Alere Inc. Announces Third Quarter 2011 Results

Oct 26, 2011, 07:45 ET from Alere Inc.

WALTHAM, Mass., Oct. 26, 2011 /PRNewswire/ -- Alere Inc. (NYSE: ALR), a global leader in enabling individuals to take charge of their health at home through the merger of rapid diagnostics and health management, today announced its financial results for the quarter ended September 30, 2011.

Financial results for the third quarter of 2011:

  • Net revenue of $585.8 million for the third quarter of 2011, compared to $538.7 million for the third quarter of 2010.
  • Product and services revenues from our Professional Diagnostics segment were $426.3 million in the third quarter of 2011, compared to $359.5 million in the third quarter of 2010.  Recent professional diagnostics acquisitions contributed $19.4 million of incremental net revenue compared to the third quarter of 2010.
  • North American influenza sales increased to $16.0 million for the third quarter of 2011, from $7.0 million for the third quarter of 2010.
  • Excluding the impact of the change in North American influenza revenues, currency adjusted organic growth in our Professional Diagnostics segment was 8.7%.
  • Adjusted cash-basis gross margins were 54.7% for the third quarter of 2011, compared to 55.9% for the third quarter of 2010 and 56.2% in the second quarter of 2011.  Adjusted cash-basis gross margins from products and services in our Professional Diagnostics segment were 58.9% in the third quarter of 2011, compared to 59.9% in the third quarter of 2010 and 58.6% in the second quarter of 2011.
  • Product and services revenues from our Health Management segment were $129.9 million in the third quarter of 2011, compared to $152.9 million in the third quarter of 2010 and $135.6 million in the second quarter of 2011.  The decline in revenues from the second quarter of 2011 was driven by the continuing impact of reduced state government spending levels which affected our wellness business and a change in billing guidance from the Centers for Medicare and Medicaid Services which affected our Alere Home Monitoring business.
  • Adjusted cash-basis gross margins from our Health Management segment were 46.2% in the third quarter of 2011, compared to 51.8% in the third quarter of 2010 and 48.4% in the second quarter of 2011.
  • Included in adjusted cash-basis interest and other income (expense), net for the third quarter of 2011 was income of $11.3 million associated with an amendment of our license agreement with Quidel and $5.0 million associated with the settlement of a dispute over past royalty obligations, offset by unrealized foreign exchange losses of $6.7 million.
  • GAAP net income of $234.2 million attributable to common stockholders of Alere Inc., and respective net income per diluted common share of $2.48, for the third quarter of 2011, compared to GAAP net loss of $2.8 million attributable to common stockholders of Alere Inc., and respective net loss per common share of $0.03, for the third quarter of 2010.
  • Adjusted cash-basis net income per diluted common share of $0.67 for the third quarter of 2011, compared to adjusted cash-basis net income per diluted common share from continuing operations of $0.59, for the third quarter of 2010.
  • Adjusted free cash flow for the quarter was $36.9 million, reflecting adjusted cash flow from operations of $64.0 million, offset by capital expenditures of $27.1 million.

The Company's GAAP results for the third quarter of 2011 include amortization of $70.3 million, $3.4 million of restructuring charges, $4.3 million of stock-based compensation expense, $2.9 million of acquisition-related costs recorded in accordance with ASC 805, Business Combinations, $1.3 million of interest expense associated with fees paid for modification of certain debt agreements, a $0.6 million write-down in the carrying value of a facility and a net realized foreign currency loss of $18.1 million associated with a cash balance established in connection with the Axis-Shield plc tender offer, offset by $3.8 million of income recorded for fair value adjustments to acquisition-related contingent consideration obligations and a $288.9 million gain in connection with the formation of our joint venture with Procter & Gamble in May 2007.  The Company's GAAP results for the third quarter of 2010 include amortization of $74.4 million, $7.3 million of stock-based compensation expense, a $1.3 million charge associated with the write-up to fair market value of inventory acquired in connection with acquisitions, $0.9 million of acquisition-related costs recorded in accordance with ASC 805, Business Combinations and $4.6 million of expense recorded for fair value adjustments to acquisition-related contingent consideration obligations, offset by $1.6 million net restructuring cost recovery and a $0.7 million, net of tax, allocation of certain of the aforementioned charges to non-controlling stockholders. These amounts, net of tax, have been excluded from the adjusted cash-basis net income per diluted common share attributable to Alere Inc. for the respective quarters.

