- Company Reports GAAP EPS of $0.28
- Product Sales Establish New Quarterly Record of $83.5 Million,
Up 21% From Prior Year
- Total Revenues Also Increase 21%, to a New Quarterly
Record of $92.2 Million
SAN DIEGO, Nov. 1 /PRNewswire-FirstCall/ -- Gen-Probe Incorporated
(Nasdaq: GPRO) today reported strong financial results for the third quarter
and nine months ended September 30, 2006, including new quarterly records for
product sales and total revenues.
On a GAAP basis, net income for the third quarter of 2006 was
$15.1 million ($0.28 per share), compared to net income of $16.4 million
($0.31 per share) in the prior year period. GAAP earnings in the third
quarter of 2006 include expenses related to share-based compensation under
SFAS No. 123(R), which reduced after-tax earnings by $4.0 million ($0.08 per
share). Adjusting only for these expenses, net income for the third quarter
of 2006 was $19.2 million ($0.36 per share) on a non-GAAP basis, an increase
of 16% per share compared to the prior year period.
Throughout this press release, all per share amounts are calculated on a
fully diluted basis, and no adjustments have been made to GAAP results except
those related to implementing SFAS No. 123(R). Gen-Probe believes these
non-GAAP financial measures help investors compare current results to those in
prior periods. See the section below entitled "About Non-GAAP Financial
Measures."
Product sales for the third quarter of 2006 were a record $83.5 million,
compared to $68.9 million in the prior year period, an increase of 21%. Total
revenues for the third quarter of 2006 were a record $92.2 million, compared
to $76.3 million in the prior year period, an increase of 21%.
On a GAAP basis, net income for the first nine months of 2006 was
$43.3 million ($0.82 per share), compared to net income of $43.3 million
($0.83 per share), in the prior year period. GAAP earnings in the first nine
months of 2006 include expenses related to share-based compensation under SFAS
No. 123(R), which reduced after-tax earnings by $10.4 million ($0.19 per
share). On a non-GAAP basis, net income for the first nine months of 2006 was
$53.7 million ($1.01 per share), an increase of 22% per share compared to the
prior year period.
Product sales in the first nine months of 2006 were $239.8 million,
compared to $193.7 million in the prior year period, an increase of 24%.
Total revenues in the first nine months of 2006 were $263.7 million, compared
to $218.0 million in the prior year period, an increase of 21%.
"Gen-Probe once again posted strong financial results in the third quarter
of 2006, as both clinical diagnostics and blood screening sales grew by more
than 20% compared to the prior year," said Henry L. Nordhoff, the Company's
chairman, president and chief executive officer. "In addition, we secured
several new product approvals that we believe will solidify our market
leadership positions and generate future growth."
Detailed Results
Gen-Probe's clinical diagnostics sales in the third quarter of 2006 were
led by the APTIMA Combo 2(R) assay, an amplified nucleic acid test (NAT) for
simultaneously detecting Chlamydia trachomatis (CT) and Neisseria gonorrhoeae
(GC). Sales of this assay continued to grow strongly, driven by market share
gains on both the semi-automated instrument platform and on the
high-throughput, fully automated TIGRIS(R) system. Revenue from the PACE(R)
product line, the Company's non-amplified tests for the same microorganisms,
declined in the third quarter compared to the prior year period, in line with
Gen-Probe's expectations.
In blood screening, product sales benefited primarily from continued
international expansion, and from higher pricing associated with commercial
sales of the PROCLEIX(R) WNV (West Nile virus) assay in the United States.
Gen-Probe's blood screening products are marketed worldwide by Chiron, a
business unit of Novartis Vaccines and Diagnostics. Sales of TIGRIS(R)
instruments and spare parts to Chiron totaled $2.0 million in the third
quarter, compared to $3.5 million in the prior year period, a decrease that
was in line with Gen-Probe's expectations.
Product sales were, in millions:
Three Months Ended Sept. 30, Nine Months Ended Sept. 30,
2006 2005 Increase 2006 2005 Increase
Clinical
diagnostics $43.3 $36.0 20% $125.8 $104.3 21%
Blood screening $40.2 $32.9 22% $114.0 $89.4 28%
Total product
sales $83.5 $68.9 21% $239.8 $193.7 24%
Collaborative research revenues for the third quarter of 2006 were
$1.5 million, compared to $6.3 million in the prior year period. For the
first nine months of 2006, collaborative research revenues were $14.7 million,
compared to $19.4 million in the prior year period. In both the third quarter
and first nine months of 2006, collaborative research revenues decreased
primarily due to the elimination of "cost recovery" revenue that Gen-Probe had
been receiving for investigational use of the PROCLEIX WNV assay. In the
third quarter of 2006, the Company began recording in product sales all
revenues associated with the PROCLEIX WNV assay, which was approved for use on
Gen-Probe's enhanced semi-automated instrument system (eSAS) in December of
2005.
