Illumina Reports Financial Results for Second Quarter of Fiscal Year 2013

  Illumina Reports Financial Results for Second Quarter of Fiscal Year 2013

                       Raises Fiscal Year 2013 Guidance

Business Wire

SAN DIEGO -- July 23, 2013

Illumina, Inc. (NASDAQ:ILMN) today announced its financial results for the
second quarter of 2013.

Second quarter 2013 results:

  *Revenue of $346 million, a 23% increase compared to $281 million in the
    second quarter of 2012
  *GAAP net income for the quarter of $36 million, or $0.26 per diluted
    share, compared to $23 million, or $0.18 per diluted share, for the second
    quarter of 2012
  *Non-GAAP net income for the quarter of $60 million, or $0.43 per diluted
    share, compared to $53 million, or $0.40 per diluted share, for the second
    quarter of 2012 (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 $89 million and free cash flow of $77 million
    for the quarter

Gross margin in the second quarter of 2013 was 64.6% compared to 68.8% in the
prior year period. Excluding the effect of non-cash charges associated with
stock compensation, amortization of acquired intangible assets, and legal
contingencies, non-GAAP gross margin was 69.5% for the second quarter of 2013
compared to 70.9% in the prior year period.

Research and development (R&D) expenses for the second quarter of 2013 were
$67.6 million compared to $71.2 million in the second quarter of 2012. R&D
expenses included $9.0 million and $7.7 million of non-cash stock compensation
expense in the second quarters of 2013 and 2012, respectively. Excluding these
charges, contingent compensation, and impairment of in-process R&D, R&D
expenses as a percentage of revenue were 17.0% compared to 14.7% in the prior
year period.

Selling, general and administrative (SG&A) expenses for the second quarter of
2013 were $88.7 million compared to $68.5 million for the second quarter of
2012. SG&A expenses included $13.9 million and $14.3 million of non-cash stock
compensation expense in the second quarters of 2013 and 2012, respectively.
Excluding these charges, contingent compensation, and amortization of acquired
intangible assets, SG&A expenses as a percentage of revenue were 20.3%
compared to 19.4% in the prior year period.

Depreciation and amortization expenses were $23.3 million and capital
expenditures were $11.5 million during the second quarter of 2013. The Company
ended the second quarter of 2013 with $1.13 billion in cash, cash equivalents
and short-term investments, compared to $1.35 billion as of December30, 2012.

“We are very pleased with our operational execution for the first half of 2013
and the resulting record financial performance,” said Illumina’s President and
Chief Executive Officer Jay Flatley. “Our business demonstrated strong trends
globally and our 2013 strategic initiatives for robust long-term growth are
progressing as planned. As a result we are raising our expectations for 2013
financial performance.”

Updates since our last earnings release:

  *Launched the full commercial availability of BaseSpace® Apps, which
    includes an e-commerce system that allows customers to quickly and easily
    purchase Illumina and third-party bioinformatics applications
  *Applied the CE mark to the MiSeqDx™ Cystic Fibrosis System
  *Published clinical laboratory performance data for the verifi® prenatal
    test
  *Announced an agreement with Teva Pharmaceutical Industries and the MOR
    Institute for Medical Data to commercialize the verifi® prenatal test in
    Israel
  *Launched Phasing Analysis Service for Human Whole-Genome Sequencing
    empowering gene mapping studies which provide a more comprehensive view of
    genomic variation
  *Announced that HistoGenetics, a leader in high-resolution sequencing-based
    human leukocyte antigen (HLA) testing services, selected the MiSeq system
    for use in its CLIA laboratory
  *Acquired Advanced Liquid Logic, a leading provider of liquid handling
    solutions
  *Announced collaborations with leading providers of liquid handling robotic
    platforms to develop automation methods for TruSeq® and Nextera® Sample
    Preparation kits
  *Repurchased $25 million of common stock under our previously announced
    share repurchase program
  *Retired 3 million warrants for $125 million on July 18, 2013

Financial outlook and guidance

The non-GAAP financial guidance discussed below reflects certain pro forma
adjustments to assist in analyzing and assessing our core operational
performance. 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 fiscal 2013 the Company is projecting approximately 20% revenue growth and
non-GAAP earnings per fully diluted share of $1.68 to $1.72, including the
impact of the Verinata and Advanced Liquid Logic acquisitions. These
projections assume full year non-GAAP gross margin of approximately 69.5%, a
pro forma tax rate of approximately 30% and stock compensation expense of
approximately $105 million. Full-year weighted average diluted shares
outstanding, for the measurement of pro forma amounts, is expected to be
approximately 138 million shares assuming the current stock price.

