Guarantor Financial Information | (23) Guarantor Financial Information Our 7.25% senior notes due 2018, our 8.625% senior subordinated notes due 2018, our 6.5% senior subordinated notes due 2020 and our 6.375% senior subordinated notes due 2023 are guaranteed by certain of our consolidated 100% 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, balance sheets as of June 30, 2015 and December 31, 2014, the related statements of operations and comprehensive income (loss) for each of the three and six months ended June 30, 2015 and 2014, respectively, and the statements of cash flows for the six months ended June 30, 2015 and 2014, respectively, for Alere Inc., the Guarantor Subsidiaries and our other subsidiaries, or the Non-Guarantor Subsidiaries. The supplemental financial information reflects the investments of Alere Inc. 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. Prior periods have been presented on a basis that is consistent with the current period, giving retrospective effect to the impact of discontinued operations. CONSOLIDATING STATEMENT OF OPERATIONS For the Three Months Ended June 30, 2015 (in thousands) Guarantor Non-Guarantor Issuer Subsidiaries Subsidiaries Eliminations Consolidated Net product sales $ — $ 212,604 $ 350,063 $ (65,833 ) $ 496,834 Services revenue — 114,983 11,645 — 126,628 Net product sales and services revenue — 327,587 361,708 (65,833 ) 623,462 License and royalty revenue — 3,233 5,710 (3,249 ) 5,694 Net revenue — 330,820 367,418 (69,082 ) 629,156 Cost of net product sales 417 120,939 194,199 (57,070 ) 258,485 Cost of services revenue 80 77,884 7,477 (8,688 ) 76,753 Cost of net product sales and services revenue 497 198,823 201,676 (65,758 ) 335,238 Cost of license and royalty revenue 19 410 4,164 (3,249 ) 1,344 Cost of net revenue 516 199,233 205,840 (69,007 ) 336,582 Gross profit (loss) (516 ) 131,587 161,578 (75 ) 292,574 Operating expenses: Research and development 3,241 13,993 9,964 — 27,198 Sales and marketing 1,570 52,101 53,513 — 107,184 General and administrative 24,390 51,288 (14,865 ) — 60,813 Impairment and (gain) loss on dispositions, net 44,378 (39,412 ) 576 — 5,542 Operating income (loss) (74,095 ) 53,617 112,390 (75 ) 91,837 Interest expense, including amortization of original issue discounts and deferred financing costs (59,086 ) (3,060 ) (4,702 ) 7,354 (59,494 ) Other income (expense), net 3,596 4,576 3,442 (7,354 ) 4,260 Income (loss) from continuing operations before provision (benefit) for income taxes (129,585 ) 55,133 111,130 (75 ) 36,603 Provision (benefit) for income taxes (16,306 ) 11,277 22,768 (38 ) 17,701 Income (loss) from continuing operations before equity in earnings of subsidiaries and unconsolidated entities, net of tax (113,279 ) 43,856 88,362 (37 ) 18,902 Equity in earnings of subsidiaries, net of tax 132,620 — — (132,620 ) — Equity earnings of unconsolidated entities, net of tax 922 — 424 15 1,361 Net income 20,263 43,856 88,786 (132,642 ) 20,263 Less: Net income attributable to non-controlling interests — — 359 — 359 Net income attributable to Alere Inc. and Subsidiaries 20,263 43,856 88,427 (132,642 ) 19,904 Preferred stock dividends (5,309 ) — — — (5,309 ) Net income available to common stockholders $ 14,954 $ 43,856 $ 88,427 $ (132,642 ) $ 14,595 CONSOLIDATING STATEMENT OF OPERATIONS For the Three Months Ended June 30, 2014 (in thousands) Non - Guarantor Guarantor Issuer Subsidiaries Subsidiaries Eliminations Consolidated Net product sales $ — $ 199,339 $ 358,657 $ (57,638 ) $ 500,358 Services revenue — 122,436 18,000 — 140,436 Net product sales and services revenue — 321,775 376,657 (57,638 ) 640,794 License