Illumina, Inc. (NASDAQ:ILMN) today announced its financial
results for the fourth quarter and fiscal year of 2011.
Fourth quarter 2011 results:
- Revenue of $250 million, a 4% decrease
compared to the $261 million in the fourth quarter of 2010.
- GAAP net income for the quarter of
$11.7 million, or $0.09 per diluted share, compared to net income
of $38.4 million, or $0.25 per diluted share, for the fourth
quarter of 2010.
- Non-GAAP net income for the quarter of
$43.5 million, or $0.35 per diluted share, compared to $40.9
million, or $0.29 per diluted share, for the fourth quarter of 2010
(see the table entitled "Itemized Reconciliation Between GAAP and
Non-GAAP Net Income" for a reconciliation of these GAAP and
non-GAAP financial measures).
- Record cash flow from operations of
$108 million and record free cash flow of $81 million for the
quarter.
- Excluding a very large sequencing
equipment order in the fourth quarter of 2009, record orders during
the quarter and a book-to-bill ratio of 1.2.
- As a result of our strong book-to-bill
ratio we exited the year with a backlog of $251 million.
Gross margin in the fourth quarter of 2011 was 68.2% compared to
63.6% in the prior year period. Excluding the effect of non-cash
charges associated with stock compensation and the amortization of
acquired intangibles, non-GAAP gross margin was 70.2% for the
fourth quarter of 2011 compared to 65.1% in the prior year
period.
Research and development (R&D) expenses for the fourth
quarter of 2011 were $45.5 million compared to $45.8 million in the
fourth quarter of 2010. R&D expenses included $7.3 million and
$7.0 million of non-cash stock compensation expense in the fourth
quarters of 2011 and 2010, respectively. Excluding these charges
and contingent compensation expense, R&D expenses as a
percentage of revenue were 15.0% compared to 14.5% in the prior
year period.
Selling, general and administrative (SG&A) expenses for the
fourth quarter of 2011 were $60.9 million compared to $62.0 million
for the fourth quarter of 2010. SG&A expenses included $12.7
million and $11.3 million of non-cash stock compensation expense in
the fourth quarters of 2011 and 2010, respectively. SG&A
expenses in the fourth quarter of 2011 also included $2.3 million
in legal settlement gain and amortization of acquired intangibles.
Excluding these items, SG&A expenses as a percentage of revenue
were 18.3% compared to 19.4% in the prior year period.
The company generated $108.3 million in cash flow from
operations during the fourth quarter of 2011 compared to $81.5
million in the prior year period. Depreciation and amortization
expenses were $18.5 million and capital expenditures were $27.1
million during the fourth quarter of 2011. The company ended the
fourth quarter of 2011 with $1.2 billion in cash, cash equivalents
and short-term investments compared to $894.3 million as of January
2, 2011.
Fiscal 2011 results:
- Revenue of $1.056 billion, a 17%
increase over the $902.7 million reported in fiscal 2010.
- GAAP net income of $86.6 million, or
$0.62 per diluted share, compared to $124.9 million or $0.87 per
share in fiscal 2010.
- Non-GAAP net income of $176.0 million,
or $1.30 per diluted share, compared to $142.2 million, or $1.06
per diluted share in fiscal 2010 (see table entitled "An Itemized
Reconciliation Between GAAP and Non-GAAP Net Income" for a
reconciliation of these GAAP and non-GAAP financial measures).
- Record cash flow from operations of
$358 million.
Gross margin for fiscal 2011 was 67.2% compared to 66.6% in
fiscal 2010. Excluding the effect of non-cash charges associated
with stock compensation and the amortization of acquired
intangibles, non-GAAP gross margin was 69.0% in fiscal 2011
compared to 68.1% in fiscal 2010.
R&D expenses for fiscal 2011 were $196.9 million compared to
$177.9 million in fiscal 2010. R&D expenses for fiscal 2011
included non-cash stock compensation expense of $32.1 million
compared to $25.4 million in fiscal 2010. R&D expenses also
included contingent compensation expense of $4.8 million in fiscal
2011 and $3.7 million in fiscal 2010. Excluding these charges,
R&D expenses as a percentage of revenue were 15.2% compared to
16.5% in fiscal 2010.
