Alere Inc. Announces Second Quarter 2013 Results

Alere Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(in thousands, except per share amounts)

Three Months Ended June 30, 

2013

2012

Net product sales and services revenue

$               759,120

$               697,280

License and royalty revenue

4,865

3,237

Net revenue

763,985

700,517

Cost of net revenue

379,498

344,909

      Gross profit

384,487

355,608

      Gross margin

50%

51%

Operating expenses:

Research and development

40,500

40,447

Selling, general and administrative

299,583

280,807

   Total operating expenses

340,083

321,254

      Operating income

44,404

34,354

Interest and other income (expense), net

(91,390)

(51,720)

 Loss before provision (benefit) for income taxes 

(46,986)

(17,366)

Provision (benefit) for income taxes

17,867

(489)

 Loss before equity earnings of unconsolidated entities, net of tax 

(64,853)

(16,877)

Equity earnings of unconsolidated entities, net of tax

4,551

3,998

Net loss

(60,302)

(12,879)

Less: Net income attributable to non-controlling interests

267

36

Net loss attributable to Alere Inc. and Subsidiaries

(60,569)

(12,915)

Preferred stock dividends

(5,309)

(5,279)

Net loss available to common stockholders

$               (65,878)

$               (18,194)

Basic net loss per common share

$                   (0.81)

$                   (0.23)

Diluted net loss per common share

$                   (0.81)

$                   (0.23)

Weighted-average shares - basic

81,311

80,375

Weighted-average shares - diluted

81,311

80,375

Alere Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(in thousands, except per share amounts)

Six Months Ended June 30, 

2013

2012

Net product sales and services revenue

$           1,494,305

$           1,365,501

License and royalty revenue

8,929

6,145

Net revenue

1,503,234

1,371,646

Cost of net revenue

754,490

662,967

      Gross profit

748,744

708,679

      Gross margin

50%

52%

Operating expenses:

Research and development

81,954

79,447

Selling, general and administrative

591,897

559,820

   Total operating expenses

673,851

639,267

      Operating income

74,893

69,412

Interest and other income (expense), net

(149,259)

(90,616)

 Loss before benefit for income taxes 

(74,366)

(21,204)

Benefit for income taxes

(19,004)

(1,944)

 Loss before equity earnings of unconsolidated entities, net of tax 

(55,362)

(19,260)

Equity earnings of unconsolidated entities, net of tax

7,485

7,410

Net loss

(47,877)

(11,850)

Less: Net income (loss) attributable to non-controlling interests

242

(149)

Net loss attributable to Alere Inc. and Subsidiaries

(48,119)

(11,701)

Preferred stock dividends

(10,559)

(10,588)

Net loss available to common stockholders

$               (58,678)

$               (22,289)

Basic net loss per common share

$                   (0.72)

$                   (0.28)

Diluted net loss per common share

$                   (0.72)

$                   (0.28)

Weighted-average shares - basic

81,255

80,307

Weighted-average shares - diluted

81,255

80,307

Alere Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(in thousands)

June 30,

December 31,

2013

2012

ASSETS

CURRENT ASSETS:

Cash and cash equivalents

$            320,547

$            328,346

Restricted cash

9,919

3,076

Marketable securities

889

904

Accounts receivable, net

553,760

524,332

Inventories, net

356,753

337,121

Prepaid expenses and other current assets

167,209

212,958

Total current assets

1,409,077

1,406,737

PROPERTY, PLANT AND EQUIPMENT, NET

530,467

534,469

GOODWILL AND OTHER INTANGIBLE ASSETS, NET

4,965,095

4,919,081

DEFERRED FINANCING COSTS AND OTHER ASSETS, NET

195,366

207,641

Total assets

$        7,100,005

$         7,067,928

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:

Current portion of long-term debt and capital lease obligations

$              56,497

$               66,916

Other current liabilities

603,931

581,893

Total current liabilities

660,428

648,809

LONG-TERM LIABILITIES:

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

3,819,987

3,641,592

Deferred tax liabilities

390,012

428,188

Other long-term liabilities

197,781

166,635

Total long-term liabilities

4,407,780

4,236,415

TOTAL EQUITY

2,031,797

2,182,704

Total liabilities and equity

$        7,100,005

$         7,067,928

Alere Inc. and Subsidiaries

Selected Consolidated Revenues by Business Area ⁽¹⁾

(in thousands)

