2014

Alere Inc. Announces Second Quarter 2013 Results

WALTHAM, Mass., July 31, 2013 /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 June 30, 2013.

Ron Zwanziger, Chairman, Chief Executive Officer and President of Alere said, "We are pleased to report a very strong quarter for Alere and continued progress against the three-point strategic plan that we implemented in November 2012.  In particular, our currency adjusted organic growth rate for our professional diagnostics segment, excluding changes in our U.S. Triage and influenza revenues, was 8.6%, reflecting the strength of our highly-differentiated portfolio across the globe.  In addition, our combined adjusted research and development and selling, general and administrative expenses decreased as a percentage of revenue by 230 basis points from the prior year quarter. Our growth rate in the quarter, coupled with disciplined expense control, demonstrates our continued momentum and commitment to enhancing value for our shareholders."

Financial results for the second quarter of 2013:

  • Net revenue of $764.0 million for the second quarter of 2013, compared to $700.5 million for the second quarter of 2012.  Non-GAAP adjusted net revenue was $764.6 million for the second quarter of 2013, compared to $701.6 million for the second quarter of 2012.
  • Net loss of $65.9 million attributable to common stockholders of Alere Inc., and respective net loss per diluted common share of $0.81, for the second quarter of 2013, compared to net loss of $18.2 million attributable to common stockholders of Alere Inc., and respective net loss per diluted common share of $0.23, for the second quarter of 2012.
  • Non-GAAP adjusted net income per diluted common share of $0.64 for the second quarter of 2013, compared to non-GAAP adjusted net income per diluted common share of $0.48 for the second quarter of 2012.
  • Net product and services revenue from our Professional Diagnostics segment was $599.6 million in the second quarter of 2013, compared to net product and services revenue of $536.9 million in the second quarter of 2012. Non-GAAP adjusted net product and services revenue from our Professional Diagnostics segment was $600.2 million in the second quarter of 2013, compared to non-GAAP adjusted net product and services revenue of $538.0 million in the second quarter of 2012.  Recent professional diagnostics acquisitions contributed $47.4 million of incremental net revenue compared to the second quarter of 2012.
  • North American influenza sales decreased to $2.0 million for the second quarter of 2013, from $4.2 million for the second 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 8.6%.
  • Net product and services revenue from our Health Information Solutions segment was $134.8 million in the second quarter of 2013, compared to $138.6 million in the second quarter of 2012 and $134.2 million in the first quarter of 2013.  Despite the decrease in revenue as compared to Q2 2012, Non-GAAP adjusted operating income increased to $6.3 million in the second quarter of 2013 from $3.0 million in the second quarter of 2012, as a result of a reduction in segment operating expenses, as compared to the prior year period.

The Company's GAAP results for the second quarter of 2013 exclude $0.6 million of revenue associated with acquired software license contracts that are not recognized due to business combination accounting rules and include amortization of $79.3 million, $8.1 million of restructuring charges, $4.7 million of stock-based compensation expense, $0.4 million of acquisition-related costs recorded in accordance with ASC 805, Business Combinations, $5.3 million of expense recorded for fair value adjustments to acquisition-related contingent consideration, $0.8 million of interest expense recorded in connection with fees paid for certain debt modifications, $0.5 million in compensation charges and $0.2 million of related interest accretion associated with acquisition-related contingent consideration obligations, a $0.7 million charge associated with the write-up to fair market value of inventory acquired in connection with the acquisition of Epocal Inc., $35.6 million of expense associated with the extinguishment of debt and a $5.1 million non-cash write-off of an investment, offset by a $8.1 million bargain purchase gain in connection with our acquisition of the Liberty business.  The Company's GAAP results for the second quarter of 2012 exclude $1.1 million of revenue associated with acquired software license contracts that are not recognized due to business combination accounting rules and include amortization of $81.7 million, $1.4 million of restructuring charges, $4.4 million of stock-based compensation expense, $3.8 million of acquisition-related costs recorded in accordance with ASC 805, Business Combinations, and $1.3 million of interest expense associated with fees paid for modification of certain debt agreements, offset by $6.7 million of income recorded for fair value adjustments to acquisition-related contingent consideration obligations.  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, July 31, 2013, 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 www.alere.com/investors, or directly through the following link: http://www.videonewswire.com/event.