A detailed reconciliation of the Company's adjusted cash-basis net income, which is a non-GAAP financial measure, to net income under GAAP, as well as a discussion regarding this non-GAAP financial measure, is included in the schedules to this press release.

The Company will host a conference call beginning at 8:30 a.m. (Eastern Time) today, October 26, 2011, to discuss these results, as well as other corporate matters.  During the conference call, the Company may answer questions concerning business and financial developments and trends and other business and financial matters.  The Company's responses to these questions, as well as other matters discussed during the conference call, may contain or constitute information that has not been previously disclosed.

The conference call may be accessed by dialing (800) 860-2442 (domestic) or (412) 858-4600 (international) and asking for Alere Inc.  A webcast of the call can also be accessed via the Alere website at http://www.alere.com/investors, or directly through the following link: http://www.videonewswire.com/event.asp?id=83174.

A replay of the call will be available approximately four hours 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 10002372.  The replay will also be available via online webcast at http://www.videonewswire.com/event.asp?id=83174 or via the Alere website at www.alere.com 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 website at http://www.alere.com.

By developing new capabilities in near-patient diagnosis, monitoring and health management, Alere enables individuals to take charge of improving their health and quality of life at home.  Alere's global leading products and services, as well as its new product development efforts, focus on infectious disease, cardiology, oncology, toxicology and women's health.  Alere is headquartered in Waltham, Massachusetts.

Cautionary Note Regarding Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the federal securities laws, including statements regarding our expected full year 2011 adjusted cash-basis net income per diluted share. Such forward-looking statements are estimates reflecting management's best judgment based upon current information and involve a number of risks and uncertainties. Actual results and the timing of certain events could differ materially from those projected or contemplated by the forward-looking statements due to numerous factors, including without limitation, changes in global economic conditions or in the global financial markets, including the credit markets, which impact our plans and operations and those of our suppliers and customers; our exposure to changes in interest rates and foreign currency exchange rates; our ability to successfully develop and commercialize products; the market acceptance of our products; continued acceptance of health management services by payors, providers and patients; our ability to develop enhanced health management programs through the integrated use of innovative diagnostic and monitoring devices and to recognize the expected benefits of this strategy; the effects of legislative changes, including US healthcare reform legislation, and the content and timing of decisions by regulatory authorities, as well as the impact of budgetary constraints and changes in reimbursement policy, both in the United States and abroad; the effect of pending and future legal proceedings on our financial performance and the risks and uncertainties described in our periodic reports filed with the Securities and Exchange Commission, including our Form 10-K, as amended, for the year ended December 31, 2010, as well as in our Quarterly Reports on Form 10-Q. We undertake no obligation to update any forward-looking statements contained herein.

Alere Inc. and Subsidiaries

Condensed Consolidated Statements of Operations and

Reconciliation to Non-GAAP Adjusted Cash Basis Amounts

(in $000s, except per share amounts)

Three Months Ended September 30, 2011

Three Months Ended September 30, 2010

Non-GAAP

Non-GAAP

Adjusted

Adjusted

Non-GAAP

Cash

Non-GAAP

Cash

GAAP

Adjustments

Basis (a)

GAAP

Adjustments

Basis (a)

Net product sales and services revenue

$ 580,520

$                 -

$   580,520

$ 534,556

$                 -

$   534,556

License and royalty revenue

5,249

-

5,249

4,123

-

4,123

Net revenue

585,769

-

585,769

538,679

-

538,679

Cost of net revenue

279,807

(14,473)

(b) (c) (d)

265,334

253,133

(17,314)

(b) (c) (d) (e)

235,819

  Gross profit

305,962

14,473

320,435

285,546

17,314

302,860

  Gross margin

52%

55%

53%

56%

Operating expenses:

