UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

(Mark One)

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

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

COMMISSION FILE NUMBER 001-16789

ALERE INC.

(Exact name of registrant as specified in its charter)

DELAWARE (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 November 1, 2010 was 84,848,054.

 

 

ALERE INC.

REPORT ON FORM 10-Q

For the Quarterly Period Ended September 30, 2010

     This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Readers can identify these statements by forward-looking words such as “may,” “could,” “should,” “would,” “intend,” “will,” “expect,” “anticipate,” “believe,” “estimate,” “continue” or similar words. A number of important factors could cause actual results of Alere Inc. and its subsidiaries to differ materially from those indicated by such forward-looking statements. These factors include, but are not limited to, the risk factors detailed in Part I, Item 1A, “Risk Factors,” of our Annual Report on Form 10-K, as amended, for the fiscal year ended December 31, 2009 and other risk factors identified herein or from time to time in our periodic filings with the Securities and Exchange Commission. Readers should carefully review these risk factors, and should not place undue reliance on our forward-looking statements. These forward-looking statements are based on information, plans and estimates at the date of this report. We undertake no obligation to update any forward-looking statements to reflect changes in underlying assumptions or factors, new information, future events or other changes.

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

TABLE OF CONTENTS

		PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
a) Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2010 and 2009			3
b) Consolidated Balance Sheets as of September 30, 2010 and December 31, 2009			4
c) Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2010 and 2009			5
d) Notes to Consolidated Financial Statements			6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			40
Item 3. Quantitative and Qualitative Disclosures About Market Risk			53
Item 4. Controls and Procedures			56
PART II. OTHER INFORMATION
Item 1. Legal Proceedings			56
Item 1A. Risk Factors			56
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			56
Item 6. Exhibits			57
SIGNATURE			58
EX-10.2
EX-10.3
EX-10.4
EX-10.5
EX-10.6
EX-10.8
EX-31.1
EX-31.2
EX-32.1
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ALERE INC. AND SUBSIDIARIES

(unaudited)

(in thousands, except per share amounts)

		Three Months Ended September 30,								Nine Months Ended September 30,
		2010				2009				2010				2009
Net product sales		$	363,433			$	370,742			$	1,063,549			$	972,603
Services revenue			171,123				134,075				497,292				383,279
Net product sales and services revenue			534,556				504,817				1,560,841				1,355,882
License and royalty revenue			4,123				7,848				16,052				20,588
Net revenue			538,679				512,665				1,576,893				1,376,470
Cost of net product sales			170,549				169,213				500,990				446,352
Cost of services revenue			80,782				61,209				238,991				172,123
Cost of net product sales and services revenue			251,331				230,422				739,981				618,475
Cost of license and royalty revenue			1,802				1,946				5,411				5,352
Cost of net revenue			253,133				232,368				745,392				623,827
Gross profit			285,546				280,297				831,501				752,643
Operating expenses:
Research and development			32,434				27,720				96,187				80,811
Sales and marketing			125,606				116,280				369,016				316,880
General and administrative			96,131				86,447				284,155				247,377
Gain on disposition			—				(3,355	)			—				(3,355	)
Operating income			31,375				53,205				82,143				110,930
Interest expense, including amortization of original issue discounts and deferred financing costs			(34,180	)			(30,580	)			(100,921	)			(72,092	)
Other income (expense), net			7,525				1,187				14,681				1,018
Income (loss) from continuing operations before provision (benefit) for income taxes			4,720				23,812				(4,097	)			39,856
Provision (benefit) for income taxes			(167	)			6,001				(964	)			12,901
Income (loss) from continuing operations before equity earnings of unconsolidated entities, net of tax			4,887				17,811				(3,133	)			26,955
Equity earnings (losses) of unconsolidated entities, net of tax			(62	)			2,059				8,195				5,539
Income from continuing operations			4,825				19,870				5,062				32,494
Income (loss) from discontinued operations, net of tax			2				413				11,913				(1,100	)
Net income			4,827				20,283				16,975				31,394
Less: Net income attributable to non-controlling interests			1,494				141				1,167				465
Net income attributable to Alere Inc. and Subsidiaries			3,333				20,142				15,808				30,929
Preferred stock dividends			(6,147	)			(5,843	)			(18,001	)			(17,056	)
Net income (loss) available to common stockholders		$	(2,814	)		$	14,299			$	(2,193	)		$	13,873
Basic net income (loss) per common share attributable to Alere Inc. and Subsidiaries:
Income (loss) from continuing operations		$	(0.03	)		$	0.17			$	(0.17	)		$	0.19
Income (loss) from discontinued operations			—				0.01				0.14				(0.01	)
Net income (loss) per common share		$	(0.03	)		$	0.18			$	(0.03	)		$	0.17
Diluted net income (loss) per common share attributable to Alere Inc. and Subsidiaries:
Income (loss) from continuing operations		$	(0.03	)		$	0.17			$	(0.17	)		$	0.18
Income (loss) from discontinued operations			—				0.01				0.14				(0.01	)
Net income (loss) per common share		$	(0.03	)		$	0.17			$	(0.03	)		$	0.17
Weighted average shares-basic			84,796				81,625				84,269				79,682
Weighted average shares-diluted			84,796				83,418				84,269				81,110

