Alere Inc. Announces Third Quarter 2013 Results

Oct 29, 2013, 07:30 ET from Alere Inc.

WALTHAM, Mass., Oct. 29, 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 September 30, 2013.

Ron Zwanziger, Chairman, Chief Executive Officer and President of Alere said, "We are pleased to report a very strong quarter for Alere.  The combination of continued excellent organic growth, coupled with good expense control, demonstrates our continued momentum and commitment to enhancing value for our shareholders and delivering against the three-point strategic plan that we implemented in November 2012."

Financial results for the third quarter of 2013:

  • Net revenue of $753.9 million for the third quarter of 2013, compared to $691.4 million for the third quarter of 2012.  Non-GAAP adjusted net revenue was $754.4 million for the third quarter of 2013, compared to $692.3 million for the third quarter of 2012.
  • Net loss of $24.8 million attributable to common stockholders of Alere Inc., and respective net loss per diluted common share of $0.30, for the third quarter of 2013, compared to 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.
  • Non-GAAP adjusted net income per diluted common share of $0.59 for the third quarter of 2013, compared to non-GAAP adjusted net income per diluted common share of $0.43 for the third quarter of 2012.
  • Net product and services revenue from our Professional Diagnostics segment was $587.3 million in the third quarter of 2013, compared to net product and services revenue of $528.8 million in the third quarter of 2012. Non-GAAP adjusted net product and services revenue from our Professional Diagnostics segment was $587.8 million in the third quarter of 2013, compared to non-GAAP adjusted net product and services revenue of $529.7 million in the third quarter of 2012.  Recent professional diagnostics acquisitions contributed $30.6 million of incremental net revenue compared to the third quarter of 2012, offset by a reduction in revenue of $2.3 million related to dispositions in the quarter.
  • North American influenza sales increased to $18.3 million for the third quarter of 2013, from $9.9 million for the third 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 9.1%.
  • Net product and services revenue from our Health Information Solutions segment was $134.2 million in the third quarter of 2013, compared to $135.1 million in the third quarter of 2012 and $134.8 million in the second quarter of 2013.
  • Included in interest and other income (expense), net is a provision of $5.0 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.

The Company's GAAP results for the third 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 $82.4 million, $7.8 million of restructuring charges, $5.7 million of stock-based compensation expense, $0.5 million of acquisition-related costs recorded in accordance with ASC 805, Business Combinations, $2.7 million of expense recorded for fair value adjustments to acquisition-related contingent consideration, $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 $0.7 million charge associated with the write-up to fair market value of inventory acquired in connection with the acquisition of Epocal Inc., $5.5 million of costs associated with the proxy contest, a $5.9 million loss associated with the disposition of our Spinreact, S.A. subsidiary located in Spain and a $0.04 million adjustment to the bargain purchase gain in connection with our acquisition of the Liberty business.  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 interest expense associated with fees paid for modification of certain debt agreements, offset by $15.1 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, October 29, 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 10036058.  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 September 30, 

2013

2012

Net product sales and services revenue

$              749,698

$              686,228

License and royalty revenue

4,184

5,188

Net revenue

753,882

691,416

Cost of net revenue

385,236

345,641

      Gross profit

368,646

345,775

      Gross margin

49%

50%

Operating expenses:

Research and development

40,498

40,562

Selling, general and administrative

301,964

266,481

Loss on disposition

5,885

-

      Operating income

20,299

38,732

Interest and other income (expense), net

(62,289)

(55,933)

 Loss before benefit for income taxes 

(41,990)

(17,201)

Benefit for income taxes

(17,148)

(10,677)

 Loss before equity earnings of unconsolidated entities, net of tax 

(24,842)

(6,524)

Equity earnings of unconsolidated entities, net of tax

5,753

3,007

Net loss

(19,089)

(3,517)

Less: Net income attributable to non-controlling interests

359

286

Net loss attributable to Alere Inc. and Subsidiaries

(19,448)

(3,803)

Preferred stock dividends

(5,367)

(5,352)

Net loss available to common stockholders

$               (24,815)

$                 (9,155)

Basic and diluted net loss per common share

$                   (0.30)

$                   (0.11)

Weighted-average shares - basic and diluted

81,735

80,792

 

