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8-K - 8-K - ALERE INC.d59384d8k.htm

Exhibit 99.1

 

LOGO

Alere Reports Third Quarter 2016 Financial Results

WALTHAM, Mass., November 4, 2016 – Alere Inc. (NYSE: ALR), a global leader in rapid diagnostic tests, today announced that it has filed its Form 10-Q and reported financial results for the third quarter ended September 30, 2016.

Revenue for the third quarter of 2016 was $582 million, a 4% decrease compared to $604 million in the prior year period. Infectious disease revenue grew 11% or $19 million year-over-year with strength in Africa and Latin America, particularly in malaria and HIV product sales. This strong growth was offset by revenue declines of $15 million due to the divestiture of BBI in November 2015, $12 million in mail order diabetes and $7 million in Toxicology. Foreign currency had a negative impact of $4 million and organic growth was -0.7% during the third quarter of 2016.

Net income (loss) from continuing operations during the third quarter of 2016 was $22 million, or $0.19 per basic and diluted share, compared to $(2) million, or $(0.10) per basic and diluted share in the prior year period. On a non-GAAP basis, the Company reported non-GAAP adjusted EBITDA of $64 million in the third quarter of 2016, compared to $135 million in the prior year period. The year-over-year decrease was primarily driven by $41 million in merger and legal-related expenses, $12 million of investments in infrastructure and performance improvement initiatives and $5 million in acquisition costs.

 

Revenue (in millions)    Third Quarter
2016
     Third Quarter
2015
     % Change  

Cardiometabolic Disease

   $ 189       $ 209         (10 %) 

Infectious Disease

     183         165         11

Toxicology

     156         163         (4 %) 

Other

     33         45         (28 %) 

Consumer Diagnostics

     19         19         —     

License and Royalty

     2         3         (25 %) 
  

 

 

    

 

 

    

 

 

 

Total

   $ 582       $ 604         (4 %) 
  

 

 

    

 

 

    

 

 

 

Certain amounts presented may not recalculate directly, due to rounding.


Non-GAAP Information

To supplement the financial measures prepared in accordance with U.S. GAAP, the Company uses non-GAAP adjusted EBITDA and organic growth, which are non-GAAP financial measures. The reconciliations of non-GAAP adjusted EBITDA to net income (loss) from continuing operations and organic growth to revenue, the most directly comparable financial measure calculated and presented in accordance with U.S. GAAP, is shown in the table in this press release. The Company believes non-GAAP adjusted EBITDA and organic growth are useful to investors because these metrics are commonly used by investors to assess the unleveraged, pre-tax financial performance and operating results of ongoing business operations. The Company’s management also uses non-GAAP adjusted EBITDA and organic growth because the Company’s management also believes that these are useful measures to evaluate operating performance and cash flows of the Company based on operational factors. It should also be noted that not all companies calculate non-GAAP adjusted EBITDA and organic growth in the same manner and, accordingly, these measures presented in this press release may not be comparable to similar measures used by other companies.

Conference Call

As announced on February 1, 2016, Alere entered into a definitive agreement under which Abbott will acquire Alere for $56 per common share. Due to the pending transaction, Alere will no longer hold conference calls to discuss its quarterly financial results.

Cautionary Statement Regarding Forward-Looking Statements

This communication contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Readers can identify these statements by forward-looking words such as “may,” “could,” “should,” “would,” “intend,” “will,” “expect,” “anticipate,” “believe,” “estimate,” “continue,” “goal,” “can” or similar words. A number of important factors could cause actual results of the Company and its subsidiaries to differ materially from those indicated by such forward-looking statements. These factors include, but are not limited to, (i) the risk that the proposed merger with Abbott Laboratories (“Abbott”) may not be completed in a timely manner or at all; (ii) the possibility that competing offers or acquisition proposals for Alere will be made; (iii) the possibility that any or all of the various conditions to the consummation of the merger may not be satisfied or waived, including the failure to receive any required regulatory approvals from any applicable governmental entities (or any conditions, limitations or restrictions placed on such approvals); (iv) the occurrence of any event, change or other circumstance that could give rise to the termination of the Agreement and Plan of Merger (the “Merger Agreement”) among Alere and Abbott pursuant to which Abbott will acquire Alere, including in circumstances which would require Alere to pay a termination fee or other expenses; (v) the effect of the announcement or pendency of the transactions contemplated by the Merger Agreement on Alere’s ability to retain and hire key personnel, its ability to maintain relationships with its customers, suppliers and others with whom it does business, or its operating results and business generally; (vi) risks related to diverting management’s attention from Alere’s ongoing business operations; (vii) the risk that stockholder litigation in connection with the transactions contemplated by the Merger Agreement may result in significant costs of

