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.