ALERE INC WALTHAM, Mass., Oct. 28, 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 September 30, 2014.
Namal Nawana, Chief Executive Officer and President of Alere said, "We made great progress during the third quarter to reset our strategic direction to focus on our strengths as the Global Leader in Rapid Diagnostics. Doing so has allowed us to begin to execute a significant cost reduction program and to clearly identify non-core assets for disposition. As we announced earlier today, the agreement that we reached with Optum for the disposition of our Alere Health organization is a great step towards simplifying and focusing our organization and achieving our strategic goals."
Financial results for the third quarter of 2014:
-- Net revenue of $736.2 million for the third quarter of 2014, compared to
$753.3 million for the third quarter of 2013. Non-GAAP adjusted net
revenue was $736.6 million for the third quarter of 2014, compared to
$753.9 million for the third quarter of 2013.
-- Loss from continuing operations of $98.6 million attributable to common
shareholders of Alere Inc., and respective net loss per diluted common
share of $1.19 for the third quarter of 2014, compared to net loss from
continuing operations of $21.7 million attributable to common
shareholders of Alere Inc., and respective net loss per diluted common
share of $0.27 for the third quarter of 2013.
-- Non-GAAP adjusted net income from continuing operations attributable to
common shareholders of Alere Inc. per diluted common share of $0.48 for
the third quarter of 2014, compared to non-GAAP adjusted net income from
continuing operations attributable to common shareholders per diluted
common share of $0.61 for the third quarter of 2013.
-- Net product and services revenue from our Professional Diagnostics
segment was $581.8 million in the third quarter of 2014, compared to net
product and services revenue of $587.3 million in the third quarter of
2013. Non-GAAP adjusted net product and services revenue from our
Professional Diagnostics segment was $582.1 million in the third quarter
of 2014, compared to non-GAAP adjusted net product and services revenue
of $587.8 million in the third quarter of 2013.
-- U.S. influenza and meter-based Triage product revenues were $15.0
million and $15.8 million, respectively, for the third quarter of 2014,
compared to $18.3 million and $17.7 million, respectively, for the third
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 1.2%. This decrease reflects a 5.4% decrease in adjusted
U.S. revenues, compared to the third quarter of 2013, offset by a 3.3%
increase in our international business. The decrease in the U.S.
business principally relates to lower revenues from sales of Beckman
Coulter BNP tests due to supply constraints and to lower pain management
revenues in our Toxicology business. New products contributed favorably
to our overall adjusted growth rate, with sales of CD4 products
increasing from $5.0 million in Q3 2013 to $7.6 million in Q3 2014 and
Epoc sales increasing from $5.7 million to $6.7 million for the same
periods.
-- Net product and services revenue from our Health Information Solutions
segment was $123.9 million in the third quarter of 2014, compared to
$133.7 million in the third quarter of 2013, reflecting growth in our
patient self-testing business from $27.0 million in the third quarter of
2013 to $30.2 million in the third quarter of 2014.
-- Gross margin was 46.6% of net revenue in the third quarter of 2014,
compared to 49.0% in the third 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 49.6% of non-GAAP adjusted net revenue in the third
quarter of 2014, compared to 52.1% in the third quarter of 2013 and
48.4% in the second quarter of 2014.
-- Non-GAAP adjusted selling, general and administrative expenses were
$207.1 million or 28.1% of adjusted net revenue in the third quarter of
2014, compared to $218.8 million or 29.0% of adjusted net revenue in the
third quarter of 2014. Non-GAAP adjusted research and development
expense was $31.6 million, or 4.3% of adjusted net revenue, compared to
$37.1 million, or 4.9% of adjusted net revenues, in Q3 2013
-- Free cash flow for the third quarter of 2014 was a $62.9 million,
reflecting cash flow from operations of $91.7 million, offset by capital
expenditures of $28.8 million. Of the $91.7 million of operating cash
flows during the third quarter, $96.4 million was cash flows from
continuing operations.
-- Non-GAAP EBITDA for the third quarter of 2014 was $129.4 million, which
reflects adjustments to add back non-interest related restructuring
charges of $17.9 million, $0.3 million of acquisition-related costs and
$6.2 million of costs associated with potential business dispositions.
On a last-twelve-months basis, our non-GAAP adjusted EBITDA, with
restructuring, acquisition and other costs added back, was $630.3
million, resulting in a net debt to non-GAAP adjusted EBITDA ratio of
5.3 times.
The Company's GAAP results for the third quarter of 2014 exclude $0.3 million of revenue associated with acquired software license contracts that are not recognized due to business combination accounting rules and include $66.1 million of amortization, $17.9 million of restructuring charges, $3.2 million of stock-based compensation expense, $0.3 million of acquisition-related costs recorded in accordance with ASC 805, Business Combinations, $6.2 million of costs associated with potential business dispositions, $0.4 million of interest expense recorded in connection with fees paid for certain debt modifications, $0.7 million in compensation charges and $0.1 million of related interest accretion associated with acquisition-related contingent consideration obligations, $0.4 million loss on the sale of our equity investment in Vedalab S.A., offset by the reversal of $5.5 million of expense recorded for fair value adjustments to acquisition-related contingent consideration. The Company's GAAP results for the third quarter of 2013 exclude $0.5 million of revenue associated with acquired software license contracts that are not recognized due to business combination accounting rules and include amortization of $82.4 million, $7.8 million of restructuring charges, $5.7 million of stock-based compensation expense, $0.5 million of acquisition-related costs recorded in accordance with ASC 805, Business Combinations, $2.7 million of expense recorded for fair value adjustments to acquisition-related contingent consideration, $0.4 million of interest expense recorded in connection with fees paid for certain debt modifications, $0.8 million in compensation charges and $0.1 million of related interest accretion associated with acquisition-related contingent consideration obligations, a $0.7 million charge associated with the write-up to fair market value of inventory acquired in connection with the acquisition of Epocal Inc., $5.5 million of costs associated with the proxy contest, a $5.9 million loss associated with the disposition of our Spinreact, S.A. subsidiary located in Spain and a $0.04 million adjustment to the bargain purchase gain in connection with our acquisition of the Liberty business.
