2014

Alere Inc. Announces Fourth Quarter 2013 Results

WALTHAM, Mass., Feb. 6, 2014 /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 information solutions, today announced its financial results for the quarter ended December 31, 2013.

Ron Zwanziger, Chairman, Chief Executive Officer and President of Alere said, "Our strong fourth quarter results complete a very successful year for Alere.  Our focus on organic growth, expense control and value creation for our shareholders positions us well for continued improvements in 2014 and beyond."

Financial results for the fourth quarter of 2013:

  • Net revenue of $772.3 million for the fourth quarter of 2013, compared to $755.8 million for the fourth quarter of 2012.  Non-GAAP adjusted net revenue was $772.8 million for the fourth quarter of 2013, compared to $756.5 million for the fourth quarter of 2012.
  • Net loss of $9.1 million attributable to common stockholders of Alere Inc., and respective net loss per diluted common share of $0.11, for the fourth quarter of 2013, compared to net loss of $68.0 million attributable to common stockholders of Alere Inc., and respective net loss per diluted common share of $0.84, for the fourth quarter of 2012.
  • Non-GAAP adjusted net income per diluted common share of $0.68 for the fourth quarter of 2013, compared to non-GAAP adjusted net income per diluted common share of $0.55 for the fourth quarter of 2012.
  • Net product and services revenue from our Professional Diagnostics segment was $600.7 million in the fourth quarter of 2013, compared to net product and services revenue of $584.1 million in the fourth quarter of 2012. Non-GAAP adjusted net product and services revenue from our Professional Diagnostics segment was $601.1 million in the fourth quarter of 2013, compared to non-GAAP adjusted net product and services revenue of $584.9 million in the fourth quarter of 2012. Recent professional diagnostics acquisitions contributed $27.2 million of incremental net revenue compared to the fourth quarter of 2012, offset by a reduction in revenue of $6.3 million related to dispositions in the quarter.
  • North American influenza sales decreased to $20.9 million for the fourth quarter of 2013, from $23.0 million for the fourth quarter of 2012.
  • Excluding the impact of the change in North American influenza revenues and the impact on revenues from the reduction in our U.S. meter-based Triage product sales, currency adjusted organic growth in our Professional Diagnostics segment was 2.0%. This growth rate was adversely impacted by the change in reimbursement rates which became effective on July 1, 2013 for our U.S. mail order diabetes business. Excluding revenues from our U.S. mail order diabetes business and considering the flu and Triage adjustments, the currency adjusted organic growth rate for the quarter was 5.2% for the remainder of our Professional Diagnostics segment.
  • Net product and services revenue from our Health Information Solutions segment was $130.0 million in the fourth quarter of 2013, compared to $131.0 million in the fourth quarter of 2012 and $134.2 million in the third quarter of 2013.
  • Included in royalty revenues in the fourth quarter of 2013 was $8.5 million associated with the license of certain of our molecular intellectual property, compared with $11.0 million during the fourth quarter of 2012.
  • Included in interest and other income (expense), is an incremental provision of $4.5 million to reflect an estimate of the settlement or litigation costs, which we may incur associated with an ongoing dispute with a customer in our U.S. toxicology business during the fourth quarter of 2013, and a charge of a $3.9 million associated with the settlement of a prior year dispute with a former distributor during the fourth quarter of 2012.

The Company's GAAP results for the fourth quarter of 2013 exclude $0.5 million of revenue associated with acquired software license contracts that are not recognized due to business combination accounting rules and include amortization of $81.4 million, $7.8 million of restructuring charges, $6.7 million of stock-based compensation expense, $1.3 million of acquisition-related costs recorded in accordance with ASC 805, Business Combinations, $6.1 million of costs associated with potential business dispositions, $0.4 million of interest expense recorded in connection with fees paid for certain debt modifications, $0.8 million in compensation charges and $0.1 million of related interest accretion associated with acquisition-related contingent consideration obligations, a $0.6 million charge associated with the write-up to fair market value of inventory acquired in connection with the acquisition of Epocal Inc., $0.1 million of costs associated with the proxy contest, offset by an $0.8 million reduction in the loss on disposition of our Spinreact, S.A. subsidiary located in Spain, and $1.0 million of income recorded for fair value adjustments to acquisition-related contingent consideration.  The Company's GAAP results for the fourth quarter of 2012 exclude $0.8 million of revenue associated with acquired software license contracts that are not recognized due to business combination accounting rules and include amortization of $105.1 million, $10.3 million of restructuring charges, $3.8 million of stock-based compensation expense, $3.6 million of acquisition-related costs recorded in accordance with ASC 805, Business Combinations, $10.2 million of expense recorded for fair value adjustments to acquisition-related contingent consideration, $1.0 million of interest expense recorded in connection with fees paid for certain debt modifications, and $23.2 million of expense associated with the extinguishment of debt.  These amounts, net of tax, have been excluded from the non-GAAP adjusted net income per diluted common share attributable to Alere Inc. for the respective quarters.