Alere Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(in thousands, except per share amounts)

Nine Months Ended September 30, 

2013

2012

Net product sales and services revenue

$           2,244,003

$           2,051,729

License and royalty revenue

13,113

11,333

Net revenue

2,257,116

2,063,062

Cost of net revenue

1,139,726

1,008,608

      Gross profit

1,117,390

1,054,454

      Gross margin

50%

51%

Operating expenses:

Research and development

122,452

120,009

Selling, general and administrative

893,861

826,301

Loss on disposition

5,885

-

      Operating income

95,192

108,144

Interest and other income (expense), net

(211,548)

(146,549)

 Loss before benefit for income taxes 

(116,356)

(38,405)

Benefit for income taxes

(36,152)

(12,621)

 Loss before equity earnings of unconsolidated entities, net of tax 

(80,204)

(25,784)

Equity earnings of unconsolidated entities, net of tax

13,238

10,417

Net loss

(66,966)

(15,367)

Less: Net income attributable to non-controlling interests

601

137

Net loss attributable to Alere Inc. and Subsidiaries

(67,567)

(15,504)

Preferred stock dividends

(15,926)

(15,940)

Net loss available to common stockholders

$               (83,493)

$               (31,444)

Basic and diluted net loss per common share

$                   (1.03)

$                   (0.39)

Weighted-average shares - basic and diluted

81,417

80,492

 

Alere Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(in thousands)

September 30,

December 31,

2013

2012

ASSETS

CURRENT ASSETS:

Cash and cash equivalents

$             353,993

$            328,346

Restricted cash

7,905

3,076

Marketable securities

820

904

Accounts receivable, net

568,873

524,332

Inventories, net

370,448

337,121

Prepaid expenses and other current assets

172,778

212,958

Total current assets

1,474,817

1,406,737

PROPERTY, PLANT AND EQUIPMENT, NET

544,271

534,469

GOODWILL AND OTHER INTANGIBLE ASSETS, NET

4,909,986

4,919,081

RESTRICTED CASH - NON-CURRENT

29,045

-

DEFERRED FINANCING COSTS AND OTHER ASSETS, NET

196,500

207,641

Total assets

$          7,154,619

$         7,067,928

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:

Current portion of long-term debt and capital lease obligations

$               54,259

$              66,916

Other current liabilities

642,219

581,893

Total current liabilities

696,478

648,809

LONG-TERM LIABILITIES:

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

3,805,458

3,641,592

Deferred tax liabilities

352,859

428,188

Other long-term liabilities

209,683

166,635

Total long-term liabilities

4,368,000

4,236,415

TOTAL EQUITY

2,090,141

2,182,704

Total liabilities and equity

$          7,154,619

$         7,067,928

 

Alere Inc. and Subsidiaries

Reconciliation to Non-GAAP Adjusted Operating Results

(in thousands, except per share amounts)

Three Months Ended September 30,

2013

2012

Reconciliation to Non-GAAP Adjusted Operating Income (1)

Operating income

$                 20,299

$                 38,732

Adjustment related to acquired software license contracts 

535

905

Amortization of acquisition-related intangible assets

82,248

82,867

Restructuring charges 

7,694

3,239

Stock-based compensation expense

5,662

3,626

Compensation charges associated with acquisition-related contingent consideration

obligations

762

-

Acquisition-related costs

450

833

Fair value adjustments to acquisition-related contingent consideration

2,719

(15,145)

Non-cash charge associated with acquired inventory

708

-

Costs associated with proxy contest

5,467

-

Loss on disposition

5,885

-

Non-GAAP adjusted operating income

$               132,429

$               115,057

Three Months Ended September 30,

2013

2012

Reconciliation to Non-GAAP Adjusted Net Income(1)

Net loss available to common stockholders

$                (24,815)

$                  (9,155)

Adjustment related to acquired software license contracts 

535

905

Amortization of acquisition-related intangible assets

82,304

83,083

Restructuring charges 

7,805

3,287

Stock-based compensation expense

5,662

3,626

Compensation charges associated with acquisition-related contingent consideration

obligations

762

-

Acquisition-related costs

450

833

Fair value adjustments to acquisition-related contingent consideration

2,719

(15,145)

