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Gen-Probe Reports Financial Results for the Fourth Quarter of 2009

-- Company Posts Non-GAAP EPS of $0.52(1), Excluding Transaction-Related Expenses, and GAAP EPS of $0.48 --

-- Acquisitions of Tepnel and Prodesse Contribute to New Quarterly and Annual Records for Product Sales and Total Revenues --

-- Company Generates $29.5 Million of Free Cash Flow in Quarter --


News provided by

Gen-Probe Incorporated

Feb 18, 2010, 04:01 ET

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SAN DIEGO, Feb. 18 /PRNewswire-FirstCall/ -- Gen-Probe Incorporated (Nasdaq: GPRO) today reported financial results for the fourth quarter of 2009, with record product sales and total revenues driving non-GAAP earnings per share (EPS) of $0.52 and GAAP EPS of $0.48.  

"Gen-Probe posted strong financial results in the fourth quarter of 2009 based on balanced performance across our key product areas: women's health, infectious diseases, blood screening and transplant diagnostics," said Carl Hull, the Company's president and chief executive officer.  

    
    
    Key financial results for the fourth quarter of 2009 were
    ($ in millions, except EPS):
    
                              Non-GAAP                  GAAP
                        --------------------     -------------------
                        2009    2008  Change     2009   2008  Change
                        ----    ----  ------     ----   ----  ------
    Product sales     $135.5  $105.8    +28%   $135.5 $105.8    +28%
    Total revenues    $138.9  $109.1    +27%   $138.9 $109.1    +27%
    Operating profit   $37.4   $27.2    +37%    $34.9  $27.2    +28%
    Net income         $25.8   $21.1    +22%    $24.0  $21.1    +14%
    EPS                $0.52   $0.39    +33%    $0.48  $0.39    +23%
    Free cash flow(2)  $29.5   $10.4   +184%    $29.5  $10.4   +184%
    
    
    Key financial results for the full year 2009 were
    ($ in millions, except EPS):
    
                             Non-GAAP                    GAAP
                        --------------------     -------------------
                        2009    2008  Change     2009   2008  Change
                        ----    ----  ------     ----   ----  ------
    Product sales     $483.8  $429.2    +13%   $483.8 $429.2    +13%
    Total revenues    $498.3  $472.7     +5%   $498.3 $472.7     +5%
    Operating profit  $131.0  $145.4    -10%   $120.1 $145.4    -17%
    Net income         $99.8  $107.0     -7%    $91.8 $107.0    -14%
    EPS                $1.95   $1.95      0%    $1.79  $1.95     -8%
    Free cash flow    $112.7  $138.9    -19%   $112.7 $138.9    -19%

In 2008, Gen-Probe's total revenues, net income, EPS and free cash flow benefited from a number of non-recurring items.  The two most significant benefits were:

  • $16.4 million of royalty and license revenue ($0.20 of EPS) recorded in the first quarter of 2008 based on the settlement of patent infringement litigation against Bayer (now Siemens Healthcare Diagnostics).
  • $10.0 million of collaborative research revenue ($0.12 of EPS) recorded from the Company's commercial partner, Novartis Diagnostics, in the third quarter of 2008 based on the full approval by the US Food and Drug Administration (FDA) of the PROCLEIX® ULTRIO® assay on the TIGRIS® system.

In 2009, the Company's product sales, total revenues, net income, EPS and free cash flow benefited from $8.2 million of one-time revenue ($0.10 of EPS) recorded in the first quarter associated with the renegotiation of the Company's collaboration agreement with Novartis.  

Revenue Detail

In the fourth quarter of 2009, clinical diagnostics sales growth was driven by transplant diagnostics and influenza products, and the APTIMA Combo 2® assay for detecting Chlamydia and gonorrhea.  Compared to the prior year period, clinical diagnostics sales also benefited from the weaker US dollar, which added an estimated $0.8 million, or 1%, to growth.(3)

In blood screening, fourth quarter sales growth was driven mainly by higher sales of TIGRIS instruments to Novartis, which generally are a precursor to future assay sales.  Compared to the prior year period, blood screening sales also benefited from the weaker US dollar, which added an estimated $1.2 million, or 2%, to growth.