Research and development

34,772

(2,319)

(b) (d)

32,453

32,434

(2,936)

(b) (c) (d)

29,498

Selling, general and administrative

226,271

(60,407)

(b) (c) (d) (f) (g) (k)

165,864

221,737

(68,180)

(b) (c) (d) (f) (g)

153,557

 Total operating expenses

261,043

(62,726)

198,317

254,171

(71,116)

183,055

  Operating income

44,919

77,199

122,118

31,375

88,430

119,805

Interest and other income (expense), net

233,319

(269,442)

(c) (h) (i) (j)

(36,123)

(26,655)

(3,411)

(c)

(30,066)

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

278,238

(192,243)

85,995

4,720

85,019

89,739

Provision (benefit) for income taxes

42,652

(16,252)

(n)

26,400

(167)

30,432

(n)

30,265

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

235,586

(175,991)

59,595

4,887

54,587

59,474

Equity earnings (losses) of unconsolidated entities, net of tax

4,118

415

(b) (c)

4,533

(62)

1,896

(b) (c)

1,834

Income (loss) from continuing operations

239,704

(175,576)

64,128

4,825

56,483

61,308

Income from discontinued operations, net of tax

-

-

-

2

13

(m)

15

Net income (loss)

239,704

(175,576)

64,128

4,827

56,496

61,323

Less: Net income attributable to non-controlling interests, net of tax

138

21

(l)

159

1,494

700

(l)

2,194

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

$ 239,566

$     (175,597)

$     63,969

$     3,333

$         55,796

$    59,129

Preferred stock dividends

$   (5,358)

$     (5,358)

$   (6,147)

$    (6,147)

Net income (loss) available to common stockholders

$ 234,208

$     58,611

$   (2,814)

$    52,982

Basic net income (loss) per common share attributable to Alere Inc. and Subsidiaries:

Basic income (loss) per common share from continuing operations

$       2.84

$         0.71

$   (0.03)

$        0.62

Basic income per common share from discontinued operations

$           -

$              -

$           -

$              -

Basic net income (loss) per common share

$       2.84

$           0.71

$   (0.03)

$        0.62

Diluted net income (loss) per common share attributable to Alere Inc. and Subsidiaries:

Diluted income (loss) per common share from continuing operations

$       2.48

(o)

$        0.67

(q)

$   (0.03)

(p)

$        0.59

(r)

Diluted income per common share from discontinued operations

$           -

(o)

$              -

(q)

$           -

(p)

$              -

(r)

Diluted net income (loss) per common share

$       2.48

(o)

$           0.67

(q)

$   (0.03)

(p)

$        0.59

(r)

Weighted average common shares - basic

82,486

82,486

84,796

84,796

Weighted average common shares - diluted

97,090

(o)

97,090

(q)

84,796

(p)

101,126

(r)

(a) In calculating net income or loss on an adjusted cash basis, the Company excludes from net income or 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 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 net income or loss for the costs associated with litigation, including payments made or received through settlements.  It should be noted that "net income or loss on an adjusted cash basis" 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 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, "net income or loss on an adjusted cash basis" presented in this press release may not be comparable to similar measures used by other companies.

(b) Amortization expense of $70.3 million and $74.4 million in the third quarter of 2011 and 2010 GAAP results, respectively, including $14.0 million and $16.1 million charged to cost of sales, $1.4 million and $1.2 million charged to research and development, $54.7 million and $56.9 million charged to selling, general and administrative, with $0.2 million and $0.2 million charged through equity earnings of unconsolidated entities, net of tax, during each of the respective quarters.

(c) Restructuring associated with the decision to close facilities resulted in a charge of $3.4 million and a net recovery of $1.6 million for the third quarter of 2011 and 2010 GAAP results, respectively. The $3.4 million charge for the third quarter of 2011 included $0.1 million charged to cost of sales, $3.1 million charged to selling, general and administrative expense, $0.1 million charged to interest expense and $0.2 million charged through equity earnings of unconsolidated entities, net of tax. The $1.6 million net recovery for the third quarter of 2010 included a net recovery of $0.7 million recorded to cost of sales, $0.2 million charged to research and development, $0.6 million charged to selling, general and administrative expense, a net recovery of $3.4 million recorded to interest and other income (expense) and $1.7 million charged through equity earnings of unconsolidated entities, net of tax.

