SECURITIES AND EXCHANGE
COMMISSION Washington, D.C. 20549

# FORM 10-Q

QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934

For the quarterly
period ended June 30, 2003

Commission File Number
1-13388

GUIDANT CORPORATION (Exact name of
Registrant as specified in its charter)

|INDIANA                         |  | 35-1931722          | 
|------------------------------- |  | ------------------- | 
|(State or other jurisdiction of |  | (I.R.S. Employer    | 
|incorporation or organization)  |  | Identification No.) | 

111 MONUMENT CIRCLE, 29TH FLOOR
                                              INDIANAPOLIS, INDIANA 46204-5129
                                         (Address of principal executive offices)

Registrants
telephone number, including area code: (317) 971-2000

Indicate by check mark whether the
Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

Indicate by check mark whether the
registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

The number of shares of common stock
outstanding as of August 6, 2003:

|Class  |  | Number of Shares Outstanding
|------ |  | ----------------------------
|Common |  | 311,116,943                 



---

# PART IFINANCIAL INFORMATION

# Item 1. Financial
Statements

GUIDANT CORPORATION Consolidated
Statements of Operation(In millions, except
per share data) (unaudited)

|                                                             | Three Months EndedJune 30, | Six Months EndedJune 30,
|------------------------------------------------------------ | -------------------------- | ------------------------
|                                                             |                            | 2003                    
|Net sales                                                    |                            | $     944.9             
|Cost of products sold                                        |                            | 232.7                   
|                                                             |                            |                         
|Gross profit                                                 |                            | 712.2                   
|Research and development                                     |                            | 130.3                   
|Purchased in-process research and development                |                            | 12.0                    
|Sales, marketing and administrative                          |                            | 301.2                   
|Interest, net                                                |                            | (2.0)                   
|Royalties, net                                               |                            | 16.8                    
|Amortization                                                 |                            | 3.4                     
|Other, net                                                   |                            | 0.6                     
|Litigation, net                                              |                            | 422.8                   
|Foundation contribution                                      |                            | --                      
|Restructuring charge                                         |                            | --                      
|                                                             |                            |                         
|Income (loss) from continuing operations before income taxes |                            | (172.9)                 
|Income taxes                                                 |                            | (93.2)                  
|                                                             |                            |                         
|Income (loss) from continuing operations                     |                            | (79.7)                  
|Loss from discontinued operations, net of income taxes       |                            | (17.4)                  
|                                                             |                            |                         
|Net income (loss)                                            |                            | ($  97.1)               
|                                                             |                            |                         
|Earnings (loss) per share-basic                              |                           
|Income (loss) from continuing operations                     |                            | ($  0.26)               
|Loss from discontinued operations, net of income taxes       |                            | (0.06)                  
|                                                             |                            |                         
|Net income (loss)                                            |                            | ($  0.32)               
|Earnings (loss) per share-diluted                            |                           
|Income (loss) from continuing operations                     |                            | ($  0.26)               
|Loss from discontinued operations, net of income taxes       |                            | (0.06)                  
|                                                             |                            |                         
|Net income (loss)                                            |                            | ($  0.32)               
|                                                             |                            |                         
|                                                             |                            |                         
|Dividends declared per common share                          |                            | --                      
|                                                             |                            |                         
|                                                             |                            |                         

See notes to consolidated financial
statements

---

GUIDANT CORPORATION Consolidated Balance
Sheets(In millions, except
share data)

|                                                                                                  | June 30,2003(unaudited) | December 31,2002
|------------------------------------------------------------------------------------------------- | ----------------------- | ----------------
|Assets                                                                                            |                         |                 
|Current Assets                                                                                    |                        
|Cash and cash equivalents                                                                         |                         | $1,190.4        
|Short-term investments                                                                            |                         | 10.3            
|Accounts receivable, net of allowances       of $31.8 (2003) and $30.9 (2002)                     |                         | 757.8           
|Inventories                                                                                       |                         | 339.9           
|Deferred income taxes                                                                             |                         | 242.0           
|Prepaid expenses and other current assets                                                         |                         | 57.3            
|Current assets of discontinued operations                                                         |                         | 2.1             
|                                                                                                  |                         |                 
|Total Current Assets                                                                              |                         | 2,599.8         
|Other Assets                                                                                      |                        
|Goodwill, net of allowances of $159.5 (2003) and $159.4 (2002)                                    |                         | 516.5           
|Other intangible assets, net of allowances of $67.2 (2003) and       $60.3 (2002)                 |                         | 143.3           
|Deferred income taxes                                                                             |                         | 49.8            
|Investments                                                                                       |                         | 44.6            
|Sundry                                                                                            |                         | 47.0            
|Other assets of discontinued operations                                                           |                         | 0.4             
|                                                                                                  |                         |                 
|                                                                                                  |                         | 801.6           
|Property and equipment, net of accumulated depreciation of
       $607.0 (2003) and $550.6 (2002) |                         | 707.1           
|                                                                                                  |                         |                 
|                                                                                                  |                         | $4,108.5        
|                                                                                                  |                         |                 

See notes to consolidated financial
statements

---

GUIDANT CORPORATIONConsolidated Balance
Sheets(In millions, except
share data)

|                                               | June 30,2003 | December 31,2002
|---------------------------------------------- | ------------ | ----------------
|
|Liabilities and Shareholders' Equity           |              |                 
|Current Liabilities                            |             
|Accounts payable                               |              | $      88.1     
|Employee compensation                          |              | 139.8           
|Cordis accrual                                 |              | 425.0           
|Other liabilities                              |              | 267.2           
|Income taxes payable                           |              | 117.5           
|Short-term debt                                |              | 72.8            
|Current liabilities of discontinued operations |              | 31.3            
|                                               |              |                 
|Total Current Liabilities                      |              | 1,141.7         
|                                              
|Noncurrent Liabilities                         |             
|Long-term debt                                 |              | 357.8           
|Other                                          |              | 172.3           
|                                               |              |                 
|                                               |              | 530.1           
|Commitments and contingencies                  |              | --              
|                                              
|Shareholders' Equity                           |             
|Preferred stock:                               |             
|Authorized shares:      50,000,000             |              |                 
|Issued shares:                        none     |              | --              
|Common stock, no par value:                    |              |                 
|Authorized shares:  1,000,000,000              |              |                 
|Issued shares:             310,201,000         |              | 256.2           
|Additional paid-in capital                     |              | 229.0           
|Retained earnings                              |              | 1,974.0         
|Deferred cost, ESOP                            |              | (19.6)          
|Unearned compensation                          |              | (59.1)          
|Treasury stock, at cost:                       |             
|Shares:         2,388,000 (2002)               |              | --              
|Accumulated other comprehensive income         |              | 56.2            
|                                               |              |                 
|                                               |              | 2,436.7         
|                                               |              |                 
|                                               |              | $4,108.5        
|                                               |              |                 

See notes to consolidated financial
statements

---

GUIDANT CORPORATIONConsolidated
Statements of Cash Flows(In millions)(unaudited)

|                                                             | Six Months EndedJune 30,
|------------------------------------------------------------ | ------------------------
|
|Cash Provided by Operating Activities                        |                         
|Net income (loss)                                            |                         
|Adjustments to Reconcile Net Income (Loss) to Cash           |                         
|Provided by Operating Activities                             |                         
|Depreciation                                                 |                         
|Amortization of other intangible assets                      |                         
|Provision for inventory and other losses                     |                         
|Purchased in-process research and development                |                         
|Other noncash, net                                           |                         
|                                                             |                         
|                                                             |                         
|Changes in Operating Assets and Liabilities                  |                         
|Receivables                                                  |                         
|Inventories                                                  |                         
|Prepaid expenses and other current assets                    |                         
|Accounts payable and accrued liabilities                     |                         
|Income taxes payable                                         |                         
|Other liabilities                                            |                         
|                                                             |                         
|Net Cash Provided by Operating Activities                    |                         
|                                                            
|Investing Activities                                         |                         
|Investment purchases                                         |                         
|Sale/maturity of investments                                 |                         
|Additions of property and equipment, net                     |                         
|Additions of other assets, net                               |                         
|Purchase of in-process research and development              |                         
|Acquisition of business, net of cash acquired                |                         
|                                                             |                         
|Net Cash Used for Investing Activities                       |                         
|                                                            
|Financing Activities                                         |                         
|Increase (decrease) in borrowings, net                       |                         
|Issuance of common stock under stock plans and other capital |                         
|transactions                                                 |                         
|Dividends paid                                               |                         
|Repurchase of common stock                                   |                         
|                                                             |                         
|Net Cash Provided by (Used for) Financing Activities         |                         
|                                                            
|Effect of Exchange Rate Changes on Cash                      |                         
|                                                             |                         
|Net Increase in Cash and Cash Equivalents                    |                         
|Cash and Cash Equivalents at Beginning of Period             |                         
|                                                             |                         
|Cash and Cash Equivalents at End of Period                   |                         
|                                                             |                         

See notes to consolidated financial
statements

---

GUIDANT CORPORATION
Notes to Consolidated
Financial Statements(In millions, except
per share data)(unaudited)

# Note 1  Basis of Presentation

The accompanying unaudited
consolidated financial statements have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the instructions to Form
10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the
information necessary for a fair presentation of results of operations, financial position
and cash flows in conformity with generally accepted accounting principles. Operating
results from interim periods are not necessarily indicative of results that may be
expected for the fiscal year as a whole. In the opinion of management, the consolidated
financial statements reflect all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation of the Companys results for the periods
presented. The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that affect
the reported amounts of assets, liabilities, revenues, expenses and related disclosures at
the date of the financial statements and during the reporting period. Actual results could
differ from these estimates. A discussion of the Companys significant accounting
policies is described in the Significant Accounting Policies section of
Managements Discussion and Analysis of Results of Operations and Financial
Condition.

