Alere Reports Second Quarter 2015 Financial Results

Organic Growth of 3.5% Driven by New and Existing Product Sales across Core Portfolio

-- Net revenue of $629.2 million; non-GAAP adjusted net revenue of $629.4 million

-- Organic revenue growth was 3.5 percent; excluding North America influenza sales, organic revenue growth was 3.3 percent

-- $0.17 income per diluted share available to common stockholders from continuing operations; non-GAAP adjusted income of $0.54 per diluted share available to common stockholders from continuing operations

Aug 04, 2015, 07:29 ET from Alere Inc.

WALTHAM, Mass., Aug. 4, 2015 /PRNewswire/ -- Alere Inc. (NYSE: ALR), a global leader in rapid diagnostic tests, today announced its financial results for the quarter ended June 30, 2015.  Net revenue was $629.2 million, a decrease of 2.8 percent, compared to $647.4 million in the second quarter of 2014. Non-GAAP adjusted net revenue was $629.4 million, a decrease of 2.8 percent, compared to $647.8 million in the second quarter of 2014.

Net Revenue (in millions)

Second Quarter 2015

Second Quarter 2014 (1)

% Change

Cardiometabolic Disease

$214

$209

2

Infectious Disease

$177

$175

1

Toxicology

$157

$170

(7)

Other

$ 51

$ 65

(22)

Consumer Diagnostics

$ 25

$ 22

13

License and Royalty

$   5

$  6

(14)

Total

$629

$647

(3)

(1)        Revenues, other than License and Royalty, have been reclassified due to a change in segment reporting as a result of the divestiture of our health management business in 2015 and the results of our patient self-testing business are primarily included within Cardiometabolic Disease.

"Our second quarter 2015 results, with 18.5 percent non-GAAP adjusted operating income growth compared to the prior year period, demonstrate the significant progress we've made in transforming Alere. During the first half of 2015, we met our operational targets and achieved 2.9 percent non-GAAP adjusted organic revenue growth with contribution from new products and continued operating expense discipline," said Namal Nawana, CEO and President of Alere. "We continue to focus on strong execution to accelerate our business during the second half of 2015. Our 2015 guidance includes the recently announced accretive acquisition of US Diagnostics and the BBI divestiture that is expected to close during the fourth quarter."

Second Quarter Highlights

  • Announced completion of $425 million of senior subordinated notes offering at 6.375 percent; refinanced senior secured credit facilities
  • CEO Namal Nawana participated in the White House Antibiotic Stewardship Forum
  • Received FDA clearance for Alere i Strep A rapid molecular test

Second Quarter 2015 Results

Non-GAAP adjusted net revenue of $629.4 million for the second quarter of 2015 included increases of $6.4 million in global HIV product sales, $9.2 million in Alere Home Monitoring and mail-order diabetes, and $2.2 million in epoc® product sales compared to the prior year period, offset by a $33.1 million decrease due to foreign currency exchange, a $13.3 million decrease in our pain management business, and a $1.2 million decrease in North America INRatio® product sales compared to the prior year period.  Included in second quarter non-GAAP adjusted net revenue was $8.6 million in global influenza product sales.

Gross profit was $292.6 million in the second quarter of 2015, with 46.5 percent gross margin. On a non-GAAP basis, adjusted gross profit was $307.1 million, with 48.8 percent non-GAAP adjusted gross margin in the second quarter of 2015. Non-GAAP adjusted gross profit excludes amortization of acquisition-related intangibles, restructuring charges, and stock-based compensation.

Operating expenses were $200.7 million, or 31.9 percent of net revenue, in the second quarter of 2015. Included in the second quarter operating expenses was R&D expense of $27.2 million, or 4.3 percent of net revenue, and SG&A expense of $168.0 million, or 26.7 percent of net revenue. Non-GAAP adjusted operating expenses during the second quarter of 2015 were $191.8 million, or 30.5 percent of non-GAAP adjusted net revenue, and were comprised of $25.8 million of non-GAAP adjusted R&D expenses, or 4.1 percent of non-GAAP adjusted net revenue, and non-GAAP adjusted SG&A expenses of $166.0 million, or 26.4 percent of non-GAAP adjusted net revenue.  Non-GAAP adjusted operating expenses, non-GAAP adjusted R&D expenses and non-GAAP adjusted SG&A expenses exclude, as applicable, amortization of acquisition-related intangibles, restructuring charges, stock-based compensation, fair value adjustments to contingent consideration, compensation costs associated with contingent consideration and costs associated with potential business dispositions.  Also included in operating expenses for the second quarter of 2015 was a $5.1 million loss on the divestiture of our Alere Analytics business and $0.3 million of costs associated with the closure of our Alere Connect operation.  Both of these amounts are excluded from non-GAAP adjusted operating expenses.