Non-cash charge associated with acquired inventory

708

-

Costs associated with proxy contest

5,467

-

Loss on disposition

5,885

-

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

364

1,320

Interest accretion associated with acquisition-related compensation charges

98

-

Bargain purchase gain associated with the  acquisition of the Liberty business

39

-

Income tax effects on items above

(37,913)

(32,931)

Non-GAAP adjusted net income available to common stockholders

$                 50,070

$                 35,823

Net loss per diluted common share

$                    (0.30)

$                    (0.11)

Non-GAAP adjusted net income per diluted common share

$                      0.59

$                      0.43

Weighted-average shares - diluted

81,735

80,792

Non-GAAP adjusted weighted average shares - diluted

95,830

84,299

(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,

2013

2012

Reconciliation to Non-GAAP Adjusted Operating Income (1)

Operating income

$                 95,192

$               108,144

Adjustment related to acquired software license contracts 

1,770

3,317

Amortization of acquisition-related intangible assets

237,273

242,167

Restructuring charges 

19,630

10,132

Stock-based compensation expense

14,462

11,868

Compensation charges associated with acquisition-related contingent consideration

obligations

2,032

-

Acquisition-related costs

1,772

6,094

Fair value adjustments to acquisition-related contingent consideration

18,995

(16,782)

Non-cash charge associated with acquired inventory

1,880

4,681

Costs associated with proxy contest

5,467

-

Loss on disposition

5,885

-

Non-GAAP adjusted operating income

$               404,358

$               369,621

Nine Months Ended September 30,

2013

2012

Reconciliation to Non-GAAP Adjusted Net Income(1)

Net loss available to common stockholders

$                (83,493)

$                (31,444)

Adjustment related to acquired software license contracts 

1,770

3,317

Amortization of acquisition-related intangible assets

237,533

242,849

Restructuring charges 

19,858

10,290

Stock-based compensation expense

14,462

11,868

Compensation charges associated with acquisition-related contingent consideration

obligations

2,032

-

Acquisition-related costs

1,772

6,094

Fair value adjustments to acquisition-related contingent consideration

18,995

(16,782)

Non-cash charge associated with acquired inventory

1,880

4,681

Costs associated with proxy contest

5,467

-

Loss on disposition

5,885

-

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

2,126

3,960

Interest accretion associated with acquisition-related compensation charges

258

-

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

-

Income tax effects on items above

(112,736)

(93,028)

Non-GAAP adjusted net income available to common stockholders

$               148,663

$               141,805

Net loss per diluted common share

$                    (1.03)

$                    (0.39)

Non-GAAP adjusted net income per diluted common share

$                      1.75

$                      1.70

Weighted-average shares - diluted

81,417

80,492

Non-GAAP adjusted weighted average shares - diluted

95,244

94,327

(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 2013

YTD 2013

Q3 2012

YTD 2012

Q3 13 v. Q3 12

YTD 13 v. YTD 12

Cardiology

$                 116,281

$                 349,650

$                 122,372

$                 386,795

-5%

-10%

Infectious disease

172,739

520,289

136,561

425,398

26%

22%

Toxicology

166,536

481,469

156,074

437,736

7%

10%

Diabetes

53,150

178,138

35,670

100,628

49%

77%

Other (1)

78,607

235,992

78,077

230,519

1%

2%

Professional diagnostics net product sales and services revenue (1)

587,313

1,765,538

528,754

1,581,076

11%

12%

License and royalty revenue

3,488

11,517

2,688

8,833

30%

30%

Professional diagnostics net revenue

$                 590,801

$              1,777,055

$                 531,442

$              1,589,909

11%

12%

Health Information Solutions Segment

% Change

% Change

Q3 2013

YTD 2013

Q3 2012

YTD 2012

Q3 13 v. Q3 12

YTD 13 v. YTD 12

Disease and case management

$                   56,554

$                 163,258

$                   57,383

$                 165,277

-1%

-1%

Wellness

22,223

75,753

24,290

80,881

-9%

-6%

Women's & children's health

28,431

86,767

29,136

90,220

-2%

-4%

Patient self-testing services

27,025

77,437

24,269

68,074

11%

14%

Health information solutions net revenue

$                 134,233

$                 403,215

$                 135,078

$                 404,452

-1%

0%

(1)Revenues are presented in accordance with Generally Accepted Accounting Principles and exclude an adjustment of $0.5 million and $1.8 million, and $0.9 million and $3.3 million, in revenue related to acquired software license contracts which were not recognized during the three and nine months ended September 30, 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 September 30, 2013

