UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

(Mark One)

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

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

COMMISSION FILE NUMBER 001-16789

ALERE INC.

(Exact name of registrant as specified in its charter)

DELAWARE		04-3565120
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		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)

Inverness Medical Innovations, Inc.
(Former name, former address and former fiscal year, if changed since last report)

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 þ       No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§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 þ      No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ		Accelerated filer o		Non-accelerated filer o		Smaller reporting company o
				(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o       No þ

The number of shares outstanding of the registrant’s common stock, par value of $0.001 per share, as of August 2, 2010 was 84,800,590.

 

 

ALERE INC.

REPORT ON FORM 10-Q

For the Quarterly Period Ended June 30, 2010

     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, 2009 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 factors, as well as the “Forward-Looking Statements” beginning on page 44 in this Quarterly Report on Form 10-Q 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
Item 1. Financial Statements (Unaudited)
a) Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2010 and 2009			3
b) Consolidated Balance Sheets as of June 30, 2010 and December 31, 2009			4
c) Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2010 and 2009			5
d) Notes to Consolidated Financial Statements			6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			44
Item 3. Quantitative and Qualitative Disclosures About Market Risk			58
Item 4. Controls and Procedures			61
PART II. OTHER INFORMATION
Item 1. Legal Proceedings			61
Item 1A. Risk Factors			61
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			62
Item 6. Exhibits			63
SIGNATURE			64
EX-3.1
EX-10.1
EX-10.2
EX-10.3
EX-10.4
EX-10.5
EX-31.1
EX-31.2
EX-32.1
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ALERE INC. AND SUBSIDIARIES

(unaudited)

(in thousands, except per share amounts)

		Three Months Ended June 30,								Six Months Ended June 30,
		2010				2009				2010				2009
Net product sales		$	350,015			$	309,504			$	700,116			$	601,861
Services revenue			166,865				125,468				326,169				249,204
Net product sales and services revenue			516,880				434,972				1,026,285				851,065
License and royalty revenue			6,080				3,680				11,929				12,740
Net revenue			522,960				438,652				1,038,214				863,805
Cost of net product sales			166,736				142,822				330,441				277,139
Cost of services revenue			82,424				55,957				158,209				110,914
Cost of net product sales and services revenue			249,160				198,779				488,650				388,053
Cost of license and royalty revenue			1,802				1,977				3,609				3,406
Cost of net revenue			250,962				200,756				492,259				391,459
Gross profit			271,998				237,896				545,955				472,346
Operating expenses:
Research and development			32,760				26,039				63,753				53,091
Sales and marketing			123,819				102,205				243,410				200,600
General and administrative			93,361				82,382				188,024				160,930
Total operating expenses			249,940				210,626				495,187				414,621
Operating income			22,058				27,270				50,768				57,725
Interest expense, including amortization of original issue discounts and deferred financing costs			(33,606	)			(23,640	)			(66,741	)			(41,512	)
Other income (expense), net			4,112				2,544				7,156				(169	)
(Loss) income from continuing operations before (benefit) provision for income taxes			(7,436	)			6,174				(8,817	)			16,044
(Benefit) provision for income taxes			(1,243	)			2,271				(797	)			6,900
(Loss) income from continuing operations before equity earnings of unconsolidated entities, net of tax			(6,193	)			3,903				(8,020	)			9,144
Equity earnings of unconsolidated entities, net of tax			4,217				983				8,257				3,480
(Loss) income from continuing operations			(1,976	)			4,886				237				12,624
(Loss) income from discontinued operations, net of tax			(35	)			(166	)			11,911				(1,513	)
Net (loss) income			(2,011	)			4,720				12,148				11,111
Less: Net income (loss) attributable to non-controlling interests			343				224				(327	)			324
Net (loss) income attributable to Alere Inc. and Subsidiaries			(2,354	)			4,496				12,475				10,787
Preferred stock dividends			(5,984	)			(5,693	)			(11,837	)			(11,213	)
Net (loss) income available to common stockholders		$	(8,338	)		$	(1,197	)		$	638			$	(426	)
Basic net (loss) income per common share attributable to Alere Inc. and Subsidiaries:
(Loss) income from continuing operations		$	(0.10	)		$	(0.01	)		$	(0.13	)		$	0.01
Income (loss) from discontinued operations			—				—				0.14				(0.02	)
Net (loss) income per common share		$	(0.10	)		$	(0.02	)		$	0.01			$	(0.01	)
Diluted net (loss) income per common share attributable to Alere Inc. and Subsidiaries:
(Loss) income from continuing operations		$	(0.10	)		$	(0.01	)		$	(0.13	)		$	0.01
Income (loss) from discontinued operations			—				—				0.14				(0.02	)
Net (loss) income per common share		$	(0.10	)		$	(0.02	)		$	0.01			$	(0.01	)
Weighted average shares-basic			84,193				78,775				84,001				78,695
Weighted average shares-diluted			84,193				78,775				84,001				79,879

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

ALERE INC. AND SUBSIDIARIES

(unaudited)

(in thousands, except par value)

		June 30,				December 31,
		2010				2009
ASSETS
Current assets:
Cash and cash equivalents		$	266,043			$	492,773
Restricted cash			2,128				2,424
Marketable securities			3,346				947
Accounts receivable, net of allowances of $16,263 and $12,462 at June 30, 2010 and December 31, 2009, respectively			358,654				354,453
Inventories, net			243,812				221,539
Deferred tax assets			45,609				66,492
Income tax receivable			2,667				1,107
Prepaid expenses and other current assets			66,122				73,075
Assets held for sale			—				54,148
Total current assets			988,381				1,266,958
Property, plant and equipment, net			352,290				324,388
Goodwill			3,668,745				3,463,358
Other intangible assets with indefinite lives			63,391				43,644
Core technology and patents, net			461,947				421,719
Other intangible assets, net			1,266,521				1,264,708
Deferred financing costs, net, and other non-current assets			70,786				72,762
Investments in unconsolidated entities			62,922				63,965
Marketable securities			14,506				1,503
Deferred tax assets			21,526				20,987
Total assets		$	6,971,015			$	6,943,992
LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term debt		$	15,654			$	18,970
Current portion of capital lease obligations			1,818				899
Accounts payable			107,176				126,322
Accrued expenses and other current liabilities			276,593				279,732
Payable to joint venture, net			1,806				533
Deferred gain on joint venture			287,742				—
Liabilities related to assets held for sale			—				11,558
Total current liabilities			690,789				438,014
Long-term liabilities:
Long-term debt, net of current portion			2,124,953				2,128,515
Capital lease obligations, net of current portion			1,413				940
Deferred tax liabilities			445,306				442,049
Deferred gain on joint venture			—				288,767
Other long-term liabilities			125,829				116,818
Total long-term liabilities			2,697,501				2,977,089
Commitments and contingencies (Note 17)
Redeemable non-controlling interest			49,331				—
Stockholders’ equity:
Series B preferred stock, $0.001 par value (liquidation preference: $814,741 at June 30, 2010 and $793,696 at December 31, 2009);
Authorized: 2,300 shares;
Issued and outstanding: 2,037 shares at June 30, 2010 and 1,984 shares at December 31, 2009			706,314				694,427
Common stock, $0.001 par value;
Authorized: 150,000 shares;
Issued and outstanding: 84,641 shares at June 30, 2010 and 83,567 at December 31, 2009			85				84
Additional paid-in capital			3,224,076				3,195,372
Accumulated deficit			(347,399	)			(359,874	)
Accumulated other comprehensive loss			(50,828	)			(2,454	)
Total stockholders’ equity			3,532,248				3,527,555
Non-controlling interests			1,146				1,334
Total equity			3,533,394				3,528,889
Total liabilities and equity		$	6,971,015			$	6,943,992

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

ALERE INC. AND SUBSIDIARIES

(unaudited)

(in thousands)

