CORRECTING and REPLACING Illumina Reports Financial Results for Fourth Quarter and Fiscal Year 2011

SAN DIEGO--(BUSINESS WIRE)--Please replace the release dated Feb. 7, 2012, with the following corrected version. This corrected release reflects non-GAAP SG&A results for the quarter and the year of $50.4 million and $209.9 million, respectively, which were previously reported as $45.8 million and $205.3 million, respectively.

The corrected release reads:

ILLUMINA REPORTS FINANCIAL RESULTS FOR FOURTH QUARTER AND FISCAL YEAR 2011

Illumina, Inc. (NASDAQ:ILMN) today announced its financial results for the fourth quarter and fiscal year of 2011.

Fourth quarter 2011 results:

• Revenue of $250 million, a 4% decrease compared to the $261 million in the fourth quarter of 2010.
• GAAP net income for the quarter of $11.7 million, or $0.09 per diluted share, compared to net income of $38.4 million, or $0.25 per diluted share, for the fourth quarter of 2010.
• Non-GAAP net income for the quarter of $43.5 million, or $0.35 per diluted share, compared to $40.9 million, or $0.29 per diluted share, for the fourth quarter of 2010 (see the table entitled "Itemized Reconciliation Between GAAP and Non-GAAP Net Income" for a reconciliation of these GAAP and non-GAAP financial measures).
• Record cash flow from operations of $108 million and record free cash flow of $81 million for the quarter.
• Excluding a very large sequencing equipment order in the fourth quarter of 2009, record orders during the quarter and a book-to-bill ratio of 1.2.
• As a result of our strong book-to-bill ratio we exited the year with a backlog of $251 million.

Gross margin in the fourth quarter of 2011 was 68.2% compared to 63.6% in the prior year period. Excluding the effect of non-cash charges associated with stock compensation and the amortization of acquired intangibles, non-GAAP gross margin was 70.2% for the fourth quarter of 2011 compared to 65.1% in the prior year period.

Research and development (R&D) expenses for the fourth quarter of 2011 were $45.5 million compared to $45.8 million in the fourth quarter of 2010. R&D expenses included $7.3 million and $7.0 million of non-cash stock compensation expense in the fourth quarters of 2011 and 2010, respectively. Excluding these charges and contingent compensation expense, R&D expenses as a percentage of revenue were 15.0% compared to 14.5% in the prior year period.

Selling, general and administrative (SG&A) expenses for the fourth quarter of 2011 were $60.9 million compared to $62.0 million for the fourth quarter of 2010. SG&A expenses included $12.7 million and $11.3 million of non-cash stock compensation expense in the fourth quarters of 2011 and 2010, respectively. SG&A expenses in the fourth quarter of 2011 also included $2.3 million in legal settlement gain and amortization of acquired intangibles. Excluding these items, SG&A expenses as a percentage of revenue were 20.1% compared to 19.4% in the prior year period.

The company generated $108.3 million in cash flow from operations during the fourth quarter of 2011 compared to $81.5 million in the prior year period. Depreciation and amortization expenses were $18.5 million and capital expenditures were $27.1 million during the fourth quarter of 2011. The company ended the fourth quarter of 2011 with $1.2 billion in cash, cash equivalents and short-term investments compared to $894.3 million as of January 2, 2011.

Fiscal 2011 results:

• Revenue of $1.056 billion, a 17% increase over the $902.7 million reported in fiscal 2010.
• GAAP net income of $86.6 million, or $0.62 per diluted share, compared to $124.9 million or $0.87 per share in fiscal 2010.
• Non-GAAP net income of $176.0 million, or $1.30 per diluted share, compared to $142.2 million, or $1.06 per diluted share in fiscal 2010 (see table entitled "An Itemized Reconciliation Between GAAP and Non-GAAP Net Income" for a reconciliation of these GAAP and non-GAAP financial measures).
• Record cash flow from operations of $358 million.