SG&A expenses for fiscal 2011 were $261.8 million compared
to $220.5 million in fiscal 2010. SG&A expenses included $52.3
million and $40.4 million of non-cash stock compensation expense in
fiscal 2011 and 2010, respectively. SG&A expenses in fiscal
2011 also included $2.3 million in legal settlement gain, $1.3
million of contingent compensation expense and amortization of
acquired intangibles. Excluding these items, SG&A expenses as a
percentage of revenue were 19.5% compared to 19.9% in fiscal
2010.
The company generated $358.1 million in cash flow from
operations in fiscal 2011 compared to $272.6 million in fiscal
2010. Depreciation and amortization expenses for fiscal 2011 were
$68.3 million and capital expenditures were $77.8 million.
Highlights since our last earnings release
- Announced the HiSeq 2500, a new
multi-mode next-generation sequencer which enables researchers and
clinicians to sequence an entire human genome in approximately a
day (120Gb/run). Alternatively, the instrument can be operated in
the standard 600Gb-run mode. Existing HiSeq 2000 instruments are
upgradable through a simple, field-based upgrade priced at $50,000.
The system and upgrades will be available in the second half of
2012.
- Announced significant enhancements to
the MiSeq platform that enable read-lengths of up to 2 x 250 base
pairs per run, faster cycle times, and threefold higher throughput
(up to 7Gb per run) compared to the original MiSeq launched just
over four months ago.
- Announced a ground-breaking partnership
with Siemens Healthcare Diagnostics to use the MiSeq platform for
Siemens’ molecular HIV tests and to establish new standards based
on the use of next-generation sequencing for the identification of
infectious diseases and potential treatment paths.
- Appointed Marc Stapley, formerly
Pfizer's Senior Vice President of Finance, as Chief Financial
Officer.
- Further strengthened Illumina’s
management team by appointing Dr. Daniel Grosu to the newly created
position of Chief Medical Officer and Laura Lauman to the position
of Vice President of Marketing.
- Promoted Matt Posard to the newly
created position of Senior Vice President and General Manager of
our Translational and Consumer Genomics Business Unit; promoted
Omead Ostadan, formerly our Vice President of Marketing, to the
position of Senior Vice President Product Development.
- Expanded the Illumina Genome Network by
adding the British Columbia Cancer Agency to the growing list of
prestigious participants.
Financial outlook and guidance
The non-GAAP financial guidance discussed below excludes various
one-time or specified non-cash charges. Please see our
Reconciliation of Non-GAAP Financial Guidance included in this
release for a reconciliation of the GAAP and Non-GAAP financial
measures.
We currently expect revenue for 2012 between $1.10 billion and
$1.175 billion, representing year-over-year growth between 4% and
11%. We expect our non-GAAP gross margin percentage to approximate
70% for the year. We expect non-GAAP earnings per fully diluted
share between $1.40 and $1.50. We expect the full-year pro forma
tax rate to be approximately 33% and stock compensation expense to
be approximately $105 million. The Company expects full-year
weighted average diluted shares outstanding for the measurement of
pro forma amounts to be approximately 135 million shares.
For the first quarter of 2012, we expect revenues between $250
and $260 million and a non-GAAP gross margin percentage of
approximately 69%. We expect non-GAAP earnings per fully diluted
share of $0.29 to $0.32, assuming approximately 133 million shares.
We expect stock compensation expense during the first quarter of
approximately $25 million.
Quarterly conference call information
The conference call will begin at 2:00 pm Pacific Time (5:00 pm
Eastern Time) on Tuesday, February 7, 2012. Interested parties may
listen to the call by dialing 888-455-2265 (passcode: 8701498), or
if outside North America by dialing +1-719-457-2637 (passcode:
8701498). Individuals may access the live teleconference in the
Investor Relations section of Illumina's web site under the
“Company” tab at www.illumina.com.
A replay of the conference call will be available from 5:00 pm
Pacific Time (8:00 pm Eastern Time) on February 7, 2012 through
February 14, 2012 by dialing 888-203-1112 (passcode: 8701498), or
if outside North America by dialing +1-719-457-0820 (passcode:
8701498).