(d) Compensation costs of $4.3 million and $7.3 million associated with stock-based compensation expense for the third quarter of 2011 and 2010 GAAP results, respectively, including $0.4 million and $0.6 million charged to cost of sales, $0.9 million and $1.5 million charged to research and development and $3.0 million and $5.2 million charged to selling, general and administrative, in the respective periods.

(e) A write-off in the amount of $1.3 million during the third quarter of 2010, relating to inventory write-ups recorded in connection with the acquisitions.

(f) Acquisition-related costs in the amount of $2.9 million and $0.9 million in the third quarter of 2011 and 2010 GAAP results, respectively, recorded in connection with ASC 805, Business Combinations.  

(g) $3.8 million of income and $4.6 million of expense in the third quarter of 2011 and 2010 GAAP results, respectively, recorded in connection with fair value adjustments to acquisition-related contingent consideration obligations in accordance with ASC 805, Business Combinations.

(h) Interest expense of $1.3 million recorded in connection with fees paid for certain debt modifications and the termination of our senior secured credit facility.

(i) An $18.1 million unrealized foreign currency loss in the third quarter of 2011 GAAP results associated with a bank account funded for the potential acquisition of Axis-Shield Plc.

(j) Recognition of a $288.9 million gain originally recorded in connection with the formation of SPD, our 50/50 joint venture with the Procter & Gamble Company.

(k) A $0.6 million fair value write-down in the third quarter of 2011 recorded in connection with an idle facility.

(l) Amortization expense of $27.0 thousand ($21.0 thousand, net of tax) and $0.9 million ($0.7 million, net of tax) in the third quarter of 2011 and 2010 GAAP results, respectively.

(m)  Expenses of $21.0 thousand ($13.0 thousand, net of tax) incurred in connection with the sale of our vitamins and nutritional supplements business.

(n) Tax effect on adjustments as discussed above in notes (b), (c), (d), (e), (f), (g), (h), (i), (j) and (k).

(o) Included in the weighted average diluted common shares for the calculation of net income per common share on a GAAP basis for the three months ended September 30, 2011, are dilutive shares consisting of 756,000 common stock equivalent shares from the potential exercise of stock options and warrants. Also included were dilutive shares consisting of 3,438,000 common stock equivalent shares from the potential conversion of convertible debt securities, 189,000 common stock equivalents from the potential settlement of a portion of the deferred purchase price consideration related to the ACON Second Territory Business and 10,221,000 common stock equivalent shares from the potential conversion of Series B convertible preferred stock. The diluted net income per common share calculation for the three months ended September 30, 2011, on a GAAP basis, included the add back of interest expense related to the convertible debt of $0.7 million, the add back of $5.4 million of preferred stock dividends related to the Series B convertible preferred stock and the add back of interest expense related to the ACON Second Territory Business of $25.0 thousand, resulting in net income available to common stockholders of $240.3 million for the three months ended September 30, 2011.

(p) For the three months ended September 30, 2010, potential dilutive shares were not used in the calculation of diluted net loss per common share under GAAP because inclusion thereof would be antidilutive.

(q) Included in the weighted average diluted common shares for the calculation of net income per common share for the three months ended September 30, 2011, on an adjusted cash basis, are dilutive shares consisting of 756,000 common stock equivalent shares from the potential exercise of stock options and warrants. Also included were dilutive shares consisting of 3,438,000 common stock equivalent shares from the potential conversion of convertible debt securities, 189,000 common stock equivalents from the potential settlement of a portion of the deferred purchase price consideration related to the ACON Second Territory Business and 10,221,000 common stock equivalent shares from the potential conversion of Series B convertible preferred stock. The diluted net income per common share calculation for the three months ended September 30, 2011, on an adjusted cash basis, included the add back of interest expense related to the convertible debt of $0.7 million, the add back of $5.4 million of preferred stock dividends related to the Series B convertible preferred stock and the add back of interest expense related to the ACON Second Territory Business of $25.0 thousand, resulting in net income available to common stockholders of $64.7 million for the three months ended September 30, 2011.

