Form 8-K ALERE INC. For: Nov 04

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): November 4, 2015

 

 

ALERE INC.

(Exact name of registrant as specified in charter)

 

 

 

Delaware		1-16789		04-3565120
(State or Other Jurisdiction of Incorporation)		(Commission File Number)		(IRS Employer Identification No.)

51 Sawyer Road, Suite 200, Waltham, Massachusetts 02453

(Address of Principal Executive Offices) (Zip Code)

(781) 647-3900

(Registrant’s telephone number, including area code)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

¨	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

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Item 2.02.

Results of Operations and Financial Condition.

On November 4, 2015, Alere Inc. (the “Company”) announced its financial results for the fiscal quarter ended September 30, 2015. The full text of the press release issued in connection with the announcement is furnished as Exhibit 99.1 to this Current Report on Form 8-K.

The information provided under this Form 8-K (including Exhibit 99.1) is “furnished” and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, except as expressly set forth by specific reference in such a filing.

 

Item 9.01.

Financial Statements and Exhibits.

(d) Exhibits.

 

Exhibit No.		Description
99.1		Press Release dated November 4, 2015, entitled “Alere Reports Third Quarter 2015 Financial Results”

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

				ALERE INC.
Date: November 4, 2015				By:		/s/ James F. Hinrichs
				Name:		James F. Hinrichs
				Title:		Executive Vice President & Chief Financial
						Officer

 

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EXHIBIT INDEX

 

Exhibit No.		Description
99.1		Press Release dated November 4, 2015, entitled “Alere Reports Third Quarter 2015 Financial Results”

 

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Exhibit 99.1

 

Alere Reports Third Quarter 2015 Financial Results

WALTHAM, Mass., November 4, 2015 – Alere Inc. (NYSE: ALR), a global leader in rapid diagnostic tests, today announced its financial results for the quarter ended September 30, 2015. Net revenue for the third quarter of 2015 was $602.0 million, a 7.3 percent decrease compared to $649.2 million in the third quarter of 2014, or a 1.7 percent decrease in organic growth, which is on a constant currency basis, excluding impacts of acquisitions and divestitures. Net income from continuing operations available to common stockholders was $0.2 million, or $0.00 per diluted share, in the third quarter of 2015. On a non-GAAP basis, the Company reported non-GAAP adjusted net income from continuing operations available to common stockholders of $48.3 million, or $0.54 per diluted share, in the third quarter of 2015.

 

Net Revenue (in millions)		Third Quarter 2015				Third Quarter 2014 (1)				% Change
Cardiometabolic Disease		$	208			$	208				—
Infectious Disease		$	164			$	184				(11	)
Toxicology		$	163			$	167				(2	)
Other		$	45			$	65				(30	)
Consumer Diagnostics		$	19			$	21				(12	)
License and Royalty		$	3			$	4				(21	)
Total		$	602			$	649				(7	)

 

(1)	Revenues, other than License and Royalty, have been reclassified due to a change in segment reporting as a result of the divestiture of our health management business in 2015 and the results of our patient self-testing business are primarily included within Cardiometabolic Disease.

“Third quarter revenue was impacted by currency and lower international sales. Europe organic growth declined by 4 percent and tender awards in Africa and Asia have taken longer to ramp than anticipated; however, we expect both Africa and Asia to contribute to near-term growth,” said Namal Nawana, CEO of Alere. “Pain management and INRatio revenue declined year-over-year and negatively impacted our profitability in the third quarter; however, excluding pain management, our core Toxicology revenue grew by 6% during the third quarter, which represents 10 consecutive quarters of organic growth. Despite these short-term challenges, our core businesses and platforms had solid growth and we gained significant traction with the launch of Alere i, with revenue of $5 million in the third quarter and total worldwide placements of more than 2,800 instruments to date.

From an operational perspective, we exercised strong operating expense discipline and delivered third quarter non-GAAP EPS growth of 54 percent year-over-year. Looking ahead, we expect fourth quarter 2015 revenue to rebound and we are re-doubling our efforts to establish solid and sustainable organic growth for Alere. We are confident that the strength of our core platforms will eclipse near-term challenges and accelerate our overall growth. The Alere team is fully focused on continuing to execute against our strategic growth initiatives to deliver enhanced value for our shareholders.”

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Third Quarter Highlights

 

•

Alere receives FDA CLIA Waiver for Alere™ i Strep A Rapid Molecular Test

 

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Alere Agrees to Sell BBI Group and Acquires US Diagnostics

 

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Dr. Geoffrey S. Ginsburg Joins Alere Board

Third Quarter 2015 Results

Third quarter 2015 net revenue of $602.0 million declined by $47.2 million from $649.2 million, or 7.3 percent, compared to the prior year period, primarily due to a $33.0 million negative impact from foreign currency exchange; a $12.6 million decrease in pain management; and a $7.7 million decrease in global sales of INRatio. In addition, BBI revenue and contract manufacturing revenue associated with our consumer joint venture declined by $8.7 million and CD4 and malaria sales in Africa decreased by $8.0 million during the third quarter. Growth areas included: patient self-testing, Afinion and epoc in Cardiometabolic Disease; dengue in Infectious Disease; and employer services and reagents in Toxicology. Global influenza sales were $19.6 million in the third quarter of 2015, a 15.9 percent increase over the prior year period, including approximately $4.9 million in Alere i sales.

Gross profit in the third quarter of 2015 was $275.0 million, with 45.7 percent gross margin, compared to $301.6 million in the third quarter of 2014, with 46.5 percent gross margin. Non-GAAP adjusted gross profit in the third quarter of 2015 was $292.5 million, with 48.5 percent non-GAAP adjusted gross margin, compared to $323.6 million in the third quarter of 2014, with 49.8 percent non-GAAP adjusted gross margin. Non-GAAP adjusted gross profit excludes amortization of acquisition-related intangibles, restructuring charges, and stock-based compensation.

