Illumina Reports Strong Financial Results for Second Quarter of Fiscal Year 2014

  Illumina Reports Strong Financial Results for Second Quarter of Fiscal Year   2014                         Raises Fiscal Year 2014 Guidance  Business Wire  SAN DIEGO -- July 23, 2014  Illumina, Inc. (NASDAQ:ILMN) today announced its financial results for the second quarter of 2014.  Second quarter 2014 results:    *Revenue of $448 million, a 29% increase compared to $346 million in the     second quarter of 2013   *GAAP net income for the quarter of $47 million, or $0.31 per diluted     share, compared to $36 million, or $0.26 per diluted share, for the second     quarter of 2013   *Non-GAAP net income for the quarter of $85 million, or $0.57 per diluted     share, compared to $60 million, or $0.43 per diluted share, for the second     quarter of 2013 (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 $178 million and free cash flow of $155     million for the quarter  Gross margin in the second quarter of 2014 was 67.1% compared to 64.6% 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 70.9% for the second quarter of 2014 compared to 69.5% in the prior year period.  Research and development (R&D) expenses for the second quarter of 2014 were $83.0 million compared to $67.6 million in the prior year period. R&D expenses included $12.8 million and $9.0 million of non-cash stock compensation expense in the second quarters of 2014 and 2013, respectively. Excluding these charges and contingent compensation, R&D expenses as a percentage of revenue were 15.6% compared to 17.0% in the prior year period.  Selling, general and administrative (SG&A) expenses for the second quarter of 2014 were $114.6 million compared to $88.7 million in the prior year period. SG&A expenses included $20.8 million and $13.9 million of non-cash stock compensation expense in the second quarters of 2014 and 2013, respectively. Excluding these charges, amortization of acquired intangible assets and contingent compensation, SG&A expenses as a percentage of revenue were 20.5% compared to 20.3% in the prior year period.  Depreciation and amortization expenses were $27.5 million and capital expenditures were $23.3 million during the second quarter of 2014. The Company ended the second quarter of 2014 with $1.10 billion in cash, cash equivalents and short-term investments, compared to $1.17 billion as of December29, 2013.  “We are witnessing tremendous interest in our products, which led to record financial results in the second quarter,” stated Jay Flatley, CEO. “With the most extensive sequencing portfolio available, we remain extremely well-positioned to develop and address the large and untapped market opportunities ahead of us.”  Updates since our last earnings release:    *Launched VeriSeq™ PGS, for preimplantation genetic screening of embryos     using Illumina’s NextSeq™ 500 and MiSeq® sequencing systems   *Announced that the Sidra Medical and Research Center purchased a HiSeq X™     Ten sequencing system   *Entered into agreements with Biomnis, Genoma, and the Center for Human     Genetics and Laboratory Diagnostics Martinsried to expand access for     non-invasive prenatal testing across Europe   *Announced that Genomics England selected Illumina Cambridge Ltd, a     subsidiary of Illumina Inc., as the preferred partner for the sequencing     element of the 100,000 Genomes Project   *Announced that Berry Genomics chose Illumina’s NGS technology as the     platform on which to secure Chinese Food and Drug Administration     regulatory approval for clinical applications, including NIPT   *Acquired Myraqa, a regulatory and quality consulting firm specializing in     IVD and companion diagnostics and appointed Mya Thomae as Vice President     of Regulatory Affairs   *Further strengthened Illumina’s management team by appointing Tina Nova,     Ph.D. as Senior Vice President and General Manager of Oncology   *Completed an offering of convertible senior notes with aggregate net     proceeds of approximately $1,132 million and repurchased approximately     $600 million aggregate principal amount of the 0.25% convertible senior     notes due 2016   *Repurchased $72 million of common stock under our previously announced     share repurchase programs  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.  As a result of strong first half results, the Company has increased its full year 2014 guidance to 25% to 26% revenue growth, and its non-GAAP earnings per fully diluted share to $2.26 to $2.28.  Quarterly conference call information  The conference call will begin at 2:00 pm Pacific Time (5:00 pm Eastern Time) on Wednesday, July 23, 2014. Interested parties may listen to the call by dialing 888.679.8034 (passcode: 60693837), or if outside North America by dialing 1.617.213.4847 (passcode: 60693837). 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 6:00 pm Pacific Time (9:00 pm Eastern Time) on July 23, 2014 through July 30, 2014 by dialing 888.286.8010 (passcode: 85586770), or if outside North America by dialing 1.617.801.6888 (passcode: 85586770).  