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 10031621.  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 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 June 30, 




2013


2012







Net product sales and services revenue


$               759,120


$               697,280

License and royalty revenue


4,865


3,237


Net revenue


763,985


700,517

Cost of net revenue


379,498


344,909


      Gross profit


384,487


355,608


      Gross margin


50%


51%







Operating expenses:






Research and development


40,500


40,447


Selling, general and administrative


299,583


280,807


   Total operating expenses


340,083


321,254


      Operating income


44,404


34,354

Interest and other income (expense), net


(91,390)


(51,720)


 Loss before provision (benefit) for income taxes 


(46,986)


(17,366)

Provision (benefit) for income taxes


17,867


(489)


 Loss before equity earnings of unconsolidated entities, net of tax 


(64,853)


(16,877)

Equity earnings of unconsolidated entities, net of tax


4,551


3,998

Net loss


(60,302)


(12,879)


Less: Net income attributable to non-controlling interests


267


36

Net loss attributable to Alere Inc. and Subsidiaries


(60,569)


(12,915)








Preferred stock dividends


(5,309)


(5,279)







Net loss available to common stockholders


$               (65,878)


$               (18,194)








Basic net loss per common share


$                   (0.81)


$                   (0.23)


Diluted net loss per common share


$                   (0.81)


$                   (0.23)







Weighted-average shares - basic


81,311


80,375

Weighted-average shares - diluted


81,311


80,375







Alere Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(in thousands, except per share amounts)










Six Months Ended June 30, 




2013


2012







Net product sales and services revenue


$           1,494,305


$           1,365,501

License and royalty revenue


8,929


6,145


Net revenue


1,503,234


1,371,646

Cost of net revenue


754,490


662,967


      Gross profit


748,744


708,679


      Gross margin


50%


52%







Operating expenses:






Research and development


81,954


79,447


Selling, general and administrative


591,897


559,820


   Total operating expenses


673,851


639,267


      Operating income


74,893


69,412

Interest and other income (expense), net


(149,259)


(90,616)


 Loss before benefit for income taxes 


(74,366)


(21,204)

Benefit for income taxes


(19,004)


(1,944)


 Loss before equity earnings of unconsolidated entities, net of tax 


(55,362)


(19,260)

Equity earnings of unconsolidated entities, net of tax


7,485


7,410

Net loss


(47,877)


(11,850)


Less: Net income (loss) attributable to non-controlling interests


242


(149)

Net loss attributable to Alere Inc. and Subsidiaries


(48,119)


(11,701)








Preferred stock dividends


(10,559)


(10,588)







Net loss available to common stockholders


$               (58,678)


$               (22,289)








Basic net loss per common share


$                   (0.72)


$                   (0.28)


Diluted net loss per common share


$                   (0.72)


$                   (0.28)







Weighted-average shares - basic


81,255


80,307

Weighted-average shares - diluted


81,255


80,307







 

Alere Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(in thousands)






June 30,


December 31,


2013


2012

ASSETS




CURRENT ASSETS:




Cash and cash equivalents

$            320,547


$            328,346

Restricted cash

9,919


3,076

Marketable securities

889


904

Accounts receivable, net

553,760


524,332

Inventories, net

356,753


337,121

Prepaid expenses and other current assets

167,209


212,958

Total current assets

1,409,077


1,406,737





PROPERTY, PLANT AND EQUIPMENT, NET

530,467


534,469

GOODWILL AND OTHER INTANGIBLE ASSETS, NET

4,965,095


4,919,081

DEFERRED FINANCING COSTS AND OTHER ASSETS, NET

195,366


207,641

Total assets

$        7,100,005


$         7,067,928





LIABILITIES AND STOCKHOLDERS' EQUITY




CURRENT LIABILITIES:




Current portion of long-term debt and capital lease obligations

$              56,497


$               66,916

Other current liabilities

603,931


581,893

Total current liabilities

660,428


648,809





LONG-TERM LIABILITIES:




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

3,819,987


3,641,592

Deferred tax liabilities

390,012


428,188

Other long-term liabilities

197,781


166,635

Total long-term liabilities

4,407,780


4,236,415





TOTAL EQUITY

2,031,797


2,182,704

Total liabilities and equity

$        7,100,005


$         7,067,928



















Alere Inc. and Subsidiaries



Selected Consolidated Revenues by Business Area (1)



(in thousands)

















