Alere 8-K Results of Operations and Financial Condition

Exhibit 99.1

Alere Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(in thousands, except per share amounts)

	Three Months Ended March 31,
	2015			2014
Net product sales and services revenue	$	603,455		$	620,027
License and royalty revenue		4,698			5,212
Net revenue		608,153			625,239
Cost of net revenue		316,168			314,881
Gross profit		291,985			310,358
Gross margin		48	%		50	%
Operating expenses:
Research and development		28,016			38,699
Selling, general and administrative		201,770			236,663
Impairment and (gain) loss on dispositions, net		34,792			—
Operating income		27,407			34,996
Interest and other income (expense), net		(47,701	)		(44,878	)
Loss from continuing operations before provision (benefit) for income taxes		(20,294	)		(9,882	)
Benefit for income taxes		(8,786	)		(1,680	)
Loss from continuing operations before equity earnings of unconsolidated entities, net of tax		(11,508	)		(8,202	)
Equity earnings of unconsolidated entities, net of tax		3,959			5,352
Loss from continuing operations		(7,549	)		(2,850	)
Income (loss) from discontinued operations, net of tax		216,777			(2,596	)
Net income (loss)		209,228			(5,446	)
Less: Net income attributable to non-controlling interests		88			108
Net income (loss) attributable to Alere Inc. and Subsidiaries		209,140			(5,554	)
Preferred stock dividends		(5,250	)		(5,250	)
Net income (loss) available to common stockholders	$	203,890		$	(10,804	)
Basic and diluted net income (loss) per common share attributable to Alere Inc. and Subsidiaries:
Loss from continuing operations	$	(0.15	)	$	(0.10	)
Income (loss) from discontinued operations		2.57			(0.03	)
Net income (loss) per common share	$	2.42		$	(0.13	)
Weighted average shares—basic and diluted		84,338			82,387

Alere Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(in thousands)

	March 31, 2015		December 31, 2014
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	414,495	$	378,461
Restricted cash		37,406		37,571
Marketable securities		173		259
Accounts receivable, net		471,663		466,106
Inventories, net		374,973		365,165
Prepaid expenses and other current assets		140,538		244,986
Assets held for sale		—		315,515
Total current assets		1,439,248		1,808,063
PROPERTY, PLANT AND EQUIPMENT, NET		446,705		453,570
GOODWILL AND OTHER INTANGIBLE ASSETS, NET		4,094,233		4,246,761
DEFERRED FINANCING COSTS AND OTHER ASSETS, NET		168,185		170,562
Total assets	$	6,148,371	$	6,678,956
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term debt and current portions of long-term debt and capital lease obligations	$	100,371	$	93,116
Liabilities related to assets held for sale		—		78,843
Other current liabilities		560,872		589,086
Total current liabilities		661,243		761,045
LONG-TERM LIABILITIES:
Long-term debt and capital lease obligations, net of current portions		3,031,594		3,631,945
Deferred tax liabilities		245,863		214,639
Other long-term liabilities		138,090		161,582
Total long-term liabilities		3,415,547		4,008,166
TOTAL EQUITY		2,071,581		1,909,745
Total liabilities and equity	$	6,148,371	$	6,678,956

Alere Inc. and Subsidiaries

Reconciliation to Non-GAAP Adjusted Operating Results

(in thousands, except per share amounts)

	Three Months Ended March 31,
	2015			2014
Reconciliation to Non-GAAP Adjusted Operating Income(1)
Operating income	$	27,407		$	34,996
Adjustment related to acquired software license contracts		247			419
Amortization of acquisition-related intangible assets		50,693			58,960
Restructuring charges		4,270			4,398
Stock-based compensation expense		5,149			5,704
Compensation charges associated with acquisition-related contingent consideration obligations		606			422
Acquisition-related costs		51			321
Fair value adjustments to acquisition-related contingent consideration		(11,777	)		1,300
Costs associated with potential business dispositions		3,731			2,960
Impairment and (gain) loss on dispositions, net		34,792			—
Non-GAAP adjusted operating income	$	115,169		$	109,480
	Three Months Ended March 31,
	2015			2014
Reconciliation to Non-GAAP Adjusted Net Income(1)
Net income (loss) available to common stockholders	$	203,890		$	(10,804	)
Adjustment related to acquired software license contracts		247			419
Amortization of acquisition-related intangible assets		50,716			58,978
Restructuring charges		4,277			4,410
Stock-based compensation expense		5,149			5,704
Compensation charges associated with acquisition-related contingent consideration obligations		606			422
Acquisition-related costs		51			321
Fair value adjustments to acquisition-related contingent consideration		(11,777	)		1,300
Costs associated with potential business dispositions		3,731			2,960
Impairment and (gain) loss on dispositions, net		34,792			—
Interest expense recorded in connection with fees paid for certain debt modifications and the termination of our senior secured credit facility		364			364
Interest accretion associated with acquisition-related compensation charges		104			95
Amortization of acquisition-related intangible assets, restructuring, fair value adjustments to acquisition-related contingent consideration, and impairment, net of gain on divestiture—Discontinued operations, net of tax		(217,589	)		5,534
Income tax effects on items above		(28,640	)		(26,299	)
Non-GAAP adjusted net income available to common stockholders	$	45,921		$	43,404
Net loss per diluted common share from continuing operations	$	(0.15	)	$	(0.10	)
Net income (loss) per diluted common share from discontinued operations		2.57			(0.03	)
Net income (loss) per diluted common share	$	2.42		$	(0.13	)
Non-GAAP adjusted net income per diluted common share from continuing operations	$	0.53		$	0.48
Non-GAAP adjusted net income (loss) per diluted common share from discontinued operations		(0.01	)		0.03
Non-GAAP adjusted net income per diluted common share	$	0.52		$	0.51
Weighted average shares—diluted		84,338			82,387
Non-GAAP adjusted weighted average shares—diluted		99,281			97,346

