EX-99.1 2 d933667dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

Alere Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(in thousands, except per share amounts)

 

     Three Months Ended
March 31,		  
     2015     2014  

Net product sales and services revenue

    $ 603,455      $ 620,027   

License and royalty revenue

      4,698        5,212   
  

 

 

    

 

 

  

Net revenue

   608,153      625,239   

Cost of net revenue

   316,168      314,881   
  

 

 

    

 

 

  

Gross profit

   291,985      310,358   

Gross margin

   48 %    50 % 

Operating expenses:

Research and development

   28,016      38,699   

Selling, general and administrative

   201,770      236,663   

Impairment and (gain) loss on dispositions, net

   34,792      —     
  

 

 

    

 

 

  

Operating income

   27,407      34,996   

Interest and other income (expense), net

   (47,701 )    (44,878 ) 
  

 

 

    

 

 

  

Loss from continuing operations before provision (benefit) for income taxes

   (20,294 )    (9,882 ) 

Benefit for income taxes

   (8,786 )    (1,680 ) 
  

 

 

    

 

 

  

Loss from continuing operations before equity earnings of unconsolidated entities, net of tax

   (11,508 )    (8,202 ) 

Equity earnings of unconsolidated entities, net of tax

   3,959      5,352   
  

 

 

    

 

 

  

Loss from continuing operations

   (7,549 )    (2,850 ) 

Income (loss) from discontinued operations, net of tax

   216,777      (2,596 ) 
  

 

 

    

 

 

  

Net income (loss)

   209,228      (5,446 ) 

Less: Net income attributable to non-controlling interests

   88      108   
  

 

 

    

 

 

  

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

   209,140      (5,554 ) 

Preferred stock dividends

   (5,250 )    (5,250 ) 
  

 

 

    

 

 

  

Net income (loss) available to common stockholders

 $ 203,890    $ (10,804 ) 
  

 

 

    

 

 

  

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

Loss from continuing operations

 $ (0.15 )  $ (0.10 ) 

Income (loss) from discontinued operations

   2.57      (0.03 ) 
  

 

 

    

 

 

  

Net income (loss) per common share

 $ 2.42    $ (0.13 ) 
  

 

 

    

 

 

  

Weighted average shares—basic and diluted

   84,338      82,387   
  

 

 

    

 

 

  

Alere Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(in thousands)

 

     March 31,
2015		      December 31,
2014		  

ASSETS

      

CURRENT ASSETS:

      

Cash and cash equivalents

    $ 414,495       $ 378,461   

Restricted cash

      37,406         37,571   

Marketable securities

      173         259   

Accounts receivable, net

      471,663         466,106   

Inventories, net

      374,973         365,165   

Prepaid expenses and other current assets

      140,538         244,986   

Assets held for sale

      —           315,515   
  

 

 

     

 

 

  

Total current assets

   1,439,248      1,808,063   

PROPERTY, PLANT AND EQUIPMENT, NET

   446,705      453,570   

GOODWILL AND OTHER INTANGIBLE ASSETS, NET

   4,094,233      4,246,761   

DEFERRED FINANCING COSTS AND OTHER ASSETS, NET

   168,185      170,562   
  

 

 

     

 

 

  

Total assets

 $ 6,148,371    $ 6,678,956   
  

 

 

     

 

 

  

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:

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

 $ 100,371    $ 93,116   

Liabilities related to assets held for sale

   —        78,843   

Other current liabilities

   560,872      589,086   
  

 

 

     

 

 

  

Total current liabilities

   661,243      761,045   
  

 

 

     

 

 

  

LONG-TERM LIABILITIES:

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

   3,031,594      3,631,945   

Deferred tax liabilities

   245,863      214,639   

Other long-term liabilities

   138,090      161,582   
  

 

 

     

 

 

  

Total long-term liabilities

   3,415,547      4,008,166   
  

 

 

     

 

 

  

TOTAL EQUITY

   2,071,581      1,909,745   
  

 

 

     

 

 

  

Total liabilities and equity

 $ 6,148,371    $ 6,678,956   
  

 

 

     

 

 

  

Alere Inc. and Subsidiaries

Reconciliation to Non-GAAP Adjusted Operating Results

(in thousands, except per share amounts)

 

     Three Months
Ended March 31,		  
     2015     2014  

Reconciliation to Non-GAAP Adjusted Operating Income(1)

     