Detailed reconciliations of the non-GAAP financial measures presented in this release to the most directly comparable financial measures under GAAP, as well as a discussion regarding these non-GAAP financial measures, are included in the schedules to this press release.
The Company will host a conference call beginning at 8:30 a.m. (Eastern Time) today, October 28, 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=100809.
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 10054917. The replay will also be available via online webcast at http://www.videonewswire.com/event.asp?id=100809 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.
About Alere
Because Knowing now matters(TM), Alere delivers reliable and actionable information through rapid diagnostic tests, resulting in better clinical and economic healthcare outcomes globally. Headquartered in Waltham, Mass., Alere focuses on rapid diagnostics for infectious disease, cardiometabolic disease and toxicology. For more information on Alere, please visit www.alere.com.
Alere Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)
Three Months Ended September 30,
2014 2013
---- ----
Net product sales and services revenue $732,064 $749,136
License and royalty revenue 4,182 4,184
----- -----
Net revenue 736,246 753,320
Cost of net revenue 393,387 384,003
------- -------
Gross profit 342,859 369,317
Gross margin 47% 49%
Operating expenses:
Research and development 38,726 40,498
Selling, general and administrative 266,521 297,350
Loss on disposition - 5,885
Operating income 37,612 25,584
Interest and other income (expense), net (60,741) (62,288)
------- -------
Loss from continuing operations
before provision (benefit) for
income taxes (23,129) (36,704)
Provision (benefit) for income taxes 76,648 (14,980)
------ -------
Loss from continuing operations
before equity earnings of
unconsolidated entities, net of tax (99,777) (21,724)
Equity earnings of unconsolidated entities, net of tax 6,277 5,753
----- -----
Loss from continuing operations (93,500) (15,971)
Income (loss) from discontinued
operations, net of tax 7,045 (3,118)
Net loss (86,455) (19,089)
Less: Net income (loss) attributable
to non-controlling interests (306) 359
Net loss attributable to Alere Inc. and Subsidiaries (86,149) (19,448)
Preferred stock dividends (5,367) (5,367)
Net loss available to common stockholders $(91,516) $(24,815)
======== ========
Basic and diluted net loss per common
share attributable to Alere Inc. and
Subsidiaries:
Loss from continuing operations $(1.19) $(0.27)
Income (loss) from discontinued
operations 0.09 (0.03)
Net loss per common share $(1.10) $(0.30)
Weighted average shares - basic and diluted 83,115 81,735
====== ======
Alere Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)
Nine Months Ended September 30,
2014 2013
---- ----
Net product sales and services revenue $2,173,825 $2,242,220
License and royalty revenue 15,999 13,113
------ ------
Net revenue 2,189,824 2,255,333
Cost of net revenue 1,154,057 1,136,846
--------- ---------
Gross profit 1,035,767 1,118,487
Gross margin 47% 50%
Operating expenses:
Research and development 114,855 120,860
Selling, general and administrative 857,525 882,527
Loss on disposition 638 5,885
Operating income 62,749 109,215
Interest and other income (expense), net (157,564) (211,532)
-------- --------
Loss from continuing operations
before provision (benefit) for
income taxes (94,815) (102,317)
Provision (benefit) for income taxes 63,109 (30,359)
------ -------
Loss from continuing operations
before equity earnings of
unconsolidated entities, net of tax (157,924) (71,958)
Equity earnings of unconsolidated
entities, net of tax 13,716 13,238
------ ------
Loss from continuing operations (144,208) (58,720)
Income (loss) from discontinued
operations, net of taxes 2,047 (8,246)
Net loss (142,161) (66,966)
Less: Net income (loss) attributable
to non-controlling interests (136) 601
Net loss attributable to Alere Inc. and
Subsidiaries (142,025) (67,567)
Preferred stock dividends (15,926) (15,926)
Net loss available to common stockholders $(157,951) $(83,493)
========= ========
Basic and diluted net loss per common
share attributable to Alere Inc. and
Subsidiaries:
Loss from continuing operations $(1.93) $(0.92)
Income (loss) from discontinued
operations 0.02 (0.11)
Net loss per common share $(1.91) $(1.03)
Weighted average shares -basic and
diluted 82,719 81,417
====== ======
Alere Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands)
September 30, December 31,
2014 2013
---- ----
ASSETS
------
CURRENT ASSETS:
Cash and cash equivalents $444,853 $361,626
Restricted cash 38,156 6,273
Marketable securities 794 858
Accounts receivable, net 517,434 547,860
Inventories, net 362,102 364,185
Prepaid expenses and other
current assets 161,677 190,015
Assets held for sale 2,143 19,052
Total current assets 1,527,159 1,489,869
PROPERTY, PLANT AND
EQUIPMENT, NET 526,922 543,877
GOODWILL AND OTHER
INTANGIBLE ASSETS, NET 4,579,501 4,818,836
RESTRICTED CASH - NON-
CURRENT - 29,370
DEFERRED FINANCING COSTS AND
OTHER ASSETS, NET 175,039 178,862
------- -------
Total assets $6,808,621 $7,060,814
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Short-term debt and current
portions of long-term debt
