<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 DATE
OF REPORT (DATE OF EARLIEST EVENT REPORTED)
FEBRUARY 11, 1999
001-13388
(Commission File Number)
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GUIDANT CORPORATION
(Exact name of registrant as specified in its charter)
INDIANA 35-1931722
(Jurisdiction of Incorporation) (IRS Employer
Identification Number)
111 MONUMENT CIRCLE, 29TH FLOOR, INDIANAPOLIS, INDIANA 46204
(Address of registrant's principal executive office)
317-971-2000
(Registrant's telephone number)
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<PAGE>
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(c) Exhibits
99.1 Press Release, dated February 11, 1999, of the Company
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
GUIDANT CORPORATION
By: /s/ Keith E. Brauer
----------------------------
Keith E. Brauer
Vice President and Chief Financial
Officer
Date: February 11, 1999
<PAGE>
EXHIBIT INDEX
Exhibit
Number
- --------
Press release, dated February 11, 1999, of the Company
<PAGE>
EXHIBIT 99.1
________
GUIDANT
PRESS RELEASE
DATE: February 11, 1999
CONTACTS: Todd McKinney, Investor Relations, 317-971-2094
Rob Allen, Media Relations, 317-971-2031
GUIDANT TAKES FOURTH QUARTER 1998 CHARGE ASSOCIATED WITH ORIGIN
SUBSIDIARY
INDIANAPOLIS, IN-FEBRUARY 11, 1999--Guidant Corporation (NYSE and PCX: GDT)
today announced that it is recording charges of $49 million associated with
its general surgery business. These charges, of which $40 million will be
non-cash, will be taken in the fourth quarter of 1998, and is due to the
following events.
On June 4, 1996, General Surgical Innovations, Inc. (GSI) filed suit
against Origin MedSystems, Inc., a wholly owned subsidiary of Guidant,
alleging that Origin's VASOVIEW(TM) Balloon Dissection System and
Preperitoneal Distention Ballon Systems infringe a patent owned by GSI. On
February 8, 1999, the jury in this case returned a verdict against Origin
finding the GSI patent valid after the court had previously determined that
infringement existed. The jury found that Origin should pay $12.9 million
in damages to GSI. While the company may appeal the decision once a
judgement is entered and post-trial matters have been resolved, an
additional charge to reported income of approximately $9 million has been
recognized for the year ended December 31, 1998, to provide for this
potential loss.
As a result of this decision, and due to management's strategic redirection
of this business to cardiovascular applications announced in 1997, Guidant
also reassessed the recoverability of Guidant's general surgery assets
using impairment guidelines specified by generally accepted accounting
principles. Guidant's analysis determined that a non-cash impairment write-
down of $40 million became necessary.
Both the litigation and the non-cash impairment charge are being reflected
in Guidant's amended 1998 results. While these charges have no effect on
the company's previously reported sales, operating income or net income
before special charges for the fourth quarter and year end 1998, they do
reduce reported net income and the related earnings per share amount by
$46.0 million and $0.16 respectively. Accordingly, Guidant will report net
income of $40.8 million and earnings per share of $0.13 for the fourth
quarter of 1998, and the company will report a net loss of $2.2 million and
a loss per share of $0.01 for the year ended December 31, 1998.
A global leader in the medical device industry, Guidant provides
innovative, minimally invasive and cost-effective products and services for
the treatment of cardiovascular and vascular disease.
GUIDANT CORPORATION
P.O. BOX 44906 INDIANAPOLIS, IN 46244 TEL:317 971 2000 FAX 317 971 2040
<PAGE>
GUIDANT CORPORATION AND SUBSIDIARIES
Income Statements
(In millions, except per-share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED THREE MONTHS ENDED
DECEMBER 31, 1998 DECEMBER 31, 1997
AS ADJUSTED AS ADJUSTED
Revised SPECIAL TO EXCLUDE SPECIAL TO EXCLUDE
Reported CHARGES (1) SPECIAL CHARGES REPORTED ITEMS (2) SPECIAL CHARGES
-------- ------------------- --------------- --------- ------------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Cardiac rhythm management $ 210.7 $ 210.7 $ 183.3 $ 183.3
Vascular intervention 262.8 262.8 293.7 293.7
Cardiac & vascular surgery 20.0 20.0 18.8 18.8
------- ------- ------- ---------------
NET SALES $ 493.5 $ 493.5 $ 495.8 $ 495.8
Cost of products sold 108.9 108.9 110.7 110.7
------- ------- ------- ---------------
GROSS PROFIT 384.6 384.6 385.1 385.1
Research and development 78.2 78.2 66.1 66.1
Sales, marketing, and
administrative 147.2 147.2 170.6 170.6
Foundation contribution -- -- -- 11.5 (11.5) --
Merger-related costs -- -- -- 11.1 (11.1) --
------- ------- ------- ------- ------- ---------------
225.4 -- 225.4 259.3 (22.6) 236.7
INCOME FROM OPERATIONS 159.2 159.2 125.8 22.6 148.4
Other expenses, net 25.1 -- 25.1 14.0 11.7 25.7
Impairment charge 40.0 (40.0) -- -- -- --
Litigation settlement charges 9.2 (9.2) -- -- -- --
------- ------- ------- ------- ------- ---------------
Income before income taxes and
cumulative
effect of change in accounting
principle 84.9 49.2 134.1 111.8 10.9 122.7
Income taxes 44.1 3.2 47.3 45.0 0.7 45.7
------- ------- ------- ------- ------- ---------------
INCOME BEFORE CUMULATIVE EFFECT OF
CHANGE IN
ACCOUNTING PRINCIPLE (NET OF TAX) 40.8 46.0 86.8 66.8 10.2 77.0
Cumulative effect of change in
accounting
principle (net of tax) -- -- -- (4.7) 4.7 --
------- ------- ------- ------- ------- ---------------
NET INCOME $ 40.8 $ 46.0 $ 86.8 $ 62.1 $ 14.9 $ 77.0
======= ======= ======= ======= ======= ===============
Earnings per share - basic $ 0.14 $ 0.15 $ 0.29 $ 0.21 $ 0.05 $ 0.26
Weighted average shares outstanding 294.59 294.59 294.59 294.48 294.48 294.48
Earnings per share - assuming
dilution $ 0.13 $ 0.16 $ 0.29 $ 0.21 $ 0.05 $ 0.26
Weighted average shares outstanding
-assuming dilution 302.96 302.96 302.96 301.26 301.26 301.26
</TABLE>
(1) Special charges include the following:
- $9.2 million charge related to damages awarded to GSI
- $40 million non-cash impairment charge related to general surgery
goodwill
(2) Special charges and other items include the following:
- contribution to the Guidant Foundation of $11.5 million
- merger-related costs in connection with the acquisition of EndoVascular
Technologies, Inc.