Operating income was $91.8 million in the second quarter of 2015. On a non-GAAP basis, adjusted operating income was $115.2 million in the second quarter of 2015.

Income from continuing operations available to common stockholders was $14.6 million, or $0.17 per diluted share, in the second quarter of 2015. On a non-GAAP basis, the Company reported adjusted income from continuing operations available to common stockholders of $48.3 million, or $0.54 per diluted share, in the second quarter of 2015.

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.

2015 Business Outlook

For the year ending December 31, 2015, the Company expects:

  • Net revenue to be in the range of $2.5 billion to $2.6 billion
  • Non-GAAP adjusted net income from continuing operations available to common stockholders in the range of $2.40 to $2.50 per diluted share

Conference Call

We will host a conference call beginning at 8:30 a.m. (Eastern Time) today, August 4, 2015, to discuss these results, as well as other company matters. During the conference call, we may answer questions concerning business and financial developments and trends and other business and financial matters. Our 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 will be webcast live on the Investor Relations section of our website or accessed directly through the following link: https://www.webcaster4.com/Webcast/Page/411/9606

To access the conference call, please use the following dial-in numbers and access code 1496673:

  • US (toll-free): 1-888-317-6003
  • International: 1-412-317-6061
  • Canada (toll-free): 1-866-284-3684

A replay 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. To hear a replay of the conference call, please use the following dial-in numbers and replay code 10069486 (available for seven days):

  • US (toll-free): 1-877-344-7529
  • International: 1-412-317-0088
  • Canada (toll-free): 1-855-669-9658

The replay will also be available via online webcast on the Investor Relations section of the Alere website.

Additionally, reconciliations to non-GAAP financial measures not included in this press release that may be discussed during the call will also be available on the Investor Relations section of the Alere website.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. For example, forward-looking statements include statements regarding, future revenues, future non-GAAP adjusted net income from continuing operations available to common stockholders per diluted share, future operating results, during the second half of 2015 the Company will focus on strong execution to accelerate the business, a recent acquisition by the Company will be accretive, the BBI divestiture is expected to close during the fourth quarter, the effect of trends in our business, areas of management focus,  and future financial goals.  In some cases, forward-looking statements can be identified by terms such as "may," "will," "intend," "expect," "plan," "believe," "estimate," "predict" or the like.  These statements involve risks and uncertainties, and actual results could differ materially from the statements made in this press release. Factors that might cause these differences include, but are not limited to, the effect of intense competition, failure to meet closing conditions necessary in order to complete acquisitions and divestitures, ability to execute on business plans to make acquisitions accretive, risks arising from FDA inspections and government subpoenas, delays in product development, international business risks, fluctuations in currency exchange rates, the effects of healthcare reform, risks of clinical trials, potential regulatory burdens and obstacles, litigation and legal compliance risks, government investigations, cybersecurity risks, changes in global economic and political conditions, potential product defects, manufacturing or supply issues, potential intellectual property infringement, risks of acquisitions and divestitures, substantial indebtedness, contractual debt restrictions and requirements, fluctuations in quarterly results, potential future financial restatements, potential reviews, investigations or other proceedings by government authorities, stockholders or other parties; the risk that the Company's remediation plan related to its material weakness will be unsuccessful to prevent or detect additional misstatements, including a potential inability to prepare financial statements or file periodic reports on a timely basis, which would be a default under the Company's senior secured credit facility and note indentures as well as a violation of the Securities Exchange Act and the listing rules of the NYSE, and any additional material weaknesses in internal controls.  These and other risk factors are discussed in more detail under the heading "Risk Factors" in Item 1A of the Company's Annual Report on Form 10-K, as amended, filed with the Securities and Exchange Commission on May 28, 2015. Copies are available through the Company's Investor Relations department and at www.alere.com. The Company does not assume any obligation to update its forward-looking statements to reflect new information and developments.

About Alere

Alere believes that when diagnosing and monitoring health conditions, Knowing now matters.™  Alere delivers reliable and actionable information by providing rapid diagnostic tests, enhancing clinical and economic healthcare outcomes globally. Headquartered in Waltham, Mass., Alere focuses on rapid diagnostics for cardiometabolic disease, infectious disease and toxicology. For more information on Alere, please visit www.alere.com.

