ALERE INC WALTHAM, Mass., Aug. 4, 2014 /PRNewswire/ -- Alere Inc. (NYSE: ALR), a global leader in rapid diagnostics and health information solutions, today announced its financial results for the quarter ended June 30, 2014.
Namal Nawana, Interim Chief Executive Officer and Chief Operating Officer of Alere said, "The second quarter was a period of significant transition for Alere. With the recently announced change in leadership, we are now narrowing our focus on our global leading rapid diagnostic business and pursuing opportunities with the highest potential for value creation. This new strategic direction will center on Alere's core strengths in rapid diagnostics and our focus areas of infectious and cardiometabolic disease and toxicology, which will enhance our ability to deliver more consistent and improved financial results. Alere's Board and management team are committed to determining the best allocation of resources to drive growth and shareholder value creation."
Financial results for the second quarter of 2014:
-- Net revenue of $737.9 million for the second quarter of 2014, compared
to $764.0 million for the second quarter of 2013. Non-GAAP adjusted net
revenue was $738.3 million for the second quarter of 2014, compared to
$764.6 million for the second quarter of 2013.
-- Net loss of $55.0 million attributable to common stockholders of Alere
Inc., and respective net loss per diluted common share of $0.67 for the
second quarter of 2014, compared to net loss of $65.9 million
attributable to common stockholders of Alere Inc., and respective net
loss per diluted common share of $0.81 for the second quarter of 2013.
-- Non-GAAP adjusted net income per diluted common share of $0.42 for the
second quarter of 2014, compared to non-GAAP adjusted net income per
diluted common share of $0.64 for the second quarter of 2013.
-- Net product and services revenue from our Professional Diagnostics
segment was $578.1 million in the second quarter of 2014, compared to
net product and services revenue of $599.6 million in the second quarter
of 2013. Non-GAAP adjusted net product and services revenue from our
Professional Diagnostics segment was $578.4 million in the second
quarter of 2014, compared to non-GAAP adjusted net product and services
revenue of $600.2 million in the second quarter of 2013. Recent
Professional Diagnostics acquisitions contributed $8.4 million of
incremental net revenue, compared to the second quarter of 2013, offset
by a $6.8 million decrease in net revenue related to our 2013
disposition of Spinreact.
-- U.S. influenza, meter-based Triage products and mail-order diabetes
revenues were $5.1 million, $16.2 million and $33.0 million,
respectively, for the second quarter of 2014, compared to $2.0 million,
$19.3 million and $56.2 million, respectively, for the second quarter of
2013.
-- Excluding the impact of the change in U.S. influenza revenues and the
impact on revenues from the U.S. meter-based Triage product sales,
currency-adjusted organic growth in our Professional Diagnostics segment
was negative 5.0%. This growth rate was adversely impacted by the
decrease in reimbursement rates that became effective on July 1, 2013
for our U.S. mail-order diabetes business. Excluding revenues from our
U.S. mail-order diabetes business and considering the flu and Triage
adjustments, the currency-adjusted organic growth rate for the second
quarter of 2014 was 0.4% for the remainder of our Professional
Diagnostics segment.
-- The 0.4% adjusted organic growth rate for our Professional Diagnostic
segment for the second quarter of 2014, adjusted for the impact of the
U.S. influenza, meter-based Triage products and mail-order diabetes
revenues as noted above, reflects a 4.1% decrease in adjusted U.S.
revenues, compared to the second quarter of 2013, offset by a 4.3%
increase in adjusted net revenues from our international business. The
4.1% decrease in the U.S. business principally reflects a continued
weakness in utilization in our professional business during the quarter,
coupled with the impacts of a recall of INRatio2 test strips during the
quarter.
-- Net product and services revenue from our Health Information Solutions
segment was $125.8 million in the second quarter of 2014, compared to
$134.8 million in the second quarter of 2013 and $123.7 million in the
first quarter of 2014, as a result of the weak contracting season that
we experienced during the second half of 2013.
-- Gross margin was 46.1% of net revenue in the second quarter of 2014,
compared to 50.3% in the second quarter of 2013. Non-GAAP adjusted
gross margins, which exclude from cost of net revenue amortization of
acquisition-related intangibles, stock-based compensation expense,
restructuring charges, and non-cash charges associated with acquired
inventory, was 48.4% of non-GAAP adjusted net revenue in the second
quarter of 2014, compared to 52.8% in the second quarter of 2013. The
lower gross margin in the current period principally reflects reduced
mail-order diabetes reimbursement rates noted above, as well as revenue
and cost of sales charges of approximately $7.5 million incurred in the
quarter in connection with the INRatio2 recall and a recall of Alere
Triage BNP Tests for Beckman Coulter Immunoassay Systems.
-- Operating expenses consisting of research and development and selling,
general and administrative expenses were $348.0 million for the second
quarter of 2014, compared to $340.1 million for the second quarter of
2013. Also included in operating expenses during the second quarter of
2014 was a $0.6 million loss associated with the disposition of a
component of our Alere Informatics business. Non-GAAP adjusted
operating expenses, which exclude amortization of acquisition-related
intangibles, restructuring charges, stock-based compensation expense,
acquisition-related fair value, compensation-related contingent
consideration charges and acquisition and disposition costs and the loss
on disposition were $255.0 million for the second quarter of 2014, or
34.5% of non-GAAP adjusted net revenue, compared to $260.0 million, or
34.0% of non-GAAP adjusted net revenue, for the second quarter of 2013.