For further information, refer to the
consolidated financial statements and notes thereto included in the Companys Annual
Report on Form 10-K for the year ended December 31, 2002. As used herein, the terms
the Company and Guidant mean Guidant Corporation and its
consolidated subsidiaries.

Certain reclassifications have been
made to prior year amounts to conform to current year presentation (see Note 8).

# Note 2 
Stock-Based Compensation

The Company has adopted the
disclosure-only provisions of Statement of Financial Accounting Standard
(SFAS) 123, Accounting for Stock-Based Compensation, as amended by SFAS
148, Accounting for Stock-Based CompensationTransition and Disclosure.
Accordingly, the Company accounts for stock-based compensation under Accounting Principles
Board Opinion No. 25, Accounting for Stock Issued to Employees,and related
interpretations, using the intrinsic value method. The following table illustrates the
effect on net income (loss) and earnings (loss) per share if the Company had applied the
fair value recognition provisions of SFAS 123 to all stock-based employee compensation.
The pro forma impact on net income (loss) assumes a forfeiture rate of approximately 10%.
These pro forma amounts may not be representative of the effects on reported net income
(loss) for future years due to the uncertainty of stock option grant volume and potential
changes in assumptions driven by market factors.

|                                                                     | Three Months EndedJune 30, | Six Months EndedJune 30,
|-------------------------------------------------------------------- | -------------------------- | ------------------------
|
|Reported net income (loss)                                           |                            | ($97.1)                 
|Deduct: Total stock option employee compensation expense, net of tax |                            | 15.1                    
|                                                                     |                            |                         
|Pro forma net income (loss)                                          |                            | ($112.2)                
|                                                                     |                            |                         
|                                                                     |                            |                         
|Earnings (loss) per share:                                           |                           
|Basic--as reported                                                   |                            | ($ 0.32)                
|                                                                     |                            |                         
|Basic--pro forma                                                     |                            | ($ 0.37)                
|                                                                     |                            |                         
|Diluted--as reported                                                 |                            | ($ 0.32)                
|                                                                     |                            |                         
|Diluted--pro forma                                                   |                            | ($ 0.37)                
|                                                                     |                            |                         

In February 2003, Guidants
Board of Directors authorized the issuance of approximately 2.3 million restricted shares
of common stock (U.S.) and restricted stock units (outside the U.S.) to over 2,000
employees. Restricted stock awards granted to certain executive officers vest over six
years. Awards granted to other employees vest over three years. Grants may vest earlier
upon a qualifying disability, death, retirement or change in control. This grant includes
a performance element that allows

---

# GUIDANT CORPORATION Notes to Consolidated
Financial Statements

# Note 2 
Stock-Based Compensation (continued)

vesting to accelerate if certain
Guidant share price performance measures are met. Specifically, 1/3 of the general grant
will vest immediately upon achievement of 25%, 50% and 75% appreciation of the 60-day
moving average stock price from the date of grant ($34.37 on February 18, 2003). Portions
of the executive officer grant may accelerate from six years to three years under this same
performance measure. Guidant recorded $79.0 million of unearned compensation in
conjunction with this grant, representing the fair value of restricted stock awards on the
date of grant. Unearned compensation will be recognized as compensation expense ratably
over the vesting period or earlier based on the performance element. The related
compensation expense totaled $16.6 million and $19.4 million for the three- and six-month
periods ended June 30, 2003. The first performance element was met in July 2003;
therefore, additional compensation expense for the portion earned in the second quarter of
2003 was recorded. The Company will record approximately $17.0 million of compensation
expense during the remainder of 2003 related to this award, absent the achievement of an
additional performance measure.

# Note 3  Inventories

Inventories consisted of the
following:

|                           | June 30,2003 |        | December 31,2002
|-------------------------- | ------------ | ------ | ----------------
|                          
|Finished products          |              | $131.2 |                 
|Work in process            |              | 65.1   |                 
|Raw materials and supplies |              | 143.6  |                 
|                           |              |        |                 
|                           |              | $339.9 |                 
|                           |              |        |                 

---

GUIDANT CORPORATION Notes to Consolidated
Financial Statements

# Note 4  Earnings
Per Share

The following table sets forth the
computation of earnings per share:

|                                                             | Three Months EndedJune 30, | Six Months EndedJune 30,
|------------------------------------------------------------ | -------------------------- | ------------------------
|
|Income (loss) from continuing operations                     |                            | ($79.7)                 
|Loss from discontinued operations, net of income taxes       |                            | (17.4)                  
|                                                             |                            |                         
|Net income (loss)                                            |                            | ($97.1)                 
|                                                             |                            |                         
|Earnings (loss) per share-basic                              |                           
|Income (loss) from continuing operations                     |                            | ($0.26)                 
|Loss from discontinued operations, net of income taxes       |                            | (0.06)                  
|                                                             |                            |                         
|Net income (loss)                                            |                            | ($0.32)                 
|                                                             |                            |                         
|Earnings (loss) per share-diluted                            |                           
|Income (loss) from continuing operations                     |                            | ($0.26)                 
|Loss from discontinued operations, net of income taxes       |                            | (0.06)                  
|                                                             |                            |                         
|Net income (loss)                                            |                            | ($0.32)                 
|                                                             |                            |                         
|Weighted average common shares outstanding                   |                            | 304.52                  
|Effect of dilutive stock options and restricted stock awards |                            | --                      
|                                                             |                            |                         
|Weighted average common shares outstanding                   |                           
|and assumed conversions                                      |                            | 304.52                  
|                                                             |                            |                         

All stock options were excluded from
loss per share-diluted for the three- and six-month periods ended June 30, 2003, as the
impact would have been anti-dilutive. Earnings per share-diluted for the three- and
six-month periods ended June 30, 2002, exclude 31.0 million and 28.0 million shares
related to stock options, as the exercise price of these stock options was greater than
the average market value, resulting in an anti-dilutive effect on earnings per
share-diluted.

# Note 5 
Comprehensive Income (Loss)

Comprehensive income (loss) is
comprised of net income (loss) adjusted for changes in foreign currency translation
adjustments and unrealized gains or losses on foreign currency derivative contracts
designated and qualifying as cash flow hedges. For the second quarter 2003 and 2002,
comprehensive income (loss) was ($70.7) million and $270.1 million. Comprehensive income
for the six months ended June 30, 2003 and 2002 was $43.6 million and $402.9 million. The
decrease in comprehensive income (loss) was primarily due to net losses in 2003 versus net
income in 2002 and a decrease in foreign currency translation gains in 2003 compared to
2002.

---

GUIDANT CORPORATION Notes to Consolidated
Financial Statements

# Note 6  Segment
Information

|              | Three Months EndedJune 30, | Six Months EndedJune 30,
|------------- | -------------------------- | ------------------------
|
|             
|Net Sales(1): |                            |                         
|U.S.          |                            | $640.9                  
|International |                            | 304.0                   
|              |                            |                         
|              |                            | $944.9                  
|              |                            |                         

(1)    
          Revenues are attributed to countries based on location of the customer.



|                   | June 30,2003 | December 31,2002
|------------------ | ------------ | ----------------
|Long-lived Assets: |              |                 
|U.S.               |              | $618.8          
|International      |              | 88.3            
|                   |              |                 
|                   |              | $707.1          
|                   |              |                 



|                                       | Three Months EndedJune 30, | Six Months EndedJune 30,
|-------------------------------------- | -------------------------- | ------------------------
|
|Net Sales:                             |                            |                         
|Implantable cardioverter defibrillator |                           
|systems                                |                            | $377.2                  
|Pacemaker systems                      |                            | 172.7                   
|Coronary stent systems                 |                            | 224.4                   
|Angioplasty and intravascular          |                           
|radiotherapy systems and accessories . |                            | 118.4                   
|Emerging therapies                     |                            | 52.2                    
|                                       |                            |                         
|                                       |                            | $944.9                  
|                                       |                            |                         

# Note 7 
Acquisitions

Biosensors International: In
March 2003, the Company completed its acquisition of certain assets of Biosensors
Internationals (Biosensors) everolimus-eluting stent program, including an exclusive
worldwide license to Biosensors polymer formulation technology in the field of
everolimus-eluting stents and a nonexclusive license to use this technology with other
drugs in drug eluting stents. Additionally, Guidant acquired the option of manufacturing
and commercializing the Biosensors everolimus-eluting stent that has been used in
Biosensors clinical trials. Guidant recorded a $20.5 million in-process research and
development (IPRD) charge in connection with the purchase, since technological feasibility
of the project has not been attained and the research has no alternative future uses. In
June 2003, Guidant recorded a $10.1 million IPRD charge as a result of the achievement of
a performance milestone related to six-month clinical data of the everolimus-eluting stent
trial, FUTURE I. Biosensors may receive additional milestone payments over the course of
clinical development and upon CE Mark approval and receive royalties on future sales of
products utilizing Biosensors technology.

