Jul 17, 2001
Guidant Reports Second Quarter Sales of $656 Million

Earnings per share reach $0.38. Double-digit sales growth projected for the third and fourth quarters.

Indianapolis, IN - Guidant Corporation (NYSE and PCX: GDT), a global leader in technology for the treatment of cardiac and vascular disease, today reported sales of $656.3 million in the second quarter. Sales growth versus the prior year was 1 percent on a constant currency basis. Unfavorable foreign exchange rates reduced second quarter revenue by $18.3 million versus the prior year. Net income of $115.3 million and earnings per share of $0.38 were recorded. For the prior year, sales, net income, and earnings per share were $668.4 million, $124.3 million, and $0.40, respectively.

Three Months Ended June 30, 2001

"We're very pleased with the second quarter results, which were at the upper range of our estimates and better than analysts' consensus," stated Ronald W. Dollens, Guidant president and CEO. "Sales on a constant currency basis were higher than the best quarter of last year - even though this was our most challenging quarter of 2001. Our challenges this quarter included competitor product launches in both stents and implantable defibrillators, along with our own product availability constraints," said Dollens.

Quarter Highlights

Sales momentum increased throughout the quarter. Coronary stent sales in the U.S. totaled $130.2 million with market share gains increasing as the quarter ended due to diminished competitive product trialing and the launch of the MULTI-LINK PENTA(tm) Coronary Stent System. In Europe, stent unit sales increased 23 percent over the prior year fueled by the launch of the MULTI-LINK PENTA and the MULTI-LINK PIXEL(tm) Coronary Stent System designed for small diameter lesions. As previously reported, the MULTI-LINK PIXEL was approved for U.S. marketing by the Food and Drug Administration in June. Worldwide coronary stent sales were $187.6 million for the quarter. Worldwide angioplasty system revenue of $97.6 million grew 16 percent on a constant currency basis, when compared to the prior year.

Sales of implantable defibrillator systems in the period were $183.7 million worldwide and $146.4 million in the U.S. International defibrillator sales were led by European sales growth of 20 percent in constant currency. Record pacemaker sales in the U.S. were $100.0 million, an increase of 15 percent over the second quarter of 2000. Worldwide pacemaker sales were $150.7 million, an increase of 12 percent in constant currency over the prior year and grew well ahead of the estimated market growth rate.

Gross profit for Guidant in the second quarter of 2001 of $500.7 million represented 76.3 percent of sales versus 75.7 percent in the second quarter of 2000 and 74.7 percent in the first quarter of 2001. The gross profit improvement was due to productivity gains and increased production of pacemakers and defibrillator products.

Total operating expenses for the second quarter of 2001 grew by 7 percent over the second quarter of 2000. The increase was exclusively due to accelerated investment in sales force expansions and key clinical trials, as previously announced. "We achieved our objective of significantly enhancing our sales and distribution capacity in the U.S. by adding 200 cardiac rhythm management sales personnel since July of last year. As you can see from our pacemaker sales performance, we may already be realizing the benefits of this enhanced capability," remarked Dollens.

Other expenses decreased by $4.7 million over the same period in the prior year due primarily to reductions in interest and royalty expense. The company's effective tax rate for the quarter remained 28 percent. The effective tax rate for the second quarter of 2000 was 31.5 percent.

In the quarter, the company achieved net income of $115.3 million, and earnings per share of $0.38.

Sales and Earnings Guidance

Regarding financial guidance for the remainder of the year and into 2002, Dollens commented, "For the third quarter, we expect double-digit sales growth and EPS to meet current analyst estimates of $0.40. In the fourth quarter, double-digit sales growth is again expected, with EPS in the range of $0.46 to 0.48. For 2002, we expect EPS in the $1.88 to 1.93 range resulting from sales exceeding $3.0 billion." This guidance does not reflect the anticipated accounting changes for goodwill amortization.

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.

This release contains forward-looking statements about the company's future financial results, the company's prospects and products in research and development. This information is based upon management's current expectations, but actual results may differ materially from those discussed in the forward-looking statements. Other factors affecting future results include those outlined in Exhibit 99 to the company's Form 10-Q for the quarter ending March 31, 2001.