Operating expenses were $245.9 million, or 40.8 percent of net revenue, in the third quarter of 2015, compared to operating expenses of $266.3 million, or 41.0 percent of net revenue, in the third quarter of 2014. Included in the third quarter 2015 operating expenses was R&D expense of $36.0 million, or 6.0 percent of net revenue, and SG&A expense of $207.8 million, or 34.5 percent of net revenue. Also included in the third quarter 2015 operating expenses were $2.1 million in net charges related to impairment and loss on dispositions. Non-GAAP adjusted operating expenses during the third quarter of 2015 were $187.0 million, or 31.0 percent of net revenue, and were comprised of $27.4 million of non-GAAP adjusted R&D expense, or 4.5 percent of net revenue, and non-GAAP adjusted SG&A expense of $159.6 million, or 26.5 percent of net revenue. Non-GAAP adjusted operating expenses, non-GAAP adjusted R&D expenses and non-GAAP adjusted SG&A expense exclude, as applicable, amortization of acquisition-related intangibles, restructuring charges, stock-based compensation, fair value adjustments to contingent consideration, compensation costs associated with contingent consideration, costs associated with business dispositions, and impairment and loss on dispositions, net.

 

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Operating income was $29.2 million in the third quarter of 2015, compared to operating income of $35.3 million in the third quarter of 2014. Non-GAAP adjusted operating income was $105.4 million in the third quarter of 2015, compared to non-GAAP adjusted operating income of $116.6 million in the third quarter of 2014.

Net income from continuing operations available to common stockholders was $0.2 million, or $0.00 per diluted share, in the third quarter of 2015, compared to a net loss from continuing operations available to common stockholders of $89.4 million, or $1.08 per diluted share, in the third quarter of 2014. On a non-GAAP basis, the Company reported non-GAAP adjusted net income from continuing operations available to common stockholders of $48.3 million, or $0.54 per diluted share, in the third quarter of 2015, compared to non-GAAP adjusted net income from continuing operations available to common stockholders of $30.0 million, or $0.35 per diluted share, in the third quarter of 2014.

Financial results for the three- and nine-month periods of 2015 and the comparable three- and nine-month periods of 2014 are included in the schedules to this press release.

Detailed reconciliations of the non-GAAP financial measures presented in this release to the most directly comparable financial measures under GAAP, as well as a discussion regarding these non-GAAP financial measures, are included in the schedules to this press release.

2015 Business Outlook

For the year ending December 31, 2015, the Company expects:

 

•

Net revenue to be in the range of $2.48 billion to $2.50 billion

 

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Non-GAAP adjusted net income from continuing operations available to common stockholders in the range of $2.20 to $2.25 per diluted common share

Conference Call

We will host a conference call beginning at 5:00 p.m. (Eastern Time) today, November 4, 2015, to discuss these results, as well as other company matters. During the conference call, we may answer questions concerning business and financial developments and trends and other business and financial matters. Our responses to these questions, as well as other matters discussed during the conference call, may contain or constitute material information that has not been previously disclosed.

A live webcast will be available on the Investor Relations section of Alere’s website, or accessed directly through the following link: https://www.webcaster4.com/Webcast/Page/411/11453

To access the audio conference call, please use the following dial-in numbers and access code 5625983:

 

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US (toll-free): 1-888-317-6003

 

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International: 1-412-317-6061

 

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Canada (toll-free): 1-866-284-3684

 

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A replay will be available approximately one hour after the conclusion of the call and will remain available for a period of seven days following the call. To hear a replay of the conference call, please use the following dial-in numbers and replay code 10075496 (available for seven days):

 

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US (toll-free): 1-877-344-7529

 

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International: 1-412-317-0088

 

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Canada (toll-free): 1-855-669-9658

The replay will also be available via online webcast on the Investor Relations section of the Alere website.

Additionally, reconciliations to non-GAAP financial measures not included in this press release that may be discussed during the call will also be available on the Investor Relations section of the Alere website.

Forward-looking Statements

This press release 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. For example, forward-looking statements include statements regarding: the Company expects both Africa and Asia to contribute to near-term growth, tender awards in Africa and Asia will ramp, revenue will rebound in the fourth quarter of 2015, the Company is re-doubling efforts to establish solid and sustainable organic growth, the strength of the Company’s core platforms will eclipse near-term challenges and accelerate overall growth which will enable the Company to deliver enhanced value for our stockholders, expected net revenues for the year ending December 31, 2015, expected non-GAAP adjusted net income from continuing operations available to common stockholders per diluted share for the year ending December 31, 2015, future operating results, and future financial and operational goals. In some cases, forward-looking statements can be identified by terms such as “may,” “will,” “intend,” “expect,” “plan,” “believe,” “estimate,” “outlook,” “predict” or the like. These statements involve risks and uncertainties, and actual results could differ materially from the statements made in this press release. Factors that might cause these differences include, but are not limited to: limited demand for certain of our products in the markets we serve; limited market acceptance for new products brought to market (and inability to recover investments made in such products); the effect of intense competition in the markets we serve; ability to execute on business plans; risks and expenses arising from FDA inspections and government subpoenas; delays in product development; international business risks; fluctuations in currency exchange rates; the effects of healthcare reform; risks of clinical trials; potential regulatory burdens and obstacles; litigation and legal compliance risks; government investigations; cybersecurity risks; changes in global economic and political conditions; potential product defects; manufacturing or supply issues; potential intellectual property infringement and risks (and expense) related to the ability to enforce intellectual property rights held by the Company; risks of acquisitions and divestitures; substantial indebtedness and risks related to the inability to refinance outstanding indebtedness;

 

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contractual debt restrictions and requirements; fluctuations in quarterly results; potential future financial restatements; potential reviews, investigations or other proceedings by government authorities, stockholders or other parties; the risk that the Company’s remediation plan related to its material weakness will be unsuccessful to prevent or detect additional misstatements, including a potential inability to prepare financial statements or file periodic reports on a timely basis, which would be a default under the Company’s senior secured credit facility and note indentures as well as a violation of the Securities Exchange Act and the listing rules of the NYSE; and any additional material weaknesses in internal controls. These and other risk factors are discussed in more detail under the heading “Risk Factors” in Item 1A of the Company’s Annual Report on Form 10-K, as amended, filed with the Securities and Exchange Commission on May 28, 2015. Copies are available through the Company’s Investor Relations department and at www.alere.com. The Company does not assume any obligation to update its forward-looking statements to reflect new information and developments.