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

ALERE INC. AND SUBSIDIARIES

(unaudited)

(in thousands, except par value)

		September 30,				December 31,
		2010				2009
ASSETS
Current assets:
Cash and cash equivalents		$	487,581			$	492,773
Restricted cash			2,699				2,424
Marketable securities			5,684				947
Accounts receivable, net of allowances of $16,474 and $12,462 at September 30, 2010 and December 31, 2009, respectively			384,828				354,453
Inventories, net			262,466				221,539
Deferred tax assets			34,313				66,492
Income tax receivable			1,680				1,107
Prepaid expenses and other current assets			71,283				73,075
Assets held for sale			—				54,148
Total current assets			1,250,534				1,266,958
Property, plant and equipment, net			369,795				324,388
Goodwill			3,727,596				3,463,358
Other intangible assets with indefinite lives			66,603				43,644
Finite-lived intangible assets, net			1,708,260				1,686,427
Deferred financing costs, net, and other non-current assets			82,208				72,762
Investments in unconsolidated entities			62,297				63,965
Marketable securities			21,012				1,503
Deferred tax assets			22,418				20,987
Total assets		$	7,310,723			$	6,943,992
LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term debt		$	15,030			$	18,970
Current portion of capital lease obligations			1,833				899
Accounts payable			115,429				126,322
Accrued expenses and other current liabilities			303,154				279,732
Payable to joint venture, net			4,773				533
Deferred gain on joint venture			288,565				—
Liabilities related to assets held for sale			—				11,558
Total current liabilities			728,784				438,014
Long-term liabilities:
Long-term debt, net of current portion			2,381,153				2,128,515
Capital lease obligations, net of current portion			939				940
Deferred tax liabilities			427,485				442,049
Deferred gain on joint venture			—				288,767
Other long-term liabilities			125,973				116,818
Total long-term liabilities			2,935,550				2,977,089
Commitments and contingencies (Note 17)
Redeemable non-controlling interest			50,371				—
Stockholders’ equity:
Series B preferred stock, $0.001 par value (liquidation preference: $826,184 at September 30, 2010 and $793,696 at December 31, 2009);
Authorized: 2,300 shares;
Issued and outstanding: 2,065 shares at September 30, 2010 and 1,984 shares at December 31, 2009			712,392				694,427
Common stock, $0.001 par value;
Authorized: 150,000 shares;
Issued and outstanding: 84,864 shares at September 30, 2010 and 83,567 at December 31, 2009			85				84
Additional paid-in capital			3,229,310				3,195,372
Accumulated deficit			(344,066	)			(359,874	)
Accumulated other comprehensive loss			(4,904	)			(2,454	)
Total stockholders’ equity			3,592,817				3,527,555
Non-controlling interests			3,201				1,334
Total equity			3,596,018				3,528,889
Total liabilities and equity		$	7,310,723			$	6,943,992

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

ALERE INC. AND SUBSIDIARIES

(unaudited)

(in thousands)