Gross margin for fiscal 2011 was 67.2% compared to 66.6% in fiscal 2010. Excluding the effect of non-cash charges associated with stock compensation and the amortization of acquired intangibles, non-GAAP gross margin was 69.0% in fiscal 2011 compared to 68.1% in fiscal 2010.

R&D expenses for fiscal 2011 were $196.9 million compared to $177.9 million in fiscal 2010. R&D expenses for fiscal 2011 included non-cash stock compensation expense of $32.1 million compared to $25.4 million in fiscal 2010. R&D expenses also included contingent compensation expense of $4.8 million in fiscal 2011 and $3.7 million in fiscal 2010. Excluding these charges, R&D expenses as a percentage of revenue were 15.2% compared to 16.5% in fiscal 2010.

SG&A expenses for fiscal 2011 were $261.8 million compared to $220.5 million in fiscal 2010. SG&A expenses included $52.3 million and $40.4 million of non-cash stock compensation expense in fiscal 2011 and 2010, respectively. SG&A expenses in fiscal 2011 also included $2.3 million in legal settlement gain, $1.3 million of contingent compensation expense and amortization of acquired intangibles. Excluding these items, SG&A expenses as a percentage of revenue were 19.9%, consistent with fiscal 2010.

The company generated $358.1 million in cash flow from operations in fiscal 2011 compared to $272.6 million in fiscal 2010. Depreciation and amortization expenses for fiscal 2011 were $68.3 million and capital expenditures were $77.8 million.

Highlights since our last earnings release

• Announced the HiSeq 2500, a new multi-mode next-generation sequencer which enables researchers and clinicians to sequence an entire human genome in approximately a day (120Gb/run). Alternatively, the instrument can be operated in the standard 600Gb-run mode. Existing HiSeq 2000 instruments are upgradable through a simple, field-based upgrade priced at $50,000. The system and upgrades will be available in the second half of 2012.
• Announced significant enhancements to the MiSeq platform that enable read-lengths of up to 2 x 250 base pairs per run, faster cycle times, and threefold higher throughput (up to 7Gb per run) compared to the original MiSeq launched just over four months ago.
• Announced a ground-breaking partnership with Siemens Healthcare Diagnostics to use the MiSeq platform for Siemens’ molecular HIV tests and to establish new standards based on the use of next-generation sequencing for the identification of infectious diseases and potential treatment paths.
• Appointed Marc Stapley, formerly Pfizer's Senior Vice President of Finance, as Chief Financial Officer.
• Further strengthened Illumina’s management team by appointing Dr. Daniel Grosu to the newly created position of Chief Medical Officer and Laura Lauman to the position of Vice President of Marketing.
• Promoted Matt Posard to the newly created position of Senior Vice President and General Manager of our Translational and Consumer Genomics Business Unit; promoted Omead Ostadan, formerly our Vice President of Marketing, to the position of Senior Vice President Product Development.
• Expanded the Illumina Genome Network by adding the British Columbia Cancer Agency to the growing list of prestigious participants.

Financial outlook and guidance

The non-GAAP financial guidance discussed below excludes various one-time or specified non-cash charges. Please see our Reconciliation of Non-GAAP Financial Guidance included in this release for a reconciliation of the GAAP and Non-GAAP financial measures.

We currently expect revenue for 2012 between $1.10 billion and $1.175 billion, representing year-over-year growth between 4% and 11%. We expect our non-GAAP gross margin percentage to approximate 70% for the year. We expect non-GAAP earnings per fully diluted share between $1.40 and $1.50. We expect the full-year pro forma tax rate to be approximately 33% and stock compensation expense to be approximately $105 million. The Company expects full-year weighted average diluted shares outstanding for the measurement of pro forma amounts to be approximately 135 million shares.

For the first quarter of 2012, we expect revenues between $250 and $260 million and a non-GAAP gross margin percentage of approximately 69%. We expect non-GAAP earnings per fully diluted share of $0.29 to $0.32, assuming approximately 133 million shares. We expect stock compensation expense during the first quarter of approximately $25 million.

