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UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
WASHINGTON, D.C.
20549
FORM 10-K
ANNUAL REPORT PURSUANT TO
SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For
the fiscal year ended December 31, 2010.
Commission file number
000-16789
ALERE INC.
(Exact Name of Registrant as
Specified in Its Charter)
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Delaware
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04-3565120
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(State or other jurisdiction of incorporation or
organization)
51 Sawyer Road, Suite 200, Waltham, Massachusetts
(Address of principal executive offices)
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(I.R.S. Employer Identification No.)
02453
(Zip Code)
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(781) 647-3900
(Registrants telephone
number, including area code)
Securities registered pursuant to
Section 12(b) of the Securities Exchange Act of 1934 (the
Exchange Act):
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Title of Each Class
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Name of Each Exchange on Which Registered
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Common Stock, $0.001 per share par value
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New York Stock Exchange
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Series B Convertible Perpetual Preferred
Stock, $0.001 per share par value
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New York Stock Exchange
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9.00% Senior Subordinated Notes Due 2016,
$0.001 per share par value
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New York Stock Exchange
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Securities registered pursuant to
Section 12(g) of the Exchange Act: None
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act of
1933. Yes þ No o
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the
Exchange
Act. Yes o No þ
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Exchange Act during the preceding 12 months (or for
such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing
requirements for the past
90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any,
every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of
Regulation S-T
during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such
files). Yes þ No o
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of
Regulation S-K
is not contained herein, and will not be contained, to the best
of registrants knowledge, in definitive proxy or
information statements incorporated by reference in
Part III of this
Form 10-K
or any amendment to this
Form 10-K. o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in
Rule 12b-2
of the Exchange Act. (Check one):
Large accelerated
filer þ Accelerated
filer o Non-accelerated
filer o Smaller
reporting
company o
(Do
not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the Exchange
Act). Yes o No þ
The aggregate market value of the voting common stock held by
non-affiliates of the registrant based on the closing price of
the registrants stock on the New York Stock Exchange on
June 30, 2010 (the last business day of the
registrants most recently completed second fiscal quarter)
was $1,901,649,455.
As of February 24, 2011, the registrant had
85,371,694 shares of common stock, par value $0.001 per
share, outstanding.
ALERE
INC.
FORM 10-K
For The
Fiscal Year Ended December 31, 2010
PART I
This Annual Report on
Form 10-K
contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as
amended. Readers can identify these statements by
forward-looking words such as may,
could, should, would,
intend, will, expect,
anticipate, believe,
estimate, continue or similar words.
Readers should carefully review statements that contain these
words because they discuss our future expectations, contain
projections of our future results of operations or of our
financial condition or state other forward-looking
information. We caution investors that all such forward-looking
statements involve risks and uncertainties that could cause our
actual results to differ materially from any projected results
or expectations that we discuss in this report. You should
therefore carefully review the risk factors and uncertainties
discussed in Item 1A entitled Risk Factors,
which begins on page 13 of this report, as well as those
factors identified from time to time in our periodic filings
with the Securities and Exchange Commission. We undertake no
obligation to update any forward-looking statements.
Unless the context requires otherwise, references in this
Annual Report on
Form 10-K
to we, us, our, or our
company refer to Alere Inc. and its subsidiaries.
GENERAL
Alere Inc. enables individuals to take charge of improving their
health and quality of life at home, under medical supervision,
by developing new capabilities in near-patient diagnosis,
monitoring and health management. Our global leading products
and services, as well as our new product development efforts,
focus on cardiology, womens health, infectious disease,
oncology and toxicology. We are confident that our ability to
offer rapid diagnostic tools combined with value-added
healthcare services will improve care for patients, lower costs
to payers and help healthcare providers become more effective.
Our company, then known as Inverness Medical Innovations, Inc.,
was formed to acquire the womens health and professional
diagnostics businesses of its predecessor, Inverness Medical
Technology, Inc., through a split-off and merger transaction,
which occurred in November 2001. Since that time, we have grown
our businesses through strategic acquisitions, tactical use of
our intellectual property portfolio and through organic growth.
In July 2010, our company changed its name from Inverness
Medical Innovations, Inc. to Alere Inc. Our common stock is
listed on the New York Stock Exchange under the symbol
ALR.
Our principal executive offices are located at 51 Sawyer Road,
Suite 200, Waltham, Massachusetts 02453 and our telephone
number is
(781) 647-3900.
Our website is www.alere.com, and we make available through the
investor center of this site, free of charge, our Annual Reports
on
Form 10-K,
Quarterly Reports on
Form 10-Q,
Current Reports on
Form 8-K,
and amendments to those reports, filed or furnished pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of
1934, as amended, as soon as reasonably practicable after such
reports are electronically filed with, or furnished to, the
Securities and Exchange Commission, or the SEC. We also make our
code of ethics and certain other governance documents and
policies available through our website. We intend to make
required disclosures of amendments to our code of ethics, or
waivers of a provision of our code of ethics, on the
Corporate Governance page of our websites
investor center.
Segments
Our major reportable operating segments are professional
diagnostics, health management and consumer diagnostics.
Financial information about our reportable segments is provided
in Note 17 of the Notes to Consolidated Financial
Statements which are included elsewhere in this report. As
discussed in Note 23 of the Notes to Consolidated
Financial Statements, in January 2010, we completed the
divestiture of our entire vitamins and nutritional supplements
business segment and the results of this former business segment
are classified as discontinued operations.
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Products
and Services
Professional Diagnostics. Professional
diagnostics are generally designed to assist medical
professionals in both preventative and interventional medicine,
and include testing and monitoring performed in hospitals,
laboratories and doctors offices and, increasingly,
patient self-testing, which we define as testing or monitoring
performed at home under the supervision of a medical
professional. Professional diagnostic products provide for
qualitative or quantitative analysis of patient samples for
evidence of a specific medical condition, disease state or
toxicological state or to measure response to therapy. Within
professional diagnostics, we focus on
point-of-care,
rapid diagnostic testing and health monitoring and the
developing patient self-testing market. We distinguish the
point-of-care
and patient self-testing markets from clinical diagnostic
markets consisting of large, centralized laboratories offering a
wide range of highly-automated laboratory services in hospital
or related settings. The
point-of-care
market for rapid diagnostic products consists primarily of small
and medium size laboratories and testing locations, such as
physician office laboratories, specialized mobile clinics,
emergency rooms and some rapid-response laboratories in larger
medical centers.
In the market for rapid diagnostic products, the ability to
deliver faster, accurate results at reasonable prices generally
drives demand. This means that, while there is certainly demand
for faster, more efficient automated equipment from large
hospitals and major reference testing laboratories, there is
also growing demand by
point-of-care
facilities and smaller laboratories for fast, high-quality, less
expensive, self-contained diagnostic kits. As the speed and
accuracy of such products improve, we believe that these
products will play an increasingly important role in achieving
early diagnosis, timely intervention and therapy monitoring
outside of acute medicine environments, especially where
supplemented by the support and management services that we also
provide.
Our current professional diagnostic products include
point-of-care
and laboratory tests sold within our focus areas of cardiology,
womens health, infectious disease, oncology and
toxicology. While we currently sell these products under
numerous brands, as discussed below, we have begun a process of
consolidating many of our brands under the Alere name.
Cardiology. Cardiovascular disease
encompasses a spectrum of conditions and illnesses, including
high blood pressure, high cholesterol, metabolic syndrome,
coronary artery disease, heart attack, heart failure and stroke.
It is estimated that 80 million Americans alone have one or
more types of cardiovascular disease. The worldwide cardiology
diagnostic market, including the markets for heart failure
diagnostics, coronary artery disease risk assessment,
coagulation testing and acute coronary syndrome, exceeds
$1.5 billion. Our Triage, Cholestech LDX and INRatio
products, all acquired through acquisitions in 2007, have
established us as a leader in this market. The Triage system
consists of a portable fluorometer that interprets consumable
test devices for cardiovascular conditions, as well as the
detection of certain drugs of abuse. The Triage cardiovascular
tests include the following:
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Triage BNP Test. An immunoassay that measures
B-type Natriuretic Peptide (BNP) in whole blood or plasma, used
as an aid in the diagnosis and assessment of severity of heart
failure. The test is also used for the risk stratification of
patients with acute coronary syndrome and heart failure. We also
offer a version of the Triage BNP Test for use on Beckman
Coulter lab analyzers.
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Triage Cardiac Panel. An immunoassay for the
quantitative determination of creatine kinase-MB (CK-MB),
myoglobin and troponin I in whole blood or plasma, used as an
aid in the diagnosis of acute myocardial infarction.
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Triage CardioProfilER Panel. An immunoassay
for use as an aid in the diagnosis of acute myocardial
infarction, the diagnosis and assessment of severity of
congestive heart failure, risk stratification of patients with
acute coronary syndromes and risk stratification of patients
with heart failure. This panel combines troponin I, CK-MB,
myoglobin and BNP to provide rapid, accurate results in whole
blood and plasma.
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Triage Profiler Shortness of Breath (S.O.B.)
Panel. An immunoassay for use as an aid in the
diagnosis of myocardial infarction, the diagnosis and assessment
of severity of congestive heart failure, the assessment and
evaluation of patients suspected of having disseminated
intravascular coagulation and
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thromboembolic events, including pulmonary embolism and deep
vein thrombosis, and the risk stratification of patients with
acute coronary syndromes. This panel combines troponin I,
CK-MB, myoglobin, BNP and d-dimer to provide rapid, accurate
results in whole blood and plasma.
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Triage D-Dimer Test. An immunoassay for use as
an aid in the assessment and evaluation of patients suspected of
having disseminated intravascular coagulation or thromboembolic
events, including pulmonary embolism and deep vein thrombosis.
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Triage NGAL. An immunoassay for use in the
rapid, quantitative determination of neutrophil
gelantinase-associated lipocalin (NGAL) in anticoagulated whole
blood or plasma specimens. Studies have shown a link between
elevated NGAL levels and the later occurrence of elevated
creatinine indicative of prior acute kidney injury. Triage NGAL
is not available for sale in the United States.
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Our Cholestech LDX System is a
point-of-care
monitor of blood cholesterol and related lipids which is used to
test patients at risk of, or suffering from, heart disease and
related conditions. The Cholestech LDX System makes it possible
to provide a complete lipid profile with tests for total
cholesterol, high-density lipoprotein cholesterol (HDL) and
low-density lipoprotein cholesterol (LDL), triglycerides, and
glucose, as well as tests for alanine aminotransferase (ALT) and
aspartate aminotransferase (AST) (for liver enzyme monitoring),
and high sensitivity C-reactive protein, or hs-CRP. The system
can also provide coronary heart disease risk assessment from the
patients results as measured on the lipid profile
cassette. The Cholestech LDX System provides results in five
minutes per test cassette (seven minutes for hs-CRP) and is
CLIA-waived, meaning the United States Food and Drug
Administration, or FDA, has waived the more stringent
requirements for laboratory testing applicable to moderate or
high complexity laboratories based on the Cholestech LDX
Systems ease of use and accuracy. This waiver allows the
Cholestech LDX System to be marketed to physician offices,
rather than hospitals or larger laboratories.
Our Alere INRatio System is an easy-to-use, hand-held blood
coagulation monitoring system for use by patients and healthcare
professionals in the management of warfarin, a commonly
prescribed medication used to prevent blood clots. The Alere
INRatio System measures PT/INR, which is the patients
blood clotting time reported pursuant to an internationally
normalized ratio, to help ensure that patients at risk of blood
clot formation are maintained within the therapeutic range with
the proper dosage of oral anticoagulant therapy. The Alere
INRatio System is 510(k) cleared by the FDA for use by
healthcare professionals, as well as for patient self-testing,
and is also CE marked in Europe. The system is targeted to both
the professional, or
point-of-care
market, as well as the patient self-testing market. Today we
sell an improved version of the system, the Alere INRatio2
System, which targets the patient self-testing market through
enhanced ease of use. Patient self-testing has gained
significant momentum since March 2008 when Centers for
Medicare & Medicaid Services expanded coverage of home
INR monitoring to include chronic atrial fibrillation and venous
thromboembolism patients on warfarin.
We also distribute the
epoc®
Blood Analysis System for blood gas and electrolyte testing
pursuant to an agreement with Epocal, Inc., or Epocal. The epoc
(enterprise
point-of-care)
platform is a
point-of-care
analysis system which provides wireless bedside blood gas and
electrolyte measurement testing solutions and complements our
Triage products in cardiology and emergency room settings.
Utilizing easy to use, low-cost disposable
Smart-Cardstm,
the epoc System produces laboratory quality results in critical
and acute care settings in about 30 seconds. The epoc System
received FDA 510(k) clearance in 2006 for marketing in the U.S.
and is also CE marked in Europe.
During 2010, we launched the Alere Heart Check System in Europe.
The Alere Heart Check provides a quantitative reading of BNP in
10 minutes using a fingerstick sample (12 microliters) with
substantially equivalent performance to lab instruments.
Initially being marketed as a
point-of-care
device, the Alere Heart Check System is ultimately designed for
home use and is intended to enable doctors to remotely monitor
BNP levels of congestive heart failure patients and adjust their
therapy accordingly.
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We also sell disposable, lateral flow rapid diagnostic tests for
d-dimer and troponin I under our Clearview brand. These tests
offer efficiency, as well as ease of use and accuracy, to
clinics, hospitals and laboratories around the world.
Womens Health. Since womens
health and general sexual health issues are a global health
concern, this area remains a priority for us. In the
professional marketplace, we are a global leader in pregnancy
fertility/ovulation testing and bone therapy (osteoporosis)
monitoring. Our professional pregnancy tests are generally
urine-based, CLIA-waived rapid tests in dipstick or cassette
format.
Our professional womens health products also target
diseases or conditions, such as pre-eclampsia, rubella, pre-term
labor and premature rupture of membrane, which pose unique
threats to mothers or their unborn or newborn babies. We also
market a portfolio of tests for sexually-transmitted diseases.
Our womens health products are currently sold under our
Acceava, Clearview, Sure-Step, Inverness Medical TestPack and
Osteomark brands.
Infectious Disease. We believe that the
demand for infectious disease diagnostic products is growing
faster than many other segments of the immunoassay market due to
the increasing incidence and awareness of certain diseases or
groups of diseases, including viral hepatitis, respiratory
syncytial virus (RSV), influenza, pneumonia, tuberculosis, human
immunodeficiency virus (HIV) / acquired
immunodeficiency syndrome (AIDS), enteric disease, herpes and
other sexually-transmitted diseases. To meet this demand, we
have continued to expand our product offerings and now offer one
of the worlds largest infectious disease test menus. We
develop and market a wide variety of
point-of-care
tests for influenza A/B, strep throat, HIV, herpes simplex virus
(HSV-2), hepatitis C (HCV), malaria, pneumonia,
C.difficile, infectious mononucleosis, lyme disease, chlamydia,
H.pylori, RSV, rubella and other infectious diseases. Our tests
for infectious disease are currently sold under brand names
which include Acceava, Alere, BinaxNOW, Clearview, Determine,
TestPack, DoubleCheckGold, Panbio, Standard Diagnostics and
TECHLAB. We have also started commercializing the Alere CD4
Analyzer in several countries in Africa. The Alere CD4 Analyzer
is the first
point-of-care
platform which measures absolute CD4 counts in HIV patients with
results in 20 minutes, using single-use, disposable fingerstick
cartridges.
In addition to
point-of-care
products, we also offer a line of indirect fluorescent antibody,
or IFA, assays for over 20 viral, bacterial and autoimmune
diseases, a full line of serology diagnostic products covering a
broad range of disease categories and over 70 enzyme-linked
immunosorbent assays, or ELISA tests, for a wide variety of
infectious and autoimmune diseases, as well as a full line of
automated instrumentation for processing ELISA tests. We are the
exclusive U.S. distributor of the AtheNA
Multi-Lyte®
Test System, a multiplexed, fluorescent bead-based system
designed to simultaneously perform multiple assays from a single
sample using just one well. It offers a simple and streamlined
alternative to IFA and ELISA testing, providing improved
clinical sensitivity and comparable clinical specificity in a
labor-saving, automation-friendly format. Our IFA, serology and
ELISA products, which generally serve the clinical diagnostics
laboratory markets, are generally marketed under our Wampole
brand.
Demand for certain infectious disease tests, such as influenza
A/B, or flu, is significantly affected by the seasonal nature of
the cold and flu season. As a result, we typically experience
higher sales of our flu tests in the first and fourth quarters.
Sales of our flu products also vary widely from year to year
based in large part on the severity, duration and timing of the
onset of the cold and flu season. While we believe that these
factors will continue to impact sales of certain of our
infectious disease products, there can be no assurance that our
future sales of these products will necessarily follow
historical patterns.
Oncology. Among chronic disease
categories, we are focused on oncology diagnostics as an area of
significant future opportunity. The Matritech NMP22 BladderChek
Test is the only in-office test approved by the FDA as an aid in
the diagnosis of bladder cancer. The NMP22 BladderChek Test is a
non-invasive assay, performed on a single urine sample that
detects elevated levels of NMP22 protein. The test can be
performed in a physicians office with results delivered
during the patient visit, allowing a rapid, accurate and
cost-effective means of aiding the detection of bladder cancer
in patients at risk, when used in conjunction with standard
diagnostic procedures. We also offer the NMP22 Test Kit, a
quantitative ELISA also designed to detect elevated levels of
NMP22 protein.
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Our Clearview FOB and Ultra FOB rapid tests aid in the early
detection of colorectal cancer, the third most common type of
cancer in men and women. Also, as a result of our November 2010
acquisition of AdnaGen AG, or AdnaGen, a German company
specializing in the development of cancer diagnostics through
the detection and analysis of circulating tumor cells, we now
sell the AdnaTest ColonCancer and AdnaTest BreastCancer
products, which are CE-certified for the detection of
circulating tumor cells.
Toxicology. Drug abuse is a major
global health problem, as well as a social and economic burden.
In addition to being a primary cause of lost workforce
productivity, family conflict and drug-related crime, drug abuse
is linked globally to the spread of HIV/AIDS through
contaminated needles. Drug abuse is one of the most costly
health problems in the United States, and increasingly abroad.
As a result, employers, law enforcement officials, healthcare
professionals and others expend considerable effort to ensure
their employees, patients and other constituents are free of
substance abuse and misuse. This critical need creates a
significant market for simple and reliable laboratory,
point-of-care
and rapid toxicology tests to detect both the most commonly
abused substances and an ever-evolving set of esoteric and
regional toxins. Additionally, physicians are increasingly
utilizing drug testing to identify and address signs of
prescription drug misuse. Urine and oral-based screening and
confirmation tests for drugs of abuse range from simple
immunoassay tests to complex analytical procedures. The speed
and sensitivity of immunoassays have made them the most
widely-accepted method for toxicology screening.
We offer one of the most comprehensive lines of drugs of abuse
tests, reagent systems and laboratory testing options available
today. Our products include tests to detect alcohol, as well as
various device platforms for the detection of the following
illicit and prescription drugs of abuse:
amphetamines/methamphetamines, cocaine, opiates, phencyclidine,
tetrahydrocannabinol, acetaminophen, barbiturates,
benzodiazepines, methadone, propoxyphene and tricyclic
antidepressants, using urine and, for some applications, saliva,
hair and other body fluids.
Our rapid toxicology tests are sold primarily under the brands
Triage, iScreen, Concateno and SureStep. The TOX Drug Screen
panel sold for use with our Triage MeterPro system detects the
presence of many of the illicit and prescription drugs listed
above at the point of care in approximately 15 minutes. It is
widely used in hospital and clinical testing as a laboratory
instrument to aid in the detection of drug abuse. Our Drug
Detection System, or DDS, is an enhanced,
on-site
saliva drug detection system utilized in roadside testing which
displays results for the presence of up to six different drugs
in under five minutes and two drugs in under 90 seconds.
We also offer comprehensive laboratory-based testing services
throughout Europe under the name Concateno and in the United
States under the names Alere Toxicology Services, or Alere
Toxicology, and Redwood Laboratories, or Redwood. Alere
Toxicologys laboratories are certified by the
U.S. Substance Abuse and Mental Health Services
Administration, or SAMHSA. Through Redwood, we offer
comprehensive, low-cost laboratory testing services to multiple
domestic clients, including law enforcement agencies, penal
systems, insurers and employers in the United States. In
addition, we are expanding our offerings in the growing market
for pain management services, or the monitoring and
documentation of adherence to prescription drug treatment plans
through diagnostic testing.
Health Management. Our health management
business strives to empower participants of our programs and
physicians so they can work together towards better health. We
believe that by utilizing existing professional diagnostic
devices and new devices under development to enhance the
delivery of health management and by improving the quality of
medical data available to healthcare providers, we can further
facilitate cost containment and outcome-driven decision making.
We also provide services supporting home INR testing. Currently,
our health management business is principally conducted in the
United States, but we have plans to expand further
internationally.
Our expert-designed health management programs:
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embrace the entire lifespan, from pre-cradle to
end-of-life,
and targeted health states, from wellness to prevention to total
health management of the individual for those having various
chronic illnesses;
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target high-cost chronic conditions with programs designed to
improve outcomes and reduce expenditures;
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provide health coaches who engage and motivate participants
during teachable moments;
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help participants improve their health by supporting their
individual health goals;
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help payers, physicians and patients connect more efficiently
through the exchange of health information;
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bring greater clarity to healthcare with empowering technologies
that lead to better outcomes; and
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offer the expertise of more than 1,800 healthcare professionals
who share a passion for patient and customer care.
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Our key health management programs are:
Care. The Alere Disease Management
(Chronic Care) Program provides technology-enabled,
evidence-based solutions for managing chronic and high-cost
conditions, improving clinical outcomes and reducing healthcare
costs. The Alere Disease Management Program assists individuals
with chronic diseases or conditions to better manage their care
by increasing their knowledge about their illnesses, potential
complications and the importance of medication and treatment
plan compliance. Our highly-trained clinicians proactively
contact participants to monitor their progress and ensure they
are following the plan of care set by their physician. They work
with participants to identify potential gaps in care, which
occur when individuals are not treated in accordance with
national standards of care, or best practices, or when an
individual fails to comply with his or her treatment plan.
We offer a personal health support model of care. This model
differs from providers of traditional, total population health
models in several ways, including how individuals are selected,
as well as a more disciplined approach to defining who can
benefit from what kinds of touches and how these
specific interactions are best accomplished. A second key
differentiator is the use of the Alere DayLink Monitor for
persons participating in higher risk health management programs.
The DayLink Monitor records a participants weight
and/or blood
glucose, as well as answers to questions regarding their
symptoms. This information is gathered daily and sent to our
clinicians for review. The Alere Disease Management Program
currently assists individuals with the following chronic
diseases or conditions: asthma, coronary artery disease, chronic
obstructive pulmonary disease, diabetes, heart failure, pain,
weight management and depression. In addition, we also offer
Complex Care Management for participants who require more
attention and care than a traditional disease management program
provides. What distinguishes our two programs is that Complex
Care provides
on-site
care, and the Disease Management (Chronic Care) Program involves
telephone contact with Alere clinicians.
Patient Self-Testing Services. We also
offer services designed to support anticoagulation management
for patients at risk for stroke and other clotting disorders who
can benefit from home INR monitoring. As mentioned above, home
INR monitoring has grown increasingly popular since the Centers
for Medicare & Medicaid Services expanded coverage to
include home INR monitoring of chronic atrial fibrillation and
venous thromboembolism patients on warfarin. Our Alere Home
Monitoring business assists patients in acquiring home INR
monitors, including our Alere INRatio2 monitors, and seeking
Medicare reimbursement and insurance coverage, while providing
physicians with a comprehensive solution for incorporating home
INR monitoring into their practice. Our CoagNow program includes
our Face-2-Face patient training model, which utilizes
experienced nurse educators, patient scheduling, collection and
reporting of home testing results to the physician and
CoagClinic, our sophisticated web-based application that
provides healthcare professionals with real-time access to
patient information.
Womens & Childrens
Health. Our Womens and Childrens
Health division delivers a wide spectrum of obstetrical care
services, ranging from a risk assessment to identify women at
risk for pregnancy complications to a neonatal program for early
infant care management. In between, are first and second
trimester genetic testing, as well as home-based obstetrical
programs to manage and monitor pregnant women who have medical
or pregnancy-related problems that could harm the health of the
mother or baby. We deliver
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telephonic and home-based nursing services that support
physician and patient goals. We have developed and refined these
services over the years to accommodate physician plans of care.
We focus on assessment of patient data and providing education.
Our high-risk pregnancy management program revenues tend to be
seasonal. Revenues tend to decrease with the onset of the
holiday season starting with Thanksgiving in the United States.
As a result, first and fourth quarter revenues each year tend to
be lower than second and third quarter revenues.
Oncology. The Alere Oncology Program is
the longest-running cancer management program (since
1994) in the U.S. The Alere Oncology Program manages
adults diagnosed with any cancer that requires treatment beyond
a single surgery. Since the programs inception, we have
managed more than 65,000 participants. Cancer continues to
challenge employers and health plans as they search for tools to
compassionately manage this condition among their population in
the most cost-effective manner. By incorporating best of
breed practices and coordinating with physicians and
participants, we provide an integrated solution to proactively
manage this expensive and debilitating disease.
Wellness. Wellness Solutions is a suite
of integrated wellness programs and resources designed to help
organizations reduce health risks and improve the health and
productivity of their employees and health plan members, while
reducing healthcare-related costs. Wellness programs include
screening for risk factors associated with diabetes,
cardiovascular heart disease, hypertension and obesity;
screening for high-risk pregnancies; assessments of health risks
for broad populations; programs that promote better health by
encouraging sustainable changes in behavior and health coaching.
Our Free & Clear business specializes in web-based
learning and phone-based cognitive behavioral coaching to help
employers, health plans and state governments improve the
overall health and productivity of their covered populations.
Free & Clears evidence-based programs address
the four key modifiable health risks that contribute to chronic
disease: tobacco use, poor nutrition, physical inactivity and
stress.
Technology Solutions. Our
technology solutions provide employers and health plans with a
powerful portal or front door to our continuum of
healthcare services and allow individuals to create a
confidential on-line record of their personal healthcare data
that is compliant with the requirements of the Health Insurance
Portability and Accountability Act and its regulations, or
HIPAA. Our Apollo technology platform, which was launched in
January 2010, provides the framework and supporting
infrastructure for a series of significant enhancements to
Aleres services, including a dynamic, interactive and
personalized experience for employees via an enhanced health
portal, and was designed to provide us with the ability to
integrate data from a variety of sources, including health
plans, pharmacy benefit managers,
self-reported
data and
point-of-care
devices.
Apollo serves as the hub for participants to access their
medical information, personal health record and appropriate
health programs and offers the following key enhancements:
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personalized platform that acts as a virtual coach,
presenting content based on data collected on the participant
and delivering personal health support in a way that is designed
to feel satisfying to the participant when they need it the most;
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a meaningful, engaging experience with content and activities
presented based on the participants preferences,
activities and personal health data; and
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a deep, rich library of multi-media resources designed to
address individual learning styles that can be generated
dynamically by the system or located through a search by the
participant.
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Providing access to the broad-based resources of the Apollo
portal demonstrates a commitment to the enhanced health of an
organizations population.
Consumer Diagnostics. In 2007, we and
affiliates of The Procter & Gamble Company, or
P&G, commenced a 50/50 joint venture for the development,
manufacturing, marketing and sale of existing and
to-be-developed consumer diagnostic products, outside the
cardiology, diabetes and oral care fields. As part of this
arrangement, we transferred essentially all of the assets of our
consumer diagnostics business, other than our manufacturing and
core intellectual property assets, to the joint venture, and
P&G acquired its interest in the joint venture.
Accordingly, substantially all of the consumer diagnostics
business conducted by us prior to
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the joint venture, including all of our products targeting the
worldwide
over-the-counter
pregnancy and fertility/ovulation test market, are now sold by
the joint venture, which is an unconsolidated entity operating
primarily under the name SPD Swiss Precision Diagnostics GmbH,
or SPD.
As part of the SPD joint venture, we entered into a finished
product purchase agreement, pursuant to which we currently
manufacture and sell to SPD substantially all of the consumer
diagnostic products which it sells. We also entered into certain
transition and long-term services agreements with SPD, pursuant
to which we provide certain operational support services to the
joint venture. Our consumer diagnostics segment recognizes the
revenue and costs arising from these arrangements.
Our other current consumer diagnostic products consist of our
market-leading First Check brand of
over-the-counter
drug tests for at-home testing for up to seven illicit drugs and
five prescription drugs, as well as First Check brand
over-the-counter
tests for cholesterol monitoring and colon cancer screening.
Taking advantage of our leadership in the field of womens
health, we also sell Balance Activ Vaginal Gel directly to
consumers and health care professionals for the effective
treatment of bacterial vaginosis without antibiotics.
Methods
of Distribution and Customers
In the United States, Canada, the United Kingdom, Ireland,
Germany, Italy, Spain, Switzerland, the Netherlands, Belgium,
France, Austria, India, Japan, China, South Korea, Taiwan,
Australia, New Zealand, South Africa, Brazil, Argentina and
Colombia, we distribute our professional diagnostic products to
hospitals, reference laboratories, physician offices and other
point-of-care
settings through our own sales forces and distribution networks.
In these countries, as well as in all other major world markets,
we also utilize third-party distributors to sell our products.
Our Alere Home Monitoring business facilitates the distribution
of our Alere INRatio PT/INR coagulation monitors by contacting
targeted customers and facilitating the Medicare reimbursement
process for physicians and for patients monitoring at home.
We market our health management programs primarily to health
plans (both commercial and governmental) and self-insured
employers and, to a lesser extent, to pharmaceutical companies
and physicians, through our employee sales force and channel
partners.
We market and sell our First Check consumer drug testing
products in the United States through retail drug stores, drug
wholesalers, groceries and mass merchandisers. These products
compete intensively with other brand name drug testing products
based on price, performance and brand awareness.
Manufacturing
Our primary manufacturing facilities are located San Diego,
California; Scarborough, Maine; Hangzhou and Shanghai, China;
Matsudo, Japan; and Yongin, South Korea. We also manufacture
products at a number of other facilities in the United States,
Australia, Germany, India, Israel, South Africa, Spain and the
United Kingdom.
Our primary manufacturing facilities are ISO certified and
registered with the FDA. We manufacture substantially all of our
consumable diagnostic products at these facilities. We also
manufacture the consumable diagnostic devices containing the
diagnostic chemistry or other proprietary diagnostic technology,
which are used in conjunction with our diagnostic or monitoring
systems, including our Triage system, our Cholestech LDX
monitoring devices, our Alere INRatio monitoring devices and the
digital pregnancy and ovulation prediction tests and fertility
monitors that we supply to the SPD joint venture. We contract
with third parties to supply the electronic reader portion of
these diagnostic or monitoring systems and to supply various
other products that we sell, including our Triage BNP Test for
use on Beckman Coulter systems, a majority of our IFA tests and
our TECHLAB products.
Research
and Development
Our primary research and development centers are in
San Diego, California; Scarborough, Maine; Jena, Germany
and Stirling, Scotland. We also conduct research and development
at various of our other facilities, including facilities in the
United States, Australia, China, Germany, Israel, South Korea,
and the United Kingdom. Our research and development
programs currently focus on the development of cardiology,
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womens health, infectious disease, oncology and toxicology
products and on health management programs.
Global
Operations
We are a global company with major manufacturing facilities in
the United States, China, Japan, Korea and significant research
and development operations in the United States, Germany and the
United Kingdom. Our distribution network supporting our
professional diagnostics business includes offices in the United
States, Argentina, Australia, Austria, Belgium, Brazil, Canada,
China, Colombia France, Germany, Hong Kong, India, Israel,
Italy, Japan, the Netherlands, New Zealand, South Africa, South
Korea, Spain, Switzerland, Taiwan and the United Kingdom.
Our professional diagnostic products are sold throughout the
world. Our health management programs are offered almost
exclusively in the United States. During 2010 and 2009,
respectively, approximately 64% and 69% of our net revenue was
generated from the United States, approximately 17% and 17% of
our net revenue was generated from Europe, and approximately 19%
and 14% of our net revenue was generated from customers located
elsewhere.
Competition
Professional Diagnostics. Our professional
diagnostics products are primarily
point-of-care
rapid diagnostic testing products focused within the areas of
cardiology, womens health, infectious disease, oncology
and toxicology. Competition for rapid diagnostic products is
intense and is primarily based on price, quality, breadth of
product line and distribution capabilities. Some competitors in
the market for professional rapid diagnostic products, such as
Becton Dickinson, are large companies with substantial
resources, while numerous smaller, yet aggressive companies also
compete with us. No competitor, small or large, offers a
portfolio of professional rapid diagnostic products as broad as
ours and, as a result, our competitors differ significantly
within each of our areas of focus. Some automated immunoassay
systems may also be considered to compete with our products when
labor shortages force laboratories to automate or when the costs
of such systems are lower. Such systems are provided by Abbott,
Siemens, Beckman Coulter, Johnson & Johnson, Roche and
other large diagnostic companies.
In cardiology, the majority of diagnostic immunoassays utilized
by physicians and other healthcare providers are performed by
independent clinical reference laboratories and hospital-based
laboratories using automated analyzers for batch testing. As a
result, the primary competitors for our Triage and Cholestech
LDX
point-of-care
testing systems, which consist of rapid diagnostic devices
interpreted by portable electronic readers, are the large
diagnostic companies identified above who produce automated
immunoassay systems. We expect these large companies to continue
to compete vigorously to maintain their dominance of the
cardiology testing market. Although we offer our Triage BNP test
for use on Beckman Coulter Immunoassay Systems, our other
primary cardiology products are not currently designed for
automated batch testing. Our Triage products face strong
competition from Abbotts i-Stat hand-held system and our
Cholestech LDX system also faces direct competition from Abaxis
Medical Diagnostics, which markets its
point-of-care
blood laboratory systems to physician office laboratories. The
primary competitors for our Alere INRatio PT/INR monitoring
system are Roche and International Technidyne Corporation, which
recently merged with Nexus Dx, who together currently account
for approximately 75% of the domestic sales of PT/INR
point-of-care
and patient self-testing devices.
Becton Dickinson, Quidel and Meridian Bioscience, are the
largest competitors for our rapid diagnostic tests targeted at
womens health and infectious disease. Our HIV products, in
particular, also compete with tests offered by Orasure
Technologies. Newer technologies utilizing amplification
techniques for analyzing molecular DNA gene sequences, from
companies such as Abbott, Becton Dickinson, Roche, Cepheid and
Gen-Probe, are making in-roads into the infectious disease
market.
In oncology, our NMP-22 diagnostic products aid in diagnosing
and monitoring bladder cancer patients, in conjunction with
standard diagnostic procedures, and are based on our proprietary
nuclear matrix protein
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technology. Our NMP-22 BladderChek Test is currently the only
in-office test approved by the FDA as an aid in the diagnosis of
bladder cancer. However, competition in the development and
marketing of cancer diagnostics and therapeutics, using a
variety of other technologies, is intense. Competing diagnostic
products based on other technologies may be introduced by other
companies and could adversely affect our competitive position.
In a larger sense, our tests also compete with more invasive or
expensive procedures, such as surgery, bone scans, magnetic
resonance imaging and other in vivo imaging techniques. In the
market for urine-based diagnostic tests, our NMP-22 tests also
compete with existing cellular-based tests, such as the
microscopic examination of suspicious cells, and UroVysion,
which is a fluorescent in-situ hybridization test.
In toxicology, the competitors for our drugs of abuse tests
include many of the large diagnostics companies named above,
which manufacture instrumented drug tests, reagents or
instruments sold in a variety of formats to customers in the
worldwide employment, transportation, government and clinical
sectors. Additionally, in many markets in which the barriers to
entry are low due to less stringent regulations, we compete with
dozens of privately-held, boutique manufacturers of lateral flow
point-of-care
drug tests. Our worldwide drug testing laboratory services
compete with hundreds of multi-national and regional clinical,
toxicology and forensic laboratories.
We also sell ELISA and multiplex immunoassay diagnostic testing
products, as well as serology, IFA and microbiology tests, all
primarily targeted at infectious and autoimmune disease. Our
ELISA tests compete against the large diagnostics companies
named above, which manufacture
state-of-the-art
automated immunoassay systems and a wide array of diagnostic
products designed for processing on those systems. Other
competitors, including INOVA Diagnostics, DiaSorin and Diamedx,
are smaller companies that compete based on quality and service.
In the United States and Canada, we focus on matching the
instrumentation and product testing requirements of our
customers by offering a wide selection of diagnostic products
and test equipment. The markets for our serology, IFA and
microbiology products are mature and competition is based
primarily on price and customer service. Our main competitors in
serology and microbiology testing include Remel and Biokit. Our
main competitors in IFA testing are Bio-Rad Laboratories, INOVA
Diagnostics, Immuno Concepts, Trinity Biotech, Meridian
Biosciences and DiaSorin. However, products in these categories
also compete to a large extent against rapid membrane and ELISA
products, which are often easier to perform and read and can be
more precise.
Generally, our professional diagnostic products
competitive positions may be based on, among other things, being
first to market with a novel product, product performance,
accuracy, convenience, cost-effectiveness, the strength of our
intellectual property and price, as well as on the effectiveness
of our sales force and our marketing and distribution partners.
Where we face competition from large diagnostic companies, these
competitors have greater resources than we do. In addition,
certain competitors may have more favorable competitive
positions than we do in markets outside of the United States.
We believe that our dedication to research and development and
our strong intellectual property portfolio, coupled with our
manufacturing expertise, diversified product positioning, global
market presence and established distribution networks, provide
us with a competitive advantage in the
point-of-care
markets in which we compete.
Health Management. Competition in the health
management market is intense because barriers to entry are low.
Other health management service providers include Health Dialog,
Healthways and numerous smaller service providers. Our
competitors and potential competitors also include health plans,
self-insured employers, healthcare providers, pharmaceutical
companies, pharmacy benefit management companies, case
management companies and other organizations that provide
services to health plans, state governments and self-insured
employers. Some of these entities, health plans and self-insured
employers in particular, may be customers or potential customers
and may own, acquire or establish health management service
providers or capabilities for the purpose of providing health
management services in-house. Many of these competitors are
considerably larger than we are and have access to greater
resources. We believe however that our ability to improve
clinical and financial outcomes and our technology platforms,
most notably our new Apollo system, will enable us to compete
effectively.
Consumer Diagnostics. Our First Check tests
compete against
over-the-counter
diagnostic tests sold primarily by Phamatech, but also by other
smaller competitors. Essentially, all of our remaining consumer
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diagnostic product sales are to SPD, our joint venture. These
products are sold by SPD in retail markets where competition is
intense and based primarily on brand recognition and price. Our
revenues, as well as our share of the profits from the sale of
these products by SPD, are dependent upon SPDs ability to
effectively compete in these markets.
Patents
and Proprietary Technology; Trademarks
We have built a strong intellectual property portfolio
consisting of an increasing number of patents, patent
applications and licensed patents which are intended to protect
our vision of the technologies, products and services of the
future. Our intellectual property portfolio consists of patents
that we own and, in some cases, patents or other proprietary
rights that we license from third parties, which may be limited
in terms of field of use or transferability and may require
royalty payments.
The medical products industry, including the diagnostic testing
industry, historically has been characterized by extensive
litigation regarding patents, licenses and other intellectual
property rights. Litigation relating to intellectual property
rights is also a risk in the health management industry.
We believe that our history of successfully enforcing our
intellectual property rights in the United States and abroad
demonstrates our resolve in enforcing our intellectual property
rights, the strength of our intellectual property portfolio and
the competitive advantage that we have in this area. We have
incurred substantial costs, both in asserting infringement
claims against others and in defending ourselves against patent
infringement claims and we expect to incur substantial
litigation costs as we continue to aggressively protect our
technology and defend our proprietary rights.
Finally, we believe that certain of our trademarks are valuable
assets that are important to the marketing of both our products
and services. Many of these trademarks have been registered with
the United States Patent and Trademark Office or
internationally, as appropriate.
The medical products industry, including the diagnostic testing
industry, and the health management industry place considerable
importance on obtaining and enforcing patent and trade secret
protection for new technologies, products, services and
processes. Trademark protection is an important factor in the
success of certain of our product lines and health management
programs. Our success therefore depends, in part, on our
abilities to obtain and enforce the patents and trademark
registrations necessary to protect our products, to preserve our
trade secrets and to avoid or neutralize threats to our
proprietary rights from third parties. We cannot, however,
guarantee our success in enforcing or maintaining our patent
rights; in obtaining future patents or licensed patents in a
timely manner or at all; or as to the breadth or degree of
protection that our patents or trademark registrations or other
intellectual property rights might afford us. For more
information regarding the risks associated with our reliance on
intellectual property rights see the discussion in Item 1A
entitled Risk Factors on pages 13 through 28 of this
report.
Government
Regulation
Our businesses are subject to extensive and frequently changing
federal, state, local and foreign laws and regulations. Changes
in applicable laws or any failure to comply with existing or
future laws, regulations or standards could have a material
adverse effect on our results of operations, financial
condition, business and prospects. We believe our current
arrangements and practices are in material compliance with
applicable laws and regulations. There can be no assurance that
we are in compliance with all applicable laws and regulations or
that we will be able to comply with new laws or regulations.
Our research, development and clinical programs, as well as our
manufacturing and marketing operations, are subject to extensive
regulation in the United States and other countries. Most
notably, all of our products sold in the United States are
subject to the Federal Food, Drug and Cosmetic Act, or the FDCA,
as implemented and enforced by the FDA. All of our diagnostic
products sold in the United States require either FDA clearance
to market under Section 510(k) of the FDCA, or Pre-market
Approval, or PMA, which may require pre-clinical and clinical
trials. Foreign countries may require similar or more onerous
approvals to manufacture or market these products. The marketing
of our consumer diagnostic products is also subject to
12
regulation by the U.S. Federal Trade Commission, or the
FTC. In addition, we are required to meet regulatory
requirements in countries outside the United States, which can
change rapidly with relatively short notice. We must also
demonstrate to the FDA that our diagnostic tests intended for
home use or for use by laboratories holding a Certificate of
Waiver under the Clinical Laboratory Improvement Act of 1967 and
the Clinical Laboratory Amendments of 1988, or CLIA, including
most physician office laboratories, are simple with a low risk
of error. Foreign countries may require similar or more onerous
approvals to manufacture or market our products.
CLIA extends federal oversight to many clinical laboratories,
including certain of our drug testing laboratories in the United
States, by requiring that they be certified to meet quality
assurance, quality control and personnel standards. Laboratories
also must undergo proficiency testing and are subject to
inspections. Certain of our drug testing laboratories perform
drug testing on employees of federal government contractors and
certain other entities and are therefore regulated by the
Substance Abuse and Mental Health Services Administration, or
SAMHSA, which has established detailed performance and quality
standards that laboratories must meet to be approved to perform
drug testing on employees of federal government contractors and
certain other entities.
Certain of the clinicians, such as nurses, must comply with
individual licensing requirements. All of our clinicians who are
subject to licensing requirements are licensed in the state in
which they are physically present, such as the location of the
call center from which they operate and, if applicable, states
in which they visit or interact with patients, to the extent
such licensure is required. In the future, multiple state
licensing requirements for healthcare professionals who provide
services telephonically over state lines may require us to
license more of our clinicians in more than one state. New
judicial decisions, agency interpretations or federal or state
laws or regulations could increase the requirement for
multi-state licensing of a greater number of our clinical staff,
which would increase our administrative costs.
Certain aspects of our health management business are subject to
unique licensing or permit requirements by state and local
health agencies. In addition, our health management business is
subject to HIPAA and the Health Information Technology for
Economic and Clinical Health, or HITECH, Act. We are also
required to obtain certification to participate in certain
governmental payment programs, such as various state or federal
Medicare/Medicaid programs. Some states have established
Certificate of Need/Determination of Need, or CON/DON, programs
regulating the expansion of healthcare operations. The failure
to obtain, renew or maintain any of the required licenses,
certifications or CON/DONs could adversely affect our business.
For more information about the governmental regulations to which
are business is subject and the risk associated with
non-compliance with those regulations, see the risk factors
discussed in Item 1A entitled Risk Factors on
pages 13 through 28 of this report.
Employees
As of January 31, 2011, we had approximately
11,900 employees, including temporary and contract
employees, of which approximately 6,500 employees are
located in the United States. In addition, we utilize
consultants specializing in areas such as research and
development, risk management, regulatory compliance and
marketing.
The risks described below may materially impact your
investment in our company or may in the future, and, in some
cases already do, materially affect us and our business,
financial condition and results of operations. You should
carefully consider these factors with respect to your investment
in our securities.
We face intense competition, and our failure to compete
effectively may negatively affect sales of our products and
services.
The industries in which we operate, including the medical
diagnostic products industry and the healthcare industry, are
rapidly evolving, and developments are expected to continue at a
rapid pace. Competition in these industries is intense and
expected to increase as new products, services and technologies
become
13
available and new competitors enter the market. Our competitors
in the United States and abroad are numerous and include, among
others, diagnostic testing and medical products companies,
universities and other research institutions, health management
service providers, healthcare providers and health insurers.
Many of our existing or potential competitors have substantially
greater research and development capabilities, clinical,
manufacturing, regulatory and marketing experience and financial
and managerial resources than we do. Our sales and results of
operations may be adversely affected by:
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customers perceptions of the comparative quality of our
competitors products or services;
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the ability of our competitors to develop products, services and
technologies that are more effective than ours or that render
ours obsolete;
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our competitors ability to obtain patent protection or
other intellectual property rights that would prevent us from
offering competing products or services;
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the ability of our competitors to obtain regulatory approval for
the commercialization of products or services more rapidly or
effectively than we do; and
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competitive pricing by our competitors.
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In addition, as markets for our novel products become saturated
with competing products, such as for our meter-based Triage BNP
test, the growth rates of sales unit volume and average selling
prices for those products may decline, which may adversely
impact our product sales, gross margins and overall financial
results. This may occur even if we are able to successfully
introduce new products in these markets, and achieve market
acceptance of those products, in a timely manner.
We may experience difficulties that may delay or prevent our
development, introduction or marketing of new or enhanced
products or services.
Our success depends on our ability to effectively introduce new
and competitive products and services. The development of new or
enhanced products or services is a complex, costly and uncertain
process. Furthermore, developing and manufacturing new products
and services requires us to anticipate customers and
patients needs and emerging technology trends accurately.
We may experience research and development, manufacturing,
marketing and other difficulties that could delay or prevent our
introduction of new or enhanced products and services. The
research and development process in the healthcare industry
generally takes a significant amount of time from design stage
to product launch. This process is conducted in various stages,
and each stage presents the risk that we will not achieve our
goals. We may have to abandon a product in which we have
invested substantial resources. We cannot be certain that:
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any of our products or services under development will prove to
be safe and effective in clinical trials;
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we will be able to obtain, in a timely manner or at all,
necessary regulatory approvals;
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the products and services we develop can be manufactured or
provided at acceptable cost and with appropriate quality; or
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these products and services, if and when approved, can be
successfully marketed.
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These factors, as well as manufacturing or distribution problems
or other factors beyond our control, could delay the launch of
new products or services. Any delay in the development,
production, marketing or distribution of a new product or
service could materially and adversely affect our competitive
position, our branding and our results of operations.
Our financial condition and results of operations may be
adversely affected by international business risks.
We generate a significant percentage of our net revenue from
outside the United States, and a significant number of our
employees, including manufacturing, sales, support, and research
and development personnel,
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are located in foreign countries, including Australia, China,
England, Germany, India, Israel, Japan and South Korea.
Conducting business outside the United States subjects us to
numerous risks, including:
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decreased liquidity resulting from longer accounts receivable
collection cycles typical of foreign countries;
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lower productivity resulting from difficulties we encounter in
staffing and managing sales, support, and research and
development operations across many countries;
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lost revenues or unexpected expenses resulting from difficulties
associated with enforcing agreements and collecting receivables
through foreign legal systems;
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lost revenues or unexpected expenses resulting from disputes
with third-party distributors of our products or from third
parties claiming distribution rights to our products under
foreign laws or legal systems;
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lost revenues or unexpected expenses resulting from the
imposition by foreign governments of trade barriers such as
tariffs, quotas and import restrictions;
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higher cost of sales resulting from import or export licensing
requirements;
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lost revenues or other adverse effects resulting from acts of
war, terrorism, theft or other lawless conduct or otherwise
resulting from economic, social or political instability in or
affecting foreign countries in which we sell our products or
operate;
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adverse effects resulting from changes in foreign regulatory or
other laws affecting sales of our products or our foreign
operations;
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greater tax liability resulting from international tax laws,
including U.S. taxes on foreign subsidiaries;
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increased financial accounting and reporting burdens and
complexities;
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increased costs to comply with changes in legislative or
regulatory requirements;
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lost revenues or increased expenses resulting from the failure
of laws to protect our intellectual property rights; and
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lost revenues resulting from delays in obtaining import or
export licenses, transportation difficulties and delays
resulting from inadequate local infrastructure.
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Our international operations subject us to varied and complex
domestic, foreign and international laws and regulations.
Compliance with these laws and regulations often involves
significant costs or requires changes in our business practices
that may reduce revenues and profitability. We could incur
additional legal compliance costs associated with our global
operations and could become subject to legal penalties if we do
not comply with certain regulations. For example, we are subject
to the United States Foreign Corrupt Practices Act which, among
other restrictions, prohibits U.S. companies and their
intermediaries from making payments to foreign officials for the
purpose of obtaining or retaining business or otherwise
obtaining favorable treatment, as well as anti-bribery and
corruption laws of other jurisdictions. Our training and
compliance program and our other internal control policies and
procedures may not always protect us from acts committed by our
employees or agents.
Because our business relies heavily on foreign operations and
revenues, changes in foreign currency exchange rates and our
need to convert currencies may negatively affect our financial
condition and results of operations.
Our business relies heavily on our foreign operations. Four of
our six largest manufacturing operations are conducted outside
the United States in China, Japan and South Korea and we also
have manufacturing operations in Australia, Germany, India,
Israel, South Africa, Spain and the United Kingdom. We also have
significant research and development operations in Germany and
the United Kingdom, and we also conduct research and development
activities outside of the United States in Australia, China,
Israel and South Korea. In addition, for the year ended
December 31, 2010, approximately 36% of our net revenue was
derived from
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sales outside the United States. Because of the scope of our
foreign operations and foreign sales, we face significant
exposure to movements in foreign currency exchange rates. Our
primary exposures are related to the operations of our European
and Asia Pacific subsidiaries and our manufacturing facilities
in China, Japan and South Korea. These exposures may change over
time as our business practices evolve and could result in
increased costs or reduced revenue and could affect our actual
cash flow. Changes in the relative values of currencies occur
regularly and, in some instances, may have a significant impact
on our operating results. We cannot predict with any certainty
changes in foreign currency exchange rates or the degree to
which we can cost-effectively mitigate these risks.
Healthcare reform legislation could adversely affect our
revenue and financial condition.
The Patient Protection and Affordable Care Act of 2010 (as
amended by the Health Care and Education Reconciliation Act of
2010), or the PPACA, makes comprehensive reforms at the federal
and state level affecting the coverage and payment for
healthcare services in the United States. In particular, the
PPACA significantly alters Medicare Advantage reimbursements by
setting the federal benchmark payment closer to the payments in
the traditional fee-for-service Medicare program. This change
could reduce our revenues from the Medicare Advantage plans for
which we perform services, although the precise effect on any
particular plan, much less the impact on us, is impossible to
predict. Effective January 1, 2013, the PPACA includes a
2.3% excise tax on the sale of certain medical devices.
Legislative provisions impose federal reporting requirements
regarding payments or relationships between manufacturers of
covered drugs, devices or biological, or medical supplies, and
physicians, among others.
Additionally, the PPACA requires that providers of health
insurance plans maintain specified minimum medical loss ratios.
If our health management services are not classified as
quality improving activities under the PPACA, as
implemented in regulations issued at the end of 2010, health
insurance providers will not be permitted to count expenditures
on those services toward the calculation of their medical loss
ratios, which may adversely impact demand for our health
management services and the results of operations of our health
management business.
Legislative and regulatory bodies are likely to continue to
pursue healthcare reform initiatives and may continue to reduce
the funding of the Medicare and Medicaid programs, including
Medicare Advantage, in an effort to reduce overall healthcare
spending. The ultimate impact of all of the reforms in the
PPACA, and its impact on us, is impossible to predict. If all of
the reforms in the legislation are implemented, or if other
reforms in the United States or elsewhere are adopted, those
reforms may have an adverse effect on our financial condition
and results of operations.
If the results of clinical studies required to gain
regulatory approval to sell our products are not available when
expected, or do not demonstrate the safety and effectiveness of
those products, we may be unable to sell those products.
Before we can sell certain of our products, we must conduct
clinical studies intended to demonstrate that those products are
safe and effective and perform as expected. The results of these
clinical studies are used to obtain regulatory approval from
government authorities such as the FDA. Clinical studies are
experiments involving human patients having the diseases or
medical conditions that the product is trying to evaluate or
diagnose. Conducting clinical studies is a complex,
time-consuming and expensive process. In some cases, we may
spend several years completing the necessary clinical studies.
If we fail to adequately manage our clinical studies, those
clinical studies and corresponding regulatory approvals may be
delayed or we may fail to gain approval for our products
altogether. Even if we successfully manage our clinical studies,
we may not obtain favorable results and may not obtain
regulatory approval. If we are unable to market and sell our new
products or are unable to obtain approvals in the timeframe
needed to execute our product strategies, our business and
results of operations would be materially and adversely affected.
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If we are unable to obtain required clearances or approvals
for the commercialization of our products in the United States,
we would not be able to sell those products in the United
States.
Our future performance depends on, among other matters, the
timely receipt of necessary regulatory approvals for new
products. Regulatory approval can be a lengthy, expensive and
uncertain process. In addition, regulatory processes are subject
to change, and new or changed regulations can result in
increased costs and unanticipated delays.
In the United States, clearance or approval to commercially
distribute new medical devices is received from the FDA through
clearance of a Premarket Notification, or 510(k), or through
approval of a PMA. The FDA may deny 510(k) clearance because,
among other reasons, it determines that our product is not
substantially equivalent to another U.S. legally marketed
device. The FDA may deny a PMA because, among other reasons, it
determines that our product is not sufficiently safe or
effective. As part of the clearance or approval process, if we
intend to sell certain diagnostic tests for home use or for use
by laboratories holding a CLIA Certificate of Waiver, including
most physician office laboratories, we must generally provide
data demonstrating to the FDAs satisfaction that our tests
are simple with a low risk of error. Failure to obtain FDA
clearance or approval would preclude commercialization in the
United States, and failure to obtain CLIA-waived status for any
product would preclude us from selling that product for home use
or to CLIA-waived laboratories, which could materially and
adversely affect our future results of operations.
Modifications or enhancements that could significantly affect
safety or effectiveness, or that constitute a major change in
the intended use of the device, require new 510(k) or PMA
submissions. We have made modifications to some of our products
since receipt of initial 510(k) clearance or PMA. With respect
to several of these modifications, we filed new 510(k)s
describing the modifications and received FDA 510(k) clearance.
We have made other modifications to some of our products that we
believe do not require the submission of new 510(k)s or PMAs.
The FDA may not agree with any of our determinations not to
submit a new 510(k) or PMA for any of these modifications made
to our products. If the FDA requires us to submit a new 510(k)
or PMA for any device modification, we may be prohibited from
marketing the modified products until the new submission is
cleared or approved by the FDA.
The FDA has proposed changes to the 510(k) process. If the
changes to the 510(k) process are adopted as proposed, the time
and cost to obtain a 510(k) clearance or PMA could increase
significantly.
We are subject to regulatory approval requirements of the
foreign countries in which we sell our products, and these
requirements may prevent or delay us from marketing our products
in those countries.
We are subject to the regulatory approval requirements for each
foreign country in which we sell our products. The process for
complying with these approval requirements can be lengthy and
expensive. Any changes in foreign approval requirements and
processes may cause us to incur additional costs or lengthen
review times of our products. We may not be able to obtain
foreign regulatory approvals on a timely basis, if at all, and
any failure to do so may cause us to incur additional costs or
prevent us from marketing our products in foreign countries,
which may have a material adverse effect on our business,
financial condition and results of operations.
Our business is subject to substantial regulatory oversight
and our failure to comply with applicable regulations may result
in significant costs or, in certain circumstances, the
suspension or withdrawal of previously obtained clearances or
approvals.
Our businesses are extensively regulated by the FDA and other
federal, state and foreign regulatory agencies. These
regulations impact many aspects of our operations, including
development, manufacturing, labeling, packaging, adverse event
reporting, storage, advertising, promotion and record-keeping.
The FDA and foreign regulatory agencies may require post-market
testing and surveillance to monitor the performance of approved
products or may place conditions on any product approvals that
could restrict the commercial applications of those products.
The discovery of problems with a product may result in
restrictions on the product, including withdrawal of the product
from the market. In addition, in some cases we may sell
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products or provide services which are reliant on the use or
commercial availability of products of third parties, including
medical devices, equipment or pharmaceuticals, and regulatory
restrictions placed upon any such third party products could
have a material adverse impact on the sales or commercial
viability of our related products or services.
We are subject to routine inspection by the FDA and other
agencies for compliance with the Quality System Regulation and
Medical Device Reporting requirements in the United States and
other applicable regulations worldwide. Our manufacturing
facilities and those of our suppliers and distributors also are,
or can be, subject to periodic regulatory inspections.
Under CLIA, some of our drug testing laboratories in the United
States are required to be certified to meet quality assurance,
quality control and personnel standards. Laboratories also must
undergo proficiency testing and are subject to inspections. Our
laboratories that perform drug testing on employees of federal
government contractors and some other entities are regulated by
the United States SAMHSA, which has established detailed
performance and quality standards that laboratories must meet in
order to perform this work.
Portions of our health management business are subject to unique
licensing or permit requirements. For example, we may be
required to obtain certification to participate in governmental
payment programs, such as state or federal Medicaid/Medicare
programs. We may need an operating license in some states, and
some states have established Certificate of Need programs
regulating the expansion of healthcare operations. In addition,
we believe that some of our health management services are
educational in nature, do not constitute the practice of
medicine or provision of healthcare and, thus, do not require
that we maintain federal or state licenses to provide these
services. However, it is possible that federal or state laws
regarding the provision of virtual or telephonic
medicine could be revised or interpreted to include our
services, or that other laws may be enacted which require
licensure or otherwise relate to our health management services.
In that event, we may incur significant costs to comply with
such laws and regulations.
We are also subject to laws relating to matters such as privacy,
safe working conditions, manufacturing practices, environmental
protection, fire hazard control and disposal of hazardous or
potentially hazardous substances. We may incur significant costs
to comply with these laws and regulations. If we fail to comply
with applicable regulatory requirements, we may be subject to
fines, suspension or withdrawal of regulatory approvals, product
recalls, seizure of products or injunctions against our
distribution of products, termination of our service agreements
by our customers, disgorgement of money, operating restrictions
and criminal prosecution.
New laws may be enacted, or regulatory agencies may impose new
or enhanced standards, that would increase our costs, as well as
expose us to risks associated with non-compliance.
We are subject to healthcare fraud and abuse regulations that
could result in significant liability, require us to change our
business practices and restrict our operations in the future.
We are subject to laws regulating fraud and abuse in the
healthcare industry, including anti-kickback and false claims
laws. The Federal Anti-Kickback Statute prohibits persons from
knowingly and willfully soliciting, offering, receiving or
providing remuneration, directly or indirectly, in exchange for
or to induce either the referral of an individual, or the
furnishing or arranging for a good or service, for which payment
may be made under a federal healthcare program, such as Medicare
or Medicaid. Many states have also adopted laws similar to the
Anti-Kickback Statute. Some of these state prohibitions apply to
the referral of patients for health care items or services
reimbursed by any payer, not only the Medicare, Medicaid and
Veterans Administration programs. These laws constrain the
sales, marketing and other promotional activities of
manufacturers of medical devices by limiting the kinds of
financial arrangements, including sales programs, with
hospitals, physicians, laboratories and other potential
purchasers of medical devices and related services.
Other laws generally prohibit individuals or entities from
knowingly presenting, or causing to be presented, claims for
payment from Medicare, Medicaid, or other third-party payers
that are false or fraudulent, or are for items or services that
were not provided as claimed. These laws may also be triggered
by failure to return identified overpayments to a payer.
Anti-kickback and false claims laws prescribe civil
and/or
criminal penalties for noncompliance that can be substantial
including, in some instances, fines, imprisonment and, within
the United
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States, exclusion from participation in government healthcare
programs. Furthermore, since we are reimbursed directly by
federal healthcare programs for certain good and services and,
given that many of our customers rely on reimbursement from
Medicare, Medicaid and other governmental programs to cover a
substantial portion of their expenditures, our exclusion from
such programs as a result of a violation of these laws could
have a material adverse effect on our business, results of
operations, financial condition and cash flows. The
interpretation and enforcement of these laws and regulations are
uncertain and subject to rapid change.
Billing and payment for healthcare services are highly
regulated, and the failure to comply with applicable laws and
regulations can result in civil or criminal sanctions, including
exclusion from federal and state healthcare programs.
A portion of our healthcare products and services are paid for
by private and governmental third-party payers, such as Medicare
and Medicaid. These third-party payers typically have different
and complex billing and documentation requirements that we must
satisfy in order to receive payment, and they carefully audit
and monitor our compliance with these requirements. We must also
comply with numerous other laws applicable to billing and
payment for healthcare services, including privacy laws. Failure
to comply with these requirements may result in non-payment,
refunds, exclusion from government healthcare programs, and
civil or criminal liabilities, any of which may have a material
adverse effect on our revenues and earnings.
The health management business is a relatively new component
of the overall healthcare industry, making its future
uncertain.
The health management services that we provide are relatively
new components of the overall healthcare industry. Accordingly,
our health management customers have not had significant
experience in purchasing, evaluating or monitoring such
services, which can result in a lengthy sales cycle. The success
of our health management business depends on a number of
factors. These factors include:
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our ability to differentiate our health management services from
those of competitors;
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the extent and timing of the acceptance of our services as a
replacement for, or supplement to, traditional managed-care
offerings;
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the effectiveness of our sales and marketing efforts with
customers and their health plan participants;
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our ability to devise new and additional services beneficial to
health plans and employers and their respective participants or
employees;
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our ability to obtain and retain all necessary licenses, permits
and regulatory clearances and approvals related to our services
and any products used as part of our services, and to deliver
effective, reliable and safe services to our customers and their
participants;
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our ability to achieve, measure and effectively communicate cost
savings for health plans and employers through the use of our
services; and
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our ability to obtain, retain and renew contracts with health
maintenance organizations, preferred provider organizations and
other managed-care plans as competition increases and to the
extent that health plan customers attempt to provide health
management services themselves.
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Since the health management business is continually evolving, we
may not be able to anticipate and adapt to the developing
market. Moreover, we cannot predict with certainty the future
growth rate or the ultimate size of the market.
Increasing health insurance premiums and co-payments may
cause individuals to forgo health insurance and avoid medical
attention, either of which may reduce demand for our products
and services.
Health insurance premiums and co-payments have generally
increased in recent years. These increases may cause individuals
to forgo health insurance, as well as medical attention. This
behavior may reduce demand for our
point-of-care
diagnostic products and also reduce the number of lives managed
by our health management programs. Increased co-payments may
cause insured individuals to forgo medical attention,
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thereby reducing demand for our professional diagnostic tests,
as well as revenues under certain health management programs.
Rising unemployment may negatively impact the collectability
of uninsured accounts and patient due accounts
and/or
reduce total health plan populations.
Some of our health management contracts provide reimbursement to
us based on total relevant populations managed by health plans.
If unemployment rates rise, our revenues under these contracts
may be reduced as managed lives may decrease. One of the primary
collection risks of our health management business
accounts receivable relates to uninsured patient accounts and
patient accounts for which the primary insurance carrier has
paid the amounts covered by the applicable insurance policy, but
patient responsibility amounts (deductibles and co-payments)
remain outstanding. If unemployment rates rise, these uninsured
and patient due accounts could increase as a percentage of the
health management business accounts receivable.
Deterioration in the collectability of these accounts could
adversely affect the health management business collection
of accounts receivable, cash flows and results of operations.
These financial pressures could have an adverse impact on our
business.
A portion of our health management fees are contingent upon
performance.
