UNITEDTable STATESof SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Contents

~~FORM~~UNITED ~~10-Q~~STATES SECURITIES AND EXCHANGE COMMISSION

~~QUARTERLY~~Washington, ~~REPORT PURSUANT~~D.C. ~~TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT~~20549 ~~OF 1934~~

~~For~~FORM ~~the quarterly~~10-Q ~~period ended June 30, 2004~~

~~Commission~~QUARTERLY ~~File~~REPORT ~~Number~~PURSUANT TO SECTION 13 OR 15(d) OF THE ~~1-13388~~SECURITIES EXCHANGE ACT OF 1934

~~GUIDANT~~For ~~CORPORATION(Exact~~the ~~name~~quarterly ~~of Registrant~~period asended ~~specified~~June 30, ~~in its charter)~~ 2005

~~INDIANA(State~~Commission orFile ~~other~~Number ~~jurisdiction ofincorporation or organization) 35~~1-~~1931722(I.R.S. EmployerIdentification No.)~~13388

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

~~Registrant’s telephone~~(Exact ~~number,~~name ~~including~~of ~~area~~Registrant ~~code:~~as ~~(317)~~specified ~~971-2000~~in its charter)

~~Indicate~~INDIANA ~~by check mark whether the Registrant~~ (1)State ~~has filed all reports required to be filed by Section 13~~ or ~~15(d)~~other ofjurisdiction ~~the Securities Exchange Act~~ of ~~1934~~incorporation ~~during the preceding 12 months (~~or ~~for such shorter period that the Registrant was required to file such reports~~organization), ~~and~~35-1931722 (2)I.R.S. ~~has~~Employer ~~been~~Identification ~~subject to such filing requirements for the past 90 days~~No. )

~~Yes X No~~111 ~~_____~~MONUMENT CIRCLE, 29TH FLOOR INDIANAPOLIS, INDIANA 46204-5129 (Address of principal executive offices)

~~Indicate~~Registrant’s bytelephone ~~check~~number, ~~mark~~including ~~whether~~area ~~the registrant~~code: ~~is an accelerated filer~~ (~~as defined in Rule 12b-2 of the Exchange Act~~317). 971-2000

~~Yes X No~~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.

~~The number of shares of common stock~~Yes ~~outstanding~~þ asNo ~~of August 4, 2004:~~ o

Class		Number of Shares Outstanding
Common		314,576,547

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

~~PART~~Yes þ ~~IFINANCIAL~~No ~~INFORMATION~~o

~~Item~~The 1.number ~~Financial~~of ~~Statements~~shares of common stock outstanding as of August 3, 2005:

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


Class		Number of Shares Outstanding
Common		330,033,634

	Three Months EndedJune 30,		Six Months EndedJune 30,
	2004	2003	2004	2003
Net sales	$ 938.8	$ 926.6	$ 1,872.9	$ 1,784.5
Cost of products sold	234.6	224.5	460.9	429.6
Gross profit	704.2	702.1	1,412.0	1,354.9
Research and development	136.8	129.4	274.4	242.2
Purchased in-process research and development	73.0	12.0	99.8	48.5
Sales, marketing and administrative	298.1	297.2	612.8	566.2
Interest, net	(0.2)	(2.5)	(1.2)	(3.9)
Royalties, net	12.5	15.7	24.6	29.0
Amortization	7.7	3.3	15.0	6.5
Other, net	6.4	0.4	8.9	5.7
Litigation, net	--	422.8	--	422.8
Income (loss) from continuing operations before income taxes	169.9	(176.2)	377.7	37.9
Income taxes	34.3	(94.4)	89.1	(36.7)
Income (loss) from continuing operations	135.6	(81.8)	288.6	74.6
Loss from discontinued operations, net of income taxes	(9.1)	(15.3)	(22.7)	(78.3)
Net income (loss)	$ 126.5	($ 97.1)	$ 265.9	($ 3.7)
Earnings (loss) per share-basic
Income (loss) from continuing operations	$ 0.44	($ 0.27)	$ 0.93	$ 0.25
Loss from discontinued operations, net of income taxes	(0.03)	(0.05)	(0.07)	(0.26)
Net income (loss)	$ 0.41	($ 0.32)	$ 0.86	($ 0.01)
Earnings (loss) per share-diluted
Income (loss) from continuing operations	$ 0.42	($ 0.27)	$ 0.90	$ 0.24
Loss from discontinued operations, net of income taxes	(0.03)	(0.05)	(0.07)	(0.25)
Net income (loss)	$ 0.39	($ 0.32)	$ 0.83	($ 0.01)
Dividends declared per common share	$ 0.10	--	$ 0.20	$ 0.08

TABLE OF CONTENTS

See notes to consolidated financial statements


PART I FINANCIAL INFORMATION
	Item 1. Financial Statements
	Item 2. Management’s Discussion and Analysis of Results of Operations and Financial Condition
	Item 4. Controls and Procedures
PART II OTHER INFORMATION
	Item 1. Legal Proceedings
	Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities
	Item 4. Submission of Matters to a Vote of Security Holders
	Item 6. Exhibits
SIGNATURES
EXHIBIT INDEX
Section 302 Certification
Section 302 Certification
Section 906 Certification
Section 906 Certification
Exhibit 99

GUIDANTTable CORPORATIONof Consolidated Balance Sheets (In millions, except share data) Contents

	June 30, 2004 (unaudited)	December 31, 2003
Assets
Current Assets
Cash and cash equivalents	$1,690.4	$1,468.2
Short-term investments	100.6	--
Accounts receivable, net of allowances
of $23.5 (2004) and $24.0 (2003)	826.9	822.9
Inventories	398.0	401.9
Deferred income taxes	289.0	313.2
Prepaid expenses and other current assets	57.8	57.7
Current assets of discontinued operations	3.6	16.0
Total Current Assets	3,366.3	3,079.9
Other Assets
Goodwill, net of allowances of $157.9 (2004) and $157.9 (2003)	513.3	512.9
Other intangible assets, net of allowances of $91.1 (2004) and
$81.7 (2003)	179.7	160.8
Deferred income taxes	9.9	0.9
Investments	69.6	55.1
Sundry	65.7	60.9
Other assets of discontinued operations	0.3	20.5
Total Other Assets	838.5	811.1
Property and equipment, net of accumulated depreciation of
$715.9 (2004) and $657.0 (2003)	791.8	749.1
Total Assets	$4,996.6	$4,640.1

PART I FINANCIAL INFORMATION

~~See~~Item 1. ~~notes~~Financial ~~to consolidated financial~~Statements ~~statements~~

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

Liabilities and Shareholders' Equity	June 30, 2004		December 31, 2003
	(unaudited)
Current Liabilities
Accounts payable	$ 57.0		$ 85.7
Employee compensation	140.4		198.7
Other liabilities	308.2		306.9
Income taxes payable	203.9		197.2
Short-term debt	250.0		250.0
Current liabilities of discontinued operations	25.4		23.9
Total Current Liabilities	984.9		1,062.4
Noncurrent Liabilities
Long-term debt	704.1		698.3
Other	156.6		166.1
Total Noncurrent Liabilities	860.7		864.4
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: 314,844,000 (2004)
312,129,000 (2003)	384.3		301.5
Additional paid-in capital	252.3		242.4
Retained earnings	2,462.5		2,258.9
Deferred cost, ESOP	(14.7	)	(17.1	)
Unearned compensation	(50.8	)	(25.2	)
Treasury stock, at cost:
Shares: 3,158,000 (2003)	--		(171.2	)
Accumulated other comprehensive income	117.4		124.0
Total Shareholders' Equity	3,151.0		2,713.3
Total Liabilities and Shareholders' Equity	$ 4,996.6		$ 4,640.1

Consolidated Statements of Income
(In millions, except per share data)
(unaudited)

See notes to consolidated financial statements


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2005			2004			2005			2004
Net sales	$	974.1		$	938.8		$	1,927.4		$	1,872.9
Cost of products sold		346.2			234.6			571.5			460.9


Gross profit		627.9			704.2			1,355.9			1,412.0

Research and development		143.9			136.8			273.5			274.4
Purchased in-process research and development		10.0			73.0			10.0			99.8
Sales, marketing and administrative		351.8			298.1			662.1			612.8
Interest, net		(12.0	)		(0.2	)		(19.6	)		(1.2	)
Royalties, net		12.3			12.5			25.0			24.6
Amortization		4.8			7.7			12.6			15.0
Other, net		(0.1	)		6.4			(7.2	)		8.9
Impairment charge		—			—			60.0			—


Income from continuing operations before income taxes		117.2			169.9			339.5			377.7

Income taxes		1.1			34.3			46.7			89.1


Income from continuing operations		116.1			135.6			292.8			288.6

Loss from discontinued operations, net of income taxes		(8.8	)		(9.1	)		(23.2	)		(22.7	)


Net income	$	107.3		$	126.5		$	269.6		$	265.9


Earnings per share-basic
Income from continuing operations	$	0.36		$	0.44		$	0.91		$	0.93
Loss from discontinued operations, net of income taxes		(0.03	)		(0.03	)		(0.07	)		(0.07	)

Net income	$	0.33		$	0.41		$	0.84		$	0.86


Earnings per share-diluted
Income from continuing operations	$	0.35		$	0.42		$	0.89		$	0.90
Loss from discontinued operations, net of income taxes		(0.03	)		(0.03	)		(0.07	)		(0.07	)

Net income	$	0.32		$	0.39		$	0.82		$	0.83


Dividends declared per common share	$	0.10		$	0.10		$	0.20		$	0.20

~~GUIDANT~~See ~~CORPORATION~~Notes to Consolidated ~~Statements~~ ofFinancial ~~Cash Flows (In millions) (unaudited)~~ Statements

	Six Months EndedJune 30,
	2004		2003
Operating Activities
Net income (loss)	$ 265.9		($ 3.7	)
Adjustments to Reconcile Net Income (Loss) to Cash
Provided by Operating Activities
Depreciation	69.0		63.0
Amortization of other intangible assets	15.0		6.7
Provision for inventory and accounts receivable	13.2		29.6
Purchased in-process research and development	99.8		48.5
Deferred income taxes	2.9		(16.4	)
Compensation earned under restricted stock and ESOP	44.0		46.9
Other noncash, net	27.8		(46.6	)
	537.6		128.0
Changes in Operating Assets and Liabilities
Receivables	(15.9	)	(37.8	)
Inventories	(12.9	)	(46.9	)
Prepaid expenses and other current assets	(9.9	)	7.7
Accounts payable and accrued liabilities	(80.6	)	(18.0	)
Income taxes payable	80.5		(124.5	)
Other liabilities	(3.3	)	335.0
Net Cash Provided by Operating Activities	495.5		243.5
Investing Activities
Additions of property and equipment, net	(114.6	)	(125.4	)
Acquisitions, net of cash acquired	(99.7	)	(104.8	)
Purchases of equity and short-term investments	(122.8	)	(0.5	)
Net Cash Used for Investing Activities	(337.1	)	(230.7	)
Financing Activities
Increase in borrowings, net	6.1		62.2
Issuance of common stock under stock plans and other capital
transactions	251.1		42.9
Dividends paid	(62.2	)	(24.6	)
Repurchase of common stock	(127.5	)	(0.3	)
Net Cash Provided by Financing Activities	67.5		80.2
Effect of Exchange Rate Changes on Cash	(3.7	)	82.6
Net Increase in Cash and Cash Equivalents	222.2		175.6
Cash and Cash Equivalents at Beginning of Period	1,468.2		1,014.8
Cash and Cash Equivalents at End of Period	$ 1,690.4		$ 1,190.4

SeeTable notesof to consolidated financial statements Contents

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

~~Note~~Consolidated 1Balance –Sheets (In ~~Basis~~millions, ofexcept ~~Presentation~~share data)

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 and footnotes required by generally accepted accounting principles for complete financial statements. 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.


	June 30,		December 31,
	2005		2004

	(unaudited)
Assets

*Current Assets*
Cash and cash equivalents	$	2,022.6	$	1,894.2

Short-term investments		574.6		320.1

Accounts receivable, net of allowances of $19.7 (2005) and $22.0 (2004)		797.2		845.9

Inventories		345.2		353.9

Deferred income taxes		283.0		215.1

Prepaid expenses and other current assets		92.7		78.7

Total Current Assets		4,115.3		3,707.9

*Other Assets*
Goodwill		512.2		511.7

Other intangible assets, net		96.2		168.8

Deferred income taxes		60.8		36.2

Investments		85.9		81.5

Sundry		57.9		57.2

Total Other Assets		813.0		855.4

Property and equipment, net of accumulated depreciation of $827.8 (2005) and $780.4 (2004)		847.1		808.9


Total Assets	$	5,775.4	$	5,372.2

~~For~~See ~~further~~Notes ~~information, including the Company’s significant accounting policies, refer~~ to ~~the~~Consolidated ~~consolidated~~Financial ~~financial~~Statements statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2003. As used herein, the terms “the Company” and “Guidant” mean Guidant Corporation and its consolidated subsidiaries.

~~Certain reclassifications have been~~3 ~~made to prior year amounts to conform to current year presentation (see Note 9).~~

NoteTable 2of – Stock-Based CompensationContents

~~The~~GUIDANT ~~Company has adopted the~~CORPORATION 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 and earnings per share if the Company had applied the fair value recognition provisions of SFAS 123 to all stock-based employee compensation. The fair value of stock options was estimated as of the grant date using the Black-Scholes option-pricing model, the attribution method and a forfeiture rate of 10%. These pro forma amounts may not be representative of the effects on reported net income 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,
	2004	2003		2004	2003
Reported net income (loss) (1)	$ 126.5	($ 97.1	)	$ 265.9	($ 3.7	)
Deduct: Stock-based compensation not reflected in
net income (loss), net of tax	17.6	15.1		28.0	31.0
Pro forma net income (loss)	$ 108.9	($112.2	)	$ 237.9	($34.7	)
Earnings (loss) per share:
Basic--as reported	$ 0.41	($ 0.32	)	$ 0.86	($0.01	)
Basic--pro forma	$ 0.35	($ 0.37	)	$ 0.77	($0.11	)
Diluted--as reported	$ 0.39	($ 0.32	)	$ 0.83	($0.01	)
Diluted--pro forma	$ 0.34	($ 0.37	)	$ 0.74	($0.11	)

Consolidated Balance Sheets
(In millions, except share data)

(1) Reported amounts include expense associated with restricted stock awards.


	June 30,			December 31,
	2005			2004

	(unaudited)
Liabilities and Shareholders’ Equity

*Current Liabilities*
Accounts payable	$	82.7		$	56.2

Employee compensation		114.6			141.3

Other liabilities		327.0			284.8

Income taxes payable		283.1			220.5

Short-term debt		350.3			302.0

Current liabilities of discontinued operations		35.2			23.9

Total Current Liabilities		1,192.9			1,028.7

*Noncurrent Liabilities*
Long-term debt		5.5			357.2

Other		236.8			244.2

Total Noncurrent Liabilities		242.3			601.4

*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: 328,852,000 (2005)
320,692,000 (2004)		890.2			609.1

Additional paid-in capital		530.9			344.6

Retained earnings		2,862.5			2,657.6

Deferred cost, ESOP		(10.6	)		(12.6	)

Unearned compensation		(97.4	)		(36.9	)

Accumulated other comprehensive income		164.6			180.3

Total Shareholders’ Equity		4,340.2			3,742.1


Total Liabilities and Shareholders’ Equity	$	5,775.4		$	5,372.2

OnSee ~~April~~Notes ~~1, 2004, Guidant granted options on approximately 3.1 million shares and 610,000 restricted stock awards~~ to ~~over 2,500~~Consolidated ~~employees.~~Financial ~~Restricted stock awards are expensed ratably over the vesting period.~~Statements Under this program, stock options will vest ratably over three years and the restricted stock awards will vest primarily on April 1, 2007. For certain executive officers, the restricted stock awards vest over six years, but may be accelerated to three-year vesting, in 1/3 increments, upon achievement of 25%, 50% and 75% appreciation of the 60-day moving average stock price from the date of grant ($63.11 on April 1, 2004). Grants may vest earlier upon a qualifying disability, death, retirement or change in control.

~~Note~~4 ~~3 – Inventories~~

InventoriesTable consisted of the following: Contents

	June 30,2004	December 31,2003
Finished products	$191.3	$172.9
Work in process	69.9	81.5
Raw materials and supplies	136.8	147.5
	$398.0	$401.9

GUIDANT CORPORATION

~~Note~~Consolidated 4Statements –of ~~Product~~Cash ~~Warranties~~Flows (In millions) (unaudited)

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 failure rates. Warranty cost accruals are adjusted from time to time when warranty claim experience differs from estimates. A summary of the changes in the product warranty activity is as follows:


	Six Months Ended
	June 30,
	2005			2004

Operating Activities
Net income	$	269.6		$	265.9
Adjustments to Reconcile Net Income to Cash Provided by Operating Activities
Depreciation		74.8			69.0
Amortization of other intangible assets		12.6			15.0
Provision for inventory and accounts receivable		35.6			13.2
Purchased in-process research and development		10.0			99.8
Deferred income taxes		(116.4	)		2.9
Compensation associated with equity programs		59.5			44.0
Impairment charge		60.0			—
Other noncash, net		27.1			27.8

		432.8			537.6

Changes in Operating Assets and Liabilities
Receivables		(3.7	)		(15.9	)
Inventories		(38.6	)		(12.9	)
Prepaid expenses and other current assets		(5.6	)		(9.9	)
Accounts payable and accrued liabilities		(6.8	)		(80.6	)
Income taxes payable		147.4			80.5
Other liabilities		133.4			(3.3	)

Net Cash Provided by Operating Activities		658.9			495.5

Investing Activities
Additions of property and equipment, net		(116.8	)		(114.6	)
Acquisitions, net of cash acquired		(35.0	)		(99.7	)
Net purchases of short-term investments		(254.5	)		(100.7	)
Purchases of equity investments		(6.5	)		(22.1	)

Net Cash Used for Investing Activities		(412.8	)		(337.1	)

Financing Activities
(Decrease) increase in borrowings, net		(303.1	)		6.1
Issuance of common stock under stock plans and other capital transactions		290.8			251.1
Dividends paid		(64.7	)		(62.2	)
Repurchase of common stock		(26.1	)		(127.5	)

Net Cash (Used) Provided by Financing Activities		(103.1	)		67.5

Effect of Exchange Rate Changes on Cash		(14.6	)		(3.7	)


Net Increase in Cash and Cash Equivalents		128.4			222.2

Cash and Cash Equivalents at Beginning of Period		1,894.2			1,468.2


Cash and Cash Equivalents at End of Period	$	2,022.6		$	1,690.4

	Six Months EndedJune 30,
	2004	2003
January 1	$ 22.3	$ 18.8
Provisions for product warranties	4.5	3.3
Settlements during the period	(7.9)	(4.2)
June 30	$ 18.9	$ 17.9

See Notes to Consolidated Financial Statements

~~GUIDANT CORPORATION Notes to Consolidated~~5 ~~Financial Statements~~

NoteTable 5of – Earnings (Loss) Per ShareContents

~~The~~GUIDANT ~~following table sets forth the~~CORPORATION ~~computation of earnings (loss) per share:~~

	Three Months EndedJune 30,		Six Months EndedJune 30,
	2004	2003	2004	2003
Income (loss) from continuing operations	$ 135.6	($81.8)	$ 288.6	$ 74.6
Loss from discontinued operations, net of income taxes	(9.1)	(15.3)	(22.7)	(78.3)
Net income (loss)	$ 126.5	($97.1)	$ 265.9	($ 3.7)
Earnings (loss) per share-basic
Income (loss) from continuing operations	$ 0.44	($0.27)	$ 0.93	$ 0.25
Loss from discontinued operations, net of income taxes	(0.03)	(0.05)	(0.07)	(0.26)
Net income (loss)	$ 0.41	($0.32)	$ 0.86	($ 0.01)
Earnings (loss) per share-diluted
Income (loss) from continuing operations	$ 0.42	($0.27)	$ 0.90	$ 0.24
Loss from discontinued operations, net of income taxes	(0.03)	(0.05)	(0.07)	(0.25)
Net income (loss)	$ 0.39	($0.32)	$ 0.83	($ 0.01)
Weighted average common shares outstanding	310.91	304.52	309.70	303.86
Effect of dilutive stock options and unvested restricted
stock awards	9.24	--	9.65	6.11
Weighted average common shares outstanding
and assumed conversions	320.15	304.52	319.35	309.97

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

~~Total~~Note ~~options~~1 ~~outstanding~~– atBasis June 30, 2004 and 2003 were 41.2 million and 48.3 million. Earnings per share-diluted includes 37.8 million and 39.5 million stock options for the three- and six-month periods ended June 30, 2004 and includes 22.2 million stock options for the six-month period ended June 30, 2003. Stock options with an exercise price greater than the average market value stock price for the period were excluded from the calculation of ~~earnings per share-diluted because~~Presentation including them would have had an anti-dilutive impact. All stock options were excluded from loss per share-diluted for the three-month period ended June 30, 2003, as the impact would have been anti-dilutive.

