EX-99.1 2 ex9914q12earningspressrele.htm EXHIBIT EX 99.1 4Q12 Earnings Press Release



Illumina Reports Record Financial Results for Fourth Quarter and Fiscal Year 2012

San Diego, Calif., -- January 28, 2013 - Illumina, Inc. (NASDAQ:ILMN) today announced its financial results for the fourth quarter and fiscal year of 2012.

Fourth quarter 2012 results:
Revenue of $309 million, a 24% increase compared to $250 million in the fourth quarter of 2011
GAAP net income for the quarter of $72 million, or $0.53 per diluted share, compared to net income of $12 million, or $0.09 per diluted share, for the fourth quarter of 2011
Non-GAAP net income for the quarter of $57 million, or $0.42 per diluted share, compared to $44 million, or $0.35 per diluted share, for the fourth quarter of 2011 (see the table entitled "Itemized Reconciliation Between GAAP and Non-GAAP Net Income" for a reconciliation of these GAAP and non-GAAP financial measures)
Cash flow from operations of $79 million and free cash flow of $62 million for the quarter

Gross margin in the fourth quarter of 2012 was 65.8% compared to 68.2% in the prior year period. Excluding the effect of non-cash charges associated with stock compensation, amortization of acquired intangibles, and amortization of inventory revaluation costs, non-GAAP gross margin was 68.5% for the fourth quarter of 2012 compared to 70.2% in the prior year period.

Research and development (R&D) expenses for the fourth quarter of 2012 were $56.9 million compared to $45.5 million in the fourth quarter of 2011. R&D expenses included $8.0 million and $7.3 million of non-cash stock compensation expense in the fourth quarters of 2012 and 2011, respectively. Excluding these charges and contingent compensation expense, R&D expenses as a percentage of revenue were 15.4% compared to 15.0% in the prior year period.

Selling, general and administrative (SG&A) expenses for the fourth quarter of 2012 were $79.7 million compared to $60.9 million for the fourth quarter of 2011. SG&A expenses included $14.1 million and $12.7 million of non-cash stock compensation expense in the fourth quarters of 2012 and 2011, respectively. Excluding these charges, contingent compensation, acquired intangible asset amortization, and legal contingencies, SG&A expenses as a percentage of revenue were 19.9% compared to 20.1% in the prior year period.

GAAP net income included the impact of a pre-tax gain of $48.6 million from the sale of the Company's minority ownership interest in deCODE Genetics to Amgen, Inc.

Depreciation and amortization expenses were $18.1 million and capital expenditures were $17.1 million during the fourth quarter of 2012. The Company ended the quarter with $1.35 billion in cash, cash equivalents and short-term investments, compared to $1.19 billion as of January 1, 2012.

Fiscal 2012 results:
Revenue of $1.15 billion, a 9% increase over the $1.06 billion reported in fiscal 2011
GAAP net income of $151 million, or $1.13 per diluted share, compared to $87 million, or $0.62 per diluted share in fiscal 2011
Non-GAAP net income of $210 million, or $1.59 per diluted share, compared to $176 million, or $1.30 per diluted share, in fiscal 2011 (see table entitled "Itemized Reconciliation Between GAAP and Non-GAAP Net Income" for a reconciliation of these GAAP and non-GAAP financial measures)

Gross margin for fiscal 2012 was 67.4% compared to 67.2% in fiscal 2011. Excluding the effect of non-cash charges associated with stock compensation, amortization of acquired intangibles, legal contingencies, and amortization of inventory revaluation costs, non-GAAP gross margin was 69.7% for fiscal 2012 compared to 69.0% in fiscal 2011.

R&D expenses for fiscal 2012 were $231.0 million compared to $196.9 million in fiscal 2011. R&D expenses for fiscal 2012 included a one-time impairment charge of $21.4 million related to an in-process research and development asset previously acquired. R&D expenses also included $30.9 million and $32.1 million of non-cash stock compensation expense in fiscal 2012 and 2011, respectively. Excluding these charges and contingent compensation expense, R&D expenses as a percentage of revenue were 15.3% compared to 15.2% in the prior year.