Detailed reconciliations of the non-GAAP financial measures presented in this release to the most directly comparable financial measures under GAAP, as well as a discussion regarding these non-GAAP financial measures, are included in the schedules to this press release.

The Company will host a conference call beginning at 8:30 a.m. (Eastern Time) today, February 6, 2014, 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 material information that has not been previously disclosed.

The conference call may be accessed by dialing (877) 270-2148 (domestic) or (412) 902-6510 (international) and asking for Alere Inc.  A webcast of the call can also be accessed via the Alere website at http://www.alere.com/us/en/about/investor-relations/events.html, or directly through the following link: http://www.videonewswire.com/event.asp?id=97913.

A replay of the call will be available approximately one hour 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 10040461.  The replay will also be available via online webcast at http://www.videonewswire.com/event.asp?id=97913 or via the Alere website at http://www.alere.com/us/en/about/investor-relations/events.html 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/us/en/about/investor-relations/events.html) 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 web site at http://www.alere.com.

By developing new capabilities in near-patient diagnosis, monitoring and health information solutions, 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 cardiology, infectious disease, toxicology and diabetes.  Alere is headquartered in Waltham, Massachusetts.

 

 

 

Alere Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(in thousands, except per share amounts)










Three Months Ended December 31, 




2013


2012







Net product sales and services revenue


$           758,210


$           738,520

License and royalty revenue


14,116


17,243


Net revenue


772,326


755,763

Cost of net revenue


387,977


381,895


      Gross profit


384,349


373,868


      Gross margin


50%


49%







Operating expenses:






Research and development


38,350


62,992


Selling, general and administrative


307,200


309,888


Loss (adjustment) on disposition


(761)


-


      Operating income 


39,560


988

Interest and other income (expense), net


(57,236)


(84,054)


 Loss before benefit for income taxes 


(17,676)


(83,066)

Benefit for income taxes


(10,159)


(17,698)


 Loss before equity earnings of unconsolidated entities, net of tax 


(7,517)


(65,368)

Equity earnings of unconsolidated entities, net of tax


4,205


2,828

Net loss



(3,312)


(62,540)


Less: Net income attributable to non-controlling interests


375


138

Net loss attributable to Alere Inc. and Subsidiaries


(3,687)


(62,678)








Preferred stock dividends


(5,367)


(5,353)







Net loss available to common stockholders


$              (9,054)


$            (68,031)








Basic and diluted net loss per common share


$                (0.11)


$                (0.84)







Weighted average shares - basic and diluted


81,913


80,872







 

 

Alere Inc. and Subsidiaries

Condensed Consolidated Statements of Operations 

(in thousands, except per share amounts)










Year Ended December 31, 




2013


2012







Net product sales and services revenue


$         3,002,213


$         2,790,249

License and royalty revenue


27,229


28,576


Net revenue


3,029,442


2,818,825

Cost of net revenue


1,527,703


1,390,503


      Gross profit


1,501,739


1,428,322


      Gross margin


50%


51%







Operating expenses:






Research and development


160,802


183,001


Selling, general and administrative


1,201,061


1,136,189


Loss on disposition


5,124


-


      Operating income 


134,752


109,132

Interest and other income (expense), net


(268,784)


(230,603)


 Loss before benefit for income taxes 


(134,032)


(121,471)

Benefit for income taxes


(46,311)


(30,319)


 Loss before equity earnings of unconsolidated entities, net of tax 


(87,721)


(91,152)

