| - Company Records Fourth Quarter EPS of $0.32 on a GAAP Basis - - Quarterly Product Sales Establish New Record of $85.5 Million, Total Revenues Increase to $91.1 Million - - For Full Year 2006, Product Sales, Total Revenues and Non-GAAP EPS Increase by More Than 15% -SAN DIEGO, Feb 13, 2007 /PRNewswire-FirstCall via COMTEX News Network/ -- Gen-Probe Incorporated
(Nasdaq: GPRO) today reported strong financial results for the fourth quarter
and full year ended December 31, 2006, as another quarterly record in product
sales drove GAAP EPS of $0.32.
"Gen-Probe once again posted strong financial results in the fourth
quarter of 2006, led by continued robust growth in our clinical diagnostics
business," said Henry L. Nordhoff, the Company's chairman, president and chief
executive officer. "In addition, for the full year 2006, product sales, total
revenues and non-GAAP EPS all grew by more than 15%."
Throughout this press release, all per share amounts are calculated on a
fully diluted basis, and any non-GAAP results solely reflect the
implementation of 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."
In the fourth quarter of 2006, net income was $17.1 million ($0.32 per
share) on a GAAP basis, compared to net income of $16.8 million ($0.32 per
share) in the prior year period. GAAP earnings in the fourth quarter of 2006
include expenses related to share-based compensation under SFAS No. 123(R),
which reduced after-tax earnings by $3.3 million ($0.06 per share). Adjusting
only for these expenses, net income for the fourth quarter of 2006 was
$20.4 million ($0.38 per share) on a non-GAAP basis, an increase of 19% per
share compared to the prior year period.
In the fourth quarter of 2006, product sales were a record $85.5 million,
compared to $78.0 million in the prior year period, an increase of 10%. Total
revenues for the fourth quarter of 2006 were $91.1 million, compared to
$88.0 million in the prior year period, an increase of 4%. As previously
disclosed, in the fourth quarter of 2005 both product sales and total revenues
benefited from the recognition of approximately $3.6 million of previously
deferred domestic blood screening revenue.
For the full year 2006, net income was $59.5 million ($1.12 per share) on
a GAAP basis, compared to net income of $60.1 million ($1.15 per share) in the
prior year, a decrease of 3% per share. GAAP earnings in 2006 include
expenses related to share-based compensation under SFAS No. 123(R), which
reduced after-tax earnings by $13.6 million ($0.26 per share). On a non-GAAP
basis, net income for 2006 was $73.1 million ($1.37 per share), an increase of
19% per share compared to the prior year.
For the full year 2006, product sales were $325.3 million, compared to
$271.7 million in the prior year, an increase of 20%. Total revenues in 2006
were $354.8 million, compared to $306.0 million in the prior year, an increase
of 16%.
Gen-Probe's financial results for both the fourth quarter and full year
2006 also were affected by the implementation of a new accounting standard,
Staff Accounting Bulletin (SAB) No. 108, "Considering the Effects of Prior
Year Misstatements when Quantifying Misstatements in Current Year Financial
Statements." For complete details, see the sections below entitled "Effects
of Implementing SAB No. 108" and "Background on SAB No. 108."
Detailed Results
Gen-Probe's clinical diagnostics sales in the fourth quarter of 2006 were
again 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 fourth quarter compared to the prior year period, in line with
Gen-Probe's expectations.
In blood screening, product sales benefited 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. Blood screening sales also benefited from
higher than expected sales of TIGRIS(R) instruments and spare parts to Chiron,
which totaled $3.9 million in the fourth quarter, compared to $4.1 million in
the prior year period. The decline in blood screening sales compared to the
fourth quarter of 2005 was expected, and resulted primarily from the
recognition of approximately $3.6 million of previously deferred domestic
blood screening revenue in the prior year period.
Product sales were, in millions:
Three Months Ended Dec. 31, Year Ended Dec. 31,
2006 2005 Change 2006 2005 Change
Clinical diagnostics $45.4 $37.3 22% $171.2 $141.7 21%
Blood screening $40.1 $40.7 (1)% $154.1 $130.0 19%
Total product sales $85.5 $78.0 10% $325.3 $271.7 20%
Collaborative research revenue for the fourth quarter of 2006 was
$1.2 million, compared to $6.5 million in the prior year period, a decrease of
82%. For the full year 2006, collaborative research revenue was
$15.9 million, compared to $25.8 million in the prior year, a decrease of 38%.