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

Alere Inc. and Subsidiaries

Selected Consolidated Revenues

(in thousands)

	Q1 2015		Q1 2014		% Change Q1 15 v. Q1 14
Professional diagnostics segment(1)
Cardiometabolic	$	202,843	$	213,963		-5	%
Infectious disease		178,756		167,613		7	%
Toxicology		148,756		155,533		-4	%
Other (2)		51,132		60,616		-16	%
Total professional diagnostics segment(1)(2)		581,487		597,725		-3	%
Consumer diagnostics segment(1)		21,968		22,302		-1	%
License and royalty revenue		4,698		5,212		-10	%
Net revenue	$	608,153	$	625,239		-3	%

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

(2) Revenues are presented in accordance with generally accepted accounting principles and exclude an adjustment of $0.2 million and $0.4 million related to acquired software license contracts which were not recognized during the three months ended March 31, 2015 and 2014, respectively, due to business combination accounting rules.

Alere Inc. and Subsidiaries

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

(in thousands)

	For the Three Months Ended March 31, 2015
Operating Segment	Professional Diagnostics			Consumer Diagnostics			Corporate			Total
Net revenue	$	586,185		$	21,968		$	—		$	608,153
Adjustment related to acquired software license contracts (1)		247			—			—			247
Non-GAAP adjusted net revenue	$	586,432		$	21,968		$	—		$	608,400
Operating income (loss)	$	49,790		$	2,204		$	(24,587	)	$	27,407
Adjustment related to acquired software license contracts (1)		247			—			—			247
Amortization of acquisition-related intangible assets		50,645			9			39			50,693
Restructuring charges		4,235			—			35			4,270
Stock-based compensation expense		—			—			5,149			5,149
Compensation charges associated with acquisition-related contingent consideration obligations		606			—			—			606
Acquisition-related costs		—			—			51			51
Fair value adjustments to acquisition-related contingent consideration		(11,777	)		—			—			(11,777	)
Costs associated with potential business dispositions		3,580			151			—			3,731
Impairment and (gain) loss on dispositions, net		34,792			—			—			34,792
Non-GAAP adjusted operating income (loss)	$	132,118		$	2,364		$	(19,313	)	$	115,169
Non-GAAP adjusted operating income (loss) as % of Non-GAAP adjusted net revenue		22.5	%		10.8	%					18.9	%

(1) Estimated revenue related to acquired software license contracts that was not recognized during the first quarter of 2015 due to business combination accounting rules.

	For the Three Months Ended March 31, 2014
Operating Segment	Professional Diagnostics			Consumer Diagnostics			Corporate			Total
Net revenue	$	602,937		$	22,302		$	—		$	625,239
Adjustment related to acquired software license contracts (1)		419			—			—			419
Non-GAAP adjusted net revenue	$	603,356		$	22,302		$	—		$	625,658
Operating income (loss)	$	55,480		$	698		$	(21,182	)	$	34,996
Adjustment related to acquired software license contracts (1)		419			—			—			419
Amortization of acquisition-related intangible assets		58,671			289			—			58,960
Restructuring charges		4,303			—			95			4,398
Stock-based compensation expense		—			—			5,704			5,704
Compensation charges associated with acquisition-related contingent consideration obligations		422			—			—			422
Acquisition-related costs		—			—			321			321
Fair value adjustments to acquisition-related contingent consideration		1,200			—			100			1,300
Costs associated with potential business dispositions		2,960			—			—			2,960
Non-GAAP adjusted operating income (loss)	$	123,455		$	987		$	(14,962	)	$	109,480
Non-GAAP adjusted operating income (loss) as % of Non-GAAP adjusted net revenue		20.5	%		4.4	%					17.5	%

(1) Estimated revenue related to acquired software license contracts that was not recognized during the first quarter of 2014 due to business combination accounting rules.