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 of acquired intangible assets, non-cash interest expense associated with the Company’s convertible debt instruments that may be settled in cash, 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 at the beginning of the year 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 further develop and commercialize our instruments and consumables and to deploy new products, services, and applications, and expand the markets, for our technology platforms; (ii) our ability to manufacture robust instrumentation and consumables; (iii) our ability to successfully identify and integrate acquired technologies, products, or businesses; (iv) our expectations and beliefs regarding future conduct and growth of the business and the markets in which we operate; (v) challenges inherent in developing, manufacturing, and launching new products and services; and (vi) our ability to maintain our revenue levels and profitability during periods of research funding reduction or uncertainty and adverse economic and business conditions, 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 29,        December 29,                                                2014            2013 ASSETS                                         (unaudited) Current assets: Cash and cash equivalents                      $ 675,221       $  711,637 Short-term investments                         427,835         453,966 Accounts receivable, net                       258,694         238,946 Inventory                                      177,534         154,099 Deferred tax assets, current portion           44,929          36,076 Prepaid expenses and other current assets      36,508         22,811 Total current assets                           1,620,721       1,617,535 Property and equipment, net                    230,113         202,666 Goodwill                                       721,648         723,061 Intangible assets, net                         304,850         331,173 Deferred tax assets, long-term portion         70,126          88,480 Other assets                                   87,597         56,091 Total assets                                   $ 3,035,055    $  3,019,006                                                                 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable                               $ 91,513        $  73,655 Accrued liabilities                            259,676         219,120 Long-term debt, current portion                298,018        29,288 Total current liabilities                      649,207         322,063 Long-term debt                                 972,945         839,305 Long-term legal contingencies                  143,597         132,933 Other long-term liabilities                    188,870         191,221 Conversion option subject to cash settlement   —               282 Stockholders’ equity                           1,080,436      1,533,202 Total liabilities and stockholders’ equity     $ 3,035,055    $  3,019,006                                                                            Illumina, Inc.           Condensed Consolidated Statements of Income           (In thousands, except per share amounts)           (unaudited)                                                                                           Three Months Ended         Six Months Ended                           June 29,      June 30,     June 29,      June 30,                           2014          2013         2014          2013 Revenue:     Product revenue       $ 390,808     $ 313,497    $ 753,019     $ 609,667     Service and other     56,760       32,597      115,330      67,385         revenue        Total revenue      447,568      346,094     868,349      677,052    Cost of revenue:     Cost of product       114,307       98,150       225,748       188,128     revenue (a)     Cost of service and   23,176        15,951       44,689        31,089     other revenue (a)     Amortization of     acquired intangible   9,545        8,584       19,080       15,134         assets        Total cost of      147,028      122,685     289,517      234,351           revenue           Gross profit    300,540      223,409     578,832      442,701    Operating expense:     Research and          82,985        67,608       160,026       129,058     development (a)     Selling, general     and administrative    114,649       88,700       224,222       173,774     (a)     Headquarter           2,892         (1,507    )  3,487         (750      )     relocation     Acquisition related   (225      )   (5,725    )  (1,238    )   (1,904    )     gain, net     Legal contingencies   —             9,516        —             115,369     Unsolicited tender     offer related         —            4,811       —            12,295         expense        Total operating    200,301      163,403     386,497      427,842           expense           Income from     100,239       60,006       192,335       14,859           operations Other expense, net        (39,773   )   (10,646   )  (48,081   )   (13,061   )           Income before   60,466        49,360       144,254       1,798           income taxes Provision for (benefit    13,861       13,483      37,672       (11,492   ) from) income taxes           Net income      $ 46,605     $ 35,877    $ 106,582    $ 13,290   Net income per basic      $ 0.36       $ 0.29      $ 0.82       $ 0.11     share Net income per diluted    $ 0.31       $ 0.26      $ 0.71       $ 0.10     share Shares used in calculating basic net     130,583      124,362     129,365      124,065    income per share Shares used in calculating diluted net   149,121      139,377     149,870      137,645    income per share  (a) Includes total stock-based compensation expense for stock-based