In both the fourth quarter and full year 2006, collaborative research revenue
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 second half of 2006, the Company recorded in product sales all
revenue associated with this assay, which was approved for use on Gen-Probe's
enhanced semi-automated instrument system (eSAS) in December of 2005.
Royalty and license revenue for the fourth quarter of 2006 was
$4.4 million, compared to $3.5 million in the prior year period, an increase
of 26% that resulted primarily from license revenue earned from bioMerieux.
For the full year 2006, royalty and license revenue was $13.5 million,
compared to $8.5 million in 2005, an increase of 59% that resulted primarily
from $5.0 million of revenue associated with the settlement of Gen-Probe's
patent infringement litigation against Bayer.
Gross margin on product sales was 67.6% in the fourth quarter of 2006 on a
GAAP basis, compared to 65.8% 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. This benefit
was partially offset by unexpectedly high sales of TIGRIS instruments and
spare parts for blood screening to Chiron. These sales, which totaled
$3.9 million in the quarter, are made contractually at cost. Gross margin
percentage also was negatively affected by SFAS No. 123(R), which added
$0.9 million to cost of product sales, and by SAB No. 108, which added
approximately $0.5 million to cost of product sales (see the section "Effects
of Implementing SAB No. 108" below). On a non-GAAP basis, gross margin on
product sales was 68.7% in the fourth quarter of 2006.
For the full year 2006, gross margin on product sales was 68.1% on a GAAP
basis, compared to 69.1% in 2005. This decrease resulted primarily from SFAS
No. 123(R), which added $2.3 million to cost of product sales, from additional
scrap expense incurred in the second quarter of 2006, and from increased
low-margin sales of TIGRIS instruments and spare parts for blood screening to
Chiron. In addition, gross margin percentage was negatively affected by SAB
No. 108, which added approximately $2.0 million to cost of product sales for
the year (see the section "Effects of Implementing SAB No. 108" below). On a
non-GAAP basis, gross margin on product sales was 68.8% in 2006.
Research and development (R&D) expenses were $20.7 million in the fourth
quarter of 2006 on a GAAP basis, compared to $18.2 million in the prior year
period, an increase of 14%. This increase resulted primarily from SFAS
No. 123(R), which added $1.7 million to R&D expenses, and from expenses
associated with the Company's development program for human papillomavirus
(HPV). On a non-GAAP basis, R&D expenses were $19.1 million in the fourth
quarter of 2006, an increase of 5% compared to the prior year period.
For the full year 2006, R&D expenses were $84.5 million on a GAAP basis,
compared to $71.8 million in the prior year, an increase of 18%. This
increase resulted primarily from the factors described above, including the
effect of SFAS No. 123(R), which added $7.4 million to R&D expenses. On a
non-GAAP basis, R&D expenses were $77.2 million in 2006, an increase of 8%
compared to the prior year.
Marketing and sales expenses were $9.6 million in the fourth quarter of
2006 on a GAAP basis, compared to $8.8 million in the prior year period, an
increase of 9%. This increase resulted primarily from SFAS No. 123(R), which
added $0.5 million to marketing and sales expenses. On a non-GAAP basis,
marketing and sales expenses were $9.1 million in the fourth quarter of 2006,
an increase of 3% compared to the prior year period.
For the full year 2006, marketing and sales expenses were $37.1 million on
a GAAP basis, compared to $31.1 million in the prior year, an increase of 19%.
This increase resulted primarily from SFAS No. 123(R), which added
$2.8 million to marketing and sales expenses. On a non-GAAP basis, marketing
and sales expenses were $34.3 million in 2006, an increase of 10% compared to
the prior year.
General and administrative (G&A) expenses were $10.8 million in the fourth
quarter of 2006 on a GAAP basis, compared to $9.3 million in the prior year
period, an increase of 16%. This increase resulted primarily from SFAS
No. 123(R), which added $2.1 million to G&A expenses. On a non-GAAP basis,
G&A expenses were $8.8 million in the fourth quarter of 2006, a decrease of 5%
compared to the prior year period that resulted primarily from lower legal
expenses.