Professional Diagnostics Segment

% Change

% Change

Q2 2013

YTD 2013

Q2 2012

YTD 2012

Q2 13 v. Q2 12

YTD 13 v. YTD 12

Cardiology

$                  118,436

$                  233,369

$                  125,597

$                  264,423

-6%

-12%

Infectious disease

157,706

347,550

137,821

288,837

14%

20%

Toxicology

165,884

314,933

159,922

281,662

4%

12%

Diabetes

74,905

124,988

36,797

64,958

104%

92%

Other ⁽¹⁾

82,666

157,385

76,736

152,442

8%

3%

Professional diagnostics net product sales and

services revenue ⁽¹⁾

599,597

1,178,225

536,873

1,052,322

12%

12%

License and royalty revenue

4,165

8,029

3,237

6,145

29%

31%

Professional diagnostics net revenue

$                  603,762

$              1,186,254

$                  540,110

$              1,058,467

12%

12%

Health Information Solutions Segment

% Change

% Change

Q2 2013

YTD 2013

Q2 2012

YTD 2012

Q2 13 v. Q2 12

YTD 13 v. YTD 12

Disease and case management

$                    52,578

$                  106,704

$                    54,512

$                  107,894

-4%

-1%

Wellness

27,230

53,530

29,567

56,591

-8%

-5%

Women's & children's health

29,256

58,336

31,313

61,084

-7%

-4%

Patient self-testing services

25,711

50,412

23,198

43,805

11%

15%

Health information solutions net revenue

$                  134,775

$                  268,982

$                  138,590

$                  269,374

-3%

0%

⁽¹⁾ Revenues are presented in accordance with Generally Accepted Accounting Principles and exclude an adjustment of $0.6 million and $1.2 million, and $1.1 million and $2.4 million, in revenue related to acquired software license contracts which were not recognized during the three and six months ended June 30, 2013 and 2012, respectively, due to business combination accounting rules.

Alere Inc. and Subsidiaries

Reconciliation to Non-GAAP Adjusted Operating Results

(in thousands, except per share amounts)

Three Months Ended June 30,

2013

2012

Reconciliation to Non-GAAP Adjusted Operating Income ⁽¹⁾

Operating income

$                  44,404

$                  34,354

Adjustment related to acquired software license contracts 

592

1,126

Amortization of acquisition-related intangible assets

79,158

81,371

Restructuring charges 

8,044

1,365

Stock-based compensation expense

4,677

4,368

Compensation charges associated with acquisition-related contingent consideration obligations

580

-

Acquisition-related costs

426

3,800

Fair value adjustments to acquisition-related contingent consideration

5,258

(6,681)

Non-cash charge associated with acquired inventory

711

-

Non-GAAP adjusted operating income

$                143,850

$                119,703

Three Months Ended June 30,

2013

2012

Reconciliation to Non-GAAP Adjusted Net Income⁽¹⁾

Net loss available to common stockholders

$                (65,878)

$                (18,194)

Adjustment related to acquired software license contracts 

592

1,126

Amortization of acquisition-related intangible assets

79,240

81,644

Restructuring charges 

8,106

1,415

Stock-based compensation expense

4,677

4,368

Compensation charges associated with acquisition-related contingent consideration obligations

580

-

Acquisition-related costs

426

3,800

Fair value adjustments to acquisition-related contingent consideration

5,258

(6,681)

Non-cash charge associated with acquired inventory

711

-

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

810

1,320

Interest accretion associated with acquisition-related compensation charges

160

-

Non-cash write-off of an investment 

5,110

-

Bargain purchase gain associated with the  acquisition of the Liberty business

(8,062)

-

Expense associated with extinguishment of debt

35,604

-

Income tax effects on items above

(12,768)

(29,318)

Non-GAAP adjusted net income available to common stockholders

$                  54,566

$                  39,480

Net loss per diluted common share

$                    (0.81)

$                    (0.23)

Non-GAAP adjusted net income per diluted common share

$                       0.64

$                       0.48

Weighted-average shares - diluted

81,311

80,375

Non-GAAP adjusted weighted average shares - diluted

95,207

83,960

⁽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)