Some of our existing health management agreements contain
savings or other guarantees, which provide that our revenues, or
a portion of them, are contingent upon projected cost savings or
other quality performance measures related to our health
management programs. There is no guarantee that we will
accurately forecast cost savings and clinical outcome
improvements under our health management agreements or meet the
performance criteria necessary to recognize potential revenues
under the agreements. Additionally, untimely, incomplete or
inaccurate data from our customers, or flawed analysis of such
data, could have a material adverse impact on our ability to
recognize revenues.
If our costs of providing health management services
increase, we may not be able to pass these cost increases on to
our customers.
Many of our health management services are provided pursuant to
long-term contracts that we may not be able to re-negotiate. If
our costs increase, we may not be able to increase our prices,
which would adversely affect our overall profit margin and net
income.
Demands of third-party payers, cost reduction pressures among
our customers and restrictive reimbursement practices may
adversely affect our revenues.
Our ability to negotiate favorable contracts with
non-governmental payers, including managed-care plans,
significantly affects the revenues and operating results of our
health management business. Our customers continue to face cost
reduction pressures that may cause them to curtail their use of,
or reimbursement for, health management services, to negotiate
reduced fees or other concessions or to delay payment.
Furthermore, the increasing leverage of organized buying groups
among non-governmental payers may reduce market prices for our
products and services, thereby reducing our profitability.
Reductions in price increases or the amounts received from
managed-care, commercial insurance or other payers could have a
material adverse effect on the financial position, cash flows
and results of operations of our health management business.
In addition, the ability of our customers to obtain appropriate
reimbursement for products and services from third-party payers
is critical to the success of our business because it affects
which products customers purchase and the prices they are
willing to pay. If we develop a new product but the product is
not approved for reimbursement by private and governmental
third-party payers, the product may not be successful. Domestic
and foreign healthcare reforms may further reduce reimbursement
levels and adversely affect demand for and profitability of our
products and services. These reforms, along with other
cost-containment initiatives, could have a material adverse
effect on our business, results of operations and financing
condition.
Our data management and information technology systems are
critical to maintaining and growing our business.
Our business, particularly our health management business, is
dependent on the effective use of information technology and,
consequently, technology failure or obsolescence may negatively
impact our
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business. In addition, data acquisition, data quality control,
data security and data analysis, which are a cornerstone of our
health management programs, are intense and complex processes
subject to error. Untimely, incomplete or inaccurate data,
flawed analysis of data or our inability to properly integrate,
implement and update systems could have a material adverse
impact on our business and results of operations. In particular,
we are relying on our recently launched healthcare portal,
Apollo, to provide the framework and supporting infrastructure
for significantly enhanced future health management programs and
to provide a competitive advantage. Apollo is a relatively new
system and may not provide these expected benefits or meet our
needs or the needs of our customers or program participants.
We expect that we will need to continue to improve and further
integrate our information technology systems by training and
educating our employees with respect to system improvements and
integrations on an ongoing basis in order to effectively run our
business. If we fail to successfully manage our information
technology systems, including Apollo, our business and operating
results could be adversely affected.
Poor economic conditions may negatively impact our toxicology
business.
The high rates of unemployment currently affecting the United
States and other countries negatively impact the demand for
pre-employment drug testing. Additionally, reduced government
funding for drug screening programs negatively impacts the
market for our toxicology tests. If these trends continue or
accelerate, they may have a material adverse impact on the
results of operations of our toxicology business.
If we deliver products with defects, we may be subject to
product recalls or negative publicity, our credibility may be
harmed, market acceptance of our products may decrease and we
may be exposed to liability.
The manufacturing and marketing of professional and consumer
diagnostics involve an inherent risk of product liability
claims. For example, a defect in one of our diagnostic products
could lead to a false positive or false negative result,
affecting the eventual diagnosis. Our product development and
production are extremely complex and could expose our products
to defects. Manufacturing and design defects could lead to
recalls (either voluntary or required by the FDA or other
government authorities) and could result in the removal of a
product from the market. Defects in our products could also harm
our reputation, lead to negative publicity and decrease sales of
our products.
In addition, our marketing of monitoring services may cause us
to be subjected to various product liability or other claims,
including, among others, claims that inaccurate monitoring
results lead to injury or death. Any product liability or other
claim brought against us, regardless of merit, could be costly
to defend and could result in an increase to our insurance
premiums. If we are held liable for a claim, that claim could
materially damage our business and financial condition.
We may experience manufacturing problems or delays due to,
among other reasons, our volume and specialized processes, which
could result in decreased revenue or increased costs.
The global supply of our products depends on the uninterrupted
efficient operation of our manufacturing facilities. Many of our
manufacturing processes are complex and involve sensitive
scientific processes, including unique and often proprietary
antibodies which cannot be replicated or acquired through
alternative sources without undue delay or expense. Other
processes present difficult technical challenges to obtain the
manufacturing yields necessary to operate profitably. In
addition, our manufacturing processes may require complex and
specialized equipment which can be expensive to repair or
replace with required lead times of up to a year.
The manufacturing of certain of our products is concentrated in
one or more of our plants, with limited alternate facilities.
Any event that negatively impacts our manufacturing facilities,
our manufacturing systems or equipment, or our contract
manufacturers or suppliers could delay or suspend shipments of
products or the release of new products or could result in the
delivery of inferior products. Our revenues from the affected
products would decline and we could incur losses until such time
as we or our contract manufacturers are able to restore our or
their production processes or we are able to put in place
alternative contract manufacturers or suppliers.
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We rely on suppliers for raw materials and other products and
services, and fluctuations in the availability and price of such
products and services may adversely affect our business or
results of operations.
We rely on numerous third parties to supply raw materials and
other components for our manufacturing processes. In some cases,
these raw materials and components are available only from a
sole supplier. We also rely on a number of significant
third-party manufacturers to produce some of our professional
diagnostics products. Stringent requirements of the FDA and
other regulatory authorities regarding the manufacture of our
products may prevent us from quickly establishing additional or
replacement sources for the raw materials, components or
manufacturing services that we use or from doing so without
excessive cost. As a result, a reduction or interruption in
supply or an inability to secure alternative sources of raw
materials, components or manufacturing services could have a
material adverse effect on our business, result of operations,
financial condition and cash flows.
We may not realize the intended benefits of the relocation of
some of our manufacturing facilities to China.
In recent years we have shifted production of several of our
products to our manufacturing facilities in China and closed
less efficient and more expensive facilities elsewhere. We may
shift production of additional products to China and other lower
cost facilities. Moving production is difficult and involves
significant risk. We may experience delays, inefficiencies and
unanticipated costs as a result of problems establishing
relationships with local materials suppliers; acquiring new
facilities or adapting existing facilities and equipment to the
production of new products; hiring, training and retaining
personnel; and establishing and maintaining compliance with
governmental regulations and industry standards. Any of these
factors could have a material negative impact on our financial
performance.
We could suffer monetary damages, incur substantial costs or
be prevented from using technologies important to our products
as a result of pending legal proceedings.
We are involved in various legal proceedings arising out of our
business. Because of the nature of our business, we may be
subject at any particular time to commercial disputes, product
liability claims, negligence claims or various other lawsuits
arising in the ordinary course of our business, including
infringement, distributor disputes, employment matters or
investor matters. The lawsuits we face generally seek damages,
sometimes in substantial amounts, for commercial or personal
injuries allegedly suffered and can include claims for punitive
or other special damages. An adverse ruling or rulings in one or
more such lawsuits could, individually or in the aggregate,
substantially harm our sales, operations or financial
performance.
The rights we rely upon to protect the intellectual property
underlying our products may not be adequate to prevent third
parties from using our technology, which would reduce a
competitive advantage provided by our patents.
Our success depends in part on our ability to develop or acquire
commercially valuable intellectual property rights and to
enforce those rights. The degree of present and future
protection for our intellectual property is uncertain and may
change. The risks and uncertainties that we face with respect to
our patents and other proprietary rights include the following:
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pending patent applications we have filed, or to which we have
exclusive rights, may not result in issued patents or may take
longer than we expect to result in issued patents;
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patents licensed or issued to us or our customers may not
provide a competitive advantage;
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other parties may challenge patents or patent applications
licensed or issued to us or our customers;
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other companies may design around technologies we have patented,
licensed or developed; and
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all patents have a limited life, meaning at some point valuable
patents will expire and we will lose the competitive advantage
they provide.
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In addition to patents, we rely on a combination of trade
secrets, non-disclosure agreements and other contractual
provisions and technical measures to protect our intellectual
property rights. Nevertheless, these measures may not be
adequate to safeguard the technology underlying our products. If
these measures do not protect our rights, third parties could
access our technology and our competitive advantage in the
market would be reduced. In addition, employees, consultants and
others who participate in the development of our products may
breach their agreements with us regarding our intellectual
property, and we may not have adequate remedies for the breach.
We also may not be able to effectively protect our intellectual
property rights in some foreign countries. For a variety of
reasons, we may decide not to file for patent, copyright or
trademark protection or prosecute potential infringements of our
patents. Our trade secrets may also become known through other
means not currently foreseen by us. Despite our efforts to
protect our intellectual property, our competitors or customers
may independently develop similar or alternative technologies or
products that are equal or superior to our technology and
products without infringing any of our intellectual property
rights, or design around our proprietary technologies.
Claims by others that our products infringe their proprietary
rights could adversely affect our ability to sell our products
and services and could increase our costs.
Substantial litigation over intellectual property rights exists
in the professional and consumer diagnostics industries and in
the health management industry. We expect that our products and
services could be increasingly subject to third-party
infringement claims as the number and functionality of our
products grows and as we enter new and different industries and
markets. Third parties may have or obtain patents which our
products and services or technology may actually or allegedly
infringe. Any of these third parties might assert infringement
claims against us. Any litigation could result in the
expenditure of significant financial resources and the diversion
of managements time and resources. In addition, litigation
in which we are accused of infringement may result in negative
publicity, have an impact on prospective customers, cause
product delays, or require us to develop alternative technology,
make substantial payments to third parties or enter into royalty
or license agreements, which may not be available on acceptable
terms, or at all. If a successful claim of infringement were
made against us and we could not develop non-infringing
technology or license rights to the infringed or similar
technology on a timely and cost-effective basis, we may be
forced to stop selling current products or abandon new products
under development and we could be exposed to legal actions by
our customers.
We may need to initiate lawsuits to protect or enforce our
patents and other intellectual property rights, which could be
expensive and, if we lose, could cause us to lose some of our
intellectual property rights, which would reduce our ability to
compete.
In order to protect or enforce our patent rights, we may
initiate litigation or other proceedings against, or enter into
negotiations or settlement discussions with, third parties.
Litigation may be necessary to:
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assert claims of infringement;
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enforce licensing terms and conditions;
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protect our trade secrets or know-how; or
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determine the enforceability, scope and validity of the
proprietary rights of ourselves or others.
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We have initiated a number of lawsuits against competitors whom
we believe to be selling products that infringe our proprietary
rights. These lawsuits and any other lawsuits that we initiate
in the future could be expensive, take significant time and
divert managements attention from other business concerns.
Litigation also puts our patents at risk of being invalidated or
interpreted narrowly and our patent applications at risk of not
issuing. Additionally, we may provoke third parties to assert
claims against us.
Patent law relating to the scope of claims in the technology
fields in which we operate is still evolving and, consequently,
patent positions in our industry are subject to change and often
uncertain. We may not prevail in any of these suits, and the
damages or other remedies awarded, if any, may not be
commercially valuable. During the course of these suits, there
may be public announcements of the results of hearings, motions
and other interim proceedings or developments in the litigation.
If securities analysts or investors perceive any of these
results to be negative, the trading prices of our securities may
decline.
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Our future business prospects may be limited if our
acquisition strategy is not successful.
As part of our business strategy, we seek to acquire or invest
in businesses that offer complementary products, services or
technologies to ours. If we are unable to identify and
consummate acquisition opportunities, we may not achieve our
growth targets. We may lose acquisition opportunities to
competitors who offer a higher purchase price or who reach
agreement with the target company earlier than we do. We may
fail to complete acquisitions for many reasons, including
failure to obtain antitrust or other regulatory clearances,
failure to obtain requisite shareholder approval and failure to
obtain necessary financing, and we may incur significant
expenses, including potentially the expense of litigation,
pursuing acquisitions, whether or not consummated.
Our business could be materially adversely affected as a
result of the risks associated with our acquisition strategy.
Since our inception, we have acquired numerous businesses,
including Standard Diagnostics, Inc. in 2010; certain assets of
ACON Laboratories, Inc. and certain related entities, or the
ACON Second Territory Business, in 2009; and Alere
San Diego, Inc., formerly Biosite Incorporated, or Biosite,
in 2007. The ultimate success of our acquisitions depends, in
part, on our ability to realize the anticipated synergies, cost
savings and growth opportunities from integrating newly-acquired
businesses or assets into our existing businesses. However, the
acquisition and successful integration of independent businesses
or assets is a complex, costly and time-consuming process, and
the benefits we realize may not exceed the costs of the
acquisition. The risk and difficulties associated with acquiring
and integrating companies and other assets include, among others:
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the impact of the acquisition on our financial and strategic
position and reputation;
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consolidating manufacturing, research and development operations
and health management information technology platforms, where
appropriate;
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integrating newly-acquired businesses or product lines into a
uniform financial reporting system;
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coordinating sales, distribution and marketing functions and
strategies, including the integration of our current health
management products and services;
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establishing or expanding manufacturing, sales, distribution and
marketing functions in order to accommodate newly-acquired
businesses or product lines or rationalizing these functions to
take advantage of synergies;
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preserving the important licensing, research and development,
manufacturing and supply, distribution, marketing, customer and
other relationships of acquired businesses;
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minimizing the diversion of managements attention from
ongoing business concerns;
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the potential loss of key employees of the acquired business;
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coordinating geographically separate operations; and
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regulatory and legal issues relating to the integration of
legacy and newly-acquired businesses.
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These factors could have a material adverse effect on our
business, results of operations or financial condition, and
managing multiple acquisitions or investments at the same time
could exacerbate these risks. To the extent that we issue equity
securities in connection with any future acquisition or
investment, existing shareholders may experience dilution.
Additionally, regardless of the form of consideration we pay,
acquisitions and investments could negatively impact our net
income and earnings per share.
If goodwill or other intangible assets that we have recorded
in connection with our acquisitions of other businesses become
impaired, we could have to take significant charges against
earnings.
As a result of our acquisitions, we have recorded, and may
continue to record, a significant amount of goodwill and other
intangible assets. Under current accounting guidelines, we must
assess, at least annually and potentially more frequently,
whether the value of goodwill and other intangible assets has
been impaired. For example, during the fourth quarter of 2010,
we determined that our goodwill related to our health
24
management business was impaired, resulting in a non-cash
impairment charge in the amount of $1.0 billion. Any
further reduction or impairment of the value of goodwill or
other intangible assets will result in additional charges
against earnings, which could materially reduce our reported
results of operations in future periods.
We do not have complete control over the operations of SPD,
our 50/50 joint venture with P&G, and we may be required to
repurchase P&Gs interest in SPD at fair market
value.
Because SPD is a 50/50 joint venture, we do not have complete
control over its operations, including business decisions, which
may impact SPDs profitability.
Additionally, P&G retains an option to require us to
purchase P&Gs interest in SPD at fair market value
during the
60-day
period beginning on May 17, 2011. The exercise of this
option could strain our financial resources. Certain
subsidiaries of P&G also have the right, at any time upon
certain material breaches by us or our subsidiaries of our
obligations under the joint venture documents, to acquire all of
our interest in SPD at fair market value less any applicable
damages.
Our business has substantial indebtedness.
We currently have, and will likely continue to have, a
substantial amount of indebtedness. Our indebtedness could,
among other things, make it more difficult for us to satisfy our
debt obligations, require us to use a large portion of our cash
flow from operations to repay and service our debt or otherwise
create liquidity problems, limit our flexibility to adjust to
market conditions, place us at a competitive disadvantage and
expose us to interest rate fluctuations. As of December 31,
2010, we had total debt outstanding of approximately
$2.4 billion, which included approximately
$941.3 million in aggregate principal amount of
indebtedness outstanding under our senior secured credit
facility, $250.0 million in aggregate principal amount of
indebtedness outstanding under our junior secured credit
facility, to which we refer, together with the senior secured
credit facility, as our secured credit facilities. Our secured
credit facilities mature in stages during the period beginning
in 2013, 2014 or and continuing through 2015. At
December 31, 2010, we also had an aggregate of
$1.0 billion in aggregate principal amount of indebtedness
outstanding under our senior and senior subordinated notes, all
of which matures in 2016 or 2018, as well as $150.0 million
in aggregate principal amount of indebtedness outstanding under
our 2007 senior subordinated convertible notes, which matures in
2016.
We expect to obtain the money to pay our expenses and to pay the
principal and interest on our indebtedness from cash flow from
our operations and potentially from other debt or equity
offerings. Accordingly, our ability to meet our obligations
depends on our future performance and capital raising
activities, which will be affected by financial, business,
economic and other factors, many of which are beyond our
control. If our cash flow and capital resources prove inadequate
to allow us to the pay principal and interest on our debt and
meet our other obligations, we could face substantial liquidity
problems and might be required to dispose of material assets or
operations, restructure or refinance our debt and forego
attractive business opportunities. We may be unable to do so on
acceptable terms. In addition, the terms of our existing or
future debt agreements may restrict us from pursuing any of
these alternatives.
The agreements governing our indebtedness subject us to
various restrictions that may limit our ability to pursue
business opportunities.
The agreements governing our indebtedness subject us to various
restrictions on our ability to engage in certain activities,
including, among other things, our ability to:
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acquire other businesses;
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raise additional capital;
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incur additional debt;
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pay dividends or make distributions or repurchase or redeem our
stock or subordinated debt;
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prepay indebtedness; and
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consolidate, merge or sell all or substantially all or our
assets.
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25
These restrictions may limit or restrict our cash flow and our
ability to pursue business opportunities or strategies that we
would otherwise consider to be in our best interests.
Our secured credit facilities contain certain financial and
other restrictive covenants that we may not satisfy, and that,
if not satisfied, could result in the acceleration of the
amounts due under our secured credit facilities and the
limitation of our ability to borrow additional funds in the
future.
The agreements governing our secured credit facilities subject
us to various financial and other restrictive covenants with
which we must comply on an ongoing or periodic basis. These
include covenants pertaining to maximum consolidated leverage
ratios, minimum consolidated interest coverage ratios and limits
on capital expenditures. If we violate any of these covenants,
we may suffer a material adverse effect. Most notably, our
outstanding debt under our secured credit facilities could
become immediately due and payable, our lenders could proceed
against any collateral securing such indebtedness, and our
ability to borrow additional funds in the future may be limited
or terminated. Alternatively, we could be forced to refinance or
renegotiate the terms and conditions of our secured credit
facilities, including the interest rates, financial and
restrictive covenants and security requirements of the secured
credit facilities, on terms that may be significantly less
favorable to us.
A default under any of the agreements governing our
indebtedness could result in a default and acceleration of
indebtedness under other agreements.
The agreements governing our indebtedness contain cross-default
provisions whereby a default under one agreement could result in
a default and acceleration of our repayment obligations under
other agreements. If a cross-default were to occur, we may not
be able to pay our debts or borrow sufficient funds to refinance
them. Even if new financing were available, it may not be
available on acceptable terms. If some or all of our
indebtedness is in default for any reason, our business,
financial condition and results of operations could be
materially and adversely affected.
We may not be able to satisfy our debt obligations upon a
change of control or fundamental change, which could limit our
opportunity to enter into a change of control or fundamental
change transaction.
If we undergo a change of control, as provided in our secured
credit facilities, the senior notes or the senior subordinated
notes, or a fundamental change or termination of trading, as
provided in the 2007 senior subordinated convertible notes, we
may be required to repay or repurchase some or all of such
indebtedness. We may not have sufficient financial resources to
satisfy all of our repayment and repurchase obligations. Our
failure to purchase notes as required under the senior or senior
subordinated notes or the 2007 senior subordinated convertible
notes would constitute a default under the relevant indentures
and under our secured credit facilities and could have material
adverse consequences for us and our stakeholders.
Non-competition obligations and other restrictions will limit
our ability to take full advantage of our management team, the
technology we own or license and our research and development
capabilities.
Members of our management team have had significant experience
in the diabetes field. In addition, technology we own or license
may have potential applications to this field and our research
and development capabilities could be applied to this field.
However, in conjunction with our split-off from Inverness
Medical Technology, Inc., or IMT, we agreed not to compete with
IMT and Johnson & Johnson in the field of diabetes
through November 21, 2011. In addition, our license
agreement with IMT prevents us from using any of the licensed
technology in the field of diabetes. As a result of these
restrictions, we are limited in our ability to pursue
opportunities in the field of diabetes.
Our operating results may fluctuate for various reasons and,
as a result,
period-to-period
comparisons of our results of operations will not necessarily be
meaningful.
Many factors relating to our business, such as those described
elsewhere in this section, make our future operating results
uncertain and may cause them to fluctuate from period to period.
Because our revenue and operating results are difficult to
predict, we believe that
period-to-period
comparisons of our results of operations are not a good
indicator of our future performance. If revenue declines in a
quarter, our results of operations will be harmed because many
of our expenses are relatively fixed. In particular, research
and
26
development, sales and marketing and general and administrative
expenses are not significantly affected by variations in
revenue. If our quarterly operating results fail to meet or
exceed the expectations of securities analysts or investors, our
stock price could drop suddenly and significantly.
Our effective tax rate may fluctuate, and we may incur
obligations in tax jurisdictions in excess of amounts that have
been accrued.
We are subject to income taxes in both the United States and
various foreign jurisdictions, and we may take certain income
tax positions on our tax returns that tax authorities may
disagree with. We provide reserves for potential payments of tax
to various tax authorities related to uncertain tax positions.
However, the calculation of our tax liabilities involves the
application of complex tax regulations to our global operations
in many jurisdictions. Therefore, any dispute with any tax
authority may result in a payment that is materially different
from our current estimate of the tax liabilities associated with
our returns.
Changes in tax laws or tax rulings could materially impact our
effective tax rate. There are several proposals to reform
U.S. tax rules being considered by U.S. law makers,
including proposals that may reduce or eliminate the deferral of
U.S. income tax on our unrepatriated earnings, potentially
requiring those earnings to be taxed at the U.S. federal
income tax rate, reduce or eliminate our ability to claim
foreign tax credits, and eliminate various tax deductions until
foreign earnings are repatriated to the U.S. Our future
reported financial results may be adversely affected by tax rule
changes which restrict or eliminate our ability to claim foreign
tax credits or deduct expenses attributable to foreign earnings,
or otherwise affect the treatment of our unrepatriated earnings.
We may incur losses in excess of our insurance coverage.
Our insurance coverage includes product liability, property,
fire, terrorism and business interruption policies. Our
insurance coverage contains policy limits, specifications and
exclusions. We believe that our insurance coverage is consistent
with general practices within our industry. Nonetheless, we may
incur losses of a type for which we are not covered by insurance
or which exceed the limits of liability of our insurance
policies. In that event, we could experience a significant loss
which could have a material negative impact on our financial
condition.
Our future success depends on our ability to recruit and
retain key personnel.
Our future success depends on our continued ability to attract,
hire and retain highly qualified personnel, including our
executive officers and scientific, technical, sales and
marketing employees, and their ability to manage growth
successfully. Experienced personnel in our industry are in high
demand and competition for their talents is intense. If we are
unable to attract and retain key personnel, our business may be
harmed. In addition, the loss of any of our key personnel,
particularly key research and development personnel, could harm
our business and prospects and could impede the achievement of
our research and development, operation or strategic objectives.
Future sales of our common stock issuable upon conversion of
our Series B Convertible Perpetual Preferred Stock, or
Series B Preferred Stock, or our senior subordinated
convertible notes may adversely affect the market price of our
common stock.
Sales of a substantial number of shares of our common stock or
other equity securities in the public market could depress the
price of our common stock and impair our ability to raise
capital through the sale of additional equity securities. The
price of our common stock could be affected by possible sales of
the substantial number of shares of our common stock potentially
issuable upon conversion of our Series B Preferred Stock or
our senior subordinated convertible notes and by other hedging
or arbitrage trading activity that may develop involving our
common stock. If the conditions applicable to the conversion of
our Series B Preferred Stock were satisfied, then subject
to adjustment, each of the approximately 2.1 million shares
of Series B Preferred Stock outstanding as of
December 31, 2010 could convert into 5.7703 shares of
our common stock, or approximately 12.1 million shares of
our common stock. Upon certain extraordinary transactions,
depending on the market price of our common stock at that time,
the conversion rate could increase such that significantly more
shares of common stock could be issued. Our $150.0 million
in
27
aggregate principal amount of senior subordinated convertible
notes is convertible into shares of our common stock at a
conversion price of approximately $43.98 per share, or
approximately 3.4 million shares.
The holders of our Series B Preferred Stock are entitled
to receive liquidation payments in preference to the holders of
our common stock.
As of December 31, 2010, the outstanding shares of our
Series B Preferred Stock had an aggregate stated
liquidation preference of approximately $836.2 million.
Dividends accrue on the shares of Series B Preferred Stock
at a rate of 3% per annum, and we have the option to pay these
dividends in shares of common stock or additional shares of
Series B Preferred Stock and in either case must satisfy
the dividend obligation by issuing the requisite number of
shares based upon market prices. Upon a liquidation of our
company, the holders of shares of Series B Preferred Stock
will be entitled to receive a liquidation payment prior to the
payment of any amount with respect to the shares of our common
stock. The amount of this preferential liquidation payment is
the aggregate stated liquidation preference, plus any accrued
and unpaid dividends. Because of the substantial liquidation
preference to which the holders of the Series B Preferred
Stock are entitled, the amount available to be distributed to
the holders of our common stock upon a liquidation of our
company could be substantially limited or reduced to zero.
The terms of the Series B Preferred Stock may limit our
ability to raise additional capital through subsequent issuances
of preferred stock.
For so long as any shares of Series B Preferred Stock
remain outstanding, we are not permitted, without the
affirmative vote or written consent of the holders of at least
two-thirds of the Series B Preferred Stock then
outstanding, to authorize or designate any class or series of
capital stock having rights on liquidation or as to
distributions (including dividends) senior to the Series B
Preferred Stock. This restriction could limit our ability to
plan for or react to market conditions or meet extraordinary
capital needs, which could have a material adverse impact on our
business.
Anti-takeover provisions in our organizational documents and
Delaware law may limit the ability of our stockholders to
control our policies and effect a change of control of our
company and may prevent attempts by our stockholders to replace
or remove our current management, which may not be in your best
interests.
Provisions of our certificate of incorporation and bylaws may
discourage a third party from making a proposal to acquire us,
even if some of our stockholders might consider the proposal to
be in their best interests, and may prevent attempts by our
stockholders to replace or remove our current management. These
provisions include the following:
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our certificate of incorporation provides for three classes of
directors with the term of office of one class expiring each
year, commonly referred to as a staggered board. By preventing
stockholders from voting on the election of more than one class
of directors at any annual meeting of stockholders, this
provision may have the effect of keeping the current members of
our board of directors in control for a longer period of time
than stockholders may desire;
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our certificate of incorporation authorizes our board of
directors to issue shares of preferred stock without stockholder
approval and to establish the preferences and rights of any
preferred stock issued, which would allow the board to issue one
or more classes or series of preferred stock that could
discourage or delay a tender offer or change in control;
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In addition, our board of directors may in the future adopt
other protective measures, such as a stockholder rights plan,
which could delay, deter or prevent a change in control.
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ITEM 1B.
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UNRESOLVED
STAFF COMMENTS
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None.
28
Our principal corporate administrative office, together with the
administrative office for most of our United States consumer
operations, is located at 51 Sawyer Road, Waltham,
Massachusetts. Our health management business is headquartered
in Atlanta, Georgia. We also operate a shared service center in
Orlando, Florida, which houses certain critical back-office and
sales operations supporting our U.S. professional
diagnostics operations. These key administrative facilities are
leased from third parties.
We own approximately 32.6 acres of land in San Diego,
California which houses one of our six primary manufacturing
operations, as well as significant administrative and research
and development operations for our professional diagnostics
business. Our buildings on this property total
336,000 square feet and include 167,000 square feet of
manufacturing space for professional diagnostic products.
Our other primary manufacturing operations are in Hangzhou and
Shanghai, China; Matsudo, Japan; Yongin, South Korea and
Scarborough, Maine. We manufacture some of our consumer and
professional diagnostics products in a manufacturing facility of
approximately 410,000 square feet in Hangzhou, China, which
we own. The majority of our consumer diagnostic products are
manufactured in a facility of approximately 54,000 square
feet in Shanghai, China, which we lease. We manufacture our
Determine products in a leased space of approximately
35,000 square feet in Matsudo, Japan. We will also continue
to rent 16,000 square feet of space in Matsudo from Abbott
Laboratories through March 2011. Standard Diagnostics
manufactures most of its professional diagnostic products in a
63,000 square foot facility, which it owns, in Yongin,
South Korea. We manufacture certain professional diagnostic
products in a 64,000 square foot facility that we lease in
Scarborough, Maine.
We rely increasingly on toxicology laboratories to provide
reliable drugs of abuse testing results to customers. We own two
SAMHSA certified laboratories located in Gretna, Louisiana and
Richmond, Virginia. We also operate laboratories in Santa Rosa,
California; Austin, Texas and Abingdon, England.
We also have leases or other arrangements for other facilities
in various locations worldwide, including smaller manufacturing
operations and laboratories, as well as research and
developments operations, administrative or sales offices, call
centers and warehouses. We believe that adequate space for our
manufacturing, testing and other operations will be available as
needed.
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ITEM 3.
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LEGAL
PROCEEDINGS
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We are not a party to any pending legal proceedings that we
currently believe could have a material adverse impact on our
sales, operations or financial performance. However, because of
the nature of our business, we may be subject at any particular
time to lawsuits or other claims arising in the ordinary course
of our business, and we expect that this will continue to be the
case in the future.
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ITEM 4.
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REMOVED
AND RESERVED
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29
PART II
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ITEM 5.
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MARKET
FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES
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Unregistered
Sales of Equity Securities and Use of Proceeds
On December 17, 2010, we issued 400 shares of our
common stock upon the exercise of warrants for cash, resulting
in aggregate proceeds to us of $5,416. These shares were offered
and sold, in one transaction, pursuant to an exemption afforded
by Section 4(2) of the Securities Act of 1933, as amended.
Market
Information
Our common stock trades on the New York Stock Exchange (NYSE)
under the symbol ALR. The following table sets forth
the high and low sales prices of our common stock for each
quarter during fiscal 2010 and 2009.
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High
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Low
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Fiscal 2010
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Fourth Quarter
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$
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36.81
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$
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26.61
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Third Quarter
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$
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31.60
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$
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25.36
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Second Quarter
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$
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40.32
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$
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26.06
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First Quarter
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$
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44.87
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$
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38.30
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Fiscal 2009
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Fourth Quarter
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$
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44.01
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$
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37.02
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Third Quarter
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$
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41.86
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$
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30.27
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Second Quarter
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$
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35.99
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$
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25.80
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First Quarter
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$
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28.93
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$
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18.59
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On February 23, 2011, there were 2,029 holders of record of our
common stock.
Dividend
Policy
We have never declared or paid any cash dividends on our common
stock. We currently intend to retain earnings to support our
growth strategy and do not anticipate paying cash dividends on
our common stock in the foreseeable future. Payment of future
dividends, if any, on our common stock will be at the discretion
of our board of directors after taking into account various
factors, including our financial condition, operating results,
current and anticipated cash needs and plans for expansion. In
addition, restrictive covenants under our secured credit
facilities and the indentures governing the terms of our senior
notes and our senior subordinated notes currently prohibit or
limit the payment of cash or stock dividends.
30
Stock
Performance Graph
The following line graph compares the cumulative total
stockholder return on our common stock from December 31,
2005 through December 31, 2010 with the cumulative total
return of a broad equity market index and a published industry
index. This graph assumes an investment of $100.00 on
December 30, 2005 in our common stock, and compares its
performance with the NYSE Composite Index and the Dow Jones
U.S. Healthcare Index (the Current Indices). We
paid no dividends on our common stock during the period covered
by the graph. The Current Indices reflect a cumulative total
return based upon the reinvestment of dividends of the stocks
included in those indices. Measurement points are
December 30, 2005 and the last trading day of each
subsequent year end through December 31, 2010.
The comparisons shown in the graph below are based upon
historical data. We caution that the stock price performance
shown in the graph below is not necessarily indicative of, nor
is it intended to forecast, the potential future performance of
our common stock.
Current
Indices
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NYSE Composite
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Dow Jones U.S.
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Date
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ALR
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Index
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Healthcare Index
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12/30/05
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$
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100.00
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$
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100.00
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$
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100.00
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12/29/06
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$
|
163.22
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$
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117.86
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$
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105.20
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12/31/07
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$
|
236.95
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$
|
125.62
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$
|
112.10
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12/31/08
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$
|
79.76
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$
|
74.25
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$
|
85.17
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12/31/09
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|
$
|
175.07
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$
|
92.66
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$
|
101.24
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12/31/10
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|
$
|
154.37
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$
|
102.71
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$
|
103.70
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The performance graph above shall not be deemed
filed for purposes of Section 18 of the
Securities Exchange Act of 1934, as amended (or the Exchange
Act), or otherwise subject to the liabilities of that section.
This graph will not be deemed incorporated by reference into any
filing under the Securities Act of 1933, as amended, or the
Exchange Act, whether made before or after the date hereof,
regardless of any general incorporation language in such filing.
31
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ITEM 6.
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SELECTED
CONSOLIDATED FINANCIAL DATA
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The following tables set forth selected consolidated financial
data of our company as of and for each of the years in the
five-year period ended December 31, 2010 and should be read
in conjunction with Managements Discussion and
Analysis of Financial Condition and Results of Operations
and our consolidated financial statements and notes thereto
included elsewhere in this Annual Report on
Form 10-K.
On January 15, 2010, we completed the sale of our vitamins
and nutritional supplements business. The sale included our
entire private label and branded nutritionals businesses and
represents the complete divestiture of our entire vitamins and
nutritional supplements business segment. The results of the
vitamins and nutritional supplements business are included in
income (loss) from discontinued operations, net of tax, for all
periods presented in the statement of operations data below. The
assets and liabilities associated with the vitamins and
nutritional supplements business have been reclassified to
current classifications as assets held for sale and liabilities
related to assets held for sale and, as such, have impacted
working capital amounts, which are reflected in the balance
sheet data section below, for all balance sheet dates presented.
For a discussion of certain factors that materially affect the
comparability of the selected consolidated financial data or
cause the data reflected herein not to be indicative of our
future results of operations or financial condition, see
Item 1A Risk Factors, Item 7
Managements Discussion and Analysis of Financial
Condition and Results of Operation and Notes 2(r) and 4 of
our consolidated financial statements included elsewhere in this
report.
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For the Year Ended December 31,
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2010
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2009
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2008
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2007
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2006
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(in thousands, except per share data)
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Statement of Operations Data:
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|
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|
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Net product sales
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|
$
|
1,472,403
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|
|
$
|
1,365,079
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|
|
$
|
1,151,265
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|
|
$
|
728,091
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|
|
$
|
470,079
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Services revenue
|
|
|
662,185
|
|
|
|
528,487
|
|
|
|
405,462
|
|
|
|
16,646
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Net product sales and services revenue
|
|
|
2,134,588
|
|
|
|
1,893,566
|
|
|
|
1,556,727
|
|
|
|
744,737
|
|
|
|
470,079
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License and royalty revenue
|
|
|
20,759
|
|
|
|
29,075
|
|
|
|
25,826
|
|
|
|
21,979
|
|
|
|
17,324
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Net revenue
|
|
|
2,155,347
|
|
|
|
1,922,641
|
|
|
|
1,582,553
|
|
|
|
766,716
|
|
|
|
487,403
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
Cost of net product sales
|
|
|
688,325
|
|
|
|
619,503
|
|
|
|
543,317
|
|
|
|
365,545
|
|
|
|
257,785
|
|
Cost of services revenue
|
|
|
325,286
|
|
|
|
240,026
|
|
|
|
177,098
|
|
|
|
5,261
|
|
|
|
|
|
Cost of license and royalty revenue
|
|
|
7,149
|
|
|
|
8,890
|
|
|
|
8,620
|
|
|
|
9,149
|
|
|
|
5,432
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of net revenue
|
|
|
1,020,760
|
|
|
|
868,419
|
|
|
|
729,035
|
|
|
|
379,955
|
|
|
|
263,217
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
1,134,587
|
|
|
|
1,054,222
|
|
|
|
853,518
|
|
|
|
386,761
|
|
|
|
224,186
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
133,278
|
|
|
|
112,848
|
|
|
|
111,828
|
|
|
|
69,547
|
|
|
|
48,706
|
|
Purchase of in-process research and development
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
173,825
|
|
|
|
4,960
|
|
Sales and marketing
|
|
|
499,124
|
|
|
|
441,646
|
|
|
|
381,939
|
|
|
|
163,028
|
|
|
|
89,700
|
|
General and administrative
|
|
|
446,917
|
|
|
|
357,033
|
|
|
|
295,059
|
|
|
|
155,153
|
|
|
|
67,938
|
|
Goodwill impairment charge
|
|
|
1,006,357
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Gain) loss on dispositions, net
|
|
|
|
|
|
|
(3,355
|
)
|
|
|
|
|
|
|
|
|
|
|
3,498
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
(951,089
|
)
|
|
|
146,050
|
|
|
|
64,692
|
|
|
|
(174,792
|
)
|
|
|
9,384
|
|
Interest expense and other expenses, net, including amortization
of original issue discounts and write-off of deferred financing
costs
|
|
|
(116,697
|
)
|
|
|
(105,802
|
)
|
|
|
(102,939
|
)
|
|
|
(73,563
|
)
|
|
|
(17,595
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations before provision
(benefit) for income taxes
|
|
|
(1,067,786
|
)
|
|
|
40,248
|
|
|
|
(38,247
|
)
|
|
|
(248,355
|
)
|
|
|
(8,211
|
)
|
Provision (benefit) for income taxes
|
|
|
(29,931
|
)
|
|
|
15,627
|
|
|
|
(16,644
|
)
|
|
|
(1,049
|
)
|
|
|
5,712
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
(in thousands, except per share data)
|
|
|
|
|
|
Income (loss) from continuing operations before equity earnings
of unconsolidated entities, net of tax
|
|
|
(1,037,855
|
)
|
|
|
24,621
|
|
|
|
(21,603
|
)
|
|
|
(247,306
|
)
|
|
|
(13,923
|
)
|
Equity earnings of unconsolidated entities, net of tax
|
|
|
10,566
|
|
|
|
7,626
|
|
|
|
1,050
|
|
|
|
4,372
|
|
|
|
336
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
|
(1,027,289
|
)
|
|
|
32,247
|
|
|
|
(20,553
|
)
|
|
|
(242,934
|
)
|
|
|
(13,587
|
)
|
Income (loss) from discontinued operations, net of tax
|
|
|
11,397
|
|
|
|
1,934
|
|
|
|
(1,048
|
)
|
|
|
(418
|
)
|
|
|
(3,255
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
(1,015,892
|
)
|
|
|
34,181
|
|
|
|
(21,601
|
)
|
|
|
(243,352
|
)
|
|
|
(16,842
|
)
|
Less: Net income attributable to non-controlling interests
|
|
|
1,418
|
|
|
|
465
|
|
|
|
167
|
|
|
|
1,401
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to Alere Inc. and Subsidiaries
|
|
|
(1,017,310
|
)
|
|
|
33,716
|
|
|
|
(21,768
|
)
|
|
|
(244,753
|
)
|
|
|
(16,842
|
)
|
Preferred stock dividends
|
|
|
(24,235
|
)
|
|
|
(22,972
|
)
|
|
|
(13,989
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) available to common stockholders(1)
|
|
$
|
(1,041,545
|
)
|
|
$
|
10,744
|
|
|
$
|
(35,757
|
)
|
|
$
|
(244,753
|
)
|
|
$
|
(16,842
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income (loss) per common share attributable to Alere
Inc. and Subsidiaries:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per common share from continuing operations
|
|
$
|
(12.47
|
)
|
|
$
|
0.11
|
|
|
$
|
(0.45
|
)
|
|
$
|
(4.74
|
)
|
|
$
|
(0.39
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per common share from discontinued operations
|
|
$
|
0.14
|
|
|
$
|
0.02
|
|
|
$
|
(0.01
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
(0.10
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per common share(1)
|
|
$
|
(12.33
|
)
|
|
$
|
0.13
|
|
|
$
|
(0.46
|
)
|
|
$
|
(4.75
|
)
|
|
$
|
(0.49
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net income (loss) per common share attributable to Alere
Inc. and Subsidiaries:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per common share from continuing operations
|
|
$
|
(12.47
|
)
|
|
$
|
0.11
|
|
|
$
|
(0.45
|
)
|
|
$
|
(4.74
|
)
|
|
$
|
(0.39
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per common share from discontinued operations
|
|
$
|
0.14
|
|
|
$
|
0.02
|
|
|
$
|
(0.01
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
(0.10
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per common share(1)
|
|
$
|
(12.33
|
)
|
|
$
|
0.13
|
|
|
$
|
(0.46
|
)
|
|
$
|
(4.75
|
)
|
|
$
|
(0.49
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands)
|
|
|
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
401,306
|
|
|
$
|
492,773
|
|
|
$
|
141,324
|
|
|
$
|
414,732
|
|
|
$
|
71,104
|
|
Working capital
|
|
$
|
411,399
|
|
|
$
|
828,944
|
|
|
$
|
470,349
|
|
|
$
|
674,048
|
|
|
$
|
133,297
|
|
Total assets
|
|
$
|
6,330,374
|
|
|
$
|
6,943,992
|
|
|
$
|
5,955,360
|
|
|
$
|
4,880,759
|
|
|
$
|
1,085,771
|
|
Total debt
|
|
$
|
2,398,985
|
|
|
$
|
2,149,324
|
|
|
$
|
1,520,534
|
|
|
$
|
1,387,849
|
|
|
$
|
202,976
|
|
Total stockholders equity
|
|
$
|
2,575,038
|
|
|
$
|
3,527,555
|
|
|
$
|
3,278,838
|
|
|
$
|
2,586,667
|
|
|
$
|
714,138
|
|
|
|
|
(1) |
|
Net income (loss) available to common stockholders and basic and
diluted net income (loss) per common share are computed
consistent with annual per share calculations described in
Notes 2(n) and 12 of our consolidated financial statements
included elsewhere in this Annual Report on
Form 10-K. |
33
|
|
ITEM 7.
|
MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
Forward-Looking
Statements
This Annual Report on
Form 10-K,
including this Item 7, 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. You can identify these
statements by forward-looking words such as may,
could, should, would,
intend, will, expect,
anticipate, believe,
estimate, continue or similar words. You
should read statements that contain these words carefully
because they discuss our future expectations, contain
projections of our future results of operations or of our
financial condition or state other forward-looking
information. Forward-looking statements in this Item 7
include, without limitation, statements regarding anticipated
expansion and growth in certain of our product and service
offerings, the impact of our research and development
activities, potential new product and technology achievements,
the potential for selective acquisitions, including acquisitions
of health management businesses outside the United States, our
ability to improve our working capital and operating margins,
our expectations with respect to Apollo, our integrated health
management technology platform, our ability to improve care and
lower healthcare costs for both providers and patients, and our
funding plans for our future working capital needs and
commitments. Actual results or developments could differ
materially from those projected in such statements as a result
of numerous factors, including, without limitation, those risks
and uncertainties set forth in Item 1A entitled Risk
Factors, which begins on page 13 of this report, as
well as those factors identified from time to time in our
periodic filings with the Securities and Exchange Commission. We
do not undertake any obligation to update any forward-looking
statements. This report and, in particular, the following
discussion and analysis of our financial condition and results
of operations, should be read in light of those risks and
uncertainties and in conjunction with our accompanying
consolidated financial statements and notes thereto.
Overview
We enable individuals to take charge of improving their health
and quality of life at home, under medical supervision, by
developing new capabilities in near-patient diagnosis,
monitoring and health management. Our global, leading products
and services, as well as our new product development efforts,
currently focus on cardiology, womens health, infectious
disease, oncology and toxicology. We are continuing to expand
our product and service offerings in all of these categories.
As a global, leading supplier of near-patient monitoring tools,
as well as value-added healthcare services, we are uniquely
positioned to improve care and lower healthcare costs for both
providers and patients. Our rapidly growing home coagulation
monitoring business, which supports doctors and
patients efforts to monitor warfarin therapy using our
INRatio blood coagulation monitoring system, continues to
represent an early example of this. We have also continued to
introduce our new integrated health management technology
platform, called Apollo, to our customers since its launch on
January 1, 2010. Using a sophisticated data engine for
acquiring and analyzing information, combined with a state of
the art touch engine for communicating with individuals and
their health partners, we expect Apollo to benefit healthcare
providers, health insurers and patients alike by enabling more
efficient and effective health management programs.
We have continued to grow through strategic acquisitions. Our
February 2010 acquisition of Kroll Laboratory Specialists, Inc.,
now renamed Alere Toxicology, as well as other small
acquisitions during the year, expanded the range of toxicology
testing products and services that we can offer government
agencies, employers, health plans and healthcare professionals.
Our 2010 acquisition of Standard Diagnostics brought us a
comprehensive range of rapid diagnostic products, with
particular strength in the infectious disease category. This
acquisition builds on our already significant presence in
Asia-Pacific through its distribution capabilities in South
Korea and India, and additionally provides us with a strong
management team and established manufacturing facilities in each
of those countries. We also acquired a small health management
provider in Australia and expect to continue to expand our
health management business outside the U.S. through
selective acquisitions.
34
During 2010, we completed several technology-based acquisitions
that we hope will aid us in bringing future products or
diagnostic platforms to market. Through the acquisition of two
privately-owned research and development operations, we have
enhanced our capabilities in the area of rapid molecular
diagnostic testing. Additionally, in November 2010, we acquired
AdnaGen, a small German company specializing in the development
of cancer diagnostics through the detection and analysis of
circulating tumor cells in order to determine the correct course
of therapy for individual cancer patients. We hope that this
acquisition will assist us in developing a rapid molecular
testing platform focused on oncology, allowing for truly
personalized cancer care.
We continued to lay the groundwork during 2010 for future
revenue and earnings growth by focusing our efforts on new
product development and introductions. We introduced our Alere
Heart Check System in Europe and, while the European launch is
in very early stages, early indicators are positive. The Alere
Heart Check System provides a quantitative reading of BNP in 10
minutes using a fingerstick sample with substantially equivalent
performance to lab instruments. The Alere Heart Check System,
while launched as a
point-of-care
device, is ultimately designed for home use and is intended to
enable doctors to remotely monitor BNP levels of congestive
heart failure patients and adjust their therapy accordingly.
Additionally, during 2010, we introduced our Alere CD4 Analyzer
in additional countries in Africa and Asia-Pacific. The Alere
CD4 Analyzer is the first
point-of-care
platform which measures absolute CD4 counts in HIV patients with
results in 20 minutes, through single-use, disposable
fingerstick cartridges. We also made headway during 2010 in
sales of the epoc platform, and expect this trend to continue as
we make progress in securing contracts through the relatively
long sales process associated with integrated networks and large
hospital systems. The epoc (enterprise
point-of-care)
platform is a
point-of-care
analysis system which provides wireless bedside blood gas and
electrolyte measurement testing solutions and complements our
Triage products in cardiology and emergency room settings.
Utilizing easy to use, low-cost disposable
Smart-Cardstm,
the epoc System produces laboratory-quality results in critical
and acute care settings in about 30 seconds.
We continue to build momentum for two novel biomarkers, NGAL and
placental growth factor (PlGF). In 2009, we introduced the
Triage NGAL test outside the U.S., as the worlds first
point-of-care
test for acute kidney injury (AKI) and we expect U.S. FDA
clearance for this product in 2012. In January 2010, we launched
Triage PlGF in Europe. PlGF is a novel biomarker that aids in
the early diagnosis of pre-eclampsia (PE), which is the leading
cause of maternal and perinatal mortality. Our efforts have
focused on building awareness and acceptance of this marker
outside of the U.S., while key clinical studies needed to gain
regulatory clearance in the U.S. and Japan are expected to
commence in 2011.
2010
Financial Highlights
|
|
|
|
|
Net revenue increased by $232.7 million, or 12%, to
$2.2 billion in 2010, from $1.9 billion in 2009.
|
|
|
|
Gross profit increased by $80.4 million, or 8%, to
$1.13 billion in 2010, from $1.05 billion in 2009.
|
|
|
|
For the year ended December 31, 2010, we generated a net
loss of $1.0 billion, or $12.33 per basic and diluted
common share after preferred stock dividends, based on a net
loss available to common stockholders of $1.0 billion. For
the year ended December 31, 2009, we generated net income
of $33.7 million, or $0.13 per basic and diluted common
share after preferred stock dividends, based on net income
available to common stockholders of $10.7 million. The
2010 net loss included a $1.0 billion non-cash charge
associated with the impairment of goodwill in our health
management business segment and reporting unit.
|
Results
of Operations
The following discussions of our results of continuing
operations exclude the results related to the vitamins and
nutritional supplements business segment, which was previously
presented as a separate operating segment prior to its
divestiture in January 2010. The vitamins and nutritional
supplements business segment has been segregated from continuing
operations and reflected as discontinued operations for all
periods presented. See Discontinued Operations
below. Results excluding the impact of currency translation are
calculated on the basis of local currency results, using foreign
currency exchange rates applicable to the
35
earlier comparative period. We believe presenting information
using the same foreign currency exchange rates helps investors
isolate the impact of changes in those rates from other trends.
Our results of operations were as follows:
Year
Ended December 31, 2010 Compared to Year Ended
December 31, 2009
Net Product Sales and Services Revenue. Net
product sales and services revenue increased by
$241.0 million, or 13%, to $2.1 billion in 2010 from
$1.9 billion in 2009. Net product sales and services
revenue increased primarily as a result of our health management
and professional diagnostics-related acquisitions which
contributed $338.0 million of the increase. Excluding the
impact of currency translation, net product sales and services
revenue in 2010 grew by approximately $237.6 million, or
13%, over 2009. Offsetting the increased net product sales and
services revenue contributed by acquisitions was a decrease in
North American flu-related net product sales during 2010, as
compared to 2009. Net product sales from our North American flu
sales declined approximately $82.3 million, comparing 2010
to 2009, from $101.1 million in 2009 to $18.8 million
in 2010, as a result of a weaker than normal flu season in 2010
and unusually strong flu sales during 2009 caused by the H1N1
flu outbreak. In addition, worldwide respiratory sales,
excluding North American flu sales discussed above, declined
approximately $19.4 million, comparing 2010 to 2009. Net
product sales and services revenue in our health management
segment, excluding the impact of acquisitions, was adversely
impacted by the increasingly competitive environment,
particularly in the less differentiated services, such as
disease management and case management.
Net Product Sales and Services Revenue by Business
Segment. Net product sales and services revenue
by business segment for 2010 and 2009 are as follows (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% Increase
|
|
|
|
2010
|
|
|
2009
|
|
|
(Decrease)
|
|
|
Professional diagnostics
|
|
$
|
1,440,718
|
|
|
$
|
1,238,251
|
|
|
|
16
|
%
|
Health management
|
|
|
598,819
|
|
|
|
521,695
|
|
|
|
15
|
%
|
Consumer diagnostics
|
|
|
95,051
|
|
|
|
133,620
|
|
|
|
(29
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net product sales and services revenue
|
|
$
|
2,134,588
|
|
|
$
|
1,893,566
|
|
|
|
13
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Professional
Diagnostics
The increase in net product sales and services revenue from our
professional diagnostics business segment was
$202.5 million, or 16%, resulting in $1.4 billion of
net product sales and services revenue in 2010. Net product
sales and services revenue increased primarily as a result of
our acquisitions of: (i) the ACON Second Territory
Business, in April 2009, which contributed $15.2 million of
net product sales and services revenue in excess of those earned
in the prior years comparative period,
(ii) Concateno, in August 2009, which contributed
$48.8 million of net product sales and services revenue in
excess of those earned in the prior years comparative
period, (iii) Standard Diagnostics, in February 2010, which
contributed $78.9 million of net product sales and services
revenue, (iv) Alere Toxicology, in February 2010, which
contributed $31.3 million of net product sales and services
revenue and (v) various less significant acquisitions,
which contributed an aggregate of $41.8 million of such
increase. Offsetting the increased net product sales and
services revenue contributed by acquisitions was a decrease in
North American flu-related net product sales during 2010
compared to 2009. Net product sales from our North American flu
sales declined approximately $82.3 million, comparing 2010
to 2009, as a result of a weaker than normal flu season in 2010
and unusually strong flu sales during 2009 caused by the H1N1
flu outbreak. In addition, worldwide respiratory sales,
excluding North American flu sales discussed above, declined
approximately $19.4 million, comparing 2010 to 2009.
Excluding the impact of currency translation, net product sales
and services revenue from our professional diagnostics business
segment increased by $198.7 million, or 16%, comparing 2010
to 2009. Excluding the impact of currency translation and the
decrease in flu-related sales during the comparable periods,
organic growth for our professional diagnostics net product
sales and services revenue was 6%.
36
Health
Management
Our health management net product sales and services revenue
increased $77.1 million, or 15%, to $598.8 million in
2010 from $521.7 million in 2009. Of the increase, net
product sales and services revenue increased primarily as a
result of our acquisitions of: (i) Free & Clear,
Inc., or Free & Clear, in September 2009, which
contributed $55.5 million of net products sales and
services revenue in excess of those earned in the prior
years comparative period, (ii) Tapestry Medical,
Inc., or Tapestry, in November 2009, which contributed
$45.3 million of net product sales and services revenue
(which includes revenue transferred to Tapestry from our QAS
subsidiary) in excess of those earned in the prior years
comparative period, (iii) CVS Caremarks common
disease management program, or Accordant, in September 2009,
which contributed $15.3 million of net product sales and
services revenue in excess of those earned in the prior
years comparative period and (iv) various less
significant acquisitions, which contributed an aggregate of
$5.9 million of such increase. Net product sales and
services revenue in our health management segment, excluding the
impact of these acquisitions, was adversely impacted by the
increasingly competitive environment, particularly in the less
differentiated services, such as disease management and case
management.
Consumer
Diagnostics
Our consumer diagnostics net product sales and services revenue
decreased by $38.6 million, or 29%, to $95.1 million
in 2010 from $133.6 million in 2009. The decrease during
2010, as compared to 2009, was primarily driven by a decrease of
approximately $35.0 million of manufacturing revenue
associated with our manufacturing agreement with our 50/50 joint
venture with P&G, or SPD, whereby we manufacture and sell
consumer diagnostic products to SPD. Our manufacturing revenue
is generated on a cost-plus basis. Manufacturing revenue has
been adversely impacted as a result of transitioning the
manufacturing of our consumer diagnostic-related products to
some of our lower cost facilities and to certain third party
facilities. Net product sales by SPD were $193.8 million
and $184.6 million during 2010 and 2009, respectively. The
transition of the manufacturing of our consumer
diagnostic-related products to the lower cost facilities has
been substantially completed at the end of 2010.
Net Product Sales and Services Revenue by Geographic
Location. Net product sales and services revenue
by geographic location for 2010 and 2009 are as follows (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
% Increase
|
|
|
United States
|
|
$
|
1,363,145
|
|
|
$
|
1,302,376
|
|
|
|
5
|
%
|
Europe
|
|
|
358,865
|
|
|
|
315,130
|
|
|
|
14
|
%
|
Elsewhere
|
|
|
412,578
|
|
|
|
276,060
|
|
|
|
49
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net product sales and services revenue
|
|
$
|
2,134,588
|
|
|
$
|
1,893,566
|
|
|
|
13
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net product sales and services revenue of $1.4 billion and
$1.3 billion generated in the United States were
approximately 64% and 69%, respectively, of total net product
sales and services revenue for the year ended December 31,
2010 and 2009, respectively. The growth in net product sales and
services revenue in all geographic regions resulted primarily
from the various acquisitions and organic growth, both discussed
above. The increase in net product sales and services revenue
outside the U.S. and Europe was primarily a result of our
acquisition of Standard Diagnostics located in South Korea.
License and Royalty Revenue. License and
royalty revenue represents license and royalty fees from
intellectual property license agreements with third parties.
License and royalty revenue decreased by $8.3 million, or
29%, to $20.8 million in 2010, from $29.1 million in
2009. The decrease in license and royalty revenue during 2010,
as compared to 2009, was largely attributed to a decrease in
royalty payments received from Quidel under existing licensing
agreements and a $5.0 million royalty payment received
during 2009 in connection with a license arrangement in the
field of animal health diagnostics. The decrease in royalties
received from Quidel during 2010, compared to 2009, is a result
of a decrease in flu-related product sales.
37
Gross Profit and Margin. Gross profit
increased by $80.4 million, or 8%, to $1.13 billion in
2010, from $1.05 billion in 2009. The increase in gross
profit during 2010, compared to 2009, was largely attributed to
the increase in net product sales and services revenue resulting
from acquisitions and organic growth from our professional
diagnostics business segment. Cost of net revenue during 2010
included amortization of $6.6 million relating to the
write-up of
inventory to fair value in connection with certain acquisitions.
Cost of net revenue during 2009 included amortization of
$2.0 million relating to the
write-up of
inventory to fair value in connection with the acquisition of
Concateno during the third quarter of 2009. Reducing gross
profit for 2010 and 2009 was $3.9 million and
$9.5 million in restructuring charges, respectively.
Cost of net revenue included amortization expense of
$63.0 million and $42.1 million for 2010 and 2009,
respectively.
Overall gross margin was 53% in 2010, compared to 55% in 2009.
Gross Profit from Net Product Sales and Services Revenue by
Business Segment. Gross profit from net product
sales and services revenue increased by $86.9 million to
$1.1 billion in 2010, from $1.0 billion in 2009. Gross
profit from net product sales and services revenue by business
segment for 2010 and 2009 is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% Increase
|
|
|
|
2010
|
|
|
2009
|
|
|
(Decrease)
|
|
|
Professional diagnostics
|
|
$
|
801,745
|
|
|
$
|
733,640
|
|
|
|
9
|
%
|
Health management
|
|
|
297,085
|
|
|
|
280,547
|
|
|
|
6
|
%
|
Consumer diagnostics
|
|
|
22,147
|
|
|
|
19,850
|
|
|
|
12
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit from net product sales and services revenue
|
|
$
|
1,120,977
|
|
|
$
|
1,034,037
|
|
|
|
8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Professional
Diagnostics
Gross profit from our professional diagnostics net product sales
and services revenue increased by $68.1 million, or 9%, to
$801.7 million during 2010, compared to $733.6 million
during 2009, principally as a result of gross profit earned on
revenue from acquired businesses, as discussed above. Reducing
gross profit for 2010 was amortization of $6.6 million
relating to the
write-up of
inventory to fair value in connection with various acquisitions.
Reducing gross profit for 2009 was amortization of
$2.0 million relating to the
write-up of
inventory to fair value in connection with the acquisition of
Concateno during the third quarter of 2009. Start up costs
incurred during 2010 associated with our production of CD4
disposable tests also contributed to reduced gross profit during
2010, as compared to 2009. Reducing gross profit for 2010 and
2009 was $3.3 million and $8.6 million in
restructuring charges, respectively.
As a percentage of our professional diagnostics net product
sales and services revenue, gross profit from our professional
diagnostics business was 56% in 2010, compared to 59% in 2009.
The inventory
write-ups
noted above, coupled with higher revenue from our recently
acquired toxicology businesses, which contribute lower than
segment average gross margins, and a decrease in North American
flu-related net product sales, which contribute higher than
segment average gross margin, contributed to the decrease in
gross margin percentage for 2010, compared to 2009.
Health
Management
Gross profit from our health management net product sales and
services revenue increased by $16.5 million, or 6%, to
$297.1 million during 2010, compared to $280.5 million
during 2009. The increase in gross profit was largely attributed
to gross profit earned on revenues from recent acquisitions, as
discussed above. Reducing gross profit for both 2010 and 2009
was $0.6 million in restructuring charges.
As a percentage of our health management net product sales and
services revenue, gross profit from our health management
business was 50% in 2010, compared to 54% in 2009. The lower
margin percentage earned during 2010, as compared to 2009, is a
result of the increasingly competitive environment for the
38
health management segment, particularly in the less
differentiated services, such as disease management and case
management. In addition, reserves totaling approximately
$3.0 million were established during the fourth quarter of
2010 for the potential return of unused test strips distributed
in connection with our home monitoring portion of the health
management business.
Consumer
Diagnostics
Gross profit from our consumer diagnostics net product sales and
services revenue increased $2.3 million, or 12%, to
$22.1 million during 2010, compared to $19.8 million
during 2009. The increase in gross profit is primarily a result
of changes in net product sales and services revenue mix during
the year ended December 31, 2010, compared to the year
ended December 31, 2009.
As a percentage of our consumer diagnostics net product sales
and services revenue, gross profit from our consumer diagnostics
business was 23% for 2010, compared to 15% in 2009.
Research and Development Expense. Research and
development expense increased by $20.4 million, or 18%, to
$133.3 million in 2010, from $112.8 million in 2009.
Included in research and development expense in 2010 is
$7.1 million of stock-based compensation expense,
representing an increase of approximately $1.9 million from
2009. Restructuring charges associated with our various
restructuring plans to integrate our newly-acquired businesses
totaling $0.5 million were included in research and
development expense during 2010, representing a decrease of
approximately $0.6 million from 2009. Amortization expense
of $4.8 million and $3.7 million was included in
research and development expense for 2010 and 2009, respectively.
Research and development expense as a percentage of net revenue
was 6% for both 2010 and 2009.
Sales and Marketing Expense. Sales and
marketing expense increased by $57.5 million, or 13%, to
$499.1 million in 2010, from $441.6 million in 2009.
Amortization expense of $212.3 million and
$186.9 million was included in sales and marketing expense
for 2010 and 2009, respectively. The remaining increase in sales
and marketing expense primarily relates to additional spending
related to newly-acquired businesses. Restructuring charges
associated with our various restructuring plans to integrate our
newly-acquired businesses totaling $1.5 million were
included in sales and marketing expense during 2010,
representing a decrease of approximately $0.4 million from
2009.
Sales and marketing expense as a percentage of net revenue was
23% for both 2010 and 2009.
General and Administrative Expense. General
and administrative expense increased by $89.9 million, or
25%, to $446.9 million in 2010, from $357.0 million in
2009. The increase in general and administrative expense relates
primarily to $60.1 million of compensation expense recorded
in connection with purchasing the remaining shares of a minority
shareholder of Standard Diagnostics during the fourth quarter of
2010. Partially offsetting the increase was a decrease in legal
spending of approximately $7.1 million for 2010, as
compared to 2009. Acquisition-related costs of $8.2 million
and $15.9 million were included in general and
administrative expense for 2010 and 2009, respectively.
Amortization expense of $18.4 million and
$22.9 million was included in general and administrative
expense for 2010 and 2009, respectively.
General and administrative expense as a percentage of net
revenue was 21% and 19% for 2010 and 2009, respectively.
Impairment of Goodwill. We conducted our
annual goodwill impairment analysis during the fourth quarter of
2010. When conducting Step 1 of the impairment analysis, as
prescribed by ASC 350, Intangibles Goodwill
and Other, or ASC 350, the analysis indicated that the
carrying value of the net assets of our health management
reporting unit exceeded the estimated fair value of the
reporting unit. As a result, we were required to complete Step 2
of the impairment analysis, as prescribed by ASC 350, to
determine the amount of the goodwill impairment charge. The Step
2 portion of the analysis indicated that we needed to record a
goodwill impairment charge of approximately $1.0 billion,
which was recorded during the fourth quarter of 2010. Any
further reduction or impairment of the value of goodwill or
other intangible assets will result in additional charges
against earnings, which could materially reduce our reported
results of operations
39
in future periods. Further details of the goodwill impairment
analysis are disclosed in Note 2 of our consolidated
financial statements included elsewhere in this Annual Report on
Form 10-K.
Gain on Disposition. In 2009, we disposed of
our majority ownership interest in our Diamics Inc., or Diamics,
operation, which was part of our professional diagnostics
reporting unit and business segment. During the period from the
date of acquisition of Diamics in July 2007 until its
disposition in September 2009, under the principles of
consolidation, we consolidated 100% of the operating results of
the Diamics operations in our consolidated statement of
operations. As a result of the disposition, we recorded a gain
of $3.4 million during the year ended December 31,
2009.