~~Note~~The 6accompanying –unaudited ~~Comprehensive~~consolidated ~~Income~~financial statements have been prepared in accordance with accounting principles generally accepted in the United States 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 and footnotes necessary for fair presentation of financial position, results of operations, and cash flows in conformity with accounting principles generally accepted in the United States. 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 (~~Loss~~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 accounting principles generally accepted in the United States 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.

~~Comprehensive~~For ~~income~~further ~~(loss)~~information, ~~is comprised~~including ofthe ~~net~~Company’s ~~income~~significant ~~(loss)~~accounting ~~adjusted~~policies, ~~for~~refer ~~changes~~to ~~in foreign currency translation~~the ~~adjustments~~consolidated ~~and~~financial ~~unrealized~~statements ~~gains or losses on foreign currency derivative contracts designated~~ and ~~qualifying~~notes asthereto ~~cash~~included ~~flow~~in ~~hedges. For~~ the ~~second~~Company’s ~~quarters~~Form of10-K ~~2004 and 2003, comprehensive income (loss) was $133.1 million and ($70.7) million. Comprehensive income~~ for the year ~~six months~~ ended ~~June 30~~December 31, 2004 ~~and 2003 was $259~~.3 ~~million~~As ~~and~~used ~~$43.6 million. The increase in comprehensive income was primarily due to net income in 2004~~herein, ~~compared~~the toterms ~~net losses~~“the inCompany” ~~2003,~~and ~~partially~~“Guidant” ~~offset~~mean ~~by foreign currency translation losses in 2004 compared~~Guidant toCorporation ~~gains~~and inits ~~2003.~~consolidated subsidiaries.

~~GUIDANT~~Note ~~CORPORATION~~2 ~~Notes~~– toPending ~~Consolidated~~Merger ~~Financial Statements~~

~~Note~~In 7a –special ~~Segment~~meeting ~~Information~~held on April 27, 2005, Guidant shareholders approved the agreement whereby Johnson & Johnson (J&J) will acquire Guidant for $76 per share or $25.4 billion in fully diluted equity. For purposes of the Company’s stock plans, shareholder approval constituted a change of control. As a result of this change of control, each outstanding unvested stock option and restricted stock award granted prior to December 15, 2004 (date of the merger agreement) automatically vested. The effect of this change of control, specifically the vesting of restricted stock awards, resulted in additional compensation expense, including related payroll taxes, of $33.6 million which was recorded in the second quarter of 2005. The agreement, which was announced on December 15, 2004, remains subject to regulatory review as well as other customary closing conditions.

~~Geographic~~Note ~~Information~~3 – New Accounting Pronouncements

	Three Months EndedJune 30,		Six Months EndedJune 30,
	2004	2003	2004	2003
Net Sales(1):
US	$631.3	$ 628.6	$1,248.1	$1,221.8
International	307.5	298.0	624.8	562.7
	$938.8	$ 926.6	$1,872.9	$1,784.5

In December 2004, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standard (SFAS) 123(R), Share-Based Payment. This Statement is a revision to SFAS 123 and supersedes Accounting Principles Board (APB) Opinion No. 25. SFAS 123(R) requires the measurement of the cost of employee services in exchange for an award of equity instruments based on the grant-date fair value of the award. On April 15, 2005, the Securities and Exchange Commission delayed the effective date of SFAS 123(R) to fiscal years beginning on or after June 15, 2005. As a result, the Company expects to adopt SFAS 123(R) on January 1, 2006 and recognize the fair value of the award to compensation expense over the period during which an employee is required to provide service in exchange for the award. No compensation cost is recognized for equity instruments for which employees do not render service. As a result of the Company’s shareholders approving the plan of merger with J&J (See Note 2), there are substantially no unvested stock options outstanding after April 27, 2005. The impact to the Company’s financial statements of adopting SFAS 123(R) will depend upon future stock option grant activity.

~~(1)~~ In May 2005, the FASB issued SFAS 154, Accounting Changes and Error Corrections, a replacement of ~~Revenues~~APB ~~are~~Opinion ~~attributed~~No. 20, Accounting Changes, and SFAS 3, Reporting Accounting Changes in Interim Financial Statements. SFAS 154 changes the requirements related to ~~countries~~accounting for ~~based~~and onreporting ~~location~~of a change in accounting principle. This Statement applies to all voluntary changes in accounting principle and changes required by a new accounting pronouncement in the unusual instance that the pronouncement does not include specific transition provisions. SFAS 154 requires retrospective application to prior periods’ financial statements of changes in accounting principle versus the ~~customer~~previous guidance which allowed the recording of the impact of an accounting change in the current period’s net income as a cumulative effect adjustment. The Statement is effective for the Company beginning January 1, 2006.

	June 30,2004	December 31,2003
Property and Equipment, Net:
US	$706.5	$660.8
International	85.3	88.3
	$791.8	$749.1

	Three Months EndedJune 30,		Six Months EndedJune 30,
Classes of Similar Products:	2004	2003	2004	2003
Net Sales:
Implantable defibrillator
systems	$ 455.7	$ 376.5	860.7	$ 708.5
Pacemaker systems	183.1	171.7	362.6	330.9
Coronary stent systems	120.4	223.0	291.8	444.0
Angioplasty systems	111.2	103.4	227.8	203.0
Cardiac surgery, biliary, peripheral
and carotid systems	68.4	52.0	130.0	98.1
	$ 938.8	$ 926.6	$1,872.9	$1,784.5

~~Note~~GUIDANT ~~8 – Acquisitions~~CORPORATION

~~AFx,~~Notes inc.: On February 9, 2004, Guidant acquired AFx, inc., a manufacturer of microwave surgical cardiac ablation medical devices. Guidant paid $48.4 million (including transaction expenses) in cash and forgave a $5.8 million extension of credit. The purchase price was allocated to ~~the acquired~~Consolidated ~~assets~~Financial ~~and liabilities based upon fair market values (using the income approach),~~Statements including a $22.8 million in process research and development (IPRD) charge for technology that had not reached technological feasibility and had no alternative use and $33.0 million for intangible assets related to proven technology. In addition, a deferred tax liability of $12.2 million was recorded for the tax effect of the intangible assets and deferred tax assets of $11.7 million were recorded for the net operating loss carryovers. In order to value the IPRD, a risk-adjusted discount rate of 22.5% was applied to the cash flows. Guidant may make additional payments upon future satisfaction of regulatory, clinical and sales performance criteria. These payments will be recorded when the amount is determinable and will be allocated to the fair value of the intangibles or IPRD, with any amounts paid above fair value of identifiable assets recorded as goodwill.

~~Biosensors~~Note ~~International (Biosensors):~~4 In– March 2003, the Company completed its acquisition of certain assets of 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 Biosensors’ everolimus eluting stent platform that has been used in Biosensors’ FUTURE I and II Clinical Trials. Guidant recorded a $20.5 million IPRD charge in connection with the purchase, since technological feasibility of the project had not been attained and the research had 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 sixStock-~~month~~Based ~~clinical data of the everolimus eluting stent~~Compensation trial, FUTURE I. An additional IPRD charge of $50.0 million was recorded in the second quarter of 2004 for clinical results related to Biosensors’ everolimus eluting stent trial, FUTURE II. Over the course of clinical development, Biosensors may receive additional milestone payments. In addition, Biosensors will receive royalties on future sales of products utilizing Biosensors’ technology.

~~Bioabsorbable~~The ~~Vascular~~Company ~~Solutions (BVS):~~has Inadopted ~~March~~the ~~2003~~disclosure-only provisions of SFAS 123, ~~Guidant~~Accounting ~~acquired~~for ~~the~~Stock-Based Compensation, ~~majority~~as ~~interest~~amended inby ~~BVS~~SFAS 148, Accounting for ~~$10.0~~Stock-Based ~~million~~ Compensation—Transition and Disclosure. ~~accrued~~Accordingly, anthe ~~additional~~Company ~~$6.0~~accounts ~~million~~ for astock-based ~~future~~compensation ~~clinical~~under ~~milestone~~APB Opinion No. 25, InAccounting ~~addition~~for Stock Issued to Employees, and related ~~Guidant~~interpretations, ~~purchased~~using the ~~remaining~~intrinsic ~~49%~~value ~~interest for $6~~method.0 ~~million~~The infollowing ~~April~~table ~~2004.~~illustrates ~~All~~the ~~these~~effect on ~~amounts~~net ~~are~~income ~~accounted~~and ~~for~~earnings asper ~~IPRD,~~share ~~since~~if ~~technological~~the ~~feasibility~~Company ofhad applied the ~~project~~fair ~~has~~value ~~not~~recognition provisions ~~been~~of ~~attained~~SFAS ~~and~~123 ~~the~~to ~~research~~all ~~has~~stock-based noemployee ~~alternative~~compensation. ~~future~~The ~~uses.~~fair ~~BVS~~value isof ~~developing~~stock ~~vascular~~options was ~~stent~~estimated ~~platforms~~as ~~designed~~of tothe begrant ~~absorbed~~date byusing ~~tissue~~the ~~following~~Black-Scholes ~~the~~option-pricing ~~restoration~~model, ofthe ~~blood~~attribution ~~flow~~method inand ~~patients~~a ~~with~~forfeiture ~~coronary~~rate ~~artery~~of ~~disease~~10%. ~~Guidant~~These pro forma amounts may ~~pay~~not ~~milestone~~be ~~payments~~representative ~~over~~of the effects on ~~course~~reported net income for future years due to the uncertainty of ~~clinical~~stock ~~development.~~option grant volume and potential changes in assumptions driven by market factors.

X Technologies, Inc. (X Technologies): In June 2003, Guidant acquired X Technologies, the manufacturer of the FDA-approved FX miniRAIL™ Balloon Dilatation 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. The purchase price was allocated to the acquired assets and liabilities based upon fair market values, including $88.7 million to intangible assets related to developed technology and the related deferred tax liability of $32.8 million. Guidant may make additional payments upon future satisfaction of sales performance criteria.


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2005		2004		2005		2004

Reported net income ⁽¹⁾	$	107.3	$	126.5	$	269.6	$	265.9
Deduct: Stock-based compensation not reflected in net income, net of tax ⁽²⁾		30.1		17.6		37.7		28.0

Pro forma net income	$	77.2	$	108.9	$	231.9	$	237.9


Earnings per share:
Basic-as reported	$	0.33	$	0.41	$	0.84	$	0.86

Basic-pro forma	$	0.24	$	0.35	$	0.72	$	0.77

Diluted-as reported	$	0.32	$	0.39	$	0.82	$	0.83

Diluted-pro forma	$	0.23	$	0.34	$	0.70	$	0.74

Novartis Pharma AG and Novartis AG (Novartis): In 2002, Guidant entered into an agreement with Novartis that provided Guidant an exclusive worldwide license to use everolimus in drug eluting stents. In the second quarter of 2004, a payment of $15.0 million was made to Novartis for completion of SPIRIT FIRST clinical trial enrollment. This amount was recorded as IPRD, since technological feasibility of the project has not been attained and the research has no alternative future uses.


(1)		Reported amounts include expense associated with restricted stock awards, including $33.6 million as a result of the Company’s shareholders’ approval of the plan of merger with J&J on April 27, 2005.

(2)		All remaining pro forma stock-based compensation, including pro forma compensation expense of $21.9 million is reflected in the second quarter of 2005 as a result of the Company’s shareholders’ approval of the plan of merger with J&J on April 27, 2005, which accelerated the vesting of these options.

~~Certain~~On ofJune 1, 2005, Guidant~~’s acquisitions~~ ~~involve~~granted ~~contingent~~approximately ~~consideration~~1.3 million ~~and~~restricted ~~certain~~stock ~~equity~~awards. Restricted ~~investments~~stock ~~may~~awards ~~involve contingent~~are ~~payments,~~recorded ~~which~~at ~~would~~fair ~~provide~~value ~~additional~~at ~~ownership~~the todate ~~Guidant~~of ~~(collectively referred~~the togrant asand ~~“milestone~~expensed ~~payments”)~~ratably over the vesting period. ~~These~~In ~~milestone~~general, ~~payments~~restricted ~~are~~stock ~~generally contingent~~awards ~~upon~~vest ~~reaching~~after ~~performance-related~~three ~~milestones~~years, ~~including~~and ~~specified~~may ~~revenue~~vest ~~levels,~~earlier ~~product~~upon ~~development~~a ~~targets~~qualifying ordisability, ~~regulatory~~death, ~~approvals~~retirement or ~~filings~~change in control. AtThe June 2005 restricted ~~30,~~stock ~~2004, Guidant’s~~awards ~~accrual~~do ~~for~~not ~~milestone~~vest ~~payments~~upon ~~totaled~~the ~~$35.3~~closing ~~million~~of ~~and~~the isacquisition ~~expected~~of toGuidant beby J&J. Upon ~~paid~~closing, ~~during~~these ~~the~~awards ~~next~~will ~~two~~be ~~years.~~converted Inon ~~addition,~~the ~~future~~same ~~undiscounted~~basis ~~performance-related milestone~~as ~~payments~~common ofshares; upwhereby, toeach ~~$268.3~~Guidant restricted ~~million~~share ~~could~~will be ~~paid~~exchanged ~~through~~for ~~2010,~~$30.40 ~~depending~~in oncash ~~when~~ and ~~if milestones are attained~~$44.60 ~~Potential~~in ~~milestone~~J&J ~~payments~~restricted ~~under~~stock, ~~existing agreements~~provided ~~during~~that the ~~next~~average 12J&J ~~months~~common ~~range~~stock ~~from~~price is between $255.045 toand $8067.009 ~~million.~~during ~~The~~the ~~Company~~fifteen-day ~~continues to~~trading ~~evaluate~~period ~~business~~ending ~~development~~three ~~opportunities,~~days ~~which~~prior ~~may~~to ~~generate~~the ~~additional~~transaction ~~payments~~closing.

~~The~~Note ~~operating~~5 ~~results~~– ~~of all~~Inventories ~~acquisitions are included in the Company’s consolidated financial statements from the date of each acquisition.~~

~~Note~~Inventories 9consisted –of ~~Discontinued~~the ~~Operations~~following:

In March 2004, Guidant’s Board of Directors approved a plan to discontinue the GALILEO® Intravascular Radiotherapy System (GALILEO System) product line for the treatment of in-stent restenosis due to the significant competitive impact of drug eluting stents. On April 21, 2004, Guidant signed a definitive agreement with Novoste Corporation (Novoste) to cooperate in assisting existing US and Canadian customers of the GALILEO System who wish to transition to Novoste products. Guidant received $2.5 million upon signing and will receive earn-out payments up to a maximum of $4.0 million based on Novoste sales in the US and Canada. The disposal plan consists primarily of the termination of normal activity, abandonment of property and equipment, product returns, collection of accounts receivable and settlement of liabilities. Net loss from discontinued operations for the six months ended June 30, 2004 includes a charge of $11.2 million, primarily related to the write down of long-lived assets to fair value and recording inventory and accounts receivable at net realizable value.


	June 30,		December 31,
	2005		2004

Finished products	$	196.9	$	181.2
Work-in-process		42.6		64.5
Raw materials and supplies		105.7		108.2

	$	345.2	$	353.9

~~Guidant expects this discontinuation~~7 ~~to occur in several phases, concluding within the next six months. Guidant has taken steps to close the Houston and Pearland, Texas, facilities.~~

InTable December 2003, Guidant’s Board of Directors ratified a plan to discontinue Guidant’s operations in Brazil due to unfavorable business conditions and poor operating performance. Contents

InGUIDANT ~~June 2003, Guidant’s Board of~~CORPORATION Directors approved a plan to dispose of the ANCURE ENDOGRAFT System (ANCURE) 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 US Department of Justice investigation.

InNotes ~~accordance~~to ~~with~~Consolidated ~~SFAS~~Financial ~~144,~~Statements Accounting for the Impairment or Disposal of Long-Lived Assets, these disposals represent discontinued operations. Accordingly, the accompanying consolidated financial statements and notes reflect the results of operations and financial position of the AAA and GALILEO product lines and the Brazil operations as discontinued operations for all periods presented.

AtNote ~~June~~6 ~~30,~~– ~~2004,~~Product ~~and December 31,~~Warranties 2003, there were $3.9 million and $36.5 million in assets and $25.4 million and $23.9 million in liabilities related to discontinued operations. Assets are primarily comprised of accounts receivable, inventory and property, plant and equipment. Liabilities primarily include accruals for severance, product returns, ANCURE-related settlements and lease commitments. Net loss from discontinued operations includes charges related to the impairment of certain long-lived assets, inventory write-downs, customer returns, ANCURE-related settlements, employee severance and facility costs. Loss from discontinued operations before income taxes, for the six months ended June 30, 2003, includes a $62.4 million charge for the previously disclosed agreement with the US Department of Justice surrounding the ANCURE product line for the treatment of AAA.

~~The~~Provisions ~~following~~for ~~summarizes~~estimated ~~financial~~expenses related to product warranties are recorded at the time the ~~information~~products are sold. Estimates for ~~discontinued~~warranty ~~operations:~~costs are calculated based primarily upon historical warranty experience, but may include assumptions related to anticipated changes in warranty costs and failure rates.

	Three Months EndedJune 30,		Six Months EndedJune 30,
	2004	2003	2004	2003
Net sales	$ 4.1	$ 21.4	$ 15.4	$ 48.9
Loss from discontinued operations before income taxes	(15.0)	(41.5)	(36.1)	(105.5)
Net loss from discontinued operations	(9.1)	(15.3)	(22.7)	(78.3)

Additionally, in the second quarter of 2005, the Company voluntarily issued a series of field actions advising physicians of important safety information and corrective actions for certain of its implantable defibrillator and pacemaker systems. The FDA subsequently classified certain of these field actions as recalls. The Company has elected to provide supplemental warranty programs for the devices covered under certain of these field actions. The supplemental programs cover the product and certain costs should a physician determine replacement of a patient’s device is appropriate, as well as the return of any unused inventory. A charge of $94.0 million was recorded in the second quarter of 2005 covering the current and anticipated future costs associated with these supplemental warranty programs. The charge is based primarily upon the Company’s estimates of the number of devices which physicians may choose to replace. These estimates were determined through a device-specific review of relevant current and historical product recall observations, including FDA recall classification, known and expected device failure rates, the presence of non-invasive corrective actions, and the remaining service life of the device. Should the actual costs incurred differ from these assumptions, adjustments to the anticipated costs may be required. Through August 3, 2005, the Company has incurred $16.0 million of actual warranty claims under these programs. In addition, the Company recorded a charge of $19.1 million for estimated write down of non-saleable inventory. The total charge to cover these field actions of $113.1 million was recorded to cost of products sold in the second quarter of 2005. See the Field Actions section of this filing for more information on these field actions.

~~Note~~Warranty 10cost –accruals ~~Dividend~~are adjusted from time to time when warranty claim experience differs from estimates and when supplemental warranty coverage is provided. A summary of the changes in the product warranty activity is as follows:

For the six months ended June 30, 2004 Guidant’s Board of Directors declared total dividends of $0.20 per common share outstanding compared to $0.08 per common share outstanding for the first six months ended June 30, 2003.


