/FIRST AND FINAL ADD - SFW058 - GENENTECH ANNOUNCES THIRD QUARTER
2004 RESULTS/ GENENTECH, INC. CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS (in thousands, except per share amounts) (unaudited)
Three Months Ended September 30, 2004 2003 GAAP Difference Non-GAAP
GAAP Difference Non-GAAP (1) (2) (1) (2) Revenues: Product sales
$1,005,511 $1,005,511 $654,948 $654,948 Royalties 153,942 153,942
116,535 116,535 Contract revenue 43,191 43,191 45,561 45,561 Total
operating revenues 1,202,644 1,202,644 817,044 817,044 Costs and
expenses: Cost of sales 165,990 165,990 115,673 115,673 Research
and development 234,086 234,086 168,707 168,707 Marketing, general
and administra- tive 264,648 264,648 209,860 209,860 Collaboration
profit sharing 151,894 151,894 119,676 119,676 Recurring charges
related to redemption 34,534 $(34,534)(3) -- 38,586 $(38,586)(3) --
Special items: litigation- related 13,419 (13,419)(4) -- (131,617)
131,617(4) -- Total costs and expenses 864,571 (47,953) 816,618
520,885 93,031 613,916 Operating margin 338,073 47,953 386,026
296,159 (93,031) 203,128 Other income, net(5) 23,510 -- 23,510
15,884 -- 15,884 Income before taxes and cumulative effect of
accounting change 361,583 47,953 409,536 312,043 (93,031) 219,012
Income tax provision 130,709 19,181 149,890 112,407 (37,316) 75,091
Income before cumulative effect of accounting change 230,874 28,772
259,646 199,636 (55,715) 143,921 Cumulative effect of accounting
change, net of tax -- -- -- (47,655) 47,655(6) -- Net income
$230,874 $28,772 $259,646 $151,981 $(8,060) $143,921 Earnings per
share:(7) Basic: Earnings before cumulative effect of accounting
change $0.22 $0.03 $0.25 $0.19 $(0.05) $0.14 Cumulative effect of
accounting change, net of tax -- -- -- (0.04) 0.04 -- Net earnings
per share $0.22 $0.03 $0.25 $0.15 $(0.01) $0.14 Diluted: Earnings
before cumulative effect of accounting change $0.21 $0.03 $0.24
$0.18 $(0.04) $0.14 Cumulative effect of accounting change, net of
tax -- -- -- (0.04) 0.04 -- Net earnings per share $0.21 $0.03
$0.24 $0.14 $-- $0.14 Weighted average shares used to compute
earnings per share:(7) Basic 1,055,140 1,055,140 1,040,762
1,040,762 Diluted 1,077,093 1,077,093 1,065,572 1,065,572 (1)
Reflects operating results in accordance with U.S. generally
accepted accounting principles (or GAAP). (2) Non-GAAP amounts
exclude litigation-related special items, recurring charges related
to the 1999 redemption of Genentech's Special Common Stock, and the
cumulative effect of a change in accounting principle related to
our adoption of Financial Accounting Standards Board Interpretation
No. 46, "Consolidation of Variable Interest Entities," (or FIN 46),
net of tax effects. (3) Represents the amortization of other
intangible assets related to the 1999 redemption of Genentech's
Special Common Stock. (4) Represents accrued interest and bond
costs for Q3 2004 and 2003 related to the City of Hope trial
judgment; and also includes amount received in Q3 2003 related to
the Amgen patent litigation settlement. (5) "Other income, net"
includes realized gains and losses from the sale of certain
biotechnology equity securities and write-downs for other-than-
temporary declines in the fair value of certain biotechnology debt
and equity securities. In addition, "other income, net" includes
interest income and interest expense. For further detail, refer to
our web site at http://www.gene.com/. (6) Amount represents the
cumulative effect of the accounting change, net of tax, related to
our adoption of FIN 46 in Q3 2003. (7) All share and per share
amounts reflect the May 2004 two-for-one stock split of our Common
Stock. 2004 Reconciliation of GAAP and Non-GAAP EPS Our 2004 GAAP
EPS is not estimable at this time. The 2004 GAAP EPS would include
recurring charges related to the 1999 redemption of our stock by
Roche, which are estimated to be approximately $145 million on a
pretax basis in 2004. In addition, the 2004 GAAP EPS would include
litigation-related special charges for accrued interest and
associated bond costs on the City of Hope judgment, which are
estimated to be approximately $54 million on a pretax basis in
2004. The 2004 non-GAAP EPS estimate does not include the
redemption related recurring charges and the litigation-related
special charges or any other potential special charges related to
existing or future litigation or its resolution, or changes in
accounting principles, all of which may be significant. GENENTECH,
INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands,
except per share amounts) (unaudited) Nine Months Ended September
30, 2004 2003 GAAP Difference Non-GAAP GAAP Difference Non-GAAP (1)
(2) (1) (2) Revenues: Product sales $2,682,577 $2,682,577
$1,897,754 $1,897,754 Royalties 459,899 459,899 352,597 352,597
