UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant x Filed by a Party other than the Registrant ¨
Check the appropriate box:
| ¨ | Preliminary Proxy Statement | |||
| ¨ | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |||
| ¨ | Definitive Proxy Statement | |||
| x | Definitive Additional Materials | |||
| ¨ | Soliciting Material Under Rule 14a-12 | |||
Illumina, Inc. | ||||
| (Name of Registrant as Specified In Its Charter) | ||||
| (Name of Person(s) Filing Proxy Statement, if other than the Registrant) | ||||
| Payment of Filing Fee (Check the appropriate box): | ||||
| x | No fee required. | |||
| ¨ | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. | |||
| (1) | Title of each class of securities to which transaction applies:
| |||
|
| ||||
| (2) | Aggregate number of securities to which transaction applies:
| |||
|
| ||||
| (3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
| |||
|
| ||||
| (4) | Proposed maximum aggregate value of transaction:
| |||
|
| ||||
| (5) | Total fee paid: | |||
|
| ||||
| ¨ | Fee paid previously with preliminary materials. | |||
| ¨ | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. | |||
| (1) | Amount Previously Paid:
| |||
|
| ||||
| (2) | Form, Schedule or Registration Statement No.:
| |||
|
| ||||
| (3) | Filing Party:
| |||
|
| ||||
| (4) | Date Filed:
| |||
|
| ||||
 ©
2011
Illumina, Inc. All rights reserved.
Illumina, illuminaDx, BaseSpace, BeadArray, BeadXpress, cBot, CSPro, DASL,
DesignStudio, Eco, GAIIx, Genetic Energy, Genome Analyzer, GenomeStudio, GoldenGate, HiScan, HiSeq, Infinium,
iSelect, MiSeq, Nextera, Sentrix, SeqMonitor, Solexa, TruSeq, VeraCode, the pumpkin
orange color, and the Genetic Energy streaming bases design are trademarks or registered trademarks of
Illumina,
Inc.
All
other
brands
and
names
contained
herein
are
the
property
of
their
respective
owners.
PN
15023168
Illumina, Inc.
Investor Presentation
Spring 2012 |
 2
This communication may contain statements that are forward-looking.
Forward-looking statements are subject to known and unknown risks and
uncertainties and are based on potentially inaccurate assumptions that could
cause actual results to differ materially from those expected or implied by
the forward-looking statements. 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,
BeadArray™, VeraCode®, Eco™, and consumables technologies and
to deploy new sequencing, genotyping, gene expression, and diagnostics
products and applications for our technology platforms, (ii) our ability to
manufacture robust instrumentation and consumables, (iii) significant
uncertainty
concerning
government
and
academic
research
funding
worldwide
as governments in the United States and Europe, in particular, focus on reducing
fiscal deficits while at the same time confronting slowing economic growth,
(iv) business disruptions associated with the tender offer commenced by CKH
Acquisition Corporation, a wholly owned subsidiary of Roche Holding Ltd, and
(v) other factors detailed in our filings with the U.S. Securities and
Exchange Commission (“SEC”), 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. Illumina undertakes no
obligation, and does not intend, to update these forward-looking
statements. Safe Harbor Statement |
 3
Illumina Inc. Investor Presentation
Executive Summary
Roche is attempting a hostile take-over of Illumina:
The offer price of $51.00 grossly undervalues the company and does not represent a
reasonable basis from which to enter into a meaningful negotiation
regarding a potential transaction
The tender offer is blatantly opportunistic, timed to take advantage of a
temporary dislocation in Illumina’s stock price and in advance of
extraordinary growth in the market opportunity for next generation genetic
sequencing To advantage itself at the expense of Illumina stockholders,
Roche is proposing a slate of director
nominees
to
replace
four
experienced
Illumina
directors
and
to
increase
the
size
of
Illumina’s Board in order to take control of the Company
Illumina has rejected Roche’s offer:
Our independent Board, with financial advice from Goldman Sachs and Bank of
America Merrill Lynch, carefully evaluated Roche’s offer and concluded
that it is grossly inadequate and not in the best interest of our
stockholders Expansion of Illumina’s Board and election of the Roche
nominees will not be in the best interest of our stockholders
|
 4
1.
Introduction to Illumina
2.
Illumina’s Independent Board
3.
Response to Roche’s Offer
4.
Illumina’s Growth Opportunities
5.
Financial Performance and Outlook
6.
Summary and Conclusion |
 5
Illumina’s Mission
Innovating for the Future of Genetic Analysis
To be the leading provider of integrated solutions that
advance the understanding of genetics and health
From Genome Wide Discovery…
To Targeted Validation and Beyond… |
 Illumina’s Matrixed Organization
Optimized to Tap Into New Markets
Jay Flatley
CEO & President
Chris Cabou
SVP & General
Counsel
Tristan Orpin
SVP, Commercial
Operations
Kevin Harley
VP, HR
Nick Naclerio
SVP Corporate &
Venture Development
Mostafa Ronaghi
Chief Technology
Officer
Marc Stapley
SVP & CFO
Diagnostics
Genomic
Solutions
Business Units
Functions
Research/Services
& New Technologies
Legal &
Administration
Finance & Investor
Relations
Commercial
Operations
Market Development
&
Collaborations
Human Resources
Greg Heath
SVP & GM
Christian Henry
SVP & GM
Translational
& Consumer
Genomics
PCR &
Molecular
Biology
Matt Posard
SVP & GM
Mark Lewis
SVP & GM
6 |
 7
Illumina is a Global Organization
Multi-Site Manufacturing, R&D, Sales, Service & Support
Commercial
Mfg/R&D
Partners
Illumina KK (Tokyo)
Jinan, China
Chengdu, China
Korea
India
Malaysia
Vietnam
Shanghai
New Zealand
Thailand
Taiwan
Illumina BV
(The Netherlands)
Illumina China
(Beijing)
Illumina
Cambridge
Illumina
Singapore
Illumina Hayward
(Hayward, CA)
Illumina Global
Headquarters
(San Diego, CA)
Australia
South Africa
Greece
Turkey
Russia
Middle East
Israel
Epicentre
(Madison, WI)
Illumina Brazil
>2,200 Employees |
 8
Large and Growing Addressable Markets
Next-Gen Sequencing Creates New Markets
Life Sciences
~$4B
Consumer
Molecular Dx
~$3B
Applied
Markets
~$1B |
 Key
Technologies Driving the Genomic Revolution Sequencing vs. Genotyping
DNA Sequencing:
Reading the Letters
Genotyping:
Reading known
“sign posts”
9 |
 10
Who is Illumina?
Worldwide Leader in Genomic Analysis
Recognized leader in next-generation sequencing with >90% of the
world’s sequencing data generated using Illumina platforms
Recognized leader in microarrays with ~80% market share in DNA genotyping
Unmatched history of innovation and strong R&D pipeline
Singularly positioned in nascent but rapidly growing market
Enormous potential to capture major share of emerging new markets
|
 11
Recognized leader in Genetic Analysis
Illumina Has Earned and Maintained a Leadership Position
Overcame much larger market leader
(Roche)
Have grown or maintained market share
against multiple new entrants
Overcame larger and more established
DNA array market leaders (Affymetrix,
Agilent)
Recognized as the de facto collaborator
on new arrays (e.g., Exome, Bovine LD)
Year-End Next Gen Sequencing Market
Share by Revenue¹
2011 DNA Genotyping Microarray Market
Share by Revenue²
1. Based on company estimates and company filings.
2. Based on company estimates.
(Solexa)