	Six Months Ended
	June 30,
	2005			2004

January 1	$	20.1		$	22.3
Provisions for product warranties		104.8			4.5
Settlements during the period		(10.2	)		(7.9	)

June 30	$	114.7		$	18.9

~~Note 11 – Subsequent Event~~8

OnTable July 21, 2004 Guidant’s Board of Directors approved a management action that will include work force reductions and termination of certain contracts, resulting primarily from the weakness in the metallic coronary stent market. The pre-tax expense associated with this plan is estimated between $50.0 million and $70.0 million and will be recorded during the third quarter of 2004. This charge includes severance, benefits packages for affected employees, contract termination costs and other related costs. Contents

~~Note~~GUIDANT ~~12 – Contingencies~~CORPORATION

~~The~~Notes ~~description of legal proceedings in Part II, Item 1 (“Legal Proceedings”)~~ to ~~this~~Consolidated ~~filing~~Financial ~~is incorporated herein~~Statements ~~by reference.~~

~~Item~~Note 2.7 ~~Management’s Discussion~~– ~~and~~Impairment ~~Analysis of Results of Operations and Financial Condition(unaudited)~~Charge

~~Guidant~~During ~~Corporation~~the ~~provides~~first ~~innovative~~quarter of 2005, ~~therapeutic~~ ~~medical~~the ~~solutions~~Company recorded a $60.0 million impairment charge related to the write-down of ~~distinctive~~assets ~~value~~associated ~~for~~with ~~customers,~~the ~~patients~~FX ~~and~~miniRAIL® ~~healthcare~~Dilatation Catheter. In accordance with ~~systems~~SFAS ~~around~~144, Accounting for the ~~world.~~Impairment ~~Guidant’s~~or ~~lifesaving~~Disposal ~~medical~~of ~~technologies~~Long-Lived ~~are~~Assets, ~~designed~~management toreassessed the ~~extend~~expected future financial performance of the ~~lives~~FX ~~and~~miniRAIL ~~improve~~Dilatation Catheter, acquired from X Technologies, Inc., noting that the ~~quality~~value of ~~life~~the ofexpected ~~millions~~future ofcash ~~patients~~flows ~~suffering~~is ~~from~~less than the ~~life-threatening~~carrying ~~cardiac~~value ~~and~~of ~~vascular~~the ~~disease~~related intangible asset. ~~Approximately~~Among 12other reasons,~~000~~ ~~employees~~this ~~develop,~~was the result of (a) a ~~manufacture~~decrease ~~and~~in ~~market~~demand for the ~~Company’s~~product ~~medical~~for ~~devices~~use in ~~nearly~~treating ~~100~~in-stent ~~countries,~~restenosis ~~with key~~as ~~operations~~drug ineluting stents have reduced the ~~US,~~incidence ~~Europe~~of ~~and~~this ~~Asia.~~condition, Asand ~~used~~(b) demand ~~herein,~~for the ~~terms~~product ~~“the~~for use in ~~Company”~~pre-dilating ~~and~~vessels ~~“Guidant”~~in ~~mean~~advance ~~Guidant~~of ~~Corporation~~implanting ~~and~~drug ~~its~~eluting ~~consolidated subsidiaries.~~stents not developing as anticipated.

~~Cardiovascular~~Note ~~disease~~8 is– ~~the~~Earnings ~~leading cause~~Per ~~of death for both men and women in the US today and claims more lives each year than~~Share the next five leading causes of death combined. Within cardiovascular disease, Guidant develops, manufactures and markets products that focus on the treatment of coronary arrhythmias, heart failure and coronary and peripheral disease including:

•The ~~Implantable~~following ~~defibrillator~~table ~~systems~~sets ~~used~~forth tothe ~~detect~~computation ~~and~~of ~~treat~~earnings ~~abnormally~~per ~~fast heart rhythms (tachycardia) that could result in sudden cardiac death (SCD), including implantable cardiac resynchronization therapy defibrillator (CRT-D) systems used to treat heart failure~~share:

• 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


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2005			2004			2005			2004

Income from continuing operations	$	116.1		$	135.6		$	292.8		$	288.6
Loss from discontinued operations, net of income taxes		(8.8	)		(9.1	)		(23.2	)		(22.7	)

Net income	$	107.3		$	126.5		$	269.6		$	265.9


Earnings per share-basic
Income from continuing operations	$	0.36		$	0.44		$	0.91		$	0.93
Loss from discontinued operations, net of income taxes		(0.03	)		(0.03	)		(0.07	)		(0.07	)

Net income	$	0.33		$	0.41		$	0.84		$	0.86


Earnings per share-diluted
Income from continuing operations	$	0.35		$	0.42		$	0.89		$	0.90
Loss from discontinued operations, net of income taxes		(0.03	)		(0.03	)		(0.07	)		(0.07	)

Net income	$	0.32		$	0.39		$	0.82		$	0.83


Weighted average common shares outstanding		323.96			310.91			321.91			309.70
Effect of dilutive stock options and unvested restricted stock awards		7.94			9.24			8.77			9.65

Weighted average common shares outstanding and assumed conversions		331.90			320.15			330.68			319.35

•Note ~~Coronary~~9 ~~stent~~– ~~systems~~Comprehensive ~~for the treatment of coronary artery disease~~Income

•The ~~Angioplasty~~components ~~systems~~of ~~including~~comprehensive ~~dilatation~~income ~~catheters~~are ~~and~~as ~~related accessories for the treatment of coronary artery disease~~follows:

• Cardiac surgery systems


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2005			2004			2005			2004

Net income	$	107.3		$	126.5		$	269.6		$	265.9
Other comprehensive income:
Currency translation		(22.9	)		(2.5	)		(59.5	)		(24.2	)
Unrealized gains on foreign exchange contracts		19.7			9.1			43.8			17.6

Comprehensive income	$	104.1		$	133.1		$	253.9		$	259.3

~~• Peripheral systems, including those to treat biliary, peripheral vascular and carotid artery disease~~9

OperatingTable Resultsof — Three and Six Months Ended June 30, 2004Contents

~~Sales~~GUIDANT CORPORATION

~~Guidant~~Notes ~~reported $938.8 million in worldwide sales for the quarter ended June 30, 2004, representing 1% growth compared~~ to ~~the~~ ~~same~~Consolidated ~~period~~Financial ~~in 2003. The impact of fluctuations in foreign currency exchange rates~~Statements increased sales by $17.0 million, or 2%, partially offset by price declines of 1%. All product lines, except coronary stent systems, experienced growth during the second quarter of 2004. US sales of $631.3 million remained relatively flat compared to the prior year and international sales of $307.5 million increased 3%. Sales of products other than worldwide coronary stent systems represented 87% of total revenues and increased 16% in the second quarter 2004 compared to the second quarter 2003.

~~Sales~~Note ~~for~~10 ~~the~~– ~~six~~Income ~~months ended June~~Taxes 30, 2004, of $1,872.9 million, increased $88.4 million, or 5% over the same period in 2003. The impact of fluctuations in foreign currency exchange rates increased sales by $49.9 million, or 3%, volume increased sales 5% and price declines decreased sales 3%. US sales of $1,248.1 million grew 2% over the prior year due to an increase in volume, while international sales of $624.8 million increased 11%.

~~Sales~~The ~~Summary—Three~~effective ~~Months~~income ~~Ended~~tax rates for the quarters ended June 30, 2005 and 2004 were 0.9% and 20.2%. The effective tax rate is lower for the quarter ended June 30, 2005 primarily due to a $29.4 million reversal of the income tax gross-up provision recorded in the fourth quarter of 2004 associated with the one-time incentive to repatriate foreign earnings under the American Jobs Creation Act of 2004. In May 2005, the Internal Revenue Service issued guidance clarifying that the tax gross-up provision does not apply to the foreign earnings repatriated under the one-time incentive. The income tax rates for the six-month periods ending June 30, 2005 and 2004 were 13.8% and 23.6%. In addition to the tax provision reversal, the effective tax rate is lower for the six months ended June 30, 2005 due to the impairment charge in the first quarter of 2005, which is deductible at the US statutory tax rates. Guidant’s effective tax rate is typically lower than the US statutory tax rates primarily due to overseas operations having statutory tax rates that are lower than the US.

	June 30, 2004			June 30, 2003
(In millions)	US	Int'l.	Total	US	Int'l.	Total	Growth
Implantable defibrillator systems	$363.7	$ 92.0	$455.7	$306.7	$ 69.8	$376.5	21%
Pacemaker systems	111.2	71.9	183.1	107.8	63.9	171.7	7%
Coronary stent systems	51.2	69.2	120.4	123.5	99.5	223.0	(46%)
Angioplasty systems	51.5	59.7	111.2	49.0	54.4	103.4	8%
Cardiac surgery, biliary, peripheral
and carotid systems	53.7	14.7	68.4	41.6	10.4	52.0	32%
	$631.3	$307.5	$938.8	$628.6	$298.0	$926.6	1%

Note 11 – Segment Information

~~Sales~~Geographic ~~Summary—Six Months Ended~~Information:

	June 30, 2004					June 30, 2003
	Three Months Ended						Six Months Ended
(In millions)	US		Int'l.	Total		US	Int'l.		Total	Growth
	June 30,						June 30,
Implantable defibrillator systems	$ 687.4		$ 173.3	$ 860.7		$ 579.7	$ 128.8		$ 708.5	21%
	2005			2004			2005			2004
Pacemaker systems	215.4		147.2	362.6		209.5	121.4		330.9	10%
Net Sales(1):
Coronary stent systems	137.4		154.4	291.8		257.9	186.1		444.0	(34%)
US	$	634.7		$	631.3		$	1,269.9		$	1,248.1
Angioplasty systems	105.5		122.3	227.8		96.0	107.0		203.0	12%
International		339.4			307.5			657.5			624.8
Cardiac surgery, biliary, peripheral
	$	974.1		$	938.8		$	1,927.4		$	1,872.9
and carotid systems	102.4		27.6	130.0		78.7	19.4		98.1	33%
	$1,248.1		$ 624.8	$1,872.9		$1,221.8	$ 562.7		$1,784.5	5%

~~Implantable Defibrillator~~ (~~ICD~~1) ~~Systems~~ Revenues are attributed to countries based on location of the customer.

Worldwide sales of implantable defibrillator systems in the second quarter of 2004 were $455.7 million, an increase of 21% over the same period in 2003. Growth was driven primarily by increased volume, including a shift toward higher-value CRT-D systems. US implantable defibrillator system sales increased 19% to $363.7 million and international sales increased 32% to $92.0 million in the second quarter of 2004 compared to the same period in the prior year. For the first six months of 2004, worldwide ICD system sales were $860.7 million, an increase of 21% over the same period in the prior year. Sales of ICD systems increased due to the following:


	June 30,		December 31,
	2005		2004

Property and Equipment, Net:
US	$	738.8	$	721.6
International		108.3		87.3

	$	847.1	$	808.9

• Increased awareness for implantable defibrillator and cardiac resynchronization therapies based upon the findings of two Guidant-sponsored clinical trials — MADIT II and COMPANION. MADIT II demonstrated that a broader group of patients would benefit from implantable defibrillator therapy. The investigators for the COMPANION trial reported that for advanced heart failure patients with desynchronized heart contractions, the addition of resynchronization therapy to optimal drug treatment reduced the combination of death or hospitalization when compared with optimal drug treatment alone. This trial demonstrated 20% reduction in combined all-cause death and hospitalization by adding Guidant’s CRT-D systems to optimal drug therapy and 36% reduction in all-cause mortality for Guidant’s CRT-D systems for patients with advanced heart failure. The COMPANION trial was published in May 2004 in the New England Journal of Medicine.


	Three Months Ended				Six Months Ended
	June 30,				June 30,
Classes of Similar Products:	2005		2004		2005		2004

Net Sales:
Implantable defibrillator systems	$	469.8	$	455.7	$	947.8	$	860.7
Pacemaker systems		173.6		183.1		341.7		362.6
Coronary stent systems		117.6		120.4		232.8		291.8
Angioplasty systems		115.5		111.2		215.6		227.8
Cardiac surgery and peripheral, including carotid and biliary systems		97.6		68.4		189.5		130.0

	$	974.1	$	938.8	$	1,927.4	$	1,872.9

~~• Continued acceptance of the following:~~10

•Table VITALITY® family of implantable defibrillator systems, primarily the VITALITY DS and VITALITY 2Contents

•GUIDANT ~~CONTAK® RENEWAL™ family of CRT-D systems, primarily the RENEWAL 3 and RENEWAL 4~~CORPORATION

InNotes ~~July 2004, Guidant received Conformité Européenne (CE) Mark approval of its CONTAK RENEWAL® 4 AVT cardiac resynchronization therapy defibrillator, designed~~ to ~~treat~~ ~~heart~~Consolidated ~~failure~~Financial ~~patients who are at risk for sudden cardiac death and also suffer from~~Statements atrial arrhythmias. In May 2004 Guidant launched the VITALITY 2 implantable defibrillator system in the US. This device incorporates Guidant’s RHYTHM ID® feature, which utilizes rhythm discrimination technology to distinguish between lethal and non-lethal heart rhythms to deliver the appropriate care.

~~The~~Note ~~National~~12 ~~Heart,~~– ~~Lung and Blood~~Acquisitions Institute’s SCD-HeFT clinical trial has been completed, and the preliminary clinical trial results were presented in March 2004 at the American College of Cardiology Annual Scientific Session. The results demonstrated positive benefits of implantable defibrillators (reducing death by 23% versus patients who did not receive defibrillators) in patients with heart failure. The Centers for Medicare & Medicaid Services (CMS) has indicated that it may consider the SCD-HeFT results as evidence to further expand reimbursement coverage for implantable defibrillators. Guidant formally joined in support of the petition to CMS for full SCD-HeFT patient population ICD coverage. The following may impact the implantable defibrillator market:

•AFx, ~~Recent~~inc.: ~~entry~~On February 9, 2004, Guidant acquired AFx, inc., a manufacturer of microwave surgical cardiac ablation medical devices, for total consideration of $54.2 million. In April 2005, Guidant made an additional payment of $10.0 million for satisfaction of a ~~new~~clinical ~~competitor~~milestone related to the development of a minimally invasive ablation procedure, which was accounted for as in-process research and development (IPRD). Payments were recorded as IPRD since technological feasibility of the ~~resynchronization~~project ~~segment~~had not been attained and the research had no alternative future uses. Guidant may make additional milestone payments upon future satisfaction of regulatory, clinical and sales performance criteria.

•Biosensors ~~Expected~~International ~~publication~~(Biosensors): In 2003, Guidant recorded a $30.6 million IPRD charge in connection with the acquisition of ~~SCD-HeFT~~certain assets of Biosensors’ everolimus eluting stent program and a related performance milestone. An additional IPRD charge of $50.0 million was recorded in the second quarter of 2004 for clinical results related to Biosensors’ everolimus eluting stent trial, ~~results~~FUTURE II. Payments were recorded as IPRD since technological feasibility of the project had not been attained and the research had no alternative future uses. Over the course of clinical development, Biosensors may receive additional milestone payments. In addition, Biosensors will receive royalties on future sales of products utilizing Biosensors’ technology.

•Bioabsorbable ~~Recent~~Vascular ~~publication~~Solutions (BVS): In March 2003, Guidant acquired the majority interest in BVS for $10.0 million and accrued an additional $6.0 million for a future clinical milestone. In addition, Guidant purchased the remaining 49% interest for $6.0 million in April 2004. All these amounts are accounted for as IPRD, since technological feasibility of the ~~COMPANION~~project ~~trial~~has not been attained and the research has no alternative future uses. 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 may pay milestone payments over the course of clinical development.

•Novartis ~~Potential~~Pharma ~~expanded~~AG ~~indication~~ and ~~reimbursement~~Novartis ~~supported~~AG by(Novartis): ~~both~~In ~~COMPANION~~2002, ~~and~~Guidant ~~SCD-HeFT~~entered ~~clinical~~into ~~trials.~~an Inagreement ~~July~~with Novartis ~~2004,~~that ~~the~~provided ~~Circulatory~~Guidant ~~System~~an ~~Devices~~exclusive ~~Panel~~worldwide oflicense to use everolimus in drug eluting stents. In the ~~FDA~~second ~~unanimously~~quarter ~~recommended~~of ~~approval~~2004, ~~with~~a ~~conditions,~~payment of ~~expanded~~$15.0 million ~~user~~was ~~labeling,~~made ~~including~~to ~~indications,~~Novartis for completion ~~Guidant~~of ~~cardiac~~SPIRIT ~~resynchronization~~FIRST ~~therapy~~clinical ~~defibrillators~~trial ~~based~~enrollment. onThis ~~the~~amount ~~results~~was recorded as IPRD, since technological feasibility of the ~~COMPANION~~project ~~clinical~~had ~~trial~~not been attained and the research has no alternative future uses. ~~The~~Novartis ~~FDA~~may ~~will~~receive ~~now~~additional ~~consider~~milestone payments over the ~~panel’s~~course ~~recommendation~~of ~~prior~~clinical development toand ~~making~~receive ~~its~~royalties ~~final~~on ~~decision~~future sales of licensed products utilizing everolimus.

~~Pacemaker~~Certain ~~Systems~~of Guidant’s other acquisitions also involve contingent consideration. Contingent consideration will be recorded when the amount is determinable and will be allocated to the fair value of the intangibles or IPRD, with any amounts paid above fair value of identifiable assets recorded as goodwill. In addition to contingent consideration, certain equity investments made by Guidant in other entities may involve contingent payments, which would provide additional ownership to Guidant (both collectively referred to as “milestone payments”). These milestone payments are generally contingent upon reaching performance-related milestones, including specified revenue levels, product development targets or regulatory approvals or filings. At June 30, 2005, Guidant’s accrual for milestone obligations totaled $8.3 million, which is expected to be paid during the next two years. In addition, future undiscounted performance-related milestone payments of up to $237.3 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 $53.9 million, of which management currently estimates $43.0 million could result in IPRD charges if paid. The Company continues to evaluate business development opportunities, which may generate additional payments.

~~Worldwide~~The ~~pacemaker~~operating ~~system~~results sales were $183.1 million for the quarter ended June 30, 2004, a 7% increase over the same period in the prior year. US pacemaker system sales grew 3% to $111.2 million and international sales grew 13% to $71.9 million. Worldwide sales of ~~these~~all ~~products~~acquisitions ~~for~~are ~~the~~included ~~first six months of 2004 were $362.6 million, an increase of $31.7 million or 10% over the same period~~ in ~~2003. Pacemaker system sales growth was primarily due to a shift toward higher-value CRT-P systems driven by~~ the ~~acceptance~~Company’s ofconsolidated ~~the CONTAK RENEWAL TR 2 CRT-P~~financial ~~system,~~statements ~~launched~~from in the ~~third~~date ~~quarter~~ of ~~2003~~each ~~in Europe and the CONTAK RENEWAL TR CRT-P system launched in the US in January 2004~~acquisition.

~~Coronary Stent Systems~~ 11

WorldwideTable coronary stent system sales for the second quarter of 2004 were $120.4 million, a decline of 46% compared to the second quarter of 2003. Coronary stent system sales comprised 24% of sales in the second quarter of 2003 and have now declined to 13% in the second quarter of 2004. Coronary stent system sales in the US were $51.2 million for the second quarter of 2004 compared to $123.5 million for the second quarter of 2003. Increasing penetration of competitive drug eluting stents in the US primarily drove this decline. International sales for the second quarter of 2004 and 2003 were $69.2 million and $99.5 million. This decrease was primarily due to declining stent sales in Japan as a result of competitive metallic stent launches since late 2003. Further decreases are expected in Japan when the full launch of a competitor’s drug eluting stent occurs in the second half of 2004. In February 2004, Guidant entered into an agreement with Johnson & Johnson to co-promote Cordis’ CYPHER™ Sirolimus-eluting Coronary Stent. This agreement also allows for co-promotion of future drug eluting stents sold by Johnson & Johnson. Co-promotion commissions earned by Guidant under this agreement, along with sales of stent delivery systems (dilatation catheters) to Johnson & Johnson, are included in US coronary stent system sales. Worldwide coronary stent system sales for the first six months of 2004 were $291.8 million compared to $444.0 million for the same period in the prior year. International sales were $154.4 million in the first six months of 2004 compared to $186.1 million in the first six months of 2003. Continued decreases in coronary stent system sales are expected until Guidant directly participates in the drug eluting stent market. Coronary stent system sales in 2004 primarily include: Contents

•GUIDANT ~~MULTI-LINK™ VISION® Coronary Stent System~~CORPORATION

•Notes ~~MULTI-LINK~~to ~~ZETA®~~Consolidated ~~Coronary~~Financial ~~Stent System~~Statements

•Note ~~MULTI-LINK~~13 ~~PENTA®~~– ~~Coronary~~Discontinued ~~Stent System~~Operations

•In ~~MULTI-LINK~~March 2004, ~~PIXEL®~~Guidant’s ~~Coronary~~Board ~~Stent~~of Directors approved a plan to discontinue the GALILEO® Intravascular Radiotherapy System (GALILEO) product line for the treatment of in-stent restenosis due to the significant competitive impact of drug eluting stents.

