Edgar Filing: ALERE INC.

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Form 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2013

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

COMMISSION FILE NUMBER 001-16789

LOGO

ALERE INC.

(Exact name of registrant as specified in its charter)

DELAWARE

04-3565120

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

51 SAWYER ROAD, SUITE 200

WALTHAM, MASSACHUSETTS 02453

(Address of principal executive offices)(Zip code)

(781) 647-3900

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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 x No ¨

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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

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):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

The number of shares outstanding of the registrant’s common stock, par value of $0.001 per share, as of May 6, 2013 was 81,288,432.

ALERE INC.

REPORT ON FORM 10-Q

For the Quarterly Period Ended March 31, 2013

This Quarterly Report on Form 10-Q 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. A number of important factors could cause actual results of Alere Inc. and its subsidiaries to differ materially from those indicated by such forward-looking statements. These factors include, but are not limited to, the risk factors detailed in Part I, Item 1A, “Risk Factors,” of our Annual Report on Form 10-K, as amended, for the fiscal year ended December 31, 2012 and other risk factors identified herein or from time to time in our periodic filings with the Securities and Exchange Commission. Readers should carefully review these risk factors, and should not place undue reliance on our forward-looking statements. These forward-looking statements are based on information, plans and estimates at the date of this report. We undertake no obligation to update any forward-looking statements to reflect changes in underlying assumptions or factors, new information, future events or other changes.

Unless the context requires otherwise, references in this Quarterly Report on Form 10-Q to “we,” “us” and “our” refer to Alere Inc. and its subsidiaries.

TABLE OF CONTENTS


	PAGE
PART I. FINANCIAL INFORMATION		3
Item 1. Financial Statements		3
a) Consolidated Statements of Operations for the Three Months Ended March 31, 2013 and 2012		3
b) Consolidated Statements of Comprehensive Income (Loss) for the Three Months Ended March 31, 2013 and 2012		4
c) Consolidated Balance Sheets as of March 31, 2013 and December 31, 2012		5
d) Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2013 and 2012		6
e) Notes to Consolidated Financial Statements		7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		30
Item 3. Quantitative and Qualitative Disclosures About Market Risk		38
Item 4. Controls and Procedures		38
PART II. OTHER INFORMATION		38
Item 6. Exhibits		38
SIGNATURES		40

PART I—FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

ALERE INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

(in thousands, except per share amounts)


	Three Months Ended March 31,
	2013			2012
Net product sales	$	508,276		$	475,787
Services revenue		226,909			192,434

Net product sales and services revenue		735,185			668,221
License and royalty revenue		4,064			2,908

Net revenue		739,249			671,129

Cost of net product sales		253,078			225,554
Cost of services revenue		120,158			90,860

Cost of net product sales and services revenue		373,236			316,414
Cost of license and royalty revenue		1,756			1,644

Cost of net revenue		374,992			318,058

Gross profit		364,257			353,071

Operating expenses:
Research and development		41,454			39,000
Sales and marketing		156,456			158,578
General and administrative		135,858			120,435

Total operating expenses		333,768			318,013

Operating income		30,489			35,058
Interest expense, including amortization of original issue discounts and deferred financing costs		(57,399	)		(50,727	)
Other income (expense), net		(470	)		11,831

Loss before benefit for income taxes		(27,380	)		(3,838	)
Benefit for income taxes		(36,871	)		(1,455	)

Income (loss) before equity earnings of unconsolidated entities, net of tax		9,491			(2,383	)
Equity earnings of unconsolidated entities, net of tax		2,934			3,412

Net income		12,425			1,029
Less: Net loss attributable to non-controlling interests		(25	)		(185	)

Net income attributable to Alere Inc. and Subsidiaries		12,450			1,214
Preferred stock dividends		(5,250	)		(5,309	)

Net income (loss) available to common stockholders	$	7,200		$	(4,095	)

Basic net income (loss) per common share attributable to Alere Inc. and Subsidiaries:	$	0.09		$	(0.05	)

Diluted net income (loss) per common share attributable to Alere Inc. and Subsidiaries:	$	0.09		$	(0.05	)

Weighted-average shares-basic		81,199			80,240

Weighted-average shares-diluted		81,300			80,240

The accompanying notes are an integral part of these consolidated financial statements.

ALERE INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(unaudited)

(in thousands)


	Three Months Ended March 31,
	2013			2012
Net income	$	12,425		$	1,029

Other comprehensive income (loss), before tax:
Changes in cumulative translation adjustment		(75,355	)		35,939
Unrealized gains on available for sale securities		—			431
Unrealized gains on hedging instruments		11			1,107
Minimum pension liability adjustment		605			(165	)

Other comprehensive income (loss), before tax		(74,739	)		37,312
Income tax benefit related to items of other comprehensive income		—			(41	)

Other comprehensive income (loss), net of tax		(74,739	)		37,353

Comprehensive income (loss)		(62,314	)		38,382
Less: Comprehensive loss attributable to non-controlling interests		(25	)		(185	)

Comprehensive income (loss) attributable to Alere Inc. and Subsidiaries	$	(62,289	)	$	38,567

The accompanying notes are an integral part of these consolidated financial statements.

ALERE INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(unaudited)

(in thousands, except par value)


	March 31, 2013			December 31, 2012
ASSETS
Current assets:
Cash and cash equivalents	$	327,233		$	328,346
Restricted cash		11,649			3,076
Marketable securities		884			904
Accounts receivable, net of allowances of $41,337 and $36,395 at March 31, 2013 and December 31, 2012, respectively		540,093			524,332
Inventories, net		336,442			337,121
Deferred tax assets		83,530			67,722
Prepaid expenses and other current assets		167,346			145,236

Total current assets		1,467,177			1,406,737
Property, plant and equipment, net		529,164			534,469
Goodwill		3,116,857			3,048,405
Other intangible assets with indefinite lives		58,393			36,451
Finite-lived intangible assets, net		1,874,636			1,834,225
Deferred financing costs, net, and other non-current assets		99,300			108,857
Investments in unconsolidated entities		94,295			90,491
Deferred tax assets		8,653			8,293

Total assets	$	7,248,475		$	7,067,928

LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term debt	$	52,210		$	60,232
Current portion of capital lease obligations		6,146			6,684
Accounts payable		166,012			169,974
Accrued expenses and other current liabilities		470,919			411,919

Total current liabilities		695,287			648,809

Long-term liabilities:
Long-term debt, net of current portion		3,788,842			3,628,675
Capital lease obligations, net of current portion		11,615			12,917
Deferred tax liabilities		415,452			428,188
Other long-term liabilities		212,376			166,635

Total long-term liabilities		4,428,285			4,236,415

Commitments and contingencies (Note 17)
Stockholders’ equity:
Series B preferred stock, $0.001 par value (liquidation preference: $709,763 at March 31, 2013 and December 31, 2012); Authorized: 2,300 shares; Issued: 2,065 shares at March 31, 2013 and December 31, 2012; Outstanding: 1,774 shares at March 31, 2013 and December 31, 2012		606,468			606,468
Common stock, $0.001 par value; Authorized: 200,000 shares; Issued: 88,959 shares at March 31, 2013 and 88,576 shares at December 31, 2012; Outstanding: 81,280 shares at March 31, 2013 and 80,897 shares at December 31, 2012		89			89
Additional paid-in capital		3,304,448			3,299,935
Accumulated deficit		(1,552,523	)		(1,564,973	)
Treasury stock, at cost, 7,679 shares at March 31, 2013 and December 31, 2012		(184,971	)		(184,971	)
Accumulated other comprehensive income (loss)		(50,865	)		23,874

Total stockholders’ equity		2,122,646			2,180,422
Non-controlling interests		2,257			2,282

Total equity		2,124,903			2,182,704

Total liabilities and equity	$	7,248,475		$	7,067,928

The accompanying notes are an integral part of these consolidated financial statements.