 

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defense, indemnification and liability, (viii) the risk that Alere fails to file its future periodic reports on Form 10-K and Form 10-Q in a timely manner which could, among other things, lead to the acceleration of the maturity of certain of Alere’s indebtedness; (ix) the possibility that any analysis of revenue recognition for future or past periods uncovers an error or misstatements in revenue recognition which require adjustment which may be material; or material weaknesses in the Company’s internal controls over financial reporting; (x) risks relating to the ongoing investigations by the SEC and the United States Department of Justice; and (xii) the risk factors detailed in Part I, Item 1A, “Risk Factors,” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2015 (as filed with the SEC on August 8, 2016) and other risk factors identified herein or from time to time in our periodic filings with the SEC. Readers should carefully review these risk factors, and should not place undue reliance on our forward-looking statements. These forward-looking statements are based on information, plans and estimates at the date of this report. The Company undertakes no obligation to update any forward-looking statements to reflect changes in underlying assumptions or factors, new information, future events or other changes.

About Alere

Alere believes that when diagnosing and monitoring health conditions, Knowing now matters.™ Alere delivers reliable and actionable information by providing rapid diagnostic tests, enhancing clinical and economic healthcare outcomes globally. Headquartered in Waltham, Mass., Alere focuses on rapid diagnostics for cardiometabolic disease, infectious disease and toxicology. For more information on Alere, please visit www.alere.com.

###

Investor Relations

Juliet Cunningham

Vice President, Investor Relations

ir@alere.com

858.805.2232

 

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Alere Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(in thousands, except per share amounts)

 

     Three Months Ended September 30,     Nine Months Ended September 30,  
         2016             2015             2016             2015      

Net product sales and services revenue

   $ 579,874      $ 600,469      $ 1,763,909      $ 1,826,340   

License and royalty revenue

     2,480        3,299        7,742        13,691   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net revenue

     582,354        603,768        1,771,651        1,840,031   

Cost of net revenue

     316,226        326,802        957,405        980,516   
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     266,128        276,966        814,246        859,515   

Gross margin

     46     46     46     47

Operating expenses:

        

Research and development

     31,430        36,011        86,938        91,225   

Selling, general and administrative

     231,266        207,799        676,905        578,766   

Impairment and (gain) loss on disposition, net

     —          2,074        (3,810     42,408   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     3,432        31,082        54,213        147,116   

Interest and other income (expense), net

     (58,442     (48,675     (158,338     (153,772
  

 

 

   

 

 

   

 

 

   

 

 

 

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

     (55,010     (17,593     (104,125     (6,656

Provision (benefit) for income taxes

     (50,888     (10,212     (47,979     (2,376
  

 

 

   

 

 

   

 

 

   

 

 

 

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

     (4,122     (7,381     (56,146     (4,280

Equity earnings of unconsolidated entities, net of tax

     26,149        5,000        33,305        10,320   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from continuing operations

     22,027        (2,381     (22,841     6,040   

Income from discontinued operations, net of tax

     —          —          —          216,777   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

     22,027        (2,381     (22,841     222,817   

Less: Net income attributable to non-controlling interests

     207        (61     453        386   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to Alere Inc. and Subsidiaries

     21,820        (2,320     (23,294     222,431   

Preferred stock dividends

     (5,366     (5,369     (15,983     (15,927
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income available to common stockholders

   $ 16,454      $ (7,689   $ (39,277   $ 206,504   
  

 

 

   

 

 

   

 

 

   

 

 

 

Basic net income per common share:

        

Income (loss) from continuing operations

   $ 0.19      $ (0.10   $ (0.45   $ (0.13

Income from discontinued operations

     —          —            2.56   
  

 

 

   

 

 

   

 

 

   

 

 

 

Basic and diluted net income per common share

   $ 0.19      $ (0.10   $ (0.45   $ 2.43   
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted net income per common share:

        

Income (loss) from continuing operations

   $ 0.19      $ (0.10   $ (0.45   $ (0.13

Income from discontinued operations

     —          —          —          2.56   
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted net income per common share

   $ 0.19      $ (0.10   $ (0.45   $ 2.43   
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average shares - basic

     86,753        85,895        86,708        85,141   
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average shares - diluted