In ~~May 2004~~December 2003, Guidant’s ~~announced~~Board ~~CE Mark approval and launch~~ of ~~the~~Directors ~~MULTI-LINK~~ratified ~~MINI VISION™ Coronary Stent System,~~ a ~~cobalt~~ ~~chromium~~plan ~~stent~~to ~~designed~~discontinue ~~for treating coronary artery disease in small vessels. In April 2004,~~ Guidant’s ~~announced CE Mark approval of the MULTI-LINK FRONTIER™ Coronary~~operations ~~Bifurcation~~in ~~Stent~~Brazil ~~System,~~due ~~which is specifically designed~~ to ~~treat~~unfavorable ~~plaque~~business inconditions ~~coronary arteries at the site of a bifurcation, where one vessel branches from another. In July 2004, Guidant announced Japan regulatory approval~~ and ~~launch~~poor ofoperating ~~the MULTI-LINK ZETA Coronary Stent System~~performance.

~~Angioplasty~~In ~~Systems~~June 2003, Guidant’s Board of Directors approved a plan to dispose of the ANCURE ENDOGRAFT® System (ANCURE) 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 US Department of Justice investigation. See Part II, Item 1, Legal Proceedings.

~~Angioplasty~~In ~~system~~accordance ~~sales~~with ~~totaled $111.2~~SFAS ~~million~~144, inAccounting ~~the~~for ~~second quarter of 2004 compared to $103.4 million in~~ the ~~second quarter~~Impairment ofor ~~2003,~~Disposal ~~reflecting 8% sales growth. Sales~~ of ~~these~~Long-Lived ~~products~~Assets, ~~for the six months~~these ~~ended~~disposals ~~June~~represent ~~30,~~discontinued ~~2004, were $227~~operations.8 ~~million~~Accordingly, ~~compared to $203.0 million for~~ the ~~same~~accompanying ~~period~~consolidated infinancial ~~the~~statements ~~prior~~and ~~year,~~notes anreflect ~~increase~~the results of ~~12%.~~operations ~~During the second~~ and ~~third~~financial ~~quarter~~position of ~~2004,~~the ~~Guidant~~GALILEO and ~~announced~~AAA ~~FDA~~product ~~approval~~lines and ~~launched~~ the ~~over-the-wire~~Brazil ~~VOYAGER™~~operations ~~(OTW)~~as ~~and~~discontinued ~~the~~operations ~~rapid exchange~~for ~~VOYAGER~~all ~~(RX)~~periods ~~Coronary Dilatation Catheters~~presented.

~~Cardiac~~At ~~Surgery~~June 30, ~~Biliary~~2005 and December 31, ~~Peripheral~~ 2004, there were $35.2 million and ~~Carotid~~$23.9 million ~~Systems~~in liabilities related to discontinued operations. Liabilities primarily include accruals for ANCURE-related settlements, severance and product returns.

~~Worldwide~~The ~~sales~~following ofsummarizes ~~cardiac~~financial ~~surgery, biliary,~~information ~~peripheral and carotid systems totaled $68.4 million in the second quarter of 2004, representing 32% growth over the same period in 2003. Sales~~ for ~~these~~discontinued ~~systems during the first six months of 2004 were $130.0 million compared to $98.1 million for the same period in 2003, representing a 33% increase. Sales growth was driven by~~operations:

• Continued growth in the endoscopic vessel harvesting market driven by adoption of the VASOVIEW® Endoscopic Vessel Harvesting System


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2005			2004			2005			2004

Net sales⁽¹⁾		($0.2	)	$	4.1			($0.9	)	$	15.4
Loss from discontinued operations before income taxes		(13.8	)		(15.0	)		(36.7	)		(36.1	)
Net loss from discontinued operations		(8.8	)		(9.1	)		(23.2	)		(22.7	)

•(1) ~~.035~~Represents ~~Platforms:~~net ~~ABSOLUTE™~~product ~~Self~~returns ~~Expanding~~from ~~Stent,~~customers ~~OMNILINK®~~in ~~Balloon Expandable Stent and AGILTRAC™ Peripheral Dilatation Catheter~~2005.

•Note RX14 ~~ACCULINK™~~– ~~Carotid Stent System in Europe and the RX ACCUNET™ Embolic Protection System~~Contingencies

~~Cost~~The description of ~~Products~~legal proceedings in Part II, Item 1, Legal Proceedings to this filing is ~~Sold~~incorporated herein by reference.

~~Cost of products sold was $234.6 million and $460.9 million in the second quarter~~12 of 2004 and six months ended June 30, 2004, compared to $224.5 million and $429.6 million for the same respective periods in 2003. Gross profit percentage was 75.0% for the second quarter of 2004 and 75.4% for six months ended June 30, 2004, compared to 75.8% for the second quarter of 2003 and 75.9% for the six months ended June 30, 2003. The change in gross profit percentages was primarily driven by the decrease in sales of stents in the US and Japan, partially offset by continued sales mix shift toward higher value implantable defibrillator systems, including CRT-D systems. Guidant has implemented a lean manufacturing initiative across the cardiac rhythm management product lines. This initiative is expected to improve inventory management throughout the supply chain and serve to reduce raw material levels in the short term. Over the long term this will improve responsiveness of the supply chain and help offset the Company’s decreasing gross profit percentage due to decreasing stent sales.

ResearchTable andof DevelopmentContents

~~Guidant~~Item 2. ~~continued~~Management’s ~~its~~Discussion ~~commitment to product innovation by increasing its investment in research~~ and ~~development~~Analysis ~~in the second quarter~~ of ~~2004.~~Results ~~Research and development expense was $136.8 million for the second quarter~~ of ~~2004,~~Operations ~~or 14.6% of sales, compared to $129.4 million in the second quarter of 2003, or 14.0% of sales. Research~~ and ~~development~~Financial ~~expense for the first six months of 2004~~Condition ~~totaled $274.4 million~~ (~~14.7% of sales~~unaudited) ~~compared to $242.2 million (13.6% of sales) in the~~ ~~same period in 2003. Significant investments in research and development in the first half of 2004 included:~~

•Guidant Corporation provides innovative, therapeutic medical solutions of distinctive value for customers, patients and healthcare systems around the world. Guidant’s ~~two~~lifesaving ~~primary~~medical technologies ~~drug~~are ~~eluting~~designed ~~stent~~to ~~programs:~~extend the lives and improve the quality of life for millions of patients suffering from life-threatening cardiac and vascular disease. Approximately 12,000 employees develop, manufacture and market the Company’s medical devices in nearly 100 countries, with key operations in the US, Europe and Asia. As used herein, the terms “the Company” and “Guidant” mean Guidant Corporation and its consolidated subsidiaries.

•Cardiovascular ~~CHAMPION™~~disease ~~Everolimus~~is ~~Eluting~~the ~~Coronary~~leading ~~Stent~~cause ~~System~~of ~~mounted~~death onfor both men and women in the ~~MULTI-LINK~~US ~~VISION~~today ~~stent~~and claims ~~delivery~~more ~~system.~~lives ~~This~~each ~~system~~year ~~includes~~than athe ~~bioabsorbable~~next ~~polymer~~five ~~matrix~~leading causes of death combined. Within cardiovascular disease, Guidant develops, manufactures and ismarkets ~~being~~products ~~evaluated~~that infocus on the treatment ~~FUTURE~~of ~~family~~cardiac ofarrhythmias, ~~clinical~~heart ~~trials.~~failure and coronary and peripheral disease including:

• ~~MULTI~~Implantable defibrillator systems used to detect and treat abnormally fast heart rhythms (tachycardia) that could result in sudden cardiac death (SCD), including implantable cardiac resynchronization therapy defibrillator (CRT-~~LINK~~D) ~~VISION~~systems ~~Everolimus~~used ~~Eluting~~to ~~Stent~~treat ~~System~~heart failure • Implantable pacemaker systems used to manage slow or irregular heart rhythms (bradycardia), ~~which~~including isimplantable ~~currently~~cardiac ~~being~~resynchronization ~~evaluated~~therapy inpacemaker ~~the~~(CRT-P) ~~SPIRIT~~systems ~~FIRST~~used ~~Clinical~~to ~~Trial~~treat ~~and~~heart ~~includes~~failure a• ~~durable~~Coronary ~~polymer~~stent ~~matrix.~~systems ~~SPIRIT~~for ~~FIRST~~the istreatment aof ~~feasibility~~coronary ~~study~~artery disease • Angioplasty systems, including dilatation catheters, guidewires and related accessories for ~~durable~~the ~~polymer~~treatment ~~drug~~of ~~eluting~~coronary ~~stent~~artery disease • Cardiac surgery systems to ~~support~~perform ~~filings~~cardiac ~~for~~surgical ~~larger~~ablation, USendoscopic vessel harvesting (EVH) and ~~European~~clampless ~~pivotal~~beating-heart ~~trials.~~bypass surgery • Peripheral systems, including those to treat biliary, peripheral vascular and carotid artery disease

•In ~~Bioabsorbable~~a ~~stent~~special ~~research~~meeting held on April 27, 2005, Guidant shareholders approved the agreement whereby Johnson & Johnson (J&J) will acquire Guidant for $76 per share or $25.4 billion in fully diluted equity. For purposes of the Company’s stock plans, shareholder approval constituted a change of control. As a result of this change of control, each outstanding unvested stock option and restricted ~~development~~stock award granted prior to December 15, 2004 (date of the merger agreement) automatically vested. The effect of this change of control, specifically the vesting of restricted stock awards, resulted in additional compensation expense, including related payroll taxes, of $33.6 million which was recorded in the second quarter of 2005. The agreement, which was announced on December 15, 2004, remains subject to regulatory review as well as other customary closing conditions.

•Operating ~~Advanced~~Results ~~Patient~~– ~~Management™~~Three ~~applications,~~and ~~designed~~Six toMonths ~~enable~~Ended ~~physicians~~June 30, ~~to monitor patient heart function remotely and automatically~~2005

~~• Clinical trials to further demonstrate the benefits of cardiac resynchronization therapy devices for treating heart failure~~Sales

•Guidant ~~Development~~reported of$974.1 million ~~next-generation~~in ~~devices~~worldwide sales for ~~cardiac~~the ~~rhythm~~quarter ~~management~~ended June 30, ~~carotid~~2005, representing ~~stent~~4% ~~systems~~growth compared to the same period in 2004. Growth in unit volume and increasing ~~cardiac~~prices ~~surgery~~favorably ~~products~~impacted sales by 2% and 1%. The impact of fluctuations in foreign currency exchange rates increased sales by $8.5 million or 1%. Sales

~~Important~~13 ~~research and development events in 2004 included:~~

•Table 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. Enrollment of 360 patients was completed in April 2004.Contents

•growth ~~CONTAK~~was ~~RENEWAL~~driven 3primarily ~~AVT~~by ~~Clinical~~43% ~~Trial~~sales –growth ~~Study designed to determine the effect~~ of ~~device~~cardiac ~~therapy~~surgery inand ~~patients~~peripheral, including ~~who~~biliary ~~suffer~~and ~~from~~carotid ~~both~~systems ~~heart failure~~ and ~~atrial~~supported ~~arrhythmias.~~by ~~Guidant~~stable ~~expects~~coronary tostent ~~complete~~system ~~enrollment in the third quarter of 2004~~sales.

•Sales ~~FUTURE~~for IIthe ~~Clinical~~six ~~Trial~~months –ended ~~Study~~June 30, ~~designed~~2005, toof ~~evaluate~~$1,927.4 million, ~~the~~increased ~~safety~~$54.5 million, ofor 3% over the ~~CHAMPION~~same ~~Everolimus~~period ~~Eluting~~in ~~Coronary~~2004. ~~Stent~~Growth ~~System~~in ~~compared~~unit tovolume afavorably ~~metallic~~impacted ~~stent~~sales ~~platform~~by in2%, ~~previously~~while ~~untreated~~pricing was ~~lesions~~flat. The ~~Company~~impact ~~announced~~of ~~positive~~fluctuations ~~one-year~~in ~~results~~foreign incurrency ~~May~~exchange ~~2004,~~rates ~~which~~increased ~~confirmed~~sales ~~the~~by ~~positive~~$21.3 million ~~six-month~~or ~~results~~1%. ~~presented~~Sales growth was driven by 10% growth in ~~September~~implantable ~~2003~~defibrillator system sales and 46% growth in sales of cardiac surgery and peripheral, including biliary and carotid systems.

•For ~~SPIRIT~~the ~~FIRST~~three- ~~Clinical~~and ~~Trial~~six-month –periods ~~Enrollment~~ended ofJune 30, 602005 ~~patients~~sales ~~was~~were ~~completed~~negatively inimpacted ~~April~~by approximately ~~2004~~$70.0 million ~~and~~resulting 30from certain field actions including management’s voluntary decision on June 24, 2005 to temporarily stop selling the Company’s leading CRT-~~day~~D ~~Major~~system. ~~Adverse~~The CRT-D ~~Cardiac~~systems ~~Event~~returned to the market on August 2, 2005 (~~MACE~~see Implantable Defibrillator section below). Management believes that third quarter 2005 sales and net income could be lower than in the third quarter of 2004 due primarily to the temporary unavailability of these systems in the early part of the quarter. Actual results ~~were~~will ~~reported~~be dependent upon the success of the relaunch of these systems. Net income in the third quarter of 2004 included a $66.0 million restructuring charge.

•Sales ~~Acculink~~Summary—Three ~~for~~Months Revascularization of Carotids in High Risk Patients (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. In March 2004, the Company announced positive one-year results for the ARCHeR 1 and 2 Clinical Trials and positive 30-day results for the ARCHeR 3 Clinical Trial.Ended

The Company, subject to completion of appropriate clinical trials and receipt of regulatory approvals, expects to launch its first drug eluting stent in Europe in 2005 and in the US in 2007.


	June 30, 2005						% of			June 30, 2004						% of
(In millions)	US		Int’l.		Total		Total			US		Int’l.		Total		Total			Growth

Implantable defibrillator systems	$	348.0	$	121.8	$	469.8		48	%	$	363.7	$	92.0	$	455.7		49	%		3	%
Pacemaker systems		96.0		77.6		173.6		18	%		111.2		71.9		183.1		19	%		(5	%)
Coronary stent systems		61.7		55.9		117.6		12	%		51.2		69.2		120.4		13	%		(2	%)
Angioplasty systems		49.2		66.3		115.5		12	%		51.5		59.7		111.2		12	%		4	%
Cardiac surgery and peripheral, including biliary and carotid systems		79.8		17.8		97.6		10	%		53.7		14.7		68.4		7	%		43	%

	$	634.7	$	339.4	$	974.1		*100*	%	$	631.3	$	307.5	$	938.8		100	%

~~In-Process~~Sales ~~Research~~Summary—Six ~~and~~Months ~~Development (IPRD)~~Ended

Guidant recorded pre-tax IPRD charges of $73.0 million and $99.8 million for the three- and six-month periods ended June 30, 2004. This compares to $12.0 million and $48.5 million for the comparable periods in the prior year. Key components of these charges include:


	June 30, 2005						% of			June 30, 2004						% of
(In millions)	US		Int'l.		Total		Total			US		Int'l.		Total		Total			Growth

Implantable defibrillator systems	$	714.2	$	233.6	$	947.8		49	%	$	687.4	$	173.3	$	860.7		46	%		10	%
Pacemaker systems		191.0		150.7		341.7		18	%		215.4		147.2		362.6		19	%		(6	%)
Coronary stent systems		119.0		113.8		232.8		12	%		137.4		154.4		291.8		16	%		(20	%)
Angioplasty systems		91.6		124.0		215.6		11	%		105.5		122.3		227.8		12	%		(5	%)
Cardiac surgery and peripheral, including biliary and carotid systems		154.1		35.4		189.5		10	%		102.4		27.6		130.0		7	%		46	%

	$	1,269.9	$	657.5	$	1,927.4		*100*	%	$	1,248.1	$	624.8	$	1,872.9		100	%

~~2004~~Implantable Defibrillator Systems

•Sales ~~Biosensors~~of ~~International~~implantable defibrillator systems include both sales of implantable cardioverter defibrillator (~~Biosensors~~ICD)– and CRT-D systems. Worldwide sales of implantable defibrillator systems for the second quarter of 2005 were $50469.08 million, an increase of $14.1 million ~~recorded~~or 3% ~~during~~over the same period in 2004. Growth was driven primarily by a shift toward higher-value CRT-D systems. US implantable defibrillator system sales decreased 4% to $348.0 million for the second quarter of ~~2004~~2005 inand ~~conjunction~~international ~~with~~sales ~~milestones~~of ~~related~~$121.8 million increased 32% compared to the ~~FUTURE~~same IIperiod ~~clinical~~in ~~trial~~the

~~• Novartis Pharma AG and Novartis AG–$15.0 million payment for completion of SPIRIT FIRST clinical trial enrollment that occurred in April 2004~~14

•Table Bioabsorbable Vascular Solutions (BVS)–$6.0 million payment to purchase the remaining interest of BVS, an early-stage developer of bioabsorbable stents, in April 2004. Bioabsorbable stents are designed to be absorbed by tissue following the restoration of blood flow in patients with coronary artery disease.Contents

•prior ~~AFx,~~year ~~inc.-$22.8~~primarily ~~million~~due ~~associated~~to ~~with~~volume. For the ~~February~~first ~~2004~~six ~~acquisition~~months of ~~AFx~~2005, ~~inc~~sales of worldwide implantable defibrillator systems were $947.8 million, aan ~~manufacturer~~increase of ~~microwave~~10% ~~surgical~~over ~~cardiac~~the ~~ablation~~same period ~~medical~~in ~~devices~~the prior year.

~~The~~Worldwide ~~remaining~~implantable ~~charges~~defibrillator insales ~~2004~~for both the three- and six-month periods ended June 30, 2005 were negatively impacted by approximately $70.0 million primarily ~~for~~from management’s ~~the~~voluntary ~~purchase~~decision ofon ~~technology~~June 24, 2005 to betemporarily ~~utilized~~stop ~~in conjunction~~selling ~~with~~the ~~Guidant~~Company’s leading ~~carotid~~CRT-D ~~embolic~~system, ~~protection~~including the impact of lower replenishment of hospital owned inventory. Sales of these systems resumed on August 2, 2005 following the approval of product component modifications by the US Food and Drug Administration (FDA) and European regulatory authorities. The Company anticipates restoration of full world wide inventory availability during the month of August; however, sales for the third quarter of 2005 will be adversely impacted due to the temporary unavailability of these systems.

~~2003~~Notwithstanding the above, sales of implantable defibrillator systems increased in the three- and six-month periods ended June 30, 2005 due to the following:

• ~~Biosensors–In~~ICD ~~March~~and ~~2003,~~cardiac ~~Guidant~~resynchronization ~~purchased~~market ~~certain~~growth ~~assets~~based ofon ~~Biosensors’ everolimus eluting stent program, resulting in $20.5 million IPRD. 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.~~following:

• BVS-In March 2003, Guidant purchased the majority interest in BVS, resulting in a $16.0 million IPRD charge

	§		Findings of two Guidant-sponsored clinical trials—MADIT II and COMPANION. MADIT II demonstrated that a broader group of patients would benefit from ICD therapy. The investigators for the COMPANION trial reported that for advanced heart failure patients with desynchronized heart contractions, the addition of resynchronization therapy to optimal drug treatment reduced the combination of death and hospitalization when compared with optimal drug treatment alone. This trial demonstrated 20% reduction in combined all-cause death and hospitalization by adding Guidant’s CRT-D systems to optimal drug therapy and 36% reduction in all-cause mortality for Guidant’s CRT-D systems for patients with advanced heart failure.

