e10vq
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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
For the quarterly period ended September 30, 2011
OR
     
o   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                     to                    
COMMISSION FILE NUMBER 001-16789
(ALERE LOGO)
ALERE INC.
(Exact name of registrant as specified in its charter)
     
DELAWARE
(State or other jurisdiction of
incorporation or organization)
  04-3565120
(I.R.S. Employer
Identification No.)
51 SAWYER ROAD, SUITE 200
WALTHAM, MASSACHUSETTS 02453

(Address of principal executive offices)(Zip code)
(781) 647-3900
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes 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 October 31, 2011 was 86,011,860.
 
 

 


 

ALERE INC.
REPORT ON FORM 10-Q
For the Quarterly Period Ended September 30, 2011
     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, 2010 and other risk factors identified herein or from time to time in our periodic filings with the Securities and Exchange Commission. Readers should carefully review these risk factors, and should not place undue reliance on our forward-looking statements. These forward-looking statements are based on information, plans and estimates at the date of this report. We undertake no obligation to update any forward-looking statements to reflect changes in underlying assumptions or factors, new information, future events or other changes.
     Unless the context requires otherwise, references in this Quarterly Report on Form 10-Q to “we,” “us” and “our” refer to Alere Inc. and its subsidiaries.
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PART I — FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ALERE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(in thousands, except per share amounts)
                                 
    Three Months Ended September 30,     Nine Months Ended September 30,  
    2011     2010     2011     2010  
Net product sales
  $ 418,254     $ 363,433     $ 1,224,302     $ 1,063,549  
Services revenue
    162,266       171,123       493,393       497,292  
 
                       
Net product sales and services revenue
    580,520       534,556       1,717,695       1,560,841  
License and royalty revenue
    5,249       4,123       17,723       16,052  
 
                       
Net revenue
    585,769       538,679       1,735,418       1,576,893  
 
                       
Cost of net product sales
    193,899       170,549       573,919       500,990  
Cost of services revenue
    84,177       80,782       251,388       238,991  
 
                       
Cost of net product sales and services revenue
    278,076       251,331       825,307       739,981  
Cost of license and royalty revenue
    1,731       1,802       5,214       5,411  
 
                       
Cost of net revenue
    279,807       253,133       830,521       745,392  
 
                       
Gross profit
    305,962       285,546       904,897       831,501  
 
                       
Operating expenses:
                               
Research and development
    34,772       32,434       112,662       96,187  
Sales and marketing
    134,376       125,606       407,973       369,016  
General and administrative
    91,895       96,131       292,284       284,155  
 
                       
Total operating expenses
    261,043       254,171       812,919       749,358  
 
                       
Operating income
    44,919       31,375       91,978       82,143  
Interest expense, including amortization of original issue discounts and deferred financing costs
    (47,327 )     (34,180 )     (154,194 )     (100,921 )
Other income (expense), net
    (8,250 )     7,525       (5,477 )     14,681  
Gain on sale of joint venture interest
    288,896             288,896        
 
                       
Income (loss) from continuing operations before provision (benefit) for income taxes
    278,238       4,720       221,203       (4,097 )
Provision (benefit) for income taxes
    42,652       (167 )     (4,414 )     (964 )
 
                       
Income (loss) from continuing operations before equity earnings (losses) of unconsolidated entities, net of tax
    235,586       4,887       225,617       (3,133 )
Equity earnings (losses) of unconsolidated entities, net of tax
    4,118       (62 )     4,922       8,195  
 
                       
Income from continuing operations
    239,704       4,825       230,539       5,062  
Income from discontinued operations, net of tax
          2             11,913  
 
                       
Net income
    239,704       4,827       230,539       16,975  
Less: Net income attributable to non-controlling interests
    138       1,494       160       1,167  
 
                       
Net income attributable to Alere Inc. and Subsidiaries
    239,566       3,333       230,379       15,808  
Preferred stock dividends
    (5,358 )     (6,147 )     (16,682 )     (18,001 )
Preferred stock repurchase
                23,936        
 
                       
Net income (loss) available to common stockholders
  $ 234,208     $ (2,814 )   $ 237,633     $ (2,193 )
 
                       
Basic net income (loss) per common share attributable to Alere Inc. and Subsidiaries:
                               
Income (loss) from continuing operations
  $ 2.84     $ (0.03 )   $ 2.81     $ (0.17 )
Income from discontinued operations, net of tax
                      0.14  
 
                       
Net income (loss) per common share
  $ 2.84     $ (0.03 )   $ 2.81     $ (0.03 )
 
                       
Diluted net income (loss) per common share attributable to Alere Inc. and Subsidiaries:
                               
Income (loss) from continuing operations
  $ 2.48     $ (0.03 )   $ 2.56     $ (0.17 )
Income from discontinued operations, net of tax
                      0.14  
 
                       
Net income (loss) per common share
  $ 2.48     $ (0.03 )   $ 2.56     $ (0.03 )
 
                       
Weighted average shares-basic
    82,486       84,796       84,508       84,269  
 
                       
Weighted average shares-diluted
    97,090       84,796       100,058       84,269  
 
                       
The accompanying notes are an integral part of these consolidated financial statements.

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ALERE INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited)
(in thousands, except par value)
                 
    September 30,     December 31,  
    2011     2010  
ASSETS
               
Current assets:
               
Cash and cash equivalents
  $ 276,754     $ 401,306  
Restricted cash
    349,551       2,581  
Marketable securities
    1,066       2,094  
Accounts receivable, net of allowances of $22,163 and $20,381 at September 30, 2011 and December 31, 2010, respectively
    423,437       397,148  
Inventories, net
    273,310       257,720  
Deferred tax assets
    66,560       57,111  
Income tax receivable
          1,383  
Receivable from joint venture, net
    15,668        
Prepaid expenses and other current assets
    98,009       74,914  
 
           
Total current assets
    1,504,355       1,194,257  
Property, plant and equipment, net
    420,005       390,510  
Goodwill
    2,889,893       2,831,300  
Other intangible assets with indefinite lives
    14,355       28,183  
Finite-lived intangible assets, net
    1,569,024       1,707,581  
Deferred financing costs, net and other non-current assets
    98,538       57,529  
Receivable from joint venture, net of current portion
    15,579       23,872  
Investments in unconsolidated entities
    177,780       62,556  
Marketable securities
    2,040       9,404  
Deferred tax assets
    10,045       25,182  
 
           
Total assets
  $ 6,701,614     $ 6,330,374  
 
           
 
               
LIABILITIES AND EQUITY
               
Current liabilities:
               
Current portion of long-term debt
  $ 45,421     $ 16,891  
Current portion of capital lease obligations
    2,491       2,126  
Short-term debt
    6,147        
Accounts payable
    145,397       126,844  
Accrued expenses and other current liabilities
    411,183       345,832  
Payable to joint venture, net
          2,787  
Deferred gain on joint venture
          288,378  
 
           
Total current liabilities
    610,639       782,858  
 
           
Long-term liabilities:
               
Long-term debt, net of current portion
    3,018,602       2,378,566  
Capital lease obligations, net of current portion
    2,334       1,402  
Deferred tax liabilities
    395,370       420,166  
Other long-term liabilities
    121,881       169,656  
 
           
Total long-term liabilities
    3,538,187       2,969,790  
 
           
Commitments and contingencies (Note 16)
               
Redeemable non-controlling interest
    2,502        
 
           
Stockholders’ equity:
               
Series B preferred stock, $0.001 par value (liquidation preference: $709,763 at September 30, 2011 and $836,222 at December 31, 2010); Authorized: 2,300 shares; Issued: 2,065 shares at September 30, 2011 and 2,091 shares at December 31, 2010; Outstanding: 1,774 shares at September 30, 2011 and 2,091 shares at December 31, 2010
    606,468       718,554  
Common stock, $0.001 par value; Authorized: 200,000 shares; Issued: 85,999 shares at September 30, 2011 and 84,928 shares at December 31, 2010; Outstanding: 78,320 shares at September 30, 2011 and 84,904 shares at December 31, 2010
    86       85  
Additional paid-in capital
    3,259,573       3,232,997  
Accumulated deficit
    (1,122,869 )     (1,377,184 )
Treasury stock, at cost, 7,679 shares at September 30, 2011 and 24 shares at December 31, 2010
    (184,971 )     (104 )
Accumulated other comprehensive income
    (10,576 )     690  
 
           
Total stockholders’ equity
    2,547,711       2,575,038  
Non-controlling interests
    2,575       2,688  
 
           
Total equity
    2,550,286       2,577,726  
 
           
Total liabilities and equity
  $ 6,701,614     $ 6,330,374  
 
           
The accompanying notes are an integral part of these consolidated financial statements.

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ALERE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
                 
    Nine Months Ended September 30,  
    2011     2010  
Cash Flows from Operating Activities:
               
Net income
  $ 230,539     $ 16,975  
Income from discontinued operations, net of tax
          11,913  
 
           
Income from continuing operations
    230,539       5,062  
Adjustments to reconcile income from continuing operations to net cash provided by operating activities:
               
Non-cash interest expense, including amortization of original issue discounts and write-off of deferred financing costs
    32,726       10,284  
Depreciation and amortization
    287,033       275,507  
Non-cash stock-based compensation expense
    16,275       22,947  
Impairment of inventory
    445       712  
Impairment of long-lived assets
    1,674       618  
Impairment of intangible assets
    2,938        
Gain on sale of joint venture interest
    (288,896 )      
Loss on sale of fixed assets
    1,096       607  
Gain on sales of marketable securities
    (376 )      
Equity earnings of unconsolidated entities, net of tax
    (4,922 )     (8,195 )
Deferred income taxes
    (30,999 )     (33,256 )
Other non-cash items
    (8,115 )     (1,378 )
Changes in assets and liabilities, net of acquisitions:
               
Accounts receivable, net
    (30,832 )     (2,553 )
Inventories, net
    (17,013 )     (29,107 )
Prepaid expenses and other current assets
    (17,364 )     6,752  
Accounts payable
    11,977       (19,423 )
Accrued expenses and other current liabilities
    66,769       23,121  
Other non-current liabilities
    (30,448 )     (21,984 )
 
           
Net cash provided by continuing operations
    222,507       229,714  
Net cash used in discontinued operations
          (390 )
 
           
Net cash provided by operating activities
    222,507       229,324  
 
           
Cash Flows from Investing Activities:
               
Increase in restricted cash
    (346,970 )     (280 )
Purchases of property, plant and equipment
    (94,692 )     (68,457 )
Proceeds from sale of property, plant and equipment
    846       642  
Proceeds from disposition of business
    11,491        
Cash paid for acquisitions, net of cash acquired
    (127,081 )     (465,583 )
Proceeds from sales of (increase in) marketable securities
    8,392       (17,887 )
Net cash received from (paid for) equity method investments
    (44,102 )     10,835  
Increase in other assets
    (55,888 )     (1,717 )
 
           
Net cash used in continuing operations
    (648,004 )     (542,447 )
Net cash provided by discontinued operations
          63,446  
 
           
Net cash used in investing activities
    (648,004 )     (479,001 )
 
           
Cash Flows from Financing Activities:
               
Cash paid for financing costs
    (66,338 )     (9,590 )
Cash paid for contingent purchase price consideration
    (25,305 )      
Proceeds from issuance of common stock, net of issuance costs
    24,159       17,839  
Repurchase of preferred stock
    (99,068 )      
Proceeds from issuance of long-term debt
    1,752,708       400,000  
Payments on long-term debt
    (1,195,337 )     (7,313 )
Net proceeds (payments) under revolving credit facilities
    104,808       (146,985 )
Repurchase of common stock
    (184,867 )      
Excess tax benefits on exercised stock options
    2,183       1,300  
Principal payments on capital lease obligations
    (3,084 )     (1,270 )
Other
    (10,451 )     (509 )
 
           
Net cash provided by financing activities
    299,408       253,472  
 
           
Foreign exchange effect on cash and cash equivalents
    1,537       (8,987 )
 
           
Net decrease in cash and cash equivalents
    (124,552 )     (5,192 )
Cash and cash equivalents, beginning of period
    401,306       492,773  
 
           
Cash and cash equivalents, end of period
  $ 276,754     $ 487,581  
 
           
The accompanying notes are an integral part of these consolidated financial statements.

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ALERE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(1) Basis of Presentation of Financial Information
     The accompanying consolidated financial statements of Alere Inc. are unaudited. In the opinion of management, the unaudited consolidated financial statements contain all adjustments considered normal and recurring and necessary for their fair 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, 2010 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 29, 2011. 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, 2010.
     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 September 30, 2011, our cash equivalents consisted of money market funds.
      We have restricted cash of $349.6 million and $2.6 million as of September 30, 2011 and December 31, 2010, respectively. Of the $349.6 million, $347.1 million relates to a cash balance established in connection with the Axis-Shield plc, or Axis-Shield, tender offer, which we expect to consumate during the fourth quarter of 2011.
(3) Inventories
     Inventories are stated at the lower of cost (first in, first out) or market and are comprised of the following (in thousands):
                 
    September 30, 2011     December 31, 2010  
Raw materials
  $ 82,582     $ 81,640  
Work-in-process
    60,880       61,849  
Finished goods
    129,848       114,231  
 
           
 
  $ 273,310     $ 257,720  
 
           
(4) Stock-based Compensation
     We recorded stock-based compensation expense in our consolidated statements of operations for the three and nine months ended September 30, 2011 and 2010, respectively, as follows (in thousands):
                                 
    Three Months Ended September 30,     Nine Months Ended September 30,  
    2011     2010     2011     2010  
Cost of net revenue
  $ 408     $ 589     $ 1,124     $ 1,390  
Research and development
    881       1,543       3,017       5,415  
Sales and marketing
    1,016       1,181       3,184       3,094  
General and administrative
    1,981       3,950       8,950       13,048  
 
                       
 
    4,286       7,263       16,275       22,947  
Benefit for income taxes
    (674 )     (1,295 )     (3,264 )     (4,633 )
 
                       
 
  $ 3,612     $ 5,968     $ 13,011     $ 18,314  
 
                       

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

(unaudited)
(5) Net Income (Loss) per Common Share
     The following table sets forth the computation of basic and diluted net income (loss) per common share for the periods presented (in thousands, except per share data):
                                 
    Three Months Ended September 30,     Nine Months Ended September 30,  
    2011     2010     2011     2010  
Numerator:
                               
Income from continuing operations
  $ 239,704     $ 4,825     $ 230,539     $ 5,062  
Preferred stock dividends
    (5,358 )     (6,147 )     (16,682 )     (18,001 )
Preferred stock repurchase
                23,936        
 
                       
Income (loss) from continuing operations attributable to common shares
    234,346       (1,322 )     237,793       (12,939 )
Less: Net income attributable to non-controlling interest
    138       1,494       160       1,167  
 
                       
Income (loss) from continuing operations attributable to Alere Inc. and Subsidiaries
    234,208       (2,816 )     237,633       (14,106 )
Income from discontinued operations
          2             11,913  
 
                       
Net income (loss) available to common stockholders
  $ 234,208     $ (2,814 )   $ 237,633     $ (2,193 )
 
                       
 
                               
Denominator:
                               
Weighted-average common shares outstanding — basic
    82,486       84,796       84,508       84,269  
Effect of dilutive securities:
                               
Stock options
    661             1,078        
Warrants
    95             120        
Potentially issuable shares of common stock associated with deferred purchase price consideration
    189             189        
Potentially issuable shares of common stock associated with Series B convertible preferred stock
    10,221             10,725        
Potentially issuable shares of common stock associated with convertible debt securities
    3,438             3,438        
 
                       
Weighted-average common shares outstanding — diluted
    97,090       84,796       100,058       84,269  
 
                       
 
                               
Net income (loss) per common share — basic:
                               
Income (loss) from continuing operations attributable to Alere Inc. and Subsidiaries
  $ 2.84     $ (0.03 )   $ 2.81     $ (0.17 )
Income from discontinued operations
                      0.14  
 
                       
Net income (loss) per common share — basic
  $ 2.84     $ (0.03 )   $ 2.81     $ (0.03 )
 
                       
 
                               
Net income (loss) per common share — diluted:
                               
Income (loss) from continuing operations attributable to Alere Inc. and Subsidiaries
  $ 2.48     $ (0.03 )   $ 2.56     $ (0.17 )
 
                               
Income from discontinued operations
                      0.14  
 
                       
Net income (loss) per common share — diluted
  $ 2.48     $ (0.03 )   $ 2.56     $ (0.03 )
 
                       

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

(unaudited)
     For the three and nine-month periods ended September 30, 2010, anti-dilutive shares of 16.3 million and 16.9 million, respectively, were excluded from the computations of diluted net income (loss) per share.
(6) Stockholders’ Equity
     (a) Preferred Stock
     For the three and nine months ended September 30, 2011, Series B preferred stock dividends amounted to $5.4 million and $16.7 million, respectively, and for the three and nine months ended September 30, 2010, Series B preferred stock dividends amounted to $6.1 million and $18.0 million, respectively, which reduced earnings available to common stockholders for purposes of calculating net income (loss) per common share for each of the respective periods. As of October 17, 2011, payments have been made covering all dividend periods through September 30, 2011.
     (b) Share Repurchases
     In December 2010, our Board of Directors authorized the repurchase of up to $50.0 million of our common or preferred stock. During the first quarter of 2011, under this authorization we repurchased, in the open market and privately negotiated transactions, 183,000 shares of our Series B preferred stock, which were convertible into approximately 1.1 million shares of our common stock, at a cost of approximately $49.4 million, which we paid in cash. Also during the first quarter of 2011, under this same authorization, we completed this repurchase program by repurchasing 16,700 shares of our common stock at a cost of approximately $0.6 million, which we paid in cash. The repurchase of the preferred stock at an average cost of $269.84 per preferred share, an amount less than the weighted average fair value of the preferred shares at issuance, resulted in the allocation of $13.7 million of income attributable to common shareholders.
     In March 2011, our Board of Directors authorized an additional repurchase of up to $50.0 million of our preferred or common stock. During the second quarter of 2011, under this authorization we repurchased, in the open market and privately negotiated transactions, 174,788 shares of our Series B preferred stock, which were convertible into approximately 1.0 million shares of our common stock, at a cost of approximately $49.7 million, which we paid in cash. Also during the second quarter of 2011, under this same authorization, we completed this repurchase program by repurchasing 8,300 shares of our common stock at a cost of approximately $0.3 million, which we paid in cash. The repurchase of the preferred stock at an average cost of $284.28 per preferred share, an amount less than the weighted average fair value of the preferred shares at issuance, resulted in the allocation of $10.2 million of income attributable to common shareholders.
     On May 31, 2011, we announced that our Board of Directors had authorized the repurchase of $200.0 million of our common stock or preferred stock, subject to completion of the consent solicitation we announced that day and receipt of necessary authorizations from our senior secured lenders. We satisfied these conditions on June 30, 2011. During the third quarter of 2011, under this authorization we repurchased approximately 7.6 million shares of our common stock at a cost of approximately $183.9 million, which we paid in cash.
(7) Comprehensive Income (Loss)
     The following table provides a reconciliation of net income attributable to Alere Inc. and Subsidiaries reported in our consolidated financial statements to comprehensive income (loss) for the three and nine months ended September 30, 2011 and 2010 (in thousands):
                                 
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2011     2010     2011     2010  
Net income attributable to Alere Inc. and Subsidiaries
  $ 239,566     $ 3,333     $ 230,379     $ 15,808  
 
                       
Other comprehensive income (loss), net of tax:
                               
Changes in cumulative translation adjustment
    (56,737 )     45,260       (18,116 )     (3,204 )
Unrealized gains (losses) on available for sale securities
    (480 )     404       (758 )     452  
Unrealized gains (losses) on hedging instruments
    (53 )     497       7,272       237  
Minimum pension liability adjustment
    246       (237 )     336       65  
 
                       
Total other comprehensive income (loss)
    (57,024 )     45,924       (11,266 )     (2,450 )
 
                       
Total comprehensive income
  $ 182,542     $ 49,257     $ 219,113     $ 13,358  
 
                       

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

(unaudited)
     A summary of the changes in stockholders’ equity and non-controlling interest comprising total equity for the nine months ended September 30, 2011 and 2010 is provided below (in thousands):
                                                 
    Nine Months Ended September 30,  
    2011     2010  
    Total     Non-             Total     Non-        
    Stockholders’     controlling             Stockholders’     controlling        
    Equity     Interest     Total Equity     Equity     Interest     Total Equity  
Equity, beginning of period
  $ 2,575,038     $ 2,688     $ 2,577,726     $ 3,527,555     $ 1,334     $ 3,528,889  
Issuance of common stock and warrants in connection with acquisitions
    1,000             1,000       16,277             16,277  
Exercise of common stock options, warrants and shares issued under employee stock purchase plan
    24,159             24,159       17,839             17,839  
Repurchase of common stock
    (184,867 )           (184,867 )                  
Repurchase of preferred stock
    (99,068 )           (99,068 )                  
Preferred stock dividends
    (5,391 )           (5,391 )     (119 )           (119 )
Stock-based compensation related to grants of common stock options
    16,275             16,275       22,947             22,947  
Excess tax benefits on exercised stock options
    1,452             1,452       452             452  
Non-controlling interest from acquisitions
                      (5,492 )     1,864       (3,628 )
Dividend relating to non-controlling interest
          (271 )     (271 )                  
Redeemable non-controlling interest in subsidiaries’ income
          (2 )     (2 )           (1,164 )     (1,164 )
Net income
    230,379       160       230,539       15,808       1,167       16,975  
Total other comprehensive loss
    (11,266 )           (11,266 )     (2,450 )           (2,450 )
 