and capital lease
obligations $93,037 $55,967
Liabilities related to
assets held for sale 2,186 28,327
Other current liabilities 621,663 614,627
Total current liabilities 716,886 698,921
------- -------
LONG-TERM LIABILITIES:
Long-term debt and capital
lease obligations, net of
current portions 3,696,438 3,787,195
Deferred tax liabilities 310,330 329,249
Other long-term liabilities 192,686 162,601
Total long-term liabilities 4,199,454 4,279,045
--------- ---------
TOTAL EQUITY 1,892,281 2,082,848
Total liabilities and equity $6,808,621 $7,060,814
========== ==========
Alere Inc. and Subsidiaries
Reconciliation to Non-GAAP Adjusted Operating Results
(in thousands, except per share amounts)
Three Months Ended September 30,
2014 2013
---- ----
Reconciliation to Non-GAAP Adjusted Operating Income (1)
Operating income $37,612 $25,584
Adjustment related to
acquired software
license contracts 324 535
Amortization of
acquisition-related
intangible assets 65,853 81,963
Restructuring charges 17,726 7,694
Stock-based
compensation expense 3,167 5,662
Compensation charges
associated with
acquisition-related
contingent
consideration
obligations 670 762
Acquisition-related
costs 325 450
Fair value adjustments
to acquisition-
related contingent
consideration (5,537) 1,819
Non-cash charge
associated with
acquired inventory - 708
Costs associated with
potential business
dispositions 6,203 -
Costs associated with
proxy contest - 5,467
Loss on disposition - 5,885
Non-GAAP adjusted
operating income $126,343 $136,529
======== ========
Three Months Ended September 30,
2014 2013
---- ----
Reconciliation to Non-GAAP Adjusted Net Income(1)
Net loss available to
common stockholders $(91,516) $(24,815)
Adjustment related to
acquired software
license contracts 324 535
Amortization of
acquisition-related
intangible assets 65,858 82,019
Restructuring charges 17,869 7,805
Stock-based
compensation expense 3,167 5,662
Compensation charges
associated with
acquisition-related
contingent
consideration
obligations 670 762
Acquisition-related
costs 325 450
Fair value adjustments
to acquisition-
related contingent
consideration (5,537) 1,819
Non-cash charge
associated with
acquired inventory - 708
Costs associated with
potential business
dispositions 6,203 -
Costs associated with
proxy contest - 5,467
Loss on disposition - 5,885
Loss on sale of equity
investment 457 -
Interest expense
recorded in connection
with fees paid for
certain debt
modifications and the
termination of our
senior secured credit
facility 363 364
Interest accretion
associated with
acquisition-related
compensation charges 102 98
Bargain purchase gain
associated with the
acquisition of the
Liberty business - 39
Amortization of
acquisition-related
intangible assets and
fair value adjustments
to acquisition-
related contingent
consideration -
discontinued
operations (10,903) 727
Income tax effects on
items above 50,527 (37,455)
Non-GAAP adjusted net
income available to
common stockholders $37,909 $50,070
======= =======
Net loss per diluted
common share from
continuing operations $(1.19) $(0.27)
Net income (loss) per
diluted common share
from discontinued
operations 0.09 (0.03)
---- -----
Net loss per diluted
common share $(1.10) $(0.30)
====== ======
Non-GAAP adjusted net
income per diluted
common share from
continuing operations $0.48 $0.61
Non-GAAP adjusted net
income (loss) per
diluted common share
from discontinued
operations (0.04) (0.02)
Non-GAAP adjusted net
income per diluted
common share $0.44 $0.59
===== =====
Weighted average shares
-diluted 83,115 81,735
====== ======
Non-GAAP adjusted
weighted average
shares - diluted 87,930 95,830
====== ======
(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
Alere Inc. and Subsidiaries
Reconciliation to Non-GAAP Adjusted Operating Results
(in thousands, except per share amounts)
Nine Months Ended September 30,
2014 2013
---- ----
Reconciliation to Non-GAAP Adjusted Operating Income (1)
Operating income $62,749 $109,215
Adjustment related to
acquired software
license contracts 1,116 1,770
Amortization of
acquisition-related
intangible assets 197,726 236,418
Restructuring charges 40,771 19,630
Stock-based
compensation expense 7,751 14,462
Compensation charges
associated with
acquisition-related
contingent
consideration
obligations 1,673 2,032
Acquisition-related
costs 695 1,772
Fair value adjustments
to acquisition-
related contingent
consideration 17,042 16,295
Non-cash charge
associated with
acquired inventory - 1,880
Costs associated with
potential business
dispositions 20,763 -
Costs associated with
proxy contest - 5,467
Loss on disposition 638 5,885
Non-GAAP adjusted
operating income $350,924 $414,826
======== ========
Nine Months Ended September 30,
2014 2013
---- ----
Reconciliation to Non-GAAP Adjusted Net Income(1)
Net loss available to
common stockholders $(157,951) $(83,493)
Adjustment related to
acquired software
license contracts 1,116 1,770
Amortization of
acquisition-related
intangible assets 197,769 236,678
Restructuring charges 41,147 19,858
Stock-based
compensation expense 7,751 14,462
Compensation charges
associated with
acquisition-related
contingent
consideration
obligations 1,673 2,032
Acquisition-related
costs 695 1,772
Fair value adjustments
to acquisition-