Royalty and license revenues for the third quarter of 2006 were
$7.3 million, compared to $1.0 million in the prior year period. For the
first nine months of 2006, royalty and license revenues were $9.2 million,
compared to $5.0 million in the prior year period. In both the third quarter
and first nine months of 2006, royalty and license revenues increased
primarily due to $5.0 million of revenue associated with the settlement of
Gen-Probe's patent infringement lawsuits against Bayer. In addition,
Gen-Probe earned $1.0 million of license revenue in the third quarter of 2006
under the Company's 2004 agreement with Tosoh. This payment was contingent
upon a favorable outcome for Gen-Probe in its legal disputes with Bayer.
On a GAAP basis, gross margin on product sales was 71.5% in the third
quarter of 2006, compared to 69.0% in the prior year period. The increase in
gross margin percentage resulted primarily from higher pricing associated with
commercial sales of the PROCLEIX WNV assay in the United States, and from
lower sales of TIGRIS instruments and spare parts for blood screening to
Chiron. Under Gen-Probe's contract with Chiron, these sales are made
approximately at cost. These improvements in gross margin percentage were
partially offset by SFAS No. 123(R), which added $0.7 million to cost of goods
sold. The amount of share-based compensation expense included in cost of
goods sold is expected to increase in the fourth quarter of 2006 as the
related inventory is sold. On a non-GAAP basis, gross margin on product sales
was 72.4% in the third quarter of 2006.
On a GAAP basis, gross margin on product sales was 68.8% for the first
nine months of 2006, compared to 70.4% in the prior year period. This
decrease resulted primarily from SFAS No. 123(R), which added $1.4 million to
cost of goods sold, from additional scrap expense incurred in the second
quarter of 2006, and from low-margin sales of TIGRIS instruments and spare
parts for blood screening to Chiron. On a non-GAAP basis, gross margin on
product sales was 69.4% in the first nine months of 2006.
On a GAAP basis, research and development (R&D) expenses were
$24.2 million in the third quarter of 2006, compared to $17.5 million in the
prior year period, an increase of 38%. This increase resulted primarily from
SFAS No. 123(R), which added $2.0 million to R&D expenses, and from the timing
of the Company's development program for human papillomavirus (HPV). On a
non-GAAP basis, R&D expenses were $22.2 million in the third quarter of 2006,
an increase of 27% compared to the prior year period.
On a GAAP basis, R&D expenses for the first nine months of 2006 were
$63.8 million, compared to $53.6 million in the prior year period, an increase
of 19%. This increase resulted primarily from the factors described above,
including SFAS No. 123(R), which added $5.7 million to R&D expenses. On a
non-GAAP basis, R&D expenses were $58.1 million in the first nine months of
2006, an increase of 8% compared to the prior year period.
On a GAAP basis, marketing and sales expenses were $9.5 million in the
third quarter of 2006, compared to $7.6 million in the prior year period, an
increase of 25%. This increase resulted primarily from SFAS No. 123(R), which
added $0.9 million to marketing and sales expenses, from higher commissions
associated with increased sales of clinical diagnostics products, and from
increased headcount. On a non-GAAP basis, marketing and sales expenses were
$8.7 million in the third quarter of 2006, an increase of 14% compared to the
prior year period.
On a GAAP basis, marketing and sales expenses were $27.5 million for the
first nine months of 2006, compared to $22.4 million in the prior year period,
an increase of 23%. This increase resulted primarily from SFAS No. 123(R),
which added $2.3 million to marketing and sales expenses, and from the other
factors described above. On a non-GAAP basis, marketing and sales expenses
were $25.2 million in the first nine months of 2006, an increase of 13%
compared to the prior year period.