(r) Included in the weighted average diluted common shares for the calculation of net income per common share for the three months ended September 30, 2010, on an adjusted cash basis, were dilutive shares consisting of 1,030,000 common stock equivalent shares from the potential exercise of stock options and warrants. Also included were potential dilutive shares consisting of 3,438,000 common stock equivalent shares from the potential conversion of convertible debt securities, 11,727,000 common stock equivalent shares from the potential conversion of Series B convertible preferred stock and 135,000 common stock equivalents from the potential settlement of a portion of the deferred purchase price consideration related to the ACON Second Territory Business. The diluted net income per common share calculation for the three months ended September 30, 2010, on an adjusted cash basis, included the add back of interest expense related to the convertible debt of $0.7 million, the add back of $6.1 million of preferred stock dividends related to the Series B convertible preferred stock and the add back of interest expense related to the ACON Second Territory Business of $24.0 thousand, resulting in net income available to common stockholders of $59.9 million for the three months ended September 30, 2010.

Alere Inc. and Subsidiaries

Condensed Consolidated Statements of Operations and

Reconciliation to Non-GAAP Adjusted Cash Basis Amounts

(in $000s, except per share amounts)

Nine Months Ended September 30, 2011

Nine Months Ended September 30, 2010

Non-GAAP

Non-GAAP

Adjusted

Adjusted

Non-GAAP

Cash

Non-GAAP

Cash

GAAP

Adjustments

Basis (a)

GAAP

Adjustments

Basis (a)

Net product sales and services revenue

$ 1,717,695

$                 -

$  1,717,695

$  1,560,841

$                 -

$  1,560,841

License and royalty revenue

17,723

-

17,723

16,052

-

16,052

Net revenue

1,735,418

-

1,735,418

1,576,893

-

1,576,893

Cost of net revenue

830,521

(51,667)

(b) (c) (d)

778,854

745,392

(58,327)

(b) (c) (d) (e)

687,065

     Gross profit

904,897

51,667

956,564

831,501

58,327

889,828

     Gross margin

52%

55%

53%

56%

Operating expenses:

Research and development

112,662

(14,586)

(b) (c) (d)

98,076

96,187

(9,397)

(b) (c) (d)

86,790

Selling, general and administrative

700,257

(193,980)

(b) (c) (d) (f) (g) (l)

506,277

653,171

(200,015)

(b) (c) (d) (f) (g)

453,156

  Total operating expenses

812,919

(208,566)

604,353

749,358

(209,412)

539,946

     Operating income

91,978

260,233

352,211

82,143

267,739

349,882

Interest and other income (expense), net

129,225

(269,442)

(c) (h) (i) (j) (k)

(140,217)

(86,240)

(2,955)

(c) (f)

(89,195)

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

221,203

(9,209)

211,994

(4,097)

264,784

260,687

Provision (benefit) for income taxes

(4,414)

(16,252)

(p)

(20,666)

(964)

89,150

(p)

88,186

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

225,617

7,043

232,660

(3,133)

175,634

172,501

Equity earnings of unconsolidated entities, net of tax

4,922

415

(b) (c)

5,337

8,195

3,712

(b) (c)

11,907

Income (loss) from continuing operations

230,539

7,458

237,997

5,062

179,346

184,408

Income from discontinued operations, net of tax

-

-

-

11,913

180

(m)

12,093

Net income (loss)

230,539

7,458

237,997

16,975

179,526

196,501

Less: Net income attributable to non-controlling interests, net of tax

160

21

(n)

181

1,167

3,463

(n) (o)

4,630

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

$    230,379

$           7,437

$     237,816

$      15,808

$      176,063

$    191,871

Preferred stock dividends

$    (16,682)

$     (16,682)

$    (18,001)

