8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 8-K

CURRENT REPORT
PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Date of report (Date of earliest event reported):
April 22, 2004 (April 22, 2004)

Advanced Neuromodulation Systems, Inc.

(Exact name of registrant as specified in charter)

Texas	0-10521	75-1646002
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)

6501 Windcrest Drive, Suite 100
Plano, Texas 75024

(Address of principal executive offices) (Zip code)

Registrant’s telephone number, including area code:
(972) 309-8000

TABLE OF CONTENTS

	Item 5. “Other Events”
	Item 9. “Regulation FD Disclosure.” and Item 12. “Results of Operations and Financial Condition.”
SIGNATURES
INDEX TO EXHIBITS
Press Release

Item 5. “Other Events”

In a press release issued on April 22, 2004, we announced that we had completed the acquisition announced on March 8, 2004 of the assets of the Cable and Wire Division from microHelix, Inc. for approximately $2 million in cash and assumed liabilities. Prior to the acquisition, which was consummated on April 21, 2004, microHelix supplied coated fine wire, antennas, and certain other products to ANS and our wholly-owned subsidiary, Hi-Tronics Designs, Inc.

We also announced in the same press release that ANS has filed a lawsuit in U.S. District Court for the Eastern District of Texas, Sherman Division, against Advanced Bionics Corporation for patent infringement and misappropriation of ANS trade secrets.

The press release issued on April 22, 2004 is attached hereto as Exhibit 99.1.

This press release shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act

Item 9. “Regulation FD Disclosure.” and Item 12. “Results of Operations and Financial Condition.”

We are furnishing under this Form 8-K a press release issued on April 22, 2004, disclosing information regarding our results of operations and financial condition for the first quarter of 2004, and our financial outlook for 2004, a copy of which is attached hereto as Exhibit 99.1.

This press release shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act.

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Dated: April 22, 2004

ADVANCED NEUROMODULATION SYSTEMS, INC.
By:	/s/ F. Robert Merrill III
	Name:	F. Robert Merrill III
	Title:	Executive Vice President, Finance, Chief Financial Officer and Treasurer

INDEX TO EXHIBITS

Exhibit
Number	Description
99.1	Press Release dated April 22, 2004 (This press release shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act.)

EX-99.1

Exhibit 99.1

FOR IMMEDIATE RELEASE

Agency Contact:	Company Contact:
Neil Berkman Associates	Chris Chavez, President & CEO
(310) 277-5162	(972) 309-8000
info@BerkmanAssociates.com	www.ANS-medical.com

Advanced Neuromodulation Systems
Reports Record First Quarter Results

Net Income Increases 51% on 46% Increase in Neuro Sales

     DALLAS, TEXAS, April 22, 2004 — Advanced Neuromodulation Systems, Inc. (ANS) (NASDAQ:ANSI) today announced record revenue and net income for the first quarter, as sales of ANS’ neuromodulation products for the treatment of chronic pain extended a strong upward trend.

First Quarter Results

     For the three months ended March 31, 2004, revenue increased 35% to a record $26,633,000 from $19,671,000 for the first quarter of 2003. Sales of neuro products increased 46% to a record $24,228,000 from $16,627,000 a year earlier. Gross margin improved to 74% from 65% last year, and operating margin increased to 22% from 19%, despite higher sales and marketing expense incurred to support anticipated future growth. Net income for this year’s first quarter increased 51% to $3,969,000, or $0.19 per diluted share. This compares to net income of $2,620,000, or $0.13 per diluted share, for the first quarter of 2003.

     At March 31, 2004, cash and equivalents and marketable securities totaled approximately $93 million. ANS has no debt.

Operations Review

     “The rapid increase in neuro sales is a testament to the hard work and dedication of the entire ANS team, and the strong relationships we have forged with a growing list of interventional pain physicians who trust ANS’ products and people to help them care for chronic pain patients in need of advanced solutions,” said Chief Executive Officer Chris Chavez. He said that ANS’ Genesis® and GenesisXP^TM implantable spinal cord stimulation (SCS) systems and its Renew® radio frequency (RF) SCS system continued to perform well in the first quarter.

     “The pain and other neuromodulation markets we serve will soon reach $1 billion, offering us exciting opportunities for sustained growth,” Chavez said. “We are positioning ANS to take full advantage of these opportunities by adding resources and making other investments in infrastructure. We also made good progress in the first quarter in our new product development and regulatory approval programs, and we recently announced that we will file with the FDA for approval of our first generation rechargeable IPG in the current quarter.

     “During the past two quarters we accelerated our investments in people and in our operating platform. We have added a total of 74 people to our team during this period, including 41 sales reps, regional sales managers and clinical specialists in sales and marketing. While this significant increase in our human resources affected profitability in the first quarter, we expect to leverage the investment over the next few quarters as our new team members ramp up productivity this year. In addition, we recently concluded the acquisition of the sales and marketing assets of another distributor, Medtel Pty Limited in Australia. These sales and marketing, product development and platform investments position us to achieve our aggressive growth plans for the remainder of the year and into the future.”

Advanced Neuromodulation Systems Reports Record First Quarter Results
April 22, 2004
Page Two

Announces Closing of microHelix Transaction

ANS also announced that it has completed the acquisition previously announced on March 8, 2004 of the assets of the Cable and Wire Division from microHelix, Inc. for approximately $2 million in cash and assumed liabilities. The acquisition closed on April 21, 2004. microHelix previously supplied coated fine wire, antennas, and certain other products to ANS and its wholly-owned subsidiary, Hi-Tronics Designs, Inc. “This acquisition assures a continued supply of important wire and cable components. More importantly, it provides ANS with additional engineering resources and intellectual property for the design, development and manufacturing of new products, notably leads, extensions, trial cables and related products,” Chavez said.

