Affymetrix (NASDAQ:AFFX)
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Affymetrix, Inc., (Nasdaq:AFFX) today reported its operating results for
the third quarter of 2006. On a GAAP basis the Company reported net loss
of approximately $14.2 million or $0.21 per diluted share, including
restructuring charges of $10.0 million or $0.15 per diluted share and
stock-based compensation expense of $3.6 million or $0.05 per diluted
share, in the third quarter of 2006, as compared to net income of $9.4
million or $0.14 per diluted share in the third quarter of 2005.
On January 1, 2006, the Company adopted FAS 123R and is reporting
employee stock-based compensation expense in its GAAP results. Excluding
the impact of FAS 123R, the Company reported non-GAAP net loss of
approximately $11.0 million or $0.16 per diluted share in the third
quarter of 2006.
Total revenue for the quarter was $84.7 million, of which $4.6 million
was related to the sale of products to Perlegen Sciences, Inc., as
compared to total revenue of $83.4 million in the third quarter of 2005,
of which $2.2 million was related to the sale of products to Perlegen.
Product and product related revenue was $74.1 million for the third
quarter of 2006, compared to $79.5 million in the same period in 2005.
Third quarter sales included GeneChip®
consumable revenue of $59.8 million, consisting of array revenue of
$37.4 million, reagent revenue of $10.1 million, genotyping services
revenue of $7.7 million and $4.6 million of Perlegen revenue.
Additionally, the Company reported instrument revenue of $8.6 million.
Affymetrix shipped 33 GeneChip Systems in the quarter, increasing the
cumulative systems shipped to approximately 1480.
Royalties and other revenue were $6.0 million for the third quarter of
2006 compared to $1.7 million in the third quarter of 2005.
Total operating costs and expenses were $101.6 million for the third
quarter of 2006, including the $10.0 million in restructuring charges
previously mentioned, compared to $75.1 million in the third quarter of
2005.
Cost of product and product related revenue was $32.5 million in the
third quarter of 2006 compared to $23.4 million in the same period of
2005. Product and product related gross margin was 56.2 percent in the
third quarter of 2006 compared to 70.6 percent in the third quarter of
2005. The primary factor which impacted the year-over-year gross margin
comparison was the price reduction on the Company’s
two-chip 500K Mapping Array which was instituted in July ahead of the
planned shipments of a single-array 500K in the fourth quarter of 2006.
This impacted gross margin by approximately $6 million or 8 points.
Research and development expenses were $21.6 million during the third
quarter of 2006 compared to $19.8 million in the third quarter of
2005. Excluding the impact of FAS 123R, on a non-GAAP basis research and
development expenses were $20.7 million during the third quarter of 2006
compared to $19.8 million in the third quarter of 2005.
Selling, general and administrative expenses were $35.9 million for the
third quarter of 2006 compared to $30.4 million in third quarter of
2005. In the third quarter of 2006, the Company incurred approximately
$2.5 million of selling, general and administrative expenses associated
with increased legal costs as well as expenses associated with the
Company’s internal stock option review.
Excluding the impact of FAS 123R, on a non-GAAP basis selling, general
and administrative expenses were $33.6 million for the third quarter of
2006 compared to $30.2 million in the third quarter of 2005.
Recent Highlights
DNA Analysis
Affymetrix has been selected to analyze more than 9,000 samples in a
large-scale whole-genome association project for the Framingham Heart
Study. As part of the SNP Health Association Resource project,
Affymetrix will collaborate with the National Heart Lung and Blood
Institute and the National Center for Biotechnology Information of the
National Institutes of Health to identify genetic variants associated
with heart, lung, blood and sleep disorders.
The Autism Consortium has selected the single Affymetrix GeneChip
Human Mapping 500K Array for the world's most comprehensive study on
the genes associated with autism. The Autism Gene Discovery Project
will be conducted across 3,700 samples by scientific experts from the
Autism Consortium and the Broad Institute of MIT and Harvard.
Researchers from Boston University and Howard University will perform
the first genome-wide scan of an African American cohort searching for
genes associated with obesity, hypertension, diabetes and metabolic
syndrome using the Affymetrix 500K Array Set.
Researchers at the Translational Genomics Research Institute (TGen)
have used the Affymetrix 500K Array to discover a gene associated with
memory performance in humans. The team's findings may be used to
develop new medicines for memory-based diseases such as Alzheimer's
and Parkinson's. The study was published in the Oct. 20, 2006 issue of
Science.