related contingent
consideration 17,042 16,295
Non-cash charge
associated with
acquired inventory - 1,880
Costs associated with
potential business
dispositions 20,763 -
Costs associated with
proxy contest - 5,467
Loss on disposition 638 5,885
Loss on sale of equity
investment 457 -
Interest expense
recorded in connection
with fees paid for
certain debt
modifications and the
termination of our
senior secured credit
facility 1,091 2,126
Interest accretion
associated with
acquisition-related
compensation charges 295 258
Non-cash write-off of
an investment - 5,110
Bargain purchase gain
associated with the
acquisition of the
Liberty business - (8,023)
Expense associated with
extinguishment of debt - 35,767
Amortization of
acquisition-related
intangible assets and
fair value adjustments
to acquisition-
related contingent
consideration -
discontinued
operations (11,073) 2,181
Income tax effects on
items above (2,605) (111,362)
Non-GAAP adjusted net
income available to
common stockholders $118,808 $148,663
======== ========
Net loss per diluted
common share from
continuing operations $(1.93) $(0.92)
Net income (loss) per
diluted common share
from discontinued
operations 0.02 (0.11)
---- -----
Net loss per diluted
common share $(1.91) $(1.03)
====== ======
Non-GAAP adjusted net
income per diluted
common share from
continuing operations $1.49 $1.81
Non-GAAP adjusted net
income (loss) per
diluted common share
from discontinued
operations 0.10 (0.06)
Non-GAAP adjusted net
income per diluted
common share $1.39 $1.75
===== =====
Weighted average shares
-diluted 82,719 81,417
====== ======
Non-GAAP adjusted
weighted average
shares - diluted 87,312 95,244
====== ======
(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
Alere Inc. and Subsidiaries
Selected Consolidated Revenues by Business Area (1)
(in thousands)
Professional Diagnostics Segment % Change % Change
--------------------------------
Q3 2014 YTD 2014 Q3 2013 YTD 2013 Q3 14 v. Q3 13 YTD 14 v. YTD 13
------- -------- ------- -------- -------------- ----------------
Infectious disease $177,339 $507,010 $172,739 $520,289 3% -3%
Toxicology 161,940 478,514 166,536 481,469 -3% -1%
Cardiology 108,501 331,917 116,281 349,650 -7% -5%
Diabetes 49,477 151,425 53,150 178,138 -7% -15%
Other (1) 84,501 252,303 78,607 235,992 7% 7%
------ ------- ------ -------
Professional diagnostics net product sales and services revenue (1) 581,758 1,721,169 587,313 1,765,538 -1% -3%
License and royalty revenue 4,183 14,687 3,488 11,517 20% 28%
----- ------ ----- ------
Professional diagnostics net revenue $585,941 $1,735,856 $590,801 $1,777,055 -1% -2%
====================================
Health Information Solutions Segment % Change % Change
------------------------------------
Q3 2014 YTD 2014 Q3 2013 YTD 2013 Q3 14 v. Q3 13 YTD 14 v. YTD 13
------- -------- ------- -------- -------------- ----------------
Condition and case management $48,356 $145,215 $55,992 $161,475 -14% -10%
Wellness 21,546 70,030 22,223 75,753 -3% -8%
Women's & children's health 23,769 70,308 28,431 86,767 -16% -19%
Patient self-testing services 30,185 86,799 27,025 77,437 12% 12%
Health information solutions net revenue $123,856 $372,352 $133,671 $401,432 -7% -7%
========================================
(1)Revenues are presented in accordance with generally accepted accounting principles and exclude an adjustment of $0.3 million and $1.1 million, and $0.5 million and $1.8 million related to acquired software license contracts which were not recognized during the three and nine months ended September 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 September 30, 2014
---------------------------------------------
Operating Segment Professional Diagnostics Health Information Solutions Consumer Diagnostics Corporate Total
------------------------ ---------------------------- -------------------- --------- -----
Net revenue $585,941 $123,856 $26,449 $ - $736,246
Adjustment related to acquired software license contracts(1) 324 - - - 324
--- --- --- --- ---
Non-GAAP adjusted net revenue $586,265 $123,856 $26,449 $ - $736,570
======== ======== ======= ======================== ========
Operating income (loss) $56,499 $9,824 $3,743 $(32,454) $37,612
Adjustment related to acquired software license contracts(1) 324 - - - 324
Amortization of acquisition-related intangible assets 56,063 8,282 175 1,333 65,853
Restructuring charges 14,124 424 - 3,178 17,726
Stock-based compensation expense - - - 3,167 3,167
Compensation charges associated with acquisition-related contingent consideration obligations 670 - - - 670
Acquisition-related costs - - - 325 325
Fair value adjustments to acquisition-related contingent consideration (4,237) (4,400) - 3,100 (5,537)
Costs associated with potential business dispositions 5,885 318 - - 6,203
Loss on disposition - - - - -
Non-GAAP adjusted operating income (loss) $129,328 $14,448 $3,918 $(21,351) $126,343
======== ======= ====== ======== ========
Non-GAAP adjusted operating income (loss) as % of Non-GAAP adjusted net revenue 22.1% 11.7% 14.8% 17.2%
==== ==== ==== ====
(1) Estimated revenue related to acquired software license contracts that was not recognized during the third quarter of 2014 due to business combination accounting rules.