Interest Expense. Interest expense includes
interest charges, and the amortization of deferred financing
costs and original issue discounts associated with certain debt
issuances. Interest expense increased by $32.6 million, or
31%, to $139.4 million for the year ended December 31,
2010, from $106.8 million for the year ended
December 31, 2009. The increase was principally due to
additional interest expense incurred on our 9% subordinated
notes, 7.875% senior notes and 8.625% subordinated
notes, totaling $69.5 million for the year ended
December 31, 2010, compared to $32.3 million for the
year ended December 31, 2009.
Other Income (Expense), Net. Other income
(expense), net includes interest income, realized and unrealized
foreign exchange gains and losses and other income and expense.
The components and the respective amounts of other income
(expense), net are summarized as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
Change
|
|
|
Interest income
|
|
$
|
1,960
|
|
|
$
|
2,342
|
|
|
$
|
(382
|
)
|
Foreign exchange gains (losses), net
|
|
|
9,752
|
|
|
|
1,267
|
|
|
|
8,485
|
|
Other
|
|
|
11,026
|
|
|
|
(2,613
|
)
|
|
|
13,639
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense), net
|
|
$
|
22,738
|
|
|
$
|
996
|
|
|
$
|
21,742
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense), net for 2010 includes a
$4.5 million gain on a sale of marketable securities, a net
recovery of $3.3 million related to certain restructuring
activities, a $3.1 million net gain associated with legal
settlements related to previously disclosed intellectual
property litigation relating to our health management businesses
and approximately $0.5 million of income associated with a
settlement of prior years royalties during 2010, which
were partially offset by a charge related to an accounts
receivable reserve for a prior years sale.
Other income (expense), net for 2009 includes $1.9 million
of expense associated with fully-vested compensation-related
costs for certain executives incurred in connection with the
acquisition of Concateno during the third quarter of 2009, a
$2.9 million realized foreign currency gain associated with
restricted cash established in connection with the acquisition
of Concateno, and $0.6 million of stamp duty tax incurred
during 2009 in connection with an incremental investment made in
one of our foreign subsidiaries.
Provision (Benefit) for Income
Taxes. Provision (benefit) for income taxes
decreased by $45.6 million, to a $29.9 million benefit
in 2010, from a $15.6 million provision in 2009. The
effective tax rate in 2010 was 3%, compared to 39% in 2009. The
decrease in the provision for income taxes from 2009 to 2010 is
primarily related to the tax benefit associated with the
goodwill impairment charge. The decrease in the effective tax
rate between the two years primarily results from the inability
to record a tax benefit on the majority of the goodwill
impairment charge recorded during 2010.
The primary components of the 2010 provision for income taxes
relate to U.S. federal and state income taxes, taxes on
foreign income and the recognition of a tax benefit associated
with the goodwill impairment charge recorded during 2010. The
primary components of the 2009 benefit for income taxes relate
to U.S. federal and state income taxes and taxes on foreign
income.
Equity Earnings in Unconsolidated Entities, Net of
Tax. Equity earnings in unconsolidated entities
are reported net of tax and include our share of earnings in
entities that we account for under the equity method of
accounting. Equity earnings in unconsolidated entities, net of
tax, for the year ended December 31, 2010 reflect the
following: (i) earnings from our 50% interest in SPD in the
amount of $8.5 million,
40
(ii) earnings from our 40% interest in Vedalab S.A., or
Vedalab, in the amount of $0.2 million and
(iii) earnings from our 49% interest in TechLab, Inc., or
TechLab, in the amount of $1.9 million. Equity earnings in
unconsolidated entities, net of tax, for the year ended
December 31, 2009 reflect the following: (i) earnings
from our 50% interest in SPD in the amount of $5.7 million,
(ii) earnings from our 40% interest in Vedalab in the
amount of approximately $0.5 million and
(iii) earnings from our 49% interest in TechLab, in the
amount of $1.7 million.
Income (Loss) from Discontinued Operations, Net of
Tax. The results of the vitamins and nutritional
supplements business are included in income (loss) from
discontinued operations, net of tax, for all periods presented.
For the year ended December 31, 2010, the discontinued
operations generated net income of approximately
$11.4 million, as compared to net income of
$1.9 million for the year ended December 31, 2009. The
net income of $11.4 million for the year ended
December 31, 2010 includes a gain of $18.7 million
($11.6 million, net of tax) on the sale of the vitamins and
nutritional supplements business.
Net Income (Loss). For the year ended
December 31, 2010, we generated a net loss of
$1.0 billion, or $12.33 per common share after preferred
stock dividends, based on a net loss available to common
stockholders of $1.0 billion. For the year ended
December 31, 2009, we generated net income of
$33.7 million, or $0.13 per diluted common share after
preferred stock dividends, based on net income available to
common stockholders of $10.7 million. The net income (loss)
in 2010 and 2009 resulted from the various factors as discussed
above. See Note 12 of our consolidated financial statements
included elsewhere in this Annual Report on
Form 10-K
for the calculation of net income (loss) per common share.
Year
Ended December 31, 2009 Compared to Year Ended
December 31, 2008
Net Product Sales and Services Revenue. Net
product sales and services revenue increased by
$336.8 million, or 22%, to $1.9 billion in 2009 from
$1.6 billion in 2008. Excluding the unfavorable impact of
currency translation, net product sales and services revenue in
2009 grew by approximately $363.8 million, or 23%, over
2008. Of the currency adjusted increase, revenue increased
primarily as a result of our professional diagnostic-related
acquisitions which contributed $233.2 million of the
increase. Additionally, as a result of the H1N1 flu outbreak,
revenues from our North American flu sales increased by
approximately $66.5 million, or 192%, in 2009, from
$34.6 million in 2008.
Net Product Sales and Services Revenue by Business
Segment. Net product sales and services revenue
by business segment for 2009 and 2008 are as follows (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% Increase
|
|
|
|
2009
|
|
|
2008
|
|
|
(Decrease)
|
|
|
Professional diagnostics
|
|
$
|
1,238,251
|
|
|
$
|
1,029,528
|
|
|
|
20
|
%
|
Health management
|
|
|
521,695
|
|
|
|
392,399
|
|
|
|
33
|
%
|
Consumer diagnostics
|
|
|
133,620
|
|
|
|
134,800
|
|
|
|
(1
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net product sales and services revenue
|
|
$
|
1,893,566
|
|
|
$
|
1,556,727
|
|
|
|
22
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Professional
Diagnostics
The increase in net product sales and services revenue from our
professional diagnostics business segment was
$208.7 million, or 20%, resulting in $1.2 billion of
net product and services revenue in 2009. As a result of the
H1N1 flu outbreak, revenues from our North American flu sales
increased approximately $66.5 million comparing 2009 to
2008. Additionally, net product sales and services revenue
increased as a result of our acquisitions of: (i) the ACON
Second Territory Business, in April 2009, which contributed
$38.3 million of net product sales and services revenue,
(ii) Concateno, in August 2009, which contributed
$33.3 million of net product sales and services revenue,
(iii) Prodimol Biotecnologia S.A., or Prodimol, in October
2008, which contributed additional net product sales and
services revenue of $6.4 million in excess of those earned
in the prior years comparative period, (iv) Vision
Biotech Pty Ltd, or Vision, in September 2008, which contributed
additional net product sales and services revenue of
$6.3 million in excess of those earned in the prior
years
41
comparative period and (v) various less significant
acquisitions, which contributed an aggregate of
$11.2 million of such increase.
Health
Management
Our health management net product sales and services revenue
increased $129.3 million, or 33%, to $521.7 million in
2009 from $392.4 million in 2008. Of the increase, net
product sales and services revenue increased primarily as a
result of our acquisitions of: (i) Matria Healthcare Inc.,
or Matria, in May 2008, which contributed additional net product
sales and services revenue of $103.0 million in excess of
those earned in the prior years comparative period,
(ii) Free & Clear, in September 2009, which
contributed $14.3 million of net product sales and services
revenue, (iii) Accordant, in September 2009, which
contributed $11.5 million of net product sales and services
revenue and (iv) various less significant acquisitions,
which contributed an aggregate of $8.9 million of such
increase.
Consumer
Diagnostics
Our consumer diagnostics net product sales and services revenue
decreased by $1.2 million, or 1%, to $133.6 million in
2009 from $134.8 million in 2008. The decrease during the
year ended December 31, 2009, as compared to the year ended
December 31, 2008, was primarily driven by a decrease in
net product sales and services revenue associated with our First
Check at-home drug testing business.
Net Product Sales and Services Revenue by Geographic
Location. Net product sales and services revenue
by geographic location for 2009 and 2008 are as follows (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
% Increase
|
|
|
United States
|
|
$
|
1,302,376
|
|
|
$
|
1,098,894
|
|
|
|
19
|
%
|
Europe
|
|
|
315,130
|
|
|
|
283,552
|
|
|
|
11
|
%
|
Elsewhere
|
|
|
276,060
|
|
|
|
174,281
|
|
|
|
58
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net product sales and services revenue
|
|
$
|
1,893,566
|
|
|
$
|
1,556,727
|
|
|
|
22
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net product sales and services revenue of $1.3 billion and
$1.1 billion generated in the United States were
approximately 69% and 71%, respectively, of total net product
sales and services revenue for the year ended December 31,
2009 and 2008, respectively. The growth in net product sales and
services revenue in all geographic regions resulted primarily
from the various acquisitions and organic growth, both discussed
above.
License and Royalty Revenue. License and
royalty revenue represents license and royalty fees from
intellectual property license agreements with third parties.
License and royalty revenue increased by $3.2 million, or
13%, to $29.1 million in 2009, from $25.8 million in
2008. The increase in license and royalty revenue during 2009,
as compared to 2008, was primarily attributed to an increase in
royalty payments received from Quidel under existing licensing
agreements and a $5.0 million royalty payment received in
connection with a license arrangement in the field of animal
health diagnostics.
Gross Profit and Margin. Gross profit
increased by $200.7 million, or 24%, to $1.1 billion
in 2009, from $853.5 million in 2008. The increase in gross
profit for 2009, as compared to 2008, was largely attributed to
the increase in net product sales and services revenue resulting
from acquisitions, an increase in flu-related sales associated
with the H1N1 flu outbreak, and organic growth from our
professional diagnostics business segment. Included in gross
profit in 2009 were restructuring charges totaling
$9.5 million associated with the closure of various
manufacturing and operating facilities and $2.0 million of
stock-based compensation expense. Included in gross profit in
2008 were restructuring charges totaling $17.9 million
associated with the closure of various manufacturing and
operating facilities and $1.5 million of stock-based
compensation expense. Cost of net revenue included amortization
expense of $42.1 million and $43.4 million in 2009 and
2008, respectively.
Overall gross margin was 55% in 2009, compared to 54% in 2008.
42
Gross Profit from Net Product Sales and Services Revenue by
Business Segment. Gross profit from net product
sales and services revenue increased by $197.7 million to
$1.0 billion in 2009, from $836.3 million in 2008.
Gross profit from net product sales and services revenue by
business segment for 2009 and 2008 is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% Increase
|
|
|
|
2009
|
|
|
2008
|
|
|
(Decrease)
|
|
|
Professional diagnostics
|
|
$
|
733,640
|
|
|
$
|
596,186
|
|
|
|
23
|
%
|
Health management
|
|
|
280,547
|
|
|
|
214,356
|
|
|
|
31
|
%
|
Consumer diagnostics
|
|
|
19,850
|
|
|
|
25,770
|
|
|
|
(23
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit from net product sales and services revenue
|
|
$
|
1,034,037
|
|
|
$
|
836,312
|
|
|
|
24
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Professional
Diagnostics
Gross profit from our professional diagnostics net product sales
and services revenue increased by $137.5 million, or 23%,
to $733.6 million during 2009, compared to
$596.2 million during 2008, principally as a result of
gross profit earned on revenue from acquired businesses, as
discussed above. Reducing gross profit for 2009 and 2008 was
$8.6 million and $17.9 million in restructuring
charges, respectively.
As a percentage of our professional diagnostics net product
sales and services revenue, gross profit from our professional
diagnostics business was 59% in 2009, compared to 58% in 2008.
Health
Management
Gross profit from our health management net product sales and
services revenue increased by $66.2 million, or 31%, to
$280.5 million during 2009, compared to $214.4 million
during 2008. The increase in gross profit was largely attributed
to gross margins earned on revenues from recent acquisitions, as
discussed above. Reducing gross profit for 2009 was
$0.6 million in restructuring charges.
As a percentage of our health management net product sales and
services revenue, gross profit from our health management
business was 54% in 2009, compared to 55% in 2008.
Consumer
Diagnostics
Gross profit from our consumer diagnostics net product sales and
services revenue decreased $5.9 million, or 23%, to
$19.8 million during 2009, compared to $25.8 million
during 2008. The decrease in gross profit is primarily a result
of net product sales and services revenue mix during the year
ended December 31, 2009, compared to the year ended
December 31, 2008.
As a percentage of our consumer diagnostics net product sales
and services revenue, gross profit from our consumer diagnostics
business was 15% for 2009, compared to 19% in 2008.
Research and Development Expense. Research and
development expense increased by $1.0 million, or 1%, to
$112.8 million in 2009, from $111.8 million in 2008.
Included in research and development expense in 2009 is
$5.2 million of stock-based compensation expense,
representing an increase of approximately $0.6 million from
2008. Restructuring charges associated with our various
restructuring plans to integrate our newly-acquired businesses
totaling $1.1 million were included in research and
development expense during 2009, representing a decrease of
approximately $6.2 million from 2008. Amortization expense
of $3.7 million was included in research and development
expense for both 2009 and 2008.
Research and development expense as a percentage of net revenue
decreased to 6% for 2009, from 7% for 2008.
Sales and Marketing Expense. Sales and
marketing expense increased by $59.7 million, or 16%, to
$441.6 million in 2009, from $381.9 million in 2008.
Amortization expense of $186.9 million and
$148.6 million was included in sales and marketing expense
for 2009 and 2008, respectively. The remaining
43
increase in sales and marketing expense primarily relates to
additional spending related to newly-acquired businesses. Also
included in sales and marketing expense is $4.2 million of
stock-based compensation expense, representing a decrease of
approximately $0.1 million from 2008. Restructuring charges
associated with our various restructuring plans to integrate our
newly-acquired businesses totaling $1.9 million were
included in sales and marketing expense during 2009,
representing a decrease of approximately $2.4 million from
2008.
Sales and marketing expense as a percentage of net revenue
decreased to 23% for 2009, from 24% for 2008.
General and Administrative Expense. General
and administrative expense increased by $62.0 million, or
21%, to $357.0 million in 2009, from $295.1 million in
2008. The increase in general and administrative expense relates
primarily to additional spending related to newly-acquired
businesses. Contributing to the increase in general and
administrative expense for 2009, as compared to 2008, was
$15.9 million for acquisition-related costs recorded in
connection with our adoption of a new accounting standard for
business combinations on January 1, 2009. Also included in
general and administrative expense is $16.7 million of
stock-based compensation expense, representing an increase of
approximately $0.7 million from 2008. Amortization expense
of $22.9 million and $18.2 million was included in
general and administrative expense for 2009 and 2008,
respectively.
General and administrative expense as a percentage of net
revenue was 19% for both 2009 and 2008.
Interest Expense. Interest expense includes
interest charges and the amortization of deferred financing
costs. Interest expense in 2009 also includes the amortization
of original issue discounts associated with certain debt
issuances. Interest expense increased by $5.7 million, or
6%, to $106.8 million for the year ended December 31,
2009, from $101.1 million for the year ended
December 31, 2008. Such increase was principally due to
additional interest expense incurred on our 9% subordinated
notes and 7.875% senior notes, totaling $32.3 million
for the year ended December 31, 2009. Substantially
offsetting this increase was lower interest expense incurred due
to lower interest rates charged during the year ended
December 31, 2009, compared to the year ended
December 31, 2008.
Other Income (Expense), Net. Other income
(expense), net, includes interest income, realized and
unrealized foreign exchange gains and losses, and other income
and expense. The components and the respective amounts of other
income (expense), net, are summarized as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Change
|
|
|
Interest income
|
|
$
|
2,342
|
|
|
$
|
6,566
|
|
|
$
|
(4,224
|
)
|
Foreign exchange gains (losses), net
|
|
|
1,267
|
|
|
|
(457
|
)
|
|
|
1,724
|
|
Other
|
|
|
(2,613
|
)
|
|
|
(7,916
|
)
|
|
|
5,303
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense), net
|
|
$
|
996
|
|
|
$
|
(1,807
|
)
|
|
$
|
2,803
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense), net for 2009 increased by
$2.8 million as compared to 2008, and included a decrease
in interest income of $4.2 million which resulted from
lower interest earned on available cash balances,
$1.9 million of expense associated with fully-vested
compensation-related costs for certain executives incurred in
connection with the acquisition of Concateno during the third
quarter of 2009, a $2.9 million realized foreign currency
gain associated with restricted cash established in connection
with the acquisition of Concateno, and $0.6 million of
stamp duty tax incurred during 2009 in connection with an
incremental investment made in one of our foreign subsidiaries.
Other income (expense), net, for 2008 includes a
$12.5 million charge associated with an arbitration
decision, a $1.7 million realized foreign currency loss
associated with restricted cash established in connection with
the acquisition of BBI partially offset by $5.5 million of
income associated with settlements of prior years
royalties during 2008.
Provision (Benefit) for Income
Taxes. Provision (benefit) for income taxes
increased by $32.3 million, to a $15.6 million
provision in 2009, from a $16.6 million benefit in 2008.
The effective tax rate in 2009 was 39%, compared to 43% in 2008.
The increase in the provision for income taxes from 2008 to 2009
is primarily related to increased income in foreign
jurisdictions. The decrease in the effective tax rate between
44
the two years primarily results from the mix of tax
jurisdictions, along with the impact of increased
U.S. research and development credits.
The primary components of the 2009 provision for income taxes
relates to U.S. federal and state income taxes and taxes on
foreign income. The primary components of the 2008 benefit for
income taxes relates to U.S. federal and state income
taxes, taxes on foreign income and the recognition of benefit on
German and United Kingdom losses.
Discontinued Operations, Net of Tax. The
results of the vitamins and nutritional supplements business are
included in income (loss) from discontinued operations, net of
tax, for all periods presented. For the year ended
December 31, 2009, the discontinued operations generated
net income of $1.9 million, as compared to a net loss of
$1.0 million for the year ended December 31, 2008.
Net Income (Loss). For the year ended
December 31, 2009, we generated net income of
$33.7 million, or $0.13 per basic and diluted common share
after preferred stock dividends, based on net income available
to common stockholders of $10.7 million. For the year ended
December 31, 2008, we generated a net loss of
$21.8 million, or $0.46 per basic and diluted common share
after preferred stock dividends, based on net loss available to
common stockholders of $35.8 million. The net income in
2009 and the net loss 2008 resulted from the various factors as
discussed above. See Note 12 of our consolidated financial
statements included elsewhere in this Annual Report on
Form 10-K
for the calculation of net income (loss) per common share.
Liquidity
and Capital Resources
Based upon our current working capital position, current
operating plans and expected business conditions, we currently
expect to fund our short and long-term working capital needs
primarily using existing cash and our operating cash flow, and
we expect our working capital position to improve as we improve
our future operating margins and grow our business through new
product and service offerings and by continuing to leverage our
strong intellectual property position. As of December 31,
2010, we have $401.3 million of cash on our accompanying
consolidated balance sheet.
In addition to our cash resources, we may also utilize the
revolving credit line, under which we have $150.0 million
available for borrowing at December 31, 2010, or other
sources of financing to fund a portion of our capital needs and
other future commitments, including our contractual contingent
consideration obligations and future acquisitions. Our ability
to access the capital markets may be impacted by the amount of
our outstanding debt and equity and the extent to which our
assets are encumbered by our outstanding secured debt. The terms
and conditions of our outstanding debt instruments also contain
covenants which expressly restrict our ability to incur
additional indebtedness and conduct other financings. As of
December 31, 2010, we had $2.4 billion in outstanding
indebtedness comprised of $400.0 million of
8.625% subordinated notes due 2018, $244.8 million of
7.875% senior notes due 2016, $389.7 million of
9% senior subordinated notes due 2016, $941.3 million
under our First Lien Credit Agreement, $250.0 million under
our Second Lien Credit Agreement and $150.0 million of
3% senior subordinated convertible notes. The terms and
conditions of our outstanding debt are disclosed in Note 6
of our consolidated financial statements included elsewhere in
this Annual Report on
Form 10-K.
If the capital and credit markets experience volatility or the
availability of funds is limited, we may incur increased costs
associated with issuing commercial paper
and/or other
debt instruments. In addition, it is possible that our ability
to access the capital and credit markets could be limited by
these or other factors at a time when we would like, or need, to
do so, which could have an impact on our ability to refinance
maturing debt
and/or react
to changing economic and business conditions.
Our funding plans for our working capital needs and other
commitments may be adversely impacted by unexpected costs
associated with integrating the operations of newly-acquired
companies, executing our cost savings strategies and prosecuting
and defending our existing lawsuits
and/or
unforeseen lawsuits against us. We also cannot be certain that
our underlying assumed levels of revenues and expenses will be
realized. In addition, we intend to continue to make significant
investments in our research and development efforts related to
the substantial intellectual property portfolio we own. We may
also choose to further expand our research
45
and development efforts and may pursue the acquisition of new
products and technologies through licensing arrangements,
business acquisitions, or otherwise. We may also choose to make
significant investment to pursue legal remedies against
potential infringers of our intellectual property. If we decide
to engage in such activities, or if our operating results fail
to meet our expectations, we could be required to seek
additional funding through public or private financings or other
arrangements. In such event, adequate funds may not be available
when needed or may be available only on terms which could have a
negative impact on our business and results of operations. In
addition, if we raise additional funds by issuing equity or
convertible securities, dilution to then existing stockholders
may result.
After December 31, 2010, we repurchased in negotiated
transactions 118,000 shares of our Series B preferred
stock which were convertible into approximately
681,000 shares of our common stock, at a cost of
$31.4 million, which we paid in cash. Following these
repurchases, we have approximately $18.6 million remaining
from the initial $50.0 million repurchase program
authorized by our Board of Directors in December 2010.
In connection with the formation of SPD in May 2007, we entered
into an option agreement with P&G, pursuant to which
P&G has the right, for a period of 60 days commencing
on May 17, 2011, to require us to acquire all of
P&Gs interest in SPD at fair market value, and
P&G has the right, upon certain material breaches by us of
our obligations to SPD, to acquire all of our interest in SPD at
fair market value.
Summary
of Changes in Cash Position
As of December 31, 2010, we had cash and cash equivalents
of $401.3 million, a $91.5 million decrease from
December 31, 2009. Our primary sources of cash during the
year ended December 31, 2010 included $275.4 million
generated by our operating activities, $400.0 million of
proceeds from the issuance of our 8.625% subordinated
notes, $62.6 million of net proceeds received from the sale
of our vitamins and nutritional supplements business, an
$8.8 million return of capital from SPD, $3.5 million
in cash dividends received from certain equity method
investments, $3.2 million of proceeds from the sale of
certain marketable securities, net of cash used to purchase
marketable securities and $19.0 million of proceeds from
common stock issuances under employee stock option and stock
purchase plans. Our primary uses of cash during the year ended
December 31, 2010 related to $523.5 million net cash
paid for acquisitions and transactional costs,
$146.8 million related to net repayments under our
revolving line of credit, $95.4 million of capital
expenditures, net of proceeds from the sale of equipment,
$52.9 million paid to acquire the remaining non-controlling
interest in Standard Diagnostics, $13.0 million paid for
financing costs related to certain debt issuances,
$9.8 million related to repayments of long-term debt and a
$12.9 million increase in other assets, primarily relating
to the purchase of licenses and other investments. Fluctuations
in foreign currencies negatively impacted our cash balance by
$9.3 million during the year ended December 31, 2010.
Operating
Cash Flows
Net cash provided by operating activities during the year ended
December 31, 2010 was $275.4 million, which resulted
from net loss from continuing operations of $1.0 billion,
$1.3 billion of non-cash items and $38.2 million of
cash used to meet net working capital requirements during the
period. The $1.3 billion of non-cash items included a
$1.0 billion goodwill impairment charge related to our
health management reporting unit and business segment,
$372.8 million related to depreciation and amortization,
$29.9 million related to non-cash stock-based compensation
expense and $13.8 million of non-cash interest expense,
including the amortization of deferred financing costs and
original issue discounts, partially offset by a
$74.4 million decrease related to changes in our deferred
tax assets and liabilities resulting from amortization of
intangible assets partially offset by the utilization of tax
loss carryforwards, $10.6 million in equity earnings in
unconsolidated entities and a $4.5 million gain recognized
on the sale of marketable securities.
Investing
Cash Flows
Our investing activities during the year ended December 31,
2010 utilized $553.7 million of cash, including
$523.5 million used for acquisitions and
transaction-related costs, net of cash acquired,
46
$95.4 million of capital expenditures, net of proceeds from
the sale of equipment, a $12.9 million increase in other
assets, offset by $62.6 million of net proceeds received
from the sale of our vitamins and nutritional supplements
business, an $8.8 million return of capital from SPD,
$3.5 million in cash dividends received from certain equity
method investments and $3.2 million of proceeds from the
sale of certain marketable securities, net of cash used to
purchase marketable securities.
Financing
Cash Flows
Net cash provided by financing activities during the year ended
December 31, 2010 was $196.1 million. Financing
activities during the year ended December 31, 2010
primarily included $400.0 million of proceeds from the
issuance of our 8.625% subordinated notes and
$19.0 million cash received from common stock issuances
under employee stock option and stock purchase plans, offset by
$146.8 million related to net repayments under our
revolving line of credit, $52.9 million paid to acquire the
remaining non-controlling interest of Standard Diagnostics,
$13.0 million paid for financing costs related to certain
debt issuances and $9.8 million related to repayments of
long-term debt.
As of December 31, 2010, we had an aggregate of
$3.5 million in outstanding capital lease obligations which
are payable through 2015.
Income
Taxes
As of December 31, 2010, we had approximately
$156.1 million of domestic NOL and capital loss
carryforwards and $60.3 million of foreign NOL and capital
loss carryforwards, respectively, which either expire on various
dates through 2030 or may be carried forward indefinitely. These
losses are available to reduce federal, state and foreign
taxable income, if any, in future years. These losses are also
subject to review and possible adjustments by the applicable
taxing authorities. In addition, the domestic NOL carryforward
amount at December 31, 2010 included approximately
$102.2 million of pre-acquisition losses at Matria, QAS,
ParadigmHealth, Biosite, Cholestech, Redwood, HemoSense,
Ischemia, Inc. and Ostex International, Inc. Effective
January 1, 2009, we adopted a new accounting standard for
business combinations. Prior to adoption of this standard, the
pre-acquisition losses were applied first to reduce to zero any
goodwill and other non-current intangible assets related to the
acquisitions, prior to reducing our income tax expense. Upon
adoption of the new accounting standard, the reduction of a
valuation allowance is generally recorded to reduce our income
tax expense.
Furthermore, all domestic losses are subject to the Internal
Revenue Service Code Section 382 limitation and may be
limited in the event of certain cumulative changes in ownership
interests of significant shareholders over a three-year period
in excess of 50%. Section 382 imposes an annual limitation
on the use of these losses to an amount equal to the value of
the company at the time of the ownership change multiplied by
the long-term tax exempt rate. We have recorded a valuation
allowance against a portion of the deferred tax assets related
to our NOLs and certain of our other deferred tax assets to
reflect uncertainties that might affect the realization of such
deferred tax assets, as these assets can only be realized via
profitable operations.
Off-Balance
Sheet Arrangements
We had no material off-balance sheet arrangements as of
December 31, 2010.
47
Contractual
Obligations
The following table summarizes our principal contractual
obligations as of December 31, 2010 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due by Period
|
|
Contractual Obligations
|
|
Total
|
|
|
2011
|
|
|
2012-2013
|
|
|
2014-2015
|
|
|
Thereafter
|
|
|
Long-term debt obligations(1)
|
|
$
|
2,411,015
|
|
|
$
|
16,891
|
|
|
$
|
22,047
|
|
|
$
|
1,162,329
|
|
|
$
|
1,209,748
|
|
Capital lease obligations(2)
|
|
|
3,530
|
|
|
|
2,126
|
|
|
|
1,300
|
|
|
|
104
|
|
|
|
|
|
Operating lease obligations(3)
|
|
|
185,115
|
|
|
|
33,772
|
|
|
|
57,770
|
|
|
|
41,485
|
|
|
|
52,088
|
|
Pension obligations
|
|
|
3,966
|
|
|
|
661
|
|
|
|
1,322
|
|
|
|
1,322
|
|
|
|
661
|
|
Minimum royalty obligations
|
|
|
40
|
|
|
|
40
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition-related obligations(4)
|
|
|
26,959
|
|
|
|
23,171
|
|
|
|
3,788
|
|
|
|
|
|
|
|
|
|
Purchase obligations capital expenditure
|
|
|
11,787
|
|
|
|
11,763
|
|
|
|
24
|
|
|
|
|
|
|
|
|
|
Purchase obligations other(5)
|
|
|
33,423
|
|
|
|
32,344
|
|
|
|
1,079
|
|
|
|
|
|
|
|
|
|
Interest on debt(6)
|
|
|
611,901
|
|
|
|
96,540
|
|
|
|
190,846
|
|
|
|
190,846
|
|
|
|
133,669
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
3,287,736
|
|
|
$
|
217,308
|
|
|
$
|
278,176
|
|
|
$
|
1,396,086
|
|
|
$
|
1,396,166
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes original issue discounts associated with the
9% senior subordinated notes and 7.875% senior notes.
See description of various financing arrangements in Note 6
of our consolidated financial statements included elsewhere in
this Annual Report on
Form 10-K. |
|
(2) |
|
See Note 8 of our consolidated financial statements
included elsewhere in this Annual Report on
Form 10-K. |
|
(3) |
|
See Note 11(a) of our consolidated financial statements
included elsewhere in this Annual Report on
Form 10-K. |
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(4) |
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Includes $14.5 million of deferred payments associated with
the acquisition of the ACON Second Territory Business,
$10.5 million in deferred payments associated with the
acquisition of Accordant, $1.2 million in deferred payments
associated with the acquisition of Biolinker S.A. and
$0.8 million in deferred payments associated with the
acquisition of RMD Networks, Inc. |
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(5) |
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Other purchase obligations relate to inventory purchases and
other operating expense commitments. |
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(6) |
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Includes our non-variable interest-bearing debt. See the
description of various financing arrangements in Note 6 of
our consolidated financial statements included elsewhere in this
Annual Report on
Form 10-K. |
In addition to the contractual obligations detailed above, we
have contractual contingent consideration arrangements related
to the following acquisitions:
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A privately-owned research and development business has a
maximum earn-out of $57.5 million that, if earned, is
expected to be paid during 2012 through 2014.
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A privately-owned U.K. research and development business has a
maximum earn-out of up to $125.0 million that, if earned,
is expected to be paid during an eight-year period ending on the
eighth anniversary of the acquisition, but could extend
thereafter.
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Accordant has a maximum earn-out of $6.0 million that, if
earned, is expected to be paid in quarterly payments of
$1.5 million beginning in the fourth quarter of 2012.
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AdnaGen has a maximum earn-out of $63.0 million that, if
earned, is expected to be paid during 2012 through 2016.
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Capital Toxicology maximum earn-out of $16.0 million that,
if earned, is expected to be paid in annual amounts during 2012
through 2013.
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48
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Free & Clear achieved its earn-out during 2010
resulting in an accrual of approximately $11.0 million as
of December 31, 2010. Payment of this earn-out is expected
to be made during the second quarter of 2011.
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Immunalysis has a maximum remaining earn-out potential of
$4.7 million that, if earned, is expected to be paid in
annual amounts during 2012 through 2013.
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JSM achieved a portion of its earn-out during 2010 resulting in
an accrual of approximately $0.6 million as of
December 31, 2010. Payment of this portion of the earn-out
is expected to be made during the second quarter of 2011. JSM
has a maximum remaining earn-out potential of $2.4 million
that, if earned, is expected to be paid during
2012-2013.
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Medlab has maximum earn-out of $10.0 million that, if
earned, is expected to be paid in annual amounts during 2012
through 2017.
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Mologic Limited, or Mologic, achieved a portion of its earn-out
during the fourth quarter of 2010 resulting in an accrual of
approximately $3.9 million as of December 31, 2010.
Payment of this portion of the earn-out is expected to be made
during the first quarter of 2011. Mologic has a maximum
remaining earn-out potential of $15.0 million that, if
earned, is expected to be paid in shares of our common stock
during 2012 and 2013.
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Tapestry achieved its 2010 financial targets resulting in an
accrual of approximately $10.7 million as of
December 31, 2010. Cash payment for this portion of the
earn-out is expected to be made during the first quarter of
2011. Tapestry has a maximum remaining earn-out potential of
$14.3 million that, if earned, is expected to be paid
during 2012.
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Our privately-owned health management business acquired in 2008
achieved its final earn-out during 2010 resulting in an accrual
of approximately $31.8 million as of December 31,
2010. Payment of this earn-out is expected to be made during the
first quarter of 2011.
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For further information pertaining to our contractual contingent
arrangements see Note 11 of our accompanying consolidated
financial statements.
Further, we have additional contractual obligations as follows:
In November 2009, we entered into a distribution agreement with
Epocal, Inc., or Epocal, to distribute the
epoc®
Blood Analysis System for blood gas and electrolyte testing for
$20.0 million, which is recorded on our accompanying
consolidated balance sheet in other intangible assets, net. We
also entered into a definitive agreement to acquire all of the
issued and outstanding equity securities of Epocal for a total
potential purchase price of up to $255.0 million, including
a base purchase price of up to $172.5 million if Epocal
achieves certain gross margin and other financial milestones on
or prior to October 31, 2014, plus additional payments of
up to $82.5 million if Epocal achieves certain other
milestones relating to its gross margin and product development
efforts on or prior to this date. We also agreed that, if the
acquisition is consummated, we will provide $12.5 million
in management incentive arrangements, 25% of which will vest
over three years and 75% of which will be payable only upon the
achievement of certain milestones. The acquisition will also be
subject to other closing conditions, including the receipt of
any required antitrust or other approvals.
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Option agreement with P&G
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In connection with the formation of SPD in May 2007, we entered
into an option agreement with P&G, pursuant to which
P&G has the right, for a period of 60 days commencing
on May 17, 2011, to require us to acquire all of
P&Gs interest in SPD at fair market value, and
P&G has the right, upon certain material breaches by us of
our obligations to SPD, to acquire all of our interest in SPD at
fair market value. No gain on the proceeds that we received from
P&G through the formation of SPD will be recognized in our
financial statements until P&Gs option to require us
to purchase its interest in SPD expires. If P&G chooses to
exercise its option, the deferred gain carried on our books
would be reversed in connection with the repurchase transaction.
As of December 31, 2010, the deferred gain of
$288.4 million is presented as a current liability on
49
our accompanying consolidated balance sheet. As of
December 31, 2009, the deferred gain of $288.8 million
is presented as a long-term liability.
Critical
Accounting Policies
The consolidated financial statements included elsewhere in this
Annual Report on
Form 10-K
are prepared in accordance with accounting principles generally
accepted in the United States of America, or GAAP. The
accounting policies discussed below are considered by our
management and our audit committee to be critical to an
understanding of our financial statements because their
application depends on managements judgment, with
financial reporting results relying on estimates and assumptions
about the effect of matters that are inherently uncertain.
Specific risks for these critical accounting policies are
described in the following paragraphs. For all of these
policies, management cautions that future events rarely develop
exactly as forecast and the best estimates routinely require
adjustment. In addition, the notes to our audited consolidated
financial statements for the year ended December 31, 2010,
included elsewhere in this Annual Report on
Form 10-K,
include a comprehensive summary of the significant accounting
policies and methods used in the preparation of our consolidated
financial statements.
Revenue
Recognition
We primarily recognize revenue when the following four basic
criteria have been met: (1) persuasive evidence of an
arrangement exists, (2) delivery has occurred or services
rendered, (3) the fee is fixed or determinable and
(4) collection is reasonably assured.
The majority of our revenue is derived from product sales. We
recognize revenue upon title transfer of the products to
third-party customers, less a reserve for estimated product
returns and allowances. Determination of the reserve for
estimated product returns and allowances is based on our
managements analyses and judgments regarding certain
conditions. Should future changes in conditions prove
managements conclusions and judgments on previous analyses
to be incorrect, revenue recognized for any reporting period
could be adversely affected.
Additionally, we generate services revenue in connection with
contracts with health plans (both commercial and governmental)
and self-insured employers, whereby we provide clinical
expertise through fee-based arrangements. Revenue for fee-based
arrangements is recognized over the period in which the services
are provided. Some contracts provide that a portion of our fees
are at risk if our customers do not achieve certain financial
cost savings or we do not achieve certain other clinical and
operational metrics, over a period of time, typically one year.
Revenue subject to refund is not recognized if
(i) sufficient information is not available to calculate
performance measurements or (ii) interim performance
measurements indicate that we are not meeting performance
targets. If either of these two conditions exists, we record the
amounts as other current liabilities in the consolidated balance
sheet, deferring recognition of the revenue until we establish
that we are meeting the performance criteria. If we do not meet
the performance targets at the end of the contractual period we
are obligated under the contract to refund some or all of the at
risk fees. Our deferred revenue balance was $25.9 million
and $24.0 million, as of December 31, 2010 and 2009,
respectively.
We also receive license and royalty revenue from agreements with
third-party licensees. Revenue from fixed-fee license and
royalty agreements is recognized on a straight-line basis over
the obligation period of the related license agreements. License
and royalty fees that the licensees calculate based on their
sales, which we have the right to audit under most of our
agreements, are generally recognized upon receipt of the license
or royalty payments, unless we are able to reasonably estimate
the fees as they are earned. License and royalty fees that are
determinable prior to the receipt thereof are recognized in the
period they are earned.
Use of
Estimates for Sales Returns and Other Allowances and Allowance
for Doubtful Accounts
Certain sales arrangements require us to accept product returns.
From time to time, we also enter into sales incentive
arrangements with our retail customers, which generally reduce
the sale prices of our products. As a result, we must establish
allowances for potential future product returns and claims
resulting from our sales incentive arrangements against product
revenue recognized in any reporting period. Calculation of these
50
allowances requires significant judgments and estimates. When
evaluating the adequacy of the sales returns and other
allowances, our management analyzes historical returns, current
economic trends and changes in customer and consumer demand and
acceptance of our products. When such analysis is not available
and a right of return exists, we record revenue when the right
of return is no longer applicable. Material differences in the
amount and timing of our product revenue for any reporting
period may result if changes in conditions arise that would
require management to make different judgments or utilize
different estimates.
Our total provision for sales returns and other allowances
related to sales incentive arrangements amounted to
$37.3 million, $60.2 million and $35.8 million,
or 3%, 4% and 3%, respectively, of net product sales in 2010,
2009 and 2008, respectively, which have been recorded against
product sales to derive our net product sales. Of these amounts,
approximately $14.0 million, $9.3 million and
$9.3 million, for 2010, 2009 and 2008, respectively,
represent allowances for future deductions which have been
provided against our related accruals for such charges with the
balance charged directly against net sales.
Similarly, our management must make estimates regarding
uncollectible accounts receivable balances. When evaluating the
adequacy of the allowance for doubtful accounts, management
analyzes specific accounts receivable balances, historical bad
debts, customer concentrations, customer credit-worthiness,
current economic trends and changes in our customer payment
terms and patterns. Our accounts receivable balance was
$397.1 million and $354.5 million, net of allowances
for doubtful accounts of $20.4 million and
$12.5 million, as of December 31, 2010 and 2009,
respectively.
Valuation
of Inventories
We state our inventories at the lower of the actual cost to
purchase or manufacture the inventory or the estimated current
market value of the inventory, less cost to sell. In addition,
we periodically review the inventory quantities on hand and
record a provision for excess and obsolete inventory. This
provision reduces the carrying value of our inventory and is
calculated based primarily upon factors such as forecasts of our
customers demands, shelf lives of our products in
inventory, loss of customers and manufacturing lead times.
Evaluating these factors, particularly forecasting our
customers demands, requires management to make assumptions
and estimates. Actual product and services revenue may prove our
forecasts to be inaccurate, in which case we may have
underestimated or overestimated the provision required for
excess and obsolete inventory. If, in future periods, our
inventory is determined to be overvalued, we would be required
to recognize the excess value as a charge to our cost of sales
at the time of such determination. Likewise, if, in future
periods, our inventory is determined to be undervalued, we would
have over-reported our cost of sales, or understated our
earnings, at the time we recorded the excess and obsolete
provision. Our inventory balance was $257.7 million and
$221.5 million, net of a reserve for excess and obsolete
inventory of $12.3 million and $12.6 million, as of
December 31, 2010 and 2009, respectively.
Valuation
of Goodwill and Other Long-Lived and Intangible Assets
Our long-lived assets include (1) property, plant and
equipment, (2) goodwill and (3) other intangible
assets. As of December 31, 2010, the balances of property,
plant and equipment, goodwill and other intangible assets, net
of accumulated depreciation and amortization, were
$390.5 million, $2.8 billion and $1.7 billion,
respectively.
Goodwill and other intangible assets are initially created as a
result of business combinations or acquisitions of intellectual
property. The values we record for goodwill and other intangible
assets represent fair values calculated by accepted valuation
methods. Such valuations require us to provide significant
estimates and assumptions which are derived from information
obtained from the management of the acquired businesses and our
business plans for the acquired businesses or intellectual
property. Critical estimates and assumptions used in the initial
valuation of goodwill and other intangible assets include, but
are not limited to: (1) future expected cash flows from
product sales, customer contracts and acquired developed
technologies and patents, (2) expected costs to complete
any in-process research and development projects and
commercialize viable products and estimated cash flows from
sales of such products, (3) the acquired companies
brand awareness and market position, (4) assumptions about
the period of time over which we will
51
continue to use the acquired brand and (5) discount rates.
These estimates and assumptions may be incomplete or inaccurate
because unanticipated events and circumstances may occur. If
estimates and assumptions used to initially value goodwill and
intangible assets prove to be inaccurate, ongoing reviews of the
carrying values of such goodwill and intangible assets, as
discussed below, may indicate impairment, which will require us
to record an impairment charge in the period in which we
identify the impairment.
Where we believe that property, plant and equipment and
intangible assets have finite lives, we depreciate and amortize
those assets over their estimated useful lives. For purposes of
determining whether there are any impairment losses, as further
discussed below, our management has historically examined the
carrying value of our identifiable long-lived tangible and
intangible assets and goodwill, including their useful lives
where we believe such assets have finite lives, when indicators
of impairment are present. In addition, we conduct an impairment
review on the carrying values of all goodwill on at least an
annual basis. For all long-lived tangible and intangible assets
and goodwill, if an impairment loss is identified based on the
fair value of the asset, as compared to the carrying value of
the asset, such loss would be charged to expense in the period
we identify the impairment. Furthermore, if our review of the
carrying values of the long-lived tangible and intangible assets
with finite lives indicates impairment of such assets, we may
determine that shorter estimated useful lives are more
appropriate. In that event, we will be required to record higher
depreciation and amortization in future periods, which will
reduce our earnings.
Valuation
of Goodwill
In accordance with ASC 350, we test goodwill at the
reporting unit level for impairment on an annual basis and
between annual tests, if events and circumstances indicate it is
more likely than not that the fair value of a reporting unit is
less than its carrying value. Events that would indicate
impairment and trigger an interim impairment assessment include,
but are not limited to, current economic and market conditions,
including a decline in market capitalization, a significant
adverse change in legal factors, business climate or operational
performance of the business and an adverse action or assessment
by a regulator.
In performing the impairment test, we utilize the two-step
approach prescribed under ASC 350. The first step requires
a comparison of the carrying value of each reporting unit to its
estimated fair value. To estimate the fair value of our
reporting units for Step 1, we use a combination of the income
approach and the market approach. The income approach is based
on a discounted cash flow analysis, or DCF, and calculates the
fair value by estimating the after-tax cash flows attributable
to a reporting unit and then discounting the after-tax cash
flows to a present value, using a risk-adjusted discount rate.
Assumptions used in the DCF require the exercise of significant
judgment, including judgment about appropriate discount rates
and terminal values, growth rates and the amount and timing of
expected future cash flows. The forecasted cash flows are based
on our most recent budget and for years beyond the budget, our
estimates are based on assumed growth rates. We believe our
assumptions are consistent with the plans and estimates used to
manage the underlying businesses. The discount rates, which are
intended to reflect the risks inherent in future cash flow
projections, used in the DCF are based on estimates of the
weighted-average cost of capital, or WACC, of market
participants relative to each respective reporting unit. The
market approach considers comparable market data based on
multiples of revenue or earnings before taxes, depreciation and
amortization, or EBITDA.
If the carrying value of a reporting unit exceeds its estimated
fair value, we are required to perform the second step of the
goodwill impairment test to measure the amount of impairment
loss, if any. The second step of the goodwill impairment test
compares the implied fair value of a reporting units
goodwill to its carrying value. The implied fair value of
goodwill is derived by performing a hypothetical purchase price
allocation for the reporting unit as of the measurement date,
allocating the reporting units estimated fair value to its
assets and liabilities. The residual amount from performing this
allocation represents the implied fair value of goodwill. To the
extent this amount is below the carrying value of goodwill, an
impairment charge is recorded.
We conducted our annual impairment test for our reporting units
during the fourth quarter of 2010. Key assumptions (which vary
by reporting unit) used in determining fair value under the
discounted cash flow approach included discount rates ranging
from 12.5% to 13.0%, projected compound average revenue growth
rates of 6.0% to 10.0% and terminal value growth rates of 4.0%.
In determining the appropriate discount rate,
52
we considered the weighted-average cost of capital for each
reporting unit, which among other factors considers the cost of
common equity capital and the marginal cost of debt of market
participants. Key assumptions (which again vary by reporting
unit) used in determining fair value under the market approach
were based on observed market multiples of enterprise value to
revenue and EBITDA for both comparable publicly-traded companies
and recent merger and acquisition transactions involving similar
companies to estimate appropriate controlling basis multiples to
apply to each of the reporting units. Based on the multiples
implied by this market data, we selected multiples of revenue of
1.0 to 2.8 times and multiples of EBITDA of 7.5 to 10.0 times.
In assessing the reasonableness of our estimated fair values of
the reporting units, management compared the results of the
valuation analyses against our then-current market
capitalization to imply a control premium. Based on this
analysis, the implied control premium was within the range of
comparable industry transactions.
The Step 1 impairment analysis indicated that the carrying value
of the net assets of our Health Management reporting unit
exceeded the estimated fair value of the reporting unit. As a
result, we were required to perform Step 2 of the goodwill
impairment test to determine the amount, if any, of goodwill
impairment charges for the Health Management reporting unit. We
completed Step 2, consistent with the procedures described
above, and determined that a goodwill impairment charge in the
amount of approximately $1.0 billion was required. The
resulting goodwill impairment charge is reflected in operating
income (loss) in our accompanying consolidated statements of
operations.
The estimate of fair value requires significant judgment. We
based our fair value estimates on assumptions that we believe to
be reasonable but that are unpredictable and inherently
uncertain, including estimates of future growth rates and
operating margins and assumptions about the overall economic
climate and the competitive environment for our business units.
There can be no assurance that our estimates and assumptions
made for purposes of our goodwill and identifiable intangible
asset testing as of the time of testing will prove to be
accurate predictions of the future. If our assumptions regarding
business plans, competitive environments or anticipated growth
rates are not correct, we may be required to record goodwill
and/or
intangible asset impairment charges in future periods, whether
in connection with our next annual impairment testing or
earlier, if an indicator of an impairment is present before our
next annual evaluation.
Impairment charges related to goodwill have no impact on our
cash balances or compliance with financial covenants under our
Amended and Restated Credit Agreement.
Valuation
of Other Long-Lived Tangible and Intangible Assets
Factors we generally consider important which could trigger an
impairment review on the carrying value of other long-lived
tangible and intangible assets include the following:
(1) significant underperformance relative to expected
historical or projected future operating results,
(2) significant changes in the manner of our use of
acquired assets or the strategy for our overall business,
(3) underutilization of our tangible assets,
(4) discontinuance of product lines by ourselves or our
customers, (5) significant negative industry or economic
trends, (6) significant decline in our stock price for a
sustained period, (7) significant decline in our market
capitalization relative to net book value and (8) goodwill
impairment identified during an impairment review.
We conducted our annual goodwill impairment test for our
reporting units during the fourth quarter of 2010. The
impairment test indicated there was an impairment of goodwill
associated with our health management reporting unit, and thus,
a potential impairment of our long-lived tangible and intangible
assets associated with the same reporting unit. We conducted an
analysis as prescribed under ASC 360 Property, Plant and
Equipment, utilizing an undiscounted cash flow model. The
analysis indicated there was no impairment of the long-lived
tangible or intangible assets associated with our health
management reporting unit. Although we believe that the carrying
value of our long-lived tangible and intangible assets was
realizable as of December 31, 2010, future events could
cause us to conclude otherwise.
Stock-Based
Compensation
Stock-based compensation cost is measured at the grant date
based on the fair value of the award and is recognized as
expense over the vesting period. Determining the fair value of
stock-based awards at the grant
53
date requires judgment, including estimating our stock price
volatility and employee stock option exercise behaviors. If
actual results differ significantly from these estimates,
stock-based compensation expense and our results of operations
could be materially impacted.
Our expected volatility is based upon the historical volatility
of our stock. The expected term is based on the assumption that
all outstanding options will be exercised at the midpoint of the
vesting date and the full contractual term, including data on
experience to date. As stock-based compensation expense is
recognized in our consolidated statements of operations based on
awards ultimately expected to vest, the amount of expense has
been reduced for estimated forfeitures. Forfeitures are
estimated at the time of grant and revised, if necessary, in
subsequent periods if actual forfeitures differ from those
estimates. Forfeitures were estimated based on historical
experience. If factors change and we employ different
assumptions, the compensation expense that we record in future
periods may differ significantly from what we have recorded in
the current period.
Accounting
for Income Taxes
As part of the process of preparing our consolidated financial
statements, we are required to estimate our income taxes in each
of the jurisdictions in which we operate. This process involves
estimating our actual current tax exposure and assessing
temporary differences resulting from differing treatment of
items, such as reserves and accruals and lives assigned to
long-lived and intangible assets, for tax and accounting
purposes. These differences result in deferred tax assets and
liabilities. We must then assess the likelihood that our
deferred tax assets will be recovered through future taxable
income and, to the extent we believe that recovery is not more
likely than not, we must establish a valuation allowance. To the
extent we establish a valuation allowance or increase this
allowance in a period, we must include an expense within our tax
provision.
Significant management judgment is required in determining our
provision for income taxes, our deferred tax assets and
liabilities and any valuation allowance recorded against our net
deferred tax assets. We have recorded a valuation allowance of
$42.5 million as of December 31, 2010, due to
uncertainties related to the future benefits, if any, from our
deferred tax assets related primarily to our foreign businesses
and certain U.S. net operating losses, or NOLs, and tax
credits. Included in this valuation allowance is
$9.1 million for deferred tax assets of acquired companies,
the future benefits of which will be generally applied to reduce
our income tax expense. This is an increase of $5.0 million
from the valuation allowance of $37.5 million as of
December 31, 2009. The increase is primarily related to
domestic state NOLs and domestic state credits. The valuation
allowance is based on our estimates of taxable income by
jurisdiction in which we operate and the period over which our
deferred tax assets will be recoverable. In the event that
actual results differ from these estimates or we adjust these
estimates in future periods, we may need to establish an
additional valuation allowance or reduce our current valuation
allowance which could materially impact our tax provision.
We established reserves for tax uncertainties that reflect the
use of the comprehensive model for the recognition and
measurement of uncertain tax positions. We are currently
undergoing routine tax examinations by U.S. federal,
various state and foreign jurisdictions. Tax authorities
periodically challenge certain transactions and deductions we
reported on our income tax returns. We do not expect the outcome
of these examinations, either individually or in the aggregate,
to have a material adverse effect on our financial position,
results of operations or cash flows.
Loss
Contingencies
In the section of this Annual Report on
Form 10-K
titled Part I, Item 3, Legal Proceedings,
we have reported on material legal proceedings, if any. Because
of the nature of our business, we may be subject at any
particular time to lawsuits or other claims arising in the
ordinary course of our business, and we expect that this will
continue to be the case in the future.
We do not accrue for potential losses on legal proceedings where
our company is the defendant when we are not able to reasonably
estimate our potential liability, if any, due to uncertainty as
to the nature, extent and validity of the claims against us,
uncertainty as to the nature and extent of the damages or other
relief sought by the plaintiff and the complexity of the issues
involved. Our potential liability, if any, in a particular case
54
may become reasonably estimable and probable as the case
progresses, in which case we will begin accruing for the
expected loss.
Recent
Accounting Pronouncements
See Note 2(r) in the notes to the consolidated financial
statements included elsewhere in this Annual Report on
Form 10-K,
regarding the impact of certain recent accounting pronouncements
on our consolidated financial statements.
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ITEM 7A.
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QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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The following discussion about our market risk disclosures
involves forward-looking statements. Actual results could differ
materially from those discussed in the forward-looking
statements. We are exposed to market risk related to changes in
interest rates and foreign currency exchange rates. We do not
use derivative financial instruments for speculative or trading
purposes.
Interest
Rate Risk
We are exposed to market risk from changes in interest rates
primarily through our investing and financing activities. In
addition, our ability to finance future acquisition transactions
or fund working capital requirements may be impacted if we are
not able to obtain appropriate financing at acceptable rates.
To manage our interest rate exposure, our strategy is to invest
in short-term, highly-liquid investments. Our investment policy
also requires investment in approved instruments with an initial
maximum allowable maturity of eighteen months and an average
maturity of our portfolio that should not exceed six months,
with at least $500,000 cash available at all times. Currently,
our short-term investments are in money market funds with
original maturities of 90 days or less. At
December 31, 2010, our short-term investments approximated
market value.
At December 31, 2010, we had term loans in the amount of
$941.3 million and a revolving line of credit available to
us of up to $150.0 million, of which there were no
outstanding borrowings as of December 31, 2010, under our
First Lien Credit Agreement. Interest on these term loans, as
defined in the credit agreement, is as follows: (i) in the
case of Base Rate Loans, at a rate per annum equal to the sum of
the Base Rate and the Applicable Margin, each as in effect from
time to time, (ii) in the case of Eurodollar Rate Loans, at
a rate per annum equal to the sum of the Eurodollar Rate and the
Applicable Margin, each as in effect for the applicable Interest
Period, and (iii) in the case of other Obligations, at a
rate per annum equal to the sum of the Base Rate and the
Applicable Margin for Revolving Loans that are Base Rate Loans,
each as in effect from time to time. The Base Rate is a floating
rate which approximates the U.S. Prime rate and changes on
a periodic basis. The Eurodollar Rate is equal to the LIBOR rate
and is set for a period of one to three months at our election.
Applicable margin with respect to Base Rate Loans is 1.00% and
with respect to Eurodollar Rate Loans is 2.00%. Applicable
margin ranges for our revolving line of credit with respect to
Base Rate Loans is 0.75% to 1.25% and with respect to Eurodollar
Rate Loans is 1.75% to 2.25% depending upon our consolidated
leverage.
At December 31, 2010, we also had term loans in the amount
of $250.0 million under our Second Lien Credit Agreement.
Interest on these term loans, as defined in the credit
agreement, is as follows: (i) in the case of Base Rate
Loans, at a rate per annum equal to the sum of the Base Rate and
the Applicable Margin, each as in effect from time to time,
(ii) in the case of Eurodollar Rate Loans, at a rate per
annum equal to the sum of the Eurodollar Rate and the Applicable
Margin, each as in effect for the applicable Interest Period and
(iii) in the case of other obligations, at a rate per annum
equal to the sum of the Base Rate and the Applicable Margin for
Base Rate Loans, as in effect from time to time. Applicable
margin with respect to Base Rate Loans is 3.25% and with respect
to Eurodollar Rate Loans is 4.25%.
In August 2007, we entered into interest rate swap contracts,
with an effective date of September 28, 2007, that had a
total notional value of $350.0 million and a maturity date
of September 28, 2010. These interest rate swap contracts
paid us variable interest at the three-month LIBOR rate, and we
paid the counterparties a fixed rate of 4.85%. In March 2009, we
extended our August 2007 interest rate hedge for an additional
two-year period commencing in September 2010 at a one-month
LIBOR rate of 2.54%. These
55
interest rate swap contracts were entered into to convert
$350.0 million of the $1.2 billion variable rate term
loans under the secured credit facilities into fixed rate debt.
In January 2009, we entered into interest rate swap contracts,
with an effective date of January 14, 2009, that had a
total notional value of $500.0 million and a maturity date
of January 5, 2011. These interest rate swap contracts paid
us variable interest at the one-month LIBOR rate, and we paid
the counterparties a fixed rate of 1.195%. These interest rate
swap contracts were entered into to convert $500.0 million
of the $1.2 billion variable rate term loan under the
secured credit facility into fixed rate debt. We did not extend
the terms of this interest rate swap after January 5, 2011.
Assuming no changes in our leverage ratio and considering our
interest rate swaps, including our interest rate swap that
matured on January 5, 2011, which would affect the margin
of the interest rates under the credit agreements, the effect of
interest rate fluctuations on outstanding borrowings as of
December 31, 2010 over the next twelve months is quantified
and summarized as follows (in thousands):
|
|
|
|
|
|
|
Interest Expense
|
|
|
Increase
|
|
Interest rates increase by 100 basis points
|
|
$
|
8,413
|
|
Interest rates increase by 200 basis points
|
|
$
|
16,825
|
|
Foreign
Currency Risk
We face exposure to movements in foreign currency exchange rates
whenever we, or any of our subsidiaries, enter into transactions
with third parties that are denominated in currencies other than
our, or its, functional currency. Intercompany transactions
between entities that use different functional currencies also
expose us to foreign currency risk. During 2010, the net impact
of foreign currency changes on transactions was a gain of
$9.8 million. Historically, we have not used derivative
financial instruments or other financial instruments with
original maturities in excess of three months to hedge such
exposures.
Gross margins of products we manufacture at our foreign plants
and sell in U.S. dollars or manufacture in our
U.S. plants and sell in currencies other than the
U.S. dollar are also affected by foreign currency exchange
rate movements. Our gross margin on total net product sales was
53.3% in 2010. If the U.S. dollar had been stronger by 1%,
5% or 10%, compared to the actual rates during 2010, our gross
margin on total net product sales would have been 53.3%, 53.6%
and 53.9%, respectively.
In addition, because a substantial portion of our earnings is
generated by our foreign subsidiaries, whose functional
currencies are other than the U.S. dollar (in which we
report our consolidated financial results), our earnings could
be materially impacted by movements in foreign currency exchange
rates upon the translation of the earnings of such subsidiaries
into the U.S. dollar.
If the U.S. dollar had been uniformly stronger by 1%, 5% or
10%, compared to the actual average exchange rates used to
translate the financial results of our foreign subsidiaries, our
net product sales and net income would have been impacted by
approximately the following amounts (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Approximate
|
|
Approximate
|
|
|
(Decrease) in
|
|
Increase in
|
|
|
Net Revenue
|
|
Net Income
|
|
If, during 2010, the U.S. dollar was stronger by:
|
|
|
|
|
|
|
|
|
1%
|
|
$
|
(6,050
|
)
|
|
$
|
32
|
|
5%
|
|
$
|
(30,251
|
)
|
|
$
|
162
|
|
10%
|
|
$
|
(60,502
|
)
|
|
$
|
323
|
|
56
|
|
ITEM 8.
|
FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA
|
The financial statements and supplementary data, except for
selected quarterly financial data which are summarized below,
are listed under Item 15(a) and have been filed as part of
this Annual Report on
Form 10-K
on the pages indicated.
On January 15, 2010, we completed the sale of our vitamins
and nutritional supplements business. The sale included our
entire private label and branded nutritionals businesses and
represents the complete divestiture of our entire vitamins and
nutritional supplements business segment. The results of the
vitamins and nutritional supplements business are included in
income (loss) from discontinued operations, net of tax, for all
periods presented in the financial statements and supplementary
data below.