$    (18,001)

Preferred stock repurchase

$      23,936

$       (23,936)

(u)

$               -

$               -

$                -

$                -

Net income available to common stockholders

$    237,633

$     221,134

$      (2,193)

$    173,870

Basic net income (loss) per common share attributable to Alere Inc. and Subsidiaries:

Basic income (loss) per common share from continuing operations

$          2.81

$           2.62

$        (0.17)

$         1.92

Basic income per common share from discontinued operations

$              -

$               -

$          0.14

$         0.14

Basic net income (loss) per common share

$          2.81

$           2.62

$        (0.03)

$         2.06

Diluted net income (loss) per common share attributable to Alere Inc. and Subsidiaries:

Diluted income (loss) per common share from continuing operations

$          2.56

(q)

$           1.74

(s)

$        (0.17)

(r)

$         1.80

(t)

Diluted income per common share from discontinued operations

$            -

(q)

$             -

(s)

$          0.14

(r)

$         0.12

(t)

Diluted net income (loss) per common share

$          2.56

(q)

$           1.74

(s)

$        (0.03)

(r)

$         1.92

(t)

Weighted average common shares - basic

84,508

84,508

84,269

84,269

Weighted average common shares - diluted

100,058

(q)

100,058

(s)

84,269

(r)

101,124

(t)

(a) In calculating net income or loss on an adjusted cash basis, the Company excludes from net income or 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 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 net income or loss for the costs associated with litigation, including payments made or received through settlements.  It should be noted that "net income or loss on an adjusted cash basis" 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 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, "net income or loss on an adjusted cash basis" presented in this press release may not be comparable to similar measures used by other companies.

(b) Amortization expense of $227.8 million and $220.7 million in the first nine months of 2011 and 2010 GAAP results, respectively, including $48.2 million and $46.7 million charged to cost of sales, $11.1 million and $3.5 million charged to research and development, $167.8 million and $169.8 million charged to selling, general and administrative, with $0.7 million and $0.7 million charged through equity earnings of unconsolidated entities, net of tax, during each of the respective periods.

(c) Restructuring charges associated with the decision to close facilities of $20.4 million and $13.5 million in the first nine months of 2011 and 2010 GAAP results, respectively.  The $20.4 million charge for the nine months ended September 30, 2011 included $2.3 million charged to cost of sales, $0.4 million charged to research and development, $16.9 million charged to selling, general and administrative expense, $0.2 million charged to interest expense and $0.5 million charged through equity earnings of unconsolidated entities, net of tax. The $13.5 million charge for the nine months ended September 30, 2010 included $3.3 million charged to cost of sales, $0.5 million charged to research and development, $9.6 million charged to selling, general and administrative expense, a net recovery of $3.1 million recorded to interest and other income (expense) and $3.2 million charged through equity earnings of unconsolidated entities, net of tax.

(d) Compensation costs of $16.3 million and $22.9 million associated with stock-based compensation expense for the first nine months of 2011 and 2010 GAAP results, respectively, including $1.1 million and $1.4 million charged to cost of sales, $3.0 million and $5.4 million charged to research and development and $12.1 million and $16.1 million charged to selling, general and administrative, in the respective periods.

(e) A write-off in the amount of $7.0 million during the first nine months of 2010, relating to inventory write-ups recorded in connection with the acquisitions .  (See also footnote o below.)

(f) Acquisition-related costs in the amount of $6.2 million and $6.9 million in the first nine months of 2011 and 2010 GAAP results, respectively, recorded in connection with ASC 805, Business Combinations. The $6.9 million of acquisition-related costs recorded during the nine months ended September 30, 2010 included $6.8 million charged to selling, general and administrative and $0.1 million charged to interest expense.

(g) $9.7 million and $2.3 million of income in the first nine months of 2011 and 2010 GAAP results, respectively, recorded in connection with fair value adjustments to acquisition-related contingent consideration obligations in accordance with ASC 805, Business Combinations.

(h) A $1.9 million realized foreign currency loss associated with the settlement of an acquisition-related contingent consideration obligation in the first nine months of 2011.