---

# GUIDANT CORPORATION Notes to Consolidated
Financial Statements

# Note 7 
Acquisitions (continued)

Bioabsorbable Vascular
Solutions: In March 2003, Guidant acquired the majority interest in Bioabsorbable
Vascular Solutions (BVS, formerly referred to as Bioerodible Vascular Solutions) for $10.0
million. BVS is developing vascular stent platforms designed to be absorbed by tissue
following the restoration of blood flow in patients with coronary artery disease. Guidant
has the option to purchase the remaining interest for $6.0 million beginning in January
2004 and is required to purchase it if certain conditions are met. Guidant expects any
additional consideration to be recorded as IPRD. Guidant recorded a $16.0 million IPRD
charge in March 2003 in connection with the purchase of the majority interest and a
related milestone payment, since technological feasibility of the project has not been
attained and the research has no alternative future uses. Guidant may make milestone
payments over the course of clinical development.

X Technologies, Inc.: In June
2003, Guidant acquired X Technologies, Inc. (X Technologies), the manufacturer of the
FDA-approved FX miniRAIL Balloon Catheter, a device for the treatment of coronary
artery disease. Guidant paid $60.0 million in cash and forgave a $4.5 million extension of
credit. Guidant may make additional payments upon future satisfaction of sales performance
criteria. The purchase price was allocated to the acquired assets and liabilities based
upon fair market values, including $55.9 million to intangible assets related to developed
technology.

Certain of Guidants
acquisitions involve contingent consideration. Payment of the additional consideration is
generally contingent upon the acquired companies reaching performance-related milestones,
including specified revenue levels, product development targets or regulatory approvals or
filings. At June 30, 2003, Guidants accrual for milestone obligations totaled $10.8
million and will be paid during the next four years. In addition, future undiscounted
contingent consideration for performance-related milestones on acquisitions of up to
$315.0 million could be paid through 2010, depending on when and if milestones are
attained. Potential milestone payments under existing agreements during the next 12 months
range from $2.5 million to $30.0 million. The Company continues to evaluate business
development opportunities, which may generate additional payments.

The operating results of all
acquisitions are included in the Companys consolidated financial statements from the
date of each acquisition.

# Note 8 
Discontinued Operations

In June 2003, Guidants Board of
Directors approved a plan to dispose of the ANCURE® ENDOGRAFT® System product line
to treat abdominal aortic aneurysms (AAA) due to continuing financial losses, limited
prospects for the Companys AAA product line and the impact of the Department of
Justice investigation. The disposal plan consists primarily of the termination of normal
activity, abandonment of property and equipment, product returns, collection of
receivables and settlement of liabilities. Guidant has written down long-lived assets to
their fair value and recorded inventory and accounts receivable at net realizable value.
Management expects the disposal process to be completed no later than June 2004.

In accordance with SFAS 144,
Accounting for the Impairment or Disposal of Long-Lived Assets, the disposal of the
AAA product line represents a discontinued operation. Accordingly, the accompanying
consolidated financial statements and notes reflect the results of operations and
financial position of AAA as a discontinued operation for all periods presented. Net loss
from discontinued operations includes impairment of certain long-lived assets, inventory
write-downs and accruals for employee severance and lease commitments. A liability of
$19.0 million remains at June 30, 2003.

At June 30, 2003 and December 31,
2002, there were $2.5 million and $21.1 million in assets and $31.3 million and $42.8
million in liabilities related to the AAA product line. Assets are primarily comprised of
accounts receivable, inventory and property, plant and equipment. Liabilities include
accruals for severance and lease commitments. Liabilities also include the accrual for the
ANCURE-related investigation of $30.0 million at December 31, 2002, which was increased to
$92.0 million in March 2003. Guidant paid $92.4 million in June 2003.

---

# GUIDANT CORPORATION Notes to Consolidated
Financial Statements

# Note 8 
Discontinued Operations (continued)

The following summarizes financial
information for the AAA product line (in millions):

|                                                      | Three Months EndedJune 30, | Six Months EndedJune 30,
|----------------------------------------------------- | -------------------------- | ------------------------
|
|Net sales                                             |                            | $  3.1                  
|Loss from discontinued operations before income taxes |                            | 44.8                    
|Net loss from discontinued operations                 |                            | 17.4                    

# Note 9  Dividend

The Companys Board of Directors
declared a second quarter 2003 dividend of $0.08 per common share outstanding. The
dividend of $24.6 million was paid June 30, 2003, to shareholders of record on June 16,
2003.

# Note 10  New
Accounting Pronouncements

SFAS 149, Amendment of Statement
133 on Derivative Instruments and Hedging Activities, was issued in April 2003 and
amends and clarifies financial accounting and reporting for derivative instruments,
including certain derivative instruments embedded in other contracts and for hedging
activities under SFAS 133, Accounting for Derivative Instruments and Hedging
Activities. In general, SFAS 149 is effective for contracts entered into or modified
after June 30, 2003, and for hedging relationships designated after June 30, 2003. SFAS
149 is not expected to have a material impact on the Companys results of operations
or financial condition.

SFAS 150, Accounting for
Certain Financial Instruments with Characteristics of both Liabilities and Equity, was
issued in May 2003. SFAS 150 establishes standards for classification and measurement of
certain financial instruments with characteristics of both liabilities and equity. SFAS is
effective for financial instruments entered into or modified after May 31, 2003, and
is otherwise effective at the beginning of the first interim period beginning after
June 15, 2003. SFAS 150 is not expected to have a material impact on the
Companys results of operations or financial condition.

# Note 11 
Contingencies

A discussion of the Companys
policies with respect to legal proceedings and other loss contingencies is described in
the Significant Accounting Policies section of Managements
Discussion and Analysis of Results of Operations and Financial Condition. The
description of legal proceedings in Part II, Item 1 (Legal Proceedings) to
this filing is incorporated herein by reference.

---

Item 2. Managements
Discussion and Analysis of Results of Operations and Financial Condition (unaudited)

Guidant Corporation pioneers lifesaving
technology for millions of cardiac and vascular patients worldwide. The Company develops,
manufactures and markets the following products and services that enable less-invasive
care for some of lifes most threatening medical conditions:

| |  | Implantable cardioverter defibrillator (ICD) systems used to detect and treat abnormally
fast heart rhythms (tachycardia), including implantable cardiac resynchronization therapy
defibrillator (CRT-D) systems used to treat heart failure
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Implantable pacemaker systems used to manage slow or irregular heart rhythms
(bradycardia), including implantable cardiac resynchronization therapy pacemaker (CRT-P)
systems used to treat heart failure
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Coronary stent systems
 for the treatment of coronary artery disease
| | - | --------------------------------------------------------------------

| |  | Angioplasty dilatation catheters, intravascular radiotherapy systems and related accessories for the treatment of
              coronary artery disease
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Products for emerging therapies including beating heart surgery, endoscopic vessel
harvesting and biliary, peripheral, carotid and neurovascular systems
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------

In June 2003, the Company announced
that it would dispose of the ANCURE ENDOGRAFT System product line to treat abdominal
aortic aneurysms (AAA). This product line is reflected as a discontinued operation for all
periods presented.

Guidant has principal operations in
the U.S., Europe and Japan. The Company markets its products in nearly 100 countries
through a direct sales force in the U.S. and a combination of direct sales
representatives, agents and independent distributors in international markets. As used
herein, the terms the Company and Guidant mean Guidant Corporation
and its consolidated subsidiaries.

---

# Operating Results 
Three and Six Months Ended June 30, 2003

# Summary

Guidant reported $944.9 million in
sales for the quarter ended June 30, 2003, representing 20% growth compared to the same
period in 2002. Growth in unit volume and favorable fluctuations in foreign currency
exchange rates increased sales by 16% and 4%, while product pricing remained stable. The
impact of favorable fluctuations in foreign currency exchange rates on sales was $30.5
million. U.S. sales of $640.9 million grew 16% over the prior year, while international
sales of $304.0 million increased 29%. Gross margin for the second quarter of 2003 was
75.4%, an increase from 74.6% reported in the second quarter of 2002. Loss from continuing
operations was $79.7 million in the second quarter of 2003 compared to income from
continuing operations of $217.3 million for the same period in 2002.

Sales for the six months ended June
30, 2003, of $1,820.6 million, increased $338.7 million, or 23% over the same period in
2002. Unit volume, price increases and favorable fluctuations in foreign currency exchange
rates increased sales by 17%, 2% and 4%. The impact of favorable fluctuations in foreign
currency exchange rates on sales was $64.0 million. U.S. sales of $1,247.3 million grew
20% over the prior year, while international sales of $573.3 million increased 30%. Gross
margin for the first half of 2003 was 75.5%, consistent with the gross margin posted in
the first half of 2002. Income from continuing operations was $79.0 million in the first
six months of 2003 compared to $359.3 million for the same period in 2002.