and royalty revenue — 3,835 6,001 (3,232 ) 6,604 Net revenue — 325,610 382,658 (60,870 ) 647,398 Cost of net product sales 691 119,442 203,035 (51,481 ) 271,687 Cost of services revenue 70 73,993 8,674 (6,844 ) 75,893 Cost of net product sales and services revenue 761 193,435 211,709 (58,325 ) 347,580 Cost of license and royalty revenue — 47 4,310 (3,232 ) 1,125 Cost of net revenue 761 193,482 216,019 (61,557 ) 348,705 Gross profit (loss) (761 ) 132,128 166,639 687 298,693 Operating expenses: Research and development 7,163 15,590 14,677 — 37,430 Sales and marketing 3,196 60,175 72,430 — 135,801 General and administrative 25,952 46,458 58,163 — 130,573 Loss on disposition — 638 — — 638 Operating income (loss) (37,072 ) 9,267 21,369 687 (5,749 ) Interest expense, including amortization of original issue discounts and deferred financing costs (51,385 ) (5,019 ) (4,590 ) 8,960 (52,034 ) Other income (expense), net 2,423 5,073 4,683 (8,960 ) 3,219 Income (loss) from continuing operations before provision (benefit) for income taxes (86,034 ) 9,321 21,462 687 (54,564 ) Provision (benefit) for income taxes (12,977 ) 8,620 9,620 201 5,464 Income (loss) from continuing operations before equity in earnings of subsidiaries and unconsolidated entities, net of tax (73,057 ) 701 11,842 486 (60,028 ) Equity in earnings of subsidiaries, net of tax 12,596 164 — (12,760 ) — Equity earnings of unconsolidated entities, net of tax 422 — 1,673 (8 ) 2,087 Income (loss) from continuing operations (60,039 ) 865 13,515 (12,282 ) (57,941 ) Income (loss) from discontinued operations, net of tax 15,013 (2,044 ) (54 ) — 12,915 Net income (loss) (45,026 ) (1,179 ) 13,461 (12,282 ) (45,026 ) Less: Net income attributable to non-controlling interests — — 62 — 62 Net income (loss) attributable to Alere Inc. and Subsidiaries (45,026 ) (1,179 ) 13,399 (12,282 ) (45,088 ) Preferred stock dividends (5,309 ) — — — (5,309 ) Net income (loss) available to common stockholders $ (50,335 ) $ (1,179 ) $ 13,399 $ (12,282 ) $ (50,397 ) CONSOLIDATING STATEMENT OF OPERATIONS For the Six Months Ended June 30, 2015 (in thousands) Guarantor Non-Guarantor Issuer Subsidiaries Subsidiaries Eliminations Consolidated Net product sales $ — $ 429,812 $ 673,260 $ (126,639 ) $ 976,433 Services revenue — 223,040 27,444 — 250,484 Net product sales and services revenue — 652,852 700,704 (126,639 ) 1,226,917 License and royalty revenue — 6,430 10,073 (6,111 ) 10,392 Net revenue — 659,282 710,777 (132,750 ) 1,237,309 Cost of net product sales 833 234,130 374,245 (112,086 ) 497,122 Cost of services revenue 130 151,921 15,872 (15,589 ) 152,334 Cost of net product sales and services revenue 963 386,051 390,117 (127,675 ) 649,456 Cost of license and royalty revenue (21 ) 1,218 8,208 (6,111 ) 3,294 Cost of net revenue 942 387,269 398,325 (133,786 ) 652,750 Gross profit (loss) (942 ) 272,013 312,452 1,036 584,559 Operating expenses: Research and development 5,543 28,912 20,759 — 55,214 Sales and marketing 2,830 105,328 108,105 — 216,263 General and administrative 44,913 89,058 19,533 — 153,504 Impairment and (gain) loss on dispositions, net 80,901 (8,804 ) (31,763 ) — 40,334 Operating income (loss) (135,129 ) 57,519 195,818 1,036 119,244 Interest expense, including amortization of original issue discounts and deferred financing costs (105,184 ) (6,345 ) (8,745 ) 14,349 (105,925 ) Other income (expense), net 7,243 8,875 1,221 (14,349 ) 2,990 Income (loss) from continuing operations before provision (benefit) for income taxes (233,070 ) 60,049 188,294 1,036 16,309 Provision (benefit) for income taxes (36,973 ) 13,097 32,483 308 8,915 Income (loss) from continuing operations