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Affymetrix Inc. Reports Operating Results (10-K)

February 28, 2012 | About:

Affymetrix Inc. (NASDAQ:AFFX) filed Annual Report for the period ended 2011-12-31.

Affymetrix Inc has a market cap of $316.4 million; its shares were traded at around $4.41 with and P/S ratio of 1.2.

Highlight of Business Operations:

In 2011, our business was affected by a significant drop in the volume of sales of consumables to our academic and pharmaceutical customers, particularly in North America, which led to a decrease in revenue as compared to the same period in 2010. Primarily due to lower revenues from product sales, we incurred a net loss of $28.2 million for the year. Despite the lower revenues, we were able to generate cash flows from operations of almost $40 million in 2011.

Income tax expense is based on pretax financial accounting income. Under the asset and liability method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. We must assess the likelihood that the resulting deferred tax assets will be realized. To the extent we believe that realization is not more likely than not, we establish a valuation allowance. Significant estimates are required in determining our provision for income taxes, our deferred tax assets and liabilities, and any valuation allowance to be recorded against our deferred tax assets. Some of these estimates are based on interpretations of existing tax laws or regulations. We believe that our estimates are reasonable and that our reserves for income tax related uncertainties are adequate. Various internal and external factors may have favorable or unfavorable effects on our future effective tax rate. These factors include, but are not limited to, changes in overall levels, character, or geographical mix of pretax earnings, changes in tax laws, regulations and/or rates, changing interpretations of existing tax laws or regulations, changes in the valuation of our deferred tax assets or liabilities, future levels of research and development spending, nondeductible expenses, applicability of tax holidays, and ultimate outcomes of income tax audits. The total amount of unrecognized tax benefits as of December 31, 2011 was approximately $16.5 million. If recognized, the amount of unrecognized tax benefits that would impact income tax expense is $2.7 million. As of December 31, 2011, we do not anticipate any material changes to the amount of unrecognized tax benefit during the next twelve months. We classify interest and penalties related to tax positions as components of income tax expense. For the year ended December 31, 2011, the amount of accrued interest and penalties related to tax uncertainties was approximately $0.2 million for a total cumulative amount of $0.7 million of non-current income taxes payable as of December 31, 2011.

Total product sales decreased $1.4 million or 1% in 2010 as compared to 2009. Consumables sales decreased primarily due to a decrease in the sales of our RNA reagents partially offset by an increase in sales of our DNA reagents. In both areas, sales of our lower price products have increased as a percentage of the total mix. Instrument sales grew in 2010 as compared to 2009, primarily due to the increased adoption of GeneTitan® and introduction of GeneAtlasTM families of instruments, which were introduced in late 2009 and early 2010, respectively, partially offset by declines in the volume of sales of older instruments.

Total services revenue decreased in 2010 as compared to 2009, primarily due to the completion in late 2009 of several genotyping projects that began in the fourth quarter of 2008, including the Wellcome Trust Case Consortium and the National Institutes of Health projects.

Royalties and other revenue in 2010 was higher as compared to 2011 and 2009 primarily due to the receipt of a non-recurring $4.8 million license payment that was received in the fourth quarter of 2010. In addition to the non-recurring license payment, royalties and other revenue was lower in 2011 as compared to 2010 due to lower royalties and research activity.

Read the The complete Report

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Charlie Tian, Ph.D. - Founder of GuruFocus. You can now order his book Invest Like a Guru on Amazon.

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