Oct 18, 2001
Guidant Reports Record Third Quarter Sales of $662 Million

Double Digit Growth from Balanced Geographic Performance; Earnings Per Share Reach $0.40

Indianapolis, IN - Guidant Corporation (NYSE and PCX: GDT), a global leader in technology for the treatment of cardiac and vascular disease, today reported third quarter sales of $661.6 million. Guidant achieved sales growth of ten percent versus the prior year, and 12 percent on a constant currency basis. Net income of $122.4 million and earnings per share of $0.40 were also recorded. For the third quarter 2000, sales, net income, and earnings per share were $600.8 million, $122.8 million, and $0.40, respectively. Last year's third quarter net income and earnings per share benefited from a favorable $12.9 million litigation settlement.

Three Months Ended September 30, 2001

"Strong unit and revenue growth across all products in international markets along with the success of the MULTI-LINK PENTA(tm) Coronary Stent System in the U.S. led to record third quarter sales performance," stated Ronald W. Dollens, Guidant President and CEO. Led by new products introduced across the entire line, international sales growth of 18 percent on a constant currency basis and U.S. growth of 9 percent resulted in a worldwide revenue growth - net of foreign exchange - of 12 percent. "We also observed remarkable worldwide pricing stability during this quarter as compared to the second quarter of 2001, with increases in average selling prices for pacemakers and implantable defibrillators offsetting a modest decline in coronary stent prices," Dollens remarked.

Quarter Highlights

Coronary stent sales in the U.S. totaled $135.1 million, an increase of 21 percent over the prior year. Market share gains occurred throughout the quarter due to favorable market conditions and the launch of the company's newest interventional cardiology product, the MULTI-LINK PENTA. In Europe, coronary stent unit sales increased 25 percent over the prior year. This performance was fueled by the continuing success of the MULTI-LINK PENTA and the MULTI-LINK PIXEL(tm) Coronary Stent System, which is designed for small diameter vessels and is due for U.S. launch in the fourth quarter. Worldwide coronary stent sales were $192.7 million for the quarter-an increase of 17 percent over the third quarter 2000 and 3 percent over the second quarter 2001. "For much of the quarter, our MULTI-LINK PENTA and MULTI-LINK TETRA(tm) Coronary Stent Systems were the number one and two stents in the U.S.," Dollens observed. Worldwide angioplasty system revenue of $91.6 million increased eight percent on a constant currency basis when compared to the prior year. "Double-digit sales growth of vascular intervention products occurred in each of our geographic areas," commented Dollens.

Sales of implantable defibrillator systems in the period were $177.1 million worldwide and $140.1 million in the U.S. International defibrillator sales growth of 32 percent over the prior year included a strong showing in Europe where implantable defibrillator sales increased 22 percent. "The growing acceptance of the lifesaving benefits of implantable defibrillator therapy along with increasing use of cardiac resynchronization devices for heart failure resulted in exceptionally strong international sales growth," said Dollens. Worldwide pacemaker sales were $150.9 million, an increase of 9 percent in constant currency over the prior year and, once again, grew faster than the estimated market growth rate. Pacemaker sales in the U.S. grew 10 percent versus the same quarter in the prior year to $97.2 million. "Double-digit U.S. pacemaker sales growth throughout 2000 and 2001 on a year-to-date basis reflects the competitive strength of our pacing products and the benefits afforded to our customers by our expanded field distribution and service capabilities," Dollens commented.

Sales of endovascular solutions products, including the ANCURE® ENDOGRAFT® System, were $25.2 million, returning to levels near those of the prior year. "The return of the ANCURE System to treat abdominal aortic aneurysms in mid-August contributed over $10 million of sequential revenue growth versus the second quarter of this year," said Dollens. Cardiac surgery product sales grew 46 percent over the prior year to $18.0 million in the quarter.

Gross profit of $496.6 million was a third quarter record representing 75.1 percent of sales, and is consistent with the 75.2 percent of sales recorded in the same period last year. The quarter included charges for inventory replacement associated with the MULTI-LINK PENTA launch and obsolescence charges, which accounted for the decline in the gross profit percentage compared to the second quarter of this year.

Total operating expenses for the third quarter of 2001 increased over the third quarter of 2000, but declined from second quarter 2001 levels. The increase over the prior year was exclusively due to accelerated investment in sales force expansions and key clinical trials for drug-coated stents and heart failure.

"We were also pleased to settle a number of litigation and arbitration issues in our favor during the quarter. These items resulted in a net gain of $10 million, which was contributed to the Guidant Foundation," observed Dollens. The company's effective tax rate for the quarter was 28 percent, compared to 31 percent in the third quarter of 2000.

In the quarter, the company achieved net income of $122.4 million and earnings per share of $0.40.

Earnings Webcast Information

Guidant will conduct a live webcast today, Oct. 18, at 5 p.m. (EDT). The live webcast of Guidant's conference call will be accessible through Guidant's website or at CCBN's individual investor center at CompanyBoardroom.com. The webcast will be archived on both websites for future on-demand replay.

The call will be hosted by Guidant's President and CEO Ron Dollens and will feature a review of current financial results. Also participating on the call will be Guidant's Group Chairmen Ginger Graham and Jay Graf, and Vice President, Finance and CFO Keith Brauer.

Guidant Corporation pioneers lifesaving technology, giving an opportunity for a better life today to 7 million cardiac and vascular patients worldwide. The company, driven by a strong entrepreneurial culture of 10,000 employees, develops, manufactures and markets a broad array of products and services that enable less invasive care for some of life's most threatening medical conditions.