78%
11%
3%
7%
1%
Illumina
Affymetrix
Fluidigm
Sequenom
Other Arrays
0%
20%
40%
60%
80%
100%
2006
2007
2008
2009
2010
2011
Complete Genomics
Pacific Biosciences
Roche
Illumina
Life Technologies |
 12
Illumina Portfolio Overview
Addressing the Breadth of Complexity Across Genetic Analysis
From Genome-Wide Discovery to Targeted Validation and Screening
Sequencing
Arrays
qPCR
Redefining the
trajectory of
sequencing
High
performance
desktop
sequencing
Most widely
adopted NGS
platform
Unique
combination of
sequencing and
arrays
Speed, quality
and versatility
for arrays
Accuracy,
versatility and
flexibility for
molecular
testing
Gold-standard
qPCR made
accessible
HiScanSQ
Genome
Analyzer IIx
HiScan
BeadXpress
MiSeq
HiSeq
Family
Eco |
 13
Innovation is in Our DNA
Lower Array and Sequencing Costs Drive New, Large Market Opportunities
Consistently innovating microarrays and next-generation
sequencing at a much faster rate than Moore’s Law
Elasticity unlocks huge markets like agriculture, cancer, newborn
screening and consumer genomics
Array Cost Per Data Point¹
Cost Per Whole Human Genome¹
1. Based on company estimates.
$1,000
$10,000
$100,000
$1,000,000
$10,000,000
2009
GAIIx
2010
HiSeq
2011
HiSeq
v3
Cost per Whole
Human Genome
(30x)
Moore's Law
2006
GA1G
2007
G
2008
GAII
$0.0001
$0.0010
$0.0100
$0.1000
$1.0000
6/30/02
4/30/04
2/28/06
12/31/07
10/31/09
8/31/11
Cost per Datapoint
Moore's Law |
   14
Developed with bovine
thought leaders
Screening for milk
production, reproduction,
health
Customizable with add-on
content
Illumina’s Microarray Portfolio
Broadest and Most Integrated Portfolio of Common, Rare & Custom
Content AG
Focused
Whole-Genome
Omni5
Human Exome
Over 250k markers based
on exome sequencing
Over 1m samples ordered
to date
Available as add-on
content to OmniExpress
and Omni5
The highest value
content to power
GWAS (Genome-wide
Association Studies)
Up to 5m markers and
custom add-on
capability
BovineLD |
 15
An Example of Scale: the Human Genome Project (HGP)
1990-2003
–
13 years
–
~40 Institutions
–
8-9X Coverage
–
$3.8 Billion
2012
–
1 instrument
–
~1week
–
<1 FTE (Full-Time Equivalent)
–
5 Genomes at 30X coverage
–
Or approximately the output of the
entire, 13-year HGP in one 8 hour
shift
–
>2,000,000 times cheaper
–
1 instrument >14,000 X faster
than the 40 labs combined |
 The
Missing Heritability “Genetics Loads the Gun, Environment Pulls the
Trigger” Explained Heritability
Missing Heritability
Rare
Common Disease
Most diseases have familial risk, or heritability
The sum of individual effects found so far is much less than the
total
measured heritability
Adapted from Manolio et al 2009
0%
20%
40%
60%
80%
100%
16 |
 17
Genomics Technology Moves To the Clinic
Profound Impact of Whole Human Genome Sequencing
Variants, disease mechanisms, diagnosis, treatment, prevention
Illumina sequencing customers
–
Trisomy 21 –
Down’s Syndrome (Potential for T18, T13)
–
Immune system
–
Targeted gene tests
Research hospitals planning to sequence incoming patients
–
Already done by CHOP* for children (genotyping)
Most cancer centers planning to sequence every tumor biopsy
A state proposing to sequence their entire population
Several countries considering sequencing their populations
–
Over representation of specific diseases in population
* Children’s Hospital of Philadelphia |
 18
Superior Revenue and EPS Growth
Continually Innovating and Redefining the Genetic Analysis Market
1. Non-GAAP Diluted EPS.
*Non-GAAP EPS unprofitable prior to 2006
10 Year Revenue CAGR: 83%
5 Year EPS CAGR¹:
26%
$0.00
$0.20
$0.40
$0.60
$0.80
$1.00
$1.20
$1.40
$0
$200
$400
$600
$800
$1,000
$1,200
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Revenue
Non-GAAP EPS
1 |
 19
10 Year Stock Performance
Execution Delivers Superior Shareholder Value
BeadLab System Launched
Human-1 Genotyping
BeadChip Launched
Solexa Acquisition
Illumina #1 Microarrays
BeadXpress Launched
Illumina #1 NGS
iScan Launched
HiSeq 2000 and Genome
Analyzer IIe Launched
Eco Real-Time PCR
System Launched
Epicentre Acquisition
ILMN: 1,129%
S&P 500: 16%
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
$1,800
Jan-02
Oct-02
Jul-03
Apr-04
Jan-05
Oct-05
Jul-06
Apr-07
Jan-08
Oct-08
Jul-09
Apr-10
Jan-11
Oct-11
S&P 500
ILMN
HiScanSQ Begins Shipping
MiSeq & BaseSpace Launched
HiSeq 2500 Announced |
 20
Cancer
Newborn Screening
Agrigenomics
Whole Populations
The Future of Genomic Analysis
Emerging and Very Large Markets
Cancer is a disease of the
genome, resulting from a
modified genome
Saving lives, improving
diagnosis, and tailoring
personalized treatment
Primary diagnosis of metabolic
and genetic diseases
Predictive medicine –
identifying health risk during
a later part of life
Helping to feed the world
The world must increase food
output by 70-100% by 2050
Improving health and
healthcare delivery through
knowledge
Identifying risks and modifying
lifestyles or intervening earlier
for a more successful
healthcare outcome |
 21
1.
2.
3.
4.
5.
6.
Summary and Conclusion
Financial Performance and Outlook
Illumina’s Growth Opportunities
Response to Roche’s Offer
Illumina’s Independent Board
Introduction to Illumina |
 22
Independent Board of Directors
Possesses Critical Industry and Business Experience
William H. Rastetter, Ph.D. (Chairman): Director since 1998
–
Partner of Venrock Associates (venture capital firm); Former Exec. Chairman of
Biogen Idec Inc.; Former CEO, Chairman, President, and CFO of IDEC
Pharmaceuticals Corp.; S.B. (Chemistry) from MIT and Ph.D. (Chemistry) from Harvard
A. Blaine Bowman (Chair of Audit Committee): Director since 2007
–
Former
Chairman,
President,
and
CEO
of
Dionex
Corporation,
and
a
board
director
at
the
time
of
its
sale
to
Thermo
Fisher;
Past
director
of
Solexa,
Inc.
(acquired
by
Illumina);
Previously
management
consultant
with
McKinsey
&
Company
Daniel M. Bradbury: Director since 2004
–
CEO
and
director
of
Amylin
Pharmaceuticals,
Inc.;
Past
President
and
EVP
of
Amylin;
Member
of
UCSD
Rady
School
of
Management’s Advisory Council; Member of the Univ. of Miami’s Innovation
Corporate Advisory Council and its Diabetes Research Institute Corporate
Advisory Council Karin Eastham, CPA (Chair of Nominating/Corporate Gov.
Committee): Director since 2004 –
Full-time independent director, with extensive experience serving on a number
of public company boards –
Former EVP and Chief Operating Officer and Board of Trustees member of Burnham
Institute for Medical Research; Former SVP (Finance), CFO, and Secretary of
Diversa Corp.; Past director of Genoptix, Inc. until its sale to Novartis Paul
C. Grint, M.D.: Director since 2005 –
President of Cerexa, Inc., a wholly-owned subsidiary of Forest Laboratories,
Inc.; Past Chief Medical Officer of Kalypsys Inc.; Past executive positions
at Pfizer Inc., IDEC Pharmaceuticals Corp., and Schering-Plough Gerald
Möller, Ph.D.: Director since 2010 –
Advisor at HBM Bio Ventures AG (Swiss investment firm focusing on biotechnology,
emerging pharmaceutical, and medical technology); Former Head of Global
Development and Strategic Marketing, Pharmaceuticals, and Exec. Committee member of
Hoffmann LaRoche; Former CEO of Boehringer Mannheim Group (acquired by
Roche) David R. Walt, Ph.D.: Director since 1998 (one of Illumina’s
founders) –
Robinson Professor of Chemistry at Tufts University; Member of the National
Academy of Engineering; Fellow of the American Institute of Medical and
Biological Engineers; Fellow of the American Association for the Advancement of Science
Roy A. Whitfield (Chair of Compensation Committee): Director since 2007
–
Former Chairman and CEO of Incyte Corporation; Past director of Solexa, Inc.