The following table presents selected quarterly financial data
for each of the quarters in the years ended December 31,
2010 and 2009 (in thousands, except per share data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
|
First
|
|
|
Second
|
|
|
Third
|
|
|
Fourth
|
|
|
|
Quarter(2)
|
|
|
Quarter(3)
|
|
|
Quarter(4)
|
|
|
Quarter(5)
|
|
|
Net revenue
|
|
$
|
515,254
|
|
|
$
|
522,960
|
|
|
$
|
538,679
|
|
|
$
|
578,454
|
|
Gross profit
|
|
$
|
273,957
|
|
|
$
|
271,998
|
|
|
$
|
285,546
|
|
|
$
|
303,086
|
|
Income (loss) from continuing operations
|
|
$
|
2,213
|
|
|
$
|
(1,976
|
)
|
|
$
|
4,825
|
|
|
$
|
(1,032,351
|
)
|
Income (loss) from discontinued operations, net of tax
|
|
$
|
11,946
|
|
|
$
|
(35
|
)
|
|
$
|
2
|
|
|
$
|
(516
|
)
|
Net income (loss) available to common stockholders(1)
|
|
$
|
8,968
|
|
|
$
|
(8,347
|
)
|
|
$
|
(2,814
|
)
|
|
$
|
(1,039,352
|
)
|
Basic Income (loss) per common share attributable to
Alere Inc. and Subsidiaries:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) per common share from continuing operations
|
|
$
|
(0.03
|
)
|
|
$
|
(0.10
|
)
|
|
$
|
(0.03
|
)
|
|
$
|
(12.23
|
)
|
Income (loss) per common share from discontinued operations
|
|
$
|
0.14
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
(0.01
|
)
|
Net income (loss) per common share(1)
|
|
$
|
0.11
|
|
|
$
|
(0.10
|
)
|
|
$
|
(0.03
|
)
|
|
$
|
(12.24
|
)
|
Diluted Income (loss) per common share attributable
to Alere Inc. and Subsidiaries:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) per common share from continuing operations
|
|
$
|
(0.03
|
)
|
|
$
|
(0.10
|
)
|
|
$
|
(0.03
|
)
|
|
$
|
(12.23
|
)
|
Income (loss) per common share from discontinued operations
|
|
$
|
0.14
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
(0.01
|
)
|
Net income (loss) per common share(1)
|
|
$
|
0.11
|
|
|
$
|
(0.10
|
)
|
|
$
|
(0.03
|
)
|
|
$
|
(12.24
|
)
|
57
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
|
First
|
|
|
Second
|
|
|
Third
|
|
|
Fourth
|
|
|
|
Quarter(6)
|
|
|
Quarter(7)
|
|
|
Quarter(8)
|
|
|
Quarter(9)
|
|
|
Net revenue
|
|
$
|
425,153
|
|
|
$
|
438,652
|
|
|
$
|
512,665
|
|
|
$
|
546,171
|
|
Gross profit
|
|
$
|
234,450
|
|
|
$
|
237,896
|
|
|
$
|
280,297
|
|
|
$
|
301,579
|
|
Income (loss) from continuing operations
|
|
$
|
7,738
|
|
|
$
|
4,886
|
|
|
$
|
19,870
|
|
|
$
|
(247
|
)
|
Income (loss) from discontinued operations, net of tax
|
|
$
|
(1,347
|
)
|
|
$
|
(166
|
)
|
|
$
|
413
|
|
|
$
|
3,034
|
|
Net income (loss) available to common stockholders
|
|
$
|
771
|
|
|
$
|
(1,197
|
)
|
|
$
|
14,299
|
|
|
$
|
(3,129
|
)
|
Basic Income (loss) per common share attributable to
Alere Inc. and subsidiaries:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) per common share from continuing operations(1)
|
|
$
|
0.03
|
|
|
$
|
(0.02
|
)
|
|
$
|
0.17
|
|
|
$
|
(0.08
|
)
|
Income (loss) per common share from discontinued operations
|
|
$
|
(0.02
|
)
|
|
$
|
|
|
|
$
|
0.01
|
|
|
$
|
0.04
|
|
Net income (loss) per common share
|
|
$
|
0.01
|
|
|
$
|
(0.02
|
)
|
|
$
|
0.18
|
|
|
$
|
(0.04
|
)
|
Diluted Income (loss) per common share attributable
to Alere Inc. and subsidiaries:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) per common share from continuing operations(1)
|
|
$
|
0.03
|
|
|
$
|
(0.02
|
)
|
|
$
|
0.17
|
|
|
$
|
(0.08
|
)
|
Income (loss) per common share from discontinued operations
|
|
$
|
(0.02
|
)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
0.04
|
|
Net income (loss) per common share
|
|
$
|
0.01
|
|
|
$
|
(0.02
|
)
|
|
$
|
0.17
|
|
|
$
|
(0.04
|
)
|
|
|
|
(1) |
|
Net income (loss) available to common stockholders and basic and
diluted net income (loss) per common share are computed
consistent with the annual per share calculations described in
Notes 2(n) and 12 of our consolidated financial statements
included elsewhere in this Annual Report on
Form 10-K. |
|
(2) |
|
Included in net income for the first quarter of 2010 is
$8.0 million related to restructuring charges associated
with the decision to close various facilities, a write-off in
the amount of $2.8 million relating to an inventory
write-up
recorded in connection with acquisitions, acquisition-related
costs in the amount of $4.0 recorded in connection with the
adoption of a ASC 805, Business Combinations, on
January 1, 2009, $3.1 million of income recorded in
connection with fair value adjustments to acquisition-related
contingent consideration obligations in accordance with
ASC 805, Business Combinations, expenses of
$0.3 million ($0.2 million, net of tax) incurred in
connection with the sale of our vitamins and nutritional
supplements business and $7.6 million of non-cash
stock-based compensation expense. |
|
(3) |
|
Included in net loss for the second quarter of 2010 is
$7.1 million related to restructuring charges associated
with the decision to close various facilities, a write-off in
the amount of $2.8 million relating to an inventory
write-up
recorded in connection with acquisitions, acquisition-related
costs in the amount of $2.0 recorded in connection with the
adoption of a ASC 805, Business Combinations, on
January 1, 2009, $3.8 million of income recorded in
connection with fair value adjustments to acquisition-related
contingent consideration obligations in accordance with
ASC 805, Business Combinations and $8.1 million
of non-cash stock-based compensation expense. |
|
(4) |
|
Included in net loss for the third quarter of 2010 is a net
recovery of $1.6 million related to restructuring charges
associated with the decision to close various facilities, a
write-off in the amount of $1.3 million relating to
inventory
write-ups
recorded in connection with acquisitions, acquisition-related
costs in the amount of $0.9 recorded in connection with the
adoption of a ASC 805, Business Combinations, on
January 1, 2009, $4.6 million of expense recorded in
connection with fair value adjustments to acquisition-related
contingent consideration obligations in accordance with
ASC 805, Business Combinations and $7.3 million
of non-cash stock-based compensation expense. |
|
(5) |
|
Included in net loss for the fourth quarter of 2010 is a
goodwill impairment charge in the amount of $1.0 billion
related to our health management reporting unit and business
segment, $1.6 million related to restructuring charges
associated with the decision to close various facilities, a net
recovery of $0.3 million relating to an inventory
write-up
recorded in connection with acquisitions, acquisition-related
costs in the amount of $1.4 million recorded in connection
with the adoption of ASC 805, Business Combinations,
on |
58
|
|
|
|
|
January 1, 2009, $4.1 million of expense recorded in
connection with fair value adjustments to acquisition-related
contingent consideration obligations in accordance with
ASC 805, Business Combinations, a $0.7 million
fair value write-down recorded in connection with an idle
facility, a $60.1 million compensation charge associated
with our acquisition of minority shares of Standard Diagnostics,
Inc. and $6.9 million of non-cash stock-based compensation
expense. |
|
(6) |
|
Included in net income for the first quarter of 2009 is
$5.4 million related to restructuring charges associated
with the decision to close various facilities, a write-off in
the amount of $4.7 million for acquisition-related costs
recorded in connection with the adoption of a ASC 805,
Business Combinations, on January 1, 2009 and
$5.9 million of non-cash stock-based compensation expense. |
|
(7) |
|
Included in net loss for the second quarter of 2009 is
$4.9 million related to restructuring charges associated
with the decision to close various facilities, a write-off in
the amount of $1.7 million for acquisition-related costs
recorded in connection with the adoption of ASC 805,
Business Combinations, on January 1, 2009 and
$6.6 million of non-cash stock-based compensation expense. |
|
(8) |
|
Included in net income for the third quarter of 2009 is
$6.2 million related to restructuring charges associated
with the decision to close various facilities, a write-off in
the amount of $0.7 million relating to an inventory
write-up
recorded in connection with the acquisitions,
acquisition-related costs in the amount of $5.1 million
recorded in connection with the adoption of ASC 805, Business
Combinations, on January 1, 2009, a $3.4 million
gain associated with managements decision to dispose of
our Diamics, Inc. operations, a $2.9 million net realized
foreign currency gain associated with restricted cash
established in connection with the acquisition of Concateno, a
$1.9 million compensation-related charge recorded in
connection with the acquisition of Concateno, a
$0.3 million loss recorded in connection with the deferred
payment of a portion of the ACON Second Territory Business
purchase price consideration to be paid with our common stock
and $7.8 million of non-cash stock-based compensation
expense. |
|
(9) |
|
Included in net loss for the fourth quarter of 2009 is
$6.9 million related to restructuring charges associated
with the decision to close various facilities, a write-off in
the amount of $1.4 million relating to an inventory
write-up
recorded in connection with the acquisitions,
acquisition-related costs in the amount of $4.3 million
recorded in connection with the adoption of ASC 805, Business
Combinations, on January 1, 2009, $1.8 million of
expense recorded in connection with fair value adjustments to
acquisition-related contingent consideration obligations in
accordance with ASC 805, Business Combinations, a
$3.2 million fair value write-down recorded in connection
with an idle facility, expenses of $1.8 million
($1.1 million, net of tax) incurred in connection with the
sale of our vitamins and nutritional supplements business and
$7.9 million of non-cash stock-based compensation expense. |
|
|
ITEM 9.
|
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
|
Not applicable.
|
|
ITEM 9A.
|
CONTROLS
AND PROCEDURES
|
Managements
Conclusions Regarding the Effectiveness of Our Disclosure
Controls and Procedures
Our management evaluated, with the participation of our Chief
Executive Officer (CEO) and Chief Financial Officer (CFO), the
effectiveness of the design and operation of our disclosure
controls and procedures (as defined in
Rule 13a-15(e)
under the Securities Exchange Act of 1934, as amended) as of the
end of the period covered by this Annual Report on
Form 10-K.
Based on this evaluation, our management, including the CEO and
CFO, concluded that our disclosure controls and procedures were
effective at that time. We and our management understand,
nonetheless, that controls and procedures, no matter how well
designed and operated, can provide only reasonable assurances of
achieving the desired control objectives, and our management
necessarily was required to apply its judgment in evaluating and
implementing possible controls and procedures. In reaching their
conclusions stated above regarding the effectiveness of our
disclosure controls and procedures, our CEO and CFO concluded
that such disclosure controls and procedures were effective as
of such date at the reasonable assurance level.
59
Managements
Annual Report on Internal Control over Financial
Reporting
Our management is responsible for establishing and maintaining
adequate internal control over financial reporting as defined in
Rule 13a-15(f)
under the Securities Exchange Act of 1934, as amended. Our
companys internal control over financial reporting is a
process designed under the supervision of the CEO and CFO to
provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted
accounting principles. Our internal control over financial
reporting includes those policies and procedures that:
(i) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the
transactions and dispositions of our assets;
(ii) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of our company
are being made only in accordance with authorizations of our
management and directors; and
(iii) provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use or disposition
of assets that could have a material effect on the financial
statements.
There are inherent limitations in the effectiveness of any
internal control, including the possibility of human error and
the circumvention or overriding of controls. Accordingly, even
effective internal controls can provide only reasonable
assurances with respect to financial statement preparation.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of our companys
internal control over financial reporting as of
December 31, 2010. In making this assessment, management
used the criteria established in Internal Control
Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). Based on
managements assessment and those criteria, management
determined that the Company maintained effective internal
control over financial reporting as of December 31, 2010.
In conducting managements evaluation of the effectiveness
of our companys internal control over financial reporting,
management excluded all entities acquired in purchase business
combinations during 2010 from its assessment. The contribution
from these acquisitions represented approximately 10% and 6% of
total assets and net revenue, respectively, as of and for the
year ended December 31, 2010. Refer to Note 4 of the
accompanying consolidated financial statements for further
discussion of our acquisitions and their impact on our
consolidated financial statements.
The effectiveness of our internal control over financial
reporting as of December 31, 2010 has been audited by
PricewaterhouseCoopers LLP, our independent registered public
accounting firm, as stated in their report which appears herein.
Changes
in internal control over financial reporting
There was no change in our internal control over financial
reporting that occurred during our fourth fiscal quarter of 2010
that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.
|
|
ITEM 9B.
|
OTHER
INFORMATION
|
None.
60
PART III
|
|
ITEM 10.
|
DIRECTORS,
EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
|
The information regarding directors, executive officers and
corporate governance included in our definitive Proxy Statement
to be filed pursuant to Regulation 14A in connection with
our 2011 Annual Meeting of Shareholders (the Proxy Statement) is
incorporated herein by reference.
|
|
ITEM 11.
|
EXECUTIVE
COMPENSATION
|
The information regarding executive compensation included in the
Proxy Statement is incorporated herein by reference.
|
|
ITEM 12.
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
|
The information regarding security ownership of certain
beneficial owners and management and related stockholder matters
included in the Proxy Statement is incorporated herein by
reference.
|
|
ITEM 13.
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
|
The information regarding certain relationships and related
transactions, and director independence included in the Proxy
Statement is incorporated herein by reference.
|
|
ITEM 14.
|
PRINCIPAL
ACCOUNTING FEES AND SERVICES
|
The information regarding principal accounting fees and services
included in the Proxy Statement is incorporated herein by
reference.
PART IV
|
|
ITEM 15.
|
EXHIBITS
AND FINANCIAL STATEMENT SCHEDULES
|
(a) 1. Financial Statements.
The financial statements listed below have been filed as part of
this report on the pages indicated:
2. Financial Statement Schedules.
All schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission
have been omitted because they are inapplicable or the required
information is shown in the consolidated financial statements,
or the notes, thereto, included herein.
61
3. Exhibits.
Some of the agreements filed as exhibits to this Annual Report
Form 10-K
contain representations and warranties that were made solely for
the benefit of the parties to the agreement. These
representations and warranties:
|
|
|
|
|
may have been qualified by disclosures that were made to the
other party or parties in connection with the negotiation of the
agreements, which disclosures are not necessarily reflected in
the agreements;
|
|
|
|
may apply standards of materiality that differ from those of
investors; and
|
|
|
|
were made only as of specified dates contained in the agreements
and are subject to subsequent developments and changed
circumstances.
|
Accordingly, these representations and warranties may not
describe the actual state of affairs as of the date that these
representations and warranties were made or at any other time.
Investors should not rely on them as statements of fact.
|
|
|
|
|
|
2
|
.1
|
|
Acquisition Agreement by and among Inverness Medical
Innovations, Inc., ACON Laboratories, Inc., Azure Institute,
Inc., Oakville Hong Kong Co., Ltd., ACON Biotech (Hangzhou) Co.,
Ltd., and Karsson Overseas Ltd. dated March 16, 2009
(incorporated by reference to Exhibit 99.1 to the
Companys Current Report on
Form 8-K,
event date April 30, 2009, filed on April 30, 2009)**
|
|
3
|
.1
|
|
Amended and Restated Certificate of Incorporation of the Company
(incorporated by reference to Exhibit 3.1 to the
Companys Quarterly Report on
Form 10-Q,
for the quarter ended June 30, 2010)
|
|
3
|
.2
|
|
Amended and Restated By-laws of the Company (incorporated by
reference to Exhibit 3.3 to the Companys Annual
Report on
Form 10-K,
as amended, for the year ended December 31, 2001)
|
|
4
|
.1
|
|
Indenture, dated May 14, 2007, between the Company and U.S.
Bank Trust National Association (incorporated by reference
to Exhibit 4.1 to the Companys Current Report on
Form 8-K,
event date May 9, 2007, filed on May 15, 2007)
|
|
4
|
.2
|
|
Indenture dated as of May 12, 2009 between Inverness
Medical Innovations, Inc., as issuer, and U.S. Bank National
Association, as trustee (incorporated by reference to
Exhibit 4.1 to the Companys Current Report on
Form 8-K,
event date May 12, 2009, filed on May 12, 2009)
|
|
4
|
.3
|
|
First Supplemental Indenture dated as of May 12, 2009 to
Indenture dated as of May 12, 2009 among Inverness Medical
Innovations, Inc., as issuer, the guarantor subsidiaries named
therein, as guarantors, and U.S. Bank National Association, as
trustee (incorporated by reference to Exhibit 4.2 to the
Companys Current Report on
Form 8-K,
event date May 12, 2009, filed on May 12, 2009)
|
|
4
|
.4
|
|
Second Supplemental Indenture to Indenture dated as of
May 12, 2009 (to add the guarantee of Matria of New York
Inc.) dated as of June 9, 2009 among Matria of New York
Inc., as guarantor, the Company, as issuer, the other guarantor
subsidiaries named therein, as guarantors, and U.S. Bank
National Association, as trustee (incorporated by reference to
Exhibit 4.4 to Matria of New York Inc.s Registration
Statement on
Form 8-A
filed on June 9, 2009)
|
|
4
|
.5
|
|
Third Supplemental Indenture to Indenture dated as of
May 12, 2009 (to add the guarantees of GeneCare Medical
Genetics Center, Inc. and Alere CDM LLC) dated as of
August 4, 2009 among GeneCare Medical Genetics Center,
Inc., as guarantor, Alere CDM LLC, as guarantor, the Company, as
issuer, the other guarantor subsidiaries named therein, as
guarantors and U.S. Bank National Association, as trustee
(incorporated by reference to Exhibit 4.5 to GeneCare
Medical Genetics Center, Inc. and Alere CDM LLCs
Registration Statement on
Form 8-A
filed on August 4, 2009)
|
|
4
|
.6
|
|
Fourth Supplemental Indenture to Indenture dated as of
May 12, 2009 (to add the guarantee of ZyCare, Inc.) dated
as of September 22, 2009 among ZyCare, Inc., as guarantor,
the Company, as issuer, the other guarantor subsidiaries named
therein, as guarantors and U.S. Bank National Association, as
trustee (incorporated by reference to Exhibit 4.6 to
ZyCare, Inc.s Registration Statement on
Form 8-A
filed on September 24, 2009)
|
62
|
|
|
|
|
|
4
|
.7
|
|
Fifth Supplemental Indenture to Indenture dated as of
May 12, 2009 (to add the guarantees of Free &
Clear, Inc. and Tapestry Medical, Inc.) dated as of
November 25, 2009 among Free & Clear, Inc., as
guarantor, Tapestry Medical, Inc., as guarantor, the Company, as
issuer, the other guarantor subsidiaries named therein, as
guarantors, and U.S. Bank National Association, as trustee
(incorporated by reference to Exhibit 4.7 to
Free & Clear, Inc. and Tapestry Medical, Inc.s
Registration Statement on
Form 8-A,
filed on November 25, 2009)
|
|
4
|
.8
|
|
Sixth Supplemental Indenture to Indenture dated as of
May 12, 2009 (to add the guarantee of RMD Networks, Inc.)
dated as of February 1, 2010 among RMD Networks, Inc., as
guarantor, the Company, as issuer, the other guarantor
subsidiaries named therein, as guarantors, and U.S. Bank
National Association, as trustee (incorporated by reference to
Exhibit 4.8 to RMD Networks, Inc.s Registration
Statement on
Form 8-A,
filed on February 1, 2010)
|
|
4
|
.9
|
|
Seventh Supplemental Indenture to Indenture dated as of
May 12, 2009 (to add the guarantees of Laboratory
Specialists of America, Inc., Kroll Laboratory Specialists, Inc.
and Scientific Testing Laboratories, Inc.) dated as of
March 1, 2010 among Laboratory Specialists of America,
Inc., Kroll Laboratory Specialists, Inc. and Scientific Testing
Laboratories, Inc., as guarantors, the Company, as issuer, the
other guarantor subsidiaries named therein, as guarantors, and
U.S. Bank National Association, as trustee (incorporated by
reference to Exhibit 4.9 to Laboratory Specialists of
America, Inc., Kroll Laboratory Specialists, Inc. and Scientific
Testing Laboratories, Inc.s, Registration Statement on
Form 8-A,
filed on March 2, 2010)
|
|
4
|
.10
|
|
Eighth Supplemental Indenture to Indenture dated as of
May 12, 2009 (to add the guarantees of Alere NewCo, Inc.,
Alere NewCo II, Inc., New Binax, Inc. and New Biosite, Inc.)
dated as of March 19, 2010 among Alere NewCo, Inc., Alere
NewCo II, Inc., New Binax, Inc. and New Biosite, Inc., as
guarantors, the Company, as issuer, the other guarantor
subsidiaries named therein, as guarantors, and U.S. Bank
National Association, as trustee (incorporated by reference to
Exhibit 4.10 to Alere NewCo, Inc., Alere NewCo II, Inc.,
New Binax, Inc. and New Biosite, Inc.s Registration
Statement on
Form 8-A,
filed on March 19, 2010)
|
|
4
|
.11
|
|
Ninth Supplemental Indenture dated September 21, 2010 to
Indenture date as of May 12, 2009 among Alere Inc., as
issuer, the subsidiary guarantors named therein, as guarantors,
and U.S. Bank National Association, as trustee (incorporated by
reference to Exhibit 4.1 to the Companys Current
Report on
Form 8-K,
event date September 15, 2010, filed with the SEC on
September 21, 2010)
|
|
4
|
.12
|
|
Indenture dated as of August 11, 2009 between Inverness
Medical Innovations, Inc., as issuer, and The Bank of New York
Mellon Trust Company, N.A., as trustee (incorporated by
reference to Exhibit 4.1 to the Companys Current
Report on
Form 8-K,
event date August 11, 2009, filed on August 11, 2009)
|
|
4
|
.13
|
|
First Supplemental Indenture dated as of August 11, 2009
among Inverness Medical Innovations, Inc., as issuer, the
guarantor subsidiaries named therein, as guarantors, and The
Bank of New York Mellon Trust Company, N.A., as trustee
(incorporated by reference to Exhibit 4.2 to the
Companys Current Report on
Form 8-K,
event date August 11, 2009, filed on August 11, 2009)
|
|
4
|
.14
|
|
Second Supplemental Indenture to Indenture dated as of
August 11, 2009 (to add the guarantee of ZyCare, Inc.),
dated as of September 22, 2009, among ZyCare, Inc., as
guarantor, the Company, as issuer, the other guarantor
subsidiaries named therein, as guarantors, and The Bank of New
York Mellon Trust Company, N.A., as trustee (incorporated
by reference to Exhibit 4.4 to the Companys Quarterly
Report on
Form 10-Q
for the period ended September 30, 2009)
|
|
4
|
.15
|
|
Fourth Supplemental Indenture to Indenture dated as of
August 11, 2009 (to add the guarantees of Free &
Clear, Inc. and Tapestry Medical, Inc.), dated as of
November 25, 2009, among Free & Clear, Inc., as
guarantor, Tapestry Medical, Inc., as guarantor, the Company, as
issuer, the other guarantor subsidiaries named therein, as
guarantors, and The Bank of New York Mellon Trust Company,
N.A., as trustee (incorporated by reference to Exhibit 4.14
to the Companys Registration Statement on
Form S-4
filed on February 12, 2010 (File
333-164897))
|
|
4
|
.16
|
|
Sixth Supplemental Indenture to Indenture dated as of
August 11, 2009 (to add the guarantee of RMD Networks,
Inc.), dated as of February 1, 2010, among RMD Networks,
Inc., as guarantor, the Company, as issuer, the other guarantor
subsidiaries named therein, as guarantors, and the Bank of New
York Mellon Trust Company, N.A., as trustee (incorporated
by reference to Exhibit 4.16 to the Companys
Registration Statement on
Form S-4
filed on February 12, 2010 (File
333-164897))
|
63
|
|
|
|
|
|
4
|
.17
|
|
Eighth Supplemental Indenture to Indenture dated as of
August 11, 2009 (to add the guarantees of Laboratory
Specialists of America, Inc., Kroll Laboratory Specialists, Inc.
and Scientific Testing Laboratories, Inc.), dated as of
March 1, 2010, among Laboratory Specialists of America,
Inc., Kroll Laboratory Specialists, Inc. and Scientific Testing
Laboratories, Inc., as guarantors, the Company, as issuer, the
other guarantor subsidiaries named therein, as guarantors, and
the Bank of New York Mellon Trust Company, N.A., as trustee
(incorporated by reference to Exhibit 4.18 to the
Companys Registration Statement on
Form S-4/A
filed on March 26, 2010 (File
333-164897))
|
|
4
|
.18
|
|
Tenth Supplemental Indenture to Indenture dated as of
August 11, 2009 (to add the guarantees of New Binax, Inc.,
New Biosite Incorporated, Alere NewCo, Inc., and Alere NewCo II,
Inc.), dated as of March 19, 2010, among New Binax, Inc.,
New Biosite Incorporated, Alere NewCo, Inc., and Alere NewCo II,
Inc., as guarantors, the Company, as issuer, the other guarantor
subsidiaries named therein, as guarantors, and the Bank of New
York Mellon Trust Company, N.A., as trustee (incorporated
by reference to Exhibit 4.20 to the Companys
Registration Statement on
Form S-4/A
filed on March 26, 2010 (File
333-164897))
|
|
4
|
.19
|
|
Registration Rights Agreement dated as of September 28,
2009 among Inverness Medical Innovations, Inc., the Guarantors
named therein, Jefferies & Company, Inc., Goldman
Sachs & Co., and Wells Fargo Securities (incorporated
by reference to Exhibit 4.4 to the Companys Current
Report on
Form 8-K,
event date September 28, 2009, filed on September 28,
2009)
|
|
4
|
.20
|
|
Registration Rights Agreement dated September 21, 2010
among Alere Inc., the subsidiary guarantors named therein and
Jefferies & Company, Inc., Goldman, Sachs &
Co. and Citigroup Global Markets Inc., as Representatives of the
Initial Purchasers (incorporated by reference to
Exhibit 4.3 to the Companys Current Report on
Form 8-K,
event date September 15, 2010, filed September 21,
2010)
|
|
+10
|
.1
|
|
BNP Assay Development, Manufacture and Supply Agreement between
Biosite Incorporated and Beckman Coulter, Inc. effective
June 24, 2003 (incorporated by reference to
Exhibit 10.22 to Annual Report of Biosite Incorporated on
Form 10-K,
filed March 12, 2007)
|
|
+10
|
.2
|
|
Shareholder Agreement dated as of May 17, 2007 among
Inverness Medical Switzerland GmbH, Procter & Gamble
International Operations, SA and SPD Swiss Precision Diagnostics
GmbH (incorporated by reference to Exhibit 10.12 to
Companys Quarterly Report on
Form 10-Q,
for the period ended June 30, 2007)
|
|
10
|
.3
|
|
Option Agreement, dated as of May 17, 2007 among US CD LLC,
SPD Swiss Precision Diagnostics GmbH, Inverness Medical
Innovations, Inc., Inverness Medical Switzerland GmbH,
Procter & Gamble International Operations, SA and
Procter & Gamble RHD, Inc. (incorporated by reference
to Exhibit 10.13 to Companys Quarterly Report on
Form 10-Q,
for the period ended June 30, 2007)
|
|
10
|
.4
|
|
Post-Closing Covenants Agreement, dated as of November 21,
2001, by and among Johnson & Johnson, IMT, the
Company, certain subsidiaries of IMT and certain subsidiaries of
the Company (incorporated by reference to Exhibit 10.1 to
the Companys Annual Report on
Form 10-K,
as amended, for the year ended December 31, 2001)
|
|
10
|
.5
|
|
Amended and Restated Investor Rights Agreement, effective as of
April 30, 2009, by and among Inverness Medical Innovations,
Inc., Ron Zwanziger, ACON Laboratories, Inc., AXURE Institute,
Inc., LBI, Inc., Oakville Hong Kong Co., Ltd., ACON Biotech
(Hangzhou) Co., Ltd., Karsson Overseas Ltd., Manfield Top
Worldwide Ltd., Jixun Lin and Feng Lin (incorporated by
reference to Exhibit 99.2 to the Companys Current
Report on
Form 8-K,
event date April 30, 2009, filed on April 30, 2009)
|
|
10
|
.6
|
|
Form of Warrant for the Purchase of Shares of Common Stock of
the Company issued pursuant to the Note and Warrant Purchase
Agreement dated as of December 14, 2001 (incorporated by
reference to Exhibit 99.5 to the Companys Current
Report on
Form 8-K
dated December 20, 2001)
|
|
10
|
.7
|
|
Warrant for the Purchase of Shares of Common Stock of the
Company, dated as of March 31, 2005, issued to Roger Piasio
(incorporated by reference to Exhibit 10.23 to the
Companys Annual Report on
Form 10-K,
as amended, for the year ended December 30, 2006)
|
|
10
|
.8
|
|
Form of Warrant Agreement issued pursuant to the Note and
Warrant Purchase Agreement (incorporated by reference to
Exhibit 99.3 to the Companys Current Report on
Form 8-K
dated January 4, 2002)
|
64
|
|
|
|
|
|
10
|
.9
|
|
Inverness Medical Innovations, Inc. 2001 Stock Option and
Incentive Plan, as amended (incorporated by reference to
Appendix A to the Companys Proxy Statement filed on
Schedule 14A as filed with the SEC on April 30, 2009)
|
|
10
|
.10
|
|
Alere Inc. 2010 Stock Option and Incentive Plan (incorporated by
reference to Exhibit 10.1 to the Companys Quarterly
Report on
Form 10-Q
for the period ended June 30, 2010)
|
|
10
|
.11
|
|
Rules of Alere Inc. HM Revenue and Customs Approved Share Option
Plan (2007), as amended (authorized for use under the Alere Inc.
2001 Stock Option and Incentive Plan and the Alere Inc. 2010
Stock Option and Incentive Plan) (incorporated by reference to
Exhibit 10.5 to the Companys Quarterly Report on
Form 10-Q
for the period ended June 30, 2010)
|
|
*10
|
.12
|
|
Summary of Terms of Stock Option Agreements under Alere Inc.
Stock Option Plans
|
|
10
|
.13
|
|
Summary of Non-Employee Director Compensation (incorporated by
reference to Exhibit 10.8 to the Companys Quarterly
Report on
Form 10-Q
for the period ended September 30, 2010)
|
|
10
|
.14
|
|
Inverness Medical Innovations, Inc. 2001 Employee Stock Purchase
Plan, as amended (incorporated by reference to Appendix B
to the Companys Proxy Statement filed on Schedule 14A
as filed with the SEC on April 30, 2009)
|
|
10
|
.15
|
|
Underwriting Agreement dated as of May 7, 2009 among
Inverness Medical Innovations, Inc., the subsidiary guarantors
named therein, UBS Securities LLC, Goldman, Sachs &
Co., and Banc of America Securities LLC, as representatives of
the several underwriters named in the Underwriting Agreement
(incorporated by reference to Exhibit 1.1 to the
Companys Current Report on
Form 8-K,
event date May 12, 2009, filed on May 12, 2009)
|
|
10
|
.16
|
|
Underwriting Agreement dated as of August 5, 2009 among
Inverness Medical Innovations, Inc., the subsidiary guarantors
named therein, Jefferies & Company, Inc., Goldman,
Sachs & Co., and Wells Fargo Securities, LLC as
representatives of the several underwriters named in the
Underwriting Agreement (incorporated by reference to
Exhibit 1.1 to the Companys Current Report on
Form 8-K,
event date August 11, 2009, filed on August 11, 2009)
|
|
10
|
.17
|
|
Purchase Agreement dated as of September 23, 2009 among
Inverness Medical Innovations, Inc., the Guarantors named
therein, Jefferies & Company, Inc., Goldman,
Sachs & Co., and Wells Fargo Securities, LLC
(incorporated by reference to Exhibit 1.1 to the
Companys Current Report on
Form 8-K,
event date September 28, 2009, filed on September 28,
2009)
|
|
10
|
.18
|
|
Purchase Agreement dated September 15, 2010 among Alere
Inc., the subsidiary guarantors named therein and
Jefferies & Company, Inc., Goldman, Sachs &
Co. and Citigroup Global Markets Inc., as Representatives of the
Initial Purchasers (incorporated by reference to
Exhibit 1.1 to the Companys Current Report on
Form 8-K,
event date September 15, 2010, filed with the SEC on
September 21, 2010)
|
|
10
|
.19
|
|
$1,050,000,000 First Lien Credit Agreement dated as of
June 26, 2007 among IM US HOLDINGS, LLC, as Borrower,
Inverness Medical Innovations, Inc, as Guarantor, The Lenders
and L/C Issuers Party Hereto General Electric Capital
Corporation, as Administrative Agent, Citizens Bank of
Massachusetts, Fifth Third Bank and Merrill Lynch Capital, a
division of Merrill Lynch Business Financial Services, Inc., as
Co-Documentation Agents and UBS Securities LLC, as Joint Lead
Arranger and Syndication Agent (incorporated by reference to
Exhibit 10.1 to the Companys Current Report on
Form 8-K,
event date June 26, 2007, filed on July 2, 2007)
|
|
10
|
.20
|
|
First Amendment to First Lien Credit Agreement dated as of
November 15, 2007 among IM US Holdings, LLC, as Borrower,
Inverness Medical Innovations, Inc., as a Guarantor, the Lenders
signatory hereto and General Electric Capital Corporation, as
collateral agent and administrative agent for the Lenders
(incorporated by reference to Exhibit 10.2 to the
Companys Current Report on
Form 8-K
dated November 20, 2007)
|
|
*10
|
.21
|
|
Second Amendment to First Lien Credit Agreement dated as of
December 17, 2009 among IM US Holdings, LLC, as Borrower,
Inverness Medical Innovations, Inc., as a Guarantor, the Lenders
signatory hereto and General Electric Capital Corporation, as
collateral agent and administrative agent for the Lenders
|
|
*10
|
.22
|
|
Third Amendment to First Lien Credit Agreement dated as of
December 7, 2010 among ALERE US HOLDINGS, LLC (f/k/a/ IM US
Holdings, LLC), as Borrower, Alere Inc.(f/k/a/ Inverness Medical
Innovations, Inc.), as a Guarantor, the Lenders signatory hereto
and General Electric Capital Corporation, as collateral agent
and administrative agent for the Lenders
|
65
|
|
|
|
|
|
10
|
.23
|
|
$250,000,000 Second Lien Credit Agreement dated as of
June 26, 2007 among IM US HOLDINGS, LLC, as Borrower,
Inverness Medical Innovations, Inc., as a Guarantor, The Lenders
General Electric Capital Corporation, as Administrative Agent
and UBS Securities LLC, as Syndication Agent, Joint Lead
Arranger and Sole Bookrunner (incorporated by reference to
Exhibit 10.2 to the Companys Current Report on
Form 8-K,
event date June 26, 2007, filed on July 2, 2007)
|
|
*10
|
.24
|
|
First Amendment to Second Lien Credit Agreement dated as of
December 17, 2009 among IM US Holdings, LLC, as Borrower,
Inverness Medical Innovations, Inc., as a Guarantor, the Lenders
signatory hereto and General Electric Capital Corporation, as
collateral agent and administrative agent for the Lenders
|
|
*10
|
.25
|
|
Second Amendment to Second Lien Credit Agreement dated as of
December 7, 2010 among ALERE US HOLDINGS, LLC (f/k/a IM US
Holdings, LLC), as Borrower, Alere, Inc. (f/k/a/ Inverness
Medical Innovations, Inc.), as a Guarantor, the Lenders
signatory hereto and General Electric Capital Corporation, as
collateral agent and administrative agent for the Lenders
|
|
10
|
.26
|
|
First Lien Guaranty And Security Agreement dated as of
June 26, 2007 among IM US HOLDINGS, LLC, as Borrower, and
Each Grantor and General Electric Capital Corporation, as
Administrative Agent (incorporated by reference to
Exhibit 10.3 to the Companys Current Report on
Form 8-K,
event date June 26, 2007, filed on July 2, 2007)
|
|
10
|
.27
|
|
Second Lien Guaranty And Security Agreement dated as of
June 26, 2007 among IM US HOLDINGS, LLC, as Borrower, and
Each Grantor and General Electric Capital Corporation, as
Administrative Agent (incorporated by reference to
Exhibit 10.4 to the Companys Current Report on
Form 8-K,
event date June 26, 2007, filed on July 2, 2007)
|
|
10
|
.28
|
|
Retention and severance agreement, dated November 18, 2009
between Alere LLC and Thomas Underwood (incorporated by
reference to Exhibit 10.32 to the Companys Annual Report
on
Form 10-K,
as amended, for the year ended December 31, 2009)
|
|
*10
|
.29
|
|
Letter Agreement, dated December 30, 2010, between Alere
Health, LLC and Thomas Underwood
|
|
*21
|
.1
|
|
List of Subsidiaries of the Company as of February 22, 2011
|
|
*23
|
.1
|
|
Consent of PricewaterhouseCoopers LLP, Independent Registered
Public Accounting Firm
|
|
*23
|
.2
|
|
Consent of BDO USA, LLP, Independent Registered Public
Accounting Firm
|
|
*31
|
.1
|
|
Certification by Chief Executive Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act
|
|
*31
|
.2
|
|
Certification by Chief Financial Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act
|
|
*32
|
.1
|
|
Certification Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
|
|
*101
|
|
|
Interactive Data Files regarding (a) our Consolidated
Statements of Operations for the Years Ended December 31,
2010, 2009 and 2008, (b) our Consolidated Balance Sheets as
of December 31, 2010 and 2009, (c) our Consolidated
Statements of Equity and Comprehensive Income (Loss) for the
Years Ended December 31, 2010, 2009 and 2008, (d) our
Consolidated Statements of Cash Flows for the Years Ended
December 31, 2010, 2009 and 2010 and (e) the Notes to
such Consolidated Financial Statements.
|
|
|
|
* |
|
Filed herewith. |
|
** |
|
The Company agrees to furnish supplementally to the Securities
and Exchange Commission (the Commission) a copy of
any omitted schedule or exhibit to this agreement upon request
by the Commission. |
|
+ |
|
We have omitted portions of this exhibit which have been granted
confidential treatment. |
|
|
|
Management contract or compensatory plan or arrangement, or
amendment thereto. |
66
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
ALERE INC.
Date: March 1, 2011
Ron Zwanziger
Chairman, Chief Executive Officer and President
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the Registrant and in the capacities and on the
dates indicated.
|
|
|
|
|
|
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
|
/s/ Ron
Zwanziger
Ron
Zwanziger
|
|
Chief Executive Officer, President and Director (Principal
Executive Officer)
|
|
March 1, 2011
|
|
|
|
|
|
/s/ David
Teitel
David
Teitel
|
|
Chief Financial Officer (Principal Financial Officer and
Principal Accounting Officer)
|
|
March 1, 2011
|
|
|
|
|
|
/s/ Eli
Y. Adashi, MD
Eli
Y. Adashi, MD
|
|
Director
|
|
March 1, 2011
|
|
|
|
|
|
/s/ Carol
R. Goldberg
Carol
R. Goldberg
|
|
Director
|
|
March 1, 2011
|
|
|
|
|
|
/s/ Robert
P. Khederian
Robert
P. Khederian
|
|
Director
|
|
March 1, 2011
|
|
|
|
|
|
John
F. Levy
|
|
Director
|
|
|
|
|
|
|
|
/s/ Jerry
McAleer
Jerry
McAleer
|
|
Director
|
|
March 1, 2011
|
|
|
|
|
|
/s/ John
A. Quelch
John
A. Quelch
|
|
Director
|
|
March 1, 2011
|
|
|
|
|
|
/s/ James
Roosevelt, Jr.
James
Roosevelt, Jr.
|
|
Director
|
|
March 1, 2011
|
|
|
|
|
|
David
Scott
|
|
Director
|
|
|
|
|
|
|
|
/s/ Peter
Townsend
Peter
Townsend
|
|
Director
|
|
March 1, 2011
|
67
ALERE
INC. AND SUBSIDIARIES
CONSOLIDATED
FINANCIAL STATEMENTS
Table of
Contents
|
|
|
|
|
Page
|
|
|
|
F-2
|
|
|
F-4
|
|
|
F-5
|
|
|
F-6
|
|
|
F-9
|
|
|
F-10
|
F-1
Report of
Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of Alere Inc.
In our opinion, the accompanying consolidated balance sheet and
the related consolidated statement of operations, statement of
equity and comprehensive income (loss) and cash flows present
fairly, in all material respects, the financial position of
Alere Inc. and its subsidiaries at December 31, 2010, and
the results of their operations and their cash flows for the
year ended December 31, 2010 in conformity with accounting
principles generally accepted in the United States of America.
Also in our opinion, the Company maintained, in all material
respects, effective internal control over financial reporting as
of December 31, 2010, based on criteria established in
Internal Control - Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission
(COSO). The Companys management is responsible for these
financial statements, for maintaining effective internal control
over financial reporting and for its assessment of the
effectiveness of internal control over financial reporting,
included in Managements Annual Report on Internal Control
over Financial Reporting appearing under Item 9A of Alere
Inc.s Annual Report on
Form 10-K.
Our responsibility is to express opinions on these financial
statements and on the Companys internal control over
financial reporting based on our integrated audit. We conducted
our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are
free of material misstatement and whether effective internal
control over financial reporting was maintained in all material
respects. Our audits of the financial statements included
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by
management, and evaluating the overall financial statement
presentation. Our audit of internal control over financial
reporting included obtaining an understanding of internal
control over financial reporting, assessing the risk that a
material weakness exists, and testing and evaluating the design
and operating effectiveness of internal control based on the
assessed risk. Our audits also included performing such other
procedures as we considered necessary in the circumstances. We
believe that our audits provide a reasonable basis for our
opinions.
A companys internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A companys
internal control over financial reporting includes those
policies and procedures that (i) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (ii) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the
company are being made only in accordance with authorizations of
management and directors of the company; and (iii) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
companys assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
As described in Managements Annual Report on Internal
Control over Financial Reporting appearing under Item 9A of
Alere Inc.s Annual Report on
Form 10-K,
management has excluded all entities acquired in purchase
business combinations during 2010 from its assessment of
internal control over financial reporting as of
December 31, 2010. We have also excluded these entities
acquired in purchase business combinations during 2010 from our
audit of internal control over financial reporting. The total
assets and net revenue of these entities represented
approximately 10% and 6%, respectively, of the related
consolidated financial statement amounts as of and for the year
ended December 31, 2010.
/s/ PricewaterhouseCoopers
LLP
Boston, Massachusetts
March 1, 2011
F-2
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholders of
Alere Inc.:
We have audited the accompanying consolidated balance sheet of
Alere Inc. (formerly known as Inverness Medical Innovations,
Inc.) (the Company) as of December 31, 2009,
and the related consolidated statements of operations, equity
and comprehensive income (loss), and cash flows for the years
ended December 31, 2009 and 2008. These consolidated
financial statements are the responsibility of the
Companys management. Our responsibility is to express an
opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the
consolidated financial position of Alere Inc. at
December 31, 2009, and the consolidated results of their
operations and their cash flows for each of the years ended
December 31, 2009 and 2008, in conformity with accounting
principles generally accepted in the United States of America.
As described in Note 2 of the financial statements, the
Company adopted the accounting standards related to Business
Combinations, effective for business combinations entered into
after January 1, 2009.
/s/ BDO USA, LLP
BDO USA, LLP (formerly known as BDO Seidman, LLP)
Boston, Massachusetts
February 26, 2010
F-3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Net product sales
|
|
$
|
1,472,403
|
|
|
$
|
1,365,079
|
|
|
$
|
1,151,265
|
|
Services revenue
|
|
|
662,185
|
|
|
|
528,487
|
|
|
|
405,462
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net product sales and services revenue
|
|
|
2,134,588
|
|
|
|
1,893,566
|
|
|
|
1,556,727
|
|
License and royalty revenue
|
|
|
20,759
|
|
|
|
29,075
|
|
|
|
25,826
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue
|
|
|
2,155,347
|
|
|
|
1,922,641
|
|
|
|
1,582,553
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of net product sales
|
|
|
688,325
|
|
|
|
619,503
|
|
|
|
543,317
|
|
Cost of services revenue
|
|
|
325,286
|
|
|
|
240,026
|
|
|
|
177,098
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of net product sales and services revenue
|
|
|
1,013,611
|
|
|
|
859,529
|
|
|
|
720,415
|
|
Cost of license and royalty revenue
|
|
|
7,149
|
|
|
|
8,890
|
|
|
|
8,620
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of net revenue
|
|
|
1,020,760
|
|
|
|
868,419
|
|
|
|
729,035
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
1,134,587
|
|
|
|
1,054,222
|
|
|
|
853,518
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
133,278
|
|
|
|
112,848
|
|
|
|
111,828
|
|
Sales and marketing
|
|
|
499,124
|
|
|
|
441,646
|
|
|
|
381,939
|
|
General and administrative
|
|
|
446,917
|
|
|
|
357,033
|
|
|
|
295,059
|
|
Goodwill impairment charge
|
|
|
1,006,357
|
|
|
|
|
|
|
|
|
|
Gain on disposition
|
|
|
|
|
|
|
(3,355
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
(951,089
|
)
|
|
|
146,050
|
|
|
|
64,692
|
|
Interest expense, including amortization of original issue
discounts and deferred financing costs
|
|
|
(139,435
|
)
|
|
|
(106,798
|
)
|
|
|
(101,132
|
)
|
Other income (expense), net
|
|
|
22,738
|
|
|
|
996
|
|
|
|
(1,807
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations before provision
(benefit) for income taxes
|
|
|
(1,067,786
|
)
|
|
|
40,248
|
|
|
|
(38,247
|
)
|
Provision (benefit) for income taxes
|
|
|
(29,931
|
)
|
|
|
15,627
|
|
|
|
(16,644
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations before equity
earnings of unconsolidated entities, net of tax
|
|
|
(1,037,855
|
)
|
|
|
24,621
|
|
|
|
(21,603
|
)
|
Equity earnings of unconsolidated entities, net of tax
|
|
|
10,566
|
|
|
|
7,626
|
|
|
|
1,050
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
|
(1,027,289
|
)
|
|
|
32,247
|
|
|
|
(20,553
|
)
|
Income (loss) from discontinued operations, net of tax
|
|
|
11,397
|
|
|
|
1,934
|
|
|
|
(1,048
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
(1,015,892
|
)
|
|
|
34,181
|
|
|
|
(21,601
|
)
|
Less: Net income attributable to non-controlling interests
|
|
|
1,418
|
|
|
|
465
|
|
|
|
167
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to Alere Inc. and
Subsidiaries
|
|
|
(1,017,310
|
)
|
|
|
33,716
|
|
|
|
(21,768
|
)
|
Preferred stock dividends
|
|
|
(24,235
|
)
|
|
|
(22,972
|
)
|
|
|
(13,989
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) available to common stockholders
|
|
$
|
(1,041,545
|
)
|
|
$
|
10,744
|
|
|
$
|
(35,757
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income (loss) per common share attributable to Alere
Inc. and Subsidiaries:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
$
|
(12.47
|
)
|
|
$
|
0.11
|
|
|
$
|
(0.45
|
)
|
Income (loss) from discontinued operations
|
|
|
0.14
|
|
|
|
0.02
|
|
|
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per common share
|
|
$
|
(12.33
|
)
|
|
$
|
0.13
|
|
|
$
|
(0.46
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net income (loss) per common share attributable to Alere
Inc. and Subsidiaries:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
$
|
(12.47
|
)
|
|
$
|
0.11
|
|
|
$
|
(0.45
|
)
|
Income (loss) from discontinued operations
|
|
|
0.14
|
|
|
|
0.02
|
|
|
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per common share
|
|
$
|
(12.33
|
)
|
|
$
|
0.13
|
|
|
$
|
(0.46
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares-basic
|
|
|
84,445
|
|
|
|
80,572
|
|
|
|
77,778
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares-diluted
|
|
|
84,445
|
|
|
|
81,967
|
|
|
|
77,778
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
F-4
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
ASSETS
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
401,306
|
|
|
$
|
492,773
|
|
Restricted cash
|
|
|
2,581
|
|
|
|
2,424
|
|
Marketable securities
|
|
|
2,094
|
|
|
|
947
|
|
Accounts receivable, net of allowances of $20,381 and $12,462 at
December 31, 2010 and
|
|
|
|
|
|
|
|
|
December 31, 2009, respectively
|
|
|
397,148
|
|
|
|
354,453
|
|
Inventories, net
|
|
|
257,720
|
|
|
|
221,539
|
|
Deferred tax assets
|
|
|
57,111
|
|
|
|
66,492
|
|
Income tax receivable
|
|
|
1,383
|
|
|
|
1,107
|
|
Prepaid expenses and other current assets
|
|
|
74,914
|
|
|
|
73,075
|
|
Assets held for sale
|
|
|
|
|
|
|
54,148
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
1,194,257
|
|
|
|
1,266,958
|
|
Property, plant and equipment, net
|
|
|
390,510
|
|
|
|
324,388
|
|
Goodwill
|
|
|
2,831,300
|
|
|
|
3,463,358
|
|
Other intangible assets with indefinite lives
|
|
|
28,183
|
|
|
|
43,644
|
|
Finite-lived intangible assets, net
|
|
|
1,707,581
|
|
|
|
1,686,427
|
|
Deferred financing costs, net, and other non-current assets
|
|
|
81,401
|
|
|
|
72,762
|
|
Investments in unconsolidated entities
|
|
|
62,556
|
|
|
|
63,965
|
|
Marketable securities
|
|
|
9,404
|
|
|
|
1,503
|
|
Deferred tax assets
|
|
|
25,182
|
|
|
|
20,987
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
6,330,374
|
|
|
$
|
6,943,992
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND EQUITY
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Current portion of long-term debt
|
|
$
|
16,891
|
|
|
$
|
18,970
|
|
Current portion of capital lease obligations
|
|
|
2,126
|
|
|
|
899
|
|
Accounts payable
|
|
|
126,844
|
|
|
|
126,322
|
|
Accrued expenses and other current liabilities
|
|
|
345,832
|
|
|
|
279,732
|
|
Payable to joint venture, net
|
|
|
2,787
|
|
|
|
533
|
|
Deferred gain on joint venture
|
|
|
288,378
|
|
|
|
|
|
Liabilities related to assets held for sale
|
|
|
|
|
|
|
11,558
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
782,858
|
|
|
|
438,014
|
|
|
|
|
|
|
|
|
|
|
Long-term liabilities:
|
|
|
|
|
|
|
|
|
Long-term debt, net of current portion
|
|
|
2,378,566
|
|
|
|
2,128,515
|
|
Capital lease obligations, net of current portion
|
|
|
1,402
|
|
|
|
940
|
|
Deferred tax liabilities
|
|
|
420,166
|
|
|
|
442,049
|
|
Deferred gain on joint venture
|
|
|
|
|
|
|
288,767
|
|
Other long-term liabilities
|
|
|
169,656
|
|
|
|
116,818
|
|
|
|
|
|
|
|
|
|
|
Total long-term liabilities
|
|
|
2,969,790
|
|
|
|
2,977,089
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies (Notes 8, 9 and 11)
|
|
|
|
|
|
|
|
|
Stockholders equity:
|
|
|
|
|
|
|
|
|
Series B preferred stock, $0.001 par value
(liquidation preference: $836,222 at December 31, 2010 and
$793,696 at December 31, 2009); Authorized:
2,300 shares; Issued and outstanding: 2,091 shares at
December 31, 2010 and 1,984 shares at
December 31, 2009
|
|
|
718,554
|
|
|
|
694,427
|
|
Common stock, $0.001 par value;
|
|
|
|
|
|
|
|
|
Authorized: 200,000 shares;
|
|
|
|
|
|
|
|
|
Issued and outstanding: 84,928 shares at December 31,
2010 and 83,567 at December 31, 2009
|
|
|
85
|
|
|
|
84
|
|
Additional paid-in capital
|
|
|
3,232,893
|
|
|
|
3,195,372
|
|
Accumulated deficit
|
|
|
(1,377,184
|
)
|
|
|
(359,874
|
)
|
Accumulated other comprehensive income (loss)
|
|
|
690
|
|
|
|
(2,454
|
)
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
2,575,038
|
|
|
|
3,527,555
|
|
Non-controlling interests
|
|
|
2,688
|
|
|
|
1,334
|
|
|
|
|
|
|
|
|
|
|
Total equity
|
|
|
2,577,726
|
|
|
|
3,528,889
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity
|
|
$
|
6,330,374
|
|
|
$
|
6,943,992
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
F-5
ALERE
INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY AND COMPREHENSIVE INCOME
(LOSS)
(in thousands, except par value amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred Stock
|
|
|
|
|
|
$0.001
|
|
|
Additional
|
|
|
|
|
|
Other
|
|
|
Total
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
Number of
|
|
|
|
|
|
Number of
|
|
|
Par
|
|
|
Paid-in
|
|
|
Accumulated
|
|
|
Comprehensive
|
|
|
Stockholders
|
|
|
Non-controlling
|
|
|
Total
|
|
|
Comprehensive
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Value
|
|
|
Capital
|
|
|
Deficit
|
|
|
Income (Loss)
|
|
|
Equity
|
|
|
Interest
|
|
|
Equity
|
|
|
Loss
|
|
|
BALANCE, DECEMBER 31, 2007
|
|
|
|
|
|
$
|
|
|
|
|
76,789
|
|
|
$
|
77
|
|
|
$
|
2,937,143
|
|
|
$
|
(371,822
|
)
|
|
$
|
21,269
|
|
|
$
|
2,586,667
|
|
|
$
|
869
|
|
|
$
|
2,587,536
|
|
|
|
|
|
Issuance of Series B preferred stock in connection with
acquisition of Matria Healthcare, Inc., net of issuance costs of
$350
|
|
|
1,788
|
|
|
|
657,573
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
657,573
|
|
|
|
|
|
|
|
657,573
|
|
|
|
|
|
Issuance of common stock in connection with acquisitions, net of
issuance costs of $219
|
|
|
|
|
|
|
|
|
|
|
580
|
|
|
|
|
|
|
|
20,945
|
|
|
|
|
|
|
|
|
|
|
|
20,945
|
|
|
|
|
|
|
|
20,945
|
|
|
|
|
|
Exercise of common stock options, warrants and shares issued
under employee stock purchase plan
|
|
|
|
|
|
|
|
|
|
|
1,062
|
|
|
|
1
|
|
|
|
20,712
|
|
|
|
|
|
|
|
|
|
|
|
20,713
|
|
|
|
|
|
|
|
20,713
|
|
|
|
|
|
Preferred stock dividends
|
|
|
91
|
|
|
|
13,928
|
|
|
|
|
|
|
|
|
|
|
|
(14,026
|
)
|
|
|
|
|
|
|
|
|
|
|
(98
|
)
|
|
|
|
|
|
|
(98
|
)
|
|
|
|
|
Fair value associated with options exchanged in acquisitions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,973
|
|
|
|
|
|
|
|
|
|
|
|
20,973
|
|
|
|
|
|
|
|
20,973
|
|
|
|
|
|
Stock-based compensation related to grants of common stock
options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,405
|
|
|
|
|
|
|
|
|
|
|
|
26,405
|
|
|
|
|
|
|
|
26,405
|
|
|
|
|
|
Stock option income tax benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,542
|
|
|
|
|
|
|
|
|
|
|
|
17,542
|
|
|
|
|
|
|
|
17,542
|
|
|
|
|
|
Minimum pension liability adjustment, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(562
|
)
|
|
|
(562
|
)
|
|
|
|
|
|
|
(562
|
)
|
|
$
|
(562
|
)
|
Changes in cumulative translation adjustment, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(32,889
|
)
|
|
|
(32,889
|
)
|
|
|
|
|
|
|
(32,889
|
)
|
|
|
(32,889
|
)
|
Unrealized loss on interest rate swap, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(11,614
|
)
|
|
|
(11,614
|
)
|
|
|
|
|
|
|
(11,614
|
)
|
|
|
(11,614
|
)
|
Unrealized loss on
available-for-sale
securities, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,049
|
)
|
|
|
(5,049
|
)
|
|
|
|
|
|
|
(5,049
|
)
|
|
|
(5,049
|
)
|
Earnings associated with non-controlling interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
167
|
|
|
|
167
|
|
|
|
|
|
Acquisition of non-controlling interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(167
|
)
|
|
|
(167
|
)
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(21,768
|
)
|
|
|
|
|
|
|
(21,768
|
)
|
|
|
|
|
|
|
(21,768
|
)
|
|
|
(21,768
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(71,882
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE, DECEMBER 31, 2008
|
|
|
1,879
|
|
|
$
|
671,501
|
|
|
|
78,431
|
|
|
$
|
78
|
|
|
$
|
3,029,694
|
|
|
$
|
(393,590
|
)
|
|
$
|
(28,845
|
)
|
|
$
|
3,278,838
|
|
|
$
|
869
|
|
|
$
|
3,279,707
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
F-6
ALERE
INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF EQUITY AND COMPREHENSIVE INCOME (LOSS)
(Continued)
(in thousands, except par value amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred Stock
|
|
|
|
|
|
$0.001
|
|
|
Additional
|
|
|
|
|
|
Other
|
|
|
Total
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
Number of
|
|
|
|
|
|
Number of
|
|
|
Par
|
|
|
Paid-in
|
|
|
Accumulated
|
|
|
Comprehensive
|
|
|
Stockholders
|
|
|
Non-controlling
|
|
|
Total
|
|
|
Comprehensive
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Value
|
|
|
Capital
|
|
|
Deficit
|
|
|
(Loss)
|
|
|
Equity
|
|
|
Interest
|
|
|
Equity
|
|
|
Income
|
|
|
BALANCE, DECEMBER 31, 2008
|
|
|
1,879
|
|
|
$
|
671,501
|
|
|
|
78,431
|
|
|
$
|
78
|
|
|
$
|
3,029,694
|
|
|
$
|
(393,590
|
)
|
|
$
|
(28,845
|
)
|
|
$
|
3,278,838
|
|
|
$
|
869
|
|
|
$
|
3,279,707
|
|
|
|
|
|
Issuance of common stock and warrants in connection with
acquisitions
|
|
|
|
|
|
|
|
|
|
|
3,431
|
|
|
|
4
|
|
|
|
117,815
|
|
|
|
|
|
|
|
|
|
|
|
117,819
|
|
|
|
|
|
|
|
117,819
|
|
|
|
|
|
Exercise of common stock options, warrants and shares issued
under employee stock purchase plan
|
|
|
|
|
|
|
|
|
|
|
1,705
|
|
|
|
2
|
|
|
|
30,013
|
|
|
|
|
|
|
|
|
|
|
|
30,015
|
|
|
|
|
|
|
|
30,015
|
|
|
|
|
|
Preferred stock dividends
|
|
|
105
|
|
|
|
22,926
|
|
|
|
|
|
|
|
|
|
|
|
(23,079
|
)
|
|
|
|
|
|
|
|
|
|
|
(153
|
)
|
|
|
|
|
|
|
(153
|
)
|
|
|
|
|
Fair value associated with options exchanged in acquisitions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,881
|
|
|
|
|
|
|
|
|
|
|
|
2,881
|
|
|
|
|
|
|
|
2,881
|
|
|
|
|
|
Stock-based compensation related to grants of common stock
options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28,220
|
|
|
|
|
|
|
|
|
|
|
|
28,220
|
|
|
|
|
|
|
|
28,220
|
|
|
|
|
|
Stock option income tax benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,828
|
|
|
|
|
|
|
|
|
|
|
|
9,828
|
|
|
|
|
|
|
|
9,828
|
|
|
|
|
|
Minimum pension liability adjustment, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,137
|
)
|
|
|
(1,137
|
)
|
|
|
|
|
|
|
(1,137
|
)
|
|
$
|
(1,137
|
)
|
Changes in cumulative translation adjustment, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,171
|
|
|
|
15,171
|
|
|
|
|
|
|
|
15,171
|
|
|
|
15,171
|
|
Unrealized gain on interest rate swap, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,389
|
|
|
|
11,389
|
|
|
|
|
|
|
|
11,389
|
|
|
|
11,389
|
|
Unrealized gain on
available-for-sale
securities, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
968
|
|
|
|
968
|
|
|
|
|
|
|
|
968
|
|
|
|
968
|
|
Earnings associated with non-controlling interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
465
|
|
|
|
465
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33,716
|
|
|
|
|
|
|
|
33,716
|
|
|
|
|
|
|
|
33,716
|
|
|
|
33,716
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
60,107
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE, DECEMBER 31, 2009
|
|
|
1,984
|
|
|
$
|
694,427
|
|
|
|
83,567
|
|
|
$
|
84
|
|
|
$
|
3,195,372
|
|
|
$
|
(359,874
|
)
|
|
$
|
(2,454
|
)
|
|
$
|
3,527,555
|
|
|
$
|
1,334
|
|
|
$
|
3,528,889
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
F-7
ALERE
INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY AND COMPREHENSIVE INCOME
(LOSS)
(Continued)
(in thousands, except par value amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred Stock
|
|
|
|
|
|
$0.001
|
|
|
Additional
|
|
|
|
|
|
Other
|
|
|
Total
|
|
|
|
|
|
|
|
|
Redeemable
|
|
|
Total
|
|
|
|
Number of
|
|
|
|
|
|
Number of
|
|
|
Par
|
|
|
Paid-in
|
|
|
Accumulated
|
|
|
Comprehensive
|
|
|
Stockholders
|
|
|
Non-controlling
|
|
|
Total
|
|
|
Non-controlling
|
|
|
Comprehensive
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Value
|
|
|
Capital
|
|
|
Deficit
|
|
|
Income (Loss)
|
|
|
Equity
|
|
|
Interest
|
|
|
Equity
|
|
|
Interest
|
|
|
Loss
|
|
|
BALANCE, DECEMBER 31, 2009
|
|
|
1,984
|
|
|
$
|
694,427
|
|
|
|
83,567
|
|
|
$
|
84
|
|
|
$
|
3,195,372
|
|
|
$
|
(359,874
|
)
|
|
$
|
(2,454
|
)
|
|
$
|
3,527,555
|
|
|
$
|
1,334
|
|
|
$
|
3,528,889
|
|
|
$
|
|
|
|
|
|
|
Issuance of common stock and warrants in connection with
acquisitions
|
|
|
|
|
|
|
|
|
|
|
536
|
|
|
|
|
|
|
|
16,276
|
|
|
|
|
|
|
|
|
|
|
|
16,276
|
|
|
|
|
|
|
|
16,276
|
|
|
|
|
|
|
|
|
|
Exercise of common stock options, warrants and shares issued
under employee stock purchase plan
|
|
|
|
|
|
|
|
|
|
|
825
|
|
|
|
1
|
|
|
|
19,024
|
|
|
|
|
|
|
|
|
|
|
|
19,025
|
|
|
|
|
|
|
|
19,025
|
|
|
|
|
|
|
|
|
|
Preferred stock dividends
|
|
|
107
|
|
|
|
24,127
|
|
|
|
|
|
|
|
|
|
|
|
(24,279
|
)
|
|
|
|
|
|
|
|
|
|
|
(152
|
)
|
|
|
|
|
|
|
(152
|
)
|
|
|
|
|
|
|
|
|
Stock-based compensation related to grants of common stock
options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29,879
|
|
|
|
|
|
|
|
|
|
|
|
29,879
|
|
|
|
|
|
|
|
29,879
|
|
|
|
|
|
|
|
|
|
Stock option income tax benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
789
|
|
|
|
|
|
|
|
|
|
|
|
789
|
|
|
|
|
|
|
|
789
|
|
|
|
|
|
|
|
|
|
Minimum pension liability adjustment, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(113
|
)
|
|
|
(113
|
)
|
|
|
|
|
|
|
(113
|
)
|
|
|
|
|
|
$
|
(113
|
)
|
Changes in cumulative translation adjustment, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(210
|
)
|
|
|
(210
|
)
|
|
|
|
|
|
|
(210
|
)
|
|
|
|
|
|
|
(210
|
)
|
Unrealized gain on interest rate swap, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,423
|
|
|
|
2,423
|
|
|
|
|
|
|
|
2,423
|
|
|
|
|
|
|
|
2,423
|
|
Unrealized gain on
available-for-sale
securities, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,044
|
|
|
|
1,044
|
|
|
|
|
|
|
|
1,044
|
|
|
|
|
|
|
|
1,044
|
|
Acquisition of non-controlling interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,168
|
)
|
|
|
|
|
|
|
|
|
|
|
(4,168
|
)
|
|
|
1,251
|
|
|
|
(2,917
|
)
|
|
|
(1,315
|
)
|
|
|
|
|
Redeemable non-controlling interest in subsidiaries income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,315
|
)
|
|
|
(1,315
|
)
|
|
|
1,315
|
|
|
|
|
|
Net income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,017,310
|
)
|
|
|
|
|
|
|
(1,017,310
|
)
|
|
|
1,418
|
|
|
|
(1,015,892
|
)
|
|
|
|
|
|
|
(1,017,310
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(1,014,166
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE, DECEMBER 31, 2010
|
|
|
2,091
|
|
|
$
|
718,554
|
|
|
|
84,928
|
|
|
$
|
85
|
|
|
$
|
3,232,893
|
|
|
$
|
(1,377,184
|
)
|
|
$
|
690
|
|
|
$
|
2,575,038
|
|
|
$
|
2,688
|
|
|
$
|
2,577,726
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
F-8
ALERE
INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For The Year Ended December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Cash Flows from Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(1,015,892
|
)
|
|
$
|
34,181
|
|
|
$
|
(21,601
|
)
|
Income (loss) from discontinued operations, net of tax
|
|
|
11,397
|
|
|
|
1,934
|
|
|
|
(1,048
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
|
(1,027,289
|
)
|
|
|
32,247
|
|
|
|
(20,553
|
)
|
Adjustments to reconcile income (loss) from continuing
operations to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash interest expense including amortization of original
issue discounts and write-off of deferred financing costs
|
|
|
13,758
|
|
|
|
10,423
|
|
|
|
5,930
|
|
Depreciation and amortization
|
|
|
372,790
|
|
|
|
312,435
|
|
|
|
265,654
|
|
Non-cash stock-based compensation expense
|
|
|
29,879
|
|
|
|
28,220
|
|
|
|
26,405
|
|
Impairment of inventory
|
|
|
848
|
|
|
|
1,467
|
|
|
|
4,193
|
|
Impairment of long-lived assets
|
|
|
1,411
|
|
|
|
6,983
|
|
|
|
20,031
|
|
Impairment of goodwill
|
|
|
1,006,357
|
|
|
|
|
|
|
|
|
|
Loss on sale of fixed assets
|
|
|
998
|
|
|
|
1,205
|
|
|
|
777
|
|
Gain on sale of marketable securities
|
|
|
(4,504
|
)
|
|
|
|
|
|
|
|
|
Equity earnings of unconsolidated entities, net of tax
|
|
|
(10,566
|
)
|
|
|
(7,626
|
)
|
|
|
(1,050
|
)
|
Deferred income taxes
|
|
|
(74,418
|
)
|
|
|
(9,124
|
)
|
|
|
(41,714
|
)
|
Other non-cash items
|
|
|
3,802
|
|
|
|
3,264
|
|
|
|
4,378
|
|
Changes in assets and liabilities, net of acquisitions:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable, net
|
|
|
(9,360
|
)
|
|
|
(36,455
|
)
|
|
|
(39,546
|
)
|
Inventories, net
|
|
|
(22,845
|
)
|
|
|
(16,425
|
)
|
|
|
(41,945
|
)
|
Prepaid expenses and other current assets
|
|
|
8,310
|
|
|
|
9,081
|
|
|
|
(7,386
|
)
|
Accounts payable
|
|
|
(9,088
|
)
|
|
|
2,117
|
|
|
|
7,193
|
|
Accrued expenses and other current liabilities
|
|
|
22,202
|
|
|
|
(45,445
|
)
|
|
|
(29,091
|
)
|
Other non-current liabilities
|
|
|
(27,452
|
)
|
|
|
(2,709
|
)
|
|
|
3,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by continuing operations
|
|
|
274,833
|
|
|
|
289,658
|
|
|
|
156,676
|
|
Net cash provided by (used in) by discontinued operations
|
|
|
591
|
|
|
|
(2,127
|
)
|
|
|
(8,832
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
275,424
|
|
|
|
287,531
|
|
|
|
147,844
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property, plant and equipment
|
|
|
(96,241
|
)
|
|
|
(100,606
|
)
|
|
|
(65,699
|
)
|
Proceeds from sale of property, plant and equipment
|
|
|
795
|
|
|
|
803
|
|
|
|
1,070
|
|
Cash paid for acquisitions and transaction costs, net of cash
acquired
|
|
|
(523,507
|
)
|
|
|
(468,527
|
)
|
|
|
(649,899
|
)
|
Decrease in marketable securities
|
|
|
3,182
|
|
|
|
|
|
|
|
|
|
Net cash received from equity method investments
|
|
|
12,354
|
|
|
|
12,560
|
|
|
|
12,133
|
|
Increase in other assets
|
|
|
(12,900
|
)
|
|
|
(27,720
|
)
|
|
|
(10,500
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in continuing operations
|
|
|
(616,317
|
)
|
|
|
(583,490
|
)
|
|
|
(712,895
|
)
|
Net cash provided by (used in) discontinued operations
|
|
|
62,596
|
|
|
|
(237
|
)
|
|
|
(437
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(553,721
|
)
|
|
|
(583,727
|
)
|
|
|
(713,332
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in restricted cash
|
|
|
(141
|
)
|
|
|
418
|
|
|
|
139,204
|
|
Issuance costs associated with preferred stock
|
|
|
|
|
|
|
|
|
|
|
(350
|
)
|
Cash paid for financing costs
|
|
|
(13,045
|
)
|
|
|
(17,756
|
)
|
|
|
(1,401
|
)
|
Proceeds from issuance of common stock, net of issuance costs
|
|
|
19,024
|
|
|
|
30,015
|
|
|
|
20,675
|
|
Proceeds on long-term debt
|
|
|
400,000
|
|
|
|
631,177
|
|
|
|
|
|
Repayment on long-term debt
|
|
|
(9,750
|
)
|
|
|
(11,055
|
)
|
|
|
(13,787
|
)
|
Net proceeds (repayments) from revolving
lines-of-credit
|
|
|
(146,781
|
)
|
|
|
(7,251
|
)
|
|
|
137,242
|
|
Excess tax benefit on exercised stock options
|
|
|
1,683
|
|
|
|
9,269
|
|
|
|
17,542
|
|
Principal payments of capital lease obligations
|
|
|
(1,867
|
)
|
|
|
(798
|
)
|
|
|
(958
|
)
|
Purchase of non-controlling interest
|
|
|
(52,864
|
)
|
|
|
|
|
|
|
|
|
Other
|
|
|
(141
|
)
|
|
|
(153
|
)
|
|
|
(56
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by continuing operations
|
|
|
196,118
|
|
|
|
633,866
|
|
|
|
298,111
|
|
Net cash used in discontinued operations
|
|
|
|
|
|
|
(12
|
)
|
|
|
(342
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
196,118
|
|
|
|
633,854
|
|
|
|
297,769
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange effect on cash and cash equivalents
|
|
|
(9,288
|
)
|
|
|
13,791
|
|
|
|
(5,689
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
(91,467
|
)
|
|
|
351,449
|
|
|
|
(273,408
|
)
|
Cash and cash equivalents, beginning of period
|
|
|
492,773
|
|
|
|
141,324
|
|
|
|
414,732
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period
|
|
$
|
401,306
|
|
|
$
|
492,773
|
|
|
$
|
141,324
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
F-9
ALERE
INC. AND SUBSIDIARIES
|
|
(1)
|
Description
of Business and Basis of Presentation
|
By developing new capabilities in near-patient diagnosis,
monitoring and health management, Alere Inc. and subsidiaries
enable individuals to take charge of improving their health and
quality of life at home under medical supervision. Our global
leading products and services, as well as our new product
development efforts, focus on cardiology, womens health,
infectious disease, oncology and toxicology.