Quarterly conference call information

The conference call will begin at 2:00 pm Pacific Time (5:00 pm Eastern Time)
on Tuesday, July23, 2013. Interested parties may listen to the call by
dialing 888.680.0879 (passcode: 22024538), or if outside North America by
dialing 1.617.213.4856 (passcode: 22024538). 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 July23, 2013 through July 30, 2013 by dialing
888.286.8010 (passcode: 66585327), or if outside North America by dialing
1.617.801.6888 (passcode: 66585327).

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, legal contingencies, amortization
expense related to acquired intangible assets, non-cash interest expense
associated with the company's convertible debt instruments that may be settled
in cash, costs related to the unsolicited tender offer for the company's
stock, acquisition related expense, and others that are listed in the itemized
reconciliations between GAAP and non-GAAP financial measures included in this
press release. 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.

Illumina, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
                                                         
                                               June 30,      December 30,

                                               2013          2012
ASSETS                                         (unaudited)
Current assets:
  Cash and cash equivalents                    $ 783,611     $  433,981
  Short-term investments                         345,852        916,223
  Accounts receivable, net                       207,413        214,975
  Inventory                                      168,070        158,718
  Deferred tax assets, current portion           84,887         30,451
  Prepaid expenses and other current assets     56,558        32,700
  Total current assets                           1,646,391      1,787,048
Property and equipment, net                      187,362        166,167
Goodwill                                         596,588        369,327
Intangible assets, net                           304,469        130,196
Deferred tax assets, long-term portion           9,715          40,183
Other assets                                    78,677        73,164
  Total assets                                 $ 2,823,202   $  2,566,085
                                                             
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
  Accounts payable                             $ 67,648      $  65,727
  Accrued liabilities                            198,788        201,877
  Accrued legal contingencies                    122,713        -
  Long-term debt, current portion               29,731        36,967
  Total current liabilities                      418,880        304,571
Long-term debt                                   822,169        805,406
Other long-term liabilities                      192,167        134,369
Conversion option subject to cash settlement     1,394          3,158
Stockholders’ equity                            1,388,592     1,318,581
  Total liabilities and stockholders’ equity   $ 2,823,202   $  2,566,085
                                                                

  Illumina, Inc.
   Condensed Consolidated Statements of Income
   (In thousands, except per share amounts)
   (unaudited)
                                                            
                         Three Months Ended          Six Months Ended
                         June 30,      July 1,       June 30,      July 1,

                         2013          2012          2013          2012
Revenue:
   Product revenue       $ 313,497     $ 258,839     $ 609,667     $ 514,475
   Service and other      32,597      21,768      67,385      38,902  
   revenue
      Total revenue        346,094       280,607       677,052       553,377
Cost of Revenue:
   Cost of product         98,150        74,911        188,128       155,062
   revenue (a)
   Cost of service
   and other revenue       15,951        9,656         31,089        18,221
   (a)
   Amortization of
   acquired               8,584       3,043       15,134      6,086   
   intangible assets
      Total cost of       122,685     87,610      234,351     179,369 
      revenue
   Gross profit           223,409     192,997     442,701     374,008 
Operating Expenses:
   Research and            67,608        71,223        129,058       120,062
   development (a)
   Selling, general
   and administrative      88,700        68,516        173,774       136,485
   (a)
   Legal                   9,516         -             115,369       -
   contingencies
   Acquisition
   related (gain)          (5,725  )     1,080         (1,904  )     2,817
   expense, net
   Unsolicited tender
   offer related           4,811         6,694         12,295        14,786
   expense
   Headquarter             (1,507  )     1,830         (750    )     3,970
   relocation
   Restructuring          -           674         -           3,296   
      Total operating     163,403     150,017     427,842     281,416 
      expenses
         Income from       60,006        42,980        14,859        92,592
         operations
   Other expense, net     (10,646 )    (8,193  )    (13,061 )    (17,532 )
         Income
         before            49,360        34,787        1,798         75,060
         income taxes
Provision for
(benefit from) for        13,483      11,386      (11,492 )    25,457  
income taxes
         Net income      $ 35,877     $ 23,401     $ 13,290     $ 49,603  
Net income per basic     $ 0.29       $ 0.19       $ 0.11       $ 0.40    
share
Net income per           $ 0.26       $ 0.18       $ 0.10       $ 0.37    
diluted share
Shares used in
calculating basic net     124,362     123,214     124,065     122,928 
income per share
Shares used in
calculating diluted       139,377     133,011     137,645     133,435 
net income per share
                                                        