Operating income

    $ 27,407      $ 34,996   

Adjustment related to acquired software license contracts

      247        419   

Amortization of acquisition-related intangible assets

      50,693        58,960   

Restructuring charges

      4,270        4,398   

Stock-based compensation expense

      5,149        5,704   

Compensation charges associated with acquisition-related contingent consideration obligations

      606        422   

Acquisition-related costs

      51        321   

Fair value adjustments to acquisition-related contingent consideration

      (11,777 )      1,300   

Costs associated with potential business dispositions

      3,731        2,960   

Impairment and (gain) loss on dispositions, net

      34,792        —     
  

 

 

    

 

 

  

Non-GAAP adjusted operating income

    $ 115,169      $ 109,480   
  

 

 

    

 

 

  
     Three Months
Ended March 31,		  
     2015     2014  

Reconciliation to Non-GAAP Adjusted Net Income(1)

     

Net income (loss) available to common stockholders

    $ 203,890      $ (10,804 ) 

Adjustment related to acquired software license contracts

      247        419   

Amortization of acquisition-related intangible assets

      50,716        58,978   

Restructuring charges

      4,277        4,410   

Stock-based compensation expense

      5,149        5,704   

Compensation charges associated with acquisition-related contingent consideration obligations

      606        422   

Acquisition-related costs

      51        321   

Fair value adjustments to acquisition-related contingent consideration

      (11,777 )      1,300   

Costs associated with potential business dispositions

      3,731        2,960   

Impairment and (gain) loss on dispositions, net

      34,792        —     

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

      364        364   

Interest accretion associated with acquisition-related compensation charges

      104        95   

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 )      5,534   

Income tax effects on items above

      (28,640 )      (26,299 ) 
  

 

 

    

 

 

  

Non-GAAP adjusted net income available to common stockholders

    $ 45,921      $ 43,404   
  

 

 

    

 

 

  

Net loss per diluted common share from continuing operations

    $ (0.15 )    $ (0.10 ) 

Net income (loss) per diluted common share from discontinued operations

      2.57        (0.03 ) 
  

 

 

    

 

 

  

Net income (loss) per diluted common share

    $ 2.42      $ (0.13 ) 
  

 

 

    

 

 

  

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

    $ 0.53      $ 0.48   

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

      (0.01 )      0.03   
  

 

 

    

 

 

  

Non-GAAP adjusted net income per diluted common share

    $ 0.52      $ 0.51   
  

 

 

    

 

 

  

Weighted average shares—diluted

      84,338        82,387   
  

 

 

    

 

 

  

Non-GAAP adjusted weighted average shares—diluted

      99,281        97,346   
  

 

 

    

 

 

  

 

(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)

 

     Q1 2015      Q1 2014      % Change
Q1 15 v. Q1 14		  

Professional diagnostics segment(1)

         

Cardiometabolic

    $ 202,843       $ 213,963         -5 % 

Infectious disease

      178,756         167,613         7 % 

Toxicology

      148,756         155,533         -4 % 

Other (2)

      51,132         60,616         -16 % 
  

 

 

     

 

 

     

Total professional diagnostics segment(1)(2)

   581,487      597,725      -3 % 

Consumer diagnostics segment(1)

   21,968      22,302      -1 % 

License and royalty revenue

   4,698      5,212      -10 % 
  

 

 

     

 

 

     

Net revenue

 $ 608,153    $ 625,239      -3 % 
  

 

 

     

 

 

     

 

(1) Revenues have been reclassified 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 $0.4 million related to acquired software license contracts which were not recognized during the three months ended March 31, 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 March 31, 2015  

Operating Segment

    Professional
Diagnostics		     Consumer
Diagnostics		     Corporate     Total  

Net revenue

    $ 586,185      $ 21,968      $ —        $ 608,153   

Adjustment related to acquired software license contracts (1)

      247        —          —          247   
  

 

 

    

 

 

    

 

 

    

 

 

  

Non-GAAP adjusted net revenue

 $ 586,432    $ 21,968    $ —      $ 608,400   
  

 

 

    

 

 

    

 

 

    

 

 

  

Operating income (loss)

 $ 49,790    $ 2,204    $ (24,587 )  $ 27,407   

Adjustment related to acquired software license contracts (1)

   247      —        —        247   

Amortization of acquisition-related intangible assets

   50,645      9      39      50,693   

Restructuring charges

   4,235      —        35      4,270   

Stock-based compensation expense

   —        —        5,149      5,149   

Compensation charges associated with acquisition-related contingent consideration obligations