(i) Interest expense of $31.2 million 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 in the first nine months of 2011.

(j) An $18.1 million unrealized foreign currency loss in the third quarter of 2011 GAAP results associated with a bank account funded for the potential acquisition of Axis-Shield Plc.

(k) Recognition of a $288.9 million gain originally recorded in connection with the formation of SPD, our 50/50 joint venture with the Procter & Gamble Company.

(l) A $0.6 million fair value write-down in the first nine months of 2011 recorded in connection with an idle facility.

(m) Expenses of $0.3 million ($0.2 million, net of tax) incurred in connection with the sale of our vitamins and nutritional supplements business. in the first nine months of  2010.

(n) Amortization expense of $70.0 thousand ($54.0 thousand, net of tax) and $2.9 million ($2.2 million, net of tax) in the first nine months of 2011 and 2010 GAAP results, respectively.

(o) A write-off in the amount of $1.7 million ($1.3 million, net of tax) in the first nine months of 2010 relating to inventory write-ups attributable to operating results of non-controlling interests.

(p) Tax effect on adjustments as discussed above in notes (b), (c), (d), (e), (f), (g), (h), (i), (j), (k) and (l).

(q) Included in the weighted average diluted common shares for the calculation of net income per common share on a GAAP basis for the nine months ended September 30, 2011, are dilutive shares consisting of 1,198,000 common stock equivalent shares from the potential exercise of stock options and warrants. Also included were dilutive shares consisting of 3,438,000 common stock equivalent shares from the potential conversion of convertible debt securities, 189,000 common stock equivalents from the potential settlement of a portion of the deferred purchase price consideration related to the ACON Second Territory Business and 10,725,000 common stock equivalent shares from the potential conversion of Series B convertible preferred stock. The diluted net income per common share calculation for the nine months ended September 30, 2011, on a GAAP basis, included the add back of interest expense related to the convertible debt of $2.1 million, the add back of $16.7 million of preferred stock dividends related to the Series B convertible preferred stock and the add back of interest expense related to the ACON Second Territory Business of $0.1 million, resulting in net income available to common stockholders of $256.5 million for the nine months ended September 30, 2011.

(r) For the nine months ended September 30, 2010, potential dilutive shares were not used in the calculation of diluted net income per common share under GAAP because inclusion thereof would be antidilutive.

(s) Included in the weighted average diluted common shares for the calculation of net income per common share for the nine months ended September 30, 2011, on an adjusted cash basis, are dilutive shares consisting of 1,198,000 common stock equivalent shares from the potential exercise of stock options and warrants. Also included were dilutive shares consisting of 3,438,000 common stock equivalent shares from the potential conversion of convertible debt securities, 189,000 common stock equivalents from the potential settlement of a portion of the deferred purchase price consideration related to the ACON Second Territory Business and 10,725,000 common stock equivalent shares from the potential conversion of Series B convertible preferred stock. The diluted net income per common share calculation for the nine months ended September 30, 2011, on an adjusted cash basis, included the add back of interest expense related to the convertible debt of $2.1 million, the add back of $16.7 million of preferred stock dividends related to the Series B convertible preferred stock and the add back of interest expense related to the ACON Second Territory Business of $0.1 million, resulting in net income available to common stockholders of $174.2 million for the nine months ended September 30, 2011.

(t) Included in the weighted average diluted common shares for the calculation of net income per common share for the nine months ended September 30, 2010, on an adjusted cash basis, were dilutive shares consisting of 1,453,000 common stock equivalent shares from the potential exercise of stock options and warrants. Also included were potential dilutive shares consisting of 3,438,000 common stock equivalent shares from the potential conversion of convertible debt securities, 11,573,000 common stock equivalent shares from the potential conversion of Series B convertible preferred stock and 391,000 common stock equivalents from the potential settlement of a portion of the deferred purchase price consideration related to the ACON Second Territory Business. The diluted net income per common share calculation for the nine months ended September 30, 2010, on an adjusted cash basis, included the add back of interest expense related to the convertible debt of $2.1 million, the add back of $18.0 million of preferred stock dividends related to the Series B convertible preferred stock and the add back of interest expense related to the ACON Second Territory Business of $0.2 million, resulting in net income available to common stockholders of $194.2 million for the nine months ended September 30, 2010.