(a) Includes total stock-based
compensation expense for share-based
awards:
                         Three Months Ended          Six Months Ended
                         June 30,      July 1,       June 30,      July 1,

                         2013          2012          2013          2012
   Cost of product       $ 1,444       $ 1,844       $ 2,886       $ 3,656
   revenue
   Cost of service         157           168           311           185
   and other revenue
   Research and            8,954         7,687         16,960        15,114
   development
   Selling, general       13,897      14,348      28,514      28,121  
   and administrative
      Stock-based
      compensation       $ 24,452     $ 24,047     $ 48,671     $ 47,076  
      expense before
      taxes
                                                                             

Illumina, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(unaudited)
                                                             
                        Three Months Ended          Six Months Ended
                        June 30,      July 1,       June 30,      July 1,

                        2013          2012          2013          2012
Net cash provided by    $ 88,606      $ 96,329      $ 176,446     $ 161,769
operating activities
Net cash provided by
(used in) investing       247,477       (9,648  )     182,456       (151,518 )
activities
Net cash provided by
(used in) financing       5,784         (30,264 )     (7,222  )     3,352
activities
Effect of exchange
rate changes on cash     (1,338  )    (199    )    (2,050  )    (169     )
and cash equivalents
Net increase in cash      340,529       56,218        349,630       13,434
and cash equivalents
Cash and cash
equivalents,             443,082     260,194     433,981     302,978  
beginning of period
Cash and cash
equivalents, end of     $ 783,611    $ 316,412    $ 783,611    $ 316,412  
period
                                                                  
Calculation of free
cash flow (a):
Net cash provided by    $ 88,606      $ 96,329      $ 176,446     $ 161,769
operating activities
Purchases of property    (11,534 )    (20,946 )    (32,975 )    (34,030  )
and equipment
Free cash flow          $ 77,072     $ 75,383     $ 143,471    $ 127,739  
                                                             

(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          Six Months Ended
                         June 30,      July 1,       June 30,      July 1,

                         2013          2012          2013          2012
GAAP net income per      $ 0.26        $ 0.18        $ 0.10        $ 0.37
share - diluted
Pro forma impact of
weighted average shares    -             -             0.01          0.03
(a)
Adjustments to net
income:
Legal contingencies (b)    0.12          0.01          0.90          0.02
Amortization of
acquired intangible        0.08          0.02          0.14          0.05
assets
Non-cash interest          0.07          0.07          0.13          0.13
expense (c)
Acquisition related        (0.04   )     0.01          (0.01   )     0.02
(gain) expense, net (d)
Unsolicited tender         0.03          0.05          0.09          0.11
offer related expense
Contingent compensation    0.02          -             0.04          0.02
expense (e)
Headquarter relocation     (0.01   )     0.01          (0.01   )     0.03
(f)
Loss on extinguishment     -             -             -             -
of debt
Cost-method investment     -             -             (0.04   )     -
related gain
Amortization of
inventory revaluation      -             -             -             -
costs (g)
Impairment of
in-process research and    -             0.16          -             0.16
development
Restructuring              -             0.01          -             0.02
Incremental non-GAAP      (0.10   )    (0.12   )    (0.45   )    (0.20   )
tax expense (h)
Non-GAAP net income per  $ 0.43       $ 0.40       $ 0.90       $ 0.76    
share - diluted (i)
Shares used in
calculating non-GAAP      138,313     132,086     136,581     132,477 
diluted net income per
share
                                                                   