Professional Diagnostics Segment










% Change


% Change



Q2 2013


YTD 2013



Q2 2012


YTD 2012


Q2 13 v. Q2 12


YTD 13 v. YTD 12

Cardiology

$                  118,436


$                  233,369



$                  125,597


$                  264,423


-6%


-12%

Infectious disease

157,706


347,550



137,821


288,837


14%


20%

Toxicology

165,884


314,933



159,922


281,662


4%


12%

Diabetes

74,905


124,988



36,797


64,958


104%


92%

Other (1)

82,666


157,385



76,736


152,442


8%


3%


Professional diagnostics net product sales and

services revenue (1)

599,597


1,178,225



536,873


1,052,322


12%


12%

License and royalty revenue

4,165


8,029



3,237


6,145


29%


31%


Professional diagnostics net revenue

$                  603,762


$              1,186,254



$                  540,110


$              1,058,467


12%


12%





























Health Information Solutions Segment










% Change


% Change



Q2 2013


YTD 2013



Q2 2012


YTD 2012


Q2 13 v. Q2 12


YTD 13 v. YTD 12

Disease and case management

$                    52,578


$                  106,704



$                    54,512


$                  107,894


-4%


-1%

Wellness

27,230


53,530



29,567


56,591


-8%


-5%

Women's & children's health

29,256


58,336



31,313


61,084


-7%


-4%

Patient self-testing services

25,711


50,412



23,198


43,805


11%


15%


Health information solutions net revenue

$                  134,775


$                  268,982



$                  138,590


$                  269,374


-3%


0%















(1) Revenues are presented in accordance with Generally Accepted Accounting Principles and exclude an adjustment of $0.6 million and $1.2 million, and $1.1 million and $2.4 million, in revenue related to acquired software license contracts which were not recognized during the three and six months ended June 30, 2013 and 2012, respectively, due to business combination accounting rules.



 

Alere Inc. and Subsidiaries

Reconciliation to Non-GAAP Adjusted Operating Results

(in thousands, except per share amounts)






Three Months Ended June 30,


2013


2012

Reconciliation to Non-GAAP Adjusted Operating Income (1)




Operating income

$                  44,404


$                  34,354





Adjustment related to acquired software license contracts 

592


1,126

Amortization of acquisition-related intangible assets

79,158


81,371

Restructuring charges 

8,044


1,365

Stock-based compensation expense

4,677


4,368

Compensation charges associated with acquisition-related contingent consideration obligations

580


-

Acquisition-related costs

426


3,800

Fair value adjustments to acquisition-related contingent consideration

5,258


(6,681)

Non-cash charge associated with acquired inventory

711


-





Non-GAAP adjusted operating income

$                143,850


$                119,703






Three Months Ended June 30,


2013


2012

Reconciliation to Non-GAAP Adjusted Net Income(1)




Net loss available to common stockholders

$                (65,878)


$                (18,194)





Adjustment related to acquired software license contracts 

592


1,126

Amortization of acquisition-related intangible assets

79,240


81,644

Restructuring charges 

8,106


1,415

Stock-based compensation expense

4,677


4,368

Compensation charges associated with acquisition-related contingent consideration obligations

580


-

Acquisition-related costs

426


3,800

Fair value adjustments to acquisition-related contingent consideration

5,258


(6,681)

Non-cash charge associated with acquired inventory

711


-

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

810


1,320

Interest accretion associated with acquisition-related compensation charges

160


-

Non-cash write-off of an investment 

5,110


-

Bargain purchase gain associated with the  acquisition of the Liberty business

(8,062)


-

Expense associated with extinguishment of debt

35,604


-

Income tax effects on items above

(12,768)


(29,318)





Non-GAAP adjusted net income available to common stockholders

$                  54,566


$                  39,480









Net loss per diluted common share

$                    (0.81)


$                    (0.23)

Non-GAAP adjusted net income per diluted common share

$                       0.64


$                       0.48





Weighted-average shares - diluted

81,311


80,375

Non-GAAP adjusted weighted average shares - diluted

95,207


83,960






(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)






Six Months Ended June 30,


2013


2012

Reconciliation to Non-GAAP Adjusted Operating Income (1)




Operating income

$                  74,893


$                  69,412





Adjustment related to acquired software license contracts 

1,235


2,412

Amortization of acquisition-related intangible assets

155,025


159,300

Restructuring charges 

11,936


6,893

Stock-based compensation expense

8,800


8,242

Compensation charges associated with acquisition-related contingent consideration obligations

1,270


-

Acquisition-related costs

1,322


5,261

Fair value adjustments to acquisition-related contingent consideration

16,276


(1,637)

