Affymetrix Reports Fourth Quarter and Fiscal Year 2012 Results

  Affymetrix Reports Fourth Quarter and Fiscal Year 2012 Results

Business Wire

SANTA CLARA, Calif. -- January 31, 2013

Affymetrix, Inc., (NASDAQ: AFFX) today reported its operating results for the
three and twelve months ended December 31, 2012.

Results for the three months ended December 31, 2012:

  *Total revenue was $84.4 million, which excluding eBioscience of $18.1
    million, represented a 2% increase from the fourth quarter of 2011.
  *GAAP net loss was $12.3 million, or $0.17 per diluted share, as compared
    to a net loss of $14.7 million, or $0.21 per diluted share, in the fourth
    quarter of 2011.
  *Non-GAAP net loss was $1.3 million, or $0.02 per diluted share, as
    compared to a net loss of $8.3 million, or $0.12 per diluted share, for
    the fourth quarter of 2011. Please refer to the “Itemized Reconciliation
    Between GAAP and Non-GAAP Net Loss” for a reconciliation of these GAAP and
    non-GAAP financial measures.
  *Positive cash flow from operations of $2.0 million and a total balance in
    cash, cash equivalents and available-for-sale securities of $35.7 million
    at the end of December 31, 2012, after debt payments of $9.6 million
    during the quarter.

Product revenue for the fourth quarter of 2012 was $76.4 million and service
and other revenue was $8.0 million. This compares to product revenue of $58.7
million and service and other revenue of $6.4 million in the fourth quarter of
2011. Product revenue for the fourth quarter of 2012 included Affymetrix core
consumable revenue of $53.1 million, instrument revenue of $5.2 million and
revenue from eBioscience of $18.1 million. Product revenue for the fourth
quarter of 2011 included Affymetrix core consumable revenue of $54.9 million
and instrument revenue of $3.8 million.

Total gross margin was 54%, as compared to 53% in the same period of 2011.
Excluding non-GAAP adjustments such as the amortization of step-up in
inventory fair value, total margin was 61% in 2012, as compared to 54% in
2011. Please refer to the “Itemized Reconciliation Between GAAP and Non-GAAP
Gross Margin” for a reconciliation of these GAAP and non-GAAP financial
measures.

For the fourth quarter of 2012, operating expenses were $54.4 million on a
GAAP basis as compared to $45.5 million in 2011. Excluding non-GAAP
adjustments such as the amortization of acquired intangible assets and
non-recurring charges, operating expenses were $48.5 million, compared to an
adjusted total of $41.5 million in 2011. The increase reflects the acquisition
of eBioscience in June 2012. Please refer to the “Itemized Reconciliation
Between GAAP and Non-GAAP Operating Expenses” for a reconciliation of these
GAAP and non-GAAP financial measures.

Results for the year ended December 31, 2012:

  *Total revenue was $295.6 million, which excluding eBioscience of $37.0
    million, represented a 3% decrease from 2011.
  *GAAP net loss was $10.7 million, or $0.15 per diluted share, as compared
    to a net loss of $28.2 million, or $0.40 per diluted share, in 2011.
  *Non-GAAP net loss was $6.8 million, or $0.10 per diluted share, as
    compared to a net loss of $13.0 million, or $0.18 per diluted share, for
    2011. Please refer to the “Itemized Reconciliation Between GAAP and
    Non-GAAP Net Loss” for a reconciliation of these GAAP and non-GAAP
    financial measures.
  *Positive cash flow from operations of $4.0 million. $11.7 million of debt
    payments were made during the year.

Product revenue for the year ended December 31, 2012 was $266.1 million and
service and other revenue was $29.5 million. This compares to product revenue
of $241.3 million and service and other revenue of $26.2 million in 2011.
Product revenue for 2012 included Affymetrix core consumable revenue of $210.7
million, instrument revenue of $18.4 million and revenue from eBioscience of
$37.0 million. Product revenue for 2011 included Affymetrix core consumable
revenue of $225.0 million and instrument revenue of $16.3 million.

Total gross margin was 55%, as compared to 58% in the same period of 2011.
Excluding non-GAAP adjustments such as the amortization of step-up in
inventory fair value and acquired intangible assets, total margin was 60% in
2012, as compared to 59% in 2011. Please refer to the “Itemized Reconciliation
Between GAAP and Non-GAAP Gross Margin” for a reconciliation of these GAAP and
non-GAAP financial measures.

