Jan 29, 2002
Guidant Reports Record Sales and Earnings

Fourth Quarter sales increased 11%, Net Income and EPS, as adjusted*, grew in excess of 15% Double-digit growth leads to Earnings Per Share of $0.47, as adjusted

Indianapolis, IN - Guidant Corporation (NYSE and PCX: GDT), a global leader in technology for the treatment of cardiac and vascular disease, today reported fourth quarter 2001 sales of $718.7 million, representing an all-time record. Guidant achieved sales growth of 11 percent versus the prior year, and 12 percent on a constant currency basis. Net income of $144.6 million and diluted earnings per share of $0.47 were also all-time records, each as adjusted. For the full year 2001, sales, net income, and diluted earnings per share were $2.708 billion, $509.2 million, and $1.66, respectively, on a comparable basis.

Three Months Ended December 31, 2001

"During the quarter, coronary stent share gains, a resurgent implantable defibrillator market, and expanding use of pacemakers enabled us to experience double-digit worldwide growth versus the prior year in each of these areas," stated Ronald W. Dollens, Guidant president and CEO. Guidant's worldwide total sales growth of 11 percent reflected growth in all geographic regions led by international sales growth of 19 percent when compared to the prior year. "A remarkable feature of our growth is that it came exclusively from internally generated efforts," observed Dollens. "Furthermore, we again saw worldwide pricing stability versus the third quarter of 2001 as physicians and payers continue to recognize both the clinical and economic value of Guidant's technologies," Dollens remarked. "I am particularly pleased with our profitability in light of record-setting investment in research and development and sales and marketing activities," he concluded.

Quarter Highlights

Worldwide sales of implantable defibrillator systems increased 16 percent in the period to $186.4 million. International defibrillator sales of $37.9 million were up 29 percent over the prior year while U.S. sales of $148.5 climbed 13 percent. "Implantable defibrillator sales benefited from the continuing strong European adoption of cardiac resynchronization devices that include back-up defibrillation capability," said Dollens. Worldwide pacemaker sales were $149.2 million, an increase of 12 percent over the prior year and, once again, grew faster than the estimated market growth rate. Pacemaker sales in the U.S. grew ten percent to $93.8 million. "This performance supports the assertion that both pacing and implantable defibrillator markets remain robust and that Guidant continues to maintain or increase its market share position," Dollens commented.

"Additionally, we await word from the FDA on the approval for expanded use of implantable defibrillators in patients identified by the landmark MADIT II trial," remarked Dollens. 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 30 percent reduction in mortality, compared to the use of drug therapy alone. Guidant submitted its application for expanded labeling in December, the filing is under expedited review. "These results could lead to a doubling of the number of patients currently indicated for implantable defibrillators," continued Dollens.

Worldwide coronary stent sales were $225.7 million for the quarter-an increase of ten percent over the fourth quarter 2000 and 17 percent over the third quarter 2001. Coronary stent sales in the U.S. totaled $162.2 million, an increase of eight percent over the prior year and 20 percent versus the third quarter of 2001. Continuing strong acceptance of the MULTI-LINK PENTA(tm) and the MULTI-LINK PIXEL(tm) Coronary Stent Systems drove coronary stent sales growth. Market share gains occurred throughout the quarter due to the on-going product acceptance and the withdrawal of a competitor from the rapid exchange segment of the market. "During the quarter, U.S. market share gains in both rapid exchange and over-the-wire versions of the MULTI-LINK PENTA allowed Guidant to have the top two selling coronary stents in the market," Dollens observed. International coronary stent sales of $63.5 million grew 17 percent. Worldwide, pricing remained stable and experienced no erosion compared to the third quarter of 2001.

"We also experienced substantial progress in our drug eluting stent programs. We are now in the six-month follow up phase of the ACTION trial utilizing Actinomycin-D, having completed enrollment during November. In addition, we have enrolled over 430 patients in our U.S. DELIVER trial studying paclitaxel eluting stents via our collaboration with Cook, Incorporated," commented Dollens.

Worldwide angioplasty system revenue of $99.8 million increased two percent when compared to the prior year led by six percent growth in international markets. Worldwide sales from the GALILEO(tm) Intravascular Radiotherapy System amounted to $2.9 million during the quarter. In the U.S., the GALILEO system, launched during November, was placed in 36 accounts before the end of the quarter and customers have initiated contract negotiations in over 200 additional accounts.

Sales of endovascular products, including the ANCURE® ENDOGRAFT® System, were $32.2 million, returning to levels near those of the prior year. "Sales of peripheral vascular and endovascular graft products contributed over $7.0 million of revenue growth versus the third quarter of this year," said Dollens. Cardiac surgery product sales grew 24 percent over the prior year to $19.2 million in the quarter.

Gross profit of $546.5 million was an all-time record representing 76.0 percent of sales and an improvement over the 75.1 percent gross profit percentage reported for the third quarter of 2001. The gross profit percentage for the fourth quarter was at the upper end of Guidant's historical range.

"Guidant continued to focus on the future through investment in sales force expansion and key clinical trials for drug eluting stents and heart failure while also setting records in profitability," said Dollens. Operating expenses for the fourth quarter of 2001 were $322.3 million, as adjusted to exclude purchased research and development charges. Increases in research and development and sales and marketing expenses were partially offset by reduced administrative expenses versus the prior year.

The company's effective tax rate for the quarter was 28 percent, compared to 32 percent in the fourth quarter of 2000, each as adjusted. The tax rate decline reflected benefits from an increase in overseas manufacturing and strategic investments in research and development. In the quarter, the company achieved all-time record net income of $144.6 million and diluted earnings per share of $0.47, each as adjusted. Reported net income and diluted earnings per share totaled $135.1 million and $0.44, respectively. Reported totals and adjustments are described in the attached financial statements.

Twelve Months Ended December 31, 2001

For the full year 2001, Guidant reported net sales of $2.708 billion, six percent greater than 2000. The impact of unfavorable currency fluctuations trimmed nearly $50 million of sales, or two percentage points of growth. During 2001, gross profit increased five percent versus the prior year level to $2.045 billion and represented 75.5 percent of sales. Operating expenses grew ten 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 $509.2 million and $1.66, respectively. Reported net income and diluted earnings per share totaled $484.0 million and $1.58, reflecting growth of 29 and 31 percent, respectively. Reported totals and adjustments are described in the attached financial statements.

*For a description of current and prior year special items and adjustments, see notes on attached financial statements.

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Earnings Webcast Information

As previously announced, Guidant will conduct a live webcast today, Tuesday, January 29, 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 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.

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 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.