ALERE INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(in thousands)


	Three Months Ended March 31,
	2013			2012
Cash Flows from Operating Activities:
Net income	$	12,425		$	1,029
Adjustments to reconcile net income to net cash provided by operating activities:
Non-cash interest expense, including amortization of original issue discounts and write-off of deferred financing costs		5,217			5,278
Depreciation and amortization		104,970			102,721
Non-cash charges for sale of inventories revalued at the date of acquisition		461			4,681
Non-cash stock-based compensation expense		4,123			3,874
Impairment of inventory		—			5
Impairment of long-lived assets		—			134
Loss on sale of fixed assets		172			566
Equity earnings of unconsolidated entities, net of tax		(2,934	)		(3,412	)
Deferred income taxes		(50,907	)		(13,752	)
Other non-cash items		1,941			—
Changes in assets and liabilities, net of acquisitions:
Accounts receivable, net		(20,167	)		(12,942	)
Inventories, net		(17,171	)		9,351
Prepaid expenses and other current assets		(5,833	)		3,521
Accounts payable		(1,988	)		(17,806	)
Accrued expenses and other current liabilities		39,957			3,985
Other non-current liabilities		795			14,697

Net cash provided by operating activities		71,061			101,930

Cash Flows from Investing Activities:
(Increase) decrease in restricted cash		(8,573	)		6,302
Purchases of property, plant and equipment		(36,105	)		(30,385	)
Proceeds from sale of property, plant and equipment		1,143			527
Cash paid for acquisitions, net of cash acquired		(158,421	)		(38,008	)
Cash received from equity method investment		10,771			6,066
Cash paid for marketable securities		—			(2	)
Increase in other assets		(5,569	)		(8,554	)

Net cash used in investing activities		(196,754	)		(64,054	)

Cash Flows from Financing Activities:
Cash paid for financing costs		(1,427	)		(1,876	)
Cash paid for contingent purchase price consideration		(19,098	)		(48	)
Proceeds from issuance of common stock, net of issuance costs		6,135			7,674
Proceeds from issuance of long-term debt		10,053			199,141
Payments on long-term debt		(19,638	)		(16,911	)
Net proceeds under revolving credit facilities		162,483			1,339
Payments on short-term debt		—			(6,240	)
Cash paid for dividends		(5,323	)		(5,323	)
Excess tax benefits on exercised stock options		104			148
Principal payments on capital lease obligations		(1,721	)		(1,720	)

Net cash provided by financing activities		131,568			176,184

Foreign exchange effect on cash and cash equivalents		(6,988	)		864

Net increase (decrease) in cash and cash equivalents		(1,113	)		214,924
Cash and cash equivalents, beginning of period		328,346			299,173

Cash and cash equivalents, end of period	$	327,233		$	514,097

The accompanying notes are an integral part of these consolidated financial statements.

ALERE INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(1) Basis of Presentation of Financial Information

The accompanying Consolidated Financial Statements of Alere Inc. are unaudited. In the opinion of management, the unaudited Consolidated Financial Statements contain all adjustments considered normal and recurring and necessary for their fair statement. Interim results are not necessarily indicative of results to be expected for the year. These interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, these Consolidated Financial Statements do not include all of the information and footnotes necessary for a complete presentation of financial position, results of operations, comprehensive income and cash flows. Our audited Consolidated Financial Statements for the year ended December 31, 2012 included information and footnotes necessary for such presentation and were included in our Annual Report on Form 10-K, as amended, filed with the Securities and Exchange Commission, or SEC, on March 1, 2013. These unaudited Consolidated Financial Statements should be read in conjunction with our audited Consolidated Financial Statements and notes thereto for the year ended December 31, 2012.

Certain reclassifications of prior period amounts have been made to conform to current period presentation. These reclassifications had no effect on net income or equity.

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

(2) Cash and Cash Equivalents

We consider all highly-liquid cash investments with original maturities of three months or less at the date of acquisition to be cash equivalents. At March 31, 2013, our cash equivalents consisted of money market funds.

(3) Inventories

Inventories are stated at the lower of cost (first in, first out) or market and are comprised of the following (in thousands):


	March 31, 2013		December 31, 2012
Raw materials	$	101,477	$	99,498
Work-in-process		82,574		89,895
Finished goods		152,391		147,728

	$	336,442	$	337,121

(4) Note Receivable from FGST Investments, Inc.

In December 2012, we entered into an arrangement whereby we issued a $40.0 million short-term note to an unrelated party, FGST Investments, Inc., or FGST, for the primary purpose of providing funding in connection with FGST’s acquisition of the Polymedica Corporation (“Liberty”) line of business, a medical supply business, from a subsidiary of Express Scripts Holding Company. The note bears interest at a rate of 3.25% per annum and is collateralized by substantially all of the assets of FGST and its parent entity, ATLS Acquisition, LLC, or ATLS, and was guaranteed by various subsidiaries of FGST. The $40.0 million short-term note is classified within prepaid expenses and other current assets on our Consolidated Balance Sheet as of March 31, 2013. In connection with the note, we obtained a call option to purchase certain of the assets acquired by FGST for a purchase price of $40.0 million. Under the terms of the option, we could exercise the option and satisfy the purchase price by cancellation of the principal amount of the note. On February 4, 2013, we exercised the option. On February 15, 2013, the issuer of the note filed for protection under Chapter 11 of the U.S. Bankruptcy Code. Subsequently, in April 2013, we entered into an amendment of the option agreement and settlement stipulation related to these matters. (See Note 21)

ALERE INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(unaudited)

(5) Stock-based Compensation

We recorded stock-based compensation expense in our Consolidated Statements of Operations for the three months ended March 31, 2013 and 2012, respectively, as follows (in thousands):


	Three Months Ended March 31,
	2013			2012
Cost of net revenue	$	232		$	269
Research and development		747			771
Sales and marketing		716			917
General and administrative		2,428			1,917

		4,123			3,874
Benefit for income taxes		(862	)		(541	)

	$	3,261		$	3,333

(6) Net Income (Loss) per Common Share

The following table sets forth the computation of basic and diluted net income (loss) per common share for the three months ended March 31, 2013 and 2012 (in thousands, except per share data):


	Three Months Ended March 31,
	2013			2012
Numerator:
Net income	$	12,425		$	1,029
Preferred stock dividends		(5,250	)		(5,309	)
Less: Net loss attributable to non-controlling interest		(25	)		(185	)

Net income (loss) available to common stockholders	$	7,200		$	(4,095	)

Denominator:
Weighted-average common shares outstanding—basic		81,199			80,240
Effect of dilutive securities:
Stock options		101			—

Weighted-average common shares outstanding—diluted		81,300			80,240

Basic net income (loss) per common share attributable to Alere Inc. and Subsidiaries	$	0.09		$	(0.05	)

Diluted net income (loss) per common share attributable to Alere Inc. and Subsidiaries	$	0.09		$	(0.05	)

The following potential dilutive securities were not included in the calculation of diluted net income (loss) per common share because the inclusion thereof would be antidilutive (in thousands):


	Three Months Ended March 31,
	2013		2012
Denominator:
Options to purchase shares of common stock		9,987		9,776
Warrants		4		152
Conversion shares related to 3% convertible senior subordinated notes		3,411		3,411
Conversion shares related to subordinated convertible promissory notes		27		27
Conversion shares related to Series B convertible preferred stock		10,239		10,239

Total number of antidilutive potentially issuable shares of common stock excluded from diluted common shares outstanding		23,668		23,605

ALERE INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(unaudited)

(7) Stockholders’ Equity and Non-controlling Interests

(a) Preferred Stock

For both the three months ended March 31, 2013 and 2012, Series B preferred stock dividends amounted to $5.3 million which reduced earnings available to common stockholders for purposes of calculating net income (loss) per common share for each of the respective periods. As of April 15, 2013, payments have been made covering all dividend periods through March 31, 2013.

The Series B preferred stock dividends for the three months ended March 31, 2013 and 2012 were paid in cash.

(b) Changes in Stockholders’ Equity and Non-controlling Interests

A summary of the changes in stockholders’ equity and non-controlling interests comprising total equity for the three months ended March 31, 2013 and 2012 is provided below (in thousands):


	Three Months Ended March 31,
	2013									2012
	Total Stockholders’ Equity			Non- controlling Interests			Total Equity			Total Stockholders’ Equity			Non- controlling Interests			Total Equity
Equity, beginning of period	$	2,180,422		$	2,282		$	2,182,704		$	2,229,234		$	2,340		$	2,231,574
Exercise of common stock options, warrants and shares issued under employee stock purchase plan		6,135			—			6,135			7,674			—			7,674
Preferred stock dividends		(5,323	)		—			(5,323	)		(5,323	)		—			(5,323	)
Stock-based compensation related to grants of common stock options		4,123			—			4,123			3,874			—			3,874
Excess tax benefits on exercised stock options		(422	)		—			(422	)		104			—			104
Net income (loss)		12,450			(25	)		12,425			1,214			(137	)		1,077
Total other comprehensive income (loss)		(74,739	)		—			(74,739	)		37,353			—			37,353

Equity, end of period	$	2,122,646		$	2,257		$	2,124,903		$	2,274,130		$	2,203		$	2,276,333

(8) Business Combinations

Acquisitions are accounted for using the acquisition method and the acquired companies’ results have been included in the accompanying Consolidated Financial Statements from their respective dates of acquisition. During the three months ended March 31, 2013 and 2012, we expensed acquisition-related costs of $0.9 million and $1.5 million, respectively, in general and administrative expense.