For the year ended December 31, 2012, operating expenses were $202.6 million
on a GAAP basis as compared to $173.2 million in 2011. Excluding non-GAAP
adjustments such as the amortization of acquired intangible assets and
non-recurring charges, operating expenses were $175.4 million, compared to an
adjusted total of $166.2 million in 2011, with the increase reflecting the
eBioscience acquisition in 2012. Please refer to the “Itemized Reconciliation
Between GAAP and Non-GAAP Operating Expenses” for a reconciliation of these
GAAP and non-GAAP financial measures.

“We had a good finish to 2012, achieving modest growth in our core business
during the fourth quarter, which was a very challenging environment for
academic spending. Revenue for eBioscience increased by 5% as compared to the
fourth quarter of 2011,” said Dr. Frank Witney, president & CEO. “Over the
last year we have diversified our portfolio, achieved our strategic and
revenue goals for our CytoScan product line and demonstrated renewed strength
in genotyping with our Axiom platform. We plan to return to growth and
profitability in fiscal 2013.”

Recent announcements:

  *In December of 2012, the Company prepaid $9.6 million of its
    senior-secured debt representing the entire principal due in 2013.
  *Additionally, the Company implemented a corporate restructuring to
    accelerate its path to profitability. The restructuring is expected to
    result in annualized savings of approximately $25 million based on 2013
    run rates, of which $5 million is in cost-of-goods sold. The Company
    expects to record a total charge of approximately $7 million, the majority
    of which will be incurred during the first quarter of 2013 except for $1.8
    million which was recognized in 2012.

Affymetrix will host a conference call on January 31, 2013 at 2:00 p.m. PT to
review its operating results for the fourth quarter of and the year ended
2012. A live webcast can be accessed by visiting the Investor Relations
section of the Company’s website at www.affymetrix.com. In addition, investors
and other interested parties can listen by dialing domestic: (877) 407-8291,
international: (201) 689-8345.

A replay of this call will be available from 5:00 p.m. PT on January 31, 2013
until 8:00 p.m. PT on February 8, 2013 at the following numbers: domestic:
(877) 660-6853, international: (201) 612-7415. The conference call passcode to
access the replay is 406352. An archived webcast of the conference call will
be available under the Investor Relations section of the Company's website.

About Affymetrix

Affymetrix technology is used by the world's top pharmaceutical, diagnostic,
and biotechnology companies, as well as leading academic, government, and
nonprofit research institutes. More than 2,300 systems have been shipped
around the world and more than 48,000 peer-reviewed papers have been published
using the technology. Affymetrix is headquartered in Santa Clara, California,
and has manufacturing facilities in Cleveland, Ohio, and Singapore.
eBioscience is headquartered in San Diego, California and has manufacturing
facilities in San Diego and Vienna, Austria. Including eBioscience, the
Company has about 1,100 employees worldwide and maintains sales and
distribution operations across Europe, Asia and Latin America.

All statements in this press release that are not historical are
"forward-looking statements" within the meaning of Section 21E of the
Securities Exchange Act as amended, including statements related to our plans
to return to growth and profitability in 2013 and our estimated annualized
cost savings as well as other statements regarding Affymetrix's
"expectations," "beliefs," "hopes," "intentions," "strategies" or the like.
Such statements are subject to risks and uncertainties that could cause actual
results to differ materially for Affymetrix from those projected, including,
but not limited to: Affymetrix's ability to timely and successfully integrate
and realize the anticipated strategic benefits and costs savings or other
synergies of the acquisition of eBioscience in a cost-effective manner while
minimizing the disruption to its business; risks that eBioscience’s future
performance may not be consistent with its historical performance; risks
relating to Affymetrix's ability to make scheduled payments of the principal
of, to pay interest on or to refinance its indebtedness; risks relating to
Affymetrix's ability to successfully develop and commercialize new products,
including its ability to successfully develop and commercialize novel
molecular solutions based on eBioscience’s portfolio of reagents; risks
relating to past and future acquisitions, including the ability of Affymetrix
to successfully integrate such acquisitions into its existing business; risks
of Affymetrix's ability to achieve and sustain higher levels of revenue,
higher gross margins and reduced operating expenses; risks relating to
Affymetrix’s ability to generate cash after interest and principal payments;
uncertainties relating to technological approaches; risks associated with
manufacturing and product development; personnel retention; uncertainties
relating to cost and pricing of Affymetrix products; dependence on
collaborative partners; uncertainties relating to sole-source suppliers;
uncertainties relating to FDA and other regulatory approvals; competition;
risks relating to intellectual property of others and the uncertainties of
patent protection and litigation. These and other risk factors are discussed
in Affymetrix's Annual Report on Form 10-K for the year ended December 31,
2011, and other SEC reports. Affymetrix expressly disclaims any obligation or
undertaking to release publicly any updates or revisions to any
forward-looking statements contained herein to reflect any change in
Affymetrix's expectations with regard thereto or any change in events,
conditions or circumstances on which any such statements are based.