Quarterly conference call information

The conference call will begin at 2:00 pm Pacific Time (5:00 pm Eastern Time) on Tuesday, February 7, 2012. Interested parties may listen to the call by dialing 888-455-2265 (passcode: 8701498), or if outside North America by dialing [phone] (passcode: 8701498). Individuals may access the live teleconference in the Investor Relations section of Illumina's web site under the “Company” tab at www.illumina.com.

A replay of the conference call will be available from 5:00 pm Pacific Time (8:00 pm Eastern Time) on February 7, 2012 through February 14, 2012 by dialing 888-203-1112 (passcode: 8701498), or if outside North America by dialing [phone] (passcode: 8701498).

Statement regarding use of non-GAAP financial measures

The company reports non-GAAP results for diluted net income per share, net income, gross margins, operating expenses, operating margins, other income, and free cash flow in addition to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP.

The company’s financial measures under GAAP include substantial charges related to stock compensation expense, headquarter relocation expense, non-cash interest expense associated with the company’s convertible debt instruments that may be settled in cash, restructuring charges, amortization expense related to acquired intangible assets, loss on the extinguishment of convertible debt, contingent compensation expense, legal settlement gain, and acquisition related gain or expense. Per share amounts also include the double dilution associated with the accounting treatment of the company’s 0.625% convertible senior notes outstanding and the corresponding call option overlay. Management believes that presentation of operating results that excludes these items and per share double dilution provides useful supplemental information to investors and facilitates the analysis of the company’s core operating results and comparison of operating results across reporting periods. Management also believes that this supplemental non-GAAP information is therefore useful to investors in analyzing and assessing the company’s past and future operating performance.

The company encourages investors to carefully consider its results under GAAP, as well as its supplemental non-GAAP information and the reconciliation between these presentations, to more fully understand its business. Reconciliations between GAAP and non-GAAP results are presented in the tables of this release.

Use of forward looking statements

This release contains projections, information about our financial outlook, earnings guidance, and other forward-looking statements that involve risks and uncertainties. These forward-looking statements are based on our expectations as of the date of this release and may differ materially from actual future events or results. Among the important factors that could cause actual results to differ materially from those in any forward-looking statements are (i) our ability to develop and commercialize further our sequencing, array, PCR, and consumables technologies and to deploy new products and applications, and expand the markets, for our technology platforms; (ii) our ability to manufacture robust instrumentation and consumables; (iii) our expectations and beliefs regarding future conduct and growth of the business and the markets in which we operate; (iv) challenges inherent in developing, manufacturing, and launching new products and services; (v) business disruptions associated with the tender offer commenced by CKH Acquisition Corporation, a wholly owned subsidiary of Roche Holding Ltd; (vi) our ability to maintain our revenue and profitability during periods of research funding reduction or uncertainty and adverse economic and business conditions, including as a result of slowing economic growth in the United States or worldwide, together with other factors detailed in our filings with the Securities and Exchange Commission, including our most recent filings on Forms 10-K and 10-Q, or in information disclosed in public conference calls, the date and time of which are released beforehand. We undertake no obligation, and do not intend, to update these forward-looking statements, to review or confirm analysts’ expectations, or to provide interim reports or updates on the progress of the current financial quarter.

About Illumina

Illumina (www.illumina.com) is a leading developer, manufacturer, and marketer of life science tools and integrated systems for the analysis of genetic variation and function. We provide innovative sequencing and array-based solutions for genotyping, copy number variation analysis, methylation studies, gene expression profiling, and low-multiplex analysis of DNA, RNA, and protein. We also provide tools and services that are fueling advances in consumer genomics and diagnostics. Our technology and products accelerate genetic analysis research and its application, paving the way for molecular medicine and ultimately transforming healthcare.

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 CAREFULLY IN THEIR ENTIRETY (WHEN THEY BECOME AVAILABLE) BECAUSE THEY CONTAIN IMPORTANT INFORMATION. Investors and security holders will be able to obtain free copies of these documents (when they become available) and other documents filed with the SEC by Illumina through the web site maintained by the SEC at http://www.sec.gov. Investors and security holders also will be able to obtain free copies of these documents, and other documents filed with the SEC by Illumina, from Illumina by directing a request to Illumina, Inc., Attn: Investor Relations, Kevin Williams, MD, [e-mail].