Equity earnings of unconsolidated entities, net of tax


17,443


13,245


Net loss


(70,278)


(77,907)


Less: Net income attributable to non-controlling interests


976


275

Net loss attributable to Alere Inc. and Subsidiaries


(71,254)


(78,182)








Preferred stock dividends


(21,293)


(21,293)







Net loss available to common stockholders


$             (92,547)


$             (99,475)








Basic and diluted net loss per common share


$                 (1.13)


$                 (1.23)







Weighted average shares - basic and diluted


81,542


80,587

 

 

Alere Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(in thousands)






December 31,


December 31,


2013


2012

ASSETS




CURRENT ASSETS:




Cash and cash equivalents

$            361,908


$            328,346

Restricted cash

6,373


3,076

Marketable securities

858


904

Accounts receivable, net

548,729


524,332

Inventories, net

364,185


337,121

Prepaid expenses and other current assets

190,361


212,958

Total current assets

1,472,414


1,406,737





PROPERTY, PLANT AND EQUIPMENT, NET

545,164


534,469

GOODWILL AND OTHER INTANGIBLE ASSETS, NET

4,835,004


4,919,081

RESTRICTED CASH - NON-CURRENT

29,370


-

DEFERRED FINANCING COSTS AND OTHER ASSETS, NET

178,862


207,641

Total assets

$        7,060,814


$         7,067,928





LIABILITIES AND STOCKHOLDERS' EQUITY




CURRENT LIABILITIES:




Current portions of long-term debt and capital lease obligations

$              55,967


$               66,916

Other current liabilities

617,219


581,893

Total current liabilities

673,186


648,809





LONG-TERM LIABILITIES:




Long-term debt and capital lease obligations, net of current portions

3,787,195


3,641,592


329,249


428,188

Other long-term liabilities

188,336


166,635

Total long-term liabilities

4,304,780


4,236,415





TOTAL EQUITY

2,082,848


2,182,704

Total liabilities and equity

$        7,060,814


$         7,067,928





 

 


Alere Inc. and Subsidiaries

Reconciliation to Non-GAAP Adjusted Operating Results

(in thousands, except per share amounts)






Three Months Ended December 31,


2013


2012

Reconciliation to Non-GAAP Adjusted Operating Income (1)




Operating income 

$                    39,560


$                       988





Adjustment related to acquired software license contracts 

470


783

Amortization of acquisition-related intangible assets

81,240


104,941

Restructuring charges 

7,736


10,193

Stock-based compensation expense

6,748


3,796

Compensation charges associated with acquisition-related contingent consideration obligations

762


-

Acquisition-related costs

1,315


3,575

Fair value adjustments to acquisition-related contingent consideration

(959)


10,174

Non-cash charge associated with acquired inventory

624


-

Costs associated with proxy contest

58


-

Costs associated with potential business dispositions

6,134


-

Loss (adjustment) on disposition

(761)


-

Non-GAAP adjusted operating income

$               142,927


$               134,450






Three Months Ended December 31,


2013


2012

Reconciliation to Non-GAAP Adjusted Net Income(1)




Net loss available to common stockholders

$                  (9,054)


$                (68,031)





Adjustment related to acquired software license contracts 

470


783

Amortization of acquisition-related intangible assets

81,182


105,127

Restructuring charges 

7,819


10,312

Stock-based compensation expense

6,748


3,796

Compensation charges associated with acquisition-related contingent consideration

 obligations

762


-

Acquisition-related costs

1,315


3,575

Fair value adjustments to acquisition-related contingent consideration

(959)


10,174

Non-cash charge associated with acquired inventory

624


-

Costs associated with proxy contest

58


-

Costs associated with potential business dispositions

6,134


-

Loss (adjustment) on disposition

(761)


-

Interest expense recorded in connection with fees paid for certain debt

modifications and the termination of our senior secured credit facility

364


991

Interest accretion associated with acquisition-related compensation charges

99


-

Expense associated with extinguishment of debt

-


23,235

Income tax effects on items above

(35,537)


(43,656)

Non-GAAP adjusted net income available to common stockholders

$                  59,264


$                  46,306









Net loss per diluted common share

$                    (0.11)


$                    (0.84)

