2014

Alere Inc. Announces First Quarter 2012 Results

WALTHAM, Mass., April 30, 2012 /PRNewswire/ -- Alere Inc. (NYSE: ALR), a global leader in enabling individuals to take charge of their health at home through the merger of rapid diagnostics and health management, today announced its financial results for the quarter ended March 31, 2012.

Financial results for the first quarter of 2012:

  • Adjusted net revenue of $672.4 million for the first quarter of 2012, compared to $582.5 million for the first quarter of 2011.
  • Adjusted cash-basis net income per diluted common share of $0.77 for the first quarter of 2012, compared to adjusted cash-basis net income per diluted common share of $0.61 for the first quarter of 2011.
  • Adjusted product and services revenues from our Professional Diagnostics segment were $516.7 million in the first quarter of 2012, compared to adjusted net product and services revenue of $409.8 million in the first quarter of 2011.  Recent professional diagnostics acquisitions contributed $96.9 million of incremental net revenue compared to the first quarter of 2011.
  • North American influenza sales decreased to $6.6 million for the first quarter of 2012, from $19.5 million for the first quarter of 2011.
  • Excluding the impact of the change in North American influenza revenues, currency adjusted organic growth in our Professional Diagnostics segment was 6.9%.
  • Adjusted cash-basis gross margins were 55.9% for the first quarter of 2012, compared to 55.8% in the first quarter of 2011 and 55.8% in the fourth quarter of 2011.  Adjusted cash-basis gross margins from products and services in our Professional Diagnostics segment were 60.3% in the first quarter of 2012, compared to 59.6% in the first quarter of 2011 and 60.0% in the fourth quarter of 2011.
  • Product and services revenues from our Health Management segment were $130.8 million in the first quarter of 2012, compared to $143.1 million in the first quarter of 2011 and $125.9 million in the fourth quarter of 2011.  The decrease in revenues from the first quarter of 2011 was related primarily to the insourcing of certain services by large health plans.
  • Adjusted cash-basis gross margins from our Health Management segment were 45.4% in the first quarter of 2012, compared to 49.0% in the first quarter of 2011 and 45.3% in the fourth quarter of 2011.
  • Other income for the first quarter of 2012 includes $13.5 million of a final royalty termination payment received from Quidel during the quarter, offset by $2.3 million of other charges.  Together, and net of tax, these other income items added approximately $0.12 to our adjusted cash-basis net income per diluted common share for the quarter.
  • GAAP net loss of $4.1 million attributable to common stockholders of Alere Inc., and respective net loss per common share of $0.05, for the first quarter of 2012, compared to GAAP net income of $8.1 million attributable to common stockholders of Alere Inc., and respective net income per diluted common share of $0.09, for the first quarter of 2011.  
  • Adjusted free cash flow for the first quarter of 2012 was $71.5 million, reflecting cash flow from operations of $101.9 million, offset by capital expenditures of $30.4 million.

The Company's GAAP results for the first quarter of 2012 exclude $1.3 million of revenue associated with acquired software license contracts that are not recognized due to business combination accounting rules and include amortization of $78.1 million, $5.6 million of restructuring charges, $3.9 million of stock-based compensation expense, $1.5 million of acquisition-related costs recorded in accordance with ASC 805, Business Combinations, $5.0 million of income recorded for fair value adjustments to acquisition-related contingent consideration obligations, $1.3 million of interest expense associated with fees paid for modification of certain debt agreements and a $4.7 million charge associated with the write-up to fair market value of inventory acquired in connection with the acquisition of Axis-Shield plc.  The Company's GAAP results for the first quarter of 2011 include amortization of $76.3 million, $6.4 million of restructuring charges, $5.8 million of stock-based compensation expense, $1.9 million of acquisition-related costs recorded in accordance with ASC 805, Business Combinations, a $1.9 million foreign currency loss associated with the settlement of an acquisition-related contingent consideration obligation and $1.4 million of expense recorded for fair value adjustments to acquisition-related contingent consideration obligations. These amounts, net of tax, have been excluded from the adjusted cash-basis net income per diluted common share attributable to Alere Inc. for the respective quarters.

A detailed reconciliation of the Company's adjusted cash-basis net income, which is a non-GAAP financial measure, to net income under GAAP, as well as a discussion regarding this non-GAAP financial measure, is included in the schedules to this press release.

The Company will host a conference call beginning at 8:30 a.m. (Eastern Time) today, April 30, 2012, to discuss these results, as well as other corporate matters.  During the conference call, the Company may answer questions concerning business and financial developments and trends and other business and financial matters.  The Company's responses to these questions, as well as other matters discussed during the conference call, may contain or constitute information that has not been previously disclosed.