 

 

Alere Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(in thousands, except per share amounts)

Three Months Ended June 30, 

2015

2014

Net product sales and services revenue

$              623,462

$              640,794

License and royalty revenue

5,694

6,604

Net revenue

629,156

647,398

Cost of net revenue

336,582

348,705

      Gross profit

292,574

298,693

      Gross margin

47%

46%

Operating expenses:

Research and development

27,198

37,430

Selling, general and administrative

167,997

266,374

Impairment and loss on disposition, net

5,542

638

      Operating income 

91,837

(5,749)

Interest and other income (expense), net

(55,234)

(48,815)

Income (loss) from continuing operations before provision (benefit) for income taxes

36,603

(54,564)

Provision for income taxes

17,701

5,464

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

18,902

(60,028)

Equity earnings of unconsolidated entities, net of tax

1,361

2,087

Income (loss) from continuing operations

20,263

(57,941)

Income from discontinued operations, net of tax

-

12,915

Net income (loss)

20,263

(45,026)

Less: Net income attributable to non-controlling interests

359

62

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

19,904

(45,088)

Preferred stock dividends

(5,309)

(5,309)

Net income (loss) available to common stockholders

$                14,595

$               (50,397)

Basic net income (loss) per common share:

  Income (loss) from continuing operations

$                     0.17

$                   (0.77)

  Income from discontinued operations

-

0.16

      Basic net income (loss) per common share

$                     0.17

$                   (0.61)

Diluted net income (loss) per common share:

  Income (loss) from continuing operations

$                     0.17

$                   (0.77)

  Income from discontinued operations

-

0.16

      Diluted net income (loss) per common share

$                     0.17

$                   (0.61)

Weighted average shares - basic 

85,173

82,648

Weighted average shares - diluted

86,635

82,648

 

 

Alere Inc. and Subsidiaries

Condensed Consolidated Statements of Operations 

(in thousands, except per share amounts)

Six Months Ended June 30, 

2015

2014

Net product sales and services revenue

$           1,226,917

$           1,260,821

License and royalty revenue

10,392

11,816

Net revenue

1,237,309

1,272,637

Cost of net revenue

652,750

663,586

      Gross profit

584,559

609,051

      Gross margin

47%

48%

Operating expenses:

Research and development

55,214

76,129

Selling, general and administrative

369,767

503,037

Impairment and loss on disposition, net

40,334

638

      Operating income 

119,244

29,247

Interest and other income (expense), net

(102,935)

(93,693)

Income (loss) from continuing operations before provision (benefit) for income taxes

16,309

(64,446)

Provision for income taxes

8,915

3,784

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

7,394

(68,230)

Equity earnings of unconsolidated entities, net of tax

5,320

7,439

Income (loss) from continuing operations

12,714

(60,791)

Income from discontinued operations, net of taxes

216,777

10,319

Net income (loss)

229,491

(50,472)

Less: Net income attributable to non-controlling interests

447

170

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

229,044

(50,642)

Preferred stock dividends

(10,559)

(10,559)

Net Income (loss) available to common stockholders

$              218,485

$               (61,201)

Basic net income (loss) per common share:

  Income (loss) from continuing operations

$                     0.02

$                   (0.87)

  Income from discontinued operations

2.56

0.13

      Net income (loss) per common share

$                     2.58

$                   (0.74)

Diluted net income (loss) per common share:

  Income (loss) from continuing operations

$                     0.02

$                   (0.87)

  Income from discontinued operations

2.52

0.13

      Diluted net income (loss) per common share

$                     2.54

$                   (0.74)

Weighted average shares - basic

84,758

82,518

Weighted average shares - diluted

86,070

82,518

 

Alere Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(in thousands)

June 30,

December 31,

2015

2014

ASSETS

CURRENT ASSETS:

Cash and cash equivalents

$                  464,871

$                 378,461

Restricted cash

461,636

37,571

Marketable securities

175

259

Accounts receivable, net

472,686

466,106

Inventories, net

366,340

365,165

Prepaid expenses and other current assets

143,944

244,986

Assets held for sale - current

28,631

315,515

Total current assets

1,938,283

1,808,063

PROPERTY, PLANT AND EQUIPMENT, NET

448,302

453,570

GOODWILL AND OTHER INTANGIBLE ASSETS, NET

3,988,043

4,246,761

RESTRICTED CASH - NON-CURRENT

-

-

DEFERRED FINANCING COSTS AND OTHER ASSETS, NET

147,572

170,562

Assets held for sale - non-current

129,194

-

Total assets

$               6,651,394

$             6,678,956

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:

Short-term debt and current portions of long-term debt and capital lease obligations

$                  634,014

$                   93,116

Liabilities related to assets held for sale - current

7,663

78,843

Other current liabilities

496,335

589,086

Total current liabilities

1,138,012

761,045

LONG-TERM LIABILITIES:

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

2,964,949

3,631,945

Deferred tax liabilities

227,491

214,639

Other long-term liabilities

146,240

161,582

Liabilities related to assets held for sale - non-current

11,527

-

Total long-term liabilities

3,350,207

4,008,166

TOTAL EQUITY

2,163,175

1,909,745

Total liabilities and equity

$               6,651,394

$             6,678,956

 

 

Alere Inc. and Subsidiaries

Reconciliation to Non-GAAP Adjusted Operating Results

(in thousands, except per share amounts)