Our business is organized into three primary operating segments:
(i) professional diagnostics, (ii) health management
and (iii) consumer diagnostics. The professional
diagnostics segment includes an array of innovative rapid
diagnostic test products and other in vitro diagnostic
tests marketed to medical professionals and laboratories for
detection of diseases and conditions within our areas of focus
identified above. The health management segment provides
comprehensive, integrated programs and services focused on
wellness, disease and condition management, productivity
enhancement and informatics, all designed to reduce
health-related costs and enhance the health and quality of life
of the individuals we serve. The consumer diagnostics segment
consists primarily of manufacturing operations related to our
role as the exclusive manufacturer of products for SPD Swiss
Precision Diagnostics, or SPD, our 50/50 joint venture with The
Procter & Gamble Company, or P&G. SPD has
significant operations in the worldwide
over-the-counter
pregnancy and fertility/ovulation test market.
On January 15, 2010, we completed the sale of our vitamins
and nutritional supplements business (Note 23). The sale
included our entire private label and branded nutritionals
businesses and represents the complete divestiture of our entire
vitamins and nutritional supplements business segment. The
results of the vitamins and nutritional supplements business are
included in income (loss) from discontinued operations, net of
tax, for all periods presented. The assets and liabilities
associated with the vitamins and nutritional supplements
business have been reclassified to assets held for sale and
liabilities related to assets held for sale as of
December 31, 2009 on our accompanying consolidated balance
sheet.
Acquisitions are an important part of our growth strategy. When
we acquire businesses, we seek to complement existing products
and services, enhance or expand our product lines
and/or
expand our customer base. We determine what we are willing to
pay for each acquisition partially based on our expectation that
we can cost effectively integrate the products and services of
the acquired companies into our existing infrastructure. In
addition, we utilize existing infrastructure of the acquired
companies to cost effectively introduce our products to new
geographic areas. All of these factors contributed to the
acquisition prices of acquired businesses that were in excess of
the fair value of net assets acquired and the resultant goodwill
(Note 4).
Following the completion of our 50/50 joint venture with
P&G on May 17, 2007, we ceased to consolidate the
operating results of our consumer diagnostics business, and
instead account for our 50% interest in the results of the joint
venture under the equity method of accounting. In our capacity
as the manufacturer of products for the joint venture, we supply
product to the joint venture and record revenue on those sales.
No gain on the proceeds that we received from P&G through
the formation of our joint venture will be recognized in our
financial statements until P&Gs option to require us
to purchase its interest in the joint venture at market value
expires after the fourth anniversary of the closing.
The consolidated financial statements include the accounts of
Alere Inc. and its subsidiaries. Intercompany transactions and
balances are eliminated and net earnings are reduced by the
portion of the net earnings of subsidiaries applicable to
non-controlling interests. Equity investments in which we
exercise significant influence but do not control and are not
the primary beneficiary are accounted for using the equity
method. Investments in which we are not able to exercise
significant influence over the investee and which do not have
readily determinable fair values are accounted for under the
cost method.
Certain amounts for prior periods have been reclassified to
conform to the current period classification.
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(a) Use of Estimates
To prepare our financial statements in conformity with
accounting principles generally accepted in the United States of
America, our management must make estimates and assumptions that
affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and
expenses during the reporting period. Actual results could
differ significantly from such estimates.
(b) Foreign Currencies
In general, the functional currencies of our foreign
subsidiaries are the local currencies. For purpose of
consolidating the financial statements of our foreign
subsidiaries, all assets and liabilities of the foreign
subsidiaries are translated into U.S. dollars using the
exchange rate at each balance sheet date while the
stockholders equity accounts are translated at historical
exchange rates. Translation gains and losses that result from
the conversion of the balance sheets of the foreign subsidiaries
into U.S. dollars are recorded to cumulative translation
adjustment which is a component of accumulated other
comprehensive income within stockholders equity
(Note 15). The revenue and expenses of our foreign
subsidiaries are translated using the average rates of exchange
in effect during each fiscal month during the year.
Net realized and unrealized foreign currency exchange
transaction gains of $9.8 million during 2010,
$1.3 million during 2009 and losses of $0.5 million
during 2008, are included as a component of other income
(expense), net in the accompanying consolidated statements of
operations.
(c) Cash and Cash Equivalents
We consider all highly-liquid investments purchased with
original maturities of three months or less at the date of
acquisition to be cash equivalents. Cash equivalents consisted
of money market funds at December 31, 2010 and 2009.
(d) Restricted Cash
We had restricted cash of $2.6 million and
$2.4 million as of December 31, 2010 and 2009,
respectively.
(e) Marketable Securities
Securities classified as
available-for-sale
or trading are carried at estimated fair value, as determined by
quoted market prices at the balance sheet date. Realized gains
and losses on securities are included in earnings and are
determined using the specific identification method. Unrealized
holding gains and losses (except for other than temporary
impairments) on securities classified as available for sale, are
excluded from earnings and are reported in accumulated other
comprehensive income, net of related tax effects. Unrealized
gains and losses on actively-traded securities are included in
earnings. Marketable securities that are held indefinitely are
classified in our accompanying consolidated balance sheets as
long-term marketable securities.
(f) Inventories
Inventories are stated at the lower of cost
(first-in,
first-out) or market and made up of raw material,
work-in-process
and finished goods. The cost elements of
work-in-process
and finished goods inventory consist of raw material, direct
labor and manufacturing overhead. Where finished goods inventory
is purchased from third-party manufacturers, the costs of such
finished goods inventory represent the costs to acquire such
inventory.
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(g) Property, Plant and Equipment
We record property, plant and equipment at historical cost or,
in the case of a business combination, at fair value on the date
of the business combination. Depreciation is computed using the
straight-line method based on the following estimated useful
lives of the related assets: machinery, laboratory equipment and
tooling, 2-25 years; buildings, 7-55 years; leasehold
improvements, lesser of remaining term of lease or estimated
useful life of asset; computer software and equipment,
1-25 years and furniture and fixtures,
2-25 years.
Land is not depreciated. Depreciation expense related to
property, plant and equipment amounted to $67.7 million,
$54.3 million and $49.7 million in 2010, 2009 and
2008, respectively. Expenditures for repairs and maintenance are
expensed as incurred.
(h) Goodwill and Other Intangible Assets with Indefinite
Lives
In accordance with Accounting Standards Codification, or ASC 350
Intangibles Goodwill and Other, or
ASC 350, we test goodwill and other intangible
assets with indefinite lives at the reporting unit level for
impairment on an annual basis and between annual tests, if
events and circumstances indicate it is more likely than not
that the fair value of a reporting unit is less than its
carrying value. Events that would indicate impairment and
trigger an interim impairment assessment include, but are not
limited to, current economic and market conditions, including a
decline in market capitalization, a significant adverse change
in legal factors, business climate or operational performance of
the business and an adverse action or assessment by a regulator.
In performing the impairment test, we utilize the two-step
approach prescribed under ASC 350. The first step requires
a comparison of the carrying value of each reporting unit to its
estimated fair value. To estimate the fair value of our
reporting units for Step 1, we use a combination of the income
approach and the market approach. The income approach is based
on a discounted cash flow analysis, or DCF, and calculates the
fair value by estimating the after-tax cash flows attributable
to a reporting unit and then discounting the after-tax cash
flows to a present value, using a risk-adjusted discount rate.
Assumptions used in the DCF require the exercise of significant
judgment, including judgment about appropriate discount rates
and terminal values, growth rates and the amount and timing of
expected future cash flows. The forecasted cash flows are based
on our most recent budget and for years beyond the budget, our
estimates are based on assumed growth rates. We believe our
assumptions are consistent with the plans and estimates used to
manage the underlying businesses. The discount rates, which are
intended to reflect the risks inherent in future cash flow
projections, used in the DCF are based on estimates of the
weighted-average cost of capital, or WACC, of market
participants relative to each respective reporting unit. The
market approach considers comparable market data based on
multiples of revenue or earnings before taxes, depreciation and
amortization, or EBITDA.
If the carrying value of a reporting unit exceeds its estimated
fair value, we are required to perform the second step of the
goodwill impairment test to measure the amount of impairment
loss, if any. The second step of the goodwill impairment test
compares the implied fair value of a reporting units
goodwill to its carrying value. The implied fair value of
goodwill is derived by performing a hypothetical purchase price
allocation for the reporting unit as of the measurement date,
allocating the reporting units estimated fair value to its
assets and liabilities. The residual amount from performing this
allocation represents the implied fair value of goodwill. To the
extent this amount is below the carrying value of goodwill, an
impairment charge is recorded.
We conducted our annual impairment test for our reporting units
during the fourth quarter of 2010. Key assumptions (which vary
by reporting unit) used in determining fair value under the
discounted cash flow approach included discount rates ranging
from 12.5% to 13.0%, projected compound average revenue growth
rates of 6.0% to 10.0% and terminal value growth rates of 4.0%.
In determining the appropriate discount rate, we considered the
weighted-average cost of capital for each reporting unit, which
among other factors
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considers the cost of common equity capital and the marginal
cost of debt of market participants. Key assumptions (which
again vary by reporting unit) used in determining fair value
under the market approach were based on observed market
multiples of enterprise value to revenue and EBITDA for both
comparable publicly-traded companies and recent merger and
acquisition transactions involving similar companies to estimate
appropriate controlling basis multiples to apply to each of the
reporting units. Based on the multiples implied by this market
data, we selected multiples of revenue of 1.0 to 2.8 times and
multiples of EBITDA of 7.5 to 10.0 times. In assessing the
reasonableness of our estimated fair values of the reporting
units, management compared the results of the valuation analyses
against our then-current market capitalization to imply a
control premium. Based on this analysis, the implied control
premium was within the range of comparable industry transactions.
The Step 1 impairment analysis indicated that the carrying value
of the net assets of our Health Management reporting unit
exceeded the estimated fair value of the reporting unit. As a
result, we were required to perform Step 2 of the goodwill
impairment test to determine the amount, if any, of goodwill
impairment charges for the Health Management reporting unit. We
completed Step 2, consistent with the procedures described
above, and determined that a goodwill impairment charge in the
amount of approximately $1.0 billion was required. The
resulting goodwill impairment charge is reflected in operating
income (loss) in our accompanying consolidated statements of
operations.
The estimate of fair value requires significant judgment. We
based our fair value estimates on assumptions that we believe to
be reasonable but that are unpredictable and inherently
uncertain, including estimates of future growth rates and
operating margins and assumptions about the overall economic
climate and the competitive environment for our business units.
There can be no assurance that our estimates and assumptions
made for purposes of our goodwill and identifiable intangible
asset testing as of the time of testing will prove to be
accurate predictions of the future. If our assumptions regarding
business plans, competitive environments or anticipated growth
rates are not correct, we may be required to record goodwill
and/or
intangible asset impairment charges in future periods, whether
in connection with our next annual impairment testing or
earlier, if an indicator of an impairment is present before our
next annual evaluation.
Impairment charges related to goodwill have no impact on our
cash balances or compliance with financial covenants under our
Amended and Restated Credit Agreement.
(i) Impairment of Other Long-Lived Tangible and
Intangible Assets
We evaluate long-lived tangible and intangible assets whenever
events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. If indicators of
impairment are present with respect to long-lived tangible and
intangible assets used in operations and undiscounted future
cash flows are not expected to be sufficient to recover the
assets carrying amount, additional analysis is performed
as appropriate and the carrying value of the long-lived asset is
reduced to the estimated fair value, if this is lower, and an
impairment loss would be charged to expense in the period the
impairment is identified.
We conducted our annual goodwill impairment test for our
reporting units during the fourth quarter of 2010. The
impairment test indicated there was an impairment of goodwill
associated with our health management reporting unit, and thus,
a potential impairment of our long-lived tangible and intangible
assets associated with the same reporting unit. We conducted an
analysis as prescribed under ASC 360 Property, Plant and
Equipment, utilizing an undiscounted cash flow model at the
lowest level of independent cash flows. The analysis indicated
there was no impairment of the long-lived tangible or intangible
assets associated with our health management reporting unit.
Although we believe that the carrying value of our long-lived
tangible and intangible assets was realizable as of
December 31, 2010, future events could cause us to conclude
otherwise.
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(j) Business Acquisitions
On January 1, 2009, we adopted a new accounting standard
issued by the Financial Accounting Standards Board, or FASB,
related to accounting for business combinations using the
acquisition method of accounting (previously referred to as the
purchase method). Among the significant changes, this standard
requires a redefining of the measurement date of a business
combination, expensing direct transaction costs as incurred,
capitalizing in-process research and development costs as an
intangible asset and recording a liability for contingent
consideration at the measurement date with subsequent
re-measurements recorded as general and administrative expense.
This standard also requires costs for business restructuring and
exit activities related to the acquired company to be included
in the post-combination financial results of operations and also
provides new guidance for the recognition and measurement of
contingent assets and liabilities in a business combination.
Acquisitions consummated prior to January 1, 2009 were
accounted for in accordance with the previously applicable
guidance. During 2010 and 2009, we incurred $8.2 million
and $15.9 million of acquisition-related costs. Included in
the $15.9 million of expense incurred during 2009, was
$3.8 million of costs associated with acquisition-related
activity for transactions not consummated prior to
January 1, 2009.
Our business acquisitions have historically been made at prices
above the fair value of the acquired net assets, resulting in
goodwill, based on our expectations of synergies of combining
the businesses. These synergies include elimination of redundant
facilities, functions and staffing; use of our existing
commercial infrastructure to expand sales of the acquired
businesses products; and use of the commercial
infrastructure of the acquired businesses to cost-effectively
expand product sales.
Significant judgment is required in estimating the fair value of
intangible assets and in assigning their respective useful
lives. The fair value estimates are based on available
historical information and on future expectations and
assumptions deemed reasonable by management, but are inherently
uncertain.
We generally employ the income method to estimate the fair value
of intangible assets, which is based on forecasts of the
expected future cash flows attributable to the respective
assets. Significant estimates and assumptions inherent in the
valuations reflect a consideration of other marketplace
participants, and include the amount and timing of future cash
flows (including expected growth rates and profitability), the
underlying product life cycles, economic barriers to entry, a
brands relative market position and the discount rate
applied to the cash flows. Unanticipated market or macroeconomic
events and circumstances may occur, which could affect the
accuracy or validity of the estimates and assumptions.
Allocation of the purchase price for acquisitions is based on
estimates of the fair value of the net assets acquired and, for
acquisitions completed within the past year, is subject to
adjustment upon finalization of the purchase price allocation.
We are not aware of any information that indicates the final
purchase price allocations will differ materially from the
preliminary estimates. The estimated useful lives of the
individual categories of intangible assets were based on the
nature of the applicable intangible asset and the expected
future cash flows to be derived from the intangible asset.
Amortization of intangible assets with finite lives is
recognized over the shorter of the respective lives of the
agreement or the period of time the assets are expected to
contribute to future cash flows. We amortize our finite-lived
intangible assets on patterns in which the economic benefits are
expected to be realized.
(k) Income Taxes
Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets
and liabilities are measured using enacted tax rates expected to
apply to taxable income in the year in which those temporary
differences are expected to be recovered or settled. The effect
on deferred tax assets and liabilities of a change in tax rates
is recognized in income in the period
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that includes the enactment date. Valuation allowances are
established when necessary to reduce deferred tax assets to the
amounts that are expected more likely than not to be realized in
the future (Note 16).
(l) Revenue Recognition
We primarily recognize revenue when the following four basic
criteria have been met: (1) persuasive evidence of an
arrangement exists, (2) delivery has occurred or services
rendered, (3) the fee is fixed or determinable and
(4) collection is reasonably assured.
The majority of our revenue is derived from product sales. We
recognize revenue upon title transfer of the products to
third-party customers, less a reserve for estimated product
returns and allowances. Determination of the reserve for
estimated product returns and allowances is based on our
managements analyses and judgments regarding certain
conditions. Should future changes in conditions prove
managements conclusions and judgments on previous analyses
to be incorrect, revenue recognized for any reporting period
could be adversely affected.
Additionally, we generate services revenue in connection with
contracts with health plans (both commercial and governmental)
and self-insured employers, whereby we provide clinical
expertise through fee-based arrangements. Revenue for fee-based
arrangements is recognized over the period in which the services
are provided. Some contracts provide that a portion of our fees
are at risk if our customers do not achieve certain financial
cost savings or we do not achieve certain other clinical and
operational metrics, over a period of time, typically one year.
Revenue subject to refund is not recognized if
(i) sufficient information is not available to calculate
performance measurements or (ii) interim performance
measurements indicate that we are not meeting performance
targets. If either of these two conditions exists, we record the
amounts as other current liabilities in the consolidated balance
sheet, deferring recognition of the revenue until we establish
that we have met the performance criteria. If we do not meet the
performance targets at the end of the contractual period we are
obligated under the contract to refund some or all of the at
risk fees.
We also receive license and royalty revenue from agreements with
third-party licensees. Revenue from fixed-fee license and
royalty agreements is recognized on a straight-line basis over
the obligation period of the related license agreements. License
and royalty fees that the licensees calculate based on their
sales, which we have the right to audit under most of our
agreements, are generally recognized upon receipt of the license
or royalty payments unless we are able to reasonably estimate
the fees as they are earned. License and royalty fees that are
determinable prior to the receipt thereof are recognized in the
period they are earned.
(m) Employee Stock-Based Compensation Arrangements
We account for share-based payments in accordance with
ASC 718 Compensation Stock Compensation.
Compensation cost associated with stock options includes:
(i) amortization related to the remaining unvested portion
of all stock option awards granted prior to January 1,
2006, based on the grant-date fair value estimated in accordance
with the original provisions of Statement of Financial
Accounting Standards No. 123, and (ii) amortization
related to all stock option awards granted subsequent to
January 1, 2006, based on the grant-date fair value
estimated in accordance with the provisions of ASC 718. In
addition, we record expense over the offering period in
connection with shares issued under our employee stock purchase
plan. Compensation expense for stock-based compensation awards
includes an estimate for forfeitures and is recognized over the
expected term of the options using the straight-line method. It
is our policy to recognize, through additional paid in capital,
the excess or windfall tax benefits on stock option deductions,
as those deductions are recognized on tax returns.
Our stock option plans provide for grants of options to
employees to purchase common stock at or above the fair market
value of such shares on the grant date of the award. The options
generally vest over a four-year period,
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beginning on the date of grant, with a graded vesting schedule
of 25% at the end of each of the four years. The fair value of
each option grant is estimated on the date of grant primarily
using a Black-Scholes option-pricing method. We use historical
data to estimate the expected price volatility and the expected
forfeiture rate. The contractual term of our stock option awards
is ten years. The risk-free rate is based on the
U.S. Treasury yield curve in effect at the time of grant
with a remaining term equal to the expected term of the option.
We have not made any dividend payments nor do we have plans to
pay dividends in the foreseeable future.
(n) Net Income (Loss) per Common Share
Net income (loss) per common share is based upon the weighted
average number of outstanding common shares and the dilutive
effect of common share equivalents, such as options and warrants
to purchase common stock, convertible preferred stock and
convertible notes, if applicable, that are outstanding each year
(Note 12).
(o) Other Operating Expenses
We expense advertising costs as incurred. In 2010, 2009 and
2008, advertising costs amounted to $14.4 million,
$15.4 million and $15.7 million, respectively, and are
included in sales and marketing expenses in the accompanying
consolidated statements of operations.
Shipping and handling costs are included in cost of net revenue
in the accompanying consolidated statements of operations.
Additionally, to the extent that we charge our customers for
shipping and handling costs, these costs are recorded as product
revenues.
(p) Concentration of Credit Risk, Off-Balance Sheet
Risks and Other Risks and Uncertainties
Financial instruments that potentially subject us to
concentration of credit risk primarily consist of cash and cash
equivalents and accounts receivable. We invest our excess cash
primarily in high quality securities and limit the amount of our
credit exposure to any one financial institution. We do not
require collateral or other securities to support customer
receivables; however, we perform on-going credit evaluations of
our customers and maintain allowances for potential credit
losses.
At December 31, 2010 and 2009, no individual
customers accounts receivable balance was in excess of
10%. During 2010, no one customer represented greater than 10%
of our net revenue. During 2009 and 2008, we had one customer
that represented 15% and 23% of our net revenue, respectively,
and purchased our professional diagnostics products.
We rely on a number of third parties to manufacture certain of
our products. If any of our third-party manufacturers cannot, or
will not, manufacture our products in the required volumes, on a
cost-effective basis, in a timely manner, or at all, we will
have to secure additional manufacturing capacity. Any
interruption or delay in manufacturing could have a material
adverse effect on our business and operating results.
(q) Financial Instruments and Fair Value of Financial
Instruments
Our primary financial instruments at December 31, 2010 and
2009 consisted of cash equivalents, restricted cash, marketable
securities, accounts receivable, accounts payable, debt and our
interest rate swap contract. We apply fair value measurement
accounting to value our financial assets and liabilities. Fair
value is defined as the exchange price that would be received
for an asset or paid to transfer a liability (an exit price) in
the principal or most advantageous market for the asset or
liability in an orderly transaction between market participants
on the measurement date. A fair value hierarchy requires an
entity to maximize the use of observable inputs, where
available, and minimize the use of unobservable inputs when
measuring fair value. The estimated fair value of these
financial instruments approximates their carrying values at
December 31, 2010 and 2009.
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(r) Recent Accounting Pronouncements
Recently
Issued Standards
In April 2010, the FASB issued Accounting Standards Update, or,
ASU,
No. 2010-17,
Revenue Recognition Milestone Method (Topic 605):
Milestone Method of Revenue Recognition, or ASU
2010-17. ASU
2010-17
allows the milestone method as an acceptable revenue recognition
methodology when an arrangement includes substantive milestones.
ASU 2010-17
provides a definition of substantive milestone and should be
applied regardless of whether the arrangement includes single or
multiple deliverables or units of accounting. ASU
2010-17 is
limited to transactions involving milestones relating to
research and development deliverables. ASU
2010-17 also
includes enhanced disclosure requirements about each
arrangement, individual milestones and related contingent
consideration, information about substantive milestones and
factors considered in the determination. ASU
2010-17 is
effective on a prospective basis for milestones achieved in
fiscal years, and interim periods within those years, beginning
on or after June 15, 2010, with early adoption permitted.
The adoption of this standard is not expected to have a material
impact on our financial position, results of operations or cash
flows.
In October 2009, the FASB issued ASU
No. 2009-14,
Software (Topic 985): Certain Revenue Arrangements That
Include Software Elements a consensus of the FASB
EITF, or ASU
2009-14. ASU
2009-14
changes the accounting model for revenue arrangements that
include tangible products and software elements. The amendments
of this update provide additional guidance on how to determine
which software, if any, relating to the tangible product also
would be excluded from the scope of the software revenue
recognition guidance. The amendments in this update also provide
guidance on how a vendor should allocate arrangement
consideration to deliverables in an arrangement that includes
both tangible products and software, as well as arrangements
that have deliverables both included and excluded from the scope
of software revenue recognition guidance. This standard is
effective prospectively for revenue arrangements entered into or
materially modified in fiscal years beginning on or after
June 15, 2010. The adoption of this standard is not
expected to have a material impact on our financial position,
results of operations or cash flows.
In October 2009, the FASB issued ASU
No. 2009-13,
Revenue Recognition (Topic 605): Multiple-Deliverable Revenue
Arrangements a consensus of the FASB EITF, or
ASU 2009-13.
ASU 2009-13
will separate multiple-deliverable revenue arrangements. This
update establishes a selling price hierarchy for determining the
selling price of a deliverable. The amendments of this update
will replace the term fair value in the revenue
allocation guidance with selling price to clarify
that the allocation of revenue is based on entity-specific
assumptions rather than assumptions of a marketplace
participant. The amendments of this update will eliminate the
residual method of allocation and require that arrangement
consideration be allocated at the inception of the arrangement
to all deliverables using the relative selling price method. The
amendments in this update will require that a vendor determine
its best estimated selling price in a manner consistent with
that used to determine the price to sell the deliverable on a
standalone basis. This standard is effective prospectively for
revenue arrangements entered into or materially modified in
fiscal years beginning on or after June 15, 2010. The
adoption of this standard is not expected to have a material
impact on our financial position, results of operations or cash
flows.
Recently
Adopted Standards
Effective January 1, 2010, we adopted ASU
No. 2010-06,
Fair Value Measurements and Disclosures (Topic 820):
Improving Disclosures about Fair Value Measurements, or ASU
2010-06. A
reporting entity should provide additional disclosures about the
different classes of assets and liabilities measured at fair
value, the valuation techniques and inputs used, the activity in
Level 3 fair value measurements, and the transfers between
Levels 1, 2, and 3 fair value measurements. The adoption of
the additional disclosures for Level 1
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and Level 2 fair value measurements did not have an impact
on our financial position, results of operations or cash flows.
The disclosures regarding Level 3 fair value measurements
do not become effective until January 1, 2011 and, given
such, we are currently evaluating the potential impact of this
part of the update.
Effective January 1, 2010, we adopted ASU
No. 2009-17,
Consolidations (Topic 810): Improvements to Financial
Reporting by Enterprises Involved with Variable Interest
Entities, or ASU
2009-17. The
amendments in this update replace the quantitative-based risks
and rewards calculation for determining which reporting entity,
if any, has a controlling financial interest in a variable
interest entity with an approach focused on identifying which
reporting entity has the power to direct the activities of a
variable interest entity that most significantly impact the
entitys economic performance and (1) the obligation
to absorb losses of the entity or (2) the right to receive
benefits from the entity. An approach that is expected to be
primarily qualitative will be more effective for identifying
which reporting entity has a controlling financial interest in a
variable interest entity. The amendments in this update also
require additional disclosures about a reporting entitys
involvement in variable interest entities, which will enhance
the information provided to users of financial statements. We
evaluated our business relationships to identify potential
variable interest entities and have concluded that consolidation
of such entities is not required for the periods presented. On a
quarterly basis, we will continue to reassess our involvement
with variable interest entities.
|
|
(3)
|
Other
Balance Sheet Information
|
Components of selected captions in the consolidated balance
sheets consist of (in thousands):
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
Inventories, net:
|
|
|
|
|
|
|
|
|
Raw materials
|
|
$
|
81,640
|
|
|
$
|
62,397
|
|
Work-in-process
|
|
|
61,849
|
|
|
|
56,338
|
|
Finished goods
|
|
|
114,231
|
|
|
|
102,804
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
257,720
|
|
|
$
|
221,539
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net:
|
|
|
|
|
|
|
|
|
Machinery, laboratory equipment and tooling
|
|
$
|
252,581
|
|
|
$
|
183,490
|
|
Land and buildings
|
|
|
158,109
|
|
|
|
135,644
|
|
Leasehold improvements
|
|
|
24,552
|
|
|
|
22,841
|
|
Computer software and equipment
|
|
|
129,794
|
|
|
|
96,950
|
|
Furniture and fixtures
|
|
|
22,773
|
|
|
|
19,340
|
|
|
|
|
|
|
|
|
|
|
|
|
|
587,809
|
|
|
|
458,265
|
|
Less: Accumulated depreciation and amortization
|
|
|
(197,299
|
)
|
|
|
(133,877
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
390,510
|
|
|
$
|
324,388
|
|
|
|
|
|
|
|
|
|
|
Accrued expenses and other current liabilities:
|
|
|
|
|
|
|
|
|
Compensation and compensation-related
|
|
$
|
65,839
|
|
|
$
|
76,360
|
|
Advertising and marketing
|
|
|
3,228
|
|
|
|
6,155
|
|
Professional fees
|
|
|
8,507
|
|
|
|
9,743
|
|
Interest payable
|
|
|
25,283
|
|
|
|
16,661
|
|
Royalty obligations
|
|
|
22,014
|
|
|
|
17,451
|
|
Deferred revenue
|
|
|
24,924
|
|
|
|
23,095
|
|
Taxes payable
|
|
|
46,944
|
|
|
|
33,511
|
|
Acquisition-related obligations
|
|
|
72,102
|
|
|
|
55,496
|
|
Other
|
|
|
76,991
|
|
|
|
41,260
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
345,832
|
|
|
$
|
279,732
|
|
|
|
|
|
|
|
|
|
|
F-18
ALERE
INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
(4)
|
Business
Combinations
|
(a) Acquisitions in 2010
On August 16, 2010, we acquired Diagnostixx of California,
Corp. (d/b/a Immunalysis Corporation), or Immunalysis, located
in Pomona, California, a privately-owned manufacturer and
marketer of abused and prescription drug screening solutions
used by clinical reference and forensic/crime laboratories. The
preliminary aggregate purchase price was $56.2 million,
which consisted of an initial cash payment totaling
$55.0 million and a contingent consideration obligation of
up to $5.0 million with an acquisition date fair value of
$1.2 million. Included in our consolidated statement of
operations for the year ended December 31, 2010 is revenue
totaling approximately $7.9 million related to this
acquired business. The operating results of this acquired
operation are included in our professional diagnostics reporting
unit and business segment. We do not expect the amount allocated
to goodwill to be deductible for tax purposes.
|
|
(ii)
|
A
privately-owned U.K. research and development operation
|
On March 11, 2010, we acquired a privately-owned U.K.
research and development operation. The preliminary aggregate
purchase price was $70.8 million, which consisted of an
initial cash payment totaling $35.2 million and a
contingent consideration obligation of up to $125.0 million
with an acquisition date fair value of $35.6 million.
Included in our consolidated statement of operations for the
year ended December 31, 2010 is revenue totaling
approximately $0.2 million related to this acquired
business. The operating results of this acquired operation are
included in our professional diagnostics reporting unit and
business segment. We do not expect the amount allocated to
goodwill to be deductible for tax purposes.
On February 17, 2010, we acquired Kroll Laboratory
Specialists, Inc., headquartered in Gretna, Louisiana, which
provides forensic quality substance abuse testing products and
services across the United States. The preliminary aggregate
purchase price was $109.5 million, which was paid in cash.
Included in our consolidated statement of operations for the
year ended December 31, 2010 is revenue totaling
approximately $31.3 million related to the acquired
business, which we have subsequently renamed Alere Toxicology
Services, or Alere Toxicology. The operating results of Alere
Toxicology are included in our professional diagnostics
reporting unit and business segment. The amount allocated to
goodwill from this acquisition is deductible for tax purposes.
|
|
(iv)
|
Standard
Diagnostics
|
On February 8, 2010, we acquired a 61.92% ownership
interest in Standard Diagnostics via a tender offer for
approximately $162.1 million. On March 22, 2010, we
acquired an incremental 13.37% ownership interest in Standard
Diagnostics via a follow-on tender offer for approximately
$36.2 million. In June 2010, we acquired an incremental
2.84% ownership interest for approximately $7.3 million,
bringing our acquisition-related aggregate ownership interest in
Standard Diagnostics to approximately 78.13%. Standard
Diagnostics specializes in the medical diagnostics industry. Its
main product lines relate to diagnostic reagents and devices for
hepatitis, infectious diseases, tumor markers, fertility, drugs
of abuse, urine strips and protein strips. The preliminary
aggregate purchase price was $205.6 million in cash.
Included in our consolidated statement of operations for the
year ended December 31, 2010 is revenue totaling
approximately $78.9 million related to Standard
Diagnostics. The operating results of Standard Diagnostics are
included in our professional diagnostics reporting unit and
business segment. We do not expect the amount allocated to
goodwill to be deductible for tax purposes. During the fourth
quarter of 2010, we acquired the remaining outstanding minority
interests in Standard Diagnostics bringing our aggregate
ownership interest to approximately 100% as of December 31,
2010. In connection with our purchase of shares from a certain
minority shareholder, we
F-19
ALERE
INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
(4)
|
Business
Combinations (Continued)
|
incurred a compensation charge of $60.1 million, as a
result of the transition of the
day-to-day
management control of the business to us.
|
|
(v)
|
Other
acquisitions in 2010
|
During 2010, we acquired the following businesses for a
preliminary aggregate purchase price of $160.1 million,
which consisted of initial cash payments totaling
$106.5 million, contingent consideration obligations with
an acquisition date fair value of $52.9 million and
deferred purchase price consideration with an acquisition date
present value of $0.7 million.
|
|
|
|
|
RMD Networks, Inc., or RMD, located in Denver, Colorado, a
provider of clinical groupware software and services designed to
improve communication and coordination of care among providers,
patients, and payers in the healthcare environment (Acquired
January 2010)
|
|
|
|
certain assets of Streck, Inc., or Streck, located in Nebraska,
a manufacturer of hematology, chemistry and immunology products
for the clinical laboratory (Acquired January 2010)
|
|
|
|
assets of the diagnostics division of Micropharm Ltd., or
Micropharm, located in Wales, United Kingdom, an expert in high
quality antibody production in sheep for both diagnostic and
therapeutic purposes, providing antisera on a contract basis for
U.K. and overseas companies and academic institutions, mainly
for research, therapeutic and diagnostic uses (Acquired March
2010)
|
|
|
|
Quantum Diagnostics Group Limited, or Quantum, headquartered in
Essex, England, an independent provider of drug testing products
and services to healthcare professionals across the U.K. and
Europe (Acquired April 2010)
|
|
|
|
assets of the workplace health division of Good Health Solutions
Pty Ltd., or GHS, located in East Sydney, Australia, an
important player in the Australian health and wellness market,
focusing on health screenings, health related consulting
services, health coaching and fitness instruction (Acquired
April 2010)
|
|
|
|
certain assets of Unotech Diagnostics, Inc., or Unotech, located
in California, a privately-owned company engaged in the
development, formulation, manufacture, packaging, supply and
distribution of our BladderCheck NMP22 lateral flow test and
related lateral flow products (Acquired June 2010)
|
|
|
|
Scipac Holdings Limited, or Scipac, headquartered in Kent,
England, a diagnostic reagent company with an extensive product
portfolio supplying purified human antigens, recombinant
proteins and disease state plasma to a global customer base
(Acquired June 2010)
|
|
|
|
a privately-owned research and development operation, located in
San Diego, California (Acquired July 2010)
|
|
|
|
AdnaGen AG, or AdnaGen, located in Langenhagen, Germany, a
company that focuses on the development of innovative tumor
diagnostics for the detection of rare cells (Acquired November
2010)
|
|
|
|
Medlab Produtos Medicos Hospitalares Ltda, or Medlab, located in
San Paulo, Brazil, a distributor of medical instruments and
reagents to public and private laboratories throughout Brazil
and Uruguay (Acquired December 2010)
|
|
|
|
Capital Toxicology, LLC, or Capital Toxicology, located in
Austin, Texas, a privately-held toxicology business specializing
in pain management services (Acquired December 2010)
|
The operating results of the acquired businesses mentioned
above, except for RMD and GHS, are included in our professional
diagnostics reporting unit and business segment. The operating
results of RMD
F-20
ALERE
INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
(4)
|
Business
Combinations (Continued)
|
and GHS are included in our health management reporting unit and
business segment. Our consolidated statement of operations for
the year ended December 31, 2010 included revenue totaling
approximately $12.6 million related to these businesses.
Goodwill has been recognized in all of the acquisitions, with
the exception of Unotech, and amounted to approximately
$114.0 million. Goodwill related to the acquisition of
Capitol Toxicology, which totaled $11.0 million, is
expected to be deductible for tax purposes.
A summary of the preliminary aggregate purchase price allocation
for the acquisitions consummated in 2010 is as follows (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Privately-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owned U.K.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Development
|
|
|
|
|
|
Standard
|
|
|
|
|
|
|
|
|
|
Immunalysis
|
|
|
Operation
|
|
|
Alere Toxicology
|
|
|
Diagnostics
|
|
|
Other
|
|
|
Total
|
|
|
Current assets
|
|
$
|
6,953
|
|
|
$
|
374
|
|
|
$
|
6,044
|
|
|
$
|
50,687
|
|
|
$
|
19,863
|
|
|
$
|
83,921
|
|
Property, plant and equipment
|
|
|
1,092
|
|
|
|
152
|
|
|
|
3,300
|
|
|
|
18,580
|
|
|
|
14,039
|
|
|
|
37,163
|
|
Goodwill
|
|
|
18,197
|
|
|
|
61,463
|
|
|
|
53,435
|
|
|
|
37,234
|
|
|
|
114,018
|
|
|
|
284,347
|
|
Intangible assets
|
|
|
30,600
|
|
|
|
15,700
|
|
|
|
48,400
|
|
|
|
131,179
|
|
|
|
59,513
|
|
|
|
285,392
|
|
Other non-current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,341
|
|
|
|
317
|
|
|
|
13,658
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets acquired
|
|
|
56,842
|
|
|
|
77,689
|
|
|
|
111,179
|
|
|
|
251,021
|
|
|
|
207,750
|
|
|
|
704,481
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
568
|
|
|
|
751
|
|
|
|
1,640
|
|
|
|
13,371
|
|
|
|
13,999
|
|
|
|
30,329
|
|
Non-current liabilities
|
|
|
50
|
|
|
|
6,107
|
|
|
|
|
|
|
|
32,088
|
|
|
|
33,655
|
|
|
|
71,900
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities assumed
|
|
|
618
|
|
|
|
6,858
|
|
|
|
1,640
|
|
|
|
45,459
|
|
|
|
47,654
|
|
|
|
102,229
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets acquired
|
|
|
56,224
|
|
|
|
70,831
|
|
|
|
109,539
|
|
|
|
205,562
|
|
|
|
160,096
|
|
|
|
602,252
|
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contingent consideration
|
|
|
1,200
|
|
|
|
35,600
|
|
|
|
|
|
|
|
|
|
|
|
52,908
|
|
|
|
89,708
|
|
Present value of deferred purchase price consideration
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
688
|
|
|
|
688
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid
|
|
$
|
55,024
|
|
|
$
|
35,231
|
|
|
$
|
109,539
|
|
|
$
|
205,562
|
|
|
$
|
106,500
|
|
|
$
|
511,856
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-21
ALERE
INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
(4)
|
Business
Combinations (Continued)
|
The following are the intangible assets acquired and their
respective amortizable lives (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Privately-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
owned U.K.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Development
|
|
|
|
|
|
Standard
|
|
|
|
|
|
|
|
|
Average
|
|
|
Immunalysis
|
|
|
operation
|
|
|
Alere Toxicology
|
|
|
Diagnostics
|
|
|
Other
|
|
|
Total
|
|
|
Useful Life
|
|
Core technology and patents
|
|
$
|
8,800
|
|
|
$
|
8,600
|
|
|
$
|
13,300
|
|
|
$
|
62,135
|
|
|
$
|
14,050
|
|
|
$
|
106,885
|
|
|
12.38 years
|
Quality systems
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
153
|
|
|
|
153
|
|
|
5 years
|
Database
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
654
|
|
|
|
654
|
|
|
3 years
|
Trademarks and trade names
|
|
|
800
|
|
|
|
|
|
|
|
|
|
|
|
9,350
|
|
|
|
3,041
|
|
|
|
13,191
|
|
|
8.51 years
|
License agreements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
459
|
|
|
|
459
|
|
|
10 years
|
Customer relationships
|
|
|
19,900
|
|
|
|
|
|
|
|
35,100
|
|
|
|
45,754
|
|
|
|
24,578
|
|
|
|
125,332
|
|
|
14.32 years
|
Non-compete agreements
|
|
|
300
|
|
|
|
|
|
|
|
|
|
|
|
255
|
|
|
|
2,095
|
|
|
|
2,650
|
|
|
4.18 years
|
Software
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,000
|
|
|
|
5,000
|
|
|
7 years
|
Distribution agreement
|
|
|
800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
800
|
|
|
14 years
|
Manufacturing know-how
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,683
|
|
|
|
3,683
|
|
|
10.46 years
|
In-process research and development
|
|
|
|
|
|
|
7,100
|
|
|
|
|
|
|
|
13,685
|
|
|
|
5,800
|
|
|
|
26,585
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total intangible assets
|
|
$
|
30,600
|
|
|
$
|
15,700
|
|
|
$
|
48,400
|
|
|
$
|
131,179
|
|
|
$
|
59,513
|
|
|
$
|
285,392
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(b) Acquisitions in 2009
|
|
(i)
|
Acquisition
of Tapestry Medical
|
On November 6, 2009, we acquired Tapestry Medical, Inc., or
Tapestry, located in Livermore, California, a privately-owned
company that is a provider of products and related services
designed to support anti-coagulation disease management for
patients at risk for stroke and other clotting disorders. The
aggregate purchase price was $61.1 million, which consisted
of an initial cash payment totaling $45.1 million and a
contingent consideration obligation with a fair value of
$16.0 million payable in shares of our common stock, except
in the case of the 2010 earn-out which will be paid in cash.
Included in our consolidated statements of operations for the
year ended December 31, 2010 and 2009 is revenue totaling
approximately $54.1 million and $1.8 million,
respectively, related to Tapestry. The operating results of
Tapestry are included in our health management reporting unit
and business segment. The amount allocated to goodwill from this
acquisition is deductible for tax purposes.
|
|
(ii)
|
Acquisition
of Free & Clear
|
On September 28, 2009, we acquired Free & Clear,
Inc., or Free & Clear, located in Seattle, Washington,
a privately-owned company that specializes in behavioral
coaching to help employers, health plans and government agencies
improve the overall health and productivity of their covered
populations. The aggregate purchase price was
$121.5 million, which consisted of an initial cash payment
totaling $107.3 million and a contingent consideration
obligation with a fair value of $14.2 million. Included in
our consolidated statements of operations for the year ended
December 31, 2010 and 2009 is revenue totaling
approximately $75.3 million and $14.3 million,
respectively, related to Free & Clear. The operating
results of Free & Clear are included in our health
management reporting unit and business segment. We do not expect
the amount allocated to goodwill to be deductible for tax
purposes.
F-22
ALERE
INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
(4)
|
Business
Combinations (Continued)
|
|
|
(iii)
|
Acquisition
of Concateno
|
On August 11, 2009, we acquired Concateno plc, or
Concateno, a publicly-traded company headquartered in the United
Kingdom that specializes in the manufacture and distribution of
rapid drugs of abuse diagnostic products used in health care,
criminal justice, workplace and other testing markets. The
aggregate purchase price was $251.9 million, which
consisted of $178.8 million in cash, including
$0.5 million of cash paid for shares of Concateno common
stock which we acquired prior to the acquisition date,
2,091,080 shares of our common stock with an aggregate fair
value of $70.2 million and $2.9 million of fair value
associated with Concateno employee stock options exchanged as
part of the transaction. Our consolidated statements of
operations for the year ended December 31, 2010 and 2009
included revenue totaling approximately $78.8 million and
$33.3 million, respectively, related to Concateno. The
operating results of Concateno are included in our professional
diagnostics reporting unit and business segment. We do not
expect the amount allocated to goodwill to be deductible for tax
purposes.
|
|
(iv)
|
Acquisition
of ACONs Second Territory Business
|
On April 30, 2009, we completed our acquisition of the
assets of ACON Laboratories, Inc.s and certain related
entities (collectively, ACON) business of
researching, developing, manufacturing, distributing, marketing
and selling lateral flow immunoassay and directly-related
products (the Business) for the remainder of the
world outside of the First Territory (as defined below),
including China, Asia Pacific, Latin America, South America, the
Middle East, Africa, India, Pakistan, Russia and Eastern Europe
(the Second Territory Business). We acquired
ACONs Business in the United States, Canada, Western
Europe (excluding Russia, the former Soviet Republics that are
not part of the European Union and Turkey), Israel, Australia,
Japan and New Zealand (the First Territory) in March
2006. The aggregate purchase price for the Second Territory
Business was approximately $191.0 million
($188.9 million present value), which consisted of cash
payments totaling $104.7 million, 1,202,691 shares of
our common stock with an aggregate fair value of
$42.1 million and deferred purchase price consideration
payable in cash and common stock with an aggregate fair value of
$42.1 million. Our consolidated statements of operations
for the year ended December 31, 2010 and 2009 included
revenue totaling approximately $50.9 million and
$38.0 million, respectively related to the Second Territory
Business. The operating results of the Second Territory Business
are included in our professional diagnostics reporting unit and
business segment. Goodwill resulting from this acquisition is
generally not expected to be deductible for tax purposes
depending on the tax jurisdiction.
|
|
(v)
|
Other
acquisitions in 2009
|
During 2009, we acquired the following assets and businesses for
an aggregate purchase price of $85.8 million
($83.9 million present value), which consisted of
$45.4 million in cash, 128,513 shares of our common
stock with an aggregate fair value of $5.1 million, notes
payable totaling $7.9 million, deferred purchase price
consideration payable in cash with an aggregate fair value of
$15.8 million, warrants with a fair value of
$0.1 million and contingent consideration obligations with
an aggregate fair value of $9.6 million which is recorded
as a liability of which $5.4 million is payable in shares
of our common stock.
|
|
|
|
|
GeneCare Medical Genetics Center, Inc., or GeneCare, located in
Chapel Hill, North Carolina, a medical genetics testing and
counseling business (Acquired July 2009)
|
|
|
|
Certain assets from CVS Caremarks Accordant Common disease
management programs, or Accordant, whereby chronically-ill
patients served by Accordant Common disease management programs
will be managed and have access to expanded offerings provided
by Alere (Acquired August 2009)
|
|
|
|
ZyCare, Inc., or ZyCare, located in Chapel Hill, North Carolina,
a provider of technology and services used to help manage many
chronic illnesses (Acquired August 2009)
|
F-23
ALERE
INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
(4)
|
Business
Combinations (Continued)
|
|
|
|
|
|
Medim Schweiz GmbH., or Medim, located in Zug, Switzerland, a
distributor of
point-of-care
diagnostics testing products primarily to the Swiss marketplace
(Acquired September 2009)
|
|
|
|
Biosyn Diagnostics Limited, or Biosyn, located in Belfast,
Ireland, a distributor of
point-of-care
diagnostics testing products primarily to the Irish marketplace
(Acquired October 2009)
|
|
|
|
Mologic Limited, or Mologic, located in Sharnbrook, United
Kingdom, a research and development entity having extensive
experience in applied immunoassay technology, as well as a broad
understanding of medical diagnostic devices and antibody
development (Acquired October 2009)
|
|
|
|
Jinsung Meditech, Inc., or JSM, located in Seoul, South Korea, a
distributor of
point-of-care
diagnostics testing products primarily to the South Korean
marketplace (Acquired December 2009)
|
|
|
|
Biolinker S.A., or Biolinker, located in Buenos Aires,
Argentina, a distributor of
point-of-care
diagnostics testing products primarily to the Argentinean
marketplace (Acquired December 2009)
|
|
|
|
51.0% share in Long Chain International Corp., or Long Chain,
located in Taipei, Taiwan, a distributor of
point-of-care
diagnostics testing products primarily to the Taiwanese
marketplace (Acquired December 2009). In January 2010, we
acquired the remaining 49.0% interest in Long Chain.
|
The operating results of Medim, Biosyn, Mologic, JSM, Biolinker
and Long Chain are included in our professional diagnostics
reporting unit and business segment. The operating results of
GeneCare, Accordant and Zycare are included in our health
management reporting unit and business segment. Our consolidated
statements of operations for the years ended December 31,
2010 and 2009 included revenue totaling approximately
$61.6 million and $19.6 million, respectively, related
to these businesses. Goodwill has been recognized in all
transactions and amounted to approximately $35.6 million.
Goodwill related to the acquisitions of GeneCare and Accordant,
which totaled $12.8 million, is expected to be deductible
for tax purposes. Goodwill related to all other acquisitions is
not deductible for tax purposes.
F-24
ALERE
INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
(4)
|
Business
Combinations (Continued)
|
A summary of the aggregate purchase price allocation for the
acquisitions consummated in 2009 is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Territory
|
|
|
|
|
|
|
|
|
|
Tapestry
|
|
|
Free & Clear
|
|
|
Concateno
|
|
|
Business
|
|
|
Other
|
|
|
Total
|
|
|
Current assets
|
|
$
|
2,682
|
|
|
$
|
18,723
|
|
|
$
|
38,292
|
|
|
$
|
4,156
|
|
|
$
|
23,130
|
|
|
$
|
86,983
|
|
Property, plant and equipment
|
|
|
5,026
|
|
|
|
1,224
|
|
|
|
5,192
|
|
|
|
305
|
|
|
|
1,272
|
|
|
|
13,019
|
|
Goodwill
|
|
|
45,134
|
|
|
|
80,293
|
|
|
|
156,563
|
|
|
|
83,976
|
|
|
|
35,563
|
|
|
|
401,529
|
|
Intangible assets
|
|
|
10,680
|
|
|
|
44,100
|
|
|
|
102,735
|
|
|
|
100,600
|
|
|
|
40,861
|
|
|
|
298,976
|
|
Other non-current assets
|
|
|
25
|
|
|
|
1,786
|
|
|
|
2,405
|
|
|
|
|
|
|
|
631
|
|
|
|
4,847
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets acquired
|
|
|
63,547
|
|
|
|
146,126
|
|
|
|
305,187
|
|
|
|
189,037
|
|
|
|
101,457
|
|
|
|
805,354
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
2,413
|
|
|
|
6,948
|
|
|
|
20,589
|
|
|
|
117
|
|
|
|
11,027
|
|
|
|
41,094
|
|
Non-current liabilities
|
|
|
13
|
|
|
|
17,640
|
|
|
|
32,707
|
|
|
|
|
|
|
|
6,531
|
|
|
|
56,891
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities assumed
|
|
|
2,426
|
|
|
|
24,588
|
|
|
|
53,296
|
|
|
|
117
|
|
|
|
17,558
|
|
|
|
97,985
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets acquired
|
|
|
61,121
|
|
|
|
121,538
|
|
|
|
251,891
|
|
|
|
188,920
|
|
|
|
83,899
|
|
|
|
707,369
|
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contingent consideration
|
|
|
16,000
|
|
|
|
14,208
|
|
|
|
|
|
|
|
|
|
|
|
9,606
|
|
|
|
39,814
|
|
Notes payable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,912
|
|
|
|
7,912
|
|
Fair value of common stock issued and options exchanged
|
|
|
|
|
|
|
|
|
|
|
73,099
|
|
|
|
42,142
|
|
|
|
5,172
|
|
|
|
120,413
|
|
Present value of deferred purchase price consideration
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
42,089
|
|
|
|
15,764
|
|
|
|
57,853
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid
|
|
$
|
45,121
|
|
|
$
|
107,330
|
|
|
$
|
178,792
|
|
|
$
|
104,689
|
|
|
$
|
45,445
|
|
|
$
|
481,377
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following are the intangible assets acquired and their
respective amortizable lives (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
Territory
|
|
|
|
|
|
|
|
|
Average
|
|
|
Tapestry
|
|
|
Free & Clear
|
|
|
Concateno
|
|
|
Business
|
|
|
Other
|
|
|
Total
|
|
|
Useful Life
|
|
Core technology and patents
|
|
$
|
|
|
|
$
|
4,600
|
|
|
$
|
500
|
|
|
$
|
3,000
|
|
|
$
|
5,220
|
|
|
$
|
13,320
|
|
|
6.46 years
|
Supply arrangements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,581
|
|
|
|
1,581
|
|
|
8 years
|
Trademarks and trade names
|
|
|
3,000
|
|
|
|
3,400
|
|
|
|
25,184
|
|
|
|
1,900
|
|
|
|
270
|
|
|
|
33,754
|
|
|
14.14 years
|
Customer relationships
|
|
|
6,500
|
|
|
|
36,100
|
|
|
|
77,051
|
|
|
|
94,200
|
|
|
|
31,074
|
|
|
|
244,925
|
|
|
14.93 years
|
Non-compete agreements
|
|
|
1,180
|
|
|
|
|
|
|
|
|
|
|
|
1,500
|
|
|
|
1,600
|
|
|
|
4,280
|
|
|
2.91 years
|
In-process research and development
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,116
|
|
|
|
1,116
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total intangible assets
|
|
$
|
10,680
|
|
|
$
|
44,100
|
|
|
$
|
102,735
|
|
|
$
|
100,600
|
|
|
$
|
40,861
|
|
|
$
|
298,976
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-25
ALERE
INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
(4)
|
Business
Combinations (Continued)
|
(c) Acquisitions in 2008
|
|
(i)
|
Acquisition
of Matria
|
On May 9, 2008, we acquired Matria Healthcare Inc., or
Matria, a national provider of health improvement, disease
management and high-risk pregnancy management programs and
services. The aggregate purchase price was $1.1 billion,
which consisted of $420.6 million in cash, Series B
convertible preferred stock with a fair value of approximately
$657.9 million, $17.3 million of fair value associated
with Matria employee stock options exchanged as part of the
transaction and $18.0 million for direct acquisition costs.
The operating results of Matria are included in our health
management reporting unit and business segment. We expect that
all of the amount allocated to goodwill will not be deductible
for tax purposes.
On February 12, 2008, we acquired BBI Holdings Plc, or BBI,
a publicly-traded company headquartered in the United Kingdom
that specializes in the development and manufacture of
non-invasive lateral flow tests and gold reagents. The aggregate
purchase price was $163.2 million, which consisted of
$138.6 million in cash, including $14.7 million of
cash paid for shares of BBI common stock which we owned prior to
the acquisition date, common stock with an aggregate fair value
of $14.4 million, $6.6 million for direct acquisition
costs and $3.6 million of fair value associated with BBI
employee stock options exchanged as part of the transaction. The
operating results of BBI are included in our professional and
consumer diagnostics reporting units and business segments. We
expect that all of the amount allocated to goodwill will not be
deductible for tax purposes.
|
|
(iii)
|
Other
acquisitions in 2008
|
During 2008, we acquired the following assets and businesses for
an aggregate purchase price of $120.0 million, in which we
paid $86.0 million in cash, $2.3 million in direct
acquisition costs, and accrued contingent consideration and
milestone payments totaling $31.9 million. Upon settlement
of certain milestones, we recognized a $0.2 million foreign
currency exchange loss which was included in the aggregate
purchase price.
|
|
|
|
|
Panbio Limited, or Panbio, headquartered in Brisbane, Australia,
an Australian publicly-traded company that develops and
manufactures diagnostic tests for use in the diagnosis of a
broad range of infectious diseases (Acquired January 2008)
|
|
|
|
Certain assets from Mochida Pharmaceutical Co., Ltd, or Mochida.
As part of the acquisition of certain assets, Mochida
transferred the exclusive distribution rights in Japan for
certain Osteomark products (Acquired April 2008)
|
|
|
|
Privately-owned provider of care and health management services
(Acquired July 2008)
|
|
|
|
Vision Biotech Pty Ltd, or Vision, located in Cape Town, South
Africa, a privately-owned distributor of rapid diagnostic
products predominantly to the South African marketplace
(Acquired September 2008)
|
|
|
|
Global Diagnostics CC, or Global, located in Johannesburg, South
Africa, a privately-owned contract manufacturer and distributor
of high quality rapid diagnostic tests predominantly to the
South African marketplace (Acquired September 2008)
|
|
|
|
DiaTeam Diagnostika und Arzneimittel Großhandel GmbH, or
DiaTeam, located in Linz, Austria, a privately-owned distributor
of high quality rapid diagnostic tests predominantly to the
Austrian marketplace (Acquired September 2008)
|
F-26
ALERE
INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
(4)
|
Business
Combinations (Continued)
|
|
|
|
|
|
Prodimol Biotecnologia S.A., or Prodimol, located in Brazil, a
privately-owned distributor of high quality rapid diagnostic
tests predominantly to the Brazilian marketplace (Acquired
October 2008)
|
|
|
|
Ameditech, Inc., or Ameditech, located in San Diego,
California, a manufacturer of high quality drugs of abuse
diagnostic tests (Acquired December 2008)
|
A summary of the aggregate purchase price allocation for the
acquisitions consummated in 2008 is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Matria
|
|
|
BBI
|
|
|
Other
|
|
|
Total
|
|
|
Current assets
|
|
$
|
121,399
|
|
|
$
|
22,421
|
|
|
$
|
23,795
|
|
|
$
|
167,615
|
|
Property, plant and equipment
|
|
|
23,659
|
|
|
|
7,603
|
|
|
|
2,850
|
|
|
|
34,112
|
|
Goodwill
|
|
|
844,301
|
|
|
|
89,626
|
|
|
|
62,478
|
|
|
|
996,405
|
|
Intangible assets
|
|
|
325,385
|
|
|
|
90,201
|
|
|
|
54,802
|
|
|
|
470,388
|
|
Other non-current assets
|
|
|
35,063
|
|
|
|
3,001
|
|
|
|
314
|
|
|
|
38,378
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets acquired
|
|
|
1,349,807
|
|
|
|
212,852
|
|
|
|
144,239
|
|
|
|
1,706,898
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
98,669
|
|
|
|
15,668
|
|
|
|
9,357
|
|
|
|
123,694
|
|
Non-current liabilities
|
|
|
137,346
|
|
|
|
33,953
|
|
|
|
14,843
|
|
|
|
186,142
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities assumed
|
|
|
236,015
|
|
|
|
49,621
|
|
|
|
24,200
|
|
|
|
309,836
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets acquired
|
|
|
1,113,792
|
|
|
|
163,231
|
|
|
|
120,039
|
|
|
|
1,397,062
|
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition costs paid
|
|
|
17,956
|
|
|
|
6,601
|
|
|
|
2,333
|
|
|
|
26,890
|
|
Contingent consideration
|
|
|
|
|
|
|
|
|
|
|
31,891
|
|
|
|
31,891
|
|
Realized foreign currency exchange loss
|
|
|
|
|
|
|
|
|
|
|
(179
|
)
|
|
|
(179
|
)
|
Fair value of common/preferred stock issued and options exchanged
|
|
|
675,257
|
|
|
|
18,036
|
|
|
|
|
|
|
|
693,293
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid
|
|
$
|
420,579
|
|
|
$
|
138,594
|
|
|
$
|
85,994
|
|
|
$
|
645,167
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following are the intangible assets acquired and their
respective amortizable lives (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
Matria
|
|
|
BBI
|
|
|
Other
|
|
|
Total
|
|
|
Useful Life
|
|
|
Core technology and patents
|
|
$
|
31,000
|
|
|
$
|
28,043
|
|
|
$
|
7,220
|
|
|
$
|
66,263
|
|
|
|
9.94 years
|
|
Database
|
|
|
25,000
|
|
|
|
|
|
|
|
|
|
|
|
25,000
|
|
|
|
10 years
|
|
Trademarks and trade names and other intangibles
|
|
|
1,185
|
|
|
|
16,180
|
|
|
|
5,072
|
|
|
|
22,437
|
|
|
|
14.76 years
|
|
Customer relationships
|
|
|
253,000
|
|
|
|
45,978
|
|
|
|
40,605
|
|
|
|
339,583
|
|
|
|
13.73 years
|
|
Non-compete agreements
|
|
|
15,200
|
|
|
|
|
|
|
|
1,063
|
|
|
|
16,263
|
|
|
|
2 years
|
|
Manufacturing know-how
|
|
|
|
|
|
|
|
|
|
|
842
|
|
|
|
842
|
|
|
|
5 years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total intangible assets
|
|
$
|
325,385
|
|
|
$
|
90,201
|
|
|
$
|
54,802
|
|
|
$
|
470,388
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Panbio, Mochida, Vision, Global, DiaTeam, Prodimol and Ameditech
are included in our professional diagnostics reporting unit and
business segment; and our privately-owned health management
acquisition is included in our health management reporting unit
and business segment. Goodwill has been recognized in the
F-27
ALERE
INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
(4)
|
Business
Combinations (Continued)
|
Panbio, Vision, Global, DiaTeam, Prodimol, Ameditech and our
privately-owned health management business transactions and
amounted to approximately $62.5 million. Goodwill related
to these acquisitions, excluding Ameditech and the
privately-owned health management acquisition, is not deductible
for tax purposes.
(d) Restructuring Plans Related to Business
Combinations
In connection with several of our acquisitions consummated
during 2008 and prior, we initiated integration plans to
consolidate and restructure certain functions and operations,
including the relocation and termination of certain personnel of
these acquired entities and the closure of certain of the
acquired entities leased facilities. These costs have been
recognized as liabilities assumed, in connection with the
acquisition of these entities and are subject to potential
adjustments as certain exit activities are confirmed or refined.