     87,885        85,895        86,708        85,141   
  

 

 

   

 

 

   

 

 

   

 

 

 


Alere Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(in thousands)

 

     September 30,      December 31,  
     2016      2015  

ASSETS

     

CURRENT ASSETS:

     

Cash and cash equivalents

   $ 566,213       $ 502,200   

Restricted cash

     4,999         5,694   

Marketable securities

     75         164   

Accounts receivable, net

     427,241         445,833   

Inventories, net

     348,845         347,001   

Prepaid expenses and other current assets

     163,833         152,233   

Assets held for sale

     —           4,165   
  

 

 

    

 

 

 

Total current assets

     1,511,206         1,457,290   

Property, Plant and Equipment, net

     446,313         446,039   

Goodwill and other intangible assets, net

     3,698,458         3,862,306   

Restricted Cash- non-current

     42,438         43,228   

Other non-current assets

     157,259         100,921   

Assets held for sale - non-current

     —           13,337   
  

 

 

    

 

 

 

Total assets

   $ 5,855,674       $ 5,923,121   
  

 

 

    

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

     

CURRENT LIABILITIES:

     

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

   $ 45,137       $ 203,954   

Liabilities related to assets held for sale

     —           363   

Other current liabilities

     661,373         520,217   
  

 

 

    

 

 

 

Total current liabilities

     706,510         724,534   
  

 

 

    

 

 

 

LONG-TERM LIABILITIES:

     

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

     2,913,100         2,838,347   

Deferred tax liabilities

     52,513         147,618   

Other long-term liabilities

     133,182         154,193   

Liabilities related to assets held for sale - non-current

     —           —     
  

 

 

    

 

 

 

Total long-term liabilities

     3,098,795         3,140,158   
  

 

 

    

 

 

 

TOTAL EQUITY

     2,050,369         2,058,429   
  

 

 

    

 

 

 

Total liabilities and equity

   $ 5,855,674       $ 5,923,121   
  

 

 

    

 

 

 


Alere Inc. and Subsidiaries

Selected Consolidated Revenues

(in thousands)

 

     Three Months Ended September 30,      % Change  
     2016      2015      2016 v. 2015  

Professional diagnostics segment (1)

        

Cardiometabolic

   $ 188,731       $ 208,979         -10

Infectious disease

     183,375         164,822         11

Toxicology

     155,871         162,571         -4

Other

     32,550         45,350         -28
  

 

 

    

 

 

    

Total professional diagnostics segment

     560,527         581,722         -4

Consumer diagnostics segment (1)

     19,347         18,747         3

License and royalty revenue

     2,480         3,299         -25
  

 

 

    

 

 

    

Net revenue

   $ 582,354       $ 603,768         -4
  

 

 

    

 

 

    
     Nine Months Ended September 30,      % Change  
     2016      2015      2016 v. 2015  

Professional diagnostics segment (1)

        

Cardiometabolic

   $ 587,289       $ 621,588         -6

Infectious disease

     556,777         523,059         6

Toxicology

     460,849         468,822         -2

Other

     102,411         147,511         -31
  

 

 

    

 

 

    

Total professional diagnostics segment

     1,707,327         1,760,980         -3

Consumer diagnostics segment (1)

     56,582         65,360         -13

License and royalty revenue

     7,742         13,691         -43
  

 

 

    

 

 

    

Net revenue

   $ 1,771,651       $ 1,840,031         -4
  

 

 

    

 

 

    

 

(1) Revenues have been revised for the impact of revisions made during the preparation of our consolidated financial statements for 2015. For more information on these revisions see Note 2 in our Form 10-Q.


Alere Inc. and Subsidiaries

Reconciliation of Net Income (Loss) to Non-GAAP EBITDA

(in thousands)

 

     Three Months Ended September 30,  
     2016     2015  

Net Income (loss) (1)

   $ 22,027      $ (2,383

Less: Income from discontinued operations, net of tax

     —          —     
  

 

 

   

 

 

 

Loss from continuing operations

     22,027        (2,383

Adjustment related to acquired software license contracts

       430   

Income tax benefit

     (50,888     (10,210

Depreciation and amortization

     71,829        86,651   

Interest, net

     43,354        49,999   

Non-cash stock-based compensation expense

     10,509        7,317   

Non-cash fair value adjustments to acquisition-related contingent consideration

     (14,510     957   

Impairment and (gain) loss on dispositions, net

     (18,721     2,074   

Other

       662   
  

 

 

   

 

 

 