	§		SCD-HeFT clinical trial and expanded national coverage. The National Heart, Lung and Blood Institute’s SCD-HeFT clinical trial was completed in 2003 with the clinical trial results published in the New England Journal of Medicine in January 2005. The results demonstrated positive benefits of implantable defibrillators (reducing death by 23% versus patients who did not receive defibrillators and only received standard drug therapy) in patients with heart failure. Based on these results and other recent clinical trials, CMS expanded national coverage to thousands of patients at risk for sudden cardiac death in January 2005.

Sales, Marketing and Administrative

	•		RAPIDO® delivery system and EASYTRAK® 2 and EASYTRAK 3 leads, which received FDA approval and were launched in August 2004. These products improve the physician’s ability to implant leads to the desired location.

	•		Strong market acceptance for CRT-D systems, specifically the CONTAK RENEWAL® family. Sales also benefited from continued acceptance of the VITALITY® family of implantable defibrillator systems, specifically the VITALITY 2.

~~Sales,~~Pacemaker ~~marketing and administrative~~Systems expenses were $298.1 million for the three months ended June 30, 2004, relatively unchanged from the same period in 2003, due to spending controls. These expenses for the six months ended June 30, 2004, totaled $612.8 million compared to $566.2 million for the same period in 2003, an increase of 8%. The increases for the six-month period were driven primarily by compensation associated with sales growth and the increase in the cardiac rhythm management sales force.

~~Restructuring~~Worldwide pacemaker system sales were $173.6 million for the quarter ended June 30, 2005, a 5% decrease over the same period in the prior year primarily due to volume. Sales in the US totaled $96.0 million for the second quarter of 2005, a decrease of 14% compared to the same period in the prior year. International pacemaker system sales increased 8% to $77.6 million for the second quarter of 2005 compared to the same period in 2004. Pacemaker system sales primarily include the INSIGNIA® family of pacemakers. Worldwide pacemaker system sales for the first six months of 2005 were $341.7 million, a decrease of $20.9 million or 6% over the same period in 2004. The pacemaker market has been negatively impacted, in part, by a continuing trend toward the use of implantable defibrillators (including CRT-Ds) in patients who are eligible for and otherwise would have received a pacemaker.

~~On July 21, 2004 Guidant’s Board~~15 of Directors approved a management action that will include work force reductions and termination of certain contracts, resulting primarily from the weakness in the metallic stent market. The pre-tax expense associated with this plan is estimated between $50.0 million and $70.0 million and will be recorded during the third quarter of 2004. This charge includes severance, benefits packages for affected employees, contract termination costs and other related costs. This initiative, along with other structural spending controls, is expected to decrease sales, marketing, administrative and research and development expenses by approximately 8-13% in the second half of 2004 compared to the first half of 2004. This management action is expected to provide an improved cost structure in future years. In connection with this action, the Company changed its bonus programs in a manner expected to reduce bonus compensation in the second half of 2004, including the elimination of the management committee bonuses for all of 2004.

InterestTable of Contents

~~Net~~Coronary ~~interest~~Stent ~~income was ($0.2)~~Systems million for the three months ended June 30, 2004, compared to ($2.5) million for the same period in 2003. Net interest income was ($1.2) million for the six months ended June 30, 2004, compared to ($3.9) million for the same period in 2003. The decrease in net interest income from 2003 was driven by a higher average outstanding debt balance, which was partially mitigated by increased interest income from larger balances in cash and cash equivalents and short-term investments.

	Three Months EndedJune 30,		Six Months EndedJune 30,
	2004	2003	2004	2003
Interest income	($6.6)	($5.9)	($12.8)	($11.6)
Interest expense	6.4	3.4	11.6	7.7
Interest, net	($0.2)	($2.5)	($1.2)	($3.9)

Worldwide coronary stent system sales for the second quarter of 2005 were $117.6 million, a decrease of 2% compared to the second quarter of 2004, and an increase of 2% compared to the first quarter of 2005. US coronary stent system sales were $61.7 million for the second quarter of 2005 compared to $51.2 million for the second quarter of 2004. International coronary stent system sales were $55.9 million and $69.2 million for the second quarter of 2005 and 2004. Increasing worldwide penetration of drug eluting stents drove a decrease in the Company’s global metallic stent sales; however, this decrease was more than offset in the US by the increase in revenues earned from J&J through the Company’s supply and co-promotion agreements (see below).

~~Royalties~~Worldwide coronary stent system sales for the first six months of 2005 were $232.8 million compared to $291.8 million for the same period in the prior year. The decrease for the six-month period is primarily due to declining stent sales in Japan as a result of competitive metallic coronary stent launches since late 2003 and the launch of Cordis’ CYPHER Sirolimus-eluting Coronary Stent System (CYPHER) in Japan in the third quarter of 2004. In addition, the six-month period was also impacted by continued drug eluting stent penetration in the US.

~~Royalty~~In ~~expense~~February 2004, isGuidant ~~incurred~~entered ~~for~~into ~~sales of~~an ~~certain~~agreement ~~implantable~~with ~~defibrillator~~J&J ~~systems,~~to ~~pacemaker~~co-promote ~~systems,~~the ~~coronary~~CYPHER. ~~stent systems~~This ~~and~~agreement ~~angioplasty~~allows ~~systems.~~for ~~Net~~the ~~royalty~~immediate ~~expense~~US ~~totaled~~co-promotion ~~$12.5~~of ~~million~~current inand ~~the~~future ~~second~~drug ~~quarter of~~eluting ~~2004~~stents ~~compared~~sold by ~~to $15~~J&J.7 ~~million~~It ~~for~~also ~~the~~allows ~~same~~for ~~period~~future co-promotion in ~~2003~~Japan. ~~These~~Co-promotion ~~expenses~~commissions ~~for~~earned ~~the six~~by ~~months~~Guidant ~~ended~~under ~~June~~this 30agreement, ~~2004,~~along ~~totaled~~with ~~$24.6~~sales ~~million~~of ~~compared~~stent todelivery ~~$29.0~~technology ~~million~~to inJ&J, ~~the~~arising ~~same~~from a ~~period~~prior inagreement, ~~the~~are ~~prior~~included ~~year.~~in ~~Net~~US ~~royalty~~coronary ~~expense~~stent ~~included~~system ~~royalty~~sales. ~~income~~Revenues offrom ~~less~~J&J ~~than~~were $132.02 million inand ~~all periods presented~~$16.8 million ~~The decrease~~ in ~~royalty expense was primarily due to~~ the ~~December~~ ~~2003~~second ~~expiration~~quarter of a2005 ~~Mirowski~~and ~~patent covering certain implantable defibrillator products~~2004. AtFor the ~~end~~first ofsix ~~the second quarter~~months, revenues ~~the~~from ~~Company~~J&J ~~has~~were ~~accrued~~ $5857.7 8 million, ~~which represents all royalties~~ and ~~interest~~$37.9 million. ~~potentially~~Increasing ~~payable~~world ~~under~~wide ~~the~~penetration ~~license~~of ~~agreement~~drug ~~pertaining~~eluting tostents ~~that~~in ~~patent.~~general ~~The~~and ~~ultimate~~the ~~payment~~Cypher ~~will~~system ~~depend~~specifically, ondrove athe ~~decision~~increase byin ~~the~~revenues ~~Federal~~from ~~Circuit~~J&J ~~Court~~through ofboth ~~Appeals ruling on a competitor’s challenge to~~ the ~~patent’s validity,~~co-promotion ~~claim construction~~ and ~~term~~supply ~~extension~~agreements. ~~(See Part II, Item 1, Legal Proceedings.)~~

~~Amortization~~Angioplasty Systems

~~Amortization~~Angioplasty ~~for~~system ~~other~~sales ~~intangible assets~~totaled ~~was~~ $7115.7 5 million infor the second quarter of ~~2004~~2005 compared to $3111.3 2 million infor the second quarter of ~~2003~~2004, representing a 4% increase in sales primarily due to volume. ~~These~~Sales ~~expenses~~of these products for the six months ended June 30, ~~2004,~~2005 ~~totaled~~ were $15215.0 6 million compared to $6227.5 8 million for the same period in ~~2003.~~the ~~The~~prior ~~increases~~year, ~~are attributable~~a todecrease of 5%. During the second ~~intangibles~~and ~~recorded~~third inquarter ~~conjunction~~of ~~with~~2004, ~~the~~Guidant ~~June~~announced ~~2003~~FDA ~~acquisition~~approval ~~of X~~and ~~Technologies,~~launched ~~Inc.~~the over-the-wire VOYAGER™ OTW and the ~~February~~rapid ~~2004~~exchange ~~acquisition~~VOYAGER RX Coronary Dilatation Catheters. As previously disclosed, certain sizes of ~~AFx~~the VOYAGER RX were recalled in January 2005, ~~inc~~resulting in sales declines for this product during the first quarter of 2005. The VOYAGER RX was re-launched in March 2005.

~~Other~~Cardiac Surgery and Peripheral, ~~net~~Including Biliary and Carotid Systems

~~Other,~~Worldwide ~~net~~sales ~~was~~of ~~$6.4~~cardiac ~~million~~surgery inand ~~the second~~peripheral, ~~quarter~~including ofbiliary ~~2004~~and ~~compared~~carotid tosystems totaled $097.4 6 million infor the second quarter of ~~2003,~~2005 ~~and~~compared ~~$8.9 million~~to ~~and~~ $568.7 4 million for the ~~six~~second ~~months~~quarter ~~ended June 30~~of 2004, ~~2004~~representing ~~and~~43% ~~2003~~growth. ~~For~~Sales ~~all~~for ~~periods presented~~these ~~this~~systems ~~line~~during ~~item~~the ~~primarily~~first ~~includes~~six ~~losses~~months ~~on sale~~ of ~~fixed~~2005 ~~assets and write downs~~were of$189.5 million ~~equity~~compared ~~investments~~to ~~and~~$130.0 million ~~fixed~~for ~~assets.~~the ~~The~~same ~~increase~~period in ~~expense~~2004, ~~during~~representing ~~2004~~a ~~compared~~46% toincrease. ~~2003~~Sales isincreases ~~primarily~~were ~~due~~driven toby ~~impairments~~the offollowing ~~equity investments that were considered other than~~products: ~~temporary.~~

~~Income~~• ~~Tax~~RX ACCULINK™ Carotid Stent System and the RX ACCUNET™ Embolic Protection System for which Guidant was the first to receive FDA approval in August 2004

~~The effective income tax rates for~~16 the quarters ended June 30, 2004 and 2003 were 20.2% and (53.6%). The income tax rates for the six-month periods ending June 30, 2004 and 2003 were 23.6% and (96.8%) ($36.7 million tax benefit). The effective tax rate change in 2004 was primarily due to the litigation settlement in 2003 that was deductible at the US statutory tax rates. Guidant’s ongoing operations are impacted by overseas operations having statutory tax rates that are lower than the US statutory tax rates.

LitigationTable of Contents

~~The~~• ~~Company~~Continued ~~recorded~~growth ~~a $422.8 million net litigation charge~~ in ~~the~~endoscopic ~~second~~vessel ~~quarter~~harvesting ofdriven ~~2003~~by ~~primarily related to~~ the ~~arbitration decision~~VASOVIEW® ~~involving~~Endoscopic ~~Cordis~~Vessel ~~Corporation.~~Harvesting Systems

~~Discontinued~~Cost ~~Operations~~of Products Sold

InCost ~~March~~of ~~2004,~~products ~~Guidant’s~~sold ~~Board~~ was $346.2 million and $571.5 million in the second quarter of ~~Directors~~2005 ~~approved~~and athe six ~~plan~~months ended June 30, 2005, compared to ~~discontinue~~$234.6 million ~~the~~and ~~GALILEO~~$460.9 million ~~Intravascular~~for ~~Radiotherapy~~the ~~System~~same ~~(GALILEO~~respective ~~System)~~periods ~~product~~in ~~line~~2004. Gross profit percentage was 64.5% for the ~~treatment~~second quarter of ~~in-stent~~2005 ~~restenosis~~and 70.3% ~~due~~for the six months ended June 30, 2005, compared to 75.0% for the ~~significant~~ ~~competitive~~second ~~impact~~quarter of ~~drug~~2004 ~~eluting stents~~and 75.4% Onfor ~~April~~the 21six months ended June 30, 2004,. ~~Guidant~~The ~~signed~~decrease ~~a definitive~~in ~~agreement~~gross ~~with~~profit ~~Novoste~~percentage ~~Corporation~~in ~~(Novoste)~~2005 includes toa ~~cooperate~~$113.1 million charge recorded in ~~assisting~~the ~~existing US~~second quarter of 2005 for all current and anticipated ~~Canadian~~future ~~customers~~costs of the ~~GALILEO~~voluntary ~~System~~field ~~who~~actions ~~wish~~related to ~~transition~~certain toof ~~Novoste~~the Company’s ~~products~~implantable defibrillator and pacemaker systems. ~~Guidant~~Included ~~received~~in this charge is $294.5 0 million ~~upon~~related to ~~signing~~the ~~and~~estimated ~~will~~costs ~~receive~~of ~~earn-out~~device ~~payments~~replacement ~~up to~~and ainventory ~~maximum~~returns, ofand $419.0 1 million ~~based~~for onthe estimated ~~Novoste~~write ~~sales~~down inof ~~the~~non-saleable USinventory. ~~and~~The ~~Canada~~$94.0 million ~~The~~charge ~~disposal plan~~is ~~consists~~based primarily upon the Company’s estimates of the ~~termination~~number of ~~normal~~devices ~~activity,~~which ~~abandonment~~physicians ofmay ~~property~~choose ~~and~~to replace. These ~~equipment,~~estimates ~~product~~were ~~returns,~~determined ~~collection~~through a device-specific review of ~~accounts~~relevant ~~receivable~~current and ~~settlement of~~historical ~~liabilities.~~recall ~~Net~~observations, ~~loss~~including ~~from~~FDA ~~discontinued~~recall ~~operations~~classification, ~~for~~known ~~the~~and ~~six~~expected ~~months~~device ~~ended~~failure ~~June 30~~rates, ~~2004~~ ~~includes~~the apresence ~~charge~~ of ~~$11.2~~non-invasive ~~million~~corrective actions, ~~primarily~~and ~~related to~~ the ~~write~~remaining ~~down~~service life of ~~long-lived~~the device. ~~assets~~Should tothe ~~fair~~actual ~~value,~~costs ~~severance-related~~incurred ~~charges~~differ ~~and~~from ~~recording~~these ~~inventory~~assumptions, ~~and~~adjustments ~~accounts receivable~~to atthe ~~net~~anticipated costs ~~realizable~~may ~~value~~be required. ~~Guidant~~Through ~~expects~~August 3, ~~this~~2005, ~~discontinuation~~the toCompany ~~occur~~has ~~in several~~incurred ~~phases,~~$16.0 million ~~concluding~~of ~~within~~actual warranty ~~the~~claims ~~next~~under ~~six~~these ~~months~~programs. ~~Guidant~~Excluding ~~has~~the ~~taken~~charge ~~steps~~related to ~~close~~ these actions, the ~~Houston~~2005 gross ~~and~~profit ~~Pearland,~~percentages ~~Texas,~~were ~~facilities.~~within Guidant’s historical range.

InResearch ~~addition, Guidant’s Board of Directors ratified a plan in December 2003 to discontinue Guidant’s operations in Brazil due to unfavorable business conditions~~ and ~~poor operating performance.~~ Development

InInnovation ~~June~~is ~~2003,~~essential to Guidant’s ~~Board~~success. It is one of the primary bases of competition in ~~Directors~~Guidant’s ~~approved~~markets. aThe ~~plan~~Company works to ~~dispose~~introduce new products, enhance the effectiveness and ease of use of existing products and expand the ~~ANCURE~~applications ~~ENDOGRAFT~~for ~~System~~its ~~(ANCURE)~~products. ~~product~~Research ~~line~~and development toexpense ~~treat~~was ~~abdominal~~$143.9 million ~~aortic~~for ~~aneurysms~~the ~~(AAA)~~second ~~due~~quarter toof ~~continuing~~2005, ~~financial~~or ~~losses~~14.8% of sales, ~~limited~~compared to $136.8 ~~prospects~~million for the ~~Company’s~~same ~~AAA~~period ~~product~~in ~~line~~2004, or 14.6% of sales. Research and development expense for the first ~~impact~~six months of ~~the~~2005 UStotaled ~~Department~~$273.5 million or 14.2% of sales compared to $274.4 million or ~~Justice~~14.7% ~~investigation~~of sales in the same period in 2004. Significant investments in research and development in 2005 included:

In• ~~accordance~~XIENCE™ ~~with~~V ~~SFAS~~Everolimus ~~144, Accounting~~Eluting ~~for~~Coronary ~~the~~Stent ~~Impairment~~System oris ~~Disposal~~currently ofbeing ~~Long-Lived~~evaluated ~~Assets,~~in ~~these~~the ~~disposals represent~~SPIRIT ~~discontinued~~family ~~operations.~~of ~~Accordingly~~clinical trials, ~~the~~which ~~accompanying~~is ~~consolidated~~expected ~~financial statements~~to ~~and~~support ~~notes~~filings ~~reflect~~to ~~the~~obtain ~~results~~regulatory ofapproval ~~operations~~to ~~and~~market ~~financial position of~~ the ~~AAA and GALILEO~~ product ~~lines~~in ~~and~~ the ~~Brazil~~US ~~operations~~and ~~as discontinued operations for all periods presented.~~ Europe

At June 30, 2004, and December 31, 2003, there were $3.9 million and $36.5 million in assets and $25.4 million and $23.9 million in liabilities related to discontinued operations. Assets are primarily comprised of accounts receivable, inventory and property, plant and equipment. Liabilities primarily include accruals for severance, product returns, litigation accruals and lease commitments. Net loss from discontinued operations includes charges related to the impairment of certain long-lived assets, inventory write-downs, customer returns, ANCURE-related settlements, employee severance and facility costs. Loss from discontinued operations before income taxes, for the six months ended June 30, 2003, includes a $62.4 million charge for the previously disclosed agreement with the US Department of Justice surrounding the ANCURE product line for the treatment of AAA. The Company expects to incur pre-tax losses of up to $25.0 million associated with the exit of these three businesses for the remainder of 2004, excluding litigation charges (see Part II, Item 1, Legal Proceedings).

	§		In June 2005, Guidant began enrollment in its SPIRIT III drug eluting stent trial. SPIRIT III is a large-scale pivotal clinical trial evaluating XIENCE V, an everolimus eluting coronary stent system utilizing Guidant’s cobalt chromium MULTI-LINK VISION® Coronary Stent System platform.

	§		In July 2005, Guidant began enrollment in its SPIRIT II drug eluting stent clinical study. Results of the SPIRIT II study will provide additional clinical data to support the launch of XIENCE V in several countries outside the US.

~~The~~• ~~following~~Bioabsorbable ~~summarizes~~and ~~financial information~~carotid stent systems • Advanced Patient Management applications, designed to enable a physician to monitor patient heart function remotely and automatically • Clinical trials to further demonstrate the benefits of cardiac resynchronization therapy devices for ~~discontinued~~treating ~~operations~~heart ~~(in~~failure ~~millions):~~• Development of next-generation devices for cardiac rhythm management, angioplasty, peripheral systems – including carotid stenting systems and cardiac surgery products

	Three Months EndedJune 30,		Six Months EndedJune 30,
	2004	2003	2004	2003
Net sales	$4.1	$21.4	$15.4	$ 48.9
Loss from discontinued operations before income taxes	(15.0)	(41.5)	(36.1)	(105.5)
Net loss from discontinued operations	(9.1)	(15.3)	(22.7)	(78.3)

LIQUIDITYTable ANDof FINANCIAL CONDITIONContents

	June 30, 2004	December 31, 2003
(Dollars in millions)
Cash and cash equivalents (1)	$ 1,690.4	$ 1,468.2
Working capital	$ 2,381.4	$ 2,017.5
Current ratio	3.4:1.0	2.9:1.0
Net cash position (2)	$ 836.9	$ 519.9
Days receivable outstanding	79	78
Inventory turnover	2.31	2.38

In addition to funding internal research and development efforts, Guidant also invests in early-stage technologies through equity investments, acquisitions and other collaborative vehicles.