Statement regarding use of non-GAAP financial
measures
The company reports non-GAAP results for diluted net income per
share, net income, gross margins, operating expenses, operating
margins, other income, and free cash flow in addition to, and not
as a substitute for, or superior to, financial measures calculated
in accordance with GAAP.
The company’s financial measures under GAAP include substantial
charges related to stock compensation expense, headquarter
relocation expense, non-cash interest expense associated with the
company’s convertible debt instruments that may be settled in cash,
restructuring charges, amortization expense related to acquired
intangible assets, loss on the extinguishment of convertible debt,
contingent compensation expense, legal settlement gain, and
acquisition related gain or expense. Per share amounts also include
the double dilution associated with the accounting treatment of the
company’s 0.625% convertible senior notes outstanding and the
corresponding call option overlay. Management believes that
presentation of operating results that excludes these items and per
share double dilution provides useful supplemental information to
investors and facilitates the analysis of the company’s core
operating results and comparison of operating results across
reporting periods. Management also believes that this supplemental
non-GAAP information is therefore useful to investors in analyzing
and assessing the company’s past and future operating
performance.
The company encourages investors to carefully consider its
results under GAAP, as well as its supplemental non-GAAP
information and the reconciliation between these presentations, to
more fully understand its business. Reconciliations between GAAP
and non-GAAP results are presented in the tables of this
release.
Use of forward looking statements
This release contains projections, information about our
financial outlook, earnings guidance, and other forward-looking
statements that involve risks and uncertainties. These
forward-looking statements are based on our expectations as of the
date of this release and may differ materially from actual future
events or results. Among the important factors that could cause
actual results to differ materially from those in any
forward-looking statements are (i) our ability to develop and
commercialize further our sequencing, array, PCR, and consumables
technologies and to deploy new products and applications, and
expand the markets, for our technology platforms; (ii) our ability
to manufacture robust instrumentation and consumables; (iii) our
expectations and beliefs regarding future conduct and growth of the
business and the markets in which we operate; (iv) challenges
inherent in developing, manufacturing, and launching new products
and services; (v) business disruptions associated with the tender
offer commenced by CKH Acquisition Corporation, a wholly owned
subsidiary of Roche Holding Ltd; (vi) our ability to maintain our
revenue and profitability during periods of research funding
reduction or uncertainty and adverse economic and business
conditions, including as a result of slowing economic growth in the
United States or worldwide, together with other factors detailed in
our filings with the Securities and Exchange Commission, including
our most recent filings on Forms 10-K and 10-Q, or in information
disclosed in public conference calls, the date and time of which
are released beforehand. We undertake no obligation, and do not
intend, to update these forward-looking statements, to review or
confirm analysts’ expectations, or to provide interim reports or
updates on the progress of the current financial quarter.
About Illumina
Illumina (www.illumina.com) is a leading developer,
manufacturer, and marketer of life science tools and integrated
systems for the analysis of genetic variation and function. We
provide innovative sequencing and array-based solutions for
genotyping, copy number variation analysis, methylation studies,
gene expression profiling, and low-multiplex analysis of DNA, RNA,
and protein. We also provide tools and services that are fueling
advances in consumer genomics and diagnostics. Our technology and
products accelerate genetic analysis research and its application,
paving the way for molecular medicine and ultimately transforming
healthcare.
Additional Information and Where to Find It
This communication does not constitute an offer to buy or a
solicitation of an offer to sell any securities. In response to the
tender offer commenced by CKH Acquisition Corporation, a wholly
owned subsidiary of Roche Holding Ltd, Illumina has filed a
solicitation/recommendation statement on Schedule 14D-9 with the
SEC. INVESTORS AND SECURITY HOLDERS OF ILLUMINA ARE URGED TO READ
THE SOLICITATION/RECOMMENDATION STATEMENT AND OTHER DOCUMENTS FILED
WITH THE SEC CAREFULLY IN THEIR ENTIRETY (WHEN THEY BECOME
AVAILABLE) BECAUSE THEY CONTAIN IMPORTANT INFORMATION. Investors
and security holders will be able to obtain free copies of these
documents (when they become available) and other documents filed
with the SEC by Illumina through the web site maintained by the SEC
at http://www.sec.gov. Investors and security holders also will be
able to obtain free copies of these documents, and other documents
filed with the SEC by Illumina, from Illumina by directing a
request to Illumina, Inc., Attn: Investor Relations, Kevin
Williams, MD, kwilliams@illumina.com.