Non-GAAP adjusted net income per diluted common share

$                     0.68


$                     0.55





Weighted average shares - diluted

81,913


80,872

Non-GAAP adjusted weighted average shares - diluted

96,636


94,747





(1)In calculating "non-GAAP adjusted operating income" and "non-GAAP adjusted net income", the Company excludes (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 operating income and 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 operating income or net income or loss for the costs associated

with litigation, including payments made or received through settlements.  It should be noted that "non-GAAP adjusted operating

income" and "non-GAAP adjusted net income" are not standard financial measurements under accounting principles generally

accepted in the United States of America ("GAAP") and should not be considered as an alternative to operating income and 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, "non-GAAP adjusted operating income" and "non-GAAP adjusted net income"

presented in this press release may not be comparable to similar measures used by other companies.

 

 


Alere Inc. and Subsidiaries

Reconciliation to Non-GAAP Adjusted Operating Results

(in thousands, except per share amounts)






Year Ended December 31,


2013


2012

Reconciliation to Non-GAAP Adjusted Operating Income (1)




Operating income 

$               134,752


$                109,132





Adjustment related to acquired software license contracts 

2,240


4,100

Amortization of acquisition-related intangible assets

318,513


347,108

Restructuring charges 

27,366


20,325

Stock-based compensation expense

21,210


15,665

Compensation charges associated with acquisition-related contingent consideration obligations

2,794


-

Acquisition-related costs

3,087


9,669

Fair value adjustments to acquisition-related contingent consideration

18,036


(6,608)

Non-cash charge associated with acquired inventory

2,504


4,681

Costs associated with proxy contest

5,525


-

Costs associated with potential business dispositions

6,134


-

Loss on disposition

5,124


-

Non-GAAP adjusted operating income

$               547,285


$                504,072






Year Ended December 31,


2013


2012

Reconciliation to Non-GAAP Adjusted Net Income(1)




Net loss available to common stockholders

$               (92,547)


$                (99,475)





Adjustment related to acquired software license contracts 

2,240


4,100

Amortization of acquisition-related intangible assets

318,715


347,976

Restructuring charges 

27,677


20,602

Stock-based compensation expense

21,210


15,665

Compensation charges associated with acquisition-related contingent consideration obligations

2,794


-

Acquisition-related costs

3,087


9,669

Fair value adjustments to acquisition-related contingent consideration

18,036


(6,608)

Costs associated with proxy contest

5,525


-

Costs associated with potential business dispositions

6,134


-

Loss on disposition

5,124


-

Interest expense recorded in connection with fees paid for certain debt modifications and the termination of our senior secured credit facility

2,490


4,951

Interest accretion associated with acquisition-related compensation charges

357


-

Non-cash write-off of an investment 

5,110


-

Bargain purchase gain associated with the  acquisition of the Liberty business

(8,023)


-

Expense associated with extinguishment of debt

35,767


23,235

Non-cash charge associated with acquired inventory

2,504


4,681

Income tax effects on items above

(148,273)


(136,684)

Non-GAAP adjusted net income available to common stockholders

$               207,927


$                188,112









Net loss per diluted common share

$                    (1.13)


$                    (1.23)

Non-GAAP adjusted net income per diluted common share

$                      2.41


$                       2.25





Weighted average shares - diluted

81,542


80,587

Non-GAAP adjusted weighted average shares - diluted

95,952


94,572





(1)In calculating "non-GAAP adjusted operating income" and "non-GAAP adjusted net income", the Company excludes (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 operating income and 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 operating income or net income or loss for the costs

associated with litigation, including payments made or received through settlements.  It should be noted that "non-GAAP

 adjusted operating income" and "non-GAAP adjusted net income" are not standard financial measurements under accounting

principles generally accepted in the United States of America ("GAAP") and should not be considered as an alternative to

operating income and 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, "non-GAAP adjusted operating income" and

"non-GAAP adjusted net income" presented in this press release may not be comparable to similar measures used by other companies.









