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Inverness Medical Innovations Announces Third Quarter 2008 Results
Date:10/29/2008

WALTHAM, Mass., Oct. 29 /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 September 30, 2008.

In the third quarter of 2008, the Company recorded net revenue of $438.8 million compared to net revenue of $237.6 million in the third quarter of 2007. The revenue increase was primarily due to $118.7 million of incremental revenue provided by our Health Management segment along with $63.5 million of incremental revenue contributed by our other recently acquired businesses and organic growth which, on a currency adjusted basis, was approximately 11% in our Professional Diagnostics segment.

For the third quarter of 2008, the net loss prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") was $3.7 million, or $0.12 per diluted common share, compared to net loss of $180.6 million, or $3.74 per diluted common share, for the third quarter of 2007. The Company reported adjusted cash basis net income of $43.1 million, or $0.46 per diluted common share, for the third quarter of 2008, compared to adjusted cash basis net income of $14.9 million, or $0.29 per diluted common share, for the third quarter of 2007, an increase of 59%.

The Company's GAAP results for the third quarter of 2008 include amortization of $60.0 million, $5.8 million of restructuring charges and $7.0 million of stock-based compensation expense. GAAP results for the third quarter of 2007 include amortization of $19.9 million, the write-off of $169.0 million of in-process research and development acquired in connection with the Biosite acquisition, $0.5 million of restructuring charges, $3.3 million of stock-based compensation expense, and a $6.3 million charge related to the write-up to fair market value of inventory acquired in connection with the Biosite and Cholestech acquisitions. 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.

The Company will host a conference call beginning at 10:00 a.m. (Eastern Time) today, October 29, 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://tinyurl.com/67ankb 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 September 30, 2008

Non-GAAP

Non-GAAP Adjusted Cash

GAAP Adjustments Basis(a)

Net revenue $438,800 $- $438,800

Cost of revenue 210,652 (12,721)(b)( c )(d) 197,931

Gross profit 228,148 12,721 240,869

Gross margin 52% 55%

Operating expenses:

Research and development 25,693 (2,387)(b)( c )(d) 23,306

Purchase of in-process

research and development - - -

Selling, general and

administrative 189,208 (57,165)(b)( c )(d) 132,043

Total operating expenses 214,901 (59,552) 155,349

Operating income (loss) 13,247 72,273 85,520

Interest and other income

(expense), net (24,752) 300( c ) (24,452)

Income tax (benefit)

provision (4,696) 26,018(g) 21,322

Equity earnings of

unconsolidated entities,

net of tax 3,150 237(b) 3,387

Net (loss) income $(3,659) $46,792 $43,133

Preferred stock dividends $(5,393) $(5,393)

Net (loss) income

available to common

stockholders - basic $(9,052) $37,740

Net (loss) income per

common share

Basic $(0.12) $0.48

Diluted $(0.12)(h) $0.46(i)

Weighted average common

shares - basic 77,995 77,995

Weighted average common

shares - diluted 77,995(h) 83,169(i)

Three Months Ended September 30, 2007

Non-GAAP

Non-GAAP Adjusted Cash

GAAP Adjustments Basis(a)

Net revenue $237,636 $- $237,636

Cost of revenue 127,338 (13,938)(b)(d)(e) 113,400

Gross profit 110,298 13,938 124,236

Gross margin 46% 52%

Operating expenses:

Research and development 20,530 (1,535)(b)( c )(d) 18,995

Purchase of in-process

research and development 169,000 (169,000)(f) -

Selling, general and

administrative 77,243 (14,393)(b)( c )(d) 62,850

Total operating expenses 266,773 (184,928) 81,845

Operating income (loss) (156,475) 198,866 42,391

Interest and other income

(expense), net (26,898) (26,898)

Income tax (benefit)

provision (1,645) 3,449(g) 1,804

Equity earnings of

unconsolidated entities,

net of tax 1,116 112(b) 1,228

Net (loss) income $(180,612) $195,529 $14,917

Preferred stock dividends $- $-

Net (loss) income

available to common

stockholders - basic $(180,612) $14,917

Net (loss) income per

common share

Basic $(3.74) $0.31

Diluted $(3.74)(h) $0.29(j)

Weighted average common

shares - basic 48,256 48,256

Weighted average common

shares - diluted 48,256(h) 51,483(j)

(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. In addition, all companies do not calculate

non-GAAP financial measures in the same manner and, accordingly,

"net income or loss on an adjusted cash basis" presented in this

press release may not be comparable to similar measures used by

other companies.