(acquired by Illumina); Previously management consultant with Boston
Consulting Group |
 Strong
Committee Structure Ensuring Effective Corporate Governance
Below is a summary of our committee structure and membership information:
23 |
 24
Directors Up For Re-election
Tremendous Experience and Leadership is at Stake
–
Bill has tremendous scientific and technical expertise combined with the highest
level executive business experience leading rapidly growing companies in
our industry –
Bill’s board and executive leadership experience provides valuable strategic
and governance insight to our Board –
Bill has led a number of public company transactions, including IDEC's tender for,
and merger with, Biogen in 2003 Jay T. Flatley (President and CEO since
1999) –
Jay has led and managed our remarkable growth and development
–
Jay’s long experience with Illumina is critical to our Board’s
understanding of the needs of our customers, the markets in which we
compete, and the risks and opportunities associated with our product development and
technological advances
–
Jay was a co-founder of Molecular Dynamics, Inc., and led its sale to Amersham
Pharmacia Biotech in 1998 A. Blaine Bowman (Director since 2007)
–
Blaine has a thorough understanding of highly technical manufacturing processes
associated with scientific instruments such as ours combined with deep
business leadership experience –
Blaine’s past service as a director of Solexa, Inc. (at the time we acquired
Solexa) provides our Board with critical insight in addressing the DNA
sequencing market –
Blaine has participated in a number of public company transactions, including the
sale of Dionex to Thermo Fisher in 2011
Karin Eastham, CPA (Director since 2004)
–
Karin’s unmatched understanding of biomedical research institutions, which
are among our core customers, is critical to our Board’s understanding
of the needs of our end markets –
Karin’s
broad
senior
level
business
leadership
and
finance
experience,
including
12
years
at
Boehringer
Mannheim
Corporation, ultimately serving as Vice President, Finance for the Diagnostics
Division, provides our Board with deep insight into governance and strategy
matters that have materially contributed to our success William H. Rastetter, Ph.D. (Chairman
since 2005; Director since 1998) |
 25
Active and Engaged Board of Directors
Committed to Acting in the Best Interests of Our Stockholders
Active and responsive Board
–
40 Board and Board Committee meetings in the last 12 months
All directors except CEO (Jay Flatley) are independent under NASDAQ rules and are
committed to maximizing shareholder value
Board members have significant equity ownership, which aligns their interests with
the interests of our stockholders
Chairman and CEO roles are separated
–
CEO is responsible for setting our strategic direction and for our
day-to-day leadership and performance
–
Chairman provides frequent strategic guidance to the CEO, assists in setting the
schedules and agendas for Board meetings, and presides over Board
meetings –
Chairman also facilitates robust director, Board, and CEO evaluation processes and
leads the Board in reaching consensus on particular strategies and
policies Independent Compensation Committee oversees and directs the design
and implementation of executive compensation plans
–
Senior management compensation is tied to the long-term success of the
business and is aligned with the creation of shareholder value
|
 26
1.
Introduction to Illumina
2.
Illumina’s Independent Board
3.
Response to Roche’s Offer
4.
Illumina’s Growth Opportunities
5.
Financial Performance and Outlook
6.
Summary and Conclusion |
 27
Chronology of Roche’s Unsolicited Offer
Illumina’s Board Acted Proactively and Managed Review From the Start
December 13, 2011 –
Roche’s chairman made an unsolicited oral proposal to
acquire Illumina (no price specified)
December
14,
2011
–
Illumina’s
Board
met
to
discuss
and
establish
a
process
to fully evaluate Roche’s proposal, including appointing financial advisors
and reviewing Illumina’s long-term strategic plan and
forecasts December
20,
2011
–
Roche’s
chairman
updated
its
unsolicited
proposal
to
acquire
Illumina
by
orally
suggesting
it
would
be
willing
to
pay
a
50%
premium
January 3, 2012
–
Roche’s chairman sent a letter making an unsolicited
proposal to acquire Illumina for $40 per share in cash
January
17,
2012
–
After
careful
review
and
consideration
with
its
financial
and
legal
advisors
(over
the
course
of
four
Board
meetings
between
December
23,
2011 and January 17, 2012), Illumina’s Board unanimously concluded that
Roche’s proposal grossly undervalued Illumina and its prospects for continued
growth
and
was
not
in
the
best
interests
of
Illumina’s
stockholders.
Accordingly,
Illumina’s
board
rejected
the
proposal |
 28
Chronology of Roche’s Unsolicited Offer
Illumina’s Board Acted
Proactively and Managed Review From the Start January
24,
2012
–
Roche’s
chairman
sent
a
letter,
which
Roche
simultaneously publicly disclosed, making an unsolicited proposal to acquire
Illumina for $44.50 per share in cash
February
7,
2012
–
After
careful
review
and
consideration
with
its
financial
and
legal advisors (over the course of three Board meetings between January 25,
2012 and February 7, 2012), Illumina’s Board unanimously concluded that
Roche’s proposal grossly undervalued Illumina and its prospects for continued
growth
and
was
not
in
the
best
interests
of
Illumina’s
stockholders.
Accordingly,
Illumina’s
board
rejected
the
proposal
March
28,
2012
–
Roche’s
chairman
sent
a
letter,
which
Roche
simultaneously
publicly disclosed, increasing its offer price to $51.00 per share in cash
April
2,
2012
–
After
careful
review
and
consideration
with
its
financial
and
legal
advisors (over the course of two Board meetings between March 31, 2012 and
April 2, 2012), Illumina’s Board unanimously concluded that Roche’s
proposal grossly undervalued Illumina and its prospects for continued
growth, and was not
in
the
best
interests
of
Illumina’s
stockholders.
Accordingly,
Illumina’s
board
rejected
the
proposal |
 29
Evaluating Roche’s Unsolicited Offer
The
Board’s
Process
Was
Thorough
and
Comprehensive
The Board was fully engaged in managing this process
Met thirteen times between December 14, 2011 and April 2, 2012 to review and
consider matters relating to Roche’s unsolicited proposals and
Illumina’s long-term strategic plan and financial models
Established a Transactions Committee having broad authority to assist the Board of
Directors in evaluating Roche’s unsolicited proposals and alternatives
thereto Retained experienced financial and legal advisors from the very
start –
Goldman Sachs and Bank of America Merrill Lynch as financial advisors
–
Dewey & LeBoeuf as transaction counsel and Abrams & Bayliss as Delaware
counsel
With counsel from Dewey & LeBoeuf and Abrams & Bayliss, the Board carefully
considered its fiduciary duties throughout the process, including whenever
the Board made a recommendation regarding the Roche proposal
The Board carefully reviewed and considered Illumina’s long-term strategic
plan and financial
models,
which
were
already
being
updated
as
part
of
an
annual
strategic
review
process |
 30
Roche’s Offer is Grossly Inadequate
Far From a Reasonable Starting Point For Negotiations
The offer is grossly inadequate, does not reflect the intrinsic or scarcity value
of Illumina, and is far from being a reasonable starting point for
negotiations Dramatically undervalues Illumina’s unmatched leadership
position in an industry on the verge of extraordinary growth
Does not adequately compensate our stockholders for the value of
Illumina’s:
–
Unique and innovative technological capabilities and platforms
–
Proven track record of operational and financial performance
–
Tremendous growth prospects in clinical, diagnostics, and other markets
–
Central role as an enabler of personalized healthcare
The
offer is opportunistically and urgently timed to exploit a temporary
dislocation in Illumina’s stock price caused by external factors
Illumina’s Standalone Performance Will Deliver Far Superior Value
|
 31
1.
Introduction to Illumina
2.
Illumina’s Independent Board
3.
Response to Roche’s Offer
4.
Illumina’s Growth Opportunities
5.
Financial Performance and Outlook
6.
Summary and Conclusion |
 32
Next Gen Sequencing Will Become Ubiquitous
Cost Reduction & Ease of Use Will Broaden Adoption
Potential for
Total Next-Gen
Sequencing Installations
>50,000
Molecular
Biology Labs
Globally |
 33
Segmenting the Sequencing Market
Markets and Key Characteristics
Whole genome and exome
sequencing
Tumor/normal sequencing
Applied markets
Clinical applications (CLIA)
Foundational research
Initial Markets
–
Existing HiSeq customers
–
CE replacement
–
Clinical research
–
Applied markets
Long Term Markets
–
Clinical applications
–
Diagnostics
Low capital cost, ease of use, rapid turnaround
time, sample prep, and high data quality
Low cost per base and high data quality
Low –
Mid Throughput
High Throughput |
 34
Key Features of HiSeq 2500
Strong Customer Interest –
Initial Orders Booked
HiSeq
2500
–
delivering
“a
genome
in
a
day”
Special flow cell
and reagents
On-board cluster
generation a la MiSeq
Quality equal to or better
than standard 600 G/run
Capable of 20 exomes a
day or up to 30 RNA-seq
samples in 5 hours
1 Instrument –
2 Run Configurations
5 human genomes
in 10 days
1 human genome
in a day |
 35
Expanding the MiSeq Market
Near-Term Performance Improvements
Low run cost
Amplicon & small
microbial sequencing
Targeted resequencing
4 Gb at 2 x 150
6 -
7 Gb at 2 x 250
Targeted cancer panels
100’s Mb
1-1.5 Gb
4-7 Gb |
 36
BaseSpace Creates a Connected Ecosystem
Accelerates Analysis and Sharing of Genomic Data
App Space
Public Databases |
 37
NIH Spending Levels |
 38
NCI Spend on Sequencing
Spend in Sequencing Small Portion of Total Budget
NCI Sequencing Spend
NCI Hypothetical Sequencing
Spend at 2% of Budget
$0
$20
$40
$60
$80
$100
$120
2009
2010
2011
2012
2013
2014
2015 |
 39
NIH Hypothetical Sequencing
Spend at 12% CAGR
NIH Sequencing Spend
Trend of NIH Spend in Sequencing
Utility of Sequencing Drives Double Digit Growth
$0
$100
$200
$300
$400
$500
$600
$700
2009
2010
2011
2012
2013
2014
2015 |
 40
Large Sequencing Opportunities
Sequencing Core Technology for Modern Life Science Research
|
 41
European Funding Environment Improving
Genomics Expected to Grow Significantly
$100
$150
$200
$250
$300
$350
2008
2009
2010
2011
2012E
2013E
2014E
2015E
2016E
2017E
FP7 Outlays
Horizon 2020 Estimated Outlays
$
-
$50 |
 Industrial Markets Present Significant Opportunities
Illumina Technologies Ready to Address Key Drivers for Broad Adoption
Key Drivers for Adoption:
–
Low cost / sample
–
Decreased capital costs
–
Simplified sample prep
with high levels of
automation
–
Automated data analysis
$1.8 Billion Incremental Opportunity
Industrial Market Opportunity
($millions)
Forensics
Bio / Pharma QC
Food Testing
Seed Testing
Biodefense
Vet Dx
Hi Value Agriculture
300
170
200
150
300
200
500
42 |
 43
Diagnostic Market Opportunities
Cancer & Reproductive Genetics driven by sequencing
$5.7
$13.0
$23.1
$0
$5
$10
$15
$20
$25
2012
2015
2020
Infectious Disease
Reproductive Genetics
CDx & PGx
Other
Cancer |
 HiSeq
Creates High-Throughput Clinical Market Doubled Placements into
Translational Sites (YoY) Sequenom
MaterniT21 for Down syndrome
Children’s Mercy Hospital
592-
rare childhood disorder
exome carrier test
Foundation Medicine
Cancer treatment
Wash U Med School
28-gene cancer diagnostic panel
Mayo Clinic
18-gene colorectal cancer panel
Partners Healthcare
46-gene cardiomyopathy panel
44 |
 45
Future Market Opportunities
Very Large Sequencing Markets Emerging
~$348 Million
~$348 Million
(Newborns)
(Newborns)
~$254 Million
~$254 Million
(Cancer + Normal)
(Cancer + Normal)
~$24 Million
~$24 Million
(Clinical trials)
(Clinical trials)
1. http://www.ciscrp.org/professional/facts_pat.html.