SG&A expenses for fiscal 2012 were $286.0 million compared to $261.8 million in fiscal 2011. SG&A expenses included $55.4 million and $52.3 million of non-cash stock compensation expense in fiscal 2012 and 2011, respectively. Excluding these charges, contingent compensation expense, acquired intangible asset amortization, and legal contingencies, SG&A expenses as a percentage of revenue were 19.5% compared to 19.9% in the prior year.

We are very pleased with our execution in 2012, stated Jay Flatley, President and CEO. We ended the year with a strong performance, and made significant progress on our strategy of growing our clinical business, both organically and through acquisition.  We remain optimistic about our growth prospects in 2013 and beyond, in spite of the continuing challenges of the economic environment.

Highlights since our last earnings release

Announced a definitive agreement to acquire Verinata Health, Inc., a leading provider of non-invasive tests for the early identification of fetal chromosomal abnormalities
Completed the acquisition of Moleculo Inc., which will enable the introduction of a novel library prep





method and analysis algorithm to produce synthetic read lengths up to 10 Kb
Previewed a new, ordered array flow cell technology that will provide a significant increase in cluster density and number of reads per flow cell
Announced a new kit for the HiSeq® 2500 which is capable of generating up to 300 Gb in rapid mode
Presented an updated MiSeq® roadmap with chemistry and software enhancements to deliver 15 Gb of throughput
Announced Nextera® Rapid Capture Exome Kits to provide the fastest exome enrichment workflow on both the HiSeq 2500 and MiSeq
Launched TruSeq® DNA PCR-Free Kits, a simple, all-inclusive sample prep solution for whole-genome sequencing
Announced TruSeq Targeted RNA Kits for mid-plex gene expression profiling and validation
Announced that Caris Life Sciences has selected the MiSeq system to support Caris' evidence-based molecular profiling service
Announced that VWR International, LLC, will distribute Illumina's qPCR portfolio within the United States
Announced winners of the MiSeq grant program to accelerate original research in microbial ecology, neglected disease, and human health
Named Dr. Robert S. Epstein to the Board of Directors
Announced a favorable ruling in patent litigation against Complete Genomics, Inc.
Announced new grant recipients of our Agricultural Greater Good Initiative at the 21st International Plant and Animal Genome Conference
Repurchased $25 million of common stock under our previously announced share repurchase program

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.
 
For 2013 we are projecting 15% total company revenue growth and non-GAAP earnings per fully diluted share of $1.55 to $1.62, including the pending Verinata acquisition. These projections include full year non-GAAP gross margin of approximately 70%, a pro forma tax rate of approximately 31% and stock compensation expense of approximately $115 million. Full-year weighted average diluted shares outstanding, for the measurement of pro forma amounts, is expected to be approximately 134 million shares.

Quarterly conference call information

The conference call will begin at 2:00 pm Pacific Time (5:00 pm Eastern Time) on Monday, January 28, 2013. Interested parties may listen to the call by dialing 888-679-8035 (passcode: 35493315), or, if outside North America, by dialing





+1-617-213-4848 (passcode: 35493315). 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 4:00 pm Pacific Time (7:00 pm Eastern Time) on January 28, 2013 through February 4, 2013 by dialing 888-286-8010 (passcode: 76555573), or if outside North America, by dialing +1-617-801-6888 (passcode: 76555573).

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, non-cash interest expense associated with the Company's convertible debt instruments that may be settled in cash, net gains related to cost-method investments, headquarter relocation expense, costs related to unsolicited tender offer for the Company's stock, impairment of in-process research and development, amortization expense related to acquired intangible assets, contingent compensation expense, restructuring charges, legal contingencies, acquisition related expense, amortization of inventory revaluation costs, and loss on extinguishment of debt. 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; and (v) 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 applications, paving the way for molecular medicine and ultimately transforming healthcare.

