Alere Inc. Announces Third Quarter 2012 Results

WALTHAM, Mass., Nov. 8, 2012 /PRNewswire/ -- Alere Inc. (NYSE: ALR), a global leader in enabling individuals to take charge of their health at home through the merger of rapid diagnostics and health management, today announced its financial results for the quarter ended September 30, 2012.

Financial results for the third quarter of 2012:

  • Net revenue of $691.4 million for the third quarter of 2012, compared to $585.8 million for the third quarter of 2011.  Non-GAAP adjusted net revenue, which includes $0.9 million in estimated revenue related to acquired software license contracts not recognized for GAAP purposes for the third quarter of 2012 due to business combination accounting rules, was $692.3 million for the third quarter of 2012, compared to $585.8 million for the third quarter of 2011.
  • Net loss of $9.2 million attributable to common stockholders of Alere Inc., and respective net loss per diluted common share of $0.11, for the third quarter of 2012, compared to net income of $234.2 million attributable to common stockholders of Alere Inc., and respective net income per diluted common share of $2.48, for the third quarter of 2011.  Net income for the third quarter of 2011 included a gain of $288.9 million in connection with the formation of our joint venture with the Procter & Gamble Company.
  • Non-GAAP adjusted net income per diluted common share of $0.43 for the third quarter of 2012, compared to non-GAAP adjusted net income per diluted common share of $0.67 for the third quarter of 2011.
  • Net product and services revenue from our Professional Diagnostics segment was $528.8 million in the third quarter of 2012, compared to net product and services revenue of $426.3 million in the third quarter of 2011. Non-GAAP adjusted net product and services revenue from our Professional Diagnostics segment, which includes $0.9 million in estimated revenue related to acquired software license contracts not recognized for GAAP purposes for the third quarter of 2012 due to business combination accounting rules, was $529.7 million in the third quarter of 2012, compared to non-GAAP adjusted net product and services revenue of $426.3 million in the third quarter of 2011.  Recent professional diagnostics acquisitions contributed $134.6 million of incremental net revenue compared to the third quarter of 2011.
  • North American influenza sales decreased to $9.9 million for the third quarter of 2012, from $16.0 million for the third quarter of 2011.
  • Excluding the impact of the change in North American influenza revenues and the impact on revenues of the FDA matters associated with our U.S. Alere Triage products, currency adjusted organic growth in our Professional Diagnostics segment was 1%.
  • Net product and services revenue from our Health Management segment was $135.1 million in the third quarter of 2012, compared to $129.9 million in the third quarter of 2011 and $138.6 million in the second quarter of 2012.  The increase in revenue from the third quarter of 2011 was related primarily to increased revenues from our home coagulation monitoring programs.  

The Company's GAAP results for the third quarter of 2012 exclude $0.9 million of revenue associated with acquired software license contracts that are not recognized due to business combination accounting rules and include amortization of $83.1 million, $3.3 million of restructuring charges, $3.6 million of stock-based compensation expense, $0.8 million of acquisition-related costs recorded in accordance with ASC 805, Business Combinations, and $1.3 million of amortization associated with fees paid for certain debt modifications and terminations, offset by $15.1 million of income recorded for fair value adjustments to acquisition-related contingent consideration.  The Company's GAAP results for the third quarter of 2011 include amortization of $70.3 million, $3.4 million of restructuring charges, $4.3 million of stock-based compensation expense, $2.9 million of acquisition-related costs recorded in accordance with ASC 805, Business Combinations, $1.3 million of amortization associated with fees paid for certain debt modifications and terminations, a $0.6 million fair value write-down in connection with an idle facility and a net unrealized foreign currency loss of $18.1 million associated with a bank account funded for the acquisition of Axis-Shield plc, offset by $3.8 million of income recorded for fair value adjustments to acquisition-related contingent consideration and a $288.9 million gain in connection with the formation of our joint venture with Procter & Gamble in May 2007.  These amounts, net of tax, have been excluded from the non-GAAP adjusted net income per diluted common share attributable to Alere Inc. for the respective quarters.