During the second quarter, we initiated a workforce reduction which will
reduce combined operating expenses by approximately $21.3 million
annually and which had an impact on current quarter expenses of
approximately $2.1 million.
-- Free cash flow for the second quarter of 2014 was a negative $7.6
million, reflecting cash flow from operations of $19.3 million, offset
by capital expenditures of $26.9 million. Cash flow from operations
during the quarter was adversely impacted by the payment of $9.1 million
of severance charges associated with a workforce reduction, $6.2 million
of payments associated with costs incurred related to planned
dispositions and $16.7 million of contingent purchase price payments in
excess of acquisition date accruals. Additionally, cash flow from
operations for the second quarter reflects the payment of $49.6 million
of semiannual interest payments on Senior and Senior Subordinated Notes.
Free cash flow for the second quarter of 2013 was a negative $0.8
million, reflecting cash flow from operations of $27.7 million, offset
by capital expenditures of $28.5 million.
-- Non-GAAP EBITDA for the second quarter of 2014 was $110.2 million, which
reflects adjustments to add back non-interest related restructuring
charges of $15.8 million, $0.1 million of acquisition-related costs and
$11.6 million of costs associated with potential business dispositions.
Non-GAAP EBITDA for the second quarter of 2013 was $166.6 million, which
reflects adjustments to add back non-interest related restructuring
charges of $8.0 million and $0.4 million of acquisition-related costs.
Adjusted non-GAAP EBITDA, which reflects adjustments to add back
restructuring, acquisition, disposition and proxy related costs, totaled
$623.7 million for the twelve-month period ended June 30, 2014, compared
to $639.7 million for the twelve-month period ended June 30, 2013, which
reflects adjustments to add back restructuring and acquisition related
costs.
-- Debt, net of cash and restricted cash held to secure debt ("net debt"),
was $3.38 billion as of June 30, 2014, compared to net debt of $3.56
billion as of June 30, 2013. Our net debt to adjusted non-GAAP EBITDA
ratio was 5.4x as of June 30, 2014, compared to 5.6x as of June 30,
2013.
The Company's GAAP results for the second quarter of 2014 exclude $0.4 million of revenue associated with acquired software license contracts that are not recognized due to business combination accounting rules and include $66.5 million of amortization, $15.9 million of restructuring charges, $0.1 million of acquisition-related costs recorded in accordance with ASC 805, Business Combinations, $16.8 million of expense recorded for fair value adjustments to acquisition-related contingent consideration, $11.6 million of costs associated with potential business dispositions, $0.4 million of interest expense recorded in connection with fees paid for certain debt modifications, a $0.6 million loss associated with the disposition of a component of our Alere Informatics business, $0.6 million in compensation charges and $0.1 million of related interest accretion associated with acquisition-related contingent consideration obligations, offset by the reversal of $1.1 million of stock-based compensation expense. The Company's GAAP results for the second quarter of 2013 exclude $0.6 million of revenue associated with acquired software license contracts that are not recognized due to business combination accounting rules and include amortization of $79.3 million, $8.1 million of restructuring charges, $4.7 million of stock-based compensation expense, $0.4 million of acquisition-related costs recorded in accordance with ASC 805, Business Combinations, $5.3 million of expense recorded for fair value adjustments to acquisition-related contingent consideration, $0.8 million of interest expense recorded in connection with fees paid for certain debt modifications, $0.5 million in compensation charges and $0.2 million of related interest accretion associated with acquisition-related contingent consideration obligations, a $0.7 million charge associated with the write-up to fair market value of inventory acquired in connection with the acquisition of Epocal Inc., $35.6 million of expense associated with the extinguishment of debt and a $5.1 million non-cash write-off of an investment, offset by a $8.1 million bargain purchase gain in connection with our acquisition of the Liberty business.
Detailed reconciliations of the non-GAAP financial measures presented in this release to the most directly comparable financial measures under GAAP, as well as a discussion regarding these non-GAAP financial measures, are included in the schedules to this press release.
The Company will host a conference call beginning at 8:30 a.m. (Eastern Time) today, August 4, 2014, to discuss these results, as well as other corporate matters. During the conference call, the Company may answer questions concerning business and financial developments and trends and other business and financial matters. The Company's responses to these questions, as well as other matters discussed during the conference call, may contain or constitute material information that has not been previously disclosed.
The conference call may be accessed by dialing (877) 443-4809 (domestic) or (412) 902-6615 (international) and asking for Alere Inc. A webcast of the call can also be accessed via the Alere website at http://www.alere.com/us/en/about/investor-relations/events.html, or directly through the following link: http://www.videonewswire.com/event.asp?id=100178.