ITEMIZED RECONCILIATION
BETWEEN GAAP AND
NON-GAAP NET INCOME:
GAAP net income          $ 35,877      $ 23,401      $ 13,290      $ 49,603
Legal contingencies (b)    16,559        797           123,481       3,020
Amortization of
acquired intangible        10,805        3,195         18,936        6,390
assets
Non-cash interest          9,066         8,743         18,118        17,385
expense (c)
Acquisition related        (5,725  )     1,080         (1,904  )     2,817
(gain) expense, net (d)
Unsolicited tender         4,811         6,694         12,295        14,786
offer related expense
Contingent compensation    2,262         216           5,680         3,308
expense (e)
Headquarter relocation     (1,507  )     1,830         (750    )     3,970
(f)
Loss on extinguishment     511           -             511           -
of debt
Cost-method investment     -             -             (6,113  )     -
related gain
Amortization of
inventory revaluation      -             -             458           -
costs (g)
Impairment of
in-process research and    -             21,438        -             21,438
development
Restructuring              -             674           -             3,296
Incremental non-GAAP      (12,965 )    (15,495 )    (61,689 )    (25,888 )
tax expense (h)
Non-GAAP net income (i)  $ 59,694     $ 52,573     $ 122,313    $ 100,125 
                                                                   
ITEMIZED RECONCILIATION BETWEEN GAAP
AND NON-GAAP DILUTED NUMBER OF
SHARES:
Weighted average shares
used in calculation of     139,377       133,011       137,645       133,435
GAAP diluted net income
per share
Weighted average
dilutive potential
common shares issuable    (1,064  )    (925    )    (1,064  )    (958    )
of redeemable
convertible senior notes
(a)
Weighted average shares
used in calculation of    138,313     132,086     136,581     132,477 
non-GAAP diluted net
income per share
                                                              

(a) Pro forma impact of weighted average shares includes the impact of double
dilution associated with the accounting treatment of the Company’s outstanding
convertible debt and the corresponding call option overlay.

(b) Legal contingencies during the current year primarily represent charges
recorded based on an amended judgment associated with the patent litigation
brought by Syntrix Biosystems, Inc., or Syntrix. Illumina continues to believe
that Syntrix's claims are without merit and are not supported by the law or
facts. Accordingly, Illumina filed its post-trial motion on July 17, 2013
asking the court to vacate the amended judgment and to enter judgment in our
favor or, alternatively, to grant a new trial. If the post-trial motion is
unsuccessful, the Company plans to file an appeal challenging the adverse
verdict.

(c) Non-cash interest expense is calculated in accordance with the
authoritative accounting guidance for convertible debt instruments that may be
settled in cash.

(d) Acquisition related (gain) expense, net in Q2 2013 and first half of 2013
includes net changes in fair value of contingent consideration and transaction
costs of $3.4 million recorded in Q1 2013. Acquisition related (gain) expense,
net in Q2 2012 and first half of 2012 consisted of changes in fair value of
contingent consideration.

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

(f) Headquarter relocation for the first half of 2013 consisted of a Q2 gain
on lease exit liability as a result of the Company entering into a sublease at
a more favorable rate than previously estimated, partially offset by accretion
of interest expense on such lease exit liability recorded in the period.
Headquarter relocation expense in Q2 2012 and first half of 2012 consisted
primarily of the accretion of interest expense on lease exit liability, double
rent expense during the transition to the new headquarters, and moving costs.

(g) The Company recorded $0.5 million in cost of goods sold in Q1 2013 for the
amortization of inventory revaluation costs in conjunction with the
acquisition of Verinata Health, Inc.

(h) Incremental non-GAAP tax 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 the Company’s 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 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                             Six Months Ended
                 June 30,                July 1,                 June 30,                July 1,
                                                                                      
                 2013                    2012                    2013                    2012
  GAAP gross     $ 223,409    64.6 %    $ 192,997    68.8 %    $ 442,701    65.4 %    $ 374,008    67.6 %
  profit
  Stock-based
  compensation     1,601       0.5  %      2,012       0.7  %      3,197       0.5  %      3,841       0.7  %
  expense
  Amortization
  of acquired      8,584       2.4  %      3,043       1.1  %      15,134      2.2  %      6,086       1.1  %
  intangible
  assets
  Legal
  contingencies    7,043       2.0  %      797         0.3  %      8,112       1.2  %      3,020       0.5  %
  (a)
  Amortization
  of inventory    -          -         -          -         458        0.1  %     -          -    
  revaluation
  costs (b)
  Non-GAAP gross $ 240,637    69.5 %    $ 198,849    70.9 %    $ 469,602    69.4 %    $ 386,955    69.9 %
  profit
                                                                                                       