before equity in earnings of subsidiaries and unconsolidated entities, net of tax (196,097 ) 46,952 155,811 728 7,394 Equity in earnings of subsidiaries, net of tax 205,553 — — (205,553 ) — Equity earnings of unconsolidated entities, net of tax 1,346 — 3,992 (18 ) 5,320 Income from continuing operations 10,802 46,952 159,803 (204,843 ) 12,714 Income (loss) from discontinued operations, net of tax 218,689 (1,912 ) — — 216,777 Net income 229,491 45,040 159,803 (204,843 ) 229,491 Less: Net income attributable to non-controlling interests — — 447 — 447 Net income attributable to Alere Inc. and Subsidiaries 229,491 45,040 159,356 (204,843 ) 229,044 Preferred stock dividends (10,559 ) — — — (10,559 ) Net income available to common stockholders $ 218,932 $ 45,040 $ 159,356 $ (204,843 ) $ 218,485 CONSOLIDATING STATEMENT OF OPERATIONS For the Six Months Ended June 30, 2014 (in thousands) Non - Guarantor Guarantor Issuer Subsidiaries Subsidiaries Eliminations Consolidated Net product sales $ — $ 408,623 $ 694,395 $ (111,341 ) $ 991,677 Services revenue — 233,087 36,057 — 269,144 Net product sales and services revenue — 641,710 730,452 (111,341 ) 1,260,821 License and royalty revenue — 7,319 11,020 (6,523 ) 11,816 Net revenue — 649,029 741,472 (117,864 ) 1,272,637 Cost of net product sales 1,379 230,460 386,795 (103,966 ) 514,668 Cost of services revenue 143 141,701 16,675 (12,265 ) 146,254 Cost of net product sales and services revenue 1,522 372,161 403,470 (116,231 ) 660,922 Cost of license and royalty revenue — 139 9,048 (6,523 ) 2,664 Cost of net revenue 1,522 372,300 412,518 (122,754 ) 663,586 Gross profit (loss) (1,522 ) 276,729 328,954 4,890 609,051 Operating expenses: Research and development 12,778 30,435 32,916 — 76,129 Sales and marketing 5,064 121,114 142,667 — 268,845 General and administrative 44,708 82,527 106,957 — 234,192 Loss on disposition — 638 — — 638 Operating income (loss) (64,072 ) 42,015 46,414 4,890 29,247 Interest expense, including amortization of original issue discounts and deferred financing costs (102,643 ) (10,513 ) (9,134 ) 18,346 (103,944 ) Other income (expense), net 7,117 11,032 10,506 (18,404 ) 10,251 Income (loss) from continuing operations before provision (benefit) for income taxes (159,598 ) 42,534 47,786 4,832 (64,446 ) Provision (benefit) for income taxes (45,293 ) 29,239 18,179 1,659 3,784 Income (loss) from continuing operations before equity in earnings of subsidiaries and unconsolidated entities, net of tax (114,305 ) 13,295 29,607 3,173 (68,230 ) Equity in earnings of subsidiaries, net of tax 47,665 232 — (47,897 ) — Equity earnings of unconsolidated entities, net of tax 827 — 6,737 (125 ) 7,439 Income (loss) from continuing operations (65,813 ) 13,527 36,344 (44,849 ) (60,791 ) Income (loss) from discontinued operations, net of tax 15,341 (5,803 ) 781 — 10,319 Net income (loss) (50,472 ) 7,724 37,125 (44,849 ) (50,472 ) Less: Net income attributable to non-controlling interests — — 170 — 170 Net income (loss) attributable to Alere Inc. and Subsidiaries (50,472 ) 7,724 36,955 (44,849 ) (50,642 ) Preferred stock dividends (10,559 ) — — — (10,559 ) Net income (loss) available to common stockholders $ (61,031 ) $ 7,724 $ 36,955 $ (44,849 ) $ (61,201 ) CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME For the Three Months Ended June 30, 2015 (in thousands) Non- Guarantor Guarantor Issuer Subsidiaries Subsidiaries Eliminations Consolidated Net income $ 20,263 $ 43,856 $ 88,786 $ (132,642 ) $ 20,263 Other comprehensive income, before tax: Changes in cumulative translation adjustment 196 689 45,841 — 46,726 Minimum pension liability adjustment — — (374 ) — (374 ) Other comprehensive income, before tax 196 689 45,467 — 46,352 Income tax benefit related to items of other comprehensive income — — — — — Other comprehensive income, net of tax 196 689 45,467 — 46,352 Comprehensive income 20,459 44,545 134,253 (132,642 ) 66,615 Less: Comprehensive income attributable to non-controlling interests — — 359 — 359 Comprehensive income attributable to Alere Inc. and Subsidiaries $ 20,459 $ 44,545 $ 133,894 $ (132,642 ) $ 66,256 CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS) For the Three Months Ended June 30, 2014 (in thousands) Non- Guarantor Guarantor Issuer Subsidiaries Subsidiaries Eliminations Consolidated Net income (loss) $ (45,026 ) $ (1,179 ) $ 13,461 $ (12,282 ) $ (45,026 ) Other comprehensive income, before tax: Changes in cumulative translation adjustment 89 55 37,671 — 37,815 Unrealized gains on hedging instruments — — 6 — 6 Minimum pension liability adjustment — — (87 ) — (87 ) Other comprehensive income, before tax 89 55 37,590 — 37,734 Income tax provision (benefit) related to items of other comprehensive loss — — — — — Other comprehensive income, net of tax 89 55 37,590 — 37,734 Comprehensive income (loss) (44,937 ) (1,124 ) 51,051 (12,282 ) (7,292 ) Less: Comprehensive income attributable to non-controlling interests — — 62 — 62 Comprehensive income (loss) attributable to Alere Inc. and Subsidiaries $ (44,937 ) $ (1,124 ) $ 50,989 $ (12,282 ) $ (7,354 ) CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME For the Six Months Ended June 30, 2015 (in thousands) Non- Guarantor Guarantor Issuer Subsidiaries Subsidiaries Eliminations Consolidated Net income $ 229,491 $ 45,040 $ 159,803 $ (204,843 ) $ 229,491 Other comprehensive income (loss), before tax: Changes in cumulative translation adjustment (461 ) 117 (33,272 ) — (33,616 ) Minimum pension liability adjustment — — (1,756 ) — (1,756 ) Other comprehensive income (loss), before tax (461 ) 117 (35,028 ) — (35,372 ) Income tax benefit related to items of other comprehensive income (loss) — — — — — Other comprehensive income (loss), net of tax (461 ) 117 (35,028 ) — (35,372 ) Comprehensive income 229,030 45,157 124,775 (204,843 ) 194,119 Less: Comprehensive income attributable to non-controlling interests — — 447 — 447 Comprehensive income attributable to Alere Inc. and Subsidiaries $ 229,030 $ 45,157 $ 124,328 $ (204,843 ) $ 193,672 CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS) For the Six Months Ended June 30, 2014 (in thousands) Non- Guarantor Guarantor Issuer Subsidiaries Subsidiaries Eliminations Consolidated Net income (loss) $ (50,472 ) $ 7,724 $ 37,125 $ (44,849 ) $ (50,472 ) Other comprehensive income (loss), before tax: Changes in cumulative translation adjustment 246 (74 ) 26,303 — 26,475 Unrealized losses on available for sale securities — (17 ) — — (17 ) Unrealized gains on hedging instruments — — 14 — 14 Minimum pension liability adjustment — — (13 ) — (13 ) Other comprehensive income (loss), before tax 246 (91 ) 26,304 — 26,459 Income tax benefit related to items of other comprehensive loss — — — — — Other comprehensive income (loss), net of tax 246 (91 ) 26,304 — 26,459 Comprehensive income (loss) (50,226 ) 7,633 63,429 (44,849 ) (24,013 ) Less: Comprehensive income attributable to non-controlling interests — — 170 — 170 Comprehensive income (loss) attributable to Alere Inc. and Subsidiaries $ (50,226 ) $ 7,633 $ 63,259 $ (44,849 ) $ (24,183 ) CONSOLIDATING BALANCE SHEET June 30, 2015 (in thousands) Guarantor Non-Guarantor Issuer Subsidiaries Subsidiaries Eliminations Consolidated ASSETS Current assets: Cash and cash equivalents $ 42,407 $ 75,005 $ 347,459 $ — $ 464,871 Restricted cash 427,181 — 34,455 — 461,636 Marketable securities — 175 — — 175 Accounts receivable, net of allowances — 197,643 275,043 — 472,686 Inventories, net — 199,654 188,133 (21,447 ) 366,340 Deferred tax assets (36,568 ) 29,165 27,908 (2,120 ) 18,385 Prepaid expenses and other current assets 14,217 23,036 81,554 6,752 125,559 Assets held for sale – current — — 28,631 — 28,631 Intercompany receivables 573,462 660,375 66,677 (1,300,514 ) — Total current assets 1,020,699 1,185,053 1,049,860 (1,317,329 ) 1,938,283 Property, plant and equipment, net 30,663 225,914 191,877 (152 ) 448,302 Goodwill — 1,795,118 1,058,433 — 2,853,551 Other intangible assets with indefinite lives — 8,200 33,165 (59 ) 41,306 Finite-lived intangible assets, net 5,194 660,561 427,431 — 1,093,186 Deferred financing costs, net and other non-current assets 46,331 4,574 16,928 (99 ) 67,734 Investments in subsidiaries 3,368,524 179,853 58,321 (3,606,698 ) — Investments in unconsolidated entities 503 14,765 39,919 14,407 69,594 Deferred tax assets — — 7,633 — 7,633 Non-current income tax receivable 2,611 — — — 2,611 Assets held for sale – non-current 12,363 — 116,831 — 129,194 Intercompany notes receivables 2,047,832 694,785 15,779 (2,758,396 ) — Total assets $ 6,534,720 $ 4,768,823 $ 3,016,177 $ (7,668,326 ) $ 6,651,394 LIABILITIES AND EQUITY Current liabilities: Short-term debt and current portion of long-term debt $ 601,712 $ — $ 27,659 $ — $ 629,371 Current portion of capital lease obligations — 1,809 2,834 — 4,643 Accounts payable 13,949 75,026 97,966 — 186,941 Accrued expenses and other current liabilities (516,724 ) 633,878 189,852 2,388 309,394 Liabilities related to assets held for sale – current 6,996 (6,996 ) 7,663 — 7,663 Intercompany payables 847,581 232,066 220,866 (1,300,513 ) — Total current liabilities 953,514 935,783 546,840 (1,298,125 ) 1,138,012 Long-term liabilities: Long-term debt, net of current portion 2,951,161 — 6,875 — 2,958,036 Capital lease obligations, net of current portion — 2,070 4,843 — 6,913 Deferred tax liabilities (53,700 ) 216,438 64,671 82 227,491 Other long-term liabilities 41,758 64,920 39,662 (100 ) 146,240 Liabilities related to assets held for sale – non-current — — 11,527 — 11,527 Intercompany notes payables 483,405 1,222,259 1,052,732 (2,758,396 ) — Total long-term liabilities 3,422,624 1,505,687 1,180,310 (2,758,414 ) 3,350,207 Total stockholders’ equity 2,158,582 2,327,353 1,284,434 (3,611,787 ) 2,158,582 Non-controlling interests — — 4,593 — 4,593 Total equity 2,158,582 2,327,353 1,289,027 (3,611,787 ) 2,163,175 Total liabilities and equity $ 6,534,720 $ 4,768,823 $ 3,016,177 $ (7,668,326 ) $ 6,651,394 CONSOLIDATING BALANCE SHEET December 31, 2014 (in thousands) Issuer Guarantor Non-Guarantor Eliminations Consolidated ASSETS Current assets: Cash and cash equivalents $ 2,149 $ 69,154 $ 307,158 $ — $ 378,461 Restricted cash 5,012 — 32,559 — 37,571 Marketable securities — 259 — — 259 Accounts receivable, net of allowances — 192,775 273,331 — 466,106 Inventories, net — 191,323 195,606 (21,764 ) 365,165 Deferred tax assets 36,347 44,961 31,265 — 112,573 Prepaid expenses and other current assets 9,800 31,410 88,695 2,508 132,413 Assets held for sale – current 1,361 284,369 29,785 — 315,515 Intercompany receivables 404,990 888,688 55,923 (1,349,601 ) — Total current assets 459,659 1,702,939 1,014,322 (1,368,857 ) 1,808,063 Property, plant and equipment, net 30,547 218,613 204,188 222 453,570 Goodwill — 1,795,663 1,131,003 — 2,926,666 Other intangible assets with indefinite lives — 9,287 34,422 (58 ) 43,651 Finite-lived intangible assets, net 6,104 742,760 527,580 — 