~~(1) A~~In-Process ~~substantial~~Research ~~portion of cash~~ and ~~cash~~Development ~~equivalents is indefinitely invested in Guidant’s non-US subsidiaries.~~(2IPRD) ~~Net cash position is the sum~~ ~~of cash and cash equivalents and short-term investments less total debt.~~

~~Certain of~~ Guidant~~’s acquisitions~~ ~~involve~~recorded ~~contingent~~an ~~consideration~~IPRD ~~and~~charge ~~certain~~of ~~equity investments may involve contingent payments, which would provide additional ownership to Guidant (collectively referred to as “milestone payments”)~~$10.0 million ~~These~~for ~~milestone~~the ~~payments~~three- ~~are~~and ~~generally contingent upon reaching performance~~six-~~related~~ ~~milestones,~~month ~~including~~periods ~~specified~~ended ~~revenue~~June ~~levels~~30, ~~product~~2005 ~~development~~related ~~targets~~to orthe ~~regulatory~~acquisition ~~approvals~~of orAFx, ~~filings~~inc. ~~At June 30~~, ~~2004, Guidant’s~~a ~~accrual~~manufacturer ~~for~~of ~~milestone~~microwave ~~payments~~surgical ~~totaled $35.3 million and will be paid~~cardiac ~~during~~ablation ~~the~~medical ~~next two years~~devices. InThis ~~addition,~~compares ~~future undiscounted performance-related milestone payments of up~~ to $~~268~~73.3 0 million ~~could be paid through 2010, depending on when~~ and ~~if milestones are attained~~$99.8 million ~~Potential~~for ~~milestone payments under existing agreements during~~ the comparable ~~next~~periods 12in ~~months range from $2~~2004.0 toKey ~~$80.0~~components ~~million.~~of ~~The~~the ~~Company~~2004 ~~continues~~amount ~~to evaluate~~include: ~~business development opportunities, which may generate additional payments.~~

~~Summary~~• Biosensors International–$50.0 million recorded during the second quarter of ~~Cash~~2004 ~~Flows~~in conjunction with clinical results related to the FUTURE II clinical trial • Novartis Pharma AG and Novartis AG–$15.0 million payment in April 2004 for completion of SPIRIT FIRST clinical trial enrollment • Bioabsorbable Vascular Solutions (BVS)–$6.0 million payment in April 2004 to purchase the remaining interest of BVS, an early-stage developer of bioabsorbable stents. Bioabsorbable stents are designed to be absorbed by tissue following the restoration of blood flow in patients with coronary artery disease. • AFx, inc.–$22.8 million associated with the February 2004 acquisition of AFx, inc.

	Six Months EndedJune 30,
	2004		2003		Change
(In millions)
Net cash provided by (used for):
Operating activities	$ 495.5		$ 243.5		$ 252.0
Investing activities	(337.1	)	(230.7	)	(106.4	)
Financing activities	67.5		80.2		(12.7	)
Effect of exchange rate changes on cash	(3.7	)	82.6		(86.3	)
Net increase in cash and cash equivalents	$ 222.2		$ 175.6		$ 46.6

The remaining charges in 2004 were primarily for the purchase of technology to be utilized in conjunction with Guidant’s carotid embolic protection systems.

~~Net cash provided by operating activities was $495.5 million for the first six months of 2004~~Sales, anMarketing ~~increase~~and ofAdministrative ~~$252.0~~(SM&A) ~~million primarily due to a decrease in tax payments of $94.2 million during the six months ended June 30, 2004 compared to the six months ended June 30, 2003.~~

~~Net~~SM&A ~~cash~~expenses ~~used~~were $351.8 million for ~~investing activities~~the ~~was~~second ~~$337~~quarter of 2005 or 36.1% of sales compared to $298.1 million or 31.8% of sales for the ~~first~~same period in 2004. These expenses for the six months ended ~~of 2004~~June 30, an2005 ~~increase~~totaled of $~~106~~662.4 1 million ~~from~~or ~~the~~34.4% ~~prior~~of ~~year~~sales ~~primarily~~compared ~~due~~ to an$612.8 million ~~increase~~or ~~of $122~~32.37% ~~million~~of sales for ~~purchases of~~the ~~equity~~same ~~and~~period ~~short-term~~in ~~investments~~2004. ~~The~~This ~~majority~~increase ofin ~~these~~2005 ~~purchases~~is ~~are~~primarily ~~interest-bearing~~due to higher expense ~~investments~~associated with ~~maturities~~the ~~between~~accelerated ~~three~~vesting ~~and~~of ~~six~~restricted ~~months.~~stock awards in 2005.

~~Net~~Total ~~cash~~expenses ~~provided~~for bythe ~~financing activities~~three ~~was~~and six months ended June 30, 2005 included $6734.9 million and $38.9 million associated with vesting of restricted stock awards compared to $5.8 million and $20.5 million for the ~~first~~same ~~six~~respective ~~months~~periods ofin 2004. As discussed in Note 2 to the Financial Statements, athe ~~decrease~~vesting of ~~$12.7~~restricted ~~million from~~stock awards upon shareholder approval of the ~~prior~~merger ~~year~~with ~~due~~J&J on toApril 27, 2005 resulted in additional compensation expense, including related payroll taxes, of $33.6 million, which was recorded in the ~~following:~~second quarter of 2005.

~~• $127.2 million increase in repurchases of common stock~~Interest

•The ~~$37.6~~components ~~million~~of ~~increase~~interest, innet ~~dividend~~are ~~payments~~as follows:

• $56.1 million decrease in additional borrowings


	Three Months Ended						Six Months Ended
	June 30,						June 30,
(In millions)	2005			2004			2005			2004

Interest income		($19.0	)		($6.6	)		($34.6	)		($12.8	)
Interest expense		7.0			6.4			15.0			11.6

Interest, net		($12.0	)		($0.2	)		($19.6	)		($1.2	)

~~partially offset by:~~ 18

•Table $208.2 million increase in issuances of common stock for stock option exercisesContents

~~Exchange rate fluctuations decreased~~Royalties cash by $3.7 million for the six months ended June 30, 2004 compared to an increase in cash of $82.6 million for the six months ended June 30, 2003. This decrease of $86.3 million is primarily due to the Euro weakening during the six months ended June 30, 2004 and strengthening during the six months ended June 30, 2003 compared to the US dollar.

AtRoyalty ~~June~~expense ~~30,~~is ~~2004,~~incurred ~~the~~for ~~Company~~sales ~~had outstanding borrowings~~ of ~~$954.1~~certain ~~million~~implantable atdefibrillator asystems, ~~weighted~~pacemaker systems, ~~average~~coronary ~~interest~~stent ~~rate~~systems ofand 2angioplasty systems.~~21%, including~~ ~~bank~~Net ~~borrowings,~~royalty ~~commercial~~expense ~~paper,~~totaled $~~350~~12.0 3 million ~~principal balance in long-term~~ ~~notes due in 2006~~ and ~~interest rate swap agreements valued at~~ $325.4 0 million. ~~Bank borrowings~~for ~~represent~~the ~~advances~~three ~~under~~and ~~short-term~~six ~~uncommitted~~months ~~credit~~ended ~~facilities~~June 30, ~~with commercial~~2005 ~~banks.~~compared ~~The~~to ~~commercial paper borrowings are supported by two credit facilities; a~~ $~~400~~12.0 5 million ~~facility that expires August 2007~~ and a $~~400~~24.0 6 million ~~facility~~for ~~that expires August 2004. The Company is currently renegotiating~~ the ~~credit~~same ~~facility~~respective ~~that expires~~periods ~~August~~in 2004. ~~There~~Net ~~are~~royalty ~~currently~~expense noincluded ~~outstanding~~royalty ~~borrowings under these facilities.~~income ~~The~~of ~~Company~~less ~~classified~~than $~~250~~1.0 million asin ~~short-term~~both ~~debt~~periods atpresented. ~~June~~At June 30, ~~2004.~~2005, ~~The~~the Company ~~believes~~ ~~that~~had ~~cash~~accrued $61.8 million, ~~and~~which ~~cash~~represents ~~equivalent~~all ~~balances~~royalties ~~will~~and beinterest ~~adequate~~potentially topayable ~~fund~~under ~~maturities~~the oflicense ~~short-term~~agreement ~~borrowings,~~pertaining ~~obligations~~ to ~~make~~a ~~interest~~Mirowski ~~payments~~patent oncovering ~~its~~implantable ~~debt~~defibrillator ~~and~~products. ~~other~~The ~~anticipated~~ultimate ~~operating~~payment ~~cash~~by ~~needs~~Guidant ~~for~~will ~~2004,~~depend ~~including~~on ~~planned~~a ~~capital~~final ~~expenditures~~ruling ~~of approximately~~regarding ~~$135~~the patent.0 ~~million~~See ~~for~~Part II, ~~the~~Item 1, ~~remainder~~Legal ~~of 2004~~Proceedings.

~~The Company has recognized net~~Amortization deferred tax assets aggregating $298.9 million at June 30, 2004, compared to $314.1 million at December 31, 2003. 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.

~~Field~~Amortization ~~Actions~~expense was $4.8 million for the second quarter of 2005 compared to $7.7 million for the same period in 2004. These expenses for the six months ended June 30, 2005 totaled $12.6 million compared to $15.0 million for the same period in 2004. This decrease is primarily due to the impairment charge recorded in the first quarter of 2005 as discussed below.

~~As further described in the~~Other 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~~Net ~~time~~other toincome ~~time,~~was $0.1 million in the ~~Company initiates~~second ~~field~~quarter ~~actions~~of ~~with~~2005 ~~respect~~compared to ~~market-released products~~$6.4 million ~~These~~of ~~actions may~~net ~~include~~other ~~product~~expense ~~recalls~~in orthe ~~communications~~second ~~with~~quarter aof ~~significant~~2004. ~~number~~Net ofother ~~physicians~~income ~~about~~for ~~a product~~the orsix ~~labeling~~months ~~issue~~ended June 30, 2005 was $7.2 million ~~The~~compared ~~scope~~to $8.9 million of ~~such~~net ~~actions~~other ~~can~~expense ~~range~~for ~~from~~the ~~very~~six ~~minor~~months ~~issues~~ended June ~~affecting~~30, a2004. ~~small~~The ~~number~~additional ofincome ~~units~~in 2005 compared to ~~more~~2004 ~~significant~~is ~~actions.~~primarily ~~Since~~due ~~the~~to ~~Company’s~~foreign currency ~~last~~translation ~~filing~~gains. onThe ~~Form~~additional ~~10-Q,~~expense ~~the~~in ~~Company~~2004 ~~conducted~~compared ~~the~~to ~~following~~2005 ~~field~~is ~~actions:~~primarily due to equity investments that were considered permanently impaired in 2004.

In June, Guidant initiated a field action in Japan related to product labeling of the Pulsar/Discovery II pacemaker systems. Changes to product labeling, including the Physician Technical Manual and labels on programming devices, were completed; however, no product was required to be returned. Affected physicians and the Japanese Ministry of Health, Labor and Welfare (MHLW) were notified.


	Three Months Ended						Six Months Ended
	June 30,						June 30,
(In millions)	2005			2004			2005			2004

Other expense	$	2.8		$	9.6		$	3.4		$	13.9
Other income		(2.9	)		(3.2	)		(10.6	)		(5.0	)

Other, net	($	0.1	)	$	6.4		($	7.2	)	$	8.9

InImpairment ~~June, Guidant initiated a field~~Charge action in Japan related to the ENDOTAK ENDURANCE® EZ lead, distributed only in Japan. Root cause analysis identified a small number of devices potentially affected. Physicians with suspect leads implanted were provided with diagnostic and follow-up recommendations and the MHLW was notified.

~~Cautionary~~During ~~Factors~~the first quarter of 2005, the Company recorded a $60.0 million impairment charge related to the write-down of assets associated with the FX miniRAIL Dilatation Catheter. In accordance with SFAS 144, Accounting for the Impairment or Disposal of Long-Lived Assets, management reassessed the expected future financial performance of the FX miniRAIL Dilatation Catheter, acquired from X Technologies, Inc., noting that the value of the expected future cash flows is less than the carrying value of the related intangible asset. Among other reasons, this was the result of (a) a decrease in demand for the product for use in treating in-stent restenosis as drug eluting stents have reduced the incidence of this condition, and (b) demand for the product for use in pre-dilating vessels in advance of implanting drug eluting stents not developing as anticipated.

~~Certain~~Income ~~statements made in this~~Tax report are forward-looking, including accounting estimates, statements concerning sales and expense trends, anticipated tax rates, capital expenditures, cash flows, costs of research programs, the timing of discontinued operations and the timing of product developments. The statements are based on assumptions about many important factors, including assumptions concerning:

• The ~~development~~effective ofincome tax rates for the ~~coronary~~quarters ~~stent~~ended ~~market:~~June 30, ~~Drug~~2005 ~~eluting~~and ~~stents~~2004 ~~present~~were a0.9% ~~significant~~and ~~growth~~20.2%. The ~~opportunity;~~effective ~~however,~~tax rate is lower for the ~~earlier~~quarter ~~introduction~~ended ofJune 30, ~~drug~~2005 ~~eluting~~primarily ~~stents~~due byto a $29.4 million reversal of the ~~Company’s~~income ~~competitors~~tax ~~has~~gross-up ~~substantially~~provision ~~affected~~recorded in the ~~market~~fourth ~~for~~quarter ~~metallic~~of ~~coronary~~2004 associated ~~stents~~with ~~and~~the ~~will~~one-time ~~continue~~incentive to ~~impact~~repatriate foreign earnings under the ~~Company’s~~American Jobs ~~financial~~Creation ~~results~~Act of 2004. In May 2005, the Internal Revenue Service issued guidance clarifying that the tax gross-up

~~• The effects of operating in an industry subject to complex regulation, the necessity for appropriate reimbursement of therapies and the significance of legal claims in Guidant’s industry.~~19

•Table Changes in the location or volume of production or changes in tax law.Contents

•provision ~~Product~~does ~~development~~not ~~and~~apply ~~production~~to ~~factors~~the ~~(including~~foreign ~~the~~earnings ~~uncertainties~~repatriated ~~associated~~under ~~with~~the one-time ~~clinical~~incentive. ~~trials),~~The ~~competitive~~income ~~factors~~tax ~~(including~~rates for the ~~introduction~~six-month ofperiods ~~new~~ending ~~products~~June 30, 2005 and ~~alternative~~2004 were ~~therapies),~~13.8% ~~business~~and ~~development~~23.6%. ~~factors~~In addition to the tax provision reversal, ~~internal~~the ~~factors~~effective ~~(including~~tax rate is lower for the ~~retention~~six ofmonths ~~key~~ended ~~employees~~June 30, ~~and~~2005 ~~changes~~due to the impairment charge in ~~business~~the ~~strategies)~~first ~~and~~quarter ~~others~~of 2005, which ~~all~~is asdeductible ~~further~~at ~~described~~the inUS ~~Exhibit~~statutory 99tax torates. ~~this~~Guidant’s ~~filing,~~effective ~~which~~tax rate is ~~incorporated~~typically ~~herein~~lower than bythe ~~reference~~US statutory tax rates primarily due to overseas operations having statutory tax rates that are lower than the US.

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

~~Item~~In 4.March 2004, ~~Controls~~Guidant’s ~~and~~Board ~~Procedures~~of Directors approved a plan to discontinue the GALILEO Intravascular Radiotherapy System (GALILEO) product line for the treatment of in-stent restenosis due to the significant competitive impact of drug eluting stents.

AnIn ~~evaluation was carried out~~December 2003, ~~under the supervision of and with the participation of the Company~~Guidant’s ~~management,~~Board ~~including the~~of ~~Company’s~~Directors ~~chief~~ratified ~~executive~~a ~~officer~~plan ~~(CEO)~~to ~~and~~discontinue ~~chief financial officer (CFO), of the effectiveness of the Company~~Guidant’s ~~disclosure controls and procedures as of the end of~~operations ~~the~~in ~~period~~Brazil ~~covered~~due byto ~~this~~unfavorable ~~report.~~business ~~Based~~conditions ~~on the evaluation, the CEO~~ and ~~CFO~~poor ~~have~~operating ~~concluded that the Company’s disclosure controls and procedures are effective~~performance.

~~There~~In ~~was~~June 2003, noGuidant’s ~~change~~Board inof ~~the Company’s~~Directors ~~internal~~approved ~~control~~a ~~over~~plan ~~financial~~to ~~reporting~~dispose ~~during~~of the ~~Company’s~~ANCURE ~~most~~ENDOGRAFT ~~recently~~System ~~completed~~(ANCURE) product ~~fiscal~~line ~~quarter~~to ~~that~~treat ~~has~~abdominal ~~materially~~aortic ~~affected,~~aneurysms or(AAA) due isto ~~reasonably~~continuing ~~likely to~~financial ~~materially~~losses, ~~affect~~limited prospects for the Company’s ~~internal~~AAA ~~control~~product ~~over~~line ~~financial~~and ~~reporting~~the impact of the US Department of Justice investigation. See Part II, Item 1, Legal Proceedings.

~~Section~~In ~~404~~accordance ofwith ~~the~~SFAS ~~Sarbanes-Oxley~~144, ~~Act requires~~Accounting ~~company~~for ~~management to assess and report on~~ the ~~company’s~~Impairment ~~internal~~or ~~controls. It~~Disposal ~~also~~of ~~requires~~Long-Lived ~~a company’s independent~~Assets, ~~outside auditors to issue an~~these ~~“attestation”~~disposals torepresent ~~management’s~~discontinued ~~assessment~~operations. Accordingly, asthe ~~well~~accompanying asconsolidated ~~assess the proper~~financial ~~design~~statements and ~~function~~notes ofreflect ~~internal controls. Guidant is required to comply with this requirement for~~ the ~~first~~results ~~time as~~ of ~~December~~operations ~~31,~~and ~~2004.~~financial ~~Guidant~~position ~~has~~of ~~substantially completed~~ the ~~documentation~~GALILEO toand AAA ~~comply~~product ~~with~~lines ~~this~~and ~~standard~~the ~~and~~Brazil isoperations ~~now~~as ~~working~~discontinued onoperations ~~management testing~~for ofall ~~internal~~periods ~~controls~~presented.

~~PART~~At ~~IIOTHER~~June 30, ~~INFORMATION~~2005 and December 31, 2004, there were $35.2 million and $23.9 million in liabilities related to discontinued operations. Liabilities primarily include accruals for ANCURE-related settlements, severance and product returns.

~~Item~~The 1.following ~~Legal~~summarizes ~~Proceedings~~financial information for discontinued operations:

The Company is involved in patent, product liability, shareholder and other legal proceedings that arise in the course of the Company’s business. The Company records a liability when a loss is considered probable and the amount can be reasonably estimated. If the reasonable estimate of a probable loss is a range, and no amount within the range is a better estimate, the lower end of the range is accrued. If a loss is not probable or a probable loss cannot be reasonably estimated, no liability is recorded.


	Three Months Ended						Six Months Ended
	June 30,						June 30,
(In millions)	2005			2004			2005			2004

Net sales ⁽¹⁾		($0.2	)	$	4.1			($0.9	)	$	15.4
Loss from discontinued operations before income taxes		(13.8	)		(15.0	)		(36.7	)		(36.1	)
Net loss from discontinued operations		(8.8	)		(9.1	)		(23.2	)		(22.7	)

~~Patent~~(1) ~~and~~Represents ~~other~~net ~~proprietary~~product ~~rights are~~returns ~~essential~~from tocustomers ~~the Company’s business. Significant litigation concerning patents and products is pervasive~~ in ~~the Company’s industry~~2005. Patent claims include challenges to the coverage and validity of the Company’s patents on 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.