(b) Amortization expense of $60.0 million and $19.9 million in the third

quarter of 2008 and 2007 GAAP results, respectively, including $10.5

million and $7.5 million charged to cost of sales, $1.0 million and

$0.6 million charged to research and development and $48.3 million

and $11.7 million charged to selling, general and administrative, in

the respective quarters, with $0.2 million and $0.1 million charged

through equity earnings of unconsolidated entities, net of tax

during the respective quarters.

( c ) Restructuring charges associated with the decision to close

facilities of $5.8 million and $0.5 million in the third quarter of

2008 and 2007 GAAP results, respectively. The $5.8 million charge

for the three months ended September 30, 2008 included $1.8 million

charged to cost of sales, $0.3 million charged to research and

development, $3.4 million charged to selling, general and

administrative and $0.3 million charged to interest expense. The

$0.5 million charge for the third quarter of 2007 includes $0.3

million charged to research and development and $0.2 million charged

to selling, general and administrative. 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 $7.0 million and $3.3 million associated with

stock-based compensation expense in the third quarter of 2008 and

2007 GAAP results, respectively, including $0.4 million and $0.1

million charged to cost of sales, $1.1 million and $0.6 million

charged to research and development and $5.5 million and $2.5

million charged to selling, general and administrative, in the

respective quarters.

(e) A write-off in the amount of $6.3 million during the third quarter

of 2007, relating to inventory write-ups recorded in connection with

the acquisitions of Biosite, Inc. and Cholestech Corp. during the

second and third quarters of 2007.

(f) Purchase of in-process research and development during the third

quarter of 2007 includes a write-off of $169.0 million associated

with the value of in-process research and development costs incurred

in connection with our acquisition of Biosite, Inc.

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

(d), (e) and (f).

(h) For the three months ended September 30, 2008 and 2007, potential

dilutive shares were not used in the calculation of diluted net loss

per common share under GAAP because inclusion thereof would be

antidilutive.

(i) Included in the weighted average diluted common shares for the

calculation of net income per common share for the three months

ended September 30, 2008, on an adjusted cash basis, are dilutive

shares consisting of 1,763,000 common stock equivalent shares from

the potential exercise of stock options and warrants and potential

dilutive shares consisting of 3,411,000 common stock equivalent

shares from the potential conversion of convertible debt securities.

The net income per diluted share calculation for the three months

ended September 30, 2008, on an adjusted cash basis, includes the

add back of interest expense related to the convertible debt of $0.7

million resulting in net income available to common stockholders of

$38.4 million. Potential dilutive shares consisting of 10,316,000

common stock equivalent shares from the potential conversion of

Series B convertible preferred stock for the three months ended

September 30, 2008 were not used in the calculation of diluted net

income per common share, on an adjusted cash basis, because

inclusion thereof would be antidilutive.

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

calculation of net income per common share for the three months

ended September 30, 2007, on an adjusted cash basis, are dilutive

shares consisting of 3,227,000 common stock equivalent shares from

the potential exercise of stock options and warrants. Potential

dilutive shares consisting of 2,868,000 common stock equivalent

shares from the potential conversion of convertible debt securities

for the three months ended September 30, 2007 were not used in the

calculation of diluted net income per common share, or on an

adjusted cash basis, because inclusion thereof would be

antidilutive.