Non-cash charge associated with acquired inventory

1,172


4,681





Non-GAAP adjusted operating income

$                271,929


$                254,564






Six Months Ended June 30,


2013


2012

Reconciliation to Non-GAAP Adjusted Net Income(1)




Net loss available to common stockholders

$                (58,678)


$                (22,289)





Adjustment related to acquired software license contracts 

1,235


2,412

Amortization of acquisition-related intangible assets

155,229


159,766

Restructuring charges 

12,053


7,003

Stock-based compensation expense

8,800


8,242

Compensation charges associated with acquisition-related contingent consideration obligations

1,270


-

Acquisition-related costs

1,322


5,261

Fair value adjustments to acquisition-related contingent consideration

16,276


(1,637)

Non-cash charge associated with acquired inventory

1,172


4,681

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

1,762


2,640

Interest accretion associated with acquisition-related compensation charges

160


-

Non-cash write-off of an investment 

5,110


-

Bargain purchase gain associated with the  acquisition of the Liberty business

(8,062)


-

Expense associated with extinguishment of debt

35,767


-

Income tax effects on items above

(74,823)


(60,097)





Non-GAAP adjusted net income available to common stockholders

$                  98,593


$                105,982









Net loss per diluted common share

$                    (0.72)


$                    (0.28)

Non-GAAP adjusted net income per diluted common share

$                       1.16


$                       1.25





Weighted-average shares - diluted

81,255


80,307

Non-GAAP adjusted weighted average shares - diluted

95,071


94,189






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







(in thousands)







For the Three Months Ended June 30, 2013

Operating Segment


Professional Diagnostics


Health Information Solutions


Consumer Diagnostics


Corporate


Total












Net revenue 


$          603,762


$          134,775


$             25,448


$                      -


$          763,985

Adjustment related to acquired software license contracts (1)


592


-


-


-


592

Non-GAAP adjusted net revenue


$          604,354


$          134,775


$             25,448


$                      -


$          764,577












Operating income (loss) 


$             72,896


$          (11,759)


$               3,404


$          (20,137)


$             44,404

Adjustment related to acquired software license contracts (1)


592


-


-


-


592

Amortization of acquisition-related intangible assets


67,968


10,732


458


-


79,158

Non-cash charge associated with acquired inventory


711


-


-


-


711

Restructuring charges 


1,740


6,304


-


-


8,044

Stock-based compensation expense


-


-


-


4,677


4,677

Compensation charges associated with acquisition-related contingent consideration obligations


580


-


-


-


580

Acquisition-related costs


-


-


-


426


426

Fair value adjustments to acquisition-related contingent consideration


4,330


1,028


-


(100)


5,258

Non-GAAP adjusted operating income (loss)


$          148,817


$               6,305


$               3,862


$          (15,134)


$          143,850












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


24.6%


4.7%


15.2%




18.8%












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



























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







(in thousands)







For the Three Months Ended June 30, 2012

Operating Segment


Professional Diagnostics


Health Information Solutions


Consumer Diagnostics


Corporate


Total












Net revenue 


$          540,110


$          138,590


$             21,817


$                      -


$          700,517

Adjustment related to acquired software license contracts (1)


1,126


-


-


-


1,126

Non-GAAP adjusted net revenue


$          541,236


$          138,590


$             21,817


$                      -


$          701,643












Operating income (loss) 


$             63,251


$          (12,666)


$               2,699


$          (18,930)


$             34,354

Adjustment related to acquired software license contracts (1)


1,126


-


-


-


1,126

Amortization of acquisition-related intangible assets


66,427


14,312


632


-


81,371

Restructuring charges 


817


539


-


9


1,365

Stock-based compensation expense


-


-


-


4,368


4,368

Non-cash charge associated with acquired inventory


-


-


-


-


-

Acquisition-related costs


-


-


-


3,800


3,800

Fair value adjustments to acquisition-related contingent consideration


(6,901)


863


(288)


(355)


(6,681)

Non-GAAP adjusted operating income (loss)


$          124,720


$               3,048


$               3,043


$          (11,108)


$          119,703












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


23.0%


2.2%


13.9%




17.1%












(1) Estimated revenue related to acquired software license contracts that was not recognized during the second 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 Six Months Ended June 30, 2013

Operating Segment


Professional Diagnostics


Health Information Solutions


Consumer Diagnostics


Corporate


Total












Net revenue 


$       1,186,254


$          268,982


$             47,998


$                      -


$       1,503,234

Adjustment related to acquired software license contracts (1)