Six Months Ended June 30,

2013

2012

Reconciliation to Non-GAAP Adjusted Operating Income ⁽¹⁾

Operating income

$                  74,893

$                  69,412

Adjustment related to acquired software license contracts 

1,235

2,412

Amortization of acquisition-related intangible assets

155,025

159,300

Restructuring charges 

11,936

6,893

Stock-based compensation expense

8,800

8,242

Compensation charges associated with acquisition-related contingent consideration obligations

1,270

-

Acquisition-related costs

1,322

5,261

Fair value adjustments to acquisition-related contingent consideration

16,276

(1,637)

Non-cash charge associated with acquired inventory

1,172

4,681

Non-GAAP adjusted operating income

$                271,929

$                254,564

Six Months Ended June 30,

2013

2012

Reconciliation to Non-GAAP Adjusted Net Income⁽¹⁾

Net loss available to common stockholders

$                (58,678)

$                (22,289)

Adjustment related to acquired software license contracts 

1,235

2,412

Amortization of acquisition-related intangible assets

155,229

159,766

Restructuring charges 

12,053

7,003

Stock-based compensation expense

8,800

8,242

Compensation charges associated with acquisition-related contingent consideration obligations

1,270

-

Acquisition-related costs

1,322

5,261

Fair value adjustments to acquisition-related contingent consideration

16,276

(1,637)

Non-cash charge associated with acquired inventory

1,172

4,681

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

1,762

2,640

Interest accretion associated with acquisition-related compensation charges

160

-

Non-cash write-off of an investment 

5,110

-

Bargain purchase gain associated with the  acquisition of the Liberty business

(8,062)

-

Expense associated with extinguishment of debt

35,767

-

Income tax effects on items above

(74,823)

(60,097)

Non-GAAP adjusted net income available to common stockholders

$                  98,593

$                105,982

Net loss per diluted common share

$                    (0.72)

$                    (0.28)

Non-GAAP adjusted net income per diluted common share

$                       1.16

$                       1.25

Weighted-average shares - diluted

81,255

80,307

Non-GAAP adjusted weighted average shares - diluted

95,071

94,189

⁽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 of Operating Income (Loss) to Non-GAAP Adjusted Operating Income (Loss)

(in thousands)

For the Three Months Ended June 30, 2013

Operating Segment

Professional Diagnostics

Health Information Solutions

Consumer Diagnostics

Corporate

Total

Net revenue 

$          603,762

$          134,775

$             25,448

$                      -

$          763,985

Adjustment related to acquired software license contracts (1)

592

-

-

-

592

Non-GAAP adjusted net revenue

$          604,354

$          134,775

$             25,448

$                      -

$          764,577

Operating income (loss) 

$             72,896

$          (11,759)

$               3,404

$          (20,137)

$             44,404

Adjustment related to acquired software license contracts (1)

592

-

-

-

592

Amortization of acquisition-related intangible assets

67,968

10,732

458

-

79,158

Non-cash charge associated with acquired inventory

711

-

-

-

711

Restructuring charges 

1,740

6,304

-

-

8,044

Stock-based compensation expense

-

-

-

4,677

4,677

Compensation charges associated with acquisition-related contingent consideration obligations

580

-

-

-

580

Acquisition-related costs

-

-

-

426

426

Fair value adjustments to acquisition-related contingent consideration

4,330

1,028

-

(100)

5,258

Non-GAAP adjusted operating income (loss)

$          148,817

$               6,305

$               3,862

$          (15,134)

$          143,850

Non-GAAP adjusted operating income (loss) as % of Non-GAAP adjusted net revenue

24.6%

4.7%

15.2%

18.8%

(1) Estimated revenue related to acquired software license contracts that was not recognized during the second quarter of 2013 due to business combination accounting rules

Reconciliation of Operating Income (Loss) to Non-GAAP Adjusted Operating Income (Loss)

(in thousands)

For the Three Months Ended June 30, 2012

Operating Segment

Professional Diagnostics

Health Information Solutions

Consumer Diagnostics

Corporate

Total

Net revenue 

$          540,110

$          138,590

$             21,817

$                      -

$          700,517

Adjustment related to acquired software license contracts (1)

1,126

-

-

-

1,126

Non-GAAP adjusted net revenue

$          541,236

$          138,590

$             21,817

$                      -

$          701,643

Operating income (loss) 

