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Alere Reports Second Quarter 2017 Financial Results

02:44 EDT 3 Aug 2017 | PR Newswire

WALTHAM, Mass., Aug. 3, 2017 /PRNewswire/ -- 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 InformationTo 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 CallAs 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.

Cautionary Statement Regarding Forward-Looking StatementsThis 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.

About AlereAlere 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.

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,

December 31,

2017

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 acquisitions & 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 acquisitions & 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".

View original content:http://www.prnewswire.com/news-releases/alere-reports-second-quarter-2017-financial-results-300499010.html

SOURCE Alere Inc.

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