1,235


-


-


-


1,235

Non-GAAP adjusted net revenue


$       1,187,489


$          268,982


$             47,998


$                      -


$       1,504,469












Operating income (loss) 


$          132,736


$          (25,652)


$               5,684


$          (37,875)


$             74,893

Adjustment related to acquired software license contracts (1)


1,235


-


-


-


1,235

Amortization of acquisition-related intangible assets


132,261


21,770


994


-


155,025

Non-cash charge associated with acquired inventory


1,172


-


-


-


1,172

Restructuring charges 


3,129


8,807


-


-


11,936

Stock-based compensation expense


-


-


-


8,800


8,800

Compensation charges associated with acquisition-related contingent consideration obligations


1,270


-


-


-


1,270

Acquisition-related costs


-


-


-


1,322


1,322

Fair value adjustments to acquisition-related contingent consideration


11,393


4,383


-


500


16,276

Non-GAAP adjusted operating income (loss)


$          283,196


$               9,308


$               6,678


$          (27,253)


$          271,929












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

 adjusted net revenue


23.8%


3.5%


13.9%




18.1%












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

























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







(in thousands)







For the Six Months Ended June 30, 2012

Operating Segment


Professional Diagnostics


Health Information Solutions


Consumer Diagnostics


Corporate


Total












Net revenue 


$       1,058,467


$          269,374


$             43,805


$                      -


$       1,371,646

Adjustment related to acquired software license contracts (1)


2,412


-


-


-


2,412

Non-GAAP adjusted net revenue


$       1,060,879


$          269,374


$             43,805


$                      -


$       1,374,058












Operating income (loss) 


$          133,430


$          (32,022)


$               3,064


$          (35,060)


$             69,412

Adjustment related to acquired software license contracts (1)


2,412


-


-


-


2,412

Amortization of acquisition-related intangible assets


129,312


28,636


1,352


-


159,300

Restructuring charges 


5,611


1,256


-


26


6,893

Stock-based compensation expense


-


-


-


8,242


8,242

Non-cash charge associated with acquired inventory


4,681


-


-


-


4,681

Acquisition-related costs


-


-


-


5,261


5,261

Fair value adjustments to acquisition-related contingent consideration


(6,325)


3,167


(204)


1,725


(1,637)

Non-GAAP adjusted operating income (loss)


$          269,121


$               1,037


$               4,212


$          (19,806)


$          254,564












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

 adjusted net revenue


25.4%


0.4%


9.6%




18.5%












(1) Estimated revenue related to acquired software license contracts that was not recognized during the first six months 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

Reconciliations to Non-GAAP Adjusted P&L Categories

(in thousands)








Three Months Ended

June 30, 2013


Three Months Ended

June 30, 2012









Net revenue 


$                           763,985


$                           700,517

Adjustment related to acquired software license contracts 


592


1,126

Non-GAAP adjusted net revenue


$                           764,577


$                           701,643






Cost of net revenue


$                           379,498


$                           344,909

Less adjustments:





Non-cash charge associated with acquired inventory


(711)


-

Amortization of acquisition-related intangible assets


(17,102)


(17,460)

Stock-based compensation expense


(278)


(263)

Restructuring charges 


(729)


(25)

Non-GAAP adjusted cost of net revenue


$                           360,678


$                           327,161






Non-GAAP adjusted gross profit


$                           403,899


$                           374,482








Three Months Ended

June 30, 2013


Three Months Ended

June 30, 2012









Research and development 


$                             40,500


$                             40,447

Less adjustments:





Amortization of acquisition-related intangible assets


(1,216)


(1,502)

Stock-based compensation expense


(783)


(856)

Restructuring charges 


(645)


(14)

Non-GAAP adjusted research and development


$                             37,856


$                             38,075








Three Months Ended

June 30, 2013


Three Months Ended

June 30, 2012









Selling, general and administrative


$                           299,583


$                           280,807

Less adjustments:





Amortization of acquisition-related intangible assets


(60,840)


(62,409)

Stock-based compensation expense


(3,616)


(3,249)

Compensation charges associated with acquisition-related contingent consideration obligations


(580)


-

Acquisition-related costs


(426)


(3,800)

Fair value adjustments to acquisition-related contingent consideration


(5,258)


6,681

Restructuring charges 


(6,670)


(1,326)

