Oct 17, 2002
Guidant Reports All-Time Record Sales and Third Quarter Earnings

Quarterly Sales grew 25 percent to $827 million with Net Income of $175 million (+43 percent) and Earnings Per Share of $0.57 (+42 percent) Double-digit sales and earnings growth projected for fourth quarter

Indianapolis, IN - Guidant Corporation (NYSE and PCX: GDT), a world leader in the treatment of cardiac and vascular disease, today reported record quarterly sales of $827.4 million. Guidant achieved sales growth of 25 percent versus the prior year, and 23 percent on a constant currency basis. Reported net income and earnings per share of $175.1 million and $0.57 grew 43 and 42 percent, respectively, versus the prior year. No special items or charges were recorded in the quarter.

Three Months Ended September 30, 2002

"For the second quarter in a row, year-over-year sales growth exceeded 20 percent and adjusted earnings per share growth exceeded 40 percent," stated Ronald W. Dollens, president and CEO, Guidant. "We experienced year-over-year double-digit growth across all product groups. All major geographies, including the United States, Europe and Japan operations, delivered double-digit growth. Of particular note was an increase of over $100 million in quarterly sales of cardiac rhythm management products," Dollens continued. "The breadth of Guidant''s product portfolio was evident in the success we experienced across the enterprise," he concluded.

Operational highlights of the quarter included:

• All-time record sales of $827.4 million, 25 percent over the same quarter of the prior year
• Net income of $175.1 million and earnings per share of $0.57, up 43 percent and 42 percent, respectively, over the prior year''s quarter
• CONTAK CD®/EASYTRAK® and RENEWAL(tm) systems for heart failure led a 51 percent increase in implantable defibrillator system sales in the United States and a 47 percent increase worldwide
• U.S. sales of pacemaker products increased 16 percent on the strength of the launch of the INSIGNIA® family of products. Worldwide pacemaker sales grew 13 percent versus the prior year
• Sales of vascular intervention products increased over $50 million compared to the prior year with more than half contributed by products other than stents sold in the United States. Worldwide coronary stent sales of $232.6 million increased 21 percent over Q3 2001
• Net income as a percent of sales exceeded 21 percent

Quarter Highlights

Worldwide sales of implantable defibrillator systems were a record $259.7 million. Led by sales of the CONTAK CD/EASYTRAK system for heart failure patients and the robust adoption of the results from the landmark MADIT II trial, U.S. implantable defibrillator sales reached $211.2 million. International sales of implantable defibrillator systems grew 31 percent to $48.5 million. "In the United States, the CONTAK CD/EASYTRAK system has been received enthusiastically by both patients and physicians since market release in mid-May. Additionally, Guidant announced last week that the CONTAK CD® 2 system received Food and Drug Administration (FDA) approval. Regarding implantable defibrillator systems, the VENTAK® PRIZM® family of systems continue to benefit from the wide acceptance of the results from the MADIT II trial," said Dollens. "Recently, the American Heart Association (AHA), American College of Cardiology (ACC), and North American Society of Pacing and Electrophysiology (NASPE) issued guidelines supporting the expanded use of implantable defibrillators based on the results of the MADIT II trial," Dollens stated.

Worldwide pacemaker sales amounted to a record $171.2 million. U.S. pacemaker sales were $112.3 million, on the continued strength of the INSIGNIA® PLUS pacemaker. "The INSIGNIA family accounted for over half of our pacemaker mix in the quarter, representing the most rapid adoption ever for a Guidant pacemaker. The smaller size, physiologic shape, atrial management features, enhanced diagnostics, and new active fixation lead systems all contributed to the success of INSIGNIA," commented Dollens.

Worldwide sales of vascular intervention products grew 17 percent with over half of the growth contributed by products other than stents sold in the United States. Coronary stent sales in the United States grew 16 percent over the prior year to $156.8 million, while international coronary stent sales of $75.8 million grew 31 percent. Outside the United States, coronary stent sales grew 15 and 80 percent in Europe and Japan, respectively, building on market-leading positions. "Our European growth was remarkable in light of competitive launches of both a drug eluting stent and a new bare metal stent. In fact, our unit growth in Europe was up 15 percent over the third quarter of 2001 and 2 percent versus the second quarter of 2002, reflecting the success of the European launch of the MULTI-LINK ZETA(tm) coronary stent system. In the United States, the MULTI-LINK ZETA was approved for market release in September and is currently undergoing a successful launch. The MULTI-LINK ZETA joins the MULTI-LINK PENTA® and the MULTI-LINK PIXEL® coronary stent systems, to solidify Guidant''s market-leading position of nearly 50 percent in the U.S.," Dollens observed. Worldwide stent pricing remained stable compared to the second quarter of 2002. Worldwide angioplasty and atherectomy product sales were similar to the prior quarter and amounted to $97.7 million.