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

[email protected]

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,
		2015				2014
Net product sales and services revenue		$	598,745			$	645,028
License and royalty revenue			3,299				4,182
Net revenue			602,044				649,210
Cost of net revenue			326,995				347,588
Gross profit			275,049				301,622
Gross margin			46	%			46	%
Operating expenses:
Research and development			36,011				38,726
Selling, general and administrative			207,799				227,554
Impairment and loss on disposition, net			2,074				—
Operating income			29,165				35,342
Interest and other income (expense), net			(47,588	)			(60,419	)
Loss from continuing operations before provision (benefit) for income taxes			(18,423	)			(25,077	)
Provision (Benefit) for income taxes			(18,924	)			65,489
Income (loss) from continuing operations before equity earnings of unconsolidated entities, net of tax			501				(90,566	)
Equity earnings of unconsolidated entities, net of tax			5,000				6,277
Income (loss) from continuing operations			5,501				(84,289	)
Loss from discontinued operations, net of tax			—				(14,401	)
Net income (loss)			5,501				(98,690	)
Less: Net loss attributable to non-controlling interests			(61	)			(306	)
Net income (loss) attributable to Alere Inc. and Subsidiaries			5,562				(98,384	)
Preferred stock dividends			(5,367	)			(5,367	)
Net income (loss) available to common stockholders		$	195			$	(103,751	)
Basic net loss per common share:
Loss from continuing operations		$	—			$	(1.08	)
Loss from discontinued operations			—				(0.17	)
Basic net loss per common share		$	—			$	(1.25	)
Diluted net loss per common share:
Loss from continuing operations		$	—			$	(1.08	)
Loss from discontinued operations			—				(0.17	)
Diluted net loss per common share		$	—			$	(1.25	)
Weighted average shares - basic			85,895				83,115
Weighted average shares - diluted			87,169				83,115

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Alere Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(in thousands, except per share amounts)

 

		Nine Months Ended September 30,
		2015				2014
Net product sales and services revenue		$	1,825,662			$	1,905,849
License and royalty revenue			13,691				15,998
Net revenue			1,839,353				1,921,847
Cost of net revenue			979,745				1,011,174
Gross profit			859,608				910,673
Gross margin			47	%			47	%
Operating expenses:
Research and development			91,225				114,855
Selling, general and administrative			577,566				730,591
Impairment and loss on disposition, net			42,408				638
Operating income			148,409				64,589
Interest and other income (expense), net			(150,523	)			(154,112	)
Loss from continuing operations before provision (benefit) for income taxes			(2,114	)			(89,523	)
Provision (benefit) for income taxes			(10,009	)			69,273
Income (loss) from continuing operations before equity earnings of unconsolidated entities, net of tax			7,895				(158,796	)
Equity earnings of unconsolidated entities, net of tax			10,320				13,716
Income (loss) from continuing operations			18,215				(145,080	)
Income (loss) from discontinued operations, net of taxes			216,777				(4,082	)
Net income (loss)			234,992				(149,162	)
Less: Net income (loss) attributable to non-controlling interests			386				(136	)
Net income (loss) attributable to Alere Inc. and Subsidiaries			234,606				(149,026	)
Preferred stock dividends			(15,926	)			(15,926	)
Net Income (loss) available to common stockholders		$	218,680			$	(164,952	)
Basic net income (loss) per common share:
(Income) loss from continuing operations		$	0.02			$	(1.94	)
Income (loss) from discontinued operations			2.55				(0.05	)
Net Income (loss) per common share		$	2.57			$	(1.99	)
Diluted net income (loss) per common share:
Income (loss) from continuing operations		$	0.02			$	(1.94	)
Income (loss) from discontinued operations			2.51				(0.05	)
Diluted net income (loss) per common share		$	2.53			$	(1.99	)
Weighted average shares - basic			85,141				82,719
Weighted average shares - diluted			86,279				82,719

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Alere Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(in thousands)

 

		September 30,				December 31,
		2015				2014
ASSETS
CURRENT ASSETS:
Cash and cash equivalents		$	479,381			$	378,461
Restricted cash			430,821				37,571
Marketable securities			157				259
Accounts receivable, net			452,366				466,106
Inventories, net			362,226				365,165
Prepaid expenses and other current assets			136,447				244,986
Assets held for sale			25,312				315,515
Total current assets			1,886,710				1,808,063
PROPERTY, PLANT AND EQUIPMENT, NET			445,315				453,570
GOODWILL AND OTHER INTANGIBLE ASSETS, NET			3,924,614				4,246,761
RESTRICTED CASH - NON-CURRENT			44,148				—
DEFERRED FINANCING COSTS AND OTHER ASSETS, NET			147,330				170,562
Assets held for sale - non-current			126,048				—
Total assets		$	6,574,165			$	6,678,956
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Short-term debt and current portions of long-term debt and capital lease obligations		$	607,597			$	93,116
Liabilities related to assets held for sale			8,836				78,843
Other current liabilities			509,582				589,086
Total current liabilities			1,126,015				761,045
LONG-TERM LIABILITIES:
Long-term debt and capital lease obligations, net of current portions			2,993,928				3,631,945
Deferred tax liabilities			207,451				214,639
Other long-term liabilities			135,200				161,582
Liabilities related to assets held for sale - non-current			9,603				—
Total long-term liabilities			3,346,182				4,008,166
TOTAL EQUITY			2,101,968				1,909,745
Total liabilities and equity		$	6,574,165			$	6,678,956

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Alere Inc. and Subsidiaries

Reconciliation to Non-GAAP Adjusted Operating Results

(in thousands, except per share amounts)

 

		Three Months Ended September 30,
		2015				2014
Reconciliation to Non-GAAP Adjusted Operating Income (1)
Operating income		$	29,165			$	35,342
Adjustment related to acquired software license contracts			430				324
Amortization of acquisition-related intangible assets			60,928				58,813
Restructuring charges			2,264				17,296
Stock-based compensation expense			7,317				3,168
Compensation charges associated with acquisition-related contingent consideration obligations			191				670
Acquisition-related costs			241				325
Fair value adjustments to acquisition-related contingent consideration			957				(5,537	)
Costs associated with potential business dispositions			1,878				6,203
Impairment and loss on disposition, net			2,074				—
Non-GAAP adjusted operating income		$	105,445			$	116,604