 

 

Alere Inc. and Subsidiaries



Selected Consolidated Revenues by Business Area (1)



(in thousands)

















Professional Diagnostics Segment










% Change


% Change



Q4 2013


YTD 2013



Q4 2012


YTD 2012


Q4 13 v. Q4 12


YTD 13 v. YTD 12

Cardiology

$         113,632


$         463,281



$         116,740


$         503,534


-3%


-8%

Infectious disease

202,923


723,213



190,552


615,950


6%


17%

Toxicology

151,258


632,727



149,525


587,261


1%


8%

Diabetes

47,350


225,488



43,813


144,441


8%


56%

Other (1)

85,504


321,495



83,510


314,030


2%


2%


Professional diagnostics net product sales and services revenue (1)

600,667


2,366,204



584,140


2,165,216


3%


9%

License and royalty revenue

13,415


24,933



15,843


24,676


-15%


1%


Professional diagnostics net revenue

$         614,082


$      2,391,137



$         599,983


$      2,189,892


2%


9%





























Health Information Solutions Segment










% Change


% Change



Q4 2013


YTD 2013



Q4 2012


YTD 2012


Q4 13 v. Q4 12


YTD 13 v. YTD 12

Disease and case management

$           51,902


$         215,160



$           53,101


$         218,378


-2%


-1%

Wellness

25,888


101,642



23,753


104,634


9%


-3%

Women's & children's health

26,739


113,506



30,039


120,259


-11%


-6%

Patient self-testing services

25,483


102,919



24,077


92,151


6%


12%


Health information solutions net revenue

$         130,012


$         533,227



$         130,970


$         535,422


-1%


0%















(1)Revenues are presented in accordance with generally accepted accounting principles and exclude an adjustment of $0.5 million and $0.8 million related to acquired software license contracts which were not recognized during the three months ended December 31, 2013 and 2012, respectively, and $2.2 million and $4.1million during the year ended December 31, 2013 and 2012, respectively, due to business combination accounting rules.



 

 



Alere Inc. and Subsidiaries



Reconciliation of Operating Income (Loss) to Non-GAAP Adjusted Operating Income (Loss)







(in thousands)


















For the Three Months Ended December 31, 2013

Operating Segment


Professional Diagnostics


Health

 Information

Solutions


Consumer Diagnostics


Corporate


Total












Net revenue 


$         614,082


$         130,012


$            28,232


$                     -


$         772,326

Adjustment related to acquired software license contracts (1)


470


-


-


-


470

Non-GAAP adjusted net revenue


$         614,552


$         130,012


$            28,232


$                     -


$         772,796












Operating income (loss) 


$            70,161


$         (10,146)


$              3,091


$         (23,546)


$           39,560

Adjustment related to acquired software license contracts (1)


470


-


-


-


470

Amortization of acquisition-related intangible assets


69,894


10,888


458


-


81,240

Restructuring charges 


3,444


4,292


-


-


7,736

Stock-based compensation expense


-


-


-


6,748


6,748

Compensation charges associated with acquisition-related contingent

consideration obligations


762


-


-


-


762

Non-cash charge associated with acquired inventory


624


-


-


-


624

Acquisition-related costs


-


-


-


1,315


1,315

Fair value adjustments to acquisition-related contingent consideration


(2,859)


1,700


-


200


(959)

Costs associated with proxy contest


-


-


-


58


58

Costs associated with potential business dispositions


6,134


-


-


-


6,134

Loss (adjustment) on disposition


(761)


-


-


-


(761)

Non-GAAP adjusted operating income (loss)


$          147,869


$              6,734


$              3,549


$        (15,225)


$         142,927












Non-GAAP adjusted operating income (loss) as % of Non-GAAP

adjusted net revenue


24.1%


5.2%


12.6%




18.5%












(1) Estimated revenue related to acquired software license contracts that was not recognized during the fourth quarter of 2013 due to business combination accounting rules



























For the Three Months Ended December 31, 2012

Operating Segment


Professional Diagnostics


Health

Information Solutions


Consumer Diagnostics


Corporate


Total












Net revenue 


$          599,983


$          130,970


$             24,810


$                     -


$         755,763

Adjustment related to acquired software license contracts (1)


783


-


-


-


783

Non-GAAP adjusted net revenue


$          600,766


$          130,970


$             24,810


$                     -


$         756,546












Operating income (loss) 


$             41,028


$          (27,052)


$               5,026


$         (18,014)


$                  988

Adjustment related to acquired software license contracts (1)