Our business acquisitions have historically been made at prices above the fair value of the assets acquired and liabilities assumed, resulting in goodwill, based on our expectations of synergies and other benefits of combining the businesses. These synergies and benefits include elimination of redundant facilities, functions and staffing; use of our existing commercial infrastructure to expand sales of the products of the acquired businesses; and use of the commercial infrastructure of the acquired businesses to expand product sales in a cost-efficient manner.

Net assets acquired are recorded at their fair value and are subject to adjustment upon finalization of the fair value analysis. We are not aware of any information that indicates the final fair value analysis 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 intangible assets are expected to contribute to future cash flows. We amortize our finite-lived intangible assets based on patterns on which the respective economic benefits are expected to be realized.

(a) Acquisitions in 2013

(i) Epocal

On February 1, 2013, we acquired Epocal, Inc., or Epocal, located in Ottawa, Canada, a provider of technologies that support blood gas and electrolyte testing at the point of care. The preliminary aggregate purchase price was approximately $248.5 million, which consisted of $173.5 million in cash and a contingent consideration obligation with an aggregate acquisition date fair value of $75.0 million. The operating results of Epocal are included in our professional diagnostics reporting unit and business segment. The amount allocated to goodwill from this acquisition is not deductible for tax purposes.

(ii) Mega Medika

On January 7, 2013, we acquired certain assets of PT Mega Medika Mandiri, or Mega Medika, located in South Jakarta, Indonesia, a distributor of infectious disease products to the Indonesian marketplace as well as materials for vaccines to a pharmaceutical customer. The preliminary aggregate purchase price was approximately $10.7 million, which consisted of $10.4 million in cash and a contingent consideration obligation with an aggregate acquisition date fair value of $0.3 million. Included in our Consolidated Statement of Operations for the three months ended March 31, 2013 is revenue totaling approximately $0.4 million related to Mega Medika. The operating results of Mega Medika are included in our professional diagnostics reporting unit and business segment. The amount allocated to goodwill from this acquisition is deductible for tax purposes.

A summary of the preliminary fair values of the net assets acquired for the acquisitions consummated in 2013 is as follows (in thousands):


	Epocal		Mega Medika		Total
Current assets⁽¹⁾	$	11,935	$	1,142	$	13,077
Property, plant and equipment		1,267		229		1,496
Goodwill		99,519		655		100,174
Intangible assets		164,400		9,460		173,860
Other non-current assets		17,610		—		17,610

Total assets acquired		294,731		11,486		306,217

Current liabilities		2,543		549		3,092
Non-current liabilities		43,727		211		43,938

Total liabilities assumed		46,270		760		47,030

Net assets acquired		248,461		10,726		259,187
Less:
Contingent consideration		75,000		295		75,295

Cash paid	$	173,461	$	10,431	$	183,892

⁽¹⁾	Includes approximately $2.6 million of acquired cash.

The following are the intangible assets acquired and their respective fair values and weighted-average useful lives (dollars in thousands):


	Epocal		Mega Medika		Total		Weighted- average Useful Life
Core technology and patents	$	119,700	$	—	$	119,700		20.0 years
Trademarks and trade names		20,500		—		20,500		19.2 years
Customer relationships		—		9,460		9,460		21.0 years
In-process research and development		24,200		—		24,200		N/A

Total intangible assets	$	164,400	$	9,460	$	173,860

(b) Acquisitions in 2012

During 2012, we acquired the following businesses for a preliminary aggregate purchase price of $494.8 million, which included cash payments totaling $419.2 million and contingent consideration obligations with aggregate acquisition date fair values of $75.6 million.

•

Reatrol Comercializacao De Produtos De Saude, LDA, subsequently renamed Alere Lda, located in Vila Nova de Gaia, Portugal, a distributor of products for drugs of abuse testing (Acquired January 2012)

•

Kullgren Holding AB, or Kullgren, located in Gensta, Sweden, a company that manufactures and distributes high-quality intimacy and pharmaceutical products (Acquired February 2012)

ALERE INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(unaudited)

•

Wellogic ME FZ-LLC, or Wellogic UAE, located in Dubai, United Arab Emirates, a company that provides development services to Alere Wellogic, LLC, which acquired the assets of Method Factory, Inc. (d/b/a Wellogic), or Wellogic, in December 2011 (Acquired February 2012)

•

certain assets, primarily including customer and patient lists, of AmMed Direct LLC, or AmMed, located near Nashville, Tennessee, a privately-owned mail-order provider of home-diabetes testing products and supplies (Acquired March 2012)

•

eScreen, Inc., or eScreen, headquartered in Overland Park, Kansas, a technology-enabled provider of employment drug screening solutions for hiring and maintaining healthier and more efficient workforces (Acquired April 2012)

•

MedApps Holding Company, Inc., or MedApps, headquartered in Scottsdale, Arizona, a developer of innovative remote health monitoring solutions that deliver efficient cost-effective connectivity between patient, care provider and electronic medical records (Acquired July 2012)

•

Amedica Biotech, Inc., or Amedica, located in Hayward, California, a company focused on the development and manufacture of in vitro diagnostic tests (Acquired July 2012)

•

DiagnosisOne, Inc., or DiagnosisOne, located in Lowell, Massachusetts, a software company that provides clinical analytics technology and data-driven content to hospitals, physician groups, insurers and governments (Acquired July 2012)

•

Seelen Care Laege-og & Hospitalsartikler ApS, or Seelen, located in Holstebro, Denmark, a distributor of consumables, instruments and equipment to doctors, specialists and physiotherapists (Acquired August 2012)

•

certain assets of Diagnostik Nord, or Diagnostik, located in Schwerin, Germany, a company focused on the sale of drug screening and in vitro diagnostic medical devices and a provider of diagnostic solutions (Acquired September 2012)

•

Healthcare Connections Limited, or HCC, located in Buckinghamshire, United Kingdom, an occupational health provider specializing in employment medical programs, preventative health schemes and drug and alcohol sample collection services (Acquired November 2012)

•

the diagnostic division of Medial spol. s.r.o., subsequently renamed Alere s.r.o., located in Prague, Czech Republic, a distributor of laboratory diagnostic devices, devices operating in the point-of-care testing regime, diagnostic kits and tests for biochemistry, hematology, and microbiology (Acquired November 2012)

•

certain assets of Quantum Diagnostics, or Quantum Australia, located in Australia, an on-line medical supply company that provides a range of affordable drug and alcohol tests for personal, business and professional medical use (Acquired November 2012)

•

certain assets of NationsHealth, Inc., or NationsHealth, headquartered in Sunrise, Florida, a privately-owned mail-order provider of diabetes home-testing products and supplies, and a share acquisition of NationsHealth’s subsidiary in the Philippines, or NationsHealth Philippines (Acquired December 2012)

•

Branan Medical Corporation, or Branan, headquartered in Irvine, California, a manufacturer of drugs of abuse testing products (Acquired December 2012)

The operating results of Alere Lda, AmMed, eScreen, MedApps, Amedica, Seelen, Diagnostik, HCC, Alere s.r.o., Quantum Australia, NationsHealth and Branan are included in our professional diagnostics reporting unit and business segment. The operating results of Wellogic UAE and DiagnosisOne are included in our health information solutions reporting unit and business segment. The operating results of Kullgren are included in our consumer diagnostics reporting unit and business segment.

Our Consolidated Statement of Operations for the three months ended March 31, 2012 included revenue totaling approximately $1.4 million related to the businesses that were acquired during that period. Goodwill has been recognized in all of these acquisitions and amounted to approximately $259.2 million. Goodwill related to the acquisitions of AmMed, Diagnostik and the U.S.-based assets of NationsHealth, which totaled $8.8 million, is deductible for tax purposes. The goodwill related to the remaining 2012 acquisitions is not deductible for tax purposes.

ALERE INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(unaudited)

A summary of the preliminary fair values of the net assets acquired for the acquisitions consummated in 2012 is as follows (in thousands):


Current assets⁽¹⁾	$	46,041
Property, plant and equipment		9,029
Goodwill		259,231
Intangible assets		325,223
Other non-current assets		629

Total assets acquired		640,153

Current liabilities		28,802
Non-current liabilities		116,580

Total liabilities assumed		145,382

Net assets acquired		494,771
Less:
Contingent consideration		75,620

Cash paid	$	419,151

⁽¹⁾	Includes approximately $3.8 million of acquired cash.

