Illumina Reports Financial Results for Third Quarter of Fiscal Year 2012

  Illumina Reports Financial Results for Third Quarter of Fiscal Year 2012

Business Wire

SAN DIEGO -- October 23, 2012

Illumina, Inc. (NASDAQ:ILMN) today announced financial results for the third
quarter of 2012.

Third quarter 2012 results:

  *Revenue of $286 million, a 21% increase compared to $235 million in the
    third quarter of 2011.
  *GAAP net income for the quarter of $30 million, or $0.22 per diluted
    share, compared to net income of $20 million, or $0.15 per diluted share,
    for the third quarter of 2011.
  *Non-GAAP net income for the quarter of $54 million, or $0.41 per diluted
    share, compared to $30 million, or $0.22 per diluted share, for the third
    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 $51 million compared to cash flow from
    operations of $90 million for the third quarter of 2011 primarily due to
    changes in working capital associated with the timing of shipments.

Gross margin in the third quarter of 2012 was 68.5% compared to 66.7% in the
prior year period. Excluding the effect of non-cash charges associated with
stock compensation and amortization of acquired intangibles, non-GAAP gross
margin was 70.5% for the third quarter of 2012 compared to 68.9% in the prior
year period.

Research and development (R&D) expenses for the third quarter of 2012 were
$54.1 million compared to $50.4 million in the third quarter of 2011. R&D
expenses included $7.8 million and $8.6 million of non-cash stock compensation
expense in the third quarters of 2012 and 2011, respectively. Excluding these
charges and contingent compensation, R&D expenses as a percentage of revenue
were 15.9% compared to 17.4% in the prior year period.

Selling, general and administrative (SG&A) expenses for the third quarter of
2012 were $69.8 million compared to $66.0 million for the third quarter of
2011. SG&A expenses included $13.2 million and $13.8 million of non-cash stock
compensation expense in the third quarters of 2012 and 2011, respectively.
Excluding these charges, contingent compensation, and acquired intangible
asset amortization, SG&A expenses as a percentage of revenue were 19.5%
compared to 22.2% in the prior year period.

Depreciation and amortization expenses were $15.8 million and capital
expenditures were $17.7 million during the third quarter of 2012. The company
ended the quarter with $1.2 billion in cash, cash equivalents and short-term
investments which is essentially unchanged from January1, 2012.

Highlights since our last earnings release

  *Completed the acquisition of BlueGnome, a leading provider of cytogenetics
    and in vitro fertilization (IVF) screening products
  *Announced expedited Individual Genome Sequencing Services (IGS), powered
    by HiSeq® 2500 to enable breakthrough turnaround time, available via
    Illumina's CLIA-certified laboratory
  *Announced an alliance with Partners HealthCare to introduce
    next-generation sequencing (NGS) clinical interpretation and reporting
    tools
  *Announced TruSight™ targeted sequencing content sets, enabling labs to
    offer cost-effective, streamlined, targeted sequencing solutions for
    genetic diseases
  *Held our inaugural 'Understand Your Genome' event
  *Launched Infinium ® HumanCore Arrays for economical large-scale genetic
    studies
  *Announced that the FDA selected the MiSeq® system for use in an extensive
    program to identify foodborne pathogens
  *Launched TruSeq® Stranded mRNA and Total RNA Sequencing Sample Preparation
    solutions, delivering superior data quality for challenging samples and
    unprecedented views of the transcriptome
  *Further strengthened Illumina's management team by appointing Paul Bianchi
    to Senior Vice President of Human Resources
  *Announced a favorable outcome in patent litigation against Helicos
    BioSciences Corporation
  *Repurchased $25 million of common stock under our previously announced
    share repurchase program

Financial outlook and guidance

“We are very pleased with our operational execution so far in 2012,” said Jay
Flatley, Illumina's President and Chief Executive Officer. “As a result of our
performance and the recent announcement regarding NIH funding under the
continuing resolution, we are tightening our 2012 revenue and EPS guidance
ranges. However, we remain cautious given the uncertainty of the U.S. fiscal
cliff as well as the outcome of the Presidential election. Accordingly, we now
expect 2012 revenue to be between $1.134 billion and $1.144 billion, (previous
guidance was $1.1 billion to $1.175 billion), and non-GAAP earnings per fully
diluted share to be between $1.54 and $1.59 (previous guidance was $1.50 to
$1.60).”