783


-


-


-


783

Amortization of acquisition-related intangible assets


91,960


13,724


(743)


-


104,941

Restructuring charges 


3,375


6,852


-


(34)


10,193

Stock-based compensation expense


-


-


-


3,796


3,796

Acquisition-related costs


-


-


-


3,575


3,575

Fair value adjustments to acquisition-related contingent consideration


7,014


3,860


-


(700)


10,174

Non-GAAP adjusted operating income (loss)


$          144,160


$             (2,616)


$               4,283


$         (11,377)


$         134,450












Non-GAAP adjusted operating income (loss) as % of Non-GAAP adjusted net revenue


24.0%


-2.0%


17.3%




17.8%












(1) Estimated revenue related to acquired software license contracts that was not recognized during the fourth quarter of 2012 due to business combination accounting rules














Comments:











In calculating "adjusted operating income (loss)" in the schedule presented above, the Company excludes from operating income (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 operating income (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 operating income (loss) for the costs associated with litigation, including payments made or received through settlements.  It should be noted that "adjusted operating income (loss)" 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 operating income (loss) 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, "adjusted operating income (loss)" presented in this schedule may not be comparable to similar measures used by other companies.












Reference should also be made to the Company's financial results contained in our earnings press release respective to the periods presented in this schedule, which include a more detailed discussion of the adjustments to the GAAP operating results presented above.












 

 



Alere Inc. and Subsidiaries



Reconciliation of Operating Income (Loss) to Non-GAAP Adjusted Operating Income (Loss)







(in thousands)


















For the Year Ended December 31, 2013

Operating Segment


Professional Diagnostics


Health

Information

Solutions


Consumer Diagnostics


Corporate


Total












Net revenue 


$         2,391,137


$            533,227


$            105,078


$                        -


$         3,029,442

Adjustment related to acquired software license contracts (1)


2,240


-


-


-


2,240

Non-GAAP adjusted net revenue


$         2,393,377


$            533,227


$            105,078


$                        -


$         3,031,682












Operating income (loss) 


$            256,086


$            (43,001)


$              12,122


$            (90,455)


$            134,752

Adjustment related to acquired software license contracts (1)


2,240


-


-


-


2,240

Amortization of acquisition-related intangible assets


271,711


44,891


1,911


-


318,513

Restructuring charges 


12,606


14,760


-


-


27,366

Stock-based compensation expense


-


-


-


21,210


21,210

Compensation charges associated with acquisition-related contingent

consideration obligations


2,794


-


-


-


2,794

Non-cash charge associated with acquired inventory


2,504


-


-


-


2,504

Acquisition-related costs


-


-


-


3,087


3,087

Fair value adjustments to acquisition-related contingent consideration


10,050


6,886


-


1,100


18,036

Costs associated with proxy contest


-


-


-


5,525


5,525

Costs associated with potential business dispositions


6,134


-


-


-


6,134

Loss on disposition


5,124


-


-


-


5,124

Non-GAAP adjusted operating income (loss)


$            569,249


$              23,536


$              14,033


$            (59,533)


$            547,285












Non-GAAP adjusted operating income (loss) as % of Non-GAAP

 adjusted net revenue


23.8%


4.4%


13.4%




18.1%












(1) Estimated revenue related to acquired software license contracts that was not recognized during the year ended December 31, 2013 due to business combination accounting rules



























For the Year Ended December 31, 2012

Operating Segment


Professional Diagnostics


Health

Information

Solutions


Consumer Diagnostics


Corporate


Total












Net revenue


$         2,189,892


$             535,422


$               93,511


$                        -


$         2,818,825

Adjustment related to acquired software license contracts (1)


4,100


-


-


-


4,100

Non-GAAP adjusted net revenue


$         2,193,992


$             535,422


$               93,511


$                        -


$         2,822,925












Operating income (loss) 


$             237,754


$             (73,431)


$               12,707


$             (67,898)


$            109,132

Adjustment related to acquired software license contracts (1)


4,100


-


-


-


4,100

Amortization of acquisition-related intangible assets


289,033


56,869


1,206


-


347,108

Restructuring charges 


11,124


9,203


-


(2)