The following are the intangible assets acquired and their respective fair values and weighted-average useful lives (dollars in thousands):


	Amount		Weighted- average Useful Life
Core technology and patents	$	148,103		18.7 years
Trademarks and trade names		19,390		18.3 years
Customer relationships		136,485		18.1 years
Non-competition agreements		1,118		5.1 years
Other		15,227		9.2 years
In-process research and development		4,900		N/A

Total intangible assets	$	325,223

(9) Restructuring Plans

The following table sets forth aggregate restructuring charges recorded in our Consolidated Statements of Operations for the three months ended March 31, 2013 and 2012 (in thousands):


	Three Months Ended March 31,
Statement of Operations Caption	2013		2012
Cost of net revenue	$	623	$	964
Research and development		—		624
Sales and marketing		1,099		827
General and administrative		2,170		3,113

Total operating expenses		3,892		5,528
Interest expense, including amortization of original issue discounts and deferred financing costs		55		60

Total charges	$	3,947	$	5,588

ALERE INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(unaudited)

(a) 2013 Restructuring Plans

In 2013, management developed cost reduction efforts within our professional diagnostics and health information solutions business segments, including businesses in our Europe and Asia Pacific regions. The following table summarizes the restructuring activities related to our 2013 restructuring plans for the three months ended March 31, 2013 (in thousands):


	Professional Diagnostics		Health Information Solutions		Total
Severance-related costs	$	833	$	69	$	902
Facility and transition costs		13		—		13

Total charges	$	846	$	69	$	915

We anticipate incurring approximately $1.4 million in additional costs under our 2013 restructuring plans related primarily to our professional diagnostics business segment in Europe and may develop additional plans over the remainder of 2013. As of March 31, 2013, $0.1 million in severance costs arising under our 2013 restructuring plans remain unpaid.

(b) 2012 Restructuring Plans

In 2012, management developed cost reduction plans within our professional diagnostics business segment, including the integration of our business in Brazil, Europe and the United States. Additionally, management developed new plans to continue our efforts to reduce costs within our health information solutions business segment, including the termination of certain projects, which resulted in charges for the impairment of related fixed assets and intangibles. The following table summarizes the restructuring activities related to our 2012 restructuring plans for the three months ended March 31, 2013 and 2012 and since inception (in thousands):


	Three Months Ended March 31,					Since
Professional Diagnostics	2013			2012		Inception
Severance-related costs	$	62		$	1,973	$	4,794
Facility and transition costs		63			—		182

Cash charges		125			1,973		4,976
Fixed asset and inventory impairments		—			—		304

Total charges	$	125		$	1,973	$	5,280


	Three Months Ended March 31,					Since
Health Information Solutions	2013			2012		Inception
Severance-related costs	$	1,819		$	797	$	4,864
Facility and transition costs		659			—		1,893
Other exit costs		20			—		35

Cash charges		2,498			797		6,792
Fixed asset and inventory impairments		—			—		2,689
Intangible asset impairments		—			5		2,988
Other non-cash (recoveries)		(45	)		—		(76	)

Total charges	$	2,453		$	802	$	12,393

We anticipate incurring approximately $3.7 million in additional severance and facility costs under these plans related primarily to our health information solutions business segment through 2014. As of March 31, 2013, $3.8 million in severance and exit costs under these plans remain unpaid.

(b) 2011, 2010 and 2008 Restructuring Plans

In 2011, management executed a company-wide cost reduction plan, which impacted our corporate and other business segment, as well as the health information solutions and professional diagnostics business segments. Management also developed plans within our professional diagnostics business segment to consolidate operating activities among certain of our U.S., European and Asia Pacific subsidiaries, including transferring the manufacturing of our Panbio products from Australia to our Standard Diagnostics facility in South Korea and eliminating redundant costs among our newly acquired Axis-Shield subsidiaries. Additionally, within our health information solutions business segment, management executed plans to further reduce costs and improve efficiencies, as well as cease operations at our GeneCare Medical Genetics Center, Inc., or GeneCare, facility in Chapel Hill, North Carolina and transfer the majority of our Quality Assured Services, Inc. operation in Orlando, Florida to our facility in Livermore, California.

ALERE INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(unaudited)

In 2010, management developed several plans to reduce costs and improve efficiencies within our health information solutions and professional diagnostics business segments. Additionally in 2008, management developed and initiated plans to transition the businesses of Cholestech to our San Diego, California facility.

The following table summarizes the restructuring activities related to our 2011, 2010 and 2008 restructuring plans for the three months ended March 31, 2013 and 2012 and since inception (in thousands):


	Three Months Ended March 31,					Since
Professional Diagnostics	2013		2012			Inception
Severance-related costs	$	250	$	1,965		$	19,963
Facility and transition costs		169		723			7,396
Other exit costs		16		19			714

Cash charges		435		2,707			28,073
Fixed asset and inventory impairments		—		134			6,374

Total charges	$	435	$	2,841		$	34,447


	Three Months Ended March 31,					Since
Health Information Solutions	2013		2012			Inception
Severance-related costs	$	—	$	—		$	6,901
Facility and transition costs (recoveries)		—		(86	)		8,010
Other exit costs		19		41			531

Cash charges (recoveries)		19		(45	)		15,442
Fixed asset and inventory impairments		—		—			1,114
Intangible asset impairments		—		—			2,935
Other non-cash charges		—		—			761

Total charges (recoveries)	$	19	$	(45	)	$	20,252


	Three Months Ended March 31,					Since
Corporate and Other	2013		2012			Inception
Severance-related costs	$	—	$	17		$	1,190

Cash charges		—		17			1,190
Fixed asset and inventory impairments		—		—			3

Total charges	$	—	$	17		$	1,193

We anticipate incurring approximately $1.6 million in additional costs under these plans related primarily to our professional diagnostics business segment. A majority of these additional costs relate to the transfer of the Panbio product manufacturing to Korea and are for severance and facility exit costs. We may also incur impairment charges on assets as plans are finalized. We do not anticipate incurring significant additional costs under these plans related to our health information solutions business segment. As of March 31, 2013, $2.6 million in cash charges remain unpaid, primarily related to facility lease obligations.

ALERE INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(unaudited)

(e) Restructuring Reserves

The following table summarizes our restructuring reserves related to the plans described above, of which $5.4 million is included in accrued expenses and other current liabilities and $1.0 million is included in other long-term liabilities on our accompanying Consolidated Balance Sheets (in thousands):


	Severance- related Costs			Facility and Transition Costs			Other Exit Costs			Total
Balance, December 31, 2012	$	3,167		$	2,429		$	622		$	6,218
Cash charges		3,033			904			55			3,992
Payments		(2,923	)		(763	)		(72	)		(3,758	)
Currency adjustments		(4	)		—			—			(4	)

Balance, March 31, 2013	$	3,273		$	2,570		$	605		$	6,448

(10) Long-term Debt

We had the following long-term debt balances outstanding (in thousands):


	March 31, 2013			December 31, 2012
A term loans⁽¹⁾⁽²⁾	$	866,875		$	878,438
B term loans⁽¹⁾		911,125			913,438
Incremental B-1 term loans⁽¹⁾		246,875			247,500
Incremental B-2 term loans⁽¹⁾		196,314			196,739
Revolving line of credit⁽¹⁾		192,500			22,500
7.25% Senior notes		450,000			450,000
7.875% Senior notes		—			1,809
9% Senior subordinated notes		393,383			392,933
8.625% Senior subordinated notes		400,000			400,000
3% Convertible senior subordinated notes		150,000			150,000
Other lines of credit		1,328			31,957
Other		32,652			3,593

		3,841,052			3,688,907
Less: Current portion		(52,210	)		(60,232	)

	$	3,788,842		$	3,628,675

⁽¹⁾	Incurred under our secured credit facility.

⁽²⁾	Includes “A” term loans and “Delayed Draw” term loans under our secured credit facility.

In connection with our significant long-term debt issuances, we recorded interest expense, including amortization and write-offs of deferred financing costs and original issue discounts, in our accompanying Consolidated Statements of Operations for the three months ended March 31, 2013 and 2012, respectively, as follows (in thousands):


	Three Months Ended March 31,
	2013			2012
Secured credit facility ⁽¹⁾	$	27,275		$	22,851
7.25% Senior notes		8,356			—
7.875% Senior notes		(27	)		5,758
9% Senior subordinated notes		10,394			10,354
8.625% Senior subordinated notes		9,273			9,274
3% Convertible senior subordinated notes		1,246			1,246

	$	56,517		$	49,483

⁽¹⁾

Includes “A” term loans, including the “Delayed-Draw” term loans; “B” term loans; “Incremental B-1” term loans; “Incremental B-2” term loans; and revolving line of credit loans. For the three months ended March 31, 2013 and 2012, the amounts include $1.0 million and $1.3 million, respectively, related to the amortization of fees paid for certain debt modifications.