In addition to providing financial measures based on generally accepted
accounting principles in the United States (GAAP), Affymetrix has disclosed in
this press release its net loss and net loss per share as well as its total
gross margin and operating expenses for the fourth quarter of and fiscal year
ended 2012 excluding specified certain items. Reconciliation of GAAP to
non-GAAP measures can be found in the tables included in this press release.
Affymetrix has determined to disclose this financial information to investors
because it believes it will be useful, as a supplement to GAAP measures, in
comparing Affymetrix’s operating performance in the fourth quarter of and year
ended 2012 to the prior-year period. These non-GAAP financial measures should
not be considered in isolation from, or as a substitute for, financial
information prepared in accordance with GAAP.

PLEASE NOTE:
Affymetrix, the Affymetrix logo, GeneChip, and all other trademarks are the
property of Affymetrix, Inc.

                                                               
AFFYMETRIX, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS)
                                                                  
                                                   December 31,   December 31,
                                                    2012         2011     
                                                   (Unaudited)    (See Note 1)
ASSETS:
Current assets:
Cash and cash equivalents                          $ 25,671       $ 201,937
Restricted cash                                      699            692
Available-for-sale securities—short-term portion     9,366          7,937
Accounts receivable, net                             53,893         44,021
Inventories—short-term portion                       72,691         42,851
Deferred tax assets—short-term portion               359            364
Property and equipment, net—held for sale            -              9,000
Prepaid expenses and other current assets           10,126       7,785    
Total current assets                                 172,805        314,587
Available-for-sale securities—long-term portion      -              54,501
Property and equipment, net                          28,663         30,583
Inventories—long-term portion                        11,772         -
Goodwill                                             159,736        -
Intangible assets, net                               152,718        29,525
Deferred tax assets—long-term portion                3,394          450
Other long-term assets                              15,206       8,369    
Total assets                                       $ 544,294     $ 438,015  
                                                                  
LIABILITIES AND STOCKHOLDERS’ EQUITY:
Current liabilities:
Accounts payable and accrued liabilities           $ 50,355       $ 44,774
Convertible notes—short-term portion                 3,855          -
Term loan—short-term portion                         12,713         -
Deferred revenue—short-term portion                 8,498        9,852    
Total current liabilities                            75,421         54,626
Deferred revenue—long-term portion                   3,450          3,959
Convertible notes                                    105,000        95,469
Term loan—long-term portion                          60,563         -
Other long-term liabilities                          22,689         9,127
Stockholders’ equity:
Common stock                                         710            704
Additional paid-in capital                           759,549        750,332
Accumulated other comprehensive income               6,302          2,492
Accumulated deficit                                 (489,390 )    (478,694 )
Total stockholders’ equity                          277,171      274,834  
Total liabilities and stockholders’ equity         $ 544,294     $ 438,015  

        The condensed consolidated balance sheet at December 31, 2011 has been
Note 1: derived from the audited consolidated financial statements at that
        date included in the Company’s Annual Report on Form 10-K for the
        fiscal year ended December 31, 2011.

                                                  
AFFYMETRIX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(UNAUDITED)
                                                     