                                   
Equity, end of period
  $ 2,547,711     $ 2,575     $ 2,550,286     $ 3,592,817     $ 3,201     $ 3,596,018  
 
                                   
     A summary of the changes in redeemable non-controlling interest recorded in the mezzanine section of the balance sheet for the nine months ended September 30, 2011 and 2010 is provided below:
                  
    Nine Months Ended   Nine Months Ended  
    September 30, 2011   September 30, 2010  
Redeemable non-controlling interest, beginning of period
  $   $  
Acquisition of non-controlling interest
    2,500     49,207  
Net income
    2     1,164  
 
         
Redeemable non-controlling interest, end of period
  $ 2,502   $ 50,371  
 
         
(8) Business Combinations
     Acquisitions are accounted for using the acquisition method and the acquired companies’ results have been included in the accompanying consolidated financial statements from their respective dates of acquisition. During the three and nine months ended September 30, 2011, we expensed acquisition-related costs of $2.9 million and $6.2 million, respectively, in general and administrative expense. During the three and nine months ended September 30,

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

(unaudited)
2010, we expensed acquisition-related costs of $0.9 million and $6.9 million, respectively, primarily in general and administrative expense.
     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.
     Net assets acquired are recorded at their fair value and are subject to adjustment upon finalization of the fair value analysis. We are not aware of any information that indicates the final fair value analysis will differ materially from the preliminary estimates. 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 finite 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 based on patterns on which the respective economic benefits are expected to be realized.
     (a) Acquisitions in 2011
     During 2011, we acquired the following businesses for a preliminary aggregate purchase price of $129.7 million, which included cash payments totaling $91.1 million, 25,463 shares of our common stock with an acquisition date fair value of $1.0 million, contingent consideration obligations with an aggregate acquisition date fair value of $29.8 million and deferred purchase price consideration with an acquisition date fair value of $3.9 million.
    90% interest in BioNote, Inc., or BioNote, headquartered in South Korea, a manufacturer of diagnostic products for the veterinary industry (Acquired January 2011). We previously owned a 10% interest in BioNote.
    assets, including domain name, of Pregnancy.org, LLC, or Pregnancy.org, a U.S.-based company providing a website for preconception, pregnancy and newborn care content, tools and sharing (Acquired January 2011)
    Home Telehealth Limited, subsequently renamed Alere Connected Health Limited, or Alere Connected Health, located in Cardiff, Wales, a company that focuses on delivering integrated, comprehensive services and programs to health and social care providers and insurers (Acquired February 2011)
    Bioeasy Diagnostica Ltda., or Bioeasy, located in Belo Horizonte, Brazil, a company that markets and sells rapid diagnostic tests and systems for laboratory diagnosis, prevention and monitoring of immunological diseases and fertility (Acquired March 2011)
    80.92% interest in Standing Stone, Inc., or Standing Stone, located in Westport, Connecticut, a company that focuses on disease state management by enhancing the quality of care provided to patients who require long-term therapy for chronic disease management (Acquired May 2011)
    certain assets, rights, liabilities and properties of Drug Detection Devices, Inc., or 3DL, located in Alpharetta, Georgia, a distributor that promotes, markets, distributes and sells drugs of abuse diagnostic products, including consumables, point-of-care diagnostic kits and related products and services (Acquired July 2011)
    Colibri Medical AB, or Colibri, located in Helsingborg, Sweden, a distributor of point-of-care drugs of abuse diagnostic products primarily to the Scandinavian marketplace (Acquired July 2011)
    Laboratory Data Systems, Inc., or LDS, located in Tampa, Florida, a provider of healthcare software products, services, consulting and solutions (Acquired August 2011)
 
    certain assets, liabilities and properties of Abatek Medical LLC, or Abatek, located in Dover, New Hampshire, a distributor that promotes, markets, distributes and sells drugs of abuse diagnostic products, including consumables, point-of-care diagnostic kits and related products and services (Acquired September 2011)
    Forensics Limited, or ROAR, located in Worcestershire, United Kingdom, a company that provides forensic quality toxicology services across the United Kingdom (Acquired September 2011)
     The operating results of BioNote, Bioeasy, 3DL, Colibri, Abatek, LDS and ROAR are included in our professional diagnostics reporting unit and business segment. The operating results of Pregnancy.org, Alere Connected Health and Standing Stone are included in our health management reporting unit and business segment.

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

(unaudited)
     Our consolidated statements of operations for the three and nine months ended September 30, 2011 included revenue totaling approximately $5.6 million and $15.3 million, respectively, related to these businesses. Goodwill has been recognized in all of the acquisitions and amounted to approximately $79.7 million. Goodwill related to the acquisitions of Pregnancy.org, 3DL, Abatek and LDS which totaled $14.8 million, is expected to be deductible for tax purposes.
     A summary of the preliminary fair values of the net assets acquired for the acquisitions consummated in 2011 is as follows (in thousands):
         
Current assets (1)
  $ 13,735  
Property, plant and equipment
    5,442  
Goodwill
    79,733  
Intangible assets
    51,514  
Other non-current assets
    996  
 
     
Total assets acquired
    151,420  
 
     
Current liabilities
    7,889  
Non-current liabilities
    11,320  
 
     
Total liabilities assumed
    19,209  
 
     
Net assets acquired
    132,211  
Less:
       
Fair value of non-controlling interest
    2,500  
Previously-owned 10% investment in BioNote
    3,937  
Contingent consideration
    29,785  
Fair value of common stock issued
    1,000  
Deferred purchase price consideration
    3,870  
 
     
Cash paid
  $ 91,119  
 
     
 
(1)   Includes cash acquired of approximately $4.2 million.
     The following are the intangible assets acquired and their respective fair values and weighted average useful lives (dollars in thousands):
                 
            Weighted  
            Average  
    Amount     Useful Life  
 
         
Core technology and patents
  $ 5,441     14.4 years
Database
    64     3 years
Trademarks and trade names
    5,052     16 years
Customer relationships
    24,697     11.7 years
Non-compete agreements
    720     4.3 years
Software
    7,400     10.9 years
Other
    7,766     15.6 years
In-process research and development
    374       N/A
 
             
Total intangible assets
  $ 51,514          
 
             
     (b)   Acquisitions in 2010
     During 2010, we acquired the following businesses for a preliminary aggregate purchase price of $602.5 million, which consisted of initial cash payments totaling $512.1 million, contingent consideration obligations with an acquisition date fair value of $89.7 million and deferred purchase price consideration with an acquisition date fair 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)

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

(unaudited)
    Standard Diagnostics, Inc., or Standard Diagnostics, headquartered in South Korea, a company that 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. (Initial controlling interest acquired February 2010)
    Kroll Laboratory Specialists, Inc., subsequently renamed Alere Toxicology Services, or Alere Toxicology, headquartered in Gretna, Louisiana, a company that provides forensic quality substance abuse testing products and services across the United States (Acquired February 2010)
    a privately-owned U.K. research and development operation (Acquired March 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., subsequently renamed Alere Health Pty Ltd., 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 Alere NMP22 BladderCheck 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)
    a privately-owned research and development operation, located in San Diego, California (Acquired July 2010)
    Diagnostixx of California, Corp. (d/b/a Immunalysis Corporation), or Immunalysis, located in Pomona, California, a privately-owned manufacturer and marketer of abused and prescription drug screening solutions used by clinical reference and forensic/crime laboratories (Acquired August 2010)
    AdnaGen AG, or AdnaGen, located in Langenhagen, Germany, a company that focuses on the development of innovative tumor diagnostics for the detection of rare cells (Acquired November 2010)
    Medlab Produtos Medicos Hospitalares Ltda, now known as Alere S.A., located in Sao Paulo, Brazil, a distributor of medical instruments and reagents to public and private laboratories throughout Brazil and Uruguay (Acquired December 2010)
    Capital Toxicology, LLC, or Capital Toxicology, located in Austin, Texas, a privately-held toxicology business specializing in pain management services (Acquired December 2010)
     The operating results of the acquired businesses mentioned above, except for RMD and Alere Health Pty Ltd., are included in our professional diagnostics reporting unit and business segment. The operating results of RMD and Alere Health Pty Ltd. are included in our health management reporting unit and business segment. Our consolidated statements of operations for the three and nine months ended September 30, 2010 included revenue totaling approximately $42.3 million and $91.5 million, respectively, related to these businesses. Goodwill has been recognized in all of the acquisitions, with the exception of Unotech, Micropharm and Streck, and amounted to

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(unaudited)
approximately $327.2 million. Goodwill related to the acquisitions of Alere Toxicology, Immunalysis and Capital Toxicology, which totaled $81.7 million, is expected to be deductible for tax purposes.
     A summary of the preliminary fair values of the net assets acquired for the acquisitions consummated in 2010 is as follows (in thousands):
         
Current assets (1)
  $ 85,127  
Property, plant and equipment
    36,257  
Goodwill
    327,205  
Intangible assets
    283,855  
Other non-current assets
    16,953  
 
     
Total assets acquired
    749,397  
 
     
Current liabilities
    30,170  
Non-current liabilities
    71,060  
 
     
Total liabilities assumed
    101,230  
 
     
Net assets acquired
    648,167  
Less:
       
Fair value of non-controlling interest
    45,623  
Contingent consideration
    89,708  
Deferred purchase price consideration
    688  
 
     
Cash paid
  $ 512,148  
 
     
 
(1)   Includes cash acquired of approximately $22.8 million.
     The following are the intangible assets acquired and their respective fair values and weighted average useful lives (dollars in thousands):
                 
            Weighted  
            Average  
    Amount     Useful Life  
Core technology and patents
  $ 106,885     12.4 years  
Quality systems
    153     5 years  
Database
    654     3 years  
Trademarks and trade names
    11,654     6.3 years  
License agreements
    459     10 years  
Customer relationships
    125,332     14.3 years  
Non-compete agreements
    2,650     4.2 years  
Software
    5,000     7 years  
Distribution agreement
    800     14 years  
Manufacturing know-how
    3,683     10.5 years  
In-process research and development
    26,585       N/A  
 
           
Total intangible assets
  $ 283,855          
 
           
     (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 and the total exit costs incurred since inception of each plan (in thousands):

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

(unaudited)
                                         
    Balance at     Adjustments             Balance at     Exit Costs  
    December 31,     to the     Amounts     September 30,     Since  
    2010     Reserve (1)     Paid     2011     Inception  
Acquisition of Matria Healthcare Inc.:
                                       
Severance-related costs
  $ 255     $ (176 )   $ (11 )   $ 68     $ 13,840  
Facility costs
    967             (534 )     433       4,674  
 
                             
Total costs for Matria Healthcare Inc.
    1,222       (176 )     (545 )     501       18,514  
 
                             
Acquisition of Panbio Limited:
                                       
Severance-related costs
                            211  
Facility costs
    242       (75 )     (167 )           828  
 
                             
Total costs for Panbio Limited
    242       (75 )     (167 )           1,039  
 
                             
Acquisition of Cholestech Corporation:
                                       
Severance-related costs
    85       (85 )                 5,796  
Facility costs
    1,805             (421 )     1,384       2,732  
 
                             
Total costs for Cholestech Corporation
    1,890       (85 )     (421 )     1,384       8,528  
 
                             
Total costs for all plans
  $ 3,354     $ (336 )   $ (1,133 )   $ 1,885     $ 28,081  
 
                             
 
(1)   These adjustments resulted in a change in the aggregate purchase price and related goodwill for each related acquisition.
     Of the total $1.9 million liability outstanding as of September 30, 2011, $0.6 million is included in accrued expenses and other current liabilities and $1.3 million is included in other long-term liabilities.
     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 Standard Diagnostics, as if the acquisition of this entity had occurred on January 1, 2010. Pro forma results exclude adjustments for various other less significant acquisitions completed since January 1, 2010, as these acquisitions did not materially affect our results of operations.
     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, 2010. There was no pro forma impact on the results of operations for the three and nine months ended September 30, 2011, as the acquisition of Standard Diagnostics closed prior to January 1, 2011 (in thousands, except per share amounts).
                 
    Three Months Ended     Nine Months Ended  
    September 30, 2010     September 30, 2010  
Pro forma net revenue
  $ 538,679     $ 1,583,046  
 
           
Pro forma loss from continuing operations attributable to Alere Inc. and Subsidiaries and available to common stockholders
  $ (2,631 )   $ (13,408 )
 
           
Pro forma loss available to common stockholders
  $ (2,629 )   $ (1,495 )
 
           
Pro forma loss from continuing operations attributable to Alere Inc. and Subsidiaries per common share — basic and diluted(1)
  $ (0.03 )   $ (0.16 )
 
           
Pro forma net loss available to common stockholders — basic and diluted(1)
  $ (0.03 )   $ (0.02 )
 
           
 
(1)   Net loss per common share amounts are computed as described in Note 5.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(unaudited)
(9) Restructuring Plans
     The following table sets forth aggregate restructuring charges recorded in our consolidated statements of operations for the three and nine months ended September 30, 2011 and 2010 (in thousands):
                                 
    Three Months Ended     Nine Months Ended  
Statement of Operations Caption   September 30,     September 30,  
    2011     2010     2011     2010  
Cost of net revenue
  $ 80     $ (675 )   $ 2,310     $ 3,316  
Research and development
    (1 )     235       433       458  
Sales and marketing
    935       80       3,809       1,328  
General and administrative
    2,115       489       13,074       8,247  
 
                       
Operating income
    3,129       129       19,626       13,349  
Interest expense, including amortization of original issue discounts and deferred financing costs
    (84 )     62       (206 )     (291 )
Other income (expense), net
          3,350             3,350  
Equity earnings (losses) of unconsoliated entities, net of tax
    (199 )     (1,728 )     (534 )     (3,191 )
 
                       
Net income
  $ 3,412     $ (1,555 )   $ 20,366     $ 13,481  
 
                       
     (a) 2011 Restructuring Plans
     In 2011, management executed a company-wide cost reduction plan, which impacted our corporate and other business segment, as well as the health management and professional diagnostics business segments. Management also developed plans within our professional diagnostics business segment to consolidate operating activities among certain of our European and Asia Pacific subsidiaries, including transferring the manufacturing of our Panbio products from Australia to our Standard Diagnostics facility in South Korea. Additionally, within our health management business segment, management executed plans to further reduce costs and improve efficiencies, as well as cease operations at our GeneCare Medical Genetics Center, Inc., or GeneCare, facility in Chapel Hill, North Carolina and transfer the majority of our Quality Assured Services, Inc. operation in Orlando, Florida to our facility in Livermore, California. The following table summarizes the restructuring activities related to our 2011 restructuring plans for the three and nine months ended September 30, 2011 (in thousands):
                                 
    Three Months Ended September 30, 2011  
    Professional     Health     Corporate        
    Diagnostics     Management     and Other     Total  
Severance-related costs
  $ 2,120     $ 82     $ 69     $ 2,271  
Facility and transition costs
    208       388             596  
Other exit costs
          58             58  
 
                       
Cash charges
    2,328       528       69       2,925  
Fixed asset and inventory impairments
    43       60             103  
 
                       
Total charges
  $ 2,371     $ 588     $ 69     $ 3,028  
 
                       
                                 
    Nine Months Ended September 30, 2011  
    Professional     Health     Corporate        
    Diagnostics     Management     and Other     Total  
Severance-related costs
  $ 5,722     $ 2,274     $ 1,117     $ 9,113  
Facility and transition costs
    207       4,195             4,402  
Other exit costs
          58             58  
 
                       
Cash charges
    5,929       6,527       1,117       13,573  
Fixed asset and inventory impairments
    659       864       2       1,525  
Intangible asset impairments
          2,935             2,935  
Other non-cash charges
          812             812  
 
                       
Total charges
  $ 6,588     $ 11,138     $ 1,119     $ 18,845  
 
                       

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

(unaudited)
     We anticipate incurring approximately $4.0 million in additional costs under these plans related to our professional diagnostics business segment, primarily related to severance and facility exit costs, and may also incur impairment charges on assets as plans are finalized. We anticipate incurring approximately $1.8 million in additional costs under these plans related to our health management business segment, primarily related to transition costs and facility lease obligations at our facility in Orlando, Florida.
     (b) 2010 Restructuring Plans
     In 2010, management developed several plans to reduce costs and improve efficiencies within our health management and professional diagnostics business segments. The following table summarizes the restructuring activities related to the 2010 restructuring plans for the three and nine months ended September 30, 2011 and 2010, respectively, and since inception (in thousands):
                                         
    Professional Diagnostics  
    Three Months Ended     Nine Months Ended        
    September 30,     September 30,     Since  
    2011     2010     2011     2010     Inception  
Severance-related costs
  $     $ 339     $ 74     $ 2,121     $ 2,480  
Facility and transition costs
    80       226       141       322       954  
Other exit costs
          3             9       10  
 
                             
Cash charges
    80       568       215       2,452       3,444  
Fixed asset and inventory impairments
                      111       126  
 
                             
Total charges
  $ 80     $ 568     $ 215     $ 2,563     $ 3,570  
 
                             
                                         
    Health Management  
    Three Months Ended     Nine Months Ended        
    September 30,     September 30,     Since  
    2011     2010     2011     2010     Inception  
Severance-related costs
  $     $ 4     $     $ 3,827     $ 4,647  
Facility and transition costs
        $ 120       40       2,349       2,476  
Other exit costs
    4     $ 62       80       168       271  
 
                             
Cash charges
    4       186       120       6,344       7,394  
Fixed asset and inventory impairments
                            165  
 
                             
Total charges
  $ 4     $ 186     $ 120     $ 6,344     $ 7,559  
 
                             
     We do not anticipate incurring significant additional charges under these plans.
     (c) 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. The charges for the three and nine months ended September 30, 2010 were included in our professional diagnostics business segment. Of the $3.5 million included in operating income since inception, $2.3 million and $1.2 million were included in our health management and professional diagnostics business segments, respectively. The following table summarizes the restructuring activities under the 2009 restructuring plans for the three and nine months ended September 30, 2010 and since inception (in thousands):

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

(unaudited)
                         
    Three Months Ended     Nine Months Ended     Since  
    September 30, 2010     September 30, 2010     Inception  
Severance-related costs
  $ 80     $ 392     $ 2,904  
Facility and transition costs
    2       7       511  
Other exit costs
                109  
 
                 
Cash charges
    82       399       3,524  
Fixed asset and inventory impairments
                67  
 
                 
Total charges
  $ 82     $ 399     $ 3,591  
 
                 
     No costs were incurred during the three and nine months ended September 30, 2011. All costs have been paid under these plans and we do not expect to incur any additional costs.
     (d) 2008 Restructuring Plans
     In May 2008, management 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. The following table summarizes the restructuring activities under this plan for the three and nine months ended September 30, 2011 and 2010, respectively, and since inception (in thousands):
                                         
    Three Months Ended     Nine Months Ended        
    September 30,     September 30,     Since  
    2011     2010     2011     2010     Inception  
 
                             
Severance-related costs
  $ (108 )   $ 47     $ (103 )   $ 100     $ 3,351  
Facility and transition costs
    161       (688 )     586       1,399       4,221  
Other exit costs
          (3,519 )           (3,299 )     3,842  
 
                             
Cash charges (recoveries)
    53       (4,160 )     483       (1,800 )     11,414  
Fixed asset and inventory impairments
          (27 )           432       5,921  
 
                             
Total charges (recoveries)
  $ 53     $ (4,187 )   $ 483     $ (1,368 )   $ 17,335  
 
                             
     During the three months ended September 30, 2010, we recorded net recoveries of $3.5 million in other exit costs, and $0.7 million in facility exit costs, as a result of a settlement of the facility restoration and lease costs with the landlord of the Bedford facility. The costs incurred for the three and nine months ended September 30, 2011 and 2010 were primarily included in our professional diagnostics business segment.
     In addition to the restructuring charges discussed above, certain charges associated with the Bedford facility closure were borne by SPD, our 50/50 joint venture with the Procter & Gamble Company, or P&G. Of the restructuring charges recorded by SPD, 50% has been included in equity earnings of unconsolidated entities, net of tax, in our consolidated statements of operations. The following table summarizes the 50% portion of the restructuring charges borne by SPD and included in equity earnings of unconsolidated entities, net of tax, for the three and nine months ended September 30, 2011 and 2010, respectively, and since inception (in thousands):

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

(unaudited)
                                         
    Three Months Ended     Nine Months Ended        
    September 30,     September 30,     Since  
    2011     2010     2011     2010     Inception  
 
                             
Severance-related costs
  $     $ 99     $ 30     $ 734     $ 5,720  
Facility and transition costs
    199       1,448       433       2,249       5,341  
Other exit costs
          106             144       283  
 
                             
Cash charges
    199       1,653       463       3,127       11,344  
Fixed asset and inventory impairments
          75       71       64       4,635  
 
                             
Total charges included in equity earnings of unconsolidated entities, net of tax
  $ 199     $ 1,728     $ 534     $ 3,191     $ 15,979  
 
                             
     We do not anticipate incurring significant additional restructuring charges under this plan.
     Additionally, in 2008, management developed and initiated plans to transition the businesses of Cholestech and HemoSense, Inc., or HemoSense, to our San Diego, California facility and the Panbio business to our Orlando, Florida facility and close the respective facilities of Cholestech and HemoSense. Restructuring charges under these plans related to our professional diagnostics business segment. The following table summarizes the restructuring activities for these plans for the three and nine months ended September 30, 2011 and 2010, respectively, and since inception (in thousands):
                                         
    Three Months Ended     Nine Months Ended        
    September 30,     September 30,     Since  
    2011     2010     2011     2010     Inception  
Severance-related costs
  $     $ (103 )   $     $ 158     $ 4,505  
Facility and transition costs
    26       55       101       1,341       4,616  
Other exit costs
    22       43       68       65       546  
 
                             
Cash charges (recoveries)
    48       (5 )     169       1,564       9,667  
Fixed asset and inventory impairments
          73             788       5,011  
 
                             
Total charges
  $ 48     $ 68     $ 169     $ 2,352     $ 14,678  
 
                             
     We do not anticipate incurring significant additional restructuring charges under these plans.