$             63,251

$          (12,666)

$               2,699

$          (18,930)

$             34,354

Adjustment related to acquired software license contracts (1)

1,126

-

-

-

1,126

Amortization of acquisition-related intangible assets

66,427

14,312

632

-

81,371

Restructuring charges 

817

539

-

9

1,365

Stock-based compensation expense

-

-

-

4,368

4,368

Non-cash charge associated with acquired inventory

-

-

-

-

-

Acquisition-related costs

-

-

-

3,800

3,800

Fair value adjustments to acquisition-related contingent consideration

(6,901)

863

(288)

(355)

(6,681)

Non-GAAP adjusted operating income (loss)

$          124,720

$               3,048

$               3,043

$          (11,108)

$          119,703

Non-GAAP adjusted operating income (loss) as % of Non-GAAP adjusted net revenue

23.0%

2.2%

13.9%

17.1%

(1) Estimated revenue related to acquired software license contracts that was not recognized during the second quarter of 2012 due to business combination accounting rules

Comments:

In calculating "adjusted operating income (loss)" in the schedule presented above, the Company excludes from operating income (loss) (i) certain non-cash charges, including amortization expense and stock-based compensation expense, (ii) non-recurring charges and income, and (iii) certain other charges and income that have a significant positive or negative impact on results yet do not occur on a consistent or regular basis in its business.  In determining whether a particular item meets one of these criteria, management considers facts and circumstances that it believes are relevant.  Management believes that excluding such charges and income from operating income (loss) allows investors and management to evaluate and compare the Company's operating results from continuing operations from period to period in a meaningful and consistent manner.  Due to the frequency of their occurrence in its business, the Company does not adjust operating income (loss) for the costs associated with litigation, including payments made or received through settlements.  It should be noted that "adjusted operating income (loss)" is not a standard financial measurement under accounting principles generally accepted in the United States of America ("GAAP") and should not be considered as an alternative to operating income (loss) as an indicator of operating performance or any measure of performance derived in accordance with GAAP. In addition, all companies do not calculate non-GAAP financial measures in the same manner and, accordingly, "adjusted operating income (loss)" presented in this schedule may not be comparable to similar measures used by other companies.

Reference should also be made to the Company's financial results contained in our earnings press release respective to the periods presented in this schedule, which include a more detailed discussion of the adjustments to the GAAP operating results presented above.

Alere Inc. and Subsidiaries

Reconciliation of Operating Income (Loss) to Non-GAAP Adjusted Operating Income (Loss)

(in thousands)

For the Six Months Ended June 30, 2013

Operating Segment

Professional Diagnostics

Health Information Solutions

Consumer Diagnostics

Corporate

Total

Net revenue 

$       1,186,254

$          268,982

$             47,998

$                      -

$       1,503,234

Adjustment related to acquired software license contracts (1)

1,235

-

-

-

1,235

Non-GAAP adjusted net revenue

$       1,187,489

$          268,982

$             47,998

$                      -

$       1,504,469

Operating income (loss) 

$          132,736

$          (25,652)

$               5,684

$          (37,875)

$             74,893

Adjustment related to acquired software license contracts (1)

1,235

-

-

-

1,235

Amortization of acquisition-related intangible assets

132,261

21,770

994

-

155,025

Non-cash charge associated with acquired inventory

1,172

-

-

-

1,172

Restructuring charges 

3,129

8,807

-

-

11,936

Stock-based compensation expense

-

-

-

8,800

8,800

Compensation charges associated with acquisition-related contingent consideration obligations

1,270

-

-

-

1,270

Acquisition-related costs

-

-

-

1,322

1,322

Fair value adjustments to acquisition-related contingent consideration

11,393

4,383

-

500

16,276

Non-GAAP adjusted operating income (loss)

$          283,196

$               9,308

$               6,678

$          (27,253)

$          271,929

Non-GAAP adjusted operating income (loss) as % of Non-GAAP

 adjusted net revenue

23.8%

3.5%

13.9%

18.1%

(1) Estimated revenue related to acquired software license contracts that was not recognized during the first six months of 2013 due to business combination accounting rules

Reconciliation of Operating Income (Loss) to Non-GAAP Adjusted Operating Income (Loss)

(in thousands)