# Sales SummaryThree
Months Ended

|                                        | June 30, 2003 | June 30, 2002 | 
|--------------------------------------- | ------------- | ------------- | 
|
|                                       
|Implantable cardioverter                |               |               | 
|defibrillator systems                   |               | $306.7        | 
|Pacemaker systems                       |               | 107.7         | 
|Coronary stent systems                  |               | 123.5         | 
|Angioplasty, intravascular radiotherapy |               |               | 
|systems and accessories                 |               | 61.3          | 
|Emerging therapies                      |               | 41.7          | 
|                                       
|                                        |               | $640.9        | 
|                                       

# Sales

Implantable Cardioverter
Defibrillator (ICD) Systems

Worldwide sales of ICD systems in the
second quarter of 2003 were $377.2 million, an increase of 50% over the same period in
2002. ICD system sales include sales of CRT-D systems. Growth in unit volume, growth in
average system price and favorable fluctuations in foreign currency exchange rates
increased sales by 44%, 2% and 4%. U.S. ICD system sales increased 49% to $306.7 million,
while international sales of $70.5 million were up 53% over the same period in the prior
year. For the first six months of 2003, worldwide ICD system sales were $709.6 million, an
increase of 60% over the same period in the prior year. Sales of ICD systems increased due
to the following:

| |  | Positive impact on the ICD market following announcement of the Multicenter Automatic
Defibrillator Implantation Trial (MADIT II) and preliminary COMPANION clinical trial
results
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Positive market acceptance of
VITALITY AVT® ICD System launched in the U.S. in April 2003
| | - | ------------------------------------------------------------------------------------------

| |  | Continued
acceptance in the U.S. of PRIZM® family of ICD Systems and CONTAK® RENEWAL
CRT-D System
| | - | --------------------------------------------------------------------------------------------------

| |  | International sales growth of VITALITY ICD System launched in the fourth
quarter of 2002 and CONTAK RENEWAL 2 CRT-D System launched in the third quarter of 2002
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Significant additions to cardiac rhythm management U.S. sales force
| | - | -------------------------------------------------------------------

In July 2003, Guidant announced FDA
approval of its third new heart failure device in the last ten months, the CONTAK RENEWAL
3 CRT-D System, and the latest addition to the VITALITY ICD product portfolio, the
VITALITY DS ICD System.

In June 2003, the Centers for
Medicare and Medicaid Services (CMS) announced its intent to expand national reimbursement
coverage for the use of ICDs for patients with a previous heart attack, left ventricular
ejection fraction<30%, and QRS duration greater than 120 milliseconds. This patient
group represents a sub-population of the MADIT II clinical trial sponsored by Guidant. The
CMS announcement, ultimate CMS decision and implementation will help assure the
availability of Guidant ICD therapy to a larger population of patients and extend uniform
national coverage to the landmark MADIT I clinical trial population.

Additionally, in August 2003, CMS
approved Guidants proposal for a new hospital reimbursement group for ICD therapy
for heart failure patients. The new reimbursement group provides higher reimbursement
levels and is effective October 1, 2003.

Pacemaker Systems

Worldwide pacemaker system sales were
$172.7 million for the quarter ended June 30, 2003, an increase of $13.1 million or 8%
over the same period in the prior year. Pacemaker system sales include sales of CRT-P
systems outside the U.S. Growth in unit volume, growth in average system price and
favorable fluctuations in foreign currency exchange rates increased sales by 2%, 2% and
4%. U.S. pacemaker system sales grew 5% to $107.7 million and international sales grew 14%
to $65.0 million for the second quarter of 2003 compared to the same period in 2002.
Worldwide sales of these products for the first six months of 2003 were $332.7 million, an
increase of $31.4 million or 10% over the same period in 2002. Pacemaker system sales were
driven by continued acceptance of the INSIGNIA family of pacemakers and the
previously mentioned increase in the sales organization dedicated to cardiac rhythm
management products. Also contributing to sales growth in the second quarter of 2003 was
the INSIGNIA Entra, approved by the FDA in February 2003. In July 2003, Guidant launched
the INSIGNIA Ultra pacemaker in Europe.

---

Coronary Stent Systems

Worldwide coronary stent system sales
for the second quarter of 2003 were $224.4 million, a decrease of 2% from second quarter
2002 sales of $228.0 million. Decreases in unit volume and pricing of 4% and 1% were
partially offset by favorable foreign currency exchange rates of 3%. U.S. sales were
$123.5 million ($103.7 million to U.S. end-users) for the second quarter of 2003 compared
to $153.9 million ($140.5 million to U.S. end-users) for the second quarter of 2002. This
decrease is attributable to a competitive U.S. introduction of drug eluting stents in
April 2003, which has impacted the market for metallic stents. Sales in the U.S. include
sales of dilatation catheters to Cordis Corporation. International sales of coronary stent
systems in the second quarter of 2003 grew 36% to $100.9 million compared to $74.1 million
in the second quarter of 2002. Coronary stent system sales in Japan grew 80% to $52.4
million compared to the same period in the prior year. Worldwide coronary stent system
sales for the first six months of 2003 were $446.4 million compared to $448.9 million for
the same period in the prior year. Sales of coronary stent systems include:

| |  | MULTI-LINK ZETA Coronary Stent System launched in the U.S. in September 2002
 International acceptance of the MULTI-LINK ZETA Coronary Stent System continued
with 8% volume growth in Europe compared to the second quarter of 2002, despite
competitive drug eluting stent therapy and a competitors launch of a new metallic
stent in the second quarter of 2002.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | MULTI-LINK TRI-STAR Coronary Stent System launched in Japan in the fourth quarter of
2001 and the March 2003 launch of the MULTI-LINK PENTA Coronary Stent System.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------

The introduction of drug eluting
stents has substantially increased the value of the coronary stent market. Competitive
entry of drug eluting stents occurred in Europe in late 2002 and in the U.S. in April
2003. Guidant has experienced a decrease in sales of metallic stents in the U.S. of 12%
compared to the first quarter of 2003. A general decline in Guidants metallic stent
sales is expected as physicians adopt drug eluting stent therapy. Guidant expects to first
enter a market through one of its everolimus programs in 2005. Guidant licensed the
exclusive right to use everolimus on drug eluting stents from Novartis. The Company has
supplemented internal work on its everolimus-eluting stent program with the acquisition of
certain assets of Biosensors everolimus-eluting stent program. Biosensors achieved a
performance milestone under the agreement in June 2003, related to the six-month clinical
data of the everolimus-eluting stent FUTURE I clinical trial.

The MULTI-LINK VISION was
introduced in February 2003 to a limited number of accounts primarily in Europe. It was
voluntarily recalled in late March 2003 in response to customer observations regarding a
limited number of stents becoming dislodged during delivery. Guidant re-launched the
MULTI-LINK VISION in June 2003 in Europe and other geographies. In July 2003, Guidant
announced FDA approval of the MULTI-LINK VISION and U.S. launch is expected in August
2003.

Angioplasty and
Intravascular Radiotherapy Systems and Accessories

Angioplasty systems and accessories
sales, including atherectomy products, totaled $104.2 million in the second quarter of
2003 compared to $98.2 million during the second quarter of 2002. Sales growth of 6%
reflects increases in unit volume and favorable foreign exchange rates of 4% and 5%,
offset by price declines of 3%. Sales of these products for the six months ended June 30,
2003, were $204.3 million compared to $193.3 million for the same period in the prior
year, an increase of 6%. Sales include the rapid-exchange (RX) CROSSAIL and the
over-the-wire (OTW) OPENSAIL Coronary Dilatation Catheters.

Worldwide sales of the GALILEO®
Intravascular Radiotherapy System were $14.2 million during the second quarter of 2003
compared to $9.3 million during the same period in 2002, primarily due to increased unit
volume. The GALILEO System is used for the treatment of in-stent restenosis, the
recurrence of a blockage in a coronary artery that had been previously treated with a
coronary stent. Sales were $29.2 million for the first six months of 2003 compared to
$15.4 million for the same period in the prior year. Sales in 2003 primarily include the
GALILEO III System.

---

Emerging Therapies

Worldwide sales of biliary,
peripheral, carotid and neurovascular systems totaled $24.0 million in the second quarter
of 2003, representing 28% growth over the same period in 2002. Growth in unit volume,
price increases and favorable foreign currency exchange rates increased sales of these
systems by 20%, 2% and 6%. Sales for these systems during the first six months of 2003
were $44.8 million compared to $35.4 million for the same period in 2002, representing a
27% increase. Growth was driven by the DYNALINK® Self Expanding Biliary Stent System
and the AGILTRAC Peripheral Dilatation Catheter, with continued acceptance of the RX
HERCULINK® PLUS and OMNILINK Biliary Stent Systems and the RX ACCULINK
Carotid Stent System in Europe including the RX ACCUNET® Embolic Protection System.

Sales of cardiac surgery systems were
$28.2 million for the quarter ended June 30, 2003, compared to $22.7 million for the same
period in 2002, representing 24% growth, primarily due to increased unit volume. Sales for
the six months ended June 30, 2003 were $53.6 million compared to $43.0 million for the
same period in 2002, a 25% increase. Sales growth was driven by the VASOVIEW®
Endoscopic Vessel Harvesting System. Also contributing to the increase was the
HEARTSTRING Proximal Seal System to facilitate anastomosis, which has been on the
market since the fourth quarter of 2002.