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

(unaudited)
     (e) Restructuring Reserves
     The following table summarizes our restructuring reserves related to the plans described above, of which $4.1 million is included in accrued expenses and other current liabilities and $2.5 million is included in other long-term liabilities on our consolidated balance sheets (in thousands):
                                 
    Severance-     Facility and              
    related     Transition     Other Exit        
    Costs     Costs     Costs     Total  
 
                       
2011 Plans:
                               
Balance, December 31, 2010
  $     $     $     $  
Cash charges
    9,113       4,402       58       13,573  
Payments
    (7,306 )     (1,276 )     (4 )     (8,586 )
Currency adjustments
    (124 )     (10 )           (134 )
 
                       
Balance, September 30, 2011
    1,683       3,116       54       4,853  
 
                       
 
                               
2010 Plans:
                               
Balance, December 31, 2010
    1,607       1,543       156       3,306  
Cash charges
    74       181       80       335  
Payments
    (1,679 )     (772 )     (91 )     (2,542 )
Currency adjustments
    (2 )     4       (1 )     1  
 
                       
Balance, September 30, 2011
        956       144       1,100  
 
                       
 
                               
2008 Plans:
                               
Balance, December 31, 2010
    380       2,715       3,302       6,397  
Cash charges
    (103 )     687       68       652  
Cash charges borne by SPD
    59       866             925  
Payments
    (262 )     (4,049 )     (3,030 )     (7,341 )
Currency adjustments
    (7 )     (21 )     22       (6 )
 
                       
Balance, September 30, 2011
    67       198       362       627  
 
                       
Total
  $ 1,750     $ 4,270     $ 560     $ 6,580  
 
                       
 
(10)   Long-term Debt
     We had the following long-term debt balances outstanding (in thousands):
                 
    September 30, 2011     December 31, 2010  
A term loans
  $ 625,000     $  
B term loans
    925,000        
Revolving line of credit
    100,000        
Delayed-draw term loans
    200,000        
First Lien Credit Agreement — Term loans
          941,250  
Second Lien Credit Agreement
          250,000  
3% Senior subordinated convertible notes
    150,000       150,000  
9% Senior subordinated notes
    390,833       389,686  
7.875% Senior notes
    245,399       244,756  
8.625% Senior subordinated notes
    400,000       400,000  
Lines-of-credit
    6,793       4,405  
Other
    20,998       15,360  
 
           
 
    3,064,023       2,395,457  
Less: Current portion
    (45,421 )     (16,891 )
 
           
 
  $ 3,018,602     $ 2,378,566  
 
           
     In connection with our significant long-term debt issuances, we recorded interest expense, including amortization and write-offs of deferred financing costs and original issue discounts, in our consolidated statements of

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

(unaudited)
operations for the three and nine months ended September 30, 2011 and 2010, respectively, as follows (in thousands):
                                 
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2011     2010     2011     2010  
Secured credit facility(1)
  $ 21,160 (1)   $     $ 21,380 (1)   $  
Former secured credit facility(2)
    (279 )     15,818       53,978 (3)     47,314  
3% Senior subordinated convertible notes
    1,246       1,205       3,742       3,696  
9% Senior subordinated notes
    9,751       9,914       29,219       29,417  
7.875% Senior notes
    5,378       5,462       16,112       16,030  
8.625% Senior subordinated notes
    8,909       972       26,736       972  
 
                       
 
  $ 46,165     $ 33,371     $ 151,167     $ 97,429  
 
                       
 
(1)   Includes “A” term loans, “B” term loans, revolving line of credit and delayed-draw term loans. Amount includes $1.3 million and $1.5 million during the three and nine months ended September 30, 2011, respectively, related to the amortization of fees paid for certain debt modifications.
 
(2)   Includes First Lien Credit Agreement and Second Lien Credit Agreement.
 
(3)   Amount includes approximately $29.7 million recorded in connection with the termination of our former secured credit facility and related interest rate swap agreement.
     (a) Credit Agreement
     On June 30, 2011, we entered into a Credit Agreement, or secured credit facility, with certain lenders, General Electric Capital Corporation as administrative agent and collateral agent, and certain other agents and arrangers, and, along with certain of our subsidiaries, a related guaranty and security agreement. The secured credit facility provides for a total of $2.1 billion, which consists of term loans in the aggregate amount of $1.85 billion (consisting of “A” term loans in the aggregate principal amount of $625.0 million, “B” term loans in the aggregate principal amount of $925.0 million, and delayed-draw term loans in the aggregate principal amount of $300.0 million) and, subject to our continued compliance with the secured credit facility, a $250.0 million revolving line of credit (which revolving line of credit includes a $50.0 million sublimit for the issuance of letters of credit). We must repay the “A” term loans in eighteen consecutive quarterly installments, beginning on December 31, 2011 and continuing through March 31, 2016, in the amount of $7,812,500 each, and a final installment on June 30, 2016, in the amount of $484,375,000. We must repay the “B” term loans in twenty-two consecutive quarterly installments, beginning on December 31, 2011 and continuing through March 31, 2017, in the amount of $2,312,500 each, and a final installment on June 30, 2017, in the amount of $874,125,000. We must repay the delayed-draw term loans in fifteen consecutive quarterly installments, beginning on September 30, 2012 and continuing through March 31, 2016, each in the amount of 1.25% of the aggregate principal amount of the delayed-draw term loans that are borrowed through June 30, 2012 and remain outstanding on that date, and a final installment on June 30, 2016, in the amount of 81.25% of such aggregate principal amount. We may repay any future borrowings under the secured credit facility revolving line of credit at any time (without premium or penalty), but in no event later than June 30, 2016. The “A” term loans, any delayed draw term loans and our borrowings under the revolving credit facility bear interest at a rate per annum of, at our option, either (i) the Base Rate, as defined in the Credit Agreement, plus an applicable margin, which varies between 1.75% and 2.50% depending on our consolidated secured leverage ratio, or (ii) the Eurodollar Rate, as defined in the Credit Agreement, plus an applicable margin, which varies between 2.75% and 3.50% depending on our consolidated secured leverage ratio. The “B” term loans bear interest at a rate per annum of, at our option, either (i) the Base Rate, as defined in the Credit Agreement, plus an applicable margin, which varies between 2.50% and 3.25% depending on our consolidated secured leverage ratio, or (ii) the Eurodollar Rate, as defined in the Credit Agreement, plus an applicable margin, which varies between 3.50% and 4.25% depending on our consolidated secured leverage ratio. Interest on “B” term loans based on the Eurodollar Rate is subject to a 1.00% floor. As of September 30, 2011, the “A” term loans, the “B” term loans, the revolving line of credit and the delayed-draw term loans bore interest at 2.98%, 4.5%, 2.98% and 2.98%, respectively.
     As of September 30, 2011, aggregate borrowings under the secured credit facility amounted to $1.85 billion, consisting of “A” term loans in the aggregate principal amount of $625.0 million, “B” term loans in the aggregate principal amount of $925.0 million, borrowing under the revolving line of credit totaling $100.0 million and borrowing under the delayed-draw term loans in the aggregate principal amount of $200.0 million. As of September 30, 2011, we were in compliance with all debt covenants related to the above debt, which consisted principally of maximum consolidated secured leverage and minimum consolidated interest coverage requirements.
     (b) First Lien Credit Agreement and Second Lien Credit Agreement
     In connection with entering into the secured credit facility on June 30, 2011, we repaid in full all outstanding indebtedness under and terminated our First Lien Credit Agreement, or senior secured credit facility, and our Second Lien Credit Agreement, or junior secured credit facility (and, collectively with the senior secured credit facility, our former secured credit facility), each dated June 26, 2007, with certain lenders, General Electric Capital Corporation as

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

(unaudited)
administrative agent and collateral agent, and certain other agents and arrangers, and certain related guaranty and security agreements. The aggregate outstanding principal amount of the loans repaid under our former secured credit facility in connection with the termination thereof was approximately $1.2 billion.
     In August 2007, we entered into interest rate swap contracts, with an effective date of September 28, 2007, that had a total notional value of $350.0 million and an original maturity date of September 28, 2010. These interest rate swap contracts paid us variable interest at the three-month LIBOR rate, and we paid 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 former secured credit facility into fixed rate debt. In connection with entering into the secured credit facility on June 30, 2011, we paid $10.1 million to terminate these interest rate swap contracts which was recorded in interest expense, including amortization of original issue discounts and deferred financing costs in our consolidated statements of operations.
     In January 2009, we entered into interest rate swap contracts, with an effective date of January 14, 2009, that had a total notional value of $500.0 million and a maturity date of January 5, 2011. These interest rate swap contracts paid us variable interest at the one-month LIBOR rate, and we paid 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 loan under the former secured credit facility into fixed rate debt. We did not extend the terms of these interest rate swap contracts after January 5, 2011.
(11) Derivative Financial Instruments
     We manage our economic and transaction exposure to certain market-based risks through the use of derivative instruments. Our objective for holding derivative instruments has been to reduce volatility of net earnings and cash flows associated with changes in interest rates and foreign currency exchange rates. We do not hold or issue derivative financial instruments for speculative purposes.
     (a) Interest Rate Risk
     We have historically used interest rate swap contracts in the management of our interest rate exposure related to our former secured credit facility. On June 30, 2011, we entered into a new secured credit facility, and in connection therewith, repaid in full all outstanding indebtedness under and terminated our former secured credit facility and related interest rate swaps.
     (b) Foreign Exchange Risk
     During the second quarter of 2011, we entered into a foreign exchange forward contract with a notional value of 1.0 billion South Korean Won to hedge against the effect of exchange rate fluctuations on a certain obligation denominated in non-functional currency. The contract has a term of six months. We report the effective portion of the gain or loss on a cash flow hedge as a component of other comprehensive income, and it is subsequently reclassified into net earnings in the period in which the hedged transaction affects net earnings or the forecasted transaction is no longer probable of occurring.
     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 (in thousands):
                         
            Fair Value at     Fair Value at  
Derivative Instruments   Balance Sheet Caption     September 30, 2011     December 31, 2010  
Foreign exchange forward contract
  Accrued expenses and other current liabilities   $ 80     $  
 
                   
Interest rate swap contracts(1)
  Accrued expenses and other current liabilities   $     $ 26  
 
                   
Interest rate swap contracts(1)
  Other long-term liabilities   $     $ 11,954  
 
                   

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

(unaudited)
                     
        Amount of     Amount of  
        Loss Recognized     Gain Recognized  
        During the Three     During the Three  
        Months Ended     Months Ended  
Derivative Instruments   Location of Gain (Loss) Recognized in Income   September 30, 2011     September 30, 2010  
Foreign exchange forward contract
  Other comprehensive income (loss)   $ (88 )   $  
Interest rate swap contracts(1)
  Other comprehensive income (loss)           1,115  
 
               
Total gain (loss)
  Other comprehensive income (loss)   $ (88 )   $ 1,115  
 
               
                     
        Amount of Gain     Amount of  
        (Loss) Recognized     Gain Recognized  
        During the Nine     During the Nine  
        Months Ended     Months Ended  
Derivative Instruments   Location of Gain (Loss) Recognized in Income   September 30, 2011     September 30, 2010  
Foreign exchange forward contract
  Other comprehensive income (loss)   $ (80 )   $  
Interest rate swap contracts(1)
  Other comprehensive income (loss)     1,841       388  
 
               
Total gain
  Other comprehensive income (loss)   $ 1,761     $ 388  
 
               
 
(1)   See Note 10(b) regarding our interest rate swaps which qualify as cash flow hedges.
(12) Fair Value Measurements
     We apply fair value measurement accounting to value our financial assets and liabilities. Fair value measurement accounting provides a framework for measuring fair value under U.S. GAAP and requires expanded disclosures regarding fair value measurements. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. A fair value hierarchy requires an entity to maximize the use of observable inputs, where available, and minimize the use of unobservable inputs when measuring fair value.
     Described below are the three levels of inputs that may be used to measure fair value:
     
Level 1
  Quoted prices in active markets for identical assets or liabilities. Our Level 1 assets and liabilities include investments in marketable securities.
 
   
Level 2
  Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Our Level 2 assets and liabilities include a foreign exchange forward contract and interest rate swap contracts.
 
   
Level 3
  Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. The fair value of the contingent consideration obligations related to our acquisitions completed after January 1, 2009 are valued using Level 3 inputs.
     The following tables present information about our assets and liabilities that are measured at fair value on a recurring basis as of September 30, 2011 and December 31, 2010, and indicates the fair value hierarchy of the valuation techniques we utilized to determine such fair value (in thousands):
                                 
            Quoted Prices in     Significant Other        
    September 30,     Active Markets     Observable Inputs     Unobservable Inputs  
Description   2011     (Level 1)     (Level 2)     (Level 3)  
Assets:
                               
Marketable securities
  $ 3,106     $ 3,106     $     $  
 
                       
Total assets
  $ 3,106     $ 3,106     $     $  
 
                       
Liabilities:
                               
Foreign exchange forward contract (1)
  $ 80     $     $ 80     $  
Contingent consideration obligations (2)
    127,280                   127,280  
 
                       
Total liabilities
  $ 127,360     $     $ 80     $ 127,280  
 
                       

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(unaudited)
                                 
            Quoted Prices in     Significant Other        
    December 31,     Active Markets     Observable Inputs     Unobservable Inputs  
Description   2010     (Level 1)     (Level 2)     (Level 3)  
Assets:
                               
Marketable securities
  $ 11,948     $ 11,948     $     $  
 
                       
Total assets
  $ 11,948     $ 11,948     $     $  
 
                       
Liabilities:
                               
Interest rate swap liability (3)
  $ 11,980     $     $ 11,980     $  
Contingent consideration obligations (2)
    132,879                   132,879  
 
                       
Total liabilities
  $ 144,859     $     $ 11,980     $ 132,879  
 
                       
 
(1)   The fair value of the foreign exchange forward contract was measured using readily observable market inputs, such as quotations on forward foreign exchange points and foreign interest rates.
 
(2)   The fair value measurements for our contingent consideration obligations relate to acquisitions completed after January 1, 2009 and are valued using Level 3 inputs. We determine the fair value of the contingent consideration obligations based on a probability-weighted approach derived from earn-out criteria estimates and a probability assessment with respect to the likelihood of achieving the various earn-out criteria. The measurement is based upon significant inputs not observable in the market. Changes in the fair value of these contingent consideration obligations are recorded as income or expense within operating income in our consolidated statements of operations. See Note 16 for additional information on the valuation of our contingent consideration obligations.
 
(3)   The fair value of our interest rate swaps is based on the application of standard discounted cash flow models using market interest rate data.
     Changes in the fair value of our Level 3 contingent consideration obligations during the nine months ended September 30, 2011 were as follows (in thousands):
         
Fair value of contingent consideration obligations, January 1, 2011
  $ 132,879  
Acquisition date fair value of contingent consideration obligations recorded
    29,785  
Payments
    (25,305 )
Present value accretion
    10,153  
Adjustments, net (income) expense
    (20,232 )
 
     
Fair value of contingent consideration obligations, September 30, 2011
  $ 127,280  
 
     
     At September 30, 2011 and December 31, 2010, the carrying amounts of cash and cash equivalents, restricted cash, receivables, accounts payable and other current liabilities approximated their estimated fair values.
     The carrying amount and estimated fair value of our long-term debt were $3.1 billion and 2.9 billion, respectively, at September 30, 2011. The carrying amount and estimated fair value of our long-term debt were both $2.4 billion at December 31, 2010. The estimated fair value of our long-term debt was determined using market sources that were derived from available market information and may not be representative of actual values that could have been or will be realized in the future.
(13) Defined Benefit Pension Plan
     Our subsidiary Unipath Ltd., in England, has a defined benefit pension plan established for certain of its employees. The net periodic benefit costs are as follows (in thousands):
                                 
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2011     2010     2011     2010  
Service cost
  $     $     $     $  
Interest cost
    203       158       610       469  
Expected return on plan assets
    (156 )     (110 )     (468 )     (327 )
Amortization of prior service costs
    106             320        
Realized losses
                       
 
                       
Net periodic benefit cost
  $ 153     $ 48     $ 462     $ 142  
 
                       

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(unaudited)
(14) Financial Information by Segment
     Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. Our chief operating decision-making group is composed of the Chief Executive Officer and members of senior management. Our reportable operating segments are professional diagnostics, health management, consumer diagnostics and corporate and other. Our operating results include license and royalty revenue which is allocated to professional diagnostics and consumer diagnostics on the basis of the original license or royalty agreement.
     We evaluate performance of our operating segments based on revenue and operating income (loss). Segment information for the three and nine months ended September 30, 2011 and 2010 is as follows (in thousands):
                                         
                            Corporate        
    Professional     Health     Consumer     and        
    Diagnostics     Management     Diagnostics     Other     Total  
Three Months Ended September 30, 2011:
                                       
Net revenue
  $ 429,952     $ 129,931     $ 25,886     $     $ 585,769  
Operating income (loss)
  $ 64,893     $ (12,565 )   $ 3,844     $ (11,253 )   $ 44,919  
Depreciation and amortization
  $ 63,053     $ 26,228     $ 1,428     $ 208     $ 90,917  
Restructuring charge
  $ 2,587     $ 530     $ (57 )   $ 69     $ 3,129  
Stock-based compensation
  $     $     $     $ 4,286     $ 4,286  
Three Months Ended September 30, 2010:
                                       
Net revenue
  $ 363,519     $ 152,894     $ 22,266     $     $ 538,679  
Operating income (loss)
  $ 50,902     $ 74     $ 1,584     $ (21,185 )   $ 31,375  
Depreciation and amortization
  $ 61,328     $ 29,907     $ 960     $ 157     $ 92,352  
Restructuring charge
  $ 13     $ 123     $ (7 )   $     $ 129  
Stock-based compensation
  $     $     $     $ 7,263     $ 7,263  
Nine Months Ended September 30, 2011:
                                       
Net revenue
  $ 1,254,838     $ 408,566     $ 72,014     $     $ 1,735,418  
Operating income (loss)
  $ 174,459     $ (39,652 )   $ 9,107     $ (51,936 )   $ 91,978  
Depreciation and amortization
  $ 200,645     $ 81,871     $ 4,007     $ 510     $ 287,033  
Restructuring charge
  $ 7,445     $ 11,119     $ (57 )   $ 1,119     $ 19,626  
Stock-based compensation
  $     $     $     $ 16,275     $ 16,275  
Nine Months Ended September 30, 2010:
                                       
Net revenue
  $ 1,053,423     $ 451,182     $ 72,288     $     $ 1,576,893  
Operating income (loss)
  $ 135,333     $ (8,180 )   $ 5,421     $ (50,431 )   $ 82,143  
Depreciation and amortization
  $ 181,487     $ 89,955     $ 3,583     $ 482     $ 275,507  
Restructuring charge
  $ 7,128     $ 6,176     $ 45     $     $ 13,349  
Stock-based compensation
  $     $     $     $ 22,947     $ 22,947  
Assets:
                                       
As of September 30, 2011
  $ 5,386,036     $ 967,611     $ 208,255     $ 139,712     $ 6,701,614  
As of December 31, 2010
  $ 4,913,491     $ 1,011,183     $ 207,795     $ 197,905     $ 6,330,374  
     The following tables summarize the Company’s net revenue from the professional diagnostics and health management reporting segments by groups of similar products and services for the three and nine months ended September 30, 2011 and 2010 (in thousands):
Professional Diagnostics Segment
                                 
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2011     2010     2011     2010  
Infectious disease
  $ 142,639     $ 106,633     $ 405,559     $ 303,236  
Cardiology
    127,943       120,061       390,652       360,773  
Toxicology
    93,497       77,413       267,834       220,600  
Other
    62,172       55,374       176,206       154,706  
 
                       
Net product sales and services revenue
    426,251       359,481       1,240,251       1,039,315  
License and royalty revenue
    3,701       4,038       14,587       14,108  
 