A replay of the call will be available approximately one hour after the conclusion of the call and will remain available for a period of seven days following the call. The replay may be accessed by dialing (877) 344-7529 (domestic) or (412) 317-0088 (international) and entering replay code 10050325. The replay will also be available via online webcast at http://www.videonewswire.com/event.asp?id=100178 or via the Alere website at http://www.alere.com/us/en/about/investor-relations/events.html 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/us/en/about/investor-relations/events.html) under the Earnings Calls and Releases section shortly before the conference call begins and will continue to be available on this website.
For more information about Alere, please visit our web site at http://www.alere.com.
Alere's global leading products and services, as well as its new product development efforts, focus on infectious disease, toxicology, cardiology and diabetes. Alere is headquartered in Waltham, Massachusetts.
Alere Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)
Three Months Ended June 30,
2014 2013
---- ----
Net product sales and services revenue $731,339 $759,120
License and royalty revenue 6,604 4,865
----- -----
Net revenue 737,943 763,985
Cost of net revenue 398,025 379,498
------- -------
Gross profit 339,918 384,487
Gross margin 46% 50%
Operating expenses:
Research and development 37,430 40,500
Selling, general and administrative 310,609 299,583
Loss on disposition 638 -
Operating income (8,759) 44,404
Interest and other income (expense), net (49,532) (91,390)
------- -------
Loss before provision (benefit) for
income taxes (58,291) (46,986)
Provision (benefit) for income taxes (6,611) 17,867
------ ------
Loss before equity earnings of
unconsolidated entities, net of tax (51,680) (64,853)
Equity earnings of unconsolidated
entities, net of tax 2,087 4,551
----- -----
Net loss (49,593) (60,302)
Less: Net income attributable to non-
controlling interests 62 267
Net loss attributable to Alere Inc. and
Subsidiaries (49,655) (60,569)
Preferred stock dividends (5,309) (5,309)
Net loss available to common stockholders $(54,964) $(65,878)
======== ========
Basic and diluted net loss per common
share $(0.67) $(0.81)
Weighted average shares -basic and
diluted 82,648 81,311
====== ======
Alere Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)
Six Months Ended June 30,
2014 2013
---- ----
Net product sales and services revenue $1,442,749 $1,494,305
License and royalty revenue 11,816 8,929
------ -----
Net revenue 1,454,565 1,503,234
Cost of net revenue 763,408 754,490
------- -------
Gross profit 691,157 748,744
Gross margin 48% 50%
Operating expenses:
Research and development 76,129 81,954
Selling, general and administrative 597,209 591,897
Loss on disposition 638 -
Operating income 17,181 74,893
Interest and other income (expense), net (96,854) (149,259)
------- --------
Loss before benefit for income taxes (79,673) (74,366)
Benefit for income taxes (16,528) (19,004)
------- -------
Loss before equity earnings of
unconsolidated entities, net of tax (63,145) (55,362)
Equity earnings of unconsolidated
entities, net of tax 7,439 7,485
----- -----
Net loss (55,706) (47,877)
Less: Net income attributable to non-
controlling interests 170 242
Net loss attributable to Alere Inc. and
Subsidiaries (55,876) (48,119)
Preferred stock dividends (10,559) (10,559)
Net loss available to common stockholders $(66,435) $(58,678)
======== ========
Basic and diluted net loss per common
share $(0.81) $(0.72)
Weighted average shares -basic and
diluted 82,518 81,255
====== ======
Alere Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands)
June 30, December 31,
2014 2013
---- ----
ASSETS
------
CURRENT ASSETS:
Cash and cash equivalents $398,802 $361,908
Restricted cash 10,268 6,373
Marketable securities 802 858
Accounts receivable, net 537,605 548,729
Inventories, net 368,153 364,185
Prepaid expenses and other
current assets 189,696 190,361
Total current assets 1,505,326 1,472,414
PROPERTY, PLANT AND
EQUIPMENT, NET 541,873 545,164
GOODWILL AND OTHER
INTANGIBLE ASSETS, NET 4,733,568 4,835,004
RESTRICTED CASH - NON-
CURRENT 28,886 29,370
DEFERRED FINANCING COSTS AND
OTHER ASSETS, NET 181,012 178,862
------- -------
Total assets $6,990,665 $7,060,814
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Short-term debt and current
portions of long-term debt
and capital lease
obligations $69,496 $55,967
Other current liabilities 599,621 617,219
Total current liabilities 669,117 673,186
------- -------
LONG-TERM LIABILITIES:
Long-term debt and capital
lease obligations, net of
current portions 3,737,834 3,787,195
Deferred tax liabilities 293,150 329,249
Other long-term liabilities 221,782 188,336
Total long-term liabilities 4,252,766 4,304,780
--------- ---------
TOTAL EQUITY 2,068,782 2,082,848
Total liabilities and equity $6,990,665 $7,060,814
========== ==========
Alere Inc. and Subsidiaries
Reconciliation to Non-GAAP Adjusted Operating Results
(in thousands, except per share amounts)
Three Months Ended June 30,
2014 2013
---- ----
Reconciliation to Non-GAAP Adjusted Operating Income (1)
Operating income (loss) $(8,759) $44,404
Adjustment related to
acquired software
license contracts 373 592
Amortization of
acquisition-related
intangible assets 66,349 79,158
