EXHIBIT 99.1
[ATS MEDICAL LOGO]
Contact: Michael Dale, President/CEO
763-553-7736
Investors: EVC Group, Inc.
Jennifer Beugelmans, 646-277-8704
Doug Sherk, 415-896-6820
Steve DiMattia, 646-277-8706 (Media)
FOR IMMEDIATE RELEASE
ATS Medical Reports Strong Second Quarter Revenue Growth
Total Revenue Increases 17% Year-Over-Year to New Quarterly Record
Revenue from Diversification Strategy Increases Nearly Threefold
Gross Margins Exceed 50% for First Time in Company History
Company Reiterates Guidance for 2006
MINNEAPOLIS, August 2, 2006 -- ATS Medical, Inc. (NASDAQ: ATSI) manufacturer and
marketer of state-of-the-art cardiac surgery products and services, today
reported the highest quarterly revenue in its history. Revenue for the second
quarter ended June 30, 2006 was $10.9 million, surpassing the previous record of
$9.9 million set in the fourth quarter of 2005. Revenue for the second quarter
increased 17% from the comparable period a year ago, and 12% from the first
quarter of 2006.
Revenue generated from products and services other than the Company's mechanical
heart valve increased nearly threefold from the second quarter of 2005 to $1.8
million and worldwide mechanical heart valve sales increased 4.3%. Revenue from
ATS Medical's newest products represented 16.4% of total revenue, up from 14.3%
in the first quarter of 2006.
Gross margins for the second quarter increased to 50.2% from 41.2% for the
comparable second quarter of 2005. The operating loss for the period ended June
30, 2006 was $2.4 versus $3.1 million for the second quarter ended June 30,
2005. The net loss for the quarter was $2.8 million, or $0.09 per share compared
with the net loss for the second quarter of 2005 of $3.1 million, or $0.10 per
share.
"The continued development of our product portfolio that focuses on the unique
needs of the cardiac surgery market led to a new record quarter," said Michael
Dale, Chairman, President & CEO. "Our team is executing well and, as a result,
we nearly tripled the sales of new products added to our portfolio during the
past 18 months to nearly $1.8 million. Sales of our CryoCath products for
surgical cryoablation of cardiac arrhythmias more than doubled compared with the
second quarter of 2005. Our second quarter performance underscores the cardiac
surgery community's continued embrace of our products and services, and
illustrates ATS Medical's emergence as a leading innovator and provider of
proprietary technology to the cardiovascular surgeon.
"Since we updated our shareholders on the proposed acquisition of 3F
Therapeutics, we've made further progress toward completing this transaction,"
continued Mr. Dale. "As expected, we have filed amendments to our latest Form
10-K and Form 10-Q with the Securities and Exchange Commission (SEC) reflecting
restated financials for 2005 and the first quarter of 2006, and we have filed an
amendment to our Form S-4 related to the 3F Therapeutics acquisition responding
to the SEC's last round of comments. Our goal remains to hold our shareholder
meeting and close this transaction during the third quarter."
Outlook
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"Despite the tough competitive environment, we remain on track to achieve our
2006 financial goals and are reiterating our guidance," continued Mr. Dale. "We
continue to believe that for the full year we will increase sales by a minimum
of 20% and surpass $40 million in annual revenue. While the third quarter is
impacted by seasonality in both the U.S. and European markets, we do expect
gross margins for the second half of the year to continue to increase beyond the
second quarter's record level. We will continue to focus on 3F Therapeutics
product development programs as well as ATS development programs including the
PARSUS(TM) blood filtration technology and next-generation heart valve related
research. While we will generate a net loss for the year, we do believe we will
substantially improve the enterprise value of ATS Medical through the 3F
transaction as well as the continued execution of our strategy." Mr. Dale
concluded.