                       
Professional diagnostics net revenue
  $ 429,952     $ 363,519     $ 1,254,838     $ 1,053,423  
 
                       

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(unaudited)
Health Management Segment
                                 
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2011     2010     2011     2010  
Disease and case management
  $ 59,441     $ 73,137     $ 182,118     $ 214,039  
Women’s & children’s health
    28,509       31,814       85,550       95,957  
Wellness
    24,427       25,444       80,369       75,883  
Patient self-testing services
    17,554       22,499       60,529       65,303  
 
                       
Health management net revenue
  $ 129,931     $ 152,894     $ 408,566     $ 451,182  
 
                       
(15) Related Party Transactions
     In May 2007, we completed the formation of SPD, our 50/50 joint venture with P&G, for the development, manufacturing, marketing and sale of existing and to-be-developed consumer diagnostic products, outside the cardiology, diabetes and oral care fields. Upon completion of the arrangement to form the joint venture, we ceased to consolidate the operating results of our consumer diagnostic products business related to the joint venture and instead account for our 50% interest in the results of the joint venture under the equity method of accounting.
     We had a net receivable from the joint venture of $15.7 million and a net payable to the joint venture of $2.8 million as of September 30, 2011 and December 31, 2010, respectively. Included in the $15.7 million receivable balance as of September 30, 2011 is approximately $8.6 million of costs incurred in connection with our 2008 SPD-related restructuring plans. We have also recorded a long-term receivable totaling approximately $15.6 million and $23.9 million as of September 30, 2011 and December 31, 2010, respectively, related to the 2008 SPD-related restructuring plans. Additionally, customer receivables associated with revenue earned after the joint venture was completed have been classified as other receivables within prepaid and other current assets on our accompanying consolidated balance sheets in the amount of $7.3 million and $7.8 million as of September 30, 2011 and December 31, 2010, respectively. In connection with the joint venture arrangement, the joint venture bears the collection risk associated with these receivables. Sales to the joint venture under our manufacturing agreement totaled $19.4 million and $52.0 million during the three and nine months ended September 30, 2011, respectively, and $14.7 million and $49.4 million during the three and nine months ended September 30, 2010, respectively. Additionally, services revenue generated pursuant to the long-term services agreement with the joint venture totaled $0.2 million and $0.8 million during the three and nine months ended September 30, 2011, respectively, and $0.4 million and $0.9 million during the three and nine months ended September 30, 2010, respectively. Sales under our manufacturing agreement and long-term services agreement are included in net product sales and services revenue, respectively, in our accompanying consolidated statements of operations.
     Under the terms of our product supply agreement, the joint venture purchases products from our manufacturing facilities in the U.K. and China. The joint venture in turn sells a portion of those tests back to us for final assembly and packaging. Once packaged, the tests are sold to P&G for distribution to third-party customers in North America.
     As a result of these related transactions, we have recorded $9.7 million and $7.0 million of trade receivables which are included in accounts receivable on our accompanying consolidated balance sheets as of September 30, 2011 and December 31, 2010, respectively, and $23.4 million and $20.5 million of trade accounts payable which are included in accounts payable on our accompanying consolidated balance sheets as of September 30, 2011 and December 31, 2010, respectively.
     In connection with the formation of SPD in May 2007, we entered into an option agreement with P&G, pursuant to which P&G had the right, for a period of 60 days commencing on May 17, 2011, to require us to acquire all of P&G’s interest in SPD at fair market value, and P&G had the right, upon certain material breaches by us of our obligations to SPD, to acquire all of our interest in SPD at fair market value. No gain on the proceeds that we received from P&G through the formation of SPD was recognized in our financial statements until P&G’s option to require us to purchase its interest in SPD expired. As of December 31, 2010, the deferred gain of $288.4 million is presented as a current liability on our accompanying consolidated balance sheet. On July 16, 2011, P&G’s option to require us to acquire its interest in SPD at fair market value expired. In connection with the expiration of the option, the gain totaling approximately $288.9 million was recognized during the third quarter of 2011.
(16) Material Contingencies and Legal Settlements
     (a) Legal Proceedings
     We are not a party to any pending legal proceedings that we currently believe could have a material adverse impact on our sales, operations or financial performance. However, because of the nature of our business, we may be subject at any particular time to lawsuits or other claims arising in the ordinary course of our business, and we expect that this will continue to be the case in the future.
     (b) Acquisition-related Contingent Consideration Obligations

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(unaudited)
     The following summarizes our principal contractual acquisition-related contingent consideration obligations as of September 30, 2011 that have changed significantly since December 31, 2010. Other acquisition-related contingent consideration obligations that were presented in our Annual Report on Form 10-K, as amended, for the year ended December 31, 2010, but omitted below, represent those that have not changed significantly since that date.
     (i) Acquisitions completed prior to January 1, 2009
    Privately-owned health management business
     With respect to a privately-owned health management business which we acquired in 2008, the terms of the acquisition agreement provide for contingent consideration payable upon successfully meeting certain revenue and EBITDA targets. The final earn-out was achieved during the fourth quarter of 2010, resulting in an accrual of approximately €23.9 million ($31.8 million). A cash payment totaling €24.1 million ($34.0 million) was made during the first quarter of 2011.
     (ii) Acquisitions completed on or after January 1, 2009
    Bioeasy
     With respect to Bioeasy, the terms of the acquisition agreement require us to pay earn-outs upon successfully meeting certain revenue and EBITDA targets during each of the calendar years 2011 through 2013. The maximum amount of the earn-out payments is approximately $7.5 million.
    Colibri
     With respect to Colibri, the terms of the acquisition agreement require us to pay an earn-out upon successfully meeting certain operational and EBITDA targets during the calendar years 2011 through 2012. The maximum amount of the earn-out payments is SEK 3.0 million (approximately $0.4 million at September 30, 2011).
    Alere Wellbeing
     With respect to Free & Clear, now known as Alere Wellbeing, Inc., or Alere Wellbeing, the terms of the acquisition agreement require us to pay an earn-out upon successfully meeting certain revenue and EBITDA targets during fiscal year 2010. A payment of approximately $11.5 million was made during the second quarter of 2011, which was previously accrued.
    Alere Healthcare
     With respect to Jinsung Meditech, Inc., now known as Alere Healthcare Inc., or Alere Healthcare, the terms of the acquisition agreement require us to pay an earn-out upon successfully meeting certain revenue and operating income targets during each of the calendar years 2010 through 2012. The 2010 portion of the earn-out totaling approximately $0.6 million was earned and accrued as of December 31, 2010. Payment of the 2010 earn-out was made during the third quarter of 2011. The maximum remaining amount of the earn-out payments is approximately $2.4 million.
    LDS
     With respect to LDS, the terms of the acquisition agreement require us to pay an earn-out upon successfully meeting certain revenue and operating income targets during each of the twelve-month periods ending June 30, 2012 and 2013. The maximum amount of the earn-out payments is $20.0 million.
    Mologic
     With respect to Mologic Limited, or Mologic, the terms of the acquisition agreement require us to pay earn-outs, in shares of our common stock or cash, at our election, upon successfully meeting nine research and development project milestones during the five years following the acquisition. A portion of the earn-out was determined to have been achieved during the third quarter of

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(unaudited)
2011, resulting in an accrual of $3.0 million. Payment of this portion of the earn-out was made in cash during the fourth quarter of 2011. The maximum remaining amount of the earn-out payments is $16.0 million.
    Alere Home Monitoring
     With respect to Alere Home Monitoring, Inc., or Alere Home Monitoring, the terms of the acquisition agreement require us to pay an earn-out upon successfully meeting certain revenue and EBITDA targets during each of the calendar years 2010 and 2011. Cash payment for the 2010 portion of the earn-out totaling $12.7 million was paid during the first quarter of 2011. The maximum remaining amount of the earn-out payments is $12.3 million, which, if earned, will be paid in shares of our common stock.
    Standing Stone
     With respect to Standing Stone, the terms of the acquisition agreement require us to pay earn-outs and employee bonuses upon successfully meeting certain operational, product development and revenue targets during the period from the date of acquisition through calendar year 2013. The maximum amount of the earn-out payments is approximately $10.9 million. The maximum amount of the employee bonuses is $0.6 million.
    ROAR
     With respect to ROAR, the terms of the acquisition agreement require us to pay an earn-out upon successfully meeting certain EBITDA targets during 2011 through 2014. The maximum amount of the earn-out payments is £10.5 million (approximately $16.4 million at September 30, 2011).
     (c) Contingent Obligations
    Agreements with Epocal
     In November 2009, we entered into a distribution agreement with Epocal, Inc., or Epocal, to distribute the epoc® Blood Analysis System for blood gas and electrolyte testing for $20.0 million, which is recorded on our accompanying consolidated balance sheet in other intangible assets, net. We also entered into a definitive agreement to acquire all of the issued and outstanding equity securities of Epocal for a total potential purchase price of up to $255.0 million, including a base purchase price of up to $172.5 million if Epocal achieves certain gross margin and other financial milestones on or prior to October 31, 2014, plus additional payments of up to $82.5 million if Epocal achieves certain other milestones relating to its gross margin and product development efforts on or prior to this date. The agreement contains a working capital adjustment whereby the purchase price is increased or decreased to the extent that Epocal’s working capital at closing is more or less than a specified amount. We also agreed that, if the acquisition is consummated, we will provide $12.5 million in management incentive arrangements, 25% of which will vest over three years and 75% of which will be payable only upon the achievement of certain milestones. The acquisition will also be subject to other closing conditions, including the receipt of any required antitrust or other approvals. In April 2011, we entered into a license agreement with Epocal and amended some of the terms of the definitive agreement to acquire Epocal. The license agreement provides Alere with royalty-free access to certain Epocal intellectual property for use in Alere home-use products and provided for an upfront license payment of $18.0 million, which was paid in 2011. The amendment of the definitive agreement increased the working capital target by $18.0 million, which may have the effect of reducing the purchase price of the acquisition. The amendment of the agreement also added an additional potential milestone payment of $8.0 million. As a result, the maximum purchase price under the acquisition agreement increased to $263.0 million.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(unaudited)
    Standing Stone
     The terms of the acquisition agreement require us to purchase the remaining 19.08% of the issued and outstanding capital stock of Standing Stone, the holders of which are officers and employees of Standing Stone, in May 2012 for an aggregate purchase price of approximately $2.6 million. The redeemable non-controlling interest was recorded at its fair value of $2.5 million, as of the consummation of the transaction on May 16, 2011. 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.
(17) Recent Accounting Pronouncements
     From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board, or FASB, or other standard setting bodies that we adopt as of the specified effective date. Unless otherwise discussed, we believe that the impact of recently issued standards that are not yet effective will not have a material impact on our financial position, results of operations or cash flows upon adoption.
Recently Adopted Standards
     Effective January 1, 2011, we adopted Accounting Standards Update, or ASU, No. 2009-13, Revenue Recognition (Topic 605): Multiple-Deliverable Revenue Arrangements — a consensus of the FASB EITF, or ASU 2009-13. ASU 2009-13 will separate multiple-deliverable revenue arrangements. This update establishes a selling price hierarchy for determining the selling price of a deliverable. The amendments of this update will replace the term “fair value” in the revenue allocation guidance with “selling price” to clarify that the allocation of revenue is based on entity-specific assumptions rather than assumptions of a marketplace participant. The amendments of this update will eliminate the residual method of allocation and require that arrangement consideration be allocated at the inception of the arrangement to all deliverables using the relative selling price method. The amendments in this update will require that a vendor determine its best estimated selling price in a manner consistent with that used to determine the price to sell the deliverable on a standalone basis. The adoption of this standard did not have a material impact on our financial position, results of operations or cash flows.
(18) Equity Investments
     We account for the results from our equity investments under the equity method of accounting in accordance with ASC 323, Investments — Equity Method and Joint Ventures, based on the percentage of our ownership interest in the business. Our equity investments primarily include the following:
     (a) Axis-Shield
     During the third quarter of 2011, we acquired, in various transactions, approximately 15.0 million shares of Axis-Shield, a U.K. publicly traded company focused on the development and manufacture of in vitro diagnostic tests for use in clinical laboratories and at the point of care. Our investment represents a 29.9% ownership interest in Axis-Shield as of September 30, 2011. Our equity earnings attributable to this investment for the third quarter were immaterial. In addition, as of October 28, 2011, we have received valid acceptances in connection with our publicly announced tender offer for shares representing approximately 61.3% of the issued share capital of Axis-Shield which, in addition to the shares we owned as of September 30, 2011, bring our total shares owned or validly tendered to 91.2%. During the fourth quarter of 2011, we expect to consummate our acquisition of these tendered shares and commence a process under U.K. law to acquire the remainder of the outstanding shares.
     (b) SPD
     In May 2007, we completed the formation of SPD, our 50/50 joint venture with P&G, for the development, manufacturing, marketing and sale of existing and to-be-developed consumer diagnostic products, outside the cardiology, diabetes and oral care fields. Upon completion of the arrangement to form the joint venture, we ceased to consolidate the operating results of our consumer diagnostics business related to the joint venture. We recorded earnings of $3.6 million and $3.0 million during the three and nine months ended September 30, 2011, respectively, and we recorded losses of $0.4 million and earnings of $6.8 million during the three and nine months ended September 30, 2010, respectively, in equity earnings (losses) of unconsolidated entities, net of tax, in our accompanying consolidated statements of operations, which represented our 50% share of SPD’s net income (losses) for the respective periods.

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(unaudited)
     (c) TechLab
     In May 2006, we acquired 49% of TechLab, Inc., or TechLab, a privately-held developer, manufacturer and distributor of rapid non-invasive intestinal diagnostics tests in the areas of intestinal inflammation, antibiotic associated diarrhea and parasitology. We recorded earnings of $0.3 million and $1.5 million during the three and nine months ended September 30, 2011, respectively, and we recorded earnings of $0.4 million and $1.4 million during the three and nine months ended September 30, 2010, respectively, in equity earnings (losses) of unconsolidated entities, net of tax, in our accompanying consolidated statements of operations, which represented our minority share of TechLab’s net income for the respective periods.
     Summarized financial information for SPD and TechLab on a combined basis is as follows (in thousands):
Combined Condensed Results of Operations:
                                 
    Three Months Ended September 30,     Nine Months Ended September 30,  
    2011     2010     2011     2010  
Net revenue
  $ 61,538     $ 54,014     $ 178,180     $ 168,876  
 
                       
Gross profit
  $ 38,294     $ 31,182     $ 110,659     $ 101,024  
 
                       
Net income (loss) after taxes
  $ 7,858     $ (281 )   $ 9,142     $ 16,393  
 
                       
Combined Condensed Balance Sheets:
                 
    September 30, 2011     December 31, 2010  
Current assets
  $ 105,018     $ 93,250  
Non-current assets
    28,933       25,965  
 
           
Total assets
  $ 133,951     $ 119,215  
 
           
Current liabilities
  $ 57,726     $ 62,788  
Non-current liabilities
    6,116       2,091  
 
           
Total liabilities
  $ 63,842     $ 64,879  
 
           
(19) Discontinued Operations
     On January 15, 2010, we completed the sale of our vitamins and nutritional supplements business for a purchase price of approximately $62.6 million in cash, which is net of the final working capital adjustment. The sale included our entire private label and branded nutritional businesses and represents the complete divestiture of our entire vitamins and nutritional supplements business segment. We recognized a gain of approximately $18.7 million ($11.6 million, net of tax) during 2010. The results of the vitamins and nutritional supplements business, which represents our entire vitamins and nutritional supplements business segment, are included in income (loss) from discontinued operations, net of tax, in our consolidated financial statements.
     The following summarized financial information related to the vitamins and nutritional supplements businesses has been segregated from continuing operations and reported as discontinued operations through the date of disposition (in thousands).
                 
    Three Months Ended     Nine Months Ended  
    September 30, 2010     September 30, 2010  
Net revenue
  $     $ 4,362  
 
           
Income (loss) from discontinued operations before income taxes
  $ (40 )   $ 19,227  
Provision (benefit) for income taxes
    (42 )     7,314  
 
           
Income from discontinued operations, net of taxes
  $ 2     $ 11,913  
 
           
(20) Guarantor Financial Information
     Our 9% senior subordinated notes due 2016, our 7.875% senior notes due 2016, and our 8.625% senior subordinated notes due 2018 are guaranteed by certain of our consolidated wholly-owned subsidiaries, or the Guarantor Subsidiaries. The guarantees are full and unconditional and joint and several. The following supplemental financial information sets forth, on a consolidating basis, balance sheets as of September 30, 2011 and December 31, 2010, the statements of operations for the three and nine months ended September 30, 2011 and 2010 and cash flows for the nine months ended September 30, 2011 and 2010 for the Company, the Guarantor Subsidiaries and our other subsidiaries, or the Non-Guarantor Subsidiaries. The supplemental financial information reflects the investments of

29


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

(unaudited)
the Company and the Guarantor Subsidiaries in the Guarantor and Non-Guarantor Subsidiaries using the equity method of accounting.
     We have extensive transactions and relationships between various members of the consolidated group. These transactions and relationships include intercompany pricing agreements, intellectual property royalty agreements and general and administrative and research and development cost-sharing agreements. Because of these relationships, it is possible that the terms of these transactions are not the same as those that would result from transactions among wholly unrelated parties.

30


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

(unaudited)
CONSOLIDATING STATEMENT OF OPERATIONS
For the Three Months Ended September 30, 2011

(in thousands)
                                         
                    Non-              
            Guarantor     Guarantor              
    Issuer     Subsidiaries     Subsidiaries     Eliminations     Consolidated  
Net product sales
  $     $ 227,479     $ 224,801     $ (34,026 )   $ 418,254  
Services revenue
          144,641       17,625             162,266  
 
                             
Net product sales and services revenue
          372,120       242,426       (34,026 )     580,520  
License and royalty revenue
          1,728       4,475       (954 )     5,249  
 
                             
Net revenue
          373,848       246,901       (34,980 )     585,769  
 
                             
Cost of net product sales
    1,097       100,514       127,086       (34,798 )     193,899  
Cost of services revenue
          77,828       6,349             84,177  
 
                             
Cost of net product sales and services revenue
    1,097       178,342       133,435       (34,798 )     278,076  
Cost of license and royalty revenue
                2,685       (954 )     1,731  
 
                             
Cost of net revenue
    1,097       178,342       136,120       (35,752 )     279,807  
 
                             
Gross profit (loss)
    (1,097 )     195,506       110,781       772       305,962  
 
                             
Operating expenses:
                                       
Research and development
    5,063       16,195       13,514             34,772  
Sales and marketing
    1,973       78,667       53,736             134,376  
General and administrative
    7,424       52,300       32,171             91,895  
 
                             
Total operating expenses
    14,460       147,162       99,421             261,043  
 
                             
Operating income (loss)
    (15,557 )     48,344       11,360       772       44,919  
Interest expense, including amortization of original issue discounts and deferred financing costs
    (46,857 )     (13,418 )     (4,240 )     17,188       (47,327 )
Other income (expense), net
    4,055       14,889       (10,006 )     (17,188 )     (8,250 )
Gain on sale of joint venture interest
    16,309             272,587             288,896  
 
                             
Income (loss) from continuing operations before provision (benefit) for income taxes
    (42,050 )     49,815       269,701       772       278,238  
Provision (benefit) for income taxes
    (2,010 )     19,156       25,475       31       42,652  
 
                             
Income (loss) from continuing operations before equity earnings of unconsolidated entities, net of tax
    (40,040 )     30,659       244,226       741       235,586  
Equity in earnings (losses) of subsidiaries, net of tax
    279,392       (24 )           (279,368 )      
Equity earnings of unconsolidated entities, net of tax
    352             3,772       (6 )     4,118  
 
                             
Net income
    239,704       30,635       247,998       (278,633 )     239,704  
Less: Net income attributable to non-controlling interests
                138             138  
 
                             
Net income attributable to Alere Inc. and Subsidiaries
    239,704       30,635       247,860       (278,633 )     239,566  
Preferred stock dividends
    (5,358 )                       (5,358 )
 
                             
Net income available to common stockholders
  $ 234,346     $ 30,635     $ 247,860     $ (278,633 )   $ 234,208  
 
                             

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

(unaudited)
CONSOLIDATING STATEMENT OF OPERATIONS
For the Three Months Ended September 30, 2010

(in thousands)
                                         
                    Non-              
            Guarantor     Guarantor              
    Issuer     Subsidiaries     Subsidiaries     Eliminations     Consolidated  
Net product sales
  $     $ 206,790     $ 183,080     $ (26,437 )   $ 363,433  
Services revenue
          156,956       14,167             171,123  
 
                             
Net product sales and services revenue
          363,746       197,247       (26,437 )     534,556  
License and royalty revenue
          2,378       3,199       (1,454 )     4,123  
 
                             
Net revenue
          366,124       200,446       (27,891 )     538,679  
 
                             
Cost of net product sales
    141       98,140       98,149       (25,881 )     170,549  
Cost of services revenue
          76,288       4,494             80,782  
 
                             
Cost of net product sales and services revenue
    141       174,428       102,643       (25,881 )     251,331  
Cost of license and royalty revenue
          36       3,220       (1,454 )     1,802  
 
                             
Cost of net revenue
    141       174,464       105,863       (27,335 )     253,133  
 