		Nine Months Ended September 30,
		2010				2009
Cash Flows from Operating Activities:
Net income		$	16,975			$	31,394
Income (loss) from discontinued operations, net of tax			11,913				(1,100	)
Income from continuing operations			5,062				32,494
Adjustments to reconcile income from continuing operations to net cash provided by operating activities:
Non-cash interest expense related to amortization of original issue discounts and write-off of deferred financing costs			10,284				6,461
Depreciation and amortization			275,507				224,408
Non-cash stock-based compensation expense			22,947				20,287
Impairment of inventory			712				838
Impairment of long-lived assets			618				3,181
Loss on sale of fixed assets			607				611
Equity earnings of unconsolidated entities, net of tax			(8,195	)			(5,539	)
Deferred income taxes			(33,256	)			(10,621	)
Other non-cash items			(1,378	)			1,069
Changes in assets and liabilities, net of acquisitions:
Accounts receivable, net			(2,553	)			(47,232	)
Inventories, net			(29,107	)			(7,657	)
Prepaid expenses and other current assets			6,752				3,456
Accounts payable			(19,423	)			19,531
Accrued expenses and other current liabilities			23,121				(10,670	)
Other non-current liabilities			(21,984	)			10,306
Net cash provided by continuing operations			229,714				240,923
Net cash provided by (used in) discontinued operations			(390	)			4,376
Net cash provided by operating activities			229,324				245,299
Cash Flows from Investing Activities:
Purchases of property, plant and equipment			(68,457	)			(74,459	)
Proceeds from sale of property, plant and equipment			642				672
Cash paid for acquisitions and transaction costs, net of cash acquired			(465,583	)			(397,467	)
Increase in marketable securities			(17,887	)			—
Net cash received from equity method investments			10,835				12,003
Increase in other assets			(1,717	)			(5,056	)
Net cash used in continuing operations			(542,167	)			(464,307	)
Net cash provided by (used in) discontinued operations			63,446				(271	)
Net cash used in investing activities			(478,721	)			(464,578	)
Cash Flows from Financing Activities:
Increase in restricted cash			(280	)			(252	)
Cash paid for financing costs			(9,590	)			(15,331	)
Proceeds from issuance of common stock, net of issuance costs			17,839				15,539
Proceeds on long-term debt			400,000				631,176
Repayment on long-term debt			(7,313	)			(8,344	)
Net proceeds (repayments) from revolving lines-of-credit			(146,985	)			(3,453	)
Excess tax benefit on exercised stock options			1,300				2,152
Principal payments of capital lease obligations			(1,270	)			(640	)
Other			(509	)			(115	)
Net cash provided by continuing operations			253,192				620,732
Net cash used in discontinued operations			—				(8	)
Net cash provided by financing activities			253,192				620,724
Foreign exchange effect on cash and cash equivalents			(8,987	)			13,102
Net increase (decrease) in cash and cash equivalents			(5,192	)			414,547
Cash and cash equivalents, beginning of period			492,773				141,324
Cash and cash equivalents, end of period		$	487,581			$	555,871

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

ALERE INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

(1) Basis of Presentation of Financial Information

     The accompanying consolidated financial statements of Alere Inc. are unaudited. In the opinion of management, the unaudited consolidated financial statements contain all adjustments considered normal and recurring and necessary for their fair presentation. Interim results are not necessarily indicative of results to be expected for the year. These interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, these consolidated financial statements do not include all of the information and footnotes necessary for a complete presentation of financial position, results of operations and cash flows. Our audited consolidated financial statements for the year ended December 31, 2009 included information and footnotes necessary for such presentation and were included in our Annual Report on Form 10-K, as amended, filed with the Securities and Exchange Commission, or SEC, on April 16, 2010. These unaudited consolidated financial statements should be read in conjunction with our audited consolidated financial statements and notes thereto for the year ended December 31, 2009.

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

(2) Cash and Cash Equivalents

     We consider all highly-liquid cash investments with original maturities of three months or less at the date of acquisition to be cash equivalents. At September 30, 2010, our cash equivalents consisted of money market funds.

(3) Inventories

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

		September 30, 2010				December 31, 2009
Raw materials		$	86,162			$	62,397
Work-in-process			63,100				56,338
Finished goods			113,204				102,804
		$	262,466			$	221,539

(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, 2010 and 2009, respectively, as follows (in thousands):

		Three Months Ended September 30,								Nine Months Ended September 30,
		2010				2009				2010				2009
Cost of sales		$	589			$	572			$	1,390			$	1,480
Research and development			1,543				1,419				5,415				3,740
Sales and marketing			1,181				1,079				3,094				2,958
General and administrative			3,950				4,732				13,048				12,109
			7,263				7,802				22,947				20,287
Benefit for income taxes			(1,295	)			(1,653	)			(4,633	)			(4,083	)
Stock-based compensation, net of tax		$	5,968			$	6,149			$	18,314			$	16,204