In addition, Illumina will file a proxy statement and a WHITE proxy card with the SEC. The definitive proxy statement will be mailed to security holders of Illumina. INVESTORS AND SECURITY HOLDERS OF ILLUMINA ARE URGED TO READ THE PROXY STATEMENT AND OTHER DOCUMENTS FILED WITH THE SEC CAREFULLY IN THEIR ENTIRETY (WHEN THEY BECOME AVAILABLE) BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. Investors and security holders will be able to obtain free copies of these documents (when they become available) and other documents filed with the SEC by Illumina through the web site maintained by the SEC at http://www.sec.gov. Investors and security holders also will be able to obtain free copies of the proxy statement, and other documents filed with the SEC by Illumina, from Illumina by directing a request to Illumina, Inc., Attn: Investor Relations, Kevin Williams, MD, [e-mail].

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 2, 2011, which was filed with the SEC on February 28, 2011, and (ii) Illumina’s proxy statement for its 2011 Annual Meeting of Stockholders, which was filed with the SEC on March 24, 2011. To the extent that Illumina’s directors’ and executive officers’ holdings of Illumina’s securities have changed from the amounts printed in the proxy statement for the 2011 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. Additional information regarding the interests of these participants in any proxy solicitation and a description of their direct and indirect interests, by security holdings or otherwise, will also be included in any proxy statement and other relevant materials to be filed with the SEC when they become available.

Illumina, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
		January 1, 2012		January 2, 2011
ASSETS		(unaudited)
Current assets:
	Cash and cash equivalents	$	302,978	$	248,947
	Short-term investments		886,590		645,342
	Accounts receivable, net		173,886		165,598
	Inventory, net		128,781		142,211
	Deferred tax assets, current portion		23,188		19,378
	Prepaid expenses and other current assets		29,196		36,922
	Total current assets		1,544,619		1,258,398
Property and equipment, net			143,483		129,874
Goodwill			321,853		278,206
Intangible assets, net			106,475		91,462
Deferred tax assets, long-term portion			19,675		39,497
Other assets			59,735		41,676
	Total assets	$	2,195,840	$	1,839,113
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
	Accounts payable	$	49,806	$	66,744
	Accrued liabilities		187,774		156,164
	Long-term debt, current portion		-		311,609
	Total current liabilities		237,580		534,517
Long-term debt			807,369		-
Other long-term liabilities			69,954		28,531
Conversion option subject to cash settlement			5,722		78,390
Stockholders’ equity			1,075,215		1,197,675
	Total liabilities and stockholders’ equity	$	2,195,840	$	1,839,113

Illumina, Inc.
Condensed Consolidated Statements of Income
(In thousands, except per share amounts)
(unaudited)
				Three Months Ended						Year Ended
				January 1, 2012			January 2, 2011			January 1, 2012			January 2, 2011
Revenue:
	Product revenue			$	230,396		$	245,626		$	987,280		$	842,510
	Service and other revenue				19,675			15,672			68,255			60,231
		Total revenue			250,071			261,298			1,055,535			902,741
Cost of Revenue:
	Cost of product revenue (a)				69,509			87,183			308,228			271,997
	Cost of service and other revenue (a)				6,940			5,694			26,118			21,399
	Amortization of acquired intangible assets				3,036			2,295			12,091			7,805
		Total cost of revenue			79,485			95,172			346,437			301,201
			Gross profit		170,586			166,126			709,098			601,540
Operating Expenses:
	Research and development (a)				45,513			45,800			196,913			177,947
	Selling, general and administrative (a)				60,918			62,034			261,843			220,454
	Headquarter relocation expense				30,243			-			41,826			-
	Restructuring charges				8,136			-			8,136			-
	Acquisition related (gain) expense, net				(1,523	)		(10,376	)		919			(8,515	)
		Total operating expenses			143,287			97,458			509,637			389,886
			Income from operations		27,299			68,668			199,461			211,654
	Other expense, net				(7,077	)		(17,886	)		(66,416	)		(26,275	)
			Income before income taxes		20,222			50,782			133,045			185,379
Provision for income taxes					8,502			12,342			46,417			60,488
			Net income	$	11,720		$	38,440		$	86,628		$	124,891
Net income per basic share				$	0.10		$	0.31		$	0.70		$	1.01
Net income per diluted share				$	0.09		$	0.25		$	0.62		$	0.87
Shares used in calculating basic net income per share					121,541			125,876			123,399			123,581
Shares used in calculating diluted net income per share					124,888			151,171			138,937			143,433
(a) Includes total stock-based compensation expense for stock based awards:
				Three Months Ended						Year Ended
				January 1, 2012			January 2, 2011			January 1, 2012			January 2, 2011
	Cost of product revenue			$	1,684		$	1,508		$	6,951		$	5,378
	Cost of service and other revenue				159			76			695			470
	Research and development				7,295			6,977			32,105			25,428
	Selling, general and administrative				12,678			11,279			52,341			40,369
		Stock-based compensation expense before taxes		$	21,816		$	19,840		$	92,092		$	71,645