		Six Months Ended June 30,
		2010				2009
Cash Flows from Operating Activities:
Net income		$	12,148			$	11,111
(Loss) income from discontinued operations, net of tax			11,911				(1,513	)
Income from continuing operations			237				12,624
Adjustments to reconcile income from continuing operations to net cash provided by operating activities:
Non-cash interest expense related to amortization of original issue discounts and write-off of deferred financing costs			7,235				3,553
Depreciation and amortization			183,155				144,538
Non-cash stock-based compensation expense			15,684				12,485
Impairment of inventory			640				224
Impairment of long-lived assets			644				3,150
Loss on sale of fixed assets			514				366
Equity earnings of unconsolidated entities, net of tax			(8,257	)			(3,480	)
Deferred income taxes			(22,982	)			(9,181	)
Other non-cash items			(6,270	)			3,772
Changes in assets and liabilities, net of acquisitions:
Accounts receivable, net			18,632				(2,371	)
Inventories, net			(14,651	)			(6,594	)
Prepaid expenses and other current assets			1,889				8,534
Accounts payable			(26,125	)			13,247
Accrued expenses and other current liabilities			(15,169	)			(5,142	)
Other non-current liabilities			(253	)			1,515
Net cash provided by continuing operations			134,923				177,240
Net cash (used in) provided by discontinued operations			(1,081	)			3,023
Net cash provided by operating activities			133,842				180,263
Cash Flows from Investing Activities:
Purchases of property, plant and equipment			(41,776	)			(50,126	)
Proceeds from sale of property, plant and equipment			382				620
Cash paid for acquisitions and transaction costs, net of cash acquired			(377,125	)			(99,798	)
Net cash received from equity method investments			6,333				11,455
Increase in other assets			(1,443	)			(3,677	)
Net cash used in continuing operations			(413,629	)			(141,526	)
Net cash provided by (used in) discontinued operations			63,446				(111	)
Net cash used in investing activities			(350,183	)			(141,637	)
Cash Flows from Financing Activities:
Decrease (increase) in restricted cash			42				(140,147	)
Cash paid for financing costs			(1,491	)			(10,839	)
Proceeds from issuance of common stock, net of issuance costs			12,957				8,572
Proceeds on long-term debt			—				387,460
Repayment on long-term debt			(4,875	)			(5,752	)
Net repayments from revolving lines-of-credit			(3,696	)			(2,969	)
Excess tax benefit on exercised stock options			1,218				2,055
Principal payments of capital lease obligations			(975	)			(288	)
Other			(75	)			(75	)
Net cash provided by continuing operations			3,105				238,017
Net cash used in discontinued operations			—				(6	)
Net cash provided by financing activities			3,105				238,011
Foreign exchange effect on cash and cash equivalents			(13,494	)			6,057
Net (decrease) increase in cash and cash equivalents			(226,730	)			282,694
Cash and cash equivalents, beginning of period			492,773				141,324
Cash and cash equivalents, end of period		$	266,043			$	424,018
Supplemental Disclosure of Cash Flow Information:
Interest paid		$	59,257			$	33,937
Income taxes paid		$	16,525			$	15,387
Supplemental Disclosure of Non-cash Activities:
Note issued for purchase of intangible assets		$	—			$	1,700
Equipment purchases under capital leases		$	2,363			$	1,356
Fair value of stock issued for settlement of an acquisition-related deferred purchase price obligation		$	16,281			$	—

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

(1) Basis of Presentation of Financial Information

     The accompanying consolidated financial statements of Alere Inc., formerly known as Inverness Medical Innovations, 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 presentation. 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 and cash flows. Our audited consolidated financial statements for the year ended December 31, 2009 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 April 16, 2010. 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, 2009.

     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.

(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 June 30, 2010, 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):

		June 30, 2010				December 31, 2009
Raw materials		$	76,100			$	62,397
Work-in-process			52,308				56,338
Finished goods			115,404				102,804
		$	243,812			$	221,539

(4) Stock-based Compensation

     We recorded stock-based compensation expense in our consolidated statements of operations of $8.1 million ($6.2 million, net of tax), $15.7 million ($12.3 million, net of tax), $6.6 million ($5.3 million, net of tax) and $12.5 million ($10.1 million, net of tax) for the three and six months ended June 30, 2010 and 2009, respectively, as follows (in thousands):

		Three Months Ended June 30,								Six Months Ended June 30,
		2010				2009				2010				2009
Cost of sales		$	395			$	476			$	801			$	908
Research and development			1,506				1,305				3,872				2,321
Sales and marketing			900				979				1,913				1,879
General and administrative			5,313				3,846				9,098				7,377
		$	8,114			$	6,606			$	15,684			$	12,485

     We report excess tax benefits from the exercise of stock options as financing cash flows. For the three and six months ended June 30, 2010 there was $0.9 million and $1.2 million, respectively, of excess tax benefits generated from option exercises. For the three and six months ended June 30, 2009 there was $2.1 million of excess tax benefits generated from option exercises.

ALERE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(unaudited)

     Our stock option plans provide for grants of options to employees and others to purchase common stock at the fair market value of such shares on the grant date of the award. The options generally vest over a four-year period, beginning on the date of grant, with a graded vesting schedule of 25% at the end of each of the four years. We generally use a Black-Scholes option-pricing model to calculate the grant-date fair value of options. The fair value of the stock options granted during the three and six months ended June 30, 2010 and 2009 was calculated using the following weighted-average assumptions:

		Three Months Ended June 30,								Six Months Ended June 30,
		2010				2009				2010				2009
Stock Options:
Risk-free interest rate			2.29	%			2.07	%			2.41	%			2.08	%
Expected dividend yield			—				—				—				—
Expected term		5.34 years				5.20 years				5.34 years				5.20 years
Expected volatility			41.54	%			44.53	%			41.89	%			44.52	%

		Three Months Ended June 30,								Six Months Ended June 30,
		2010				2009				2010				2009
Employee Stock Purchase Plan:
Risk-free interest rate			0.18	%			0.28	%			0.18	%			0.28	%
Expected dividend yield			—				—				—				—
Expected term		181 days				181 days				181 days				181 days
Expected volatility			38.70	%			72.05	%			38.70	%			72.05	%

     A summary of the stock option activity for the six months ended June 30, 2010 is as follows (in thousands, except price per share and contractual term):

										Weighted-
										Average
						Weighted-				Remaining
						Average Exercise				Contractual				Aggregate
		Options				Price				Term				Intrinsic Value
Options outstanding, January 1, 2010			9,838			$	34.72
Granted			794			$	49.72
Exercised			(364	)		$	24.84
Canceled/expired/forfeited			(392	)		$	40.10
Options outstanding, June 30, 2010			9,876			$	36.04			6.23 years				$	22,166
Options exercisable, June 30, 2010			6,114			$	32.43			4.88 years				$	19,694

     The weighted-average grant-date fair value under a Black-Scholes option pricing model of options granted during the six months ended June 30, 2010 and 2009 was $14.79 per share and $14.27 per share, respectively. The total intrinsic value of options exercised during the three and six months ended June 30, 2010 was $1.6 million and $5.5 million, respectively.

     As of June 30, 2010, there was $43.9 million of total unrecognized compensation cost related to non-vested stock options, which is expected to be recognized over a remaining weighted-average vesting period of 1.51 years.

(5) Net (Loss) Income per Common Share

     The following table sets forth the computation of basic and diluted net (loss) income per common share for the periods presented (in thousands, except per share data):

		Three Months Ended June 30,								Six Months Ended June 30,
		2010				2009				2010				2009
(Loss) income from continuing operations		$	(1,976	)		$	4,886			$	237			$	12,624
Less: Preferred stock dividends			5,984				5,693				11,837				11,213
(Loss) income from continuing operations attributable to common shares			(7,960	)			(807	)			(11,600	)			1,411
Less: Net income (loss) attributable to non-controlling interest			343				224				(327	)			324
(Loss) income from continuing operations attributable to Alere Inc. and Subsidiaries			(8,303	)			(1,031	)			(11,273	)			1,087
(Loss) income from discontinued operations			(35	)			(166	)			11,911				(1,513	)
Net (loss) income available to common stockholders		$	(8,338	)		$	(1,197	)		$	638			$	(426	)

ALERE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(unaudited)

		Three Months Ended June 30,								Six Months Ended June 30,
		2010				2009				2010				2009
Weighted-average common shares outstanding — basic			84,193				78,775				84,001				78,695
Effect of dilutive securities:
Stock options			—				—				—				1,057
Warrants			—				—				—				127
Weighted-average common shares outstanding — diluted			84,193				78,775				84,001				79,879

		Three Months Ended June 30,								Six Months Ended June 30,
		2010				2009				2010				2009
Net income per common share — basic:
(Loss) income from continuing operations attributable to Alere Inc. and Subsidiaries		$	(0.10	)		$	(0.01	)		$	(0.13	)		$	0.01
(Loss) income from discontinued operations			—				—				0.14				(0.02	)
Net (loss) income per common share — basic		$	(0.10	)		$	(0.02	)		$	0.01			$	(0.01	)
Net income per common share — diluted:
(Loss) income from continuing operations attributable to Alere Inc. and Subsidiaries		$	(0.10	)		$	(0.01	)		$	(0.13	)		$	0.01
(Loss) income from discontinued operations			—				—				0.14				(0.02	)
Net (loss) income per common share — diluted		$	(0.10	)		$	(0.02	)		$	0.01			$	(0.01	)

     For the three and six-month periods ended June 30, 2010, anti-dilutive shares of 17,105,000 and 17,310,000, respectively, were excluded from the computations of diluted net (loss) income per share. For the three and six-month periods ended June 30, 2009, anti-dilutive shares of 17,180,000 and 14,936,000, respectively, were excluded from the computations of diluted net (loss) income per share.

(6) Redeemable Non-controlling Interest

     We entered into a put arrangement as part of a shareholder agreement with respect to the common securities that represent the 21.25% non-controlling interest of a certain minority shareholder in Standard Diagnostics, Inc., or Standard Diagnostics. This put arrangement is exercisable at KRW 40,000 per share by the counterparty upon the occurrence of certain events which are outside of our control. As a result, this non-controlling interest is classified as mezzanine equity on our accompanying consolidated balance sheet as of June 30, 2010. The redeemable non-controlling interest was recorded at its fair value of KRW 57.9 billion, or $49.2 million, as of the consummation of the transaction on February 8, 2010. The fair value of the redeemable non-controlling interest was determined using both a market approach and an income approach which utilizes a discounted cash flow model including assumptions of projected revenue, expenses, capital expenditures, other costs and a discount rate appropriate for the risk of achieving the projected cash flows. The redeemable put arrangement has an estimated redemption price of KRW 65.4 billion, or $53.7 million as of June 30, 2010. The redeemable non-controlling interest will be accreted to the redemption price, through equity, at the point at which the redemption becomes probable. In addition, if the put is exercised, we will incur a penalty in the amount of KRW 63.0 billion, or approximately $51.7 million at June 30, 2010, which will be accounted for as compensation expense at the time of the exercise.