2.
http://www.cancer.org/acs/groups/content/@epidemiologysurveilance/documents/document/acspc-031941.pdf.
3. Assumes tumor-normal sequencing pair.
4. http://globocan.iarc.fr/factsheet.asp.
5. http://www.unicef.org/infobycountry.
6. Includes China, Russia and Mexico.
US annual newborns 4.4M
5
Ex-US Industrial countries’
annual
newborns 30.4M
5,6
US annual cancer diagnoses ex-
non melanoma skin cancer
1.6M
2,3
Ex-US annual cancer diagnoses
ex-non melanoma skin cancer
11M
3,4
US clinical trial participants ~1.5M¹
Ex-US clinical trial participants ~.9M¹
~$626 Million Total
Assuming $1,000
genome and 1%
penetration |
 46
Summary
Rapid innovation is driving new market opportunities
–
Integrated systems will create competitive advantage
Global funding environment expected to improve
–
Allocation to next generation sequencing increasing
Diverse array of applications is driving industrial
markets
–
Enabled by lower costs, higher throughput and ease of
use
Largest opportunity is beginning to emerge in
Diagnostics
–
Reproductive Genetics market
–
Clinical utility demonstrated in cancer market
–
Infectious disease market growing rapidly |
 47
1.
Introduction to Illumina
2.
Illumina’s Independent Board
3.
Response to Roche’s Offer
4.
Illumina’s Growth Opportunities
5.
Financial Performance and Outlook
6.
Summary and Conclusion |
 48
Revenue Growth
Illumina Has Delivered Consistent and Superior Revenue Growth…
Illumina Historical Revenue
5 Year Revenue CAGR vs. Peers
Source: Company filings, Capital IQ, and IBES.
Note: Life Sciences include: Affymetrix, Agilent, Bio-Rad, Bruker, Complete
Genomics, Fluidigm, Life Technologies, Luminex, Pacific Biosciences, PerkinElmer, Qiagen, Sigma-Aldrich,
Techne, Thermo Fisher, and Waters.
Molecular Diagnostics include: Cepheid, Genomic Health, Gen-Probe, Myriad,
Qiagen, and Sequenom. $184.6
$366.8
$573.2
$666.3
$902.7
$1,055.5
$0.0
$200.0
$400.0
$600.0
$800.0
$1,000.0
$1,200.0
2006
2007
2008
2009
2010
2011
41.7%
10.2%
23.1%
Illumina
Life Sciences Median
Molecular Diagnostics
Median |
 49
Gross Profit
…Supported by Solid Gross Margins…
Constant technology & chemistry
innovation has enabled us to lead the
enormous reduction in the cost of
sequencing
Our advances in production methods
concurrently preserve robust gross
margins
New generations of instruments, while
preserving support for the previous
generations, contribute to our increasing
installed base
The growing installed base increases
consumable revenue, providing an annuity
stream of income with strong margins
Source: Company filings, Capital IQ, and IBES.
Note: Life Sciences include: Affymetrix, Agilent, Bio-Rad, Bruker, Complete
Genomics, Fluidigm, Life Technologies, Luminex, Pacific Biosciences, PerkinElmer, Qiagen, Sigma-Aldrich,
Techne, Thermo Fisher, and Waters.
Molecular Diagnostics include: Cepheid, Genomic Health, Gen-Probe, Myriad,
Qiagen, and Sequenom. 1. Adjusted gross profit defined as non-GAAP gross
profit, excluding stock based compensation expense. $239.5
$372.7
$465.8
$615.2
$728.8
69%
50%
60%
70%
80%
90%
100%
$0.0
$100.0
$200.0
$300.0
$400.0
$500.0
$600.0
$700.0
$800.0
2006
2007
2008
2009
2010
2011
$126.8
65%
65%
70%
68%
69%
Illumina Historical Adjusted Gross Profit¹
Key Drivers |
 50
2011 Operating Profit Margin vs. Peers¹
Source: Company filings, Capital IQ, and IBES.
Note: Life Sciences include: Affymetrix, Agilent, Bio-Rad, Bruker, Complete
Genomics, Fluidigm, Life Technologies, Luminex, Pacific Biosciences, PerkinElmer, Qiagen, Sigma-Aldrich,
Techne, Thermo Fisher, and Waters.
Molecular Diagnostics include: Cepheid, Genomic Health, Gen-Probe, Myriad,
Qiagen, and Sequenom. 1. Non-GAAP operating profit as defined by IBES;
includes stock based compensation expense. 25.3%
15.7%
14.8%
Illumina
Molecular Diagnostics
Median
Life Sciences Median
Operating Profit
…Coupled with Robust and Improving Operating Margins…
$37.8
$59.8
$121.2
$149.3
$214.6
$266.8
20%
16%
21%
22%
24%
25%
10%
15%
20%
25%
30%
35%
40%
45%
50%
$0.0
$50.0
$100.0
$150.0
$200.0
$250.0
$300.0
2006
2007
2008
2009
2010
2011
Illumina Historical Non-GAAP Operating Profit¹
|
 Earnings
Per Share …And Industry Leading EPS Growth…
Source: Company filings, Capital IQ, and IBES. Excludes companies with not
meaningful metrics. Note: Life Sciences include: Affymetrix, Agilent,
Bio-Rad, Bruker, Complete Genomics, Fluidigm, Life Technologies, Luminex, Pacific Biosciences, PerkinElmer, Qiagen, Sigma-Aldrich,
Techne, Thermo Fisher, and Waters.
Molecular Diagnostics include: Cepheid, Genomic Health, Gen-Probe, Myriad,
Qiagen, and Sequenom. 1. Non-GAAP EPS as defined by IBES.
$0.41
$0.42
$0.68
$0.80
$1.06
$1.30
$0.00
$0.20
$0.40
$0.60
$0.80
$1.00
$1.20
$1.40
2006
2007
2008
2009
2010
2011
26.0%
12.8%
13.2%
Life Sciences Median
Illumina
Molecular Diagnostics
Median
Illumina Historical Non-GAAP EPS¹
5 Year Non-GAAP EPS CAGR vs. Peers¹
51 |
 52
Return on Invested Capital
…In Addition to Strong and Improving Return on Invested Capital…
Source: Company filings, Capital IQ, and IBES. Excludes companies with not
meaningful metrics. Note: Life Sciences include: Affymetrix, Agilent,
Bio-Rad, Bruker, Complete Genomics, Fluidigm, Life Technologies, Luminex, Pacific Biosciences, PerkinElmer, Qiagen, Sigma-Aldrich,
Techne, Thermo Fisher, and Waters.
Molecular Diagnostics include: Cepheid, Genomic Health, Gen-Probe, Myriad,
Qiagen, and Sequenom. 1. ROIC
defined
as
after
tax
non-GAAP
operating
profit
(including
SBC
expense)
divided
by
the
sum
of
shareholders
equity
and
debt
less
cash.