Restructuring charges 15,830 8,044
Stock-based
compensation expense (1,122) 4,677
Compensation charges
associated with
acquisition-related
contingent
consideration
obligations 581 580
Acquisition-related
costs 49 426
Fair value adjustments
to acquisition-
related contingent
consideration 16,779 5,258
Non-cash charge
associated with
acquired inventory - 711
Costs associated with
potential business
dispositions 11,600 -
Loss on disposition 638 -
Non-GAAP adjusted
operating income $102,318 $143,850
======== ========
Three Months Ended June 30,
2014 2013
---- ----
Reconciliation to Non-GAAP Adjusted Net Income(1)
Net loss available to
common stockholders $(54,964) $(65,878)
Adjustment related to
acquired software
license contracts 373 592
Amortization of
acquisition-related
intangible assets 66,369 79,240
Restructuring charges 15,938 8,106
Stock-based
compensation expense (1,122) 4,677
Compensation charges
associated with
acquisition-related
contingent
consideration
obligations 581 580
Acquisition-related
costs 49 426
Fair value adjustments
to acquisition-
related contingent
consideration 16,779 5,258
Non-cash charge
associated with
acquired inventory - 711
Costs associated with
potential business
dispositions 11,600 -
Interest expense
recorded in connection
with fees paid for
certain debt
modifications and the
termination of our
senior secured credit
facility 364 810
Interest accretion
associated with
acquisition-related
compensation charges 98 160
Non-cash write-off of
an investment - 5,110
Bargain purchase gain
associated with the
acquisition of the
Liberty business - (8,062)
Expense associated with
extinguishment of debt - 35,604
Income tax effects on
items above (21,092) (12,768)
Loss on disposition 638 -
Non-GAAP adjusted net
income available to
common stockholders $35,611 $54,566
======= =======
Net loss per diluted
common share $(0.67) $(0.81)
====== ======
Non-GAAP adjusted net
income per diluted
common share $0.42 $0.64
===== =====
Weighted average shares
-diluted 82,648 81,311
====== ======
Non-GAAP adjusted
weighted average
shares - diluted 87,453 95,207
====== ======
(1) In calculating "non-GAAP adjusted operating income" and "non-GAAP adjusted net income", the Company excludes (i) certain
non-cash charges, including amortization expense and stock-based compensation expense, (ii) non-recurring charges and
income, and (iii) certain other charges and income that have a significant positive or negative impact on results yet do not
occur on a consistent or regular basis in its business. In determining whether a particular item meets one of these criteria,
management considers facts and circumstances that it believes are relevant. Management believes that excluding such charges
and income from operating income and net income or loss allows investors and management to evaluate and compare the Company's
operating results from continuing operations from period to period in a meaningful and consistent manner. Due to the
frequency of their occurrence in its business, the Company does not adjust operating income or net income or loss for the
costs associated with litigation, including payments made or received through settlements. It should be noted that "non-GAAP
adjusted operating income" and "non-GAAP adjusted net income" are not standard financial measurements under accounting
principles generally accepted in the United States of America ("GAAP") and should not be considered as an alternative to
Alere Inc. and Subsidiaries
Reconciliation to Non-GAAP Adjusted Operating Results
(in thousands, except per share amounts)
Six Months Ended June 30,
2014 2013
---- ----
Reconciliation to Non-GAAP Adjusted Operating Income (1)
Operating income $17,181 $74,893
Adjustment related to
acquired software
license contracts 792 1,235
Amortization of
acquisition-related
intangible assets 132,822 155,025
Restructuring charges 23,045 11,936
Stock-based
compensation expense 4,582 8,800
Compensation charges
associated with
acquisition-related
contingent
consideration
obligations 1,003 1,270
Acquisition-related
costs 370 1,322
Fair value adjustments
to acquisition-
related contingent
consideration 21,329 16,276
Non-cash charge
associated with
acquired inventory - 1,172
Costs associated with
potential business
dispositions 14,560 -
Loss on disposition 638 -
Non-GAAP adjusted
operating income $216,322 $271,929
======== ========
Six Months Ended June 30,
2014 2013
---- ----
Reconciliation to Non-GAAP Adjusted Net Income(1)
Net loss available to
common stockholders $(66,435) $(58,678)
Adjustment related to
acquired software
license contracts 792 1,235
Amortization of
acquisition-related
intangible assets 132,860 155,229
Restructuring charges 23,278 12,053
Stock-based
compensation expense 4,582 8,800
Compensation charges
associated with
acquisition-related
contingent
consideration
obligations 1,003 1,270
Acquisition-related
costs 370 1,322
Fair value adjustments
to acquisition-
related contingent
consideration 21,329 16,276
Non-cash charge
associated with
acquired inventory - 1,172
Costs associated with
potential business
dispositions 14,560 -
Loss on disposition 638 -
Interest expense
recorded in connection
with fees paid for
certain debt
modifications and the
termination of our
senior secured credit
facility 728 1,762
Interest accretion