 

		Three Months Ended September 30,
		2015				2014
Reconciliation to Non-GAAP Adjusted Net Income (1)
Net income (loss) available to common stockholders		$	195			$	(103,751	)
Adjustment related to acquired software license contracts			430				324
Amortization of acquisition-related intangible assets			60,954				58,818
Restructuring charges			2,270				17,307
Stock-based compensation expense			7,317				3,168
Compensation charges associated with acquisition-related contingent consideration obligations			191				670
Acquisition-related costs			241				325
Fair value adjustments to acquisition-related contingent consideration			957				(5,537	)
Costs associated with potential business dispositions			1,878				6,203
Impairment and loss on disposition, net			2,074				—
Loss on sale of equity investment			—				457
Write off of equity investment in BBI			662				—
Interest expense recorded in connection with fees paid for certain debt modifications and the termination of our senior secured credit facility			9,273				363
Interest accretion associated with acquisition-related compensation charges			35				102
Amortization of acquisition-related intangible assets, restructuring, fair value adjustments to acquisition-related contingent consideration, and impairment, net of gain on divestiture - Discontinued operations, net of tax			—				17,223
Income tax effects on items above			(38,179	)			37,139
Non-GAAP adjusted net income available to common stockholders		$	48,298			$	32,811
Loss per diluted common share from continuing operations		$	—			$	(1.08	)
Loss per diluted common share from discontinued operations			—				(0.17	)
Net loss per diluted common share		$	—			$	(1.25	)
Weighted average shares - diluted			87,169				83,115
Non-GAAP adjusted income per diluted common share from continuing operations (2)		$	0.54			$	0.35
Non-GAAP adjusted income per diluted common share from discontinued operations (2)			—				0.03
Non-GAAP adjusted net income per diluted common share (2)		$	0.54			$	0.38
Non-GAAP adjusted weighted average shares - diluted (2)			100,846				87,929

 

(1)

In calculating “Non-GAAP adjusted operating income” and “Non-GAAP adjusted net income available to common stockholders”, 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 available to common stockholders” 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 available to common stockholders” presented in this press release may not be comparable to similar measures used by other companies.

(2)

Included in the weighted average diluted common shares for the calculation of net income per common share for the three months ended September 30, 2015, on a non-GAAP adjusted basis, are dilutive shares consisting of 1,244,000 common stock equivalent shares from the potential exercise of stock options and warrants. Also included were dilutive shares consisting of 3,438,000 common stock equivalent shares from the potential conversion of convertible debt securities, 30,000 potentially issuable shares of common stock associated with a contingent consideration arrangement, and 10,239,000 common stock equivalent shares from the potential conversion of Series B convertible preferred stock. The diluted net income per common share calculation for the three months ended September 30, 2015, on a non-GAAP adjusted basis, included the add back of interest expense related to the convertible debt of $0.7 million and the add back of $5.4 million of preferred stock dividends related to the Series B convertible preferred stock, resulting in net income available to common stockholders of $54.4 million for the three months ended September 30, 2015.

Included in the weighted average diluted common shares for the calculation of net income per common share for the three months ended September 30, 2014, on a non-GAAP adjusted basis, were dilutive shares consisting of 1,376,000 common stock equivalent shares from the potential exercise of stock options and warrants. Also included were potential dilutive shares consisting of 3,438,000 common stock equivalent shares from the potential conversion of convertible debt securities. The diluted net income per common share calculation for the three months ended September 30, 2014, on a non-GAAP adjusted basis, included the add back of interest expense related to the convertible debt of $0.7 million, resulting in net income available to common stockholders of $33.5 million for the three months ended September 30, 2014.

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Alere Inc. and Subsidiaries

Reconciliation to Non-GAAP Adjusted Operating Results

(in thousands, except per share amounts)

 

		Nine Months Ended September 30,
		2015				2014
Reconciliation to Non-GAAP Adjusted Operating Income (1)
Operating income		$	148,409			$	64,589
Adjustment related to acquired software license contracts			877				1,116
Amortization of acquisition-related intangible assets			160,867				176,608
Restructuring charges			11,387				37,074
Stock-based compensation expense			19,596				7,750
Compensation charges associated with acquisition-related contingent consideration obligations			(2,615	)			1,673
Acquisition-related costs			332				695
Fair value adjustments to acquisition-related contingent consideration			(51,910	)			12,442
Non-cash charge associated with acquired inventory			—				—
Costs associated with potential business dispositions			6,097				20,763
Impairment and loss on disposition, net			42,408				638
Non-GAAP adjusted operating income		$	335,448			$	323,348

 

		Nine Months Ended September 30,
		2015				2014
Reconciliation to Non-GAAP Adjusted Net Income (1)
Net income (loss) available to common stockholders		$	218,680			$	(164,952	)
Adjustment related to acquired software license contracts			877				1,116
Amortization of acquisition-related intangible assets			160,941				176,651
Restructuring charges			11,406				37,108
Stock-based compensation expense			19,596				7,750
Compensation charges associated with acquisition-related contingent consideration obligations			(2,615	)			1,673
Acquisition-related costs			332				695
Fair value adjustments to acquisition-related contingent consideration			(51,910	)			12,442
Costs associated with potential business dispositions			6,488				20,763
Impairment and loss on disposition, net			42,408				638
Loss on sale of equity investment			—				457
Write off of equity investment in BBI			662				—
Interest expense recorded in connection with fees paid for certain debt modifications and the termination of our senior secured credit facility			20,940				1,091
Interest accretion associated with acquisition-related compensation charges			(406	)			295
Expense associated with extinguishment of debt			3,480				—
Amortization of acquisition-related intangible assets, restructuring, fair value adjustments to acquisition-related contingent consideration, and impairment, net of gain on divestiture - Discontinued operations, net of tax			(217,589	)			12,386
Income tax effects on items above			(70,821	)			6,766
Non-GAAP adjusted net income available to common stockholders		$	142,469			$	114,879
Income (loss) per diluted common share from continuing operations		$	0.02			$	(1.94	)
Income (loss) per diluted common share from discontinued operations			2.51				(0.05	)
Net income (loss) per diluted common share		$	2.53			$	(1.99	)
Weighted average shares - diluted			86,279				82,719
Non-GAAP adjusted income per diluted common share from continuing operations (2)		$	1.62			$	1.25
Non-GAAP adjusted income (loss) per diluted common share from discontinued operations (2)			(0.01	)			0.09
Non-GAAP adjusted net income per diluted common share (2)		$	1.61			$	1.34
Non-GAAP adjusted weighted average shares - diluted (2)			99,956				87,311

 

(1)

In calculating “Non-GAAP adjusted operating income” and “Non-GAAP adjusted net income available to common stockholders”, 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 available to common stockholders” 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 available to common stockholders” presented in this press release may not be comparable to similar measures used by other companies.