(u)  Non-cash income allocated to net income available to common stockholders as a result of repurchases of preferred shares during the first nine months of 2011.

Alere Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(in $000s)

September 30,

December 31,

2011

2010

ASSETS

CURRENT ASSETS:

Cash and cash equivalents

$       276,754

$      401,306

Restricted cash

349,551

2,581

Marketable securities

1,066

2,094

Accounts receivable, net

423,437

397,148

Inventories, net

273,310

257,720

Prepaid expenses and other current assets

180,237

133,408

Total current assets

1,504,355

1,194,257

PROPERTY, PLANT AND EQUIPMENT, NET

420,005

390,510

GOODWILL AND OTHER INTANGIBLE ASSETS, NET

4,473,272

4,567,064

DEFERRED FINANCING COSTS AND OTHER ASSETS, NET

303,982

178,543

Total assets

$    6,701,614

$   6,330,374

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:

Current portion of notes payable

$         54,059

$        19,017

Current portion of deferred gain on joint venture

-

288,378

Other current liabilities

556,580

475,463

Total current liabilities

610,639

782,858

LONG-TERM LIABILITIES:

Notes payable, net of current portion

3,020,936

2,379,968

Deferred tax liability

395,370

420,166

Other long-term liabilities

121,881

169,656

Total long-term liabilities

3,538,187

2,969,790

Redeemable non-controlling interest

2,502

-

TOTAL EQUITY

2,550,286

2,577,726

Total liabilities and equity

$    6,701,614

$   6,330,374

 Alere Inc. and Subsidiaries

Selected Consolidated Revenues by Business Area

(in thousands)

Professional Diagnostics Segment 

% Change

% Change

Q1 2010

Q2 2010

Q3 2010

YTD 2010

Q1 2011

Q2 2011

Q3 2011

YTD 2011

Q3 11 v. Q3 10

YTD 11 v. YTD 10

Cardiology

$ 122,025

$ 118,687

$ 120,061

$       360,773

$ 129,855

$ 132,854

$ 127,943

$    390,652

7%

8%

Infectious disease

98,737

97,866

106,633

303,236

140,426

122,494

142,639

405,559

34%

34%

Toxicology

66,269

76,918

77,413

220,600

85,504

88,833

93,497

267,834

21%

21%

Other

49,172

50,159

55,375

154,706

54,000

60,034

62,172

176,206

12%

14%

Professional Diagnostics net product sales and services revenue

336,203

343,630

359,482

1,039,315

409,785

404,215

426,251

1,240,251

19%

19%

License and royalty revenue

4,190

5,881

4,037

14,108

6,027

4,859

3,701

14,587

-8%

3%

Professional Diagnostics net revenue

$ 340,393

$ 349,511

$ 363,519

$    1,053,423

$ 415,812

$ 409,074

$ 429,952

$ 1,254,838

18%

19%

Health Management Segment

% Change

% Change

Q1 2010

Q2 2010

Q3 2010

YTD 2010

Q1 2011

Q2 2011

Q3 2011

YTD 2011

Q3 11 v. Q3 10

YTD 11 v. YTD 10

Disease and case management

$   70,200

$   70,702

$   73,137

$       214,039

$   61,455

$   61,222

$   59,441

$    182,118

-19%

-15%

Wellness

24,963

25,476

25,444

75,883

29,805

26,137

24,427

80,369

-4%

6%

Women's & children's health

32,004

32,139

31,814

95,957

28,575

28,466

28,509

85,550

-10%

-11%

Patient self-testing services

21,365

21,439

22,499

65,303

23,228

19,747

17,554

60,529

-22%

-7%

Health Management net revenue

148,532

149,756

152,894

451,182

143,063

135,572

$ 129,931

$    408,566

-15%

-9%

SOURCE Alere Inc.



RELATED LINKS

http://www.alere.com