  Research and
  development    $ 67,608      19.5 %    $ 71,223      25.4 %    $ 129,058     19.1 %    $ 120,062     21.7 %
  expense
  Stock-based
  compensation     (8,954  )   (2.5 )%     (7,687  )   (2.7 )%     (16,960 )   (2.5 )%     (15,114 )   (2.7 )%
  expense
  Contingent
  compensation     164         -           (732    )   (0.4 )%     (325    )   (0.1 )%     (1,464  )   (0.3 )%
  gain (expense)
  (c)
  Impairment of
  in-process      -          -         (21,438 )   (7.6 )%    -          -         (21,438 )   (3.9 )%
  research and
  development
  Non-GAAP
  research and   $ 58,818     17.0 %    $ 41,366     14.7 %    $ 111,773    16.5 %    $ 82,046     14.8 %
  development
  expense
                                                                                                       
  Selling,
  general and    $ 88,700      25.6 %    $ 68,516      24.4 %    $ 173,774     25.7 %    $ 136,485     24.7 %
  administrative
  expense
  Stock-based
  compensation     (13,897 )   (4.0 )%     (14,348 )   (5.1 )%     (28,514 )   (4.2 )%     (28,121 )   (5.1 )%
  expense
  Contingent
  compensation     (2,426  )   (0.7 )%     516         0.2  %      (5,355  )   (0.8 )%     (1,844  )   (0.3 )%
  (expense) gain
  (c)
  Amortization
  of acquired     (2,221  )   (0.6 )%    (152    )   (0.1 )%    (3,802  )   (0.6 )%    (304    )   (0.1 )%
  intangible
  assets
  Non-GAAP
  selling,
  general and    $ 70,156     20.3 %    $ 54,532     19.4 %    $ 136,103    20.1 %    $ 106,216    19.2 %
  administrative
  expense
                                                                                                       
  GAAP operating $ 60,006      17.3 %    $ 42,980      15.3 %    $ 14,859      2.2  %    $ 92,592      16.7 %
  profit
  Stock-based
  compensation     24,452      7.1  %      24,047      8.6  %      48,671      7.2  %      47,076      8.5  %
  expense
  Legal
  contingencies    16,559      4.8  %      797         0.3  %      123,481     18.2 %      3,020       0.5  %
  (a)
  Amortization
  of acquired      10,805      3.1  %      3,195       1.1  %      18,936      2.8  %      6,390       1.2  %
  intangible
  assets
  Unsolicited
  tender offer     4,811       1.4  %      6,694       2.4  %      12,295      1.8  %      14,786      2.7  %
  related
  expense
  Acquisition
  related (gain)   (5,725  )   (1.7 )%     1,080       0.4  %      (1,904  )   (0.3 )%     2,817       0.5  %
  expense, net
  (d)
  Contingent
  compensation     2,262       0.7  %      216         0.1  %      5,680       0.8  %      3,308       0.6  %
  expense (c)
  Headquarter      (1,507  )   (0.4 )%     1,830       0.7  %      (750    )   (0.1 )%     3,970       0.7  %
  relocation (e)
  Amortization
  of inventory     -           -           -           -           458         0.1  %      -           -
  revaluation
  costs (b)
  Impairment of
  in-process       -           -           21,438      7.6  %      -           -           21,438      3.9  %
  research and
  development
  Restructuring   -          -         674        0.2  %     -          -         3,296      0.6  %
  Non-GAAP
  operating      $ 111,663    32.3 %    $ 102,951    36.7 %    $ 221,726    32.7 %    $ 198,693    35.9 %
  profit (f)
                                                                                                       