# # #

Investors:
Rebecca Chambers
Investor Relations
858-255-5243
rchambers@illumina.com
or
Media:
Jennifer Temple
Public Relations
858-882-6822
pr@illumina.com






Illumina, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
 
 
 
 
 
December 30,
2012
 
January 1,
2012
ASSETS
(unaudited)
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
433,981

 
$
302,978

Short-term investments
916,223

 
886,590

Accounts receivable, net
214,975

 
173,886

Inventory, net
158,718

 
128,781

Deferred tax assets, current portion
30,451

 
23,188

Prepaid expenses and other current assets
32,700

 
29,196

Total current assets
1,787,048

 
1,544,619

Property and equipment, net
166,167

 
143,483

Goodwill
369,327

 
321,853

Intangible assets, net
130,196

 
106,475

Deferred tax assets, long-term portion
40,183

 
19,675

Other assets
73,164

 
59,735

Total assets
$
2,566,085

 
$
2,195,840

 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
65,727

 
$
49,806

Accrued liabilities
201,877

 
177,115

Long-term debt, current portion
36,967

 

Total current liabilities
304,571

 
226,921

Long-term debt
805,406

 
807,369

Other long-term liabilities
134,369

 
80,613

Conversion option subject to cash settlement
3,158

 
5,722

Stockholders’ equity
1,318,581

 
1,075,215

Total liabilities and stockholders’ equity
$
2,566,085

 
$
2,195,840








Illumina, Inc.
Condensed Consolidated Statements of Income
(In thousands, except per share amounts)
(unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Year Ended
 
 
 
 
 
 
December 30,
2012
 
January 1,
2012
 
December 30,
2012
 
January 1,
2012
 
Revenue:
 
 
 
 
 
 
 
 
 
 
Product revenue
 
$
278,933

 
$
230,396

 
$
1,055,826

 
$
987,280

 
 
Service and other revenue
 
30,332

 
19,675

 
92,690

 
68,255

 
 
 
Total revenue
 
309,265

 
250,071

 
1,148,516

 
1,055,535

 
Cost of Revenue:
 
 
 
 
 
 
 
 
 
 
Cost of product revenue (a)
 
86,348

 
69,509

 
317,283

 
308,228

 
 
Cost of service and other revenue (a)
 
14,791

 
6,940

 
43,552

 
26,118

 
 
Amortization of acquired intangible assets
 
4,479

 
3,036

 
14,153

 
12,091

 
 
 
Total cost of revenue
 
105,618

 
79,485

 
374,988

 
346,437

 
 
 
 
Gross profit
 
203,647

 
170,586

 
773,528

 
709,098

 
Operating Expenses:
 
 
 
 
 
 
 
 
 
 
Research and development (a)
 
56,907

 
45,513

 
231,025

 
196,913

 
 
Selling, general and administrative (a)
 
79,715

 
60,918

 
285,991

 
261,843

 
 
Unsolicited tender offer related expense
 
4,394

 

 
23,136

 

 
 
Headquarter relocation expense
 
2,883

 
30,243

 
26,328

 
41,826

 
 
Restructuring charges
 
88

 
8,136

 
3,522

 
8,136

 
 
Acquisition related expense (gain), net
 
314

 
(1,523
)
 
2,774

 
919

 
 
 
Total operating expenses
 
144,301

 
143,287

 
572,776

 
509,637

 
 
 
 
Income from operations
 
59,346

 
27,299

 
200,752

 
199,461

 
 
Other income (expense), net
 
44,557

 
(7,077
)
 
21,856

 
(66,416
)
 
 
 
 
Income before income taxes
 
103,903

 
20,222

 
222,608

 
133,045

 
Provision for income taxes
 
32,000

 
8,502

 
71,354

 
46,417

 
 
 
 
Net income
 
$
71,903

 
$
11,720

 
$
151,254

 
$
86,628

 
Net income per basic share
 
$
0.58

 
$
0.10

 
$
1.23

 
$
0.70

 
Net income per diluted share
 
$
0.53

 
$
0.09

 
$
1.13

 
$
0.62

 
Shares used in calculating basic net income per share
 
123,211

 
121,541

 
122,999

 
123,399

 
Shares used in calculating diluted net income per share
 
135,393

 
124,888

 
133,693

 
138,937

 
 
 
 
 
 
 
 
 
 
 
 
 
 
(a) Includes total stock-based compensation expense for stock-based awards:
 
 
 
 
 
 
Three Months Ended
 
Year Ended
 
 
 
 
 
 
December 30,
2012
 
January 1,
2012
 
December 30,
2012
 
January 1,
2012
 
 
Cost of product revenue
 
$
1,991

 
$
1,684

 
$
7,575

 
$
6,951

 
 