The conference call may be accessed by dialing (800) 860-2442 (domestic) or (412) 858-4600 (international) and asking for Alere Inc.  A webcast of the call can also be accessed via the Alere website at www.alere.com/investors, or directly through the following link: http://www.videonewswire.com/event.

A replay of the call will be available approximately four hours after the conclusion of the call and will remain available for a period of seven days following the call.  The replay may be accessed by dialing (877) 344-7529 (domestic) or (412) 317-0088 (international) and entering replay code 10013183.  The replay will also be available via online webcast at http://www.videonewswire.com/event or via the Alere website at www.alere.com/investors for a period of 60 days following the call.

Additionally, reconciliations to non-GAAP financial measures not included in this press release that may be discussed during the call will also be available at the Alere website (http://www.alere.com/investors) under the Earnings Calls and Releases section shortly before the conference call begins and will continue to be available on this website.

For more information about Alere, please visit our website at http://www.alere.com.

By developing new capabilities in near-patient diagnosis, monitoring and health management, Alere enables individuals to take charge of improving their health and quality of life at home.  Alere's global leading products and services, as well as its new product development efforts, focus on infectious disease, cardiology, oncology, toxicology and women's health.  Alere is headquartered in Waltham, Massachusetts.
















Alere Inc. and Subsidiaries


Condensed Consolidated Statements of Operations and


Reconciliation to Non-GAAP Adjusted Cash Basis Amounts


(in $000s, except per share amounts)



































Three Months Ended March 31, 2012


Three Months Ended March 31, 2011









 Non-GAAP 






 Non-GAAP 









 Adjusted 






 Adjusted 







 Non-GAAP 


 Cash 




 Non-GAAP 


 Cash 





GAAP


 Adjustments 


 Basis (a) 


GAAP


 Adjustments 


 Basis (a) 

















Net product sales and services revenue


$  668,221


$              1,286

 (b) 

$        669,507


$  574,795


$                    -


$        574,795


License and royalty revenue


2,908


-


2,908


7,669


-


7,669


Net revenue


671,129


1,286


672,415


582,464


-


582,464


Cost of net revenue


318,058


(21,651)

 (c) (d) (e) (j) 

296,407


276,257


(18,654)

 (c) (d) (e) 

257,603


 Gross profit


353,071


22,937


376,008


306,207


18,654


324,861


 Gross margin


53%




56%


53%




56%
















Operating expenses:














Research and development


39,000


(3,797)

 (c) (d) (e) 

35,203


36,542


(3,251)

 (c) (e) 

33,291


Selling, general and administrative


279,013


(73,069)

 (c) (d) (e) (f) (g) 

205,944


238,760


(69,480)

 (c) (d) (f) (g) 

169,280


 Total operating expenses


318,013


(76,866)


241,147


275,302


(72,731)


202,571


Operating income


35,058


99,803


134,861


30,905


91,385


122,290


Interest and other income (expense), net


(38,896)


1,380

 (h) 

(37,516)


(35,969)


1,969

 (i) 

(34,000)


 Income (loss) before provision (benefit) for income taxes 


(3,838)


101,183


97,345


(5,064)


93,354


88,290


Provision (benefit) for income taxes


(1,455)


30,783

 (l) 

29,328


(4,330)


32,596

 (l) 

28,266


 Income (loss) before equity earnings of unconsolidated entities, net of tax 


(2,383)


70,400


68,017


(734)


60,758


60,024


Equity earnings of unconsolidated entities, net of tax


3,412


218

 (c) 

3,630


1,011


410

 (c) (d) 

1,421


Net income


1,029


70,618


71,647


277


61,168


61,445


Less: Net income (loss) attributable to non-controlling interests, net of tax


(185)


21

 (k) 

(164)


62


7

 (k) 

69


Net income attributable to Alere Inc. and Subsidiaries


$      1,214


$            70,597


$          71,811


$         215


$            61,161


$          61,376
















Preferred stock dividends


$    (5,309)


$                    -


$          (5,309)


$    (5,809)


$                    -


$          (5,809)


Preferred stock repurchase


$            -


$                    -


$                 -


$    13,688


$           (13,688)

 (q) 

$                 -
















Net income (loss) available to common stockholders


$    (4,095)




$          66,502


$      8,094




$          55,567
















Basic net income (loss) per common share


$      (0.05)




$              0.83


$        0.09




$              0.65


Diluted net income (loss) per common share


$      (0.05)

 (m) 



$              0.77

 (o) 

$        0.09

 (n) 



$              0.61

(p)















Weighted average common shares - basic


80,240




80,240


85,362




85,362


Weighted average common shares - diluted


80,240

 (m) 



94,206

 (o) 

86,953

 (n) 



101,829

 (p)