For the Three Months Ended September 30, 2013
---------------------------------------------
Operating Segment Professional Diagnostics Health Information Solutions Consumer Diagnostics Corporate Total
------------------------ ---------------------------- -------------------- --------- -----
Net revenue $590,801 $133,671 $28,848 $ - $753,320
Adjustment related to acquired software license contracts(1) 535 - - - 535
--- --- --- --- ---
Non-GAAP adjusted net revenue $591,336 $133,671 $28,848 $ - $753,855
======== ======== ======= ======================== ========
Operating income (loss) $53,189 $(1,918) $3,347 $(29,034) $25,584
Adjustment related to acquired software license contracts(1) 535 - - - 535
Amortization of acquisition-related intangible assets 69,556 11,948 459 - 81,963
Non-cash charge associated with acquired inventory 708 - - - 708
Restructuring charges 6,033 1,661 - - 7,694
Stock-based compensation expense - - - 5,662 5,662
Compensation charges associated with acquisition-related contingent consideration obligations 762 - - - 762
Acquisition-related costs - - - 450 450
Fair value adjustments to acquisition-related contingent consideration 1,516 (97) - 400 1,819
Costs associated with proxy contest - - - 5,467 5,467
Loss on disposition 5,885 - - - 5,885
Non-GAAP adjusted operating income (loss) $138,184 $11,594 $3,806 $(17,055) $136,529
======== ======= ====== ======== ========
Non-GAAP adjusted operating income (loss) as % of Non-GAAP adjusted net revenue 23.4% 8.7% 13.2% 18.1%
==== === ==== ====
(1) Estimated revenue related to acquired software license contracts that was not recognized during the third quarter of 2013 due to business combination accounting rules.
Comments:
In calculating "Non-GAAP adjusted operating income (loss)" in the schedule presented above, the Company excludes from "Operating income (loss)" (i) certain non-cash charges, including amortization expense and stock-based compensation expense, (ii) non-recurring charges and income, and (iii) certain other charges and income that have a significant
positive or negative impact on results yet do not occur on a consistent or regular basis in its business. In determining whether a particular item meets one of these criteria, management considers facts and circumstances that it believes are relevant. Management believes that excluding such charges and income from "Operating income (loss)" allows
investors and management to evaluate and compare the Company's operating results from continuing operations from period to period in a meaningful and consistent manner. Due to the frequency of their occurrence in its business, the Company does not adjust "Operating income (loss)" for the costs associated with litigation, including payments made or
received through settlements. It should be noted that "Non-GAAP adjusted operating income (loss)" is not a standard financial measurement under accounting principles generally accepted in the United States of America ("GAAP") and should not be considered as an alternative to "Operating income (loss)" as an indicator of operating performance or any
measure of performance derived in accordance with GAAP. In addition, all companies do not calculate non-GAAP financial measures in the same manner and, accordingly, "Non-GAAP adjusted operating income (loss)" presented in this schedule may not be comparable to similar measures used by other companies.
Reference should also be made to the Company's financial results contained in our earnings press release respective to the periods presented in this schedule, which include a more detailed discussion of the adjustments to the GAAP operating results presented above.
Alere Inc. and Subsidiaries
Reconciliation of Operating Income (Loss) to Non-GAAP Adjusted Operating Income (Loss)
(in thousands)
For the Nine Months Ended September 30, 2014
--------------------------------------------
Operating Segment Professional Diagnostics Health Information Solutions Consumer Diagnostics Corporate Total
------------------------ ---------------------------- -------------------- --------- -----
Net revenue $1,735,856 $372,352 $81,616 $ - $2,189,824
Adjustment related to acquired software license contracts(1) 1,116 - - - 1,116
----- --- --- --- -----
Non-GAAP adjusted net revenue $1,736,972 $372,352 $81,616 $ - $2,190,940
========== ======== ======= =========================== ==========
Operating income (loss) $119,341 $6,813 $10,618 $(74,023) $62,749
Adjustment related to acquired software license contracts(1) 1,116 - - - 1,116
Amortization of acquisition-related intangible assets 170,687 25,068 638 1,333 197,726
Restructuring charges 29,571 3,872 - 7,328 40,771
Stock-based compensation expense - - - 7,751 7,751
Compensation charges associated with acquisition-related contingent consideration obligations 1,673 - - - 1,673
Acquisition-related costs - - - 695 695
Fair value adjustments to acquisition-related contingent consideration 16,803 (3,161) - 3,400 17,042
Costs associated with potential business dispositions 20,445 318 - - 20,763
Loss on disposition 638 - - - 638
Non-GAAP adjusted operating income (loss) $360,274 $32,910 $11,256 $(53,516) $350,924
======== ======= ======= ======== ========
Non-GAAP adjusted operating income (loss) as % of Non-GAAP adjusted net revenue 20.7% 8.8% 13.8% 16.0%
==== === ==== ====
(1) Estimated revenue related to acquired software license contracts that was not recognized during the nine months of 2014 due to business combination accounting rules.