ALERE INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(unaudited)

The following summarizes the material terms of our secured credit facility that have changed significantly since December 31, 2012. All other terms of our secured credit facility as described in our Annual Report on Form 10-K, as amended, for the year ended December 31, 2012, but omitted below, have not changed since that date.

On March 22, 2013, we and certain of our subsidiaries entered into a fourth amendment to the credit agreement that governs our secured credit facility, or the credit agreement. The fourth amendment provides for 50 basis point reductions in the interest rate margins applicable to the “B” term loans, the “Incremental B-1” term loans and the “Incremental B-2” term loans and certain other changes. Under the terms of the credit agreement as amended by the fourth amendment, the “B” term loans, the “Incremental B-1” term loans and the “Incremental B-2” term loans bear interest at a rate per annum of, at our option, either (i) the Base Rate, as defined in the credit agreement, plus an applicable margin, which varies between 2.00% and 2.75% depending on our consolidated secured leverage ratio, or (ii) the Eurodollar Rate, as defined in the credit agreement, plus an applicable margin, which varies between 3.00% and 3.75% depending on our consolidated secured leverage ratio. Interest on “B” term loans, “Incremental B-1” term loans and “Incremental B-2” term loans based on the Eurodollar Rate is subject to a 1.00% floor with respect to the base Eurodollar Rate. Furthermore, under the terms of the credit agreement as amended by the fourth amendment, we may make optional prepayments of the term loans under our secured credit facility from time to time without any premium or penalty, except that if, on or before September 22, 2013, we repay or prepay any “B” term loans, “Incremental B-1” term loans or “Incremental B-2” term loans with the proceeds of, or convert any “B” term loans, “Incremental B-1” term loans or “Incremental B-2” term loans into, any new term loans bearing interest with an effective yield (as defined in the credit agreement) less than the effective yield applicable to the “B” term loans, the “Incremental B-1” term loans or the “Incremental B-2” term loans, as applicable, we must pay a premium equal to 1.0% of the principal amount of the “B” term loans, “Incremental B-1” term loans or “Incremental B-2” term loans so repaid, prepaid or converted.

(11) Derivative Financial Instruments

We may manage our economic and transaction exposure to certain market-based risks through the use of derivative instruments. Our objective for holding derivative instruments has been to reduce volatility of net earnings and cash flows associated with changes in interest rates and foreign currency exchange rates. We do not hold or issue derivative financial instruments for speculative purposes.

(a) Foreign Currency Risk

In connection with our acquisition of Axis-Shield, we acquired a number of foreign currency forward contracts. The specific risk hedged in these contracts was the undiscounted foreign currency spot rate risk on forecasted foreign currency revenue. As of December 31, 2012, all of the acquired foreign currency forward contracts were settled. We report the effective portion of the gain or loss on a cash flow hedge as a component of other comprehensive income, and it was subsequently reclassified into net earnings in the period in which the hedged transaction affected net earnings or the forecasted transaction was no longer probable of occurring.

The following table summarize the effect of derivative instruments in our accompanying Consolidated Statement of Operations (in thousands):

(12) 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.

ALERE INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(unaudited)

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.

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.

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 following tables present information about our assets and liabilities that are measured at fair value on a recurring basis as of March 31, 2013 and December 31, 2012, and indicates the fair value hierarchy of the valuation techniques we utilized to determine such fair value (in thousands):


Description	March 31, 2013		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Unobservable Inputs (Level 3)
Assets:
Marketable securities	$	884	$	884	$	—	$	—

Total assets	$	884	$	884	$	—	$	—

Liabilities:
Contingent consideration obligations ⁽¹⁾	$	240,604	$	—	$	—	$	240,604

Total liabilities	$	240,604	$	—	$	—	$	240,604


Description	December 31, 2012		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Unobservable Inputs (Level 3)
Assets:
Marketable securities	$	904	$	904	$	—	$	—

Total assets	$	904	$	904	$	—	$	—

Liabilities:
Contingent consideration obligations ⁽¹⁾	$	176,172	$	—	$	—	$	176,172

Total liabilities	$	176,172	$	—	$	—	$	176,172

⁽¹⁾

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. Significant increases or decreases in any of these inputs could result in a significantly higher or lower fair value measurement. Changes in the fair value of these contingent consideration obligations are recorded as income or expense within operating income in our Consolidated Statements of Operations.

Changes in the fair value of our Level 3 contingent consideration obligations during the three months ended March 31, 2013 were as follows (in thousands):


Fair value of contingent consideration obligations, January 1, 2013	$	176,172
Acquisition date fair value of contingent consideration obligations recorded		75,295
Foreign currency		(557	)
Payments		(21,323	)
Present value accretion		3,474
Adjustments, net (income) expense		7,543

Fair value of contingent consideration obligations, March 31, 2013	$	240,604

ALERE INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(unaudited)

At March 31, 2013 and December 31, 2012, the carrying amounts of cash and cash equivalents, restricted cash, receivables, accounts payable and other current liabilities approximated their estimated fair values.

The carrying amount and estimated fair value of our long-term debt were $3.8 billion and $3.9 billion, respectively, at March 31, 2013. The carrying amount and estimated fair value of our long-term debt were $3.7 billion at December 31, 2012. The estimated fair value of our long-term debt was determined using market sources that were derived from available market information (Level 2 in the fair value hierarchy) and may not be representative of actual values that could have been or will be realized in the future.

(13) Defined Benefit Pension Plan

Our subsidiary in England, Unipath Ltd., has a defined benefit pension plan established for certain of its employees. The net periodic benefit costs are as follows (in thousands):


	Three Months Ended March 31,
	2013			2012
Service cost	$	—		$	—
Interest cost		182			198
Expected return on plan assets		(156	)		(152	)
Amortization of prior service cost		103			104
Realized losses		—			—

Net periodic benefit cost	$	129		$	150

(14) 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 information solutions, 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.

We evaluate performance of our operating segments based on revenue and operating income (loss). Segment information for the three months ended March 31, 2013 and 2012 is as follows (in thousands):


	Professional Diagnostics		Health Information Solutions			Consumer Diagnostics		Corporate and Other			Total
Three Months Ended March 31, 2013:
Net revenue	$	582,492	$	134,207		$	22,550	$	—		$	739,249
Operating income (loss)	$	59,840	$	(13,893	)	$	2,280	$	(17,738	)	$	30,489
Depreciation and amortization	$	82,794	$	20,737		$	1,153	$	286		$	104,970
Non-cash charge associated with acquired inventory	$	461	$	—		$	—	$	—		$	461
Restructuring charge	$	1,389	$	2,503		$	—	$	—		$	3,892
Stock-based compensation	$	—	$	—		$	—	$	4,123		$	4,123
Three Months Ended March 31, 2012:
Net revenue	$	518,357	$	130,784		$	21,988	$	—		$	671,129
Operating income (loss)	$	70,179	$	(19,356	)	$	365	$	(16,130	)	$	35,058
Depreciation and amortization	$	77,467	$	23,774		$	1,259	$	221		$	102,721
Non-cash charge associated with acquired inventory	$	4,681	$	—		$	—	$	—		$	4,681
Restructuring charge	$	4,794	$	717		$	—	$	17		$	5,528
Stock-based compensation	$	—	$	—		$	—	$	3,874		$	3,874
Assets:
As of March 31, 2013	$	6,414,701	$	608,161		$	175,285	$	50,328		$	7,248,475
As of December 31, 2012	$	6,214,847	$	593,172		$	192,748	$	67,161		$	7,067,928

ALERE INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(unaudited)

The following tables summarize our net revenue from the professional diagnostics and health information solutions reporting segments by groups of similar products and services for the three months ended March 31, 2013 and 2012 (in thousands):


	Three Months Ended March 31,
Professional Diagnostics Segment	2013		2012
Cardiology	$	114,933	$	138,826
Infectious disease		189,844		151,016
Toxicology		149,049		121,740
Diabetes		50,083		28,161
Other		74,719		75,706

Net product sales and services revenue		578,628		515,449
License and royalty revenue		3,864		2,908

Professional diagnostics net revenue	$	582,492	$	518,357


	Three Months Ended March 31,
Health Information Solutions Segment	2013		2012
Disease and case management	$	54,126	$	53,380
Wellness		26,300		27,026
Women’s & children’s health		29,080		29,771
Patient self-testing services		24,701		20,607

Health information solutions net revenue	$	134,207	$	130,784

(15) Related Party Transactions

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.

