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Inverness Medical Innovations Announces First Quarter 2008 Results
Date:4/24/2008

WALTHAM, Mass., April 24 /PRNewswire-FirstCall/ -- Inverness Medical Innovations, Inc. (Amex: IMA), a global leader in rapid point-of-care diagnostic products, today announced its financial results for the quarter ended March 31, 2008.

In the first quarter of 2008, the Company recorded net revenue of $372.2 million compared to net revenue of $159.0 million in the first quarter of 2007. The revenue increase was primarily due to increased product and service revenue in our Professional Diagnostics segment which grew from $83.8 million in the first quarter of 2007 to $259.6 million in 2008, principally as a result of businesses acquired which contributed $152.4 million of the increased product and service revenue. Also contributing to the net revenue increase was product and service revenue provided by our newly formed Health Management segment totaling $45.2 million in the first quarter of 2008. In addition, total royalty and license revenue grew from $5.2 million in the first quarter of 2007 to $10.9 million in 2008, principally as a result of businesses acquired which contributed $4.4 million of the increased royalty and license revenue. As a result of the formation of our Consumer Diagnostics joint venture with The Procter & Gamble Company, we no longer consolidate the third party revenues earned on sales of consumer products sold through the joint venture and instead recognized product sales to the joint venture of $28.9 million in the first quarter of 2008 compared to pre-joint venture formation revenues of $49.9 million in the first quarter of 2007. Despite the $21.0 million of decreased revenues included in our consolidated results, underlying Consumer Diagnostics revenues recorded by the joint venture increased to $54.7 millio tax liability 363,640 326,128

Other long-term liabilities 332,098 322,303

Total long-term liabilities 2,068,601 2,015,184

TOTAL STOCKHOLDERS' EQUITY 2,612,191 2,586,667

Total liabilities and stockholders' equity $5,033,435 $4,880,759

(1) December 31, 2007 amounts have been adjusted to reflect the correction

of certain errors and their related estimated tax effects. The

Company will amend its Form 10-K to correct its previously reported

results. Amounts presented above related to the estimated tax effects

of the corrections may differ from those included in the amended Form

10-K upon finalization of the restatement.

n in the first quarter of 2008 compared to $49.9 million in the first quarter of 2007.

For the first quarter of 2008, the net loss prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") was $4.2 million, or $0.05 per diluted common share, compared to net income of $6.3 million, or $0.14 per diluted common share, for the first quarter of 2007. The Company reported adjusted cash basis net income of $39.1 million, or $0.48 per diluted common share, for the first quarter of 2008, compared to adjusted cash basis net income of $14.3 million, or $0.31 per diluted common share, for the first quarter of 2007.

The Company's GAAP results for the first quarter of 2008 include amortization of $40.0 million, $16.3 million of restructuring charges, $5.6 million of stock-based compensation expense, a $1.7 million charge related to the write-up to fair market value of inventory acquired in connection with the acquisitions of Panbio Limited and BBI Holdings Plc, and a net realized foreign currency loss of $1.7 million associated with a cash escrow established in connection with the BBI acquisition. GAAP results for the first quarter of 2007 include amortization of $6.5 million, a $0.6 million restructuring charge, $1.6 million of non-cash stock-based compensation expense and $0.2 million of deferred financing costs related to the repayment of outstanding debt. These amounts, net of tax, have been excluded from the adjusted cash basis net income per common share for the respective quarters.

A detailed reconciliation of the Company's adjusted cash basis net income, which is a non-GAAP financial measure, to net loss under GAAP, as well as a discussion regarding this non-GAAP financial measure, is included in the schedules to this press release.

In connection with the review of the current quarter's results, two errors affecting the Company's previously reported fourth quarter 2007 results were noted as requiring correction. The first error was the understatement of the fourth quarter 2007 income tax provision by $1.8 million for a non-cash charge related to the write off of in-process research and development expense recorded during the quarter. The second error was a $2.4 million understatement of non-cash amortization expense to sales and marketing related to a 2007 acquisition. The Company will file the required 8-K relating to the restatement, as well as an amendment to its Form 10-K to correct its previously reported 2007 results.

The Company will host a conference call beginning at 10:00 a.m. (Eastern Time) today, April 24, 2008, to discuss these results as well as other corporate matters. During the conference call, the Company may answer questions concerning business and financial developments and trends and other business and financial matters. The Company's responses to these questions, as well as other matters discussed during the conference call, may contain or constitute information that has not been previously disclosed.