On a GAAP basis, general and administrative (G&A) expenses were
$12.7 million in the third quarter of 2006, compared to $7.8 million in the
prior year period, an increase of 63%. This increase resulted primarily from
$2.0 million of incremental legal expenses that Gen-Probe paid its outside
litigation counsel in connection with the Company's settlement of its disputes
with Bayer, and from SFAS No. 123(R), which added $2.7 million to G&A
expenses. On a non-GAAP basis, G&A expenses were $10.0 million in the third
quarter of 2006, an increase of 28% compared to the prior year period.
On a GAAP basis, G&A expenses for the first nine months of 2006 were
$34.1 million, compared to $22.8 million in the prior year period, an increase
of 50%. This increase resulted primarily from SFAS No. 123(R), which added
$6.8 million to G&A expenses, and from the additional legal expenses described
above. On a non-GAAP basis, G&A expenses were $27.3 million in the first nine
months of 2006, an increase of 20% compared to the prior year period.
Gen-Probe continues to have a strong balance sheet. As of September 30,
2006, the Company had $271.5 million of cash, cash equivalents and short-term
investments, and no debt. In the first nine months of 2006, Gen-Probe
generated net cash of $72.0 million from its operating activities, including
$33.8 million in the third quarter of 2006.
Updated 2006 Financial Guidance
"Based on our strong performance in the third quarter, we are increasing
our full-year 2006 revenue guidance and raising the low end of our EPS
guidance," said Herm Rosenman, the Company's vice president of finance and
chief financial officer.
Gen-Probe's non-GAAP 2006 guidance for gross margins, R&D expenses,
marketing and sales expenses, G&A expenses, effective income tax rate and EPS
is computed without the effect of SFAS No. 123(R) and is reconciled to the
corresponding GAAP measure in the bullets and table below and discussed in the
section titled "About Non-GAAP Financial Measures."
The following table describes Gen-Probe's updated guidance for the full
year 2006, on both a GAAP and a non-GAAP basis. The percentages shown are of
total revenues.
GAAP Estimated Effects of Non-GAAP
Guidance SFAS No. 123(R) (a) Guidance
Total Revenues $349 - $352 million None $349 - $352 million
Product Gross
Margin Approx. 69% Less than 1% 69% to 70%
R&D Expenses 24% to 25% Approx. 2% 22% to 23%
Marketing and
Sales Expenses 10% to 11% Approx. 1% 9% to 10%
G&A Expenses 12% to 13% Approx. 2% 10% to 11%
Effective Income
Tax Rate Approx. 37% Less than 1% Approx. 37%
Diluted EPS $1.09 to $1.12 $0.27 to $0.28 $1.37 to $1.39
(a) These estimated effects reconcile the Company's 2006 GAAP financial
guidance ranges to the Company's non-GAAP financial guidance ranges.
The reconciling item represents the estimated impact of SFAS
No. 123(R), which includes non-cash stock compensation awards,
including stock options and employee stock purchase plan shares.
About Non-GAAP Financial Measures
To supplement Gen-Probe's financial results for the third quarter and
first nine months of 2006 and its 2006 financial guidance, in each case
presented in accordance with GAAP, Gen-Probe uses the following financial
measures defined as non-GAAP by the SEC: non-GAAP net income, non-GAAP product
gross margin, non-GAAP R&D expenses, non-GAAP marketing and sales expenses,
non-GAAP G&A expenses, non-GAAP effective income tax rate, and non-GAAP
diluted EPS. Gen-Probe's management does not itself, nor does it suggest that
investors should, consider such non-GAAP financial measures in isolation from,
or as a substitute for, financial information prepared and presented in
accordance with GAAP. Gen-Probe's management believes that these non-GAAP
financial measures provide meaningful supplemental information regarding the
Company's performance by excluding certain expenses that may not be indicative
of core business results. Gen-Probe believes that both management and
investors benefit from referring to these non-GAAP financial measures in
assessing Gen-Probe's performance and when planning, forecasting and analyzing
future periods. These non-GAAP financial measures also facilitate
management's internal comparisons to Gen-Probe's historical performance and
our competitors' operating results. Gen-Probe believes these non-GAAP
financial measures are useful to investors in allowing for greater
transparency with respect to supplemental information used by management in
its financial and operational decision making.
Recent Events
* FDA License for PROCLEIX ULTRIO Assay. On October 4, Gen-Probe
announced that the U.S. Food and Drug Administration (FDA) had granted
marketing approval for the PROCLEIX ULTRIO assay to run on the eSAS.