For the Nine Months Ended September 30, 2013
--------------------------------------------
Operating Segment Professional Diagnostics Health Information Solutions Consumer Diagnostics Corporate Total
------------------------ ---------------------------- -------------------- --------- -----
Net revenue $1,777,055 $401,432 $76,846 $ - $2,255,333
Adjustment related to acquired software license contracts(1) 1,770 - - - 1,770
----- --- --- --- -----
Non-GAAP adjusted net revenue $1,778,825 $401,432 $76,846 $ - $2,257,103
========== ======== ======= =========================== ==========
Operating income (loss) $185,925 $(18,832) $9,031 $(66,909) $109,215
Adjustment related to acquired software license contracts(1) 1,770 - - - 1,770
Amortization of acquisition-related intangible assets 201,817 33,148 1,453 - 236,418
Restructuring charges 9,162 10,468 - - 19,630
Stock-based compensation expense - - - 14,462 14,462
Compensation charges associated with acquisition-related contingent consideration obligations 2,032 - - - 2,032
Non-cash charge associated with acquired inventory 1,880 - - - 1,880
Acquisition-related costs - - - 1,772 1,772
Fair value adjustments to acquisition-related contingent consideration 12,909 2,486 - 900 16,295
Costs associated with proxy contest - - - 5,467 5,467
Loss on disposition 5,885 - - - 5,885
Non-GAAP adjusted operating income (loss) $421,380 $27,270 $10,484 $(44,308) $414,826
======== ======= ======= ======== ========
Non-GAAP adjusted operating income (loss) as % of Non-GAAP adjusted net revenue 23.7% 6.8% 13.6% 18.4%
==== === ==== ====
(1) Estimated revenue related to acquired software license contracts that was not recognized during the nine months of 2013 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 September 30, 2014 Three Months Ended September 30, 2013
------------------------------------- -------------------------------------
Net revenue $736,246 $753,320
Adjustment related to acquired
software license contracts 324 535
Non-GAAP adjusted net revenue $736,570 $753,855
-------- --------
Cost of net revenue $393,387 $384,003
Less adjustments:
Amortization of acquisition-
related intangible assets (15,973) (17,979)
Restructuring charges (5,654) (3,556)
Stock-based compensation expense (291) (287)
Non-cash charge associated with
acquired inventory - (708)
--- ----
Non-GAAP adjusted cost of net
revenue $371,469 $361,473
-------- --------
Non-GAAP adjusted gross profit $365,101 $392,382
======== ========
Three Months Ended September 30, 2014 Three Months Ended September 30, 2013
------------------------------------- -------------------------------------
Research and development $38,726 $40,498
Less adjustments:
Amortization of acquisition-
related intangible assets (1,372) (1,231)
Restructuring charges (5,457) (1,100)
Stock-based compensation expense (279) (1,111)
---- ------
Non-GAAP adjusted research and
development $31,618 $37,056
======= =======
Three Months Ended September 30, 2014 Three Months Ended September 30, 2013
------------------------------------- -------------------------------------
Selling, general and administrative $266,521 $297,350
Less adjustments:
Amortization of acquisition-
related intangible assets (48,508) (62,753)
Restructuring charges (6,615) (3,038)
Stock-based compensation expense (2,597) (4,264)
Compensation charges associated
with acquisition-related
contingent consideration
obligations (670) (762)
Acquisition-related costs (325) (450)
Fair value adjustments to
acquisition-related contingent
consideration 5,537 (1,819)
Costs associated with potential
business dispositions (6,203) -
Costs associated with proxy contest - (5,467)
Non-GAAP adjusted selling, general
and administrative $207,140 $218,797
======== ========
Three Months Ended September 30, 2014 Three Months Ended September 30, 2013
------------------------------------- -------------------------------------
Loss on disposition $ - $5,885
Loss on disposition - (5,885)
--- ------
Non-GAAP adjusted loss on
disposition $ - $ -
========================================= =========================================
Three Months Ended September 30, 2014 Three Months Ended September 30, 2013
------------------------------------- -------------------------------------
Interest and other income
(expense), net $(60,741) $(62,288)
Less adjustments:
Restructuring charges 143 111
Interest expense recorded in
connection with fees paid for
certain debt modifications and the
termination of our senior secured
credit facility 363 364
Interest accretion associated with
acquisition-related compensation
charges 102 98
Bargain purchase gain associated
with the acquisition of the
Liberty business - 39
Non-GAAP adjusted interest and
other income (expense), net $(60,133) $(61,676)
======== ========
Three Months Ended September 30, 2014 Three Months Ended September 30, 2013
------------------------------------- -------------------------------------
Provision (benefit) for income
taxes $76,648 $(14,980)
Add: Income tax effects on Non-
GAAP adjustments (50,497) 37,477
------- ------
Non-GAAP adjusted provision for
income taxes $26,151 $22,497
======= =======
Three Months Ended September 30, 2014 Three Months Ended September 30, 2013
------------------------------------- -------------------------------------
Equity earnings of unconsolidated
entities, net of tax $6,277 $5,753