Three Months Ended June 30, 

2015

2014

Reconciliation to Non-GAAP Adjusted Operating Income (1)

Operating income (loss)

$                 91,837

$                       (5,749)

Adjustment related to acquired software license contracts 

200

373

Amortization of acquisition-related intangible assets

49,246

58,835

Restructuring charges 

4,853

15,380

Stock-based compensation expense

7,130

(1,122)

Compensation charges associated with acquisition-related contingent consideration obligations

(3,412)

581

Acquisition-related costs

40

49

Fair value adjustments to acquisition-related contingent consideration

(41,090)

16,679

Costs associated with potential business dispositions

879

11,600

Impairment and loss on disposition, net

5,542

638

Non-GAAP adjusted operating income

$               115,225

$                       97,264

Three Months Ended June 30, 

2015

2014

Reconciliation to Non-GAAP Adjusted Net Income(1)

Net income (loss) available to common stockholders

$                 14,595

$                     (50,397)

Adjustment related to acquired software license contracts 

200

373

Amortization of acquisition-related intangible assets

49,271

58,855

Restructuring charges 

4,859

15,391

Stock-based compensation expense

7,130

(1,122)

Compensation charges associated with acquisition-related contingent consideration obligations

(3,412)

581

Acquisition-related costs

40

49

Fair value adjustments to acquisition-related contingent consideration

(41,090)

16,679

Costs associated with potential business dispositions

879

11,600

Impairment and loss on disposition, net

5,542

638

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

11,303

364

Interest accretion associated with acquisition-related compensation charges

(545)

98

Expense associated with extinguishment of debt

3,480

-

Amortization of acquisition-related intangible assets, restructuring, fair value adjustments to acquisition-related contingent consideration, and impairment, net of gain on divestiture - Discontinued operations, net of tax

-

(10,041)

Income tax effects on items above

(4,002)

(6,884)

Non-GAAP adjusted net income available to common

stockholders

$                 48,250

$                       36,184

Income (loss) per diluted common share from continuing operations

$                      0.17

$                         (0.77)

Income per diluted common share from discontinued operations

-

0.16

      Net Income (loss) per diluted common share

$                      0.17

$                         (0.61)

Weighted average shares - diluted

86,635

82,648

Non-GAAP adjusted income per diluted common share  from continuing operations

$                      0.54

$                           0.39

Non-GAAP adjusted income per diluted common share  from discontinued operations

-

0.03

      Non-GAAP adjusted net income per diluted common share

$                      0.54

$                           0.42

Non-GAAP adjusted weighted average shares -

diluted

100,312

87,453

(1)In calculating "Non-GAAP adjusted operating income" and "Non-GAAP adjusted net income available to common stockholders", 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 available to common stockholders" 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 available to common stockholders" presented in this press release may not be comparable to similar measures used by other companies.

 

 

Alere Inc. and Subsidiaries

Reconciliation to Non-GAAP Adjusted Operating Results

(in thousands, except per share amounts)

Six Months Ended June 30, 

2015

2014

Reconciliation to Non-GAAP Adjusted Operating Income (1)

Operating income 

$               119,244

$                 29,247

Adjustment related to acquired software license contracts 

447

792

Amortization of acquisition-related intangible assets

99,939

117,795

Restructuring charges 

9,123

19,778

Stock-based compensation expense

12,279

4,582

Compensation charges associated with acquisition-related contingent consideration obligations

(2,806)

1,003

Acquisition-related costs

91

370

Fair value adjustments to acquisition-related contingent consideration

(52,867)

17,979

Non-cash charge associated with acquired inventory

-

-

Costs associated with potential business dispositions

4,219

14,560

Impairment and loss on disposition, net

40,334

638

Non-GAAP adjusted operating income

$               230,003

$               206,744

Six Months Ended June 30, 

2015

2014

Reconciliation to Non-GAAP Adjusted Net Income(1)

Net income (loss) available to common stockholders

$               218,485

$                (61,201)

Adjustment related to acquired software license contracts 

447

792

Amortization of acquisition-related intangible assets

99,987

117,833

Restructuring charges 

9,136

19,801

Stock-based compensation expense

12,279

4,582

Compensation charges associated with acquisition-related contingent consideration obligations

(2,806)

1,003

Acquisition-related costs

91

370

Fair value adjustments to acquisition-related contingent consideration

(52,867)

17,979

Costs associated with potential business dispositions

4,610

14,560

Impairment and loss on disposition, net

40,334

638

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

11,667

728

Interest accretion associated with acquisition-related compensation charges

(441)

193

Expense associated with extinguishment of debt

3,480

-

Amortization of acquisition-related intangible assets, restructuring, fair value adjustments to acquisition-related contingent consideration, and impairment, net of gain on divestiture - Discontinued operations, net of tax