For the full year 2006, G&A expenses were $44.9 million on a GAAP basis,
compared to $32.1 million in the prior year, an increase of 40%. This
increase resulted primarily from SFAS No. 123(R), which added $8.8 million to
G&A expenses, and 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. On a non-GAAP basis, G&A expenses were
$36.1 million in 2006, an increase of 12% compared to the prior year.
Gen-Probe continues to have a strong balance sheet. As of December 31,
2006, the Company had $289.9 million of cash, cash equivalents and short-term
investments, and no debt. In 2006, Gen-Probe generated net cash of
$97.8 million from its operating activities.
Effects of Implementing SAB No. 108
As mentioned above, Gen-Probe's fourth quarter and full year 2006
financial results were affected by the Company's implementation of SAB
No. 108, which was issued by the US Securities and Exchange Commission (SEC)
in September and adopted by Gen-Probe in 2006.
"This new accounting standard required us to use an alternative
methodology to re-assess how we were correcting an inventory under-valuation
that we quantified at the end of the first quarter of 2003," said Herm
Rosenman, Gen-Probe's vice president of finance and chief financial officer.
"Implementing the new standard has no effect on the underlying economics or
operations of our business."
Based on SAB No. 108, Gen-Probe recorded the following changes to its
balance sheet, effective January 1, 2006:
* An increase in inventory of approximately $6.5 million.
* An increase in retained earnings of approximately $3.9 million.
* A decrease in current deferred income tax assets of approximately
$2.5 million.
* An increase in income taxes payable of approximately $0.1 million.
In addition, when Gen-Probe files its 2006 Annual Report on Form 10-K, the
Company will add approximately $0.5 million to cost of product sales for each
of the first three quarters of the year. This will lower diluted EPS for the
second quarter by $0.01, but will not change EPS for the first or third
quarters. The effects of SAB No. 108 on Gen-Probe's fourth quarter results
already have been incorporated into the results reported in this press
release.
Background on SAB No. 108
Gen-Probe's implementation of SAB No. 108 arose from an in-depth,
multi-year inventory analysis the Company completed in March of 2003. In this
analysis, the Company concluded that inventory had been understated, and cost
of product sales therefore overstated, by approximately $11.4 million over a
period of several years. Specifically, the analysis concluded that costs such
as quality control, quality assurance and manufacturing equipment support,
which historically had been included in cost of product sales as a period
expense, should have first been capitalized into inventory.
Rather than writing up the inventory value in 2003, which would have
materially overstated net income, the Company chose to amortize the increase
in the inventory value over six years. This time period was chosen because
the inventory under-valuation had accumulated over many years, because some of
the inventory involved had a long economic life, and to ensure that increasing
the inventory value would not materially affect earnings in any future
quarter. In 2003, Gen-Probe determined that increasing the inventory value in
this manner was not material to its financial statements based on the
"rollover" accounting method applied under then-current GAAP. The Company's
independent auditor, Ernst & Young, LLP, concurred with this assessment.
SAB No. 108, however, provides companies new direction on how to apply
GAAP to situations such as this one. Under SAB No. 108, Gen-Probe must assess
the materiality of the inventory re-valuation using the rollover method, as
the Company did in 2003, but also apply another accounting technique known as
the "iron curtain" method.
Since Gen-Probe concluded that the inventory re-valuation was material
under the iron curtain method, SAB No. 108 requires the Company to adjust the
2006 opening balances of several balance sheet accounts, and reverse the
effects of the inventory amortization on prior quarterly results in 2006.
Gen-Probe's adoption of SAB No. 108 will not require changes to prior years'
results.
2007 Financial Guidance
"We expect 2007 to be another year of solid revenue growth and high
profitability for Gen-Probe," Rosenman said. "We anticipate that this
top-line growth will enable us to continue investing in attractive R&D
projects to drive our future growth, while still delivering strong net profit
margins."
For the full year 2007, Gen-Probe expects the following on a GAAP basis:
* Total revenues of $380 million to $390 million. Product sales growth
is expected to be led by continued market share gains for the APTIMA
Combo 2 assay, by commercial pricing of the PROCLEIX WNV assay in the
United States, and by ongoing international expansion of the PROCLEIX
ULTRIO assay on the TIGRIS system. The Company's 2007 revenue guidance
does not include a $10 million milestone that will be earned from
Chiron upon full U.S. approval of the PROCLEIX ULTRIO assay on the
TIGRIS system. As previously disclosed, based on the estimated timing
of the post-marketing study to detect hepatitis B yield, Gen-Probe
believes this milestone is most likely to be earned in 2008.