Less adjustments:
Amortization of acquisition-
related intangible assets 132 147
Loss on sale of equity investment 457 -
Income tax effects on items above - -
--- ---
Non-GAAP adjusted equity earnings
of unconsolidated entities, net of
tax $6,866 $5,900
====== ======
Alere Inc. and Subsidiaries
Reconciliations to Non-GAAP Adjusted P&L Categories
(in thousands)
Nine Months Ended September 30, 2014 Nine Months Ended September 30, 2013
------------------------------------ ------------------------------------
Net revenue $2,189,824 $2,255,333
Adjustment related to acquired software license contracts 1,116 1,770
----- -----
Non-GAAP adjusted net revenue $2,190,940 $2,257,103
---------- ----------
Cost of net revenue $1,154,057 $1,136,846
Less adjustments:
Amortization of acquisition-related intangible assets (48,109) (53,737)
Restructuring charges (6,821) (4,908)
Stock-based compensation expense (863) (797)
Non-cash charge associated with acquired inventory - (1,880)
Non-GAAP adjusted cost of net revenue $1,098,264 $1,075,524
---------- ----------
Non-GAAP adjusted gross profit $1,092,676 $1,181,579
========== ==========
Nine Months Ended September 30, 2014 Nine Months Ended September 30, 2013
------------------------------------ ------------------------------------
Research and development $114,855 $120,860
Less adjustments:
Amortization of acquisition-related intangible assets (3,721) (3,729)
Restructuring charges (8,488) (1,745)
Stock-based compensation expense 340 (2,641)
--- ------
Non-GAAP adjusted research and development $102,986 $112,745
======== ========
Nine Months Ended September 30, 2014 Nine Months Ended September 30, 2013
------------------------------------ ------------------------------------
Selling, general and administrative $857,525 $882,527
Less adjustments:
Amortization of acquisition-related intangible assets (145,896) (178,952)
Restructuring charges (25,462) (12,977)
Stock-based compensation expense (7,228) (11,024)
Compensation charges associated with acquisition-related contingent
consideration obligations (1,673) (2,032)
Acquisition-related costs (695) (1,772)
Fair value adjustments to acquisition-related contingent consideration (17,042) (16,295)
Costs associated with potential business dispositions (20,763) -
Costs associated with proxy contest - (5,467)
--- ------
Non-GAAP adjusted selling, general and administrative $638,766 $654,008
======== ========
Nine Months Ended September 30, 2014 Nine Months Ended September 30, 2013
------------------------------------ ------------------------------------
Loss on disposition $638 $5,885
Loss on disposition (638) (5,885)
---- ------
Non-GAAP adjusted loss on disposition $ - $ -
================================================= =====================================================
Nine Months Ended September 30, 2014 Nine Months Ended September 30, 2013
------------------------------------ ------------------------------------
Interest and other income (expense), net $(157,564) $(211,532)
Less adjustments:
Restructuring charges 376 228
Interest expense recorded in connection with fees paid for certain debt
modifications and the termination of our senior secured credit facility 1,091 2,126
Interest accretion associated with acquisition-related compensation charges 295 258
Non-cash write-off of an investment - 5,110
Bargain purchase gain associated with the acquisition of the Liberty business - (8,023)
Expense associated with extinguishment of debt - 35,767
--- ------
Non-GAAP adjusted interest and other income (expense), net $(155,802) $(176,066)
========= =========
Nine Months Ended September 30, 2014 Nine Months Ended September 30, 2013
------------------------------------ ------------------------------------
Provision (benefit) for income taxes $63,109 $(30,359)
Add: Income tax effects on Non-GAAP adjustments 2,693 111,405
----- -------
Non-GAAP adjusted provision for income taxes $65,802 $81,046
======= =======
Nine Months Ended September 30, 2014 Nine Months Ended September 30, 2013
------------------------------------ ------------------------------------
Equity earnings of unconsolidated entities, net of tax $13,716 $13,238
Less adjustments:
Amortization of acquisition-related intangible assets 430 448
Loss on sale of equity investment 457 -
Income tax effects on items above - -
--- ---
Non-GAAP adjusted equity earnings of unconsolidated entities, net of tax $14,603 $13,686
======= =======
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 September 30, 2013 (1) June 30, 2014 (1) September 30, 2014
--------------------- ---------------- ------------------
Net revenue $753,320 $737,416 $736,246
Adjustment related to acquired
software license contracts 535 373 324
--- --- ---
Non-GAAP adjusted net revenue 753,855 737,789 736,570
------- ------- -------
Cost of net revenue 384,003 396,594 393,387
Less adjustments:
Amortization of acquisition-related intangible assets 17,979 15,972 15,972
Stock-based compensation expense 287 285 291
Non-cash charge associated with acquired inventory 708 - -
Restructuring charges 3,556 292 5,654
----- --- -----
Non-GAAP adjusted cost of net revenue 361,473 380,045 371,470
------- ------- -------
Non-GAAP adjusted gross profit/margin $392,382 52.1% $357,744 48.5% $365,100 49.6%
======== ==== ======== ==== ======== ====
Three Months Ended Three Months Ended Three Months Ended