(217,589)

(4,837)

Income tax effects on items above

(32,642)

(30,373)

Non-GAAP adjusted net income available to common stockholders

$                 94,171

$                 82,068

Income (loss) per diluted common share from continuing operations

$                     0.02

$                    (0.87)

Income per diluted common share from discontinued operations

2.52

0.13

      Net income (loss) per diluted common share

$                     2.54

$                    (0.74)

Weighted average shares - diluted

86,070

82,518

Non-GAAP adjusted income per diluted common share  from continuing operations

$                     1.07

$                      0.90

Non-GAAP adjusted income (loss) per diluted common share  from discontinued operations

(0.01)

0.06

      Non-GAAP adjusted net income per diluted common share

$                     1.06

$                      0.96

Non-GAAP adjusted weighted average shares -

diluted

99,747

87,150

(1)In calculating "Non-GAAP adjusted operating income" and "Non-GAAP adjusted net income available to common stockholders", 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 available to common stockholders" 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 available to common stockholders" presented in this press release may not be comparable to similar measures used by other companies.

 

Alere Inc. and Subsidiaries

Selected Consolidated Revenues

(in thousands)

% Change

%Change

Q2 2015

YTD 2015

Q2 2014

YTD 2014

Q2 15 v. Q2 14

YTD 15 v. YTD 14

Professional diagnostics segment (1)

Cardiometabolic

$                     213,661

$                   416,504

$                 209,241

$          423,204

2%

-2%

Infectious disease

176,630

355,386

175,001

342,614

1%

4%

Toxicology

157,495

306,251

169,647

325,180

-7%

-6%

Other (2)

51,031

102,163

65,187

125,803

-22%

-19%

Total professional diagnostics segment(1) (2)

598,817

1,180,304

619,076

1,216,801

-3%

-3%

Consumer diagnostics segment (1)

24,645

46,613

21,718

44,020

13%

6%

License and royalty revenue

5,694

10,392

6,604

11,816

-14%

-12%

Net revenue

$                     629,156

$                1,237,309

$                 647,398

$       1,272,637

-3%

-3%

(1)Revenues have been restated for the impact of a change in segment reporting due to the divestiture of our health management business.

(2)Revenues are presented in accordance with generally accepted accounting principles and exclude an adjustment of $0.2 million and $0.4million, and $0.4 million and $0.8 million related to acquired software license contracts which were not recognized during the three and six months ended June 30, 2015 and 2014, 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 June 30, 2015

Operating Segment

Professional Diagnostics

Consumer Diagnostics

Corporate

Total

Net revenue 

$                   604,511

$                     24,645

$                             -

$                  629,156

Adjustment related to acquired software license contracts(1)

200

-

-

200

Non-GAAP adjusted net revenue

$                   604,711

$                     24,645

$                             -

$                  629,356

Operating income (loss) 

$                   115,302

$                       1,079

$                  (24,544)

$                    91,837

Adjustment related to acquired software license contracts(1)

200

-

-

200

Amortization of acquisition-related intangible assets

49,198

9

39

49,246

Restructuring charges 

4,290

-

563

4,853

Stock-based compensation expense

-

-

7,130

7,130

Compensation charges associated with acquisition-related contingent consideration obligations

(3,412)

-

-

(3,412)

Acquisition-related costs

-

-

40

40

Fair value adjustments to acquisition-related contingent consideration

(41,090)

-

-

(41,090)

Costs associated with potential business dispositions

879

-

-

879

Impairment and loss on disposition, net

5,542

-

-

5,542

Non-GAAP adjusted operating income (loss)

$                   130,909

$                       1,088

$                  (16,772)

$                  115,225

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

21.6%

4.4%

18.3%

(1) Estimated revenue related to acquired software license contracts that was not recognized during the second quarter of 2015 due to business combination accounting rules.

For the Three Months Ended June 30, 2014

Operating Segment

Professional Diagnostics

Consumer Diagnostics

Corporate

Total

Net revenue  (1) 

$                   625,680

$                     21,718

$                             -

$                  647,398

Adjustment related to acquired software license contracts(2)

373

-

-

373

Non-GAAP adjusted net revenue

$                   626,053

$                     21,718

$                             -

$                  647,771

Operating income (loss) 

$                      14,455

$                           702

$                  (20,906)

$                     (5,749)

Adjustment related to acquired software license contracts(2)

373

-

-

373

Amortization of acquisition-related intangible assets

58,661

174

-

58,835

Restructuring charges 

11,325

-

4,055

15,380

Stock-based compensation expense

-

-

(1,122)

(1,122)

Compensation charges associated with acquisition-related contingent consideration obligations

581

-

-

581

Acquisition-related costs

-

-

49

49

Fair value adjustments to acquisition-related contingent consideration

16,479

-

200

16,679

Costs associated with potential business dispositions

11,600

-

-

11,600

Loss on disposition

638

-

-

638

Non-GAAP adjusted operating income (loss)

$                   114,112

$                           876

$                  (17,724)

$                    97,264

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

18.2%

4.0%

15.0%

(1)  Net revenue has been restated for the impact of a change in segment reporting due to the divestiture of our health management business.