In addition, Illumina will file a proxy statement and a WHITE
proxy card with the SEC. The definitive proxy statement will be
mailed to security holders of Illumina. INVESTORS AND SECURITY
HOLDERS OF ILLUMINA ARE URGED TO READ THE PROXY STATEMENT AND OTHER
DOCUMENTS FILED WITH THE SEC CAREFULLY IN THEIR ENTIRETY (WHEN THEY
BECOME AVAILABLE) BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION.
Investors and security holders will be able to obtain free copies
of these documents (when they become available) and other documents
filed with the SEC by Illumina through the web site maintained by
the SEC at http://www.sec.gov. Investors and security holders also
will be able to obtain free copies of the proxy statement, and
other documents filed with the SEC by Illumina, from Illumina by
directing a request to Illumina, Inc., Attn: Investor Relations,
Kevin Williams, MD, kwilliams@illumina.com.
Certain Information Regarding Participants in the
Solicitation
Illumina and certain of its directors and executive officers may
be deemed to be participants in the solicitation of proxies in
connection with Illumina’s 2012 Annual Meeting of Stockholders
under the rules of the SEC. Security holders may obtain information
regarding the names, affiliations and direct and indirect interests
(by security holdings or otherwise) of Illumina’s directors and
executive officers in (i) Illumina’s Annual Report on Form 10-K for
the year ended January 2, 2011, which was filed with the SEC on
February 28, 2011, and (ii) Illumina’s proxy statement for its 2011
Annual Meeting of Stockholders, which was filed with the SEC on
March 24, 2011. To the extent that Illumina’s directors’ and
executive officers’ holdings of Illumina’s securities have changed
from the amounts printed in the proxy statement for the 2011 Annual
Meeting of Stockholders, such changes have been or will be
reflected on Statements of Changes in Beneficial Ownership on Form
4 filed with the SEC. These documents can be obtained free of
charge from the sources indicated above. Additional information
regarding the interests of these participants in any proxy
solicitation and a description of their direct and indirect
interests, by security holdings or otherwise, will also be included
in any proxy statement and other relevant materials to be filed
with the SEC when they become available.
Illumina, Inc. Condensed Consolidated Balance
Sheets (In thousands)
January 1, 2012 January 2, 2011 ASSETS
(unaudited)
Current assets: Cash and cash equivalents $ 302,978 $ 248,947
Short-term investments 886,590 645,342 Accounts receivable, net
173,886 165,598 Inventory, net 128,781 142,211 Deferred tax assets,
current portion 23,188 19,378 Prepaid expenses and other current
assets 29,196 36,922 Total current assets 1,544,619
1,258,398 Property and equipment, net 143,483 129,874 Goodwill
321,853 278,206 Intangible assets, net 106,475 91,462 Deferred tax
assets, long-term portion 19,675 39,497 Other assets 59,735
41,676 Total assets $ 2,195,840 $ 1,839,113
LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities:
Accounts payable $ 49,806 $ 66,744 Accrued liabilities 187,774
156,164 Long-term debt, current portion - 311,609
Total current liabilities 237,580 534,517 Long-term debt 807,369 -
Other long-term liabilities 69,954 28,531 Conversion option subject
to cash settlement 5,722 78,390 Stockholders’ equity
1,075,215 1,197,675 Total liabilities and stockholders’
equity $ 2,195,840 $ 1,839,113
Illumina, Inc.