The Foundation for the National Institutes of Health (FNIH) announced
that six major studies of brain, skin, and kidney disorders have been
selected as the first to undergo whole genome analysis by the Genetic
Association Information Network (GAIN). GAIN is a unique
public-private partnership involving the NIH, Pfizer, Affymetrix,
FNIH, Perlegen Sciences, Abbott, and the Broad Institute.
RNA Analysis
NCI and NHGRI announced grant awards in the Cancer Genome Atlas Pilot
Project. The $100 million Project will test the use of large-scale
genome analysis technologies in lung, brain, and ovarian cancer
research. Affymetrix technology will be used at two institutions
involved in the project. The Broad Institute of MIT and Harvard will
use Affymetrix chips to look at expression and copy number changes.
Lawrence Berkeley National Laboratory will use the Affymetrix Exon
Arrays to look at cancer transcription profiles.
The MicroArray Quality Control (MAQC) study, a collaborative effort
led by the FDA and published in the September 8, 2006 issue of Nature
Biotechnology, demonstrated that at a high level, gene expression
signatures generated by microarrays are repeatable, further advancing
the field towards widespread use in clinical applications. Affymetrix
technology outperformed all other platforms in four areas:
Reproducibility, Robustness, Sensitivity, and Controls.
Molecular Diagnostics
The Company has completed setup of Affymetrix Clinical Services Lab
(ACSL), including filing Clinical Laboratory Improvement Amendments
(CLIA) applications. Located in West Sacramento, the purpose of ACSL
is to accelerate adoption of GeneChip assays to clinical practice.
This lab will perform clinical tests, clinical trials, and assist in
the development of clinical assays to accelerate the transition of
GeneChip technologies under CLIA-validated, reproducible, standardized
assay development practices.
Pharmaceutical
Wyeth has extended its agreement with Affymetrix for three more years,
continuing the relationship that began in 1994. Under the agreement,
Wyeth will apply Affymetrix technology in numerous areas of the drug
discovery and development process. Wyeth was one of the first
pharmaceutical companies to apply genomics in clinical research.
Translational Medicine
Affymetrix and Partners HealthCare have entered into a three-year
translational research collaboration to develop microarray-based
diagnostics for complex diseases such as newborn hearing loss, autism
and hypertrophic cardiomyopathy. Researchers at Harvard Medical
School, Partners HealthCare and Harvard Medical School-Partners
HealthCare Center for Genetics and Genomics will create and validate
microarray tests in CLIA laboratories.
Affymetrix has entered into a five-year collaboration with the Peter
MacCallum Cancer Centre (Peter Mac) in Melbourne, Australia, to
analyze genomic information across large sets of patient samples.
Peter Mac researchers will use Affymetrix arrays for translational
research projects, beginning with studies on ovarian cancer and
carcinoma of unknown primaries.
Affymetrix and Zhejiang California Nanosystem Institute at Zhejiang
University have entered into a collaboration to develop clinical
applications using GeneChip technology in the areas of cancer, newborn
genetic diseases and infectious diseases. This is Affymetrix' first
translational medicine collaboration in China.
Licensing
NimbleGen has obtained a non-exclusive, worldwide license to a number
of Affymetrix patents covering the manufacture, use and sales of
nucleic acid microarrays and related products and services in the
research field.
Affymetrix' management team will host a conference call on October 25,
2006 at 2:00 p.m. PT to review its operating results for the third
quarter of 2006. A live webcast can be accessed by visiting the Investor
Relations section of the Company’s website at www.affymetrix.com.
In addition, investors and other interested parties can listen by
dialing domestic: (866) 500-AFFX, international: (706) 643-2771.
A replay of this call will be available from 5:00 p.m. PT on October 25,
2006 until 8:00 p.m. PT on November 1, 2006 at the following numbers:
domestic: (800) 642-1687, international: (706) 645-9291. The passcode
for both replays is 8258660. An archived webcast of the conference call
will be available under the Investor Relations section of the Company's
website at www.affymetrix.com.
