Apr 23, 2001
Guidant Reports All Time Record Sales And Pre-Charge Earnings

Sales Reach $671 million and Generate Adjusted Earnings per share of $0.41

Indianapolis, IN - Guidant Corporation (NYSE and PCX: GDT), a global leader in technology for the treatment of cardiac and vascular disease, today reported all time record sales of $671.0 million in the first quarter compared to $630.7 million in the prior year. Sales growth was 9 percent on a constant currency basis. Adjusted for the previously announced charge associated with the ANCURE® ENDOGRAFT® System recall and first-generation VENTAK® PRIZM(tm) defibrillator field action*, record net income of $126.9 million and earnings per share of $0.41 were recorded versus $118.8 million in net income and $0.38 per share in the first quarter 2000. Reported net income and earnings per share for the quarter were $111.2 million and $0.36 per share, respectively.

Three Months Ended March 31, 2001

"Very positive worldwide volume increases of 12.6 percent were offset by unfavorable exchange rates of 2.3 percent and lower selling prices of 3.9 percent versus the prior year," stated Ronald W. Dollens, Guidant president and CEO. "Our most recent experience sequentially from the fourth quarter 2000 shows minimal impact from exchange rates. The effect of price was actually slightly positive between the two periods, leading to 3 percent sequential sales growth from the prior quarter. Each of our geographies reported growth year over year, led by the European operations with a 17 percent increase on a constant currency basis. Diversification of Guidant's product lines and revenue base continues with implantable defibrillators, pacemakers, angioplasty systems and coronary stents each accounting for 15 percent or more of the company's revenue. Additionally, our emerging therapies addressing heart failure, beating heart surgery, endovascular aneurysm repair, peripheral vascular disease, intravascular radiation and endoscopic vein harvesting accounted for 9 percent of Guidant revenue this quarter," Dollens concluded.

Coronary stent sales were $212.8 million worldwide and $157.0 million in the U.S. These results include U.S. sales of stent delivery systems to Cordis under a previously announced agreement. Excluding these sales to Cordis, coronary stent prices in the U.S. declined less than 1 percent from the fourth quarter 2000 level. Sales of implantable defibrillator systems in the period were $171.4 million worldwide and $138.3 million in the U.S. International defibrillator sales were led by European sales growth of 20 percent in constant currency. Worldwide pacemaker sales of $138.9 million, led by strong acceptance of the PULSAR(tm) MAX and DISCOVERY(tm) family of advanced pacemaker systems, rose 10 percent in constant currency and grew faster than the estimated market growth rate. Pacemaker sales in the U.S. were $87.2 million, an increase of 7 percent over the first quarter of 2000. Angioplasty systems grew 15 percent worldwide and 20 percent on a constant currency basis, when compared to the prior year. This performance was fueled by continued worldwide market acceptance of the RX CROSSSAIL(tm) and OTW OPENSAIL(tm) Coronary Dilatation Catheters - further expanding the company's leadership to the top market share position in the U.S.

Gross profit for Guidant in the first quarter of $501.5 million represented 74.7 percent of sales versus 76.6 percent in the fourth quarter of 2000. Two thirds of the first quarter 2001 gross margin erosion was due to the lower margin associated with sales under the Cordis distribution agreement.

Total operating expenses for the first quarter grew by 8 percent over the first quarter of 2000. The increase was due to accelerated investment in sales force expansions and key clinical trials, as previously announced. "We are progressing well in achieving our objective of adding over 200 cardiac rhythm management sales personnel in the U.S. by the middle of the year, having added 176 representatives over the previous nine months. This will significantly enhance our competitive posture with our core cardiac rhythm management product distribution as well as position us favorably to take advantage of future heart failure market development opportunities," remarked Dollens.

Other expenses decreased by $7.8 million over the prior year due primarily to reductions in interest and royalty expense. The company's effective tax rate for the quarter, excluding the special charge, was 28 percent, reflecting benefits from strategic investments in research and development and an increase in overseas manufacturing. The effective tax rate for the first quarter of 2000 was 33.5 percent.

In the quarter, excluding the special charge, the company achieved record net income of $126.9 million, and earnings per share of $0.41. Reported net income and earnings per share for the quarter were $111.2 million and $0.36, respectively, compared to $118.8 million or $0.38 per share in the first quarter of 2000.

Second Quarter 2001 Sales and Earnings Guidance

Given the uncertainties surrounding the previously announced ANCURE System and first-generation PRIZM defibrillator field actions, the company is revising its revenue and earnings estimates for the coming quarter. Guidant estimates second quarter sales will total between $630 million and $665 million, and earnings per share will approximate $0.35 to $0.39.

Earnings Webcast Information

Guidant will conduct a live webcast today, Monday, April 23, at 5 p.m. (EST). The webcast of Guidant's conference call will be accessible to all investors through Guidant's website or at StreetFusion.com. The webcast will be archived on both websites for future on-demand replay.

System requirements for the webcast include Internet Explorer 5.0 (or higher) or Netscape Navigator 4.0 (or higher). Users also should have the most recent version of Windows Media Player, which can be downloaded for free. Users may experience varying levels of performance based on their connection speed, system capabilities and presence of a corporate firewall. To ensure a connection, users should go to the program five to 15 minutes before its start.

A global leader in the medical technology industry, Guidant provides innovative, minimally invasive and cost-effective products and services for the treatment of cardiovascular and vascular disease.

* As announced on March 16, 2001, Guidant implemented a worldwide voluntary recall of the ANCURE endovascular graft system in order to address various deficiencies associated with documentation and reporting to the FDA. As a result, Guidant recorded an $11.0 million pre-tax charge in the first quarter related to expenses associated with the recall. Also, on , the company announced a field action concerning the first-generation PRIZM implantable cardioverter defibrillator due to a component of the device's memory. Guidant recorded a $14.0 million pre-tax charge for the cost of the field action. 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 99.1 to the company's Form 10-K dated December 31, 2000.