Condensed Consolidated Statements of Income (In
thousands, except per share amounts) (unaudited)
Three Months Ended Year Ended January 1, 2012
January 2, 2011
January 1, 2012 January 2, 2011 Revenue: Product
revenue $ 230,396 $ 245,626 $ 987,280 $ 842,510 Service and other
revenue 19,675 15,672 68,255
60,231 Total revenue 250,071
261,298 1,055,535 902,741
Cost of Revenue: Cost of product revenue
(a) 69,509 87,183
308,228 271,997 Cost of service and other revenue
(a) 6,940
5,694 26,118 21,399 Amortization of acquired intangible assets
3,036 2,295 12,091
7,805 Total cost of revenue 79,485
95,172 346,437 301,201 Gross
profit 170,586 166,126 709,098
601,540 Operating Expenses: Research and
development
(a) 45,513 45,800 196,913 177,947 Selling,
general and administrative
(a) 60,918 62,034 261,843 220,454
Headquarter relocation expense 30,243 - 41,826 - Restructuring
charges 8,136 - 8,136 - Acquisition related (gain) expense, net
(1,523 ) (10,376 ) 919 (8,515 )
Total operating expenses 143,287 97,458
509,637 389,886 Income from operations
27,299 68,668 199,461 211,654 Other expense, net (7,077 )
(17,886 ) (66,416 ) (26,275 ) Income before
income taxes 20,222 50,782 133,045 185,379 Provision for income
taxes 8,502 12,342 46,417
60,488 Net income $ 11,720 $ 38,440 $
86,628 $ 124,891 Net income per basic share $ 0.10
$ 0.31 $ 0.70 $ 1.01 Net income per
diluted share $ 0.09 $ 0.25 $ 0.62 $ 0.87
Shares used in calculating basic net income per share
121,541 125,876 123,399
123,581 Shares used in calculating diluted net income per
share 124,888 151,171 138,937
143,433
(a) Includes total stock-based compensation expense
for stock based awards:
Three Months Ended Year
Ended January 1, 2012 January 2, 2011 January
1, 2012 January 2, 2011 Cost of product revenue $ 1,684
$ 1,508 $ 6,951 $ 5,378 Cost of service and other revenue 159 76
695 470 Research and development 7,295 6,977 32,105 25,428 Selling,
general and administrative 12,678 11,279
52,341 40,369 Stock-based
compensation expense before taxes $ 21,816 $ 19,840 $
92,092 $ 71,645
Illumina, Inc.
Condensed Consolidated Statements of Cash Flows (In
thousands) (unaudited)
Three Months Ended Year Ended
January 1, 2012 January 2, 2011 January 1,
2012 January 2, 2011 Net cash provided by operating
activities $ 108,300 $ 81,481 $ 358,140 $ 272,573 Net cash used in
investing activities (42,960 ) (70,056 ) (400,999 ) (285,053 ) Net
cash provided by financing activities 7,848 26,543 97,016 116,474
Effect of exchange rate changes on cash and cash equivalents
(56 ) 212 (126 ) 320 Net
increase in cash and cash equivalents 73,132 38,180 54,031 104,314
Cash and cash equivalents, beginning of period 229,846
210,767 248,947 144,633
Cash and cash equivalents, end of period $ 302,978 $
248,947 $ 302,978 $ 248,947 Calculation
of free cash flow
(a): Net cash provided by operating
activities $ 108,300 $ 81,481 $ 358,140 $ 272,573 Purchases of
property and equipment (27,114 ) (12,384 )
(77,800 ) (49,818 ) Free cash flow $ 81,186 $ 69,097
$ 280,340 $ 222,755
(a) Free cash flow, which is a
non-GAAP financial measure, is calculated as net cash provided by
operating activities reduced by purchases of property and
equipment. Free cash flow is useful to management as it is one of
the metrics used to evaluate our performance and to compare us with
other companies in our industry. However, our calculation of free
cash flow may not be comparable to similar measures used by other
companies.