See Discontinued
Operation and Legal Matters for additional discussion of the
Companys AAA business.

# Cost of Products Sold

Cost of products sold was $232.7
million in the second quarter of 2003 compared to $199.9 million for the same period in
2002. Gross profit percentage was 75.4% for the second quarter of 2003, an improvement of
80 basis points over the same period in 2002 and at the high end of the Companys
historical range of 74  76%. The improved gross profit percentage was driven by a
favorable product mix of ICDs and increased stent sales in Japan, despite the decline in
U.S. coronary stent sales. Gross profit percentage was consistent at 75.5% for the six
months ended June 30, 2003 and 2002.

# Research and Development

Guidant continued to invest
aggressively in research and development in the second quarter of 2003. Research and
development expense was $130.3 million for the quarter ended June 30, 2003, or 13.8% of
sales, compared to $99.6 million in the same quarter in 2002, or 12.6% of sales. Research
and development expense for the first six months of 2003 totaled $243.9 million (13.4% of
sales) compared to $196.8 million (13.3% of sales) in the same period in 2002.

Through the first half of 2003, the Company announced a number of developments relating to its
clinical trials:

| |  | COMPANION Clinical Trial  Prospective, multi-center, randomized
study of patients with advanced heart failure. Preliminary
results of the COMPANION clinical trial demonstrated 19% reduction in the primary endpoint
of combined all-cause death and hospitalization by adding Guidants CRT systems to
optimal drug therapy and 43% reduction in all-cause mortality.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | DECREASE HF Clinical Trial  Heart failure study designed to demonstrate the safety
and effectiveness of the flexible pacing modes offered in Guidants newest CRT-D
systems began in March 2003.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | FUTURE I and II Clinical Trials  Studies that evaluate the safety of an everolimus-eluting
coronary stent utilizing a bioabsorbable drug-delivery coating compared to a metallic
stent platform in previously untreated lesions. In June 2003 Biosensors achieved a
milestone related to the six-month clinical data of FUTURE I. In addition to FUTURE I and
II, Guidant plans to initiate the SPIRIT FIRST trial, a dose-selection feasibility study
with the MULTI-LINK VISION Coronary Stent System and everolimus, upon successful
completion and analysis of preclinical studies.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | European PIXEL Clinical Trial  Study designed to evaluate the performance of Guidants
MULTI-LINK PIXEL Small Vessel Stent System. The clinical trial compared the
restenosis rates of patients with first-time lesions whose vessels were expanded with a
balloon catheter prior to stent implantation versus those who received direct stenting
with a MULTI-LINK PIXEL stent. Guidant announced in July 2003 that the study demonstrated
six-month restenosis rates of 25% for the patients in the pre-dilatation group, compared
to 16% for those patients who received direct stenting.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | ARCHeR Clinical Trial  Study designed to evaluate the safety and effectiveness of
carotid artery stenting as a minimally invasive alternative for treating carotid artery
disease in patients ineligible for surgery or at high surgical risk. The Company announced
positive preliminary 30-day results in March 2003. In June 2003, Guidant announced
enrollment of the first patient in its second clinical trial designed to evaluate carotid
stenting, the ARCHeR RX Clinical Trial.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

Guidant recorded pre-tax IPRD charges
of $12.0 million and $48.5 million for the three- and six-month periods ended June 30,
2003. The Company recorded a $6.5 million pre-tax charge for the six-month period ended
June 30, 2002. Key components of these charges include:

| |  | Biosensors  In the second quarter of 2003, a milestone related to the FUTURE I
clinical trial was achieved, resulting in an IPRD charge of $10.1 million. The milestone
was based on final adjudication of the six-month MACE (Major Adverse Cardiac Events) rate
being equal to or less than the metallic stent in the control arm. In March 2003, Guidant
purchased certain assets of Biosensors, resulting in $20.5
million of IPRD. Guidant also obtained an exclusive worldwide license to Biosensors
polymer formulation technology in the field of everolimus-eluting stents and a
non-exclusive license to this technology for use with other drugs in drug eluting stents.
Additionally, Guidant acquired the option of manufacturing and commercializing the
Biosensors everolimus-eluting stent that has been used in Biosensors clinical
trials.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Bioabsorbable Vascular Solutions  In March 2003, Guidant purchased the majority
interest in Bioabsorbable Vascular Solutions (BVS, formerly referred to as Bioerodible
Vascular Solutions), an early-stage developer of bioabsorbable stents, resulting in a
$16.0 million IPRD charge. Bioabsorbable stents are designed to be absorbed by tissue
following the restoration of blood flow in patients with coronary artery disease.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Novartis  Guidant recorded a pre-tax IPRD charge of $6.5 million in the second quarter of 2002 in
connection with its worldwide co-exclusive license agreement with Novartis Pharma AG and
Novartis AG granting Guidant rights to utilize the drug everolimus in drug eluting stents
for the treatment of coronary and peripheral vascular diseases.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

# Sales, Marketing and
Administrative

Sales, marketing and administrative
expenses were $301.2 million for the three months ended June 30, 2003, an increase of
$61.4 million or 25.6% compared to the same period in 2002. These expenses for the six
months ended June 30, 2003, totaled $574.1 million compared to $453.1 million for the same
period in 2002, an increase of 26.7%. The increases were the result of sales growth and
continued expansion of the global sales organization, particularly U.S. sales
representatives dedicated to cardiac rhythm management products.

Total expenses increased as a result
of additional compensation expense from the restricted stock grants awarded in February
2003. The related compensation expense totaled $16.6 million and $19.4 million for the
three- and six-month periods ended June 30, 2003, and were classified in the statement of
operations consistent with the functional area of related employees.

---

# Interest

Net interest income was $2.0 million
for the three months ended June 30, 2003, compared to $1.7 million of net interest expense
for the same period in 2002. Net interest income was $3.1 million for the six months ended
June 30, 2003, compared to $5.8 million of net interest expense for the same period in
2002. The favorable change from 2002 was driven by a lower average outstanding debt
balance, increased interest income due to larger balances in cash and cash equivalents and
short-term investments and lower interest rates on borrowings, in part due to an
additional interest rate swap agreement entered into in March 2003 that was not in effect
during the second quarter of 2002.

# Royalties

Net royalties expense totaled $16.8
million in the second quarter of 2003 compared to $13.7 million for the same period in
2002. These expenses for the six months ended June 30, 2003, totaled $31.2 million
compared to $24.9 million in the same period in the prior year. The increase in 2003
compared to 2002 was primarily due to increased sales of ICD systems.

# Litigation

The Company recorded a $422.8 million
net litigation charge in the second quarter of 2003 primarily related to the preliminary
arbitration decision involving Cordis Corporation. In the second quarter of 2002, Guidant
recorded a net legal benefit of $137.1 million primarily due to an award in Guidants
favor against Medtronic, Inc.

On June 12, 2003, the Company
announced that its subsidiary, EndoVascular Technologies, Inc. (EVT), had entered into a
plea agreement with the U.S. Department of Justice, relating to the previously disclosed
investigation regarding the ANCURE ENDOGRAFT System product line for the treatment of AAA.
The Company subsequently has been served with a number of products and securities class
action cases, as well as derivative suits. The plea and subsequent proceedings are further
described in Part II, Item I, to this filing, and the description is incorporated herein
by reference.

On July 1, 2003, the Company
announced that it and its EVT subsidiary had entered a Corporate Integrity Agreement with
the Office of Inspector General of the U.S. Department of Health and Human Services. Under
the terms of the agreement, the Company will enhance its compliance programs including a
focus on comprehensive policies, procedures and training. Training will include adverse
event reporting, complaint and medical device reporting (MDR) processes and corrective and
preventive action processes. In addition, Guidants EVT subsidiary has additional
compliance activities. The agreement has a five-year term.

---

# Income Tax

The income tax rates for the quarters
ended June 30, 2003 and 2002, were 53.9% ($93.2 million tax benefit) and 29.5% ($90.8
million tax expense). The income tax rates for the six-month periods ending June 30, 2003
and 2002, were 75.9% ($34.1 million tax benefit) and 26.0% ($142.2 million tax expense).
The change in the income tax rates in 2003 is due to litigation and IPRD charges in 2003
that are tax-deductible at U.S. tax rates.  Guidant's ongoing operations are
impacted by overseas operations that operate in jurisdictions having statutory tax rates
that are lower than the U.S. statutory tax rates.

# Discontinued Operation

In June 2003, Guidants Board of
Directors approved a plan to dispose of the ANCURE ENDOGRAFT System product line to treat
AAA due to continuing financial losses, limited prospects for the Companys AAA
product line and the impact of the Department of Justice investigation. The disposal plan
consists primarily of the termination of normal activity, abandonment of property and
equipment, product returns, collection of receivables and settlement of liabilities.
Guidant has written down long-lived assets to their fair value and recorded inventory and
accounts receivable at net realizable value. Management expects the disposal process to be
completed no later than June 2004.