For the Six Months Ended June 30, 2012

Operating Segment

Professional Diagnostics

Health Information Solutions

Consumer Diagnostics

Corporate

Total

Net revenue 

$       1,058,467

$          269,374

$             43,805

$                      -

$       1,371,646

Adjustment related to acquired software license contracts (1)

2,412

-

-

-

2,412

Non-GAAP adjusted net revenue

$       1,060,879

$          269,374

$             43,805

$                      -

$       1,374,058

Operating income (loss) 

$          133,430

$          (32,022)

$               3,064

$          (35,060)

$             69,412

Adjustment related to acquired software license contracts (1)

2,412

-

-

-

2,412

Amortization of acquisition-related intangible assets

129,312

28,636

1,352

-

159,300

Restructuring charges 

5,611

1,256

-

26

6,893

Stock-based compensation expense

-

-

-

8,242

8,242

Non-cash charge associated with acquired inventory

4,681

-

-

-

4,681

Acquisition-related costs

-

-

-

5,261

5,261

Fair value adjustments to acquisition-related contingent consideration

(6,325)

3,167

(204)

1,725

(1,637)

Non-GAAP adjusted operating income (loss)

$          269,121

$               1,037

$               4,212

$          (19,806)

$          254,564

Non-GAAP adjusted operating income (loss) as % of Non-GAAP

 adjusted net revenue

25.4%

0.4%

9.6%

18.5%

(1) Estimated revenue related to acquired software license contracts that was not recognized during the first six months of 2012 due to business combination accounting rules

Comments:

In calculating "adjusted operating income (loss)" in the schedule presented above, the Company excludes from operating income (loss) (i) certain non-cash charges, including amortization expense and stock-based compensation expense, (ii) non-recurring charges and income, and (iii) certain other charges and income that have a significant positive or negative impact on results yet do not occur on a consistent or regular basis in its business.  In determining whether a particular item meets one of these criteria, management considers facts and circumstances that it believes are relevant.  Management believes that excluding such charges and income from operating income (loss) allows investors and management to evaluate and compare the Company's operating results from continuing operations from period to period in a meaningful and consistent manner.  Due to the frequency of their occurrence in its business, the Company does not adjust operating income (loss) for the costs associated with litigation, including payments made or received through settlements.  It should be noted that "adjusted operating income (loss)" is not a standard financial measurement under accounting principles generally accepted in the United States of America ("GAAP") and should not be considered as an alternative to operating income (loss) as an indicator of operating performance or any measure of performance derived in accordance with GAAP. In addition, all companies do not calculate non-GAAP financial measures in the same manner and, accordingly, "adjusted operating income (loss)" presented in this schedule may not be comparable to similar measures used by other companies.

Reference should also be made to the Company's financial results contained in our earnings press release respective to the periods presented in this schedule, which include a more detailed discussion of the adjustments to the GAAP operating results presented above.

Alere Inc. and Subsidiaries

Reconciliations to Non-GAAP Adjusted P&L Categories

(in thousands)

Three Months Ended

June 30, 2013

Three Months Ended

June 30, 2012

Net revenue 

$                           763,985

$                           700,517

Adjustment related to acquired software license contracts 

592

1,126

Non-GAAP adjusted net revenue

$                           764,577

$                           701,643

Cost of net revenue

$                           379,498

$                           344,909

Less adjustments:

Non-cash charge associated with acquired inventory

(711)

-

Amortization of acquisition-related intangible assets

(17,102)

(17,460)

Stock-based compensation expense

(278)

(263)

Restructuring charges 

(729)

(25)

Non-GAAP adjusted cost of net revenue

$                           360,678

$                           327,161

Non-GAAP adjusted gross profit

$                           403,899

$                           374,482

Three Months Ended

June 30, 2013

Three Months Ended

June 30, 2012

Research and development 

$                             40,500

$                             40,447

Less adjustments:

Amortization of acquisition-related intangible assets

(1,216)

(1,502)

Stock-based compensation expense

(783)

(856)

Restructuring charges 

(645)

(14)

Non-GAAP adjusted research and development

$                             37,856

$                             38,075

Three Months Ended

June 30, 2013

Three Months Ended

June 30, 2012

Selling, general and administrative

$                           299,583

$                           280,807

Less adjustments:

Amortization of acquisition-related intangible assets

(60,840)

(62,409)

Stock-based compensation expense

(3,616)