About Affymetrix
Affymetrix scientists invented the world's first high-density microarray
in 1989 and began selling the first commercial microarray in 1994. Since
then, Affymetrix GeneChip(R) technology has become the industry standard
in molecular biology research. Affymetrix technology is used by the
world's top pharmaceutical, diagnostic and biotechnology companies as
well as leading academic, government and not-for-profit research
institutes. More than 1,400 systems have been installed around the world
and more than 7,000 peer-reviewed papers have been published using the
technology. Affymetrix' patented photolithographic manufacturing process
provides the most information capacity available today on an array,
enabling researchers to use a whole-genome approach to analyzing the
relationship between genetics and health. Affymetrix is headquartered in
Santa Clara, Calif., with manufacturing facilities in Sacramento,
Calif., and Bedford, Mass. The company maintains important sales and
marketing operations in Europe and Asia and has about 1,100 employees
worldwide. For more information about Affymetrix, please visit the
company's website at www.affymetrix.com.
Use of Non-GAAP Financial Measures
In addition to disclosing financial results calculated in accordance
with GAAP, the Company’s earnings release
contains non-GAAP financial measures that exclude the effects of
non-cash equity-based stock compensation expense as a result of the
Company’s adoption of FAS 123R on January 1,
2006. The Company believes that the presentation of results excluding
non-cash equity-based stock compensation expense provides meaningful
supplemental information to both management and investors that is
indicative of the Company’s core operating
results. The Company used the Modified Prospective Method to adopt FAS
123R and did not restate prior year results for the impact of employee
stock option expensing. Therefore, the Company believes these non-GAAP
financial measures facilitate comparison of operating results across
reporting periods. A reconciliation between the Company’s
results of operations on a GAAP and non-GAAP basis for the periods
reported is included as part of the condensed consolidated statements of
operations at the end of the Company’s
earnings release.
The Company uses these non-GAAP financial measures when evaluating its
financial results as well as for internal planning and forecasting
purposes. The non-GAAP financial measures disclosed by the Company
should not be considered a substitute for or superior to financial
measures calculated in accordance with GAAP, and the financial results
calculated in accordance with GAAP and reconciliations to those
financial statements should be carefully evaluated. The non-GAAP
financial measures used by the Company may be calculated differently
from, and therefore may not be comparable to, similarly titled measures
used by other companies.
All statements in this press release that are not historical are
"forward-looking statements" under the federal securities laws. Such
statements are subject to risks and uncertainties that could cause
actual results to differ materially, including but not limited to:
risks related to the Company's ability to achieve and sustain higher
levels of revenue and improved gross margins and operating income and
reduced operating expenses (including risks related to the outcome of
the Company's previously announced efforts to reduce expenses in the
general and administrative functions including the rationalization of
the Company's facilities); uncertainties relating to technological
approaches, manufacturing (including risks related to resolving any
manufacturing problems) and product development; uncertainties relating
to changes in senior management personnel and structure; uncertainties
related to cost and pricing of Affymetrix products; risks relating to
dependence on collaborative partners; uncertainties relating to sole
source suppliers; uncertainties relating to FDA and other regulatory
approvals; competition; risks relating to intellectual property of
others and the uncertainties of patent protection; and risks relating to
intellectual property and other litigation. These and other risk factors
are discussed in Affymetrix' Form 10-K/A for the year ended December 31,
2005 and other SEC reports, including reports on Form 10-Q and Form
10-Q/A for subsequent periods. Affymetrix expressly disclaims any
obligation or undertaking to release publicly any updates or revisions
to any forward-looking statements contained herein to reflect any change
in Affymetrix' expectations or any change in events, conditions, or
circumstances on which any such statements are based.
PLEASE NOTE:
Affymetrix, the Affymetrix logo and GeneChip are trademarks owned or
used by Affymetrix, Inc.
AFFYMETRIX, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)
September 30,2006
December 31,2005
(Note 1)
ASSETS
Current assets:
Cash and cash equivalents
$
66,487
$
100,236
Available-for-sale securities – short-term
179,055
184,696
Accounts receivable
65,097
93,028
Accounts receivable from Perlegen Sciences
5,153
4,082
Inventories
45,654
35,980
Deferred tax assets—current portion
26,375
26,230
Prepaid expenses and other current assets
7,584
12,622
Total current assets
395,405
456,874
Property and equipment, net
132,465
85,560
Acquired technology rights, net
57,204
61,426
Goodwill
124,787
124,498
Deferred tax assets — long-term portion
18,087
17,594
Notes receivable from employees
2,364
1,824
Other assets
33,051
27,318
$
763,363
$
775,094
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities
$
60,939
$
71,551
Deferred revenue — current portion
34,316
35,644
Total current liabilities
95,255
107,195
Deferred revenue — long-term portion
12,029
15,606
Other long-term liabilities
5,279
4,184
Convertible notes
120,000
120,000
Stockholders’ equity:
Common stock
678
672
Additional paid-in capital
660,732
646,186
Deferred stock compensation
—
(10,799)
Accumulated other comprehensive loss
(1,503)
(1,227)
Accumulated deficit
(129,107)
(106,723)
Total stockholders’ equity
530,800
528,109
$
763,363
$
775,094
Note 1: The condensed consolidated balance sheet at December 31,
2005 has been derived from the audited consolidated financial
statements at that date included in the Company’s
Form 10-K/A for the fiscal year ended December 31, 2005.