* Product gross margins to improve to approximately 69% to 70% of product
sales. This improvement over 2006 is expected to result from
commercial pricing of the PROCLEIX WNV assay, from the leverage
inherent in rising manufacturing volumes, and from reduced sales of
TIGRIS instruments to Chiron, which contractually are made at cost.
* R&D expenses approximating 24% to 25% of total revenues. R&D expenses
are expected to increase slightly as a percentage of revenues in 2007
as the Company develops potential products for several large,
economically attractive markets. These products include clinical
diagnostics assays for human papillomavirus and prostate cancer; tests
for common industrial contaminants through the Company's collaborations
with General Electric, Millipore and 3M; and a fully automated
instrument system for low- and mid-volume labs.
* Marketing and sales expenses approximating 10% of total revenues.
* G&A expenses approximating 11% to 12% of total revenues.
* EPS of between $1.26 and $1.34, including stock-based compensation
expense under SFAS No. 123(R) comparable to 2006 levels. The Company's
EPS guidance is based on approximately 54 million fully diluted shares
outstanding for the year, and a tax rate of approximately 37%.
Recent Events
* Regulatory Progress for PROCLEIX ULTRIO Assay. On January 29,
Gen-Probe announced that it had submitted to the U.S. Food and Drug
Administration (FDA) a regulatory application to run the PROCLEIX
ULTRIO blood screening assay on the fully automated TIGRIS system, and
that a post-marketing study of the assay to detect Hepatitis B yield is
expected to begin in March.
* Standalone APTIMA CT and GC Assays. On January 29, Gen-Probe announced
that the FDA had granted marketing clearance to use the Company's
standalone APTIMA assays for CT and GC to test liquid Pap specimens on
the TIGRIS system. The clearance applies to liquid Pap specimens
collected in the PreservCyt(R) solution and processed with Cytyc's
ThinPrep(R) 2000 System. The APTIMA CT and GC assays previously had
been cleared to test other specimen types on the TIGRIS system.
* Food Collaboration with 3M. On December 6, Gen-Probe announced that it
had formed an exclusive worldwide collaboration with 3M to develop,
manufacture and market innovative nucleic acid tests to enhance food
safety and increase the efficiency of testing for food manufacturers.
* European PCA3 Launch. On November 22, Gen-Probe announced the European
commercial launch of its CE-marked PCA3 assay, a new prostate cancer-
specific molecular diagnostic test.
About Non-GAAP Financial Measures
To supplement Gen-Probe's financial results for the fourth quarter and
full year 2006, 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.
Webcast Conference Call
A live webcast of Gen-Probe's fourth 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) 433-1159 for domestic callers and
(203) 369-0996 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 24 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 1,000 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. PreservCyt and ThinPrep are trademarks
of Cytyc Corporation. 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 "2007 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 2007 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,
Siemens (as assignee of 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.
Contact:
Michael Watts
sr. director, investor relations and corporate communications
858-410-8673
Gen-Probe Incorporated
Consolidated Balance Sheets
(In thousands, except share and per share data)
December 31,
2006 2005
Assets
Current assets:
Cash and cash equivalents $87,905 $32,328
Short-term investments 202,008 187,960
Trade accounts receivable, net of
allowance for doubtful accounts of
$670 and $790 at December 31, 2006
and 2005, respectively 25,880 31,930
Accounts receivable - other 1,646 1,924
Inventories 52,056 36,342
Deferred income taxes - short term 7,247 10,389
Prepaid expenses 11,362 10,768
Other current assets 2,583 3,650
Total current assets 390,687 315,291
Property, plant and equipment, net 134,614 105,190