(a) In calculating net income or loss on an adjusted cash basis, the Company excludes from net income or loss (i) certain non-cash charges, including amortization expense and stock-based compensation expense, (ii) non-recurring charges and income, and (iii) certain other charges and income that have a significant positive or negative impact on results yet do not occur on a consistent or regular basis in its business.  In determining whether a particular item meets one of these criteria, management considers facts and circumstances that it believes are relevant.  Management believes that excluding such charges and income from net income or loss allows investors and management to evaluate and compare the Company's operating results from continuing operations from period to period in a meaningful and consistent manner.  Due to the frequency of their occurrence in its business, the Company does not adjust net income or loss for the costs associated with litigation, including payments made or received through settlements.  It should be noted that "net income or loss on an adjusted cash basis" is not a standard financial measurement under accounting principles generally accepted in the United States of America ("GAAP") and should not be considered as an alternative to net income or loss or cash flow from operating activities, as a measure of liquidity or as an indicator of operating performance or any measure of performance derived in accordance with GAAP. In addition, all companies do not calculate non-GAAP financial measures in the same manner and, accordingly, "net income or loss on an adjusted cash basis" presented in this press release may not be comparable to similar measures used by other companies.

(b) Approximately $1.3 million in estimated revenue related to acquired software license contracts will not be recognized for the first quarter of 2012 due to business combination accounting rules.

(c) Amortization expense of $78.1 million and $76.3 million in the first quarter of 2012 and 2011 GAAP results, respectively, including $15.7 million and $16.9 million charged to cost of sales, $2.4 million and $2.3 million charged to research and development, $59.8 million and $56.9 million charged to selling, general and administrative, with $0.2 million and $0.2 million charged through equity earnings of unconsolidated entities, net of tax during each of the respective quarters.

(d) Restructuring charges associated with the decision to close facilities of $5.6 million and $6.4 million for the first quarter of 2012 and 2011 GAAP results, respectively. The $5.6 million charge for the first quarter of 2012 included $1.0 million charged to cost of sales, $0.6 million charged to research and development, $3.9 million charged to selling, general and administrative expense and $0.1 million charged to interest and other income (expense), net. The $6.4 million charge for the first quarter of 2011 included $1.4 million charged to cost of sales, $4.8 million charged to selling, general and administrative expense and $0.2 million charged through equity earnings of unconsolidated entities, net of tax.

(e) Compensation costs of $3.9 million and $5.8 million associated with stock-based compensation expense for the first quarter of 2012 and 2011 GAAP results, respectively, including $0.3 million and $0.4 million charged to cost of sales, $0.8 million and $0.9 million charged to research and development and $2.8 million and $4.5 million charged to selling, general and administrative, in the respective quarters.

(f) Acquisition-related costs in the amount of $1.5 million and $1.9 million in the first quarter of 2012 and 2011 GAAP results, respectively, recorded in connection with ASC 805, Business Combinations.

(g) $5.0 million of expense and $1.4 million of expense in the first quarter of 2012 and 2011 GAAP results, respectively, recorded in connection with fair value adjustments to acquisition-related contingent consideration obligations in accordance with ASC 805, Business Combinations.

(h) Interest expense of $1.3 million recorded in connection with fees paid for certain debt modifications and the termination of our senior secured credit facility.

(i) A $1.9 million realized foreign currency loss associated with the settlement of an acquisition-related contingent consideration obligation.

(j) A write-off in the amount of $4.7 million during the first quarter of 2012, relating to inventory write-ups recorded in connection with an acquisition.

(k) Amortization expense of $27.0 thousand ($21.0 thousand, net of tax) and $9.0 thousand ($7.0 thousand, net of tax) in the first quarter of 2012 and 2011 GAAP results, respectively.

(l) Tax effect on adjustments as discussed above in notes (b), (c), (d), (e), (f), (g), (h), (i) and (j).

(m) For the three months ended March 31, 2012, potential dilutive shares were not used in the calculation of diluted net loss per common share under GAAP because inclusion thereof would be antidilutive.

(n) Included in the weighted average diluted common shares for the calculation of net income per common share on a GAAP basis for the three months ended March 31, 2011, are dilutive shares consisting of 1,484,000 common stock equivalent shares from the potential exercise of stock options and warrants. Also included were dilutive shares consisting of 107,000 potentially issuable shares of common stock associated with contingent consideration arrangements. Potential dilutive shares consisting of 3,438,000 common stock equivalent shares from the potential conversion of convertible debt securities, 110,000 common stock equivalents from the potential settlement of a portion of the deferred purchase price consideration related to the ACON Second Territory Business and potential dilutive shares consisting of 11,328,000 common stock equivalent shares from the potential conversion of Series B convertible preferred stock were not included in the calculation of net income per common share on a GAAP basis for the three months ended March 31, 2011, because inclusion thereof would be antidilutive.