~~Losses~~Liquidity in the matters below are not considered probable or cannot be reasonably estimated. Accordingly, the Company has not recorded reserves for these matters. While the liability of the Company in connection with the claims cannot be estimated with any certainty, the outcome of these legal proceedings, except as specifically identified below, is not expected to have a material adverse effect on the Company’s consolidated financial position, although the resolution in any reporting period of one or more of these matters could have a significant impact on the Company’s results of operations for that period. While the Company believes that it has valid defenses in these matters, litigation is inherently uncertain, excessive verdicts do occur, and ~~the~~Capital ~~Company may in the future incur material judgments or enter~~Resources ~~into material settlements of claims.~~

On February 18, 1998, Arterial Vascular Engineering, Inc. (now known as Medtronic Vascular) filed suit against the Company’s subsidiary, Advanced Cardiovascular Systems, Inc. (ACS), in the District Court for Delaware alleging that the sale of its balloon-expandable coronary and peripheral stents infringe the Boneau patents owned by Medtronic Vascular. The suit is consolidated with a suit by ACS alleging infringement by Medtronic Vascular of the Company’s Lau stent patents. The Medtronic Vascular complaint also alleges misappropriation of trade secrets and breach of a confidentiality agreement by ACS. In the lawsuit, Medtronic Vascular is seeking injunctive relief, co-ownership of the Lau patents, monetary damages and a ruling that the ACS stent patents asserted against Medtronic Vascular are invalid. Pretrial matters are scheduled through 2004, with trial set in the first quarter of 2005. This suit is one of a number of suits brought by Medtronic Vascular under the Boneau patents against all substantial participants in the stent market. The allegations made by Medtronic Vascular are wide-ranging and cover the Company’s stent products broadly. Accordingly, while potential liability cannot be estimated with any certainty, an adverse outcome could have a material impact on results of operations or consolidated financial position.


	June 30,		December 31,
(Dollars in millions)	2005		2004

Cash and cash equivalents and short-term investments ⁽¹⁾	$	2,597.2	$	2,214.3
Working capital	$	2,922.4	$	2,679.2
Current ratio ⁽²⁾		3.4:1.0		3.6:1.0
Net cash position ⁽³⁾	$	2,241.4	$	1,555.1
Days receivable outstanding		77		79

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 into the second half of 2004.


(1)		Short-term investments consist primarily of highly rated commercial paper and US Government securities with maturities greater than three months. Similar investments with maturities of less than three months are included in cash and cash equivalents.

(2)		Current ratio is lower at June 30, 2005 primarily due to $350.0 million of long-term notes (due in February 2006), which were classified as long-term debt as of December 31, 2004.

(3)		Net cash position is the sum of cash and cash equivalents and short-term investments less total debt.

~~On March 6, 2002, Pacesetter, Inc.~~20 (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 a number of Pacesetter patents covering various features of pacemakers and implantable defibrillators. On the Company’s motion, the case was transferred to the District Court for Minnesota. Pacesetter is seeking injunctive relief, monetary damages and attorney fees. Currently four patents are at issue. Pacesetter has sought reexamination of two of the patents. On the Company’s motion, the litigation has been stayed pending the completion of the reexaminations.

OnTable 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, MULTI-LINK PENTA and MULTI-LINK VISION Coronary Stent Systems infringe five Medinol patents related to stent design. The complaint seeks injunctive relief and monetary damages. Pretrial matters are scheduled through 2004. Contents

OnCertain ~~June~~of ~~12,~~Guidant’s ~~2003,~~acquisitions ~~the~~involve ~~Company announced~~contingent ~~that its subsidiary, EndoVascular Technologies, Inc~~consideration. ~~(EVT),~~Contingent ~~had~~consideration will ~~entered~~be ~~into~~recorded ~~a plea~~when ~~agreement~~the ~~with~~amount ~~the~~is USdeterminable ~~Department~~and ofwill ~~Justice~~be ~~relating~~allocated to ~~a previously disclosed investigation regarding~~ the ~~ANCURE~~fair ~~ENDOGRAFT~~value ~~System for the treatment~~ of ~~abdominal aortic~~the ~~aneurysms.~~intangibles Ator ~~the time of the EVT plea~~IPRD, ~~the~~with ~~Company~~any ~~had~~amounts ~~outstanding~~paid ~~fourteen~~above ~~suits alleging~~fair ~~product~~value ~~liability related causes~~ of ~~action~~identifiable ~~relating~~assets torecorded ~~the ANCURE System~~as goodwill. ~~The Company settled~~In ~~eleven~~addition ofto ~~the~~contingent ~~suits~~consideration, ~~that~~certain ~~predated~~equity ~~the~~investments ~~EVT~~made ~~plea~~by ~~for~~Guidant ~~an amount recorded~~ in other ~~the~~entities ~~third~~may ~~quarter~~involve ofcontingent ~~2003~~payments, ~~that~~which ~~was~~would ~~not~~provide ~~material~~additional toownership ~~the Company. Subsequent~~ to ~~the EVT~~Guidant ~~plea,~~(both ~~the~~collectively ~~Company~~referred ~~has~~to ~~been~~as ~~notified~~“milestone ofpayments”). ~~additional~~These ~~claims~~milestone ~~and~~payments ~~served~~are ~~with additional~~generally ~~complaints.~~contingent ~~From~~upon ~~time~~reaching toperformance-related ~~time~~milestones, ~~the~~including ~~Company~~specified ~~has~~revenue ~~settled certain of the claims and suits for~~levels, ~~amounts~~product ~~that~~development ~~were~~targets ~~not~~or ~~material~~regulatory toapprovals ~~the~~or ~~Company~~filings. ~~Currently~~At June 30, ~~the~~2005, ~~Company has outstanding~~Guidant’s ~~approximately~~accrual ~~thirty-five~~for ~~suits,~~milestone ~~and~~obligations ~~more~~totaled ~~suits~~$8.3 million, ~~are~~which ~~likely~~is expected to be ~~filed.~~paid Aduring ~~consolidated class action complaint covering ANCURE recipients was also filed in~~ the ~~Northern District~~ ofnext ~~California;~~two ~~however, the plaintiffs have recently voluntarily dismissed their class allegations~~years. ~~The~~In ~~remaining~~addition, ~~cases~~future ~~allege~~undiscounted ~~that~~performance-related ~~plaintiffs~~milestone ~~died~~payments ~~or suffered other injuries as a result~~ of ~~purported~~up ~~defects in the device or the accompanying warnings and~~to ~~labeling~~$237.3 million ~~The~~could ~~complaints~~be ~~seek~~paid ~~damages~~through 2010, ~~including~~depending ~~punitive~~on ~~damages,~~when and ~~equitable~~if ~~relief. An~~milestones ~~additional~~are ~~complaint includes state-law allegations of unfair trade and business~~attained. ~~practices~~Potential ~~relating~~milestone topayments ~~sales~~under ofexisting ~~the~~agreements ~~product.~~during ~~While~~ the ~~Company~~next ~~maintains~~12 months ~~insurance~~range ~~that~~from ~~may~~$2.5 ~~serve~~million to ~~reduce the Company’s exposure with respect to these claims~~$53.9 million, ~~one~~ of ~~the Company’s~~which ~~carriers,~~management ~~Allianz~~currently ~~Insurance~~estimates ~~Company~~$43.0 million ~~(Allianz),~~could ~~has~~result ~~filed suit~~ in ~~the~~ ~~Circuit~~IPRD ~~Court,~~charges ~~State~~if ~~of Illinois, County of DuPage, seeking to rescind or otherwise deny coverage, and additional carriers have intervened in the case~~paid. The Company ~~also~~continues ~~has initiated~~to ~~suit~~evaluate ~~against~~business ~~certain~~development ~~of its carriers~~opportunities, ~~including Allianz, in the Superior Court,~~which ~~State~~may ofgenerate ~~Indiana,~~additional ~~County of Marion, in order to preserve the Company’s rights to coverage~~payments.

~~Also~~Summary following the EVT plea, the Company has been served with securities class action and shareholder derivative complaints relating to the ANCURE System. A consolidated securities class action, which names as defendants the Company, EVT and certain of ~~their~~Cash ~~current and former officers, is pending~~Flows in the Southern District of Indiana. Generally, it is alleged 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. Damages are sought on behalf of persons who purchased or otherwise acquired Company shares during that period. The Company has filed a motion to dismiss the case, which motion is fully briefed.

The derivative suits relating to the ANCURE System currently are pending in the Southern District of Indiana and in the Superior Court of the State of Indiana, County of Marion. The suits, purportedly filed on behalf of the Company, generally allege that the Company’s directors 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 state court suits have been stayed in favor of the federal action. The Company has filed a motion to dismiss the federal action, which motion is fully briefed. In connection with the briefing, the court recently certified an issue to the Indiana Supreme Court relating to the plaintiff’s obligation to make a demand on the Company’s board of directors before filing a lawsuit.


	Six Months Ended
	June 30,
(In millions)	2005			2004			Change

Net cash provided by (used for):
Operating activities	$	658.9		$	495.5		$	163.4
Investing activities		(412.8	)		(337.1	)		(75.7	)
Financing activities		(103.1	)		67.5			(170.6	)
Effect of exchange rate changes on cash		(14.6	)		(3.7	)		(10.9	)

Net increase in cash and cash equivalents	$	128.4		$	222.2		($	93.8	)

OnNet ~~August~~cash ~~29,~~provided ~~2003,~~by ~~Medtronic~~operating ~~filed~~activities ~~a declaratory~~was ~~judgment~~$658.9 million ~~action in the District Court~~ for ~~Delaware against~~ the ~~Company,~~first ~~GSC, Eli~~six ~~Lilly~~months ~~and Company (Lilly), and Mirowski Family Ventures L.L.C. (Mirowski), challenging its obligation to pay royalties to Mirowski on certain devices by alleging the invalidity~~ of ~~certain claims of US patent RE 38~~2005,~~119~~ ~~(‘119), which patent relates to cardiac~~an ~~resynchronization~~increase ~~therapy and bi-ventricular pacing therapy. The ‘119 patent is exclusively licensed to the Company as part~~ of ~~a broader license covering Mirowski patents and is sublicensed to Medtronic~~$163.4 million ~~The~~primarily ~~parties~~due ~~have agreed~~ to ~~an expedited proceeding with~~: ~~limited scope and a bench trial is scheduled in the fourth quarter of 2004.~~

On February 2, 2004, the Company, GSC, CPI and Mirowski filed a declaratory judgment action in the District Court for Delaware against St. Jude and Pacesetter alleging that their Epic HF, Atlas HF, and Frontier 3x2 devices infringe the ‘119 patent (described in the prior paragraph).

	•		$52.6 million additional payments to vendors during the first six months of 2004 compared to the first six months of 2005

	•		$30.0 million additional bonus payouts during the first six months of 2004 compared to the first six months of 2005

OnNet ~~February~~cash ~~24,~~used ~~2004,~~for ~~the Company’s~~investment ~~subsidiary,~~activities ~~CPI,~~was ~~filed~~$412.8 million afor ~~patent~~the ~~infringement~~first ~~action~~six inmonths ~~the~~of ~~District~~2005, ~~Court~~an increase of ~~Minnesota against St~~$75.7 million ~~Jude~~compared ~~and~~to ~~Pacesetter~~the ~~alleging~~same ~~that~~period ~~their~~in ~~Quicksite over-~~the~~-wire pacing~~ ~~lead~~prior ~~has~~year ~~infringed~~primarily USdue ~~Patent No. 5,755,766/Reexamination Certificate No. 5,755,766~~to: ~~C1 (‘766 Patent).~~

On• ~~February 24, 2004, the Company entered into an agreement with Johnson & Johnson (J&J) to co-promote the CYPHER Sirolimus-eluting Coronary Stent in the US~~$153.8 ~~Previously,~~million ~~Boston~~increase ~~Scientific Corporation (BSC) sued J&J~~ in ~~the~~net USpurchases ~~District Court for the District~~ of ~~Delaware~~short-term ~~alleging that the CYPHER stent infringes certain patents owned by BSC~~investments. OnThe ~~March~~majority ~~16,~~of ~~2004,~~short-term ~~BSC~~investments ~~filed~~are ~~an amended~~interest-bearing ~~complaint~~investments ~~adding the Company as a defendant. Under the terms of the agreement~~ with ~~J&J,~~ ~~J&J~~maturities isbetween ~~required~~three toand ~~indemnify~~six ~~the Company~~months.

~~Anna~~partially ~~Mirowski,~~offset ~~Lilly and two Company~~by: 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 $140.0 million against St. Jude. The Company did not record a gain given the uncertainty remaining as to the ultimate resolution. 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. Cross appeals are pending in the Federal Circuit Court of Appeals.

~~Item~~• 2$64.7 ~~Changes~~million inadditional ~~Securities,~~cash ~~Use of~~used ~~Proceeds~~for ~~and~~acquisitions ~~Issuer~~during ~~Purchases~~the first six months of ~~Equity~~2004 ~~Securities~~compared to the first six months of 2005.

~~The following table provides~~21 ~~information about purchases by the Company during the quarter ended June 30, 2004, of the Company’s common shares:~~

Period	Total Number ofShares Purchased (1)	AveragePrice PerShare	Total Number ofShares Purchasedas Part of PubliclyAnnouncedProgram	ApproximateDollar Value of SharesThat May Yet BePurchased Underthe Program
04/01/04-
04/30/04	452,116	$65.90	1,652,179	$137,273,976
05/01/04-
05/31/04	--	--	1,652,179	$137,273,976
06/01/04-
06/30/04	--	--	1,652,179	$137,273,976

(Net cash used for financing activities was $103.1) million ~~Guidant~~for ~~repurchased~~the anfirst ~~aggregate~~six months of ~~452~~2005,~~116~~ ~~common~~a change ~~shares~~of ~~pursuant~~$170.6 million compared to the ~~$250.0~~same ~~million~~period ~~repurchase~~in ~~program~~the ~~publicly~~prior ~~announced~~year, onprimarily ~~February~~due ~~17, 2004.~~to:

~~Item~~• 4$303.1 ~~Submission~~million net payments on borrowings during the first six months of ~~Matters~~2005 compared to ~~a Vote~~an ofincrease ~~Security~~in ~~Holders~~borrowings of $6.1 million during the first six months of 2004

~~The~~partially ~~Company’s~~offset ~~Annual Meeting of Shareholders was held on May 18, 2004. The following matters were voted on at the meeting~~by:

Election of Directors:

	•		$101.4 million additional repurchases of common stock during the first six months of 2004 compared to the first six months of 2005

	•		$39.7 million additional cash provided by issuances of common stock primarily for stock option exercises in the first six months of 2005

~~Each~~Exchange ofrate fluctuations decreased cash by $14.6 million for the ~~following~~six ~~was~~months ~~elected~~ended toJune 30, 2005 compared to a ~~three-~~decrease of $3.7 million for the same period in the prior year ~~term~~due to ~~expire~~the inUS ~~2007:~~dollar strengthening relative to the Euro more during the first half of 2005 compared to the first half of 2004.

NAME	FOR	WITHHELD
Maurice A. Cox, Jr	240,053,869	32,784,384
Nancy-Ann Min DeParle	267,039,280	5,798,973
Ronald W. Dollens	265,763,945	7,074,307
Enrique C. Falla	240,206,957	32,631,296
Kristina M. Johnson, Ph.D	268,749,715	4,088,537

At June 30, 2005, the Company had outstanding borrowings of $355.8 million at a weighted average interest rate of 5.5%, consisting primarily of $350.0 million principal balance in long-term notes due in 2006. The Company has two credit facilities aggregating $900.0 million under which there are currently no outstanding borrowings. The Company classified $350.3 million as short-term debt at June 30, 2005. The Company believes that 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 requirements, including planned capital expenditures of up to $308.0 million for the remainder of 2005. The Company repatriated approximately $1.5 billion of overseas cash during the first half of 2005 under the American Jobs Creation Act of 2004.

~~Mr.~~The ~~Dollens,~~Company ~~who~~has ~~also~~recognized ~~serves~~net asdeferred ~~President~~tax ~~and~~assets ~~Chief~~aggregating ~~Executive~~$343.8 million ~~Officer~~at ofJune 30, ~~the~~2005, ~~Company~~compared to $251.3 million at December 31, ~~has~~2004. ~~announced~~Net ~~his~~deferred ~~intention~~tax toassets ~~retire~~increased ~~from~~because ~~that~~the ~~position~~tax expense aton the ~~end~~repatriation of ~~the~~ ~~year.~~cash ~~Ms.~~was ~~Susan~~originally B.deferred ~~King,~~in 2004 and is now currently payable as a ~~director~~result of the ~~Company~~repatriation ~~from~~of ~~1996~~cash ~~and~~during ~~member~~2005. This repatriation of overseas cash also resulted in a corresponding increase to current taxes payable. In view of the ~~director~~consistent ~~class~~profitability of its ~~2005~~past operations, ~~passed~~the ~~away~~Company inbelieves ~~July~~that ~~2004.~~these assets will be substantially recovered and that no significant additional valuation allowances are necessary.

~~Ratification of the appointment of~~22 ~~Ernst & Young LLP as independent auditors for the year 2004:~~

For		236,122,762
Against		35,003,377
Abstain		1,712,113

~~Shareholder~~Critical ~~proposal~~Accounting ~~to adopt a~~Estimates ~~policy regarding stock option expensing:~~

For		153,034,896
Against		87,060,595
Abstain		4,971,637
Broker Non-Votes		27,771,124

It is important to understand Guidant’s accounting policies and estimates in order to understand its financial statements. In preparing the consolidated financial statements in accordance with US 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. Management considers an accounting estimate to be critical if:

~~Thus,~~• ~~each~~It ~~listed~~requires ~~director~~assumptions ~~was elected~~ to abe ~~three-year~~made ~~term,~~that were uncertain at the ~~appointment~~time ofthe ~~auditors~~estimate was ~~ratified~~made; and • Changes in the ~~shareholder proposal~~estimate ~~received~~are areasonably ~~majority~~likely to occur from period to period as new information becomes available, or use of different estimates that Guidant reasonably could have used in the ~~votes~~current ~~cast~~period, ~~(however~~could ~~not~~have a ~~majority~~material effect on Guidant’s consolidated results of ~~the~~any ~~shares outstanding).~~one period.

~~The~~Guidant ~~Company’s~~continually ~~board~~evaluates ofthe ~~directors is~~accounting ~~continuing~~policies and estimates it uses to ~~evaluate~~prepare the consolidated ~~advisory~~financial ~~vote~~statements. ofIn ~~the~~cases ~~shareholders~~where ~~concerning~~management ~~stock~~estimates ~~option~~are used, they are ~~expensing~~based on historical experience, ~~particularly~~information from third-party professionals and various other assumptions believed to be reasonable. From time to time, material changes in ~~light~~critical accounting ofestimates ~~continuing~~may ~~developments~~occur due to changes in methodology in computing the ~~area~~estimate, ~~including~~ ~~proposed~~additional ~~rules~~estimates ~~from~~that meet the ~~Financial~~above ~~Accounting~~criteria, ~~Standards~~or ~~Board~~changes asin ~~well~~assumptions asunderlying ~~potentially~~the ~~inconsistent~~estimate. ~~Congressional~~Due to the field actions. discussed in the Field Actions section of this filing, management considers its estimates for product warranties to be critical for the period covered by this filing, based on the criteria set forth above.

~~Item~~Product 6Warranties – Provisions for estimated expenses related to product warranties are recorded at the time the products are sold. ~~Exhibits~~Estimates for warranty costs are calculated based upon historical warranty experience, but may include assumptions related to anticipated changes in warranty costs and ~~Reports~~failure rates. Assumptions and historical warranty experience are evaluated on ~~Form~~at ~~8-K~~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.