Capitalized software 18,437 20,952
Goodwill 18,621 18,621
Deferred income taxes - long term 2,064 --
License, manufacturing access fees
and other assets 59,416 50,182
Total assets $623,839 $510,236
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $13,586 $14,029
Accrued salaries and employee benefits 16,723 14,660
Other accrued expenses 3,320 3,264
Income tax payable 14,075 13,192
Deferred revenue 921 7,771
Total current liabilities 48,625 52,916
Deferred income taxes -- 5,124
Deferred revenue 3,667 4,333
Deferred rent 128 240
Deferred compensation plan liabilities 1,211 250
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, 52,233,656
and 51,137,541 shares issued and
outstanding at December 31, 2006
and 2005, respectively 5 5
Additional paid-in capital 334,184 281,907
Deferred compensation -- (5,951)
Accumulated other comprehensive (loss) income (5) (1,231)
Retained earnings 236,024 172,643
Total stockholders' equity 570,208 447,373
Total liabilities and stockholders' equity $623,839 $510,236
Gen-Probe Incorporated
Consolidated Statements of Income
(In thousands, except per share data)
Three Months Ended Years Ended
December 31 December 31
2006 2005 2006 2005
(unaudited)
Revenues:
Product sales $85,496 $77,999 $325,307 $271,650
Collaborative research revenue 1,194 6,485 15,937 25,843
Royalty and license revenue 4,369 3,488 13,520 8,472
Total revenues 91,059 87,972 354,764 305,965
Operating expenses:
Cost of product sales 27,675 26,653 103,882 83,900
Research and development 20,712 18,249 84,545 71,846
Marketing and sales 9,563 8,780 37,096 31,145
General and administrative 10,832 9,314 44,936 32,107
Total operating expenses 68,782 62,996 270,459 218,998
Income from operations 22,277 24,976 84,305 86,967
Total other income, net 3,608 1,327 8,689 4,727
Income before income taxes 25,885 26,303 92,994 91,694
Income tax expense 8,751 9,548 33,496 31,605
Net income $17,134 $16,755 $59,498 $60,089
Net income per share:
Basic $0.33 $0.33 $1.15 $1.19
Diluted $0.32 $0.32 $1.12 $1.15
Weighted average shares
outstanding:
Basic 51,835 50,892 51,538 50,617
Diluted 53,305 52,619 53,101 52,445
Gen-Probe Incorporated
Consolidated Statements of Income
(In thousands, except per share data)
(Unaudited)
Three Months Ended Three Months Ended
December 31, 2006 December 31, 2005
Adjust- Adjust-
Non-GAAP ments GAAP Non-GAAP ments GAAP
Revenues:
Product
sales $85,496 $-- $85,496 $77,999 $-- $77,999
Collaborative
research
revenue 1,194 -- 1,194 6,485 -- 6,485
Royalty and
license
revenue 4,369 -- 4,369 3,488 -- 3,488
Total
revenues 91,059 -- 91,059 87,972 -- 87,972
Operating
expenses:
Cost of
product
sales 26,777 898 a 27,675 26,653 -- 26,653
Research and
development 19,050 1,662 a 20,712 18,249 -- 18,249
Marketing
and sales 9,070 493 a 9,563 8,780 -- 8,780
General and
administ-
rative 8,778 2,054 a 10,832 9,314 -- 9,314
Total
operating
expenses 63,675 5,107 68,782 62,996 -- 62,996
Income from
operations 27,384 (5,107) 22,277 24,976 -- 24,976
Total other
income, net 3,608 -- 3,608 1,327 -- 1,327
Income before
income taxes 30,992 (5,107) 25,885 26,303 -- 26,303
Income tax
expense 10,605 (1,854) a 8,751 9,548 -- 9,548
Net income $20,387 $(3,253) $17,134 $16,755 $-- $16,755
Net income
per share:
Diluted
earnings per
share:
Basic $0.39 $(0.06) $0.33 $0.33 $-- $0.33
Diluted $0.38 $(0.06) $0.32 $0.32 $-- $0.32
Weighted average
shares
outstanding:
Basic 51,835 -- 51,835 50,892 -- 50,892
Diluted 53,418 (113) b 53,305 52,619 -- 52,619
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
December 31, 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 December 31, 2006, this
expense totaled $5,107,000 before income taxes (after deducting $2,000
of net capitalization to inventory) and $3,253,000 net of income taxes
for the period. The Company did not record this stock-based
compensation expense for the three months ended December 31, 2005. As
previously disclosed in the notes to the financial statements for the
three months ended December 31, 2005, net income including pro forma
stock-based compensation expense for this period was $13,387,000.