The accompanying consolidated
financial statements and notes reflect the results of operations and financial position of
AAA as a discontinued operation for all periods presented. The net loss from discontinued
operations includes charges related to the impairment of certain long-lived assets,
inventory write-downs and accruals for employee severance and lease commitments. A
liability of $19.0 million remains at June 30, 2003. The accrual for the ANCURE-related
investigation of $30.0 million at December 31, 2002, was increased to $92.0 million in
March 2003. Guidant paid $92.4 million in June 2003.

The following summarizes financial
information for the AAA product line (in millions):

|                                                      | Three Months EndedJune 30, | Six Months EndedJune 30,
|----------------------------------------------------- | -------------------------- | ------------------------
|
|Net sales                                             |                            | $  3.1                  
|Loss from discontinued operations before income taxes |                            | 44.8                    
|Net loss from discontinued operations                 |                            | 17.4                    

---

# LIQUIDITY AND FINANCIAL
CONDITION

|                              | June 30, 2003 | December 31, 2002
|----------------------------- | ------------- | -----------------
|(Dollars in millions)         |               |                  
|Cash and cash equivalents (1) |               | $  1,190.4       
|Working capital               |               | $  1,458.1       
|Current ratio                 |               | 2.3:1.0          
|Net cash position (2)         |               | $     770.1      
|Days receivable outstanding   |               | 71               
|Inventory turnover            |               | 2.80             

(1)     

          A substantial portion of cash and cash equivalents is held as a permanent
          investment by Guidants non-U.S. subsidiaries.
(2)     Net cash position is the sum of cash and cash equivalents and short-term
          investments less total debt.

The Company believes its cash from
operations is adequate to meet anticipated working capital needs. Certain of
Guidants acquisitions involve contingent consideration. Payment of the additional
consideration is generally contingent upon the acquired companies reaching certain
performance-related milestones, including specified revenue levels, product development
targets or regulatory approvals or filings. At June 30, 2003, Guidants accrual for
milestone obligations totaled $10.8 million, which will be paid during the next four
years. In addition, future undiscounted contingent consideration for performance-related
milestones on acquisitions of up to $315.0 million could be paid through 2010, depending
on when and if milestones are attained. Potential milestone payments under existing
agreements during the next 12 months range from $2.5 million to $30.0 million. The Company
continues to evaluate business development opportunities, which may require additional
commitments of cash in the future.

# Summary of Cash Flows

|                                          | Six Months EndedJune 30, |        
|----------------------------------------- | ------------------------ | -------
|
|(In millions)                             |                          |        
|Net cash provided by (used for):          |                         
|Operating activities                      |                          | $ 243.5
|Investing activities                      |                          | (230.7)
|Financing activities                      |                          | 80.2   
|Effect of exchange rate changes on cash   |                          | 82.6   
|                                          |                          |        
|Net increase in cash and cash equivalents |                          | $ 175.6
|                                          |                          |        

---

Net cash provided by operating
activities was $243.5 million for the first six months of 2003, a decrease of $301.4
million from the comparable period in 2002 primarily due to:

| |  | $299.0 million decrease in
net income (loss), adjusted for noncash items, in the first six months of 2003 compared to
2002
| | - | --------------------------------------------------------------------------------------------------------------------------

| |  | $61.3 million decrease in accounts payable and accrued liabilities primarily due to
increased performance-based employee bonus payouts in 2003 compared to 2002
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | $216.3 million decrease in taxes
payable due to net loss in 2003 compared to net income in 2002
| | - | -----------------------------------------------------------------------------------------------

| |  | Decreases in other liabilities including $50.0 million termination fee to Cook, Incorporated and $30.0
million ANCURE litigation accrual, both of which were incurred in 2002 and paid in 2003 (remaining ANCURE
litigation of $62.4 million accrued and paid in 2003) and $40.0 million Guidant Foundation
contribution accrued in 2002
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

partially offset by:

| |  | $425.0 million increase in other liabilities for the Cordis accrual
| | - | -------------------------------------------------------------------

Net cash used for investing
activities was $230.7 million for the first six months of 2003, an increase of $137.2
million from the prior year due to the following:

| |  | $57.1 million primarily related to the
termination of a lease and purchase of the related land and buildings
| | - | ------------------------------------------------------------------------------------------------------------

| |  | $27.6 million for
the asset purchase and related milestone payment to Biosensors
| | - | --------------------------------------------------------------------------------

| |  | $10.0 million for the
purchase of Bioabsorable Vascular Solutions
| | - | -----------------------------------------------------------------

| |  | $63.6 million for the acquisition of X
Technologies, Inc.
| | - | ---------------------------------------------------------

Net cash provided by financing
activities was $80.2 million for the first six months of 2003, compared to net cash used
of $260.7 million in the prior year, a change of $340.9 million due to the following:

| |  | $62.2 million increase in borrowings in 2003 compared to net payments of $287.3 in 2002
| | - | ---------------------------------------------------------------------------------------

| |  | $16.3 million increase in issuances of common stock for stock option exercises
| | - | ------------------------------------------------------------------------------

partially
offset by:

| |  | $24.6 million in dividend payments in 2003
| | - | ------------------------------------------

The effect of exchange rate changes
on cash increased $23.0 million for the six months ended June 30, 2003, compared to the
same period in 2002 primarily due to the strengthening of the Euro and Guidants
increasing cash levels offshore. Effective January 1, 2003, Guidants manufacturing
affiliate in Ireland changed from Euro to U.S. dollar functional currency since the
majority of transactions are now denominated in U.S. dollars.

---

At June 30, 2003, the Company had
outstanding borrowings of $430.6 million at a weighted average interest rate of 2.55%,
including the effect of interest rate swap agreements. Outstanding borrowings included
short-term bank borrowings and commercial paper of $72.8 million, along with long-term
notes of $357.8 million, which include interest rate swap agreements valued at $9.3
million, due 2006. At June 30, 2003, Guidant had interest rate swap agreements with a
notional amount of $350.0 million, converting the fixed interest rate to a variable
interest rate indexed to LIBOR. Bank borrowings represent short-term uncommitted credit
facilities with various commercial banks, primarily outside the U.S. At June 30, 2003, the
Company had a $400.0 million credit facility that permits borrowings through August 2003
and a $400.0 million credit facility that permits borrowings through August 2007. There
are currently no outstanding borrowings under these arrangements, which carry a variable
rate of interest.

The Company believes that amounts
available through existing commercial paper programs and cash and cash equivalent balances
will be adequate to fund maturities of short-term borrowings, obligations to make interest
payments on its debt and other anticipated operating cash needs for the remainder of 2003,
including planned capital expenditures of approximately $110.0 million.

The Company has recognized net
deferred tax assets aggregating $291.8 million at June 30, 2003, compared to $263.9
million at December 31, 2002. In view of the consistent profitability of its past
operations, the Company believes that these assets will be substantially recovered and
that no significant additional valuation allowances are necessary.

# Significant Accounting
Policies

It is important to understand
Guidants accounting policies in order to understand its financial statements. The
most significant policies are described in Note 2 and elsewhere in the Notes to the
Consolidated Financial Statements in the Companys latest Annual Report on Form 10-K.

In preparing the financial statements
in accordance with generally accepted accounting principles, management must often make
estimates and assumptions that affect the reported amounts of assets, liabilities,
revenues, expenses and related disclosures at the date of the financial statements and
during the reporting period. Some of those judgments can be subjective and complex.
Consequently, actual results could differ from those estimates. The accounting policies
that are most subject to important estimates or assumptions include those described below.
The Notes to the Consolidated Financial Statements in our latest Annual Report on Form
10-K described above and this 10-Q provide additional information about managements
evaluation of these items.

Guidant continually evaluates the
accounting policies and estimates it uses to prepare the consolidated financial
statements. In cases where management estimates are used, they are based on historical
experience, information from third-party professionals, and various other assumptions
believed to be reasonable.

Inventory Reserves  The
Company values its inventory at the lower of cost, determined on a first-in, first-out
method, or market. Reserves are estimated for excess, slow moving and obsolete inventory
as well as inventory with a carrying value in excess of its net realizable value. The
Company reviews inventory on hand at least quarterly and records provisions for excess and
obsolete inventory based on several factors, including current assessment of future
product demand, anticipated release of new products into the market, historical experience
and product expiration. The Companys industry is characterized by rapid product
development and frequent new product introductions. Uncertain timing of product approvals,
variability in product launch strategies, product recalls and variation in product
utilization all impact the estimates related to excess and obsolete inventory.

---

Product Warranties 
Provisions for estimated expenses related to product warranties are recorded at the time
the products are sold. Estimates for warranty costs are calculated based primarily upon
historical warranty experience, but may include assumptions related to anticipated changes
in warranty costs and product reliability rates. Assumptions and historical warranty
experience are evaluated on at least a quarterly basis to determine the continued
appropriateness of such assumptions. Warranty cost accruals are adjusted from time to time
when warranty claim experience differs from estimates.