Sales of research products and services in the fourth quarter of 2009 were $4.4 million.  These sales, resulting from the Tepnel acquisition, were not included in Gen-Probe's prior year results.

    
    
    Fourth quarter product sales were ($ in millions):
    
                       Three Months Ended Dec. 31,        Change
                       ---------------------------        ------
                                                       As     Constant
                              2009      2008        Reported  Currency
                              ----      ----        --------  --------
    Clinical Diagnostics     $77.6     $57.7           +34%     +33%
    Blood Screening          $53.4     $48.1           +11%      +9%
    Research Products
     and Services             $4.4       N/A           N/A      N/A
    -----------------         ----       ---           ---      ---
    Total Product Sales     $135.5    $105.8           +28%     +26%

For the full year 2009, clinical diagnostics sales were negatively affected by the stronger US dollar, which reduced growth by an estimated $2.9 million, or 1%, compared to the prior year.  In blood screening, full year 2009 sales also were negatively affected by the stronger US dollar, which reduced growth by an estimated $6.1 million, or 3%, compared to the prior year.  

    
    
    Product sales for the full year 2009 were ($ in millions):
    
                         12 Months Ended Dec. 31,          Change
                         ------------------------          ------
                                                        As       Constant
                              2009      2008         Reported    Currency
                              ----      ----         --------    --------
    Clinical Diagnostics    $274.2    $222.9            +23%        +24%
    Blood Screening         $197.5    $206.3             -4%         -1%
    Research Products
     and Services            $12.0       N/A            N/A         N/A
    -----------------        -----       ---            ---         ---
    Total Product Sales     $483.8    $429.2            +13%        +15%

Collaborative research revenues in the fourth quarter of 2009 were $2.0 million, compared to $2.1 million in the prior year period.  For the full year 2009, collaborative research revenues were $7.9 million, compared to $20.6 million in the prior year.  As discussed, this decrease resulted primarily from the $10.0 million milestone earned from Novartis in 2008 based on the full FDA approval of the PROCLEIX ULTRIO assay on the TIGRIS system.  

Royalty and license revenues for the fourth quarter of 2009 were $1.4 million, compared to $1.3 million in the prior year period.  For the full year 2009, royalty and license revenues were $6.6 million, compared to $22.9 million in the prior year.  As discussed, this decrease resulted primarily from $16.4 million of revenue that was recorded in 2008 associated with the settlement of patent infringement litigation against Bayer.  

Expense Detail

Gross margin on product sales in the fourth quarter of 2009 was 67.3% on a non-GAAP basis that excludes $0.1 million of acquisition-related depreciation expense, compared to 69.6% in the prior year period.  This decrease resulted mainly from increased sales of low-margin TIGRIS instruments to Novartis.  For the full year 2009, gross margin on product sales was 68.6% on a non-GAAP basis that excludes $0.3 million of acquisition-related depreciation expense, compared to 70.2% in the prior year.  On a GAAP basis, gross margin on product sales was 67.2% in the fourth quarter of 2009, and 68.5% for the full year.

Acquisition-related amortization expenses were $1.9 million in the fourth quarter of 2009 and $4.1 million for the full year, compared to $0 in the comparable periods of the prior year.

Research and development (R&D) expenses in the fourth quarter of 2009 were $27.4 million, compared to $24.2 million in the prior year period, an increase of 13% that resulted primarily from expenses associated with clinical trials of the Company's HPV, PCA3 and trichomonas assays, and from the addition of Tepnel's R&D activities.  For the full year 2009, R&D expenses were $106.0 million, compared to $101.1 million in the prior year, an increase of 5%.  R&D expenses represented 21.3% of total revenues in 2009, and 21.4% of total revenues in 2008.