(2)

Included in the weighted average diluted common shares for the calculation of net income per common share for the nine months ended September 30, 2015, on a non-GAAP adjusted basis, are dilutive shares consisting of 1,120,000 common stock equivalent shares from the potential exercise of stock options and warrants. Also included were dilutive shares consisting of 3,438,000 common stock equivalent shares from the potential conversion of convertible debt securities, 18,000 potentially issuable shares of common stock associated with a contingent consideration arrangement, and 10,239,000 common stock equivalent shares from the potential conversion of Series B convertible preferred stock. The diluted net income per common share calculation for the nine months ended September 30, 2015, on a non-GAAP adjusted basis, included the add back of interest expense related to the convertible debt of $2.1 million and the add back of $15.9 million of preferred stock dividends related to the Series B convertible preferred stock, resulting in net income available to common stockholders of $160.5 million for the nine months ended September 30, 2015.

Included in the weighted average diluted common shares for the calculation of net income per common share for the nine months ended September 30, 2014, on a non-GAAP adjusted basis, were dilutive shares consisting of 1,154,000 common stock equivalent shares from the potential exercise of stock options and warrants. Also included were potential dilutive shares consisting of 3,438,000 common stock equivalent shares from the potential conversion of convertible debt securities. The diluted net income per common share calculation for the nine months ended September 30, 2014, on a non-GAAP adjusted basis, included the add back of interest expense related to the convertible debt of $2.2 million, resulting in net income available to common stockholders of $117.1 million for the nine months ended September 30, 2014.

---

Alere Inc. and Subsidiaries

Selected Consolidated Revenues

(in thousands)

 

		Q3 2015				YTD 2015				Q3 2014				YTD 2014				% Change Q3 15 v. Q3 14				% Change YTD 15 v. YTD 14
Professional diagnostics segment (1)
Cardiometabolic		$	208,319			$	624,823			$	208,248			$	631,452				0	%			-1	%
Infectious disease			163,759				519,145				184,018				526,632				-11	%			-1	%
Toxicology			162,571				468,822				166,381				491,561				-2	%			-5	%
Other (2)			45,349				147,512				65,183				190,986				-30	%			-23	%
Total professional diagnostics segment(1) (2)			579,998				1,760,302				623,830				1,840,631				-7	%			-4	%
Consumer diagnostics segment (1)			18,747				65,360				21,198				65,218				-12	%			0	%
License and royalty revenue			3,299				13,691				4,182				15,998				-21	%			-14	%
Net revenue		$	602,044			$	1,839,353			$	649,210			$	1,921,847				-7	%			-4	%

 

(1)	Revenues have been restated for the impact of a change in segment reporting due to the divestiture of our health management business.

(2)

Revenues are presented in accordance with generally accepted accounting principles and exclude an adjustment of $0.5 million and $0.9 million, and $0.3 million and $1.1 million related to acquired software license contracts which were not recognized during the three and nine months ended September 30, 2015 and 2014, respectively, due to business combination accounting rules.

---

Alere Inc. and Subsidiaries

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

(in thousands)

 

		For the Three Months Ended September 30, 2015
		Professional Diagnostics				Consumer Diagnostics				Corporate				Total
Operating Segment
Net revenue		$	583,297			$	18,747			$	—			$	602,044
Adjustment related to acquired software license contracts (1)			430				—				—				430
Non-GAAP adjusted net revenue		$	583,727			$	18,747			$	—			$	602,474
Operating income (loss)		$	54,450			$	1,039			$	(26,324	)		$	29,165
Adjustment related to acquired software license contracts (1)			430				—				—				430
Amortization of acquisition-related intangible assets			60,880				9				39				60,928
Restructuring charges			1,578				—				686				2,264
Stock-based compensation expense			—				—				7,317				7,317
Compensation charges associated with acquisition-related contingent consideration obligations			191				—				—				191
Acquisition-related costs			—				—				241				241
Fair value adjustments to acquisition-related contingent consideration			957				—				—				957
Costs associated with potential business dispositions			1,878				—				—				1,878
Impairment and loss on disposition, net			2,074				—				—				2,074
Non-GAAP adjusted operating income (loss)		$	122,438			$	1,048			$	(18,041	)		$	105,445
Non-GAAP adjusted operating income (loss) as % of Non-GAAP adjusted net revenue			21.0	%			5.6	%							17.5	%

 

(1)	Estimated revenue related to acquired software license contracts that was not recognized during the three months ended September 30, 2015 due to business combination accounting rules.

 

		For the Three Months Ended September 30, 2014
		Professional Diagnostics				Consumer Diagnostics				Corporate				Total
Operating Segment
Net revenue (1)		$	628,012			$	21,198			$	—			$	649,210
Adjustment related to acquired software license contracts (2)			324				—				—				324
Non-GAAP adjusted net revenue		$	628,336			$	21,198			$	—			$	649,534
Operating income (loss)		$	67,232			$	1,499			$	(33,389	)		$	35,342
Adjustment related to acquired software license contracts (2)			324				—				—				324
Amortization of acquisition-related intangible assets			57,306				175				1,332				58,813
Restructuring charges			14,118				—				3,178				17,296
Stock-based compensation expense			—				—				3,168				3,168
Compensation charges associated with acquisition-related contingent consideration obligations			670				—				—				670
Acquisition-related costs			—				—				325				325
Fair value adjustments to acquisition-related contingent consideration			(8,637	)			—				3,100				(5,537	)
Costs associated with potential business dispositions			6,203				—				—				6,203
Non-GAAP adjusted operating income (loss)		$	137,216			$	1,674			$	(22,286	)		$	116,604
Non-GAAP adjusted operating income (loss) as % of Non-GAAP adjusted net revenue			21.8	%			7.9	%							18.0	%

 

(1)	Net revenue has been restated for the impact of a change in segment reporting due to the divestiture of our health management business.