There have been several recent events concerning Guidant''s drug eluting stent development programs. As previously announced, in the existing action between Cook Incorporated and Boston Scientific Corporation, the court enjoined performance under the original agreements between Cook Incorporated and Guidant relating to the development and distribution of paclitaxel eluting stents. The injunction also prevents the use of the information, data or technology generated or gathered in connection with the agreements. "We are working to resolve issues raised as part of the ongoing litigation. Guidant is actively pursuing solutions to allow us to move forward with Cook and ensure our participation in this very exciting therapy that builds on Guidant''s leadership in coronary stent technology," Dollens concluded. Guidant also announced an expansion of its license agreement with Novartis Pharma AG to provide the exclusive right to use everolimus on drug eluting stents and the right to sub-license.

Sales of endovascular products were $32.7 million, up 30 percent over the prior year. "New products launched during the quarter included the DYNALINK(tm) peripheral stenting system and AGILTRAC(tm) .035 peripheral balloon dilatation catheter system," commented Dollens. Led by endoscopic vessel harvesting system growth, cardiac surgery product sales grew 29 percent over the prior year to $23.3 million in the quarter. Guidant launched the SYNCRUS(tm) system for postoperative atrial fibrillation during the quarter.

Financial Summary

Gross profit of $621.7 million was an all-time record representing 75.1 percent of sales consistent with the 75.1 gross profit percentage reported in the third quarter of 2001. Days of inventory on hand for sale were stable and days of receivables outstanding were down 13 percent, each versus the third quarter of 2001. Worldwide pricing was up 2 percent compared to the third quarter of 2001.

Operating expenses for the third quarter of 2002 were $361.6 million, and grew at a rate less than sales growth. "Guidant again exceeded 20 percent return on sales while continuing to invest substantially in research and development, sales force expansion and market development activities," said Dollens. Net other expenses were $23.5 million and declined from $31.5 million in the prior year due primarily to lower amortization expense and reduced interest expense associated with strong cash flow and lower interest rates.

The company''s effective tax rate for the quarter was 26 percent, compared to 28 percent in the third quarter of 2001. The tax rate decline reflected benefits from increased overseas manufacturing, strategic investments in research and development, and the elimination of non-tax deductible goodwill amortization.

No adjustments or special charges were reported in the quarter yielding reported net income of $175.1 million and earnings per share of $0.57. Financial statements, including reported totals, are described in the attachments.

Nine Months Ended September 30, 2002

Year to date 2002, Guidant reported net sales of $2,344.1 million, 18 percent greater than year to date 2001. Gross profit increased 17 percent versus the prior year level to $1,758.3 million and represented 75.0 percent of sales. Operating expenses grew 16 percent as adjusted to exclude purchased research and development charges.

Excluding special items, net income and diluted earnings per share were both all-time records at $482.1 million and $1.57, respectively, each reflecting growth of 32 percent. Reported net income and diluted earnings per share totaled $519.4 million and $1.69, each reflecting growth of 49 percent. Reported totals and adjustments are described in the attached financial statements.

Fourth Quarter 2002 Financial Guidance

"Sales and earnings guidance for the fourth quarter reflects sales of $815-$845 million with earnings per share ranging from $0.54-$0.60," commented Dollens. "With three-fourths of the year complete and solid momentum entering the fourth quarter, we are expanding our full year 2002 guidance range for earnings per share to $2.11-$2.17, adjusted," Dollens concluded.

Earnings Webcast Information

As previously announced, Guidant will conduct a live webcast today, Thursday, October 17, at 1:00 p.m. EDT. The live webcast of Guidant''s conference call will be accessible through Guidant''s website at www.guidant.com/webcast or at CCBN's individual investor center at www.companyboardroom.com. The webcast will be archived on both websites for future on-demand replay. The webcast will also include presentation visuals.

The call will be hosted by Guidant''s President and CEO Ronald Dollens and will feature a review of current financial results. Also participating on the call will be John Capek, Ph.D., president, Vascular Intervention; Fred McCoy, president, Cardiac Rhythm Management; and Keith Brauer, vice president, finance and CFO.

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 at http://www.microsoft.com/windows/windowsmedia/en/download/. 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.

Guidant Corporation pioneers lifesaving technology, giving an opportunity for a better life today to millions of cardiac and vascular patients worldwide. The company, driven by a strong entrepreneurial culture of more than 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. For more information, visit www.guidant.com.

View this release and complete financials in PDF format.

This release includes forward-looking statements concerning financial guidance and business prospects. The statements are based on assumptions about many important factors, including general business conditions; market trends and competition, including sales growth rates for defibrillator and pacemaker systems and company stent sales trends in light of the potential competitive introduction of drug eluting stents; economic conditions, including exchange rates; litigation developments and the factors listed on exhibit 99.1 to Guidant''s most recent 10-Q. As such, they involve risks that could cause actual results to differ materially. The company does not undertake to update its forward-looking statements.