associated with
acquisition-related
compensation charges 193 160
Non-cash write-off of
an investment - 5,110
Bargain purchase gain
associated with the
acquisition of the
Liberty business - (8,062)
Expense associated with
extinguishment of debt - 35,767
Income tax effects on
items above (50,950) (74,823)
Non-GAAP adjusted net
income available to
common stockholders $82,948 $98,593
======= =======
Net loss per diluted
common share $(0.81) $(0.72)
====== ======
Non-GAAP adjusted net
income per diluted
common share $0.97 $1.16
===== =====
Weighted average shares
-diluted 82,518 81,255
====== ======
Non-GAAP adjusted
weighted average
shares - diluted 87,150 95,071
====== ======
(1) In calculating "non-GAAP adjusted operating income" and "non-GAAP adjusted net income", the Company excludes (i) certain
non-cash charges, including amortization expense and stock-based compensation expense, (ii) non-recurring charges and
income, and (iii) certain other charges and income that have a significant positive or negative impact on results yet do not
occur on a consistent or regular basis in its business. In determining whether a particular item meets one of these
criteria, management considers facts and circumstances that it believes are relevant. Management believes that excluding
such charges and income from operating income and net income or loss allows investors and management to evaluate and compare
the Company's operating results from continuing operations from period to period in a meaningful and consistent manner. Due
to the frequency of their occurrence in its business, the Company does not adjust operating income or net income or loss for
the costs associated with litigation, including payments made or received through settlements. It should be noted that "non-
GAAP adjusted operating income" and "non-GAAP adjusted net income" are not standard financial measurements under accounting
principles generally accepted in the United States of America ("GAAP") and should not be considered as an alternative to
Alere Inc. and Subsidiaries
Selected Consolidated Revenues by Business Area (1)
(in thousands)
Professional Diagnostics Segment % Change % Change
--------------------------------
Q2 2014 YTD 2014 Q2 2013 YTD 2013 Q2 14 v. Q2 13 YTD 14 v. YTD 13
------- -------- ------- -------- -------------- ----------------
Infectious disease $165,641 $329,671 $157,706 $347,550 5% -5%
Toxicology 164,677 316,574 165,884 314,933 -1% 1%
Cardiology 101,783 223,416 118,436 233,369 -14% -4%
Diabetes 51,227 101,948 74,905 124,988 -32% -18%
Other (1) 94,750 167,802 82,666 157,385 15% 7%
------ ------- ------ -------
Professional diagnostics net
product sales and services revenue
(1) 578,078 1,139,411 599,597 1,178,225 -4% -3%
License and royalty revenue 5,292 10,504 4,165 8,029 27% 31%
----- ------ ----- -----
Professional diagnostics net
revenue $583,370 $1,149,915 $603,762 $1,186,254 -3% -3%
=============================
Health Information Solutions Segment % Change % Change
------------------------------------
Q2 2014 YTD 2014 Q2 2013 YTD 2013 Q2 14 v. Q2 13 YTD 14 v. YTD 13
------- -------- ------- -------- -------------- ----------------
Condition and case management $48,527 $97,846 $52,578 $106,704 -8% -8%
Wellness 23,534 48,484 27,230 53,530 -14% -9%
Women's & children's health 24,324 46,539 29,256 58,336 -17% -20%
Patient self-testing services 29,430 56,614 25,711 50,412 14% 12%
------ ------ ------ ------
Health information solutions net
revenue $125,815 $249,483 $134,775 $268,982 -7% -7%
=================================
(1) Revenues are presented in accordance with generally accepted accounting principles and exclude an adjustment of $0.4 million and $0.8 million, and $0.6 million and $1.2 million related to acquired software license contracts which were not recognized during the three and six months ended June 30, 2014 and 2013,
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, 2014
----------------------------------------
Operating Segment Professional Diagnostics Health Information Solutions Consumer Diagnostics Corporate Total
------------------------ ---------------------------- -------------------- --------- -----
Net revenue $583,370 $125,815 $28,758 $ - $737,943
Adjustment related to acquired
software license contracts(1) 373 - - - 373
--- --- --- --- ---
Non-GAAP adjusted net revenue $583,743 $125,815 $28,758 $ - $738,316
======== ======== ======= ======================== ========
Operating income (loss) $11,516 $(4,247) $4,627 $(20,655) $(8,759)
Adjustment related to acquired
software license contracts(1) 373 - - - 373
Amortization of acquisition-
related intangible assets 57,339 8,836 174 - 66,349
Restructuring charges 11,144 631 - 4,055 15,830
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 15,579 1,000 - 200 16,779
Costs associated with
potential business
dispositions 11,600 - - - 11,600
Loss on disposition 638 - - - 638
Non-GAAP adjusted operating
income (loss) $108,770 $6,220 $4,801 $(17,473) $102,318
======== ====== ====== ======== ========
Non-GAAP adjusted operating
income (loss) as % of Non-
GAAP adjusted net revenue 18.6% 4.9% 16.7% 13.9%
==== === ==== ====
(1) Estimated revenue related to acquired software license contracts that was not recognized during the second quarter of 2014 due to business combination accounting rules.