Illumina, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(unaudited)
	Three Months Ended						Year Ended
	January 1, 2012			January 2, 2011			January 1, 2012			January 2, 2011
Net cash provided by operating activities	$	108,300		$	81,481		$	358,140		$	272,573
Net cash used in investing activities		(42,960	)		(70,056	)		(400,999	)		(285,053	)
Net cash provided by financing activities		7,848			26,543			97,016			116,474
Effect of exchange rate changes on cash and cash equivalents		(56	)		212			(126	)		320
Net increase in cash and cash equivalents		73,132			38,180			54,031			104,314
Cash and cash equivalents, beginning of period		229,846			210,767			248,947			144,633
Cash and cash equivalents, end of period	$	302,978		$	248,947		$	302,978		$	248,947
Calculation of free cash flow (a):
Net cash provided by operating activities	$	108,300		$	81,481		$	358,140		$	272,573
Purchases of property and equipment		(27,114	)		(12,384	)		(77,800	)		(49,818	)
Free cash flow	$	81,186		$	69,097		$	280,340		$	222,755
(a) Free cash flow, which is a non-GAAP financial measure, is calculated as net cash provided by operating activities reduced by purchases of property and equipment. Free cash flow is useful to management as it is one of the metrics used to evaluate our performance and to compare us with other companies in our industry. However, our calculation of free cash flow may not be comparable to similar measures used by other companies.

Illumina, Inc.
Results of Operations - Non-GAAP
(In thousands, except per share amounts)
(unaudited)
ITEMIZED RECONCILIATION BETWEEN GAAP AND NON-GAAP NET INCOME PER SHARE:
	Three Months Ended						Year Ended
	January 1, 2012			January 2, 2011			January 1, 2012			January 2, 2011
GAAP net income per share - diluted	$	0.09		$	0.25		$	0.62		$	0.87
Pro forma impact of weighted average shares (a)		-			0.01			0.03			0.06
Adjustments to net income:
Headquarter relocation expense (b)		0.24			-			0.31			-
Non-cash interest expense (c)		0.07			0.04			0.24			0.16
Restructuring charges		0.07			-			0.06			-
Amortization of acquired intangible assets		0.02			0.02			0.09			0.06
Legal settlement gain		(0.02	)		-			(0.02	)		-
Acquisition related (gain) expense, net (d)		(0.01	)		(0.07	)		0.01			(0.09	)
Contingent compensation expense (e)		0.01			0.01			0.04			0.03
Loss on extinguishment of debt		-			-			0.28			-
Impairment loss related to a cost-method investment		-			0.09			-			0.10
Incremental non-GAAP tax expense (f)		(0.12	)		(0.06	)		(0.36	)		(0.13	)
Non-GAAP net income per share - diluted (g)	$	0.35		$	0.29		$	1.30		$	1.06
Shares used in calculating non-GAAP diluted net income per share		124,409			140,080			135,154			134,375
ITEMIZED RECONCILIATION BETWEEN GAAP AND NON-GAAP NET INCOME:
GAAP net income	$	11,720		$	38,440		$	86,628		$	124,891
Headquarter relocation expense (b)		30,243			-			41,826			-
Non-cash interest expense (c)		8,542			5,363			32,495			20,832
Restructuring charges		8,136			-			8,136			-
Amortization of acquired intangible assets		3,188			2,295			12,689			7,805
Legal settlement gain		(2,300	)		-			(2,300	)		-
Acquisition related (gain) expense, net (d)		(1,523	)		(10,376	)		919			(11,429	)
Contingent compensation expense (e)		732			919			6,057			3,675
Loss on extinguishment of debt		-			-			37,611			-
Impairment loss related to a cost-method investment		-			13,223			-			13,223
Incremental non-GAAP tax expense (f)		(15,215	)		(9,014	)		(48,053	)		(16,813	)
Non-GAAP net income (g)	$	43,523		$	40,850		$	176,008		$	142,184
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			151,171			138,937			143,433
Weighted average dilutive potential common shares issuable of redeemable convertible senior notes (a)		(479	)		(11,091	)		(3,783	)		(9,058	)
Weighted average shares used in calculation of Non-GAAP diluted net income per share		124,409			140,080			135,154			134,375
(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 Q4 2011 and fiscal year 2011 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.
(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
(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.