Non-GAAP adjusted selling, general and administrative 


$                           222,193


$                           216,704








Three Months Ended

June 30, 2013


Three Months Ended

June 30, 2012









Interest and other income (expense), net


$                           (91,390)


$                           (51,720)

Less adjustments:





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


810


1,320

Interest accretion associated with acquisition-related compensation charges


160


-

Non-cash write-off of an investment 


5,110


-

Bargain purchase gain associated with the  acquisition of the Liberty business


(8,062)


-

Expense associated with extinguishment of debt


35,604


-

Restructuring charges 


62


50

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


$                           (57,706)


$                           (50,350)








Three Months Ended

June 30, 2013


Three Months Ended

June 30, 2012









Provision (benefit) for income taxes


$                             17,867


$                                 (489)

    Add:  Income tax effects on Non-GAAP adjustments


12,783


29,322

Non-GAAP adjusted provision for income taxes


$                             30,650


$                             28,833








Three Months Ended

June 30, 2013


Three Months Ended

June 30, 2012









Equity earnings of unconsolidated entities, net of tax


$                                4,551


$                                3,998

Less adjustments:





Amortization of acquisition-related intangible assets


150


301

Income tax effects on items above


-


(3)

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


$                                4,701


$                                4,296






Alere Inc. and Subsidiaries

Reconciliations to Non-GAAP Adjusted P&L Categories

(in thousands)








Six Months Ended

June 30, 2013


Six Months Ended

June 30, 2012









Net revenue 


$                       1,503,234


$                       1,371,646

Adjustment related to acquired software license contracts 


1,235


2,412

Non-GAAP adjusted net revenue


$                       1,504,469


$                       1,374,058






Cost of net revenue


$                           754,490


$                           662,967

Less adjustments:





Non-cash charge associated with acquired inventory


(1,172)


(4,681)

Amortization of acquisition-related intangible assets


(36,272)


(33,197)

Stock-based compensation expense


(510)


(532)

Restructuring charges 


(1,352)


(989)

Non-GAAP adjusted cost of net revenue


$                           715,184


$                           623,568






Non-GAAP adjusted gross profit


$                           789,285


$                           750,490








Six Months Ended

June 30, 2013


Six Months Ended

June 30, 2012









Research and development 


$                             81,954


$                             79,447

Less adjustments:





Amortization of acquisition-related intangible assets


(2,498)


(3,904)

Stock-based compensation expense


(1,530)


(1,627)

Restructuring charges 


(645)


(638)

Non-GAAP adjusted research and development


$                             77,281


$                             73,278








Six Months Ended

June 30, 2013


Six Months Ended

June 30, 2012









Selling, general and administrative


$                           591,897


$                           559,820

Less adjustments:





Amortization of acquisition-related intangible assets


(116,255)


(122,199)

Stock-based compensation expense


(6,760)


(6,083)

Compensation charges associated with acquisition-related contingent consideration obligations


(1,270)


-

Acquisition-related costs


(1,322)


(5,261)

Fair value adjustments to acquisition-related contingent consideration


(16,276)


1,637

Restructuring charges 


(9,939)


(5,266)

Non-GAAP adjusted selling, general and administrative 


$                           440,075


$                           422,648








Six Months Ended

June 30, 2013


Six Months Ended

June 30, 2012









Interest and other income (expense), net


$                         (149,259)


$                           (90,616)

Less adjustments:





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


1,762


2,640

Interest accretion associated with acquisition-related compensation charges


160


-

Non-cash write-off of an investment 


5,110


-

Bargain purchase gain associated with the  acquisition of the Liberty business


(8,062)


-

Expense associated with extinguishment of debt


35,767


-

Restructuring charges 


117


110

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


$                         (114,405)


$                           (87,866)








Six Months Ended

June 30, 2013


Six Months Ended

June 30, 2012









Benefit for income taxes


$                           (19,004)


$                             (1,944)

    Add:  Income tax effects on Non-GAAP adjustments


74,844


60,105

Non-GAAP adjusted provision for income taxes


$                             55,840


$                             58,161








Six Months Ended

June 30, 2013


Six Months Ended

June 30, 2012









Equity earnings of unconsolidated entities, net of tax


$                                7,485


$                                7,410

Less adjustments:





Amortization of acquisition-related intangible assets


301


521

Income tax effects on items above


-


(5)

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


$                                7,786


$                                7,926






 

SOURCE Alere Inc.



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