Non-GAAP Adjusted EBITDA

   $ 63,599      $ 135,496   
  

 

 

   

 

 

 

 

(1)  Net income (loss) for the three months ended September 30, 2015 includes restructuring charges of $3.2 million, $0.9 million of costs associated with business dispositions, and $0.2 million of acquisition-related costs which have not been added back for purposes of computing Non-GAAP Adjusted EBITDA. The three months ended September 30, 2016 includes $17.3 million of Abbott integration costs, non-interest related restructuring charges of $11.3 million, $10.5 million for a legal settlement accrual, $15.2 million of charges related to governmental investigations, and $0.3 million of acquisition-related costs which have not been added back for purposes of computing Non-GAAP Adjusted EBITDA.

 

     Nine Months Ended September 30,  
     2016     2015  

Net Income (loss) (1)

   $ (22,841   $ 222,815   

Less: Income from discontinued operations, net of tax

     —          216,776   
  

 

 

   

 

 

 

Loss from continuing operations

     (22,841     6,040   

Adjustment related to acquired software license contracts

       877   

Income tax benefit

     (47,979     (2,375

Depreciation and amortization

     214,418        233,965   

Interest, net

     125,979        154,596   

Non-cash stock-based compensation expense

     31,115        19,596   

Non-cash fair value adjustments to acquisition-related contingent consideration

     (16,290     (51,910

Impairment and (gain) loss on dispositions, net

     (22,531     42,408   

Other

       662   
  

 

 

   

 

 

 

Non-GAAP Adjusted EBITDA

   $ 261,870      $ 403,858   
  

 

 

   

 

 

 

 

(1)  Net income (loss) for the nine months ended September 30, 2015 includes restructuring charges of $12.3 million, $5.5 million of costs associated with business dispositions, and $0.3 million of acquisition-related costs which have not been added back for purposes of computing Non-GAAP Adjusted EBITDA. The nine months ended September 30, 2016 includes restructuring charges of $27.7 million, $38.2 million of Abbott integration costs, $20.7 million for a legal settlement accrual, $25.5 million of charges related to governmental investigations, and $1.0 million of costs associated with business dispositions which have not been added back for purposes of computing Non-GAAP Adjusted EBITDA. The nine months ended September 30, 2016 also includes $1.0 million of acquisition-related costs.


Alere Inc. and Subsidiaries

Reconciliation of Organic Revenue Growth

(in thousands)

 

     Three Months Ended September 30,     % Change  
     2016     2015     2016 v. 2015  

Net revenue

   $ 582,354      $ 603,768        -3.5

Impact of foreign currency exchange

     3,491        —       

Impact of acquisitons & dispositions

     (1,163     (15,072  
  

 

 

   

 

 

   

Non-GAAP organic net revenue

   $ 584,682      $ 588,696        -0.7
  

 

 

   

 

 

   
     Nine Months Ended September 30,     % Change  
     2016     2015     2016 v. 2015  

Net revenue

   $ 1,771,651      $ 1,840,030        -3.7

Impact of foreign currency exchange

     30,403        —       

Impact of acquisitons & dispositions

     (12,531     (52,181  
  

 

 

   

 

 

   

Non-GAAP organic net revenue

   $ 1,789,524      $ 1,787,850        0.1
  

 

 

   

 

 

   

 


Alere Inc. and Subsidiaries

Supplemental Financial Information

(in thousands, except per share amounts)

 

    Three months ended September 30, 2016  
    Cost of Net
Revenue
    Research and
Development
    Selling, General
& Administrative
    Impairment,
net of loss on
disposition
    Interest and
other income,
net
    Provision for
income taxes
    Equity earnings of
unconsolidated entities,

net of tax
    Net Income1  

Amortization of acquisition-related intangible assets

  $ 12,398      $ 926      $ 31,982      $ —        $ —        $ —        $ —        $ (45,307

Restructuring charges

    1,531        586        9,172        —          —          —          —          (11,290

Impairment Charges

    —          —            —          —          —          —          —     

Stock-based compensation expense

    456        494        9,558        —          —          —          —          (10,509

Acquisition-related costs

    —          5,000        266        —          —          —          —          (5,266

Fair value adjustments to acquisition-related contingent consideration

    —          —          (14,510     —          —          —          —          14,510   

Costs associated with potential business dispositions

    —          —          50        —          —          —          —          (50

Impairment and (gain) loss on disposition, net

    —          —          —          —          —          —          (18,721     18,721   