Illumina, Inc. Results of Operations -
Non-GAAP (In thousands, except per share amounts)
(unaudited)
ITEMIZED RECONCILIATION BETWEEN GAAP AND NON-GAAP NET INCOME PER
SHARE: Three Months Ended Year Ended
January 1, 2012 January 2, 2011 January 1,
2012 January 2, 2011 GAAP net income per share -
diluted $ 0.09 $ 0.25 $
0.62 $ 0.87 Pro forma impact of weighted
average shares
(a)
-
0.01 0.03 0.06 Adjustments to net income: Headquarter relocation
expense
(b) 0.24
-
0.31 - Non-cash interest expense
(c) 0.07 0.04 0.24 0.16
Restructuring charges 0.07 - 0.06 - Amortization of acquired
intangible assets
0.02
0.02 0.09 0.06 Legal settlement gain (0.02 ) - (0.02 ) -
Acquisition related (gain) expense, net
(d) (0.01 ) (0.07 )
0.01 (0.09 ) Contingent compensation expense
(e) 0.01 0.01
0.04 0.03 Loss on extinguishment of debt - - 0.28 - Impairment loss
related to a cost-method investment - 0.09 - 0.10 Incremental
non-GAAP tax expense
(f) (0.12 ) (0.06 )
(0.36 ) (0.13 ) Non-GAAP net income per share -
diluted
(g) $ 0.35 $ 0.29 $ 1.30 $ 1.06
Shares used in calculating non-GAAP diluted net income per
share 124,409 140,080 135,154
134,375
ITEMIZED RECONCILIATION
BETWEEN GAAP AND NON-GAAP NET INCOME: GAAP net
income $ 11,720 $ 38,440 $
86,628 $ 124,891 Headquarter relocation
expense
(b) 30,243 - 41,826 - Non-cash interest expense
(c) 8,542 5,363 32,495 20,832 Restructuring charges 8,136 -
8,136 - Amortization of acquired intangible assets 3,188 2,295
12,689 7,805 Legal settlement gain (2,300 ) - (2,300 ) -
Acquisition related (gain) expense, net
(d) (1,523 ) (10,376
) 919 (11,429 ) Contingent compensation expense
(e) 732 919
6,057 3,675 Loss on extinguishment of debt - - 37,611 - Impairment
loss related to a cost-method investment - 13,223 - 13,223
Incremental non-GAAP tax expense
(f) (15,215 )
(9,014 ) (48,053 ) (16,813 ) Non-GAAP net income
(g) $ 43,523 $ 40,850 $ 176,008 $
142,184
ITEMIZED RECONCILIATION BETWEEN GAAP AND
NON-GAAP DILUTED NUMBER OF SHARES: Weighted average
shares used in calculation of GAAP diluted net income per share
124,888 151,171 138,937 143,433 Weighted average dilutive potential
common shares issuable of redeemable convertible senior notes
(a) (479 ) (11,091 ) (3,783 )
(9,058 ) Weighted average shares used in calculation of Non-GAAP
diluted net income per share 124,409 140,080
135,154 134,375
(a) Pro
forma impact of weighted average shares represents the impact of
double dilution associated with the accounting treatment of the
company's outstanding convertible debt and the corresponding call
option overlay.
(b) The Company relocated its headquarters
to a new facility in San Diego, California during the second half
of 2011. Headquarter relocation expense in Q4 2011 and fiscal year
2011 are primarily non-cash in nature and includes a cease-use loss
upon vacating certain buildings of our prior headquarters,
accelerated depreciation expense, and double rent expense during
the transition to our new headquarter facility.
(c) Non-cash
interest expense is calculated in accordance with the authoritative
accounting guidance for convertible debt instruments that may be
settled in cash.
(d) Acquisition related (gain) expense, net
includes the following current year and prior year adjustments:
2011
adjustments:
- IPR&D charge of $5.4 million related to milestone payments
for a prior acquisition - Gain of $4.5 million for changes in fair
value of contingent consideration, $1.5 million of which was
recorded in Q4 2011
2010
adjustments:
- IPR&D charge of $1.3 million related to milestone payments
for a prior acquisition - Acquisition expenses of $0.5 million
- Gain on acquisition of $2.9 million
recorded for the difference between the carrying value of a
cost-method investment prior to acquisition and the fair value of
that investment at the time of acquisition
- Gain of $10.4 million recorded in Q4 2010 for changes in fair
value of contingent consideration
(e) Contingent
compensation expense represents contingent consideration for
post-combination services associated with acquisitions.
(f)
Incremental non-GAAP tax expense reflects the increase to GAAP tax
expense related to the non-GAAP adjustments listed above.