Marketing and sales expenses in the fourth quarter of 2009 were $15.2 million on a non-GAAP basis that excludes $0.1 million of acquisition-related expense, compared to $11.8 million in the prior year period, an increase of 29% that resulted primarily from the addition of Tepnel's cost structure, and European sales force expansion and market development efforts.  For the full year 2009, marketing and sales expenses were $53.8 million on a non-GAAP basis that excludes $0.1 million of acquisition-related expense, compared to $45.9 million in the prior year, an increase of 17%.  On a GAAP basis, marketing and sales expenses were $15.3 million in the fourth quarter of 2009, and $53.9 million for the full year.

General and administrative (G&A) expenses in the fourth quarter of 2009 were $14.5 million on a non-GAAP basis that excludes $0.4 million of transaction-related expense, compared to $13.8 million in the prior year period.  This increase of 5% resulted primarily from the addition of Tepnel's cost structure.  For the full year 2009, G&A expenses were $55.5 million on a non-GAAP basis that excludes $6.3 million of transaction-related expense, compared to $52.3 million in the prior year, an increase of 6%.  On a GAAP basis, G&A expenses were $14.9 million in the fourth quarter of 2009, and $61.8 million for the full year.

Total other income in the fourth quarter of 2009 was $2.3 million, compared to $3.8 million in the prior year period.  This decrease of 39% resulted primarily from lower yields on the Company's municipal bond portfolio, and lower investment balances following the completion of the Company's $250 million share repurchase program and the acquisitions of Tepnel and Prodesse.  For the full year 2009, total other income was $19.7 million, compared to $15.5 million in the prior year, an increase of 27% that resulted primarily from realized investment gains.

In the fourth quarter of 2009, Gen-Probe generated net cash of $39.6 million from operating activities, substantially higher than GAAP net income of $24.0 million.  The Company spent $10.1 million on property, plant and equipment in the quarter, leading to free cash flow of $29.5 million.

Gen-Probe continues to have a strong balance sheet.  As of December 31, 2009, the Company had $501.1 million of cash, cash equivalents and marketable securities, and $240.8 million of short-term debt.  The Company pays interest on substantially all this debt at a rate 0.6% above the one-month London Interbank Offered Rate (LIBOR), which was recently below 0.3%.  

2010 Financial Guidance

"Based on the midpoints of our non-GAAP 2010 guidance, we expect to show solid, double-digit growth on both the top and bottom lines, as well as improved operating profit and very strong free cash flow," said Herm Rosenman, Gen-Probe's senior vice president - finance, and chief financial officer.  

    
    
    Gen-Probe 2010 financial guidance is described in the table below:
    
                                        Non-GAAP                  GAAP
                                        --------                  ----
    Total revenues                $540 to $565 million    $540 to $565 million
    Product gross margins               68% to 70%             68% to 70%
    Acquisition-related
     amortization                          N/A              $9 to $10 million
    Fair value adjustment of
     acquisition-related
     contingent consideration              N/A               $4 to $5 million
    Operating margin                    27% to 28%             24.5% to 25.5%
    Tax rate                            34% to 35%               34% to 35%
    Diluted shares                    ~ 50 million            ~ 50 million
    EPS                              $2.10 to $2.25           $1.90 to $2.05

Webcast Conference Call

A live webcast of Gen-Probe's fourth quarter 2009 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 800-509-8621 for domestic callers and 203-369-3807 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 molecular diagnostic products and services that are used primarily to diagnose human diseases, screen donated human blood, and ensure transplant compatibility.  Gen-Probe has approximately 27 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 1,300 people. For more information, go to www.gen-probe.com.

