[ATS MEDICAL LOGO]
Contacts:
ATS Medical, Inc.
Michael Dale
President and CEO, 763-557-2224
Jack Judd
CFO, 763-557-2222
Investors: Media:
Douglas Sherk, 415-652-9100 Steve DiMattia, 646-277-8706
Jennifer Beugelmans, 415-896-6820 Sheryl Seapy, 949-608-0841
FOR IMMEDIATE RELEASE
ATS MEDICAL REPORTS 37.5% INCREASE IN FOURTH QUARTER SALES
Fourth Quarter and Full Year Results Set New Record
MINNEAPOLIS, February 8, 2006 /PR Newswire-First Call/-- ATS Medical, Inc.
(Nasdaq: ATSI), 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.
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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