(g) Non-GAAP net income per share and net income exclude the
effect of the pro forma adjustments as detailed above. Non-GAAP
diluted net income per share and net income are key drivers of our
core operating performance and major factors in management's bonus
compensation each year. Management has excluded the effects of
these items in these measures to assist investors in analyzing and
assessing our past and future core operating performance.
Illumina, Inc. Results of Operations - Non-GAAP
(continued) (Dollars in thousands) (unaudited)
ITEMIZED RECONCILIATION BETWEEN GAAP AND NON-GAAP RESULTS
OF OPERATIONS AS A PERCENT OF REVENUE: Three
Months Ended Year Ended January 1,
2012 January 2, 2011 January 1,
2012 January 2, 2011 GAAP gross
profit $ 170,586 68.2
% $ 166,126 63.6 %
$ 709,098 67.2 % $
601,540 66.6 % Stock-based
compensation expense 1,843 0.7 % 1,584 0.6 % 7,646 0.7 % 5,848 0.6
% Amortization of acquired intangible assets 3,036
1.2 % 2,295 0.9 % 12,091 1.1 %
7,805 0.9 % Non-GAAP gross profit $ 175,465 70.2 % $
170,005 65.1 % $ 728,835 69.0 % $ 615,193 68.1
%
Research and development expense $
45,513 18.2 % $ 45,800
17.5 % $ 196,913 18.7 %
$ 177,947 19.7 % Stock-based
compensation expense (7,295 ) (2.9 %) (6,977 ) (2.7 %) (32,105 )
(3.0 %) (25,428 ) (2.8 %) Contingent compensation expense
(a) (732 ) (0.3 %) (919 ) (0.4 %)
(4,799 ) (0.5 %) (3,675 ) (0.4 %) Non-GAAP research and
development expense $ 37,486 15.0 % $ 37,904 14.5 % $
160,009 15.2 % $ 148,844 16.5 %
Selling,
general and administrative expense $ 60,918
24.4 % $ 62,034 23.7 %
$ 261,843 24.8 % $
220,454 24.4 % Stock-based compensation
expense (12,678 ) (5.1 %) (11,279 ) (4.3 %) (52,341 ) (5.0 %)
(40,369 ) (4.5 %) Legal settlement gain (2,300 ) (0.9 %) - - (2,300
) (0.2 %) - - Contingent compensation expense
(a) - - - -
(1,258 ) (0.1 %) - - Amortization of acquired intangible assets
(152 ) (0.1 %) - - (598 ) (0.1
%) - - Non-GAAP selling, general and
administrative expense $ 45,788 18.3 % $ 50,755 19.4
% $ 205,346 19.5 % $ 180,085 19.9 %
GAAP
operating profit $ 27,299 10.9 %
$ 68,668 26.3 % $ 199,461
18.9 % $ 211,654 23.4 %
Stock-based compensation expense 21,816 8.7 % 19,840 7.6 % 92,092
8.7 % 71,645 7.9 % Headquarter relocation expense
(b) 30,243
12.1 % - - 41,826 4.0 % - - Amortization of acquired intangible
assets 3,188 1.3 % 2,295 0.9 % 12,689 1.2 % 7,805 0.9 %
Restructuring charges 8,136 3.3 % - - 8,136 0.8 % - - Contingent
compensation expense
(a) 732 0.3 % 919 0.4 % 6,057 0.6 %
3,675 0.4 % Legal settlement gain (2,300 ) (0.9 %) - - (2,300 )
(0.2 %) - - Acquisition related (gain) expense, net
(c)
(1,523 ) (0.6 %) (10,376 ) -4.0 % 919
0.1 % (8,515 ) -0.9 % Non-GAAP operating profit
(d) $
87,591 35.0 % $ 81,346 31.1 % $ 358,880 34.0 %
$ 286,264 31.7 %
GAAP other expense, net
$ (7,077 ) (2.8 %) $
(17,886 ) (6.8 %) $
(66,416 ) (6.3 %) $
(26,275 ) (2.9 %) Loss on
extinguishment of debt - - - - 37,611 3.6 % - - Acquisition related
gain
(c) - - - - - - (2,914 ) (0.3 %) Impairment loss
related to a cost-method investment - - 13,223 5.1 % - - 13,223 1.5
% Non-cash interest expense
(e) 8,542 3.4 %
5,363 2.1 % 32,495 3.1 % 20,832
2.3 % Non-GAAP other income, net
(d) $ 1,465
0.6 % $ 700 0.3 % $ 3,690 0.3 % $ 4,866 0.5 %
(a) Contingent compensation expense represents contingent
consideration for post-combination services associated with
acquisitions.