Quarterly conference call information

The conference call will begin at 2:00 pm Pacific Time (5:00 pm Eastern Time)
on Tuesday, October23, 2012. Interested parties may listen to the call by
dialing 888-679-8038 (passcode: 10421979), or, if outside North America, by
dialing +1-617-213-4850 (passcode: 10421979). 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 October23, 2012 through October 30, 2012 by dialing
888-286-8010 (passcode: 78765276), or if outside North America by dialing
+1-617-801-6888 (passcode: 78765276).

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,
headquarter relocation expense, costs related to unsolicited tender offer for
the company's stock, amortization expense related to acquired intangible
assets, contingent compensation expense, restructuring charges, legal
contingencies, acquisition related expense, impairment of in-process research
and development, 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; (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.

Illumina, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
                                                           
                                             September 30,   January 1,
                                             2012            2012
ASSETS                                       (unaudited)
Current assets:
Cash and cash equivalents                    $ 343,089       $ 302,978
Short-term investments                       889,977         886,590
Accounts receivable, net                     218,145         173,886
Inventory, net                               147,684         128,781
Deferred tax assets, current portion         27,229          23,188
Prepaid expenses and other current assets    20,112         29,196
Total current assets                         1,646,236       1,544,619
Property and equipment, net                  154,869         143,483
Goodwill                                     370,189         321,853
Intangible assets, net                       134,829         106,475
Deferred tax assets, long-term portion       54,410          19,675
Other assets                                 77,450         59,735
Total assets                                 $ 2,437,983    $ 2,195,840
                                                             
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable                             $ 74,971        $ 49,806
Accrued liabilities                          191,821         177,115
Long-term debt, current portion              36,307         —
Total current liabilities                    303,099         226,921
Long-term debt                               797,162         807,369
Other long-term liabilities                  111,690         80,613
Conversion option subject to cash settlement 3,818           5,722
Stockholders’ equity                         1,222,214      1,075,215
Total liabilities and stockholders’ equity   $ 2,437,983    $ 2,195,840
                                                               

Illumina, Inc.
Condensed Consolidated Statements of Income
(In thousands, except per share amounts)
(unaudited)
                                                           
                       Three Months Ended            Nine Months Ended
                       September 30,   October 2,    September     October 2,
                       2012            2011          30,           2011
                                                     2012
Revenue:
   Product revenue     $  262,418      $ 220,296     $ 776,893     $ 756,884
   Service and other   23,456         15,203       62,358       48,580    
   revenue
      Total revenue    285,874        235,499      839,251      805,464   
Cost of Revenue:
   Cost of product     75,873          68,764        230,935       238,719
   revenue (a)
   Cost of service
   and other revenue   10,540          6,585         28,761        19,178
   (a)
   Amortization of
   acquired            3,588          3,035        9,674        9,055     
   intangible assets
      Total cost of    90,001         78,384       269,370      266,952   
      revenue
         Gross         195,873        157,115      569,881      538,512   
         profit
Operating Expenses:
   Research and        54,056          50,399        174,118       151,400
   development (a)
   Selling, general
   and                 69,791          66,031        206,276       200,925
   administrative
   (a)
   Unsolicited
   tender offer        3,956           —             18,742        —
   related expense
   Restructuring       138             —             3,434         —
   charges
   Headquarter
   relocation          19,475          6,519         23,445        11,583
   expense
   Acquisition
   related (gain)      (357        )   (2,598    )   2,460        2,442     
   expense, net
      Total
      operating        147,059        120,351      428,475      366,350   
      expenses
         Income from   48,814          36,764        141,406       172,162
         operations
   Other expense,      (5,169      )   (8,973    )   (22,701   )   (59,339   )
   net
         Income
         before        43,645          27,791        118,705       112,823
         income
         taxes
Provision for income   13,897         7,640        39,354       37,915    
taxes
         Net income    $  29,748      $ 20,151     $ 79,351     $ 74,908  
Net income per basic   $  0.24        $ 0.17       $ 0.65       $ 0.60    
share
Net income per         $  0.22        $ 0.15       $ 0.60       $ 0.52    
diluted share
Shares used in
calculating basic      122,930        122,079      122,929      124,017   
net income per share
Shares used in
calculating diluted    132,507        135,966      133,126      143,620   
net income per share
                                                        