Conference Call Today
- ---------------------
ATS management will host a conference call and web cast today, August 2, 2006 at
5:00 p.m. ET to discuss its second quarter financial results, outlook for the
remainder of 2006 and current corporate developments. The dial-in number for the
conference call is 800-366-3908 for domestic participants and 303-205-0044 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 for
seven days. The replay can be accessed by dialing 800-405-2236 for domestic
callers and 303-590-3000 for international callers, using the passcode
11066362#. 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 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, 2005, as amended.
###
ATS MEDICAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
Three months ended Six months ended
June 30, June 30,
----------- -- ----------- ------------ -- -----------
2006 2005 2006 2005
----------- ----------- ------------ -----------
Net sales $10,857 $9,307 $20,587 $16,370
Cost of goods sold 5,410 5,474 10,408 9,775
----------- ----------- ------------ -----------
Gross profit 5,447 3,833 10,179 6,595
Operating expenses:
Sales and marketing 5,112 4,711 9,946 9,442
Research and development 437 407 842 709
General and administrative 2,279 1,826 4,221 3,515
----------- ----------- ------------ -----------
Total operating expenses 7,828 6,944 15,009 13,666
----------- ----------- ------------ -----------
Operating loss (2,381) (3,111) (4,830) (7,071)
----------- ----------- ------------ -----------
Interest expense, net (478) (22) (789) (21)
Change in value of derivative
liability bifurcated from
convertible senior notes 95 - 1,280 -
----------- ----------- ------------ -----------
Net loss ($ 2,764) ($3,133) ($4,339) ($7,092)
=========== =========== ============ ===========
Net loss per share:
Basic and diluted ($0.09) ($0.10) ($0.14) ($0.23)
Weighted average number of shares outstanding:
Basic and diluted 31,225 30,993 31,206 30,952
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ATS MEDICAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
June 30, December 31,
2006 2005
---------------- -----------------
ASSETS
Cash and short-term investments $15,527 $ 21,709
Accounts receivable 12,694 10,453
Inventories 19,049 21,286
Prepaid expenses 2,657 1,204
---------------- -----------------
Total current assets 49,927 54,652
Property and equipment, net 7,628 8,330
Intangible assets 22,074 22,015
Other assets 449 446
---------------- -----------------
Total assets $80,078 $ 85,443
================ =================
LIABILITIES & SHAREHOLDERS' EQUITY
Accounts payable $2,595 $ 3,598
Accrued compensation 2,026 2,394
Other accrued liabilities 1,292 1,410
Current maturities of long-term debt 1,058 833
---------------- -----------------
Total current liabilities 6,971 8,235
Convertible senior notes payable 17,572 18,776
Notes payable 1,761 903
Shareholders' equity 53,774 57,529
---------------- -----------------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $80,078 $ 85,443
================ =================
ATS MEDICAL, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOW
(IN THOUSANDS)
Six months ended June 30,
--------------------------------------
2006 2005
---------------- -----------------
OPERATING ACTIVITIES
Net loss ($4,339) ($7,092)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation 875 750
Loss on disposal of equipment 5 17
Stock compensation expense 460 61
Non-cash interest expense 234 15
Change in value of convertible senior notes
derivative liability (1,280) -
Changes in operating assets and liabilities (3,053) (891)
---------------- -----------------
Net cash used in operating activities (7,098) (7,140)
INVESTING ACTIVITIES
Maturities of short-term investments, net of purchases 415 4,857
Payments for technology licenses (210) (1,555)
Net purchases of furniture, machinery and equipment (178) (1,078)
---------------- -----------------
Net cash provided by investing activities 2,224
27
FINANCING ACTIVITIES
Advances on notes payable 1,500 -
Repayments on notes payable (417) (347)
Net proceeds from sales of common stock 101 280
---------------- -----------------
Net cash provided by (used in) financing activities 1,184 (67)
Other items 120 (153)
---------------- -----------------
Decrease in cash and cash equivalents ($5,767) ($5,136)
================ =================
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