1,276,444 Deferred financing costs, net and other non-current assets 40,992 5,334 21,541 (35 ) 67,832 Investments in subsidiaries 3,740,004 179,315 58,067 (3,977,386 ) — Investments in unconsolidated entities 13,987 14,765 49,608 13,333 91,693 Deferred tax assets — — 8,569 — 8,569 Non-current income tax receivable 2,468 — — — 2,468 Intercompany notes receivables 2,028,701 649,444 46,676 (2,724,821 ) — Total assets $ 6,322,462 $ 5,318,120 $ 3,095,976 $ (8,057,602 ) $ 6,678,956 LIABILITIES AND EQUITY Current liabilities: Short-term debt and current portion of long-term debt $ 61,700 $ 2 $ 27,173 $ — $ 88,875 Current portion of capital lease obligations — 1,045 3,196 — 4,241 Accounts payable 21,402 81,741 110,449 — 213,592 Accrued expenses and other current liabilities (536,286 ) 663,221 248,604 (45 ) 375,494 Liabilities related to assets held for sale – current 1,094 77,749 — — 78,843 Intercompany payables 902,576 198,788 248,237 (1,349,601 ) — Total current liabilities 450,486 1,022,546 637,659 (1,349,646 ) 761,045 Long-term liabilities: Long-term debt, net of current portion 3,615,759 — 5,626 — 3,621,385 Capital lease obligations, net of current portion — 4,097 6,463 — 10,560 Deferred tax liabilities (107,844 ) 252,944 69,457 82 214,639 Other long-term liabilities 42,762 46,865 71,988 (33 ) 161,582 Intercompany notes payables 415,700 1,276,245 1,032,876 (2,724,821 ) — Total long-term liabilities 3,966,377 1,580,151 1,186,410 (2,724,772 ) 4,008,166 Total stockholders’ equity 1,905,599 2,715,423 1,267,761 (3,983,184 ) 1,905,599 Non-controlling interests — — 4,146 — 4,146 Total equity 1,905,599 2,715,423 1,271,907 (3,983,184 ) 1,909,745 Total liabilities and equity $ 6,322,462 $ 5,318,120 $ 3,095,976 $ (8,057,602 ) $ 6,678,956 CONSOLIDATING STATEMENT OF CASH FLOWS For the Six Months Ended June 30, 2015 (in thousands) Issuer Guarantor Non-Guarantor Eliminations Consolidated Cash Flows from Operating Activities: Net income $ 229,491 $ 45,040 $ 159,803 $ (204,843 ) $ 229,491 Income (loss) from discontinued operations, net of tax. 218,689 (1,912 ) — — 216,777 Income from continuing operations 10,802 46,952 159,803 (204,843 ) 12,714 Adjustments to reconcile net income from continuing operations to net cash provided by (used in) operating activities: Equity in earnings of subsidiaries, net of tax (205,553 ) — — 205,553 — Non-cash interest expense, including amortization of original issue discounts and deferred financing costs 7,728 13 43 — 7,784 Depreciation and amortization 3,840 82,576 60,560 35 147,011 Non-cash stock-based compensation expense 6,458 2,633 3,188 — 12,279 Impairment of inventory — 133 (65 ) — 68 Impairment of long-lived assets — 64 323 — 387 Loss on disposition of fixed assets — 2,764 554 — 3,318 Equity earnings of unconsolidated entities, net of tax (1,346 ) — (3,992 ) 18 (5,320 ) Gain on sales of marketable securities. — (8 ) — — (8 ) Deferred income taxes (8,686 ) (30,581 ) (1,826 ) 438 (40,655 ) (Gain) loss related to impairment and net (gain) loss on dispositions 80,901 (8,804 ) (31,763 ) — 40,334 Loss on extinguishment of debt 3,480 — — — 3,480 Other non-cash items (159 ) (1,497 ) (676 ) — (2,332 ) Non-cash change in fair value of contingent purchase price consideration (30,895 ) 15,748 (37,720 ) — (52,867 ) Changes in assets and liabilities, net of acquisitions: Accounts receivable, net — (5,779 ) (21,685 ) — (27,464 ) Inventories, net — (26,943 ) (17,739 ) (1,411 ) (46,093 ) Prepaid expenses and other current assets (3,052 ) (19,127 ) 810 (5,708 ) (27,077 ) Accounts payable (7,499 ) (11,331 ) (4,421 ) — (23,251 ) Accrued expenses and other current liabilities (8,944 ) 59,310 (26,607 ) 3,898 27,657 Other non-current liabilities 915 5,278 (1,783 ) 1,615 6,025 Cash paid for contingent purchase price consideration (3,768 ) — (13 ) — (3,781 ) Intercompany payable (receivable) 127,569 (101,515 ) (26,054 ) — — Net cash provided by (used in) continuing operations (28,209 ) 9,886 50,937 (405 ) 32,209 Net cash provided by discontinued operations — 318 — — 318 Net cash provided by (used in) operating activities (28,209 ) 10,204 50,937 (405 ) 32,527 Cash Flows from Investing Activities: Increase in restricted cash (422,169 ) — (1,856 ) — (424,025 ) Purchases of property, plant and equipment (5,147 ) (19,386 ) (23,907 ) 1,156 (47,284 ) Proceeds from sale of property, plant and equipment — 738 1,199 (817 ) 1,120 Cash received from (used in) disposition, net of cash divested 593,217 (8,723 ) 2,131 — 586,625 Cash received from equity method investments 2,205 — 12,092 — 14,297 Cash received from sales of marketable securities. — 93 — — 93 Decrease in other assets 348 409 927 66 1,750 Net cash provided by (used in) continuing operations 168,454 (26,869 ) (9,414 ) 405 132,576 Net cash used in discontinued operations — (209 ) — — (209 ) Net cash provided by (used in) investing activities 168,454 (27,078 ) (9,414 ) 405 132,367 Cash Flows from Financing Activities: Cash paid for financing costs (15,731 ) — — — (15,731 ) Cash paid for contingent purchase price consideration (5,503 ) — (870 ) — (6,373 ) Proceeds from issuance of common stock, net of issuance costs 56,332 — — — 56,332 Proceeds from issuance of long-term debt 2,119,125 — 2,726 — 2,121,851 Payments on short-term debt — — (584 ) — (584 ) Payments on long-term debt (2,117,875 ) — (389 ) — (2,118,264 ) Net payments under revolving credit facilities (127,000 ) — 680 — (126,320 ) Cash paid for dividends (10,646 ) — — — (10,646 ) Excess tax benefits on exercised stock options 1,311 893 307 — 2,511 Principal payments on capital lease obligations — (1,263 ) (1,647 ) — (2,910 ) Net cash provided by (used in) continuing operations (99,987 ) (370 ) 223 — (100,134 ) Net cash used in discontinued operations — (76 ) — — (76 ) Net cash provided by (used in) financing activities (99,987 ) (446 ) 223 — (100,210 ) Foreign exchange effect on cash and cash equivalents — (129 ) (1,445 ) — (1,574 ) Net increase (decrease) in cash and cash equivalents 40,258 (17,449 ) 40,301 — 63,110 Cash and cash equivalents, beginning of period — continuing operations 2,149 69,154 307,158 — 378,461 Cash and cash equivalents, beginning of period — discontinued operations — 23,300 — — 23,300 Cash and cash equivalents of continuing operations, end of period $ 42,407 $ 75,005 $ 347,459 $ — $ 464,871 CONSOLIDATING STATEMENT OF CASH FLOWS For the Six Months Ended June 30, 2014 (in thousands) Issuer Guarantor Non-Guarantor Eliminations Consolidated Cash Flows from Operating Activities: Net income (loss) $ (50,472 ) $ 7,724 $ 37,125 $ (44,849 ) $ (50,472 ) Income (loss) from discontinued operations, net of tax 15,341 (5,803 ) 781 — 10,319 Income (loss) from continuing operations (65,813 ) 13,527 36,344 (44,849 ) (60,791 ) Adjustments to reconcile net income (loss) from continuing operations to net cash provided by operating activities: Equity in earnings of subsidiaries, net of tax (47,665 ) (232 ) — 47,897 — Tax benefit related to discontinued operations retained by Alere Inc. — 3,477 (487 ) — 2,990 Non-cash interest expense, including amortization of original issue discounts and deferred financing costs 7,715 22 189 — 7,926 Depreciation and amortization 3,066 88,108 76,418 47 167,639 Non-cash stock-based compensation expense 752 2,352 1,478 — 4,582 Impairment of inventory — — 