(3,249)

Compensation charges associated with acquisition-related contingent consideration obligations

(580)

-

Acquisition-related costs

(426)

(3,800)

Fair value adjustments to acquisition-related contingent consideration

(5,258)

6,681

Restructuring charges 

(6,670)

(1,326)

Non-GAAP adjusted selling, general and administrative 

$                           222,193

$                           216,704

Three Months Ended

June 30, 2013

Three Months Ended

June 30, 2012

Interest and other income (expense), net

$                           (91,390)

$                           (51,720)

Less adjustments:

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

810

1,320

Interest accretion associated with acquisition-related compensation charges

160

-

Non-cash write-off of an investment 

5,110

-

Bargain purchase gain associated with the  acquisition of the Liberty business

(8,062)

-

Expense associated with extinguishment of debt

35,604

-

Restructuring charges 

62

50

Non-GAAP adjusted interest and other income (expense), net

$                           (57,706)

$                           (50,350)

Three Months Ended

June 30, 2013

Three Months Ended

June 30, 2012

Provision (benefit) for income taxes

$                             17,867

$                                 (489)

    Add:  Income tax effects on Non-GAAP adjustments

12,783

29,322

Non-GAAP adjusted provision for income taxes

$                             30,650

$                             28,833

Three Months Ended

June 30, 2013

Three Months Ended

June 30, 2012

Equity earnings of unconsolidated entities, net of tax

$                                4,551

$                                3,998

Less adjustments:

Amortization of acquisition-related intangible assets

150

301

Income tax effects on items above

-

(3)

Non-GAAP adjusted equity earnings of unconsolidated entities, net of tax

$                                4,701

$                                4,296

Alere Inc. and Subsidiaries

Reconciliations to Non-GAAP Adjusted P&L Categories

(in thousands)

Six Months Ended

June 30, 2013

Six Months Ended

June 30, 2012

Net revenue 

$                       1,503,234

$                       1,371,646

Adjustment related to acquired software license contracts 

1,235

2,412

Non-GAAP adjusted net revenue

$                       1,504,469

$                       1,374,058

Cost of net revenue

$                           754,490

$                           662,967

Less adjustments:

Non-cash charge associated with acquired inventory

(1,172)

(4,681)

Amortization of acquisition-related intangible assets

(36,272)

(33,197)

Stock-based compensation expense

(510)

(532)

Restructuring charges 

(1,352)

(989)

Non-GAAP adjusted cost of net revenue

$                           715,184

$                           623,568

Non-GAAP adjusted gross profit

$                           789,285

$                           750,490

Six Months Ended

June 30, 2013

Six Months Ended

June 30, 2012

Research and development 

$                             81,954

$                             79,447

Less adjustments:

Amortization of acquisition-related intangible assets

(2,498)

(3,904)

Stock-based compensation expense

(1,530)

(1,627)

Restructuring charges 

(645)

(638)

Non-GAAP adjusted research and development

$                             77,281

$                             73,278

Six Months Ended

June 30, 2013

Six Months Ended

June 30, 2012

Selling, general and administrative

$                           591,897

$                           559,820

Less adjustments:

Amortization of acquisition-related intangible assets

(116,255)

(122,199)

Stock-based compensation expense

(6,760)

(6,083)

Compensation charges associated with acquisition-related contingent consideration obligations

(1,270)

-

Acquisition-related costs

(1,322)

(5,261)

Fair value adjustments to acquisition-related contingent consideration

(16,276)

1,637

Restructuring charges 

(9,939)

(5,266)

Non-GAAP adjusted selling, general and administrative 

$                           440,075

$                           422,648

Six Months Ended

June 30, 2013

Six Months Ended

June 30, 2012

Interest and other income (expense), net

$                         (149,259)

$                           (90,616)

Less adjustments:

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

1,762

2,640

Interest accretion associated with acquisition-related compensation charges

160

-

Non-cash write-off of an investment 

5,110

-

Bargain purchase gain associated with the  acquisition of the Liberty business

(8,062)

-

Expense associated with extinguishment of debt

35,767

-

Restructuring charges 

117

110

Non-GAAP adjusted interest and other income (expense), net

$                         (114,405)

$                           (87,866)

Six Months Ended

June 30, 2013

Six Months Ended

June 30, 2012