Jul 18, 2002
Guidant Reports All-Time Record Sales and Earnings
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 $807.0 million. Guidant achieved sales growth of 23 percent versus the prior year, and 21 percent on a constant currency basis. Sales growth was 14 percent versus first quarter 2002. Net income and earnings per share, each as adjusted, of $163.2 million and $0.53, grew 42 and 41 percent, respectively, versus the prior year and were also all-time records. Reported net income and earnings per share totaled $204.8 million and $0.67, respectively, and include a one-time net litigation benefit offset by a Guidant Foundation contribution and a previously announced restructuring charge. "The successful U.S. launch of the CONTAK CD®/EASYTRAK® system for heart failure patients, continued physician enthusiasm for implantable defibrillator therapy stemming from the results of the landmark MADIT II clinical trial, and ongoing worldwide performance of the Guidant stent franchise formed the basis of a very successful quarter," stated Ronald W. Dollens, Guidant president and CEO."We experienced year-over-year double-digit growth across all product groups. All major geographies, including the United States, Europe and Japan operations, each delivered double-digit growth. Once again, balanced sales growth was generated by a broad base of products resulting from our internal development efforts," Dollens continued. "The operational execution required to produce these results across all geographies and products is particularly noteworthy. This demonstrated implementation capability will prepare the enterprise to take full advantage of future growth opportunities," he concluded. Operational highlights of the quarter included (as adjusted): Quarter Highlights Worldwide sales of implantable defibrillator systems increased 37 percent in the period to $251.2 million. Led by the U.S. approval of the CONTAK CD/EASYTRAK system for heart failure patients, U.S. implantable defibrillator sales increased 40 percent over the prior year to $205.2 million. International sales of implantable defibrillator systems grew 23 percent to $46.0 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. Both physician training and sales results exceeded our expectations. At the same time, implantable defibrillator systems, led by the VENTAK® PRIZM(tm) family, continue to benefit from the wide acceptance of the results from the MADIT II trial," said Dollens. As previously presented at the American College of Cardiology meeting and published in The New England Journal of Medicine, the MADIT II trial demonstrated that patients who had a prior heart attack and compromised heart function and who received an implantable defibrillator experienced a 31 percent reduction in mortality compared to the use of drug therapy alone. Worldwide pacemaker sales were a record $159.6 million, an increase of six percent over the prior year. U.S. pacemaker sales grew two percent to $102.4 million, benefiting late in the quarter from the June launch of the INSIGNIA(tm) PLUS pacemaker. "Compared to the first quarter of this year, pacemaker sales were up 11 percent in the United States demonstrating early acceptance of the INSIGNIA pacemaker and successful launch implementation concurrent with the CONTAK CD system''s introduction. The INSIGNIA state-of-the-art pacemaker platform will allow us to continue to enhance our position in this important market," commented Dollens. Worldwide coronary stent sales reached $228.0 million for the quarter - an increase of 22 percent over the second quarter 2001. Coronary stent sales in the United States grew 18 percent over the prior year to $153.9 million, while international coronary stent sales of $74.1 million grew 29 percent. Outside the United States, coronary stent sales grew 13 and 81 percent in Europe and Japan, respectively, building on market leading positions. "Our European growth was remarkable in light of the April launch of a competitor's drug eluting stent. In fact, our unit growth in Europe was 12 percent over the second quarter of 2001 and 4 percent versus the first quarter of 2002, reflecting the success of the European launch of the MULTI-LINK ZETA(tm) coronary stent system. In the United States, as a result of continuing strong acceptance of the MULTI-LINK PENTA(tm) and the MULTI-LINK PIXEL(tm) coronary stent systems, Guidant continued to solidify its market-leading position resulting in market share of approximately 45-50 percent," Dollens observed. Worldwide stent pricing remained stable compared to the first quarter of 2002. During the quarter, several events took place regarding Guidant''s drug eluting stent development programs. "Data were presented in Paris at the Euro Paris Course on Revascularization in May from the 1,043-patient U.S. clinical trial, named DELIVER, using the ACHIEVE(tm) paclitaxel eluting stent via our collaboration with Cook Incorporated. Thirty-day MACE (Major Adverse Cardiac Events) data presented at the meeting demonstrated a favorable safety profile. One-year clinical follow-up data were also presented from the ELUTES trial utilizing Cook's paclitaxel eluting stents. These studies, along with others, continue to demonstrate the effectiveness of paclitaxel eluting stents to treat coronary artery disease," commented Dollens. In the U.S. clinical trial, which completed enrollment in late February, clinical investigators continue to follow patients in order to collect clinical data necessary for regulatory submissions. "We are also working to resolve issues raised as part of the ongoing litigation between Cook and Boston Scientific. We are vigorously pursuing solutions to ensure our participation in this very exciting therapy that builds on Guidant's leadership in coronary stent technology," Dollens concluded. Sales of endovascular products, including the ANCURE® ENDOGRAFT® System, were $38.0 million, up substantially over the prior year and 18 percent over the first quarter of 2002. "Significant sales growth and the restructuring of the endovascular business announced during the quarter led to enhanced profitability," commented Dollens. Led by endoscopic vessel harvesting system growth, cardiac surgery product sales grew 23 percent over the prior year to $22.7 million in the quarter. Gross profit of $599.0 million was an all-time record representing 74.2 percent of sales compared to the 76.3 gross profit percentage reported in the second quarter of 2001. The gross profit percentage change from the prior year was primarily due to reduced manufacturing throughput. Days of inventory on hand for sale were reduced 15 percent versus the first quarter of 2002. Worldwide pricing was up 2 percent compared to the first quarter of 2002. Operating expenses for the second quarter of 2002 were $354.7 million, and grew at a rate considerably 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 $23.8 million and declined from $35.0 million in the prior year due primarily to lower amortization expense and reduced interest expense associated with strong cash flow. The company's effective tax rate for the quarter was 26 percent, compared to 28 percent in the second quarter of 2001, each as adjusted. The tax rate decline reflected benefits from increased overseas manufacturing, strategic investments in research and development, and the elimination of primarily non-tax deductible goodwill amortization. Reported net income of $204.8 million includes a one-time net litigation benefit of $137.1 million offset by a $40.0 million Guidant Foundation contribution and a previously announced restructuring charge of $31.0 million. Financial statements, including reported totals and adjustments, are described in the attachments. "Sales and earnings guidance for the third quarter reflects sales growth in the range of 19 percent to 25 percent with earnings per share growth of 25 percent to 33 percent year over year, adjusted," commented Dollens. "With the first half of the year complete and solid momentum entering the third quarter, we are expanding our full year 2002 guidance range for earnings per share to $2.00-2.06, adjusted," Dollens concluded. As previously announced, Guidant will conduct a live webcast today, Thursday, July 18, at 5:00 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 W. Dollens and will feature a review of current financial results. Also participating on the call will be Guidants Group Chairman, A. Jay Graf, and Vice President, Finance and CFO Keith E. Brauer. 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. 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 and competition, including the timing of new product introductions and market growth rates; economic conditions, including exchange rates; litigation developments and the factors listed on exhibit 99 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.Quarterly Sales reach $807 million (+23 percent) with adjusted Net Income of $163 million (+42 percent) and Earnings Per Share of $0.53 (+41 percent)
Double-digit sales and earnings growth projected for second halfThree Months Ended June 30, 2002
Second Half 2002 Financial Guidance
Earnings Webcast Information