About Non-GAAP Financial Measures

To supplement Gen-Probe's financial results for the fourth quarter of 2009 and its 2010 financial guidance, in each case presented in accordance with GAAP, Gen-Probe uses the following financial measures defined as non-GAAP by the SEC: non-GAAP net income, non-GAAP gross margin, non-GAAP marketing and sales expenses, non-GAAP G&A expenses, non-GAAP operating margin, non-GAAP income tax rate, and non-GAAP EPS.  Gen-Probe's management does not, 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.  Further, our reconciliations of non-GAAP to GAAP operating results, which are included on the attached tables, are presented in the format of consolidated statements of income solely to assist a reader in understanding the impact of the various adjustments to our GAAP operating results, individually and in the aggregate, and are not intended to place any undue prominence on our non-GAAP operating results.

Trademarks

APTIMA, APTIMA COMBO 2 and TIGRIS are trademarks of Gen-Probe.  PROCLEIX and ULTRIO are trademarks of Novartis.  All other trademarks are the property of their owners.

Caution Regarding Forward-Looking Statements

Any statements in this news release about our expectations, beliefs, plans, objectives, assumptions or future events or performance, including those under the heading "2010 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 milestones, growth opportunities, and plans 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 2010 financial targets, (ii) the risk that we may not integrate acquisitions, such as Tepnel and Prodesse, successfully, (iii) the possibility that the market for the sale of our new products, such as our PANTHER system and PROGENSA PCA3, APTIMA HPV and APTIMA trichomonas assays, may not develop as expected, (iv) the enhancement of existing products and the development of new products may not proceed as planned, (v) the risk that investigational products, including those now in US clinical trials, may not be approved by regulatory authorities or become commercially available in the time frame we anticipate, or at all, (vi) the risk that we may not be able to compete effectively, (vii) the risk that we may not be able to maintain our current corporate collaborations and enter into new corporate collaborations or customer contracts, (viii) our dependence on Novartis and other third parties for the distribution of some of our products, (ix) our dependence 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, (xi) changes in government regulation or tax policy affecting our diagnostic products could harm our sales, increase our development costs or increase our taxes, (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.  This list includes 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.

(1) In this press release, all per share amounts are calculated on a fully diluted basis.  Non-GAAP EPS for the fourth quarter of 2009 excludes $2.5 million of pre-tax expenses ($0.04 per share) related mainly to the Company's acquisitions of Tepnel and Prodesse.  Some totals may not foot due to rounding.

(2) Cash from operations less purchases of property, plant and equipment.

(3) In this press release, all estimates of "constant currency" growth exclude foreign currency fluctuations associated with revenues from acquired companies, which were not part of Gen-Probe in 2008.

Contact:


Michael Watts

Vice president, investor relations and corporate communications

858-410-8673

    
    
                               Gen-Probe Incorporated
                        Consolidated Balance Sheets - GAAP
                  (In thousands, except share and per share data)
    
                                                   December 31,  December 31,
                                                       2009         2008
                                                       ----         ----
    Assets
    Current assets:
      Cash and cash equivalents, including
       restricted cash of $17 and $0 at
       December 31, 2009 and December 31, 2008,
       respectively                                   $82,616      $60,122
      Marketable securities                           402,990      371,276
      Trade accounts receivable, net of
       allowance for doubtful accounts of $516
       and $700 at December 31, 2009 and
       December 31, 2008, respectively                 55,305       33,397
      Accounts receivable – other                       4,707        2,900
      Inventories                                      61,071       54,406
      Deferred income tax – short-term                 16,082        7,269
      Prepaid income tax                                7,317        2,306
      Prepaid expenses                                 14,747       15,094
      Other current assets                              4,708        6,135
                                                        -----        -----
    Total current assets                              649,543      552,905
    
    Marketable securities, net of current
     portion                                           15,472       73,780
    Property, plant and equipment, net                157,437      141,922
    Capitalized software, net                          12,560       13,409
    Goodwill                                          122,247       18,621
    Deferred income tax, net of current
     portion                                            8,692       12,286
    Purchased intangibles, net                        108,015          298
    Licenses, manufacturing access fees and
     other assets, net                                 64,601       56,310
                                                       ------       ------
    Total assets                                   $1,138,567     $869,531
                                                   ==========     ========
    