The conference call can be accessed by dialing 973-582-2700 (domestic and international), an access code is not required, or via a link on the Inverness website at http://www.invernessmedical.com. It is also available via link at http://audioevent.mshow.com/343993/ using Real Player or Windows Media. An on-demand webcast of the call will be available at the Inverness website (http://www.invernessmedical.com/News.cfm) two hours after the end of the call and will be accessible for 30 days. Additionally, reconciliations to non-GAAP financial measures not included in this press release that may be discussed during the call will also be available at the same website beginning shortly before the conference call and will continue to be available on this website for 30 days.

For more information about Inverness Medical Innovations, please visit our website at http://www.invernessmedical.com.

By developing new capabilities in near-patient diagnosis, monitoring and health management, Inverness Medical Innovations enables individuals to take charge of improving their health and quality of life. A global leader in rapid point-of-care diagnostics, Inverness' products, as well as its new product development efforts, focus on infectious disease, cardiology, oncology, drugs of abuse and women's health. Inverness is headquartered in Waltham, Massachusetts.

Inverness Medical Innovations, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations and

Reconciliation to Non-GAAP Adjusted Cash Basis Amounts

(in $000s, except per share amounts)

Three Months Ended March 31, 2008

Non-GAAP

Adjusted

Non-GAAP Cash

GAAP Adjustments Basis (a)

Net revenue $372,233 $- $372,233

Cost of revenue 191,843 (23,614)(b)(c)(d)(e) 168,229

Gross profit 180,390 23,614 204,004

Gross margin 48% 55%

Operating expenses:

Research and development 30,925 (5,380)(b)(c)(d) 25,545

Selling, general and

administrative 134,687 (34,327)(b)(c)(d) 100,360

Total operating expenses 165,612 (39,707) 125,905

Operating income 14,778 63,321 78,099

Interest and other income

(expense), net (20,995) 1,933 (b)(f) (19,062)

Income tax (benefit)

provision (880) 21,966 (h) 21,086

Equity earnings of

unconsolidated entities, net

of tax 1,163 - 1,163

Net (loss) income $(4,174) $43,288 $39,114

Net (loss) income per common

share:

Basic $(0.05) $0.51

Diluted $(0.05)(i) $0.48(j)

Weighted average shares

- basic 77,244 77,244

Weighted average shares

- diluted 77,244 (i) 83,124(j)

Three Months Ended March 31, 2007

Non-GAAP

Adjusted

Non-GAAP Cash

GAAP Adjustments Basis (a)

Net revenue $158,979 $- $158,979

Cost of revenue 80,641 (3,128)(b)(d) 77,513

Gross profit 78,338 3,128 81,466

Gross margin 49% 51%

Operating expenses:

Research and development 12,009 (1,063)(b)(d) 10,946

Selling, general and

administrative 50,990 (4,387)(b)(c)(d) 46,603

Total operating expenses 62,999 (5,450) 57,549

Operating income 15,339 8,578 23,917

Interest and other income

(expense), net (3,155) 317 (b)(g) (2,838)

Income tax (benefit)

provision 5,879 867 (h) 6,746

Equity earnings of

unconsolidated entities,

net of tax - - -

Net (loss) income $6,305 $8,028 $14,333

Net (loss) income per common

share:

Basic $0.14 $0.32

Diluted $0.14 (k) $0.31(k)

Weighted average shares

- basic 44,446 44,446

Weighted average shares

- diluted 46,198 (k) 46,198(k)

(a) In calculating net income or loss on an adjusted cash basis, the

Company excludes from net income or loss (i) certain non-cash charges

including amortization expense and stock-based compensation expense,

(ii) non-recurring charges and income, and (iii) certain other charges

and income that have a significant positive or negative impact on

results yet do not occur on a consistent or regular basis in its

business. In determining whether a particular item meets one of these

criteria, management considers facts and circumstances that it

believes are relevant. Management believes that excluding such

charges and income from income or loss allows investors and management

to evaluate and compare the Company's operating results from

continuing operations from period to period in a meaningful and

consistent manner. Due to the frequency of their occurrence in its

business, the Company does not adjust net income or loss for the costs

associated with litigation, including payments made or received

through settlements. It should be noted that "net income or loss on

an adjusted cash basis" is not a standard financial measurement under

accounting principles generally accepted in the United States of

America ("GAAP") and should not be considered as an alternative to net

income or loss or cash flow from operating activities, as a measure of

liquidity or as an indicator of operating performance or any measure

of performance derived in accordance with GAAP.