Cost of service and other revenue
 
134

 
159

 
461

 
695

 
 
Research and development
 
8,001

 
7,295

 
30,879

 
32,105

 
 
Selling, general and administrative
 
14,050

 
12,678

 
55,409

 
52,341

 
 
 
Stock-based compensation expense before taxes
 
$
24,176

 
$
21,816

 
$
94,324

 
$
92,092

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 







Illumina, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(unaudited)
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Year Ended
 
 
December 30,
2012
 
January 1,
2012
 
December 30,
2012
 
January 1,
2012
 
Net cash provided by operating activities
$
78,876

 
$
108,300

 
$
291,873

 
$
358,140

 
Net cash provided by (used in) investing activities
18,611

 
(42,960
)
 
(150,012
)
 
(400,999
)
 
Net cash (used in) provided by financing activities
(6,042
)
 
7,848

 
(10,755
)
 
97,016

 
Effect of exchange rate changes on cash and cash equivalents
(553
)
 
(56
)
 
(103
)
 
(126
)
 
Net increase in cash and cash equivalents
90,892

 
73,132

 
131,003

 
54,031

 
Cash and cash equivalents, beginning of period
343,089

 
229,846

 
302,978

 
248,947

 
Cash and cash equivalents, end of period
$
433,981

 
$
302,978

 
$
433,981

 
$
302,978

 
 
 
 
 
 
 
 
 
 
Calculation of free cash flow (a):
 
 
 
 
 
 
 
 
Net cash provided by operating activities
$
78,876

 
$
108,300

 
$
291,873

 
$
358,140

 
Purchases of property and equipment
(17,101
)
 
(27,114
)
 
(68,781
)
 
(77,800
)
 
Free cash flow
$
61,775

 
$
81,186

 
$
223,092

 
$
280,340

 
 
 
 
 
 
 
 
 
 
________________________________________________________________________________________________________________

(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
 
 
December 30,
2012
 
January 1,
2012
 
December 30,
2012
 
January 1,
2012
 
GAAP net income per share - diluted
$
0.53

 
$
0.09

 
$
1.13

 
$
0.62

 
Pro forma impact of weighted average shares (a)

 

 
0.02

 
0.03

 
Adjustments to net income:
 
 
 
 
 
 
 
 
Cost-method investment related gain, net (b)
(0.34
)
 

 
(0.35
)
 

 
Non-cash interest expense (c)
0.07

 
0.07

 
0.27

 
0.24

 
Recovery of previously impaired note receivable
(0.04
)
 

 
(0.05
)
 

 
Amortization of acquired intangible assets
0.04

 
0.02

 
0.12

 
0.09

 
Unsolicited tender offer related expense
0.03

 

 
0.17

 

 
Contingent compensation expense (d)
0.03

 
0.01

 
0.07

 
0.04

 
Headquarter relocation expense (e)
0.02

 
0.24

 
0.20

 
0.31

 
Amortization of inventory revaluation costs (f)
0.01

 

 
0.01

 

 
Acquisition related expense (gain), net (g)

 
(0.01
)
 
0.03

 
0.01

 
Restructuring charges

 
0.07

 
0.02

 
0.06

 
Impairment of in-process research and development

 

 
0.02

 

 
Legal contingencies

 
(0.02
)
 
0.16

 
(0.02
)
 
Loss on extinguishment of debt

 

 

 
0.28

 
Incremental non-GAAP tax benefit (expense) (h)
0.07

 
(0.12
)
 
(0.23
)
 
(0.36
)
 
Non-GAAP net income per share - diluted (i)
$
0.42

 
$
0.35

 
$
1.59

 
$
1.30

 
Shares used in calculating non-GAAP diluted net income per share
134,348

 
124,409

 
132,725

 
135,154

 
 
 
 
 
 
 
 
 
 
ITEMIZED RECONCILIATION BETWEEN GAAP AND NON-GAAP NET INCOME:
GAAP net income
$
71,903

 
$
11,720

 
$
151,254

 
$
86,628

 
Cost-method investment related gain, net (b)
(45,911
)
 

 
(45,911
)
 

 
Non-cash interest expense (c)
8,950

 
8,542

 
35,180

 
32,495

 
Recovery of previously impaired note receivable
(6,000
)
 