Valuation of Purchased In-Process
Research and Development (IPRD), Goodwill and Other Intangible Assets  When a
business combination occurs, the purchase price is allocated based upon the fair value of
tangible assets, intangible assets, IPRD and goodwill as required by SFAS 141, Business
Combinations. The Company recognizes IPRD in business combinations for the portion of
the purchase price allocated to the appraised value of in-process technologies, defined as
those technologies relating to products that have not received FDA approval and have no
alternative future use. The portion assigned to in-process technologies excludes the value
of core and developed technologies, which are recognized as intangible assets when
purchased. Valuations require the use of significant estimates. The amount of the purchase
price allocated to IPRD is determined by estimating the future cash flows of the
technology and discounting the net cash flows back to their present values. Goodwill
represents the excess of cost over the fair value of identifiable net assets of the
business acquired and the amount allocated to IPRD. The methodologies used in arriving at
these estimates are in accordance with accepted valuation methods.

Goodwill is required to be tested for
impairment annually, or more frequently if changes in circumstances or the occurrence of
events suggest impairment exists. The test for impairment requires us to make several
estimates about fair value, most of which are based on projected cash flows. Furthermore,
our projections of future cash flows require several estimates, including the expected
life cycles of the technologies acquired. Our estimates associated with goodwill
impairment tests are considered to be significant due to the judgment required in
determining fair value amounts, including projected future cash flows.

Income Taxes  Guidant
operates in multiple tax jurisdictions with different tax rates and must determine the
allocation of income to each of these jurisdictions based on estimates and assumptions. In
the normal course of business, the Company will undergo scheduled reviews by taxing
authorities regarding the amount of taxes due. These reviews include questions regarding
the timing and amount of deductions and the allocation of income among various tax
jurisdictions. Tax reviews often require an extended period of time to resolve and may
result in income tax adjustments if changes to the allocation are required between
jurisdictions with different tax rates.

Legal Proceedings and Other Loss
Contingencies  The Company is subject to various legal proceedings, many
involving routine litigation incidental to the business. Other matters contain allegations
that are not routine and involve compensatory, punitive or treble damage claims, or claims
for injunctive relief related to alleged infringement of a third partys patents, or
seek declarations affecting the validity of the Companys patents. Litigation
outcomes are not within the Companys complete control, are difficult to predict and
often are resolved over long periods of time. Estimating probable losses requires the
analysis of multiple possible outcomes that often depend on judgments about potential
actions by third parties. Loss contingencies are recorded as liabilities in the
consolidated financial statements when it is both i) probable or known that a liability
has been incurred, and ii) the amount of the loss is reasonably estimable, in accordance
with SFAS 5, Accounting for Contingencies. If the reasonable estimate of a probable
or known loss is a range and no amount within the range is a better estimate, the minimum
amount of the range is recorded as a liability. If a loss contingency is not probable or
not reasonably estimable, a liability is not recorded in the consolidated financial
statements.

---

# Field Actions

As further described in the
Companys Annual Report on Form 10-K and Exhibit 99 to this filing, the medical
device industry is subject to substantial regulation, including by the FDA and comparable
international agencies. In addition to requiring clearance or approval to market new or
improved devices, the Company is subject to regulation as a device manufacturer.
Regulations cover many aspects of the Companys operations, including quality
systems, marketing and device reporting.

From time to time, the Company
initiates field actions with respect to market-released products. These actions may
include product recalls or communications with a significant number of physicians about a
product or labeling issue. The scope of such actions can range from very minor issues
affecting a small number of units to more significant actions.

Announced field actions since the
Companys last filing on Form 10-Q include the following:

In June 2003, the Company took action
on a unique PULSAR MAX II Pacemaker failure that occurred in Japan. The Companys
quality system isolated the cause to an incomplete electrical connection resulting from a
single manufacturing operation that potentially affected 115 devices. The Company
voluntarily removed all potentially affected non-implanted devices. The Company also
communicated the very low risk of this issue to physicians monitoring patients with
potentially affected implanted devices and provided recommendations to ensure appropriate
patient care. No serious injuries have been reported as a result of this situation.

A shipment to a Guidant subsidiary
contained a small number of MULTI-LINK ZETA Coronary Stents that had a packaging defect.
There were no patients affected by this issue and the affected product was recovered.

In August 2003, the Company informed
regulatory authorities and is in the process of advising physicians concerning steps
physicians should consider to assure a consistent and quality end-of-service experience
with VIGOR® Pacemakers. The communication provides information regarding device
behavior as well as options for best managing patients with VIGOR Pacemakers, including
follow-up considerations or the potential replacement of the device as it approaches
end-of-service. These measures address pauses in pacing that can only arise upon
programmer interaction with the device or through electrocautery use near the device.
There have been no reports of serious injury related to these behaviors. VIGOR Pacemakers
were distributed from August 1994 to June 2002.

In July 2003, Guidant voluntarily
issued an advisory notice to European physicians reinforcing points in the instructions
for use for the RX ACCUNET Embolic Protection System and is planning to update the product
labeling. Guidant took this action after receiving notice of one instance in the U.S. in
which the RX ACCUNET filter basket detached from the guide wire after becoming entangled
in a stent. The RX ACCUNET is available for commercial distribution in Europe and is in
clinical studies in the U.S. as well as selected sites in Europe for use in capturing
embolic debris released during carotid stenting procedures. No serious injuries have been
reported as a result of this situation.

---

# Cautionary Factors

This report includes forward-looking
statements, including statements concerning accounting estimates, expectations with
respect to announced transactions and related milestone payments, anticipated litigation
and field action outcomes and related reserves, sales trends, recovery of tax assets, cash
flows and the timing of product developments (particularly with respect to clinical trials
and product launch dates for stents).  The statements are based on assumptions about many
important factors, including assumptions concerning:

| |  | The development of the coronary stent market, including the effects of the introduction of
drug eluting stents by the Companys competitors, which has affected the market for
coronary stents generally.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | The effects of operating in a highly regulated industry, the necessity for appropriate
reimbursement of therapies and the significance of legal matters in Guidants
industry.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Other factors included on Exhibit
99 to this filing, which is incorporated herein by reference.
| | - | -----------------------------------------------------------------------------------------------

Actual results may differ materially.
The Company does not undertake to update its forward-looking statements.

---

# Item 4. Controls and
Procedures

An evaluation was carried out, under
the supervision of and with the participation of the Companys management, including
the Companys chief executive officer (CEO) and chief financial officer (CFO), of the
effectiveness of the Companys disclosure controls and procedures as of the end of
the period covered by this report. Based on the evaluation, the CEO and CFO have concluded
that the Companys disclosure controls and procedures are effective.

There was no change in the
Companys internal control over financial reporting during the Companys most
recently completed fiscal quarter that has materially affected, or is reasonably likely to
materially affect the Companys internal control over financial reporting.

# Submission of Matters to
a Vote of Security-Holders

The Companys Annual Meeting of
Shareholders was held on May 19, 2003. The following matters were voted on at the meeting:

Election of Directors:

|NAME               | FOR | WITHHELD   
|------------------ | --- | -----------
|James M. Cornelius |     | 263,182,088
|Michael Grobstein  |     | 235,730,641
|Mark Novitch, M.D. |     | 263,292,189
|Eugene L. Step     |     | 262,990,338

Ratification of the appointment of
Ernst & Young LLP as independent auditors for the year 2003:

|For     |  | 232,524,610 | 
|------- |  | ----------- | 
|Against |  | 32,378,579  | 
|Abstain |  | 1,583,977   | 

Thus, each listed director was
elected to a three-year term, and the appointment of auditors was ratified.

---

# PART II

# OTHER INFORMATION

# Item 1. Legal Proceedings

A discussion of the Companys
policies with respect to legal proceedings and other loss contingencies is provided in
Significant Accounting Policies of Managements Discussion and
Analysis of Results of Operations and Financial Condition.

The Company is involved in various
patent, product liability, commercial, shareholder, and other legal proceedings that arise
from time to time in the course of the Companys business. The Company believes that
it is not currently involved in legal proceedings other than those identified below that
could reasonably be expected to have a material effect on the financial condition or
results of operations of the Company. Nevertheless, litigation is inherently
unpredictable, and excessive verdicts do occur. Although the Company believes that it has
valid defenses in the matters identified below (subject to the settlements, decisions and
accruals described below), the Company could in the future incur material judgments or
enter into material settlements of claims.

Patent claims include challenges to
the coverage and/or validity of the Companys patents on various products or
processes as well as allegations that the Companys products infringe patents held by
competitors or other third parties. Although the Company believes that it has valid
defenses to these challenges with respect to material patents, there can be no assurance
as to the outcome of these matters, and a loss in any of these cases could result in a
loss of patent protection or the ability to market products, which could lead to a
significant loss of sales, or otherwise materially affect future results of operations.

On October 3, 1997, Cordis
Corporation (Cordis), a subsidiary of Johnson & Johnson, filed suit against the
Company, alleging that the sale of the Companys stent products infringes the
Palmaz/Schatz patents owned by Cordis. On April 3, 2000, the parties agreed to dismiss all
patent litigation between them and resolve remaining disputes in arbitration proceedings.
As part of the agreement, each party received licenses to the others patents
involved in the disputes; thus, future sales of the Companys products are not
affected by the resolution of this matter. On June 5, 2003, the arbitration panel entered
a preliminary finding that the Companys MULTI-LINK DUET Coronary Stent System
infringes certain claims under the patents owned by Cordis. The Company has requested
additional review of the findings by the arbitration panel. A final decision is expected
in August 2003. If the panel upholds its decision following further review, the Company
will make a payment of $425.0 million to Cordis in the fourth quarter of 2003. The Company
accrued the amount of the award in the second quarter of 2003.