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)

Nine Months Ended September 30, 2008

Non-GAAP

Non-GAAP Adjusted Cash

GAAP Adjustments Basis(a)

Net revenue $1,212,160 $- $1,212,160

Cost of revenue 597,520 (53,560)(b)( c ) 543,960

(d)(e)

Gross profit 614,640 53,560 668,200

Gross margin 51% 55%

Operating expenses:

Research and development 86,426 (13,080)(b)( c )(d) 73,346

Purchase of in-process

research and development - -

Selling, general and

administrative 496,687 (142,286)(b)( c )(d) 354,401

Total operating expenses 583,113 (155,366) 427,747

Operating income

(loss) 31,527 208,926 240,453

Interest and other income

(expense), net (84,151) 8,615( c )(h) (75,536)

Income tax (benefit)

provision (13,274) 71,050(j) 57,776

Equity earnings of

unconsolidated entities,

net of tax 1,169 6,678(b)( c ) 7,847

Net (loss) income $(38,181) $153,169 $114,988

Preferred stock dividends $(8,500) $(8,500)

Net (loss) income

available to common

stockholders - basic $(46,681) $106,488

Net (loss) income per common

share

Basic $(0.60) $1.37

Diluted $(0.60)(k) $1.30(l)

Weighted average common

shares - basic 77,630 77,630

Weighted average common

shares - diluted 77,630(k) 83,390(l)

Nine Months Ended September 30, 2007

Non-GAAP

Non-GAAP Adjusted Cash

GAAP Adjustments Basis(a)

Net revenue $551,580 $- $551,580

Cost of revenue 296,604 (21,611)(b)(d)(e) 274,993

Gross profit 254,976 21,611 276,587

Gross margin 46% 50%

Operating expenses:

Research and development 44,649 (3,759)(b)( c )(d) 40,890

Purchase of in-process

research and development 169,000 (169,000)(f) -

Selling, general and

administrative 224,008 (71,921)(b)( c )(d) 152,087

Total operating expenses 437,657 (244,680) 192,977

Operating income (loss) (182,681) 266,291 83,610

Interest and other income

(expense), net (47,416) 13,663(g)(i) (33,753)

Income tax (benefit)

provision 1,550 10,247(j) 11,797

Equity earnings of

unconsolidated entities,

net of tax 2,666 336(b) 3,002

Net (loss) income $(228,981) $270,043 $41,062

Preferred stock dividends $- $-

Net (loss) income available

to common stockholders -

basic $(228,981) $41,062

Net (loss) income per

common share

Basic $(4.89) $0.88

Diluted $(4.89)(k) $0.84(m)

Weighted average common

shares - basic 46,787 46,787

Weighted average common

shares - diluted 46,787(k) 49,070(m)

(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. In addition, all companies do not calculate

non-GAAP financial measures in the same manner and, accordingly,

"net income or loss on an adjusted cash basis" presented in this

press release may not be comparable to similar measures used by

other companies.

(b) Amortization expense of $155.1 million and $36.4 million in the

first nine months of 2008 and 2007 GAAP results, respectively,

including $34.2 million and $13.8 million charged to cost of sales,

$2.8 million and $2.1 million charged to research and development

and $117.4 million and $20.2 million charged to selling, general and

administrative, in the respective periods, with $0.7 million and

$0.3 million charged through equity earnings of unconsolidated

entities, net of tax during the nine months ended September 30, 3008

and 2007, respectively.

( c ) Restructuring charges associated with the decision to close

facilities of $45.7 million and $1.5 million in the first nine

months of 2008 and 2007 GAAP results, respectively. The $45.7

million charge for the nine months ended September 30, 2008 included

$16.4 million charged to cost of sales, $6.9 million charged to

research and development, $9.6 million charged to selling, general

and administrative, $6.9 million charged to interest expense and

$6.0 million charged through equity earnings of unconsolidated

entities, net of tax. The $1.5 million charge for the nine months

ended September 30, 2007 included $0.3 million charged to research

and development and $1.2 million charged to selling, general and

administrative. 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 $19.7 million and $52.2 million associated

with stock-based compensation expense in the first nine months of

2008 and 2007 GAAP results, respectively, including $1.0 million and

$0.3 million charged to cost of sales, $3.4 million and $1.3 million

charged to research and development and $15.3 million and $50.6

million charged to selling, general and administrative. The $50.6

million charged to selling, general and administrative during the

nine months ended September 30, 2007 includes $45.2 million of costs

associated with stock option acceleration and conversion in

connection with our acquisition of Biosite, Inc.

