Alere Files Form 10-K, Reports Fourth Quarter and Full Year 2015 Financial Results

WALTHAM, Mass., Aug. 8, 2016 /PRNewswire/ -- Alere Inc. (NYSE: ALR), a global leader in rapid diagnostic tests, today announced that it has filed its Form 10-K and reported its financial results for the fourth quarter and full year ended December 31, 2015.  

The Company also announced that it concluded the analysis of certain aspects of revenue recognition for the years ended December 31, 2015, 2014, and 2013 (and each of the quarters in those annual periods). As a result of the review, the Company has revised its financial statements for the interim periods of 2015 and the years ended December 31, 2014 and 2013 to correct immaterial errors in its previously issued financial statements.

The revisions include the impact to gross profit related to the revenue adjustments and the movement of other previously recorded out-of-period adjustments into the periods in which they originated. Most notably, the Company recognized additional income tax expense of $8 million in 2015 (nine months YTD) and a reduction in income tax expense of $7 million in 2014 related to the timing of recognition of certain tax-specific items. These tax-related revisions resulted in a decrease of $0.09 in basic and diluted earnings per share in 2015 (nine months YTD) and an increase of $0.07 in basic and diluted earnings per share in 2014.  None of these revisions impacted the Company's cash flow or cash balances.

The impact of the revisions is as follows:

The table below shows revenue and EPS as previously reported, the impact of the revision adjustments and as revised:

Certain amounts presented may not recalculate directly, due to rounding.

"We are pleased to announce the completion of a thorough and diligent review of our historical revenue recognition processes," said Namal Nawana, CEO of Alere. "Following our review, we made immaterial revisions to our previously issued financial statements for 2013, 2014 and 2015 with the filing of our current 2015 Form 10-K. We are in the process of implementing a remediation plan and remain committed to providing accurate and transparent financial reporting."

Alere expects to file its first quarter 2016 Form 10-Q by August 18, 2016. The Company does not currently expect to file its second quarter 2016 Form 10-Q by August 9, 2016. Alere expects to file its second quarter 2016 Form 10-Q as soon as practicable.

Fourth Quarter 2015 Results
Revenue for the fourth quarter of 2015 was $623 million, a 6.6% decrease compared to $667 million in the fourth quarter of 2014, primarily due to the negative impact of $26 million in foreign currency exchange, a $7 million decrease in pain management revenue, and lower revenues related to our BBI business which was divested in November 2015. Organic growth during the fourth quarter of 2015 was approximately flat compared to the prior year period. 

Net income (loss) from continuing operations during the fourth quarter of 2015 was $(19) million, or $(0.28) per diluted share, compared to $(31) million, or $(0.43) per diluted share in the prior year period. During the fourth quarter of 2015, the Company recorded $43 million in pre-tax expenses ($30 million after tax) related to its previously announced voluntary INRatio market withdrawal. On a non-GAAP basis, the Company reported Non-GAAP adjusted EBITDA of $95 million in the fourth quarter of 2015, compared to $127 million in the prior year period.

Full Year 2015 Results
During 2015 Alere made solid progress on its strategic initiatives, returning to organic growth in each of its core businesses, excluding pain management. The Company reported a 4.3% decrease in revenue in 2015, primarily due to the negative impact of $121 million in foreign currency exchange, and organic growth of approximately 1.5% in 2015. The Company launched numerous innovations around the world, including the introduction of two ground-breaking molecular diagnostics platforms in Infectious Disease. Alere i placements reached nearly 4,000 by year end 2015 and Alere q achieved numerous regulatory approvals, including World Health Organization prequalification in June 2016, making it available for public sector procurement.

On July 14, 2016, Alere issued preliminary unaudited financial results for the fiscal year ended December 31, 2015, including unaudited revenue of $2.45-$2.48 billion, net income (loss) from continuing operations of $10-$25 million and Non-GAAP adjusted EBITDA of $505-520 million.  As stated at that time, those results were preliminary and unaudited. In connection with the review and finalization of the FY2015 results, the Company updated its financials, resulting in revenue of $2.46 billion, net income (loss) of $(13) million and Non-GAAP adjusted EBITDA of $499 million. The majority of the change in net income (loss) and Non-GAAP adjusted EBITDA versus our preliminary results was related to the finalization of certain charges incurred in connection with the previously announced voluntary INRatio market withdrawal.  As disclosed on July 11, 2016, Alere expected to record approximately $70-90 million of charges relating to this voluntary withdrawal in 2016. Due to the fact that the condition that led to the voluntary withdrawal existed as of December 31, 2015, certain of these charges incurred in connection with the recall are being recorded in 2015, rather than 2016. Specifically, the Company recorded $43 million in pre-tax expenses ($30 million after tax) in the fourth quarter of 2015 related to its previously announced voluntary INRatio market withdrawal. Of this amount, approximately $17 million will ultimately be settled in cash and is, therefore, included in non-GAAP adjusted EBITDA for both the quarter and full year ended December 31, 2015.

Revenue for the full year 2015 was $2.46 billion, compared to $2.58 billion in the prior year period, a decrease of $112 million or 4.3%. Net income (loss) from continuing operations was $(13) million, or $(0.40) per diluted share, for the full year 2015 (including the impact from the InRatio expenses as noted above), compared to $(172) million, or $(2.33) per diluted share in the prior year period. On a non-GAAP basis, the Company reported adjusted EBITDA of $499 million for the full year 2015, compared to $477 million in the prior year period.

Non-GAAP Information
To supplement the financial measures prepared in accordance with U.S. GAAP, the Company uses Non-GAAP adjusted EBITDA and organic growth, which are non-GAAP financial measures.  The reconciliations of Non-GAAP adjusted EBITDA to net income (loss) from continuing operations and organic growth to revenue, the most directly comparable financial measure calculated and presented in accordance with U.S. GAAP, is shown in the table in this press release. The Company believes Non-GAAP adjusted EBITDA and organic growth are useful to investors because these metrics are commonly used by investors to assess the unleveraged, pre-tax financial performance and operating results of ongoing business operations. The Company's management also uses Non-GAAP adjusted EBITDA and organic growth because the Company's management also believes that these are useful measures to evaluate operating performance and cash flows of the Company based on operational factors.

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