Comments:

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

Alere Inc. and Subsidiaries

Reconciliations to Non-GAAP Adjusted P&L Categories

(in thousands)

	Three Months Ended March 31, 2015			Three Months Ended March 31, 2014
Net revenue	$	608,153		$	625,239
Adjustment related to acquired software license contracts		247			419
Non-GAAP adjusted net revenue	$	608,400		$	625,658
Cost of net revenue	$	316,168		$	314,881
Less adjustments:
Amortization of acquisition-related intangible assets		(14,196	)		(15,876	)
Restructuring charges		(1,502	)		(833	)
Costs associated with potential business dispositions		(391	)		—
Stock-based compensation expense		(253	)		(287	)
Non-GAAP adjusted cost of net revenue	$	299,826		$	297,885
Non-GAAP adjusted gross profit	$	308,574		$	327,773
	Three Months Ended March 31, 2015			Three Months Ended March 31, 2014
Research and development	$	28,016		$	38,699
Less adjustments:
Amortization of acquisition-related intangible assets		(861	)		(1,165	)
Restructuring charges		(493	)		—
Stock-based compensation expense		(324	)		(1,191	)
Non-GAAP adjusted research and development	$	26,338		$	36,343
	Three Months Ended March 31, 2015			Three Months Ended March 31, 2014
Selling, general and administrative	$	201,770		$	236,663
Less adjustments:
Amortization of acquisition-related intangible assets		(35,636	)		(41,919	)
Restructuring charges		(2,275	)		(3,565	)
Stock-based compensation expense		(4,572	)		(4,226	)
Compensation charges associated with acquisition-related contingent consideration obligations		(606	)		(422	)
Acquisition-related costs		(51	)		(321	)
Fair value adjustments to acquisition-related contingent consideration		11,777			(1,300	)
Costs associated with potential business dispositions		(3,340	)		(2,960	)
Non-GAAP adjusted selling, general and administrative	$	167,067		$	181,950
	Three Months Ended March 31, 2015			Three Months Ended March 31, 2014
Impairment and (gain) loss on dispositions, net	$	34,792		$	—
Impairment and (gain) loss on dispositions, net		(34,792	)		—
Non-GAAP adjusted impairment and loss on disposition, net	$	—		$	—
	Three Months Ended March 31, 2015			Three Months Ended March 31, 2014
Interest and other income (expense), net	$	(47,701	)	$	(44,878	)
Less adjustments:
Restructuring charges		7			12
Interest expense recorded in connection with fees paid for certain debt modifications and the termination of our senior secured credit facility		364			364
Interest accretion associated with acquisition-related compensation charges		104			95
Non-GAAP adjusted interest and other income (expense), net	$	(47,226	)	$	(44,407	)
	Three Months Ended March 31, 2015			Three Months Ended March 31, 2014
Benefit for income taxes	$	(8,786	)	$	(1,680	)
Add: Income tax effects on Non-GAAP adjustments		28,661			26,328
Non-GAAP adjusted provision for income taxes	$	19,875		$	24,648
	Three Months Ended March 31, 2015			Three Months Ended March 31, 2014
Equity earnings of unconsolidated entities, net of tax	$	3,959		$	5,352
Less adjustments:
Amortization of acquisition-related intangible assets		105			148
Income tax effects on items above		—			—
Non-GAAP adjusted equity earnings of unconsolidated entities, net of tax	$	4,064		$	5,500

Alere Inc. and Subsidiaries

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

(in thousands)

	Three Months Ended				Three Months Ended				Three Months Ended
Alere Consolidated	March 31, 2014(1)				December 31, 2014				March 31, 2015
Net revenue	$	625,239			$	666,857			$	608,153
Adjustment related to acquired software license contracts		419				285				247
Non-GAAP adjusted net revenue		625,658				667,142				608,400
Cost of net revenue		314,881				358,593				316,168
Less adjustments:
Amortization of acquisition-related intangible assets		15,876				17,269				14,196
Costs associated with potential business dispositions		—				—				391
Stock-based compensation expense		287				317				253
Restructuring charges		833				5,053				1,502
Non-GAAP adjusted cost of net revenue		297,885				335,954				299,826
Non-GAAP adjusted gross profit/margin	$	327,773	52.4	%	$	331,188	49.6	%	$	308,574	50.7	%
	Three Months Ended				Three Months Ended				Three Months Ended
Professional Diagnostics Segment	March 31, 2014(2)				December 31, 2014(2)				March 31, 2015
Net product sales and services revenue	$	597,725			$	633,181			$	581,487
Adjustment related to acquired software license contracts		419				285				247
Non-GAAP adjusted net product sales and services revenue		598,144				633,466				581,734
Cost of net revenue		293,354				334,603				295,416
Less adjustments:
Amortization of acquisition-related intangible assets		15,789				16,747				14,196
Costs associated with potential business dispositions		—				—				391
Stock-based compensation expense		287				317				253
Restructuring charges		833				5,053				1,502
Non-GAAP adjusted cost of net revenue		276,445				312,486				279,074
Non-GAAP adjusted gross profit/margin	$	321,699	53.8	%	$	320,980	50.7	%	$	302,660	52.0	%

Note:

⁽¹⁾ Restated to reflect the impact of discontinued operations

⁽²⁾ Reflects the impact of a change in segment reporting