(2)Estimated revenue related to acquired software license contracts that was not recognized during the second quarter of 2014 due to business combination accounting rules.

Comments:

In calculating "Non-GAAP 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 "Non-GAAP 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, "Non-GAAP adjusted operating income (loss)" presented in this schedule may not be comparable to similar measures used by other companies.

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

 

Alere Inc. and Subsidiaries

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

(in thousands)

For the Six Months Ended June 30, 2015

Operating Segment

Professional Diagnostics

Consumer Diagnostics

Corporate

Total

Net revenue 

$                        1,190,696

$                           46,613

$                                     -

$                          1,237,309

Adjustment related to acquired software license contracts(1)

447

-

-

447

Non-GAAP adjusted net revenue

$                        1,191,143

$                           46,613

$                                     -

$                          1,237,756

Operating income (loss) 

$                           165,090

$                             3,283

$                          (49,129)

$                             119,244

Adjustment related to acquired software license contracts(1)

447

-

-

447

Amortization of acquisition-related intangible assets

99,920

19

-

99,939

Restructuring charges 

8,525

-

598

9,123

Stock-based compensation expense

-

-

12,279

12,279

Compensation charges associated with acquisition-related contingent consideration obligations

(2,806)

-

-

(2,806)

Acquisition-related costs

-

-

91

91

Fair value adjustments to acquisition-related contingent consideration

-

-

(52,867)

(52,867)

Costs associated with potential business dispositions

4,610

-

-

4,610

 Impairment and gain (loss) on dispositions, net

40,334

-

-

40,334

Non-GAAP adjusted operating income (loss)

$                           316,120

$                              3,302

$                          (89,028)

$                             230,394

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

26.5%

7.1%

18.6%

(1) Estimated revenue related to acquired software license contracts that was not recognized during the six months ended June 30, 2015 due to business combination accounting rules.

For the Six Months Ended June 30, 2014

Operating Segment

Professional Diagnostics

Consumer Diagnostics

Corporate

Total

Net revenue  (1) 

$                        1,227,306

$                           45,331

$                                     -

$                          1,272,637

Adjustment related to acquired software license contracts(2)

792

-

-

792

Non-GAAP adjusted net revenue

$                        1,228,098

$                           45,331

$                                     -

$                          1,273,429

Operating income (loss) 

$                             68,624

$                             2,711

$                          (42,088)

$                               29,247

Adjustment related to acquired software license contracts(2)

792

-

-

792

Amortization of acquisition-related intangible assets

117,332

463

-

117,795

Restructuring charges 

15,628

-

4,150

19,778

Stock-based compensation expense

-

-

4,582

4,582

Compensation charges associated with acquisition-related contingent consideration obligations

1,003

-

-

1,003

Non-cash charge associated with acquired inventory

-

-

-

-

Acquisition-related costs

-

-

370

370

Fair value adjustments to acquisition-related contingent consideration

17,679

-

300

17,979

Costs associated with proxy contest

-

-

-

-

Costs associated with potential business dispositions

14,560

-

-

14,560

Loss on disposition

638

-

-

638

Non-GAAP adjusted operating income (loss)

$                           236,256

$                              3,174

$                          (32,686)

$                             206,744

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

19.2%

7.0%

16.2%

(1)  Net revenue has been restated for the impact of a change in segment reporting due to the divestiture of our health management business.

(2)Estimated revenue related to acquired software license contracts that was not recognized during the six months ended June 30, 2014 due to business combination accounting rules.

Comments:

In calculating "Non-GAAP 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 "Non-GAAP 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, "Non-GAAP adjusted operating income (loss)" presented in this schedule may not be comparable to similar measures used by other companies.

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

 

Alere Inc. and Subsidiaries

Reconciliations to Non-GAAP Adjusted P&L Categories

(in thousands)

Three Months Ended

June 30, 2015

Three Months Ended

June 30, 2014

Net revenue 

$                          629,156

$                          647,398

Adjustment related to acquired software license contracts 

200

373

Non-GAAP adjusted net revenue

$                          629,356

$                          647,771

Cost of net revenue

$                          336,582

$                          348,705

Less adjustments:

Amortization of acquisition-related intangible assets

(13,112)

(15,682)

Restructuring charges 

(897)

(220)

Costs associated with potential business dispositions

-

-

Stock-based compensation expense

(287)

(285)

