Alere Inc. Announces Third Quarter 2012 Results

08 Nov, 2012, 07:30 ET from Alere Inc.

WALTHAM, Mass., Nov. 8, 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 September 30, 2012.

Financial results for the third quarter of 2012:

  • Net revenue of $691.4 million for the third quarter of 2012, compared to $585.8 million for the third quarter of 2011.  Non-GAAP adjusted net revenue, which includes $0.9 million in estimated revenue related to acquired software license contracts not recognized for GAAP purposes for the third quarter of 2012 due to business combination accounting rules, was $692.3 million for the third quarter of 2012, compared to $585.8 million for the third quarter of 2011.
  • Net loss of $9.2 million attributable to common stockholders of Alere Inc., and respective net loss per diluted common share of $0.11, for the third quarter of 2012, compared to net income of $234.2 million attributable to common stockholders of Alere Inc., and respective net income per diluted common share of $2.48, for the third quarter of 2011.  Net income for the third quarter of 2011 included a gain of $288.9 million in connection with the formation of our joint venture with the Procter & Gamble Company.
  • Non-GAAP adjusted net income per diluted common share of $0.43 for the third quarter of 2012, compared to non-GAAP adjusted net income per diluted common share of $0.67 for the third quarter of 2011.
  • Net product and services revenue from our Professional Diagnostics segment was $528.8 million in the third quarter of 2012, compared to net product and services revenue of $426.3 million in the third quarter of 2011. Non-GAAP adjusted net product and services revenue from our Professional Diagnostics segment, which includes $0.9 million in estimated revenue related to acquired software license contracts not recognized for GAAP purposes for the third quarter of 2012 due to business combination accounting rules, was $529.7 million in the third quarter of 2012, compared to non-GAAP adjusted net product and services revenue of $426.3 million in the third quarter of 2011.  Recent professional diagnostics acquisitions contributed $134.6 million of incremental net revenue compared to the third quarter of 2011.
  • North American influenza sales decreased to $9.9 million for the third quarter of 2012, from $16.0 million for the third quarter of 2011.
  • Excluding the impact of the change in North American influenza revenues and the impact on revenues of the FDA matters associated with our U.S. Alere Triage products, currency adjusted organic growth in our Professional Diagnostics segment was 1%.
  • Net product and services revenue from our Health Management segment was $135.1 million in the third quarter of 2012, compared to $129.9 million in the third quarter of 2011 and $138.6 million in the second quarter of 2012.  The increase in revenue from the third quarter of 2011 was related primarily to increased revenues from our home coagulation monitoring programs.  

The Company's GAAP results for the third quarter of 2012 exclude $0.9 million of revenue associated with acquired software license contracts that are not recognized due to business combination accounting rules and include amortization of $83.1 million, $3.3 million of restructuring charges, $3.6 million of stock-based compensation expense, $0.8 million of acquisition-related costs recorded in accordance with ASC 805, Business Combinations, and $1.3 million of amortization associated with fees paid for certain debt modifications and terminations, offset by $15.1 million of income recorded for fair value adjustments to acquisition-related contingent consideration.  The Company's GAAP results for the third quarter of 2011 include amortization of $70.3 million, $3.4 million of restructuring charges, $4.3 million of stock-based compensation expense, $2.9 million of acquisition-related costs recorded in accordance with ASC 805, Business Combinations, $1.3 million of amortization associated with fees paid for certain debt modifications and terminations, a $0.6 million fair value write-down in connection with an idle facility and a net unrealized foreign currency loss of $18.1 million associated with a bank account funded for the acquisition of Axis-Shield plc, offset by $3.8 million of income recorded for fair value adjustments to acquisition-related contingent consideration and a $288.9 million gain in connection with the formation of our joint venture with Procter & Gamble in May 2007.  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 Company's non-GAAP adjusted operating income and non-GAAP adjusted net income available to common shareholders to operating income and net loss available to common shareholders under GAAP, as well as a discussion regarding these non-GAAP financial measures, 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, November 8, 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 (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 web site 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 10020552.  The replay will also be available via online webcast at http://www.videonewswire.com/event or via the Alere web site 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 web site (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 web site.

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 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 cardiology, infectious disease, toxicology, diabetes, oncology and women's health.  Alere is headquartered in Waltham, Massachusetts.