AFFYMETRIX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF (LOSS) INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
Three Months Ended September 30,
Nine Months Ended September 30,
2006
2005
2006
2005
Revenue
Product sales
$
56,139
$
69,044
$
183,154
$
211,808
Product related revenue
17,971
10,456
45,621
32,707
Total product and product related revenue
74,110
79,500
228,775
244,515
Royalties and other revenue
5,969
1,727
10,263
5,280
Revenue from Perlegen Sciences
4,593
2,220
12,091
6,318
Total revenue
84,672
83,447
251,129
256,113
Costs and expenses:
Cost of product sales
23,618
20,755
62,338
57,986
Cost of product related revenue
8,859
2,655
22,712
7,619
Cost of revenue from Perlegen Sciences
1,646
1,359
4,304
4,351
Research and development
21,639
19,835
66,737
57,724
Selling, general and administrative
35,865
30,362
114,107
92,499
Stock-based compensation
—
141
—
257
Restructuring
10,008
—
10,008
—
Total costs and expenses
101,635
75,107
280,206
220,436
(Loss) income from operations
(16,963)
8,340
(29,077)
35,677
Interest income and other, net
2,942
2,294
10,949
3,961
Interest expense
(350)
(413)
(1,174)
(1,129)
(Loss) income before income taxes
(14,371)
10,221
(19,302)
38,509
Income tax benefit (provision)
216
(823)
(3,082)
(3,330)
Net (loss) income
$
(14,155)
$
9,398
$
(22,384)
$
35,179
Basic net (loss) income per common share
$
(0.21)
$
0.15
$
(0.33)
$
0.56
Diluted net (loss) income per common share
$
(0.21)
$
0.14
$
(0.33)
$
0.52
Shares used in computing basic net (loss) income per share
67,248
63,786
67,320
63,112
Shares used in computing diluted net (loss) income per share
67,248
70,463
67,320
69,966
AFFYMETRIX, INC.
RECONCILIATION OF GAAP TO NON-GAAP RESULTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
Three Months EndedSeptember 30,
Nine Months EndedSeptember 30,
2006
2005
2006
2005
GAAP net (loss) income
$
(14,155)
$
9,398
$
(22,384)
$
35,179
Stock-based compensation:
Cost of product sales(1)
408
—
1,126
—
Research and development(1)
934
7
3,038
10
Selling, general and administrative(1)
2,290
134
8,350
247
Income tax effect(2)
(509)
(12)
(3,124)
(22)
Non-GAAP net (loss) income
$
(11,032)
$
9,527
$
(12,994)
$
35,414
Non-GAAP diluted net (loss) income per share
$
(0.16)
$
0.14
$
(0.19)
$
0.52
Shares used in computing non-GAAP diluted net (loss) income per share(3)
67,248
70,463
67,320
69,966
Explanations for Non-GAAP adjustments included in table above:
(1) For the three and nine months ended September 30, 2006, the
Company has added back stock-based compensation expense recorded
under FAS 123R to compute its non-GAAP operating results.
(2) Amount reflects the estimated tax impact on the above noted
non-GAAP adjustments.
(3) For the three and nine months ended September 30, 2006, the
Company did not adjust the shares used in computing non-GAAP
diluted net loss per share to conform to what the diluted shares
would had been had it applied prior accounting standards as the
Company was in a loss position.
Affymetrix, Inc., (Nasdaq:AFFX) today reported its operating
results for the third quarter of 2006. On a GAAP basis the Company
reported net loss of approximately $14.2 million or $0.21 per diluted
share, including restructuring charges of $10.0 million or $0.15 per
diluted share and stock-based compensation expense of $3.6 million or
$0.05 per diluted share, in the third quarter of 2006, as compared to
net income of $9.4 million or $0.14 per diluted share in the third
quarter of 2005.