(b) Headquarter relocation expense in Q4 2011
and fiscal year 2011 are primarily non-cash in nature and includes
a cease-use loss upon vacating certain buildings of our prior
headquarters, accelerated depreciation expense, and double rent
expense during the transition to our new headquarter facility.
(c) Acquisition related (gain) expense, net includes the
following current year and prior year adjustments:
2011
adjustments:
- IPR&D charge of $5.4 million related to milestone payments
for a prior acquisition - Gain of $4.5 million for changes in fair
value of contingent consideration, $1.5 million of which was
recorded in Q4 2011
2010
adjustments:
- IPR&D charge of $1.3 million related to milestone payments
for a prior acquisition - Acquisition expenses of $0.5 million -
Gain on acquisition of $2.9 million recorded for the difference
between the carrying value of a cost-method investment prior to
acquisition and the fair value of that investment at the time of
acquisition - Gain of $10.4 million recorded in Q4 2010 for changes
in fair value of contingent consideration
(d) Non-GAAP
operating profit, and non-GAAP other income, net, exclude the
effects of the pro forma adjustments as detailed above. Management
has excluded the effects of these items in these measures to assist
investors in analyzing and assessing our past and future core
operating performance. Non-GAAP gross profit, included within the
non-GAAP operating profit, is a key measure of the effectiveness
and efficiency of our manufacturing processes, product mix and the
average selling prices of our products and services.
(e)
Non-cash interest expense is calculated in accordance with the
authoritative accounting guidance for convertible debt instruments
that may be settled in cash.
Illumina, Inc.
Reconciliation of Non-GAAP Financial Guidance
The financial guidance provided below is an estimate based on
information available as of February 7, 2012. The company’s future
performance and financial results are subject to risks and
uncertainties, and actual results could differ materially from the
guidance set forth below. Some of the factors that could affect the
company’s financial results are stated above in this press release.
More information on potential factors that could affect the
company’s financial results is included from time to time in the
company’s public reports filed with the SEC, including the
company’s Form 10-K for the fiscal year ended January 1, 2012 to be
filed with the SEC, and the company's Form 10-Q for the fiscal
quarters ended April 3, 2011, July 3, 2011, and October 2, 2011.
The company assumes no obligation to update any forward-looking
statements or information, which speak as of their respective
dates.
Fiscal Year 2012 Q1 2012 Gross
Margin Non-GAAP gross margin 70% 69% Stock-based compensation
expense (1%) (1%) Amortization of acquired intangible assets (1%)
(1%)
GAAP gross margin 68% 67%
Diluted net income per share Non-GAAP diluted net income per
share $1.40 - $1.50 $0.29 - $0.32 Non-cash interest expense
(a) (0.16) (0.04) Headquarter relocation expense
(b)
(0.11) -- Amortization of intangible assets (0.06) (0.02)
Contingent compensation expense
(c) (0.03) (0.01)
Restructuring charges (0.03) (0.02) Pro forma impact of weighted
average shares
(d) (0.01) --
GAAP diluted
net income per share $1.00 - $1.10 $0.20 - $0.23
(a) Non-cash interest expense is calculated in accordance
with the authoritative accounting guidance for convertible debt
instruments that may be settled in cash.
(b) We expect to
incur additional headquarter relocation expenses during the first
half of 2012, the majority of which are non-cash in nature. These
expenses include items such as additional cease-use loss upon
vacating our former headquarter facilities, accelerated
depreciation of certain property and equipment, and double rent
expense during the transition to the new facility.
(c)
Contingent compensation expense represents contingent consideration
for post-combination services associated with acquisitions.
(d) Pro forma impact of weighted average shares represents
the estimated impact of double dilution associated with the
accounting treatment of the company's outstanding convertible debt
and the corresponding call option overlay.
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