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,
		2010				2009				2010				2009
Income from continuing operations		$	4,825			$	19,870			$	5,062			$	32,494
Less: Preferred stock dividends			(6,147	)			(5,843	)			(18,001	)			(17,056	)
Income (loss) from continuing operations attributable to common shares			(1,322	)			14,027				(12,939	)			15,438
Less: Net income attributable to non-controlling interest			1,494				141				1,167				465
Income (loss) from continuing operations attributable to Alere Inc. and Subsidiaries			(2,816	)			13,886				(14,106	)			14,973
Income (loss) from discontinued operations			2				413				11,913				(1,100	)
Net income (loss) available to common stockholders		$	(2,814	)		$	14,299			$	(2,193	)		$	13,873

		Three Months Ended September 30,								Nine Months Ended September 30,
		2010				2009				2010				2009
Weighted-average common shares outstanding — basic			84,796				81,625				84,269				79,682
Effect of dilutive securities:
Stock options			—				1,605				—				1,280
Warrants			—				188				—				148
Weighted-average common shares outstanding — diluted			84,796				83,418				84,269				81,110

		Three Months Ended September 30,								Nine Months Ended September 30,
		2010				2009				2010				2009
Net income (loss) per common share — basic:
Income (loss) from continuing operations attributable to Alere Inc. and Subsidiaries		$	(0.03	)		$	0.17			$	(0.17	)		$	0.19
Income (loss) from discontinued operations			—				0.01				0.14				(0.01	)
Net income (loss) per common share — basic		$	(0.03	)		$	0.18			$	(0.03	)		$	0.17
Net income (loss) per common share — diluted:
Income (loss) from continuing operations attributable to Alere Inc. and Subsidiaries		$	(0.03	)		$	0.17			$	(0.17	)		$	0.18
Income (loss) from discontinued operations			—				0.01				0.14				(0.01	)
Net income (loss) per common share — diluted		$	(0.03	)		$	0.17			$	(0.03	)		$	0.17

     For the three and nine-month periods ended September 30, 2010, anti-dilutive shares of 16,330,000 and 16,855,000, respectively, were excluded from the computations of diluted net income (loss) per common share. For the three and nine-month periods ended September 30, 2009, anti-dilutive shares of 15,198,000 and 14,753,000, respectively, were excluded from the computations of diluted net income (loss) per common share.

(6) Redeemable Non-controlling Interest

     We entered into a put arrangement as part of a shareholder agreement with respect to the common securities that represent the 21.25% non-controlling interest of a certain minority shareholder in Standard Diagnostics, Inc., or Standard Diagnostics. This put arrangement is exercisable at KRW 40,000 per share by the counterparty upon the occurrence of certain events which are outside of our control. As a result, this non-controlling interest is classified as mezzanine equity on our accompanying consolidated balance sheet as of September 30, 2010. The redeemable non-controlling interest was recorded at its fair value of KRW 57.9 billion, or $49.2 million, as of the consummation of the transaction on February 8, 2010. The fair value of the redeemable non-controlling interest was determined using both a market approach and an income approach which utilizes a discounted cash flow model including assumptions of projected revenue, expenses, capital expenditures, other costs and a discount rate appropriate for the risk of achieving the projected cash flows. The redeemable put arrangement has an estimated redemption price of KRW 65.4 billion, or $56.9 million, as of September 30, 2010. The redeemable non-controlling interest will be accreted to the redemption price, through equity, at the point at which the redemption becomes probable. In addition, if the put is exercised, we will incur a penalty in the amount of KRW 63.0 billion, or approximately $54.8 million at

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

September 30, 2010, which will be accounted for as compensation expense at the time of the exercise. On October 30, 2010, we entered into an agreement with this minority shareholder whereby we would purchase all of this shareholder’s remaining shares in Standard Diagnostics for a total purchase price of KRW 125.4 billion, or approximately $111.6 million at October 30, 2010. This share purchase transaction was completed on November 5, 2010, which included the termination of the put arrangement. We will account for KRW 65.4 billion, or approximately $58.2 million at November 5, 2010, of the transaction consideration as purchase price and KRW 60.0 billion, or approximately $53.4 million at November 5, 2010, as compensation expense as a result of the transition of the day-to-day management control of the business to us and the termination of the put arrangement.

(7) Preferred Stock

     As of September 30, 2010, we had 5.0 million shares of preferred stock, $0.001 par value, authorized, of which 2.3 million shares were designated as Series B Convertible Perpetual Preferred Stock, or Series B preferred stock. In connection with our acquisition of Matria Healthcare Inc., or Matria, we issued shares of the Series B preferred stock and have paid dividends to date in shares of Series B preferred stock. At September 30, 2010, there were 2.1 million shares of Series B preferred stock outstanding with a fair value of approximately $454.4 million.