We had a net receivable from the joint venture of $0.6 million and $2.3 million as of March 31, 2013 and December 31, 2012, respectively. Included in the $0.6 million receivable balance as of March 31, 2013 is approximately $1.5 million of costs incurred in connection with our 2008 SPD-related restructuring plans. Included in the $2.3 million receivable balance as of December 31, 2012 is approximately $1.6 million of costs incurred in connection with our 2008 SPD-related restructuring plans. We have also recorded a long-term receivable totaling approximately $13.7 million and $14.6 million as of March 31, 2013 and December 31, 2012, respectively, related to the 2008 SPD-related restructuring plans. 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 $8.9 million and $6.9 million as of March 31, 2013 and December 31, 2012, 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 $17.1 million during each of the three-month periods ended March 31, 2013 and 2012. Additionally, services revenue generated pursuant to the long-term services agreement with the joint venture totaled $0.3 million during each of the three-month periods ended March 31, 2013 and 2012. 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.

ALERE INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(unaudited)

Under the terms of our product supply agreement, the joint venture purchases products from our manufacturing facilities in the U.K. and China. The joint venture 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 $8.7 million and $7.3 million of trade receivables which are included in accounts receivable on our accompanying Consolidated Balance Sheets as of March 31, 2013 and December 31, 2012, respectively, and $15.7 million and $21.3 million of trade accounts payable which are included in accounts payable on our accompanying Consolidated Balance Sheets as of March 31, 2013 and December 31, 2012, respectively. During the three months ended March 31, 2013 and 2012, we received $10.8 million and $6.1 million, respectively, in cash from SPD as a return of capital.

The following table summarizes our related party balances with SPD within our Consolidated Balance Sheets (in thousands):


Balance Sheet Caption	March 31, 2013		December 31, 2012
Accounts receivable, net of allowances	$	8,667	$	7,317
Prepaid expenses and other current assets	$	9,425	$	9,161
Deferred financing costs, net, and other non-current assets	$	13,665	$	14,629
Accounts payable	$	15,676	$	21,258

(16) Other Arrangements

On February 19, 2013, we entered into an agreement with the Bill and Melinda Gates Foundation, or the Gates Foundation, whereby we were awarded a grant by the Gates Foundation in the amount of $21.6 million to support the development and commercialization of a validated, low-cost, nucleic-acid assay for clinical Tuberculosis, or TB, detection and drug-resistance test cartridges and adaptation of an analyzer platform capable of operation in rudimentary laboratories in low-resource settings. In connection with this agreement, we also entered into a loan agreement with the Gates Foundation, or the Gates Loan Agreement, which provides for the making of subordinated term loans by the Gates Foundation to us from time to time, subject to the achievement of certain milestones, in an aggregate principal amount of up to $20.6 million. Funding under the Gates Loan Agreement will be used in connection with the purchase of equipment for an automated high-throughput manufacturing line and other uses as necessary for the manufacture of the TB and HIV-related products. All loans under the Gates Loan Agreement are evidenced by promissory notes that we have executed and delivered to the Gates Foundation, bear interest at the rate of 3% per annum and, except to the extent earlier repaid by us, mature and are required to be repaid in full on December 31, 2019. As of March 31, 2013, we had borrowed no amounts under the Gates Loan Agreement. As of March 31, 2013, we had received approximately $7.9 million in grant-related funding from the Gates Foundation, which was recorded as restricted cash and deferred grant funding. The deferred grant funding is classified within accrued expenses and other current liabilities on our accompanying consolidated balance sheet. As qualified expenditures are incurred under the terms of the grant, we use the deferred funding to recognize a reduction of our related qualified research and development expenditures. For the three months ended March 31, 2013, we recognized $0.5 million of qualified expenditures, which was recorded as an offset to our research and development expenses.

(17) Material Contingencies

(a) Acquisition-related Contingent Consideration Obligations

The following summarizes our principal contractual acquisition-related contingent consideration obligations as of March 31, 2013 that have changed significantly since December 31, 2012. Other acquisition-related contingent consideration obligations that were presented in our Annual Report on Form 10-K, as amended, for the year ended December 31, 2012, but which are omitted below, represent those that have not changed significantly since that date.

•

Accordant

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 of the acquisition date. An earn-out totaling $4.5 million was earned and accrued as of December 31, 2012. A payment of $1.5 million was made during the first quarter of 2013 and the remaining payments will be made in quarterly installments of $1.5 million during the second and third quarter of 2013.

•

Branan

With respect to Branan, the terms of the acquisition agreement require us to pay earn-outs upon successfully achieving various regulatory product approval milestones by the second anniversary of the acquisition date. Four milestones were achieved during 2012, resulting in an accrual totaling approximately $2.0 million as of December 31, 2012. During the first quarter of 2013, two additional milestones were achieved, resulting in an incremental accrual of $1.0 million. Payment of these earn-outs was made during the first quarter of 2013. The maximum remaining amount of the earn-out payments is $2.0 million.

•

Epocal

With respect to Epocal, the terms of the acquisition agreement require us to pay earn-outs and management incentive payments upon successfully meeting certain product development and United States Food and Drug Administration regulatory approval milestones from the date of acquisition through December 31, 2018. The maximum amount of the earn-out payments is $90.5 million, of which $15.0 million was paid at the acquisition closing date. The maximum amount of the management incentive payments is $9.4 million.

•

ROAR

With respect to Forensics Limited, or ROAR, the terms of the acquisition agreement require us to pay an earn-out upon successfully meeting certain EBITDA targets during 2012 through 2014. Payment of the 2012 earn-out totaling approximately £1.0 million (approximately $1.5 million), which was previously accrued, was made during the first quarter of 2013. The maximum remaining amount of the earn-out payments is £9.5 million (approximately $14.4 million at March 31, 2013).

(18) Recent Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board, or FASB, or other standard setting bodies that we adopt as of the specified effective date. Unless otherwise discussed, we believe that the impact of recently issued standards that are not yet effective will not have a material impact on our financial position, results of operations, comprehensive income or cash flows upon adoption.

Recently Adopted Standards

Effective January 1, 2013, we adopted ASU No. 2012-02, Intangibles — Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment, or ASU 2012-02. ASU 2012-02 allows an entity the option to first assess qualitative factors to determine whether the existence of events and circumstances indicates that it is more likely than not that the indefinite-lived intangible asset is impaired. If an entity concludes that it is not more likely than not that the indefinite-lived intangible asset is impaired, then the entity is not required to take further action. However, if an entity concludes otherwise, then it is required to determine the fair value of the indefinite-lived intangible asset and perform the quantitative impairment test by comparing the fair value with the carrying amount. An entity also has the option to bypass the qualitative assessment for any indefinite-lived intangible asset in any period and proceed directly to performing the quantitative impairment test. An entity will be able to resume performing the qualitative assessment in any subsequent period. The adoption of this standard is not expected to have an impact on our financial position, results of operations, comprehensive income or cash flows.

(19) Equity Investments

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:

(a) SPD

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 three months ended March 31, 2013 and 2012, we recorded earnings of $2.5 million and $2.8 million, respectively, in equity earnings of unconsolidated entities, net of tax, in our accompanying Consolidated Statements of Operations, which represented our 50% share of SPD’s net income for the respective periods.

(b) TechLab

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 three months ended March 31, 2013 and 2012, we recorded earnings of $0.2 million and $0.7 million, respectively, in equity earnings of unconsolidated entities, net of tax, in our accompanying Consolidated Statements of Operations, which represented our minority share of TechLab’s net income for the respective periods.

ALERE INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(unaudited)

Summarized financial information for SPD and TechLab on a combined basis is as follows (in thousands):


	Three Months Ended March 31,
Combined Condensed Results of Operations:	2013		2012
Net revenue	$	49,155	$	52,525

Gross profit	$	37,113	$	35,179

Net income after taxes	$	5,577	$	6,993


Combined Condensed Balance Sheet:	March 31, 2013		December 31, 2012
Current assets	$	65,835	$	79,842
Non-current assets		37,603		38,991

Total assets	$	103,438	$	118,833

Current liabilities	$	32,950	$	45,084
Non-current liabilities		6,986		6,791

Total liabilities	$	39,936	$	51,875

(20) Guarantor Financial Information

Our 7.25% senior notes due 2018, our 9% senior subordinated notes due 2016, and our 8.625% senior 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, balance sheets as of March 31, 2013 and December 31, 2012, the related statements of operations, statements of comprehensive income (loss) and cash flows for each of the three months ended March 31, 2013 and 2012, 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.