Alere Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(in thousands, except per share amounts)

Three Months Ended September 30, 

2012

2011

Net product sales and services revenue

$               686,228

$               580,520

License and royalty revenue

5,188

5,249

Net revenue

691,416

585,769

Cost of net revenue

345,641

279,807

      Gross profit

345,775

305,962

      Gross margin

50%

52%

Operating expenses:

Research and development

40,562

34,772

Selling, general and administrative

266,481

226,271

   Total operating expenses

307,043

261,043

      Operating income

38,732

44,919

Interest and other income (expense), net

(55,933)

233,319

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

(17,201)

278,238

Provision (benefit) for income taxes

(10,677)

42,652

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

(6,524)

235,586

Equity earnings of unconsolidated entities, net of tax

3,007

4,118

Net income (loss)

(3,517)

239,704

Less: Net income attributable to non-controlling interests

286

138

Net income (loss) attributable to Alere Inc. and Subsidiaries

(3,803)

239,566

Preferred stock dividends

(5,352)

(5,358)

Net income (loss) available to common stockholders

$                 (9,155)

$               234,208

Basic net income (loss) per common share

$                   (0.11)

$                      2.84

Diluted net income (loss) per common share

$                   (0.11)

$                      2.48

Weighted average shares - basic

80,792

82,486

Weighted average shares - diluted

80,792

97,090

Alere Inc. and Subsidiaries

Condensed Consolidated Statements of Operations 

(in thousands, except per share amounts)

Nine Months Ended September 30, 

2012

2011

Net product sales and services revenue

$           2,051,729

$           1,717,695

License and royalty revenue

11,333

17,723

Net revenue

2,063,062

1,735,418

Cost of net revenue

1,008,608

830,521

      Gross profit

1,054,454

904,897

      Gross margin

51%

52%

Operating expenses:

Research and development

120,009

112,662

Selling, general and administrative

826,301

700,257

   Total operating expenses

946,310

812,919

      Operating income

108,144

91,978

Interest and other income (expense), net

(146,549)

129,225

 Income (loss) before benefit for income taxes 

(38,405)

221,203

Benefit for income taxes

(12,621)

(4,414)

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

(25,784)

225,617

Equity earnings of unconsolidated entities, net of tax

10,417

4,922

Net income (loss)

(15,367)

230,539

Less: Net income attributable to non-controlling interests

137

160

Net income (loss) attributable to Alere Inc. and Subsidiaries

(15,504)

230,379

Preferred stock dividends

(15,940)

(16,682)

Preferred stock repurchase

-

23,936

Net income (loss) available to common stockholders

$               (31,444)

$               237,633

Basic net income (loss) per common share

$                    (0.39)

$                      2.81

Diluted net income (loss) per common share

$                    (0.39)

$                      2.56

Weighted average shares - basic

80,492

84,508

Weighted average shares - diluted

80,492

100,058

Alere Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(in thousands)

September 30,

December 31,

2012

2011

ASSETS

CURRENT ASSETS:

Cash and cash equivalents

$            302,254

$            299,173

Restricted cash

3,216

8,987

Marketable securities

897

1,086

Accounts receivable, net

508,591

475,824

Inventories, net

332,512

320,269

Prepaid expenses and other current assets

153,249

188,388

Total current assets

1,300,719

1,293,727

PROPERTY, PLANT AND EQUIPMENT, NET

516,814

491,205

GOODWILL AND OTHER INTANGIBLE ASSETS, NET

4,974,806

4,676,742

DEFERRED FINANCING COSTS AND OTHER ASSETS, NET

220,342

211,027

Total assets

$        7,012,681

$         6,672,701

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:

Short-term debt and current portion of long-term debt

$              58,860

$               73,415

Other current liabilities

588,722

551,037

Total current liabilities

647,582

624,452

LONG-TERM LIABILITIES:

Long-term debt, net of current portion

3,541,290

3,280,080

Deferred tax liability

413,808

380,700

Other long-term liabilities

178,406

153,398

Total long-term liabilities

4,133,504

3,814,178

Redeemable non-controlling interest

-

2,497

TOTAL EQUITY

2,231,595

2,231,574

Total liabilities and equity

$        7,012,681

$         6,672,701

Alere Inc. and Subsidiaries

Reconciliation to Non-GAAP Adjusted Operating Results

(in thousands, except per share amounts)

Three Months Ended September 30,

2012

2011

Reconciliation to Non-GAAP Adjusted Operating Income (1)

Operating income

$                  38,732

$                  44,919

Revenue related to acquired software license contracts

905

-

Amortization of acquisition-related intangible assets

82,867

70,121

Restructuring charges 

3,239

3,129

Stock-based compensation expense

3,626

4,286

Acquisition-related costs

833

2,912

Fair value adjustments to acquisition-related contingent consideration

(15,145)

(3,845)

Fair value write-down in connection with an idle facility

-

596

Non-GAAP adjusted operating income

$                115,057

$                122,118

Three Months Ended September 30,

2012

2011

Reconciliation to Non-GAAP Adjusted Net Income(1)

Net income (loss) available to common shareholders

$                  (9,155)

$                234,208

Revenue related to acquired software license contracts

905

-

Amortization of acquisition-related intangible assets

83,083

70,314

Restructuring charges 

3,287

3,412

Stock-based compensation expense

3,626

4,286

Acquisition-related costs

833

2,912

Fair value adjustments to acquisition-related contingent consideration

(15,145)