On January 1, 2006, the Company adopted FAS 123R and is reporting
employee stock-based compensation expense in its GAAP results.
Excluding the impact of FAS 123R, the Company reported non-GAAP net
loss of approximately $11.0 million or $0.16 per diluted share in the
third quarter of 2006.
Total revenue for the quarter was $84.7 million, of which $4.6
million was related to the sale of products to Perlegen Sciences,
Inc., as compared to total revenue of $83.4 million in the third
quarter of 2005, of which $2.2 million was related to the sale of
products to Perlegen.
Product and product related revenue was $74.1 million for the
third quarter of 2006, compared to $79.5 million in the same period in
2005.
Third quarter sales included GeneChip(R) consumable revenue of
$59.8 million, consisting of array revenue of $37.4 million, reagent
revenue of $10.1 million, genotyping services revenue of $7.7 million
and $4.6 million of Perlegen revenue. Additionally, the Company
reported instrument revenue of $8.6 million. Affymetrix shipped 33
GeneChip Systems in the quarter, increasing the cumulative systems
shipped to approximately 1480.
Royalties and other revenue were $6.0 million for the third
quarter of 2006 compared to $1.7 million in the third quarter of 2005.
Total operating costs and expenses were $101.6 million for the
third quarter of 2006, including the $10.0 million in restructuring
charges previously mentioned, compared to $75.1 million in the third
quarter of 2005.
Cost of product and product related revenue was $32.5 million in
the third quarter of 2006 compared to $23.4 million in the same period
of 2005. Product and product related gross margin was 56.2 percent in
the third quarter of 2006 compared to 70.6 percent in the third
quarter of 2005. The primary factor which impacted the year-over-year
gross margin comparison was the price reduction on the Company's
two-chip 500K Mapping Array which was instituted in July ahead of the
planned shipments of a single-array 500K in the fourth quarter of
2006. This impacted gross margin by approximately $6 million or 8
points.
Research and development expenses were $21.6 million during the
third quarter of 2006 compared to $19.8 million in the third quarter
of 2005. Excluding the impact of FAS 123R, on a non-GAAP basis
research and development expenses were $20.7 million during the third
quarter of 2006 compared to $19.8 million in the third quarter of
2005.
Selling, general and administrative expenses were $35.9 million
for the third quarter of 2006 compared to $30.4 million in third
quarter of 2005. In the third quarter of 2006, the Company incurred
approximately $2.5 million of selling, general and administrative
expenses associated with increased legal costs as well as expenses
associated with the Company's internal stock option review. Excluding
the impact of FAS 123R, on a non-GAAP basis selling, general and
administrative expenses were $33.6 million for the third quarter of
2006 compared to $30.2 million in the third quarter of 2005.
Recent Highlights
DNA Analysis
-- Affymetrix has been selected to analyze more than 9,000
samples in a large-scale whole-genome association project for
the Framingham Heart Study. As part of the SNP Health
Association Resource project, Affymetrix will collaborate with
the National Heart Lung and Blood Institute and the National
Center for Biotechnology Information of the National
Institutes of Health to identify genetic variants associated
with heart, lung, blood and sleep disorders.
-- The Autism Consortium has selected the single Affymetrix
GeneChip Human Mapping 500K Array for the world's most
comprehensive study on the genes associated with autism. The
Autism Gene Discovery Project will be conducted across 3,700
samples by scientific experts from the Autism Consortium and
the Broad Institute of MIT and Harvard.
-- Researchers from Boston University and Howard University will
perform the first genome-wide scan of an African American
cohort searching for genes associated with obesity,
hypertension, diabetes and metabolic syndrome using the
Affymetrix 500K Array Set.
-- Researchers at the Translational Genomics Research Institute
(TGen) have used the Affymetrix 500K Array to discover a gene
associated with memory performance in humans. The team's
findings may be used to develop new medicines for memory-based
diseases such as Alzheimer's and Parkinson's. The study was
published in the Oct. 20, 2006 issue of Science.
-- The Foundation for the National Institutes of Health (FNIH)
announced that six major studies of brain, skin, and kidney
disorders have been selected as the first to undergo whole
genome analysis by the Genetic Association Information Network
(GAIN). GAIN is a unique public-private partnership involving
the NIH, Pfizer, Affymetrix, FNIH, Perlegen Sciences, Abbott,
and the Broad Institute.