(2)	Estimated revenue related to acquired software license contracts that was not recognized during the three months ended September 30, 2014 due to business combination accounting rules.

 

Comments:

In calculating “Non-GAAP 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 “Non-GAAP 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, “Non-GAAP 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 Nine Months Ended September 30, 2015
		Professional Diagnostics				Consumer Diagnostics				Corporate				Total
Operating Segment
Net revenue		$	1,773,993			$	65,360			$	—			$	1,839,353
Adjustment related to acquired software license contracts (1)			877				—				—				877
Non-GAAP adjusted net revenue		$	1,774,870			$	65,360			$	—			$	1,840,230
Operating income (loss)		$	219,543			$	4,322			$	(75,456	)		$	148,409
Adjustment related to acquired software license contracts (1)			877				—				—				877
Amortization of acquisition-related intangible assets			160,723				28				116				160,867
Restructuring charges			10,103				—				1,284				11,387
Stock-based compensation expense			—				—				19,596				19,596
Compensation charges associated with acquisition-related contingent consideration obligations			(2,615	)			—				—				(2,615	)
Acquisition-related costs			—				—				332				332
Fair value adjustments to acquisition-related contingent consideration			—				—				(51,910	)			(51,910	)
Costs associated with potential business dispositions			6,488				—				—				6,488
Impairment and gain (loss) on dispositions, net			42,408				—				—				42,408
Non-GAAP adjusted operating income (loss)		$	437,527			$	4,350			$	(106,038	)		$	335,839
Non-GAAP adjusted operating income (loss) as % of Non-GAAP adjusted net revenue			24.7	%			6.7	%							18.2	%

 

(1)	Estimated revenue related to acquired software license contracts that was not recognized during the nine months ended September 30, 2015 due to business combination accounting rules.

 

		For the Nine Months Ended September 30, 2014
		Professional Diagnostics				Consumer Diagnostics				Corporate				Total
Operating Segment
Net revenue (1)		$	1,855,318			$	66,529			$	—			$	1,921,847
Adjustment related to acquired software license contracts (2)			1,116				—				—				1,116
Non-GAAP adjusted net revenue		$	1,856,434			$	66,529			$	—			$	1,922,963
Operating income (loss)		$	135,856			$	4,210			$	(75,477	)		$	64,589
Adjustment related to acquired software license contracts (2)			1,116				—				—				1,116
Amortization of acquisition-related intangible assets			174,638				638				1,332				176,608
Restructuring charges			29,746				—				7,328				37,074
Stock-based compensation expense			—				—				7,750				7,750
Compensation charges associated with acquisition-related contingent consideration obligations			1,673				—				—				1,673
Acquisition-related costs			—				—				695				695
Fair value adjustments to acquisition-related contingent consideration			9,042				—				3,400				12,442
Costs associated with potential business dispositions			20,763				—				—				20,763
Loss on disposition			638				—				—				638
Non-GAAP adjusted operating income (loss)		$	373,472			$	4,848			$	(54,972	)		$	323,348
Non-GAAP adjusted operating income (loss) as % of Non-GAAP adjusted net revenue			20.1	%			7.3	%							16.8	%

 

(1)	Net revenue has been restated for the impact of a change in segment reporting due to the divestiture of our health management business.

(2)	Estimated revenue related to acquired software license contracts that was not recognized during the nine months ended September 30, 2014 due to business combination accounting rules.

 

Comments:

In calculating “Non-GAAP 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 “Non-GAAP 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, “Non-GAAP 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 September 30, 2015				Three Months Ended September 30, 2014
Net revenue		$	602,044			$	649,210
Adjustment related to acquired software license contracts			430				324
Non-GAAP adjusted net revenue (1)		$	602,474			$	649,534
Cost of net revenue		$	326,995			$	347,588
Less adjustments:
Amortization of acquisition-related intangible assets			(16,132	)			(15,684	)
Restructuring charges			(523	)			(5,654	)
Stock-based compensation expense			(326	)			(291	)
Non-GAAP adjusted cost of net revenue (1)		$	310,014			$	325,959
Non-GAAP adjusted gross profit (1)		$	292,460			$	323,575

 

		Three Months Ended September 30, 2015				Three Months Ended September 30, 2014
Research and development		$	36,011			$	38,726
Less adjustments:
Amortization of acquisition-related intangible assets			(8,304	)			(1,372	)
Restructuring charges			(18	)			(5,457	)
Stock-based compensation expense			(287	)			(279	)
Non-GAAP adjusted research and development (1)		$	27,402			$	31,618

 

		Three Months Ended September 30, 2015				Three Months Ended September 30, 2014
Selling, general and administrative		$	207,799			$	227,554
Less adjustments:
Amortization of acquisition-related intangible assets			(36,492	)			(41,757	)
Restructuring charges			(1,723	)			(6,185	)
Stock-based compensation expense			(6,704	)			(2,598	)
Compensation charges associated with acquisition-related contingent consideration obligations			(191	)			(670	)
Acquisition-related costs			(241	)			(325	)
Fair value adjustments to acquisition-related contingent consideration			(957	)			5,537
Costs associated with potential business dispositions			(1,878	)			(6,203	)
Non-GAAP adjusted selling, general and administrative(1)		$	159,613			$	175,353

 

		Three Months Ended September 30, 2015				Three Months Ended September 30, 2014
Impairment and loss on disposition, net		$	2,074			$	—
Impairment and loss on disposition, net			(2,074	)			—
Non-GAAP adjusted impairment and loss on disposition, net(1)		$	—			$	—

 