(7) Preferred Stock

     As of June 30, 2010, we had 5.0 million shares of preferred stock, $0.001 par value, authorized, of which 2.3 million shares were designated as Series B Convertible Perpetual Preferred Stock, or Series B preferred stock. In

ALERE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(unaudited)

connection with our acquisition of Matria Healthcare Inc., or Matria, we issued shares of the Series B preferred stock and have paid dividends to date in shares of Series B preferred stock. At June 30, 2010, there were 2.0 million shares of Series B preferred stock outstanding with a fair value of approximately $401.6 million.

     Each share of Series B preferred stock, which has a liquidation preference of $400.00 per share, is convertible, at the option of the holder and only upon certain circumstances, into 5.7703 shares of our common stock, plus cash in lieu of fractional shares. The initial conversion price is $69.32 per share, subject to adjustment upon the occurrence of certain events, but will not be adjusted for accumulated and unpaid dividends. Upon a conversion of shares of the Series B preferred stock, we may, at our option, satisfy the entire conversion obligation in cash or through a combination of cash and common stock. Series B preferred stock outstanding at June 30, 2010 would convert into 11.8 million shares of our common stock which are reserved. There were no conversions as of June 30, 2010.

     Generally, the shares of Series B preferred stock are convertible, at the option of the holder, if during any calendar quarter beginning with the second calendar quarter after the issuance date of the Series B preferred stock, if the closing sale price of our common stock for each of 20 or more trading days within any period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter exceeds 130% of the conversion price per share of common stock in effect on the last trading day of the immediately preceding calendar quarter. In addition, the shares of Series B preferred stock are convertible, at the option of the holder, in certain other circumstances, including those relating to the trading price of the Series B preferred stock and upon the occurrence of certain fundamental changes or major corporate transactions. We also have the right, under certain circumstances relating to the trading price of our common stock, to force conversion of the Series B preferred stock. Depending on the timing of any such forced conversion, we may have to make certain payments relating to foregone dividends, which payments we can make, at our option, in the form of cash, shares of our common stock, or a combination of cash and shares of our common stock.

     Each share of Series B preferred stock accrues dividends at $12.00, or 3%, per annum, payable quarterly on January 15, April 15, July 15 and October 15 of each year, commencing following the first full calendar quarter after the issuance date. Dividends on the Series B preferred stock are cumulative from the date of issuance. Accrued dividends are payable only if declared by our board of directors and, upon conversion by the Series B preferred stockholder, the holder will not receive any cash payment representing accumulated dividends. If our board of directors declares a dividend payable, we have the right to pay the dividends in cash, shares of common stock, additional shares of Series B preferred stock or a similar convertible preferred stock or any combination thereof.

     Quarterly dividends paid in shares of common stock or Series B preferred stock are in an amount per share of such stock equal to the quotient of (a) $3.00 divided by (b) 97% of the average of the volume-weighted average price per share of either our common stock or the Series B preferred stock, as the case may be, on the New York Stock Exchange for each of the five consecutive trading days ending on the second trading day immediately prior to the record date of the dividend.

     For the three and six months ended June 30, 2010, Series B preferred stock dividends amounted to $6.0 million and $11.8 million, respectively, which reduced earnings available to common stockholders for purposes of calculating net (loss) income per common share for the three and six months ended June 30, 2010 (Note 5). For the three and six months ended June 30, 2009, Series B preferred stock dividends amounted to $5.7 million and $11.2 million, respectively, which reduced earnings available to common stockholders for purposes of calculating net (loss) income per common share for the three and six months ended June 30, 2009 (Note 5). As of July 15, 2010, payments have been made in shares of Series B preferred stock covering all dividend periods through June 30, 2010. As of June 30, 2010, 2.0 million shares of Series B preferred stock are issued and outstanding.

     The holders of Series B preferred stock have liquidation preferences over the holders of our common stock and other classes of stock, if any, outstanding at the time of liquidation. Upon liquidation, the holders of outstanding Series B preferred stock would receive an amount equal to $400.00 per share of Series B preferred stock, plus any accumulated and unpaid dividends. As of June 30, 2010, the liquidation preference of the outstanding Series B preferred stock was $814.7 million. The holders of the Series B preferred stock generally have no voting rights, except with respect to matters affecting the Series B preferred stock (including the creation of a senior preferred

ALERE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(unaudited)

stock) or in the event that dividends payable on the Series B preferred stock are in arrears for six or more quarterly periods, whether or not consecutive.

     We evaluated the terms and provisions of our Series B preferred stock to determine if it qualified for derivative accounting treatment. Based upon our evaluation, these securities do not qualify for derivative accounting.

(8) Comprehensive Income (Loss)

     In general, comprehensive income (loss) combines net income (loss) and other changes in equity during the year from non-owner sources. Our accumulated other comprehensive loss, which is a component of stockholders’ equity, includes foreign currency translation adjustments, gains (losses) on available-for-sale securities and interest rate swap adjustments. For the three and six months ended June 30, 2010, we generated a comprehensive loss of $32.1 million and $35.9 million, respectively, and for the three and six months ended June 30, 2009, we generated comprehensive income of $53.5 million and $21.8 million, respectively.

     A summary of the changes in stockholders’ equity and non-controlling interest comprising total equity for the six months ended June 30, 2010 and 2009 is provided below (in thousands):

		Six Months Ended June 30,
		2010												2009
		Total				Non-								Total				Non-
		Stockholders’				controlling								Stockholders’				controlling
		Equity				Interest				Total Equity				Equity				Interest				Total Equity
Equity, beginning of period		$	3,527,555			$	1,334			$	3,528,889			$	3,278,838			$	869			$	3,279,707
Comprehensive (loss) income:
Net income (loss)			12,475				(327	)			12,148				10,787				324				11,111
Other comprehensive (loss) income:
Unrealized gains (losses) on available for sale securities			48				—				48				164				—				164
Unrealized (losses) gains on interest rate swap			(260	)			—				(260	)			5,920				—				5,920
Minimum pension liability adjustment			302				—				302				44				—				44
Changes in cumulative translation adjustment			(48,464	)			(2,950	)			(51,414	)			4,836				—				4,836
Total other comprehensive (loss) income			(48,374	)			(2,950	)			(51,324	)			10,964				—				10,964
Total comprehensive (loss) income			(35,899	)			(3,277	)			(39,176	)			21,751				324				22,075
Issuance of common stock in connection with settlement of an acquisition-related deferred purchase price obligation			16,281				—				16,281				—				—				—
Exercise of common stock options and shares issued under employee stock purchase plan			12,958				—				12,958				8,572				—				8,572
Preferred stock dividends			(86	)			—				(86	)			(75	)			—				(75	)
Stock-based compensation related to grants of common stock options			15,684				—				15,684				12,485				—				12,485
Stock option income tax benefits			1,060				—				1,060				1,754				—				1,754
Acquisition of non-controlling interest			(5,305	)			3,213				(2,092	)			—				—				—
Redeemable non-controlling interest in subsidiaries’ income			—				(124	)			(124	)			—				—				—
Equity, end of period		$	3,532,248			$	1,146			$	3,533,394			$	3,323,325			$	1,193			$	3,324,518

     A summary of the changes in redeemable non-controlling interest recorded in the mezzanine section of the balance sheet for the six months ended June 30, 2010 is provided below:

		Six Months Ended
		June 30, 2010
Redeemable non-controlling interest, beginning of period		$	—
Acquisition of non-controlling interest			49,207
Net income			124
Redeemable non-controlling interest, end of period		$	49,331

(9) Business Combinations

     On January 1, 2009, we adopted a new accounting standard issued by the Financial Accounting Standards Board, or FASB, related to accounting for business combinations using the acquisition method of accounting (previously referred to as the purchase method). Acquisitions consummated prior to January 1, 2009 were accounted for in accordance with the previously applicable guidance. In accordance with the new accounting standard, we expensed $2.0 million and $5.9 million of acquisition-related costs during the three and six months ended June 30, 2010, respectively, primarily in general and administrative expense. We expensed $1.7 million and $6.4 million of acquisition-related costs during the three and six months ended June 30, 2009, respectively, in general and administrative expense. Included in the $6.4 million of expense during the six months ended June 30, 2009, was $3.8 million of costs associated with acquisition-related activity for transactions not consummated prior to January 1, 2009.

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

     Allocation of the purchase price for acquisitions is based on estimates of the fair value of the net assets acquired and, for acquisitions completed within the past year, is subject to adjustment upon finalization of the purchase price allocation. We are not aware of any information that indicates the final purchase price allocations will differ materially from the preliminary estimates. Determination of the estimated useful lives of the individual categories of intangible assets was 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 definite lives is recognized over the shorter of the respective lives of the agreement or the period of time the assets are expected to contribute to future cash flows. We amortize our finite-lived intangible assets on patterns in which the economic benefits are expected to be realized.