~~(a)~~No ~~Exhibits.~~other ~~The~~material ~~Exhibit~~changes ~~Index~~have isbeen ~~incorporated~~made ~~herein~~to bythe ~~reference~~Company’s critical accounting estimates, which are described in the Company’s latest Form 10-K.

~~(b)~~Field Reports on Form 8-K. During the quarter for which this Report on Form 10-Q is filed, the Registrant filed two current reports on Form 8-K dated April 6, 2004 and April 22, 2004, describing pursuant to Item 12 the Company’s earnings releases.Actions

~~SIGNATURES~~As further described in the Company’s Form 10-K and Exhibit 99 to this report, 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.

~~Pursuant~~The Company continually collects and analyzes information about product performance through field observations and other quality metrics to ~~the~~determine ~~requirements~~if ofa ~~the~~field action is necessary. Following this ~~Securities~~process, ~~Exchange~~from ~~Act~~time ofto ~~1934~~time, the ~~Registrant~~Company ~~has~~initiates ~~duly~~field ~~caused~~actions ~~this~~with ~~report~~respect to ~~be signed~~market-released onproducts. ~~its~~These ~~behalf~~actions bymay ~~the~~include ~~undersigned~~product ~~thereunto~~recalls ~~duly~~or ~~authorized~~communications with a significant number of physicians about a product or labeling issue. The scope of such actions can range from very minor issues

				GUIDANT CORPORATION(Registrant)
Date: August 6, 2004				/s/ Keith E. Brauer
				Vice President, Finance and
				Chief Financial Officer

Date: August 6, 2004				/s/ Peter J. Mariani
				Vice President, Corporate
				Controller and ChiefAccounting Officer

~~EXHIBIT~~affecting ~~INDEX~~a small number of units to more significant actions. Since the Company’s last filing on Form 10-Q, the Company conducted the following field actions:

~~Exhibit~~• 31A subset of PRIZM® 2 DR ICDs related to the deterioration in a wire insulator which, in conjunction with other factors, may result in a short, and thereby prevent the device from delivering therapy. The FDA classified this action as a Class I recall. Guidant has elected to provide supplemental warranty coverage for products impacted by this field action. Sales of this product have been largely replaced by the VITALITY family of products since 2003. • A subset of CONTAK RENEWAL 1~~: Certification~~ ~~Pursuant~~and 2 CRT-Ds related to ~~Section~~the ~~302~~deterioration in a wire insulator, which in conjunction with other factors, may result in a short and thereby prevent the device from delivering therapy. The FDA classified this action as a Class I recall. Guidant has elected to provide supplemental warranty coverage for products impacted by this field action. These products manufactured after August 26, 2004 (unaffected by this field action) are currently available for sale. • The AVT family of ICDs and CRT-Ds related to the ~~Sarbanes~~potential for a rare memory latching event. The Company notified physicians of a non-~~Oxley~~invasive ~~Act~~programming change, which was subsequently updated in another field action (see below). A non-invasive software solution is expected to be available in the fourth quarter of ~~Ronald~~2005, Wpending regulatory approval. ~~Dollens~~No supplemental warranty coverage was required for this field action. The FDA classified this action as a Class II recall. • RENEWAL 3 and 4 CRT-Ds related to a magnetic switch component which in rare instances may become stuck in the closed position, potentially inhibiting the device’s ability to deliver therapy when required, and can accelerate battery depletion. The Company temporarily stopped selling these products and advised physicians of a non-invasive programming change that can be completed at the next regularly scheduled patient follow-up which would serve to mitigate the occurrence of this potential failure. This programming change eliminates the need to provide supplemental warranty coverage for currently implanted units; however, the Company requested that all unused inventory be returned to the Company. The FDA classified this action as a Class II recall. The Company resumed sales of the Renewal 3 and 4 CRT-D systems on August 2, 2005, following FDA and European Community approval of product component modifications. • Guidant learned of a Product Removal Notice issued by a manufacturer of introducers for Guidant and one of Guidant’s suppliers. Guidant is replacing all affected hospital owned inventory at no charge; however, because introducers are only used during the implant process, Guidant recommends no changes to post-implant patient follow-up. • A subset of the PDM family of pacemakers related to the potential failure of a hermetic sealing component which may gradually degrade resulting in higher than normal moisture content developing within the device late in the products life which could prevent the device from performing properly. The FDA classified this action a Class I recall. Guidant has elected to provide supplemental warranty coverage for products impacted by this field action. Sales of this product family have been largely replaced by the INSIGNIA family of products since 2003. • Notified physicians of an updated corrective action regarding the non-invasive programming change for the AVT family of ICDs and CRT-Ds.

~~Exhibit 31.2:~~ 24 ~~Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of Keith E. Brauer~~

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

~~Exhibit~~In ~~32.2: Certification~~July 2005, ~~Pursuant~~Guidant toconducted ~~Section~~a ~~906~~voluntary recall of the ~~Sarbanes-Oxley~~HEARTSTRING® ~~Act~~II Aortic Cutter, part of ~~Keith~~the EHEARTSTRING® II Proximal Seal System used in clampless beating heart surgery, based on complaints relating to incomplete or no aortotomy with the use of the Aortic Cutter. ~~Brauer~~Updates to the Instructions For Use were also explained in the customer notification.

~~Exhibit~~ ~~99: Factors~~All ~~Possibly~~of ~~Affecting~~the ~~Future~~field ~~Operating~~actions ~~Results~~discussed above have been reported to and discussed with the FDA and applicable regulatory authorities worldwide. The Company continues to work closely with the FDA and other regulatory bodies on these matters.

Cautionary Factors

Certain statements included in this filing are forward-looking, including accounting estimates, expectations with respect to announced transactions, statements concerning pricing and sales trends, drug eluting stent development, recovery of tax assets and the outcome of other tax matters, capital expenditures, cash flows, costs of research programs, the timing of discontinued operations and the timing of product developments. The statements are based on assumptions about many important factors, including assumptions concerning:

	•		ICD system revenue growth driven by continued developments in future clinical science, publication of clinical results, reimbursement decisions and new competition.

	•		Actual costs incurred related to the product field actions.

	•		Coronary stent business developments: Drug eluting stents present a significant growth opportunity; however, the earlier introduction of drug eluting stents by the Company’s competitors has substantially affected metallic coronary stent sales and will continue to impact the Company’s financial results.

	•		The effects of operating in an industry subject to complex regulation, the necessity for appropriate reimbursement of therapies and the significance of legal claims in Guidant’s industry.

	•		Changes in the location or volume of production or changes in tax law.

	•		Progress in closing the pending transaction with J&J, including satisfaction of conditions to closing, such as regulatory approvals in the US, Europe and elsewhere, and other customary closing conditions.

	•		Product development and production factors (including the uncertainties associated with clinical trials), competitive factors (including the introduction of new products and alternative therapies), business development factors, internal factors (including the retention of key employees and changes in business strategies) and others, all as further described in Exhibit 99 to this report.

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 Guidant’s management, including the 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 most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, internal control over financial reporting.

PART II OTHER INFORMATION

Item 1. Legal Proceedings

Patent and other proprietary rights are essential to the Company’s business. Significant litigation concerning patents and products is pervasive in the Company’s industry. Patent claims include challenges to the coverage and validity of the Company’s patents on 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.

Losses in the matters below generally are not considered probable or cannot be reasonably estimated. Accordingly, the Company has not recorded material reserves, individually or in the aggregate, for these matters. While the liability of the Company in connection with the claims cannot be estimated with any certainty, the outcome of these legal proceedings is not expected to have a material adverse effect on the Company’s consolidated financial position, although the resolution in any reporting period of one or more of these matters could have a significant impact on the Company’s results of operations for that period. While the Company believes that it has valid defenses in these matters, litigation is inherently uncertain, excessive verdicts do occur, and the Company may in the future incur material judgments or enter into material settlements of claims.

On February 18, 1998, Arterial Vascular Engineering, Inc. (now known as Medtronic Vascular, Inc.) filed suit against the Company’s subsidiary, Advanced Cardiovascular Systems, Inc. (ACS), in the District Court for Delaware alleging that the sale of its balloon-expandable coronary and peripheral stents infringes the Boneau patents Medtronic Vascular claims to own. The suit was consolidated with a suit by ACS alleging infringement by Medtronic Vascular of the Company’s Lau stent patents. The Medtronic Vascular complaint also alleges misappropriation of trade secrets and breach of a confidentiality agreement by ACS. In the lawsuit, Medtronic Vascular is seeking injunctive relief, co-ownership of the Lau patents, monetary damages and a ruling that the ACS stent patents asserted against Medtronic Vascular are invalid and/or unenforceable. This suit is one of a number of suits brought by Medtronic Vascular under the Boneau patents against most of the substantial participants in the stent business. The allegations made by Medtronic Vascular are wide-ranging and cover the Company’s stent products broadly. Accordingly, while potential liability cannot be estimated with any certainty, an adverse outcome could have a material impact on results of operations or consolidated financial position. However, on January 5, 2005, the court ruled: Guidant’s stents do not infringe the Boneau patents; Medtronic

Vascular’s state law claims regarding alleged misappropriation of trade secrets were time-barred due to the statute of limitations; and Mr. Boneau was not a co-inventor of the Lau patents. On March 16, 2005, Medtronic Vascular filed an appeal to the US Court of Appeals for the Federal Circuit regarding the District Court’s rulings on non-infringement of the Boneau patents and on Medtronic Vascular’s trade secret misappropriation claims. The Company expects to respond appropriately to the appeal, which may be heard in late 2005 or early 2006. A jury verdict on February 18, 2005, in the US District Court in Delaware, found that all twelve of the accused Medtronic Vascular stent delivery system products infringe at least one of the asserted Lau patent claims. Further, the jury verdict found that none of the asserted Lau patent claims were invalid. An allegation by Medtronic Vascular that the Lau patent claims found to be infringed by Medtronic Vascular products are unenforceable for inequitable conduct was contested by the Company in a bench trial held in the US District Court in Delaware June 7-8, 2005. The parties’ post trial briefing activity is scheduled to extend into October 2005, after which it is expected that the Court will render its verdict. The timing for this verdict is at the Court’s convenience, which is expected in either late 2005 or early 2006. Assuming the asserted and infringed Lau patent claims are not found to be unenforceable, a jury trial to determine damages based upon Medtronic Vascular’s infringement will be conducted; however, this trial has not yet been scheduled.

On March 6, 2002, Pacesetter, Inc. (Pacesetter), a subsidiary of 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 a number of Pacesetter patents covering various features of pacemakers and implantable defibrillators. On the Company’s motions, the case was transferred to the District Court for Minnesota and stayed in October 2003 pending reexamination of two of the patents. The parties stipulated to lift the stay in October 2004. Currently four patents are at issue. Pacesetter is seeking injunctive relief, monetary damages and attorney fees. Pretrial matters are scheduled into late 2006.

On April 14, 2003, Medinol Ltd. (Medinol) 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®, MULTI-LINK PENTA® and MULTI-LINK VISION Coronary Stent Systems infringes five Medinol patents related to stent design. The complaint seeks injunctive relief and monetary damages. On September 30, 2004, the court issued a decision interpreting certain disputed terms in Medinol’s patents. Since then, Medinol has withdrawn its infringement allegations relating to two of the five initially asserted patents. Certain pretrial matters are currently ongoing, although no date has been set for trial on the remaining three patents.

On June 12, 2003, the Company announced that its subsidiary, EndoVascular Technologies, Inc., had entered into a plea agreement with the US Department of Justice relating to a previously disclosed investigation regarding the ANCURE ENDOGRAFT System for the treatment of abdominal aortic aneurysms. At the time of the EVT plea, the Company had outstanding fourteen suits alleging product liability related causes of action relating to the ANCURE System. Subsequent to the EVT plea, the Company has been notified of additional claims and served with additional complaints. From time to time, the Company has settled certain of the claims and suits for amounts that were not material to the Company. Currently, the Company has outstanding approximately forty suits, and more suits may be filed. The cases generally allege the plaintiffs suffered injuries, and in certain cases died, as a result of purported defects in the device or the accompanying warnings and labeling. The complaints seek damages, including punitive damages, and equitable relief. While insurance may reduce the Company’s exposure with respect to ANCURE claims, one of the Company’s carriers, Allianz Insurance Company (Allianz), filed suit in the Circuit Court, State of Illinois, County of DuPage, seeking to rescind or otherwise deny coverage, and

additional carriers have intervened in the case. The Company also has initiated suit against certain of its carriers, including Allianz, in the Superior Court, State of Indiana, County of Marion, in order to preserve the Company’s rights to coverage.

Also following the EVT plea, the Company was served with securities class action and shareholder derivative complaints relating to the ANCURE System. The securities class action has been dismissed with prejudice and without payment by the Company. The derivative suits relating to the ANCURE System currently are pending in the Southern District of Indiana and in the Superior Court of the State of Indiana, County of Marion. The suits, purportedly filed on behalf of the Company, generally allege that the Company’s directors 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 state court suits have been stayed in favor of the federal action. The Company has filed a motion to dismiss the federal action, which motion is fully briefed. In connection with the briefing, the court certified an issue to the Indiana Supreme Court relating to the plaintiffs’ obligation to make a demand on the Company’s Board of Directors before filing a lawsuit. The parties are awaiting a ruling on the certified issue.

On August 29, 2003, Medtronic filed a declaratory judgment action in the District Court for Delaware against the Company, GSC, Eli Lilly and Company, and Mirowski Family Ventures L.L.C. (Mirowski), challenging its obligation to pay royalties to Mirowski on certain devices by alleging the invalidity of certain claims of US patent RE 38,119 (‘119), which patent relates to cardiac resynchronization therapy and bi-ventricular pacing therapy. The ‘119 patent is exclusively licensed to the Company as part of a broader license covering Mirowski patents and is sublicensed to Medtronic. The parties agreed to an expedited proceeding with limited scope, a bench trial was held in November 2004. On July 19, 2005 the judge issued an order upholding the validity of the patent.

On February 2, 2004, the Company, GSC, CPI and Mirowski filed a declaratory judgment action in the District Court for Delaware against St. Jude and Pacesetter alleging that their Epic HF, Atlas HF and Frontier 3x2 devices infringe the ‘119 patent, described in the prior paragraph. Pretrial matters are scheduled into 2006.

On February 24, 2004, the Company’s subsidiary, CPI, filed a patent infringement action in the District Court of Minnesota against St. Jude and Pacesetter. In the Company’s complaint, as amended, CPI and GSC allege that St. Jude’s Quicksite over-the-wire pacing lead infringes US Patent No. 5,755,766/Reexamination Certificate No. 5,755,766 C1. Pretrial matters are scheduled into 2006.

On February 24, 2004, the Company entered into an agreement with J&J to co-promote the CYPHER Sirolimus-eluting Coronary Stent in the US. Previously, Boston Scientific sued J&J in the US District Court for the District of Delaware alleging that the CYPHER stent infringes four patents owned or licensed by Boston Scientific. On March 16, 2004, Boston Scientific filed an amended complaint adding the Company as a defendant. On March 11, 2005, Boston Scientific dismissed all of its claims relating to three of the four asserted patents. Trial on the one remaining patent is scheduled for fall 2005. Under the terms of the Company’s agreement with J&J, J&J is required to indemnify the Company.

Mirowski and two Company 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. In July 2001, a jury found that US Patent No. 4,407,288, which was licensed to CPI and expired in December 2003, was valid but not infringed by St. Jude’s defibrillator

products. In February 2002, the District Court reversed the jury’s finding of validity. In August 2004, the Federal Circuit Court of Appeals, among other things, reinstated the jury verdict of validity and remanded the matter for a new trial on infringement and damages. St. Jude’s request for additional Federal Circuit review was denied, and the case has been sent back to the District Court for further proceedings. St. Jude has also sought review of the Federal Circuit’s decision in the US Supreme Court, which was denied. The parties are awaiting assignment of a judge and a new trial schedule in the District Court.

On December 8, 2004, Scimed Life Systems, Inc. (Scimed), a subsidiary of Boston Scientific, filed suit against the Company and the Company’s subsidiaries, ACS and GSC, in the District of Minnesota alleging that ACS and GSC have infringed three of Scimed’s patents covering various features of embolic protection systems. Scimed is seeking injunctive relief, monetary damages and attorney fees. Pretrial matters are scheduled into 2006.

In April 2005, Joseph Kopstein filed suit against the Company, as the successor to X Technologies, Inc., and several other defendants in the Superior Court of the State of California, County of San Diego, alleging, among other things, breach of contract and fraud related to shares that he held in X Technologies. X Technologies was acquired by the Company in June of 2003. See Note 7 to the Consolidated Financial Statements.

Beginning in late June 2005, three securities class action complaints were filed on behalf of Company shareholders in the United States District Court for the Southern District of Indiana, against the Company and several of its officers. The complaints allege that the defendants concealed adverse information about the Company’s defibrillators and sold stock in violation of federal securities laws. The complaints seek class certification, monetary damages, and injunctive relief.

In July 2005, a purported class action complaint was filed on behalf of participants in the Company’s employee pension benefit plans. This action is also in the United States District Court for the Southern District of Indiana, against the Company and its directors. The complaint alleges breaches of fiduciary duty under the Employee Retirement Income Security Act (“ERISA”), 29 U.S.C. § 1132. Specifically, the complaint alleges that Company fiduciaries concealed adverse information about the Company’s defibrillators and imprudently made contributions to the Company’s 401(k) plan and employee stock ownership plan in the form of Company stock. The complaint seeks class certification, declaratory and injunctive relief, monetary damages, the imposition of a constructive trust, and costs and attorneys’ fees.

Approximately twenty-one product liability class actions and eleven individual actions have been filed in various state and federal jurisdictions against the Company as a result of the Company’s recent implantable defibrillator and pacemaker systems field actions. An additional action is filed in Canada. The complaints generally allege strict liability, negligence, warranty and other common law and/or statutory claims. The majority of claimants alleges no physical injury, but is suing for medical monitoring and anxiety. The complaints generally seek class certification, monetary damages and injunctive relief.

Approximately seventy former employees have filed charges against the Company with the United States Equal Employment Opportunity Commission (EEOC). Most of the charges were filed in the Minneapolis Area Office. The charges allege that the Company discriminated against the former employees on the basis of their age when the Company terminated their employment in August 2004. The EEOC has not yet rendered a decision on the charges.

On July 22, 2005, Tamela Ivens filed suit against Guidant and Guidant Sales Corporation in the US District Court for the District of Minnesota to recover damages including double the amount paid by Medicare to reimburse health care providers for all health care services provided to Plaintiff and all other Medicare beneficiaries resulting from recalled Guidant ICDs. Ivens purports to bring the action in her representative capacity as a “private attorney general” pursuant to the private cause of action provisions of the Medicare as Secondary Payer Statute. Ivens alleges liability against Guidant on grounds, among other things, of strict liability, negligence, breach of express and implied warranty, misrepresentation by omission, constructive fraud, and violation of various Minnesota state statutes.

Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities

The following table provides information about purchases by the Company during the quarter ended June 30, 2005, of the Company’s common shares:


					Total Number of		Approximate
					Shares Purchased		Dollar Value of Shares
			Average		as Part of Publicly		That May Yet Be
	Total Number of		Price Per		Announced		Purchased Under
Period	Shares Purchased (1)		Share		Program		the Program
04/01/05- 04/30/05		353,962	$	74.00		—		—

05/01/05- 05/31/05		—		—		—		—

06/01/05- 06/30/05		—		—		—		—


(1)		Guidant repurchased 353,962 common shares to pay employee withholding taxes due upon the vesting of restricted stock.

Item 4. Submission of Matters to a Vote of Security Holders

The Company held a special meeting of shareholders on April 27, 2005 to vote to approve the Agreement and Plan of Merger dated as of December 15, 2004 related to the acquisition of Guidant by J&J. The acquisition was approved as follows:


For	207,977,295	shares

Against	475,552	shares

Abstain	1,792,304	shares

Item 6. Exhibits

The Exhibit Index is incorporated herein by reference.

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 5, 2005		/s/ Keith E. Brauer

		Vice President, Finance and
		Chief Financial Officer

Date: August 5, 2005		/s/ Peter J. Mariani

		Vice President, Corporate
		Controller and Chief
		Accounting Officer

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

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