Based
on
statutory
tax
rate.
20.5%
11.2%
15.8%
Life Sciences Median
Illumina
10.6%
14.1%
17.3%
20.1%
20.5%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
2007
2008
2009
2010
2011
Molecular Diagnostics
Median
Illumina Historical ROIC¹
2011 ROIC vs. Peers¹ |
 53
Analyst Estimates
Illumina Has Outperformed Analyst EPS Estimates for 16 of the Last 20 Quarters
Source: Company filings and IBES.
1. For quarters in which the company pre-announced results, the IBES median is
based on estimates prior to the pre-announcement date. Source: Company
filings and IBES 1. For quarters in which the company pre-announced
results, the IBES median is based on estimates prior to the pre-announcement date
Revenue
Non-GAAP EPS
%
vs. IBES
8.6%
9.1%
4.0%
6.9%
5.6%
7.8%
2.9%
4.1%
1.2%
(0.4)%
(5.4)%
7.6%
8.0%
9.3%
8.7%
4.7%
8.1%
2.1%
(15.7)%
1.0%
2007
2008
2009
2011
2010
%
vs. IBES
40.3%
55.6%
26.7%
20.4%
8.3%
12.7%
(8.0)%
47.1%
5.3%
28.5%
(15.8)%
16.7%
11.1%
14.0%
23.5%
(6.5)%
13.3%
3.8%
(37.5)%
34.6%
2007
2008
2009
2011
2010
$72
$85
$98
$113
$122
$140
$150
$161
$166
$162
$158
$181
$192
$212
$237
$261
$283
$287
$235
$250
$66
$77
$94
$105
$115
$130
$146
$155
$164
$162
$167
$168
$178
$194
$218
$250
$261
$282
$279
$248
$0
$50
$100
$150
$200
$250
$300
$350
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4¹
Q1
Q2
Q3
Q4¹
Q1
Q2
Q3¹
Q4¹
$0.06
$0.10
$0.12
$0.15
$0.13
$0.16
$0.15
$0.25
$0.20
$0.23
$0.17
$0.21
$0.21
$0.26
$0.30
$0.29
$0.35
$0.38
$0.22
$0.35
$0.04
$0.06
$0.10
$0.12
$0.12
$0.14
$0.16
$0.17
$0.19
$0.18
$0.20
$0.18
$0.19
$0.23
$0.24
$0.31
$0.31
$0.37
$0.35
$0.26
$0.00
$0.10
$0.20
$0.30
$0.40
$0.50
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4¹
Q1
Q2
Q3
Q4¹
Q1
Q2
Q3¹
Q4¹
Reported Results Above IBES Median
Reported Results Below IBES Median
IBES Median Estimate
No.
Above
= ILMN
Actual
No.
Below
= IBES Median |
 54
Illumina
Life Sciences
Molecular Diagnostics
Share Price and Total Shareholder Return
…Leading to Superior Share Price Performance and Shareholder Return…
5 Year Stock Price Performance¹
5 Year Total Shareholder Return¹
Source: Bloomberg.
Note: Excludes Complete Genomics, Fluidigm, and Pacific Biosciences because
companies have not been publicly traded for the entire time period. 1. For
the 5 years prior to Roche’s public announcement of unsolicited offer for Illumina on 24-Jan-2012.
(2.3)%
(2.3)%
297.3 %
84.1 %
82.6 %
78.6 %
56.5 %
50.6 %
50.3 %
30.6 %
30.6 %
24.3 %
22.1 %
21.4 %
17.0 %
8.4 %
5.2 %
0.2 %
297.3 %
88.9 %
84.1 %
82.6 %
56.5 %
50.6 %
50.3 %
30.6 %
30.6 %
30.4 %
23.4 %
22.1 %
21.4 %
12.2 %
8.4 %
0.2 % |
 EV /
Sales Trading Multiples …And Premium Trading Multiples
5.7x
2.8x
4.5x
5.5x
0x
2x
4x
6x
8x
10x
12x
14x
Mar-2007
Jan-2008
Nov-2008
Sep-2009
Jul-2010
May-2011
Mar-2012
Daily from 30-Mar-2007 to 30-Mar-2012
Illumina
Life Sciences
Molecular Diagnostics
Roche Tender Offer at $51.00
1 Year
3 Year
5 Year
Illumina Average
5.8
x
6.5
x
7.6
x
% of Days Illumina Multiple Greater than Roche Offer
51%
77%
82%
Life Sciences Average
2.8
x
2.7
x
2.9
x
Implied Premium for Illumina
106%
139%
163%
Molecular Diagnostics Average
4.6
x
4.5
x
5.5
x
Implied Premium for Illumina
27%
44%
38%
Source: Company filings, Capital IQ, and IBES. Excludes companies with not meaningful multiples.
Market capitalization component of EV represents basic market capitalization. Note: Life
Sciences include: Affymetrix, Agilent, Bio-Rad, Bruker, Complete Genomics, Fluidigm, Life Technologies, Luminex, Pacific Biosciences, PerkinElmer, Qiagen, Sigma-Aldrich,
Techne, Thermo Fisher, and Waters.
Molecular Diagnostics include: Cepheid, Genomic Health, Gen-Probe, Myriad, Qiagen, and Sequenom.
LTM EV/Sales
55 |
 Premium
P/E Multiple Most Analysts Use P/E as Their Primary Valuation Metric for
Illumina Source: Company filings, Capital IQ, and IBES. Excludes companies
with not meaningful multiples. Note: Life Sciences include: Affymetrix,
Agilent, Bio-Rad, Bruker, Complete Genomics, Fluidigm, Life Technologies, Luminex, Pacific Biosciences, PerkinElmer, Qiagen, Sigma-Aldrich,
Techne, Thermo Fisher, and Waters.
Molecular Diagnostics include: Cepheid, Genomic Health, Gen-Probe, Myriad,
Qiagen, and Sequenom. 34.8x
15.5x
16.8x
33.7x
0x
10x
20x
30x
40x
50x
60x
70x
Mar-
2007
Jan-2008
Nov-2008
Sep-2009
Jul-2010
May-2011
Mar-2012
Illumina
Life Sciences
Molecular Diagnostics
Roche Tender Offer at $51.00
Daily from 30-Mar-2007 to 30-Mar-2012
56
1 Year
3 Year
5 Year
Illumina Average
31.9
x
35.3
x
40.5
x
% of Days Illumina Multiple Greater than Roche Offer
45%
70%
76%
Life Sciences Average
15.7
x
16.7
x
17.4
x
Implied Premium for Illumina
104%
111%
133%
Molecular Diagnostics Average
17.1
x
18.8
x
22.6
x
Implied Premium for Illumina
87%
88%
79%
NTM P/E |
 57
Recent Performance
Third Quarter 2011 Challenges
Illumina
Life Sciences
Illumina Quarterly Revenue
Stock Performance
Source: Company filings and Bloomberg as of 30-Mar-2012.
Note: Life Sciences include: Affymetrix, Agilent, Bio-Rad, Bruker, Complete
Genomics, Fluidigm, Life Technologies, Luminex, Pacific Biosciences, PerkinElmer, Qiagen,
Sigma-Aldrich, Techne, Thermo Fisher, and Waters.
Multi-Year NIH
Funding Uncertainty
European Debt
Crisis
Temporary Excess
Capacity from
Launch of V3 kits
“Perfect Storm”
in Q3
Corrective Actions
Taken:
Suspended
management
guidance
Pre-announced
disappointing
results
Took immediate
action on
restructuring
Significant
Progress in Q4
Key
Accomplishments:
MiSeq instruments
drove return to
sequential growth
1.2 book-to-bill
ratio delivered
strong backlog of
$251mm
Record cash flow
from operations of
$108mm
Continued
Recovery in Q1
Quarter-to-Date
Trends:
MiSeq continuing
to gain momentum
V3 overcapacity
largely absorbed
Strong
international
performance
Clarity on 2012
NIH Budget
Market Dynamics |
 Revenue
Expectations and Share Price Performance Industry Headwinds Impacted the
NextGen Sequencing Sector Illumina ($bn)
Life Technologies ($bn)
Pacific Biosciences ($mm)
Complete Genomics ($mm)
Source: Bloomberg and IBES.
58
Sum of 2012-2014 Revenue Estimates
Stock Price |
 59
Sources of Revenue
The Company has Significantly Diversified its Revenue Base Over the Last 5
Years
Source: Company filings, company estimates and Wall Street research.