    Liabilities and stockholders' equity
    Current liabilities:
      Accounts payable                                $26,750      $16,050
      Accrued salaries and employee benefits           27,093       25,093
      Other accrued expenses                           18,027        4,027
      Short-term borrowings                           240,841            –
      Deferred income tax                               2,123            –
      Deferred revenue                                  3,527        1,278
                                                        -----        -----
    Total current liabilities                         318,361       46,448
    
    Non-current income tax payable                      5,958        4,773
    Deferred income tax, net of current portion        31,912           55
    Deferred revenue, net of current portion            1,978        2,333
    Other long-term liabilities                        13,183        2,162
    
    Commitments and contingencies
    
    Stockholders' equity:
      Preferred stock, $0.0001 par value per
       share, 20,000,000 shares authorized,
       none issued and outstanding                          –            –
      Common stock, $0.0001 par value per
       share; 200,000,000 shares authorized,
       49,143,798 and 52,920,971 shares issued
       and outstanding at December 31, 2009 and
       December 31, 2008, respectively                      5            5
      Additional paid-in capital                      242,615      382,544
      Accumulated other comprehensive income            4,616        3,055
      Retained earnings                               519,939      428,156
                                                      -------      -------
    Total stockholders' equity                        767,175      813,760
                                                      -------      -------
    Total liabilities and stockholders' equity     $1,138,567     $869,531
                                                   ==========     ========
    
    
                               Gen-Probe Incorporated 
                      Consolidated Statements of Income - GAAP
                        (In thousands, except per share data)
    
                             Three Months Ended     Twelve Months Ended
                                 December 31,           December 31,
                                 ------------           ------------
                               2009        2008        2009      2008
                               ----        ----        ----      ----
    Revenues:
      Product sales          $135,470   $105,759    $483,759   $429,220
      Collaborative
       research revenue         2,049      2,128       7,911     20,581
      Royalty and license
       revenue                  1,351      1,254       6,632     22,894
                                -----      -----       -----     ------
    Total revenues            138,870    109,141     498,302    472,695
    
    Operating expenses:
      Cost of product
       sales (excluding
       acquisition-
       related intangible
       amortization)           44,454     32,202     152,393    128,029
      Acquisition-
       related intangible
       amortization             1,894          –       4,144          –
      Research and
       development             27,428     24,158     105,970    101,099
      Marketing and sales      15,306     11,780      53,853     45,850
      General and
       administrative          14,925     13,806      61,828     52,322
                               ------     ------      ------     ------
    Total operating
     expenses                 104,007     81,946     378,188    327,300
                              -------     ------     -------    -------
    Income from
     operations                34,863     27,195     120,114    145,395
    Other income/
     (expense):
      Investment and
       interest income          1,923      4,527      21,603     16,801
      Interest expense           (392)         –      (1,857)         –
      Other income/
       (expense)                  769       (683)        (58)    (1,333)
                                  ---       ----         ---     ------
    Total other income,
     net                        2,300      3,844      19,688     15,468
                                -----      -----      ------     ------
    Income before
     income tax                37,163     31,039     139,802    160,863
    
    Income tax expense         13,138      9,899      48,019     53,909
                               ------      -----      ------     ------
    Net income                $24,025    $21,140     $91,783   $106,954
                              =======    =======     =======   ========
    
    Net income per
     share:
      Basic                     $0.49      $0.40       $1.82      $1.98(4)
                                =====      =====       =====     ======
      Diluted                   $0.48      $0.39       $1.79      $1.95
                                =====      =====       =====      =====
    
    Weighted average
     shares
     outstanding:
      Basic                    48,923     53,191      50,356     53,740
                               ======     ======      ======     ======
      Diluted                  49,458     53,823      50,965     54,785
                               ======     ======      ======     ======
    
    
    (4) Effective January 1, 2009, Gen-Probe adopted Financial Accounting 
    Standards Board guidance that addresses whether restricted stock grants to
    employees have a dilutive effect on EPS.  The guidance was applied 
    retroactively to prior periods, resulting in a $0.01 decrease in basic EPS
    for full year 2008.
    