		Three Months Ended September 30, 2015				Three Months Ended September 30, 2014
Interest and other income (expense), net		$	(47,588	)		$	(60,419	)
Less adjustments:
Restructuring charges			6				11
Write off of equity investment in BBI			662				—
Interest expense recorded in connection with fees paid for certain debt modifications and the termination of our senior secured credit facility			9,273				363
Interest accretion associated with acquisition-related compensation charges			35				102
Non-GAAP adjusted interest and other income (expense), net(1)		$	(37,612	)		$	(59,943	)

 

		Three Months Ended September 30, 2015				Three Months Ended September 30, 2014
Provision (benefit) for income taxes		$	(18,924	)		$	65,489
Add: Income tax effects on Non-GAAP adjustments			38,200				(37,109	)
Non-GAAP adjusted provision for income taxes, net(1)		$	19,276			$	28,380

 

		Three Months Ended September 30, 2015				Three Months Ended September 30, 2014
Equity earnings of unconsolidated entities, net of tax		$	5,000			$	6,277
Less adjustments:
Amortization of acquisition-related intangible assets			104				132
Loss on sale of equity investment			—				457
Income tax effects on items above			—				—
Non-GAAP adjusted equity earnings of unconsolidated entities, net of tax(1)		$	5,104			$	6,866

 

		Three Months Ended September 30, 2015				Three Months Ended September 30, 2014
Loss from discontinued operations, net of taxes		$	—			$	(14,401	)
Less adjustments:
Amortization of acquisition-related intangible assets			—				7,514
Restructuring charges			—				562
Goodwill impairment charge			—				17,984
Fair value adjustments to acquisition-related contingent consideration			—				(25,071	)
Income tax effects on items above			—				16,234
Non-GAAP adjusted income from discontinued operations, net of taxes(1)		$	—			$	2,822

 

		Three Months Ended September 30, 2015				Three Months Ended September 30, 2014
Net loss attributable to non-controlling interests, net of tax		$	(61	)		$	(306	)
Less: Amortization of acquisition-related intangible assets, net of tax			78				127
Income tax effects on items above			21				30
Non-GAAP adjusted net loss attributable to non-controlling interests, net of tax(1)		$	(4	)		$	(209	)
(1)    The following is a summary of our non-GAAP adjusted measures included above:
Non-GAAP adjusted net revenue		$	602,474			$	649,534
Non-GAAP adjusted cost of net revenue		$	310,014			$	325,959
Non-GAAP adjusted research and development		$	27,402			$	31,618
Non-GAAP adjusted selling, general and administrative		$	159,613			$	175,353
Non-GAAP adjusted impairment and loss on dispositions, net		$	—			$	—
Non-GAAP adjusted interest and other income (expense), net		$	(37,612	)		$	(59,943	)
Non-GAAP adjusted provision for income taxes		$	19,276			$	28,380
Non-GAAP adjusted equity earnings of unconsolidated entities, net of tax		$	5,104			$	6,866
Non-GAAP adjusted income from discontinued operations, net of tax		$	—			$	2,822
Non-GAAP adjusted net loss attributable to non-controlling interests, net of tax		$	(4	)		$	(209	)

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Alere Inc. and Subsidiaries

Reconciliations to Non-GAAP Adjusted P&L Categories

(in thousands)

 

		Nine Months Ended September 30, 2015				Nine Months Ended September 30, 2014
Net revenue		$	1,839,353			$	1,921,847
Adjustment related to acquired software license contracts			877				1,116
Non-GAAP adjusted net revenue (1)		$	1,840,230			$	1,922,963
Cost of net revenue		$	979,745			$	1,011,174
Less adjustments:
Amortization of acquisition-related intangible assets			(43,440	)			(47,242	)
Restructuring charges			(2,921	)			(6,707	)
Stock-based compensation expense			(866	)			(863	)
Costs associated with potential business dispositions			(391	)			—
Non-GAAP adjusted cost of net revenue (1)		$	932,127			$	956,362
Non-GAAP adjusted gross profit (1)		$	908,103			$	966,601

 

		Nine Months Ended September 30, 2015				Nine Months Ended September 30, 2014
Research and development		$	91,225			$	114,855
Less adjustments:
Amortization of acquisition-related intangible assets			(10,088	)			(3,721	)
Restructuring charges			(666	)			(8,488	)
Stock-based compensation expense			(893	)			341
Non-GAAP adjusted research and development (1)		$	79,578			$	102,987

 

		Nine Months Ended September 30, 2015				Nine Months Ended September 30, 2014
Selling, general and administrative		$	577,566			$	730,591
Less adjustments:
Amortization of acquisition-related intangible assets			(107,339	)			(125,645	)
Restructuring charges			(7,800	)			(21,879	)
Stock-based compensation expense			(17,837	)			(7,228	)
Compensation charges associated with acquisition-related contingent consideration obligations			2,615				(1,673	)
Acquisition-related costs			(332	)			(695	)
Fair value adjustments to acquisition-related contingent consideration			51,910				(12,442	)
Costs associated with potential business dispositions			(6,097	)			(20,763	)
Non-GAAP adjusted selling, general and administrative(1)		$	492,686			$	540,266

 

		Nine Months Ended September 30, 2015				Nine Months Ended September 30, 2014
Impairment and loss on disposition, net		$	42,408			$	638
Impairment and loss on disposition, net			(42,408	)			(638	)
Non-GAAP adjusted impairment and loss on disposition, net(1)		$	—			$	—

 

		Nine Months Ended September 30, 2015				Nine Months Ended September 30, 2014
Interest and other income (expense), net		$	(150,523	)		$	(154,112	)
Less adjustments:
Restructuring charges			19				34
Write off of equity investment in BBI			662				—
Interest expense recorded in connection with fees paid for certain debt modifications and the termination of our senior secured credit facility			20,940				1,091
Interest accretion associated with acquisition-related compensation charges			(406	)			295
Expense associated with extinguishment of debt			3,480				—
Non-GAAP adjusted interest and other income (expense), net(1)		$	(125,828	)		$	(152,692	)

 

		Nine Months Ended September 30, 2015				Nine Months Ended September 30, 2014
Provision (benefit) for income taxes		$	(10,009	)		$	69,273
Add: Income tax effects on Non-GAAP adjustments			70,884				(6,678	)
Non-GAAP adjusted provision for income taxes, net(1)		$	60,875			$	62,595