Non-GAAP adjusted cost of net revenue

$                          322,286

$                          332,518

Non-GAAP adjusted gross profit

$                          307,070

$                          315,253

Three Months Ended June 30, 2015

Three Months Ended June 30, 2014

Research and development 

$                            27,198

$                            37,430

Less adjustments:

Amortization of acquisition-related intangible assets

(923)

(1,184)

Restructuring charges 

(155)

(3,031)

Stock-based compensation expense

(282)

1,811

Non-GAAP adjusted research and development

$                            25,838

$                            35,026

Three Months Ended June 30, 2015

Three Months Ended June 30, 2014

Selling, general and administrative

$                          167,997

$                          266,374

Less adjustments:

Amortization of acquisition-related intangible assets

(35,211)

(41,969)

Restructuring charges 

(3,801)

(12,129)

Stock-based compensation expense

(6,561)

(404)

Compensation charges associated with acquisition-related contingent consideration obligations

3,412

(581)

Acquisition-related costs

(40)

(49)

Fair value adjustments to acquisition-related contingent consideration

41,090

(16,679)

Costs associated with potential business dispositions

(879)

(11,600)

Non-GAAP adjusted selling, general and administrative 

$                          166,007

$                          182,963

Three Months Ended June 30, 2015

Three Months Ended June 30, 2014

Impairment and loss on disposition, net

$                               5,542

$                                  638

Impairment and loss on disposition, net

(5,542)

(638)

Non-GAAP adjusted impairment and loss on disposition, net

$                                       -

$                                       -

Three Months Ended June 30, 2015

Three Months Ended June 30, 2014

Interest and other income (expense), net

$                           (55,234)

$                           (48,815)

Less adjustments:

Restructuring charges 

6

11

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

11,303

364

Interest accretion associated with acquisition-related compensation charges

(545)

98

Expense associated with extinguishment of debt

3,480

-

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

$                           (40,990)

$                           (48,342)

Three Months Ended June 30, 2015

Three Months Ended June 30, 2014

Provision for income taxes

$                            17,701

$                               5,464

    Add:  Income tax effects on Non-GAAP adjustments

4,023

6,913

Non-GAAP adjusted provision for income taxes

$                            21,724

$                            12,377

Three Months Ended June 30, 2015

Three Months Ended June 30, 2014

Equity earnings of unconsolidated entities, net of tax

$                               1,361

$                               2,087

Less adjustments:

Amortization of acquisition-related intangible assets

105

150

Income tax effects on items above

-

-

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

$                               1,466

$                               2,237

 

Alere Inc. and Subsidiaries

Reconciliations to Non-GAAP Adjusted P&L Categories

(in thousands)

Six Months Ended

June 30, 2015

Six Months Ended

June 30, 2014

Net revenue

$                       1,237,309

$               1,272,637

Adjustment related to acquired software license contracts 

447

792

Non-GAAP adjusted net revenue

$                       1,237,756

$               1,273,429

Cost of net revenue

$                          652,750

$                  663,586

Less adjustments:

Amortization of acquisition-related intangible assets

(27,308)

(31,558)

Restructuring charges 

(2,399)

(1,053)

Stock-based compensation expense

(540)

(572)

Non-cash charge associated with acquired inventory

-

-

Costs associated with potential business dispositions

(391)

-

Non-GAAP adjusted cost of net revenue

$                          622,112

$                  630,403

Non-GAAP adjusted gross profit

$                          615,644

$                  643,026

Six Months Ended

 June 30, 2015

Six Months Ended June 30, 2014

Research and development

$                            55,214

$                    76,129

Less adjustments:

Amortization of acquisition-related intangible assets

(1,784)

(2,349)

Restructuring charges 

(648)

(3,031)

Stock-based compensation expense

(606)

620

Non-GAAP adjusted research and development

$                             52,176

$                    71,369

Six Months Ended

June 30, 2015

Six Months Ended June 30, 2014

Selling, general and administrative

$                           369,767

$                  503,037

Less adjustments:

Amortization of acquisition-related intangible assets

(70,847)

(83,888)

Restructuring charges 

(6,076)

(15,694)

Stock-based compensation expense

(11,133)

(4,630)

Compensation charges associated with acquisition-related contingent consideration obligations

2,806

(1,003)

Acquisition-related costs

(91)

(370)

Fair value adjustments to acquisition-related contingent consideration

52,867

(17,979)

Costs associated with potential business dispositions

(4,219)

(14,560)

Non-GAAP adjusted selling, general and administrative 

$                          333,074

$                  364,913

Six Months Ended

June 30, 2015

Six Months Ended June 30, 2014

Impairment and loss on disposition, net

$                             40,334

$                         638

Impairment and loss on disposition, net

(40,334)

(638)

