MINNEAPOLIS, Feb. 8 /PRNewswire-FirstCall/ -- ATS Medical, Inc. , developer, manufacturer and marketer of state-of-the-art cardiac surgery products and services, today reported that sales for the fourth quarter of 2005 increased 37.5% to $9.9 million, compared with sales of $7.2 million for the fourth quarter of 2004. Mechanical heart valve sales represented 86% of total revenue, while other products and services represented 14% of total revenue. There was no meaningful impact on revenue from foreign currency exchange. The operating loss for the fourth quarter of 2005 was $5.1 million, compared with an operating loss of $5.5 million in the fourth quarter of 2004. The net loss in both 2005 and 2004 for the fourth quarter was $5.4 million.
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For the full year ended December 31, 2005, sales increased 24% to $34.6 million, compared with sales of $28.0 million for the year ended December 31, 2004. The net loss for the year was $16.6 million, which was comparable to the net loss of $16.6 million for 2004.
“We finished 2005 with a record quarter and a strong foundation for success for the future,” said Michael Dale, Chairman, President and CEO. “We achieved sales growth of 37.5% through an 18.3% year-over-year increase in the sales of our Open Pivot Heart Valve(R) and a 15.3% sequential increase in the sale of other products and services. The diversification of our product portfolio over the last year into surgical ablation of cardiac arrhythmias, cardiac allograft tissue services, and our entry this quarter into the heart valve repair market, expand our market opportunities while leveraging existing customer relationships and distribution infrastructure. Our proposed acquisition of 3F Therapeutics potentially expands our revenue market opportunity by more than $600 million and substantially completes our effort to establish a competitive presence in all segments of the $1.2 billion heart valve therapy market. Each of the three generations of the 3F Aortic Bioprosthesis(TM) product line is unique in its advantages while sharing a common technology platform. We believe 3F’s tissue heart valve and beating heart surgery technology will provide ATS a best of class product offering capable of capturing tissue heart valve market share in the short- and long- term.
“Finally, we continued to make operational progress during the fourth quarter and are on target with our efforts to improve gross margins in 2006,” said Mr. Dale. “Our inventories have declined more than $6 million, or 22%, from the December 31, 2004 level. During the fourth quarter of 2005, we charged $1.8 million of production variances related to our pyrolytic carbon manufacturing activities to operations due to the completion of an analysis of the Company’s pyrolytic carbon facility and the determination that certain factory ramp-up costs should be appropriately charged to cost of sales. Selling and marketing costs for the fourth quarter of 2005 increased approximately 10% year-over-year due primarily to the expansion of the product lines we offer the cardiovascular surgeon, while general and administrative expense has increased 5% primarily due to the expensing of restricted stock awards.
“Looking ahead, we believe we will increase sales in 2006 by at least 20% and surpass $40 million in annual revenue,” continued Mr. Dale. “The 3F research and development program will substantially increase our investment in this area during 2006. However, we do expect to continue to increase our gross margins as we consume our remaining high-cost pyrolytic carbon inventory during the first quarter of 2006. In addition, we remain very excited about the market potential of the PARSUS(TM) blood filtration technology and look forward to reporting on the next product development milestone in the first half of 2006,” Mr. Dale concluded.
Conference Call Today
ATS management will host a conference call and web cast today, February 8, 2006 at 4:30 p.m. ET to discuss its fourth quarter and full year financial results, outlook for the remainder of 2006 and current corporate developments. The dial in number for the conference call is 800-218-0713 for domestic participants and 303-262-2211 for international participants.
A taped replay of the conference call will also be available beginning approximately one hour after the call’s conclusion and will remain available through Midnight ET on Thursday, February 16, 2006 and can be accessed by dialing 800-405-2236 for domestic callers and 303-590-3000 for international callers, using the passcode 11052117#. A live webcast of the call can be accessed at http://www.atsmedical.com by clicking on the Investors icon. The replay of the webcast will be available on the company’s website for one year.
About ATS Medical
ATS Medical, Inc. manufactures and markets products and services focused on cardiac surgery. The Company, global in scope, has been headquartered in Minneapolis since its founding in 1991. More than 100,000 ATS Open Pivot(R) Heart Valves, which utilize a unique pivot design resulting in exceptional performance and low risk profile, have been implanted in patients worldwide. ATS Medical’s focus on serving the cardiac surgery community is further strengthened by product and service offerings including ATS Simulus(TM) annuloplasty products for heart valve repair, Surgi-Frost(R) and Frost-Byte(R) products for surgical cryoablation of cardiac arrhythmias, RTI-Cardiovascular for allograft tissue services, QAS home monitoring services for anticoagulation therapy, and the development of PARSUS blood filtration technology. The ATS Medical web site is http://www.atsmedical.com .