589 — 589 Impairment of long-lived assets — — 1,491 — 1,491 Loss on disposition of fixed assets — 3,035 230 — 3,265 Equity earnings of unconsolidated entities, net of tax (827 ) — (6,737 ) 125 (7,439 ) Deferred income taxes (22,249 ) (4,743 ) (8,561 ) 1,659 (33,894 ) Loss related to impairment and net loss on dispositions — 638 — — 638 Other non-cash items — 2,247 (7,508 ) — (5,261 ) Non-cash change in fair value of contingent purchase price consideration (157 ) 12,903 3,983 — 16,729 Changes in assets and liabilities, net of acquisitions: Accounts receivable, net — (8,900 ) 23,968 — 15,068 Inventories, net — (10,786 ) 182 (4,725 ) (15,329 ) Prepaid expenses and other current assets (38,974 ) 36,047 5,952 (2,362 ) 663 Accounts payable (3,153 ) 18,760 14,830 — 30,437 Accrued expenses and other current liabilities 17,304 (9,220 ) (10,496 ) (1,357 ) (3,769 ) Other non-current liabilities 2,221 345 93 3,718 6,377 Cash paid for contingent purchase price consideration (20,124 ) — (81 ) — (20,205 ) Intercompany payable (receivable) 207,786 (146,084 ) (61,702 ) — — Net cash provided by continuing operations 39,882 1,496 70,175 153 111,706 Net cash provided by discontinued operations — 12,785 613 — 13,398 Net cash provided by operating activities 39,882 14,281 70,788 153 125,104 Cash Flows from Investing Activities: Increase in restricted cash (1,424 ) — (2,610 ) — (4,034 ) Purchases of property, plant and equipment (11,770 ) (20,863 ) (17,318 ) 2,668 (47,283 ) Proceeds from sale of property, plant and equipment 268 670 2,310 (2,755 ) 493 Cash received from disposition, net of cash divested — 1,081 4,373 — 5,454 Cash paid for business acquisitions, net of cash acquired (75 ) — — — (75 ) Cash received from equity method investments 980 — — — 980 Cash received from sales of marketable securities — 39 — — 39 Cash received (paid) for investments (503 ) (278 ) 2 — (779 ) (Increase) decrease in other assets (311 ) 196 920 59 864 Net cash used in continuing operations (12,835 ) (19,155 ) (12,323 ) (28 ) (44,341 ) Net cash used in discontinued operations — (6,769 ) — — (6,769 ) Net cash used in investing activities (12,835 ) (25,924 ) (12,323 ) (28 ) (51,110 ) Cash Flows from Financing Activities: Cash paid for financing costs (5 ) — — — (5 ) Cash paid for contingent purchase price consideration (15,355 ) — (264 ) — (15,619 ) Proceeds from issuance of common stock, net of issuance costs 21,121 — — — 21,121 Payments on long-term debt (30,000 ) (148 ) (1,579 ) — (31,727 ) Proceeds from issuance of short-term debt — — 806 — 806 Net proceeds under revolving credit facilities — — 111 — 111 Cash paid for dividends (10,646 ) — — — (10,646 ) Excess tax benefits on exercised stock options 65 282 68 — 415 Principal payments on capital lease obligations — (1,462 ) (1,577 ) — (3,039 ) Net cash used in continuing operations (34,820 ) (1,328 ) (2,435 ) — (38,583 ) Net cash used in discontinued operations (150 ) (17 ) — — (167 ) Net cash used in financing activities (34,970 ) (1,345 ) (2,435 ) — (38,750 ) Foreign exchange effect on cash and cash equivalents 8 (79 ) 1,846 (125 ) 1,650 Net increase (decrease) in cash and cash equivalents (7,915 ) (13,067 ) 57,876 — 36,894 Cash and cash equivalents, beginning of period — continuing operations 14,801 78,976 261,654 — 355,431 Cash and cash equivalents, beginning of period — discontinued operations — 6,476 — — 6,476 Cash and cash equivalents, end of period 6,886 72,385 319,530 — 398,801 Less: Cash and cash equivalents of discontinued operations, end of period — 8,647 — — 8,647 Cash and cash equivalents of continuing operations at end of period $ 6,886 $ 63,738 $ 319,530 $ — $ 390,154 |