- one-time gain on equity investments of $23.2 million recorded in Other
Expenses
- corporate legal reserves of $11.5 million also recorded in Other
Expenses
- cumulative effect of change in accounting principle, net of tax, of $4.7
million
The income statements give retroactive effect to the Company's two-for-one stock
split declared in December 1998 and effective January 1999.
<PAGE>
Guidant Corporation and Subsidiaries
Income Statements
(In millions, except per-share data)
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1998 DECEMBER 31, 1997
AS ADJUSTED AS ADJUSTED
Revised SPECIAL TO EXCLUDE SPECIAL TO EXCLUDE
Reported CHARGES (1) SPECIAL CHARGES REPORTED ITEMS (2) SPECIAL CHARGES
--------- ------------------ --------------- --------- ------------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Cardiac rhythm management $ 824.6 $ 824.6 $ 669.6 $ 669.6
Vascular intervention 1,002.2 1,002.2 591.4 591.4
Cardiac & vascular surgery 70.2 70.2 67.2 67.2
-------- -------- -------- ---------------
NET SALES $1,897.0 $1,897.0 $1,328.2 $1,328.2
Cost of products sold 422.0 422.0 320.8 320.8
-------- -------- -------- ---------------
GROSS PROFIT 1,475.0 1,475.0 1,007.4 1,007.4
Purchased research and development 118.7 (118.7) -- 57.4 (57.4) --
Research and development 276.0 276.0 208.3 208.3
Sales, marketing, and administrative 558.6 558.6 439.7 439.7
Foundation contribution -- -- -- 11.5 (11.5) --
Merger-related costs -- -- -- 11.1 (11.1) --
-------- ------- -------- -------- ------- ---------------
953.3 (118.7) 834.6 728.0 (80.0) 648.0
INCOME FROM OPERATIONS 521.7 118.7 640.4 279.4 80.0 359.4
Other expenses, net 84.9 -- 84.9 30.6 11.7 42.3
Impairment charge 40.0 (40.0) -- -- -- --
Litigation settlement charges 269.2 (269.2) -- -- -- --
-------- ------- -------- -------- ------- ---------------
Income before income taxes and
cumulative
effect of change in accounting
principle 127.6 427.9 555.5 248.8 68.3 317.1
Income taxes 129.8 66.3 196.1 98.8 20.9 119.7
-------- ------- -------- -------- ------- ---------------
INCOME BEFORE CUMULATIVE EFFECT OF
CHANGE IN
ACCOUNTING PRINCIPLE (NET OF TAX) (2.2) 361.6 359.4 150.0 47.4 197.4
Cumulative effect of change in
accounting
principle (net of tax) -- -- -- (4.7) 4.7 --
-------- ------- -------- -------- ------- ---------------
NET (LOSS) INCOME ($2.2) $ 361.6 $ 359.4 $ 145.3 $ 52.1 $ 197.4
====== ======= ======== ======== ======= ===============
Earnings (loss) per share - basic ($0.01) $ 1.23 $ 1.22 $ 0.49 $ 0.18 $ 0.67
Weighted average shares outstanding 294.59 294.59 294.59 294.30 294.30 294.30
Earnings (loss) per share -
assuming dilution ($0.01) $ 1.20 $ 1.19 $ 0.48 $ 0.18 $ 0.66
Weighted average shares outstanding
-assuming dilution 294.59 302.27 302.27 299.78 299.78 299.78
</TABLE>
(1) Special charges include the following:
- purchased research and development charges of $118.7 million recorded
related to the acquisitions of InControl, Inc. and NeoCardia, LLC
- $200 million ascribed to litigation settlement relative to Guidant's
acquisition of NeoCardia, LLC
- $60 million litigation settlement related to Guidant's agreement with
C.R. Bard, Inc. agreement, settling two patent infringement lawsuits
- $9.2 million charge related to damages awarded to GSI
- $40 million non-cash impairment charge related to general surgery
goodwill
(2) Special charges and other items include the following:
- purchased research and development of $57.4 million recorded with the
asset acquisition of NeoCardia, LLC
- contribution to the Guidant Foundation of $11.5 million
- merger-related costs in connection with the acquisition of EndoVascular
Technologies, Inc.
- one-time gain on equity investments of $23.2 million recorded in Other
Expenses
- corporate legal reserves of $11.5 million also recorded in Other Expenses
- cumulative effect of change in accounting principle, net of tax, of $4.7
million
The income statements give retroactive effect to the Company's two-for-one stock
split declared in December 1998 and effective January 1999.