                         Three Months Ended          Twelve Months Ended
                         December 31,                December 31,
                          2012       2011        2012       2011    
REVENUE:
Product sales            $ 76,382      $ 58,665      $ 266,063     $ 241,273
Services and other        7,967       6,439       29,560      26,201  
Total revenue             84,349      65,104      295,623     267,474 
COSTS AND EXPENSES:
Cost of product sales      34,354        26,902        116,261       97,815
Cost of services and       4,817         3,510         15,874        13,137
other
Research and               14,464        16,697        57,881        63,591
development
Selling, general and       38,102        28,770        142,853       109,572
administrative
Restructuring charges     1,845       -           1,845       -       
Total costs and           93,582      75,879      334,714     284,115 
expenses
Loss from operations       (9,233  )     (10,775 )     (39,091 )     (16,641 )
Interest income and        1,367         (2,753  )     (265    )     (6,302  )
other, net
Interest expense          3,002       947         7,193       3,813   
Loss before income         (10,868 )     (14,475 )     (46,549 )     (26,756 )
taxes
Income tax provision      1,401       264         (35,853 )    1,405   
(benefit)
Net loss                 $ (12,269 )   $ (14,739 )   $ (10,696 )   $ (28,161 )
                                                                   
Basic and diluted net    $ (0.17   )   $ (0.21   )   $ (0.15   )   $ (0.40   )
loss per common share
                                                                   
Shares used in
computing basic and       70,657      69,889      70,300      70,877  
diluted net loss per
common share

                                                  
AFFYMETRIX, INC.

RESULTS OF OPERATIONS – NON-GAAP

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(UNAUDITED)

ITEMIZED RECONCILIATION BETWEEN GAAP AND NON-GAAP NET LOSS
                                                     
                         Three Months Ended          Twelve Months Ended
                         December 31,               December 31,
                          2012       2011       2012       2011    
GAAP net loss - basic    $ (12,269 )  $ (14,739 )   $ (10,696 )  $ (28,161 )
and diluted
Amortization of
inventory fair value       4,589         -             9,444         -
adjustment
Amortization of
acquired intangible        4,929         1,544         12,848        6,176
assets
Acquisition-related        53            2,936         6,146         2,936
transaction costs
Acquisition-related        543           -             2,084         -
integration costs
Share-based
compensation charge        -             -             8,265         -
related to acquisition
Income tax benefit         -             -             (37,462 )     -
related to acquisition
Gain on sale of            (514    )     -             (514    )     -
product line
(Recovery) impairment
of held-for-sale           (508    )     1,710         3,492         1,710
property, net
Restructuring charges      1,845         -             1,845         -
(Recovery) provision       -             -             (2,215  )     2,215
of note receivable
Impairment of             -          223        -          2,123   
financial instruments
Non-GAAP net loss -      $ (1,332  )  $ (8,326  )  $ (6,763  )  $ (13,001 )
basic and diluted
                                                                   
Basic and diluted net    $ (0.02   )  $ (0.12   )  $ (0.10   )  $ (0.18   )
loss per common share
                                                                   
Shares used in
computing basic and       70,657     69,889     70,300     70,877  
diluted net loss per
common share

                                                
ITEMIZED RECONCILIATION BETWEEN GAAP AND NON-GAAP GROSS MARGIN
                                                   
               Three Months Ended                  Twelve Months Ended
               December 31,                        December 31,
               2012            2011             2012             2011           
GAAP total     $ 45,178  54 %   $ 34,692  53 %   $ 163,488  55 %   $ 156,522  58 %
gross margin
Amortization
of inventory     4,589    5  %     -        0  %     9,444     3  %     -         0  %
fair value
adjustment
Amortization
of acquired     1,500   2  %    533     1  %    4,031    2  %    2,132    1  %
intangible
assets
Non-GAAP
total gross    $ 51,267  61 %   $ 35,225  54 %   $ 176,963  60 %   $ 158,654  59 %
margin

                                                  
ITEMIZED RECONCILIATION BETWEEN GAAP AND NON-GAAP OPERATING EXPENSES
                                                     
                           Three Months Ended        Twelve Months Ended
                           December 31,             December 31,
                            2012      2011      2012       2011    
Total GAAP operating       $ 54,411    $ 45,467     $ 202,579    $ 173,163
expenses
Amortization of acquired     (3,429 )     (1,011 )     (8,817  )     (4,044  )
intangible assets
Acquisition-related          (53    )     (2,936 )     (6,146  )     (2,936  )
transaction costs
Acquisition-related          (543   )     -            (2,084  )     -
integration costs
Share-based compensation
charge related to            -            -            (8,265  )     -
acquisition
Restructuring charges       (1,845 )   -         (1,845  )   -       
Total non-GAAP operating   $ 48,541   $ 41,520   $ 175,422   $ 166,183 
expenses

Contact:

Affymetrix, Inc.
Doug Farrell, 408-731-5285
Vice President of Investor Relations
 
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