RNA Analysis
-- NCI and NHGRI announced grant awards in the Cancer Genome
Atlas Pilot Project. The $100 million Project will test the
use of large-scale genome analysis technologies in lung,
brain, and ovarian cancer research. Affymetrix technology will
be used at two institutions involved in the project. The Broad
Institute of MIT and Harvard will use Affymetrix chips to look
at expression and copy number changes. Lawrence Berkeley
National Laboratory will use the Affymetrix Exon Arrays to
look at cancer transcription profiles.
-- The MicroArray Quality Control (MAQC) study, a collaborative
effort led by the FDA and published in the September 8, 2006
issue of Nature Biotechnology, demonstrated that at a high
level, gene expression signatures generated by microarrays are
repeatable, further advancing the field towards widespread use
in clinical applications. Affymetrix technology outperformed
all other platforms in four areas: Reproducibility,
Robustness, Sensitivity, and Controls.
Molecular Diagnostics
-- The Company has completed setup of Affymetrix Clinical
Services Lab (ACSL), including filing Clinical Laboratory
Improvement Amendments (CLIA) applications. Located in West
Sacramento, the purpose of ACSL is to accelerate adoption of
GeneChip assays to clinical practice. This lab will perform
clinical tests, clinical trials, and assist in the development
of clinical assays to accelerate the transition of GeneChip
technologies under CLIA-validated, reproducible, standardized
assay development practices.
Pharmaceutical
-- Wyeth has extended its agreement with Affymetrix for three
more years, continuing the relationship that began in 1994.
Under the agreement, Wyeth will apply Affymetrix technology in
numerous areas of the drug discovery and development process.
Wyeth was one of the first pharmaceutical companies to apply
genomics in clinical research.
Translational Medicine
-- Affymetrix and Partners HealthCare have entered into a
three-year translational research collaboration to develop
microarray-based diagnostics for complex diseases such as
newborn hearing loss, autism and hypertrophic cardiomyopathy.
Researchers at Harvard Medical School, Partners HealthCare and
Harvard Medical School-Partners HealthCare Center for Genetics
and Genomics will create and validate microarray tests in CLIA
laboratories.
-- Affymetrix has entered into a five-year collaboration with the
Peter MacCallum Cancer Centre (Peter Mac) in Melbourne,
Australia, to analyze genomic information across large sets of
patient samples. Peter Mac researchers will use Affymetrix
arrays for translational research projects, beginning with
studies on ovarian cancer and carcinoma of unknown primaries.
-- Affymetrix and Zhejiang California Nanosystem Institute at
Zhejiang University have entered into a collaboration to
develop clinical applications using GeneChip technology in the
areas of cancer, newborn genetic diseases and infectious
diseases. This is Affymetrix' first translational medicine
collaboration in China.
Licensing
-- NimbleGen has obtained a non-exclusive, worldwide license to a
number of Affymetrix patents covering the manufacture, use and
sales of nucleic acid microarrays and related products and
services in the research field.
Affymetrix' management team will host a conference call on October
25, 2006 at 2:00 p.m. PT to review its operating results for the third
quarter of 2006. A live webcast can be accessed by visiting the
Investor Relations section of the Company's website at
www.affymetrix.com. In addition, investors and other interested
parties can listen by dialing domestic: (866) 500-AFFX, international:
(706) 643-2771.
A replay of this call will be available from 5:00 p.m. PT on
October 25, 2006 until 8:00 p.m. PT on November 1, 2006 at the
following numbers: domestic: (800) 642-1687, international: (706)
645-9291. The passcode for both replays is 8258660. An archived
webcast of the conference call will be available under the Investor
Relations section of the Company's website at www.affymetrix.com.
About Affymetrix
Affymetrix scientists invented the world's first high-density
microarray in 1989 and began selling the first commercial microarray
in 1994. Since then, Affymetrix GeneChip(R) technology has become the
industry standard in molecular biology research. Affymetrix technology
is used by the world's top pharmaceutical, diagnostic and
biotechnology companies as well as leading academic, government and
not-for-profit research institutes. More than 1,400 systems have been
installed around the world and more than 7,000 peer-reviewed papers
have been published using the technology. Affymetrix' patented
photolithographic manufacturing process provides the most information
capacity available today on an array, enabling researchers to use a
whole-genome approach to analyzing the relationship between genetics
and health. Affymetrix is headquartered in Santa Clara, Calif., with
manufacturing facilities in Sacramento, Calif., and Bedford, Mass. The
company maintains important sales and marketing operations in Europe
and Asia and has about 1,100 employees worldwide. For more information
about Affymetrix, please visit the company's website at
www.affymetrix.com.