The following table summarizes the liabilities established for
exit activities related to these acquisitions (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance
|
|
|
Facility
|
|
|
Total Exit
|
|
|
|
Related
|
|
|
And Other
|
|
|
Activities
|
|
|
Balance at December 31, 2007
|
|
$
|
14,579
|
|
|
$
|
1,898
|
|
|
$
|
16,477
|
|
Restructuring plan accruals and adjustments
|
|
|
19,561
|
|
|
|
3,897
|
|
|
|
23,458
|
|
Payments
|
|
|
(23,407
|
)
|
|
|
(854
|
)
|
|
|
(24,261
|
)
|
Currency adjustments
|
|
|
(385
|
)
|
|
|
(15
|
)
|
|
|
(400
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2008
|
|
|
10,348
|
|
|
|
4,926
|
|
|
|
15,274
|
|
Restructuring plan accruals and adjustments
|
|
|
203
|
|
|
|
5,317
|
|
|
|
5,520
|
|
Payments
|
|
|
(5,182
|
)
|
|
|
(3,243
|
)
|
|
|
(8,425
|
)
|
Currency adjustments
|
|
|
|
|
|
|
2
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2009
|
|
|
5,369
|
|
|
|
7,002
|
|
|
|
12,371
|
|
Restructuring plan accruals and adjustments
|
|
|
(2,167
|
)
|
|
|
(281
|
)
|
|
|
(2,448
|
)
|
Payments
|
|
|
(2,863
|
)
|
|
|
(3,701
|
)
|
|
|
(6,564
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2010
|
|
$
|
339
|
|
|
$
|
3,020
|
|
|
$
|
3,359
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In connection with our acquisition of Matria, we implemented an
integration plan to improve operating efficiencies and eliminate
redundant costs resulting from the acquisition. The
restructuring plan impacted all cost centers within the Matria
organization, as activities were combined with our existing
business operations. We recorded $18.5 million in exit
costs, of which $13.8 million relates to change of control
and severance costs to involuntarily terminate employees and
$4.7 million related to facility exit costs. During 2010,
we determined that $1.5 million in change of control costs
and $0.2 million in facility exit costs would not be
incurred, thereby reducing the assumed liability and goodwill
related to the Matria acquisition by $1.7 million. As of
December 31, 2010, $1.2 million in exit costs remain
unpaid. See Note 20 for additional restructuring charges
related to the Matria facility exit costs, within the health
management reporting unit.
In conjunction with our acquisition of Panbio, we formulated a
restructuring plan to realize efficiencies and cost savings. In
February 2008, we agreed upon a plan to close Panbios
facility located in Columbia, Maryland. The manufacturing
operation at the Maryland-based facility was transferred to a
third-party manufacturer, the sales of the products at this
facility were transferred to our shared services center in
Orlando, Florida and the distribution operations were
transferred to our distribution facility in Freehold, New
Jersey. We recorded $1.0 million in exit costs, including
$0.8 million related to facility and other exit costs
F-28
ALERE
INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
(4)
|
Business
Combinations (Continued)
|
and $0.2 million related to severance costs to
involuntarily terminated employees. As of December 31,
2010, $0.3 million in facility exit costs remain unpaid.
See Note 20 for additional restructuring charges related to
the Panbio facility closure and integration.
Although we believe our plan and estimated exit costs for our
2008 acquisitions are reasonable, actual spending for exit
activities may differ from current estimated exit costs.
During 2007, we formulated restructuring plans in connection
with our acquisition of Cholestech Corporation, or Cholestech,
consistent with our acquisition strategy to realize operating
efficiencies and cost savings. Additionally, in March 2008, we
announced plans to close the Cholestech facility in Hayward,
California. We have transitioned the manufacturing of the
related products to our facility in San Diego, California
and have transitioned the sales and distribution of the products
to our shared services center in Orlando, Florida. Since
inception of the plans, we recorded $8.6 million in exit
costs, of which $5.9 million relates to executive change of
control agreements and severance costs to involuntarily
terminate employees and $2.7 million relates to facility
exit costs. During the third quarter of 2010, we determined that
$0.6 million in change of control and severance costs would
not be incurred, thereby reducing the assumed liability and
goodwill related to the Cholestech acquisition. As of
December 31, 2010, $1.9 million in exit costs remain
unpaid. Although we believe our plans and estimated exit costs
are reasonable, actual spending for exit activities may differ
from current estimated exit costs.
In conjunction with our acquisitions of Biosite Incorporated, or
Biosite, HemoSense, Inc., or HemoSense, Alere Medical, Inc., or
Alere Medical, ParadigmHealth, Inc., or ParadigmHealth, and
Matritech, Inc., or Matritech, we implemented integration plans
to improve efficiencies and eliminate redundant costs resulting
from the acquisitions. Since inception of the plans, we recorded
$20.6 million in exit costs, including $18.6 million
in change in control and severance costs to involuntarily
terminated employees and $2.0 million in facility and other
exit costs primarily related to the closure of the Matritech and
HemoSense facilities. As of December 31, 2010,
substantially all exit costs have been paid.
See Note 20 for additional restructuring charges related to
the Cholestech and HemoSense facility closures and integrations.
(e) Pro Forma Financial Information
The following table presents selected unaudited financial
information, including the assets of the ACON Second Territory
Business and Standard Diagnostics, as if the acquisition of
these entities had occurred on January 1, 2009. Pro forma
results exclude adjustments for various other less significant
acquisitions completed since January 1, 2009, as these
acquisitions did not materially affect our results of operations.
The pro forma results are derived from the historical financial
results of the acquired businesses for the periods presented and
are not necessarily indicative of the results that would have
occurred had the acquisitions been consummated on
January 1, 2009 (in thousands, except per share amount).
F-29
ALERE
INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
(4)
|
Business
Combinations (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
Pro forma net revenue
|
|
$
|
2,161,500
|
|
|
$
|
1,994,771
|
|
|
|
|
|
|
|
|
|
|
Pro forma net income (loss) from continuing operations
attributable to Alere Inc. and Subsidiaries
|
|
$
|
(1,048,463
|
)
|
|
$
|
11,403
|
|
|
|
|
|
|
|
|
|
|
Pro forma net income (loss) available to common stockholders
|
|
$
|
(1,037,066
|
)
|
|
$
|
13,336
|
|
|
|
|
|
|
|
|
|
|
Pro forma net income (loss) from continuing operations
attributable to Alere Inc. and Subsidiaries per common
share basic(1)
|
|
$
|
(12.42
|
)
|
|
$
|
0.14
|
|
|
|
|
|
|
|
|
|
|
Pro forma net income (loss) from continuing operations
attributable to Alere Inc. and Subsidiaries per common
share diluted(1)
|
|
$
|
(12.42
|
)
|
|
$
|
0.14
|
|
|
|
|
|
|
|
|
|
|
Pro forma net income (loss) available to common
stockholders basic(1)
|
|
$
|
(12.28
|
)
|
|
$
|
0.16
|
|
|
|
|
|
|
|
|
|
|
Pro forma net income (loss) available to common
stockholders diluted(1)
|
|
$
|
(12.28
|
)
|
|
$
|
0.16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Net income (loss) per common share amounts are computed as
described in Note 12. |
F-30
ALERE
INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
(5)
|
Goodwill
and Other Intangible Assets
|
The following is a summary of goodwill and other intangible
assets as of December 31, 2010 (in thousands, except useful
life):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
|
|
|
Accumulated
|
|
|
Net
|
|
|
Weighted
|
|
|
|
Carrying
|
|
|
Amortization and
|
|
|
Carrying
|
|
|
Average
|
|
|
|
Amount
|
|
|
Impairment Losses
|
|
|
Value
|
|
|
Useful Life
|
|
|
Amortized intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Core technology and patents
|
|
$
|
660,245
|
|
|
$
|
195,559
|
|
|
$
|
464,686
|
|
|
|
13.45 years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplier relationships
|
|
|
18,775
|
|
|
|
13,255
|
|
|
|
5,520
|
|
|
|
9.19 years
|
|
Trademarks and trade names
|
|
|
226,290
|
|
|
|
60,814
|
|
|
|
165,476
|
|
|
|
9.65 years
|
|
License agreements
|
|
|
11,325
|
|
|
|
10,292
|
|
|
|
1,033
|
|
|
|
7.04 years
|
|
Customer relationships
|
|
|
1,525,842
|
|
|
|
532,799
|
|
|
|
993,043
|
|
|
|
16.11 years
|
|
Manufacturing know-how
|
|
|
11,215
|
|
|
|
5,071
|
|
|
|
6,144
|
|
|
|
12.62 years
|
|
Other
|
|
|
136,154
|
|
|
|
64,475
|
|
|
|
71,679
|
|
|
|
7.36 years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other intangible assets
|
|
|
1,929,601
|
|
|
|
686,706
|
|
|
|
1,242,895
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total intangible assets with finite lives
|
|
$
|
2,589,846
|
|
|
$
|
882,265
|
|
|
$
|
1,707,581
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible assets with indefinite lives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
$
|
3,837,657
|
|
|
$
|
1,006,357
|
|
|
$
|
2,831,300
|
|
|
|
|
|
Other intangible assets(1)
|
|
|
28,183
|
|
|
|
|
|
|
|
28,183
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total intangible assets with indefinite lives
|
|
$
|
3,865,840
|
|
|
$
|
1,006,357
|
|
|
$
|
2,859,483
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Primarily includes in-process research and development recorded
in connection with certain acquisitions completed during 2009
and 2010. |
F-31
ALERE
INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
(5)
|
Goodwill
and Other Intangible Assets (Continued)
|
The following is a summary of goodwill and other intangible
assets as of December 31, 2009 (in thousands, except useful
life):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
|
|
|
|
|
|
Net
|
|
|
Weighted
|
|
|
|
Carrying
|
|
|
Accumulated
|
|
|
Carrying
|
|
|
Average
|
|
|
|
Amount
|
|
|
Amortization
|
|
|
Value
|
|
|
Useful Life
|
|
|
Amortized intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Core technology and patents
|
|
$
|
558,036
|
|
|
$
|
136,317
|
|
|
$
|
421,719
|
|
|
|
13.92 years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplier relationships
|
|
|
18,939
|
|
|
|
11,781
|
|
|
|
7,158
|
|
|
|
9.21 years
|
|
Trademarks and trade names
|
|
|
174,856
|
|
|
|
37,720
|
|
|
|
137,136
|
|
|
|
10.95 years
|
|
License agreements
|
|
|
10,825
|
|
|
|
9,881
|
|
|
|
944
|
|
|
|
6.91 years
|
|
Customer relationships
|
|
|
1,395,786
|
|
|
|
343,728
|
|
|
|
1,052,058
|
|
|
|
16.31 years
|
|
Manufacturing know-how
|
|
|
7,259
|
|
|
|
4,190
|
|
|
|
3,069
|
|
|
|
13.77 years
|
|
Other
|
|
|
103,642
|
|
|
|
39,299
|
|
|
|
64,343
|
|
|
|
6.02 years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other intangible assets
|
|
|
1,711,307
|
|
|
|
446,599
|
|
|
|
1,264,708
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total intangible assets with finite lives
|
|
$
|
2,269,343
|
|
|
$
|
582,916
|
|
|
$
|
1,686,427
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible assets with indefinite lives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
$
|
3,463,358
|
|
|
$
|
|
|
|
$
|
3,463,358
|
|
|
|
|
|
Other intangible assets(1)
|
|
|
43,644
|
|
|
|
|
|
|
|
43,644
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total intangible assets with indefinite lives
|
|
$
|
3,507,002
|
|
|
$
|
|
|
|
$
|
3,507,002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Primarily includes trademarks and trade names. During 2010, we
began the process of rebranding our company and key products
under the name Alere. In connection with the rebranding
initiative, we assigned economic useful lives to certain
intangible assets previously classified as other intangible
assets with indefinite lives. Of the $43.6 million recorded
as other intangible assets with indefinite lives as of
December 31, 2009, we reclassified $42.9 million to
other intangible assets with finite lives during 2010. |
The estimated useful lives of the individual categories of
intangible assets were based on the nature of the applicable
intangible asset and the expected future cash flows to be
derived from the intangible asset. Amortization of intangible
assets with finite lives is recognized over the shorter of the
respective lives of the agreement or the period of time the
assets are expected to contribute to future cash flows. We
amortize our finite-lived intangible assets on patterns in which
the economic benefits are expected to be realized. Amortization
expense of intangible assets, which in the aggregate amounted to
$298.1 million, $255.4 million and $213.8 million
in 2010, 2009 and 2008, respectively, is included in cost of net
revenue, research and development, sales and marketing and
general and administrative in the accompanying consolidated
statements of operations. The allocation of amortization expense
to the expense categories is based on the intended usage and the
expected benefits of the intangible assets in relation to the
expense categories.
F-32
ALERE
INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
(5)
|
Goodwill
and Other Intangible Assets (Continued)
|
The following is a summary of estimated aggregate amortization
expense of intangible assets for each of the five succeeding
fiscal years as of December 31, 2010 (in thousands):
|
|
|
|
|
2011
|
|
$
|
282,349
|
|
2012
|
|
$
|
235,824
|
|
2013
|
|
$
|
202,054
|
|
2014
|
|
$
|
178,391
|
|
2015
|
|
$
|
156,042
|
|
During the fourth quarter, we perform our annual impairment
tests of the carrying value of our goodwill by reporting unit.
Our annual impairment review conducted during the fourth quarter
of 2010 indicated that a goodwill impairment charge was required
in our health management business segment and reporting unit.
For further discussion see Note 2(h).
We allocate goodwill by reporting unit based on the relative
percentage of estimated future revenues generated for the
respective reporting unit as of the acquisition date. Goodwill
amounts allocated to our professional diagnostics, health
management and consumer diagnostics reporting units are
summarized as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Professional
|
|
|
Health
|
|
|
Consumer
|
|
|
|
|
|
|
Diagnostics
|
|
|
Management
|
|
|
Diagnostics
|
|
|
Total
|
|
|
Goodwill at December 31, 2008
|
|
$
|
1,713,223
|
|
|
$
|
1,280,179
|
|
|
$
|
52,481
|
|
|
$
|
3,045,883
|
|
Acquisitions(1)
|
|
|
262,567
|
|
|
|
141,964
|
|
|
|
|
|
|
|
404,531
|
|
Other(2)
|
|
|
13,133
|
|
|
|
62
|
|
|
|
(251
|
)
|
|
|
12,944
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill at December 31, 2009
|
|
$
|
1,988,923
|
|
|
$
|
1,422,205
|
|
|
$
|
52,230
|
|
|
$
|
3,463,358
|
|
Acquisitions(1)
|
|
|
327,467
|
|
|
|
36,948
|
|
|
|
|
|
|
|
364,415
|
|
Goodwill impairment charge(3)
|
|
|
|
|
|
|
(1,006,357
|
)
|
|
|
|
|
|
|
(1,006,357
|
)
|
Other(2)
|
|
|
9,724
|
|
|
|
166
|
|
|
|
(6
|
)
|
|
|
9,884
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill at December 31, 2010
|
|
$
|
2,326,114
|
|
|
$
|
452,962
|
|
|
$
|
52,224
|
|
|
$
|
2,831,300
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes initial purchase price allocation, purchase accounting
adjustments recorded to the acquired entities opening
balance sheet and additional payments made for earn-outs and
milestones achieved. |
|
(2) |
|
These amounts relate primarily to adjustments resulting from
fluctuations in foreign currency exchange rates. |
|
(3) |
|
We recorded a goodwill impairment charge of approximately
$1.0 billion related to our health management business
segment and reporting unit. Any further reduction or impairment
of the value of goodwill or other intangible assets will result
in additional charges against earnings, which could materially
reduce our reported results of operations in future periods. |
We generally expense costs incurred to internally-develop
intangible assets, except for costs that are incurred to
establish patents and trademarks, such as legal fees for
initiating, filing and obtaining the patents and trademarks. As
of December 31, 2010, we had approximately
$8.9 million of costs capitalized, net of amortization, in
connection with establishing patents and trademarks which are
included in other intangible assets, net, in the accompanying
consolidated balance sheets. Upon the initial filing of the
patents and trademarks, we commence amortization of such
intangible assets over their estimated useful lives. Costs
incurred to maintain the patents and trademarks are expensed as
incurred.
F-33
ALERE
INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
We had the following long-term debt balances outstanding (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
First Lien Credit Agreement Term loans
|
|
$
|
941,250
|
|
|
$
|
951,000
|
|
First Lien Credit Agreement Revolving
line-of-credit
|
|
|
|
|
|
|
142,000
|
|
Second Lien Credit Agreement
|
|
|
250,000
|
|
|
|
250,000
|
|
3% Senior subordinated convertible notes
|
|
|
150,000
|
|
|
|
150,000
|
|
9% Senior subordinated notes
|
|
|
389,686
|
|
|
|
388,278
|
|
7.875% Senior notes
|
|
|
244,756
|
|
|
|
243,959
|
|
8.625% Senior subordinated notes
|
|
|
400,000
|
|
|
|
|
|
Lines-of-credit
|
|
|
4,405
|
|
|
|
2,902
|
|
Other
|
|
|
15,360
|
|
|
|
19,346
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,395,457
|
|
|
|
2,147,485
|
|
Less: Current portion
|
|
|
(16,891
|
)
|
|
|
(18,970
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,378,566
|
|
|
$
|
2,128,515
|
|
|
|
|
|
|
|
|
|
|
The following describes each of the above listed debt
instruments:
(a) First Lien Credit Agreement and Second Lien Credit
Agreement
On June 26, 2007, in conjunction with our acquisition of
Biosite, we entered into a First Lien Credit Agreement, or
senior secured credit facility, and a Second Lien Credit
Agreement, or junior secured credit facility, collectively,
secured credit facility, with certain lenders, General Electric
Capital Corporation as administrative agent and collateral
agent, and certain other agents and arrangers, and certain
related guaranty and security agreements. The senior secured
credit facility initially provided for term loans in the
aggregate amount of $900.0 million and, subject to our
continued compliance with the senior secured credit facility, a
$150.0 million revolving
line-of-credit.
The junior secured credit facility provides for term loans in
the aggregate amount of $250.0 million. We may repay any
future borrowings under the senior secured credit facility
revolving
line-of-credit
at any time, but in no event later than June 26, 2013. We
must repay the entire junior facility term loan on June 26,
2015. As of December 31, 2010, the term loans and the
revolving
line-of-credit
under the senior secured credit facility bore interest at 2.26%
and 4.25%, respectively. The term loan under the junior secured
credit facility bore interest at 4.51%.
On November 15, 2007, we amended the senior secured credit
facility, increasing the total amount of credit available to us
to $1,125,000,000 resulting from the increase in the term loans
to the aggregate amount of $975.0 million. Additionally,
under the amendment, we must repay the senior secured credit
facility term loans as follows: (a) in two initial
installments in the amount of $2,250,000 each on
September 30, 2007 and December 31, 2007 (each of
which installment payment has been made), (b) in
twenty-five consecutive quarterly installments, beginning on
March 31, 2008 and continuing through March 31, 2014,
in the amount of $2,437,500 each and (c) in a final
installment on June 26, 2014 in an amount equal to the then
outstanding principal balance of the senior secured credit
facility term loans.
As of December 31, 2010, aggregate borrowings amounted to
$1.2 billion under the term loans. Interest expense related
to the secured credit facility for the year ended
December 31, 2010, including amortized deferred financing
costs, was $60.6 million. As of December 31, 2010,
accrued interest related to the secured credit facility amounted
to $0.9 million. As of December 31, 2010, we were in
compliance with all debt
F-34
ALERE
INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
(6)
|
Long-term
Debt (Continued)
|
covenants related to the above debt, which consisted principally
of maximum consolidated leverage and minimum interest coverage
requirements.
In August 2007, we entered into interest rate swap contracts,
with an effective date of September 28, 2007, that have a
total notional value of $350.0 million and had an original
maturity date of September 28, 2010. These interest rate
swap contracts paid us variable interest at the three-month
LIBOR rate, and we paid the counterparties a fixed rate of
4.85%. In March 2009, we extended our August 2007 interest rate
hedge for an additional two-year period commencing in September
2010 at a one-month LIBOR rate of 2.54%. These interest rate
swap contracts were entered into to convert $350.0 million
of the $1.2 billion variable rate term loans under the
secured credit facilities into fixed rate debt.
In January 2009, we entered into interest rate swap contracts,
with an effective date of January 14, 2009, that had a
total notional value of $500.0 million and a maturity date
of January 5, 2011. These interest rate swap contracts paid
us variable interest at the one-month LIBOR rate, and we paid
the counterparties a fixed rate of 1.195%. These interest rate
swap contracts were entered into to convert $500.0 million
of the $1.2 billion variable rate term loan under the
secured credit facility into fixed rate debt. We did not extend
the terms of this interest rate swap after January 5, 2011.
(b) 3% Senior Subordinated Convertible Notes,
Principal Amount $150.0 million
On May 14, 2007, we sold $150.0 million principal
amount of 3% senior subordinated convertible notes due
2016, or the Convertible Notes, in a private placement to
qualified institutional buyers. At the initial conversion price
of $52.30, the Convertible Notes were convertible into an
aggregate 2,868,120 shares of our common stock. The
conversion price was subject to adjustment one year from the
date of sale. Based upon the daily volume-weighted price per
share of our common stock for the thirty consecutive trading
days ending May 9, 2008, the conversion price decreased
from $52.30 to $43.98 in May 2008. The decrease in conversion
price resulted in additional shares of our common stock becoming
issuable upon conversion of our senior subordinated convertible
notes. The senior subordinated convertible notes are now
convertible into 3.4 million shares of our common stock at
a conversion price of $43.98. Interest accrues at 3% per annum,
compounded daily, on the outstanding principal amount and is
payable in arrears on May 15th and November 15th,
which started on November 15, 2007. Interest expense for
the year ended December 31, 2010 and 2009, including
amortized deferred costs, was $5.0 million and
$5.1 million, respectively.
(c) 9% Senior Subordinated Notes
On May 12, 2009, we completed the sale of
$400.0 million aggregate principal amount of 9% senior
subordinated notes due 2016, or the 9% subordinated notes,
in a public offering. Net proceeds from this offering amounted
to $379.5 million, which was net of underwriters
commissions totaling $8.0 million and original issue
discount totaling $12.5 million. The net proceeds are
intended to be used for general corporate purposes. At
December 31, 2010, we had $389.7 million in
indebtedness under our 9% subordinated notes.
The 9% subordinated notes, which were issued under an
Indenture dated May 12, 2009, as amended or supplemented,
the 9% Indenture, accrue interest from the date of their
issuance, or May 12, 2009, at the rate of 9% per year.
Interest on the notes are payable semi-annually on May 15 and
November 15, commencing on November 15, 2009. The
notes mature on May 15, 2016, unless earlier redeemed.
We may redeem the 9% subordinated notes, in whole or part,
at any time on or after May 15, 2013, by paying the
principal amount of the notes being redeemed plus a declining
premium, plus accrued and unpaid interest to, but excluding, the
redemption date. The premium declines from 4.50% during the
twelve months after May 15, 2013 to 2.25% during the twelve
months after May 15, 2014 to zero on and after May 15,
2015. At any time prior to May 15, 2012, we may redeem up
to 35% of the aggregate principal amount of the
F-35
ALERE
INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
(6)
|
Long-term
Debt (Continued)
|
9% subordinated notes with money that we raise in certain
equity offerings so long as (i) we pay 109% of the
principal amount of the notes being redeemed, plus accrued and
unpaid interest to (but excluding) the redemption date;
(ii) we redeem the notes within 90 days of completing
such equity offering; and (iii) at least 65% of the
aggregate principal amount of the 9% subordinated notes
remains outstanding afterwards. In addition, at any time prior
to May 15, 2013, we may redeem some or all of the
9% subordinated notes by paying the principal amount of the
notes being redeemed plus the payment of a make-whole premium,
plus accrued and unpaid interest to, but excluding, the
redemption date.
If a change of control occurs, subject to specified conditions,
we must give holders of the 9% subordinated notes an
opportunity to sell their notes to us at a purchase price of
101% of the principal amount of the notes, plus accrued and
unpaid interest to, but excluding, the date of the purchase.
If we, or our, subsidiaries engage in asset sales, we, or they,
generally must either invest the net cash proceeds from such
sales in our or their businesses within a specified period of
time, prepay senior debt or make an offer to purchase a
principal amount of the 9% subordinated notes equal to the
excess net cash proceeds, subject to certain exceptions. The
purchase price of the notes will be 100% of their principal
amount, plus accrued and unpaid interest.
The 9% subordinated notes are unsecured and are
subordinated in right of payment to all of our existing and
future senior debt, including our borrowing under our secured
credit facilities. Our obligations under the
9% subordinated notes and the 9% Indenture are fully and
unconditionally guaranteed, jointly and severally, on an
unsecured senior subordinated basis by certain of our domestic
subsidiaries, and the obligations of such domestic subsidiaries
under their guarantees are subordinated in right of payment to
all of their existing and future senior debt. See Note 25
for guarantor financial information.
The 9% Indenture contains covenants that will limit our ability,
and the ability of our subsidiaries, to, among other things,
incur additional debt; pay dividends on capital stock or redeem,
repurchase or retire capital stock or subordinated debt; make
certain investments; create liens on assets; transfer or sell
assets; engage in transactions with affiliates; create
restrictions on our or their ability pay dividends or make
loans, asset transfers or other payments to us or them; issue
capital stock; engage in any business, other than our or their
existing businesses and related businesses; enter into sale and
leaseback transactions; incur layered indebtedness and
consolidate, merge or transfer all or substantially all of our,
or their, assets, taken as a whole. These covenants are subject
to certain exceptions and qualifications.
Interest expense related to our 9% subordinated notes for
the year ended December 31, 2010, including amortization of
deferred financing costs and original issue discounts, was
$38.3 million. As of December 31, 2010, accrued
interest related to the senior subordinated notes amounted to
$4.5 million.
(d) 7.875% Senior Notes
During the third quarter of 2009, we sold a total of
$250.0 million aggregate principal amount of
7.875% senior notes due 2016, or the 7.875% senior
notes, in two separate transactions. On August 11, 2009, we
sold $150.0 million aggregate principal amount of
7.875% senior notes in a public offering. Net proceeds from
this offering amounted to approximately $145.0 million,
which was net of underwriters commissions totaling
$2.2 million and original issue discount totaling
$2.8 million. The net proceeds were used to fund our
acquisition of Concateno. At December 31, 2010, we had
$147.7 million in indebtedness under this issuance of our
7.875% senior notes.
On September 28, 2009, we sold $100.0 million
aggregate principal amount of 7.875% senior notes in a
private placement to initial purchasers, who agreed to resell
the notes only to qualified institutional buyers. We also agreed
to file a registration statement with the SEC so that the
holders of these notes could exchange the
F-36
ALERE
INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
(6)
|
Long-term
Debt (Continued)
|
notes for registered notes that have substantially identical
terms as the original notes. We filed this registration
statement with the SEC on February 12, 2010 and the
exchange offer was completed on June 11, 2010. Net proceeds
from this offering amounted to approximately $95.0 million,
which was net of the initial purchasers original issue
discount totaling $3.5 million and offering expenses
totaling approximately $1.5 million. The net proceeds were
used to partially fund our acquisition of Free &
Clear. At December 31, 2010, we had $97.1 million in
indebtedness under this issuance of our 7.875% senior notes.
The 7.875% senior notes were issued under an Indenture
dated August 11, 2009, as amended or supplemented, the
7.875% Indenture. The 7.875% senior notes accrue interest
from the dates of their respective issuances at the rate of
7.875% per year. Interest on the notes are payable semi-annually
on February 1 and August 1, commencing on February 1,
2010. The notes mature on February 1, 2016, unless earlier
redeemed.
We may redeem the 7.875% senior notes, in whole or part, at
any time on or after February 1, 2013, by paying the
principal amount of the notes being redeemed plus a declining
premium, plus accrued and unpaid interest to, but excluding, the
redemption date. The premium declines from 3.938% during the
twelve months on and after February 1, 2013 to 1.969%
during the twelve months on and after February 1, 2014 to
zero on and after February 1, 2015. At any time prior to
August 1, 2012, we may redeem up to 35% of the aggregate
principal amount of the 7.875% senior notes with money that
we raise in certain equity offerings, so long as (i) we pay
107.875% of the principal amount of the notes being redeemed,
plus accrued and unpaid interest to, but excluding, the
redemption date; (ii) we redeem the notes within
90 days of completing such equity offering; and
(iii) at least 65% of the aggregate principal amount of the
7.875% senior notes remains outstanding afterwards. In
addition, at any time prior to February 1, 2013, we may
redeem some or all of the 7.875% senior notes by paying the
principal amount of the notes being redeemed plus the payment of
a make-whole premium, plus accrued and unpaid interest to, but
excluding, the redemption date.
If a change of control occurs, subject to specified conditions,
we must give holders of the 7.875% senior notes an
opportunity to sell their notes to us at a purchase price of
101% of the principal amount of the notes, plus accrued and
unpaid interest to, but excluding, the date of the purchase.
If we, or our, subsidiaries engage in asset sales, we, or they,
generally must either invest the net cash proceeds from such
sales in our or their businesses within a specified period of
time, prepay certain indebtedness or make an offer to purchase a
principal amount of the 7.875% senior notes equal to the
excess net cash proceeds, subject to certain exceptions. The
purchase price of the notes will be 100% of their principal
amount, plus accrued and unpaid interest.
The 7.875% senior notes are unsecured and are equal in
right of payment to all of our existing and future senior debt,
including our borrowing under our secured credit facilities. Our
obligations under the 7.875% senior notes and the 7.875%
Indenture are fully and unconditionally guaranteed, jointly and
severally, on an unsecured senior basis by certain of our
domestic subsidiaries, and the obligations of such domestic
subsidiaries under their guarantees are equal in right of
payment to all of their existing and future senior debt. See
Note 25 for guarantor financial information.
The 7.875% Indenture contains covenants that will limit our
ability, and the ability of our subsidiaries, to, among other
things, incur additional debt; pay dividends on capital stock or
redeem, repurchase or retire capital stock or subordinated debt;
make certain investments; create liens on assets; transfer or
sell assets; engage in transactions with affiliates; create
restrictions on our or their ability pay dividends or make
loans, asset transfers or other payments to us or them; issue
capital stock; engage in any business, other than our or their
existing businesses and related businesses; enter into sale and
leaseback transactions; incur layered indebtedness and
consolidate, merge or transfer all or substantially all of our,
or their, assets, taken as a whole. These covenants are subject
to certain exceptions and qualifications. Interest expense
related to our 7.875% senior notes for the year ended
December 31, 2010, including amortization of deferred
financing costs
F-37
ALERE
INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
(6)
|
Long-term
Debt (Continued)
|
and original issue discounts, was $21.3 million. As of
December 31, 2010, accrued interest related to the senior
notes amounted to $8.2 million.
(e) 8.625% Senior Subordinated Notes
On September 21, 2010, we completed the sale of
$400.0 million aggregate principal amount of the
8.625% senior subordinated notes due 2018, or the
8.625% subordinated notes, in a private placement to
initial purchasers, who agreed to resell the notes only to
qualified institutional buyers and to persons outside the United
States. The proceeds are intended to be used for working capital
and other general corporate purposes. At December 31, 2010,
we had $400.0 million in indebtedness under our
8.625% subordinated notes.
The 8.625% subordinated notes, which were issued under a
supplemental indenture dated September 21, 2010, as amended
or supplemented, the 8.625% Indenture, accrue interest from the
date of their issuance, at the rate of 8.625% per year. Interest
on the notes is payable semi-annually on April 1 and
October 1, commencing on April 1, 2011. The notes
mature on October 1, 2018, unless earlier redeemed.
We may redeem the 8.625% subordinated notes, in whole or
part, at any time (which may be more than once) on or after
October 1, 2014, by paying the principal amount of the
notes being redeemed plus a declining premium, plus accrued and
unpaid interest to, but excluding, the redemption date. The
premium declines from 4.313% during the twelve months on and
after October 1, 2014 to 2.156% during the twelve months on
and after October 1, 2015 to zero on and after
October 1, 2016. Prior to October 1, 2013, we may
redeem, in whole or part, at any time (which may be more than
once), up to 35% of the aggregate principal amount of the
8.625% subordinated notes with money that we raise in
certain equity offerings so long as (i) we pay 108.625% of
the principal amount of the notes being redeemed, plus accrued
and unpaid interest to (but excluding) the redemption date;
(ii) we redeem the notes within 90 days of completing
such equity offering; and (iii) at least 65% of the
aggregate principal amount of the 8.625% subordinated
notes, including any 8.625% subordinated notes issued after
September 21, 2010, remains outstanding afterwards. In
addition, at any time prior to October 1, 2014, we may
redeem some or all of the 8.625% subordinated notes by
paying the principal amount of the notes being redeemed plus the
payment of a make-whole premium, plus accrued and unpaid
interest to, but excluding, the redemption date.
If a change of control occurs, subject to specified conditions,
we must give holders of the 8.625% subordinated notes an
opportunity to sell their notes to us at a purchase price of
101% of the principal amount of the notes, plus accrued and
unpaid interest to, but excluding, the date of the purchase.
If we or our subsidiaries engage in asset sales, we or they
generally must either invest the net cash proceeds from such
sales in our or their businesses within a specified period of
time, repay senior indebtedness or make an offer to purchase a
principal amount of the 8.625% subordinated notes equal to
the excess net cash proceeds, subject to certain exceptions. The
purchase price of the notes will be 100% of their principal
amount, plus accrued and unpaid interest.
The 8.625% subordinated notes are unsecured and are
subordinated in right of payment to all of our existing and
future senior debt, including our borrowing under our secured
credit facilities. Our obligations under the
8.625% subordinated notes and the 8.625% Indenture are
fully and unconditionally guaranteed, jointly and severally, on
an unsecured senior subordinated basis by certain of our
domestic subsidiaries, and the obligations of such domestic
subsidiaries under their guarantees are subordinated in right of
payment to all of their existing and future senior debt. See
Note 25 for guarantor financial information.
The 8.625% Indenture contains covenants that will limit our
ability and the ability of our subsidiaries to, among other
things, incur additional debt; pay dividends on capital stock or
redeem, repurchase or retire capital stock or subordinated debt;
make certain investments; create liens on assets; transfer or
sell assets;
F-38
ALERE
INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
(6)
|
Long-term
Debt (Continued)
|
engage in transactions with affiliates; create restrictions on
our or their ability to pay dividends or make loans, asset
transfers or other payments to us or them; issue capital stock
of our or their subsidiaries; engage in any business, other than
our or their existing businesses and related businesses; enter
into sale and leaseback transactions; incur layered
indebtedness; and consolidate, merge or transfer all or
substantially all of our or their assets, taken as a whole.
These covenants are subject to certain exceptions and
qualifications. Interest expense related to our
8.625% subordinated notes for the year ended
December 31, 2010, including amortization of deferred
financing costs, was $9.9 million. As of December 31,
2010, accrued interest related to the subordinated notes
amounted to $9.6 million.
(f) Lines of credit
Some of our subsidiaries maintain local lines of credit for
short-term advances. Total available credit under the local
lines of credit is approximately $5.4 million, of which $4.4
million was borrowed and outstanding as of December 31,
2010.
(g) Other Debt
Included in other debt above, for the year ended
December 31, 2010, are borrowings by certain of our
subsidiaries from various financial institutions. The borrowed
funds are used to fund capital expenditure and working capital
requirements. Interest expense on these borrowings was
$1.1 million for the year ended December 31, 2010.
(i) Maturities of Long-term Debt
The following is a summary of the maturities of long-term debt
outstanding on December 31, 2010 (in thousands):
|
|
|
|
|
2011
|
|
$
|
16,891
|
|
2012
|
|
|
12,125
|
|
2013
|
|
|
9,922
|
|
2014
|
|
|
912,174
|
|
2015
|
|
|
250,155
|
|
Thereafter
|
|
|
1,209,748
|
|
|
|
|
|
|
|
|
|
2,411,015
|
|
Less: Original issue discounts
|
|
|
(15,558
|
)
|
|
|
|
|
|
|
|
$
|
2,395,457
|
|
|
|
|
|
|
|
|
(7)
|
Fair
Value Measurements
|
We apply fair value measurement accounting to value our
financial assets and liabilities. Fair value measurement
accounting provides a framework for measuring fair value under
U.S. GAAP and requires expanded disclosures regarding fair
value measurements. Fair value is defined as the exchange price
that would be received for an asset or paid to transfer a
liability (an exit price) in the principal or most advantageous
market for the asset or liability in an orderly transaction
between market participants on the measurement date. A fair
value hierarchy requires an entity to maximize the use of
observable inputs, where available, and minimize the use of
unobservable inputs when measuring fair value.
F-39
ALERE
INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
(7)
|
Fair
Value Measurements (Continued)
|
Described below are the three levels of inputs that may be used
to measure fair value:
Level 1 Quoted prices in active markets for
identical assets or liabilities. Our Level 1 assets and
liabilities include investments in marketable securities.
Level 2 Observable inputs other than Level 1
prices, such as quoted prices for similar assets or liabilities;
quoted prices in markets that are not active; or other inputs
that are observable or can be corroborated by observable market
data for substantially the full term of the assets or
liabilities. Our Level 2 liabilities include interest rate
swap contracts.
Level 3 Unobservable inputs that are supported by
little or no market activity and that are significant to the
fair value of the assets or liabilities. The fair value of the
contingent consideration obligations related to our acquisitions
completed after January 1, 2009 are valued using
Level 3 inputs.
The following table presents information about our assets and
liabilities that are measured at fair value on a recurring basis
as of December 31, 2010 and 2009, and indicates the fair
value hierarchy of the valuation techniques we utilized to
determine such fair value (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quoted Prices in
|
|
|
Significant Other
|
|
|
|
|
|
|
December 31,
|
|
|
Active Markets
|
|
|
Observable Inputs
|
|
|
Unobservable Inputs
|
|
Description
|
|
2010
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketable securities
|
|
$
|
11,948
|
|
|
$
|
11,948
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
11,948
|
|
|
$
|
11,948
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap liability(1)
|
|
$
|
11,980
|
|
|
$
|
|
|
|
$
|
11,980
|
|
|
$
|
|
|
Contingent consideration obligations(2)
|
|
|
132,879
|
|
|
|
|
|
|
|
|
|
|
|
132,879
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
$
|
144,859
|
|
|
$
|
|
|
|
$
|
11,980
|
|
|
$
|
132,879
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-40
ALERE
INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
(7)
|
Fair
Value Measurements (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quoted Prices in
|
|
|
Significant Other
|
|
|
|
|
|
|
December 31,
|
|
|
Active Markets
|
|
|
Observable Inputs
|
|
|
Unobservable Inputs
|
|
Description
|
|
2009
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketable securities
|
|
$
|
2,450
|
|
|
$
|
2,450
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
2,450
|
|
|
$
|
2,450
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap liability(1)
|
|
$
|
15,945
|
|
|
$
|
|
|
|
$
|
15,945
|
|
|
$
|
|
|
Contingent consideration obligations(2)
|
|
|
43,178
|
|
|
|
|
|
|
|
|
|
|
|
43,178
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
$
|
59,123
|
|
|
$
|
|
|
|
$
|
15,945
|
|
|
$
|
43,178
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The fair value of our interest rate swaps is based on the
application of standard discounted cash flow models using market
interest rate data. |
|
(2) |
|
The fair value measurements for our contingent consideration
obligations related to the acquisitions completed after
January 1, 2009 are valued using Level 3 inputs. We
determine the fair value of the contingent consideration
obligations based on a probability-weighted approach derived
from earn-out criteria estimates and a probability assessment
with respect to the likelihood of achieving the various earn-out
criteria. The measurement is based upon significant inputs not
observable in the market. Changes in the value of these
contingent consideration obligations are recorded as income or
expense, a component of operating income in our consolidated
statement of operations. See Note 11 for additional
information on the valuation of our contingent consideration
obligations. |
Changes in the fair value of our Level 3 contingent
consideration obligations during the year ended
December 31, 2010 were as follows (in thousands):
|
|
|
|
|
Fair value of contingent consideration obligations,
January 1, 2010
|
|
$
|
43,178
|
|
Acquisition date fair value of contingent consideration
obligations recorded
|
|
|
88,400
|
|
Payments
|
|
|
(500
|
)
|
Adjustments, net (income) expense
|
|
|
1,801
|
|
|
|
|
|
|
Fair value of contingent consideration obligations,
December 31, 2010
|
|
$
|
132,879
|
|
|
|
|
|
|
At December 31, 2010 and 2009, the carrying amounts of cash
and cash equivalents, restricted cash, receivables, accounts
payable and other current liabilities approximated their
estimated fair values.
Both the carrying amounts and estimated fair values of our
long-term debt were $2.4 billion and $2.1 billion at
December 31, 2010 and 2009, respectively. The estimated
fair value of our long-term debt was determined using market
sources that were derived from available market information and
may not be representative of actual values that could have been
or will be realized in the future.
F-41
ALERE
INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following is a schedule of the future minimum lease payments
under the capital leases, together with the present value of
such payments as of December 31, 2010 (in thousands):
|
|
|
|
|
2011
|
|
$
|
2,126
|
|
2012
|
|
|
773
|
|
2013
|
|
|
527
|
|
2014
|
|
|
80
|
|
2015
|
|
|
24
|
|
|
|
|
|
|
Total future minimum lease payments
|
|
|
3,530
|
|
Less: Imputed interest
|
|
|
(2
|
)
|
|
|
|
|
|
Present value of future minimum lease payments
|
|
|
3,528
|
|
Less: Current portion
|
|
|
(2,126
|
)
|
|
|
|
|
|
|
|
$
|
1,402
|
|
|
|
|
|
|
At December 31, 2010, the capitalized amounts of the
building, machinery and equipment and computer equipment under
capital leases were as follows (in thousands):
|
|
|
|
|
Machinery, laboratory equipment and tooling
|
|
$
|
5,916
|
|
Computer equipment
|
|
|
18
|
|
Furniture and fixtures
|
|
|
179
|
|
Leasehold improvements
|
|
|
72
|
|
|
|
|
|
|
|
|
|
6,185
|
|
Less: Accumulated amortization
|
|
|
(2,039
|
)
|
|
|
|
|
|
|
|
$
|
4,146
|
|
|
|
|
|
|
The amortization expense of assets recorded under capital leases
is included in depreciation and amortization expense of
property, plant and equipment.
|
|
(9)
|
Postretirement
Benefit Plans
|
(a) Employee Savings Plans
Our company and several of our
U.S.-based
subsidiaries sponsor various 401(k) savings plans, to which
eligible domestic employees may voluntarily contribute a portion
of their income, subject to statutory limitations. In addition
to the participants own contributions to these 401(k)
savings plans, we match such contributions up to a designated
level. Total matching contributions related to employee savings
plans were $6.9 million, $6.4 million and
$4.6 million in 2010, 2009 and 2008, respectively.
F-42
ALERE
INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
(9)
|
Postretirement
Benefit Plans (Continued)
|
(b) U.K. Pension Plans
Changes in benefit obligations, plan assets, funded status and
amounts recognized on the accompanying balance sheet as of and
for the years ended December 31, 2010 and 2009, for our
Defined Benefit Plan, were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
Change in projected benefit obligation
|
|
|
|
|
|
|
|
|
Benefit obligation at beginning of year
|
|
$
|
12,909
|
|
|
$
|
9,078
|
|
Interest cost
|
|
|
717
|
|
|
|
596
|
|
Actuarial loss
|
|
|
1,195
|
|
|
|
1,990
|
|
Benefits paid
|
|
|
(167
|
)
|
|
|
(127
|
)
|
Curtailment loss (gain)
|
|
|
|
|
|
|
313
|
|
Foreign exchange impact
|
|
|
(263
|
)
|
|
|
1,059
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation at end of year
|
|
$
|
14,391
|
|
|
$
|
12,909
|
|
|
|
|
|
|
|
|
|
|
Change in plan assets
|
|
|
|
|
|
|
|
|
Fair value of plan assets at beginning of year
|
|
$
|
8,833
|
|
|
$
|
5,928
|
|
Actual return on plan assets
|
|
|
1,462
|
|
|
|
1,477
|
|
Employer contribution
|
|
|
894
|
|
|
|
854
|
|
Benefits paid
|
|
|
(167
|
)
|
|
|
(127
|
)
|
Foreign exchange impact
|
|
|
(167
|
)
|
|
|
701
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets at end of year
|
|
$
|
10,855
|
|
|
$
|
8,833
|
|
|
|
|
|
|
|
|
|
|
Funded status at end of year for projected benefit
obligation
|
|
$
|
(3,536
|
)
|
|
$
|
(4,076
|
)
|
|
|
|
|
|
|
|
|
|
Funded status at end of year for accumulated benefit
obligation
|
|
$
|
(812
|
)
|
|
$
|
(1,290
|
)
|
|
|
|
|
|
|
|
|
|
The net amounts recognized in the accompanying consolidated
balance sheets are shown in current liabilities and were
$3.5 million and $4.1 million for the years ended
December 31, 2010 and 2009, respectively.
Amounts recognized in accumulated other comprehensive income
(loss) for the years ending December 31, 2010 and 2009, are
as follows:
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
Net actuarial loss
|
|
$
|
1,824
|
|
|
$
|
1,545
|
|
Prior service costs
|
|
|
5,413
|
|
|
|
5,535
|
|
|
|
|
|
|
|
|
|
|
Net amount recognized
|
|
$
|
7,237
|
|
|
$
|
7,080
|
|
|
|
|
|
|
|
|
|
|
The measurement date used to determine plan assets and benefit
obligations for the Defined Benefit Plan was December 31,
2010 and 2009.
F-43
ALERE
INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
(9)
|
Postretirement
Benefit Plans (Continued)
|
The following table provides the weighted-average actuarial
assumptions:
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
Assumptions used to determine benefit obligations(1):
|
|
|
|
|
|
|
|
|
Discount rate
|
|
|
5.30
|
%
|
|
|
5.70
|
%
|
Rate of compensation increase
|
|
|
4.15
|
%
|
|
|
4.25
|
%
|
Assumptions used to determine net periodic benefit
cost(2):
|
|
|
|
|
|
|
|
|
Discount rate
|
|
|
5.70
|
%
|
|
|
6.10
|
%
|
Expected return on plan assets
|
|
|
6.70
|
%
|
|
|
6.55
|
%
|
Rate of compensation increase
|
|
|
4.25
|
%
|
|
|
3.85
|
%
|
|
|
|
(1) |
|
The actuarial assumptions used to compute the unfunded status
for the plan are based upon information available as of
December 31, 2010 and 2009. |
|
(2) |
|
The actuarial assumptions used to compute the net periodic
pension benefit cost are based upon the information available as
of the beginning of the year. |
The actuarial assumptions are reviewed on an annual basis. The
overall expected long-term rate of return on plan assets
assumption was determined based on historical investment return
rates on portfolios with a high proportion of equity securities.
The annual cost of the Defined Benefit Plan is as follows (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Interest cost
|
|
$
|
717
|
|
|
$
|
596
|
|
|
$
|
677
|
|
Expected return on plan assets
|
|
|
(597
|
)
|
|
|
(444
|
)
|
|
|
(634
|
)
|
Amortization of net loss (gain)
|
|
|
20
|
|
|
|
|
|
|
|
(80
|
)
|
Curtailment loss (gain)
|
|
|
|
|
|
|
313
|
|
|
|
(1,113
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost (benefit)
|
|
$
|
140
|
|
|
$
|
465
|
|
|
$
|
(1,150
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The plan assets of the Defined Benefit Plan comprise of a mix of
stocks and fixed income securities and other investments. At
December 31, 2010, these stocks and fixed income securities
represented 70% and 30%, respectively, of the market value of
the pension assets. We expect to contribute approximately
0.6 million British Pounds Sterling (or $0.9 million
at December 31, 2010) to the Defined Benefit Plan in
2011. We expect benefits to be paid to plan participants of
approximately $0.3 million per year for each of the next
five years and for benefits totaling $0.4 million to be
paid annually for the five years thereafter.
Our overall investment strategy is to ensure the investments are
spread across a range of investments varying by both investment
class and geographical location which is achieved by investing
largely in equity and fixed income funds. Spreading the
investments in this manner reduces the risk of a decline in a
particular market having a substantial impact on the whole fund.
The target allocation for the plan assets is a 70% holding in
equities (both in the U.K. and overseas), with the remaining
assets invested in investment grade corporate bonds.
F-44
ALERE
INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
(9)
|
Postretirement
Benefit Plans (Continued)
|
The fair values of our pension plan assets at December 31,
2010 and 2009 by asset category are presented in the following
table (Level 2 in the fair value hierarchy).
|
|
|
|
|
|
|
|
|
|
|
Plan Assets at
|
|
|
|
December 31,
|
|
Asset Category
|
|
2010
|
|
|
2009
|
|
|
Equity securities:
|
|
|
|
|
|
|
|
|
U.K. equities
|
|
$
|
3,758
|
|
|
$
|
2,997
|
|
Overseas equities
|
|
|
3,828
|
|
|
|
3,037
|
|
Debt securities corporate bonds
|
|
|
3,067
|
|
|
|
2,581
|
|
Other cash
|
|
|
202
|
|
|
|
218
|
|
|
|
|
|
|
|
|
|
|
Total plan assets
|
|
$
|
10,855
|
|
|
$
|
8,833
|
|
|
|
|
|
|
|
|
|
|
The table above presents the fair value of our plans
assets in accordance with the fair value hierarchy. The pension
plan assets are measured using net asset value per share (or its
equivalent) and are reported as a Level 2 investment above
due to our ability to redeem the investment either at the
balance sheet date or within limited time restrictions.
Unipath Limited, or Unipath, contributed $0.4 million in
2010, $0.8 million in 2009 and $1.0 million in 2008 to
a Defined Contribution Plan, which was recognized as an expense
in the accompanying consolidated statement of operations.
|
|
(10)
|
Derivative
Financial Instruments
|
We use derivative financial instruments (interest rate swap
contracts) in the management of our interest rate exposure
related to our secured credit facilities. We do not hold or
issue derivative financial instruments for speculative purposes.
The following tables summarize the fair value of our derivative
instruments and the effect of derivative instruments on/in our
accompanying consolidated balance sheets and consolidated
statements of operations and in accumulated other comprehensive
income (loss) (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value at
|
|
|
Fair Value at
|
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
Derivative Instruments
|
|
Balance Sheet Caption
|
|
2010
|
|
|
2009
|
|
|
Interest rate swap contracts(1)
|
|
Accrued expenses and other current liabilities
|
|
$
|
26
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap contracts(1)
|
|
Other long-term liabilities
|
|
$
|
11,954
|
|
|
$
|
15,945
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of Gain
|
|
|
Amount of Gain
|
|
|
|
|
|
Recognized
|
|
|
Recognized
|
|
|
|
|
|
During the Year
|
|
|
During the Year
|
|
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
Location of Gain (Loss)
|
|
December 31,
|
|
|
December 31,
|
|
Derivative Instruments
|
|
Recognized in Income
|
|
2010
|
|
|
2009
|
|
|
Interest rate swap contracts(1)
|
|
Other comprehensive income (loss)
|
|
$
|
3,965
|
|
|
$
|
5,187
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
See Note 6(a) regarding our interest rate swaps which
qualify as cash flow hedges. |
F-45
ALERE
INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
(11)
|
Commitments
and Contingencies
|
(a) Operating Leases
We have operating lease commitments for certain of our
facilities and equipment that expire on various dates through
2020. The following schedule outlines future minimum annual
rental payments under these leases at December 31, 2010 (in
thousands):
|
|
|
|
|
2011
|
|
$
|
33,772
|
|
2012
|
|
|
30,155
|
|
2013
|
|
|
27,615
|
|
2014
|
|
|
21,737
|
|
2015
|
|
|
19,748
|
|
Thereafter
|
|
|
52,088
|
|
|
|
|
|
|
|
|
$
|
185,115
|
|
|
|
|
|
|
Rent expense relating to operating leases was approximately
$39.0 million, $37.3 million and $34.2 million
during 2010, 2009 and 2008, respectively.
(b) Contingent Consideration Obligations
Effective January 1, 2009, we adopted changes issued by the
FASB to accounting for business combinations. These changes
apply to all assets acquired and liabilities assumed in a
business combination that arise from certain contingencies and
require: (i) an acquirer to recognize at fair value, at the
acquisition date, an asset acquired or liability assumed in a
business combination that arises from a contingency if the
acquisition-date fair value of that asset or liability can be
determined during the measurement period; otherwise, the asset
or liability should be recognized at the acquisition date if
certain defined criteria are met and (ii) contingent
consideration arrangements of an acquiree assumed by the
acquirer in a business combination to be recognized initially at
fair value.
We determine the acquisition date fair value of the contingent
consideration obligations based on a probability-weighted
approach derived from the overall likelihood of achieving the
targets before the corresponding delivery dates. The fair value
measurement is based on significant inputs not observable in the
market and thus represents a Level 3 measurement, as
defined in fair value measurement accounting. The resultant
probability-weighted milestone payments are discounted using a
discount rate based upon the weighted-average cost of capital.
At each reporting date, we revalue the contingent consideration
obligations to the reporting date fair values and record
increases and decreases in the fair values as income or expense
in our consolidated statements of operations.
Increases or decreases in the fair values of the contingent
consideration obligations may result from changes in discount
periods and rates, changes in the timing and amount of earn-out
criteria and changes in probability assumptions with respect to
the likelihood of achieving the various earn-out criteria.
The adoption of this guidance was done on a prospective basis.
For acquisitions completed prior to January 1, 2009,
contingent consideration will be accounted for as an increase in
the aggregate purchase price and goodwill, if and when the
contingencies occur.
We have contractual contingent consideration obligations related
to our acquisitions of Accordant, AdnaGen, Capital Toxicology,
Free & Clear, Immunalysis, a privately-owned research
and development operation, JSM, Medlab, Mologic, Tapestry, a
privately-owned U.K. research and development operation, a
privately-owned health management business acquired in 2008, and
certain other small businesses.
F-46
ALERE
INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
(11)
|
Commitments
and Contingencies (Continued)
|
|
|
(i)
|
Acquisitions
Completed prior to January 1, 2009
|
|
|
|
|
|
Privately-owned health management business
|
With respect to a privately-owned health management business
which we acquired in 2008, the terms of the acquisition
agreement provide for contingent consideration payable upon
successfully meeting certain revenue and EBITDA targets. The
final earn-out was achieved during the fourth quarter of 2010,
resulting in an accrual of approximately $31.8 million.
Payment is expected to be made during the first quarter of 2011.
The achievement of this milestone was accounted for as an
increase in the aggregate purchase price and goodwill during the
fourth quarter of 2010.
|
|
(ii)
|
Acquisitions
Completed on or after January 1, 2009
|
With respect to Accordant, the terms of the acquisition
agreement require us to pay an earn-out upon successfully
meeting certain revenue and cash collection targets starting
after the second anniversary of the acquisition date and
completed prior to the third anniversary date of the
acquisition. The maximum amount of the earn-out payment is
$6.0 million and, if earned, payment is expected to be made
during 2012 and 2013. We recorded expense of approximately
$0.5 million and $0.2 million within general and
administrative expense in our consolidated statements of
operations during the years ended December 31, 2010 and
2009, respectively, as a net result of a decrease in the
discount period and fluctuations in the discount rate since the
acquisition date. As of December 31, 2010, the fair value
of the contingent consideration obligation was approximately
$3.9 million.
With respect to AdnaGen, the terms of the acquisition agreement
require us to pay earn-outs upon successfully (i) meeting
certain financial targets during the two years following the
acquisition; (ii) achieving multiple product development
milestones during the three years following the acquisition and
(iii) creating pharmaceutical alliances during the six
years following the acquisition. The maximum amount of the
earn-out payments is approximately $63.0 million. We
recorded expense of approximately $0.1 million within
general and administrative expense in our consolidated statement
of operations during the year ended December 31, 2010 as a
net result of a decrease in the discount period and fluctuations
in the discount rate since the acquisition date. As of
December 31, 2010, the fair value of the contingent
consideration obligation was approximately $20.6 million.
With respect to Capital Toxicology, the terms of the acquisition
agreement require us to pay an earn-out upon successfully
meeting certain operating income targets during each of the
calendar years 2011 and 2012. The maximum amount of the earn-out
payments is approximately $16.0 million. As of
December 31, 2010, the fair value of the contingent
consideration obligation was approximately $2.9 million.
With respect to Free & Clear, the terms of the
acquisition agreement require us to pay an earn-out upon
successfully meeting certain revenue and EBITDA targets during
fiscal year 2010. We recorded income of approximately
$3.7 million and expense of $0.5 million within
general and administrative expense in our consolidated
statements of operations during the years ended
December 31, 2010 and 2009, respectively, as a net result
of changes to revenue and EBITDA estimates, changes in
probability assumptions, a decrease in the discount period and
fluctuations in the discount rate since the acquisition date.
The earn-out was achieved as
F-47
ALERE
INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
(11)
|
Commitments
and Contingencies (Continued)
|
of December 31, 2010, resulting in an accrual of
approximately $11.0 million. Payment is expected to be made
during the second quarter of 2011.
With respect to Immunalysis, the terms of the acquisition
agreement require us to pay earn-outs upon successfully meeting
certain gross profit targets during each of the calendar years
2010 through 2012. The maximum amount of the earn-out payments
is $5.0 million. We recorded income of approximately
$0.1 million within general and administrative expense in
our consolidated statement of operations during the year ended
December 31, 2010 as a net result of a decrease in the
discount period, changes in probability assumptions and
fluctuations in the discount rate since the acquisition date. As
of December 31, 2010, the fair value of the contingent
consideration obligation was approximately $1.1 million.
Additionally, we have a contractual contingent obligation to pay
up to a total of $3.0 million in compensation to certain
executives of Immunalysis in accordance with the acquisition
agreement that, if earned, will be paid out in connection with
the contingent consideration payable to the former shareholders
of Immunalysis, in each of the calendar years 2010, 2011 and
2012. As of December 31, 2010, approximately
$0.3 million of compensation was earned. Payment is
expected to be made during the first quarter of 2011.
In no case will the aggregate total of the two contingent
obligations noted above exceed $6.0 million.
With respect to JSM, the terms of the acquisition agreement
require us to pay an earn-out upon successfully meeting certain
revenue and operating income targets during each of the calendar
years 2010 through 2012. We recorded expense of approximately
$0.2 million within general and administrative expense in
our consolidated statement of operations during the year ended
December 31, 2010 as a net result of a decrease in the
discount period, changes in probability assumptions and
fluctuations in the discount rate since the acquisition date.
The 2010 portion of the earn-out totaling approximately
$0.6 million was earned as of December 31, 2010.
Payment of the 2010 earn-out is expected to be made during the
second quarter of 2011. As of December 31, 2010, the fair
value of the contingent consideration obligation, including the
$0.6 million earned in 2010, was approximately
$1.2 million. The maximum remaining amount of the earn-out
payments is approximately $2.4 million.
With respect to Medlab, the terms of the acquisition agreement
require us to pay an earn-out upon successfully meeting certain
revenue and operating income targets during each of the calendar
years 2011 through 2016. The maximum amount of the earn-out
payments is approximately $10.0 million. As of
December 31, 2010, the fair value of the contingent
consideration obligation was approximately $4.3 million.
With respect to Mologic, the terms of the acquisition agreement
require us to pay earn-outs upon successfully meeting four
R&D project milestones during the four years following the
acquisition. We recorded expense of approximately
$5.0 million and $0.4 million within general and
administrative expense in our consolidated statements of
operations during the year ended December 31, 2010 and
2009, respectively, as a net result of a decrease in the
discount period, adjustments to certain probability factors and
fluctuations in the discount rate since the acquisition date. A
portion of the earn-out was achieved during the fourth quarter
of 2010, resulting in an accrual of approximately
$3.9 million as of December 31, 2010. Payment of this
portion of the earn-out is expected to be made during the first
quarter of 2011. As of December 31, 2010, the fair value of
the contingent consideration obligation, including the
$3.9 million earned during 2010, was
F-48
ALERE
INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
(11)
|
Commitments
and Contingencies (Continued)
|
approximately $10.8 million. The maximum remaining amount
of the earn-out payments is $15.0 million, which will be
paid in shares of our common stock.
|
|
|
|
|
Privately-owned research and development operation
|
With respect to our acquisition of a privately-owned research
and development operation, the terms of the acquisition
agreement require us to pay earn-outs upon successfully meeting
multiple product development milestones during the five years
following the acquisition. The maximum amount of the earn-out
payments is $57.5 million. We recorded expense of
approximately $0.3 million within general and
administrative expense in our consolidated statement of
operations during the year ended December 31, 2010 as a net
result of a decrease in the discount period and fluctuations in
the discount rate since the acquisition date. As of
December 31, 2010, the fair value of the contingent
consideration obligation was approximately $24.8 million.
|
|
|
|
|
Privately-owned U.K. research and development operation
|
With respect to our acquisition of a privately-owned U.K.
research and development operation, the terms of the acquisition
agreement require us to pay an earn-out upon successfully
meeting certain revenue and product development targets. The
maximum amount of the earn-out payments is $125.0 million
and, if earned, payments are expected to be made during the
eight-year period following the acquisition date, but could
extend thereafter. We recorded expense of approximately
$2.2 million within general and administrative expense in
our consolidated statement of operations during the year ended
December 31, 2010 as a net result of a decrease in the
discount period and fluctuations in the discount rate since the
acquisition date. As of December 31, 2010, the fair value
of the contingent consideration obligation was approximately
$37.8 million.
With respect to Tapestry, the terms of the acquisition agreement
require us to pay an earn-out upon successfully meeting certain
revenue and EBITDA targets during each of the calendar years
2010 and 2011. The maximum amount of the earn-out payments is
$25.0 million which, if earned, will be paid in shares of
our common stock, except that the 2010 earn-out under the
amended agreement and plan of merger will be paid in cash. We
recorded income of approximately $2.7 million and expense
of $0.7 million within general and administrative expense
in our consolidated statements of operations during the year
ended December 31, 2010 and 2009, respectively, as a net
result of a decrease in the discount period, adjustments to
certain probability factors and fluctuations in the discount
rate since the acquisition date. As of December 31, 2010,
the 2010 financial targets were achieved resulting in an accrual
of approximately $10.7 million. Cash payment is expected to
be made during the first quarter of 2011. As of
December 31, 2010, the fair value of the contingent
consideration obligation, which includes the $10.7 million
earned during 2010, was approximately $14.0 million.
(c) Contingent Obligations
In November 2009, we entered into a distribution agreement with
Epocal, Inc., or Epocal, to distribute the
epoc®
Blood Analysis System for blood gas and electrolyte testing for
$20.0 million, which is recorded on our accompanying
consolidated balance sheet in other intangible assets, net. We
also entered into a definitive agreement to acquire all of the
issued and outstanding equity securities of Epocal for a total
potential purchase price of up to $255.0 million, including
a base purchase price of up to $172.5 million if Epocal
achieves certain gross margin and other financial milestones on
or prior to October 31, 2014, plus additional payments of
up to $82.5 million if Epocal achieves certain other
milestones relating to its gross margin and product development
efforts on or prior to this date. We also agreed that, if the
acquisition is consummated, we will provide $12.5 million
in management incentive arrangements, 25% of which will vest
over three years and
F-49
ALERE
INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
(11)
|
Commitments
and Contingencies (Continued)
|
75% of which will be payable only upon the achievement of
certain milestones. The acquisition will also be subject to
other closing conditions, including the receipt of any required
antitrust or other approvals.
|
|
|
|
|
Option agreement with P&G
|
In connection with the formation of SPD in May 2007, we entered
into an option agreement with P&G, pursuant to which
P&G has the right, for a period of 60 days commencing
on May 17, 2011, to require us to acquire all of
P&Gs interest in SPD at fair market value, and
P&G has the right, upon certain material breaches by us of
our obligations to SPD, to acquire all of our interest in SPD at
fair market value. No gain on the proceeds that we received from
P&G through the formation of SPD will be recognized in our
financial statements until P&Gs option to require us
to purchase its interest in SPD expires. If P&G chooses to
exercise its option, the deferred gain carried on our books
would be reversed in connection with the repurchase transaction.
As of December 31, 2010, the deferred gain of
$288.4 million is presented as a current liability on our
accompanying consolidated balance sheet. As of December 31,
2009, the deferred gain of $288.8 million is presented as a
long-term liability.