Non-GAAP adjusted impairment and loss on disposition, net

$                                       -

$                             -

Six Months Ended

June 30, 2015

Six Months Ended June 30, 2014

Interest and other income (expense), net

$                         (102,935)

$                  (93,693)

Less adjustments:

Restructuring charges 

13

23

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

11,667

728

Interest accretion associated with acquisition-related compensation charges

(441)

193

Expense associated with extinguishment of debt

3,480

-

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

$                           (88,216)

$                  (92,749)

Six Months Ended

June 30, 2015

 Six Months Ended June 30, 2014 

Provision for income taxes

$                               8,915

$                      3,784

    Add:  Income tax effects on Non-GAAP adjustments

32,684

30,431

Non-GAAP adjusted provision for income taxes

$                             41,599

$                    34,215

Six Months Ended

June 30, 2015

Six Months Ended June 30, 2014

Equity earnings of unconsolidated entities, net of tax 

$                               5,320

$                      7,439

Less adjustments:

Amortization of acquisition-related intangible assets

210

298

Income tax effects on items above

-

-

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

$                               5,530

$                      7,737

 

Alere Inc. and Subsidiaries

Reconciliations of Gross Profit/Margin to Non-GAAP Adjusted Gross Profit/Margin

(in thousands)

Three Months Ended 

Three Months Ended 

Three Months Ended 

Alere Consolidated

June 30, 2014 (1)

March 31, 2015

June 30, 2015

Net revenue 

$   647,398

$   608,153

$   629,156

    Adjustment related to acquired

      software license contracts

373

247

200

Non-GAAP adjusted net revenue

647,771

608,400

629,356

Cost of net revenue 

348,705

316,168

336,582

Less adjustments:

    Amortization of acquisition-related intangible assets

15,682

14,196

13,112

    Costs associated with potential business dispositions

-

391

-

    Stock-based compensation expense

285

253

287

    Restructuring charges

220

1,502

897

         Non-GAAP adjusted cost of net revenue

332,518

299,826

322,286

Non-GAAP adjusted gross profit/margin 

$   315,253

48.7%

$   308,574

50.7%

$   307,070

48.8%

Three Months Ended 

Three Months Ended 

Three Months Ended 

Professional Diagnostics Segment

June 30, 2014 (1)

March 31, 2015

June 30, 2015

Net product sales and services revenue 

$   619,076

$   581,487

$   598,817

    Adjustment related to acquired

      software license contracts

373

247

200

Non-GAAP adjusted net product sales and services revenue

619,449

581,734

599,017

Cost of net revenue 

328,318

295,416

312,068

Less adjustments:

    Amortization of acquisition-related intangible assets

15,657

14,196

13,112

    Costs associated with potential business dispositions

-

391

-

    Stock-based compensation expense

285

253

287

    Restructuring charges

220

1,502

897

         Non-GAAP adjusted cost of net revenue

312,156

279,074

297,772

Non-GAAP adjusted gross profit/margin 

$   307,293

49.6%

$   302,660

52.0%

$   301,245

50.3%

Note:

(1)Restated to reflect the impact of discontinued operations and the impact of a change in segment reporting.

 

Alere Inc. and Subsidiaries

Reconciliation of Net Income to Non-GAAP EBITDA

(in thousands)

 Three Months Ended 

 Six Months Ended 

June 30, 2015

June 30, 2015

Net income (1) 

$                      20,263

$                     229,491

  Less: Income from discontinued operations, net of tax

-

216,777

Income from continuing operations 

20,263

12,714

Adjustment related to acquired software license contracts

200

447

Income tax provision

17,701

8,915

Depreciation and amortization

72,749

147,222

Interest, net

58,765

104,597

Non-cash stock-based compensation expense

7,130

12,279

Non-cash fair value adjustments to acquisition-related contingent consideration

(41,090)

(52,867)

Impairment and loss on dispositions, net

5,542

40,334

Non-GAAP EBITDA

$                  141,260

$                  273,641

(1)  Net income for the three months and six months ended June 30, 2015 includes non-interest related restructuring charges of $4.8 million and $9.1 million, respectively, and $0.9 million and $4.6 million of costs associated with potential business dispositions, respectively, which have not been added back for purposes of computing Non-GAAP EBITDA.The six months ended June 30, 2015 also includes $0.1 million of acquisition-related costs.

(2)  Includes $3.5 million of expense associated with the extinguishment of debt during the three and six months ended June 30, 2015.

 

Reconciliation of Cash Flow from Operating Activities to Free Cash Flow

(in thousands)

Three Months Ended

Six Months Ended

June 30, 2015

June 30, 2015

Cash flow from operating activities 

$                   4,148

$               32,526

Capital expenditures

(21,637)

(47,284)

Free cash flow

$                (17,489)

$              (14,758)

 

SOURCE Alere Inc.



RELATED LINKS

http://www.alere.com