     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 the three and nine months ended September 30, 2010 (Note 5). For the three and nine months ended September 30, 2009, Series B preferred stock dividends amounted to $5.8 million and $17.1 million, respectively, which reduced earnings available to common stockholders for purposes of calculating net income (loss) per common share for the three and nine months ended September 30, 2009 (Note 5). Payments have been made in shares of Series B preferred stock covering all dividend periods through September 30, 2010.

(8) Comprehensive Income

     The following table provides a reconciliation of net income reported in our consolidated financial statements to comprehensive income for the three and nine months ended September 30, 2010 and 2009 (in thousands):

		Three Months Ended September 30,								Nine Months Ended September 30,
		2010				2009				2010				2009
Net income attributable to Alere Inc. and subsidiaries		$	3,333			$	20,142			$	15,808			$	30,929
Other comprehensive income (loss):
Changes in cumulative translation adjustment			45,260				7,106				(3,204	)			11,942
Unrealized gains on available for sale securities			404				374				452				539
Unrealized gains (losses) on interest rate swaps			497				(3,646	)			237				2,274
Minimum pension liability adjustment			(237	)			(14	)			65				30
Total other comprehensive income (loss)			45,924				3,820				(2,450	)			14,785
Total comprehensive income		$	49,257			$	23,962			$	13,358			$	45,714

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

		Nine Months Ended September 30,
		2010												2009
		Total				Non-								Total				Non-
		Stockholders’				controlling								Stockholders’				controlling
		Equity				Interest				Total Equity				Equity				Interest				Total Equity
Equity, beginning of period		$	3,527,555			$	1,334			$	3,528,889			$	3,278,838			$	869			$	3,279,707
Issuance of common stock and warrants in connection with acquisitions			16,277				—				16,277				115,584				—				115,584
Exercise of common stock options and shares issued under employee stock purchase plan			17,839				—				17,839				15,539				—				15,539
Preferred stock dividends			(119	)			—				(119	)			(115	)			—				(115	)
Stock-based compensation related to grants of common stock options			22,947				—				22,947				20,287				—				20,287
Stock option income tax benefits			452				—				452				2,836				—				2,836

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

		Nine Months Ended September 30,
		2010												2009
		Total				Non-								Total				Non-
		Stockholders’				controlling								Stockholders’				controlling
		Equity				Interest				Total Equity				Equity				Interest				Total Equity
Non-controlling interest from acquisitions			(5,492	)			1,864				(3,628	)			—				—				—
Redeemable non-controlling interest in subsidiaries’ income			—				(1,164	)			(1,164	)			—				—				—
Net income			15,808				1,167				16,975				30,929				465				31,394
Total other comprehensive income (loss)			(2,450	)			—				(2,450	)			14,785				—				14,785
Equity, end of period		$	3,592,817			$	3,201			$	3,596,018			$	3,478,683			$	1,334			$	3,480,017

     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, 2010 is provided below:

		Nine Months Ended
		September 30, 2010
Redeemable non-controlling interest, beginning of period		$	—
Non-controlling interest from acquisitions			49,207
Adjustment to fair value through charge to income			1,164
Redeemable non-controlling interest, end of period		$	50,371

(9) Business Combinations

     On January 1, 2009, we adopted a new accounting standard issued by the Financial Accounting Standards Board, or FASB, related to accounting for business combinations using the acquisition method of accounting. Acquisitions consummated prior to January 1, 2009 were accounted for in accordance with the previously applicable guidance. In accordance with the new accounting standard, we expensed $0.9 million and $6.9 million of acquisition-related costs during the three and nine months ended September 30, 2010, respectively, primarily in general and administrative expense. We expensed $5.1 million and $11.5 million of acquisition-related costs during the three and nine months ended September 30, 2009, respectively, in general and administrative expense. Included in the $11.5 million of expense during the nine months ended September 30, 2009, was $3.8 million of costs associated with acquisition-related activity for transactions not consummated prior to January 1, 2009.

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

     Allocation of the purchase price for acquisitions is based on estimates of the fair value of the net assets acquired and, for acquisitions completed within the past year, is subject to adjustment upon finalization of the purchase price allocation. We are not aware of any information that indicates the final purchase price allocations will differ materially from the preliminary estimates. Determination of the estimated useful lives of the individual categories of intangible assets was based on the nature of the applicable intangible asset and the expected future cash flows to be derived from the intangible asset. Amortization of intangible assets with 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 on patterns in which the economic benefits are expected to be realized.