Use of Non-GAAP Financial Measures
In addition to disclosing financial results calculated in
accordance with GAAP, the Company's earnings release contains non-GAAP
financial measures that exclude the effects of non-cash equity-based
stock compensation expense as a result of the Company's adoption of
FAS 123R on January 1, 2006. The Company believes that the
presentation of results excluding non-cash equity-based stock
compensation expense provides meaningful supplemental information to
both management and investors that is indicative of the Company's core
operating results. The Company used the Modified Prospective Method to
adopt FAS 123R and did not restate prior year results for the impact
of employee stock option expensing. Therefore, the Company believes
these non-GAAP financial measures facilitate comparison of operating
results across reporting periods. A reconciliation between the
Company's results of operations on a GAAP and non-GAAP basis for the
periods reported is included as part of the condensed consolidated
statements of operations at the end of the Company's earnings release.
The Company uses these non-GAAP financial measures when evaluating
its financial results as well as for internal planning and forecasting
purposes. The non-GAAP financial measures disclosed by the Company
should not be considered a substitute for or superior to financial
measures calculated in accordance with GAAP, and the financial results
calculated in accordance with GAAP and reconciliations to those
financial statements should be carefully evaluated. The non-GAAP
financial measures used by the Company may be calculated differently
from, and therefore may not be comparable to, similarly titled
measures used by other companies.
All statements in this press release that are not historical are
"forward-looking statements" under the federal securities laws. Such
statements are subject to risks and uncertainties that could cause
actual results to differ materially, including but not limited to:
risks related to the Company's ability to achieve and sustain higher
levels of revenue and improved gross margins and operating income and
reduced operating expenses (including risks related to the outcome of
the Company's previously announced efforts to reduce expenses in the
general and administrative functions including the rationalization of
the Company's facilities); uncertainties relating to technological
approaches, manufacturing (including risks related to resolving any
manufacturing problems) and product development; uncertainties
relating to changes in senior management personnel and structure;
uncertainties related to cost and pricing of Affymetrix
products; risks relating to dependence on collaborative partners;
uncertainties relating to sole source suppliers; uncertainties
relating to FDA and other regulatory approvals; competition; risks
relating to intellectual property of others and the uncertainties of
patent protection; and risks relating to intellectual property and
other litigation. These and other risk factors are discussed in
Affymetrix' Form 10-K/A for the year ended December 31, 2005 and other
SEC reports, including reports on Form 10-Q and Form 10-Q/A for
subsequent periods. Affymetrix expressly disclaims any obligation or
undertaking to release publicly any updates or revisions to any
forward-looking statements contained herein to reflect any change in
Affymetrix' expectations or any change in events, conditions, or
circumstances on which any such statements are based.
PLEASE NOTE:
Affymetrix, the Affymetrix logo and GeneChip are trademarks owned
or used by Affymetrix, Inc.
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AFFYMETRIX, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)
September 30, December 31,
2006 2005
------------- ------------
(Note 1)
ASSETS
Current assets:
Cash and cash equivalents $ 66,487 $ 100,236
Available-for-sale securities - short-
term 179,055 184,696
Accounts receivable 65,097 93,028
Accounts receivable from Perlegen
Sciences 5,153 4,082
Inventories 45,654 35,980
Deferred tax assets--current portion 26,375 26,230
Prepaid expenses and other current assets 7,584 12,622
------------- ------------
Total current assets 395,405 456,874
Property and equipment, net 132,465 85,560
Acquired technology rights, net 57,204 61,426
Goodwill 124,787 124,498
Deferred tax assets -- long-term portion 18,087 17,594
Notes receivable from employees 2,364 1,824
Other assets 33,051 27,318
------------- ------------
$ 763,363 $ 775,094
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 60,939 $ 71,551
Deferred revenue -- current portion 34,316 35,644
------------- ------------
Total current liabilities 95,255 107,195
Deferred revenue -- long-term portion 12,029 15,606
Other long-term liabilities 5,279 4,184
Convertible notes 120,000 120,000
Stockholders' equity:
Common stock 678 672
Additional paid-in capital 660,732 646,186
Deferred stock compensation -- (10,799)
Accumulated other comprehensive loss (1,503) (1,227)
Accumulated deficit (129,107) (106,723)
------------- ------------
Total stockholders' equity 530,800 528,109
------------- ------------
$ 763,363 $ 775,094
============= ============
-------------------------------------------
Note 1: The condensed consolidated balance sheet at December 31, 2005
has been derived from the audited consolidated financial statements
at that date included in the Company's Form 10-K/A for the fiscal
year ended December 31, 2005.