awards:                                                                                                         Three Months Ended         Six Months Ended                           June 29,      June 30,     June 29,      June 30,                           2014          2013         2014          2013     Cost of product       $ 2,149       $ 1,444      $ 4,244       $ 2,886     revenue     Cost of service and   284           157          569           311     other revenue     Research and          12,785        8,954        24,454        16,960     development     Selling, general      20,778       13,897      40,153       28,514         and administrative        Stock-based        compensation       $ 35,996     $ 24,452    $ 69,420     $ 48,671          expense before        taxes                                                                                Illumina, Inc. Condensed Consolidated Statements of Cash Flows (In thousands) (unaudited)                                                                                         Three Months Ended          Six Months Ended                          June 29,      June 30,      June 29,      June 30,                          2014          2013          2014          2013 Net cash provided by operating activities     $ 178,030     $ 88,606      $ 215,117     $ 176,446 (a) Net cash provided by (used in) investing      114,777       247,477       (29,610   )   182,456 activities Net cash (used in) provided by financing    (136,521  )   5,784         (222,445  )   (7,222    ) activities (a) Effect of exchange rate changes on cash     422          (1,338    )   522          (2,050    ) and cash equivalents Net increase (decrease) in cash and   156,708       340,529       (36,416   )   349,630 cash equivalents Cash and cash equivalents, beginning   518,513      443,082      711,637      433,981    of period Cash and cash equivalents, end of      $ 675,221    $ 783,611    $ 675,221    $ 783,611  period                                                                               Calculation of free cash flow: Net cash provided by operating activities     $ 178,030     $ 88,606      $ 215,117     $ 176,446 (a) Purchases of property    (23,324   )   (11,534   )   (42,336   )   (32,975   ) and equipment Free cash flow (b)       $ 154,706    $ 77,072     $ 172,781    $ 143,471   ______________________________________________________________________________________________________  (a) Net cash provided by operating activities excludes excess tax benefit related to stock-based compensation of $77.3 million in the first half of 2014, of which $26.8 million was recorded in Q2, and $14.8 million in the first half of 2013, of which $9.5 million was recorded in Q2. Net cash used in financing activities reflects the excess tax benefit as a corresponding in-flow in the respective periods.  (b) 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 29,     June 30,     June 29,      June 30,                            2014         2013         2014          2013 GAAP net income per        $ 0.31       $ 0.26       $ 0.71        $ 0.10 share - diluted Pro forma impact of weighted average shares    —            —            —             0.01 (a) Adjustments to net income: Loss on extinguishment     0.21         —            0.21          — of debt Amortization of acquired   0.08         0.08         0.17          0.14 intangible assets Non-cash interest          0.06         0.07         0.12          0.13 expense (b) Legal contingencies (c)    0.03         0.12         0.07          0.90 Headquarter relocation     0.02         (0.01    )   0.02          (0.01     ) (d) Contingent compensation    —            0.02         0.02          0.04 expense (e) Acquisition related        —            (0.04    )   (0.01     )   (0.01     ) gain, net (f) Unsolicited tender offer   —            0.03         —             0.09 related expense Cost-method investment     —            —            —             (0.04     ) related gain Inventory revaluation      —            —            —             — adjustment (g) Incremental non-GAAP tax   (0.14    )   (0.10    )   (0.21     )   (0.45     ) expense (h) Non-GAAP net income per    $ 0.57      $ 0.43      $ 1.10       $ 0.90     share - diluted (i) Shares used in calculating non-GAAP       149,121     138,313     149,546      136,581    diluted net income per share                                                                               ITEMIZED RECONCILIATION BETWEEN GAAP AND NON-GAAP NET INCOME: GAAP net income            $ 46,605     $ 35,877     $ 106,582     $ 13,290 Loss on extinguishment     31,360       511          31,360        511 of debt Amortization of acquired   11,507       10,805       24,698        18,936 intangible assets Non-cash interest          9,143        9,066        18,165        18,118 expense (b) Legal contingencies (c)    4,817        16,559       10,663        123,481 Headquarter relocation     2,892        (1,507   )   3,487         (750      ) (d) Contingent compensation    496          2,262        3,336         5,680 expense (e) Acquisition related        (225     )   (5,725   )   (1,238    )   (1,904    ) gain, net (f) Unsolicited tender offer   —            4,811        —             12,295 related expense Cost-method investment     —            —            —             (6,113    ) related gain Inventory revaluation      —            —            —             458 adjustment (g) Incremental non-GAAP tax   (22,025  )   (12,965  )   (32,436   )   (61,689   ) expense (h) Non-GAAP net income (i)    $ 84,570    $ 59,694    $ 164,617    $ 122,313                                                                                ITEMIZED RECONCILIATION BETWEEN GAAP AND NON-GAAP DILUTED NUMBER OF SHARES: Weighted average shares used in calculation of     149,121      139,377      149,870       137,645 GAAP diluted net income per share Weighted average dilutive potential common shares issuable     —           (1,064   )   (324      )   (1,064    ) of redeemable convertible senior notes (a) Weighted average shares used in calculation of     149,121     138,313     149,546      136,581    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) Non-cash interest expense is calculated in accordance with the authoritative accounting guidance for convertible debt instruments that may be settled in cash.  (c) Legal contingencies primarily represented charges recorded based on a 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, on December 3, 2013, Illumina filed an appeal to the court challenging the judgment.  (d) Headquarter relocation for the first half of 2014 consisted primarily of changes in estimated lease exit liability recorded in Q2 and accretion of interest expense on such lease exit liability recorded in the period. Headquarter relocation for the first half of 2013 included a Q2 gain on lease exit liability as a result of the Company entering into a sublease for a portion of its prior headquarters at a more favorable rate than previously estimated. Such gains were offset by accretion of interest expense on such lease exit liability recorded in the period.  (e) Contingent compensation expense relates to contingent payments for post-combination services associated with prior period acquisitions.  (f) Acquisition related gain, net in Q2 2014 and first half of 2014 consisted primarily of $3.3 million in net gains from changes in fair value of contingent consideration, of which $1.5 million was recorded in Q2, offset by $2.1 million in transaction related costs for a prior period acquisition, of which $1.3 million was recorded in Q2. Acquisition related gain, net in Q2 2013 and first half of 2013 consisted of net gains from changes in fair value of contingent consideration, partially offset by transaction cost of $3.4 million recorded in Q1.  (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 tax impact related to the non-GAAP adjustments listed above.  (i) Non-GAAP net income and diluted net income per share exclude the effect of the pro forma adjustments as detailed above. Non-GAAP net income and diluted net income per share 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                              Six Months Ended                  June 29,               June 30,                June 29,               June 30,                  2014                    2013                    2014                    2013 GAAP gross       $ 300,540    67.1 %    $ 223,409    64.6 %    $ 578,832    66.7 %    $ 442,701    65.4 % profit Stock-based compensation     2,433         0.6  %    1,601         0.5  %    4,813         0.5  %    3,197         0.5  % expense Amortization of acquired      9,545         2.1  %    8,584         2.4  %    19,080        2.2  %    15,134        2.2  % intangible assets Legal contingencies    4,817         1.1  %    7,043         2.0  %    10,663        1.2  %    8,112         1.2  % (a) Inventory revaluation      —            —        —            —        —            —        458          0.1  % adjustment (b) Non-GAAP gross   $ 317,335    70.9 %    $ 240,637    69.5 %    $ 613,388    70.6 %    $ 469,602    69.4 % profit (c)                                                                                                              Research and development      $ 82,985      18.5 %    $ 67,608      19.5 %    $ 160,026     18.4 %    $ 129,058     19.1 % expense Stock-based compensation     (12,785   )   (2.8 )%   (8,954    )   (2.5 )%   (24,454   )   (2.8 )%   (16,960   )   (2.5 )% expense Contingent compensation     (496      )   (0.1 )%   164          —        (580      )   (0.1 )%   (325      )   (0.1 )% (expense) gain (d) Non-GAAP research and     $ 69,704     15.6 %    $ 58,818     17.0 %    $ 134,992    15.5 %    $ 111,773    16.5 % development expense                                                                                                              Selling, general and      $ 114,649     25.6 %    $ 88,700      25.6 %    $ 224,222     25.8 %    $ 173,774     25.7 % administrative expense Stock-based compensation     (20,778   )   (4.6 )%   (13,897   )   (4.0 )%   (40,153   )   (4.7 )%   (28,514   )   (4.2 )% expense Amortization of acquired      (1,962    )   (0.5 )%   (2,221    )   (0.6 )%   (5,618    )   (0.6 )%   (3,802    )   (0.6 )% intangible assets Contingent compensation     —            —        (2,426    )   (0.7 )%   (2,756    )   (0.3 )%   (5,355    )   (0.8 )% expense (d) Non-GAAP selling, general and      $ 91,909     20.5 %    $ 70,156     20.3 %    $ 175,695    20.2 %    $ 136,103    20.1 % administrative expense                                                                                                              GAAP operating   $ 100,239     22.4 %    $ 60,006      17.3 %    $ 192,335     22.1 %    $ 14,859      2.2  % profit Stock-based compensation     35,996        8.0  %    24,452        7.1  %    69,420        8.0  %    48,671        7.2  % expense