Detailed reconciliations of the Company's non-GAAP adjusted operating income and non-GAAP adjusted net income available to common shareholders to operating income and net loss available to common shareholders under GAAP, as well as a discussion regarding these non-GAAP financial measures, is included in the schedules to this press release.

The Company will host a conference call beginning at 8:30 a.m. (Eastern Time) today, November 8, 2012, to discuss these results, as well as other corporate matters.  During the conference call, the Company may answer questions concerning business and financial developments and trends and other business and financial matters.  The Company's responses to these questions, as well as other matters discussed during the conference call, may contain or constitute information that has not been previously disclosed.

The conference call may be accessed by dialing (877) 270-2148 (domestic) or (412) 902-6510 (international) and asking for Alere Inc.  A webcast of the call can also be accessed via the Alere web site at www.alere.com/investors, or directly through the following link: http://www.videonewswire.com/event.

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 10020552.  The replay will also be available via online webcast at http://www.videonewswire.com/event or via the Alere web site at www.alere.com/investors 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 web site (http://www.alere.com/investors) under the Earnings Calls and Releases section shortly before the conference call begins and will continue to be available on this web site.

For more information about Alere, please visit our web site at http://www.alere.com.

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

Alere Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(in thousands, except per share amounts)










Three Months Ended September 30, 




2012


2011







Net product sales and services revenue


$               686,228


$               580,520

License and royalty revenue


5,188


5,249


Net revenue


691,416


585,769

Cost of net revenue


345,641


279,807


      Gross profit


345,775


305,962


      Gross margin


50%


52%







Operating expenses:






Research and development


40,562


34,772


Selling, general and administrative


266,481


226,271


   Total operating expenses


307,043


261,043


      Operating income


38,732


44,919

Interest and other income (expense), net


(55,933)


233,319


 Income (loss) before provision (benefit) for income taxes 


(17,201)


278,238

Provision (benefit) for income taxes


(10,677)


42,652


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

(6,524)


235,586

Equity earnings of unconsolidated entities, net of tax


3,007


4,118

Net income (loss)


(3,517)


239,704


Less: Net income attributable to non-controlling interests


286


138

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


(3,803)


239,566








Preferred stock dividends


(5,352)


(5,358)







Net income (loss) available to common stockholders


$                 (9,155)


$               234,208








Basic net income (loss) per common share


$                   (0.11)


$                      2.84


Diluted net income (loss) per common share


$                   (0.11)


$                      2.48







Weighted average shares - basic


80,792


82,486

Weighted average shares - diluted


80,792


97,090













Alere Inc. and Subsidiaries

Condensed Consolidated Statements of Operations 

(in thousands, except per share amounts)










Nine Months Ended September 30, 




2012


2011







Net product sales and services revenue


$           2,051,729


$           1,717,695

License and royalty revenue


11,333


17,723


Net revenue


2,063,062


1,735,418

Cost of net revenue


1,008,608


830,521


      Gross profit


1,054,454


904,897


      Gross margin


51%


52%







Operating expenses:






Research and development


120,009


112,662


Selling, general and administrative


826,301


700,257


   Total operating expenses


946,310


812,919


      Operating income


108,144


91,978

Interest and other income (expense), net


(146,549)


129,225


 Income (loss) before benefit for income taxes 


(38,405)


221,203

Benefit for income taxes


(12,621)


(4,414)


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

(25,784)


225,617

Equity earnings of unconsolidated entities, net of tax


10,417


4,922

Net income (loss)


(15,367)


230,539


Less: Net income attributable to non-controlling interests


137


160

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


(15,504)


230,379








Preferred stock dividends


(15,940)


(16,682)


Preferred stock repurchase


-


23,936







Net income (loss) available to common stockholders


$               (31,444)


$               237,633








Basic net income (loss) per common share


$                    (0.39)


$                      2.81


Diluted net income (loss) per common share


$                    (0.39)


$                      2.56







Weighted average shares - basic


80,492


84,508

Weighted average shares - diluted


80,492


100,058













Alere Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(in thousands)






September 30,


December 31,


2012


2011

ASSETS




CURRENT ASSETS:




Cash and cash equivalents

$            302,254


$            299,173

Restricted cash

3,216


8,987

Marketable securities

897


1,086

Accounts receivable, net

508,591


475,824

Inventories, net

332,512


320,269

Prepaid expenses and other current assets

153,249


188,388

Total current assets

1,300,719


1,293,727





PROPERTY, PLANT AND EQUIPMENT, NET

516,814


491,205

GOODWILL AND OTHER INTANGIBLE ASSETS, NET

4,974,806


4,676,742

DEFERRED FINANCING COSTS AND OTHER ASSETS, NET

220,342


211,027

Total assets

$        7,012,681


$         6,672,701





LIABILITIES AND STOCKHOLDERS' EQUITY




CURRENT LIABILITIES:




Short-term debt and current portion of long-term debt

$              58,860


$               73,415

Other current liabilities

588,722


551,037

Total current liabilities

647,582


624,452





LONG-TERM LIABILITIES:




Long-term debt, net of current portion

3,541,290


3,280,080

Deferred tax liability

413,808


380,700

Other long-term liabilities

178,406


153,398

Total long-term liabilities

4,133,504


3,814,178





Redeemable non-controlling interest

-


2,497





TOTAL EQUITY

2,231,595


2,231,574

Total liabilities and equity

$        7,012,681


$         6,672,701





Alere Inc. and Subsidiaries

Reconciliation to Non-GAAP Adjusted Operating Results

(in thousands, except per share amounts)






Three Months Ended September 30,


2012


2011

Reconciliation to Non-GAAP Adjusted Operating Income (1)




Operating income

$                  38,732


$                  44,919





Revenue related to acquired software license contracts

905


-

Amortization of acquisition-related intangible assets

82,867


70,121

Restructuring charges 

3,239


3,129

Stock-based compensation expense

3,626


4,286

Acquisition-related costs

833


2,912

Fair value adjustments to acquisition-related contingent consideration

(15,145)


(3,845)

Fair value write-down in connection with an idle facility

-


596





Non-GAAP adjusted operating income

$                115,057


$                122,118






Three Months Ended September 30,


2012


2011

Reconciliation to Non-GAAP Adjusted Net Income(1)




Net income (loss) available to common shareholders

$                  (9,155)


$                234,208





Revenue related to acquired software license contracts

905


-

Amortization of acquisition-related intangible assets

83,083


70,314

Restructuring charges 

3,287


3,412

Stock-based compensation expense

3,626


4,286

Acquisition-related costs

833


2,912

Fair value adjustments to acquisition-related contingent consideration

(15,145)


(3,845)

Gain in connection with the formation of a joint venture

-


(288,896)

Unrealized foreign currency loss associated with a bank account funded for the acquisition of Axis-Shield plc

-


18,050

Fair value write-down in connection with an idle facility

-


596

Amortization of fees paid for certain debt modifications and terminations

1,320


1,320

Income tax effects on items above

(32,931)


16,254





Non-GAAP adjusted net income available to common shareholders

$                  35,823


$                  58,611









Net income (loss) per diluted common share

$                    (0.11)


$                       2.48

Non-GAAP adjusted net income per diluted common share

$                       0.43


$                       0.67





Weighted average shares - diluted

80,792


97,090

Non-GAAP adjusted weighted average shares - diluted

84,299


97,090





(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 operating income and net income or loss or cash flow from operating activities, as a measure of liquidity or as an indicator of operating performance or any measure of performance derived in accordance with GAAP. In addition, all companies do not calculate non-GAAP financial measures in the same manner and, accordingly, "non-GAAP adjusted operating income" and "non-GAAP adjusted net income" presented in this press release may not be comparable to similar measures used by other companies.