    
                             Gen-Probe Incorporated 
                  Consolidated Statements of Income – Non-GAAP
                      (In thousands, except per share data)
    
    
                                               Three Months Ended
                                                December 31, 2009
                                                -----------------
                                         Non-GAAP   Adjustments      GAAP
                                         --------   -----------      ----
    Revenues:
      Product sales                      $135,470         $–      $135,470
      Collaborative research revenue        2,049          –         2,049
      Royalty and license revenue           1,351          –         1,351
                                            -----        ---         -----
    Total revenues                        138,870          –       138,870
    
    Operating expenses:
      Cost of product sales (excluding
       acquisition-related intangible
       amortization)                       44,361         93        44,454
      Acquisition-related intangible
       amortization                             –      1,894         1,894
      Research and development             27,428          –        27,428
      Marketing and sales                  15,209         97        15,306
      General and administrative           14,479        446        14,925
                                           ------        ---        ------
    Total operating expenses              101,477      2,530       104,007
                                          -------      -----       -------
    Income from operations                 37,393     (2,530)       34,863
    Other income/(expense):
      Investment and interest income        1,923          –         1,923
      Interest expense                       (392)         –          (392)
      Other income/(expense)                  769          –           769
                                              ---        ---           ---
    Total other income, net                 2,300          –         2,300
                                            -----        ---         -----
    Income before income tax               39,693     (2,530)       37,163
    
    Income tax expense                     13,890       (752)       13,138
                                           ------       ----        ------
    Net income                            $25,803    $(1,778)      $24,025
                                          =======    =======       =======
    
    Net income per share:
      Basic                                 $0.53     $(0.04)        $0.49
                                            =====     ======         =====
      Diluted                               $0.52     $(0.04)        $0.48
                                            =====     ======         =====
    
    Weighted average shares outstanding:
      Basic                                48,923     48,923        48,923
                                           ======     ======        ======
      Diluted                              49,458     49,458        49,458
                                           ======     ======        ======
    
    
                              Gen-Probe Incorporated 
                  Consolidated Statements of Income – Non-GAAP
                      (In thousands, except per share data)
    
    
                                                Twelve Months Ended
                                                 December 31, 2009
                                                 -----------------
                                         Non-GAAP   Adjustments      GAAP
                                         --------   -----------      ----
    Revenues:
      Product sales                      $483,759          $–     $483,759
      Collaborative research revenue        7,911           –        7,911
      Royalty and license revenue           6,632           –        6,632
                                            -----         ---        -----
    Total revenues                        498,302           –      498,302
    
    Operating expenses:
      Cost of product sales (excluding
       acquisition-related intangible
       amortization)                      152,118         275      152,393
      Acquisition-related intangible
       amortization                             –       4,144        4,144
      Research and development            105,970           –      105,970
      Marketing and sales                  53,756          97       53,853
      General and administrative           55,497       6,331       61,828
                                           ------       -----       ------
    Total operating expenses              367,341      10,847      378,188
                                          -------      ------      -------
    Income from operations                130,961     (10,847)     120,114
    Other income/(expense):
      Investment and interest income       21,603           –       21,603
      Interest expense                     (1,857)          –       (1,857)
      Other income/(expense)                  (58)          –          (58)
                                              ---         ---          ---
    Total other income, net                19,688           –       19,688
                                           ------         ---       ------
    Income before income tax              150,649     (10,847)     139,802
    
