Jan 27, 2006
Guidant Reports Fourth Quarter Sales of $828 Million; Full Year 2005 Sales of $3.55 Billion

Earnings from continuing operations of $85 million or $0.25 per share compared to guidance of $0.17-$0.23 per share

Indianapolis, Ind. - Guidant Corporation (NYSE: GDT), a world leader in the treatment of cardiac and vascular disease, today reported fourth quarter sales of $828 million, representing a sales decline of $140 million or 14 percent versus the prior year, primarily due to the impact of the 2005 product recalls and field actions. Foreign currency translations negatively impacted revenue by $27 million or 3 percent compared to the prior year, and by $6 million or 1 percent compared to the third quarter of 2005.

Income and earnings per share from continuing operations for the quarter were $85 million and $0.25 versus $124 million and $0.38 in the fourth quarter of 2004, down 31 and 34 percent reflecting both the sales decline, and continued investment in drug-eluting stent and implantable defibrillator development and distribution capabilities, as well as product recall and merger transaction related expenses. Prior year fourth quarter income from continuing operations included $104 million or $0.32 per share of additional tax expense associated with the one-time repatriation of foreign earnings under the American Jobs Creation Act of 2004.

The company also reported full year 2005 sales of $3.55 billion, representing sales decline of $215 million or 6 percent versus 2004. Foreign currency translations negatively impacted revenue by $5 million compared to the prior year. Income and earnings per share from continuing operations for 2005 were $444 million and $1.33 versus $573 million and $1.78 in 2004, down 23 and 25 percent. The sales and earnings declines are primarily the result of the same factors described above. Adjusted income and earnings per share from continuing operations for 2005 were $505 million and $1.52 compared to $793 million and $2.47 in 2004.

Please see the attached schedules and the Guidant website at www.guidant.com/investorseconciliations/ for additional information, including reconciliations of U.S. GAAP to as adjusted income and earnings per share, net cash reconciliations and product sales summaries reclassified for discontinued operations.

Fourth Quarter Financial Summary:

• Worldwide implantable defibrillator sales of $372 million decreased 19 percent versus the prior year and increased 13 percent versus the third quarter; U.S. implantable defibrillator sales of $272 million declined 23 percent versus the prior year and increased 11 percent versus the third quarter.
• Worldwide pacemaker sales of $134 million declined 24 percent versus the prior year and 12 percent versus the third quarter; U.S. pacemaker sales of $70 million declined 29 percent versus the prior year and 19 percent versus the third quarter.
• Worldwide coronary stent sales of $117 million declined 6 percent versus the prior year; U.S. stent sales increased 3 percent to $64 million.
• Worldwide angioplasty system sales decreased 6 percent to $113 million.
• Worldwide sales of cardiac surgery and peripheral, including carotid and biliary systems increased 2 percent to $92 million.
• Gross margin was 77.3 percent compared to 76.0 percent in the fourth quarter of 2004. The improvement was primarily due to positive manufacturing variances from inventory builds supporting the re-launch of certain implantable defibrillators.

Fourth quarter income and earnings per share from continuing operations reflect continued investments in drug-eluting stent and implantable defibrillator development and distribution capabilities. These investments include the SPIRIT family of clinical trials evaluating the XIENCE V drug-eluting stent, next generation implantable defibrillator technologies and expansion of the cardiac rhythm management sales force. In addition, the company incurred expenses of approximately $26 million pre-tax, or $0.06 per share after-tax, primarily related to legal expenses resulting from the 2005 product recalls and field actions, and merger transaction-related expenses.

2005 Financial Summary:

• Worldwide implantable defibrillator sales decreased 6 percent to $1.65 billion; U.S. implantable defibrillator sales declined 12 percent to $1.23 billion.
• Worldwide pacemaker sales declined 13 percent to $629 million; U.S. pacemaker sales declined 19 percent to $346 million.
• Worldwide coronary stent sales of $462 million declined 14 percent; U.S. stent sales decreased 5 percent to $247 million.
• Worldwide angioplasty system sales decreased 4 percent to $436 million.
• Worldwide sales of cardiac surgery and peripheral, including carotid and biliary systems, increased 28 percent to $373 million.
• Gross margin was 73.8 percent compared to 75.5 percent in 2004. The margin decline was primarily due to the impact of net charges resulting from the 2005 product recalls and field actions.
• $2.5 billion net cash, up $921 million versus December 31, 2004.

2006 Financial Guidance Reaffirmed:

The company reaffirms its previously disclosed 2006 sales guidance of $3.8 - $4.0 billion and GAAP earnings per share guidance of $1.48 - $1.58. Adjusted earnings per share (which excludes the impact of projected in-process research and development expenses (IPRD) related to the achievement of product development milestones of approximately $0.17 per share) is expected to be $1.65 - $1.75 per share. This earnings per share range includes product recall and field action-related product liability and employee retention program expenses of approximately $0.15 per share.

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 12,000 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.

Guidant provides earnings per share on an adjusted basis from continuing operations because Guidant's management believes that the presentation provides useful information to investors. Among other things, it may assist investors in evaluating the company's operations period over period. In various periods, this measure may exclude such items as business development activities (including IPRD at acquisition or upon attainment of milestones and any extraordinary expenses), strategic developments (including restructuring and product line changes), significant litigation, and changes in applicable laws and regulations (including significant accounting or tax matters). Special items may be highly variable, difficult to predict, and of a size that sometimes has substantial impact on the company's reported operations for a period. Management uses this measure internally for planning, forecasting and evaluating the performance of the business, including allocating resources and evaluating results relative to employee performance compensation targets. Investors should consider non-GAAP measures in addition to, not as a substitute for, or as superior to, measures of financial performance prepared in accordance with GAAP.

This release includes forward-looking statements concerning anticipated financial results. The statements are based on assumptions about many important factors, including trends affecting ICD and coronary stent sales; other clinical, regulatory, competitive, and market developments; reporting of final, audited results; progress with respect to the merger, including satisfaction of conditions to closing, including antitrust approvals; and other factors identified on Exhibit 99.1 to the company's most recent 10-Q. Actual results may differ materially. The company does not undertake to update its forward-looking statements.

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