For the Three Months Ended June 30, 2013
----------------------------------------
Operating Segment Professional Diagnostics Health Information Solutions Consumer Diagnostics Corporate Total
------------------------ ---------------------------- -------------------- --------- -----
Net revenue $603,762 $134,775 $25,448 $ - $763,985
Adjustment related to acquired
software license contracts(1) 592 - - - 592
--- --- --- --- ---
Non-GAAP adjusted net revenue $604,354 $134,775 $25,448 $ - $764,577
======== ======== ======= ======================== ========
Operating income (loss) $72,896 $(11,759) $3,404 $(20,137) $44,404
Adjustment related to acquired
software license contracts(1) 592 - - - 592
Amortization of acquisition-
related intangible assets 67,968 10,732 458 - 79,158
Restructuring charges 1,740 6,304 - - 8,044
Stock-based compensation
expense - - - 4,677 4,677
Compensation charges
associated with acquisition-
related contingent
consideration obligations 580 - - - 580
Non-cash charge associated
with acquired inventory 711 - - - 711
Acquisition-related costs - - - 426 426
Fair value adjustments to
acquisition-related
contingent consideration 4,330 1,028 - (100) 5,258
Non-GAAP adjusted operating
income (loss) $148,817 $6,305 $3,862 $(15,134) $143,850
======== ====== ====== ======== ========
Non-GAAP adjusted operating
income (loss) as % of Non-
GAAP adjusted net revenue 24.6% 4.7% 15.2% 18.8%
==== === ==== ====
(1) Estimated revenue related to acquired software license contracts that was not recognized during the second quarter of 2013 due to business combination accounting rules.
Comments:
In calculating "adjusted operating income (loss)" in the schedule presented above, the Company excludes from operating income (loss) (i) certain non-cash charges, including amortization expense and stock-based compensation expense, (ii) non-recurring charges and income, and (iii)
certain other charges and income that have a significant positive or negative impact on results yet do not occur on a consistent or regular basis in its business. In determining whether a particular item meets one of these criteria, management considers facts and circumstances
that it believes are relevant. Management believes that excluding such charges and income from operating income (loss) allows investors and management to evaluate and compare the Company's operating results from continuing operations from period to period in a meaningful and
consistent manner. Due to the frequency of their occurrence in its business, the Company does not adjust operating income (loss) for the costs associated with litigation, including payments made or received through settlements. It should be noted that "adjusted operating income
(loss)" is not a standard financial measurement under accounting principles generally accepted in the United States of America ("GAAP") and should not be considered as an alternative to operating income (loss) as an indicator of operating performance or any measure of performance
derived in accordance with GAAP. In addition, all companies do not calculate non-GAAP financial measures in the same manner and, accordingly, "adjusted operating income (loss)" presented in this schedule may not be comparable to similar measures used by other companies.
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, 2014
--------------------------------------
Operating Segment Professional Diagnostics Health Information Solutions Consumer Diagnostics Corporate Total
------------------------ ---------------------------- -------------------- --------- -----
Net revenue $1,149,915 $249,483 $55,167 $ - $1,454,565
Adjustment related to acquired
software license contracts(1) 792 - - - 792
--- --- --- --- ---
Non-GAAP adjusted net revenue $1,150,707 $249,483 $55,167 $ - $1,455,357
========== ======== ======= =========================== ==========
Operating income (loss) $62,842 $(10,967) $6,875 $(41,569) $17,181
Adjustment related to acquired
software license contracts(1) 792 - - - 792
Amortization of acquisition-
related intangible assets 114,624 17,735 463 - 132,822
Restructuring charges 15,447 3,448 - 4,150 23,045
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 21,040 (11) - 300 21,329
Costs associated with
potential business
dispositions 14,560 - - - 14,560
Loss on disposition 638 - - - 638
Non-GAAP adjusted operating
income (loss) $230,946 $10,205 $7,338 $(32,167) $216,322
======== ======= ====== ======== ========
Non-GAAP adjusted operating
income (loss) as % of Non-
GAAP adjusted net revenue 20.1% 4.1% 13.3% 14.9%
==== === ==== ====
(1) Estimated revenue related to acquired software license contracts that was not recognized during the first six months of 2014 due to business combination accounting rules.
For the Six Months Ended June 30, 2013
--------------------------------------
Operating Segment Professional Diagnostics Health Information Solutions Consumer Diagnostics Corporate Total
------------------------ ---------------------------- -------------------- --------- -----
Net revenue $1,186,254 $268,982 $47,998 $ - $1,503,234
Adjustment related to acquired
software license contracts(1) 1,235 - - - 1,235
----- --- --- --- -----
Non-GAAP adjusted net revenue $1,187,489 $268,982 $47,998 $ - $1,504,469
========== ======== ======= =========================== ==========
Operating income (loss) $132,736 $(25,652) $5,684 $(37,875) $74,893
Adjustment related to acquired
software license contracts(1) 1,235 - - - 1,235
Amortization of acquisition-
related intangible assets 132,261 21,770 994 - 155,025
Restructuring charges 3,129 8,807 - - 11,936
Stock-based compensation
expense - - - 8,800 8,800
Compensation charges
associated with acquisition-
related contingent
consideration obligations 1,270 - - - 1,270
Non-cash charge associated
with acquired inventory 1,172 - - - 1,172
Acquisition-related costs - - - 1,322 1,322
Fair value adjustments to
acquisition-related
contingent consideration 11,393 4,383 - 500 16,276
Non-GAAP adjusted operating
income (loss) $283,196 $9,308 $6,678 $(27,253) $271,929
======== ====== ====== ======== ========
Non-GAAP adjusted operating
income (loss) as % of Non-
GAAP adjusted net revenue 23.8% 3.5% 13.9% 18.1%
==== === ==== ====
(1) Estimated revenue related to acquired software license contracts that was not recognized during the first six months of 2013 due to business combination accounting rules.