Files Lawsuit

     ANS also announced that it has filed a lawsuit in U.S. District Court for the Eastern District of Texas, Sherman Division, against Advanced Bionics Corporation for patent infringement and misappropriation of ANS trade secrets. Ken Hawari, General Counsel of ANS, said that ANS’ special litigation counsel has advised the company not to comment on the specifics of the lawsuit, but stated that the complaint is on file and is of public record. “ANS will actively defend the intellectual property portfolio that we have spent considerable time, effort and financial resources to build,” Hawari said.

Management Reiterates Guidance for 2004

     As previously announced, ANS’ management currently expects revenue for 2004 in the range of $116 to $121 million, and net income in the range of $0.87 to $0.91 per diluted share.

Conference Call

     ANS has scheduled a conference call today at 11:00 a.m. EDT. The simultaneous webcast is available at
www.ANS-medical.com/investors/index.html. A replay will be available at this same Internet address, or at (800) 633-8284, reservation #21193368, after 1:00 p.m. 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. Forbes magazine recently recognized ANS as one of America’s 200 Best Small Companies and Fortune magazine recently recognized ANS as one of Fortune’s Top 100 Fastest-Growing Small Companies in the United States. Frost & Sullivan, an international strategic market research firm, also recently presented ANS with its Product Innovation Award, recognizing ANS as the technology innovation leader in the neurostimulation market and ANS’ Genesis® Implantable Pulse Generator system as the most advanced fully implantable spinal cord stimulator on the market. Additional information is available at www.ans-medical.com.

“Safe harbor” statement under the Private Securities Litigation Reform Act of 1995:

     Statements contained in this document that are not based on historical facts are “forward-looking statements.” 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: continued market acceptance of the Genesis® IPG and GenesisXPTM IPG; competition from Medtronic, Inc. and future competitors; continued market acceptance of our Renew® system following the launches of the Genesis IPG and GenesisXP IPG; patient or physician selection of less invasive or less expensive alternatives; adverse changes in coverage or reimbursement amounts by Medicare, Medicaid, private insurers, managed care organizations or workers’ comp programs; intellectual property protection and potential infringement issues; obtaining necessary government approvals for our rechargeable IPGs and other new products or applications and maintaining compliance with FDA product and manufacturing requirements; product liability; reliance on single suppliers for certain components; completion of research and development projects in an efficient and timely manner; the satisfactory completion of clinical trials and/or market tests prior to the introduction of new products; successful integration of acquired businesses, products and technologies; the cost, uncertainty and other risks inherent in patent and intellectual property litigation; international trade risks; and other risks detailed from time to time in the Company’s SEC 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. Such forward-looking statements speak only as of the date on which they are made and the company does not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date of this release.

Advanced Neuromodulation Systems, Inc. and Subsidiaries
Consolidated Statements of Operations
(Unaudited)

	Three Months Ended
	March 31,
	2004			2003
Net revenue	$	26,632,863		$	19,670,591
Cost of revenue		6,965,532			6,881,691
Gross profit		19,667,331			12,788,900
Operating expenses:
Research and development		2,314,950			1,692,431
Sales and marketing		8,564,046			5,159,908
Amortization of other intangibles		574,874			354,934
General and administrative		2,316,740			1,765,918
		13,770,610			8,973,191
Income from operations		5,896,721			3,815,709
Other income (expense):
Foreign currency transaction loss		(29,347	)		—
Interest and other income		251,329			281,655
		221,982			281,655
Income before income taxes		6,118,703			4,097,364
Income taxes		2,150,112			1,477,550
Net income	$	3,968,591		$	2,619,814
Basic income per share:
Net income	$	.20		$	.14
Number of basic shares		19,928,946			18,618,911
Diluted income per share:
Net income	$	.19		$	.13
Number of diluted shares		21,187,163			19,992,147

ADVANCED NEUROMODULATION SYSTEMS, INC. and SUBSIDIARIES
Condensed Consolidated Balance Sheets

	March 31,		December 31,
	2004		2003
	(Unaudited)		(Audited)
Assets
Current assets:
Cash and marketable securities	$	93,001,356	$	94,802,122
Receivable, trade net		18,706,313		17,892,416
Receivable, interest and other		293,010		259,687
Inventories		22,988,816		22,113,159
Deferred income taxes		2,160,650		1,423,228
Income tax receivable		1,303,359		1,324,001
Prepaid expenses and other current assets		1,369,892		1,007,244
Total current assets		139,823,396		138,821,857
Net property, plant and equipment		25,515,440		21,150,010
Minority equity investments in preferred stock		1,104,000		1,104,000
Goodwill, patents, trademarks, purchased technology & other assets, net		34,486,984		33,730,420
Total assets	$	200,929,820	$	194,806,287
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	3,710,924	$	5,717,222
Accrued salary and employee benefit costs		1,456,927		4,045,361
Deferred revenue		346,645		503,093
Accrued commissions		1,305,312		1,424,471
Warranty reserve		252,989		294,290
Other accrued expenses		361,540		400,159
Total current liabilities		7,434,337		12,384,596
Deferred income taxes		3,761,828		3,389,255
Non-current deferred revenue		862,162		907,513
Total stockholders’ equity		188,871,493		178,124,923
Total liabilities and stockholders’ equity	$	200,929,820	$	194,806,287