Professional Diagnostics Segment September 30, 2013 June 30, 2014 September 30, 2014
------------------ ------------- ------------------
Net product sales and services revenue $587,313 $578,077 $581,759
Adjustment related to acquired
software license contracts 535 373 324
--- --- ---
Non-GAAP adjusted net product sales and services revenue 587,848 578,450 582,083
------- ------- -------
Cost of net revenue 286,481 307,001 308,467
Less adjustments:
Amortization of acquisition-related intangible assets 15,245 15,053 15,081
Stock-based compensation expense 287 285 291
Non-cash charge associated with acquired inventory 708 - -
Restructuring charges 3,422 220 5,654
----- --- -----
Non-GAAP adjusted cost of net revenue 266,819 291,443 287,441
------- ------- -------
Non-GAAP adjusted gross profit/margin $321,029 54.6% $287,007 49.6% $294,642 50.6%
======== ==== ======== ==== ======== ====
Three Months Ended Three Months Ended Three Months Ended
Health Information Solutions Segment September 30, 2013 (1) June 30, 2014 (1) September 30, 2014
--------------------- ---------------- ------------------
Net product sales and services revenue $133,671 $125,288 $123,857
-------- -------- --------
Cost of net revenue 72,764 67,145 63,470
Less adjustments:
Amortization of acquisition-related intangible assets 2,522 894 866
Restructuring charges 134 72 -
--- --- ---
Non-GAAP adjusted cost of net revenue 70,108 66,179 62,604
------ ------ ------
Non-GAAP adjusted gross profit/margin $63,563 47.6% $59,109 47.2% $61,253 49.5%
======= ==== ======= ==== ======= ====
Note:
-----
(1)Restated to reflect the impact of discontinued operations
Alere Inc. and Subsidiaries
Reconciliation of Net Loss to Non-GAAP EBITDA
(in thousands)
Three Months Ended Nine Months Ended
September 30, 2014 September 30, 2014
------------------ ------------------
Net Loss (1) $(86,455) (142,161)
Less: Income from
discontinued
operations, net of
tax 7,045 2,047
----- -----
Loss from
continuing
operations (93,500) (144,208)
Adjustment related
to acquired
software license
contracts 324 1,116
Income tax
provision
(benefit) 76,648 63,109
Depreciation and
amortization 96,048 291,190
Interest, net 51,765 155,104
Non-cash stock-
based compensation
expense 3,169 7,751
Non-cash fair
value adjustments
to acquisition-
related contingent
consideration (5,537) 17,042
Loss on sale of
equity investment 457 457
Loss on disposition - 638
Non-GAAP EBITDA $129,374 $392,199
======== ========
(1) Net loss for the three months and nine months ended September 30, 2014 includes non-interest related restructuring charges of $17.7
million and $40.7 million, $0.3 million and $0.7 million of acquisition costs and $6.2 million and $20.8 million of costs associated
with potential business dispositions, respectively, which have not been added back for purposes of computing Non-GAAP EBITDA.
Alere Inc. and Subsidiaries
Reconciliation of Net Cash Provided by Operating Activities to Non-GAAP Free Cash Flow
(in thousands)
Three Months Ended Nine Months Ended
September 30, 2014 September 30, 2014
------------------ ------------------
Net cash provided
by operating
activities $91,720 $216,887
Capital
expenditures (28,807) (80,456)
Non-GAAP free
cash flow $62,913 $136,431
======= ========
Alere Inc. and Subsidiaries
Discontinued Operations
(in thousands)
Three Months Ended Three Months Ended Three Months Ended Three Months Ended Three Months Ended Three Months Ended Three Months Ended
March 31, 2013 June 30, 2013 September 30, 2013 December 31, 2013 March 31, 2014 June 30, 2014 September 30, 2014
-------------- ------------- ------------------ ----------------- -------------- ------------- ------------------
Net product sales and services revenue $596 $625 $562 $582 $461 $527 $690
License and royalty revenue - - - - - - -
--- --- --- --- --- --- ---
Net revenue 596 625 562 582 461 527 690
Cost of net revenue 427 1,221 1,233 2,925 1,307 1,431 7,440
--- ----- ----- ----- ----- ----- -----
Gross profit (loss) 169 (596) (671) (2,343) (846) (904) (6,750)
Operating expenses:
Research and development 892 700 - - - - -
Sales and marketing 804 831 909 837 829 706 694
General and administrative 2,693 2,392 3,705 2,847 1,429 3,241 (7,913)
Operating loss (4,220) (4,519) (5,285) (6,027) (3,104) (4,851) 469
Interest and other income (expense), net (15) (0) (1) (2) (1) (31) (29)
--- --- --- --- --- --- ---
Loss before benefit for income taxes (4,235) (4,519) (5,286) (6,029) (3,105) (4,882) 440
Benefit for income taxes (1,684) (1,733) (2,063) (2,402) (1,210) (1,779) (6,605)
------ ------ ------ ------ ------ ------ ------
Income (loss) from discontinued operations, net of taxes $(2,551) $(2,786) $(3,223) $(3,627) $(1,894) $(3,103) $7,045
======= ======= ======= ======= ======= ======= ======
Certain items included above:
-----------------------------
Amortization of intangible assets:
Cost of net revenue $ - $514 $257 $2,022 $471 $471 $18,430
Sales and marketing - 50 25 19 - - -
General and administrative - 6 3 3 3 3 29
Change in fair value of contingent consideration:
General and administrative 1,700 100 900 600 (1,350) 100 (25,071)
1,700 670 1,185 2,644 (876) 574 (6,612)
Provision (benefit) for income taxes (663) (253) (458) (1,002) 348 (217) (4,291)
Total $1,037 $417 $727 $1,642 $(528) $357 $(10,903)
====== ==== ==== ====== ===== ==== ========
SOURCE Alere Inc.