The assay was approved to screen donated blood, plasma, organs and
tissue for HIV-1 and hepatitis C virus (HCV) in individual blood
donations or in pools of up to 16 blood samples, and to detect the
presence of hepatitis B virus (HBV). However, the initial pivotal study
for the assay was not designed to, and did not, demonstrate yield,
defined as HBV-infected blood donations that are negative based on
serology tests. Based on discussions with the FDA, Gen-Probe and Chiron
plan to initiate a post-marketing study in early 2007 to demonstrate HBV
yield and gain a donor-screening claim for HBV.
* Response to TIGRIS/WNV Questions. On September 20, Gen-Probe announced
that it had submitted responses to the FDA's questions on the Company's
regulatory application to run the previously approved PROCLEIX WNV assay
on the investigational TIGRIS system.
* APTIMA(R) Qualitative Viral Assays. On October 5, Gen-Probe announced
that the FDA had granted marketing approval for the APTIMA HIV-1 RNA
qualitative assay. The assay may be used as an aid in the diagnosis of
acute and primary HIV-1 infection, and to confirm HIV-1 infection in an
individual whose specimen is repeatedly reactive (positive) for HIV-1
antibodies. The assay is the first FDA-approved qualitative nucleic
acid test for these intended uses. Gen-Probe expects to launch the
assay this month in conjunction with the APTIMA HCV RNA qualitative
assay.
* Additional TIGRIS Menu. On October 18, Gen-Probe announced that the FDA
had granted marketing clearance to run the Company's standalone APTIMA
assays for CT and GC on the TIGRIS system. And on August 22, the
Company announced that the FDA had granted marketing clearance to use
the APTIMA Combo 2 assay to test two additional kinds of patient samples
on the TIGRIS system. These samples are liquid Pap specimens collected
in the PreservCyt(R) solution and processed with Cytyc's ThinPrep(R)
2000 system, and clinician- and patient-collected vaginal swab
specimens.
* New TIGRIS Patent. On October 16, Gen-Probe announced that it had been
issued U.S. Patent No. 7,118,892, which extends the Company's
intellectual property estate relating to integrated instrument systems
for nucleic acid testing.
* Stronger Corporate Governance Practices. On October 2, Gen-Probe
announced that as part of its ongoing efforts to strengthen its
corporate governance practices, the Company's board of directors had
approved the termination of its shareholder rights plan, or "poison
pill," and instituted a stock ownership policy for officers and
directors.
Webcast Conference Call<
A live webcast of Gen-Probe's third quarter 2006 conference call for
investors can be accessed at http://www.gen-probe.com beginning at 4:30 p.m.
Eastern Time today. The webcast will be archived for at least 90 days.
A telephone replay of the call also will be available for approximately
24 hours. The replay number is (866) 365-4158 for domestic callers and
(203) 369-0225 for international callers.
About Gen-Probe
Gen-Probe Incorporated is a global leader in the development, manufacture
and marketing of rapid, accurate and cost-effective nucleic acid tests (NATs)
that are used primarily to diagnose human diseases and screen donated human
blood. Gen-Probe has more than 20 years of NAT expertise, and received the
2004 National Medal of Technology, America's highest honor for technological
innovation, for developing NAT assays for blood screening. Gen-Probe is
headquartered in San Diego and employs approximately 900 people. For more
information, go to www.gen-probe.com.
Trademarks
TIGRIS, APTIMA, APTIMA COMBO 2 and PACE are trademarks of Gen-Probe
Incorporated. ULTRIO and PROCLEIX are trademarks of Chiron, a business unit
of Novartis Vaccines and Diagnostics. All other trademarks are the property
of their owners.
Caution Regarding Forward-Looking Statements
Any statements in this press release about our expectations, beliefs,
plans, objectives, assumptions or future events or performance, including
those under the heading "Updated 2006 Financial Guidance," are not historical
facts and are forward-looking statements. These statements are often, but not
always, made through the use of words or phrases such as believe, will,
expect, anticipate, estimate, intend, plan and would. For example, statements
concerning Gen-Probe's financial condition, possible or expected results of
operations, regulatory approvals, future milestone payments, growth
opportunities, and plans and objectives of management are all forward-looking
statements. Forward-looking statements are not guarantees of performance.
