ALERE INC. - FORM 8-K - EX-99.1

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8-K - FORM 8-K - ALERE INC.	d435012d8k.htm

Exhibit 99.1

LOGO

Alere Reports Second Quarter 2017 Financial Results

WALTHAM, Mass., August 3, 2017 – Alere Inc. (NYSE: ALR), a global leader in rapid diagnostic tests, today announced its financial results for the second quarter ended June 30, 2017.

Second Quarter 2017

•

Total revenue was $558 million, a 9% decrease compared to $610 million in the prior year period.

•

Non-GAAP organic growth during the second quarter of 2017 was -7.8% and -3.6% excluding Arriva*.

•

Negative impact of foreign currency exchange was $6 million in the second quarter of 2017.

•

GAAP loss from continuing operations during the second quarter of 2017 was $(93) million, or $(1.13) per diluted share, compared to $(33) million, or $(0.44) per diluted share in the prior year period.

•

Non-GAAP adjusted EBITDA was $44 million in the second quarter of 2017, compared to $91 million in the prior year period. The decrease was primarily due to higher merger-related costs and audit and legal fees related to ongoing investigations as detailed in the Supplemental Financial Information table.

Six Months 2017

•

For the six months ended June 30, 2017, revenue was $1.15 billion, a 4% decrease compared to $1.20 billion in the prior year period. The decrease was primarily due to $28 million in Arriva products and services revenue that could not be recognized (see note below*), and a decrease in seasonal product sales. The Company also continued to make investments in global operations and infrastructure to strengthen the enterprise.

•

Non-GAAP organic growth during the six months ended June 30, 2017 was -3.6% and +1.4% excluding Arriva*.

During the three and six months ended June 30, 2017, the Company furnished to customers $14 million and $28 million, respectively, of Arriva products and services revenue and corresponding earnings that were subject to the CMS revocation but did not recognize any revenue for such products and services because they were not eligible for reimbursement by CMS at the time the Company furnished them.


*Revenue (in millions***)	Second Quarter 2017		Second Quarter 2016 (as restated)		% Change
Cardiometabolic Disease	$	140	$	167		(16	%)
Infectious Disease		167		189		(12	%)
Toxicology		160		158		1	%
Other		35		36		(4	%)
Consumer Diagnostics		17		20		(17	%)
Other Non-reportable*		37		37		1	%
License and Royalty		3		3		18	%

Total	$	558	$	610		(9	%)

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

*	Patient self-testing has been reclassified into a separate reporting segment called “Other Non-reportable.”

Non-GAAP Information

To supplement the financial measures prepared in accordance with U.S. GAAP, the Company uses Non-GAAP adjusted EBITDA and Non-GAAP organic growth, which are non-GAAP financial measures. The reconciliations of Non-GAAP adjusted EBITDA to net income (loss) from continuing operations and Non-GAAP organic growth to revenue, the most directly comparable financial measures 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 Non-GAAP 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 our ongoing business operations. The Company’s management also uses Non-GAAP adjusted EBITDA and Non-GAAP 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 Non-GAAP 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, which definitive agreement was amended on April 13, 2017. The transaction is expected to close by the end of the third quarter of 2017, subject to the satisfaction of certain customary closing conditions, including applicable regulatory approvals. Due to the pending transaction, Alere will no longer hold conference calls to discuss its quarterly financial results.

Page 2 of 4

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 “preliminary”, “may,” “could,” “should,” “would,” “intend,” “will,” “expect,” “anticipate,” “believe,” “estimate,” “can,” “continue” or similar words, and include statements with respect to the merger with Abbott Laboratories (“Abbott”) expecting to close by the end of the third quarter of 2017. A number of important factors could cause actual results of Alere 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, and the divestitures of certain Alere businesses in connection therewith, 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 with Abbott (or the divestitures of certain Alere businesses in connection therewith) 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, as amended (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 occurrence of any event, change or other circumstance that could give rise to the termination of the agreements to divest certain Alere businesses in connection with the merger with Abbott; (vi) the effect of the announcement or pendency of the transactions contemplated by the Merger Agreement or the divestiture of certain businesses 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; (vii) risks related to diverting management’s attention from Alere’s ongoing business operations; (viii) the risk that stockholder litigation in connection with the transactions contemplated by the Merger Agreement may result in significant costs of defense, indemnification and liability; (ix) the possibility that the previously announced review of certain aspects of revenue recognition uncovers an additional error or errors in revenue recognition or other financial information which require additional adjustments 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 United States Securities and Exchange Commission (the “SEC”) and the United States Department of Justice, and (xi) 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, 2016 (as filed with the SEC on June 5, 2017) 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 communication. 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.