(a) Includes total stock-based compensation expense for stock based awards:

                       Three Months Ended            Nine Months Ended
                       September 30,   October 2,    September     October 2,
                       2012            2011          30,           2011
                                                     2012
   Cost of product     $  1,928        $ 1,955       $ 5,584       $ 5,267
   revenue
   Cost of service     142             194           327           536
   and other revenue
   Research and        7,764           8,621         22,878        24,810
   development
   Selling, general
   and                 13,238         13,801       41,359       39,663    
   administrative
      Stock-based
      compensation     $  23,072      $ 24,571     $ 70,148     $ 70,276  
      expense before
      taxes
                                                                             

Illumina, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(unaudited)
                                                               
                     Three Months Ended           Nine Months Ended
                     September 30,  October 2,   September 30,   October 2,
                     2012            2011          2012            2011
Net cash provided by $  51,228       $ 90,042      $  212,997      $ 249,840
operating activities
Net cash (used in)
provided by          (17,105     )   67,101        (168,623    )   (358,039  )
investing activities
Net cash (used in)
provided by          (8,065      )   (187,830  )   (4,713      )   89,168
financing activities
Effect of exchange
rate changes on cash 619           (551      )  450            (70       )
and cash equivalents
Net increase
(decrease) in cash   26,677          (31,238   )   40,111          (19,101   )
and cash equivalents
Cash and cash
equivalents,         316,412       261,084     302,978        248,947   
beginning of period
Cash and cash
equivalents, end of  $  343,089    $ 229,846   $  343,089     $ 229,846 
period
                                                                   
Calculation of free
cash flow (a):
Net cash provided by $  51,228       $ 90,042      $  212,997      $ 249,840
operating activities
Purchases of
property and         (17,650     )  (22,183   )  (51,680     )   (50,686   )
equipment
Free cash flow       $  33,578     $ 67,859    $  161,317     $ 199,154 


(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          Nine Months Ended
                       September 30,   October 2,  September 30,   October 2,
                       2012            2011        2012            2011
GAAP net income per    $  0.22         $ 0.15      $  0.60         $ 0.52
share - diluted
Pro forma impact of
weighted average       —               —           —               0.02
shares (a)
Adjustments to net
income:
Headquarter relocation 0.15            0.05        0.18            0.08
expense (b)
Non-cash interest      0.07            0.07        0.20            0.17
expense (c)
Unsolicited tender     0.03            —           0.14            —
offer related charges
Amortization of
acquired intangible    0.03            0.02        0.08            0.07
assets
Contingent
compensation expense   0.01            —           0.04            0.04
(d)
Restructuring charges  —               —           0.03            —
Acquisition related
(gain) expense, net    —               (0.02    )  0.02            0.02
(e)
Legal contingencies    —               —           0.02            —
Impairment of
in-process research    —               —           0.16            —
and development
Loss on extinguishment —               0.01        —               0.27
of debt
Incremental non-GAAP   (0.10      )    (0.06    )  (0.31       )   (0.24     )
tax expense (f)
Non-GAAP net income
per share - diluted    $  0.41        $ 0.22     $  1.16        $ 0.95    
(g)
Shares used in
calculating non-GAAP   131,601        134,674    132,185        138,735   
diluted net income per
share
                                                                   
ITEMIZED RECONCILIATION BETWEEN GAAP AND NON-GAAP NET INCOME:
GAAP net income        $  29,748       $ 20,151    $  79,351       $ 74,908
Headquarter relocation 19,475          6,519       23,445          11,583
expense (b)
Non-cash interest      8,846           9,200       26,230          23,953
expense (c)
Unsolicited tender     3,956           —           18,742          —
offer related charges
Amortization of
acquired intangible    3,740           3,188       10,130          9,501
assets
Contingent
compensation expense   1,496           496         4,804           5,326
(d)
Restructuring charges  138             —           3,434           —
Acquisition related
(gain) expense, net    (357       )    (2,598   )  2,460           2,442
(e)
Legal contingencies    —               —           3,021           —
Impairment of
in-process research    —               —           21,438          —
and development
Loss on extinguishment —               755         —               37,611
of debt
Incremental non-GAAP   (13,539    )    (7,983   )  (39,427     )   (32,839   )
tax expense (f)
Non-GAAP net income    $  53,503      $ 29,728   $  153,628     $ 132,485 
(g)
                                                                   