 
(6,000
)
 

 
Amortization of acquired intangible assets
5,411

 
3,188

 
15,541

 
12,689

 
Unsolicited tender offer related expense
4,394

 

 
23,136

 

 
Contingent compensation expense (d)
4,347

 
732

 
9,151

 
6,057

 
Headquarter relocation expense (e)
2,883

 
30,243

 
26,328

 
41,826

 
Amortization of inventory revaluation costs (f)
1,458

 

 
1,458

 

 
Acquisition related expense (gain), net (g)
314

 
(1,523
)
 
2,774

 
919

 
Restructuring charges
88

 
8,136

 
3,522

 
8,136

 
Impairment of in-process research and development

 

 
21,438

 

 
Legal contingencies

 
(2,300
)
 
3,021

 
(2,300
)
 
Loss on extinguishment of debt

 

 

 
37,611

 
Incremental non-GAAP tax benefit (expense) (h)
8,963

 
(15,215
)
 
(30,464
)
 
(48,053
)
 
Non-GAAP net income (i)
$
56,800

 
$
43,523

 
$
210,428

 
$
176,008

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ITEMIZED RECONCILIATION BETWEEN GAAP AND NON-GAAP DILUTED NUMBER OF SHARES:
Weighted average shares used in calculation of GAAP diluted net income per share
135,393

 
124,888

 
133,693

 
138,937

 
Weighted average dilutive potential common shares issuable of redeemable convertible senior notes (a)
(1,045
)
 
(479
)
 
(968
)
 
(3,783
)
 
Weighted average shares used in calculation of Non-GAAP diluted net income per share
134,348

 
124,409

 
132,725

 
135,154

 
 
 
 
 
 
 
 
 
 
______________________________________________________________________________________________________

(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) Cost-method investment related gain, net, consists of $48.6 million in gains from sale of minority interest in deCODE Genetics offset by $2.7 million in impairment of another cost-method investment.

(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) Contingent compensation expense relates to contingent payments for post-combination services associated with acquisitions.

(e) Headquarter relocation expense in Q4 2012 consists primarily of additional cease-use loss recorded due to a delay in the sublease of our prior headquarters and accretion of interest expense on lease exit liability recorded upon vacating our prior headquarters. Headquarter relocation expense in fiscal year 2012 consists primarily of cease-use loss recorded upon vacating our prior headquarters, double rent expense during the transition to our new headquarter facility, accretion of interest expense on lease exit liability, and moving costs. Headquarter relocation expense recorded in Q4 2011 and fiscal year 2011 consisted of cease-use loss, accelerated depreciation expense and double rent expense during the transition to the new facility.

(f) The Company recorded $1.5 million in inventory revaluation costs in conjunction with the acquisition of BlueGnome, Ltd., which was amortized into cost of goods sold during Q4 2012.

(g) Acquisition related expense (gain), net during fiscal year 2012 includes changes in fair value of contingent consideration of $2.0 million, of which $0.3 million was recorded in Q4, and transaction costs of $0.8 million related to the acquisition of BlueGnome Ltd. Acquisition related (gain) expense, net in the fiscal year 2011 consists of an acquired in-process research and development charge of $5.4 million related to a milestone payment for a prior acquisition, offset by changes in fair value of contingent consideration of $4.5 million, of which $1.5 million was recorded in Q4.

(h) Incremental non-GAAP tax benefit (expense) reflects the increase to GAAP tax expense related to the non-GAAP adjustments listed above.

(i) 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
 
 
December 30,
2012
 
January 1,
2012
 
December 30,
2012
 
January 1,
2012
 
GAAP gross profit
$
203,647

 
65.8
 %
 
$
170,586

 
68.2
 %
 
$
773,528

 
67.4
 %
 
$
709,098

 
67.2
 %
 
Stock-based compensation expense
2,125

 
0.7
 %
 
1,843

 
0.7
 %
 
8,036

 
0.7
 %
 
7,646

 
0.7
 %
 
Amortization of acquired intangible assets
4,479

 
1.5
 %
 
3,036

 
1.3
 %
 
14,153

 
1.2
 %
 
12,091

 
1.1
 %
 
Amortization of inventory revaluation costs (a)
1,458

 
0.5
 %
 

 