20,325

Stock-based compensation expense


-


-


-


15,665


15,665

Non-cash charge associated with acquired inventory


4,681


-


-


-


4,681

Acquisition-related costs


-


-


-


9,669


9,669

Fair value adjustments to acquisition-related contingent consideration


(15,688)


8,727


-


353


(6,608)

Non-GAAP adjusted operating income (loss)


$             531,004


$                  1,368


$               13,913


$             (42,213)


$            504,072












Non-GAAP adjusted operating income (loss) as % of Non-GAAP

adjusted net revenue


24.2%


0.3%


14.9%




17.9%












(1) Estimated revenue related to acquired software license contracts that was not recognized during the year ended December 31, 2012 due to business combination accounting rules














Comments:











In calculating "adjusted operating income (loss)" in the schedule presented above, the Company excludes from operating income (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 operating income (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 operating income (loss) for the costs associated with litigation, including payments made or received through settlements.  It should be noted that "adjusted operating income (loss)" 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 operating income (loss) 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, "adjusted operating income (loss)" presented in this schedule may not be comparable to similar measures used by other companies.












Reference should also be made to the Company's financial results contained in our earnings press release respective to the periods presented in this schedule, which include a more detailed discussion of the adjustments to the GAAP operating results presented above.























 

 

Alere Inc. and Subsidiaries

Reconciliations to Non-GAAP Adjusted P&L Categories

(in thousands)








Three Months Ended

December 31, 2013


Three Months Ended

 December 31, 2012









Net revenue 


$                           772,326


$                           755,763

Adjustment related to acquired software license contracts 


470


783

Non-GAAP adjusted net revenue


$                           772,796


$                           756,546






Cost of net revenue


$                           387,977


$                           381,895

Less adjustments:





Amortization of acquisition-related intangible assets


(17,656)


(20,658)

Restructuring charges 


(2,957)


(1,044)

Stock-based compensation expense


(329)


(262)

Non-cash charge associated with acquired inventory


(624)


-

Non-GAAP adjusted cost of net revenue


$                           366,411


$                           359,931






Non-GAAP adjusted gross profit


$                           406,385


$                           396,615








Three Months Ended

December 31, 2013


Three Months Ended

December 31, 2012









Research and development 


$                             38,350


$                             62,992

Less adjustments:





Amortization of acquisition-related intangible assets


(1,206)


(21,643)

Restructuring charges 


(50)


(640)

Stock-based compensation expense


(1,413)


(771)

Non-GAAP adjusted research and development


$                             35,681


$                             39,938








Three Months Ended

December 31, 2013


Three Months Ended

December 31, 2012









Selling, general and administrative


$                           307,200


$                           309,888

Less adjustments:





Amortization of acquisition-related intangible assets


(62,378)


(62,640)

Restructuring charges 


(4,729)


(8,509)

Stock-based compensation expense


(5,006)


(2,763)

Compensation charges associated with acquisition-related contingent consideration obligations


(762)


-

Acquisition-related costs


(1,315)


(3,575)

Fair value adjustments to acquisition-related contingent consideration


959


(10,174)

Costs associated with proxy contest


(58)


-

Costs associated with potential business dispositions


(6,134)


-

Non-GAAP adjusted selling, general and administrative 


$                           227,777


$                           222,227








Three Months Ended

December 31, 2013


Three Months Ended

December 31, 2012




Loss (adjustment) on disposition


$                                 (761)


$                                       -

Loss (adjustment) on disposition


761


-

Non-GAAP adjusted loss on disposition


$                                       -


$                                       -








Three Months Ended

December 31, 2013


Three Months Ended

December 31, 2012









Interest and other income (expense), net


$                           (57,236)


$                           (84,054)

Less adjustments:





Restructuring charges 


83


119

Interest expense recorded in connection with fees paid for certain debt

modifications and the termination of our senior secured credit facility


364


991

Interest accretion associated with acquisition-related compensation charges


99


-

Expense associated with extinguishment of debt


-


23,235

Non-GAAP adjusted interest and other income (expense), net


$                           (56,690)


$                           (59,709)








Three Months Ended

December 31, 2013


Three Months Ended

December 31, 2012









Benefit for income taxes


$                           (10,159)


$                           (17,698)