ITEMIZED RECONCILIATION BETWEEN GAAP AND NON-GAAP DILUTED NUMBER OF SHARES:
Weighted average
shares used in
calculation of GAAP    132,507         135,966     133,126         143,620
diluted net income per
share
Weighted average
dilutive potential
common shares issuable (906       )    (1,292   )  (941        )   (4,885    )
of redeemable
convertible senior
notes (a)
Weighted average
shares used in
calculation of         131,601        134,674    132,185        138,735   
Non-GAAP diluted net
income per share


(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) Headquarter relocation expense in Q3 2012 and first three quarters of 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 recorded upon
vacating certain buildings of our prior headquarters, and moving costs.
Headquarter relocation expense recorded in Q3 2011 and first three quarters of
2011 consisted of accelerated depreciation expense and double rent expense
during the transition to the new 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) Contingent compensation expense relates to contingent payments for
post-combination services associated with acquisitions.

(e) Acquisition related (gain) expense, net during the first three quarters of
2012 year includes changes in fair value of contingent consideration of $1.7
million, $1.1 million, and $(1.1) million recorded in Q1, Q2, and Q3,
respectively, and transaction costs related to acquisition of BlueGnome Ltd.
of $0.7 million recorded in Q3. Acquisition related (gain) expense, net in Q3
2011 consists of change in fair value of contingent consideration of $2.6
million. Acquisition related (gain) expense, net in the first three quarters
of 2011 consists of an acquired in-process research and development charge of
$5.4 million in Q2 2011 related to a milestone payment for a prior
acquisition, offset by changes in fair value of contingent consideration of
$3.0 million.

(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                             Nine Months Ended
               September 30,          October 2,             September 30,          October 2,
               2012                    2011                   2012                    2011
GAAP gross     $ 195,873    68.5 %    $ 157,115    66.7 %   $ 569,881    67.9 %    $ 538,512    66.9 %
profit
Stock-based
compensation   2,070         0.7  %    2,149         0.9  %   5,911         0.7  %    5,803         0.7  %
expense
Amortization
of acquired    3,588         1.3  %    3,035         1.3  %   9,674         1.1  %    9,055         1.1  %
intangible
assets
Legal          —            —        —            —       3,021        0.4  %    —            —    
contingencies
Non-GAAP gross $ 201,531    70.5 %    $ 162,299    68.9 %   $ 588,487    70.1 %    $ 553,370    68.7 %
profit
                                                                                                    
Research and
development    $ 54,056      18.9 %    $ 50,399      21.4 %   $ 174,118     20.7 %    $ 151,400     18.8 %
expense
Stock-based
compensation   (7,764    )   (2.7 )%   (8,621    )   (3.7 )%  (22,878   )   (2.7 )%   (24,810   )   (3.1 )%
expense
Contingent
compensation   (754      )   (0.3 )%   (775      )   (0.3 )%  (2,218    )   (0.2 )%   (4,067    )   (0.5 )%
expense (a)
Impairment of
in-process     —            —        —            —       (21,438   )   (2.6 )%   —            —    
research and
development
Non-GAAP
research and   $ 45,538     15.9 %    $ 41,003     17.4 %   $ 127,584    15.2 %    $ 122,523    15.2 %
development
expense
                                                                                                    
Selling,
general and    $ 69,791      24.4 %    $ 66,031      28.0 %   $ 206,276     24.6 %    $ 200,925     24.9 %
administrative
expense
Stock-based
compensation   (13,238   )   (4.5 )%   (13,801   )   (5.8 )%  (41,359   )   (4.9 )%   (39,663   )   (4.8 )%
expense
Contingent
compensation   (742      )   (0.3 )%   279           0.1  %   (2,586    )   (0.3 )%   (1,259    )   (0.2 )%
(expense) gain
(a)
Amortization
of acquired    (152      )   (0.1 )%   (152      )   (0.1 )%  (456      )   (0.1 )%   (446      )   (0.1 )%
intangible
assets
Non-GAAP
selling,
general and    $ 55,659     19.5 %    $ 52,357     22.2 %   $ 161,875    19.3 %    $ 159,557    19.8 %
administrative
expense
                                                                                                    