(d) Legal Proceedings
We are not a party to any pending legal proceedings that we
currently believe could have a material adverse impact on our
sales, operations or financial performance. However, because of
the nature of our business, we may be subject at any particular
time to lawsuits or other claims arising in the ordinary course
of our business, and we expect that this will continue to be the
case in the future.
|
|
(12)
|
Net
Income (Loss) Per Common Share
|
The following tables set forth the computation of basic and
diluted income (loss) per common share (in thousands, except per
share amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Income (loss) per common share basic:
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator continuing operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
$
|
(1,028,707
|
)
|
|
$
|
31,782
|
|
|
$
|
(20,720
|
)
|
Less: Preferred stock dividends
|
|
|
(24,235
|
)
|
|
|
(22,972
|
)
|
|
|
(13,989
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) available to common stockholders from continuing
operations
|
|
$
|
(1,052,942
|
)
|
|
$
|
8,810
|
|
|
$
|
(34,709
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator discontinued operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from discontinued operations
|
|
|
11,397
|
|
|
|
1,934
|
|
|
|
(1,048
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator net income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
$
|
(1,028,707
|
)
|
|
$
|
31,782
|
|
|
$
|
(20,720
|
)
|
Income (loss) from discontinued operations
|
|
|
11,397
|
|
|
|
1,934
|
|
|
|
(1,048
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
(1,017,310
|
)
|
|
|
33,716
|
|
|
|
(21,768
|
)
|
Less: Preferred stock dividends
|
|
|
(24,235
|
)
|
|
|
(22,972
|
)
|
|
|
(13,989
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) available to common stockholders
|
|
$
|
(1,041,545
|
)
|
|
$
|
10,744
|
|
|
$
|
(35,757
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-50
ALERE
INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
(12)
|
Net
Income (Loss) Per Common Share (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding
|
|
|
84,445
|
|
|
|
80,572
|
|
|
|
77,778
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) per common share from continuing operations
|
|
$
|
(12.47
|
)
|
|
$
|
0.11
|
|
|
$
|
(0.45
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) per common share from discontinued operations
|
|
$
|
0.14
|
|
|
$
|
0.02
|
|
|
$
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per common share
|
|
$
|
(12.33
|
)
|
|
$
|
0.13
|
|
|
$
|
(0.46
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Income (loss) per common share diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator continuing operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
$
|
(1,028,707
|
)
|
|
$
|
31,782
|
|
|
$
|
(20,720
|
)
|
Less: Preferred stock dividends
|
|
|
(24,235
|
)
|
|
|
(22,972
|
)
|
|
|
(13,989
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) available to common stockholders from continuing
operations
|
|
$
|
(1,052,942
|
)
|
|
$
|
8,810
|
|
|
$
|
(34,709
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator discontinued operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from discontinued operations
|
|
|
11,397
|
|
|
$
|
1,934
|
|
|
$
|
(1,048
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator net income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
$
|
(1,028,707
|
)
|
|
$
|
31,782
|
|
|
$
|
(20,720
|
)
|
Income (loss) from discontinued operations
|
|
|
11,397
|
|
|
|
1,934
|
|
|
|
(1,048
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
(1,017,310
|
)
|
|
$
|
33,716
|
|
|
$
|
(21,768
|
)
|
Less: Preferred stock dividends
|
|
|
(24,235
|
)
|
|
|
(22,972
|
)
|
|
|
(13,989
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) available to common stockholders
|
|
$
|
(1,041,545
|
)
|
|
$
|
10,744
|
|
|
$
|
(35,757
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding
|
|
|
84,445
|
|
|
|
80,572
|
|
|
|
77,778
|
|
Stock options
|
|
|
|
|
|
|
1,228
|
|
|
|
|
|
Warrants
|
|
|
|
|
|
|
167
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shares
|
|
|
84,445
|
|
|
|
81,967
|
|
|
|
77,778
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) per common share from continuing operations
|
|
$
|
(12.47
|
)
|
|
$
|
0.11
|
|
|
$
|
(0.45
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) per common share from discontinued operations
|
|
$
|
0.14
|
|
|
$
|
0.02
|
|
|
$
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per common share
|
|
$
|
(12.33
|
)
|
|
$
|
0.13
|
|
|
$
|
(0.46
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We had the following potential dilutive securities outstanding
on December 31, 2010: (a) options to purchase an
aggregate of 10.148 million shares of our common stock at a
weighted average exercise price of $35.61 per share;
(b) warrants to purchase 0.24 million shares at a
weighted average exercise price of $16.00 per share;
(c) 3.4 million shares issuable upon conversion of our
$150.0 million, 3% senior subordinated
F-51
ALERE
INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
(12)
|
Net
Income (Loss) Per Common Share (Continued)
|
convertible notes, convertible at $43.98 per share;
(d) $1.7 million of subordinated convertible
promissory notes, convertible at $61.49 per share; and
(e) 2.1 million shares of our Series B
convertible preferred stock, with an aggregate liquidation
preference of approximately $836.2 million, convertible
under certain circumstances at $69.32 per share into
12.1 million shares of our common stock. In addition, at
December 31, 2010, we had 0.3 million common stock
equivalents from the potential settlement of a portion of the
deferred purchase price consideration related to the ACON Second
Territory Business and 0.03 million common stock
equivalents from the potential settlement of a contingent
consideration obligation. These potential dilutive securities
were not included in the computation of diluted net earnings per
common share in 2010 because the inclusion thereof would be
antidilutive.
We had dilutive securities outstanding on December 31, 2009
consisting of options and warrants to purchase an aggregate of
10.3 million shares of our common stock at a weighted
average exercise price of $34.11 per share. We had the following
potential dilutive securities outstanding on December 31,
2009: (a) 3.4 million shares issuable upon conversion
of our $150.0 million, 3% senior subordinated
convertible notes, convertible at $43.98 per share;
(b) $1.7 million of subordinated convertible
promissory notes, convertible at $61.49 per share; and
(c) 2.0 million shares of our Series B
convertible preferred stock, with an aggregate liquidation
preference of approximately $793.7 million, convertible
under certain circumstances at $69.32 per share into
11.4 million shares of our common stock. In addition, at
December 31, 2009, we had 0.4 million common stock
equivalents from the potential settlement of a portion of the
deferred purchase price consideration related to the ACON Second
Territory Business. These potential dilutive securities were not
included in the computation of diluted net earnings per common
share in 2009 because the inclusion thereof would be
antidilutive.
We had the following potential dilutive securities outstanding
on December 31, 2008: (a) options and warrants to
purchase an aggregate of 10.6 million shares of our common
stock at a weighted average exercise price of $32.15 per share,
(b) 3.4 million shares issuable upon conversion of our
$150.0 million, 3% senior subordinated convertible
notes and (c) 1.9 million shares of our Series B
convertible preferred stock, convertible under certain
circumstances at $69.32 per share into 10.8 million shares
of our common stock. Potential dilutive securities were not
included in the computation of diluted net loss per common share
in 2008 because the inclusion thereof would be antidilutive.
|
|
(13)
|
Stockholders
Equity
|
(a) Common Stock
As of December 31, 2010, we had 200.0 million shares
of common stock, $0.001 par value, authorized, of which
approximately 84.9 million shares were issued and
outstanding, 11.1 million shares were reserved for issuance
upon grant and exercise of equity awards under current equity
compensation plans, 0.8 million shares were reserved for
issuance under our employee stock purchase plan and
0.2 million shares were reserved for issuance upon exercise
of outstanding warrants. We had the following potential dilutive
securities outstanding on December 31, 2010:
$150.0 million, 3% senior subordinated convertible
notes, convertible at $43.98 per share into 3.4 million
shares of our common stock which are reserved; $1.7 million
of subordinated convertible promissory notes, convertible at
$61.49 per share into 27,647 shares of our common stock
which are reserved and 2.1 million shares of our
Series B convertible preferred stock, with an aggregate
liquidation preference of approximately $836.2 million,
convertible under certain circumstances at $69.32 per share into
12.1 million shares of our common stock which are reserved.
F-52
ALERE
INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
(13)
|
Stockholders
Equity (Continued)
|
(b) Preferred Stock
As of December 31, 2010, we had 5.0 million shares of
preferred stock, $0.001 par value, authorized, of which
2.3 million shares were designated as Series B
Convertible Perpetual Preferred Stock, or Series B
preferred stock. In connection with our acquisition of Matria,
we issued shares of the Series B preferred stock and
through December 31, 2010 paid all dividends on outstanding
shares of series B prefered stock in additional shares of
Series B preferred stock. At December 31, 2010, there
were 2.1 million shares of Series B preferred stock
outstanding with a fair value of approximately
$521.5 million (Note 4(c)(i)).
Each share of Series B preferred stock, which has a
liquidation preference of $400.00 per share, is convertible, at
the option of the holder and only upon certain circumstances,
into 5.7703 shares of our common stock, plus cash in lieu
of fractional shares. The initial conversion price is $69.32 per
share, subject to adjustment upon the occurrence of certain
events, but will not be adjusted for accumulated and unpaid
dividends. Upon a conversion of shares of the Series B
preferred stock, we may, at our option, satisfy the entire
conversion obligation in cash or through a combination of cash
and common stock. Series B preferred stock outstanding at
December 31, 2010 would convert into 12.1 million
shares of our common stock which are reserved. There were no
conversions as of December 31, 2010.
Generally, the shares of Series B preferred stock are
convertible, at the option of the holder, if during any calendar
quarter beginning with the second calendar quarter after the
issuance date of the Series B preferred stock, if the
closing sale price of our common stock for each of 20 or more
trading days within any period of 30 consecutive trading days
ending on the last trading day of the immediately preceding
calendar quarter exceeds 130% of the conversion price per share
of common stock in effect on the last trading day of the
immediately preceding calendar quarter. In addition, the shares
of Series B preferred stock are convertible, at the option
of the holder, in certain other circumstances, including those
relating to the trading price of the Series B preferred
stock and upon the occurrence of certain fundamental changes or
major corporate transactions. We also have the right, under
certain circumstances relating to the trading price of our
common stock, to force conversion of the Series B preferred
stock. Depending on the timing of any such forced conversion, we
may have to make certain payments relating to foregone
dividends, which payments we can make, at our option, in the
form of cash, shares of our common stock, or a combination of
cash and shares of our common stock.
Each share of Series B preferred stock accrues dividends at
$12.00, or 3%, per annum, payable quarterly on January 15,
April 15, July 15 and October 15 of each year, commencing
following the first full calendar quarter after the issuance
date. Dividends on the Series B preferred stock are
cumulative from the date of issuance. For the year ended
December 31, 2010, Series B preferred stock dividends
amounted to $24.2 million, which reduced earnings available
to common stockholders for purposes of calculating net income
per common share in 2010 (Note 12). Accrued dividends are
payable only if declared by our board of directors and, upon
conversion by the Series B preferred stockholder, holders
will not receive any cash payment representing accumulated
dividends. If our board of directors declares a dividend
payable, we have the right to pay the dividends in cash, shares
of common stock, additional shares of Series B preferred
stock or a similar convertible preferred stock or any
combination thereof.
The holders of Series B preferred stock have liquidation
preferences over the holders of our common stock and other
classes of stock, if any, outstanding at the time of
liquidation. Upon liquidation, the holders of outstanding
Series B preferred stock would receive an amount equal to
$400.00 per share of Series B preferred stock, plus any
accumulated and unpaid dividends. As of December 31, 2010,
the liquidation preference of the outstanding Series B
preferred stock was $836.2 million. The holders of the
Series B preferred stock have no voting rights, except with
respect to matters affecting the Series B preferred stock
(including the creation of a senior preferred stock).
F-53
ALERE
INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
(13)
|
Stockholders
Equity (Continued)
|
We evaluated the terms and provisions of our Series B
preferred stock to determine if it qualified for derivative
accounting treatment. Based on our evaluation, these securities
do not qualify for derivative accounting.
(c) Stock Options and Awards
In 2010, we adopted the Alere Inc. 2010 Stock Option and
Incentive Plan, or the 2010 Plan, which replaced our 2001 Stock
Option and Incentive Plan, or the 2001 Plan. The 2010 Plan
currently allows for the issuance of up to 1.7 million
shares of common stock and other awards. The 2010 Plan is
administered by the Compensation Committee of the Board of
Directors, which selects the individuals eligible to receive
awards, determines or modifies the terms and conditions of the
awards granted, accelerates the vesting schedule of any award
and generally administers and interprets the 2010 Plan. The 2010
Plan permits the granting of incentive and nonqualified stock
options with terms of up to ten years and the granting of stock
appreciation rights, restricted stock awards, unrestricted stock
awards, performance share awards and dividend equivalent rights.
The 2010 Plan also provides for option grants to non-employee
directors and automatic vesting acceleration of all options and
stock appreciation rights upon a change in control, as defined
by the 2010 Plan. As of December 31, 2010, there were
0.9 million shares available for future grant under the
2010 Plan. As of December 31, 2009, there were
1.1 million shares available for future grant under the
2001 Plan.
The following summarizes all stock option activity during the
year ended December 31 (in thousands, except exercise price):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
Options
|
|
|
Exercise Price
|
|
|
Options
|
|
|
Exercise Price
|
|
|
Options
|
|
|
Exercise Price
|
|
|
Outstanding at January 1
|
|
|
9,838
|
|
|
$
|
34.72
|
|
|
|
10,155
|
|
|
$
|
32.65
|
|
|
|
7,836
|
|
|
$
|
31.42
|
|
Exchanged
|
|
|
|
|
|
|
N/A
|
|
|
|
315
|
|
|
$
|
29.78
|
|
|
|
1,820
|
|
|
$
|
30.52
|
|
Granted
|
|
|
1,542
|
|
|
$
|
40.33
|
|
|
|
1,243
|
|
|
$
|
36.28
|
|
|
|
1,787
|
|
|
$
|
34.13
|
|
Exercised
|
|
|
(484
|
)
|
|
$
|
23.39
|
|
|
|
(1,319
|
)
|
|
$
|
17.83
|
|
|
|
(836
|
)
|
|
$
|
16.84
|
|
Canceled/expired/forfeited
|
|
|
(748
|
)
|
|
$
|
41.18
|
|
|
|
(556
|
)
|
|
$
|
39.21
|
|
|
|
(452
|
)
|
|
$
|
37.75
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31
|
|
|
10,148
|
|
|
$
|
35.61
|
|
|
|
9,838
|
|
|
$
|
34.72
|
|
|
|
10,155
|
|
|
$
|
32.65
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at December 31
|
|
|
6,646
|
|
|
$
|
33.57
|
|
|
|
5,902
|
|
|
$
|
31.71
|
|
|
|
5,866
|
|
|
$
|
27.08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The aggregate intrinsic value of the options outstanding at
December 31, 2010 was $61.5 million. The aggregate
intrinsic value of the options exercisable at December 31,
2010 was $50.8 million. The aggregate intrinsic value of
stock options exercised during 2010, 2009 and 2008 was
$6.9 million, $25.7 million, and $18.2 million,
respectively. Based on equity awards outstanding as of
December 31, 2010, there was $40.1 million of
unrecognized compensation costs related to unvested share-based
compensation arrangements that are expected to vest. Such costs
are expected to be recognized over a weighted average period of
1.5 years.
F-54
ALERE
INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
(13)
|
Stockholders
Equity (Continued)
|
(d) Warrants
The following is a summary of all warrant activity during the
three years ended December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
Number of
|
|
|
|
|
|
Average
|
|
|
|
Shares
|
|
|
Exercise Price
|
|
|
Exercise Price
|
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
Warrants outstanding and exercisable, December 31, 2007
|
|
|
469
|
|
|
$
|
3.81 - $29.78
|
|
|
$
|
20.80
|
|
Exercised
|
|
|
(12
|
)
|
|
$
|
13.54 - $20.06
|
|
|
$
|
19.64
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants outstanding and exercisable, December 31, 2008
|
|
|
457
|
|
|
$
|
3.81 - $29.78
|
|
|
$
|
20.83
|
|
Issued
|
|
|
4
|
|
|
$
|
50.00
|
|
|
$
|
50.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants outstanding and exercisable, December 31, 2009
|
|
|
461
|
|
|
$
|
3.81 - $50.00
|
|
|
$
|
21.09
|
|
Exercised
|
|
|
(105
|
)
|
|
$
|
3.81 - $29.78
|
|
|
$
|
23.66
|
|
Cancelled
|
|
|
(113
|
)
|
|
$
|
20.06 - $29.78
|
|
|
$
|
29.62
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants outstanding and exercisable, December 31, 2010
|
|
|
243
|
|
|
$
|
13.54 - $50.00
|
|
|
$
|
16.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table presents additional information related to
warrants outstanding and exercisable at December 31, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding and Exercisable
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Weighted
|
|
|
|
Number of
|
|
|
Remaining
|
|
|
Average
|
|
Exercise Price
|
|
Shares
|
|
|
Contract Life
|
|
|
Exercise Price
|
|
|
$13.54 - $18.12
|
|
|
214
|
|
|
|
0.97 - 1.72
|
|
|
$
|
14.43
|
|
$24.00
|
|
|
25
|
|
|
|
4.25
|
|
|
$
|
24.00
|
|
$50.00
|
|
|
4
|
|
|
|
5.50
|
|
|
$
|
50.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
243
|
|
|
|
1.92
|
|
|
$
|
16.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The majority of the warrants included in the table above were
issued in connection with debt and equity financings, or
amendments thereto, of which warrants to purchase an aggregate
of 0.04 million shares of our common stock were issued to
officers and directors of our company or entities controlled by
these officers and directors and were outstanding at
December 31, 2010. All outstanding warrants have been
classified in equity.
(e) Employee Stock Purchase Plan
In 2001, we adopted the 2001 Employee Stock Purchase Plan, under
which eligible employees are allowed to purchase shares of our
common stock at a discount through periodic payroll deductions.
Purchases may occur at the end of every six month offering
period at a purchase price equal to 85% of the market value of
our common stock at either the beginning or end of the offering
period, whichever is lower. We may issue up to 2.0 million
shares of common stock under this plan. At December 31,
2010, 1.2 million shares had been issued under this plan.
F-55
ALERE
INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
(14)
|
Stock-based
Compensation
|
We recorded stock-based compensation expense in our consolidated
statements of operations for the year ended December 31,
2010, 2009 and 2008, respectively, as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Cost of net revenue
|
|
$
|
1,904
|
|
|
$
|
2,011
|
|
|
$
|
1,504
|
|
Research and development
|
|
|
7,087
|
|
|
|
5,246
|
|
|
|
4,627
|
|
Sales and marketing
|
|
|
4,161
|
|
|
|
4,236
|
|
|
|
4,264
|
|
General and administrative
|
|
|
16,727
|
|
|
|
16,727
|
|
|
|
16,010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29,879
|
|
|
|
28,220
|
|
|
|
26,405
|
|
Benefit for income taxes
|
|
|
(6,203
|
)
|
|
|
(5,577
|
)
|
|
|
(5,707
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation, net of tax
|
|
$
|
23,676
|
|
|
$
|
22,643
|
|
|
$
|
20,698
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in the amount above for general and administrative
expense for the year ended December 31, 2009, is
$1.0 million related to our assumption of certain Concateno
options. The expense relates to the acceleration of certain
unvested Concateno employee options. See Note 4(b)(iii)
regarding our acquisition of Concateno.
For the year ended December 31, 2010, 2009 and 2008, the
presentation of our cash flows reports the excess tax benefits
from the exercise of stock options as financing cash flows. For
the year ended December 31, 2010, 2009 and 2008, excess tax
benefits generated from option exercises amounted to
$1.7 million, $9.3 million and $17.5 million,
respectively.
The following assumptions were used to estimate the fair value
of options granted during the year ended December 31, 2010,
2009 and 2008, using a Black-Scholes option-pricing model:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Risk-free interest rate
|
|
|
2.03%
|
|
|
|
2.26%
|
|
|
|
2.89%
|
|
Expected dividend yield
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected life
|
|
|
5.34 years
|
|
|
|
5.20 years
|
|
|
|
5.19 years
|
|
Expected volatility
|
|
|
41.91%
|
|
|
|
44.02%
|
|
|
|
39.55%
|
|
The weighted average fair value under a Black-Scholes option
pricing model of options granted to employees during 2010, 2009
and 2008 was $13.54, $15.11 and $10.66 per share, respectively.
All options granted during these periods were granted at or
above the fair market value on the date of grant.
For the year ended December 31, 2010, we recorded
compensation expense of $2.7 million related to our
Employee Stock Purchase Plan. The fair value of the option
component of the Employee Stock Purchase Plan shares was
estimated at the date of grant using a Black-Scholes option
pricing model and assumed an expected volatility of 39% and 45%,
a risk-free interest rate of 0.18% and 0.22% and an expected
life of 181 days and 184 days, for each of the two
respective offering periods. The charge is included in general
and administrative expense in the table above.
For the year ended December 31, 2009, we recorded
compensation expense of $2.7 million related to our
Employee Stock Purchase Plan. The fair value of the option
component of the Employee Stock Purchase Plan shares was
estimated at the date of grant using a Black-Scholes option
pricing model and assumed an expected volatility of 72% and 43%,
a risk-free interest rate of 0.28% and 0.33% and an expected
life of 181 days and 184 days, for each of the two
respective offering periods. The charge is included in general
and administrative expense in the table above.
F-56
ALERE
INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
(14)
|
Stock-based
Compensation (Continued)
|
For the year ended December 31, 2008, we recorded
compensation expense of $2.8 million related to our
Employee Stock Purchase Plan. The fair value of the option
component of the Employee Stock Purchase Plan shares was
estimated at the date of grant using a Black-Scholes option
pricing model and assumed an expected volatility of 43% and 54%,
a risk-free interest rate of 3.32% and 2.13%, and an expected
life of 181 days and 184 days, for each of the two
respective offering periods. The charge is included in general
and administrative expense in the table above.
|
|
(15)
|
Comprehensive
Income
|
In general, comprehensive income combines net income and other
changes in equity during the year from non-owner sources.
Accumulated other comprehensive income is recorded as a
component of stockholders equity. The following is a
summary of the components of and changes in accumulated other
comprehensive income as of December 31, 2010 and in each of
the three years then ended (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative
|
|
|
Pension
|
|
|
|
|
|
Accumulated
|
|
|
|
Translation
|
|
|
Liability
|
|
|
|
|
|
Other
|
|
|
|
Adjustment
|
|
|
Adjustment
|
|
|
|
|
|
Comprehensive
|
|
|
|
(Note 2(b))
|
|
|
(Note 9(b))
|
|
|
Other(1)
|
|
|
Income (Loss)(2)
|
|
|
Balance at December 31, 2007
|
|
$
|
30,633
|
|
|
$
|
(3,397
|
)
|
|
$
|
(5,967
|
)
|
|
$
|
21,269
|
|
Period change
|
|
|
(32,889
|
)
|
|
|
(562
|
)
|
|
|
(16,663
|
)
|
|
|
(50,114
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2008
|
|
|
(2,256
|
)
|
|
|
(3,959
|
)
|
|
|
(22,630
|
)
|
|
|
(28,845
|
)
|
Period change
|
|
|
15,171
|
|
|
|
(1,137
|
)
|
|
|
12,357
|
|
|
|
26,391
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2009
|
|
|
12,915
|
|
|
|
(5,096
|
)
|
|
|
(10,273
|
)
|
|
|
(2,454
|
)
|
Period change
|
|
|
(210
|
)
|
|
|
(113
|
)
|
|
|
3,467
|
|
|
|
3,144
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2010
|
|
$
|
12,705
|
|
|
$
|
(5,209
|
)
|
|
$
|
(6,806
|
)
|
|
$
|
690
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Other represents (realization of) unrealized gains on
available-for-sale
securities and interest rate swaps. |
|
(2) |
|
All of the components of accumulated other comprehensive income
relate to our foreign subsidiaries, except item (1) above.
No adjustments for income taxes were recorded against other
comprehensive income of our foreign subsidiaries, as we intend
to permanently invest in our foreign subsidiaries in the
foreseeable future. |
Our income tax provision (benefit) in 2010, 2009 and 2008 mainly
represents those recorded by us and certain of our
U.S. subsidiaries and by our foreign subsidiaries located
in Australia, the United Kingdom, France, Italy, Israel, Japan,
China and Switzerland. Income (loss) before provision (benefit)
for income taxes consists of the following (in thousands):
Continuing
Operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
United States
|
|
$
|
(1,078,981
|
)
|
|
$
|
(14,032
|
)
|
|
$
|
(52,805
|
)
|
Foreign
|
|
|
11,195
|
|
|
|
54,280
|
|
|
|
14,558
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(1,067,786
|
)
|
|
$
|
40,248
|
|
|
$
|
(38,247
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-57
ALERE
INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
(16)
|
Income
Taxes (Continued)
|
Discontinued
Operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
United States
|
|
$
|
16,973
|
|
|
$
|
2,069
|
|
|
$
|
(107
|
)
|
Foreign
|
|
|
1,514
|
|
|
|
33
|
|
|
|
(983
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
18,487
|
|
|
$
|
2,102
|
|
|
$
|
(1,090
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Our primary temporary differences that give rise to the deferred
tax asset and liability are net operating loss, or NOL,
carryforwards, nondeductible reserves, accruals and differences
in bases of the tangible and intangible assets, and the gain on
the joint venture transaction. The income tax effects of these
temporary differences are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
NOL and capital loss carryforwards
|
|
$
|
99,540
|
|
|
$
|
96,355
|
|
Tax credit carryforwards
|
|
|
29,862
|
|
|
|
26,316
|
|
Nondeductible reserves
|
|
|
15,381
|
|
|
|
16,151
|
|
Nondeductible accruals
|
|
|
30,269
|
|
|
|
39,505
|
|
Difference between book and tax bases of tangible assets
|
|
|
3,654
|
|
|
|
13,662
|
|
Difference between book and tax bases of intangible assets
|
|
|
31,287
|
|
|
|
38,956
|
|
Gain on joint venture
|
|
|
33,376
|
|
|
|
33,709
|
|
All other
|
|
|
30,059
|
|
|
|
30,476
|
|
|
|
|
|
|
|
|
|
|
Gross deferred tax asset
|
|
|
273,428
|
|
|
|
295,130
|
|
Less: Valuation allowance
|
|
|
(42,518
|
)
|
|
|
(37,524
|
)
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets
|
|
|
230,910
|
|
|
|
257,606
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Difference between book and tax bases of tangible assets
|
|
|
36,468
|
|
|
|
32,248
|
|
Difference between book and tax bases of intangible assets
|
|
|
523,316
|
|
|
|
571,611
|
|
Other
|
|
|
8,999
|
|
|
|
8,317
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax liability
|
|
|
568,783
|
|
|
|
612,176
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax liability
|
|
$
|
337,873
|
|
|
$
|
354,570
|
|
|
|
|
|
|
|
|
|
|
Reported as:
|
|
|
|
|
|
|
|
|
Deferred tax assets, current portion
|
|
$
|
57,111
|
|
|
$
|
66,492
|
|
Deferred tax assets, long-term
|
|
|
25,182
|
|
|
|
20,987
|
|
Deferred tax liabilities, long-term
|
|
|
(420,166
|
)
|
|
|
(442,049
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax liability
|
|
$
|
(337,873
|
)
|
|
$
|
(354,570
|
)
|
|
|
|
|
|
|
|
|
|
As of December 31, 2010, we had approximately
$156.1 million of domestic NOL and domestic capital loss
carryforwards and $60.3 million of foreign NOL and foreign
capital loss carryforwards, which either expire on various dates
through 2030 or can be carried forward indefinitely. As of
December 31, 2010, we had approximately $26.5 million
of domestic R&D, foreign tax and AMT credits which either
expire on various dates through 2030 or can be carried forward
indefinitely. These loss carryforwards and tax credits are
available to reduce future federal, state and foreign taxable
income, if any. These loss carryforwards and tax credits are
subject to review and possible adjustment by the appropriate tax
authorities. The domestic NOL
F-58
ALERE
INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
(16)
|
Income
Taxes (Continued)
|
carryforwards include approximately $102.2 million of
pre-acquisition losses. Our domestic NOLs and tax credits are
subject to the Internal Revenue Service, or IRS, Code
Section 382 limitation. Section 382 imposes an annual
limitation on the use of these losses to an amount equal to the
value of the company at the time of the ownership change
multiplied by the long-term tax exempt rate. The acquired
Section 382 limited amount for 2011 is approximately
$74.8 million. In addition, the total NOL available for use
in 2011 is approximately $132.8 million.
We have recorded a valuation allowance of $42.5 million as
of December 31, 2010 due to uncertainties related to the
future benefits, if any, from our deferred tax assets related
primarily to our foreign businesses and certain U.S. net
operating losses and tax credits. This is an increase of
$5.0 million from the valuation allowance of
$37.5 million as of December 31, 2009. The increase is
primarily related to foreign NOLs and domestic state credits.
The valuation allowance is based on our estimates of taxable
income by jurisdiction in which we operate and the period over
which our deferred tax assets will be recoverable. In the event
that actual results differ from these estimates or we adjust
these estimates in future periods, we may need to establish an
additional valuation allowance or reduce our current valuation
allowance, which could materially impact our tax provision.
The accounting for the tax benefits of acquired deductible
temporary differences and NOL carryforwards, which are not
recognized at the acquisition date because a valuation allowance
is established and which are recognized subsequent to the
relevant acquisition, will be applied to reduce our income tax
expense as required under a new accounting standard for business
combinations, adopted January 1, 2009. As of
December 31, 2010, $13.1 million of deferred tax
assets with a valuation allowance pertains to acquired companies.
Our two China-based manufacturing subsidiaries qualify for a
reduced income tax rate in 2010 and 2009. The general income tax
rate is 25%. The income tax rate for one of the subsidiaries is
12.5% for 2009 and 2010, and for the other is 10% for 2009 and
11% for 2010. The reduced rates for 2009 and 2010 are
grandfathered in the China Tax Reform Act. A tax rate of 15% or
25% will apply to 2011 and future years. The tax rate of 15%
applies to companies with high technology status. Both
subsidiaries are approved for high technology status. Therefore,
a 15% tax rate will apply to both companies in 2011. The reduced
tax rate produced a tax expense of approximately
$1.3 million in 2010. In the absence of the reduced tax
rate for 2010 a tax rate of 25% would have applied and would
have resulted in a tax expense of approximately
$2.9 million in 2010. The earnings per common share effect
of the reduced tax rate is $0.02 for 2009. The reduced tax rate
produced a tax expense of approximately $1.6 million in
2009. In the absence of the reduced tax rate for 2009 a tax rate
of 25% would have applied and would have resulted in a tax
expense of approximately $3.4 million in 2009. The earnings
per common share effect of the reduced tax rate was $0.02 for
2009.
The estimated amount of undistributed earnings of our foreign
subsidiaries is $231.6 million at December 31, 2010.
No amount for U.S. income tax has been provided on
undistributed earnings of our foreign subsidiaries because we
consider such earnings to be indefinitely reinvested. In the
event of distribution of those earnings in the form of dividends
or otherwise, we would be subject to both U.S. income
taxes, subject to an adjustment, if any, for foreign tax
credits, and foreign withholding taxes payable to certain
foreign tax authorities. Determination of the amount of
U.S. income tax liability that would be incurred is not
practicable because of the complexities associated with this
hypothetical calculation, however, unrecognized foreign tax
credit carryforwards may be available to reduce some portion of
the U.S. tax liability, if any.
F-59
ALERE
INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
(16)
|
Income
Taxes (Continued)
|
The following table presents the components of our provision
(benefit) for income taxes (in thousands) for continuing
operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
(2,350
|
)
|
|
$
|
(1,409
|
)
|
|
$
|
7,433
|
|
State
|
|
|
5,285
|
|
|
|
2,435
|
|
|
|
7,250
|
|
Foreign
|
|
|
41,552
|
|
|
|
23,725
|
|
|
|
10,387
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
44,487
|
|
|
|
24,751
|
|
|
|
25,070
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
(40,154
|
)
|
|
|
8,170
|
|
|
|
(5,859
|
)
|
State
|
|
|
(12,695
|
)
|
|
|
(3,017
|
)
|
|
|
(4,233
|
)
|
Foreign
|
|
|
(21,569
|
)
|
|
|
(14,277
|
)
|
|
|
(31,622
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(74,418
|
)
|
|
|
(9,124
|
)
|
|
|
(41,714
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total provision (benefit) for income taxes
|
|
$
|
(29,931
|
)
|
|
$
|
15,627
|
|
|
$
|
(16,644
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table presents the components of our provision
(benefit) for income taxes (in thousands) for discontinued
operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
State
|
|
|
(73
|
)
|
|
|
|
|
|
|
|
|
Foreign
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(73
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
5,644
|
|
|
|
738
|
|
|
|
(38
|
)
|
State
|
|
|
1,095
|
|
|
|
(269
|
)
|
|
|
(4
|
)
|
Foreign
|
|
|
424
|
|
|
|
(301
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,163
|
|
|
|
168
|
|
|
|
(42
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total provision (benefit) for income taxes
|
|
$
|
7,090
|
|
|
$
|
168
|
|
|
$
|
(42
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-60
ALERE
INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
(16)
|
Income
Taxes (Continued)
|
The following table presents a reconciliation from the
U.S. statutory tax rate to our effective tax rate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Statutory rate
|
|
|
35
|
%
|
|
|
35
|
%
|
|
|
35
|
%
|
Effect of goodwill impairment charge
|
|
|
(31
|
)
|
|
|
|
|
|
|
|
|
Stock-based compensation
|
|
|
|
|
|
|
10
|
|
|
|
(10
|
)
|
Rate differential on foreign earnings
|
|
|
|
|
|
|
(8
|
)
|
|
|
3
|
|
Research and development benefit
|
|
|
|
|
|
|
(4
|
)
|
|
|
6
|
|
State income taxes, net of federal benefit
|
|
|
1
|
|
|
|
|
|
|
|
2
|
|
Acquisition costs
|
|
|
(2
|
)
|
|
|
6
|
|
|
|
|
|
Other permanent items
|
|
|
|
|
|
|
3
|
|
|
|
(4
|
)
|
Change in valuation allowance
|
|
|
|
|
|
|
(3
|
)
|
|
|
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective tax rate
|
|
|
3
|
%
|
|
|
39
|
%
|
|
|
43
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The goodwill impairment charge created a deferred tax impact due
to the existence of goodwill deductible for tax purposes. The
deferred tax is calculated based on a methodology which
allocates the goodwill impairment loss proportionally to the
goodwill deductible for tax purposes compared to total goodwill.
The goodwill impairment allocated to goodwill deductible for tax
purposes created a deferred tax asset of $25.9 million as
of December 31, 2010.
During the year ended December 31, 2010, we increased the
liability for income taxes associated with uncertain tax
positions by $1.3 million to a total of $6.2 million
at December 31, 2010. The primary reasons for the increase
is due to our acquisition of a German company, which increased
the liability for income taxes associated with uncertain tax
positions by $1.9 million. We classify $6.2 million of
income tax liabilities as non-current income tax liabilities
because a payment of cash is not anticipated within one year of
the balance sheet date. These non-current income tax liabilities
are recorded in other long-term liabilities in our consolidated
balance sheet at December 31, 2010. We anticipate an
increase every quarter to the total amount of unrecognized tax
benefits. We do not anticipate a significant increase or
decrease of the total amount of unrecognized tax benefits within
twelve months of the reporting date.
F-61
ALERE
INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
(16)
|
Income
Taxes (Continued)
|
A reconciliation of the beginning and ending amount of
unrecognized tax benefits is as follows (in thousands):
|
|
|
|
|
|
|
Amount
|
|
|
Balances as of January 1, 2008
|
|
$
|
8,765
|
|
Additions for tax positions taken during prior years
|
|
|
63
|
|
Additions for tax positions in current and prior year
acquisitions
|
|
|
2,296
|
|
Additions for tax positions taken during current year
|
|
|
143
|
|
Expiration of statutes of limitations or closure of tax audits
|
|
|
(134
|
)
|
|
|
|
|
|
Balances as of December 31, 2008
|
|
|
11,133
|
|
Reductions for tax positions taken during prior years
|
|
|
(728
|
)
|
Reductions for tax positions in current and prior year
acquisitions
|
|
|
(3,535
|
)
|
Additions for tax positions taken during current year
|
|
|
360
|
|
Expiration of statutes of limitations or closure of tax audits
|
|
|
(2,325
|
)
|
|
|
|
|
|
Balances as of December 31, 2009
|
|
|
4,905
|
|
Additions for tax positions in current and prior year
acquisitions
|
|
|
2,070
|
|
Additions for tax positions taken during current year
|
|
|
263
|
|
Expiration of statutes of limitations or closure of tax audits
|
|
|
(1,078
|
)
|
|
|
|
|
|
Balance as of December 31, 2010
|
|
$
|
6,160
|
|
|
|
|
|
|
Interest and penalties related to income tax liabilities are
included in income tax expense. The interest and penalties
recorded in 2010 amounted to $0.2 million. The balance of
accrued interest and penalties recorded on the consolidated
balance sheet at December 31, 2010 was $0.7 million.
With limited exceptions, we are subject to U.S. federal,
state and local or
non-U.S. income
tax audits by tax authorities for 2004 through 2009. We are
currently under income tax examination by the IRS and a number
of state and foreign tax authorities and anticipate these audits
will be completed by the end of 2011. We cannot currently
estimate the impact of these audits due to the uncertainties
associated with tax examinations.
|
|
(17)
|
Financial
Information by Segment
|
Operating segments are defined as components of an enterprise
about which separate financial information is available that is
evaluated regularly by the chief operating decision maker, or
decision-making group, in deciding how to allocate resources and
in assessing performance. Our chief operating decision-making
group is composed of the chief executive officer and members of
senior management. Our reportable operating segments are
Professional Diagnostics, Health Management, Consumer
Diagnostics and Corporate and Other. Our operating results
include license and royalty revenue which are allocated to
Professional Diagnostics and Consumer Diagnostics on the basis
of the original license or royalty agreement.
On January 15, 2010, we completed the sale of our vitamins
and nutritional supplements business (Note 23). The sale
included all of our private label and branded nutritionals
businesses and represents the complete divestiture of our entire
vitamins and nutritional supplements business segment. The
results of the vitamins and nutritional supplements business,
which represents our entire vitamins and nutritional supplements
business segment, are included in income (loss) from
discontinued operations, net of tax, for all periods presented.
The net assets and net liabilities associated with the vitamins
and nutritional supplements business have been reclassified to
assets held for sale and liabilities related to assets held for
sale within
F-62
ALERE
INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
(17)
|
Financial
Information by Segment (Continued)
|
current assets and current liabilities, respectively, and have
been presented in Corporate and Other as of December 31,
2009.
The accounting policies of the segments are the same as those
described in the summary of significant accounting policies. We
evaluate performance of our operating segments based on revenue
and operating income (loss). Revenues are attributed to
geographic areas based on where the customer is located. Segment
information for 2010, 2009 and 2008 are as follows (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate
|
|
|
|
|
|
|
Professional
|
|
|
Health
|
|
|
Consumer
|
|
|
and
|
|
|
|
|
2010
|
|
Diagnostics
|
|
|
Management
|
|
|
Diagnostics
|
|
|
Other
|
|
|
Total
|
|
|
Net revenue to external customers
|
|
$
|
1,459,492
|
|
|
$
|
598,819
|
|
|
$
|
97,036
|
|
|
$
|
|
|
|
$
|
2,155,347
|
|
Operating income (loss)
|
|
$
|
134,687
|
|
|
$
|
(1,024,809
|
)
|
|
$
|
11,310
|
|
|
$
|
(72,277
|
)
|
|
$
|
(951,089
|
)
|
Goodwill impairment charge
|
|
$
|
|
|
|
$
|
1,006,357
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
1,006,357
|
|
Depreciation and amortization
|
|
$
|
246,080
|
|
|
$
|
120,617
|
|
|
$
|
5,439
|
|
|
$
|
654
|
|
|
$
|
372,790
|
|
Restructuring charge
|
|
$
|
7,941
|
|
|
$
|
7,249
|
|
|
$
|
77
|
|
|
$
|
|
|
|
$
|
15,267
|
|
Stock-based compensation
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
29,879
|
|
|
$
|
29,879
|
|
Assets
|
|
$
|
4,913,491
|
|
|
$
|
1,011,183
|
|
|
$
|
207,795
|
|
|
$
|
197,905
|
|
|
$
|
6,330,374
|
|
Expenditures for property, plant and equipment
|
|
$
|
43,364
|
|
|
$
|
48,410
|
|
|
$
|
4,314
|
|
|
$
|
153
|
|
|
$
|
96,241
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate
|
|
|
|
|
|
|
Professional
|
|
|
Health
|
|
|
Consumer
|
|
|
and
|
|
|
|
|
2009
|
|
Diagnostics
|
|
|
Management
|
|
|
Diagnostics
|
|
|
Other
|
|
|
Total
|
|
|
Net revenue to external customers
|
|
$
|
1,263,511
|
|
|
$
|
521,947
|
|
|
$
|
137,183
|
|
|
$
|
|
|
|
$
|
1,922,641
|
|
Operating income (loss)
|
|
$
|
235,412
|
|
|
$
|
(6,829
|
)
|
|
$
|
(2,008
|
)
|
|
$
|
(80,525
|
)
|
|
$
|
146,050
|
|
Depreciation and amortization
|
|
$
|
187,907
|
|
|
$
|
116,800
|
|
|
$
|
6,637
|
|
|
$
|
1,091
|
|
|
$
|
312,435
|
|
Restructuring charge
|
|
$
|
14,537
|
|
|
$
|
2,292
|
|
|
$
|
563
|
|
|
$
|
|
|
|
$
|
17,392
|
|
Stock-based compensation
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
28,220
|
|
|
$
|
28,220
|
|
Assets
|
|
$
|
4,261,716
|
|
|
$
|
2,031,260
|
|
|
$
|
219,647
|
|
|
$
|
431,369
|
|
|
$
|
6,943,992
|
|
Expenditures for property, plant and equipment
|
|
$
|
45,588
|
|
|
$
|
50,871
|
|
|
$
|
3,536
|
|
|
$
|
611
|
|
|
$
|
100,606
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate
|
|
|
|
|
|
|
Professional
|
|
|
Health
|
|
|
Consumer
|
|
|
and
|
|
|
|
|
2008
|
|
Diagnostics
|
|
|
Management
|
|
|
Diagnostics
|
|
|
Other
|
|
|
Total
|
|
|
Net revenue to external customers
|
|
$
|
1,051,301
|
|
|
$
|
392,399
|
|
|
$
|
138,853
|
|
|
$
|
|
|
|
$
|
1,582,553
|
|
Operating income (loss)
|
|
$
|
97,994
|
|
|
$
|
11,241
|
|
|
$
|
9,505
|
|
|
$
|
(54,048
|
)
|
|
$
|
64,692
|
|
Depreciation and amortization
|
|
$
|
171,980
|
|
|
$
|
85,990
|
|
|
$
|
6,821
|
|
|
$
|
863
|
|
|
$
|
265,654
|
|
Restructuring charge
|
|
$
|
36,196
|
|
|
$
|
|
|
|
$
|
238
|
|
|
$
|
|
|
|
$
|
36,434
|
|
Stock-based compensation
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
26,405
|
|
|
$
|
26,405
|
|
Expenditures for property, plant and equipment
|
|
$
|
46,859
|
|
|
$
|
7,935
|
|
|
$
|
1,917
|
|
|
$
|
8,988
|
|
|
$
|
65,699
|
|
F-63
ALERE
INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
(17)
|
Financial
Information by Segment (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Revenue by Geographic Area:
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
1,380,314
|
|
|
$
|
1,329,747
|
|
|
$
|
1,121,477
|
|
Europe
|
|
|
361,810
|
|
|
|
316,623
|
|
|
|
285,696
|
|
Elsewhere
|
|
|
413,223
|
|
|
|
276,271
|
|
|
|
175,380
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,155,347
|
|
|
$
|
1,922,641
|
|
|
$
|
1,582,553
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
Long-lived Tangible Assets by Geographic Area:
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
255,572
|
|
|
$
|
238,475
|
|
United Kingdom
|
|
|
19,864
|
|
|
|
15,807
|
|
China
|
|
|
26,164
|
|
|
|
22,112
|
|
Elsewhere
|
|
|
88,910
|
|
|
|
47,994
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
390,510
|
|
|
$
|
324,388
|
|
|
|
|
|
|
|
|
|
|
|
|
(18)
|
Related
Party Transactions
|
In November 2008, the Zwanziger Family Trust, a trust
established for the benefit of the children of Ron Zwanziger,
our Chairman, Chief Executive Officer and President, and the
trustee of which is Mr. Zwanzigers sister, purchased
certain of our securities from third parties in market
transactions. The purchase consisted of approximately
$1.0 million of each of the following securities: our
common stock, our Series B Preferred Stock, our Convertible
Notes, interests in our First Lien Credit Agreement and
interests in our Second Lien Credit Agreement. To the extent we
make principal and interest payments under the Convertible Notes
and the credit facilities in accordance with their terms, the
Zwanziger Family Trust, as a holder of Convertible Notes and as
a lender under the credit facilities, will receive its
proportionate share. In connection with its purchases of
interests under our First Lien Credit Agreement and Second
Lien Credit Agreement, the Trust agreed that, whenever the
consent or vote of the lenders is required under the credit
facilities, it will vote the outstanding principal amount of its
holdings in the same proportion as the votes cast by the other
lenders under these credit facilities.
In May 2007, we completed the formation of SPD, our 50/50 joint
venture with P&G, for the development, manufacturing,
marketing and sale of existing and to-be-developed consumer
diagnostic products, outside the cardiology, diabetes and oral
care fields. Upon completion of the arrangement to form the
joint venture, we ceased to consolidate the operating results of
our consumer diagnostic products business related to the joint
venture and instead account for our 50% interest in the results
of the joint venture under the equity method of accounting.
At December 31, 2010 and 2009, we had a net payable to the
joint venture of $2.8 million and $0.5 million,
respectively. Additionally, customer receivables associated with
revenue earned after the joint venture was completed have been
classified as other receivables within prepaid and other current
assets on our accompanying consolidated balance sheets in the
amount of $7.8 million and $12.3 million as of
December 31, 2010 and 2009, respectively. In connection
with the joint venture arrangement, the joint venture bears the
collection risk associated with these receivables. Sales to the
joint venture under our manufacturing agreement totaled
$68.1 million, $103.1 million and $103.0 million
during the years ended December 31, 2010, 2009 and 2008,
respectively. Additionally, services revenue generated pursuant
to the long-term services
F-64
ALERE
INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
(18)
|
Related
Party Transactions (Continued)
|
agreement with the joint venture totaled $1.2 million,
$1.8 million and $2.4 million during the years ended
December 31, 2010, 2009 and 2008, respectively. Sales under
our manufacturing agreement and long-term services agreement are
included in net product sales and services revenue,
respectively, in our accompanying consolidated statements of
operations.
Under the terms of our product supply agreement, SPD purchases
products from our manufacturing facilities in the U.K. and
China. SPD in turn sells a portion of those tests back to us for
final assembly and packaging. Once packaged, the tests are sold
to P&G for distribution to third-party customers in North
America. As a result of these related transactions, we have
recorded $7.0 million and $14.5 million of trade
receivables which are included in accounts receivable on our
accompanying consolidated balance sheets as of December 31,
2010 and 2009, respectively, and $20.5 million and
$23.2 million of trade accounts payable which are included
in accounts payable on our accompanying consolidated balance
sheets as of December 31, 2010 and 2009, respectively.
During 2010 and 2009, we received $8.8 million and
$10.0 million, respectively, in cash from SPD as a return
of capital.
In July 2009, we sold one of our consumer-related Australian
subsidiaries to SPD for approximately $0.2 million in
connection with the original terms of the joint venture
agreement to transition the distribution responsibilities of
certain consumer diagnostic products to SPD. The sale of the
subsidiary was completed at net book value resulting in no gain
or loss on the transaction.
|
|
(19)
|
Valuation
and Qualifying Accounts
|
We have established reserves against accounts receivable for
doubtful accounts, product returns, discounts and other
allowances. The activity in the table below includes all
accounts receivable reserves. Provisions for doubtful accounts
are recorded as a component of general and administrative
expenses. Provisions for returns, discounts and other allowances
are charged against net product sales. The following table sets
forth activities in our accounts receivable reserve accounts (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts
|
|
|
|
|
Balance at
|
|
|
|
Charged
|
|
Balance at
|
|
|
Beginning of
|
|
|
|
Against
|
|
End of
|
|
|
Period
|
|
Provision
|
|
Reserves
|
|
Period
|
|
Year ended December 31, 2008
|
|
$
|
6,847
|
|
|
$
|
9,328
|
|
|
$
|
(6,214
|
)
|
|
$
|
9,961
|
|
Year ended December 31, 2009
|
|
$
|
9,961
|
|
|
$
|
9,314
|
|
|
$
|
(6,813
|
)
|
|
$
|
12,462
|
|
Year ended December 31, 2010
|
|
$
|
12,462
|
|
|
$
|
14,021
|
|
|
$
|
(6,102
|
)
|
|
$
|
20,381
|
|
We have established reserves against obsolete and slow-moving
inventories. The activity in the table below includes all
inventory reserves. Provisions for obsolete and slow-moving
inventories are recorded as a component of cost of net product
sales. The following table sets forth activities in our
inventory reserve accounts (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts
|
|
|
|
|
Balance at
|
|
|
|
Charged
|
|
Balance at
|
|
|
Beginning of
|
|
|
|
Against
|
|
End of
|
|
|
Period
|
|
Provision
|
|
Reserves
|
|
Period
|
|
Year ended December 31, 2008
|
|
$
|
6,637
|
|
|
$
|
8,023
|
|
|
$
|
(5,042
|
)
|
|
$
|
9,618
|
|
Year ended December 31, 2009
|
|
$
|
9,618
|
|
|
$
|
6,954
|
|
|
$
|
(3,940
|
)
|
|
$
|
12,632
|
|
Year ended December 31, 2010
|
|
$
|
12,632
|
|
|
$
|
6,269
|
|
|
$
|
(6,593
|
)
|
|
$
|
12,308
|
|
F-65
ALERE
INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
(20)
|
Restructuring
Activities
|
The following table sets forth the aggregate charges associated
with restructuring plans recorded in operating income (loss) for
the years ended December 31, (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Cost of net revenue
|
|
$
|
3,896
|
|
|
$
|
9,451
|
|
|
$
|
17,894
|
|
Research and development
|
|
|
488
|
|
|
|
1,076
|
|
|
|
7,230
|
|
Sales and marketing
|
|
|
1,539
|
|
|
|
1,856
|
|
|
|
4,219
|
|
General and administrative
|
|
|
9,344
|
|
|
|
5,009
|
|
|
|
7,091
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
15,267
|
|
|
$
|
17,392
|
|
|
$
|
36,434
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) 2010 Restructuring Plans
In 2010, management developed additional plans to reduce costs
and improve efficiencies in our health management business
segment. As a result of these plans, we recorded
$7.4 million in charges during the year ended
December 31, 2010, which included $4.6 million in
severance costs, $2.4 million in costs associated with
facility exit costs, $0.2 million in fixed asset
impairments and $0.2 million in present value accretion on
facility exit costs, which was included in interest expense. As
of December 31, 2010, $3.0 million in costs remains
unpaid. We anticipate incurring $0.2 million in additional
restructuring costs associated with the present value accretion
on facility exit costs under these plans, as well as minimal
severance charges.
During 2010, management also developed several plans to reduce
costs and improve efficiencies in our professional diagnostics
business segment. As a result of these plans, we recorded
$3.4 million in charges during the year ended
December 31, 2010, which included $2.4 million in
severance-related costs, $0.8 million in facility and other
exit costs and $0.2 million in fixed asset impairments. As
of September 30, 2010, $0.3 million of these costs
remains unpaid. We anticipate incurring additional severance and
facility exit costs of $0.2 million under these plans.
(b) 2009 Restructuring Plans
In 2009, management developed plans to reduce costs and improve
efficiencies in our health management reporting unit and
business segment, as well as reduce costs and consolidate
operating activities among several of our professional
diagnostics related German subsidiaries. As a result of these
plans, we recorded $0.4 million in severance-related
restructuring charges in our professional diagnostics business
segment during the year ended December 31, 2010. We
recorded $3.2 million in restructuring charges during the
year ended December 31, 2009, which included
$2.5 million in severance costs, $0.5 million in
contract cancellation costs, $0.1 million in present value
accretion on facility exit costs and $0.1 million in fixed
asset impairment costs. Of the $3.1 million included in
operating income for the year ended December 31, 2009,
$2.3 million and $0.8 million was included in our
health management and professional diagnostics business
segments, respectively. We also recorded $0.1 million in
present value accretion related to Matrias facility exit
costs to interest expense during the year ended
December 31, 2009. We have incurred a total of
$3.6 million under this plan and we do not expect to incur
any additional costs. As of December 31, 2010, all costs
have been paid.
(c) 2008 Restructuring Plans
In May 2008, we decided to close our facility located in
Bedford, England and initiated steps to cease operations at this
facility and transition the manufacturing operations principally
to our manufacturing facilities in Shanghai and Hangzhou, China.
Based upon this decision, during the year ended
December 31, 2010, we recorded net recoveries of
$1.2 million in restructuring charges, of which
$0.2 million related to severance-related costs,
$1.6 million related to transition costs, $0.4 million
related to fixed asset and
F-66
ALERE
INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
(20)
|
Restructuring
Activities (Continued)
|
inventory write-offs and $3.4 million net recovery related
to facility restoration and other facility exit costs. During
the year ended December 31, 2009, we recorded
$5.5 million in restructuring charges, of which
$2.8 million related primarily to severance-related costs,
$1.3 million related to transition costs, $0.7 million
related to fixed asset and inventory write-offs,
$0.3 million related to a pension plan curtailment charge
and $0.4 million related to the acceleration of facility
restoration costs. During the year ended December 31, 2008,
we recorded $12.6 million in restructuring charges,
including $6.9 million related to the acceleration of
facility restoration costs, $4.8 million of fixed asset
impairments, $1.1 million in severance costs,
$0.7 million in early termination lease penalties and
$0.9 million related to a pension plan curtailment gain
associated with the Bedford employees being terminated. Of the
$2.2 million charge included in operating income for the
year ended December 31, 2010, substantially all was charged
to our professional diagnostics business segment. Of the
$5.1 million included in operating income for the year
ended December 31, 2009, $0.6 million and
$4.5 million was charged to our consumer diagnostics and
professional diagnostics business segments, respectively. The
$5.7 million included in operating income for the year
ended December 31, 2008 was charged to our professional
diagnostics business segment. Included in interest expense
during the years ended December 31, 2010, 2009 and 2008
were charges of $0.1 million, $0.4 million and
$6.9 million, respectively, related to the accelerated
present value accretion of our lease restoration costs due to
the early termination of our facility lease. We also recorded a
net recovery of $3.5 million related to the facility lease
obligation settlement during the year ended December 31,
2010, to other income (expense), net.
In addition to the restructuring charges discussed above,
$6.0 million, $10.4 million and $14.5 million of
charges associated with the Bedford facility closure was borne
by SPD during the years ended December 31, 2010, 2009 and
2008, respectively. Included in the $6.0 million charges
for the year ended December 31, 2010, was $4.7 million
in facility and transition costs, $1.5 million in severance
and retention costs, $0.1 million in inventory write-offs,
$0.3 million in acceleration of facility exit costs and a
net recovery of $0.6 million in fixed asset impairments due
to unanticipated asset sales. Included in the $10.4 million
charges for the year ended December 31, 2009, was
$7.3 million in severance and retention costs,
$1.2 million of fixed asset and inventory impairments,
$1.7 million in transition costs and $0.2 million in
acceleration of facility exit costs. Included in the
$14.5 million charges for the year ended December 31,
2008, was $8.4 million of fixed asset impairments,
$3.2 million in early termination lease penalties,
$2.6 million in severance and retention costs,
$0.2 million facility exit costs and $0.1 million
related to the acceleration of facility restoration costs. Of
these restructuring charges, 50%, or $3.0 million,
$5.2 million and $7.2 million, has been included in
equity earnings of unconsolidated entities, net of tax, in our
consolidated statements of operations for the years ended
December 31, 2010, 2009 and 2008, respectively. Of the
total exit costs incurred jointly with SPD under this plan,
including severance-related costs, lease penalties and
restoration costs, $5.8 million remains unpaid as of
December 31, 2010.
Since inception of the plan, we recorded $16.9 million in
restructuring charges, including $5.9 million of fixed
asset and inventory impairments, $4.6 million related to
the acceleration of facility restoration costs and early
termination lease penalties, $4.1 million in severance
costs, $2.9 million in transition costs and
$0.6 million related to a pension plan curtailment gain
associated with the Bedford employees being terminated. SPD has
been allocated $30.9 million in restructuring charges since
the inception of the plan, including $9.1 million of fixed
asset and inventory impairments, $11.4 million in severance
and retention costs, $2.9 million in early termination
lease penalties, $6.9 million in facility exit costs and
$0.6 million related to the acceleration of facility exit
costs. We anticipate incurring additional costs of approximately
$1.0 million related to the closure of this facility,
primarily related to severance and transition costs through the
end of 2011. Of these additional anticipated costs,
approximately $0.8 million will be borne by SPD and
$0.2 million will be borne by us and included primarily in
our professional diagnostics business segment.
F-67
ALERE
INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
(20)
|
Restructuring
Activities (Continued)
|
On March 18, 2008, we announced our plans to close our
BioStar, Inc., or BioStar, facility in Louisville, Colorado and
exit production of the BioStar OIA product line, along with our
plans to close two of our newly-acquired facilities in the
San Francisco, California area, relating to Cholestech and
HemoSense and our newly-acquired facility in Columbia, Maryland,
relating to Panbio. The Cholestech operation, which was acquired
in September 2007 and manufactures and distributes the
Cholestech LDX system, a
point-of-care
monitor of blood cholesterol and related lipids used to test
patients at risk of, or suffering from, heart disease and
related conditions, has moved to our Biosite facility in
San Diego, California. The HemoSense operation, which was
acquired in November 2007 and manufactures and distributes the
INRatio System, an easy-to-use, hand-held blood coagulation
monitoring system for use by patients and healthcare
professionals in the management of warfarin, a
commonly-prescribed medication used to prevent blood clots, has
moved to our Biosite facility. The operations of the Panbio
distribution facility, which was acquired in January 2008, have
transferred to our distribution center in Freehold, New Jersey.
BioStar manufacturing ceased at the end of June 2008, with
BioStar OIA products available for purchase through the end of
the first quarter of 2009. During the year ended
December 31, 2009, we incurred $0.1 million in
severance-related restructuring charges. During the year ended
December 31, 2008, we incurred $10.6 million in
restructuring charges related to this plan, which consisted of
$5.1 million of intangible asset impairments,
$1.4 million in severance-related costs, $0.6 million
in fixed asset impairments, $1.2 million in facility exit
costs and $2.3 million related to the write-off of
inventory. Since the inception of the plan, we incurred
$10.7 million in restructuring charges related to this
plan, which consisted of $5.1 million of intangible assets
impairment, $1.5 million in severance-related costs,
$0.6 million in fixed asset impairments, $1.2 million
in facility exit costs and $2.3 million related to the
write-off of inventory. All costs related to this plan have been
included in our professional diagnostics business segment. We do
not expect to incur additional charges under this plan. As of
December 31, 2009, all costs have been paid.
As a result of our plans to transition the businesses of
Cholestech and HemoSense to Biosite and Panbio to Orlando,
Florida and close these facilities, we incurred
$2.5 million in restructuring charges during the year ended
December 31, 2010, of which $0.2 million relates to
severance and retention costs, $1.3 million in facility
closure and transition costs, $0.9 million in fixed asset
and inventory write-offs and $0.1 million in present value
accretion of facility lease costs. We incurred $8.2 million
in restructuring charges during the year ended December 31,
2009, of which $2.4 million relates to fixed asset
impairments, $1.7 million relates to severance and
retention costs, $2.6 million in transition costs,
$1.3 million in inventory write-offs and $0.2 million
in present value accretion of facility lease costs. We incurred
$3.8 million in restructuring charges during the year ended
December 31, 2008, of which $2.7 million relates to
severance and retention costs, $0.4 million in fixed asset
impairments, $0.5 million in transition costs and
$0.2 million in present value accretion of facility lease
costs related to these plans. During the years ended
December 31, 2010, 2009 and 2008, respectively,
$2.4 million, $8.0 million and $3.6 million in
charges were included in operating income of our professional
diagnostics business segment. We charged $0.1 million,
$0.2 million and $0.2 million related to the present
value accretion of facility lease costs, to interest expense for
the years ended December 31, 2010, 2009 and 2008,
respectively. Since the inception of the plan, we incurred
$14.5 million in restructuring charges, of which
$4.6 million relates to severance and retention costs,
$3.4 million in fixed asset impairments, $4.4 million
in transition costs, $1.6 million in inventory write-offs
and $0.5 million in present value accretion of facility
lease costs related to these plans. Of the $9.5 million in
severance and exit costs, $0.6 million remains unpaid as of
December 31, 2010. We do not anticipate incurring
significant additional restructuring charges under these plans.
See Note 4(d) for further information and costs related to
these plans.
In addition to transitioning the businesses of Cholestech and
HemoSense to Biosite, we also made the decision to close our
Innovacon facility in San Diego, California and move the
operating activities to Biosite; the Innovacon business is the
rapid diagnostics business that we acquired from ACON in March
2006. During
F-68
ALERE
INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
(20)
|
Restructuring
Activities (Continued)
|
the year ended December 31, 2008 and since inception, we
recorded $0.6 million in restructuring charges, of which
$0.5 million related to facility lease and exit costs and
$0.1 million related to impairment of fixed assets. These
charges are included in our professional diagnostics business
segment. As of December 31, 2009, all costs have been paid.
We vacated the facility in August 2008 and do not anticipate
incurring additional costs under this plan.
In February 2008, we decided to cease research and development
activities for one of the products in development at our
Bedford, England facility, based upon comparison of the product
under development with existing products acquired in the
HemoSense acquisition. During the year ended December 31,
2008 and since inception of the plan, we recorded restructuring
charges of $9.4 million, of which $6.8 million related
to the impairment of fixed assets, $1.9 million related to
the write-off of inventory, $0.5 million related to
contractual obligations with suppliers and $0.2 million
related to severance costs to involuntarily terminate employees
working on the development of this product. The
$9.4 million was included in our professional diagnostics
business segment. Of the $0.7 million in contractual
obligations and severance costs, all has been paid as of
December 31, 2008. We do not expect to incur additional
charges under this plan.
In April 2008, we initiated cost reduction efforts at our
facilities in Stirling, Scotland, consolidating our business
activities into one facility and with our Biosite operations. As
a result of these efforts, we recorded $3.3 million in
restructuring charges for the year ended December 31, 2008
and since inception of the plan, consisting of $2.0 million
in fixed asset impairments, $1.0 million in severance costs
and $0.3 million in facility exit costs. All costs related
to this plan are included in our professional diagnostics
business segment. Of the $1.3 million in severance and
facility exit costs, substantially all has been paid as of
December 31, 2010. We do not expect to incur additional
charges under this plan.
(d) 2007 Restructuring Plans
During 2007, we committed to several plans to restructure and
integrate our worldwide sales, marketing, order management and
fulfillment operations, as well as to evaluate certain research
and development projects. The objectives of the plans were to
eliminate redundant costs, improve customer responsiveness and
improve operational efficiencies. As a result of these
restructuring plans, we recorded a recovery of $0.3 million
in restructuring charges during the year ended December 31,
2010, related to severance charges. We recorded
$1.1 million in restructuring charges during the year ended
December 31, 2009, primarily related to severance charges
and outplacement services. We recorded $3.0 million in
restructuring charges during the year ended December 31,
2008, including $2.6 million related to severance charges
and outplacement services and $0.4 million related to
facility exit costs. Since inception of the plans, we have
recorded $9.0 million in restructuring charges, including
$4.6 million related to severance charges and outplacement
services, $0.4 million related to facility exit costs and
$4.0 million related to impairment charges on fixed assets.
The restructuring charges related to this plan are included in
our professional diagnostics business segment. As of
December 31, 2010, all costs have been paid. We do not
anticipate incurring additional charges related to this plan.
In addition, we recorded restructuring charges associated with
the formation of our joint venture with P&G. In connection
with the joint venture, we committed to a plan to close our
sales offices in Germany and Sweden, as well as to evaluate
redundancies in all departments of the consumer diagnostics
business segment that are impacted by the formation of the joint
venture. For the year ended December 31, 2008, we recorded
$0.2 million in severance costs related to this plan. We
have recorded $1.4 million in restructuring charges since
inception of the plan, of which $1.0 million relates to
severance costs and $0.4 million relates to facility and
other exit costs. Of the total $1.4 million in exit costs,
all have been paid as of December 31, 2010. We do not
anticipate incurring additional charges related to this plan.
