilities 19,481,125 9,469,697 Deferred income taxes 6,055,263 14,734,487 Non-current deferred revenue 616,849 718,820 Total stockholders' equity 264,607,236 222,564,137 Total liabilities and stockholders' equity $290,760,473 $247,487,141

Advanced Neuromodulation Systems, Inc.

CONTACT: investors, Neil Berkman Associates, +1-310-277-5162, orinfo@BerkmanAssociates.com , for Advanced Neuromodulation Systems, Inc.; orChris Chavez, President & CEO of Advanced Neuromodulation Systems, Inc.,+1-972-309-8000

Web site: http://www.ans-medical.com/