Page 3 of 4

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

Page 4 of 4

Alere Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(in thousands, except per share amounts)


	Three Months Ended June 30,						Six Months Ended June 30,
	2017			2016 (as restated)			2017			2016 (as restated)
Net product sales and services revenue	$	554,691		$	607,771		$	1,140,265		$	1,191,982
License and royalty revenue		2,981			2,533			5,623			5,262

Net revenue		557,672			610,304			1,145,888			1,197,244
Cost of net revenue		304,940			328,666			611,430			644,481

Gross profit		252,732			281,638			534,458			552,763
Gross margin		45	%		46	%		47	%		46	%
Operating expenses:
Research and development		29,448			28,446			55,732			55,508
Selling, general and administrative		252,283			239,298			512,747			454,894
Impairment and (gain) loss on disposition, net		—			—			—			(3,810	)

Operating income		(28,999	)		13,894			(34,021	)		46,171
Interest and other income (expense), net		(47,710	)		(46,241	)		(93,409	)		(89,696	)

Loss from continuing operations before provision (benefit) for income taxes		(76,709	)		(32,347	)		(127,430	)		(43,525	)
Provision (benefit) for income taxes		17,312			2,582			35,921			2,410

Income (loss) from continuing operations before equity earnings of unconsolidated entities, net of tax		(94,021	)		(34,929	)		(163,351	)		(45,935	)
Equity earnings of unconsolidated entities, net of tax		1,321			2,122			6,522			7,156

Income (loss) from continuing operations		(92,700	)		(32,807	)		(156,829	)		(38,779	)
Income from discontinued operations, net of tax		—			—			—			—

Net income		(92,700	)		(32,807	)		(156,829	)		(38,779	)
Less: Net income attributable to non-controlling interests		368			143			551			246

Net income attributable to Alere Inc. and Subsidiaries		(93,068	)		(32,950	)		(157,380	)		(39,025	)
Preferred stock dividends		(5,308	)		(5,308	)		(10,558	)		(10,617	)

Net income available to common stockholders	$	(98,376	)	$	(38,258	)	$	(167,938	)	$	(49,642	)

Basic net income per common share:
Income (loss) from continuing operations	$	(1.13	)	$	(0.44	)	$	(1.92	)	$	(0.57	)
Income from discontinued operations		—									—

Basic and diluted net income per common share	$	(1.13	)	$	(0.44	)	$	(1.92	)	$	(0.57	)

Diluted net income per common share:
Income (loss) from continuing operations	$	(1.13	)	$	(0.44	)	$	(1.92	)	$	(0.57	)
Income from discontinued operations		—						—			—

Diluted net income per common share	$	(1.13	)	$	(0.44	)	$	(1.92	)	$	(0.57	)

Weighted average shares—basic		87,360			86,737			87,300			86,692

Weighted average shares—diluted		87,360			86,737			87,300			86,692

Alere Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(in thousands)


	June 30, 2017		December 31, 2016
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	491,699	$	567,215
Restricted cash		52,480		51,550
Marketable securities		150		76
Accounts receivable, net		377,963		413,535
Inventories, net		335,710		308,920
Prepaid expenses and other current assets		125,604		118,607
Assets held for sale		—		—

Total current assets		1,383,606		1,459,903
Property, Plant and Equipment, net		436,201		441,190
Goodwill and other intangible assets, net		3,574,864		3,592,107
Restricted Cash- non-current		2,353		2,171
Other non-current assets		159,811		152,908
Assets held for sale—non-current		—		—

Total assets	$	5,556,835	$	5,648,279

LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Short-term debt and current portions of long-term debt and capital lease obligations	$	86,671	$	85,434
Liabilities related to assets held for sale		—		—
Other current liabilities		592,768		590,722