2006
2011
Revenue by Product Mix
Revenue by End Market
Revenue by Geography |
 Financial
Outlook Illumina Will Continue to Deliver Growth for the Foreseeable Future
2012
2013 and Beyond
Financial
Guidance
Key Target Markets:
–
Life sciences: $4bn
–
Molecular Dx: $3bn
–
Applied markets: $1bn
–
Consumer
Emerging Diagnostic Opportunities:
Based on $1,000 per genome and
1% market penetration, Illumina can
target and could generate:
–
~$350mm in neo-natal market
revenues
–
~$250mm in oncology market
revenues
–
~$25mm in clinical trial
market revenues
Revenue: $1,100 -
$1,175mm
(4% –
11% Y-o-Y growth)
Gross Margin: ~ 70%
Non-GAAP EPS¹: $1.40 -
$1.50
(8% –
15% Y-o-Y growth)
Shares Outstanding: ~135mm
Stock Based Compensation:
$105mm
1. Non-GAAP EPS guidance includes stock based compensation.
Future
Growth
Drivers
60 |
 61
1.
Introduction to Illumina
2.
Illumina’s Independent Board
3.
Response to Roche’s Offer
4.
Illumina’s Growth Opportunities
5.
Financial Performance and Outlook
6.
Summary and Conclusion |
 62
Summary and Conclusions
Recommend a Vote AGAINST Roche’s Proposals and FOR Illumina’s
Proposals Illumina is the clear innovation and market leader in tools for
genetic analysis at a
time
when
our
industry
as
a
whole
–
and
Illumina
in
particular
–
has
the
potential to experience extraordinary growth
Illumina’s track record of innovation, commercialization and creating
stockholder value is recognized as unique in the industry
Roche has acted opportunistically to take advantage of a temporary dislocation
in Illumina’s stock price as well as the certainty of extraordinary
growth in the market opportunity in the near term
Illumina’s independent Board has evaluated Roche’s offer thoroughly and
carefully and is committed to continuing to act in the best interests of
stockholders
We believe the facts and circumstances strongly support
recommendations against Roche’s proposals and nominees, and in favor
of Illumina’s directors |
 63
“…the sequence of the human DNA is the reality of the
species, and everything that happens in the world depends
upon those sequences.”
Renato Dulbecco, Nobel Laureate |
 64
ADDITIONAL INFORMATION AND WHERE TO FIND IT
This communication does not constitute an offer to buy or a solicitation of an
offer to sell any securities. In response to the tender offer commenced by
CKH Acquisition Corporation, a wholly owned subsidiary of Roche Holding Ltd,
Illumina has filed a solicitation/recommendation statement on Schedule 14D-9
with the SEC. INVESTORS AND SECURITY HOLDERS OF ILLUMINA ARE URGED TO READ
THE SOLICITATION/RECOMMENDATION STATEMENT AND OTHER DOCUMENTS FILED WITH THE
SEC (WHEN THEY BECOME AVAILABLE) CAREFULLY IN THEIR ENTIRETY BECAUSE THEY
CONTAIN IMPORTANT INFORMATION. Investors and security holders are able to
obtain free copies of these documents and other documents filed with the SEC by
Illumina (when they become available) through the web site maintained by the SEC at
http://www.sec.gov. Investors and security holders also are able to obtain
free copies of these documents, and other documents filed with the SEC by
Illumina (when they become available), from Illumina by directing a request to Illumina, Inc., Attn:
Investor Relations, Kevin Williams, MD, kwilliams@illumina.com.
In addition, in connection with its 2012 Annual Meeting of Stockholders, Illumina
has filed a definitive proxy statement
and
a
WHITE
proxy
card
with
the
SEC
on
March
19,
2012,
and
has
mailed
the
definitive
proxy
statement
and WHITE proxy card to its security holders. INVESTORS AND SECURITY HOLDERS OF
ILLUMINA ARE URGED
TO
READ
THE
DEFINITIVE
PROXY
STATEMENT
AND
THE
WHITE
PROXY
CARD
FOR
THE
2012
ANNUAL MEETING OF STOCKHOLDERS AND OTHER DOCUMENTS FILED WITH THE SEC (WHEN THEY
BECOME AVAILABLE) CAREFULLY IN THEIR ENTIRETY BECAUSE THEY CONTAIN IMPORTANT
INFORMATION. Investors and security holders are able to obtain free copies
of the definitive proxy statement and other
documents
filed
with
the
SEC
by
Illumina
(when
they
become
available)
through
the
web
site
maintained by
the SEC at http://www.sec.gov. Investors and security holders also are able to
obtain free copies of the definitive proxy statement, and other documents
filed with the SEC by Illumina (when they become available), from Illumina
by directing a request to Illumina, Inc., Attn: Investor Relations, Kevin Williams,
MD, kwilliams@illumina.com. |
 65
CERTAIN INFORMATION REGARDING
PARTICIPANTS IN THE SOLICITATION
Illumina and certain of its directors and executive officers may be deemed to be participants in the
solicitation of proxies in connection with Illumina’s 2012 Annual Meeting of Stockholders
under the rules of the SEC. Security holders may obtain information regarding the names,
affiliations and direct and indirect interests (by security holdings or otherwise) of
Illumina’s directors and executive officers in (i) Illumina’s Annual Report on Form
10-K for the year ended January 1, 2012, which was filed with the SEC on February 24, 2012,
and (ii) Illumina’s definitive proxy statement for its 2012 Annual Meeting of
Stockholders, which was filed with the SEC on March 19, 2012. To the extent that Illumina’s
directors’ and executive officers’ holdings of Illumina’s securities have
changed from the amounts printed in the definitive proxy statement for the 2012 Annual Meeting
of Stockholders, such changes have been or will be reflected on Statements of Changes in
Beneficial Ownership on Form 4 filed with the SEC. These documents can be obtained free of
charge from the sources indicated above. |
Annex
ILLUMINA, INC.
ITEMIZED RECONCILIATIONS OF GAAP TO NON-GAAP RESULTS
Below is a reconciliation of Illumina’s diluted net income per share, gross profit, and operating profit calculated in accordance with accounting principles generally accepted in the United States (“GAAP”), to non-GAAP diluted net income per share, gross profit, and operating profit. Illumina believes the non-GAAP information that is detailed below provides useful supplemental information to investors and facilitates the analysis of our core operating results and major factors in management’s bonus compensation each year. Management has excluded the effects of the items detailed below to assist investors in analyzing and assessing our past and future operating performance. Non-GAAP results should be read in conjunction with GAAP financial measures, as non-GAAP metrics are merely a supplement to, and not a replacement for, or superior to, GAAP financial measures. It should be noted as well that our Non-GAAP metrics may be different from those provided by other companies.