In a separate arbitration, the
Company asserted claims against Cordis under the Companys Lau/Lam patents. The
arbitration process commenced in the first quarter of 2002, with the Company asserting
claims under U.S. patents 5,514,154 and 6,066,167 relating to Cordis BX VELOCITY and
OMNI BX stents. A preliminary arbitration decision is expected in early 2004.

On February 18, 1998, Arterial
Vascular Engineering, Inc. (now known as Medtronic AVE, Inc.), filed suit against the
Companys subsidiary, Advanced Cardiovascular Systems, Inc. (ACS), in the District
Court for Delaware alleging that the sale of the ACS MULTI-LINK Coronary Stent System
infringes certain patents owned by Medtronic AVE. The suit is consolidated with a suit by
ACS alleging infringement by Medtronic AVE of certain ACS stent patents. The Medtronic AVE
complaint also alleges misappropriation of trade secrets and breach of a confidentiality
agreement by ACS. In the lawsuit, Medtronic AVE is seeking injunctive relief, co-ownership
of the patents, monetary damages and a ruling that the ACS stent patents asserted against
Medtronic AVE are invalid.

On June 15, 2000, Medtronic, Inc.
(Medtronic) filed a declaratory judgment action against the Company and its Cardiac
Pacemakers, Inc. (CPI) subsidiary in the District Court for Minnesota requesting that the
court rule that Medtronic does not infringe certain of CPIs patents for atrial
fibrillation technology or that the patents are not valid. Subsequently, the Company
asserted additional patents related to atrial fibrillation technology against Medtronic in
the same court. Currently, eight patents are being asserted against Medtronic in this
consolidated litigation. Pretrial matters are scheduled through 2003.

On March 6, 2002, Pacesetter, Inc.
(Pacesetter), a subsidiary of St. Jude Medical, Inc. (St. Jude), filed suit against
the Companys subsidiaries, CPI and Guidant Sales Corporation (GSC), in the Central
District of California alleging that CPI and GSC have infringed Pacesetter patents
covering various features of pacemakers and implantable defibrillators. On the
Companys motion, the case has been transferred to the District Court for Minnesota.
Currently four patents are at issue. Pacesetter is seeking injunctive relief, monetary
damages and attorney fees. Pretrial matters are scheduled through 2003.

On December 3, 2002, the Company
filed suit against Boston Scientific Corporation (Boston Scientific) in the Northern
District of California claiming that Boston Scientifics Express 2 Monorail stent
system infringes the Companys Lau patent directed to a rapid exchange stent delivery
system. Boston Scientific subsequently filed a counterclaim alleging that the
Companys products infringe five of Boston Scientifics patents relating to
balloon dilatation. The parties are seeking injunctive relief and monetary damages. On
July 2, 2003, the court ruled that certain defenses raised by Boston Scientific are
subject to an arbitration provision in a prior settlement agreement between the Company
and Boston Scientific. As a result, the court issued a stay of the litigation, including
Boston Scientifics claims against the Company, pending the outcome of the
arbitration.

On December 30, 2002, Boston
Scientific filed suit against the Company in the Northern District of California alleging
that the sale of the Companys stent delivery systems and balloon catheter
angioplasty products, including the MULTI-LINK ZETA, MULTI-LINK PENTA and AGIL-TRAC
products, infringe certain patents owned by Boston Scientific. In the lawsuit, Boston
Scientific is seeking injunctive relief and monetary damages.

On April 14, 2003, Medinol Ltd. filed
suit against the Company and its ACS subsidiary in the Southern District of New York
alleging that the sale of the Companys MULTI-LINK ZETA and MULTI-LINK PENTA products
infringe five Medinol patents related to stent design. The complaint seeks injunctive
relief and monetary damages.

On June 12, 2003, the Company
announced that its subsidiary, EndoVascular Technologies, Inc. (EVT), had entered into a
settlement with the U.S. Department of Justice, relating to the previously disclosed
investigation regarding the ANCURE ENDOGRAFT System for the treatment of abdominal aortic
aneurysms. Under the terms of the agreement, EVT plead guilty to 10 felony counts,
including nine for shipping misbranded products and one involving false statements to the
government. EVT agreed to fines and forfeitures totaling $43.4 million and an additional
$49.0 million civil settlement payment to the government. The expenses associated with
this settlement were recorded in prior periods.

As previously announced, prior to the
EVT plea, the Company had been served with a number of individual suits alleging product
liability related causes of action relating to the ANCURE System. Subsequent to the EVT
plea, the Company has been served with a small number of complaints and additional such
suits may be filed. The Company has also been served with three putative class action
complaints in the Northern District of California. These cases generally allege that
plaintiffs suffered physical injury or death as a result of purported defects in the
device or the accompanying warnings and labeling. The complaints seek damages, including
punitive damages, and injunctive relief.

Also following the EVT plea, the
Company has been served with a number of securities class action complaints and
shareholder derivative suits relating to the ANCURE System. The securities complaints have
been filed against the Company, EVT and certain of their current and former officers and
directors in the Southern District of Indiana. Generally, the complaints allege that
during all or a portion of the period from June 23, 1999 through June 12, 2003 public
statements by the Company relating to the ANCURE System were false and misleading. The
complaints seek damages on behalf of persons who purchased or otherwise acquired Company
shares during that period.

The derivative suits currently are
pending in the Southern District of Indiana, in the Superior Court of the State of
California, County of San Mateo, and in the Superior Court of the State of Indiana, County
of Marion. The suits, purportedly filed on behalf of the Company (and EVT in the California matter), generally allege that
the Companys directors (in addition to EVT's officers and directors in the California matter) breached their
fiduciary duties by taking improper steps or failing to take steps to prevent the ANCURE
and EVT related matters described above. The complaints seek damages and other equitable
relief. The California matter also includes state-law allegations of unfair trade and
business practices relating to alleged defects with the product. Further, a second
complaint has been filed in the Superior Court of the State of California, County of San
Mateo, naming only the Company and EVT, which also includes state-law allegations of
unfair trade and business practices relating to sales of the product.

Anna Mirowski, Eli Lilly and Company
and two Guidant subsidiaries, GSC and CPI, are plaintiffs in a patent infringement suit
originally filed against St. Jude and its affiliates in November 1996 in the District
Court in Indianapolis. The suit alleges that St. Judes defibrillator products
infringe patents licensed to CPI. In July 2001, a jury found that two of the licensed
patents were valid and that St. Jude had infringed one, a patent that expired in March
2001. The jury awarded damages of $140 million against St. Jude. The Company did not
record a gain. On February 13, 2002, the court, in ruling on a number of post-trial
motions, reversed each of the three-jury findings above, along with the jury award. The
court awarded St. Jude certain post-trial fees and costs (in an immaterial amount), along
with contingent expenses and attorney fees upon any retrial of the case if a retrial is
required following any appeal of the courts rulings. The plaintiffs appeal is
pending in the Federal Circuit Court of Appeals.

As further described in the
Companys filing on Form 10-K, litigation between Cook Incorporated (Cook) and Boston
Scientific concerning agreements between Cook and the Company relating to paclitaxel was
appealed to the Court of Appeals for the Seventh Circuit. On June 19, 2003, that court
affirmed, with modifications, a district court injunction prohibiting certain performance
under the agreements.

---

# Item 6. Exhibits and
Reports on Form 8-K.

(a)       
          Exhibits. The Exhibit Index is incorporated herein by reference.

(b)       
                    Reports on Form 8-K. During the quarter for which this Report on Form 10-Q is
                    filed, the Registrant filed four Current Reports on Form 8-K: (i) filing dated
                    April 16, 2003, describing pursuant to Item 12 the Companys earnings
                    release of the same date; (ii) filing dated June 5, 2003, describing pursuant to
                    Item 5 the Companys press release of the same date announcing the
                    preliminary result in the Cordis arbitration further described in this 10-Q
                    filing; (iii) filing dated June 16, 2003, describing pursuant to Item 5 and
                    furnishing pursuant to Item 12 the Companys press release of the same date
                    announcing the Companys exit of its AAA product line; and (iv) filing
                    dated June 18, 2003, furnishing pursuant to Item 12 schedules reflecting the
                    reclassification in accordance with generally accepted accounting principles of
                    certain of the Companys financial statements in connection with
                    discontinued operations relating to the exit of the AAA product line.

---

# 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(Registrant)
|----- |  | --------------- | -------------------------------
|     
|     
|Date: |  | August 14, 2003 |                                
|      |  |                 |                                
|      |  |                 |                                
|      |  |                
|Date: |  | August 14, 2003 |                                
|      |  |                 |                                
|      |  |                 |                                
|      |  |                 |                                

---

# EXHIBIT INDEX

Exhibit 31.1:    Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of Ronald W. Dollens

Exhibit 31.2:    Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of Keith E. Brauer

Exhibit 32.1:    Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of Ronald W. Dollens

Exhibit 32.2:    Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of Keith E. Brauer

Exhibit 99:     Factors
Possibly Affecting Future Operating Results