They involve known and unknown risks, uncertainties and assumptions that may
cause actual results, levels of activity, performance or achievements to
differ materially from those expressed or implied. Some of these risks,
uncertainties and assumptions include but are not limited to: (i) the risk
that we may not achieve our expected 2006 growth, revenue, earnings or other
financial targets, (ii) the risk that we may not earn or receive milestone
payments from our collaborators, including Novartis, (iii) the possibility
that the market for the sale of our new products, such as our TIGRIS system,
APTIMA Combo 2 assay and PROCLEIX ULTRIO assay, may not develop as expected,
(iv) the enhancement of existing products and the development of new products,
including products, if any, to be developed under our recent industrial
collaborations, may not proceed as planned, (v) the risk that products
including our PROCLEIX ULTRIO assay, TIGRIS instrument for blood screening, or
PROCLEIX WNV assay on the TIGRIS instrument may not be approved by regulatory
authorities or commercially available in the time frame we anticipate, or at
all, (vi) we may not be able to compete effectively, (vii) we may not be able
to maintain our current corporate collaborations and enter into new corporate
collaborations or customer contracts, (viii) we are dependent on Novartis,
Bayer and other third parties for the distribution of some of our products,
(ix) we are dependent on a small number of customers, contract manufacturers
and single source suppliers of raw materials, (x) changes in third-party
reimbursement policies regarding our products could adversely affect sales of
our products, (xi) changes in government regulation affecting our diagnostic
products could harm our sales and increase our development costs, (xii) the
risk that our intellectual property may be infringed by third parties or
invalidated, and (xiii) our involvement in patent and other intellectual
property and commercial litigation could be expensive and could divert
management's attention. The foregoing list sets forth some, but not all, of
the factors that could affect our ability to achieve results described in any
forward-looking statements. For additional information about risks and
uncertainties we face and a discussion of our financial statements and
footnotes, see documents we file with the SEC, including our most recent
annual report on Form 10-K and all subsequent periodic reports. We assume no
obligation and expressly disclaim any duty to update forward-looking
statements to reflect events or circumstances after the date of this news
release or to reflect the occurrence of subsequent events.
Gen-Probe Incorporated
Consolidated Balance Sheets - GAAP
(In thousands, except share and per share data)
September 30, December 31,
2006 2005
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $62,066 $32,328
Short-term investments 209,454 187,960
Trade accounts receivable, net of allowance
for doubtful accounts of $670 and $790 at
September 30, 2006 and December 31, 2005,
respectively 24,303 31,930
Accounts receivable - other 2,171 1,924
Inventories 44,524 36,342
Deferred income taxes 10,030 10,389
Prepaid expenses 11,450 10,768
Other current assets 4,977 4,184
Total current assets 368,975 315,825
Property, plant and equipment, net 130,289 105,190
Capitalized software 19,066 20,952
Goodwill 18,621 18,621
License, manufacturing access fees and
other assets 56,074 49,648
Total assets $593,025 $510,236
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $10,948 $14,029
Accrued salaries and employee benefits 18,324 14,910
Other accrued expenses 3,955 3,264
Income tax payable 7,582 13,192
Deferred revenue 4,296 7,771
Total current liabilities 45,105 53,166
Deferred income taxes 5,425 5,124
Deferred revenue 3,833 4,333
Deferred rent 153 240
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.0001 par value per share;
20,000,000 shares authorized, none issued
and outstanding -- --
Common stock, $.0001 par value per share;
200,000,000 shares authorized, 52,051,761
and 51,137,541 shares issued and outstanding
at September 30, 2006 and December 31, 2005,
respectively 5 5
Additional paid-in capital 322,302 281,907
