Alere Inc. Announces Third Quarter 2013 Results

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.



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