     (a) Acquisitions in 2010

     (i) Acquisition of a privately-owned research and development operation

     On March 11, 2010, we acquired a privately-owned research and development operation. The preliminary aggregate purchase price was $70.6 million, which consisted of an initial cash payment totaling $35.0 million and a contingent consideration obligation of up to $125.0 million with an acquisition date fair value of $35.6 million.

     We determined the acquisition date fair value of the contingent consideration obligation based on a probability-weighted approach derived from earn-out criteria estimates and the overall likelihood of achieving the targets before the corresponding delivery dates. The fair value measurement is based on significant inputs not observable in the market and thus represents a Level 3 measurement, as defined in fair value measurement accounting. The resultant

ALERE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(unaudited)

probability-weighted milestone payments were originally discounted using a discount rate of 6%. At each reporting date, we revalue the contingent consideration obligation to the reporting date fair value and record increases and decreases in the fair value as income or expense within general and administrative expense in our consolidated statements of operations. Increases or decreases in the fair value of the contingent consideration obligations may result from changes in discount periods and rates, changes in the timing and amount of revenue estimates and changes in probability assumptions with respect to the likelihood of achieving the various earn-out criteria. We recorded expense of approximately $1.3 million and $1.4 million in our consolidated statement of operations during the three and six months ended June 30, 2010, respectively, as a net result of a decrease in the discount period and fluctuations in the discount rate since the acquisition date. As of June 30, 2010, the fair value of the contingent consideration obligation was approximately $37.0 million.

     Included in our consolidated statements of operations for both the three and six months ended June 30, 2010 is revenue totaling approximately $0.1 million related to this acquired operation. The operating results of this acquired operation are included in our professional diagnostics reporting unit and business segment.

     A summary of the preliminary aggregate purchase price allocation for this acquisition is as follows (in thousands):

Current assets		$	373
Property, plant and equipment			152
Goodwill			61,213
Intangible assets			15,700
Total assets acquired			77,438
Current liabilities			731
Non-current liabilities			6,107
Total liabilities assumed			6,838
Net assets acquired			70,600
Less:
Fair value of contingent consideration obligation			35,600
Cash consideration		$	35,000

     The following are the intangible assets acquired and their respective amortizable lives (dollars in thousands):

		Amount				Amortizable Life
Core technology		$	8,600			15 years
In-process research and development			7,100			N/A
Total intangible assets		$	15,700

     We do not expect the amount allocated to goodwill to be deductible for tax purposes.

     (ii) Acquisition of the ATS business

     On February 17, 2010, we acquired Kroll Laboratory Specialists, Inc., headquartered in Gretna, Louisiana, which provides forensic quality substance abuse testing products and services across the United States. The preliminary aggregate purchase price was $109.5 million, which was paid in cash.

     Included in our consolidated statements of operations for the three and six months ended June 30, 2010 is revenue totaling approximately $9.5 million and $14.3 million, respectively, related to the acquired business, which we have subsequently renamed Alere Toxicology Services, or ATS. The operating results of ATS are included in our professional diagnostics reporting unit and business segment.

     A summary of the preliminary aggregate purchase price allocation for this acquisition is as follows (in thousands):

ALERE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(unaudited)

Current assets		$	6,043
Property, plant and equipment			3,300
Goodwill			53,489
Intangible assets			48,400
Total assets acquired			111,232
Current liabilities			1,693
Total liabilities assumed			1,693
Net assets acquired/cash consideration paid		$	109,539

     The following are the intangible assets acquired and their respective amortizable lives (dollars in thousands):

		Amount				Amortizable Life
Other intangible assets		$	13,300			20 years
Customer relationships			35,100			20 years
Total intangible assets		$	48,400

     The amount allocated to goodwill from this acquisition is deductible for tax purposes.

     (iii) Acquisition of Standard Diagnostics

     On February 8, 2010, we acquired a 61.92% ownership interest in Standard Diagnostics via a tender offer for approximately $162.1 million. On March 22, 2010, we acquired an incremental 13.37% ownership interest in Standard Diagnostics via a follow-on tender offer for approximately $36.2 million. In June 2010, we acquired an incremental 2.84% ownership interest for approximately $7.3 million, bringing our aggregate ownership interest in Standard Diagnostics to approximately 78.13% as of June 30, 2010. Standard Diagnostics specializes in the medical diagnostics industry. Its main product lines relate to diagnostic reagents and devices for hepatitis, infectious diseases, tumor markers, fertility, drugs of abuse, urine strips and protein strips. The preliminary aggregate purchase price was $205.6 million in cash.

     Included in our consolidated statements of operations for the three and six months ended June 30, 2010 is revenue totaling approximately $20.7 million and $32.0 million, respectively, related to Standard Diagnostics. The operating results of Standard Diagnostics are included in our professional diagnostics reporting unit and business segment.

     A summary of the preliminary aggregate purchase price allocation for this acquisition is as follows (in thousands):

Current assets		$	52,058
Property, plant and equipment			16,562
Goodwill			83,181
Intangible assets			131,580
Other non-current assets			13,334
Total assets acquired			296,715
Current liabilities			13,338
Non-current liabilities			32,088
Total liabilities assumed			45,426
Net assets acquired			251,289
Less:
Fair value of non-controlling interest			45,727
Cash consideration		$	205,562

     The following are the intangible assets acquired and their respective amortizable lives (dollars in thousands):

		Amount				Amortizable Life
Core technology		$	62,135			10 years
Trademarks and trade names			9,350			7 years
Customer relationships			46,155			10.9-15.9 years
Non-compete agreements			255			2 years
In-process research and development			13,685			N/A
Total intangible assets		$	131,580

ALERE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(unaudited)

     We do not expect the amount allocated to goodwill to be deductible for tax purposes.

     (iv) Other acquisitions in 2010

     During the first six months of 2010, we acquired the following businesses for a preliminary aggregate purchase price of $40.2 million, which consisted of initial cash payments totaling $38.7 million, a contingent consideration obligation with an acquisition date fair value of $0.8 million and deferred purchase price consideration with an acquisition date present value of $0.7 million.

•

RMD Networks, Inc., or RMD, located in Denver, Colorado, a provider of clinical groupware software and services designed to improve communication and coordination of care among providers, patients, and payers in the healthcare environment (Acquired January 2010)

•

certain assets of Streck, Inc., or Streck, located in Nebraska, a manufacturer of hematology, chemistry and immunology products for the clinical laboratory (Acquired January 2010)

•

assets of the diagnostics division of Micropharm Ltd., or Micropharm, located in Wales, United Kingdom, an expert in high quality antibody production in sheep for both diagnostic and therapeutic purposes, providing antisera on a contract basis for U.K. and overseas companies and academic institutions, mainly for research, therapeutic and diagnostic uses (Acquired March 2010)

•

Quantum Diagnostics Group Limited, or Quantum, headquartered in Essex, England, an independent provider of drug testing products and services to healthcare professionals across the U.K. and Europe (Acquired April 2010)

•

assets of the workplace health division of Good Health Solutions Pty Ltd., or GHS, located in East Sydney, Australia, an important player in the Australian health and wellness market, focusing on health screenings, health related consulting services, health coaching, and fitness instruction (Acquired April 2010)

•

certain assets of Unotech Diagnostics, Inc., or Unotech, located in California, a privately-owned company engaged in the development, formulation, manufacture, packaging, supply and distribution of our BladderCheck NMP22 lateral flow test and related lateral flow products (Acquired June 2010)

•

Scipac Holdings Limited, or Scipac, headquartered in Kent, England, a diagnostic reagent company with an extensive product portfolio supplying purified human antigens, recombinant proteins and disease state plasma to a global customer base (Acquired June 2010)

     The operating results of Streck, Micropharm, Quantum, Unotech and Scipac are included in our professional diagnostics reporting unit and business segment. The operating results of RMD and GHS are included in our health management reporting unit and business segment. Our consolidated statements of operations for the three and six months ended June 30, 2010 included revenue totaling approximately $2.8 million and $2.9 million, respectively, related to these businesses.

     A summary of the preliminary aggregate purchase price allocation for these acquisitions is as follows (in thousands):

Current assets		$	6,328
Property, plant and equipment			3,858
Goodwill			16,836
Intangible assets			22,499
Other non-current assets			68
Total assets acquired			49,589
Current liabilities			4,006
Non-current liabilities			5,433
Total liabilities assumed			9,439
Net assets acquired			40,150
Less:

ALERE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(unaudited)

Fair value of contingent consideration obligation			750
Present value of deferred purchase price consideration			688
Cash consideration		$	38,712

     The following are the intangible assets acquired and their respective amortizable lives (dollars in thousands):

		Amount				Amortizable Life
Core technology		$	950			5.2 years
Trademarks and trade names			731			5 years
Database			654			3 years
License agreements			459			10 years
Software			5,000			7 years
Customer relationships			10,636			1-21.6 years
Manufacturing know-how			3,683			2-15 years
Non-compete agreements			233			1 year
Other intangible assets			153			5 years
Total intangible assets		$	22,499

     Goodwill has been recognized in the acquisition of RMD, Quantum, GHS and Scipac and amounted to approximately $16.8 million. We do not expect the goodwill related to these acquisitions to be deductible for tax purposes.