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)
Twelve Months Ended Twelve Months Ended
December 31, 2006 December 31, 2005
Adjust- Adjust-
Non-GAAP ments GAAP Non-GAAP ments GAAP
Revenues:
Product
sales $325,307 $-- $325,307 $271,650 $-- $271,650
Collaborative
research
revenue 15,937 -- 15,937 25,843 -- 25,843
Royalty and
license
revenue 13,520 -- 13,520 8,472 -- 8,472
Total
revenues 354,764 -- 354,764 305,965 -- 305,965
Operating
expenses:
Cost of
product
sales 101,618 2,264 a 103,882 83,900 -- 83,900
Research and
development 77,185 7,360 a 84,545 71,846 -- 71,846
Marketing
and sales 34,268 2,828 a 37,096 31,145 -- 31,145
General and
administ-
rative 36,127 8,809 a 44,936 32,107 -- 32,107
Total
operating
expenses 249,198 21,261 270,459 218,998 -- 218,998
Income from
operations 105,566 (21,261) 84,305 86,967 -- 86,967
Total other
income, net 8,689 -- 8,689 4,727 -- 4,727
Income before
income taxes 114,255 (21,261) 92,994 91,694 -- 91,694
Income tax
expense 41,132 (7,636) a 33,496 31,605 -- 31,605
Net income $73,123 $(13,625) $59,498 $60,089 $-- $60,089
Net income
per share:
Diluted
earnings per
share:
Basic $1.42 $(0.26) $1.15 $1.19 $-- $1.19
Diluted $1.37 $(0.26) $1.12 $1.15 $-- $1.15
Weighted average
shares
outstanding:
Basic 51,538 -- 51,538 50,617 -- 50,617
Diluted 53,263 (162) b 53,101 52,445 -- 52,445
a) Adjustments to exclude the impact of stock option and ESPP expense in
accordance with SFAS No. 123(R). Net income for the twelve months
ended December 31, 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 twelve months ended December 31, 2006, this
expense totaled $21,261,000 before income taxes (after deducting
$1,161,000 of net capitalization to inventory) and $13,625,000 net of
income taxes for the period. The Company did not record this stock-
based compensation expense for the twelve months ended December 31,
2005. As previously disclosed in the notes to the financial statements
for the twelve months ended December 31, 2005, net income including pro
forma stock-based compensation expense for this period was $45,250,000.
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
(In thousands)
Years Ended
December 31
2006 2005
Operating activities:
Net income $59,498 $60,089
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 27,495 22,606
Stock compensation charges - restricted stock 2,462 920
Stock compensation charges - all other 21,261 --
Stock option income tax benefits 191 8,677
Excess tax benefit from employee stock options (9,187) --
Loss on disposal of property and equipment 99 399
Changes in assets and liabilities:
Accounts receivable 6,544 (8,937)
Inventories (7,797) (9,048)
Prepaid expenses (595) (2,251)
Other current assets 1,683 1,797
Other long term assets (2,147) (534)
Accounts payable (471) 7,329
Accrued salaries and employee benefits 2,063 2,748
Other accrued expenses (27) (1,089)
Income tax payable 9,970 12,053
Deferred revenue (7,516) (2,363)
Deferred income taxes (6,559) (6,717)
Deferred rent (112) (69)
Deferred compensation plan liabilities 961 250
Net cash provided by operating activities 97,816 85,860
Investing activities:
Proceeds from sales and maturities of
short-term investments 135,861 116,907
Purchases of short-term investments (149,012) (137,841)
Cash paid for acquisition of minority interest
in Molecular Light Technology Limited -- (1,539)
Purchases of property, plant and equipment (50,760) (45,386)
Capitalization of intangible assets, including
license and manufacturing access fees (11,460) (29,117)
Other assets (633) (127)
Net cash used in investing activities (76,004) (97,103)
Financing activities:
Excess tax benefit from employee stock options 9,187 --
Repurchase and retirement of restricted stock
for payment of taxes (429) --
Proceeds from issuance of common stock 24,395 18,696
Net cash provided by financing activities 33,153 18,696
Effect of exchange rate changes on cash
and cash equivalents 612 (623)
Net increase in cash and cash equivalents 55,577 6,830
Cash and cash equivalents at the beginning of year 32,328 25,498
Cash and cash equivalents at the end of year $87,905 $32,328
SOURCE Gen-Probe Incorporated
Michael Watts, sr. director, investor relations and corporate communications,
Gen-Probe Incorporated, +1-858-410-8673
http://www.gen-probe.com
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