   606      —        —        606   

Acquisition-related costs

   —        —        51      51   

Fair value adjustments to acquisition-related contingent consideration

   (11,777 )    —        —        (11,777 ) 

Costs associated with potential business dispositions

   3,580      151      —        3,731   

Impairment and (gain) loss on dispositions, net

   34,792      —        —        34,792   
  

 

 

    

 

 

    

 

 

    

 

 

  

Non-GAAP adjusted operating income (loss)

 $ 132,118    $ 2,364    $ (19,313 )  $ 115,169   
  

 

 

    

 

 

    

 

 

    

 

 

  

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

   22.5 %    10.8 %    18.9 % 
  

 

 

    

 

 

      

 

 

  

 

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

 

     For the Three Months Ended March 31, 2014  

Operating Segment

    Professional
Diagnostics		     Consumer
Diagnostics		     Corporate     Total  

Net revenue

    $ 602,937      $ 22,302      $ —        $ 625,239   

Adjustment related to acquired software license contracts (1)

      419        —          —          419   
  

 

 

    

 

 

    

 

 

    

 

 

  

Non-GAAP adjusted net revenue

 $ 603,356    $ 22,302    $ —      $ 625,658   
  

 

 

    

 

 

    

 

 

    

 

 

  

Operating income (loss)

 $ 55,480    $ 698    $ (21,182 )  $ 34,996   

Adjustment related to acquired software license contracts (1)

   419      —        —        419   

Amortization of acquisition-related intangible assets

   58,671      289      —        58,960   

Restructuring charges

   4,303      —        95      4,398   

Stock-based compensation expense

   —        —        5,704      5,704   

Compensation charges associated with acquisition-related contingent consideration obligations

   422      —        —        422   

Acquisition-related costs

   —        —        321      321   

Fair value adjustments to acquisition-related contingent consideration

   1,200      —        100      1,300   

Costs associated with potential business dispositions

   2,960      —        —        2,960   
  

 

 

    

 

 

    

 

 

    

 

 

  

Non-GAAP adjusted operating income (loss)

 $ 123,455    $ 987    $ (14,962 )  $ 109,480   
  

 

 

    

 

 

    

 

 

    

 

 

  

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

   20.5 %    4.4 %    17.5 % 
  

 

 

    

 

 

      

 

 

  

 

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

Reconciliations to Non-GAAP Adjusted P&L Categories

(in thousands)

 

     Three Months Ended
March 31, 2015		     Three Months Ended
March 31, 2014		  

Net revenue

    $ 608,153      $ 625,239   

Adjustment related to acquired software license contracts

      247        419   
  

 

 

    

 

 

  

Non-GAAP adjusted net revenue

    $ 608,400      $ 625,658   
  

 

 

    

 

 

  

Cost of net revenue

    $ 316,168      $ 314,881   

Less adjustments:

     

Amortization of acquisition-related intangible assets

      (14,196 )      (15,876 ) 

Restructuring charges

      (1,502 )      (833 ) 

Costs associated with potential business dispositions

      (391 )      —     

Stock-based compensation expense

      (253 )      (287 ) 
  

 

 

    

 

 

  

Non-GAAP adjusted cost of net revenue

    $ 299,826      $ 297,885   
  

 

 

    

 

 

  

Non-GAAP adjusted gross profit

    $ 308,574      $ 327,773   
  

 

 

    

 

 

  
     Three Months Ended
March 31, 2015		     Three Months Ended
March 31, 2014		  

Research and development

    $ 28,016      $ 38,699   

Less adjustments:

     

Amortization of acquisition-related intangible assets

      (861 )      (1,165 ) 

Restructuring charges

      (493 )      —     

Stock-based compensation expense

      (324 )      (1,191 ) 
  

 

 

    

 

 

  

Non-GAAP adjusted research and development

    $ 26,338      $ 36,343   
  

 

 

    

 

 

  
     Three Months Ended
March 31, 2015		     Three Months Ended
March 31, 2014		  

Selling, general and administrative

    $ 201,770      $ 236,663   

Less adjustments:

     

Amortization of acquisition-related intangible assets

      (35,636 )      (41,919 ) 

Restructuring charges

      (2,275 )      (3,565 ) 

Stock-based compensation expense

      (4,572 )      (4,226 ) 

Compensation charges associated with acquisition-related contingent consideration obligations

      (606 )      (422 ) 

Acquisition-related costs

      (51 )      (321 ) 

Fair value adjustments to acquisition-related contingent consideration

      11,777        (1,300 ) 