     (b) Acquisitions in 2009

     During the year ended December 31, 2009, we acquired the following businesses for a preliminary aggregate purchase price of $655.1 million ($651.1 million present value at June 30, 2010), which consisted of $425.2 million in cash; 3,430,435 shares of our common stock with an aggregate fair value of $117.5 million; $2.9 million of fair value associated with employee stock options exchanged as part of the transactions; deferred purchase price consideration payable in cash and common stock with an aggregate fair value of $57.9 million; notes payable totaling $7.8 million; warrants with a fair value of $0.1 million and contingent consideration obligations with an acquisition date fair value of $39.8 million. In addition, we assumed and immediately repaid debt totaling approximately $45.1 million.

     We determined the acquisition date 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 fair value measurements are based on significant inputs not observable in the market and thus represents a Level 3 measurement as defined in fair value measurement accounting. The resultant probability-weighted cash flows were then initially discounted using discount rates ranging from 6% to 18%. At each reporting date, we revalue the contingent consideration obligations at fair value and record increases and decreases in the fair values as income or expense within general and administrative expense in our consolidated statement of operations. Increases or decreases in the fair value of the contingent consideration obligations may result from changes in discount periods and rates, changes in the timing and amount of financial estimates and changes in probability assumptions with respect to the likelihood of achieving the various earn-out criteria. We recorded income of approximately $5.1 million and $8.3 million in our consolidated statements of operations during the three and six months ended June 30, 2010, respectively, as a result of a decrease in the discount period, changes in the discount rates since the various acquisition dates and changes in estimates and probability assumptions with respect to the various earn-out criteria. As of June 30, 2010, the fair value of the contingent consideration obligations was approximately $33.3 million, of which $19.2 million is payable in shares of our common stock, unless certain 2010 financial targets are exceeded, in which case $11.8 million may be settled in cash at the election of the sellers.

•

51.0% share in Long Chain International Corp., or Long Chain, located in Taipei, Taiwan, a distributor of point-of-care diagnostics testing products primarily to the Taiwanese marketplace (Acquired December 2009). In January 2010, we acquired the remaining 49.0% interest in Long Chain.

•

Biolinker S.A., or Biolinker, located in Buenos Aires, Argentina, a distributor of point-of-care diagnostics testing products primarily to the Argentinean marketplace (Acquired December 2009)

ALERE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(unaudited)

•

Jinsung Meditech, Inc., or JSM, located in Seoul, Korea, a distributor of point-of-care diagnostics testing products primarily to the South Korean marketplace (Acquired December 2009)

•

Tapestry Medical, Inc., or Tapestry, located in Livermore, California, a privately-owned provider of products and related services designed to support anti-coagulation disease management for patients at risk for stroke and other clotting disorders (Acquired November 2009)

•

Mologic Limited, or Mologic, located in Sharnbrook, United Kingdom, a research and development entity having wide immunoassay experience, as well as a broad understanding of medical diagnostic devices and antibody development (Acquired October 2009)

•

Biosyn Diagnostics Limited, or Biosyn, located in Belfast, Ireland, a distributor of point-of-care diagnostics testing products primarily to the Irish marketplace (Acquired October 2009)

•

Medim Schweiz GmbH, or Medim, located in Zug, Switzerland, a distributor of point-of-care diagnostics testing products primarily to the Swiss marketplace (Acquired September 2009)

•

Free & Clear, Inc., or Free & Clear, located in Seattle, Washington, a privately-owned company that specializes in behavioral coaching to help employers, health plans and government agencies improve the overall health and productivity of their covered populations (Acquired September 2009)

•

ZyCare, Inc., or ZyCare, located in Chapel Hill, North Carolina, a provider of technology and services used to help manage many chronic illnesses (Acquired August 2009)

•

Concateno plc, or Concateno, a publicly-traded company headquartered in the United Kingdom that specializes in the manufacture and distribution of rapid drugs of abuse diagnostic products used in health care, criminal justice, workplace and other testing markets (Acquired August 2009)

•

Certain assets from CVS Caremark’s Accordant Common disease management programs, or Accordant, whereby chronically ill patients served by Accordant Common disease management programs are managed and have access to expanded offerings provided by our Alere Health business (Acquired August 2009)

•

GeneCare Medical Genetics Center, Inc., or GeneCare, located in Chapel Hill, North Carolina, a medical genetics testing and counseling business (Acquired July 2009)

•

assets of ACON Laboratories, Inc.’s and certain related entities’ business of researching, developing, manufacturing, distributing, marketing and selling lateral flow immunoassay and directly-related products in China, Asia Pacific, Latin America, South America, the Middle East, Africa, India, Pakistan, Russia and Eastern Europe (the “ACON Second Territory Business”) (Acquired April 2009)

     The operating results of Long Chain, Biolinker, JSM, Mologic, Biosyn, Medim, Concateno and the ACON Second Territory Business are included in our professional diagnostics reporting unit and business segment. The operating results of Tapestry, Free & Clear, ZyCare, Accordant and GeneCare are included in our health management reporting unit and business segment. Our consolidated statements of operations for the three and six months ended June 30, 2010 included revenue totaling approximately $75.7 million and $148.8 million, respectively, related to these businesses. Our consolidated statements of operations for both the three and six months ended June 30, 2009 included revenue totaling approximately $8.7 million related to these businesses.

ALERE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(unaudited)

     A summary of the preliminary aggregate purchase price allocation for these acquisitions is as follows (dollars in thousands):

Current assets		$	89,226
Property, plant and equipment			13,018
Goodwill			398,493
Intangible assets			298,560
Other non-current assets			1,541
Total assets acquired			800,838
Current liabilities			90,438
Non-current liabilities			59,306
Total liabilities assumed			149,744
Net assets acquired			651,094
Less:
Fair value of common stock issued (3,430,435 shares)			117,476
Fair value of stock options exchanged (315,227 options)			2,881
Fair value of warrants issued			57
Notes payable			7,819
Present value of deferred purchase price consideration			57,853
Fair value of contingent consideration obligation			39,815
Cash consideration		$	425,193

     The following are the intangible assets acquired and their respective amortizable lives (dollars in thousands):

		Amount				Amortizable Life
Core technology		$	13,320			3-10 years
Trademarks and trade names			33,753			2-20 years
Supplier relationships			1,581			8 years
Customer relationships			244,926			5.3-18.3 years
Non-compete agreements			4,280			2-5 years
In-process research and development			700			N/A
Total intangible assets		$	298,560

     Goodwill has been recognized in all transactions and amounted to approximately $398.5 million. Goodwill related to the acquisitions of Tapestry, GeneCare and Accordant, which totaled $52.7 million, is expected to be deductible for tax purposes. Goodwill related to all other acquisitions is not deductible for tax purposes.

     (c) Restructuring Plans of Acquisitions

     In connection with several of our acquisitions consummated during 2008 and prior, we initiated integration plans to consolidate and restructure certain functions and operations, including the costs associated with the termination of certain personnel of these acquired entities and the closure of certain of the acquired entities’ leased facilities. These costs have been recognized as liabilities assumed in connection with the acquisition of these entities and are subject to potential adjustments as certain exit activities are refined. The following table summarizes the liabilities established for exit activities related to these acquisitions (in thousands):

		Severance				Facility				Total Exit
		Related				And Other				Activities
Balance, December 31, 2009		$	5,369			$	7,001			$	12,370
Restructuring plan accruals			(1,536	)			—				(1,536	)
Payments			(2,743	)			(2,072	)			(4,815	)
Balance, June 30, 2010		$	1,090			$	4,929			$	6,019

     In connection with our acquisition of Matria, we implemented an integration plan to improve operating efficiencies and eliminate redundant costs resulting from the acquisition. The restructuring plan impacted all cost centers within the Matria organization, as activities were combined with our existing business operations. We recorded $18.7 million in exit costs, of which $13.8 million relates to change of control and severance costs to

ALERE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(unaudited)

involuntarily terminate employees and $4.8 million related to facility exit costs. During the first quarter of 2010, we determined that $1.5 million in change of control costs would not be incurred, therefore reducing the assumed liability and goodwill related to the Matria acquisition. As of June 30, 2010, $2.1 million in exit costs remain unpaid. See Note 10 for additional restructuring charges related to the Matria facility exit costs within the health management business segment.

     During 2007, we formulated restructuring plans in connection with our acquisition of Cholestech Corporation, or Cholestech, consistent with our acquisition strategy to realize operating efficiencies and cost savings. Additionally, in March 2008, we announced plans to close the Cholestech facility in Hayward, California. We have transitioned the manufacturing of the related products to our facility in San Diego, California and have transitioned the sales and distribution of the products to our shared services center in Orlando, Florida. Since inception of the plans, we recorded $9.2 million in exit costs, of which $6.5 million relates to executive change of control agreements and severance costs to involuntarily terminate employees and $2.7 million relates to facility exit costs. As of June 30, 2010, $3.0 million in exit costs remain unpaid. See Note 10 for additional restructuring charges related to the Cholestech facility closure and integration.