Operating Segment

Professional Diagnostics

Health Information Solutions

Consumer Diagnostics

Corporate

Total

Net revenue 

$          590,801

$          134,233

$            28,848

$                     -

$          753,882

Adjustment related to acquired software license contracts (1)

535

-

-

-

535

Non-GAAP adjusted net revenue

$          591,336

$          134,233

$            28,848

$                     -

$          754,417

Operating income (loss) 

$            53,189

$             (7,203)

$              3,347

$           (29,034)

$            20,299

Adjustment related to acquired software license contracts (1)

535

-

-

-

535

Amortization of acquisition-related intangible assets

69,556

12,233

459

-

82,248

Non-cash charge associated with acquired inventory

708

-

-

-

708

Restructuring charges 

6,033

1,661

-

-

7,694

Stock-based compensation expense

-

-

-

5,662

5,662

Compensation charges associated with acquisition-related contingent consideration obligations

762

-

-

-

762

Acquisition-related costs

-

-

-

450

450

Fair value adjustments to acquisition-related contingent consideration

1,516

803

-

400

2,719

Costs associated with proxy contest

-

-

-

5,467

5,467

Loss on disposition

5,885

-

-

-

5,885

Non-GAAP adjusted operating income (loss)

$          138,184

$              7,494

$              3,806

$           (17,055)

$          132,429

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

23.4%

5.6%

13.2%

17.6%

(1) Estimated revenue related to acquired software license contracts that was not recognized during the third 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 September 30, 2012

Operating Segment

Professional Diagnostics

Health Information Solutions

Consumer Diagnostics

Corporate

Total

Net revenue 

$          531,442

$          135,078

$            24,896

$                     -

$          691,416

Adjustment related to acquired software license contracts (1)

905

-

-

-

905

Non-GAAP adjusted net revenue

$          532,347

$          135,078

$            24,896

$                     -

$          692,321

Operating income (loss) 

$            63,298

$           (14,357)

$              4,615

$           (14,824)

$            38,732

Adjustment related to acquired software license contracts (1)

905

-

-

-

905

Amortization of acquisition-related intangible assets

67,760

14,508

599

-

82,867

Restructuring charges 

2,139

1,095

-

5

3,239

Stock-based compensation expense

-

-

-

3,626

3,626

Acquisition-related costs

-

-

-

833

833

Fair value adjustments to acquisition-related contingent consideration

(16,377)

1,700

204

(672)

(15,145)

Non-GAAP adjusted operating income (loss)

$          117,725

$              2,946

$              5,418

$           (11,032)

$          115,057

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

22.1%

2.2%

21.8%

16.6%

(1) Estimated revenue related to acquired software license contracts that was not recognized during the third 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.

 

Alere Inc. and Subsidiaries

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

(in thousands)

For the Nine Months Ended September 30, 2013

Operating Segment

Professional Diagnostics

Health Information Solutions

Consumer Diagnostics

Corporate

Total

Net revenue 

$       1,777,055

$          403,215

$            76,846

$                     -

$       2,257,116

Adjustment related to acquired software license contracts (1)

1,770

-

-

-

1,770

Non-GAAP adjusted net revenue

$       1,778,825

$          403,215

$            76,846

$                     -

$       2,258,886

Operating income (loss) 

$          185,925

$           (32,855)

$              9,031

$           (66,909)

$            95,192

Adjustment related to acquired software license contracts (1)

1,770

-

-

-

1,770

Amortization of acquisition-related intangible assets

201,817

34,003

1,453

-

237,273

Non-cash charge associated with acquired inventory

1,880

-

-

-

1,880

Restructuring charges 

9,162

10,468

-

-

19,630

Stock-based compensation expense

-

-

-

14,462

14,462

Compensation charges associated with acquisition-related contingent consideration obligations