                             
Gross profit (loss)
    (141 )     191,660       94,583       (556 )     285,546  
 
                             
Operating expenses:
                                       
Research and development
    5,335       15,538       11,561             32,434  
Sales and marketing
    1,126       80,003       44,477             125,606  
General and administrative
    14,307       58,404       23,420             96,131  
 
                             
Total operating expenses
    20,768       153,945       79,458             254,171  
 
                             
Operating income (loss)
    (20,909 )     37,715       15,125       (556 )     31,375  
Interest expense, including amortization of original issue discounts and deferred financing costs
    (17,964 )     (34,608 )     (1,900 )     20,292       (34,180 )
Other income (expense), net
    747       18,856       8,214       (20,292 )     7,525  
 
                             
Income (loss) from continuing operations before provision (benefit) for income taxes
    (38,126 )     21,963       21,439       (556 )     4,720  
Provision (benefit) for income taxes
    5,093       (3,020 )     (2,140 )     (100 )     (167 )
 
                             
Income (loss) from continuing operations before equity earnings (losses) of unconsolidated entities, net of tax
    (43,219 )     24,983       23,579       (456 )     4,887  
Equity in earnings of subsidiaries, net of tax
    47,564       2,024             (49,588 )      
Equity earnings (losses) of unconsolidated entities, net of tax
    494             (341 )     (215 )     (62 )
 
                             
Income from continuing operations
    4,839       27,007       23,238       (50,259 )     4,825  
Income (loss) from discontinued operations, net of tax
    (12 )     (1,076 )     1,090             2  
 
                             
Net income
    4,827       25,931       24,328       (50,259 )     4,827  
Less: Net income attributable to non-controlling interests
                1,494             1,494  
 
                             
Net income attributable to Alere Inc. and Subsidiaries
    4,827       25,931       22,834       (50,259 )     3,333  
Preferred stock dividends
    (6,147 )                       (6,147 )
 
                             
Net income (loss) available to common stockholders
  $ (1,320 )   $ 25,931     $ 22,834     $ (50,259 )   $ (2,814 )
 
                             

32


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

(unaudited)
CONSOLIDATING STATEMENT OF OPERATIONS
For the Nine Months Ended September 30, 2011

(in thousands)
                                         
                    Non-              
            Guarantor     Guarantor              
    Issuer     Subsidiaries     Subsidiaries     Eliminations     Consolidated  
Net product sales
  $     $ 681,711     $ 639,574     $ (96,983 )   $ 1,224,302  
Services revenue
          443,173       50,220             493,393  
 
                             
Net product sales and services revenue
          1,124,884       689,794       (96,983 )     1,717,695  
License and royalty revenue
          6,948       15,028       (4,253 )     17,723  
 
                             
Net revenue
          1,131,832       704,822       (101,236 )     1,735,418  
 
                             
Cost of net product sales
    2,526       308,920       359,500       (97,027 )     573,919  
Cost of services revenue
          232,463       18,925             251,388  
 
                             
Cost of net product sales and services revenue
    2,526       541,383       378,425       (97,027 )     825,307  
Cost of license and royalty revenue
                9,467       (4,253 )     5,214  
 
                             
Cost of net revenue
    2,526       541,383       387,892       (101,280 )     830,521  
 
                             
Gross profit (loss)
    (2,526 )     590,449       316,930       44       904,897  
 
                             
Operating expenses:
                                       
Research and development
    15,041       49,865       47,756             112,662  
Sales and marketing
    2,922       245,481       159,570             407,973  
General and administrative
    35,797       172,127       84,360             292,284  
 
                             
Total operating expenses
    53,760       467,473       291,686             812,919  
 
                             
Operating income (loss)
    (56,286 )     122,976       25,244       44       91,978  
Interest expense, including amortization of original issue discounts and deferred financing costs
    (108,308 )     (88,472 )     (12,472 )     55,058       (154,194 )
Other income (expense), net
    9,761       41,377       (1,557 )     (55,058 )     (5,477 )
Gain on sale of joint venture interest
    16,309             272,587             288,896  
 
                             
Income (loss) from continuing operations before provision (benefit) for income taxes
    (138,524 )     75,881       283,802       44       221,203  
Provision (benefit) for income taxes
    (67,593 )     33,211       30,062       (94 )     (4,414 )
 
                             
Income (loss) from continuing operations before equity earnings of unconsolidated entities, net of tax
    (70,931 )     42,670       253,740       138       225,617  
Equity in earnings of subsidiaries, net of tax
    299,961       631             (300,592 )      
Equity earnings of unconsolidated entities, net of tax
    1,509             3,420       (7 )     4,922  
 
                             
Net income
    230,539       43,301       257,160       (300,461 )     230,539  
Less: Net income attributable to non-controlling interests
                160             160  
 
                             
Net income attributable to Alere Inc. and Subsidiaries
    230,539       43,301       257,000       (300,461 )     230,379  
Preferred stock dividends
    (16,682 )                       (16,682 )
Preferred stock repurchase
    23,936                         23,936  
 
                             
Net income available to common stockholders
  $ 237,793     $ 43,301     $ 257,000     $ (300,461 )   $ 237,633  
 
                             

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Table of Contents

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

(unaudited)
CONSOLIDATING STATEMENT OF OPERATIONS
For the Nine Months Ended September 30, 2010

(in thousands)
                                         
                    Non-              
            Guarantor     Guarantor              
    Issuer     Subsidiaries     Subsidiaries     Eliminations     Consolidated  
Net product sales
  $     $ 610,847     $ 533,980     $ (81,278 )   $ 1,063,549  
Services revenue
          457,695       39,597             497,292  
 
                             
Net product sales and services revenue
          1,068,542       573,577       (81,278 )     1,560,841  
License and royalty revenue
          6,702       13,296       (3,946 )     16,052  
 
                             
Net revenue
          1,075,244       586,873       (85,224 )     1,576,893  
 
                             
Cost of net product sales
    334       291,047       289,826       (80,217 )     500,990  
Cost of services revenue
          223,752       15,239             238,991  
 
                             
Cost of net product sales and services revenue
    334       514,799       305,065       (80,217 )     739,981  
Cost of license and royalty revenue
          46       9,311       (3,946 )     5,411  
 
                             
Cost of net revenue
    334       514,845       314,376       (84,163 )     745,392  
 
                             
Gross profit (loss)
    (334 )     560,399       272,497       (1,061 )     831,501  
 
                             
Operating expenses:
                                       
Research and development
    15,076       49,715       31,396             96,187  
Sales and marketing
    2,133       235,545       131,338             369,016  
General and administrative
    31,430       176,949       75,776             284,155  
 
                             
Total operating expenses
    48,639       462,209       238,510             749,358  
 
                             
Operating income (loss)
    (48,973 )     98,190       33,987       (1,061 )     82,143  
Interest expense, including amortization of original issue discounts and deferred financing costs
    (51,393 )     (104,380 )     (6,901 )     61,753       (100,921 )
Other income (expense), net
    1,940       56,776       17,718       (61,753 )     14,681  
 
                             
Income (loss) from continuing operations before provision (benefit) for income taxes
    (98,426 )     50,586       44,804       (1,061 )     (4,097 )
Provision (benefit) for income taxes
    (22,526 )     15,595       6,068       (101 )     (964 )
 
                             
Income (loss) from continuing operations before equity earnings of unconsolidated entities, net of tax
    (75,900 )     34,991       38,736       (960 )     (3,133 )
Equity in earnings of subsidiaries, net of tax
    90,326       2,793             (93,119 )      
Equity earnings of unconsolidated entities, net of tax
    1,465             6,900       (170 )     8,195  
 
                             
Income from continuing operations
    15,891       37,784       45,636       (94,249 )     5,062  
Income from discontinued operations, net of tax
    1,084       9,764       1,090       (25 )     11,913  
 
                             
Net income
    16,975       47,548       46,726       (94,274 )     16,975  
Less: Net income attributable to non-controlling interests
                1,167             1,167  
 
                             
Net income attributable to Alere Inc. and Subsidiaries
    16,975       47,548       45,559       (94,274 )     15,808  
Preferred stock dividends
    (18,001 )                       (18,001 )
 
                             
Net income (loss) available to common stockholders
  $ (1,026 )   $ 47,548     $ 45,559     $ (94,274 )   $ (2,193 )
 
                             

34


Table of Contents

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

(unaudited)
CONSOLIDATING BALANCE SHEET
September 30, 2011

(in thousands)
                                         
            Guarantor     Non-Guarantor              
    Issuer     Subsidiaries     Subsidiaries     Eliminations     Consolidated  
ASSETS
                                       
Current assets:
                                       
Cash and cash equivalents
  $ 23,768     $ 75,985     $ 177,001     $     $ 276,754  
Restricted cash
          1,580       347,971             349,551  
Marketable securities
          725       341             1,066  
Accounts receivable, net of allowances
          209,700       213,737             423,437  
Inventories, net
          125,764       155,258       (7,712 )     273,310  
Deferred tax assets
    38,979       19,638       4,962       2,981       66,560  
Receivable from joint venture, net
          9,455       6,213             15,668  
Prepaid expenses and other current assets
    8,999       27,326       61,684             98,009  
Intercompany receivables
    823,849       445,219       12,988       (1,282,056 )      
 
                             
Total current assets
    895,595       915,392       980,155       (1,286,787 )     1,504,355  
Property, plant and equipment, net
    2,719       264,347       152,999       (60 )     420,005  
Goodwill
          1,905,411       989,500       (5,018 )     2,889,893  
Other intangible assets with indefinite lives
          7,100       7,255             14,355  
Finite-lived intangible assets, net
    27,734       1,057,024       484,266             1,569,024  
Deferred financing costs, net and other non-current assets
    89,291       5,549       3,698             98,538  
Receivable from joint venture, net of current portion
                15,579             15,579  
Investments in subsidiaries
    3,732,100       21,982       28,285       (3,782,367 )      
Investments in unconsolidated entities
    29,033             148,747             177,780  
Marketable securities
    2,040                         2,040  
Deferred tax assets
                10,045             10,045  
Intercompany notes receivable
    1,442,367       (389,302 )           (1,053,065 )      
 
                             
Total assets
  $ 6,220,879     $ 3,787,503     $ 2,820,529     $ (6,127,297 )   $ 6,701,614  
 
                             
 
                                       
LIABILITIES AND EQUITY
                                       
Current liabilities:
                                       
Current portion of long-term debt
  $ 40,500     $     $ 4,921     $     $ 45,421  
Current portion of capital lease obligations
          1,523       968             2,491  
Short-term debt
    6,147                         6,147  
Accounts payable
    10,139       66,590       68,668             145,397  
Accrued expenses and other current liabilities
    (130,805 )     333,464       206,230       2,294       411,183  
Intercompany payables
    416,030       95,542       770,483       (1,282,055 )      
 
                             
Total current liabilities
    342,011       497,119       1,051,270       (1,279,761 )     610,639  
 
                             
Long-term liabilities:
                                       
Long-term debt, net of current portion
    3,005,343             13,259             3,018,602  
Capital lease obligations, net of current portion
          1,892       442             2,334  
Deferred tax liabilities
    (16,964 )     327,263       84,480       591       395,370  
Other long-term liabilities
    21,557       44,457       55,867             121,881  
Intercompany notes payables
    321,221       534,776       188,361       (1,044,358 )      
 
                             
Total long-term liabilities
    3,331,157       908,388       342,409       (1,043,767 )     3,538,187  
 
                             
Redeemable non-controlling interest
                2,502             2,502  
 
                             
Stockholders’ equity
    2,547,711       2,381,996       1,421,773       (3,803,769 )     2,547,711  
Non-controlling interests
                2,575             2,575  
 
                             
Total equity
    2,547,711       2,381,996       1,424,348       (3,803,769 )     2,550,286  
 
                             
Total liabilities and equity
  $ 6,220,879     $ 3,787,503     $ 2,820,529     $ (6,127,297 )   $ 6,701,614  
 
                             

35


Table of Contents

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

(unaudited)
CONSOLIDATING BALANCE SHEET
December 31, 2010
(in thousands)
                                         
            Guarantor     Non-Guarantor              
    Issuer     Subsidiaries     Subsidiaries     Eliminations     Consolidated  
ASSETS
                                       
Current assets:
                                       
Cash and cash equivalents
  $ 101,666     $ 114,307     $ 185,333     $     $ 401,306  
Restricted cash
          1,739       842             2,581  
Marketable securities
          914       1,180             2,094  
Accounts receivable, net of allowances
          200,896       196,252             397,148  
Inventories, net
          126,297       139,147       (7,724 )     257,720  
Deferred tax assets
    33,487       19,252       4,372             57,111  
Income tax receivable
          1,383                   1,383  
Prepaid expenses and other current assets
    4,397       26,096       44,421             74,914  
Intercompany receivables
    624,399       437,206       9,843       (1,071,448 )      
 
                             
Total current assets
    763,949       928,090       581,390       (1,079,172 )     1,194,257  
Property, plant and equipment, net
    1,343       251,562       137,738       (133 )     390,510  
Goodwill
          1,899,801       936,517       (5,018 )     2,831,300  
Other intangible assets with indefinite lives
          7,100       21,083             28,183  
Finite-lived intangible assets, net
    12,697       1,178,730       516,154             1,707,581  
Deferred financing costs, net, and other non-current assets
    25,216       27,523       4,790             57,529  
Receivable from joint venture, net of current portion
                23,872             23,872  
Investments in subsidiaries
    3,146,921       1,568             (3,148,489 )      
Investments in unconsolidated entities
    9,659             52,897             62,556  
Marketable securities
    2,308             7,096             9,404  
Deferred tax assets
                25,182             25,182  
Intercompany notes receivable
    436,538       897,515             (1,334,053 )      
 
                             
Total assets
  $ 4,398,631     $ 5,191,889     $ 2,306,719     $ (5,566,865 )   $ 6,330,374  
 
                             
 
                                       
LIABILITIES AND EQUITY
                                       
Current liabilities:
                                       
Current portion of long-term debt
  $     $ 9,907     $ 6,984     $     $ 16,891  
Current portion of capital lease obligations
          1,954       172             2,126  
Accounts payable
    6,938       62,067       57,839             126,844  
Accrued expenses and other current liabilities
    (23,731 )     241,462       128,101             345,832  
Payable to joint venture, net
          (546 )     3,333             2,787  
Deferred gain on joint venture
    16,309             272,069             288,378  
Intercompany payables
    411,629       83,188       577,000       (1,071,817 )      
 
                             
Total current liabilities
    411,145       398,032       1,045,498       (1,071,817 )     782,858  
 
                             
Long-term liabilities:
                                       
Long-term debt, net of current portion
    1,194,054       1,181,500       3,012             2,378,566  
Capital lease obligations, net of current portion
          1,267       135             1,402  
Deferred tax liabilities
    (40,284 )     386,919       73,531             420,166  
Other long-term liabilities
    31,052       51,111       87,493             169,656  
Intercompany notes payables
    227,626       900,294       200,814       (1,328,734 )      
 
                             
Total long-term liabilities
    1,412,448       2,521,091       364,985       (1,328,734 )     2,969,790  
 
                             
Stockholders’ equity
    2,575,038       2,272,766       893,548       (3,166,314 )     2,575,038  
Non-controlling interests
                2,688             2,688  
 
                             
Total equity
    2,575,038       2,272,766       896,236       (3,166,314 )     2,577,726  
 
                             
Total liabilities and equity
  $ 4,398,631     $ 5,191,889     $ 2,306,719     $ (5,566,865 )   $ 6,330,374  
 
                             

36


Table of Contents

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

(unaudited)
CONSOLIDATING STATEMENT OF CASH FLOWS
For the Nine Months Ended September 30, 2011

(in thousands)
                                         
            Guarantor     Non-Guarantor              
    Issuer     Subsidiaries     Subsidiaries     Eliminations     Consolidated  
Cash Flows from Operating Activities:
                                       
Net income
  $ 230,539     $ 43,301     $ 257,160     $ (300,461 )   $ 230,539  
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
                                       
Equity in earnings of subsidiaries, net of tax
    (299,961 )     (631 )           300,592        
Non-cash interest expense, including amortization of original issue discounts and write-off of deferred financing costs .
    8,630       23,678       418             32,726  
Depreciation and amortization
    2,650       191,197       93,487       (301 )     287,033  
Non-cash stock-based compensation expense
    4,565       6,354       5,356             16,275  
Impairment of inventory
          172       273             445  
Impairment of long-lived assets
    2       1,331       341             1,674  
Impairment of intangible assets
          2,935       3             2,938  
Gain on sale of joint venture interest
    (16,309 )           (272,587 )           (288,896 )
(Gain) loss on sale of fixed assets
    75       1,132       (111 )           1,096  
Gain on sales of marketable securities
                (376 )           (376 )
Equity earnings of unconsolidated entities, net of tax
    (1,509 )           (3,420 )     7       (4,922 )
Deferred income taxes
    6,270       (45,374 )     8,203       (98 )     (30,999 )
Other non-cash items
    (2,774 )     3,080       (8,421 )           (8,115 )
Changes in assets and liabilities, net of acquisitions:
                                       
Accounts receivable, net
          (8,061 )     (22,771 )           (30,832 )
Inventories, net
          437       (17,431 )     (19 )     (17,013 )
Prepaid expenses and other current assets
    (2,333 )     763       (15,794 )           (17,364 )
Accounts payable
    3,201       (29 )     8,805             11,977  
Accrued expenses and other current liabilities
    (27,881 )     73,020       19,335       2,295       66,769  
Other non-current liabilities
    (5,455 )     2,995       (27,988 )           (30,448 )
Intercompany payable (receivable)
    (1,393,133 )     925,802       467,331              
 
                             
Net cash provided by (used in) operating activities
    (1,493,423 )     1,222,102       491,813       2,015       222,507  
 
                             
Cash Flows from Investing Activities:
                                       
Decrease (increase) in restricted cash
          160       (347,130 )           (346,970 )
Purchases of property, plant and equipment
    (1,148 )     (48,335 )     (45,431 )     222       (94,692 )
Proceeds from sale of property, plant and equipment
          293       553             846  
Proceeds from disposition of business
                11,491             11,491  
Cash paid for acquisitions, net of cash acquired
    (39,007 )     (5,400 )     (82,674 )           (127,081 )
Proceeds from sales of marketable securities
    268       190       7,934             8,392  
Net cash received from equity method investments
    (2,920 )           (41,182 )           (44,102 )
Increase in other assets .
    (31,824 )     (15,878 )     (5,133 )     (3,053 )     (55,888 )
 
                             
Net cash used in investing activities
    (74,631 )     (68,970 )     (501,572 )     (2,831 )     (648,004 )
 
                             
Cash Flows from Financing Activities:
                                       
Cash paid for financing costs
    (65,813 )     (525 )                 (66,338 )
Cash paid for contingent purchase price consideration
    (25,305 )                       (25,305 )
Proceeds from issuance of common stock, net of issuance costs .
    24,159                         24,159  
Repurchase of preferred stock
    (99,068 )                       (99,068 )
Proceeds from long-term debt
    1,750,000       937       1,771             1,752,708  
Payments on long-term debt
          (1,192,344 )     (2,993 )           (1,195,337 )
Net proceeds under revolving credit facilities
    100,000             4,808             104,808  
Repurchase of common stock
    (184,867 )                       (184,867 )
Excess tax benefits on exercised stock options
    1,403       429       351             2,183  
Principal payments on capital lease obligations
          (1,783 )     (1,301 )           (3,084 )
Other
    (10,251 )           (200 )           (10,451 )
 
                             
Net cash provided by (used in) financing activities
    1,490,258       (1,193,286 )     2,436             299,408  
 
                             
Foreign exchange effect on cash and cash equivalents
    (102 )     27       796       816       1,537  
 
                             
Net decrease in cash and cash equivalents
    (77,898 )     (40,127 )     (6,527 )           (124,552 )
Cash and cash equivalents, beginning of period
    101,666       116,112       183,528             401,306  
 
                             
Cash and cash equivalents, end of period
  $ 23,768     $ 75,985     $ 177,001     $     $ 276,754  
 
                             

37


Table of Contents

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

(unaudited)
CONSOLIDATING STATEMENT OF CASH FLOWS
For the Nine Months Ended September 30, 2010
(in thousands)
                                         
                    Non-              
            Guarantor     Guarantor              
    Issuer     Subsidiaries     Subsidiaries     Eliminations     Consolidated  
Cash Flows from Operating Activities:
                                       
Net income
  $ 16,975     $ 47,548     $ 46,726     $ (94,274 )   $ 16,975  
Income from discontinued operations, net of tax
    1,084       9,764       1,090       (25 )     11,913  
 
                             
Income from continuing operations
    15,891       37,784       45,636       (94,249 )     5,062  
Adjustments to reconcile income from continuing operations to net cash provided by (used in) operating activities:
                                       