ALERE INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(unaudited)

CONSOLIDATING STATEMENT OF OPERATIONS

For the Three Months Ended March 31, 2013

(in thousands)


	Issuer			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net product sales	$	—		$	233,493		$	320,897		$	(46,114	)	$	508,276
Services revenue		—			206,171			20,738			—			226,909

Net product sales and services revenue		—			439,664			341,635			(46,114	)		735,185
License and royalty revenue		—			3,035			3,533			(2,504	)		4,064

Net revenue		—			442,699			345,168			(48,618	)		739,249

Cost of net product sales		948			120,594			173,216			(41,680	)		253,078
Cost of services revenue		—			115,611			8,502			(3,955	)		120,158

Cost of net product sales and services revenue		948			236,205			181,718			(45,635	)		373,236
Cost of license and royalty revenue		—			17			4,243			(2,504	)		1,756

Cost of net revenue		948			236,222			185,961			(48,139	)		374,992

Gross profit (loss)		(948	)		206,477			159,207			(479	)		364,257

Operating expenses:
Research and development		4,423			17,380			19,651			—			41,454
Sales and marketing		1,392			82,838			72,226			—			156,456
General and administrative		14,027			64,983			56,848			—			135,858

Total operating expenses		19,842			165,201			148,725			—			333,768

Operating income (loss)		(20,790	)		41,276			10,482			(479	)		30,489
Interest expense, including amortization of original issue discounts and deferred financing costs		(56,858	)		(7,021	)		(3,417	)		9,897			(57,399	)
Other income (expense), net		4,770			6,259			(1,603	)		(9,896	)		(470	)

Income (loss) before provision (benefit) for income taxes		(72,878	)		40,514			5,462			(478	)		(27,380	)
Provision (benefit) for income taxes		(62,811	)		17,926			8,127			(113	)		(36,871	)

Income (loss) before equity earnings of unconsolidated entities, net of tax		(10,067	)		22,588			(2,665	)		(365	)		9,491
Equity in earnings (losses) of subsidiaries, net of tax		22,244			(614	)		—			(21,630	)		—
Equity earnings of unconsolidated entities, net of tax		248			—			2,688			(2	)		2,934

Net income		12,425			21,974			23			(21,997	)		12,425
Less: Net loss attributable to non-controlling interests		—			—			(25	)		—			(25	)

Net income attributable to Alere Inc. and Subsidiaries		12,425			21,974			48			(21,997	)		12,450
Preferred stock dividends		(5,250	)		—			—			—			(5,250	)

Net income available to common stockholders	$	7,175		$	21,974		$	48		$	(21,997	)	$	7,200

ALERE INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(unaudited)

CONSOLIDATING STATEMENT OF OPERATIONS

For the Three Months Ended March 31, 2012

(in thousands)


	Issuer			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net product sales	$	—		$	223,417		$	285,599		$	(33,229	)	$	475,787
Services revenue		—			176,715			15,719			—			192,434

Net product sales and services revenue		—			400,132			301,318			(33,229	)		668,221
License and royalty revenue		—			4,304			2,546			(3,942	)		2,908

Net revenue		—			404,436			303,864			(37,171	)		671,129

Cost of net product sales		850			106,202			151,598			(33,096	)		225,554
Cost of services revenue		—			83,643			7,217			—			90,860

Cost of net product sales and services revenue		850			189,845			158,815			(33,096	)		316,414
Cost of license and royalty revenue		—			5			5,581			(3,942	)		1,644

Cost of net revenue		850			189,850			164,396			(37,038	)		318,058

Gross profit (loss)		(850	)		214,586			139,468			(133	)		353,071

Operating expenses:
Research and development		5,196			17,482			16,322			—			39,000
Sales and marketing		1,057			86,337			71,184			—			158,578
General and administrative		11,631			64,644			44,160			—			120,435

Total operating expenses		17,884			168,463			131,666			—			318,013

Operating income (loss)		(18,734	)		46,123			7,802			(133	)		35,058
Interest expense, including amortization of original issue discounts and deferred financing costs		(49,716	)		(11,067	)		(3,254	)		13,310			(50,727	)
Other income (expense), net		(8,074	)		9,428			23,787			(13,310	)		11,831

Income (loss) before provision (benefit) for income taxes		(76,524	)		44,484			28,335			(133	)		(3,838	)
Provision (benefit) for income taxes		(26,998	)		16,782			8,690			71			(1,455	)

Income (loss) before equity earnings of unconsolidated entities, net of tax		(49,526	)		27,702			19,645			(204	)		(2,383	)
Equity in earnings (losses) of subsidiaries, net of tax		49,895			(348	)		—			(49,547	)		—
Equity earnings of unconsolidated entities, net of tax		660			—			2,736			16			3,412

Net income		1,029			27,354			22,381			(49,735	)		1,029
Less: Net loss attributable to non-controlling interests		—			—			(185	)		—			(185	)

Net income attributable to Alere Inc. and Subsidiaries		1,029			27,354			22,566			(49,735	)		1,214
Preferred stock dividends		(5,309	)		—			—			—			(5,309	)

Net income (loss) available to common stockholders	$	(4,280	)	$	27,354		$	22,566		$	(49,735	)	$	(4,095	)

ALERE INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(unaudited)

CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS)

For the Three Months Ended March 31, 2013

(in thousands)


	Issuer			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Consolidated
Net income	$	12,425		$	21,974	$	23		$	(21,997	)	$	12,425

Other comprehensive loss, before tax:
Changes in cumulative translation adjustment		(201	)		—		(75,154	)		—			(75,355	)
Unrealized gains on hedging instruments		—			—		11			—			11
Minimum pension liability adjustment		—			—		605			—			605

Other comprehensive loss, before tax		(201	)		—		(74,538	)		—			(74,739	)
Income tax provision (benefit) related to items of other comprehensive loss		—			—		—			—			—

Other comprehensive loss, net of tax		(201	)		—		(74,538	)		—			(74,739	)

Comprehensive income (loss)		12,224			21,974		(74,515	)		(21,997	)		(62,314	)
Less: Comprehensive loss attributable to non-controlling interests		—			—		(25	)		—			(25	)

Comprehensive income (loss) attributable to Alere Inc. and Subsidiaries	$	12,224		$	21,974	$	(74,490	)	$	(21,997	)	$	(62,289	)

ALERE INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(unaudited)

CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME

For the Three Months Ended March 31, 2012

(in thousands)


	Issuer		Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Net income	$	1,029	$	27,354		$	22,381		$	(49,735	)	$	1,029

Other comprehensive income (loss), before tax:
Changes in cumulative translation adjustment		329		(306	)		35,251			665			35,939
Unrealized gains on available for sale securities		429		2			—			—			431
Unrealized gains on hedging instruments		17		—			1,090			—			1,107
Minimum pension liability adjustment		—		—			(165	)		—			(165	)

Other comprehensive income (loss), before tax		775		(304	)		36,176			665			37,312
Income tax benefit related to items of other comprehensive income		—		—			(41	)		—			(41	)

Other comprehensive income (loss), net of tax		775		(304	)		36,217			665			37,353

Comprehensive income		1,804		27,050			58,598			(49,070	)		38,382
Less: Comprehensive loss attributable to non-controlling interests		—		—			(185	)		—			(185	)

Comprehensive income attributable to Alere Inc. and Subsidiaries	$	1,804	$	27,050		$	58,783		$	(49,070	)	$	38,567

ALERE INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(unaudited)

CONSOLIDATING BALANCE SHEET

March 31, 2013

(in thousands)


	Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	8,626		$	52,407		$	266,200		$	—		$	327,233
Restricted cash		7,933			2,309			1,407			—			11,649
Marketable securities		—			771			113			—			884
Accounts receivable, net of allowances		—			242,772			297,321			—			540,093
Inventories, net		—			147,580			209,509			(20,647	)		336,442
Deferred tax assets		32,145			37,079			11,367			2,939			83,530
Prepaid expenses and other current assets		453,291			(315,140	)		29,231			(36	)		167,346
Intercompany receivables		312,349			603,711			64,077			(980,137	)		—

