01—Abstract
Summary
Summary of the 10-K filed February 24, 2012. Cited figures are marked; the original filing is the authoritative source.
Illumina, Inc. reported fiscal 2011 total revenue of $1,055.5 milliona, up from $902.7 million in 2010, with product revenue of $987.3 million and service and other revenue of $68.3 million.
Gross margin improved to 67.2% from 66.6%, but income from operations fell to $199.5 millionb from $211.7 million, reflecting $41.8 million of headquarter relocation expense and an $8.1 million restructuring charge. Net income was $86.6 million, or $0.62 per diluted share, compared with $124.9 million, or $0.87 per diluted share, in 2010. Total other expense, net rose to $66.4 million, driven by a $37.6 million loss on extinguishment of debt tied to conversions of the 0.625% convertible notes due 2014 and higher interest expense from the 0.25% convertible notes due 2016.
Balance sheet liquidity remained substantial, with cash, cash equivalents and short-term investments of $1,189.6 millionc at January 1, 2012, and cash provided by operating activities of $358.1 million. The company repurchased $570.4 million of common stock during the year, including $314.3 million concurrently with the issuance of $920.0 million of 2016 convertible notes. Long-term debt was $807.4 million, and total stockholders' equity declined to $1,075.2 million.
Management states that it expects research and development and selling, general and administrative expenses to rise in 2012. The filing also discloses an unsolicited hostile cash tender offer from CKH Acquisition Corp. and Roche Holding Ltd. at $44.50d per share, commenced January 27, 2012.
The board unanimously recommended that stockholders reject the offer, Roche intends to oppose the re-election of four directors including the Chairman and CEO, and four stockholder class action lawsuits have been filed. Management expects higher selling, general and administrative expenses in 2012 from costs of responding to the offer.
02—Key points
Key Highlights
- Total revenue rose 17% to $1,055.5 million in 2011, driven by consumable sales growth and the launch of MiSeq in the third quarter of 2011.
- Gross margin improved to 67.2% from 66.6%, mainly from higher instrument average selling prices and a shift toward sequencing consumables.
- Income from operations decreased 6% to $199.5 million, due to $41.8 million of headquarter relocation expense and an $8.1 million restructuring charge.
- Net income was $86.6 million ($0.62 diluted EPS), down from $124.9 million ($0.87 diluted EPS) in 2010, with a $37.6 million loss on debt extinguishment.
- Cash, cash equivalents and short-term investments totaled $1,189.6 million at year-end, and operating cash flow was $358.1 million.
- The company repurchased $570.4 million of its common stock in 2011 and issued $920.0 million of 0.25% convertible senior notes due 2016.
- Roche's unsolicited $44.50 per share tender offer, the board's recommendation to reject it, and four stockholder class action lawsuits are disclosed as major risks.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2012, Illumina kept $0.13.
- Revenue$1.15B100.0%
- Cost of revenue−$375.0M32.6%
- Gross profit$773.5M67.4%
- Operating costs−$572.8M49.9%
- Operating income$200.8M17.5%
- Interest, other & tax−$49.5M4.3%
- Net income$151.3M13.2%
Where FY2012 revenue went
$1.15B- Cost of revenue: $375.0M, 33% of revenue
- SG&A: $286.0M, 25% of revenue
- R&D: $231.0M, 20% of revenue
- Net income: $151.3M, 13% of revenue
- Other operating costs: $55.8M, 4.9% of revenue
- Interest, other & tax: $49.5M, 4.3% of revenue
Kept 13% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2012filed February 24, 2012Financial Statements
FY2012 against FY2011
| Line item | FY2012FY2011 | Change |
|---|---|---|
| Revenue | $1.15B$902.74M | +27.2% |
| Cost of Revenue | $374.99M$301.20M | +24.5% |
| Gross Profit | $773.53M$601.54M | +28.6% |
| R&D Expenses | $231.03M$177.95M | +29.8% |
| SG&A Expenses | $285.99M$220.45M | +29.7% |
| Operating Expenses | $572.78M$389.89M | +46.9% |
| Operating Income | $200.75M$211.65M | −5.2% |
| Interest Expense | $37.78M$24.60M | +53.6% |
| Net Income | $151.25M$124.89M | +21.1% |
| EPS (Basic) | $1.23$1.01 | +21.8% |
| EPS (Diluted) | $1.13$0.87 | +29.9% |
| Shares Outstanding (Basic) | 123.00M123.58M | −0.5% |
| Shares Outstanding (Diluted) | 133.69M143.43M | −6.8% |
05—Questions
Frequently Asked Questions
What is the status of the Roche tender offer?
CKH Acquisition Corp. and Roche Holding Ltd. commenced an unsolicited cash tender offer on January 27, 2012 at $44.50 per share. The board of directors unanimously recommended that stockholders reject the offer and not tender their shares. Roche also intends to oppose the re-election of four directors, including the Chairman and CEO, at the 2012 annual meeting.
Why did operating income decline in 2011 despite revenue growth?
Total operating expense rose 31% to $509.6 million. The increase was driven mainly by $41.8 million of headquarter relocation expense and an $8.1 million restructuring charge, along with higher personnel costs in research and development and selling, general and administrative expenses.
How is the company's debt structure changing?
During 2011 the company issued $920.0 million of 0.25% convertible senior notes due 2016 and used $349.9 million of the proceeds to repay converted 0.625% notes due 2014. As of January 1, 2012, the principal outstanding was $920.0 million for the 2016 notes and $40.1 million for the 2014 notes. Long-term debt, net, was $807.4 million.
What drove revenue growth in 2011?
Consumables revenue increased $90.8 million, or 18%, to $595.8 million, mainly from sequencing consumables tied to a growing installed base. Instrument revenue increased $48.5 million, or 15%, to $373.1 million, reflecting the MiSeq launch in the third quarter and higher HiSeq revenue.
How much exposure does the company have to government research funding?
Management estimates that approximately one-third of total revenue is derived, directly or indirectly, from funding provided by the U.S. National Institutes of Health. The NIH budget decreased approximately 1% in fiscal 2011, and the company notes continuing uncertainty about government and academic research funding in the United States and Europe.
06—Continue