Results of Operations - Non-GAAP
(In thousands, except per share amounts)
ITEMIZED RECONCILIATION BETWEEN GAAP AND NON-GAAP NET INCOME PER SHARE BY YEAR:
| Fiscal Year 2011 |
Fiscal Year 2010 |
Fiscal Year 2009 |
Fiscal Year 2008 (h) |
Fiscal Year 2007 (h) |
Fiscal Year 2006 (i) |
|||||||||||||||||||
| GAAP net income per share — diluted |
$ | 0.62 | $ | 0.87 | $ | 0.53 | $ | 0.30 | $ | (2.65 | ) | $ | 0.41 | |||||||||||
| Pro forma impact of weighted average shares (a) |
0.03 | 0.06 | 0.03 | 0.01 | 0.20 | |||||||||||||||||||
| Adjustments to net income: |
||||||||||||||||||||||||
| Headquarter relocation expense (b) |
0.31 | — | — | — | — | — | ||||||||||||||||||
| Non-cash interest expense (c) |
0.24 | 0.16 | 0.15 | 0.15 | 0.13 | |||||||||||||||||||
| Restructuring charges |
0.06 | — | — | — | — | — | ||||||||||||||||||
| Amortization of acquired intangible assets |
0.09 | 0.06 | 0.05 | 0.08 | 0.02 | |||||||||||||||||||
| Legal settlements |
(0.02 | ) | — | — | — | 0.46 | — | |||||||||||||||||
| Acquisition related (gain) expense, net (d) |
0.01 | (0.09 | ) | 0.10 | 0.20 | 2.59 | ||||||||||||||||||
| Contingent compensation expense (e) |
0.04 | 0.03 | 0.03 | 0.01 | — | |||||||||||||||||||
| Loss on extinguishment of debt |
0.28 | — | (0.01 | ) | — | — | ||||||||||||||||||
| Impairment loss related to a cost-method investment |
— | 0.10 | — | — | — | — | ||||||||||||||||||
| Impairment of manufacturing equipment |
— | — | — | 0.03 | — | — | ||||||||||||||||||
| Amortization of inventory revaluation costs |
0.01 | |||||||||||||||||||||||
| Incremental non-GAAP tax expense (f) |
(0.36 | ) | (0.13 | ) | (0.08 | ) | (0.10 | ) | (0.34 | ) | — | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Non-GAAP net income per share — diluted (g) |
$ | 1.30 | $ | 1.06 | $ | 0.80 | $ | 0.68 | $ | 0.42 | $ | 0.41 | ||||||||||||
| Weighted average shares used in calculation of Non-GAAP diluted net income per share |
135,154 | 134,375 | 130,599 | 126,836 | 116,860 | 97,508 | ||||||||||||||||||
| ITEMIZED RECONCILIATION BETWEEN GAAP AND NON-GAAP DILUTED NUMBER OF SHARES (i): |
| |||||||||||||||||||||||
| Weighted average shares used in calculation of GAAP diluted net income per share |
138,937 | 143,433 | 137,096 | 133,607 | 108,308 | 97,508 | ||||||||||||||||||
| Weighted average dilutive potential common shares issuable of redeemable convertible senior notes (a) |
(3,783 | ) | (9,058 | ) | (6,497 | ) | (6,771 | ) | (1,357 | ) | — | |||||||||||||
| Weighted average potential common shares excluded due to anti-dilutive effect (j) |
— | — | — | — | 9,909 | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Weighted average shares used in calculation of Non-GAAP diluted net income per share |
135,154 | 134,375 | 130,599 | 126,836 | 116,860 | 97,508 | ||||||||||||||||||
| (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) | The Company relocated its headquarters to a new facility in San Diego, California during the second half of 2011. Headquarter relocation expense in fiscal year 2011 is primarily non-cash in nature and includes a cease-use loss upon vacating certain buildings of our prior headquarters, accelerated depreciation expense, and double rent expense during the transition to our new headquarter 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) | Acquisition related (gain) expense, net includes the following current year and prior year adjustments: |
| 2011 adjustments: |
| - | IPR&D charge of $5.4 million related to milestone payments for a prior acquisition |
| - | Gain of $4.5 million for changes in fair value of contingent consideration, $1.5 million of which was recorded in Q4 2011 |
| 2010 adjustments: |
| - | IPR&D charge of $1.3 million related to milestone payments for a prior acquisition |
| - | Acquisition expenses of $0.5 million |
| - | Gain on acquisition of $2.9 million recorded for the difference between the carrying value of a cost-method investment prior to acquisition and the fair value of that investment at the time of acquisition |
| - | Gain of $10.4 million recorded in Q4 2010 for changes in fair value of contingent consideration |
| 2009, 2008, & 2007 adjustments: |
| - | Research and development charges related to acquisitions |
| (e) | Contingent compensation expense represents contingent consideration for post-combination services associated with acquisitions. |
| (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. |
| (h) | Adjusted to reflect retroactive adoption of authoritative accounting guidance for convertible debt instruments that may be settled in cash upon conversion effective December 28, 2008. |
| (i) | Adjusted as necessary to reflect a two-for-one stock split effective September 22, 2008 |
| (j) | Weighted average shares excluded from calculation of GAAP diluted net income per share for 2007 due to anti-dilutive effect on GAAP net loss. |
Annex
Results of Operations as a Percentage of Revenue
(Dollars in thousands)
ITEMIZED RECONCILIATION BETWEEN GAAP AND NON-GAAP GROSS PROFIT AS A PERCENTAGE OF REVENUE:
| Fiscal Year | ||||||||||||||||||||||||||||||||||||||||||||||||
| 2011 | 2010 | 2009 | 2008 | 2007 | 2006 | |||||||||||||||||||||||||||||||||||||||||||
| GAAP gross profit |
$ | 709.1 | 67 | % | 601.5 | 67 | % | $ | 453.9 | 68 | % | $ | 353.1 | 62 | % | 231.9 | 63 | % | $ | 125.2 | 68 | % | ||||||||||||||||||||||||||
| Stock-based compensation |
7.6 | 1 | % | 5.9 | 0 | % | 5.2 | 1 | % | 5.1 | 1 | % | 4.5 | 1 | % | 1.6 | 1 | % | ||||||||||||||||||||||||||||||
| Amortization of acquired intangible assets |
12.1 | 1 | % | 7.8 | 1 | % | 6.7 | 1 | % | 10.4 | 2 | % | 2.4 | 1 | % | — | — | |||||||||||||||||||||||||||||||
| Impairment of manufacturing equipment |
— | 0 | % | — | 0 | % | — | — | 4.1 | 0 | % | — | — | — | — | |||||||||||||||||||||||||||||||||
| Amortization of inventory revaluation costs |
— | 0 | % | — | 0 | % | — | — | — | — | 0.7 | 0 | % | — | — | |||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
| Non-GAAP gross profit |
$ | 728.8 | 69 | % | $ | 615.2 | 68 | % | $ | 465.8 | 70 | % | $ | 372.7 | 65 | % | $ | 239.5 | 65 | % | $ | 126.8 | 69 | % | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
ITEMIZED RECONCILIATION BETWEEN GAAP & NON-GAAP OPERATING PROFIT AS A PERCENTAGE OF REVENUE:
| Fiscal Year | ||||||||||||||||||||||||||||||||||||||||||||||||
| 2011 | 2010 | 2009 | 2008 | 2007 | 2006 | |||||||||||||||||||||||||||||||||||||||||||
| GAAP operating profit |
$ | 199.5 | 18.9 | % | $ | 211.7 | 23.4 | % | $ | 125.6 | 18.8 | % | $ | 80.5 | 14.0 | % | $ | (301.2 | ) | (82.1 | %) | $ | 37.8 | 20.4 | % | |||||||||||||||||||||||
| Headquarter relocation expense (a) |
41.8 | 4.0 | % | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||
| Amortization of acquired intangible assets |
12.7 | 1.2 | % | 7.8 | 0.9 | % | 6.7 | 1.0 | % | 10.4 | 1.8 | % | 2.4 | 0.6 | % | — | — | |||||||||||||||||||||||||||||||
| Restructuring charges |
8.1 | 0.7 | % | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||
| Contingent compensation expense (b) |
6.1 | 0.6 | % | 3.7 | 0.4 | % | 3.7 | 0.6 | % | 1.5 | 0.3 | % | — | — | — | — | ||||||||||||||||||||||||||||||||
| Acquisition related expense (gain), net (c) |
0.9 | 0.1 | % | (8.6 | ) | (0.9 | %) | 13.3 | 2.0 | % | 24.7 | 4.3 | % | 303.4 | 82.7 | % | — | — | ||||||||||||||||||||||||||||||
| Legal settlement |
(2.3 | ) | (0.2 | %) | — | — | — | — | — | — | 54.5 | 14.9 | % | — | — | |||||||||||||||||||||||||||||||||
| Impairment of manufacturing equipment |
— | — | — | — | — | — | 4.1 | 0.7 | % | — | — | — | — | |||||||||||||||||||||||||||||||||||
| Amortization of inventory revaluation costs |
— | — | — | — | — | — | — | — | 0.7 | 0.2 | % | — | — | |||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
| Non-GAAP operating profit |
$ | 266.8 | 25.3 | % | $ | 214.6 | 23.8 | % | $ | 149.3 | 22.4 | % | $ | 121.2 | 21.1 | % | $ | 59.8 | 16.3 | % | $ | 37.8 | 20.4 | % | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
| (a) | Headquarter relocation expense are primarily non-cash in nature and includes a cease-use loss upon vacating certain buildings of our prior headquarters, accelerated depreciation expense, and double rent expense during the transition to our new headquarter facility. |
| (b) | Contingent compensation expense represents contingent consideration for post-combination services associated with acquisitions. |
| (c) | Acquisition related (gain) expense, net includes the following adjustments: |
| 2011 adjustments: |
| - | IPR&D charge of $5.4 million related to milestone payments for a prior acquisition |
| - | Gain of $4.5 million for changes in fair value of contingent consideration, $1.5 million of which was recorded in Q4 2011 |
| 2010 adjustments: |
| - | IPR&D charge of $1.3 million related to milestone payments for a prior acquisition |
| - | Acquisition expenses of $0.5 million |
| - | Gain on acquisition of $2.9 million recorded for the difference between the carrying value of a cost-method investment prior to acquisition and the fair value of that investment at the time of acquisition |
| - | Gain of $10.4 million recorded in Q4 2010 for changes in fair value of contingent consideration |