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AFFYMETRIX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF (LOSS) INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -------------------
2006 2005 2006 2005
--------- -------- --------- ---------
Revenue
Product sales $ 56,139 $69,044 $183,154 $211,808
Product related revenue 17,971 10,456 45,621 32,707
--------- -------- --------- ---------
Total product and product
related revenue 74,110 79,500 228,775 244,515
Royalties and other revenue 5,969 1,727 10,263 5,280
Revenue from Perlegen
Sciences 4,593 2,220 12,091 6,318
--------- -------- --------- ---------
Total revenue 84,672 83,447 251,129 256,113
--------- -------- --------- ---------
Costs and expenses:
Cost of product sales 23,618 20,755 62,338 57,986
Cost of product related
revenue 8,859 2,655 22,712 7,619
Cost of revenue from Perlegen
Sciences 1,646 1,359 4,304 4,351
Research and development 21,639 19,835 66,737 57,724
Selling, general and
administrative 35,865 30,362 114,107 92,499
Stock-based compensation -- 141 -- 257
Restructuring 10,008 -- 10,008 --
--------- -------- --------- ---------
Total costs and expenses 101,635 75,107 280,206 220,436
--------- -------- --------- ---------
(Loss) income from operations (16,963) 8,340 (29,077) 35,677
Interest income and other, net 2,942 2,294 10,949 3,961
Interest expense (350) (413) (1,174) (1,129)
--------- -------- --------- ---------
(Loss) income before income
taxes (14,371) 10,221 (19,302) 38,509
Income tax benefit (provision) 216 (823) (3,082) (3,330)
--------- -------- --------- ---------
Net (loss) income $(14,155) $ 9,398 $(22,384) $ 35,179
========= ======== ========= =========
Basic net (loss) income per
common share $ (0.21) $ 0.15 $ (0.33) $ 0.56
========= ======== ========= =========
Diluted net (loss) income per
common share $ (0.21) $ 0.14 $ (0.33) $ 0.52
========= ======== ========= =========
Shares used in computing basic
net (loss) income per share 67,248 63,786 67,320 63,112
========= ======== ========= =========
Shares used in computing
diluted net (loss) income per
share 67,248 70,463 67,320 69,966
========= ======== ========= =========
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AFFYMETRIX, INC.
RECONCILIATION OF GAAP TO NON-GAAP RESULTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ ------------------
2006 2005 2006 2005
---------- ------- --------- --------
GAAP net (loss) income $ (14,155) $9,398 $(22,384) $35,179
Stock-based compensation:
Cost of product sales(1) 408 -- 1,126 --
Research and development(1) 934 7 3,038 10
Selling, general and
administrative(1) 2,290 134 8,350 247
Income tax effect(2) (509) (12) (3,124) (22)
---------- ------- --------- --------
Non-GAAP net (loss) income $ (11,032) $9,527 $(12,994) $35,414
========== ======= ========= ========
Non-GAAP diluted net (loss)
income per share $ (0.16) $ 0.14 $ (0.19) $ 0.52
================== ========= ========
Shares used in computing non-
GAAP diluted net (loss) income
per share(3) 67,248 70,463 67,320 69,966
========== ======= ========= ========
Explanations for Non-GAAP adjustments included in table above:
(1) For the three and nine months ended September 30, 2006, the
Company has added back stock-based compensation expense recorded
under FAS 123R to compute its non-GAAP operating results.
(2) Amount reflects the estimated tax impact on the above noted non-
GAAP adjustments.
(3) For the three and nine months ended September 30, 2006, the
Company did not adjust the shares used in computing non-GAAP diluted
net loss per share to conform to what the diluted shares would had
been had it applied prior accounting standards as the Company was in
a loss position.
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