Illumina, Inc.
Results of Operations - Non-GAAP (continued)
(Dollars in thousands)
(unaudited)
ITEMIZED RECONCILIATION BETWEEN GAAP AND NON-GAAP RESULTS OF OPERATIONS AS A PERCENT OF REVENUE:
	Three Months Ended										Year Ended
	January 1, 2012					January 2, 2011					January 1, 2012					January 2, 2011
GAAP gross profit	$	170,586		68.2	%	$	166,126		63.6	%	$	709,098		67.2	%	$	601,540		66.6	%
Stock-based compensation expense		1,843		0.7	%		1,584		0.6	%		7,646		0.7	%		5,848		0.6	%
Amortization of acquired intangible assets		3,036		1.2	%		2,295		0.9	%		12,091		1.1	%		7,805		0.9	%
Non-GAAP gross profit	$	175,465		70.2	%	$	170,005		65.1	%	$	728,835		69.0	%	$	615,193		68.1	%
Research and development expense	$	45,513		18.2	%	$	45,800		17.5	%	$	196,913		18.7	%	$	177,947		19.7	%
Stock-based compensation expense		(7,295	)	(2.9	%)		(6,977	)	(2.7	%)		(32,105	)	(3.0	%)		(25,428	)	(2.8	%)
Contingent compensation expense (a)		(732	)	(0.3	%)		(919	)	(0.4	%)		(4,799	)	(0.5	%)		(3,675	)	(0.4	%)
Non-GAAP research and development expense	$	37,486		15.0	%	$	37,904		14.5	%	$	160,009		15.2	%	$	148,844		16.5	%
Selling, general and administrative expense	$	60,918		24.4	%	$	62,034		23.7	%	$	261,843		24.8	%	$	220,454		24.4	%
Stock-based compensation expense		(12,678	)	(5.1	%)		(11,279	)	(4.3	%)		(52,341	)	(5.0	%)		(40,369	)	(4.5	%)
Legal settlement gain		2,300		0.9	%		-		-			2,300		0.2	%		-		-
Contingent compensation expense (a)		-		-			-		-			(1,258	)	(0.1	%)		-		-
Amortization of acquired intangible assets		(152	)	(0.1	%)		-		-			(598	)	(0.1	%)		-		-
Non-GAAP selling, general and administrative expense	$	50,388		20.1	%	$	50,755		19.4	%	$	209,946		19.9	%	$	180,085		19.9	%
GAAP operating profit	$	27,299		10.9	%	$	68,668		26.3	%	$	199,461		18.9	%	$	211,654		23.4	%
Stock-based compensation expense		21,816		8.7	%		19,840		7.6	%		92,092		8.7	%		71,645		7.9	%
Headquarter relocation expense (b)		30,243		12.1	%		-		-			41,826		4.0	%		-		-
Amortization of acquired intangible assets		3,188		1.3	%		2,295		0.9	%		12,689		1.2	%		7,805		0.9	%
Restructuring charges		8,136		3.3	%		-		-			8,136		0.8	%		-		-
Contingent compensation expense (a)		732		0.3	%		919		0.4	%		6,057		0.6	%		3,675		0.4	%
Legal settlement gain		(2,300	)	(0.9	%)		-		-			(2,300	)	(0.2	%)		-		-
Acquisition related (gain) expense, net (c)		(1,523	)	(0.6	%)		(10,376	)	-4.0	%		919		0.1	%		(8,515	)	-0.9	%
Non-GAAP operating profit (d)	$	87,591		35.0	%	$	81,346		31.1	%	$	358,880		34.0	%	$	286,264		31.7	%
GAAP other expense, net	$	(7,077	)	(2.8	%)	$	(17,886	)	(6.8	%)	$	(66,416	)	(6.3	%)	$	(26,275	)	(2.9	%)
Loss on extinguishment of debt		-		-			-		-			37,611		3.6	%		-		-
Acquisition related gain (c)		-		-			-		-			-		-			(2,914	)	(0.3	%)
Impairment loss related to a cost-method investment		-		-			13,223		5.1	%		-		-			13,223		1.5	%
Non-cash interest expense (e)		8,542		3.4	%		5,363		2.1	%		32,495		3.1	%		20,832		2.3	%
Non-GAAP other income, net (d)	$	1,465		0.6	%	$	700		0.3	%	$	3,690		0.3	%	$	4,866		0.5	%
(a) Contingent compensation expense represents contingent consideration for post-combination services associated with acquisitions.
(b) Headquarter relocation expense in Q4 2011 and fiscal year 2011 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.
(c) 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
(d) Non-GAAP operating profit, and non-GAAP other income, net, exclude the effects of the pro forma adjustments as detailed above. Management has excluded the effects of these items in these measures to assist investors in analyzing and assessing our past and future core operating performance. Non-GAAP gross profit, included within the non-GAAP operating profit, is a key measure of the effectiveness and efficiency of our manufacturing processes, product mix and the average selling prices of our products and services.
(e) Non-cash interest expense is calculated in accordance with the authoritative accounting guidance for convertible debt instruments that may be settled in cash.