F-69
ALERE
INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
(20)
|
Restructuring
Activities (Continued)
|
(e) Restructuring Reserves
The following table summarizes our liabilities related to the
restructuring activities associated with the plans discussed
above (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
|
|
Additions
|
|
|
|
|
|
Balance at
|
|
|
Beginning
|
|
to the
|
|
Amounts
|
|
|
|
End of
|
|
|
of Period
|
|
Reserve
|
|
Paid
|
|
Other(1)
|
|
Period
|
|
Year ended December 31, 2008
|
|
$
|
1,123
|
|
|
$
|
25,642
|
|
|
$
|
(9,148
|
)
|
|
$
|
(2,823
|
)
|
|
$
|
14,794
|
|
Year ended December 31, 2009
|
|
$
|
14,794
|
|
|
$
|
22,730
|
|
|
$
|
(18,021
|
)
|
|
$
|
(597
|
)
|
|
$
|
18,906
|
|
Year ended December 31, 2010
|
|
$
|
18,906
|
|
|
$
|
17,036
|
|
|
$
|
(25,563
|
)
|
|
$
|
(676
|
)
|
|
$
|
9,703
|
|
|
|
|
(1) |
|
Represents foreign currency translation adjustment. |
We account for the results from our equity investments under the
equity method of accounting in accordance with ASC 323
Investments Equity Method and Joint Ventures,
based on the percentage of our ownership interest in the
business. Our equity investments primarily include the following:
In May 2007, we completed the formation of SPD, our 50/50 joint
venture with P&G for the development, manufacturing,
marketing and sale of existing and to-be-developed consumer
diagnostic products, outside the cardiology, diabetes and oral
care fields. Upon completion of the arrangement to
form SPD, we ceased to consolidate the operating results of
our consumer diagnostics business related to SPD. For the years
ended December 31, 2010 and 2009, we recorded earnings of
$8.5 million, and $5.7 million, respectively, in
equity earnings of unconsolidated entities, net of tax, in our
accompanying consolidated statements of operations, which
represented our 50% share of SPDs net income for the
respective periods. For the year ended December 31, 2008,
we recorded a loss of $0.9 million in equity earnings of
unconsolidated entities, net of tax, in our accompanying
consolidated statements of operations, which represented our 50%
share of SPDs net loss for the respective period.
In May 2006, we acquired 49% of TechLab, Inc., or TechLab, a
privately-held developer, manufacturer and distributor of rapid
non-invasive intestinal diagnostics tests in the areas of
intestinal inflammation, antibiotic associated diarrhea and
parasitology. For the years ended December 31, 2010, 2009
and 2008, we recorded earnings of $1.9 million,
$1.7 million and $1.5 million, respectively, in equity
earnings of unconsolidated entities, net of tax, in our
accompanying consolidated statements of operations, which
represented our minority share of TechLabs net income for
the respective period.
F-70
ALERE
INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
(21)
|
Equity
Investments (Continued)
|
Summarized financial information for the P&G joint venture
and TechLab on a combined basis is as follows (in thousands):
Combined
condensed results of operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For The Years Ended December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Net revenue
|
|
$
|
224,193
|
|
|
$
|
203,677
|
|
|
$
|
204,053
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
$
|
142,159
|
|
|
$
|
127,719
|
|
|
$
|
102,942
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income after taxes
|
|
$
|
20,913
|
|
|
$
|
14,821
|
|
|
$
|
1,209
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined
condensed balance sheets:
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
Current assets
|
|
$
|
93,250
|
|
|
$
|
87,880
|
|
Non-current assets
|
|
|
25,965
|
|
|
|
26,881
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
119,215
|
|
|
$
|
114,761
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
$
|
62,788
|
|
|
$
|
61,959
|
|
Non-current liabilities
|
|
|
2,091
|
|
|
|
1,492
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
$
|
64,879
|
|
|
$
|
63,451
|
|
|
|
|
|
|
|
|
|
|
In September 2009, we disposed of our majority ownership
interest in our Diamics operation, which was part of our
professional diagnostics reporting unit and business segment.
Since the date of acquisition, July 2007, under the principles
of consolidation, we consolidated 100% of the operating results
of the Diamics operations in our consolidated statement of
operations. As a result of disposition, we recorded a gain of
$3.4 million during the year ended December 31, 2009.
|
|
(23)
|
Discontinued
Operations
|
On January 15, 2010, we completed the sale of our vitamins
and nutritional supplements business for a purchase price of
approximately $62.6 million in cash, which is net of the
final working capital adjustment. The sale included our entire
private label and branded nutritionals businesses and represents
the complete divestiture of our entire vitamins and nutritional
supplements business segment. We recognized a gain of
approximately $18.7 million ($11.6 million, net of
tax) during 2010. The results of the vitamins and nutritional
supplements business, which represents our entire vitamins and
nutritional supplements business segment, are included in income
(loss) from discontinued operations, net of tax, for all periods
presented. The net assets and net liabilities associated with
the vitamins and nutritional supplements business were
classified as assets held for sale and liabilities related to
assets held for sale as of December 31, 2009.
The following assets and liabilities have been segregated and
classified as assets held for sale and liabilities related to
assets held for sale, as appropriate, in the consolidated
balance sheet as of December 31, 2009. The amounts
presented below were adjusted to exclude cash, intercompany
receivables and payables and certain assets and liabilities
between the business held for sale and our company, which were
excluded from the transaction (amounts in thousands).
F-71
ALERE
INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
(23)
|
Discontinued
Operations (Continued)
|
|
|
|
|
|
|
|
December 31, 2009
|
|
|
Assets
|
|
|
|
|
Accounts receivable, net of allowances of $2,919 at
December 31, 2009
|
|
$
|
21,100
|
|
Inventories, net
|
|
|
21,500
|
|
Prepaid expenses and other current assets
|
|
|
160
|
|
Property, plant and equipment, net
|
|
|
8,368
|
|
Goodwill
|
|
|
200
|
|
Other intangible assets with indefinite lives
|
|
|
135
|
|
Other intangible assets, net
|
|
|
2,581
|
|
Other non-current assets
|
|
|
104
|
|
|
|
|
|
|
Total assets held for sale
|
|
$
|
54,148
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
Accounts payable
|
|
$
|
8,299
|
|
Accrued expenses and other current liabilities
|
|
|
3,230
|
|
Other long-term liabilities
|
|
|
29
|
|
|
|
|
|
|
Total liabilities related to assets held for sale
|
|
$
|
11,558
|
|
|
|
|
|
|
The following summarized financial information related to the
vitamins and nutritionals supplements businesses have been
segregated from continuing operations and reported as
discontinued operations (amounts in thousands).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Net revenue
|
|
|
4,362
|
|
|
|
99,517
|
|
|
|
88,873
|
|
Income (loss) from discontinued operations before income taxes
|
|
|
18,487
|
|
|
|
2,102
|
|
|
|
(1,090
|
)
|
Provision (benefit) for income taxes
|
|
|
7,090
|
|
|
|
168
|
|
|
|
(42
|
)
|
Net income (loss) from discontinued operations
|
|
|
11,397
|
|
|
|
1,934
|
|
|
|
(1,048
|
)
|
|
|
(24)
|
Supplemental
Cash Flow Information
|
Cash Paid
for Interest and Income Taxes:
During fiscal 2010, 2009 and 2008, we made cash payments for
interest totaling $117.1 million, $87.3 million and
$88.6 million, respectively.
During fiscal 2010, 2009 and 2008, total net cash paid for
income taxes was $31.1 million, $49.2 million and
$5.5 million, respectively.
F-72
ALERE
INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
(24)
|
Supplemental
Cash Flow Information (Continued)
|
Non-cash
Investing Activities:
During fiscal 2010, 2009 and 2008, we issued shares of our
common stock and exchanged employee stock options in connection
with several of our acquisitions (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee Stock Options/
|
|
|
|
|
|
|
Restricted Stock Awards
|
|
|
|
|
Common Stock Issued
|
|
Exchanged
|
|
|
|
|
Number of
|
|
Fair Value of
|
|
Number of
|
|
Fair Value of
|
Company Acquired
|
|
Date of Acquisition
|
|
Shares
|
|
Shares
|
|
Shares
|
|
Shares
|
|
Mologic Limited
|
|
October 6, 2009
|
|
|
128,513
|
|
|
$
|
5,115
|
|
|
|
|
|
|
$
|
|
|
Concateno plc
|
|
August 11, 2009
|
|
|
2,091,080
|
|
|
$
|
70,218
|
|
|
|
315,227
|
|
|
$
|
2,881
|
|
GeneCare Medical Genetics Center, Inc.
|
|
July 1, 2009
|
|
|
4,000
|
|
|
$
|
57
|
|
|
|
|
|
|
$
|
|
|
ACON Second Territory Business(1)
|
|
April 30, 2009
|
|
|
1,681,254
|
|
|
$
|
58,708
|
|
|
|
|
|
|
$
|
|
|
Matria Healthcare, Inc.
|
|
May 9, 2008
|
|
|
|
|
|
$
|
|
|
|
|
1,490,655
|
|
|
$
|
17,334
|
|
BBI Holdings Plc
|
|
February 12, 2008
|
|
|
251,085
|
|
|
$
|
14,397
|
|
|
|
355,238
|
|
|
$
|
3,639
|
|
|
|
|
(1) |
|
Includes 1,210,842 shares of our common stock with a fair
value of $42.4 million, issued during 2009. Includes
470,412 shares of our common stock with a fair value of
approximately $16.3 million, issued during the second
quarter of 2010, as settlement of deferred purchase price
consideration. |
Non-cash
Financing Activities:
During fiscal 2010, 2009 and 2008, we recorded non-cash income
(expense) to accumulated other comprehensive income (expense) of
$2.4 million, $11.4 million and $(11.6) million,
respectively, representing the change in fair market value of
our interest rate swap agreement.
|
|
(25)
|
Guarantor
Financial Information
|
Our 9% senior subordinated notes due 2016, our
7.875% senior notes due 2016, and our
8.625% subordinated notes due 2018 are guaranteed by
certain of our consolidated wholly-owned subsidiaries, or the
Guarantor Subsidiaries. The guarantees are full and
unconditional and joint and several. The following supplemental
financial information sets forth, on a consolidating basis,
audited balance sheets as of December 31, 2010 and 2009 and
the related audited statements of operations and cash flows for
each of the three years in the period ended December 31,
2010 for the Company, the Guarantor Subsidiaries and our other
subsidiaries, or the Non-Guarantor Subsidiaries. The
supplemental financial information reflects the investments of
the Company and the Guarantor Subsidiaries in the Guarantor and
Non-Guarantor Subsidiaries using the equity method of accounting.
We have extensive transactions and relationships between various
members of the consolidated group. These transactions and
relationships include intercompany pricing agreements,
intellectual property royalty agreements and general and
administrative and research and development cost-sharing
agreements. Because of these relationships, it is possible that
the terms of these transactions are not the same as those that
would result from transactions among wholly unrelated parties.
For comparative purposes, certain amounts for prior periods have
been reclassified to conform to the current period
classification.
F-73
ALERE
INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
(25)
|
Guarantor
Financial Information (Continued)
|
CONSOLIDATING
STATEMENT OF OPERATIONS
For the Year Ended December 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
|
|
|
|
|
|
|
Issuer
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Net product sales
|
|
$
|
|
|
|
$
|
843,542
|
|
|
$
|
740,371
|
|
|
$
|
(111,510
|
)
|
|
$
|
1,472,403
|
|
Services revenue
|
|
|
|
|
|
|
608,482
|
|
|
|
53,703
|
|
|
|
|
|
|
|
662,185
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net product sales and services revenue
|
|
|
|
|
|
|
1,452,024
|
|
|
|
794,074
|
|
|
|
(111,510
|
)
|
|
|
2,134,588
|
|
License and royalty revenue
|
|
|
|
|
|
|
10,003
|
|
|
|
16,167
|
|
|
|
(5,411
|
)
|
|
|
20,759
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue
|
|
|
|
|
|
|
1,462,027
|
|
|
|
810,241
|
|
|
|
(116,921
|
)
|
|
|
2,155,347
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of net product sales
|
|
|
628
|
|
|
|
395,863
|
|
|
|
403,098
|
|
|
|
(111,264
|
)
|
|
|
688,325
|
|
Cost of services revenue
|
|
|
|
|
|
|
304,269
|
|
|
|
21,017
|
|
|
|
|
|
|
|
325,286
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of net product sales and services revenue
|
|
|
628
|
|
|
|
700,132
|
|
|
|
424,115
|
|
|
|
(111,264
|
)
|
|
|
1,013,611
|
|
Cost of license and royalty revenue
|
|
|
|
|
|
|
66
|
|
|
|
12,494
|
|
|
|
(5,411
|
)
|
|
|
7,149
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of net revenue
|
|
|
628
|
|
|
|
700,198
|
|
|
|
436,609
|
|
|
|
(116,675
|
)
|
|
|
1,020,760
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
(628
|
)
|
|
|
761,829
|
|
|
|
373,632
|
|
|
|
(246
|
)
|
|
|
1,134,587
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
20,936
|
|
|
|
68,862
|
|
|
|
43,480
|
|
|
|
|
|
|
|
133,278
|
|
Sales and marketing
|
|
|
3,001
|
|
|
|
316,884
|
|
|
|
179,239
|
|
|
|
|
|
|
|
499,124
|
|
General and administrative
|
|
|
49,222
|
|
|
|
232,067
|
|
|
|
165,628
|
|
|
|
|
|
|
|
446,917
|
|
Goodwill impairment charge
|
|
|
|
|
|
|
1,006,357
|
|
|
|
|
|
|
|
|
|
|
|
1,006,357
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
(73,787
|
)
|
|
|
(862,341
|
)
|
|
|
(14,715
|
)
|
|
|
(246
|
)
|
|
|
(951,089
|
)
|
Interest expense, including amortization of original
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
issue discounts and deferred financing costs
|
|
|
(136,772
|
)
|
|
|
(74,718
|
)
|
|
|
(10,431
|
)
|
|
|
82,486
|
|
|
|
(139,435
|
)
|
Other income (expense), net
|
|
|
85,600
|
|
|
|
(5,358
|
)
|
|
|
24,982
|
|
|
|
(82,486
|
)
|
|
|
22,738
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations before provision
(benefit) for income taxes
|
|
|
(124,959
|
)
|
|
|
(942,417
|
)
|
|
|
(164
|
)
|
|
|
(246
|
)
|
|
|
(1,067,786
|
)
|
Provision (benefit) for income taxes
|
|
|
(53,164
|
)
|
|
|
3,631
|
|
|
|
19,602
|
|
|
|
|
|
|
|
(29,931
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations before equity earnings of
unconsolidated entities, net of tax
|
|
|
(71,795
|
)
|
|
|
(946,048
|
)
|
|
|
(19,766
|
)
|
|
|
(246
|
)
|
|
|
(1,037,855
|
)
|
Equity in earnings of subsidiaries, net of tax
|
|
|
(946,694
|
)
|
|
|
|
|
|
|
|
|
|
|
946,694
|
|
|
|
|
|
Equity earnings (losses) of unconsolidated entities, net of tax
|
|
|
2,024
|
|
|
|
|
|
|
|
8,680
|
|
|
|
(138
|
)
|
|
|
10,566
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
|
(1,016,465
|
)
|
|
|
(946,048
|
)
|
|
|
(11,086
|
)
|
|
|
946,310
|
|
|
|
(1,027,289
|
)
|
Income from discontinued operations, net of tax
|
|
|
573
|
|
|
|
9,727
|
|
|
|
1,097
|
|
|
|
|
|
|
|
11,397
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
(1,015,892
|
)
|
|
|
(936,321
|
)
|
|
|
(9,989
|
)
|
|
|
946,310
|
|
|
|
(1,015,892
|
)
|
Less: Net income attributable to non-controlling interests
|
|
|
|
|
|
|
|
|
|
|
1,418
|
|
|
|
|
|
|
|
1,418
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to Alere Inc. and
Subsidiaries
|
|
|
(1,015,892
|
)
|
|
|
(936,321
|
)
|
|
|
(11,407
|
)
|
|
|
946,310
|
|
|
|
(1,017,310
|
)
|
Preferred stock dividends
|
|
|
(24,235
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(24,235
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) available to common stockholders
|
|
$
|
(1,040,127
|
)
|
|
$
|
(936,321
|
)
|
|
$
|
(11,407
|
)
|
|
$
|
946,310
|
|
|
$
|
(1,041,545
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-74
ALERE
INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
(25)
|
Guarantor
Financial Information (Continued)
|
CONSOLIDATING
STATEMENT OF OPERATIONS
For the Year Ended December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
|
|
|
|
|
|
|
Issuer
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Net product sales
|
|
$
|
|
|
|
$
|
877,135
|
|
|
$
|
597,266
|
|
|
$
|
(109,322
|
)
|
|
$
|
1,365,079
|
|
Services revenue
|
|
|
|
|
|
|
521,509
|
|
|
|
6,978
|
|
|
|
|
|
|
|
528,487
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net product sales and services revenue
|
|
|
|
|
|
|
1,398,644
|
|
|
|
604,244
|
|
|
|
(109,322
|
)
|
|
|
1,893,566
|
|
License and royalty revenue
|
|
|
|
|
|
|
6,441
|
|
|
|
26,470
|
|
|
|
(3,836
|
)
|
|
|
29,075
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue
|
|
|
|
|
|
|
1,405,085
|
|
|
|
630,714
|
|
|
|
(113,158
|
)
|
|
|
1,922,641
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of net product sales
|
|
|
380
|
|
|
|
432,168
|
|
|
|
334,699
|
|
|
|
(147,744
|
)
|
|
|
619,503
|
|
Cost of services revenue
|
|
|
|
|
|
|
236,660
|
|
|
|
3,366
|
|
|
|
|
|
|
|
240,026
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of net product sales and services revenue
|
|
|
380
|
|
|
|
668,828
|
|
|
|
338,065
|
|
|
|
(147,744
|
)
|
|
|
859,529
|
|
Cost of license and royalty revenue
|
|
|
|
|
|
|
(16
|
)
|
|
|
12,742
|
|
|
|
(3,836
|
)
|
|
|
8,890
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of net revenue
|
|
|
380
|
|
|
|
668,812
|
|
|
|
350,807
|
|
|
|
(151,580
|
)
|
|
|
868,419
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
(380
|
)
|
|
|
736,273
|
|
|
|
279,907
|
|
|
|
38,422
|
|
|
|
1,054,222
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
21,302
|
|
|
|
62,115
|
|
|
|
29,431
|
|
|
|
|
|
|
|
112,848
|
|
Sales and marketing
|
|
|
1,063
|
|
|
|
317,235
|
|
|
|
123,348
|
|
|
|
|
|
|
|
441,646
|
|
General and administrative
|
|
|
58,598
|
|
|
|
217,531
|
|
|
|
80,904
|
|
|
|
|
|
|
|
357,033
|
|
Gain on dispositions
|
|
|
(2,682
|
)
|
|
|
|
|
|
|
(673
|
)
|
|
|
|
|
|
|
(3,355
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
(78,661
|
)
|
|
|
139,392
|
|
|
|
46,897
|
|
|
|
38,422
|
|
|
|
146,050
|
|
Interest expense, including amortization of original issue
discounts and deferred financing costs
|
|
|
(102,627
|
)
|
|
|
(50,261
|
)
|
|
|
(11,505
|
)
|
|
|
57,595
|
|
|
|
(106,798
|
)
|
Other income (expense), net
|
|
|
55,476
|
|
|
|
(4,584
|
)
|
|
|
7,699
|
|
|
|
(57,595
|
)
|
|
|
996
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations before provision
(benefit) for income taxes
|
|
|
(125,812
|
)
|
|
|
84,547
|
|
|
|
43,091
|
|
|
|
38,422
|
|
|
|
40,248
|
|
Provision (benefit) for income taxes
|
|
|
(35,006
|
)
|
|
|
39,567
|
|
|
|
10,875
|
|
|
|
191
|
|
|
|
15,627
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations before equity
earnings of unconsolidated entities, net of tax
|
|
|
(90,806
|
)
|
|
|
44,980
|
|
|
|
32,216
|
|
|
|
38,231
|
|
|
|
24,621
|
|
Equity in earnings of subsidiaries, net of tax
|
|
|
124,336
|
|
|
|
|
|
|
|
|
|
|
|
(124,336
|
)
|
|
|
|
|
Equity earnings of unconsolidated entities, net of tax
|
|
|
1,747
|
|
|
|
|
|
|
|
5,972
|
|
|
|
(93
|
)
|
|
|
7,626
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
|
35,277
|
|
|
|
44,980
|
|
|
|
38,188
|
|
|
|
(86,198
|
)
|
|
|
32,247
|
|
Income (loss) from discontinued operations, net of tax
|
|
|
(1,096
|
)
|
|
|
2,689
|
|
|
|
334
|
|
|
|
7
|
|
|
|
1,934
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
34,181
|
|
|
|
47,669
|
|
|
|
38,522
|
|
|
|
(86,191
|
)
|
|
|
34,181
|
|
Less: Net income attributable to non-controlling interests
|
|
|
|
|
|
|
|
|
|
|
465
|
|
|
|
|
|
|
|
465
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to Alere Inc. and
Subsidiaries
|
|
|
34,181
|
|
|
|
47,669
|
|
|
|
38,057
|
|
|
|
(86,191
|
)
|
|
|
33,716
|
|
Preferred stock dividends
|
|
|
(22,972
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(22,972
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) available to common stockholders
|
|
$
|
11,209
|
|
|
$
|
47,669
|
|
|
$
|
38,057
|
|
|
$
|
(86,191
|
)
|
|
$
|
10,744
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-75
ALERE
INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
(25)
|
Guarantor
Financial Information (Continued)
|
CONSOLIDATING
STATEMENT OF OPERATIONS
For the Year Ended December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
|
|
|
|
|
|
|
Issuer
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Net product sales
|
|
$
|
|
|
|
$
|
782,085
|
|
|
$
|
485,091
|
|
|
$
|
(115,911
|
)
|
|
$
|
1,151,265
|
|
Services revenue
|
|
|
|
|
|
|
402,758
|
|
|
|
2,704
|
|
|
|
|
|
|
|
405,462
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net product sales and services revenue
|
|
|
|
|
|
|
1,184,843
|
|
|
|
487,795
|
|
|
|
(115,911
|
)
|
|
|
1,556,727
|
|
License and royalty revenue
|
|
|
|
|
|
|
15,536
|
|
|
|
10,290
|
|
|
|
|
|
|
|
25,826
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue
|
|
|
|
|
|
|
1,200,379
|
|
|
|
498,085
|
|
|
|
(115,911
|
)
|
|
|
1,582,553
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of net product sales
|
|
|
358
|
|
|
|
369,916
|
|
|
|
286,307
|
|
|
|
(113,264
|
)
|
|
|
543,317
|
|
Cost of services revenue
|
|
|
|
|
|
|
176,421
|
|
|
|
677
|
|
|
|
|
|
|
|
177,098
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of net product sales and services revenue
|
|
|
358
|
|
|
|
546,337
|
|
|
|
286,984
|
|
|
|
(113,264
|
)
|
|
|
720,415
|
|
Cost of license and royalty revenue
|
|
|
|
|
|
|
3,759
|
|
|
|
6,438
|
|
|
|
(1,577
|
)
|
|
|
8,620
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of net revenue
|
|
|
358
|
|
|
|
550,096
|
|
|
|
293,422
|
|
|
|
(114,841
|
)
|
|
|
729,035
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
(358
|
)
|
|
|
650,283
|
|
|
|
204,663
|
|
|
|
(1,070
|
)
|
|
|
853,518
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
22,693
|
|
|
|
53,342
|
|
|
|
35,793
|
|
|
|
|
|
|
|
111,828
|
|
Sales and marketing
|
|
|
1,693
|
|
|
|
289,071
|
|
|
|
91,043
|
|
|
|
132
|
|
|
|
381,939
|
|
General and administrative
|
|
|
36,447
|
|
|
|
186,423
|
|
|
|
72,189
|
|
|
|
|
|
|
|
295,059
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
(61,191
|
)
|
|
|
121,447
|
|
|
|
5,638
|
|
|
|
(1,202
|
)
|
|
|
64,692
|
|
Interest expense, including amortization of original issue
discounts and deferred financing costs
|
|
|
(90,328
|
)
|
|
|
(72,435
|
)
|
|
|
(15,986
|
)
|
|
|
77,617
|
|
|
|
(101,132
|
)
|
Other income (expense), net
|
|
|
78,604
|
|
|
|
(16,281
|
)
|
|
|
13,442
|
|
|
|
(77,572
|
)
|
|
|
(1,807
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations before provision
(benefit) for income taxes
|
|
|
(72,915
|
)
|
|
|
32,731
|
|
|
|
3,094
|
|
|
|
(1,157
|
)
|
|
|
(38,247
|
)
|
Provision (benefit) for income taxes
|
|
|
(59,608
|
)
|
|
|
44,690
|
|
|
|
(1,726
|
)
|
|
|
|
|
|
|
(16,644
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations before equity
earnings of unconsolidated entities, net of tax
|
|
|
(13,307
|
)
|
|
|
(11,959
|
)
|
|
|
4,820
|
|
|
|
(1,157
|
)
|
|
|
(21,603
|
)
|
Equity in earnings of subsidiaries, net of tax
|
|
|
(9,816
|
)
|
|
|
|
|
|
|
|
|
|
|
9,816
|
|
|
|
|
|
Equity earnings (losses) of unconsolidated entities, net of tax
|
|
|
1,522
|
|
|
|
(23
|
)
|
|
|
(379
|
)
|
|
|
(70
|
)
|
|
|
1,050
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
|
(21,601
|
)
|
|
|
(11,982
|
)
|
|
|
4,441
|
|
|
|
8,589
|
|
|
|
(20,553
|
)
|
Loss from discontinued operations, net of tax
|
|
|
|
|
|
|
(112
|
)
|
|
|
(891
|
)
|
|
|
(45
|
)
|
|
|
(1,048
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
(21,601
|
)
|
|
|
(12,094
|
)
|
|
|
3,550
|
|
|
|
8,544
|
|
|
|
(21,601
|
)
|
Less: Net income attributable to non-controlling interests
|
|
|
|
|
|
|
|
|
|
|
167
|
|
|
|
|
|
|
|
167
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to Alere Inc. and
Subsidiaries
|
|
|
(21,601
|
)
|
|
|
(12,094
|
)
|
|
|
3,383
|
|
|
|
8,544
|
|
|
|
(21,768
|
)
|
Preferred stock dividends
|
|
|
(13,989
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(13,989
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) available to common stockholders
|
|
$
|
(35,590
|
)
|
|
$
|
(12,094
|
)
|
|
$
|
3,383
|
|
|
$
|
8,544
|
|
|
$
|
(35,757
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-76
ALERE
INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
(25)
|
Guarantor
Financial Information (Continued)
|
CONSOLIDATING
BALANCE SHEET
December 31, 2010
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
|
|
|
|
|
|
|
Issuer
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
101,813
|
|
|
$
|
116,758
|
|
|
$
|
182,735
|
|
|
$
|
|
|
|
$
|
401,306
|
|
Restricted cash
|
|
|
|
|
|
|
1,739
|
|
|
|
842
|
|
|
|
|
|
|
|
2,581
|
|
Marketable securities
|
|
|
|
|
|
|
914
|
|
|
|
1,180
|
|
|
|
|
|
|
|
2,094
|
|
Accounts receivable, net of allowances
|
|
|
|
|
|
|
202,578
|
|
|
|
194,570
|
|
|
|
|
|
|
|
397,148
|
|
Inventories, net
|
|
|
|
|
|
|
126,374
|
|
|
|
139,070
|
|
|
|
(7,724
|
)
|
|
|
257,720
|
|
Deferred tax assets
|
|
|
33,483
|
|
|
|
19,256
|
|
|
|
4,372
|
|
|
|
|
|
|
|
57,111
|
|
Income tax receivable
|
|
|
|
|
|
|
1,383
|
|
|
|
|
|
|
|
|
|
|
|
1,383
|
|
Prepaid expenses and other current assets
|
|
|
7,815
|
|
|
|
22,709
|
|
|
|
44,390
|
|
|
|
|
|
|
|
74,914
|
|
Intercompany receivables
|
|
|
836,222
|
|
|
|
439,521
|
|
|
|
9,843
|
|
|
|
(1,285,586
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
979,333
|
|
|
|
931,232
|
|
|
|
577,002
|
|
|
|
(1,293,310
|
)
|
|
|
1,194,257
|
|
Property, plant and equipment, net
|
|
|
1,343
|
|
|
|
253,640
|
|
|
|
135,660
|
|
|
|
(133
|
)
|
|
|
390,510
|
|
Goodwill
|
|
|
|
|
|
|
1,944,719
|
|
|
|
891,599
|
|
|
|
(5,018
|
)
|
|
|
2,831,300
|
|
Other intangible assets with indefinite lives
|
|
|
|
|
|
|
12,900
|
|
|
|
15,283
|
|
|
|
|
|
|
|
28,183
|
|
Finite-lived intangible assets, net
|
|
|
12,698
|
|
|
|
1,198,979
|
|
|
|
495,904
|
|
|
|
|
|
|
|
1,707,581
|
|
Deferred financing costs, net, and other non-current assets
|
|
|
47,884
|
|
|
|
4,855
|
|
|
|
28,662
|
|
|
|
|
|
|
|
81,401
|
|
Investments in unconsolidated entities
|
|
|
3,589,973
|
|
|
|
1,196
|
|
|
|
42,700
|
|
|
|
(3,571,313
|
)
|
|
|
62,556
|
|
Marketable securities
|
|
|
2,308
|
|
|
|
|
|
|
|
7,096
|
|
|
|
|
|
|
|
9,404
|
|
Deferred tax assets
|
|
|
|
|
|
|
|
|
|
|
25,182
|
|
|
|
|
|
|
|
25,182
|
|
Intercompany notes receivable
|
|
|
1,320,925
|
|
|
|
13,128
|
|
|
|
|
|
|
|
(1,334,053
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
5,954,464
|
|
|
$
|
4,360,649
|
|
|
$
|
2,219,088
|
|
|
$
|
(6,203,827
|
)
|
|
$
|
6,330,374
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND EQUITY
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current portion of long-term debt
|
|
$
|
9,750
|
|
|
$
|
157
|
|
|
$
|
6,984
|
|
|
$
|
|
|
|
$
|
16,891
|
|
Current portion of capital lease obligations
|
|
|
|
|
|
|
1,954
|
|
|
|
172
|
|
|
|
|
|
|
|
2,126
|
|
Accounts payable
|
|
|
6,938
|
|
|
|
62,562
|
|
|
|
57,344
|
|
|
|
|
|
|
|
126,844
|
|
Accrued expenses and other current liabilities
|
|
|
(104,072
|
)
|
|
|
322,019
|
|
|
|
127,885
|
|
|
|
|
|
|
|
345,832
|
|
Payable to joint venture, net
|
|
|
|
|
|
|
(546
|
)
|
|
|
3,333
|
|
|
|
|
|
|
|
2,787
|
|
Deferred gain on joint venture
|
|
|
16,309
|
|
|
|
|
|
|
|
272,069
|
|
|
|
|
|
|
|
288,378
|
|
Intercompany payables
|
|
|
414,977
|
|
|
|
294,920
|
|
|
|
576,058
|
|
|
|
(1,285,955
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
343,902
|
|
|
|
681,066
|
|
|
|
1,043,845
|
|
|
|
(1,285,955
|
)
|
|
|
782,858
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt, net of current portion
|
|
|
2,375,554
|
|
|
|
|
|
|
|
3,012
|
|
|
|
|
|
|
|
2,378,566
|
|
Capital lease obligations, net of current portion
|
|
|
|
|
|
|
1,267
|
|
|
|
135
|
|
|
|
|
|
|
|
1,402
|
|
Deferred tax liabilities
|
|
|
(34,729
|
)
|
|
|
381,228
|
|
|
|
73,667
|
|
|
|
|
|
|
|
420,166
|
|
Other long-term liabilities
|
|
|
64,243
|
|
|
|
18,396
|
|
|
|
87,017
|
|
|
|
|
|
|
|
169,656
|
|
Intercompany notes payables
|
|
|
630,456
|
|
|
|
497,464
|
|
|
|
200,814
|
|
|
|
(1,328,734
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total long-term liabilities
|
|
|
3,035,524
|
|
|
|
898,355
|
|
|
|
364,645
|
|
|
|
(1,328,734
|
)
|
|
|
2,969,790
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redeemable non-controlling interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity
|
|
|
2,575,038
|
|
|
|
2,781,228
|
|
|
|
807,910
|
|
|
|
(3,589,138
|
)
|
|
|
2,575,038
|
|
Non-controlling interests
|
|
|
|
|
|
|
|
|
|
|
2,688
|
|
|
|
|
|
|
|
2,688
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
2,575,038
|
|
|
|
2,781,228
|
|
|
|
810,598
|
|
|
|
(3,589,138
|
)
|
|
|
2,577,726
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity
|
|
$
|
5,954,464
|
|
|
$
|
4,360,649
|
|
|
$
|
2,219,088
|
|
|
$
|
(6,203,827
|
)
|
|
$
|
6,330,374
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-77
ALERE
INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
(25)
|
Guarantor
Financial Information (Continued)
|
CONSOLIDATING
BALANCE SHEET
December 31, 2009
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
|
|
|
|
|
|
|
Issuer
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
294,137
|
|
|
$
|
82,602
|
|
|
$
|
116,034
|
|
|
$
|
|
|
|
$
|
492,773
|
|
Restricted cash
|
|
|
|
|
|
|
1,576
|
|
|
|
848
|
|
|
|
|
|
|
|
2,424
|
|
Marketable securities
|
|
|
|
|
|
|
947
|
|
|
|
|
|
|
|
|
|
|
|
947
|
|
Accounts receivable, net of allowances
|
|
|
|
|
|
|
188,355
|
|
|
|
166,098
|
|
|
|
|
|
|
|
354,453
|
|
Inventories, net
|
|
|
|
|
|
|
122,062
|
|
|
|
106,544
|
|
|
|
(7,067
|
)
|
|
|
221,539
|
|
Deferred tax assets
|
|
|
36,907
|
|
|
|
27,947
|
|
|
|
1,638
|
|
|
|
|
|
|
|
66,492
|
|
Income tax receivable
|
|
|
|
|
|
|
1,107
|
|
|
|
|
|
|
|
|
|
|
|
1,107
|
|
Prepaid expenses and other current assets
|
|
|
8,160
|
|
|
|
25,077
|
|
|
|
39,838
|
|
|
|
|
|
|
|
73,075
|
|
Assets held for sale
|
|
|
|
|
|
|
53,545
|
|
|
|
603
|
|
|
|
|
|
|
|
54,148
|
|
Intercompany receivables
|
|
|
861,596
|
|
|
|
329,771
|
|
|
|
12,500
|
|
|
|
(1,203,867
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
1,200,800
|
|
|
|
832,989
|
|
|
|
444,103
|
|
|
|
(1,210,934
|
)
|
|
|
1,266,958
|
|
Property, plant and equipment, net
|
|
|
1,646
|
|
|
|
241,732
|
|
|
|
86,034
|
|
|
|
(5,024
|
)
|
|
|
324,388
|
|
Goodwill
|
|
|
|
|
|
|
2,768,313
|
|
|
|
700,384
|
|
|
|
(5,339
|
)
|
|
|
3,463,358
|
|
Other intangible assets with indefinite lives
|
|
|
|
|
|
|
21,120
|
|
|
|
22,524
|
|
|
|
|
|
|
|
43,644
|
|
Finite-lived intangible assets, net
|
|
|
20,854
|
|
|
|
1,267,148
|
|
|
|
398,425
|
|
|
|
|
|
|
|
1,686,427
|
|
Deferred financing costs, net, and other non-current assets
|
|
|
43,368
|
|
|
|
5,640
|
|
|
|
23,754
|
|
|
|
|
|
|
|
72,762
|
|
Investments in unconsolidated entities
|
|
|
3,836,524
|
|
|
|
367
|
|
|
|
38,443
|
|
|
|
(3,811,369
|
)
|
|
|
63,965
|
|
Marketable securities
|
|
|
1,503
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,503
|
|
Deferred tax assets
|
|
|
|
|
|
|
|
|
|
|
20,987
|
|
|
|
|
|
|
|
20,987
|
|
Intercompany notes receivable
|
|
|
1,296,373
|
|
|
|
83,510
|
|
|
|
|
|
|
|
(1,379,883
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
6,401,068
|
|
|
$
|
5,220,819
|
|
|
$
|
1,734,654
|
|
|
$
|
(6,412,549
|
)
|
|
$
|
6,943,992
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current portion of long-term debt
|
|
$
|
9,750
|
|
|
$
|
2,392
|
|
|
$
|
6,828
|
|
|
$
|
|
|
|
$
|
18,970
|
|
Current portion of capital lease obligations
|
|
|
|
|
|
|
499
|
|
|
|
400
|
|
|
|
|
|
|
|
899
|
|
Accounts payable
|
|
|
2,580
|
|
|
|
63,204
|
|
|
|
60,538
|
|
|
|
|
|
|
|
126,322
|
|
Accrued expenses and other current liabilities
|
|
|
(110,283
|
)
|
|
|
260,293
|
|
|
|
129,722
|
|
|
|
|
|
|
|
279,732
|
|
Payable to joint venture, net
|
|
|
|
|
|
|
(1,242
|
)
|
|
|
1,775
|
|
|
|
|
|
|
|
533
|
|
Liabilities related to assets held for sale
|
|
|
|
|
|
|
11,556
|
|
|
|
2
|
|
|
|
|
|
|
|
11,558
|
|
Intercompany payables
|
|
|
306,869
|
|
|
|
275,316
|
|
|
|
621,683
|
|
|
|
(1,203,868
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
208,916
|
|
|
|
612,018
|
|
|
|
820,948
|
|
|
|
(1,203,868
|
)
|
|
|
438,014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt, net of current portion
|
|
|
2,125,006
|
|
|
|
|
|
|
|
3,509
|
|
|
|
|
|
|
|
2,128,515
|
|
Capital lease obligations, net of current portion
|
|
|
|
|
|
|
698
|
|
|
|
242
|
|
|
|
|
|
|
|
940
|
|
Deferred tax liabilities
|
|
|
(48,246
|
)
|
|
|
438,492
|
|
|
|
51,803
|
|
|
|
|
|
|
|
442,049
|
|
Deferred gain on joint venture
|
|
|
16,309
|
|
|
|
|
|
|
|
272,458
|
|
|
|
|
|
|
|
288,767
|
|
Other long-term liabilities
|
|
|
68,464
|
|
|
|
16,603
|
|
|
|
31,751
|
|
|
|
|
|
|
|
116,818
|
|
Intercompany notes payables
|
|
|
503,064
|
|
|
|
746,456
|
|
|
|
127,822
|
|
|
|
(1,377,342
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total long-term liabilities
|
|
|
2,664,597
|
|
|
|
1,202,249
|
|
|
|
487,585
|
|
|
|
(1,377,342
|
)
|
|
|
2,977,089
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity
|
|
|
3,527,555
|
|
|
|
3,406,552
|
|
|
|
424,787
|
|
|
|
(3,831,339
|
)
|
|
|
3,527,555
|
|
Non-controlling interests
|
|
|
|
|
|
|
|
|
|
|
1,334
|
|
|
|
|
|
|
|
1,334
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
3,527,555
|
|
|
|
3,406,552
|
|
|
|
426,121
|
|
|
|
(3,831,339
|
)
|
|
|
3,528,889
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity
|
|
$
|
6,401,068
|
|
|
$
|
5,220,819
|
|
|
$
|
1,734,654
|
|
|
$
|
(6,412,549
|
)
|
|
$
|
6,943,992
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-78
ALERE
INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
(25)
|
Guarantor
Financial Information (Continued)
|
CONSOLIDATING
STATEMENT OF CASH FLOWS
For the Year Ended December 31, 2010
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
|
|
|
|
|
|
|
Issuer
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Cash Flows from Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(1,015,892
|
)
|
|
$
|
(936,321
|
)
|
|
$
|
(9,989
|
)
|
|
$
|
946,310
|
|
|
$
|
(1,015,892
|
)
|
Income from discontinued operations, net of tax
|
|
|
573
|
|
|
|
9,727
|
|
|
|
1,097
|
|
|
|
|
|
|
|
11,397
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
|
(1,016,465
|
)
|
|
|
(946,048
|
)
|
|
|
(11,086
|
)
|
|
|
946,310
|
|
|
|
(1,027,289
|
)
|
Adjustments to reconcile income (loss) from continuing
operations to net cash provided by (used in) operating
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in earnings of subsidiaries, net of tax
|
|
|
946,694
|
|
|
|
|
|
|
|
|
|
|
|
(946,694
|
)
|
|
|
|
|
Non-cash interest expense including amortization of original
issue discounts and write-off of deferred financing costs
|
|
|
12,301
|
|
|
|
289
|
|
|
|
1,168
|
|
|
|
|
|
|
|
13,758
|
|
Depreciation and amortization
|
|
|
1,125
|
|
|
|
266,013
|
|
|
|
106,130
|
|
|
|
(478
|
)
|
|
|
372,790
|
|
Non-cash stock-based compensation expense
|
|
|
9,498
|
|
|
|
9,648
|
|
|
|
10,733
|
|
|
|
|
|
|
|
29,879
|
|
Impairment of inventory
|
|
|
|
|
|
|
261
|
|
|
|
587
|
|
|
|
|
|
|
|
848
|
|
Impairment of long-lived assets
|
|
|
|
|
|
|
1,473
|
|
|
|
(62
|
)
|
|
|
|
|
|
|
1,411
|
|
Impairment of goodwill
|
|
|
|
|
|
|
1,006,357
|
|
|
|
|
|
|
|
|
|
|
|
1,006,357
|
|
Loss on sale of fixed assets
|
|
|
|
|
|
|
719
|
|
|
|
279
|
|
|
|
|
|
|
|
998
|
|
Gain on sale of marketable securities
|
|
|
(4,190
|
)
|
|
|
|
|
|
|
(314
|
)
|
|
|
|
|
|
|
(4,504
|
)
|
Equity earnings of unconsolidated entities, net of tax
|
|
|
(2,023
|
)
|
|
|
|
|
|
|
(8,680
|
)
|
|
|
137
|
|
|
|
(10,566
|
)
|
Deferred income taxes
|
|
|
3,215
|
|
|
|
(55,335
|
)
|
|
|
(22,298
|
)
|
|
|
|
|
|
|
(74,418
|
)
|
Other non-cash items
|
|
|
1,260
|
|
|
|
1,368
|
|
|
|
1,174
|
|
|
|
|
|
|
|
3,802
|
|
Changes in assets and liabilities, net of acquisitions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable, net
|
|
|
|
|
|
|
(4,300
|
)
|
|
|
(5,060
|
)
|
|
|
|
|
|
|
(9,360
|
)
|
Inventories, net
|
|
|
|
|
|
|
(2,012
|
)
|
|
|
(21,297
|
)
|
|
|
464
|
|
|
|
(22,845
|
)
|
Prepaid expenses and other current assets
|
|
|
303
|
|
|
|
4,092
|
|
|
|
3,915
|
|
|
|
|
|
|
|
8,310
|
|
Accounts payable
|
|
|
4,358
|
|
|
|
(1,529
|
)
|
|
|
(11,917
|
)
|
|
|
|
|
|
|
(9,088
|
)
|
Accrued expenses and other current liabilities
|
|
|
(55,400
|
)
|
|
|
58,379
|
|
|
|
19,223
|
|
|
|
|
|
|
|
22,202
|
|
Other non-current liabilities
|
|
|
(5
|
)
|
|
|
120
|
|
|
|
(27,567
|
)
|
|
|
|
|
|
|
(27,452
|
)
|
Intercompany payable (receivable)
|
|
|
(162,963
|
)
|
|
|
(273,166
|
)
|
|
|
436,129
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) continuing operations
|
|
|
(262,292
|
)
|
|
|
66,329
|
|
|
|
471,057
|
|
|
|
(261
|
)
|
|
|
274,833
|
|
Net cash provided by (used in) discontinued operations
|
|
|
849
|
|
|
|
(258
|
)
|
|
|
|
|
|
|
|
|
|
|
591
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
|
(261,443
|
)
|
|
|
66,071
|
|
|
|
471,057
|
|
|
|
(261
|
)
|
|
|
275,424
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property, plant and equipment
|
|
|
(82
|
)
|
|
|
(56,922
|
)
|
|
|
(39,498
|
)
|
|
|
261
|
|
|
|
(96,241
|
)
|
Proceeds from sale of property, plant and equipment
|
|
|
|
|
|
|
73
|
|
|
|
722
|
|
|
|
|
|
|
|
795
|
|
Cash paid for acquisitions and transaction costs,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
net of cash acquired
|
|
|
(184,975
|
)
|
|
|
(32,279
|
)
|
|
|
(306,253
|
)
|
|
|
|
|
|
|
(523,507
|
)
|
Decrease (increase) in marketable securities
|
|
|
4,190
|
|
|
|
|
|
|
|
(1,008
|
)
|
|
|
|
|
|
|
3,182
|
|
Net cash received from equity method investments
|
|
|
1,317
|
|
|
|
43
|
|
|
|
10,994
|
|
|
|
|
|
|
|
12,354
|
|
Increase in other assets
|
|
|
(5,600
|
)
|
|
|
(695
|
)
|
|
|
(6,605
|
)
|
|
|
|
|
|
|
(12,900
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) continuing operations
|
|
|
(185,150
|
)
|
|
|
(89,780
|
)
|
|
|
(341,648
|
)
|
|
|
261
|
|
|
|
(616,317
|
)
|
Net cash provided by (used in) discontinued operations
|
|
|
(849
|
)
|
|
|
61,445
|
|
|
|
2,000
|
|
|
|
|
|
|
|
62,596
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided (used in) by investing activities
|
|
|
(185,999
|
)
|
|
|
(28,335
|
)
|
|
|
(339,648
|
)
|
|
|
261
|
|
|
|
(553,721
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Decrease (increase) in restricted cash
|
|
|
|
|
|
|
(163
|
)
|
|
|
22
|
|
|
|
|
|
|
|
(141
|
)
|
Cash paid for financing costs
|
|
|
(13,045
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(13,045
|
)
|
Proceeds from issuance of common stock, net of issuance costs
|
|
|
19,024
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,024
|
|
Proceeds on long-term debt
|
|
|
400,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
400,000
|
|
Repayment on long-term debt
|
|
|
(9,750
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(9,750
|
)
|
Net repayments from revolving
lines-of-credit
|
|
|
(142,000
|
)
|
|
|
(2,180
|
)
|
|
|
(2,601
|
)
|
|
|
|
|
|
|
(146,781
|
)
|
Excess tax benefit on exercised stock options
|
|
|
1,030
|
|
|
|
264
|
|
|
|
389
|
|
|
|
|
|
|
|
1,683
|
|
Principal payments of capital lease obligations
|
|
|
|
|
|
|
(1,501
|
)
|
|
|
(366
|
)
|
|
|
|
|
|
|
(1,867
|
)
|
Purchase of non-controlling interest
|
|
|
|
|
|
|
|
|
|
|
(52,864
|
)
|
|
|
|
|
|
|
(52,864
|
)
|
Other
|
|
|
(141
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(141
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) continuing operations
|
|
|
255,118
|
|
|
|
(3,580
|
)
|
|
|
(55,420
|
)
|
|
|
|
|
|
|
196,118
|
|
Net cash provided by discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
255,118
|
|
|
|
(3,580
|
)
|
|
|
(55,420
|
)
|
|
|
|
|
|
|
196,118
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange effect on cash and cash equivalents
|
|
|
|
|
|
|
|
|
|
|
(9,288
|
)
|
|
|
|
|
|
|
(9,288
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
(192,324
|
)
|
|
|
34,156
|
|
|
|
66,701
|
|
|
|
|
|
|
|
(91,467
|
)
|
Cash and cash equivalents, beginning of period
|
|
|
294,137
|
|
|
|
82,602
|
|
|
|
116,034
|
|
|
|
|
|
|
|
492,773
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period
|
|
$
|
101,813
|
|
|
$
|
116,758
|
|
|
$
|
182,735
|
|
|
$
|
|
|
|
$
|
401,306
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-79
ALERE
INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
(25)
|
Guarantor
Financial Information (Continued)
|
CONSOLIDATING
STATEMENT OF CASH FLOWS
For the Year Ended December 31, 2009
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
|
|
|
|
|
|
|
Issuer
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Cash Flows from Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
34,181
|
|
|
$
|
47,669
|
|
|
$
|
38,522
|
|
|
$
|
(86,191
|
)
|
|
$
|
34,181
|
|
Income (loss) from discontinued operations, net of tax
|
|
|
(1,096
|
)
|
|
|
2,689
|
|
|
|
334
|
|
|
|
7
|
|
|
|
1,934
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
|
35,277
|
|
|
|
44,980
|
|
|
|
38,188
|
|
|
|
(86,198
|
)
|
|
|
32,247
|
|
Adjustments to reconcile income (loss) from continuing
operations to net cash provided by (used in) operating
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in earnings of subsidiaries, net of tax
|
|
|
(124,336
|
)
|
|
|
|
|
|
|
|
|
|
|
124,336
|
|
|
|
|
|
Non-cash interest expense including amortization of original
issue discounts and write-off of deferred financing costs
|
|
|
9,710
|
|
|
|
|
|
|
|
713
|
|
|
|
|
|
|
|
10,423
|
|
Depreciation and amortization
|
|
|
1,475
|
|
|
|
251,388
|
|
|
|
59,828
|
|
|
|
(256
|
)
|
|
|
312,435
|
|
Non-cash stock-based compensation expense
|
|
|
7,463
|
|
|
|
10,206
|
|
|
|
10,551
|
|
|
|
|
|
|
|
28,220
|
|
Impairment of inventory
|
|
|
|
|
|
|
|
|
|
|
1,467
|
|
|
|
|
|
|
|
1,467
|
|
Impairment of long-lived assets
|
|
|
|
|
|
|
5,620
|
|
|
|
1,363
|
|
|
|
|
|
|
|
6,983
|
|
Loss on sale of fixed assets
|
|
|
4
|
|
|
|
1,150
|
|
|
|
51
|
|
|
|
|
|
|
|
1,205
|
|
Equity earnings of unconsolidated entities, net of tax
|
|
|
(1,747
|
)
|
|
|
|
|
|
|
(5,972
|
)
|
|
|
93
|
|
|
|
(7,626
|
)
|
Deferred income taxes
|
|
|
(5,292
|
)
|
|
|
(29,556
|
)
|
|
|
44,820
|
|
|
|
(19,096
|
)
|
|
|
(9,124
|
)
|
Other non-cash items
|
|
|
292
|
|
|
|
1,835
|
|
|
|
1,137
|
|
|
|
|
|
|
|
3,264
|
|
Changes in assets and liabilities, net of acquisitions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable, net
|
|
|
|
|
|
|
(4,785
|
)
|
|
|
(43,950
|
)
|
|
|
12,280
|
|
|
|
(36,455
|
)
|
Inventories, net
|
|
|
|
|
|
|
30,679
|
|
|
|
(12,666
|
)
|
|
|
(34,438
|
)
|
|
|
(16,425
|
)
|
Prepaid expenses and other current assets
|
|
|
(4,741
|
)
|
|
|
2,686
|
|
|
|
11,136
|
|
|
|
|
|
|
|
9,081
|
|
Accounts payable
|
|
|
(1,979
|
)
|
|
|
844
|
|
|
|
3,252
|
|
|
|
|
|
|
|
2,117
|
|
Accrued expenses and other current liabilities
|
|
|
27,045
|
|
|
|
7,015
|
|
|
|
(79,505
|
)
|
|
|
|
|
|
|
(45,445
|
)
|
Other non-current liabilities
|
|
|
1,126
|
|
|
|
4,529
|
|
|
|
(8,364
|
)
|
|
|
|
|
|
|
(2,709
|
)
|
Intercompany payable (receivable)
|
|
|
(66,879
|
)
|
|
|
(252,429
|
)
|
|
|
319,308
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) continuing operations
|
|
|
(122,582
|
)
|
|
|
74,162
|
|
|
|
341,357
|
|
|
|
(3,279
|
)
|
|
|
289,658
|
|
Net cash provided by (used in) discontinued operations
|
|
|
(1,096
|
)
|
|
|
(1,097
|
)
|
|
|
59
|
|
|
|
7
|
|
|
|
(2,127
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
|
(123,678
|
)
|
|
|
73,065
|
|
|
|
341,416
|
|
|
|
(3,272
|
)
|
|
|
287,531
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property, plant and equipment
|
|
|
(610
|
)
|
|
|
(70,674
|
)
|
|
|
(32,594
|
)
|
|
|
3,272
|
|
|
|
(100,606
|
)
|
Proceeds from sale of property, plant and equipment
|
|
|
|
|
|
|
454
|
|
|
|
349
|
|
|
|
|
|
|
|
803
|
|
Cash received (paid) for acquisitions and transaction costs, net
of cash acquired
|
|
|
(203,460
|
)
|
|
|
15,455
|
|
|
|
(280,522
|
)
|
|
|
|
|
|
|
(468,527
|
)
|
Net cash received from equity method investments
|
|
|
980
|
|
|
|
|
|
|
|
11,580
|
|
|
|
|
|
|
|
12,560
|
|
Increase in other assets
|
|
|
(20,000
|
)
|
|
|
(7,313
|
)
|
|
|
(407
|
)
|
|
|
|
|
|
|
(27,720
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) continuing operations
|
|
|
(223,090
|
)
|
|
|
(62,078
|
)
|
|
|
(301,594
|
)
|
|
|
3,272
|
|
|
|
(583,490
|
)
|
Net cash used in discontinued operations
|
|
|
|
|
|
|
(237
|
)
|
|
|
|
|
|
|
|
|
|
|
(237
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities
|
|
|
(223,090
|
)
|
|
|
(62,315
|
)
|
|
|
(301,594
|
)
|
|
|
3,272
|
|
|
|
(583,727
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Decrease (increase) in restricted cash
|
|
|
4
|
|
|
|
(417
|
)
|
|
|
831
|
|
|
|
|
|
|
|
418
|
|
Cash paid for financing costs
|
|
|
(17,756
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(17,756
|
)
|
Proceeds from issuance of common stock, net of issuance
costs
|
|
|
30,015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,015
|
|
Proceeds on long-term debt
|
|
|
631,176
|
|
|
|
312
|
|
|
|
(311
|
)
|
|
|
|
|
|
|
631,177
|
|
Repayment on long-term debt
|
|
|
(10,325
|
)
|
|
|
(3,054
|
)
|
|
|
2,324
|
|
|
|
|
|
|
|
(11,055
|
)
|
Net repayments from revolving
lines-of-credit
|
|
|
|
|
|
|
|
|
|
|
(7,251
|
)
|
|
|
|
|
|
|
(7,251
|
)
|
Excess tax benefit on exercised stock options
|
|
|
2,758
|
|
|
|
5,813
|
|
|
|
698
|
|
|
|
|
|
|
|
9,269
|
|
Principal payments of capital lease obligations
|
|
|
|
|
|
|
(584
|
)
|
|
|
(214
|
)
|
|
|
|
|
|
|
(798
|
)
|
Other
|
|
|
(153
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(153
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) continuing operations
|
|
|
635,719
|
|
|
|
2,070
|
|
|
|
(3,923
|
)
|
|
|
|
|
|
|
633,866
|
|
Net cash used in discontinued operations
|
|
|
|
|
|
|
(12
|
)
|
|
|
|
|
|
|
|
|
|
|
(12
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
635,719
|
|
|
|
2,058
|
|
|
|
(3,923
|
)
|
|
|
|
|
|
|
633,854
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange effect on cash and cash equivalents
|
|
|
3,443
|
|
|
|
|
|
|
|
10,348
|
|
|
|
|
|
|
|
13,791
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents
|
|
|
292,394
|
|
|
|
12,808
|
|
|
|
46,247
|
|
|
|
|
|
|
|
351,449
|
|
Cash and cash equivalents, beginning of period
|
|
|
1,743
|
|
|
|
69,794
|
|
|
|
69,787
|
|
|
|
|
|
|
|
141,324
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period...
|
|
$
|
294,137
|
|
|
$
|
82,602
|
|
|
$
|
116,034
|
|
|
$
|
|
|
|
$
|
492,773
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-80
ALERE
INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
(25)
|
Guarantor
Financial Information (Continued)
|
CONSOLIDATING
STATEMENT OF CASH FLOWS
For the Year Ended December 31, 2008
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
|
|
|
|
|
|
|
Issuer
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Cash Flows from Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(21,601
|
)
|
|
$
|
(12,094
|
)
|
|
$
|
3,550
|
|
|
$
|
8,544
|
|
|
$
|
(21,601
|
)
|
Loss from discontinued operations, net of tax
|
|
|
|
|
|
|
(112
|
)
|
|
|
(891
|
)
|
|
|
(45
|
)
|
|
|
(1,048
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
|
(21,601
|
)
|
|
|
(11,982
|
)
|
|
|
4,441
|
|
|
|
8,589
|
|
|
|
(20,553
|
)
|
Adjustments to reconcile income (loss) from continuing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
operations to net cash provided by (used in) operating
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in earnings of subsidiaries, net of tax
|
|
|
9,816
|
|
|
|
|
|
|
|
|
|
|
|
(9,816
|
)
|
|
|
|
|
Non-cash interest expense including amortization of original
issue discounts and write-off of deferred financing costs
|
|
|
5,930
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,930
|
|
Depreciation and amortization
|
|
|
953
|
|
|
|
221,444
|
|
|
|
43,257
|
|
|
|
|
|
|
|
265,654
|
|
Non-cash stock-based compensation expense
|
|
|
7,563
|
|
|
|
10,661
|
|
|
|
8,181
|
|
|
|
|
|
|
|
26,405
|
|
Impairment of inventory
|
|
|
|
|
|
|
2,300
|
|
|
|
1,893
|
|
|
|
|
|
|
|
4,193
|
|
Impairment of long-lived assets
|
|
|
|
|
|
|
6,117
|
|
|
|
13,914
|
|
|
|
|
|
|
|
20,031
|
|
Loss (gain) on sale of fixed assets
|
|
|
(1
|
)
|
|
|
255
|
|
|
|
523
|
|
|
|
|
|
|
|
777
|
|
Equity earnings of unconsolidated entities, net of tax
|
|
|
(1,522
|
)
|
|
|
23
|
|
|
|
379
|
|
|
|
70
|
|
|
|
(1,050
|
)
|
Deferred income taxes
|
|
|
2,587
|
|
|
|
(27,474
|
)
|
|
|
(16,827
|
)
|
|
|
|
|
|
|
(41,714
|
)
|
Other non-cash items
|
|
|
2,714
|
|
|
|
1,680
|
|
|
|
(16
|
)
|
|
|
|
|
|
|
4,378
|
|
Changes in assets and liabilities, net of acquisitions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable, net
|
|
|
|
|
|
|
(28,321
|
)
|
|
|
(12,225
|
)
|
|
|
1,000
|
|
|
|
(39,546
|
)
|
Inventories, net
|
|
|
|
|
|
|
(24,331
|
)
|
|
|
(12,677
|
)
|
|
|
(4,937
|
)
|
|
|
(41,945
|
)
|
Prepaid expenses and other current assets
|
|
|
616
|
|
|
|
11,645
|
|
|
|
(24,758
|
)
|
|
|
5,111
|
|
|
|
(7,386
|
)
|
Accounts payable
|
|
|
(84
|
)
|
|
|
9,669
|
|
|
|
(2,392
|
)
|
|
|
|
|
|
|
7,193
|
|
Accrued expenses and other current liabilities
|
|
|
(137,817
|
)
|
|
|
95,196
|
|
|
|
15,181
|
|
|
|
(1,651
|
)
|
|
|
(29,091
|
)
|
Other non-current liabilities
|
|
|
(1,173
|
)
|
|
|
139
|
|
|
|
4,434
|
|
|
|
|
|
|
|
3,400
|
|
Intercompany payable (receivable)
|
|
|
224,817
|
|
|
|
(282,154
|
)
|
|
|
53,396
|
|
|
|
3,941
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by continuing operations
|
|
|
92,798
|
|
|
|
(15,133
|
)
|
|
|
76,704
|
|
|
|
2,307
|
|
|
|
156,676
|
|
Net cash used in discontinued operations
|
|
|
|
|
|
|
(7,348
|
)
|
|
|
(1,439
|
)
|
|
|
(45
|
)
|
|
|
(8,832
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
|
92,798
|
|
|
|
(22,481
|
)
|
|
|
75,265
|
|
|
|
2,262
|
|
|
|
147,844
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property, plant and equipment
|
|
|
(1,009
|
)
|
|
|
(42,149
|
)
|
|
|
(24,220
|
)
|
|
|
1,679
|
|
|
|
(65,699
|
)
|
Proceeds from sale of property, plant and equipment
|
|
|
|
|
|
|
96
|
|
|
|
974
|
|
|
|
|
|
|
|
1,070
|
|
Cash received (paid) for acquisitions and transaction costs, net
of cash acquired
|
|
|
(470,393
|
)
|
|
|
10,185
|
|
|
|
(189,691
|
)
|
|
|
|
|
|
|
(649,899
|
)
|
Net cash received (paid) from equity method investments
|
|
|
1,372
|
|
|
|
(1,113
|
)
|
|
|
11,874
|
|
|
|
|
|
|
|
12,133
|
|
Decrease (increase) in other assets
|
|
|
(1,000
|
)
|
|
|
(4,932
|
)
|
|
|
(4,568
|
)
|
|
|
|
|
|
|
(10,500
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) continuing operations
|
|
|
(471,030
|
)
|
|
|
(37,913
|
)
|
|
|
(205,631
|
)
|
|
|
1,679
|
|
|
|
(712,895
|
)
|
Net cash used in discontinued operations
|
|
|
|
|
|
|
(437
|
)
|
|
|
|
|
|
|
|
|
|
|
(437
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities
|
|
|
(471,030
|
)
|
|
|
(38,350
|
)
|
|
|
(205,631
|
)
|
|
|
1,679
|
|
|
|
(713,332
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Decrease (increase) in restricted cash
|
|
|
|
|
|
|
(1,145
|
)
|
|
|
140,349
|
|
|
|
|
|
|
|
139,204
|
|
Issuance costs associated with preferred stock
|
|
|
(350
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(350
|
)
|
Cash paid for financing costs
|
|
|
(1,401
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,401
|
)
|
Proceeds from issuance of common stock, net of issuance costs
|
|
|
20,675
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,675
|
|
Repayment on long-term debt
|
|
|
(9,750
|
)
|
|
|
(4,037
|
)
|
|
|
|
|
|
|
|
|
|
|
(13,787
|
)
|
Net proceeds (repayments) from revolving
lines-of-credit
|
|
|
142,000
|
|
|
|
(2,320
|
)
|
|
|
(2,438
|
)
|
|
|
|
|
|
|
137,242
|
|
Excess tax benefit on exercised stock options
|
|
|
679
|
|
|
|
16,568
|
|
|
|
295
|
|
|
|
|
|
|
|
17,542
|
|
Principal payments of capital lease obligations
|
|
|
|
|
|
|
(362
|
)
|
|
|
(596
|
)
|
|
|
|
|
|
|
(958
|
)
|
Other
|
|
|
(56
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(56
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) continuing operations
|
|
|
151,797
|
|
|
|
8,704
|
|
|
|
137,610
|
|
|
|
|
|
|
|
298,111
|
|
Net cash used in discontinued operations
|
|
|
|
|
|
|
(342
|
)
|
|
|
|
|
|
|
|
|
|
|
(342
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
151,797
|
|
|
|
8,362
|
|
|
|
137,610
|
|
|
|
|
|
|
|
297,769
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange effect on cash and cash equivalents
|
|
|
|
|
|
|
(866
|
)
|
|
|
(882
|
)
|
|
|
(3,941
|
)
|
|
|
(5,689
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
(226,435
|
)
|
|
|
(53,335
|
)
|
|
|
6,362
|
|
|
|
|
|
|
|
(273,408
|
)
|
Cash and cash equivalents, beginning of period
|
|
|
228,178
|
|
|
|
123,129
|
|
|
|
63,425
|
|
|
|
|
|
|
|
414,732
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period
|
|
$
|
1,743
|
|
|
$
|
69,794
|
|
|
$
|
69,787
|
|
|
$
|
|
|
|
$
|
141,324
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-81