     (a) Acquisitions in 2010

     (i) Immunalysis

     On August 16, 2010, we acquired 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. The preliminary aggregate purchase price was $53.2 million, which consisted of an initial cash payment totaling $52.0 million and a contingent consideration obligation of up to $5.0 million with an acquisition date fair value of $1.2 million. Included in our consolidated statements of operations for both the three and nine months ended September 30, 2010 is

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

revenue totaling approximately $2.5 million related to this acquired operation. The operating results of this acquired operation are included in our professional diagnostics reporting unit and business segment. We do not expect the amount allocated to goodwill to be deductible for tax purposes.

     (ii) A privately-owned U.K. research and development operation

     On March 11, 2010, we acquired a privately-owned U.K. research and development operation. The preliminary aggregate purchase price was $70.8 million, which consisted of an initial cash payment totaling $35.2 million and a contingent consideration obligation of up to $125.0 million with an acquisition date fair value of $35.6 million. Included in our consolidated statements of operations for both the three and nine months ended September 30, 2010 is revenue totaling approximately $0.1 million related to this acquired operation. The operating results of this acquired operation are included in our professional diagnostics reporting unit and business segment. We do not expect the amount allocated to goodwill to be deductible for tax purposes.

     (iii) The ATS business

     On February 17, 2010, we acquired Kroll Laboratory Specialists, Inc., headquartered in Gretna, Louisiana, which provides forensic quality substance abuse testing products and services across the United States. The preliminary aggregate purchase price was $109.5 million, which was paid in cash. Included in our consolidated statements of operations for the three and nine months ended September 30, 2010 is revenue totaling approximately $9.5 million and $23.8 million, respectively, related to the acquired business, which we have subsequently renamed Alere Toxicology Services, or ATS. The operating results of ATS are included in our professional diagnostics reporting unit and business segment. The amount allocated to goodwill from this acquisition is deductible for tax purposes.

     (iv) Standard Diagnostics

     On February 8, 2010, we acquired a 61.92% ownership interest in Standard Diagnostics via a tender offer for approximately $162.1 million. On March 22, 2010, we acquired an incremental 13.37% ownership interest in Standard Diagnostics via a follow-on tender offer for approximately $36.2 million. In June 2010, we acquired an incremental 2.84% ownership interest for approximately $7.3 million, bringing our acquisition-related aggregate ownership interest in Standard Diagnostics to approximately 78.13%. Standard Diagnostics specializes in the medical diagnostics industry. Its main product lines relate to diagnostic reagents and devices for hepatitis, infectious diseases, tumor markers, fertility, drugs of abuse, urine strips and protein strips. The preliminary aggregate purchase price was $205.6 million in cash. Included in our consolidated statements of operations for the three and nine months ended September 30, 2010 is revenue totaling approximately $24.9 million and $56.9 million, respectively, related to Standard Diagnostics. The operating results of Standard Diagnostics are included in our professional diagnostics reporting unit and business segment. We do not expect the amount allocated to goodwill to be deductible for tax purposes.

     (v) Other acquisitions in 2010

     During the first nine months of 2010, we acquired the following businesses for a preliminary aggregate purchase price of $83.1 million, which consisted of initial cash payments totaling $57.2 million, contingent consideration obligations with an acquisition date fair value of $25.3 million and deferred purchase price consideration with an acquisition date present value of $0.7 million.

	•		RMD Networks, Inc., or RMD, located in Denver, Colorado, a provider of clinical groupware software and services designed to improve communication and coordination of care among providers, patients, and payers in the healthcare environment (Acquired January 2010)
	•		certain assets of Streck, Inc., or Streck, located in Nebraska, a manufacturer of hematology, chemistry and immunology products for the clinical laboratory (Acquired January 2010)
	•		assets of the diagnostics division of Micropharm Ltd., or Micropharm, located in Wales, United Kingdom, an expert in high quality antibody production in sheep for both diagnostic and therapeutic purposes, providing antisera on a contract basis for U.K. and overseas companies and academic institutions, mainly for research, therapeutic and diagnostic uses (Acquired March 2010)