     As a result of our acquisitions of Panbio Limited, or Panbio, Matritech, Inc. and Ostex International, Inc., we established plans to exit facilities and realize efficiencies and cost savings. Total costs associated with these plans were $6.5 million, of which $1.8 million related to severance costs and $4.7 million related to facility and exit costs. As of June 30, 2010, $0.9 million in facility costs remain unpaid.

     Although we believe our plans and estimated exit costs for our acquisitions are reasonable, actual spending for exit activities may differ from current estimated exit costs.

     (d) Pro Forma Financial Information

     The following table presents selected unaudited financial information of our company, including the assets of the ACON Second Territory Business and Standard Diagnostics as if the acquisition of these entities had occurred on January 1, 2009. Pro forma results exclude adjustments for various other less significant acquisitions completed since January 1, 2009, as these acquisitions did not materially affect our results of operations. The less significant 2009 and 2010 acquisitions contributed $77.5 million and $150.6 million of net revenue during the three and six months ended June 30, 2010, respectively, and $8.7 million during the three and six months ended June 30, 2009.

     The pro forma results are derived from the historical financial results of the acquired businesses for the periods presented and are not necessarily indicative of the results that would have occurred had the acquisitions been consummated on January 1, 2009 (in thousands, except per share amounts).

		Three Months Ended June 30,								Six Months Ended June 30,
		2010				2009				2010				2009
Pro forma net revenue		$	522,960			$	453,744			$	1,044,367			$	899,782
Pro forma net (loss) income from continuing operations attributable to Alere Inc. and Subsidiaries		$	(6,419	)		$	436			$	(7,284	)		$	(1,033	)
Pro forma net (loss) income available to common stockholders		$	(6,454	)		$	270			$	4,628			$	(2,547	)
Pro forma net (loss) income from continuing operations attributable to Alere Inc. and Subsidiaries per common share — basic(1)		$	(0.08	)		$	0.01			$	(0.09	)		$	(0.01	)
Pro forma net (loss) income from continuing operations attributable to Alere Inc. and Subsidiaries per common share — diluted(1)		$	(0.08	)		$	0.01			$	(0.09	)		$	(0.01	)
Pro forma net (loss) income available to common stockholders — basic(1)		$	(0.08	)		$	—			$	0.06			$	(0.03	)
Pro forma net (loss) income available to common stockholders — diluted(1)		$	(0.08	)		$	—			$	0.06			$	(0.03	)

ALERE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(unaudited)

(10) Restructuring Plans

     The following table sets forth the aggregate charges associated with restructuring plans recorded in operating income for the three and six months ended June 30, 2010 and 2009 (in thousands):

		Three Months ended June 30,								Six Months ended June 30,
		2010				2009				2010				2009
Cost of net revenue		$	2,411			$	1,524			$	3,991			$	3,559
Research and development			308				246				223				757
Sales and marketing			296				280				1,248				412
General and administrative			3,237				807				7,758				2,295
		$	6,252			$	2,857			$	13,220			$	7,023

     (a) 2010 Restructuring Plans

     In the first quarter of 2010, management developed additional plans to reduce costs and improve efficiencies in our health management business segment. As a result of these plans, we recorded $0.7 million and $6.2 million in charges during the three and six months ended June 30, 2010, respectively. The charges for the three-month period included $0.6 million in severance costs and $0.1 million in costs associated with facility exit costs. The charges for the six-month period included $3.8 million in severance costs, $2.3 million in costs associated with facility exit costs and $0.1 million in present value accretion on facility exit costs, which was included in interest expense. As of June 30, 2010, $3.9 million in costs remains unpaid. We anticipate incurring additional restructuring costs associated with the present value accretion on facility exit costs under these plans.

     During the second quarter of 2010, management developed several plans to reduce costs and improve efficiencies in our professional diagnostics business segment. As a result of these plans, we recorded $2.0 million in charges during the three and six months ended June 30, 2010, primarily related to severance costs. As of June 30, 2010, $1.8 million of these costs remains unpaid. We anticipate incurring additional severance and facility exit costs of $1.0 million under these plans.

     (b) 2009 Restructuring Plans

     In 2009, management developed plans to reduce costs and improve efficiencies in our health management business segment, as well as reduce costs and consolidate operating activities among several of our professional diagnostics related German subsidiaries. As a result of these plans, we recorded $0.3 million in severance-related restructuring charges during the six months ended June 30, 2010. We have incurred $3.5 million since the inception of the plans, including $2.8 million in severance costs, $0.5 million in contract cancellation costs and $0.1 million in present value accretion on facility exit costs and $0.1 million in fixed asset impairment costs. Of the $3.4 million included in operating income, $2.3 million and $1.1 million was included in our health management and professional diagnostics business segments, respectively. We also recorded $0.1 million in present value accretion related to facility exit costs to interest expense during 2009. As of June 30, 2010, $0.2 million in exit costs remain unpaid. We expect to incur an additional $0.3 million in severance and facility exit costs under these plans during 2010, which will be included primarily in our professional diagnostics business segment.

     (c) 2008 Restructuring Plans

     In May 2008, we decided to close our facility located in Bedford, England and initiated steps to cease operations at this facility and transition the manufacturing operations principally to our manufacturing facilities in Shanghai and Hangzhou, China. Based upon this decision, during the three and six months ended June 30, 2010, we recorded $2.2 million and $2.8 million in restructuring charges, respectively. Included in the charges for the three-month period were $1.5 million related to transition costs, $0.3 million in severance costs, $0.3 million related to fixed asset and inventory write-offs and $0.1 million related to the acceleration of facility restoration costs. Of the charges recorded for the six-month period, $0.1 million related to severance-related costs, $2.1 million related to transition costs, $0.4 million related to fixed asset and inventory write-offs and $0.2 million related to the acceleration of facility restoration costs. During the three and six months ended June 30, 2009, we recorded $1.7 million and $2.3 million in restructuring charges, respectively. Included in the charges for the three-month period were $0.9 million related primarily to severance-related costs, $0.5 million related to fixed asset impairments, $0.2 million related to transition costs and $0.1 million related to the acceleration of facility restoration costs. Of the charges recorded for the six-month period, $1.4 million

ALERE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(unaudited)

related primarily to severance-related costs, $0.5 million relates to fixed asset impairments, $0.2 million related to transition costs and $0.2 million related to the acceleration of facility restoration costs. Of the $2.1 million and $2.6 million included in operating income for the three and six months ended June 30, 2010, respectively, all was charged to our professional diagnostics business segment. Of the $1.6 million included in operating income for the three months ended June 30, 2009, $0.2 million and $1.4 million were charged to our consumer diagnostics and professional diagnostics business segments, respectively. Of the $2.1 million included in operating income for the six months ended June 30, 2009, $0.2 million and $1.9 million were charged to our consumer diagnostics and professional diagnostics business segments, respectively. We also recorded $0.1 million and $0.2 million during both the three and six months ended June 30, 2010 and 2009, respectively, related to the accelerated present value accretion of our lease restoration costs due to the early termination of our facility lease, to interest expense.

     In addition to the restructuring charges discussed above, $1.3 million and $2.9 million of charges associated with the Bedford facility closure was borne by our 50/50 joint venture with P&G, or SPD, during the three and six months ended June 30, 2010, respectively, and $3.7 million and $5.8 million was borne by SPD during the three and six months ended June 30, 2009, respectively. The charges for the three months ended June 30, 2010 included $0.3 million in severance and retention costs, $0.6 million in transition costs and $0.4 million in inventory write-offs. The charges for the six months ended June 30, 2010 included $1.3 million in severance and retention costs and $1.6 million in transition costs. Of the total restructuring charges, 50%, or $0.7 million and $1.5 million, has been included in equity earnings of unconsolidated entities, net of tax, in our consolidated statements of operations for the three and six months ended June 30, 2010, respectively. Included in the $3.7 million of charges recorded by SPD for the three months ended June 30, 2009 were $3.4 million in severance and retention costs, $0.3 million of fixed asset impairments, a reduction of $0.1 million in transition costs and $0.1 million in acceleration of facility exit costs. Included in the $5.8 million of charges recorded by SPD for the six months ended June 30, 2009 were $5.2 million in severance and retention costs, $0.4 million of fixed asset impairments, $0.1 million in transition costs and $0.1 million in acceleration of facility exit costs. Of these restructuring charges, $1.8 million and $2.9 million have been included in equity earnings of unconsolidated entities, net of tax, in our consolidated statements of operations for the three and six months ended June 30, 2009, respectively. Of the total exit costs incurred jointly with SPD under this plan, including severance-related costs, lease penalties and restoration costs, $10.9 million remains unpaid as of June 30, 2010.