(3,845)

Gain in connection with the formation of a joint venture

-

(288,896)

Unrealized foreign currency loss associated with a bank account funded for the acquisition of Axis-Shield plc

-

18,050

Fair value write-down in connection with an idle facility

-

596

Amortization of fees paid for certain debt modifications and terminations

1,320

1,320

Income tax effects on items above

(32,931)

16,254

Non-GAAP adjusted net income available to common shareholders

$                  35,823

$                  58,611

Net income (loss) per diluted common share

$                    (0.11)

$                       2.48

Non-GAAP adjusted net income per diluted common share

$                       0.43

$                       0.67

Weighted average shares - diluted

80,792

97,090

Non-GAAP adjusted weighted average shares - diluted

84,299

97,090

(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)

Nine Months Ended September 30,

2012

2011

Reconciliation to Non-GAAP Adjusted Operating Income (1)

Operating income

$                108,144

$                  91,978

Revenue related to acquired software license contracts

3,317

-

Amortization of acquisition-related intangible assets

242,167

227,207

Restructuring charges 

10,132

19,625

Stock-based compensation expense

11,868

16,275

Acquisition-related costs

6,094

6,191

Fair value adjustments to acquisition-related contingent consideration

(16,782)

(9,684)

Non-cash charge associated with acquired inventory

4,681

-

Fair value write-down in connection with an idle facility

-

596

Expenses incurred in connection with the sale of our vitamin and nutritional supplements business

-

23

Non-GAAP adjusted operating income

$                369,621

$                352,211

Nine Months Ended September 30,

2012

2011

Reconciliation to Non-GAAP Adjusted Net Income(1)

Net income (loss) available to common shareholders

$                (31,444)

$                237,633

Revenue related to acquired software license contracts

3,317

-

Amortization of acquisition-related intangible assets

242,849

227,798

Restructuring charges 

10,290

20,365

Stock-based compensation expense

11,868

16,275

Acquisition-related costs

6,094

6,191

Fair value adjustments to acquisition-related contingent consideration

(16,782)

(9,684)

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

3,960

31,213

Non-cash charge associated with acquired inventory

4,681

-

Gain in connection with the formation of a joint venture

-

(288,896)

Unrealized foreign currency loss associated with a bank account funded for the acquisition of Axis-Shield plc

-

18,050

Realized foreign currency loss associated with the settlement of an acquisition-related contingent consideration obligation

-

1,920

Fair value write-down in connection with an idle facility

-

596

Expenses incurred in connection with the sale of our vitamin and nutritional supplements business

-

23

Non-cash income allocated to net income available to common stockholders as a result of repurchases of preferred shares

-

(23,936)

Income tax effects on items above

(93,028)

(82,183)

Non-GAAP adjusted net income available to common shareholders

$                141,805

$                155,365

Net income (loss) per diluted common share

$                    (0.39)

$                       2.56

Non-GAAP adjusted net income per diluted common share

$                       1.70

$                       1.74

Weighted average shares - diluted

80,492

100,058

Non-GAAP adjusted weighted average shares - diluted

94,327

100,058

(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

Q3 2012

YTD 2012

Q3 2011

YTD 2011

Q3 12 v. Q3 11

YTD 12 v. YTD 11

Cardiology

$          122,372

$          386,795

$          127,943

$          390,652

-4%

-1%

Infectious disease

136,561

425,398

142,639

405,559

-4%

5%

Toxicology

156,074

437,736

93,497

267,834

67%

63%

Diabetes

35,670

100,628

-

-

Other (1)

78,077

230,519

62,172

176,206

26%

31%

Professional diagnostics net product sales and services revenue (1)

528,754

1,581,076

426,251

1,240,251

24%

27%

License and royalty revenue

2,688

8,833

3,701

14,587

-27%

-39%

Professional diagnostics net revenue

$          531,442

$      1,589,909

$          429,952

$      1,254,838

24%

27%

Health Management Segment

% Change

% Change

Q3 2012

YTD 2012

Q3 2011

YTD 2011

Q3 12 v. Q3 11

YTD 12 v. YTD 11

Disease and case management

$            57,383

$          165,277

$            59,441

$          182,118

-3%

-9%

Wellness

24,290

80,881

24,427

80,369

-1%

1%

Women's & children's health

29,136

90,220

28,509

85,550

2%

5%

Patient self-testing services

24,269

68,074

17,554

60,529

38%

12%

Health management net revenue

$          135,078

$          404,452

$          129,931

$          408,566

4%

-1%

(1)Revenues are presented in accordance with Generally Accepted Accounting Principles and exclude an adjustment of $905 and $3,317 in revenue related to acquired software license contracts which were not recognized during the three and nine months ended September 30, 2012, respectively, due to business combination accounting rules.

SOURCE Alere Inc.



RELATED LINKS

http://www.alere.com