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

	•		Quantum Diagnostics Group Limited, or Quantum, headquartered in Essex, England, an independent provider of drug testing products and services to healthcare professionals across the U.K. and Europe (Acquired April 2010)
	•		assets of the workplace health division of Good Health Solutions Pty Ltd., or GHS, located in East Sydney, Australia, an important player in the Australian health and wellness market, focusing on health screenings, health related consulting services, health coaching and fitness instruction (Acquired April 2010)
	•		certain assets of Unotech Diagnostics, Inc., or Unotech, located in California, a privately-owned company engaged in the development, formulation, manufacture, packaging, supply and distribution of our BladderCheck NMP22 lateral flow test and related lateral flow products (Acquired June 2010)
	•		Scipac Holdings Limited, or Scipac, headquartered in Kent, England, a diagnostic reagent company with an extensive product portfolio supplying purified human antigens, recombinant proteins and disease state plasma to a global customer base (Acquired June 2010)
	•		a privately-owned research and development operation, located in San Diego, California (Acquired July 2010)

     The operating results of the acquired businesses mentioned above, except for RMD and GHS, are included in our professional diagnostics reporting unit and business segment. The operating results of RMD and GHS are included in our health management reporting unit and business segment. Our consolidated statements of operations for the three and nine months ended September 30, 2010 included revenue totaling approximately $5.3 million and $8.2 million, respectively, related to these businesses. Goodwill has been recognized in the acquisitions of RMD, Quantum, GHS, Scipac and the privately-owned research and development operation and amounted to approximately $48.5 million. We do not expect the goodwill related to these acquisitions to be deductible for tax purposes.

     A summary of the preliminary aggregate purchase price allocation for the acquisitions consummated in 2010 is as follows (in thousands):

						Privately-
						owned U.K.
						research and
						development								Standard
		Immunalysis				operation				ATS				Diagnostics				Other				Total
Current assets		$	6,953			$	374			$	6,043			$	52,057			$	7,878			$	73,305
Property, plant and equipment			1,092				152				3,300				18,580				3,858				26,982
Goodwill			15,174				61,463				53,489				35,462				48,480				214,068
Intangible assets			30,600				15,700				48,400				131,580				36,598				262,878
Other non-current assets			—				—				—				13,342				68				13,410
Total assets acquired			53,819				77,689				111,232				251,021				96,882				590,643
Current liabilities			568				751				1,693				13,371				4,452				20,835
Non-current liabilities			50				6,107				—				32,088				9,339				47,584
Total liabilities assumed			618				6,858				1,693				45,459				13,791				68,419
Net assets acquired			53,201				70,831				109,539				205,562				83,091				522,224
Less:
Contingent consideration			1,200				35,600				—				—				25,250				62,050
Present value of deferred purchase price consideration			—				—				—				—				688				688
Cash paid		$	52,001			$	35,231			$	109,539			$	205,562			$	57,153			$	459,486

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

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

						Privately-
						owned U.K.
						research and
						development								Standard												Amortizable
		Immunalysis				operation				ATS				Diagnostics				Other				Total				Life
Core technology and patents		$	8,800			$	8,600			$	13,300			$	62,135			$	8,750			$	101,585			10 - 20 years
Quality systems			—				—				—				—				153				153			5 years
Database			—				—				—				—				654				654			3 years
Trademarks and trade names			800				—				—				9,350				731				10,881			3 - 7 years
License agreements			—				—				—				—				459				459			10 years
Customer relationships			19,900				—				35,100				46,155				10,635				111,790			1 - 21.58 years
Non-compete agreements			300				—				—				255				733				1,288			1 - 5 years
Software			—				—				—				—				5,000				5,000			7 years
Distribution agreement			800				—				—				—				—				800			14 years
Manufacturing know-how			—				—				—				—				3,683				3,683			2 - 15 years
In-process research and development			—				7,100				—				13,685				5,800				26,585			N/A
Total intangible assets		$	30,600			$	15,700			$	48,400			$	131,580			$	36,598			$	262,878

     (b) Acquisitions in 2009

     During the year ended December 31, 2009, we acquired the following businesses for a preliminary aggregate purchase price of $706.3 million ($702.4 million present value at September 30, 2010), which consisted of $476.4 million in cash; 3,430,435 shares of our common stock with an aggregate fair value of $117.5 million; $2.9 million of fair value associated with employee stock options exchanged as part of the transactions; deferred purchase price consideration payable in cash and common stock with an aggregate fair value of $57.9 million; notes payable totaling $7.9 million; warrants with a fair value of $0.1 million and contingent consideration obligations with an acquisition date fair value of $39.8 million.