 

		Nine Months Ended September 30, 2015				Nine Months Ended September 30, 2014
Equity earnings of unconsolidated entities, net of tax		$	10,320			$	13,716
Less adjustments:
Amortization of acquisition-related intangible assets			314				430
Loss on sale of equity investment			—				457
Income tax effects on items above			—				—
Non-GAAP adjusted equity earnings of unconsolidated entities, net of tax(1)		$	10,634			$	14,603

 

		Nine Months Ended September 30, 2015				Nine Months Ended September 30, 2014
Income (loss) from discontinued operations, net of taxes		$	216,777			$	(4,082	)
Less adjustments:
Amortization of acquisition-related intangible assets			559				22,541
Restructuring charges			(13	)			4,039
Goodwill impairment charge			—				17,984
Fair value adjustments to acquisition-related contingent consideration			—				(26,321	)
Gain on Divestiture			(366,191	)			—
Income tax effects on items above			148,056				(5,857	)
Non-GAAP adjusted income (loss) from discontinued operations, net of taxes(1)		$	(812	)		$	8,304

 

		Nine Months Ended September 30, 2015				Nine Months Ended September 30, 2014
Net income (loss) attributable to non-controlling interests, net of tax		$	386			$	(136	)
Less: Amortization of acquisition-related intangible assets, net of tax			240				387
Income tax effects on items above			63				88
Non-GAAP adjusted net income attributable to non-controlling interests, net of tax(1)		$	563			$	163
(1)    The following is a summary of our non-GAAP adjusted measures included above:
Non-GAAP adjusted net revenue		$	1,840,230			$	1,922,963
Non-GAAP adjusted cost of net revenue		$	932,127			$	956,362
Non-GAAP adjusted research and development		$	79,578			$	102,987
Non-GAAP adjusted selling, general and administrative		$	492,686			$	540,266
Non-GAAP adjusted impairment and loss on dispositions, net		$	—			$	—
Non-GAAP adjusted interest and other income (expense), net		$	(125,828	)		$	(152,692	)
Non-GAAP adjusted provision for income taxes		$	60,875			$	62,595
Non-GAAP adjusted equity earnings of unconsolidated entities, net of tax		$	10,634			$	14,603
Non-GAAP adjusted income (loss) from discontinued operations, net of tax		$	(812	)		$	8,304
Non-GAAP adjusted net income attributable to non-controlling interests, net of tax		$	563			$	163

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Alere Inc. and Subsidiaries

Reconciliations of Gross Profit/Margin to Non-GAAP Adjusted Gross Profit/Margin

(in thousands)

 

		Three Months Ended September 30, 2014 (1)								Three Months Ended June 30, 2015								Three Months Ended September 30, 2015
Alere Consolidated
Net revenue		$	649,210							$	629,156							$	602,044
Adjustment related to acquired software license contracts			324								200								430
Non-GAAP adjusted net revenue			649,534								629,356								602,474
Cost of net revenue			347,588								336,582								326,995
Less adjustments:
Amortization of acquisition-related intangible assets			15,684								13,112								16,132
Stock-based compensation expense			291								287								326
Restructuring charges			5,654								897								523
Non-GAAP adjusted cost of net revenue			325,959								322,286								310,014
Non-GAAP adjusted gross profit/margin		$	323,575				49.8	%		$	307,070				48.8	%		$	292,460				48.5	%

 

		Three Months Ended								Three Months Ended								Three Months Ended
		September 30, 2014 (1)								June 30, 2015								September 30, 2015
Professional Diagnostics Segment
Net product sales and services revenue		$	628,012							$	598,817							$	579,998
Adjustment related to acquired software license contracts			324								200								430
Non-GAAP adjusted net product sales and services revenue			628,336								599,017								580,428
Cost of net revenue			329,013								312,068								292,156
Less adjustments:
Amortization of acquisition-related intangible assets			15,659								13,112								16,133
Stock-based compensation expense			291								287								326
Restructuring charges			5,654								897								523
Non-GAAP adjusted cost of net revenue			307,409								297,772								275,174
Non-GAAP adjusted gross profit/margin		$	320,927				51.1	%		$	301,245				50.3	%		$	305,254				52.6	%

Note:

 

(1)	Restated to reflect the impact of discontinued operations and the impact of a change in segment reporting

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Alere Inc. and Subsidiaries

Reconciliation of Net Income to Non-GAAP EBITDA

(in thousands)

 

		Three Months Ended				Nine Months Ended
		September 30, 2015				September 30, 2015
Net Income (1)		$	5,501			$	234,992
Less: Income from discontinued operations, net of tax			—				216,777
Income from continuing operations			5,501				18,215
Adjustment related to acquired software license contracts			430				877
Income tax provision (benefit)			(18,924	)			(10,009	)
Depreciation and amortization			86,603				233,825
Interest, net (2)			49,999				154,596
Non-cash stock-based compensation expense			7,317				19,596
Non-cash fair value adjustments to acquisition-related contingent consideration			957				(51,910	)
Non-cash write-off of an investment			662				662
Impairment and gain (loss) on dispositions, net			2,074				42,408
Non-GAAP EBITDA		$	134,619			$	408,260

 

(1)

Net income for the three months and nine months ended September 30, 2015 includes non-interest related restructuring charges of $2.3 million and $11.4 million, respectively, and $1.9 million and $6.5 million of costs associated with business dispositions, respectively, which have not been added back for purposes of computing non-GAAP EBITDA. The three months and nine months ended September 30, 2015 also includes $0.2 million and $0.3 million, respectively, of acquisition-related costs.

(2)	Includes $3.5 million of expense associated with the extinguishment of debt during the nine months ended September 30, 2015.

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Alere Inc. and Subsidiaries

Reconciliation of Net Cash Provided by Operating Activities to Non-GAAP Free Cash Flow

(in thousands)

 

		Three Months Ended				Nine Months Ended
		September 30, 2015				September 30, 2015
Net cash provided by operating activities		$	104,724			$	137,250
Capital expenditures			(20,663	)		$	(67,947	)
Non-GAAP free cash flow		$	84,061			$	69,303