     Since inception of the plan, we have recorded $20.9 million in restructuring charges, including $7.5 million related to the acceleration of facility restoration costs, $5.9 million of fixed asset and inventory impairments, $4.0 million in severance costs, $0.7 million in early termination lease penalties, $3.4 million in transition costs and $0.6 million related to a pension plan curtailment gain associated with the Bedford employees being terminated. SPD has been allocated $27.8 million in restructuring charges since the inception of the plan, including $9.6 million of fixed asset and inventory impairments, $11.2 million in severance and retention costs, $2.9 million in early termination lease penalties, $3.8 million in facility exit costs and $0.3 million related to the acceleration of facility exit costs. We anticipate incurring additional costs of approximately $4.8 million related to the closure of this facility, including, but not limited to, severance and retention costs, rent obligations, transition costs and incremental interest expense associated with our lease obligations which will terminate at the end of 2011. Of these additional anticipated costs, approximately $1.2 million will be borne by us and included primarily in our professional diagnostics business segment. Additionally, approximately $3.6 million will be borne by SPD. We expect the majority of these costs to be incurred by the end of 2010.

     Additionally, in 2008, we formulated business transition plans related to the closure of our Cholestech, HemoSense, Inc. and Panbio facilities. In connection with these plans, we incurred $1.6 million and $2.3 million in restructuring charges related to our professional diagnostics business segment during the three and six months ended June 30, 2010, respectively. Included in the charges for the three-month period were $0.9 million in facility closure and transition costs and $0.7 million in fixed asset and inventory write-offs. Of the charges incurred in the six-month period, $0.3 million relates to severance and retention costs, $1.3 million in facility closure and transition costs and $0.7 million in fixed asset and inventory write-offs. During the three and six months ended June 30, 2009, we incurred $0.9 million and $4.0 million in restructuring charges, respectively. Of the charges incurred in the three-month period, $0.4 million relates

ALERE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(unaudited)

to severance and retention costs, $0.4 million relates to transition costs and $0.1 million relates to present value accretion of facility lease costs. Of the charges incurred in the six-month period, $1.9 million relates to fixed asset impairments, $1.2 million relates to severance and retention costs, $0.6 million in transition costs, $0.2 million in inventory write-offs and $0.1 million in present value accretion of facility lease costs. During the three and six months ended June 30, 2009, respectively, $0.8 million and $3.9 million in charges were included in operating income of our professional diagnostics business segment. We charged $0.1 million, related to the present value accretion of facility lease costs, to interest expense for the three and six months ended June 30, 2009. Since inception of the plans, we have incurred $14.3 million in restructuring charges, of which $4.6 million relates to severance and retention costs, $3.4 million in fixed asset impairments, $4.5 million in transition costs, $1.4 million in inventory write-offs and $0.4 million in present value accretion of facility lease costs related to these plans. Of the $9.5 million in severance and exit costs, $0.8 million remains unpaid as of June 30, 2010.

     We anticipate incurring an additional $0.5 million in restructuring charges under our Cholestech plan, primarily related to facility exit costs, along with costs to transition the Cholestech operations to our facility in San Diego which will be included in our professional diagnostics business segment. See Note 9(c) for further information and costs related to these plans.

(11) Long-term Debt

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

		June 30, 2010				December 31, 2009
First Lien Credit Agreement — Term loans		$	946,125			$	951,000
First Lien Credit Agreement — Revolving line of credit			142,000				142,000
Second Lien Credit Agreement			250,000				250,000
3% Senior subordinated convertible notes			150,000				150,000
9% Senior subordinated notes, net of original issue discount			388,966				388,278
7.875% Senior notes, net of original issue discount			244,350				243,959
Lines of credit			1,171				2,902
Other			17,995				19,346
			2,140,607				2,147,485
Less: Current portion			(15,654	)			(18,970	)
		$	2,124,953			$	2,128,515

     (a) 7.875% Senior Notes

     During the third quarter of 2009, we sold a total of $250.0 million aggregate principal amount of 7.875% senior notes due 2016, or the 7.875% senior notes, in two separate transactions. On August 11, 2009, we sold $150.0 million aggregate principal amount of 7.875% senior notes in a public offering. Net proceeds from this offering amounted to approximately $145.0 million, which was net of underwriters’ commissions totaling $2.2 million and original issue discount totaling $2.8 million. The net proceeds were used to fund our acquisition of Concateno. At June 30, 2010, we had $147.5 million in indebtedness under this issuance of our 7.875% senior notes.

     On September 28, 2009, we sold $100.0 million aggregate principal amount of 7.875% senior notes in a private placement to initial purchasers, who agreed to resell the notes only to qualified institutional buyers. Net proceeds from this offering amounted to approximately $95.0 million, which was net of the initial purchasers’ original issue discount totaling $3.5 million and offering expenses totaling approximately $1.5 million. The net proceeds were used to partially fund our acquisition of Free & Clear. At June 30, 2010, we had $96.8 million in indebtedness under this issuance of our 7.875% senior notes.

     The 7.875% senior notes were issued under an indenture dated August 11, 2009, as amended or supplemented, the August 2009 Indenture. The 7.875% senior notes accrue interest from the dates of their respective issuances at the rate of 7.875% per year. Interest on the notes is payable semi-annually on February 1 and August 1, commencing on February 1, 2010. The notes mature on February 1, 2016, unless earlier redeemed.

ALERE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(unaudited)

     We may redeem the 7.875% senior notes, in whole or part, at any time on or after February 1, 2013, by paying the principal amount of the notes being redeemed plus a declining premium, plus accrued and unpaid interest to, but excluding, the redemption date. The premium declines from 3.938% during the twelve months on and after February 1, 2013 to 1.969% during the twelve months on and after February 1, 2014 to zero on and after February 1, 2015. At any time prior to August 1, 2012, we may redeem up to 35% of the aggregate principal amount of the 7.875% senior notes with money that we raise in certain equity offerings so long as (i) we pay 107.875% of the principal amount of the notes being redeemed, plus accrued and unpaid interest to (but excluding) the redemption date; (ii) we redeem the notes within 90 days of completing such equity offering; and (iii) at least 65% of the aggregate principal amount of the 7.875% senior notes remains outstanding afterwards. In addition, at any time prior to February 1, 2013, we may redeem some or all of the 7.875% senior notes by paying the principal amount of the notes being redeemed plus the payment of a make-whole premium, plus accrued and unpaid interest to, but excluding, the redemption date.

     If a change of control occurs, subject to specified conditions, we must give holders of the 7.875% senior notes an opportunity to sell their notes to us at a purchase price of 101% of the principal amount of the notes, plus accrued and unpaid interest to, but excluding, the date of the purchase.

     If we or our subsidiaries engage in asset sales, we or they generally must either invest the net cash proceeds from such sales in our or their businesses within a specified period of time, prepay certain indebtedness or make an offer to purchase a principal amount of the 7.875% senior notes equal to the excess net cash proceeds, subject to certain exceptions. The purchase price of the notes will be 100% of their principal amount, plus accrued and unpaid interest.

     The 7.875% senior notes are unsecured and are equal in right of payment to all of our existing and future senior debt, including our borrowing under our secured credit facilities. Our obligations under the 7.875% senior notes and the August 2009 Indenture are fully and unconditionally guaranteed, jointly and severally, on an unsecured senior basis by certain of our domestic subsidiaries, and the obligations of such domestic subsidiaries under their guarantees are equal in right of payment to all of their existing and future senior debt. See Note 21 for guarantor financial information.

     The August 2009 Indenture contains covenants that will limit our ability and the ability of our subsidiaries to, among other things, incur additional debt; pay dividends on capital stock or redeem, repurchase or retire capital stock or subordinated debt; make certain investments; create liens on assets; transfer or sell assets; engage in transactions with affiliates; create restrictions on our or their ability to pay dividends or make loans, asset transfers or other payments to us or them; issue capital stock; engage in any business, other than our or their existing businesses and related businesses; enter into sale and leaseback transactions; incur layered indebtedness; and consolidate, merge or transfer all or substantially all of our or their assets, taken as a whole. These covenants are subject to certain exceptions and qualifications.

     Interest expense related to our 7.875% senior notes for the three and six months ended June 30, 2010, including amortization of deferred financing costs and original issue discounts, was $5.4 million and $10.6 million, respectively. As of June 30, 2010, accrued interest related to the 7.875% senior notes amounted to $8.2 million.

     (b) 9% Senior Subordinated Notes

     On May 12, 2009, we completed the sale of $400.0 million aggregate principal amount of 9% senior subordinated notes due 2016, or the 9% subordinated notes, in a public offering. Net proceeds from this offering amounted to $379.5 million, which was net of underwriters’ commissions totaling $8.0 million and original issue discount totaling $12.5 million. The net proceeds are intended to be used for general corporate purposes. At June 30, 2010, we had $389.0 million in indebtedness under our 9% subordinated notes.

     The 9% subordinated notes, which were issued under an indenture dated May 12, 2009, as amended or supplemented, the May 2009 Indenture, accrue interest from the date of their issuance, or May 12, 2009, at the rate of 9% per year. Interest on the notes is payable semi-annually on May 15 and November 15, commencing on November 15, 2009. The notes mature on May 15, 2016, unless earlier redeemed.