(b) Amortization expense of $40.0 million and $6.5 million in the first

quarter of 2008 and 2007 GAAP results, respectively, including

$12.0 million and $3.0 million charged to cost of sales, $0.8 million

and $0.8 million charged to research and development, $27.0 million

and $2.6 million charged to selling, general and administrative, and

$0.2 million and $0.1 million charged to other income, in the

respective quarters.

(c) Restructuring charges associated with the decision to close facilities

of $16.3 million and $0.6 million for the first quarter of 2008 and

2007 GAAP results, respectively. The $16.3 million charge for the

first quarter of 2008 includes: $9.7 million charged to cost of

sales, $3.4 million charged to research and development and

$3.2 million charged to selling, general and administrative expense.

The $0.6 million charge for the first quarter of 2007 was charged to

selling, general and administrative expense. These charges have been

excluded from net income or loss because they have a significant

impact on results yet do not occur on a consistent or regular basis in

the Company's business.

(d) Compensation costs of $5.6 million and $1.6 million associated with

stock-based compensation expense for the first quarter of 2008 and

2007 GAAP results, respectively, including $0.3 million and

$0.1 million charged to cost of sales, $1.2 million and $0.2 million

charged to research and development and $4.1 million and $1.3 million

charged to selling, general and administrative, in the respective

quarters.

(e) Write-off in the amount of $1.7 million during the first quarter of

2008, relating to inventory write-ups recorded in connection with the

acquisitions of Panbio Limited and BBI Holdings Plc.

(f) A $1.7 million net realized foreign currency loss associated with a

cash escrow established in connection with the acquisition of

BBI Holdings Plc.

(g) Write-off of $0.2 million in deferred financing costs related to

repayment of outstanding debt.

(h) Tax effect on adjustments as discussed above in notes (b), (c), (d),

(e), (f) and (g).

(i) For the three months ended March 31, 2008, potential diluted shares

were not used in the calculation of diluted net loss per common share

under GAAP because inclusion thereof would be antidilutive.

(j) Included in the weighted average dilutive common shares for the

calculation of net income per common share on an adjusted cash basis

for the three months ended March 31, 2008 are dilutive shares

consisting of 5,880,000 common stock equivalent shares from the

potential exercise of stock options and warrants and conversion of

convertible debt. The net income per diluted share calculation for

the three months ended March 31, 2008, on an adjusted cash basis, is

calculated as if the convertible debt was converted resulting in net

income available to common shareholders of $39.9 million.

(k) Included in the weighted average dilutive common shares for the

calculation of net income per common share on a GAAP and adjusted cash

basis for the three months ended March 31, 2007 are dilutive shares

consisting of 1,752,000 common stock equivalent shares from the

potential exercise of stock options and warrants.

Inverness Medical Innovations, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(in $000s)

March 31, December 31,

2008 (1) 2007 (1)

(unaudited) (unaudited)

ASSETS

CURRENT ASSETS:

Cash and cash equivalents $402,877 $414,732

Restricted cash 1,869 141,869

Marketable securities 1,995 2,551

Accounts receivable, net 198,549 163,380

Inventories, net 156,291 148,231

Prepaid expenses and other current assets 142,853 82,211

Total current assets 904,434 952,974

PROPERTY, PLANT AND EQUIPMENT, NET 273,039 267,880

GOODWILL AND OTHER INTANGIBLE ASSETS, NET 3,704,123 3,494,174

DEFERRED FINANCING COSTS AND OTHER

ASSETS, NET 151,839 165,731

Total assets $5,033,435 $4,880,759

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:

Current portion of notes payable $21,676 $21,096

Other current liabilities 330,967 257,812

Total current liabilities 352,643 278,908

LONG-TERM LIABILITIES:

Notes payable, net of current portion 1,372,863 1,366,753

Deferred
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SOURCE Inverness Medical Innovations, Inc.
Copyright©2008 PR Newswire.
All rights reserved

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6. Inverness Medical Innovations to Participate at JP Morgan Healthcare Conference on January 8, 2008
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10. Inverness Medical Innovations Announces Fourth Quarter 2007 Results
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