Back to GetFilings.com

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

OR

Commission File Number 0-21872

GEN-PROBE INCORPORATED

10210 Genetic Center Drive
San Diego, CA 92121-4362

(858) 410-8000

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

     Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

     As of November 7, 2003, there were 48,574,823 shares of the registrant’s common stock, par value $0.0001 per share, outstanding.

Table of Contents

GEN-PROBE INCORPORATED

TABLE OF CONTENTS

2

Table of Contents

Item 1. Financial Statements

Gen-Probe Incorporated

Note: The Balance Sheet at December 31, 2002 has been derived from the audited financial statements as of that date.

See accompanying notes.

3

Table of Contents

Gen-Probe Incorporated

See accompanying notes.

4

Table of Contents

Gen-Probe Incorporated

See accompanying notes.

5

Table of Contents

Notes to the Consolidated Financial Statements (unaudited)

Note 1 — Basis of Presentation

     The accompanying interim consolidated financial statements of Gen-Probe Incorporated (“Gen-Probe” or the “Company”) at September 30, 2003, and for the three and nine month periods ended September 30, 2002 and 2003, are unaudited and have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In management’s opinion, the unaudited financial statements include all adjustments, consisting only of normal recurring accruals, necessary to state fairly the financial information therein, in accordance with generally accepted accounting principles. Interim results are not necessarily indicative of the results that may be reported for any other interim period or for the year ending December 31, 2003.

     These unaudited consolidated financial statements and footnotes thereto should be read in conjunction with the audited financial statements and footnotes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2002.

     On September 5, 2003, the Company’s Board of Directors authorized a two-for-one stock split implemented as a 100% stock dividend, effective September 30, 2003 for holders of record as of September 16, 2003. All prior share and per share amounts in this Quarterly Report on Form 10-Q have been restated to reflect the stock split.

Note 2 — Reporting Periods

     The Company operates and reports on fiscal periods ending on the Friday closest to the end of the month except for year-end, which closes December 31. For ease of presentation, the quarterly reporting periods are deemed to end on March 31, June 30 and September 30. The three month periods ended September 30, 2002 and 2003 each included 13 weeks and the nine month periods ended September 30, 2002 and 2003 each included 39 weeks.

Note 3 — Recent Accounting Pronouncements

     In November 2002, the Emerging Issues Task Force (“EITF”) reached consensus on Issue No. 00-21, “Accounting for Revenue Arrangements with Multiple Deliverables.” This consensus requires that revenue arrangements with multiple deliverables be divided into separate units of accounting if the deliverables in the arrangement meet specific criteria. In addition, arrangement consideration must be allocated among the separate units of accounting based on their relative fair values, with certain limitations. The Company adopted the provisions of this consensus for revenue arrangements entered into after July 1, 2003. The adoption of this accounting pronouncement did not have a material impact on the Company’s consolidated financial position or results of operations.

     In 2002, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 145, “Rescission of SFAS Nos. 4, 44 and 64, Amendment of SFAS No. 13 and Technical Correction as of April 2002.” This statement rescinds SFAS No. 4, “Reporting Gains and Losses from Extinguishment of Debt,” and an amendment of that statement, SFAS No. 64, “Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements.” The Company adopted this statement in 2003 and reclassified the prepayment premium and the deferred financing fees associated with the early pay-off of debt recorded in the third quarter of 2002, from an extraordinary loss, net of tax benefit, to interest expense on the statement of income. The tax benefit has been reflected as a component of income tax expense. The reported net income did not change.

     In December 2002, the FASB issued SFAS No. 148, “Accounting for Stock-Based Compensation, Transition and Disclosure — an amendment of FASB Statement No. 123.” This statement amends SFAS No. 123 “Accounting for Stock Based Compensation” to provide alternative methods of voluntarily transitioning to the fair value based method of accounting for stock-based employee compensation. SFAS No. 148 also amends the disclosure requirements of SFAS No. 123 to require disclosure of the method used to account for stock-based employee compensation and the effect of the method on reported results in both annual and interim financial statements. The Company has chosen not to adopt fair value accounting for employee stock options under SFAS No. 123 and SFAS No. 148, but will continue to disclose the required pro forma information in the notes to the consolidated financial statements.

     Pro forma information regarding net income is required to be disclosed in interim financial statements by SFAS No. 148, and has been determined as if the Company had accounted for its employee stock options and employee stock purchase plan under the fair value method of SFAS No. 123. The fair value for these options was estimated at the dates of grant using the minimum value option pricing model through September 16, 2002 and the Black-Scholes pricing model for all option grants made subsequent to that date.

6

Table of Contents

     Had compensation expense for stock options granted been determined based on the fair value of the options at the date of grant, accounting consistent with SFAS No. 123, the Company’s net income and net income per share would have been as follows (in thousands, except per share data):

     The pro forma effects on net income for the three and nine month periods ended September 30, 2002 and 2003 are not likely to be representative of the effects on reported net income in future periods. In management’s opinion, existing stock option valuation models do not provide a reliable single measure of the fair value of employee stock options that have vesting provisions and are not transferable. In addition, option valuation models require the input of highly subjective assumptions, and changes in such subjective assumptions can materially affect the fair value estimate of employee stock options.

Note 4 — Net Income Per Share

     Gen-Probe computes net income per share in accordance with SFAS No. 128, “Earnings Per Share,” and the Securities and Exchange Commission (“SEC”) Staff Accounting Bulletin (“SAB”) No. 98. Under the provisions of SFAS No. 128, basic net income per share is computed by dividing the net income for the period by the weighted average number of common shares outstanding during the period. Diluted net income per share is computed by dividing the net income for the period by the weighted average number of common and common equivalent shares outstanding during the period.

     Under the provisions of SAB No. 98, common shares issued for nominal consideration, if any, would be included in the per share calculations as if they were outstanding for all periods presented. No common shares have been issued for nominal consideration. The Company had 47,599,890 shares of common stock outstanding as of September 30, 2002 and 48,526,008 shares of common stock outstanding as of September 30, 2003. The Company considers common equivalent shares from the exercise of stock options in the instance where the shares are dilutive to net income of the Company by application of the treasury stock method.

     The following table sets forth the computation of net income per share (in thousands, except per share amounts):