Illumina, Inc.
Reconciliation of Non-GAAP Financial Guidance
The financial guidance provided below is an estimate based on information available as of February 7, 2012. The company’s future performance and financial results are subject to risks and uncertainties, and actual results could differ materially from the guidance set forth below. Some of the factors that could affect the company’s financial results are stated above in this press release. More information on potential factors that could affect the company’s financial results is included from time to time in the company’s public reports filed with the SEC, including the company’s Form 10-K for the fiscal year ended January 1, 2012 to be filed with the SEC, and the company's Form 10-Q for the fiscal quarters ended April 3, 2011, July 3, 2011, and October 2, 2011. The company assumes no obligation to update any forward-looking statements or information, which speak as of their respective dates.
	Fiscal Year 2012	Q1 2012
Gross Margin
Non-GAAP gross margin	70%	69%
Stock-based compensation expense	(1%)	(1%)
Amortization of acquired intangible assets	(1%)	(1%)
GAAP gross margin	68%	67%
Diluted net income per share
Non-GAAP diluted net income per share	$1.40 - $1.50	$0.29 - $0.32
Non-cash interest expense (a)	(0.16)	(0.04)
Headquarter relocation expense (b)	(0.11)	--
Amortization of intangible assets	(0.06)	(0.02)
Contingent compensation expense (c)	(0.03)	(0.01)
Restructuring charges	(0.03)	(0.02)
Pro forma impact of weighted average shares (d)	(0.01)	--
GAAP diluted net income per share	$1.00 - $1.10	$0.20 - $0.23
(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.