| 2009, 2008, & 2007 adjustments: |
| - | Research and development charges related to acquisitions |
Annex
Results of Operations - Non-GAAP
(In thousands, except per share amounts)
ITEMIZED RECONCILIATION BETWEEN GAAP AND NON-GAAP NET INCOME PER SHARE BY QUARTER:
| Fiscal Year 2011 (a) | Fiscal Year 2010 (a) | Fiscal Year 2009 (a) | Fiscal Year 2008 (a) | Fiscal Year 2007 (a) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Q4 | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| GAAP net income per share — diluted |
$ | 0.09 | $ | 0.15 | $ | 0.22 | $ | 0.16 | $ | 0.25 | $ | 0.24 | $ | 0.21 | $ | 0.16 | $ | 0.09 | $ | 0.12 | $ | 0.18 | $ | 0.14 | $ | 0.20 | $ | (0.08 | ) | $ | 0.09 | $ | 0.08 | $ | (0.06 | ) | $ | 0.10 | $ | 0.06 | $ | (2.80 | ) | |||||||||||||||||||||||||||||||||||||
| Pro forma impact of weighted average shares (b) |
— | — | 0.01 | 0.01 | 0.01 | 0.01 | 0.02 | 0.01 | — | 0.01 | 0.01 | 0.01 | — | 0.01 | 0.02 | 0.02 | 0.01 | (0.01 | ) | (0.01 | ) | 0.22 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Adjustments to net income: |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Headquarter relocation expense (c) |
0.24 | 0.05 | 0.02 | 0.02 | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Non-cash interest expense (d) |
0.07 | 0.07 | 0.06 | 0.05 | 0.04 | 0.04 | 0.04 | 0.04 | 0.04 | 0.04 | 0.04 | 0.04 | 0.04 | 0.03 | 0.03 | 0.03 | 0.04 | 0.04 | 0.04 | 0.02 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Restructuring charges |
0.07 | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Amortization of acquired intangible assets |
0.02 | 0.02 | 0.02 | 0.02 | 0.02 | 0.02 | 0.01 | 0.01 | 0.01 | 0.01 | 0.01 | 0.01 | 0.02 | 0.02 | 0.02 | 0.02 | 0.01 | 0.01 | 0.01 | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Legal settlements |
(0.02 | ) | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | 0.46 | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Acquisition related (gain) expense, net (e) |
(0.01 | ) | (0.02 | ) | 0.03 | — | (0.07 | ) | — | (0.01 | ) | — | 0.08 | — | — | 0.02 | — | 0.20 | — | — | — | — | — | 2.61 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Contingent compensation expense (f) |
0.01 | — | 0.02 | 0.01 | 0.01 | 0.01 | 0.01 | 0.01 | 0.01 | 0.01 | 0.01 | 0.01 | 0.01 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Loss on extinguishment of debt |
— | 0.01 | 0.07 | 0.19 | — | — | — | — | — | — | — | (0.01 | ) | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Impairment loss related to a cost-method investment |
— | — | — | — | 0.09 | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Impairment of manufacturing equipment |
— | — | — | — | — | — | — | — | — | — | — | — | — | — | 0.03 | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Amortization of inventory revaluation costs |
— | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | 0.01 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Incremental non-GAAP tax expense (g) |
(0.12 | ) | (0.06 | ) | (0.07 | ) | (0.11 | ) | (0.06 | ) | (0.02 | ) | (0.02 | ) | (0.02 | ) | (0.02 | ) | (0.02 | ) | (0.02 | ) | (0.02 | ) | (0.02 | ) | (0.03 | ) | (0.03 | ) | (0.02 | ) | (0.31 | ) | (0.02 | ) | — | — | ||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||
| Non-GAAP net income per share — diluted |
$ | 0.35 | $ | 0.22 | $ | 0.38 | $ | 0.35 | $ | 0.29 | $ | 0.30 | $ | 0.26 | $ | 0.21 | $ | 0.21 | $ | 0.17 | $ | 0.23 | $ | 0.20 | $ | 0.25 | $ | 0.15 | $ | 0.16 | $ | 0.13 | $ | 0.15 | $ | 0.12 | $ | 0.10 | $ | 0.06 | ||||||||||||||||||||||||||||||||||||||||
| Weighted average shares used in calculation of Non-GAAP diluted net income per share |
124,409 | 134,674 | 139,357 | 142,176 | 140,080 | 135,913 | 132,547 | 128,960 | 129,698 | 132,839 | 132,329 | 127,546 | 128,044 | 133,046 | 125,310 | 120,944 | 117,756 | 118,790 | 116,122 | 116,040 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ITEMIZED RECONCILIATION BETWEEN GAAP AND NON-GAAP DILUTED NUMBER OF SHARES: |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Weighted average shares used in calculation of GAAP diluted net income per share |
124,888 | 135,966 | 141,765 | 153,129 | 151,171 | 145,205 | 140,951 | 136,407 | 136,095 | 139,874 | 139,465 | 132,967 | 131,301 | 119,733 | 133,396 | 127,528 | 110,110 | 118,790 | 116,122 | 106,844 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Weighted average dilutive potential common shares issuable of redeemable convertible senior notes (b) |
(479 | ) | (1,292 | ) | (2,408 | ) | (10,953 | ) | (11,091 | ) | (9,292 | ) | (8,404 | ) | (7,447 | ) | (6,397 | ) | (7,035 | ) | (7,136 | ) | (5,421 | ) | (3,257 | ) | (9,157 | ) | (8,086 | ) | (6,584 | ) | (4,162 | ) | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
| Weighted average potential common shares excluded due to anti-dilutive effect (h) |
— | — | — | — | — | — | — | — | — | — | — | — | 22,470 | 11,808 | — | — | 9,196 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||
| Weighted average shares used in calculation of Non-GAAP diluted net income per share |
124,409 | 134,674 | 139,357 | 142,176 | 140,080 | 135,913 | 132,547 | 128,960 | 129,698 | 132,839 | 132,329 | 127,546 | 128,044 | 133,046 | 125,310 | 120,944 | 117,756 | 118,790 | 116,122 | 116,040 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (a) | The sum of all four quarterly results by line item as presented above may be different than the reported full fiscal year results, due to the effect of rounding. In addition, for years of 2009 and prior, non-GAAP results presented above may be different from the non-GAAP results historically reported in the respective years as they have been adjusted for the following items to achieve comparability to non-GAAP results in 2010 and 2011: |
| - | Two-for-one stock split effective September 22, 2008; |
| - | Retroactive application of authoritative accounting guidance effective December 28, 2008 for convertible debt instruments that may be settled in cash upon conversion; |
| - | The effect of share-based compensation expense, while excluded from the non-GAAP results historically reported in years of 2009 and prior, is included in the non-GAAP results presented above, consistent with the inclusion of such effect in 2010 and 2011. |
| (b) | 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. |
| (c) | Headquarter relocation expense are primarily non-cash in nature and includes a cease-use loss upon vacating certain buildings of our prior headquarters, accelerated depreciation expense, and double rent expense during the transition to our new headquarter facility. |
| (d) | Non-cash interest expense is calculated in accordance with the authoritative accounting guidance for convertible debt instruments that may be settled in cash. |
| (e) | Acquisition related (gain) expense, net includes the following current year and prior year adjustments: |
| 2011 adjustments: |
| - | IPR&D charge of $5.4 million in Q2 2011 related to milestone payments for a prior acquisition |
| - | Changes in fair value of contingent consideration as follows: loss of $0.3 million in Q1, gain of $0.7 million in Q2, gain of $2.6 million in Q3, and gain of $1.5 million in Q4. |
| 2010 adjustments: |
| - | IPR&D charge of $1.3 million in Q2 related to milestone payments for a prior acquisition |
| - | Acquisition expenses in Q2 of $0.5 million |
| - | Gain on acquisition of $2.9 million recorded for the difference between the carrying value of a cost-method investment prior to acquisition and the fair value of that investment at the time of acquisition, recorded in Q2 |
| - | Gain of $10.4 million recorded in Q4 for changes in fair value of contingent consideration |
| 2009, 2008, & 2007 adjustments: |
| - | Research and development charges related to acquisitions |
| (f) | Contingent compensation expense represents contingent consideration for post-combination services associated with acquisitions. |
| (g) | Incremental non-GAAP tax expense reflects the increase to GAAP tax expense related to the non-GAAP adjustments listed above. |
| (h) | Weighted average shares excluded from calculation of GAAP diluted net income per share for Q1 2007, Q4 2007, and Q3 2008 due to anti-dilutive effect on GAAP net loss. |
Annex
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. 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 |
$ | 1.40 - $1.50 | ||
| Non-cash interest expense (a) |
(0.16 | ) | ||
| Headquarter relocation expense (b) |
(0.11 | ) | ||
| Expenses related to unsolicited tender offer |
(0.11 | ) | ||
| Amortization of intangible assets |
(0.06 | ) | ||
| Contingent compensation expense (c) |
(0.03 | ) | ||
| Restructuring charges |
(0.03 | ) | ||
| Pro forma impact of weighted average shares (d) |
(0.01 | ) | ||
|
|
|
|||
| GAAP diluted net income per share |
$ | 0.89 - $0.99 | ||
|
|
|
|||
| (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 during the first half of 2012, 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, accelerated depreciation of certain property and equipment, 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) | 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. |