(e) A write-off in the amount of $2.0 million and $7.5 million during

the nine months ended September 30, 2008 and 2007, respectively,

relating to inventory write-ups recorded in connection with the

acquisitions of Panbio Limited and BBI Holdings Plc. during the

first quarter of 2008 and Biosite, Inc. and Cholestech Corp. during

the second and third quarters of 2007, respectively.

(f) Purchase of in-process research and development during the nine

months ended September 30, 2007 includes a write-off of $169.0

million associated with the value of in-process research and

development costs incurred in connection with our acquisition of

Biosite, Inc.

(g) Charges totaling $15.6 million associated with the write-off of debt

origination costs and a prepayment premium paid upon early

extinguishment of related debt during the nine months ended

September 30, 2007, in conjunction with our financing arrangements.

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

cash escrow established in connection with the acquisition of BBI

Holdings Plc.

(i) A $1.9 million foreign currency gain realized on the settlement of

intercompany notes.

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

(d), (e), (f), (g), (h) and (i).

(k) For the nine months ended September 30, 2008 and 2007, potential

dilutive shares were not used in the calculation of diluted net loss

per common share under GAAP because inclusion thereof would be

antidilutive.

(l) Included in the weighted average diluted common shares for the

calculation of net income per common share for the nine months ended

September 30, 2008, on an adjusted cash basis, are dilutive shares

consisting of 2,349,000 common stock equivalent shares from the

potential exercise of stock options and warrants and potential

dilutive shares consisting of 3,411,000 common stock equivalent

shares from the potential conversion of convertible debt securities.

The net income per diluted share calculation for the nine months

ended September 30, 2008, on an adjusted cash basis, includes the

add back of interest expense related to the convertible debt of $2.1

million resulting in net income available to common stockholders of

$108.6 million. Potential dilutive shares consisting of 5,479,000

common stock equivalent shares from the potential conversion of

Series B convertible preferred stock for the nine months ended

September 30, 2008 were not used in the calculation of diluted net

income per common share, on an adjusted cash basis, because

inclusion thereof would be antidilutive.

(m) Included in the weighted average diluted common shares for the

calculation of net income per common share for the nine months ended

September 30, 2007, on an adjusted cash basis, are dilutive shares

consisting of 2,283,000 common stock equivalent shares from the

potential exercise of stock options and warrants. Potential

dilutive shares consisting of 1,471,000 common stock equivalent

shares from the potential conversion of convertible debt securities

for the nine months ended September 30, 2007 were not used in the

calculation of diluted net income per common share, on an adjusted

cash basis, because inclusion thereof would be antidilutive.

Inverness Medical Innovations, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(in $000s)

September 30, December 31,

2008 2007

(unaudited)

ASSETS

CURRENT ASSETS:

Cash and cash equivalents $154,170 $414,732

Restricted cash 3,593 141,869

Marketable securities 1,994 2,551

Accounts receivable, net 268,373 163,380

Inventories, net 196,646 148,231

Prepaid expenses and other current

assets 101,100 82,211

Total current assets 725,876 952,974

PROPERTY, PLANT AND EQUIPMENT, NET 287,272 267,880

GOODWILL AND OTHER INTANGIBLE ASSETS,

NET 4,790,352 3,494,174

DEFERRED FINANCING COSTS AND OTHER

ASSETS, NET 139,678 165,731

Total assets $5,943,178 $4,880,759

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:

Current portion of notes payable $20,005 $21,096

Other current liabilities 364,807 257,812

Total current liabilities 384,812 278,908

LONG-TERM LIABILITIES:

Notes payable, net of current portion 1,505,510 1,366,753

Deferred tax liability 442,446 326,128

Other long-term liabilities 342,934 322,303

Total long-term liabilities 2,290,890 2,015,184

TOTAL STOCKHOLDERS' EQUITY 3,267,476 2,586,667

Total liabilities and stockholders'

equity $5,943,178 $4,880,759


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


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