 
1,458

 
0.1
 %
 

 

 
Legal contingencies

 

 

 

 
3,021

 
0.3
 %
 

 

 
Non-GAAP gross profit
$
211,709

 
68.5
 %
 
$
175,465

 
70.2
 %
 
$
800,196

 
69.7
 %
 
$
728,835

 
69.0
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Research and development expense
$
56,907

 
18.4
 %
 
$
45,513

 
18.2
 %
 
$
231,025

 
20.1
 %
 
$
196,913

 
18.7
 %
 
Stock-based compensation expense
(8,001
)
 
(2.6
)%
 
(7,295
)
 
(2.9
)%
 
(30,879
)
 
(2.7
)%
 
(32,105
)
 
(3.0
)%
 
Contingent compensation expense (b)
(1,201
)
 
(0.4
)%
 
(732
)
 
(0.3
)%
 
(3,419
)
 
(0.2
)%
 
(4,799
)
 
(0.5
)%
 
Impairment of in-process research and development

 

 

 

 
(21,438
)
 
(1.9
)%
 

 

 
Non-GAAP research and development expense
$
47,705

 
15.4
 %
 
$
37,486

 
15.0
 %
 
$
175,289

 
15.3
 %
 
$
160,009

 
15.2
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Selling, general and administrative expense
$
79,715

 
25.8
 %
 
$
60,918

 
24.4
 %
 
$
285,991

 
24.9
 %
 
$
261,843

 
24.8
 %
 
Stock-based compensation expense
(14,050
)
 
(4.6
)%
 
(12,678
)
 
(5.1
)%
 
(55,409
)
 
(4.8
)%
 
(52,341
)
 
(4.9
)%
 
Contingent compensation expense (b)
(3,146
)
 
(1.0
)%
 

 

 
(5,732
)
 
(0.5
)%
 
(1,258
)
 
(0.1
)%
 
Amortization of acquired intangible assets
(932
)
 
(0.3
)%
 
(152
)
 
(0.1
)
 
(1,388
)
 
(0.1
)%
 
(598
)
 
(0.1
)%
 
Legal contingencies

 

 
2,300

 
0.9

 

 

 
2,300

 
0.2
 %
 
Non-GAAP selling, general and administrative expense
$
61,587

 
19.9
 %
 
$
50,388

 
20.1
 %
 
$
223,462

 
19.5
 %
 
$
209,946

 
19.9
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP operating profit
$
59,346

 
19.2
 %
 
$
27,299

 
10.9
 %
 
$
200,752

 
17.5
 %
 
$
199,461

 
18.9
 %
 
Stock-based compensation expense
24,176

 
7.8
 %
 
21,816

 
8.7
 %
 
94,324

 
8.2
 %
 
92,092

 
8.6
 %
 
Amortization of acquired intangible assets
5,411

 
1.7
 %
 
3,188

 
1.2
 %
 
15,541

 
1.4
 %
 
12,689

 
1.2
 %
 
Unsolicited tender offer related expense
4,394

 
1.4
 %
 

 

 
23,136

 
2.0
 %
 

 

 
Contingent compensation expense (b)
4,347

 
1.4
 %
 
732

 
0.3
 %
 
9,151

 
0.8
 %
 
6,057

 
0.6
 %
 
Headquarter relocation expense (c)
2,883

 
1.0
 %
 
30,243

 
12.1
 %
 
26,328

 
2.3
 %
 
41,826

 
4.0
 %
 
Amortization of inventory revaluation costs (a)
1,458

 
0.5
 %
 

 

 
1,458

 
0.1
 %
 

 

 
Acquisition related expense (gain), net (d)
314

 
0.1
 %
 
(1,523
)
 
(0.6
)%
 
2,774

 
0.2
 %
 
919

 
0.1
 %
 
Restructuring charges
88

 

 
8,136

 
3.3
 %
 
3,522

 
0.3
 %
 
8,136

 
0.8
 %
 
Impairment of in-process research and development

 

 

 

 
21,438

 
1.9
 %
 

 

 
Legal contingencies

 

 
(2,300
)
 
(0.9
)%
 
3,021

 
0.3
 %
 
(2,300
)
 