(o) Included in the weighted average diluted common shares for the calculation of net income per common share for the three months ended March 31, 2012, on an adjusted cash basis, were dilutive shares consisting of 289,000 common stock equivalent shares from the potential exercise of stock options and warrants. Also included were dilutive shares consisting of 3,438,000 common stock equivalent shares from the potential conversion of convertible debt securities and 10,239,000 common stock equivalent shares from the potential conversion of Series B convertible preferred stock. The diluted net income per common share calculation for the three months ended March 31, 2012, on an adjusted cash basis, included the add back of interest expense related to the convertible debt of $0.7 million and the add back of $5.3 million of preferred stock dividends related to the Series B convertible preferred resulting in net income available to common stockholders of $72.5 million for the three months ended March 31, 2012.

(p) Included in the weighted average diluted common shares for the calculation of net income per common share for the three months ended March 31, 2011, on an adjusted cash basis, were dilutive shares consisting of 1,484,000 common stock equivalent shares from the potential exercise of stock options and warrants. Also included were dilutive shares consisting of 107,000 potentially issuable shares of common stock associated with contingent consideration arrangements. Also included were dilutive shares consisting of 3,438,000 common stock equivalent shares from the potential conversion of convertible debt securities, 11,328,000 common stock equivalent shares from the potential conversion of Series B convertible preferred stock and 110,000 common stock equivalents from the potential settlement of a portion of the deferred purchase price consideration related to the ACON Second Territory Business. The diluted net income per common share calculation for the three months ended March 31, 2011, on an adjusted cash basis, included the add back of interest expense related to the convertible debt of $0.7 million, the add back of $5.8 million of preferred stock dividends related to the Series B convertible preferred stock and the add back of interest expense related to the ACON Second Territory Business of $24.0 thousand resulting in net income available to common stockholders of $62.1 million for the three months ended March 31, 2011.

(q)  Non-cash income allocated to net income available to common stockholders as a result of repurchases of preferred shares during the first quarter of 2011.


  





Alere Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(in $000s)






March 31,


December 31,


2012


2011

ASSETS




CURRENT ASSETS:




Cash and cash equivalents

$     514,097


$      299,173

Restricted cash

2,684


8,987

Marketable securities

1,092


1,086

Accounts receivable, net

489,262


475,824

Inventories, net

309,921


320,269

Prepaid expenses and other current assets

179,499


188,388

Total current assets

1,496,555


1,293,727





PROPERTY, PLANT AND EQUIPMENT, NET

506,507


491,205

GOODWILL AND OTHER INTANGIBLE ASSETS, NET

4,663,838


4,676,742

DEFERRED FINANCING COSTS AND OTHER ASSETS, NET

222,381


211,027

Total assets

$  6,889,281


$   6,672,701





LIABILITIES AND STOCKHOLDERS' EQUITY




CURRENT LIABILITIES:




Current portion of notes payable and short-term debt

$       68,728


$        73,415

Other current liabilities

536,972


551,037

Total current liabilities

605,700


624,452





LONG-TERM LIABILITIES:




Notes payable, net of current portion

3,465,309


3,280,080

Deferred tax liability

371,190


380,700

Other long-term liabilities

168,301


153,398

Total long-term liabilities

4,004,800


3,814,178





Redeemable non-controlling interest

2,448


2,497





TOTAL EQUITY

2,276,333


2,231,574

Total liabilities and equity

$  6,889,281


$   6,672,701






  














Alere Inc. and Subsidiaries

Selected Consolidated Revenues by Business Area (1)

(in thousands)








Professional Diagnostics Segment






% Change


Q1 2012



Q1 2011


Q1 12 v. Q1 11

Cardiology

$138,826



$129,855


7%

Infectious disease

151,016



140,426


8%

Toxicology

121,740



85,504


42%

Diabetes

28,161



-



Other (1)

75,706



54,000


40%

Professional diagnostics net product sales and services revenue (1)

515,449



409,785


26%

License and royalty revenue

2,908



6,027


-52%

Professional diagnostics net revenue

$518,357



$415,812


25%















Health Management Segment






% Change


Q1 2012



Q1 2011


Q1 12 v. Q1 11

Disease and case management

$  53,380



$  61,455


-13%

Wellness

27,026



29,805


-9%

Women's & children's health

29,771



28,575


4%

Patient self-testing services

20,607



23,228


-11%

Health management net revenue

$130,784



$143,063


-9%








(1) Revenues are presented in accordance with Generally Accepted Accounting Principles and exclude an adjustment of $1,286 in revenue related to acquired software license contracts which were not recognized for the first quarter of 2012 due to business combination accounting rules.

SOURCE Alere Inc.



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