ALERE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(unaudited)

     We may redeem the 9% subordinated notes, in whole or part, at any time on or after May 15, 2013, by paying the principal amount of the notes being redeemed plus a declining premium, plus accrued and unpaid interest to, but excluding, the redemption date. The premium declines from 4.50% during the twelve months after May 15, 2013 to 2.25% during the twelve months after May 15, 2014 to zero on and after May 15, 2015. At any time prior to May 15, 2012, we may redeem up to 35% of the aggregate principal amount of the 9% subordinated notes with money that we raise in certain equity offerings so long as (i) we pay 109% of the principal amount of the notes being redeemed, plus accrued and unpaid interest to (but excluding) the redemption date; (ii) we redeem the notes within 90 days of completing such equity offering; and (iii) at least 65% of the aggregate principal amount of the 9% subordinated notes remains outstanding afterwards. In addition, at any time prior to May 15, 2013, we may redeem some or all of the 9% subordinated notes by paying the principal amount of the notes being redeemed plus the payment of a make-whole premium, plus accrued and unpaid interest to, but excluding, the redemption date.

     If a change of control occurs, subject to specified conditions, we must give holders of the 9% subordinated notes an opportunity to sell their notes to us at a purchase price of 101% of the principal amount of the notes, plus accrued and unpaid interest to, but excluding, the date of the purchase.

     If we or our subsidiaries engage in asset sales, we or they generally must either invest the net cash proceeds from such sales in our or their businesses within a specified period of time, prepay senior debt or make an offer to purchase a principal amount of the 9% subordinated notes equal to the excess net cash proceeds, subject to certain exceptions. The purchase price of the notes will be 100% of their principal amount, plus accrued and unpaid interest.

     The 9% subordinated notes are unsecured and are subordinated in right of payment to all of our existing and future senior debt, including our borrowing under our secured credit facilities. Our obligations under the 9% subordinated notes and the May 2009 Indenture are fully and unconditionally guaranteed, jointly and severally, on an unsecured senior subordinated basis by certain of our domestic subsidiaries, and the obligations of such domestic subsidiaries under their guarantees are subordinated in right of payment to all of their existing and future senior debt. See Note 21 for guarantor financial information.

     The May 2009 Indenture contains covenants that will limit our ability and the ability of our subsidiaries to, among other things, incur additional debt; pay dividends on capital stock or redeem, repurchase or retire capital stock or subordinated debt; make certain investments; create liens on assets; transfer or sell assets; engage in transactions with affiliates; create restrictions on our or their ability to pay dividends or make loans, asset transfers or other payments to us or them; issue capital stock; engage in any business, other than our or their existing businesses and related businesses; enter into sale and leaseback transactions; incur layered indebtedness; and consolidate, merge or transfer all or substantially all of our or their assets, taken as a whole. These covenants are subject to certain exceptions and qualifications.

     Interest expense related to our 9% subordinated notes for the three and six months ended June 30, 2010, including amortization of deferred financing costs and original issue discounts, was $9.8 million and $19.5 million, respectively. Interest expense related to our 9% subordinated notes for the three and six months ended June 30, 2009, including amortization of deferred financing costs and original issue discounts, was $5.2 million. As of June 30, 2010, accrued interest related to the senior subordinated notes amounted to $5.1 million.

     (c) Secured Credit Facilities

     As of June 30, 2010, we had approximately $946.1 million in aggregate principal amount of indebtedness outstanding under our First Lien Credit Agreement and $250.0 million in aggregate principal amount of indebtedness outstanding under our Second Lien Credit Agreement (collectively with the First Lien Credit Agreement, the secured credit facilities). Included in the secured credit facilities is a revolving line of credit of $150.0 million, of which $142.0 million was outstanding as of June 30, 2010. Under the terms of the secured credit facilities, substantially all of the assets of our U.S. subsidiaries are pledged as collateral. With respect to shares or ownership interests of foreign subsidiaries owned by U.S. entities, we have pledged 66% of such assets.

     Interest on our First Lien indebtedness, as defined in the credit agreement, is as follows: (i) in the case of Base Rate Loans, at a rate per annum equal to the sum of the Base Rate and the Applicable Margin, each as in effect from

ALERE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(unaudited)

time to time, (ii) in the case of Eurodollar Rate Loans, at a rate per annum equal to the sum of the Eurodollar Rate and the Applicable Margin, each as in effect for the applicable Interest Period, and (iii) in the case of other Obligations, at a rate per annum equal to the sum of the Base Rate and the Applicable Margin for Revolving Loans that are Base Rate Loans, each as in effect from time to time. The Base Rate is a floating rate which approximates the U.S. Prime rate and changes on a periodic basis. The Eurodollar Rate is equal to the LIBOR rate and is set for a period of one to three months at our election. Applicable margin with respect to Base Rate Loans is 1.00% and with respect to Eurodollar Rate Loans is 2.00%. Applicable margin ranges for our revolving line of credit with respect to Base Rate Loans is 0.75% to 1.25% and with respect to Eurodollar Rate Loans is 1.75% to 2.25%.

     The outstanding indebtedness under the Second Lien Credit Agreement are term loans in the aggregate amount of $250.0 million. Interest on these term loans, as defined in the credit agreement, is as follows: (i) in the case of Base Rate Loans, at a rate per annum equal to the sum of the Base Rate and the Applicable Margin, each as in effect from time to time, (ii) in the case of Eurodollar Rate Loans, at a rate per annum equal to the sum of the Eurodollar Rate and the Applicable Margin, each as in effect for the applicable Interest Period, and (iii) in the case of other Obligations, at a rate per annum equal to the sum of the Base Rate and the Applicable Margin for Base Rate Loans, as in effect from time to time. Applicable margin with respect to Base Rate Loans is 3.25% and with respect to Eurodollar Rate Loans is 4.25%.

     For the three and six months ended June 30, 2010, interest expense, including amortization of deferred financing costs, under the secured credit facilities was $15.8 million and $31.5 million, respectively. For the three and six months ended June 30, 2009, interest expense, including amortization of deferred financing costs, under the secured credit facilities was $15.9 million and $31.8 million, respectively. As of June 30, 2010, accrued interest related to the secured credit facilities amounted to $0.9 million. As of June 30, 2010, we were in compliance with all debt covenants related to the secured credit facility, which consisted principally of maximum consolidated leverage and minimum interest coverage requirements.

     In August 2007, we entered into interest rate swap contracts, with an effective date of September 28, 2007, that have a total notional value of $350.0 million and a maturity date of September 28, 2010. These interest rate swap contracts pay us variable interest at the three-month LIBOR rate, and we pay the counterparties a fixed rate of 4.85%. In March 2009, we extended our August 2007 interest rate hedge for an additional two-year period commencing in September 2010 at a one-month LIBOR rate of 2.54%. These interest rate swap contracts were entered into to convert $350.0 million of the $1.2 billion variable rate term loans under the secured credit facilities into fixed rate debt.

     In January 2009, we entered into interest rate swap contracts, with an effective date of January 14, 2009, that have a total notional value of $500.0 million and a maturity date of January 5, 2011. These interest rate swap contracts pay us variable interest at the one-month LIBOR rate, and we pay the counterparties a fixed rate of 1.195%. These interest rate swap contracts were entered into to convert $500.0 million of the $1.2 billion variable rate term loans under the secured credit facilities into fixed rate debt.

     (d) 3% Senior Subordinated Convertible Notes

     In May 2007, we sold $150.0 million aggregate principal amount of 3% senior subordinated convertible notes, or senior subordinated convertible notes. At June 30, 2010, we had $150.0 million in indebtedness under our senior subordinated convertible notes. The senior subordinated convertible notes are convertible into 3.4 million shares of our common stock at a conversion price of $43.98 per share.

     Interest expense related to our senior subordinated convertible notes for the three and six months ended June 30, 2010, including amortization of deferred financing costs, was $1.2 million and $2.5 million, respectively. Interest expense related to our senior subordinated convertible notes for the three and six months ended June 30, 2009, including amortization of deferred financing costs, was $1.2 million and $2.5 million, respectively. As of June 30, 2010, accrued interest related to the senior subordinated convertible notes amounted to $0.6 million.

ALERE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(unaudited)

(12) Derivative Financial Instruments

     We use derivative financial instruments (interest rate swap contracts) in the management of our interest rate exposure related to our secured credit facilities. We do not hold or issue derivative financial instruments for speculative purposes.

     The following tables summarize the fair value of our derivative instruments and the effect of derivative instruments on/in our accompanying consolidated balance sheets and consolidated statements of operations and in accumulated other comprehensive loss (in thousands):

				Fair Value at				Fair Value at
Derivative Instruments		Balance Sheet Caption		June 30, 2010				December 31, 2009
Interest rate swap contracts(1)		Accrued expenses and other
		current liabilities		$	1,917			$	—
Interest rate swap contracts(1)		Other long-term liabilities		$	14,756			$	15,945
				Amount of				Amount of
				Gain Recognized				Gain Recognized
				During the Three				During the Three
		Location of Gain (Loss)		Months Ended				Months Ended
Derivative Instruments		Recognized in Income		June 30, 2010				June 30, 2009
Interest rate swap contracts(1)		Other comprehensive loss		$	474			$	7,836
				Amount of				Amount of
				Loss Recognized				Gain Recognized
				During the Six				During the Six
		Location of Gain (Loss)		Months Ended				Months Ended
Derivative Instruments		Recognized in Income		June 30, 2010				June 30, 2009
Interest rate swap contracts(1)		Other comprehensive loss		$	(727	)		$	5,920