    Income tax expense                     50,825      (2,806)      48,019
                                           ------      ------       ------
    Net income                            $99,824     $(8,041)     $91,783
                                          =======     =======      =======
    
    Net income per share:
      Basic                                 $1.98      $(0.16)       $1.82
                                            =====      ======        =====
      Diluted                               $1.95      $(0.16)       $1.79
                                            =====      ======        =====
    
     Weighted average shares
      outstanding:
      Basic                                50,356      50,356       50,356
                                           ======      ======       ======
      Diluted                              50,965      50,965       50,965
                                           ======      ======       ======
    
    
                           Gen-Probe Incorporated 
                Consolidated Statements of Cash Flows - GAAP
                               (In thousands)
    
    
                                                  Twelve Months Ended
                                                      December 31,
                                                      ------------
                                                    2009          2008
                                                    ----          ----
    Operating activities:
    Net income                                    $91,783      $106,954
    Adjustments to reconcile net income to net
     cash provided by operating activities:
      Depreciation and amortization                40,382        34,715
      Amortization of premiums on investments,
       net of accretion of discounts                5,868         6,908
      Stock-based compensation charges             23,420        20,663
      Stock-based compensation income tax
       benefits                                     3,343         3,276
      Excess tax benefit from employee stock-
       based compensation                          (2,005)       (2,493)
      Deferred revenue                                812        (3,831)
      Deferred income tax                          (5,786)       (2,788)
      Gain on sale of investment in MPI                 –        (1,600)
      Gain on sale of food safety business           (291)            –
      Impairment of intangible assets                   –         5,086
      Loss on disposal of property and equipment      221            55
      Changes in assets and liabilities:
        Trade and other accounts receivable       (11,303)        7,421
        Inventories                                 2,315        (5,367)
        Prepaid expenses                            1,218         2,325
        Other current assets                        1,912        (1,260)
        Goodwill                                        –             –
        Other long-term assets                     (4,123)         (173)
        Accounts payable                            3,500         4,377
        Accrued salaries and employee benefits       (676)        4,125
        Other accrued expenses                       (806)           101
        Income tax payable                         (5,714)         (499)
        Other long-term liabilities                   961           258
                                                      ---           ---
    Net cash provided by operating activities     145,032       178,253
                                                  -------       -------
    
    Investing activities:
    Proceeds from sales and maturities of
     marketable securities                        438,601       105,994
    Purchases of marketable securities           (419,019)     (198,691)
    Purchases of property, plant and equipment    (32,364)      (39,348)
    Capitalization of software development costs   (1,290)            –
    Purchases of intangible assets, including
     licenses and manufacturing access fees        (7,341)      (11,970)
    Net cash paid for business combinations      (183,725)            –
    Proceeds from sale of food safety business      6,357             –
    Proceeds from sale of investment in MPI             –         4,100
    Other assets                                      403            27
                                                      ---           ---
    Net cash used in investing activities        (198,378)     (139,888)
                                                 --------      --------
    
    Financing activities:
    Excess tax benefit from stock-based
     compensation                                   2,005         2,493
    Repurchase and retirement of restricted
     stock for payment of taxes                    (1,716)       (1,529)
    Repurchase and retirement of common stock    (174,847)      (74,970)
    Proceeds from issuance of common stock and
     ESPP                                          10,923        20,472
    Borrowings, net                               238,450             –
                                                  -------           ---
    Net cash provided by (used in) financing
     activities                                    74,815       (53,534)
                                                   ------       -------
    Effect of exchange rate changes on cash and
     cash equivalents                               1,024          (672)
                                                     ----          ----
    Net increase (decrease) in cash and cash
     equivalents                                   22,494       (15,841)
    Cash and cash equivalents at the beginning
     of year                                       60,122        75,963
                                                   ------        ------
    Cash and cash equivalents at the end of
     year                                         $82,616       $60,122
                                                  =======       =======

SOURCE Gen-Probe Incorporated

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