2,032

-

-

-

2,032

Acquisition-related costs

-

-

-

1,772

1,772

Fair value adjustments to acquisition-related contingent consideration

12,909

5,186

-

900

18,995

Costs associated with proxy contest

-

-

-

5,467

5,467

Loss on disposition

5,885

-

-

-

5,885

Non-GAAP adjusted operating income (loss)

$          421,380

$            16,802

$            10,484

$           (44,308)

$          404,358

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

23.7%

4.2%

13.6%

17.9%

(1) Estimated revenue related to acquired software license contracts that was not recognized during the first nine 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 Nine Months Ended September 30, 2012

Operating Segment

Professional Diagnostics

Health Information Solutions

Consumer Diagnostics

Corporate

Total

Net revenue 

$       1,589,909

$          404,452

$            68,701

$                     -

$       2,063,062

Adjustment related to acquired software license contracts (1)

3,317

-

-

-

3,317

Non-GAAP adjusted net revenue

$       1,593,226

$          404,452

$            68,701

$                     -

$       2,066,379

Operating income (loss) 

$          196,728

$           (46,379)

$              7,679

$           (49,884)

$          108,144

Adjustment related to acquired software license contracts (1)

3,317

-

-

-

3,317

Amortization of acquisition-related intangible assets

197,073

43,144

1,950

-

242,167

Restructuring charges 

7,750

2,351

-

31

10,132

Stock-based compensation expense

-

-

-

11,868

11,868

Non-cash charge associated with acquired inventory

4,681

-

-

-

4,681

Acquisition-related costs

-

-

-

6,094

6,094

Fair value adjustments to acquisition-related contingent consideration

(22,702)

4,867

-

1,053

(16,782)

Non-GAAP adjusted operating income (loss)

$          386,847

$              3,983

$              9,629

$           (30,838)

$          369,621

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

24.3%

1.0%

14.0%

17.9%

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

 

Alere Inc. and Subsidiaries

Reconciliations to Non-GAAP Adjusted P&L Categories

(in thousands)

Three Months Ended

September 30, 2013

Three Months Ended

September 30, 2012

Net revenue 

$                          753,882

$                          691,416

Adjustment related to acquired software license contracts 

535

905

Non-GAAP adjusted net revenue

$                          754,417

$                          692,321

Cost of net revenue

$                          385,236

$                          345,641

Less adjustments:

Non-cash charge associated with acquired inventory

(708)

(269)

Amortization of acquisition-related intangible assets

(18,236)

(18,421)

Stock-based compensation expense

(287)

(1,080)

Restructuring charges 

(3,556)

-

Non-GAAP adjusted cost of net revenue

$                          362,449

$                          325,871

Non-GAAP adjusted gross profit

$                          391,968

$                          366,450

Three Months Ended

September 30, 2013

Three Months Ended

September 30, 2012

Research and development 

$                            40,498

$                            40,562

Less adjustments:

Amortization of acquisition-related intangible assets

(1,231)

(1,311)

Stock-based compensation expense

(1,111)

(752)

Restructuring charges 

(1,100)

-

Non-GAAP adjusted research and development

$                            37,056

$                            38,499

Three Months Ended

September 30, 2013

Three Months Ended

September 30, 2012

Selling, general and administrative

$                          301,964

$                          266,481

Less adjustments:

Amortization of acquisition-related intangible assets

(62,781)

(63,135)

Stock-based compensation expense

(4,264)

(2,605)

Compensation charges associated with acquisition-related contingent consideration

obligations

(762)

-

Acquisition-related costs

(450)

(833)

Fair value adjustments to acquisition-related contingent consideration

(2,719)

15,145

Restructuring charges 

(3,038)

(2,159)

Costs associated with proxy contest

(5,467)

-

Non-GAAP adjusted selling, general and administrative 

$                          222,483

$                          212,894

Three Months Ended

September 30, 2013

Three Months Ended

September 30, 2012

Loss on disposition 

$                               5,885

$                                     -

Loss on disposition

(5,885)

-

Non-GAAP adjusted loss on disposition

$                                     -

$                                     -

Three Months Ended

September 30, 2013

Three Months Ended

September 30, 2012

Interest and other income (expense), net

$                           (62,289)

$                           (55,933)

Less adjustments:

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

364

1,320

Interest accretion associated with acquisition-related compensation charges

98

-

Bargain purchase gain associated with the  acquisition of the Liberty business

39

-

Restructuring charges 

111

48

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

$                           (61,677)

$                           (54,565)

Three Months Ended

September 30, 2013

Three Months Ended

September 30, 2012

Benefit for income taxes

$                           (17,148)

$                           (10,677)

    Add:  Income tax effects on Non-GAAP adjustments

37,935

32,935

Non-GAAP adjusted provision for income taxes

$                            20,787

$                            22,258

Three Months Ended

September 30, 2013

Three Months Ended

September 30, 2012

Equity earnings of unconsolidated entities, net of tax

$                               5,753

$                               3,007

Less adjustments:

Amortization of acquisition-related intangible assets

147

243

Income tax effects on items above

-

(2)

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

$                               5,900

$                               3,248

 

Alere Inc. and Subsidiaries

Reconciliations to Non-GAAP Adjusted P&L Categories

(in thousands)

Nine Months Ended

September 30, 2013

Nine Months Ended

September 30, 2012

Net revenue 

$                       2,257,116

$                       2,063,062

Adjustment related to acquired software license contracts 

1,770

3,317

Non-GAAP adjusted net revenue

$                       2,258,886

$                       2,066,379

Cost of net revenue

$                       1,139,726

$                       1,008,608

Less adjustments:

Non-cash charge associated with acquired inventory

(1,880)

(4,681)

Amortization of acquisition-related intangible assets

(54,508)

(51,618)

Stock-based compensation expense

(797)

(801)

Restructuring charges 

(4,908)

(2,069)

Non-GAAP adjusted cost of net revenue

$                       1,077,633

$                          949,439

Non-GAAP adjusted gross profit

$                       1,181,253

$                       1,116,940

Nine Months Ended

September 30, 2013

Nine Months Ended

September 30, 2012

Research and development 

$                          122,452

$                          120,009

Less adjustments:

Amortization of acquisition-related intangible assets

(3,729)

(5,215)

Stock-based compensation expense

(2,641)

(2,379)

Restructuring charges 

(1,745)

(638)

Non-GAAP adjusted research and development

$                          114,337

$                          111,777

Nine Months Ended

September 30, 2013

Nine Months Ended

September 30, 2012

Selling, general and administrative

$                          893,861

$                          826,301

Less adjustments:

Amortization of acquisition-related intangible assets

(179,036)

(185,334)

Stock-based compensation expense

(11,024)

(8,688)

Compensation charges associated with acquisition-related contingent consideration

obligations

(2,032)

-

Acquisition-related costs

(1,772)

(6,094)

Fair value adjustments to acquisition-related contingent consideration

(18,995)

16,782

Restructuring charges 

(12,977)

(7,425)

Costs associated with proxy contest

(5,467)

-

Non-GAAP adjusted selling, general and administrative 

$                          662,558

$                          635,542

Nine Months Ended

September 30, 2013

Nine Months Ended

September 30, 2012

Loss on disposition

$                               5,885

$                                     -

Loss on disposition

(5,885)

-

Non-GAAP adjusted loss on disposition

$                                     -

$                                     -

Nine Months Ended

September 30, 2013

Nine Months Ended

September 30, 2012

Interest and other income (expense), net

$                         (211,548)

$                         (146,549)

Less adjustments:

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

2,126

3,960

Interest accretion associated with acquisition-related compensation charges

258

-

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

-

Restructuring charges 

228

158

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

$                         (176,082)

$                         (142,431)

Nine Months Ended

September 30, 2013

Nine Months Ended

September 30, 2012

Benefit for income taxes

$                           (36,152)

$                           (12,621)

    Add:  Income tax effects on Non-GAAP adjustments

112,779

93,040

Non-GAAP adjusted provision for income taxes

$                            76,627

$                            80,419

Nine Months Ended

September 30, 2013

Nine Months Ended

September 30, 2012

Equity earnings of unconsolidated entities, net of tax

$                            13,238

$                            10,417

Less adjustments:

Amortization of acquisition-related intangible assets

448

764

Income tax effects on items above

-

(7)

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

$                            13,686

$                            11,174

 

SOURCE Alere Inc.



RELATED LINKS

http://www.alere.com