Deferred compensation -- (5,951)
Accumulated other comprehensive income (loss) 281 (1,231)
Retained earnings 215,921 172,643
Total stockholders' equity 538,509 447,373
Total liabilities and stockholders' equity $593,025 $510,236
Gen-Probe Incorporated
Consolidated Statements of Income - GAAP
(In thousands, except per share data)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2006 2005 2006 2005
Revenues:
Product sales $83,470 $68,941 $239,811 $193,651
Collaborative research revenue 1,470 6,336 14,743 19,358
Royalty and license revenue 7,287 994 9,151 4,984
Total revenues 92,227 76,271 263,705 217,993
Operating expenses:
Cost of product sales 23,801 21,399 74,715 57,247
Research and development 24,178 17,506 63,833 53,597
Marketing and sales 9,526 7,555 27,533 22,365
General and administrative 12,748 7,822 34,104 22,793
Total operating expenses 70,253 54,282 200,185 156,002
Income from operations 21,974 21,989 63,520 61,991
Total other income, net 1,921 1,318 5,081 3,400
Income before income taxes 23,895 23,307 68,601 65,391
Income tax expense 8,779 6,890 25,323 22,057
Net income $15,116 $16,417 $43,278 $43,334
Net income per share:
Basic $0.29 $0.32 $0.84 $0.86
Diluted $0.28 $0.31 $0.82 $0.83
Weighted average shares
outstanding:
Basic 51,638 50,726 51,407 50,518
Diluted 53,180 52,464 53,001 52,381
Gen-Probe Incorporated
Consolidated Statements of Income - GAAP
(In thousands, except per share data)
(Unaudited)
Three Months Ended
September 30, 2006
Non-GAAP Adjustments GAAP
Revenues:
Product sales $83,470 $-- $83,470
Collaborative research revenue 1,470 -- 1,470
Royalty and license revenue 7,287 -- 7,287
Total revenues 92,227 -- 92,227
Operating expenses:
Cost of product sales 23,058 743 a 23,801
Research and development 22,154 2,024 a 24,178
Marketing and sales 8,663 863 a 9,526
General and administrative 9,999 2,749 a 12,748
Total operating expenses 63,874 6,379 70,253
Income from operations 28,353 (6,379) 21,974
Total other income, net 1,921 -- 1,921
Income before income taxes 30,274 (6,379) 23,895
Income tax expense 11,110 (2,331)a 8,779
Net income $19,164 $(4,048) $15,116
Net income per share:
Diluted earnings per share:
Basic $0.37 $(0.08) $0.29
Diluted $0.36 $(0.08) $0.28
Weighted average shares outstanding:
Basic 51,638 -- 51,638
Diluted 53,309 (129)b 53,180
Three Months Ended
September 30, 2005
Non-GAAP Adjustments GAAP
Revenues:
Product sales $68,941 $-- $68,941
Collaborative research revenue 6,336 -- 6,336
Royalty and license revenue 994 -- 994
Total revenues 76,271 -- 76,271
Operating expenses:
Cost of product sales 21,399 -- 21,399
Research and development 17,506 -- 17,506
Marketing and sales 7,555 -- 7,555
General and administrative 7,822 -- 7,822
Total operating expenses 54,282 -- 54,282
Income from operations 21,989 -- 21,989
Total other income, net 1,318 -- 1,318
Income before income taxes 23,307 -- 23,307
Income tax expense 6,890 -- 6,890
Net income $16,417 $-- $16,417
Net income per share:
Diluted earnings per share:
Basic $0.32 $-- $0.32
Diluted $0.31 $-- $0.31
Weighted average shares outstanding:
Basic 50,726 -- 50,726
Diluted 52,464 -- 52,464
(a) Adjustments to exclude the impact of stock option and ESPP expense in
accordance with SFAS No.123(R). Net income for the three months ended
September 30, 2006 included stock-based compensation expense that
Gen-Probe recorded as a result of the adoption of SFAS No. 123(R) on
January 1, 2006. For the three months ended September 30, 2006, this
expense totaled $6,379,000 before income taxes (after deducting
$287,000 of net capitalization to inventory on the Company's balance
sheet) and $4,048,000 net of income taxes for the period. The Company
did not record this stock-based compensation expense for the three
months ended September 30, 2005. As previously disclosed in the notes
to the financial statements for the three months ended September 30,
2005, net income including pro forma stock-based compensation expense
for this period was $12,578,000.
(b) The shares adjustment for dilutive securities includes stock awards
outstanding calculated under the treasury stock method that are not
included in the GAAP diluted calculation as their effect would be
anti-dilutive.