Equity in earnings of subsidiaries, net of tax
    (90,326 )     (2,793 )           93,119        
Non-cash interest expense, including amortization of original issue discounts and write-off of deferred financing costs
    4,532       4,704       1,048             10,284  
Depreciation and amortization
    766       198,975       78,264       (2,498 )     275,507  
Non-cash stock-based compensation expense
    7,087       7,310       8,550             22,947  
Impairment of inventory
          136       576             712  
Impairment of long-lived assets
          651       (33 )           618  
Loss on sale of fixed assets
          357       250             607  
Equity earnings of unconsolidated entities, net of tax
    (1,465 )           (6,900 )     170       (8,195 )
Deferred income taxes
          (24,393 )     8,890       (17,753 )     (33,256 )
Other non-cash items
    (4,666 )     3,294       (6 )           (1,378 )
Changes in assets and liabilities, net of acquisitions:
                                       
Accounts receivable, net
          (4,473 )     14,200       (12,280 )     (2,553 )
Inventories, net
          (5,231 )     (23,786 )     (90 )     (29,107 )
Prepaid expenses and other current assets
    2,295       (1,387 )     (6,436 )     12,280       6,752  
Accounts payable
    2,430       (905 )     (20,948 )           (19,423 )
Accrued expenses and other current liabilities
    (13,617 )     42,437       (23,443 )     17,744       23,121  
Other non-current liabilities
    (11,612 )     198       (10,570 )           (21,984 )
Intercompany payable (receivable)
    (168,016 )     (81,959 )     249,975              
 
                             
Net cash provided by (used in) continuing operations
    (256,701 )     174,705       315,267       (3,557 )     229,714  
Net cash used in discontinued operations
          (390 )                 (390 )
 
                             
Net cash provided by (used in) operating activities
    (256,701 )     174,315       315,267       (3,557 )     229,324  
 
                             
Cash Flows from Investing Activities:
                                       
Decrease (increase) in restricted cash
          (296 )     16             (280 )
Purchases of property, plant and equipment
    (71 )     (46,129 )     (25,814 )     3,557       (68,457 )
Proceeds from sale of property, plant and equipment
          203       439             642  
Cash paid for acquisitions, net of cash acquired
    (192,975 )     (34,276 )     (238,332 )           (465,583 )
Increase in marketable securities
    (12,619 )           (5,268 )           (17,887 )
Net cash received from equity method investments
    336       44       10,455             10,835  
Increase in other assets
          (406 )     (1,311 )           (1,717 )
 
                             
Net cash used in continuing operations
    (205,329 )     (80,860 )     (259,815 )     3,557       (542,447 )
Net cash provided by discontinued operations
          61,446       2,000             63,446  
 
                             
Net cash used in investing activities
    (205,329 )     (19,414 )     (257,815 )     3,557       (479,001 )
 
                             
Cash Flows from Financing Activities:
                                       
Cash paid for financing costs
    (8,956 )     (634 )                 (9,590 )
Proceeds from issuance of common stock, net of issuance costs
    17,839                         17,839  
Proceeds from issuance of long-term debt
    400,000                         400,000  
Payments on long-term debt
          (7,313 )                 (7,313 )
Net payments under revolving credit facilities
          (143,445 )     (3,540 )           (146,985 )
Excess tax benefits on exercised stock options
    177       264       859             1,300  
Principal payments on capital lease obligations
          (1,054 )     (216 )           (1,270 )
Other
    (108 )           (401 )           (509 )
 
                             
Net cash provided by (used in) financing activities
    408,952       (152,182 )     (3,298 )           253,472  
 
                             
Foreign exchange effect on cash and cash equivalents
                (8,987 )           (8,987 )
 
                             
Net increase (decrease) in cash and cash equivalents
    (53,078 )     2,719       45,167             (5,192 )
Cash and cash equivalents, beginning of period
    293,328       83,411       116,034             492,773  
 
                             
Cash and cash equivalents, end of period
  $ 240,250     $ 86,130     $ 161,201     $     $ 487,581  
 
                             

38


Table of Contents

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements
     This report 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. You can identify these statements by forward-looking words such as “may,” “could,” “should,” “would,” “intend,” “will,” “expect,” “anticipate,” “believe,” “estimate,” “continue” or similar words. You should read statements that contain these words carefully because they discuss our future expectations, contain projections of our future results of operations or of our financial condition or state other “forward-looking” information. Forward-looking statements in this item include, without limitation, statements regarding anticipated expansion and growth in certain of our product and service offerings; the development and introduction of new technologies and products; the potential impact of these technologies and products under development; our expectations with respect to Apollo, our new integrated health management technology platform; our ability to accelerate adoption of our health management services; and our funding plans for our future working capital needs and commitments. Actual results or developments could differ materially from those projected in such statements as a result of numerous factors, including, without limitation, those risks and uncertainties set forth in Part I, Item 1A, “Risk Factors,” of our Annual Report on Form 10-K, as amended, for the year ended December 31, 2010 and other risk factors identified herein or from time to time in our periodic filings with the SEC. We do not undertake any obligation to update any forward-looking statements. This report and, in particular, the following discussion and analysis of our financial condition and results of operations, should be read in light of those risks and uncertainties and in conjunction with our accompanying consolidated financial statements and notes thereto.
Overview
     We enable individuals to take charge of improving their health and quality of life at home, under medical supervision, by developing new capabilities in near-patient diagnosis, monitoring and health management. Our global, leading products and services, as well as our new product development efforts, currently focus on cardiology, women’s health, infectious disease, oncology and toxicology. We are continuing to expand our product and service offerings in all of these categories.
     As a global, leading supplier of near-patient monitoring tools, as well as value-added healthcare services, we are well positioned to improve care and lower healthcare costs for both providers and patients. Our home coagulation monitoring business, which supports doctors’ and patients’ efforts to monitor warfarin therapy using our INRatio blood coagulation monitoring system, continues to represent an early example of this. We have also continued to introduce our new integrated health management technology platform, called Apollo, to our customers since its launch on January 1, 2010. Using a sophisticated data engine for acquiring and analyzing information, combined with a state-of-the-art touch engine for communicating with individuals and their health partners, we expect Apollo to benefit healthcare providers, health insurers and patients alike by enabling more efficient and effective health management programs.
     During the first nine months of 2011, we continued to grow through a number of small, but strategic, acquisitions. Subsequent to September 30, 2011, we made several additional acquisitions, including our acquisition of a majority of the outstanding shares of Axis-Shield plc, or Axis-Shield, an innovative Anglo-Norwegian developer and manufacturer of in vitro diagnostic tests. We have also continued laying the groundwork for future revenue and earnings growth by focusing our efforts on new product development and introductions. While year-to-date revenues remain slightly behind expectations, our important new products, including the epoc System, the Alere CD4 Analyzer and the Alere Heart Check System, have begun to penetrate the markets into which they have been launched, and we expect this trend to continue. We are also focused on expanding our global sales force. During the first nine months of 2011, we expanded our global sales force, and while the pace of this expansion slowed during the third quarter due to cost control measures necessitated by global economic uncertainty, we expect this initiative to continue during the fourth quarter of this year. We also continued to build awareness and acceptance for our two novel biomarkers, NGAL and placental growth factor, or PLGF.
     Our vision and strategy remain intact despite challenging economic conditions and a difficult environment faced by our health management business, particularly with the increasingly competitive environment, including the impact of health plans in-sourcing less differentiated services, such as disease management. Additionally, during the third quarter of 2011, state budgetary pressures continued to negatively impact smoking cessation revenues and we felt the final impact of Medicare reimbursement policy changes on our coagulation monitoring business; however, excluding these two businesses, health management revenues were stable compared to the prior quarter. Cost control measures put in place during the second quarter of 2011 have also helped us cope with difficult times, as we reduced our operating expenses, excluding research and development, from $235.2 million during the second quarter of 2011 to $226.3 million during the third quarter of 2011. In addition, during the third quarter of 2011, we launched our global principal operating company and shared service center, located in Galway, Ireland, and have begun the process of moving responsibility for our non-U.S. core diagnostic operations to Galway. Beginning in 2012, we expect that this initiative will provide benefits including higher customer service levels, higher operating efficiencies and improved control over our global operations.

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Financial Highlights
    Net revenue increased by $47.1 million, or 9%, to $585.8 million for the three months ended September 30, 2011, from $538.7 million for the three months ended September 30, 2010. Net revenue increased by $158.5 million, or 10%, to $1.7 billion for the nine months ended September 30, 2011, from $1.6 billion for the nine months ended September 30, 2010.
 
    Gross profit increased by $20.4 million, or 7%, to $306.0 million for the three months ended September 30, 2011, from $285.5 million for the three months ended September 30, 2010. Gross profit increased by $73.4 million, or 9%, to $904.9 million for the nine months ended September 30, 2011, from $831.5 million for the nine months ended September 30, 2010.
 
    For the three months ended September 30, 2011, we generated income from continuing operations attributable to Alere Inc. and Subsidiaries of $234.2 million, or $2.48 per diluted common share. For the three months ended September 30, 2010, we generated a loss from continuing operations attributable to Alere Inc. and Subsidiaries of $2.8 million, or $0.03 per common share. For the nine months ended September 30, 2011, we generated income from continuing operations attributable to Alere Inc. and Subsidiaries of $237.6 million, or $2.56 per diluted common share. For the nine months ended September 30, 2010, we generated a loss from continuing operations attributable to Alere Inc. and Subsidiaries of $14.1 million, or $0.17 per common share.
 
    During the third quarter of 2011, the Procter & Gamble Company’s, or P&G’s, option to require us to acquire its interest in SPD at fair market value expired. In connection with the expiration of the option, we recognized a gain totaling approximately $288.9 million during the third quarter of 2011.
 
    During the nine months ended September 30, 2011, we repurchased approximately $283.9 million of our outstanding securities, as described in more detail below.
Results of Operations
     The following discussions of our results of continuing operations exclude the results related to the vitamins and nutritional supplements business segment, which was previously presented as a separate operating segment prior to its divestiture in January 2010. The vitamins and nutritional supplements business segment has been segregated from continuing operations and is reflected as discontinued operations in our consolidated financial statements. See “Income from Discontinued Operations, Net of Tax” below. Results excluding the impact of currency translation are calculated on the basis of local currency results, using foreign currency exchange rates applicable to the earlier comparative period. We believe presenting information using the same foreign currency exchange rates helps investors isolate the impact of changes in those rates from other trends. Our results of operations were as follows:
     Net Product Sales and Services Revenue, Total and by Business Segment. Total net product sales and services revenue increased by $46.0 million, or 9%, to $580.5 million for the three months ended September 30, 2011, from $534.6 million for the three months ended September 30, 2010. Excluding the impact of currency translation, net product sales and services revenue for the three months ended September 30, 2011 increased by $36.0 million, or 7%, compared to the three months ended September 30, 2010. Total net product sales and services revenue increased by $156.9 million, or 10%, to $1.7 billion for the nine months ended September 30, 2011, from $1.6 billion for the nine months ended September 30, 2010. Excluding the impact of currency translation, net product sales and services revenue for the nine months ended September 30, 2011 increased by $126.1 million, or

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8%, compared to the nine months ended September 30, 2010. Net product sales and services revenue by business segment for the three and nine months ended September 30, 2011 and 2010 are as follows (in thousands):
                                                 
    Three Months Ended             Nine Months Ended        
    September 30,     %     September 30,     %  
    2011     2010     Change     2011     2010     Change  
Professional diagnostics
  $ 426,251     $ 359,481       19 %   $ 1,240,251     $ 1,039,315       19 %
Health management
    129,931       152,894       (15 )%     408,566       451,182       (9 )%
Consumer diagnostics
    24,338       22,181       10 %     68,878       70,344       (2 )%
 
                                       
Total net product sales and services revenue
  $ 580,520     $ 534,556       9 %   $ 1,717,695     $ 1,560,841       10 %
 
                                       
Professional Diagnostics
     The following table summarizes our net product sales and services revenue from our professional diagnostics business segment by groups of similar products and services for the three and nine months ended September 30, 2011 and 2010 (in thousands):
                                                 
    Three Months Ended             Nine Months Ended          
    September 30,     %     September 30,     %  
    2011     2010     Change     2011     2010     Change  
Infectious disease
  $ 142,639     $ 106,633       34 %   $ 405,559     $ 303,236       34 %
Cardiology
    127,943       120,061       7 %     390,652       360,773       8 %
Toxicology
    93,497       77,413       21 %     267,834       220,600       21 %
Other
    62,172       55,374       12 %     176,206       154,706       14 %
 
                                       
Professional diagnostics net product sales and services revenue
  $ 426,251     $ 359,481       19 %   $ 1,240,251     $ 1,039,315       19 %
 
                                       
     Net product sales and services revenue from our professional diagnostics business segment increased by $66.8 million, or 19%, to $426.3 million for the three months ended September 30, 2011, from $359.5 million for the three months ended September 30, 2010. Excluding the impact of currency translation, net product sales and services revenue from our professional diagnostics business segment increased by $57.1 million, or 16%, comparing the three months ended September 30, 2011 to the three months ended September 30, 2010. Revenue increased partially as a result of our acquisitions, which contributed an aggregate $19.4 million of the non-currency-adjusted increase. Also contributing to the increase in net product sales and services revenue was an increase in North American flu-related net product sales during the three months ended September 30, 2011, as compared to the three months ended September 30, 2010. Net product sales from our North American flu-related sales increased approximately $8.9 million, comparing the three months ended September 30, 2011 to the three months ended September 30, 2010, as a result of a more typical flu season in 2011 than the lower than normal flu levels observed in 2010. Excluding the impact of acquisitions and the increase in flu-related sales during the comparable periods, the currency-adjusted organic growth for our professional diagnostics net product sales and services revenue was 9%.
     Within our professional diagnostics business segment, net product sales and services revenue for our infectious disease business increased by approximately $36.0 million, or 34%, to $142.6 million for the three months ended September 30, 2011, from $106.6 million for the three months ended September 30, 2010, driven by increased North American flu-related, HIV and malaria net product sales, coupled with the impact of two recent Brazilian acquisitions, which contributed approximately $8.9 million of the increase. Net product sales and services revenue for our cardiology business increased by approximately $7.9 million, or 7%, to $127.9 million for the three months ended September 30, 2011, from $120.1 million for the three months ended September 30, 2010, driven particularly by growth outside of the U.S. and in our domestic cholesterol and professional coagulation testing businesses, offsetting continued softness in domestic BNP net product sales, primarily related to issues with sales on the Beckman Coulter platform. Our toxicology business increased by approximately $16.1 million, or 21%, to $93.5 million for the three months ended September 30, 2011, from $77.4 million for the three months ended September 30, 2010, with our recent acquisitions of Capital Toxicology, LLC, or Capital Toxicology, and Diagnostixx of California, Corp. (d/b/a) Immunalysis Corporation, or Immunalysis, contributing $10.5 million of the increase.
     Net product sales and services revenue from our professional diagnostics business segment increased by $200.9 million, or 19%, to $1.2 billion for the nine months ended September 30, 2011, from $1.0 billion for the nine months ended September 30, 2010. Excluding the impact of currency translation, net product sales and services revenue from our professional diagnostics business segment increased by $171.1 million, or 16%, comparing the nine months ended September 30, 2011 to the nine months ended September 30, 2010. Revenue increased partially as a result of our acquisitions, which contributed an aggregate $71.0 million of the non-currency-adjusted increase. Also contributing to the increase in net product sales and services revenue was an increase in North American flu-related net product sales during the nine months ended September 30, 2011, compared to the nine months ended September 30, 2010. Net product sales from our North American flu-related sales increased approximately $27.8 million, comparing the nine months ended September 30, 2011 to the nine months ended September 30, 2010, as a result of a more typical flu season in 2011 than the lower than normal flu levels observed in 2010. Excluding the impact of acquisitions and the increase in flu-related sales during the comparable periods, the currency-adjusted organic growth for our professional diagnostics net product sales and services revenue was 8%.
     Within our professional diagnostics business segment, net product sales and services revenue for our infectious disease business increased by approximately $102.3 million, or 34%, to $405.6 million for the nine months ended September 30, 2011, from $303.2 million for the nine months ended September 30, 2010, driven by increased North American flu-related, worldwide respiratory, HIV and malaria net product sales, coupled with the impact of two recent Brazilian acquisitions, which contributed approximately $23.4 million of the increase. Net product sales and services revenue for our cardiology business increased by approximately $29.9 million, or 8%, to $390.7 million for the nine months ended September 30, 2011, from $360.8 million for the nine months ended September 30, 2010, driven particularly by growth outside of the U.S. and in our domestic cholesterol and professional coagulation testing businesses, offsetting continued softness in domestic BNP net product sales, primarily related to issues with sales on the Beckman Coulter platform. Our toxicology business increased by approximately $47.2 million, or 22%, to $267.8 million for the nine months ended September 30, 2011, from $220.6 million for the nine months ended September 30, 2010, with our recent acquisitions of Kroll Laboratory Specialists, Inc., subsequently renamed Alere Toxicology, Capital Toxicology and Immunalysis contributing $36.2 million of the increase.

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Health Management
     The following table summarizes our net product sales and services revenue from our health management business segment by groups of similar products and services for the three and nine months ended September 30, 2011 and 2010 (in thousands):
                                                 
    Three Months Ended             Nine Months Ended          
    September 30,     %     September 30,     %  
    2011     2010     Change     2011     2010     Change  
Disease and case management
  $ 59,441     $ 73,137       (19 )%   $ 182,118     $ 214,039       (15 )%
Women’s & children’s health
    28,509       31,814       (10 )%     85,550       95,957       (11 )%
Wellness
    24,427       25,444       (4 )%     80,369       75,883       6 %
Patient self-testing services
    17,554       22,499       (22 )%     60,529       65,303       (7 )%
 
                                       
Health management net product sales and services revenue
  $ 129,931     $ 152,894       (15 )%   $ 408,566     $ 451,182       (9 )%
 
                                       
     Our health management net product sales and services revenue decreased by $23.0 million, or 15%, to $129.9 million for the three months ended September 30, 2011, from $152.9 million for the three months ended September 30, 2010. Our health management net product sales and services revenue decreased by $42.6 million, or 9%, to $408.6 million for the nine months ended September 30, 2011, from $451.2 million for the nine months ended September 30, 2010. Net product sales and services revenue in our health management segment was adversely impacted by the increasingly competitive environment, including pricing pressures and the impact of health plans in-sourcing less differentiated services, such as disease management. Wellness net product sales and services revenue from our Alere Wellbeing business, formerly known as Free & Clear, has been negatively impacted as a result of the continuation of decreased funding under certain states’ quit line programs. Additionally, our patient self-testing services business was impacted by a reimbursement policy change from the Centers for Medicare and Medicaid Services. For the remainder of 2011, we expect our women’s and children’s health and wellness businesses to be adversely impacted by reductions to or delays in the implementation of certain state funded programs.
Consumer Diagnostics
     Net product sales and services revenue from our consumer diagnostics business segment increased by $2.2 million, or 10%, to $24.3 million for the three months ended September 30, 2011, from $22.2 million for the three months ended September 30, 2010. The increase was primarily driven by an increase of approximately $4.7 million of manufacturing revenue associated with our manufacturing agreement with SPD, our 50/50 joint venture with P&G, whereby we manufacture and sell consumer diagnostic products to SPD. Net product sales by SPD were $54.8 million during the three months ended September 30, 2011, as compared to $47.8 million during the three months ended September 30, 2010.
     Net product sales and services revenue from our consumer diagnostics business segment decreased by $1.5 million, or 2%, to $68.9 million for the nine months ended September 30, 2011, from $70.3 million for to the nine months ended September 30, 2010. The decrease was primarily driven by a decrease in our non-SPD related revenue. Net product sales by SPD were $160.0 million during the nine months ended September 30, 2011, as compared to $143.7 million during the nine months ended September 30, 2010.
     License and Royalty Revenue. License and royalty revenue represents license and royalty fees from intellectual property license agreements with third parties. License and royalty revenue increased by approximately $1.1 million, or 27%, to $5.2 million for the three months ended September 30, 2011, from $4.1 million for the three months ended September 30, 2010. The increase in royalty revenue for the three months ended September 30, 2011,

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compared to the three months ended September 30, 2010, is primarily a result of higher royalties earned under existing licensing agreements. License and royalty revenue increased by approximately $1.7 million, or 10%, to $17.7 million for the nine months ended September 30, 2011, from $16.1 million for the nine months ended September 30, 2010. The increase in license and royalty revenue for the nine months ended September 30, 2011, compared to the nine months ended September 30, 2010, is almost entirely attributable to an increase in royalties earned on flu-related product sales under existing licensing agreements, reflecting a more typical flu season in 2011 than the low level of flu observed in 2010.
     Gross Profit and Margin. Gross profit increased by $20.4 million, or 7%, to $305.6 million for the three months ended September 30, 2011, from $285.5 million for the three months ended September 30, 2010. Gross profit increased by $73.4 million, or 9%, to $904.9 million for the nine months ended September 30, 2011, from $831.5 million for the nine months ended September 30, 2010. The increase in gross profit during the three and nine months ended September 30, 2011, compared to the three and nine months ended September 30, 2010, was largely attributed to the increase in net product sales and services revenue resulting from acquisitions and organic growth from our professional diagnostics business segment.
     Cost of net revenue included amortization expense of $14.0 million and $48.2 million for the three and nine months ended September 30, 2011, respectively, compared to $16.1 million and $46.7 million for the three and nine months ended September 30, 2010, respectively. Cost of net revenue during the three and nine months ended September 30, 2010 included amortization of $1.3 million and $7.0 million, respectively, relating to the write-up of inventory to fair value in connection with the acquisitions completed during 2010.
     Overall gross margin was 52% for both the three and nine months ended September 30, 2011, compared to 53% for both the three and nine months ended September 30, 2010, respectively.
     Gross Profit from Net Product Sales and Services Revenue, Total and by Business Segment. Gross profit from net product sales and services revenue increased by $19.2 million, or 7%, to $302.4 million for the three months ended September 30, 2011, from $283.2 million for the three months ended September 30, 2010. Gross profit from net product sales and services revenue increased by $71.5 million, or 9%, to $892.4 million for the nine months ended September 30, 2011, from $820.9 million for the nine months ended September 30, 2010. Gross profit from net product sales and services revenue by business segment for the three and nine months ended September 30, 2011 and 2010 are as follows (in thousands):
                                                 