Contract revenue 163,381 163,381 116,078 116,078 Total operating
revenues 3,305,857 3,305,857 2,366,429 2,366,429 Costs and
expenses: Cost of sales 467,153 467,153 353,921 353,921 Research
and development 637,317 637,317 506,343 506,343 Marketing, general
and administra- tive 788,616 788,616 531,340 531,340 Collaboration
profit sharing 423,546 423,546 323,530 323,530 Recurring charges
related to redemption 110,952 $(110,952)(3) -- 115,758
$(115,758)(3) -- Special items: litigation- related 40,276
(40,276)(4) -- (105,008) 105,008(4) -- Total costs and expenses
2,467,860 (151,228) 2,316,632 1,725,884 (10,750) 1,715,134
Operating margin 837,997 151,228 989,225 640,545 10,750 651,295
Other income, net(5) 61,274 -- 61,274 72,456 -- 72,456 Income
before taxes and cumulative effect of accounting change 899,271
151,228 1,050,499 713,001 10,750 723,751 Income tax provision
321,040 60,491 381,531 229,549 4,196 233,745 Income before
cumulative effect of accounting change 578,231 90,737 668,968
483,452 6,554 490,006 Cumulative effect of accounting change, net
of tax -- -- -- (47,655) 47,655(6) -- Net income $578,231 $90,737
$668,968 $435,797 $54,209 $490,006 Earnings per share:(7) Basic:
Earnings before cumulative effect of accounting change $0.55 $0.08
$0.63 $0.47 $0.01 $0.48 Cumulative effect of accounting change, net
of tax -- -- -- (0.05) 0.05 -- Net earnings per share $0.55 $0.08
$0.63 $0.42 $0.06 $0.48 Diluted: Earnings before cumulative effect
of accounting change $0.53 $0.09 $0.62 $0.46 $0.01 $0.47 Cumulative
effect of accounting change, net of tax -- -- -- (0.05) 0.05 -- Net
earnings per share $0.53 $0.09 $0.62 $0.41 $0.06 $0.47 Weighted
average shares used to compute earnings per share:(7) Basic
1,057,006 1,057,006 1,030,140 1,030,140 Diluted 1,082,081 1,082,081
1,051,649 1,051,649 (1) Reflects operating results in accordance
with U.S. generally accepted accounting principles (or GAAP). (2)
Non-GAAP amounts exclude litigation-related special items,
recurring charges related to the 1999 redemption of Genentech's
Special Common Stock, and the cumulative effect of a change in
accounting principle related to our adoption of Financial
Accounting Standards Board Interpretation No. 46, "Consolidation of
Variable Interest Entities," (or FIN 46), net of tax effects. (3)
Represents the amortization of other intangible assets related to
the 1999 redemption of Genentech's Special Common Stock. (4)
Represents accrued interest and bond costs for 2004 and 2003
related to the City of Hope trial judgment; and also includes
amount received in Q3 2003 related to the Amgen patent litigation
settlement. (5) "Other income, net" includes realized gains and
losses from the sale of certain biotechnology equity securities and
write-downs for other-than- temporary declines in the fair value of
certain biotechnology debt and equity securities. In addition,
"other income, net" includes interest income and interest expense.
For further detail, refer to our web site at http://www.gene.com/.
(6) Amount represents the cumulative effect of the accounting
change, net of tax, related to our adoption of FIN 46 in Q3 2003.
(7) All share and per share amounts reflect the May 2004
two-for-one stock split of our Common Stock. GENENTECH, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands) (unaudited)
September 30, 2004 2003 Selected balance sheet data: Cash, cash
equivalents and short-term investments $1,760,164 $1,387,223
Accounts receivable - product sales, net 570,353 286,160 Accounts
receivable - royalties, net 193,650 151,884 Accounts receivable -
other, net 88,899 62,707 Inventories 559,920 423,439 Long-term
marketable debt and equity securities 1,310,422 1,306,143 Property,
plant and equipment, net 1,922,313 1,540,849 Goodwill 1,315,019
1,315,019 Other intangible assets 677,049 827,109 Other long-term
assets 776,576 793,104 Total assets 9,377,846 8,376,545 Total
current liabilities 1,081,042 786,043 Total liabilities 2,410,280
2,132,499 Total stockholders' equity 6,967,566 6,244,046
Year-to-date: Capital expenditures $418,214 $211,245 Total GAAP(1)
depreciation and amortization expense 259,583 220,926 Less:
redemption related amortization expense(3) (110,952) (115,758)
Non-GAAP(2) depreciation and amortization expense $148,631 $105,168
(1) In accordance with U.S. generally accepted accounting
principles (or GAAP). (2) Non-GAAP amounts exclude amortization of
other intangible assets related to the 1999 redemption of
Genentech's Special Common Stock. (3) Represents the amortization
of other intangible assets related to the 1999 redemption of
Genentech's Special Common Stock. PRNewswire-FirstCall -- Oct. 6
END FIRST AND FINAL ADD DATASOURCE: Genentech, Inc. Web site:
http://www.gene.com/
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