GAAP operating $ 48,814      17.1 %    $ 36,764      15.6 %   $ 141,406     16.8 %    $ 172,162     21.4 %
profit
Stock-based
compensation   23,072        8.1  %    24,571        10.4 %   70,148        8.4  %    70,276        8.7  %
expense
Headquarter
relocation     19,475        6.8  %    6,519         2.8  %   23,445        2.7  %    11,583        1.4  %
expense (b)
Unsolicited
tender offer   3,956         1.4  %    —             —        18,742        2.2  %    —             —
related
charges
Amortization
of acquired    3,740         1.3  %    3,187         1.4  %   10,130        1.2  %    9,501         1.2  %
intangible
assets
Contingent
compensation   1,496         0.5  %    496           0.2  %   4,804         0.6  %    5,326         0.7  %
gain (expense)
(a)
Restructuring  138           —         —             —        3,434         0.4  %    —             —
charges
Acquisition
related (gain) (357      )   (0.1 )%   (2,598    )   (1.1 )%  2,460         0.3  %    2,442         0.3  %
expense, net
(c)
Impairment of
in-process     —             —         —             —        21,438        2.6  %    —             —
research and
development
Legal          —            —        —            —       3,021        0.4  %    —            —    
contingencies
Non-GAAP
operating      $ 100,334    35.1 %    $ 68,939     29.3 %   $ 299,028    35.6 %    $ 271,290    33.7 %
profit (d)
                                                                                                    
GAAP other     $ (5,169  )   (1.8 )%   $ (8,973  )   (3.8 )%  $ (22,701 )   (2.7 )%   $ (59,339 )   (7.4 )%
expense, net
Non-cash
interest       8,846         3.1  %    9,200         3.9  %   26,230        3.1  %    23,953        3.0  %
expense (e)
Loss on
extinguishment —            —        755          0.3  %   —            —        37,611       4.7  %
of debt
Non-GAAP other
income, net    $ 3,677      1.3  %    $ 982        0.4  %   $ 3,529      0.4  %    $ 2,225      0.3  %
(d)


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

(b) Headquarter relocation expense in Q3 2012 and first three quarters of 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 recorded upon
vacating certain buildings of our prior headquarters, and moving costs.
Headquarter relocation expense recorded in Q3 2011 and first three quarters of
2011 consisted of accelerated depreciation expense and double rent expense
during the transition to the new facility.

(c) Acquisition related (gain) expense, net during the first three quarters of
2012 year includes changes in fair value of contingent consideration of $1.7
million, $1.1 million, and $(1.1) million recorded in Q1, Q2, and Q3,
respectively, and transaction costs related to acquisition of BlueGnome Ltd.
of $0.7 million recorded in Q3. Acquisition related (gain) expense, net in Q3
2011 consists of change in fair value of contingent consideration of $2.6
million. Acquisition related (gain) expense, net in the first three quarters
of 2011 consists of an acquired in-process research and development charge of
$5.4 million in Q2 2011 related to a milestone payment for a prior
acquisition, offset by changes in fair value of contingent consideration of
$3.0 million.

(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 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. 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. The company assumes no obligation
to update any forward-looking statements or information.
                                                     
                                                     Fiscal Year 2012
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                $1.54 - $1.59
Non-cash interest expense (a)                        (0.17)
Unsolicited tender offer charges                     (0.12)
Headquarter relocation expense (b)                   (0.11)
Impairment of in-process research and development    (0.11)
Amortization of acquired intangible assets           (0.08)
Contingent compensation expense (c)                  (0.04)
Restructuring charges                                (0.02)
Legal contingencies                                  (0.02)
Acquisition related expense, net (d)                 (0.01)
Pro forma impact of weighted average shares (e)      (0.01)
GAAP diluted net income per share                    $0.85 - $0.90


(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, 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,
accretion of interest expense on such cease-use liabilities, 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) Acquisition related expense primarily represents changes in fair value of
contingent consideration.

(e) 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.

Contact:

Illumina, Inc.
Investors:
Rebecca Chambers
858-255-5243
rchambers@illumina.com
or
Media:
Jennifer Temple
858-882-6822
pr@illumina.com
 
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