Costs associated with potential business dispositions

      (3,340 )      (2,960 ) 
  

 

 

    

 

 

  

Non-GAAP adjusted selling, general and administrative

    $ 167,067      $ 181,950   
  

 

 

    

 

 

  
     Three Months Ended
March 31, 2015		     Three Months Ended
March 31, 2014		  

Impairment and (gain) loss on dispositions, net

    $ 34,792      $ —   

Impairment and (gain) loss on dispositions, net

      (34,792 )      —     
  

 

 

    

 

 

  

Non-GAAP adjusted impairment and loss on disposition, net

    $ —      $ —   
  

 

 

    

 

 

  
     Three Months Ended
March 31, 2015		     Three Months Ended
March 31, 2014		  

Interest and other income (expense), net

    $ (47,701 )    $ (44,878 ) 

Less adjustments:

     

Restructuring charges

      7        12   

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

      364        364   

Interest accretion associated with acquisition-related compensation charges

      104        95   
  

 

 

    

 

 

  

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

    $ (47,226 )    $ (44,407 ) 
  

 

 

    

 

 

  
     Three Months Ended
March 31, 2015		     Three Months Ended
March 31, 2014		  

Benefit for income taxes

    $ (8,786 )    $ (1,680 ) 

Add: Income tax effects on Non-GAAP adjustments

      28,661        26,328   
  

 

 

    

 

 

  

Non-GAAP adjusted provision for income taxes

    $ 19,875      $ 24,648   
  

 

 

    

 

 

  
     Three Months Ended
March 31, 2015		     Three Months Ended
March 31, 2014		  

Equity earnings of unconsolidated entities, net of tax

    $ 3,959      $ 5,352   

Less adjustments:

     

Amortization of acquisition-related intangible assets

      105        148   

Income tax effects on items above

      —          —     
  

 

 

    

 

 

  

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

    $ 4,064      $ 5,500   
  

 

 

    

 

 

  

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

    March 31, 2014(1)     December 31, 2014     March 31, 2015  

Net revenue

    $ 625,239         $ 666,857         $ 608,153      

Adjustment related to acquired software license contracts

      419           285           247      
  

 

 

       

 

 

       

 

 

     

Non-GAAP adjusted net revenue

   625,658      667,142      608,400   
  

 

 

       

 

 

       

 

 

     

Cost of net revenue

   314,881      358,593      316,168   

Less adjustments:

Amortization of acquisition-related intangible assets

   15,876      17,269      14,196   

Costs associated with potential business dispositions

   —        —        391   

Stock-based compensation expense

   287      317      253   

Restructuring charges

   833      5,053      1,502   
  

 

 

       

 

 

       

 

 

     

Non-GAAP adjusted cost of net revenue

   297,885      335,954      299,826   
  

 

 

       

 

 

       

 

 

     

Non-GAAP adjusted gross profit/margin

 $ 327,773      52.4 %  $ 331,188      49.6 %  $ 308,574      50.7 % 
  

 

 

     

 

 

    

 

 

     

 

 

    

 

 

     

 

 

  
     Three Months
Ended		     Three Months
Ended		     Three Months
Ended		  

Professional Diagnostics Segment

    March 31, 2014(2)     December 31, 2014(2)     March 31, 2015  

Net product sales and services revenue

    $ 597,725         $ 633,181         $ 581,487      

Adjustment related to acquired software license contracts

      419           285           247      
  

 

 

       

 

 

       

 

 

     

Non-GAAP adjusted net product sales and services revenue

   598,144      633,466      581,734   
  

 

 

       

 

 

       

 

 

     

Cost of net revenue

   293,354      334,603      295,416   

Less adjustments:

Amortization of acquisition-related intangible assets

   15,789      16,747      14,196   

Costs associated with potential business dispositions

   —        —        391   

Stock-based compensation expense

   287      317      253   

Restructuring charges

   833      5,053      1,502   
  

 

 

       

 

 

       

 

 

     

Non-GAAP adjusted cost of net revenue

   276,445      312,486      279,074   
  

 

 

       

 

 

       

 

 

     

Non-GAAP adjusted gross profit/margin

 $ 321,699      53.8 %  $ 320,980      50.7 %  $ 302,660      52.0 % 
  

 

 

     

 

 

    

 

 

     

 

 

    

 

 

     

 

 

  

 

Note:

(1) Restated to reflect the impact of discontinued operations

(2) Reflects the impact of a change in segment reporting