Total current liabilities		679,439		676,156

LONG-TERM LIABILITIES:
Long-term debt and capital lease obligations, net of current portions		2,820,775		2,865,426
Deferred tax liabilities		123,775		119,098
Other long-term liabilities		167,273		155,992
Liabilities related to assets held for sale—non-current		—		—

Total long-term liabilities		3,111,823		3,140,516

TOTAL EQUITY		1,765,573		1,831,607

Total liabilities and equity	$	5,556,835	$	5,648,279

Alere Inc. and Subsidiaries

Selected Consolidated Revenues

(in thousands)


	Three Months Ended June 30,				% Change
	2017		2016 (as restated)		2017 v. 2016
Professional diagnostics segment
Cardiometabolic	$	139,840	$	167,378		-16	%
Infectious disease		166,544		189,384		-12	%
Toxicology		159,871		158,196		1	%
Other		35,123		36,413		-4	%

Total professional diagnostics segment		501,378		551,371		-9	%
Consumer diagnostics segment		16,507		19,794		-17	%
Other Non-reportable		36,804		36,606		1	%
License and royalty revenue		2,981		2,533		18	%

Net revenue	$	557,670	$	610,304		-9	%


	Six Months Ended June 30,				% Change
	2017		2016 (as restated)		2017 v. 2016
Professional diagnostics segment
Cardiometabolic	$	265,017	$	327,041		-19	%
Infectious disease		389,478		381,339		2	%
Toxicology		310,508		304,979		2	%
Other		68,051		69,795		-2	%

Total professional diagnostics segment		1,033,054		1,083,154		-5	%
Consumer diagnostics segment		33,747		37,236		-9	%
Other Non-reportable		73,464		71,592		3	%
License and royalty revenue		5,623		5,262		7	%

Net revenue	$	1,145,888	$	1,197,244		-4	%

Alere Inc. and Subsidiaries

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

(in thousands)


	Three Months Ended June 30,
	2017			2016 (as restated)
Net Income (loss) ⁽¹⁾	$	(92,700	)	$	(32,807	)
Income tax provision (benefit)		17,312			2,582
Depreciation and amortization		62,575			69,977
Interest, net		45,044			41,684
Non-cash stock-based compensation expense		9,568			11,004
Non-cash fair value adjustments to acquisition-related contingent consideration		2,345			(1,923	)

Non-GAAP Adjusted EBITDA	$	44,144		$	90,518

(1)

Net income (loss) for the three months ended June 30, 2016 includes $10.5 million of Abbott integration costs, $10.2 million for a legal settlement accrual, restructuring charges of $8.8 million, $5.1 million of charges related to governmental investigations, $0.1 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 June 30, 2017 includes $26.1 million of Abbott integration costs, $15.9 million of charges related to governmental investigations, non-interest related restructuring charges of $2.6 million, expense related to the withdrawal of the InRatio product of ($2.6) million, $0.1 million of costs associated with business dispositions, and $0.1 million of acquisition-related costs which have not been added back for purposes of computing Non-GAAP Adjusted EBITDA.


	Six Months Ended June 30,
	2017			2016 (as restated)
Net Income (loss) ⁽¹⁾	$	(156,829	)	$	(38,779	)
Income tax provision (benefit)		35,921			2,410
Depreciation and amortization		123,558			142,588
Interest, net		87,243			82,625
Non-cash stock-based compensation expense		19,932			20,606
Non-cash fair value adjustments to acquisition-related contingent consideration		2,833			(1,781	)
Impairment and (gain) loss on dispositions, net		(229	)		(3,810	)

Non-GAAP Adjusted EBITDA	$	112,429		$	203,860

⁽¹⁾

Net income (loss) for the six months ended June 30, 2016 includes $20.9 million of Abbott integration costs, $19.6 million of charges related to governmental investigations, restructuring charges of $16.4 million, $0.9 million of costs associated with business dispositions, and $0.7 million of acquisition-related costs which have not been added back for purposes of computing Non-GAAP Adjusted EBITDA. The six months ended June 30, 2017 includes $67.5 million of Abbott integration costs, $26 million of charges related to governmental investigations, non-interest related restructuring charges of $5.7 million, expense related to the withdrawal of the InRatio product of ($2.6) million, $0.2 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.