    Three Months Ended             Nine Months Ended        
    September 30,     %     September 30,     %  
    2011     2010     Change     2011     2010     Change  
Professional diagnostics
  $ 238,414     $ 199,683       19 %   $ 687,131     $ 575,240       19 %
Health management
    58,609       77,732       (25 )%     189,867       228,655       (17 )%
Consumer diagnostics
    5,421       5,810       (7 )%     15,390       16,965       (9 )%
 
                                       
Total gross profit from net product sales and services revenue
  $ 302,444     $ 283,225       7 %   $ 892,388     $ 820,860       9 %
 
                                       
Professional Diagnostics
     Gross profit from our professional diagnostics net product sales and services revenue increased by $38.7 million, or 19%, to $238.4 million for the three months ended September 30, 2011, compared to $199.7 million for the three months ended September 30, 2010. Reducing gross profit for the three months ended September 30, 2010 was amortization of $1.3 million relating to the write-up of inventory to fair value in connection with the acquisitions completed during 2010.
     Gross profit from our professional diagnostics net product sales and services revenue increased by $111.9 million, or 19%, to $687.1 million for the nine months ended September 30, 2011, compared to $575.2 million for the nine months ended September 30, 2010. Reducing gross

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profit for the nine months ended September 30, 2010 was amortization of $7.0 million relating to the write-up of inventory to fair value in connection with the acquisitions completed during 2010.
     The increase in gross profit earned during the three and nine months ended September 30, 2011, compared to the three and nine months ended September 30, 2010, is primarily a result of the increase in net product sales and services revenue as discussed above.
     As a percentage of our professional diagnostics net product sales and services revenue, gross margin was 56% and 55% for the three and nine months ended September 30, 2011, respectively, compared to 56% and 55% for the three and nine months ended September 30, 2010, respectively.
Health Management
     Gross profit from our health management net product sales and services revenue decreased by $19.1 million, or 25%, to $58.6 million for the three months ended September 30, 2011, compared to $77.7 million for the three months ended September 30, 2010.
     Gross profit from our health management net product sales and services revenue decreased by $38.8 million, or 17%, to $189.9 million for the nine months ended September 30, 2011, compared to $228.7 million for the nine months ended September 30, 2010.
     The decrease in gross profit earned during the three and nine months ended September 30, 2011, compared to the three and nine months ended September 30, 2010, is primarily a result of a decrease in net product sales and services revenue as discussed above.
     As a percentage of our health management net product sales and services revenue, gross margin for the three and nine months ended September 30, 2011 was 45% and 46%, respectively, compared to 51% for both the three and nine months ended September 30, 2010. The lower margin percentage earned during the three and nine months ended September 30, 2011, compared to the three and nine months ended September 30, 2010, is primarily a result of a decrease in net product sales and services revenue as discussed above.
Consumer Diagnostics
     Gross profit from net product sales and services revenue from our consumer diagnostics business segment decreased by $0.4 million, or 7%, to $5.4 million for the three months ended September 30, 2011, compared to $5.8 million for the three months ended September 30, 2010. Gross profit from net product sales and services revenue from our consumer diagnostics business segment decreased by $1.6 million, or 9%, to $15.4 million for the nine months ended September 30, 2011, compared to $17.0 million for the nine months ended September 30, 2010.
     As a percentage of our consumer diagnostics net product sales and services revenue, gross margin for both the three and nine months ended September 30, 2011 was 22%, compared to 26% and 24% for the three and nine months ended September 30, 2010, respectively.
     Research and Development Expense. Research and development expense increased by $2.3 million, or 7%, to $34.8 million for the three months ended September 30, 2011, from $32.4 million for the three months ended September 30, 2010. Research and development expense increased by $16.5 million, or 17%, to $112.7 million for the nine months ended September 30, 2011, from $96.2 million for the nine months ended September 30, 2010.
     Research and development expense for the nine months ended September 30, 2011 included amortization expense totaling approximately $7.2 million related to the write off of certain in-process research and development projects fair valued in connection with the Standard Diagnostics, Inc. acquisition during the first quarter of 2010.
     Research and development expense as a percentage of net revenue was 6% for each of the three and nine months ended September 30, 2011 and 2010.
     Sales and Marketing Expense. Sales and marketing expense increased by $8.8 million, or 7%, to $134.4 million for the three months ended September 30, 2011, from $125.6 million for the three months ended September 30, 2010. The increase in sales and marketing expense partially relates to additional spending related to newly acquired businesses. Also contributing to the increase in sales and marketing expense for the three months ended September 30, 2011, compared to the three months ended September 30, 2010, was an increase in our global sales

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force in support of new product launches. Amortization expense of $53.0 million and $52.7 million was included in sales and marketing expense for the three months ended September 30, 2011 and 2010, respectively.
     Sales and marketing expense increased by $39.0 million, or 11%, to $408.0 million for the nine months ended September 30, 2011, from $369.0 million for the nine months ended September 30, 2010. The increase in sales and marketing expense partially relates to additional spending related to newly acquired businesses. Also contributing to the increase in sales and marketing expense for the nine months ended September 30, 2011, compared to the nine months ended September 30, 2010, was an increase in our global sales force in support of new product launches. Amortization expense of $158.6 million and $155.9 million was included in sales and marketing expense for the nine months ended September 30, 2011 and 2010, respectively.
     Sales and marketing expense as a percentage of net revenue was 23% and 24% for the three and nine months ended September 30, 2011, respectively, compared to 23% for both the three and nine months ended September 30, 2010.
     General and Administrative Expense. General and administrative expense decreased by approximately $4.2 million, or 4%, to $91.9 million for the three months ended September 30, 2011, from $96.1 million for the three months ended September 30, 2010. During the three months ended September 30, 2011 and 2010, we recorded $3.8 million of income and $4.6 million of expense, respectively, in connection with fair value adjustments to acquisition-related contingent consideration obligations in accordance with ASC 805, Business Combinations. Acquisition-related costs of $2.9 million and $0.9 million were included in general and administrative expense for the three months ended September 30, 2011 and 2010, respectively. Amortization expense of $1.7 million and $4.2 million was included in general and administrative expense for the three months ended September 30, 2011 and 2010, respectively.
     General and administrative expense increased by approximately $8.1 million, or 3%, to $292.3 million for the nine months ended September 30, 2011, from $284.2 million for the nine months ended September 30, 2010. The increase in general and administrative expense relates primarily to additional spending related to newly acquired businesses. During the nine months ended September 30, 2011 and 2010, we recorded income of $9.7 million and $2.3 million, respectively, in connection with fair value adjustments to acquisition-related contingent consideration obligations in accordance with ASC 805, Business Combinations. Acquisition-related costs of $6.2 million and $6.8 million were included in general and administrative expense for the nine months ended September 30, 2011 and 2010, respectively. Amortization expense of $9.2 million and $13.9 million was included in general and administrative expense for the nine months ended September 30, 2011 and 2010, respectively.
     General and administrative expense as a percentage of net revenue was 16% and 17% for the three and nine months ended September 30, 2011, respectively, compared to 18% for both the three and nine months ended September 30, 2010.
     Interest Expense. Interest expense includes interest charges, amortization of deferred financing costs and amortization of original issue discounts associated with certain debt issuances. Interest expense increased by $13.1 million, or 38%, to $47.3 million for the three months ended September 30, 2011, from $34.2 million for the three months ended September 30, 2010. The increase in interest expense for the three months ended September 30, 2011, compared to the three months ended September 30, 2010, was principally a result of interest expense incurred on our 8.625% senior subordinated notes issued in September 2010, totaling approximately $8.9 million for the three months ended September 30, 2011, compared to $1.0 million for the three months ended September 30, 2010. Additionally, higher outstanding debt balances during the three months ended September 30, 2011, compared to the three months ended September 30, 2010, contributed to the increase in interest expense during the respective periods.
     Interest expense increased by $53.3 million, or 53%, to $154.2 million for the nine months ended September 30, 2011, from $100.9 million for the nine months ended September 30, 2010. Such increase was principally due to interest expense of $31.2 million recorded during the nine months ended September 30, 2011, in connection with the termination of our former secured credit facility and related interest rate swap agreement, coupled with the amortization of fees paid for certain debt modifications. Contributing to the increase in interest expense for the nine months ended September 30, 2011, compared to the nine months ended September 30, 2010, was interest expense incurred on our 8.625% senior subordinated notes issued in September 2010, totaling approximately $26.7 million

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for the nine months ended September 30, 2011, compared to $1.0 million for the nine months ended September 30, 2010.
     Other Income (Expense), Net. Other income (expense), net includes interest income, realized and unrealized foreign exchange gains and losses and other income and expense. The components and the respective amounts of other income (expense), net are summarized as follows (in thousands):
                                                 
    Three Months Ended             Nine Months Ended        
    September 30,             September 30,        
    2011     2010     Change     2011     2010     Change  
Interest income
  $ 927     $ 446     $ 481     $ 1,818     $ 1,383     $ 435  
Foreign exchange gains (losses), net
    (24,740 )     3,297       (28,037 )     (27,532 )     6,680       (34,212 )
Other
    15,563       3,782       11,781       20,237       6,618       13,619  
 
                                   
Total other income (expense), net
  $ (8,250 )   $ 7,525     $ (15,775 )   $ (5,477 )   $ 14,681     $ (20,158 )
 
                                   
     The decrease in foreign exchange gains (losses), net for the three months ended September 30, 2011, compared to the three months ended September 30, 2010, was primarily a result of an $18.1 million unrealized foreign currency loss associated with a cash balance established in connection with the Axis-Shield tender offer, as well as additional net realized and unrealized foreign exchange losses associated with changes in currency exchange rates during the respective periods.
     Other income of $15.6 million for the three months ended September 30, 2011 includes a net $11.3 million of income associated with an amendment of our license agreement with Quidel, which also includes a settlement of prior period royalties, and $5.0 million of income associated with the settlement of a dispute over certain intellectual property rights. Other income of $20.2 million for the nine months ended September 30, 2011 includes $13.8 million of income associated with an amendment of our license agreement with Quidel, which also includes a settlement of prior period royalties, $5.0 million of income associated with the settlement of a dispute over certain intellectual property rights, $0.5 million of estimated prior period royalty income and a $1.8 million reversal of a prior period legal settlement reserve no longer deemed necessary.
     Other income for the three and nine months ended September 30, 2010 includes a net recovery of $3.4 million related to certain restructuring activities. Other income for the nine months ended September 30, 2010 includes a $3.1 million net gain associated with legal settlements related to previously disclosed intellectual property litigation relating to our health management businesses and approximately $0.7 million of income associated with a settlement of prior years’ royalties during 2010, which were partially offset by a charge related to an accounts receivable reserve for a prior year’s sale.
     Gain on Sale of Joint Venture Interest. In connection with the formation of SPD in May 2007, we entered into an option agreement with P&G, pursuant to which P&G had the right, for a period of 60 days commencing on May 17, 2011, to require us to acquire all of P&G’s interest in SPD at fair market value, and P&G had the right, upon certain material breaches by us of our obligations to SPD, to acquire all of our interest in SPD at fair market value. No gain on the proceeds that we received from P&G through the formation of SPD was recognized in our financial statements until P&G’s option to require us to purchase its interest in SPD expired. On July 16, 2011, P&G’s option to require us to acquire its interest in SPD at fair market value expired. In connection with the expiration of the option, the gain totaling approximately $288.9 million was recognized during the third quarter of 2011.
     Provision (Benefit) for Income Taxes. The provision for income taxes increased by $42.8 million to a provision of $42.7 million for the three months ended September 30, 2011, from a benefit of $0.2 million for the three months ended September 30, 2010. The benefit for income taxes increased by $3.5 million to a benefit of $4.4 million for the nine months ended September 30, 2011, from a benefit of $1.0 million for the nine months ended September 30, 2010. The effective tax rate was 15% and 2% for the three and nine months ended September 30, 2011, respectively, compared to 4% and 24% for the three and nine months ended September 30, 2010, respectively. The income tax provision (benefit) for the three and nine months ended September 30, 2011 and 2010 relates to federal, foreign and state income tax provisions (benefits). In addition, the effective tax rate may be impacted each period by discrete factors and events. The income tax provision and respective effective tax rate increase for the three months ended September 30, 2011, compared to the three months ended September 30, 2010, is primarily due to the foreign taxes associated with the recognition of the gain associated with the sale of our joint venture interest in SPD during the three months ended September 30, 2011, compared to the three months ended September 30, 2010. The income tax benefit and respective effective tax rate decrease for the nine months ended September 30, 2011, compared to the nine months ended September 30, 2010, is primarily due to higher forecasted pre-tax losses in higher tax rate jurisdictions, partially offset by foreign pre-tax income taxed in lower tax rate jurisdictions and a reduction in a jurisdictional tax rate during the nine months ended September 30, 2011, compared to the nine months ended September 30, 2010.
     Equity Earnings (Losses) in Unconsolidated Entities, Net of Tax. Equity earnings (losses) in unconsolidated entities is reported net of tax and includes our share of earnings (losses) in entities that we account for under the equity method of accounting. Equity earnings (losses) in unconsolidated entities, net of tax for the three and nine

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months ended September 30, 2011 reflects the following: (i) our 50% interest in SPD in the amount of $3.6 million and $3.0 million, respectively, (ii) our 40% interest in Vedalab S.A., or Vedalab, in the amount of $0.2 million and $0.4 million, respectively, and (iii) our 49% interest in TechLab, Inc., or TechLab, in the amount of $0.3 million and $1.5 million, respectively. Equity earnings (losses) in unconsolidated entities, net of tax, for the three and nine months ended September 30, 2010 reflects the following: (i) income (loss) from our 50% interest in SPD in the amount of $(0.4) million and $6.8 million, respectively, (ii) earnings from our 40% interest in Vedalab in the amount of $10,000 and $0.1 million, respectively, and (iii) earnings from our 49% interest in TechLab in the amount of $0.4 million and $1.4 million, respectively.
     The increase in earnings with respect to our 50% interest in SPD for the three months ended September 30, 2011, compared to the three months ended September 30, 2010, was partially driven by higher net product sales by SPD during the three months ended September 30, 2011, compared to the three months ended September 30, 2010. Net product sales by SPD were $54.8 million during the three months ended September 30, 2011, compared to $47.8 million during the three months ended September 30, 2010. Increased earnings with respect to our 50% interest in SPD for the three months ended September 30, 2011, compared to the three months ended September 30, 2010, were also driven by lower restructuring costs incurred during the three months ended September 30, 2011, compared to the three months ended September 30, 2010. The 50% portion of the restructuring charges borne by SPD and included in equity earnings of unconsolidated entities, net of tax, was approximately $0.2 million and $1.7 million for the three months ended September 30, 2011 and 2010, respectively.
     The decrease in earnings with respect to our 50% interest in SPD for the nine months ended September 30, 2011, compared to the nine months ended September 30, 2010, was primarily driven by higher operating expenses incurred by SPD during the nine months ended September 30, 2011, compared to the nine months ended September 30, 2010. Operating expenses for SPD for the nine months ended September 30, 2011 were $87.8 million, compared to $73.3 million for the nine months ended September 30, 2010. The increase in operating expenses during the nine months ended September 30, 2011, compared to the nine months ended September 30, 2010, was a result of increased sales and marketing media spending and an increase in legal fees associated with ongoing litigation brought against Church & Dwight Co., Inc. The increase in operating expenses was partially offset by higher net product sales by SPD during the nine months ended September 30, 2011, compared to the nine months ended September 30, 2010. Net product sales by SPD were $160.0 million during the nine months ended September 30, 2011, compared to $143.7 million during the nine months ended September 30, 2010.
     Income from Discontinued Operations, Net of Tax. The results of the vitamins and nutritional supplements business are included in income from discontinued operations, net of tax in our consolidated financial statements. For the three and nine months ended September 30, 2010, the discontinued operations generated net income of approximately $2,000 and $11.9 million, respectively. The net income of $11.9 million for the nine months ended September 30, 2010 includes a gain of $19.6 million ($12.0 million, net of tax) on the sale of our vitamins and nutritional supplements business.
     Net Income (Loss) Available to Common Stockholders. For the three months ended September 30, 2011, we generated net income available to common stockholders of $234.2 million, or $2.48 per diluted common share, compared to a net loss available to common stockholders of $2.8 million, or $0.03 per common share for the three months ended September 30, 2010. Net income (loss) available to common stockholders reflects $5.4 million and $6.1 million of preferred stock dividends paid during the three months ended September 30, 2011 and 2010, respectively. For the nine months ended September 30, 2011, we generated net income available to common stockholders of $237.6 million, or 2.56 per diluted common share, compared to a net loss available to common stockholders of $2.2 million, or $0.03 per common share for the nine months ended September 30, 2010. Net income (loss) available to common stockholders reflects $16.7 million and $18.0 million of preferred stock dividends paid during the nine months ended September 30, 2011 and 2010, respectively, and $23.9 million of income associated with the repurchase of preferred stock during the nine months ended September 30, 2011. See Note 5 of the accompanying consolidated financial statements for the calculation of net income per common share.
     Liquidity and Capital Resources
     Based upon our current working capital position, current operating plans and expected business conditions, we currently expect to fund our short and long-term working capital needs primarily using existing cash and our operating cash flow, and we expect our working capital position to improve as we improve our future operating margins and grow our business through new product and service offerings and by continuing to leverage our strong intellectual property position. As of September 30, 2011, we have $276.8 million of cash on our accompanying consolidated balance sheet, of which $100.9 million was held by domestic subsidiaries and $175.9 million was held by foreign entities. Repatriation of cash held by foreign entities could be subject to adverse tax implications.
     We may also utilize our new secured credit facility (See Note 10) or other sources of financing to fund a portion of our capital needs and other commitments, including our contractual contingent consideration obligations and future acquisitions. Our ability to access the capital markets may be impacted by the amount of our outstanding debt and equity and the extent to which our assets are encumbered by our outstanding secured debt. The terms and conditions of our outstanding debt instruments also contain covenants which expressly restrict our ability to incur additional indebtedness and conduct other financings. As of September 30, 2011, we had $3.1 billion in outstanding indebtedness comprised of $400.0 million of 8.625% subordinated notes due 2018, $245.4 million of 7.875% senior notes due 2016, $390.8 million of 9% senior subordinated notes due 2016, $1.9 billion under our secured credit facility and $150.0 million of 3% senior subordinated convertible notes.

