Guidant Announces 26 Percent Sales Growth in Record Third Quarter; Adjusted Earnings Per Share Rise 22 Percent to $0.33

Business Wire, Oct 14, 1999

INDIANAPOLIS--(BW HealthWire)--Oct. 14, 1999--

Guidant Corporation (NYSE:GDT) (PCX:GDT) today announced sales of $560.9 million in the third quarter of 1999, an increase of 26 percent over the third quarter of 1998. Income from Operations, excluding special charges(a), grew 32 percent over the previous year. Adjusted net income(b) of $100.0 million grew 23 percent over last year. Earnings per share for the quarter, excluding special charges, were $0.33, a third-quarter record for the company.

Three Months Ended September 30, 1999

"The Company's top line growth was again well supported by both of Guidant's primary business units, with Vascular Intervention leading the way with another outstanding sales effort," said Ronald W. Dollens, Guidant President and Chief Executive Officer. "The MULTI-LINK DUET Coronary Stent System(TM) continues to exhibit tremendous staying power in the US marketplace. The DUET commanded nearly half of the domestic market in the third quarter with a market share over 50% larger than that of our nearest competitor. In addition, an outstanding reception by European cardiologists of our latest coronary stent offering, the MULTI-LINK TRISTAR Coronary Stent System(TM), launched during the quarter in Europe, gives us great confidence in our ability to build upon this leadership position in the future. In Cardiac Rhythm Management, continued strong performance in our pacemaker sales, augmented by the successful integration of the Intermedics sales organization, produced outstanding results again this quarter and more than doubled our pacing unit sales over last year."

Vascular Intervention sales of $290.1 million increased 34 percent in the third quarter compared to the same period in 1998, with significant growth occurring in all major geographies. Sales of coronary stent products grew 48 percent over last year in both the US and worldwide to $147 million and $205 million, respectively. Worldwide stent prices declined 2 percent year over year, with domestic average selling prices declining 1 percent from second quarter 1999 levels.

Sales of Cardiac Rhythm Management products, which grew 25 percent over last year to $266.3 million, were again a significant contributor to Guidant's top line performance in the quarter. "By increasing our pacemaker implants by over 100 percent in this quarter versus last year," continued Dollens, "we have achieved our 1999 strategic objective of doubling our worldwide market position in pacemakers. Additionally, the June 1999 launch of the PULSAR(TM) dual sensor pacemaker line has proved extremely successful, driving this state of the art product to 30 percent of our unit sales mix and accentuating the company's position at the head of pacemaker technology."

The Company's defibrillator sales of $135.1 million in the third quarter represent a 4 percent unit decline from last year, with combination dual chamber pacemaker/defibrillator devices representing 42 percent of defibrillator units sold worldwide.

Guidant Cardiac & Vascular Surgery (C&VS) received FDA approval of the ANCURE(TM) System for minimally invasive treatment of abdominal aortic aneurysms (AAA) in late September and has begun an aggressive physician training program and product launch effort around the country. The first commercial sales and implants of the device in the US market occurred in early October. As announced on July 7, 1999, the company has completed the divestiture of C&VS' non-cardiology oriented product lines, negatively affecting total sales for Guidant in the quarter by approximately 4 percentage points. Third quarter sales of Guidant's remaining C&VS products totaled $4.5 million.

Adjusted gross profit for Guidant in the third quarter represented 76.3 percent of sales versus 78.5 percent in the same period last year. This decline in gross profit percentage was due primarily to a higher mix of pacing product sales along with new product and manufacturing plant startup costs. However, compared to the second quarter of 1999, gross profit improved by 60 basis points as the influence of these elements decreased.

Total operating expenses for the third quarter, excluding special items, grew at a rate of 16 percent and lagged sales growth by over 10 percentage points. Sales, marketing and administrative expense increases over 1998 levels were primarily due to worldwide product launches, international affiliate development and the addition of CRM sales personnel.

Income from operations, excluding special charges in both years, grew by 32 percent in the period due to strong growth in sales. Adjusted other expenses increased by $13.5 million over the prior year due primarily to higher interest and amortization expense levels associated with the company's acquisition of Intermedics in February 1999. Overall in the quarter, excluding special charges in both years, the company recorded a 23 percent increase in net income to $100.0 million, or $0.33 per share. Reported net income and earnings per share for the quarter were $98.7 million and $0.32, respectively, compared to a loss of $177.0 million or $0.60 per share in the third quarter of 1998.