Amortization - Unconsolidated Subs

    —          —          —          —          —          —          46        (46

Audit and legal fees related to on-going governmental investigations

    —          —          13,308        —          1,922        —          —          (15,230

Abbott transaction related expenses

    —          —          17,334        —          —          —          —          (17,334

INRatio recall expense

    600        —          1,300        —          —          —          —          (1,900

Legal settlement accrual

    —          —          —          —          10,675        —          —          (10,675

Income tax effects on items above

    —          —          —          —          —          (60,352     —          60,352   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total of Supplemental Information

  $ 14,985      $ 7,007      $ 68,461      $ —        $ 12,597      $ (60,352   $ (18,675   $ (24,024
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Impact of above items on EPS numerator

                $ —     

Impact of above items on EPS denominator

                  —     

 

1) All impacts are shown as pre-tax with aggregate tax effect displayed as “Income tax effects on items above”.

 

    Nine months ended September 30, 2016  
    Cost of Net
Revenue
    Research and
Development
    Selling, General
& Administrative
    Impairment,
net of loss on
disposition
    Interest and
other income,
net
    Provision for
income taxes
    Equity earnings of
unconsolidated entities,

net of tax
    Net Income1  

Amortization of acquisition-related intangible assets

  $ 37,334      $ 2,763      $ 95,869      $ —        $ —        $ —        $ —        $ (135,967

Restructuring charges

    3,901        3,540        20,296        —          —          —          —          (27,738

Impairment Charges

    85        —          —          —          —          —          —          (85

Stock-based compensation expense

    1,536        1,373        28,205        —          —          —          —          (31,115

Acquisition-related costs

    —          5,000        957        —          —          —          —          (5,957

Fair value adjustments to acquisition-related contingent consideration

    —          —          (16,290     —          —          —          —          16,290   

Costs associated with potential business dispositions

    7        —          952        —          —          —          —          (959

Impairment and (gain) loss on disposition, net

    —          —          —          (3,810     —          —          (18,721     22,531   

Amortization - Unconsolidated Subs

    —          —          —          —          —          —          229        (229

Audit and legal fees related to on-going governmental investigations

    —          —          22,722        —          2,812        —          —          (25,534

Abbott transaction related expenses

    —          —          38,202        —          —          —          —          (38,202

INRatio recall expense

    2,100        —          1,300        —          —          —          —          (3,400

Legal settlement accrual

    —          —          —          —          20,875        —          —          (20,875

Income tax effects on items above

    —          —          —          —          —          (90,980     —          90,980   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total of Supplemental Information

  $ 44,963      $ 12,677      $ 192,214      $ (3,810   $ 23,687      $ (90,980   $ (18,492   $ (160,260
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Impact of above items on EPS numerator

                $ (1,383

Impact of above items on EPS denominator

                  (2,837

 

1) All impacts are shown as pre-tax with aggregate tax effect displayed as “Income tax effects on items above”.

 


Alere Inc. and Subsidiaries

Reconciliation of Net Income (Loss) to Non-GAAP Adjusted EBITDA

(in thousands)

 

    Three Months Ended     Three Months Ended     Three Months Ended     Three Months Ended     Year Ended  
    March 31, 2015     June 30, 2015     September 30, 2015     December 31, 2015     December 31, 2015  

Net Income

  $ 210,428      $ 14,770      $ (2,383   $ (16,059   $ 206,757   

Less: Income from discontinued operations, net of tax

    216,776        (0     0        2,737        219,513   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income/(Loss) from continuing operations

    (6,348     14,770        (2,383     (18,796     (12,756

Adjustment related to acquired software license contracts

    247        201        430        —          877   

Income tax benefit

    (7,853     15,689        (10,210     (50,329     (52,704

Depreciation and amortization

    74,519        72,795        86,651        75,719        309,684   

Interest, net

    45,832        58,765        49,999        57,954        212,551   

Non-cash stock-based compensation expense

    5,149        7,130        7,317        6,795        26,391   

Non-cash fair value adjustments to acquisition-related contingent consideration

    (11,777     (41,090     957        (5,703     (57,613

Non-cash write-off of an investment

        662        —          662   

Impairment and (gain) loss on dispositions, net

    34,792        5,542        2,074        8,132        50,540   

Non-cash INRatio product recall expenses

    —          —          —          21,100        21,100   

Write-off of acquisition-related obligation

    —          —          —          (40     (40
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP Adjusted EBITDA

  $ 134,561      $ 133,801      $ 135,496      $ 94,833      $ 498,691