Total current assets		814,344			771,489			879,225			(997,881	)		1,467,177
Property, plant and equipment, net		2,387			290,253			236,980			(456	)		529,164
Goodwill		—			1,820,992			1,295,865			—			3,116,857
Other intangible assets with indefinite lives		—			13,900			44,493			—			58,393
Finite-lived intangible assets, net		10,927			1,092,551			771,158			—			1,874,636
Deferred financing costs, net and other non-current assets		69,133			10,357			19,881			(71	)		99,300
Investments in subsidiaries		4,345,418			353,666			(67,215	)		(4,631,869	)		—
Investments in unconsolidated entities		34,384			—			48,363			11,548			94,295
Deferred tax assets		—			—			8,653			—			8,653
Intercompany notes receivable		1,672,676			752,565			64,766			(2,490,007	)		—

Total assets	$	6,949,269		$	5,105,773		$	3,302,169		$	(8,108,736	)	$	7,248,475

LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term debt	$	45,000		$	985		$	6,225		$	—		$	52,210
Current portion of capital lease obligations		—			3,207			2,939			—			6,146
Accounts payable		7,390			67,623			90,999			—			166,012
Accrued expenses and other current liabilities		84,912			199,618			186,418			(29	)		470,919
Intercompany payables		584,562			133,102			262,472			(980,136	)		—

Total current liabilities		721,864			404,535			549,053			(980,165	)		695,287

Long-term liabilities:
Long-term debt, net of current portion		3,770,784			299			17,759			—			3,788,842
Capital lease obligations, net of current portion		—			4,845			6,770			—			11,615
Deferred tax liabilities		(15,907	)		319,914			111,497			(52	)		415,452
Other long-term liabilities		18,099			69,963			124,385			(71	)		212,376
Intercompany notes payables		331,783			1,602,374			555,850			(2,490,007	)		—

Total long-term liabilities		4,104,759			1,997,395			816,261			(2,490,130	)		4,428,285

Stockholders’ equity		2,122,646			2,703,843			1,934,598			(4,638,441	)		2,122,646
Non-controlling interests		—			—			2,257			—			2,257

Total equity		2,122,646			2,703,843			1,936,855			(4,638,441	)		2,124,903

Total liabilities and equity	$	6,949,269		$	5,105,773		$	3,302,169		$	(8,108,736	)	$	7,248,475

ALERE INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(unaudited)

CONSOLIDATING BALANCE SHEET

December 31, 2012

(in thousands)


	Issuer			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	3,623		$	67,449	$	257,274		$	—		$	328,346
Restricted cash		—			1,680		1,396			—			3,076
Marketable securities		—			787		117			—			904
Accounts receivable, net of allowances		—			241,050		283,282			—			524,332
Inventories, net		—			142,413		203,230			(8,522	)		337,121
Deferred tax assets		12,193			39,601		13,138			2,790			67,722
Prepaid expenses and other current assets		(20,636	)		99,271		66,634			(33	)		145,236
Intercompany receivables		298,812			1,254,727		55,847			(1,609,386	)		—

Total current assets		293,992			1,846,978		880,918			(1,615,151	)		1,406,737
Property, plant and equipment, net		2,679			293,260		239,082			(552	)		534,469
Goodwill		—			1,820,438		1,227,967			—			3,048,405
Other intangible assets with indefinite lives		—			14,600		21,851			—			36,451
Finite-lived intangible assets, net		24,701			1,132,656		676,868			—			1,834,225
Deferred financing costs, net and other non-current assets		78,522			10,341		20,065			(71	)		108,857
Investments in subsidiaries		4,114,478			358,088		(67,799	)		(4,404,767	)		—
Investments in unconsolidated entities		33,979			—		56,512			—			90,491
Deferred tax assets		—			782		7,511			—			8,293
Intercompany notes receivable		1,724,650			722,552		1,278			(2,448,480	)		—

Total assets	$	6,273,001		$	6,199,695	$	3,064,253		$	(8,469,021	)	$	7,067,928

LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term debt	$	45,000		$	349	$	14,883		$	—		$	60,232
Current portion of capital lease obligations		—			3,209		3,475			—			6,684
Accounts payable		7,993			76,256		85,725			—			169,974
Accrued expenses and other current liabilities		(388,830	)		586,116		214,659			(26	)		411,919
Intercompany payables		557,578			806,507		245,300			(1,609,385	)		—

Total current liabilities		221,741			1,472,437		564,042			(1,609,411	)		648,809

Long-term liabilities:
Long-term debt, net of current portion		3,617,068			374		11,233			—			3,628,675
Capital lease obligations, net of current portion		—			5,412		7,505			—			12,917
Deferred tax liabilities		(5,329	)		333,388		100,216			(87	)		428,188
Other long-term liabilities		17,678			72,890		76,138			(71	)		166,635
Intercompany notes payables		241,421			1,630,376		576,684			(2,448,481	)		—

Total long-term liabilities		3,870,838			2,042,440		771,776			(2,448,639	)		4,236,415

Stockholders’ equity		2,180,422			2,684,818		1,726,153			(4,410,971	)		2,180,422
Non-controlling interests		—			—		2,282			—			2,282

Total equity		2,180,422			2,684,818		1,728,435			(4,410,971	)		2,182,704

Total liabilities and equity	$	6,273,001		$	6,199,695	$	3,064,253		$	(8,469,021	)	$	7,067,928

ALERE INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(unaudited)

CONSOLIDATING STATEMENT OF CASH FLOWS

For the Three Months Ended March 31, 2013

(in thousands)


	Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Cash Flows from Operating Activities:
Net income	$	12,425		$	21,974		$	23		$	(21,997	)	$	12,425
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Equity in earnings (losses) of subsidiaries, net of tax		(22,244	)		614			—			21,630			—
Non-cash interest expense, including amortization of original issue discounts and write-off of deferred financing costs		5,153			55			9			—			5,217
Depreciation and amortization		1,287			61,956			41,756			(29	)		104,970
Non-cash charges for sale of inventories revalued at the date of acquisition		—			—			461			—			461
Non-cash stock-based compensation expense		1,660			1,096			1,367			—			4,123
(Gain) loss on sale of fixed assets		—			227			(55	)		—			172
Equity earnings of unconsolidated entities, net of tax		(248	)		—			(2,688	)		2			(2,934	)
Deferred income taxes		(30,889	)		(10,300	)		(9,605	)		(113	)		(50,907	)
Other non-cash items		(762	)		275			2,428			—			1,941
Changes in assets and liabilities, net of acquisitions:
Accounts receivable, net		—			(1,722	)		(18,445	)		—			(20,167	)
Inventories, net		—			(10,475	)		(7,271	)		575			(17,171	)
Prepaid expenses and other current assets		(473,927	)		413,773			35,134			19,187			(5,833	)
Accounts payable		(604	)		(7,960	)		6,576			—			(1,988	)
Accrued expenses and other current liabilities		478,082			(387,332	)		(31,606	)		(19,187	)		39,957
Other non-current liabilities		(126	)		(2,946	)		3,867			—			795
Intercompany payable (receivable)		63,473			(80,252	)		16,779			—			—

Net cash provided by (used in) operating activities		33,280			(1,017	)		38,730			68			71,061

Cash Flows from Investing Activities:
Increase in restricted cash		(7,933	)		(630	)		(10	)		—			(8,573	)
Purchases of property, plant and equipment		(37	)		(14,354	)		(26,736	)		5,022			(36,105	)
Proceeds from sale of property, plant and equipment		—			2,106			4,085			(5,048	)		1,143
Cash paid for acquisitions, net of cash acquired		(151,372	)		—			(7,049	)		—			(158,421	)
Cash received from equity method investments		—			—			10,771			—			10,771
Increase in other assets		(3,210	)		(928	)		(1,431	)		—			(5,569	)

Net cash used in investing activities		(162,552	)		(13,806	)		(20,370	)		(26	)		(196,754	)

Cash Flows from Financing Activities:
Cash paid for financing costs		(1,427	)		—			—			—			(1,427	)
Cash paid for contingent purchase price consideration		(19,098	)		—			—			—			(19,098	)
Proceeds from issuance of common stock, net of issuance costs		6,135			—			—			—			6,135
Proceeds from issuance of long-term debt		—			1,007			9,046			—			10,053
Payments on long-term debt		(16,845	)		(445	)		(2,348	)		—			(19,638	)
Net proceeds (payments) under revolving credit facilities		170,000			—			(7,517	)		—			162,483
Cash paid for dividends		(5,323	)		—			—			—			(5,323	)
Excess tax benefits on exercised stock options		71			17			16			—			104
Principal payments on capital lease obligations		—			(814	)		(907	)		—			(1,721	)

Net cash provided by (used in) financing activities		133,513			(235

Large accelerated filer

Accelerated filer

Non-accelerated filer

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Smaller reporting company