(0.2
)%
 
Non-GAAP operating profit (e)
$
102,417

 
33.1
 %
 
$
87,591

 
35.0
 %
 
$
401,445

 
35.0
 %
 
$
358,880

 
34.0
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP other income (expense), net
$
44,557

 
14.4
 %
 
$
(7,077
)
 
(2.8
)%
 
$
21,856

 
1.9
 %
 
$
(66,416
)
 
(6.3
)%
 
Cost-method investment related gains, net (f)
(45,911
)
 
(14.8
)%
 

 

 
(45,911
)
 
(4.1
)%
 

 

 
Non-cash interest expense (g)
8,950

 
2.8
 %
 
8,542

 
3.4
 %
 
35,180

 
3.1
 %
 
32,495

 
3.0
 %
 
Recovery of previously impaired note receivable
(6,000
)
 
(1.9
)%
 

 

 
(6,000
)
 
(0.5
)%
 

 

 
Loss on extinguishment of debt

 

 

 

 

 

 
37,611

 
3.6
 %
 
Non-GAAP other income, net (e)
$
1,596

 
0.5
 %
 
$
1,465

 
0.6
 %
 
$
5,125

 
0.4
 %
 
$
3,690

 
0.3
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

_____________________________________________________________________________________________________________

(a) The Company recorded $1.5 million in inventory revaluation costs in conjunction with the acquisition of BlueGnome, Ltd., which was amortized into cost of goods sold during Q4 2012.

(b) Contingent compensation expense relates to contingent payments for post-combination services associated with acquisitions.

(c) Headquarter relocation expense in Q4 2012 consists primarily of additional cease-use loss recorded due to a delay in the sublease of our prior headquarters and accretion of interest expense on lease exit liability recorded upon vacating our prior headquarters. Headquarter relocation expense in fiscal year 2012 consists primarily of cease-use loss recorded upon vacating our prior headquarters, double rent expense during the transition to our new headquarter facility, accretion of interest expense on lease exit liability, and moving costs. Headquarter relocation expense recorded in Q4 2011 and fiscal year 2011 consisted of cease-use loss, accelerated depreciation expense and double rent expense during the transition to the new facility.

(d) Acquisition related expense (gain), net during fiscal year 2012 includes changes in fair value of contingent consideration of $2.0 million, of which $0.3 million was recorded in Q4, and transaction costs of $0.8 million related to the acquisition of BlueGnome Ltd. Acquisition related (gain) expense, net in the fiscal year 2011 consists of an acquired in-process research and development charge of $5.4 million related to a milestone payment for a prior acquisition, offset by changes in fair value of contingent consideration of $4.5 million, of which $1.5 million was recorded in Q4.

(e) 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.

(f) Cost-method investment related gain, net, consists of $48.6 million in gains from sale of minority interest in deCODE Genetics offset by $2.7 million in impairment of another cost-method investment.

(g) 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 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 December 30, 2012 to be filed with the SEC, and the Company's Form 10-Q for the fiscal quarters ended April 1, 2012, July 1, 2012, and September 30, 2012. The Company assumes no obligation to update any forward-looking statements or information.

 
Fiscal Year 2013
 
Gross margin
 
 
Non-GAAP gross margin
70%
 
Stock-based compensation expense
(1)%
 
Amortization of acquired intangible assets
(1)%
 
GAAP gross margin
68%
 
 
 
 
Diluted net income per share
 
 
Non-GAAP diluted net income per share
$1.55 - $1.62
 
Non-cash interest expense (a)
(0.17)
 
Amortization of acquired intangible assets
(0.12)
 
Contingent compensation expense (b)
(0.06)
 
Unsolicited tender offer related expense
(0.05)
 
Headquarter relocation expense (c)
(0.01)
 
Pro forma impact of weighted average shares (d)
(0.01)
 
GAAP diluted net income per share (e)
$1.13 - $1.20
 
 
 
 
______________________________________________________________________________________________________

(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) Contingent compensation expense represents contingent consideration for post-combination services associated with acquisitions.

(c) We expect to incur additional headquarter relocation expenses, consisting primarily of accretion of interest expense on such cease-use liabilities.

(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.

(e) Reconciliation items from non-GAAP to GAAP diluted net income per share do not reflect potential impact from Verinata acquisition.