Alere Inc. and Subsidiaries

Reconciliation to Non-GAAP Adjusted Operating Results

(in thousands, except per share amounts)






Nine Months Ended September 30,


2012


2011

Reconciliation to Non-GAAP Adjusted Operating Income (1)




Operating income

$                108,144


$                  91,978





Revenue related to acquired software license contracts

3,317


-

Amortization of acquisition-related intangible assets

242,167


227,207

Restructuring charges 

10,132


19,625

Stock-based compensation expense

11,868


16,275

Acquisition-related costs

6,094


6,191

Fair value adjustments to acquisition-related contingent consideration

(16,782)


(9,684)

Non-cash charge associated with acquired inventory

4,681


-

Fair value write-down in connection with an idle facility

-


596

Expenses incurred in connection with the sale of our vitamin and nutritional supplements business

-


23





Non-GAAP adjusted operating income

$                369,621


$                352,211






Nine Months Ended September 30,


2012


2011

Reconciliation to Non-GAAP Adjusted Net Income(1)




Net income (loss) available to common shareholders

$                (31,444)


$                237,633





Revenue related to acquired software license contracts

3,317


-

Amortization of acquisition-related intangible assets

242,849


227,798

Restructuring charges 

10,290


20,365

Stock-based compensation expense

11,868


16,275

Acquisition-related costs

6,094


6,191

Fair value adjustments to acquisition-related contingent consideration

(16,782)


(9,684)

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

3,960


31,213

Non-cash charge associated with acquired inventory

4,681


-

Gain in connection with the formation of a joint venture

-


(288,896)

Unrealized foreign currency loss associated with a bank account funded for the acquisition of Axis-Shield plc

-


18,050

Realized foreign currency loss associated with the settlement of an acquisition-related contingent consideration obligation

-


1,920

Fair value write-down in connection with an idle facility

-


596

Expenses incurred in connection with the sale of our vitamin and nutritional supplements business

-


23

Non-cash income allocated to net income available to common stockholders as a result of repurchases of preferred shares

-


(23,936)

Income tax effects on items above

(93,028)


(82,183)





Non-GAAP adjusted net income available to common shareholders

$                141,805


$                155,365









Net income (loss) per diluted common share

$                    (0.39)


$                       2.56

Non-GAAP adjusted net income per diluted common share

$                       1.70


$                       1.74





Weighted average shares - diluted

80,492


100,058

Non-GAAP adjusted weighted average shares - diluted

94,327


100,058





(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 operating income and net income or loss or cash flow from operating activities, as a measure of liquidity or as an indicator of operating performance or any measure of performance derived in accordance with GAAP. In addition, all companies do not calculate non-GAAP financial measures in the same manner and, accordingly, "non-GAAP adjusted operating income" and "non-GAAP adjusted net income" presented in this press release may not be comparable to similar measures used by other companies.





















Alere Inc. and Subsidiaries




Selected Consolidated Revenues by Business Area (1)




(in thousands)



















Professional Diagnostics Segment










% Change


% Change




Q3 2012


YTD 2012



Q3 2011


YTD 2011


Q3 12 v. Q3 11


YTD 12 v. YTD 11


Cardiology

$          122,372


$          386,795



$          127,943


$          390,652


-4%


-1%


Infectious disease

136,561


425,398



142,639


405,559


-4%


5%


Toxicology

156,074


437,736



93,497


267,834


67%


63%


Diabetes

35,670


100,628



-


-






Other (1)

78,077


230,519



62,172


176,206


26%


31%



Professional diagnostics net product sales and services revenue (1)

528,754


1,581,076



426,251


1,240,251


24%


27%


License and royalty revenue

2,688


8,833



3,701


14,587


-27%


-39%



Professional diagnostics net revenue

$          531,442


$      1,589,909



$          429,952


$      1,254,838


24%


27%
































Health Management Segment










% Change


% Change




Q3 2012


YTD 2012



Q3 2011


YTD 2011


Q3 12 v. Q3 11


YTD 12 v. YTD 11


Disease and case management

$            57,383


$          165,277



$            59,441


$          182,118


-3%


-9%


Wellness

24,290


80,881



24,427


80,369


-1%


1%


Women's & children's health

29,136


90,220



28,509


85,550


2%


5%


Patient self-testing services

24,269


68,074



17,554


60,529


38%


12%



Health management net revenue

$          135,078


$          404,452



$          129,931


$          408,566


4%


-1%

















(1)Revenues are presented in accordance with Generally Accepted Accounting Principles and exclude an adjustment of $905 and $3,317 in revenue related to acquired software license contracts which were not recognized during the three and nine months ended September 30, 2012, respectively, due to business combination accounting rules.


















SOURCE Alere Inc.

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