Gen-Probe Incorporated
Consolidated Statements of Income
(In thousands, except per share data)
(Unaudited)
Nine Months Ended
September 30, 2006
Non-GAAP Adjustments GAAP
Revenues:
Product sales $239,811 $-- $239,811
Collaborative research revenue 14,743 -- 14,743
Royalty and license revenue 9,151 -- 9,151
Total revenues 263,705 -- 263,705
Operating expenses:
Cost of product sales 73,349 1,366 a 74,715
Research and development 58,135 5,698 a 63,833
Marketing and sales 25,198 2,335 a 27,533
General and administrative 27,349 6,755 a 34,104
Total operating expenses 184,031 16,154 200,185
Income from operations 79,674 (16,154) 63,520
Total other income, net 5,081 -- 5,081
Income before income taxes 84,755 (16,154) 68,601
Income tax expense 31,105 (5,782)a 25,323
Net income $53,650 $(10,372) $43,278
Net income per share:
Diluted earnings per share:
Basic $1.04 $(0.20) $0.84
Diluted $1.01 $(0.19) $0.82
Weighted average shares outstanding:
Basic 51,407 -- 51,407
Diluted 53,180 (179)b 53,001
Nine Months Ended
September 30, 2005
Non-GAAP Adjustments GAAP
Revenues:
Product sales $193,651 $-- $193,651
Collaborative research revenue 19,358 -- 19,358
Royalty and license revenue 4,984 -- 4,984
Total revenues 217,993 -- 217,993
Operating expenses:
Cost of product sales 57,247 -- 57,247
Research and development 53,597 -- 53,597
Marketing and sales 22,365 -- 22,365
General and administrative 22,793 -- 22,793
Total operating expenses 156,002 -- 156,002
Income from operations 61,991 -- 61,991
Total other income, net 3,400 -- 3,400
Income before income taxes 65,391 -- 65,391
Income tax expense 22,057 -- 22,057
Net income $43,334 $-- $43,334
Net income per share:
Diluted earnings per share:
Basic $0.86 $-- $0.86
Diluted $0.83 $-- $0.83
Weighted average shares outstanding:
Basic 50,518 -- 50,518
Diluted 52,381 -- 52,381
(a) Adjustments to exclude the impact of stock option and ESPP expense in
accordance with SFAS No.123(R). Net income for the nine months ended
September 30, 2006 included stock-based compensation expense that Gen-
Probe recorded as a result of the adoption of SFAS No. 123(R) on
January 1, 2006. For the nine months ended September 30, 2006, this
expense totaled $16,154,000 before income taxes (after deducting
$1,159,000 that has been capitalized to inventory on the Company's
balance sheet) and $10,372,000 net of income taxes for the period. The
Company did not record this stock-based compensation expense for the
nine months ended September 30, 2005. As previously disclosed in the
notes to the financial statements for the six months ended
September 30, 2005, net income including pro forma stock-based
compensation expense for this period was $31,863,000.
(b) The shares adjustment for dilutive securities includes stock awards
outstanding calculated under the treasury stock method that are not
included in the GAAP diluted calculation as their effect would be
anti-dilutive.
Gen-Probe Incorporated
Consolidated Statements of Cash Flows - GAAP
(In thousands)
(Unaudited)
Nine Months Ended
September 30,
2006 2005
Operating activities
Net income $43,278 $43,334
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 19,752 16,694
Stock-based compensation charges - restricted
stock 1,601 445
Stock-based compensation charges - all other 16,154 --
Stock option income tax benefits 111 6,948
Excess tax benefit from employee stock options (8,232) --
Loss on disposal of property and equipment 4 262
Changes in assets and liabilities:
Accounts receivable 7,550 (5,562)
Inventories (6,830) (6,809)
Prepaid expenses (682) (3,760)
Other assets (798) (2,033)
Accounts payable (3,103) 5,525
Accrued salaries and employee benefits 3,414 4,767
Other accrued expenses 624 (1,169)
Income tax payable 2,615 6,467
Deferred revenue (3,975) 5,253
Deferred income taxes 645 (2,134)
Deferred rent (87) (47)
Net cash provided by operating activities 72,041 68,181
Investing activities
Proceeds from sales and maturities of
short-term investments 83,641 98,693
Purchases of short-term investments (104,163) (105,672)
Cash paid for acquisition of minority
interest in Molecular Light Technology Limited -- (1,539)
Purchases of property, plant and equipment (40,126) (29,894)
Capitalization of intangible assets, including
license and manufacturing access fees (2,245) (22,450)
Cash paid for investment in Qualigen (6,993) --
Other assets (223) (821)
Net cash used in investing activities (70,109) (61,683)
Financing activities
Excess tax benefit from employee stock options 8,232 --
Proceeds from issuance of common stock 19,089 13,963
Net cash provided by financing activities 27,321 13,963
Effect of exchange rate changes on cash and
cash equivalents 485 (369)
Net increase in cash and cash equivalents 29,738 20,092
Cash and cash equivalents at the beginning of
period 32,328 25,498
Cash and cash equivalents at the end of period $62,066 $45,590
CONTACT:
Michael Watts
Sr. Director, Investor Relations and Corporate
Communications
Gen-Probe Incorporated
+1-858-410-8673
|