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     If the capital and credit markets experience volatility or the availability of funds is limited, we may incur increased costs associated with issuing commercial paper and/or other debt instruments. In addition, it is possible that our ability to access the capital and credit markets could be limited by these or other factors at a time when we would like, or need, to do so, which could have an impact on our ability to refinance maturing debt and/or react to changing economic and business conditions.
     Our funding plans for our working capital needs and other commitments may be adversely impacted by unexpected costs associated with integrating the operations of newly acquired companies, executing our cost savings strategies and prosecuting and defending our existing lawsuits and/or unforeseen lawsuits against us. We also cannot be certain that our underlying assumed levels of revenues and expenses will be realized. In addition, we intend to continue to make significant investments in our research and development efforts related to the substantial intellectual property portfolio we own. We may also choose to further expand our research and development efforts and may pursue the acquisition of new products and technologies through licensing arrangements, business acquisitions, or otherwise. We may also choose to make significant investment to pursue legal remedies against potential infringers of our intellectual property. If we decide to engage in such activities, or if our operating results fail to meet our expectations, we could be required to seek additional funding through public or private financings or other arrangements. In such event, adequate funds may not be available when needed or may be available only on terms which could have a negative impact on our business and results of operations. In addition, if we raise additional funds by issuing equity or convertible securities, dilution to then existing stockholders may result.
     During the nine months ended September 30, 2011, we repurchased approximately $283.9 million of our outstanding securities, as described in more detail below.
Cash Flow Summary
                 
    Nine Months Ended  
    September 30,  
    2011     2010  
Net cash provided by operating activities
  $ 222,507     $ 229,324  
Net cash used in investing activities
    (648,004 )     (479,001 )
Net cash provided by financing activities
    299,408       253,472  
Foreign exchange effect on cash and cash equivalents
    1,537       (8,987 )
 
           
Net decrease in cash and cash equivalents
    (124,552 )     (5,192 )
Cash and cash equivalents, beginning of period
    401,306       492,773  
 
           
Cash and cash equivalents, end of period
  $ 276,754     $ 487,581  
 
           

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     Summary of Changes in Cash Position
     As of September 30, 2011, we had cash and cash equivalents of $276.8 million; a $124.6 million decrease from December 31, 2010. Our primary sources of cash during the nine months ended September 30, 2011 included $222.5 million generated by our operating activities, approximately $284.8 million of net proceeds received in connection with the refinancing of our credit facilities, $100.0 million of net proceeds borrowed under our secured credit facility’s revolving line of credit, $11.5 million received from the disposition of a business, $8.4 million from the sales of marketable securities and $24.2 million from common stock issuances under employee stock option and stock purchase plans. Our primary uses of cash during the nine months ended September 30, 2011 related to $127.1 million net cash paid for acquisitions, $283.9 million related to the repurchase of our preferred and common stock, $93.8 million of capital expenditures, net of proceeds from the sale of equipment, $25.3 million related to payments of acquisition-related contingent consideration obligations, $55.9 million related to an increase in other assets, which includes purchases of various licensing agreements totaling $30.4 million, $44.1 million net cash paid for equity method investments, which includes approximately $41.2 million paid for shares of Axis-Shield, and an increase in our restricted cash balance of approximately $347.0 million, which is almost entirely attributed to a cash balance established in connection with the Axis-Shield tender offer. Fluctuations in foreign currencies positively impacted our cash balance by $1.5 million during the nine months ended September 30, 2011.
     Cash Flows from Operating Activities
     Net cash provided by operating activities during the nine months ended September 30, 2011 was $222.5 million, which resulted from net income from continuing operations of $230.5 million and $8.9 million of non-cash items, offset by $16.9 million of cash used to meet net working capital requirements during the period. The $8.9 million of non-cash items included, among various other items, $287.0 million related to depreciation and amortization, $32.7 million of interest expense related to the amortization of deferred financing costs and original issue discounts, $16.3 million related to non-cash stock-based compensation, partially offset by a $288.9 million gain associated with the sale of our joint venture interest SPD, a $31.0 million decrease related to changes in our deferred tax assets and liabilities, which partially resulted from amortization of intangible assets, and a $8.1 million decrease related to other non-cash items.

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Cash Flows from Investing Activities
     Our investing activities during the nine months ended September 30, 2011 utilized $648.0 million of cash, including $127.1 million net cash paid for acquisitions, an increase in our restricted cash balance of approximately $347.0 million primarily related to a cash balance established in connection with the Axis-Shield tender offer, $93.8 million of capital expenditures, net of proceeds from the sale of equipment, $55.9 million related to an increase in other assets, which includes a purchase of various licensing agreements totaling $30.4 million, $44.1 million net cash paid for equity method investments, which includes approximately $41.2 million paid for shares of Axis-Shield, offset by $11.5 million received from the disposition of a business and $8.4 million received from the sales of marketable securities.

Cash Flows from Financing Activities
     Net cash provided in financing activities during the nine months ended September 30, 2011 was $299.4 million. Financing activities during the nine months ended September 30, 2011 primarily included $1.8 billion of cash received in connection with entering into our new secured credit facility in June 2011. The $1.8 billion received in connection with the secured credit facility was offset by $1.3 billion of cash payments related to the termination and repayment of our former secured credit facility and related interest rate swap agreement. In addition to the $1.8 billion received in connection with entering into our new secured credit facility, we subsequently borrowed an additional $100.0 million under the secured credit facility’s revolving line of credit. We utilized approximately $283.9 million to repurchase shares of our preferred and common stock, $25.3 million for payments of acquisition-related contingent consideration obligations and $3.1 million of principal payments on capital lease obligations. These cash payments were offset by $24.2 million of cash received from common stock issuances under employee stock option and stock purchase plans and $2.2 million related to the excess tax benefits on exercised stock options.
     As of September 30, 2011, we had an aggregate of $4.8 million in outstanding capital lease obligations which are payable through 2016.
Income Taxes
     As of December 31, 2010, we had approximately $156.1 million of domestic NOL and capital loss carryforwards and $60.3 million of foreign NOL and capital loss carryforwards, respectively, which either expire on various dates through 2030 or may be carried forward indefinitely. These losses are available to reduce federal, state and foreign taxable income, if any, in future years. These losses are also subject to review and possible adjustments by the applicable taxing authorities. In addition, the domestic NOL carryforward amount at December 31, 2010 included approximately $102.2 million of pre-acquisition losses at Matria, Quality Assured Services, ParadigmHealth, Biosite, Cholestech, Redwood, HemoSense, Ischemia, Inc. and Ostex International, Inc. Effective January 1, 2009, we adopted a new accounting standard for business combinations. Prior to adoption of this standard, the pre-acquisition losses were applied first to reduce to zero any goodwill and other non-current intangible assets related to the acquisitions, prior to reducing our income tax expense. Upon adoption of the new accounting standard, the reduction of a valuation allowance is generally recorded to reduce our income tax expense.
     Furthermore, all domestic losses are subject to the Internal Revenue Code Section 382 limitation and may be limited in the event of certain cumulative changes in ownership interests of significant shareholders over a three-year period in excess of 50%. Section 382 imposes an annual limitation on the use of these losses to an amount equal to the value of the company at the time of the ownership change multiplied by the long-term tax exempt rate. We have recorded a valuation allowance against a portion of the deferred tax assets related to our NOLs and certain of our other deferred tax assets to reflect uncertainties that might affect the realization of such deferred tax assets, as these assets can only be realized via profitable operations.
Off-Balance Sheet Arrangements
     We had no material off-balance sheet arrangements as of September 30, 2011.
Contractual Obligations
     On June 30, 2011, we entered into a new secured credit facility, which provides for term loans in the aggregate amount of $1.85 billion and a revolving line of credit of $250.0 million, collectively, $2.1 billion. As of September

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30, 2011, aggregate borrowings amounted to $1.75 billion under the term loans and $100.0 million under the revolving line of credit. In connection with entering into the secured credit facility on June 30, 2011, we repaid in full all outstanding indebtedness of approximately $1.2 billion under our former secured credit facility. The table below summarizes our aggregate long-term debt obligations as of September 30, 2011.
                                         
    Payments Due by Period  
    Total     2011     2012-2013     2014-2015     Thereafter  
Contractual Obligations
                                       
Long-term debt obligations
  $ 3,077,792     $ 18,628     $ 86,801     $ 85,472     $ 2,886,891  
     The following summarizes our principal contractual obligations as of September 30, 2011 that have changed significantly since December 31, 2010 and the effects such obligations are expected to have on our liquidity and cash flow in future periods, other than the changes described above with respect to our new secured credit facility. Other contractual obligations that were presented in our Annual Report on Form 10-K, as amended, for the year ended December 31, 2010, but omitted below, represent those that have not changed significantly since that date.
(a) Acquisition-related Contingent Consideration Obligations
    Privately-owned health management business
     With respect to a privately-owned health management business which we acquired in 2008, the terms of the acquisition agreement provide for contingent consideration payable upon successfully meeting certain revenue and EBITDA targets. The final earn-out was achieved during the fourth quarter of 2010, resulting in an accrual of approximately €23.9 million ($31.8 million). A cash payment totaling €24.1 million ($34.0 million) was made during the first quarter of 2011.
    Bioeasy
     With respect to Bioeasy Diagnostica Ltda., or Bioeasy, the terms of the acquisition agreement require us to pay earn-outs upon successfully meeting certain revenue and EBITDA targets during each of the calendar years 2011 through 2013. The maximum amount of the earn-out payments is approximately $7.5 million.
    Colibri
     With respect to Colibri Medical AB, or Colibri, the terms of the acquisition agreement require us to pay an earn-out upon successfully meeting certain operational and EBITDA targets during the calendar years 2011 through 2012. The maximum amount of the earn-out payments is SEK 3.0 million (approximately $0.4 million at September 30, 2011).
    Alere Wellbeing
     With respect to Alere Wellbeing, the terms of the acquisition agreement require us to pay an earn-out upon successfully meeting certain revenue and EBITDA targets during fiscal year 2010. A payment of approximately $11.5 million was made during the second quarter of 2011, which was previously accrued.
    Alere Healthcare
     With respect to Jinsung Meditech, Inc., now known as Alere Healthcare Inc., or Alere Healthcare, the terms of the acquisition agreement require us to pay an earn-out upon successfully meeting certain revenue and operating income targets during each of the calendar years 2010 through 2012. The 2010 portion of the earn-out totaling approximately $0.6 million was earned and accrued as of December 31, 2010. Payment of the 2010 earn-out was made during the third quarter of 2011. The maximum remaining amount of the earn-out payments is approximately $2.4 million.

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    LDS
     With respect to Laboratory Data Systems, Inc., or LDS, the terms of the acquisition agreement require us to pay an earn-out upon successfully meeting certain revenue and operating income targets during each of the twelve-month periods ending June 30, 2012 and 2013. The maximum amount of the earn-out payments is $20.0 million.
    Mologic
     With respect to Mologic Limited, or Mologic, the terms of the acquisition agreement require us to pay earn-outs, in shares of our common stock or cash, at our election, upon successfully meeting nine research and development project milestones during the five years following the acquisition. A portion of the earn-out was determined to have been achieved during the third quarter of 2011, resulting in an accrual of $3.0 million. Payment of this portion of the earn-out was made in cash during the fourth quarter of 2011. The maximum remaining amount of the earn-out payments is $16.0 million.
    Alere Home Monitoring
     With respect to Alere Home Monitoring, Inc., or Alere Home Monitoring, the terms of the acquisition agreement require us to pay an earn-out upon successfully meeting certain revenue and EBITDA targets during each of the calendar years 2010 and 2011. Cash payment for the 2010 portion of the earn-out totaling $12.7 million was paid during the first quarter of 2011. The maximum remaining amount of the earn-out payments is $12.3 million, which, if earned, will be paid in shares of our common stock.
    Standing Stone
     With respect to Standing Stone, Inc., or Standing Stone, the terms of the acquisition agreement require us to pay earn-outs and employee bonuses upon successfully meeting certain operational, product development and revenue targets during the period from the date of acquisition through calendar year 2013. The maximum amount of the earn-out payments is approximately $10.9 million. The maximum amount of the employee bonuses is $0.6 million.
    ROAR
     With respect to Forensics Limited, or ROAR, the terms of the acquisition agreement require us to pay an earn-out upon successfully meeting certain EBITDA targets during 2011 through 2014. The maximum amount of the earn-out payments is £10.5 million (approximately $16.4 million at September 30, 2011).
(b) Contingent Obligations
    Agreements with Epocal
     In November 2009, we entered into a distribution agreement with Epocal, Inc., or Epocal, to distribute the epoc® Blood Analysis System for blood gas and electrolyte testing for $20.0 million, which is recorded on our accompanying consolidated balance sheet in other intangible assets, net. We also entered into a definitive agreement to acquire all of the issued and outstanding equity securities of Epocal for a total potential purchase price of up to $255.0 million, including a base purchase price of up to $172.5 million if Epocal achieves certain gross margin and other financial milestones on or prior to October 31, 2014, plus additional payments of up to $82.5 million if Epocal achieves certain other milestones relating to its gross margin and product development efforts on or prior to this date. The agreement contains a working capital adjustment whereby the purchase price is increased or decreased to the extent that Epocal’s working capital at closing is more or less than a specified amount. We also agreed that, if the acquisition is consummated, we will provide $12.5 million in management incentive arrangements, 25% of which will vest over three years and 75% of which will be payable only upon the achievement of certain milestones. The acquisition will also be subject to other closing conditions, including the receipt of any required antitrust or other approvals. In April 2011, we entered into a license agreement with Epocal and amended some of the terms of the definitive agreement to acquire Epocal. The license agreement provides Alere with royalty-free access to certain Epocal intellectual property for use in Alere home-use products and provided for an upfront license payment of $18.0 million, which was paid in 2011. The amendment of the definitive agreement increased the working capital target by $18.0 million, which may have the effect of reducing the purchase price of the acquisition. The amendment of the agreement also added an additional potential milestone payment of $8.0 million. As a result, the maximum purchase price under the acquisition agreement increased to $263.0 million.

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    Standing Stone
     The terms of the acquisition agreement require us to purchase the remaining 19.08% of the issued and outstanding capital stock of Standing Stone, the holders of which are officers and employees of Standing Stone, in May 2012 for an aggregate purchase price of approximately $2.6 million. The redeemable non-controlling interest was recorded at its fair value of $2.5 million, as of the consummation of the transaction on May 16, 2011. 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.
Critical Accounting Policies
     The discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements in accordance with generally accepted accounting principles requires us to make estimates and judgments that may affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On a quarterly basis, we evaluate our estimates, including those related to revenue recognition and related allowances, bad debt, inventory, valuation of long-lived assets, including intangible assets and goodwill, income taxes, including any valuation allowance for our net deferred tax assets, contingencies and litigation, and stock-based compensation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates under different assumptions or conditions.
     There have been no significant changes in our critical accounting policies or management estimates since the year ended December 31, 2010. A comprehensive discussion of our critical accounting policies and management estimates is included in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K, as amended, for the year ended December 31, 2010.
Recent Accounting Pronouncements
     See Note 17 in the notes to the consolidated financial statements included in this Quarterly Report on Form 10-Q, regarding the impact of certain recent accounting pronouncements on our consolidated financial statements.
     ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
     Our market risks, and the ways we manage them, are summarized in Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk” of our 2010 Form 10-K, as amended. Market risks that were presented in our 2010 Form 10-K, as amended, but omitted below, represent those that have not changed significantly since that date. The following discussion about our market risk disclosures involves forward-looking statements. Actual results could differ materially from those discussed in the forward-looking statements.

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Interest Rate Risk
     We are exposed to market risk from changes in interest rates primarily through our investing and financing activities. In addition, our ability to finance future acquisition transactions or fund working capital requirements may be impacted if we are not able to obtain appropriate financing at acceptable rates.
     Our investing strategy to manage interest rate exposure is to invest in short-term, highly-liquid investments. Our investment policy also requires investment in approved instruments with an initial maximum allowable maturity of eighteen months and an average maturity of our portfolio that should not exceed six months, with at least $500,000 cash available at all times. Currently, our short-term investments are in money market funds with original maturities of 90 days or less. At September 30, 2011, our short-term investments approximated market value.
     At September 30, 2011, under the credit agreement for our secured credit facility we had (i) term loans in an aggregate outstanding principal amount of $1.55 billion (consisting of “A” term loans in the aggregate outstanding principal amount of $625.0 million and “B” term loans in the aggregate outstanding principal amount of $925.0 million), (ii) subject to our continued compliance with the credit agreement, the ability to borrow delayed-draw term loans in the aggregate principal amount of $300.0 million, of which $200.0 million was outstanding as of September 30, 2011 and (iii) subject to our continued compliance with the credit agreement, the ability to borrow under a $250.0 million revolving line of credit, which includes a $50.0 million sublimit for the issuance of letters of credit. As of September 30, 2011, $100.0 million was outstanding under the revolving line of credit. Loans can be either Base Rate Loans or Eurodollar Rate Loans at our election, and interest accrues on loans and our other Obligations under the terms of the credit agreement as follows (with the terms referenced above and below in this paragraph having the meanings given to them in the credit agreement): (i) in the case of loans that are 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 loans that are 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 as in effect from time to time. The Eurodollar Rate is equal to the LIBOR rate and is set for a period of one, two, three or six months at our election. Applicable Margins for our “A” term loans, delayed-draw term loans and revolving line-of-credit loans range from (i) with respect to such loans that are Base Rate Loans, 1.75% to 2.50% and (ii) with respect to such loans that are Eurodollar Rate Loans, 2.75% to 3.50%, in each case, depending upon our consolidated secured leverage ratio (as determined under the credit agreement). Applicable Margins for our “B” term loans range from (i) with respect to such loans that are Base Rate Loans, 2.50% to 3.25% and (ii) with respect to such loans that are Eurodollar Rate Loans, 3.50% to 4.25%, in each case, depending upon our consolidated secured leverage ratio. Interest on “B” term loans based on the Eurodollar Rate is subject to a 1.00% floor.
     Assuming no changes in our consolidated secured leverage ratio, the effect of interest rate fluctuations on outstanding borrowings as of September 30, 2011 over the next twelve months is quantified and summarized as follows (in thousands):
         
    Interest Expense  
    Increase  
Interest rates increase by 100 basis points
  $ 18,500  
Interest rates increase by 200 basis points
  $ 37,000  

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ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
     Our management evaluated, with the participation of our Chief Executive Officer (CEO) and Chief Financial Officer (CFO), the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a -15(e) or 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, our management, including the CEO and CFO, concluded that our disclosure controls and procedures were effective at that time. We and our management understand nonetheless that controls and procedures, no matter how well designed and operated, can provide only reasonable assurances of achieving the desired control objectives, and our management necessarily was required to apply its judgment in evaluating and implementing possible controls and procedures. In reaching their conclusions stated above regarding the effectiveness of our disclosure controls and procedures, our CEO and CFO concluded that such disclosure controls and procedures were effective as of such date at the “reasonable assurance” level.
Changes in Internal Control over Financial Reporting
     There was no change in our internal control over financial reporting that occurred during the most recent fiscal quarter covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II — OTHER INFORMATION
ITEM 1A. RISK FACTORS
     There have been no material changes from the Risk Factors previously disclosed in Part I, Item 1A, “Risk Factors,” of our Annual Report on Form 10-K, as amended, for the fiscal year ending December 31, 2010, or in Part II, Item 1A, “Risk Factors” of any Quarterly Report filed subsequent to the Annual Report on Form 10-K. We note, however, that the risk factors relating to our substantial indebtedness and the agreements governing our indebtedness which are set forth in our Annual Report on Form 10-K, as amended, apply also to the secured credit facility we entered into on June 30, 2011. The secured credit facility provides for term loans in the aggregate amount of $1.85 billion (consisting of “A” term loans in the aggregate principal amount of $625.0 million, “B” term loans in the aggregate principal amount of $925.0 million, and delayed draw term loans in the aggregate principal amount of $300.0 million) and, subject to our continued compliance with the secured credit facility, a $250.0 million revolving line-of-credit (which revolving line-of-credit includes a $50.0 million sublimit for the issuance of letters of credit. A further description of the secured credit facility can be found on page 55.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
     During the period covered by this report, we issued 415 shares of our common stock upon the net exercise of warrants to purchase 800 shares of our common stock, resulting in aggregate non-cash consideration to us of $10,832. The warrants were issued in 2002 as part of a $20 million private placement. The shares issued upon exercise of the warrants were offered and sold pursuant to the exemption from registration afforded by Section 4(2) of the Securities Act of 1933, as amended, or the Securities Act.
     The following table provides information regarding shares of our common stock and Series B preferred stock that we repurchased during the third quarter of 2011.

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Issuer Purchases of Equity Securities  
                            Approximate Dollar  
                    Total Number of     Value of Shares  
                    Shares Purchased as     that May Yet be  
    Total Number     Average     Part of Publicly     Purchased Under the  
    of Shares     Price Paid     Announced Plans or     Plans or Programs  
Period   Purchased (1)     Per Share(2)     Programs (3)     (3)  
July 1, 2011 — July 31, 2011
                               
Series B preferred stock
                         
Common stock
                         
As of July 31, 2011
                          $ 200,000,000  
August 1, 2011 — August 31, 2011
                               
Series B preferred stock
    __       __       __          
Common stock
    6,866,397     $ 24.24       6,866,397          
As of August 31, 2011
                          $ 33,576,105  
September 1, 2011 — Sept. 30, 2011
                               
Series B preferred stock
    __       __       __          
Common stock
    763,829     $ 22.93       763,829          
As of September 30, 2011
                          $ 16,058,968  
Third Quarter 2011
                               
Series B preferred stock
    0     $ 0       0          
 
                           
Common stock
    7,630,226     $ 24.11       7,630,226          
 
                           
 
(1)   In the third quarter of 2011, we repurchased an aggregate of 7,630,226 shares of our common stock in the open market and in privately negotiated transactions. All repurchases were made pursuant to an authorized share repurchase plan that we publicly announced on May 31, 2011.
 
(2)   Includes commission cost.
 
(3)   On May 19, 2011, the Board of Directors authorized the repurchase of up to an additional $200.0 million of our common stock or preferred stock in the open market or through privately negotiated transactions, of which $16,058,968 remained available as of September 30, 2011.

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ITEM 6. EXHIBITS
Exhibits:
     
Exhibit No.   Description
10.1
  First Amendment to Credit Agreement dated as of July 27, 2011 among Alere Inc., as Borrower , the Lenders party thereto, and General Electric Capital Corporation, as Administrative Agent (incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q, for the quarter ended June 30, 2011).
 
   
*31.1
  Certification by Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
   
*31.2
  Certification by Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
   
*32.1
  Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
   
*101
  Interactive Data Files regarding (a) our Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2011 and 2010, (b) our Consolidated Balance Sheets as of September 30, 2011 and December 31, 2010, (c) our Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2011 and 2010 and (d) the Notes to such Consolidated Financial Statements.
 
*   Filed herewith

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SIGNATURES
     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
         
  ALERE INC.
 
 
Date: November 8, 2011  /s/ David Teitel  
  David Teitel   
  Chief Financial Officer and an authorized officer 
 

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