Comments:
In calculating "adjusted operating income (loss)" in the schedule presented above, the Company excludes from operating income (loss) (i) certain non-cash charges, including amortization expense and stock-based compensation expense, (ii) non-recurring charges and income, and (iii) certain other
charges and income that have a significant positive or negative impact on results yet do not occur on a consistent or regular basis in its business. In determining whether a particular item meets one of these criteria, management considers facts and circumstances that it believes are relevant.
Management believes that excluding such charges and income from operating income (loss) allows investors and management to evaluate and compare the Company's operating results from continuing operations from period to period in a meaningful and consistent manner. Due to the frequency of their
occurrence in its business, the Company does not adjust operating income (loss) for the costs associated with litigation, including payments made or received through settlements. It should be noted that "adjusted operating income (loss)" is not a standard financial measurement under accounting
principles generally accepted in the United States of America ("GAAP") and should not be considered as an alternative to operating income (loss) as an indicator of operating performance or any measure of performance derived in accordance with GAAP. In addition, all companies do not calculate non-
GAAP financial measures in the same manner and, accordingly, "adjusted operating income (loss)" presented in this schedule may not be comparable to similar measures used by other companies.
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 Three Months Ended
June 30, 2014 June 30, 2013
------------- -------------
Net revenue $737,943 $763,985
Adjustment related to acquired
software license contracts 373 592
Non-GAAP adjusted net revenue $738,316 $764,577
-------- --------
Cost of net revenue $398,025 $379,498
Less adjustments:
Amortization of acquisition-
related intangible assets (16,443) (17,102)
Restructuring charges (292) (729)
Stock-based compensation expense (285) (278)
Non-cash charge associated with
acquired inventory - (711)
--- ----
Non-GAAP adjusted cost of net
revenue $381,005 $360,678
-------- --------
Non-GAAP adjusted gross profit $357,311 $403,899
======== ========
Three Months Ended Three Months Ended
June 30, 2014 June 30, 2013
------------- -------------
Research and development $37,430 $40,500
Less adjustments:
Amortization of acquisition-
related intangible assets (1,184) (1,216)
Restructuring charges (3,031) (645)
Stock-based compensation expense 1,811 (783)
----- ----
Non-GAAP adjusted research and
development $35,026 $37,856
======= =======
Three Months Ended Three Months Ended
June 30, 2014 June 30, 2013
------------- -------------
Selling, general and administrative $310,609 $299,583
Less adjustments:
Amortization of acquisition-
related intangible assets (48,722) (60,840)
Restructuring charges (12,507) (6,670)
Stock-based compensation expense (404) (3,616)
Compensation charges associated
with acquisition-related
contingent consideration
obligations (581) (580)
Acquisition-related costs (49) (426)
Fair value adjustments to
acquisition-related contingent
consideration (16,779) (5,258)
Costs associated with potential
business dispositions (11,600) -
------- ---
Non-GAAP adjusted selling, general
and administrative $219,967 $222,193
======== ========
Three Months Ended Three Months Ended
June 30, 2014 June 30, 2013
------------- -------------
Loss on disposition $638 $ -
Loss on disposition (638) -
---- ---
Non-GAAP adjusted loss on
disposition $ - $ -
========================================= =========================================
Three Months Ended Three Months Ended
June 30, 2014 June 30, 2013
------------- -------------
Interest and other income
(expense), net $(49,532) $(91,390)
Less adjustments:
Restructuring charges 108 62
Interest expense recorded in
connection with fees paid for
certain debt modifications and the
termination of our senior secured
credit facility 364 810
Interest accretion associated with
acquisition-related compensation
charges 98 160
Non-cash write-off of an investment - 5,110
Bargain purchase gain associated
with the acquisition of the
Liberty business - (8,062)
Expense associated with
extinguishment of debt - 35,604
Non-GAAP adjusted interest and
other income (expense), net $(48,962) $(57,706)
======== ========
Three Months Ended Three Months Ended
June 30, 2014 June 30, 2013
------------- -------------
Provision (benefit) for income
taxes $(6,611) $17,867
Add: Income tax effects on Non-
GAAP adjustments 21,121 12,783
------ ------
Non-GAAP adjusted provision for
income taxes $14,510 $30,650
======= =======
Three Months Ended Three Months Ended
June 30, 2014 June 30, 2013
------------- -------------
Equity earnings of unconsolidated
entities, net of tax $2,087 $4,551
Less adjustments:
Amortization of acquisition-
related intangible assets 150 150