  GAAP other     $ (10,646 )   (3.1 )%   $ (8,193  )   (2.9 )%   $ (13,061 )   (1.9 )%   $ (17,532 )   (3.2 )%
  expense, net
  Non-cash
  interest         9,066       2.6  %      8,743       3.1  %      18,118      2.7  %      17,385      3.2  %
  expense (g)
  Loss on
  extinguishment   511         0.2  %      -           -           511         0.1  %      -           -
  of debt
  Cost-method
  investment      -          -         -          -         (6,113  )   (1.0 )%    -          -    
  related gain
  Non-GAAP other
  (expense)      $ (1,069  )   (0.3 )%   $ 550        0.2  %    $ (545    )   (0.1 )%   $ (147    )   -    
  income, net
  (f)
                                                                                 

(a) Legal contingencies during the current year primarily represent charges
recorded based on an amended judgment associated with the patent litigation
brought by Syntrix Biosystems, Inc., or Syntrix. Illumina continues to believe
that Syntrix's claims are without merit and are not supported by the law or
facts. Accordingly, Illumina filed its post-trial motion on July 17, 2013
asking the court to vacate the amended judgment and to enter judgment in our
favor or, alternatively, to grant a new trial. If the post-trial motion is
unsuccessful, the Company plans to file an appeal challenging the adverse
verdict.

(b) The Company recorded $0.5 million in cost of goods sold in Q1 2013 for the
amortization of inventory revaluation costs in conjunction with the
acquisition of Verinata Health, Inc.

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

(d) Acquisition related (gain) expense, net in Q2 2013 and first half of 2013
includes changes in fair value of contingent consideration and transaction
costs of $3.4 million recorded in Q1 2013. Acquisition related (gain) expense,
net in Q2 2012 and first half of 2012 consisted of changes in fair value of
contingent consideration.

(e) Headquarter relocation for the first half of 2013 consisted of a Q2 gain
on lease exit liability as a result of the Company entering into a sublease at
a more favorable rate than previously estimated, partially offset by accretion
of interest expense on such lease exit liability recorded in the period.
Headquarter relocation expense in Q2 2012 and first half of 2012 consisted
primarily of the accretion of interest expense on lease exit liability, double
rent expense during the transition to the new headquarters, and moving costs.

(f) Non-GAAP operating profit, and non-GAAP other (expense) 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 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 manufacturing processes,
product mix and the average selling prices of the Company’s products and
services.

(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,
and the Company’s Form 10-Q for the fiscal quarter ended March 30, 2013. The
Company assumes no obligation to update any forward-looking statements or
information.
                                           
                                                      
                                                      Fiscal Year 2013
Gross Margin
Non-GAAP gross margin                                 69.5 %
Stock-based compensation expense                      (0.5)%
Legal contingencies (a)                               (1.4)%
Amortization of acquired intangible assets            (2.3)%
GAAP gross margin                                     65.3 %
                                                      
Diluted net income per share
Non-GAAP diluted net income per share                 $1.68 - $1.72
Legal contingencies (a)                               (0.61)
Amortization of acquired intangible assets            (0.19)
Non-cash interest expense (b)                         (0.16)
Unsolicited tender offer related expenses             (0.08)
Contingent compensation expense (c)                   (0.06)
Cost-method investment related gain                   0.04
Acquisition related expense, net (d)                  (0.02)
GAAP diluted net income per share                     $0.60 - $0.64
                                                    

(a) Legal contingencies primarily represent charges recorded based on an
amended judgment associated with the patent litigation brought by Syntrix
Biosystems, Inc., or Syntrix. Illumina continues to believe that Syntrix's
claims are without merit and are not supported by the law or facts.
Accordingly, Illumina filed its post-trial motion on July 17, 2013 asking the
court to vacate the amended judgment and to enter judgment in our favor or,
alternatively, to grant a new trial. If the post-trial motion is unsuccessful,
the Company plans to file an appeal challenging the adverse verdict.

(b) Non-cash interest expense is calculated in accordance with the
authoritative accounting guidance for convertible debt instruments that may be
settled in cash.

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

(d) Acquisition related expense, net includes net changes in fair value of
contingent consideration and transaction costs.

Contact:

Illumina, Inc.
Investors:
Rebecca Chambers, 858.255.5243
rchambers@illumina.com
or
Media:
Jennifer Temple, 858.882.6822
pr@illumina.com
 
Press spacebar to pause and continue. Press esc to stop.