Amortization of acquired      11,507        2.6  %    10,805        3.1  %    24,698        2.8  %    18,936        2.8  % intangible assets Legal contingencies    4,817         1.1  %    16,559        4.8  %    10,663        1.2  %    123,481       18.2 % (a) Headquarter      2,892         0.7  %    (1,507    )   (0.4 )%   3,487         0.5  %    (750      )   (0.1 )% relocation (e) Contingent compensation     496           0.1  %    2,262         0.7  %    3,336         0.4  %    5,680         0.8  % expense (d) Acquisition related gain,    (225      )   (0.1 )%   (5,725    )   (1.7 )%   (1,238    )   (0.1 )%   (1,904    )   (0.3 )% net (f) Unsolicited tender offer     —             —         4,811         1.4  %    —             —         12,295        1.8  % related expense Inventory revaluation      —            —        —            —        —            —        458          0.1  % adjustment (b) Non-GAAP operating        $ 155,722    34.8 %    $ 111,663    32.3 %    $ 302,701    34.9 %    $ 221,726    32.7 % profit (c)                                                                                                              GAAP other       $ (39,773 )   (8.9 )%   $ (10,646 )   (3.1 )%   $ (48,081 )   (5.5 )%   $ (13,061 )   (1.9 )% expense, net Loss on extinguishment   31,360        7.0  %    511           0.2  %    31,360        3.6  %    511           0.1  % of debt Non-cash interest         9,143         2.1  %    9,066         2.6  %    18,165        2.1  %    18,118        2.7  % expense (g) Cost-method investment       —            —        —            —        —            —        (6,113    )   (1.0 )% related gain Non-GAAP other income           $ 730        0.2  %    $ (1,069  )   (0.3 )%   $ 1,444      0.2  %    $ (545    )   (0.1 )% (expense), net (c)  ______________________________________________________________________________________________________  (a) Legal contingencies primarily represented charges recorded based on a 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, on December 3, 2013, Illumina filed an appeal to the court challenging the judgment.  (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) Non-GAAP gross profit, included within 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. Non-GAAP  operating profit, and non-GAAP other income (expense), 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.  (d) Contingent compensation expense relates to contingent payments for post-combination services associated with prior period acquisitions.  (e) Headquarter relocation for the first half of 2014 consisted primarily of changes in estimated lease exit liability recorded in Q2 and accretion of interest expense on such lease exit liability recorded in the period. Headquarter relocation for the first half of 2013 included a Q2 gain on lease exit liability as a result of the Company entering into a sublease for a portion of its prior headquarters at a more favorable rate than previously estimated. Such gains were offset by accretion of interest expense on such lease exit liability recorded in the period.  (f) Acquisition related gain, net in Q2 2014 and first half of 2014 consisted primarily of $3.3 million in net gains from changes in fair value of contingent consideration, of which $1.5 million was recorded in Q2, offset by $2.1 million in transaction related costs for a prior period acquisition, of which $1.3 million was recorded in Q2. Acquisition related gain, net in Q2 2013 and first half of 2013 consisted of net gains from changes in fair value of contingent consideration, partially offset by transaction cost of $3.4 million recorded in Q1.  (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 29, 2013, and the Company’s Form 10-Q for the fiscal quarter ended March 30, 2014. The Company assumes no obligation to update any forward-looking statements or information.                                                                                         Fiscal Year 2014 Diluted net income per share Non-GAAP diluted net income per share      $2.26 - $2.28 Amortization of acquired intangible assets (0.20) Non-cash interest expense (a)              (0.16) Loss on extinguishment of debt             (0.16) Legal contingencies (b)                    (0.08) Cost method investment gain (c)            0.03 Contingent compensation expense (d)        (0.02) Headquarter relocation (e)                 (0.02) GAAP diluted net income per share          $1.65 - $1.67  ______________________________________________________________________________________________________  (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) Legal contingencies represent charges to be recorded based on a 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, on December 3, 2013, Illumina filed an appeal to the court challenging the judgment.  (c) Cost method investment gain represents additional sales proceeds received from escrow funds related to a prior year sale of investment.  (d) Contingent compensation expense relates to contingent payments for post-combination services associated with prior period acquisitions.  (e) Headquarter relocation represents changes in estimated lease exit liability recorded in Q2 and accretion of interest expense on lease exit liability.  Contact:  Illumina, Inc. Investors: Rebecca Chambers 858.255.5243 rchambers@illumina.com or Media: Eric Endicott 858.882.6822 pr@illumina.com  
Press spacebar to pause and continue. Press esc to stop.