Alere Inc. and Subsidiaries

Reconciliation of Non-GAAP Organic Revenue Growth

(in thousands)


	Three Months Ended June 30,						% Change
	2017			2016 (as restated)			2017 v. 2016
Net revenue	$	557,670		$	610,304			-8.6	%
Impact of foreign currency exchange		5,624			—
Impact of acquisitons & dispositions		(775	)		—

Non-GAAP organic net revenue	$	562,519		$	610,304			-7.8	%

Arriva revenue		(2,274	)		(29,065	)

Non-GAAP organic net revenue (excluding Arriva)	$	560,245		$	581,239			-3.6	%


	Six Months Ended June 30,						% Change
	2017			2016 (as restated)			2017 v. 2016
Net revenue	$	1,145,887		$	1,197,244			-4.3	%
Impact of foreign currency exchange		10,393			—
Impact of acquisitons & dispositions		(1,675	)		—

Non-GAAP organic net revenue	$	1,154,605		$	1,197,244			-3.6	%

Arriva revenue		(5,313	)		(64,208	)

Non-GAAP organic net revenue (excluding Arriva)	$	1,149,292		$	1,133,036			1.4	%

Alere Inc. and Subsidiaries

Supplemental Financial Information

(in thousands, except per share amounts)


	Three months ended June 30, 2017
	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	$	11,193	$	1,928		$	23,776	$	—	$	—	$	—	$	—	$	(36,897	)
Restructuring charges		996		(13	)		1,665		—		—		—		—		(2,648	)
Impairment Charges		—		2			—		—		—		—		—		(2	)
Stock-based compensation expense		397		382			8,789		—		—		—		—		(9,568	)
Acquisition-related costs		—		—			99		—		—		—		—		(99	)
Fair value adjustments to acquisition-related contingent consideration		—		—			2,345		—		—		—		—		(2,345	)
Costs associated with potential business dispositions		—		—			128		—		—		—		—		(128	)
Impairment and (gain) loss on disposition, net		—		—			—		—		—		—		—		—
Amortization—Unconsolidated Subs		—		—			—		—		—		—		51		(51	)
Audit and legal fees related to on-going governmental investigations		—		—			12,474		—		7,663		—		—		(20,137	)
Abbott transaction related expenses		—		—			26,079		—		—		—		—		(26,079	)
Income tax effects on items above		—		—			—		—		—		10,861		—		(10,861	)

Total of Supplemental Information	$	10,037	$	2,299		$	75,355	$	—	$	7,663	$	10,861	$	51	$	(106,266	)

Impact of above items on EPS numerator																$	—
Impact of above items on EPS denominator																	(1,459	)

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


	Six months ended June 30, 2017
	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	$	22,159		$	2,853	$	47,535	$	—	$	—	$	—	$	—		$	(72,547	)
Restructuring charges		1,811			114		3,753		—		—		—		—			(5,678	)
Impairment Charges		—			25		—		—		—		—		—			(25	)
Stock-based compensation expense		793			766		18,372		—		—		—		—			(19,932	)
Acquisition-related costs		—			—		151		—		—		—		—			(151	)
Fair value adjustments to acquisition-related contingent consideration		—			—		2,833		—		—		—		—			(2,833	)
Costs associated with potential business dispositions		—			—		185		—		—		—		—			(185	)
Impairment and (gain) loss on disposition, net		—			—		—		—		—		—		(229	)		229
Amortization—Unconsolidated Subs		—			—		—		—		—		—		100			(100	)
Audit and legal fees related to on-going governmental investigations		—			—		22,614		—		9,780		—		—			(32,393	)
Abbott transaction related expenses		—			—		67,478		—		—		—		—			(67,478	)
INRatio recall expense		(2,549	)		—		—		—		—		—		—			2,549
Legal settlement accrual		—			—		—		—		—		—		—			—
Income tax effects on items above		—			—		—		—		—		14,383		—			(14,383	)

Total of Supplemental Information	$	22,214		$	3,759	$	162,922	$	—	$	9,780	$	14,383	$	(129	)	$	(212,929	)

Impact of above items on EPS numerator																	$	—
Impact of above items on EPS denominator																		(862	)

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

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