Safe Harbor
This Press Release contains forward-looking statements that may include statements regarding intent, belief or current expectations of the Company and its management. Actual results could differ materially from those projected in the forward looking statements as a result of a number of important factors, including the successful completion of the 3F Therapeutics acquisition, which is subject to the satisfaction of various conditions, including approval by the shareholders of ATS, as well as regulatory actions, competition, pricing pressures, supplier actions and management of growth. For a discussion of these and other risks and uncertainties that could affect the Company’s activities and results, please refer to the Company’s filings with the Securities and Exchange Commission including its Form 10-K for the year ended December 31, 2004 and Form 10-Q for the quarter ended September 30, 2005.
ATS Medical, Inc. Condensed Consolidated Statements of Operations (in thousands except per share amounts) Three months ended Year ended December 31, December 31, 2005 2004 2005 2004 Net sales $9,933 $7,226 $34,636 $28,015 Cost of goods sold 7,339 5,855 22,828 21,227 Gross profit 2,594 1,371 11,808 6,788 Operating expenses: Sales and marketing 5,183 4,693 18,948 16,520 Research and development 615 360 1,733 1,011 General and administrative 1,871 1,783 7,314 5,954 Total operating expenses 7,669 6,836 27,995 23,485 Operating loss (5,075) (5,465) (16,187) (16,697) Interest (expense) income (318) 21 (376) 54 Net loss ($5,393) ($5,444) ($16,563) ($16,643) Net loss per share: Basic and diluted ($0.17) ($0.18) ($0.53) ($0.58) Weighted average number of shares outstanding: Basic and diluted 31,092 30,820 31,009 28,856 ATS Medical, Inc. Condensed Consolidated Balance Sheets (in thousands) December 31, December 31, 2005 2004 Assets Cash and short-term investments $21,709 $15,994 Accounts receivable 10,453 7,893 Inventories 21,286 24,303 Prepaid expenses 1,204 1,053 Total current assets 54,652 49,243 Property and equipment, net 8,330 7,650 Other inventories - 3,000 Intangible assets 22,015 18,720 Other assets 446 438 Total assets $85,443 $79,051 Liabilities & Shareholders’ Equity Accounts payable $3,598 $4,049 Accrued compensation 2,394 1,797 Other accrued liabilities 1,410 1,174 Current maturities of long-term debt 833 764 Total current liabilities 8,235 7,784 Convertible notes payable 20,945 - Other long-term liabilities 903 1,826 Shareholders’ equity 55,360 69,441 Total liabilities & shareholders’ equity $85,443 $79,051 ATS Medical, Inc. Consolidated Condensed Statements of Cash Flow (in thousands) Year ended December 31, 2005 2004 Operating activities Net loss ($16,563) ($16,643) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation 1,563 1,088 Compensation expense on stock options 585 60 Loss on disposal of equipment 35 17 Lower of cost or market adjustment 700 819 Changes in operating assets and liabilities 2,898 9,537 Net cash used in operating activities (10,782) (5,122) Investing activities Maturities of short-term investments, net of purchases 2,603 (5,689) Payments for intangible assets (1,817) (232) Net purchases of furniture, machinery and equipment (2,278) (2,860) Net cash used in investing activities (1,492) (8,781) Financing activities Sale of senior convertible notes, net of financing costs 20,817 - Net proceeds from sales of common stock 534 13,177 Loan advances - 2,500 Repayments on note payable (764) - Non-cash interest expense 176 12 Net cash provided by financing activities 20,763 15,689 Other items (171) 44 Increase in cash and cash equivalents $8,318 $1,830
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CONTACT: Michael Dale, President and CEO, +1-763-557-2224, or Jack Judd,CFO, +1-763-557-2222, both of ATS Medical, Inc.; or Investors, DouglasSherk, +1-415-652-9100, or Jennifer Beugelmans, +1-415-896-6820, or Media,Steve DiMattia, +1-646-277-8706, or Sheryl Seapy, +1-949-608-0841, all forATS Medical, Inc.
Web site: http://www.atsmedical.com/