Income tax effects on items above - -
--- ---
Non-GAAP adjusted equity earnings
of unconsolidated entities, net of
tax $2,237 $4,701
====== ======
Alere Inc. and Subsidiaries
Reconciliations to Non-GAAP Adjusted P&L Categories
(in thousands)
Six Months Ended Six Months Ended
June 30, 2014 June 30, 2013
------------- -------------
Net revenue $1,454,565 $1,503,234
Adjustment related to acquired
software license contracts 792 1,235
--- -----
Non-GAAP adjusted net revenue $1,455,357 $1,504,469
---------- ----------
Cost of net revenue $763,408 $754,490
Less adjustments:
Amortization of acquisition-
related intangible assets (33,079) (36,272)
Restructuring charges (1,167) (1,352)
Stock-based compensation expense (572) (510)
Non-cash charge associated with
acquired inventory - (1,172)
--- ------
Non-GAAP adjusted cost of net
revenue $728,590 $715,184
-------- --------
Non-GAAP adjusted gross profit $726,767 $789,285
======== ========
Six Months Ended Six Months Ended
June 30, 2014 June 30, 2013
------------- -------------
Research and development $76,129 $81,954
Less adjustments:
Amortization of acquisition-
related intangible assets (2,349) (2,498)
Restructuring charges (3,031) (645)
Stock-based compensation expense 620 (1,530)
--- ------
Non-GAAP adjusted research and
development $71,369 $77,281
======= =======
Six Months Ended Six Months Ended
June 30, 2014 June 30, 2013
------------- -------------
Selling, general and administrative $597,209 $591,897
Less adjustments:
Amortization of acquisition-
related intangible assets (97,394) (116,255)
Restructuring charges (18,847) (9,939)
Stock-based compensation expense (4,630) (6,760)
Compensation charges associated
with acquisition-related
contingent consideration
obligations (1,003) (1,270)
Acquisition-related costs (370) (1,322)
Fair value adjustments to
acquisition-related contingent
consideration (21,329) (16,276)
Costs associated with potential
business dispositions (14,560) -
------- ---
Non-GAAP adjusted selling, general
and administrative $439,076 $440,075
======== ========
Six Months Ended Six Months Ended
June 30, 2014 June 30, 2013
------------- -------------
Loss on disposition $638 $ -
Loss on disposition (638) -
---- ---
Non-GAAP adjusted loss on
disposition $ - $ -
================================== ==================================
Six Months Ended J Six Months Ended
une 30, 2014 June 30, 2013
------------ -------------
Interest and other income
(expense), net $(96,854) $(149,259)
Less adjustments:
Restructuring charges 233 117
Interest expense recorded in
connection with fees paid for
certain debt modifications and the
termination of our senior secured
credit facility 728 1,762
Interest accretion associated with
acquisition-related compensation
charges 193 160
Non-cash write-off of an investment - 5,110
Bargain purchase gain associated
with the acquisition of the
Liberty business - (8,062)
Expense associated with
extinguishment of debt - 35,767
--- ------
Non-GAAP adjusted interest and
other income (expense), net $(95,700) $(114,405)
======== =========
Six Months Ended Six Months Ended
June 30, 2014 June 30, 2013
------------- -------------
Benefit for income taxes $(16,528) $(19,004)
Add: Income tax effects on Non-
GAAP adjustments 51,008 74,844
------ ------
Non-GAAP adjusted provision for
income taxes $34,480 $55,840
======= =======
Six Months Ended Six Months Ended
June 30, 2014 June 30, 2013
------------- -------------
Equity earnings of unconsolidated
entities, net of tax $7,439 $7,485
Less adjustments:
Amortization of acquisition-
related intangible assets 298 301
Income tax effects on items above - -
--- ---
Non-GAAP adjusted equity earnings
of unconsolidated entities, net of
tax $7,737 $7,786
====== ======
Alere Inc. and Subsidiaries
Reconciliation of Net Loss to Non-GAAP EBITDA
(in thousands)
Three Months Ended Six Months Ended
June 30, 2014 June 30, 2014
------------- -------------
Net Loss (1) $(49,593) $(55,706)
Adjustment related
to acquired
software license
contracts 373 792
Income tax benefit (6,611) (16,528)
Depreciation and
amortization 98,040 196,274
Interest, net 51,680 103,339
Non-cash stock-
based compensation
expense (1,122) 4,582
Non-cash fair
value adjustments
to acquisition-
related contingent
consideration 16,779 21,329
Loss on disposition 638 638
Non-GAAP EBITDA $110,184 $254,720
======== ========
(1) Net loss for the three months and six months ended June 30, 2014 includes non-interest related restructuring charges
of $15.8 million and $23.0 million, $0.1 million and $0.4 million of acquisition costs and $11.6 million and $14.6 million
of costs associated with potential business dispositions, respectively, which have not been added back for purposes of
computing Non-GAAP EBITDA.
Reconciliation of Cash Flow from Operating Activities to Free Cash Flow
(in thousands)
Three Months Ended Six Months Ended
June 30, 2014 June 30, 2014
------------- -------------
Cash flow from
operating
activities $19,259 $125,167
Capital
expenditures (26,890) (54,430)
Free cash flow $(7,631) $70,737
======= =======
SOURCE Alere Inc.