    Add:  Income tax effects on Non-GAAP adjustments


35,586


43,660

Non-GAAP adjusted provision for income taxes


$                             25,427


$                             25,962








Three Months Ended

December 31, 2013


Three Months Ended

December 31, 2012









Equity earnings of unconsolidated entities, net of tax


$                                4,205


$                                2,828

Less adjustments:





Amortization of acquisition-related intangible assets


146


213

Income tax effects on items above


-


2

Non-GAAP adjusted equity earnings of unconsolidated entities, net of tax


$                                4,351


$                                3,039






 

 

Alere Inc. and Subsidiaries

Reconciliations to Non-GAAP Adjusted P&L Categories

(in thousands)








Year Ended

December 31, 2013


Year Ended

December 31, 2012









Net revenue


$                3,029,442


$                2,818,825

Adjustment related to acquired software license contracts 


2,240


4,100

Non-GAAP adjusted net revenue


$                3,031,682


$                2,822,925






Cost of net revenue


$                1,527,703


$                1,390,503

Less adjustments:





Amortization of acquisition-related intangible assets


(72,164)


(72,276)

Restructuring charges 


(7,865)


(3,113)

Stock-based compensation expense


(1,126)


(1,063)

Non-cash charge associated with acquired inventory


(2,504)


(4,681)

Non-GAAP adjusted cost of net revenue


$                1,444,044


$                1,309,370






Non-GAAP adjusted gross profit


$                1,587,638


$                1,513,555








Year Ended

December 31, 2013


Year Ended

December 31, 2012









Research and development


$                    160,802


$                    183,001

Less adjustments:





Amortization of acquisition-related intangible assets


(4,935)


(26,858)

Restructuring charges 


(1,795)


(1,278)

Stock-based compensation expense


(4,054)


(3,150)

Non-GAAP adjusted research and development


$                    150,018


$                    151,715








Year Ended

December 31, 2013


Year Ended

December 31, 2012









Selling, general and administrative


$                1,201,061


$                1,136,189

Less adjustments:





Amortization of acquisition-related intangible assets


(241,414)


(247,974)

Restructuring charges 


(17,706)


(15,934)

Stock-based compensation expense


(16,030)


(11,452)

Compensation charges associated with acquisition-related contingent consideration obligations


(2,794)


-

Acquisition-related costs


(3,087)


(9,669)

Fair value adjustments to acquisition-related contingent consideration


(18,036)


6,608

Costs associated with proxy contest


(5,525)


-

Costs associated with potential business dispositions


(6,134)


-

Non-GAAP adjusted selling, general and administrative 


$                    890,335


$                    857,768








Year Ended

December 31, 2013


Year Ended

 December 31, 2012




Loss on disposition


$                         5,124


$                                -

Loss on disposition


(5,124)


-

Non-GAAP adjusted loss on disposition


$                                -


$                                -








Year Ended

December 31, 2013


Year Ended

December 31, 2012









Interest and other income (expense), net


$                  (268,784)


$                  (230,603)

Less adjustments:





Restructuring charges 


311


277

Interest expense recorded in connection with fees paid for certain debt modifications and the termination of our senior secured credit facility


2,490


4,951

Interest accretion associated with acquisition-related compensation charges


357


-

Non-cash write-off of an investment


5,110


-

Bargain purchase gain associated with the acquisition of the Liberty business


(8,023)


-

Expense associated with extinguishment of debt


35,767


23,235

Non-GAAP adjusted interest and other income (expense), net


$                  (232,772)


$                  (202,140)








Year Ended

December 31, 2013


 Year Ended

December 31, 2012 









Benefit for income taxes


$                    (46,311)


$                    (30,319)

    Add:  Income tax effects on Non-GAAP adjustments


148,365


136,700

Non-GAAP adjusted provision for income taxes


$                    102,054


$                    106,381








Year Ended

December 31, 2013


Year Ended

December 31, 2012









Equity earnings of unconsolidated entities, net of tax 


$                      17,443


$                      13,245

Less adjustments:





Amortization of acquisition-related intangible assets


594


977

Income tax effects on items above


-


9

Non-GAAP adjusted equity earnings of unconsolidated entities, net of tax


$                      18,037


$                      14,213











SOURCE Alere Inc.



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