	•		51.0% share in Long Chain International Corp., or Long Chain, located in Taipei, Taiwan, a distributor of point-of-care diagnostics testing products primarily to the Taiwanese marketplace (Acquired December 2009). In January 2010, we acquired the remaining 49.0% interest in Long Chain.
	•		Biolinker S.A., or Biolinker, located in Buenos Aires, Argentina, a distributor of point-of-care diagnostics testing products primarily to the Argentinean marketplace (Acquired December 2009)
	•		Jinsung Meditech, Inc., or JSM, located in Seoul, Korea, a distributor of point-of-care diagnostics testing products primarily to the South Korean marketplace (Acquired December 2009)
	•		Tapestry Medical, Inc., or Tapestry, located in Livermore, California, a privately-owned provider of products and related services designed to support anti-coagulation disease management for patients at risk for stroke and other clotting disorders (Acquired November 2009)
	•		Mologic Limited, or Mologic, located in Sharnbrook, United Kingdom, a research and development entity having wide immunoassay experience, as well as a broad understanding of medical diagnostic devices and antibody development (Acquired October 2009)
	•		Biosyn Diagnostics Limited, or Biosyn, located in Belfast, Ireland, a distributor of point-of-care diagnostics testing products primarily to the Irish marketplace (Acquired October 2009)
	•		Medim Schweiz GmbH, or Medim, located in Zug, Switzerland, a distributor of point-of-care diagnostics testing products primarily to the Swiss marketplace (Acquired September 2009)
	•		Free & Clear, Inc., or Free & Clear, located in Seattle, Washington, a privately-owned company that specializes in behavioral coaching to help employers, health plans and government agencies improve the overall health and productivity of their covered populations (Acquired September 2009)
	•		ZyCare, Inc., or ZyCare, located in Chapel Hill, North Carolina, a provider of technology and services used to help manage many chronic illnesses (Acquired August 2009)

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

	•		Concateno plc, or Concateno, a publicly-traded company headquartered in the United Kingdom that specializes in the manufacture and distribution of rapid drugs of abuse diagnostic products used in health care, criminal justice, workplace and other testing markets (Acquired August 2009)
	•		certain assets from CVS Caremark’s Accordant Common disease management programs, or Accordant, whereby chronically ill patients served by Accordant Common disease management programs are managed and have access to expanded offerings provided by our Alere Health business (Acquired August 2009)
	•		GeneCare Medical Genetics Center, Inc., or GeneCare, located in Chapel Hill, North Carolina, a medical genetics testing and counseling business (Acquired July 2009)
	•		assets of ACON Laboratories, Inc.’s and certain related entities’ business of researching, developing, manufacturing, distributing, marketing and selling lateral flow immunoassay and directly-related products in China, Asia Pacific, Latin America, South America, the Middle East, Africa, India, Pakistan, Russia and Eastern Europe (the “ACON Second Territory Business”) (Acquired April 2009)

     The operating results of Long Chain, Biolinker, JSM, Mologic, Biosyn, Medim, Concateno and the ACON Second Territory Business are included in our professional diagnostics reporting unit and business segment. The operating results of Tapestry, Free & Clear, ZyCare, Accordant and GeneCare are included in our health management reporting unit and business segment. Our consolidated statements of operations for the three and nine months ended September 30, 2010 included revenue totaling approximately $79.6 million and $232.7 million, respectively, related to these businesses. Our consolidated statements of operations for the three and nine months ended September 30, 2009 included revenue totaling approximately $31.9 million and $40.6 million, respectively, related to these businesses.

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

Current assets		$	87,085
Property, plant and equipment			13,018
Goodwill			397,445
Intangible assets			298,976
Other non-current assets			4,262
Total assets acquired			800,786
Current liabilities			40,805
Non-current liabilities			57,616
Total liabilities assumed			98,421
Net assets acquired			702,365
Less:
Fair value of common stock issued (3,430,435 shares)			117,476
Fair value of stock options exchanged (315,227 options)			2,881
Fair value of warrants issued			57
Notes payable			7,912
Present value of deferred purchase price consideration			57,853
Fair value of contingent consideration obligation			39,815
Cash consideration		$	476,371

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

		Amount				Amortizable Life
Core technology		$	13,320			3-10 years
Trademarks and trade names			33,753			2-20 years
Supplier relationships			1,581			8 years
Customer relationships			244,926			5.3-18.3 years
Non-compete agreements			4,280			2-5 years
In-process research and development			1,116			N/A
Total intangible assets		$	298,976

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

     Goodwill has been recognized in all transactions and amounted to approximately $397.4 million. Goodwill related to the acquisitions of Tapestry, GeneCare and Accordant, which totaled $52.7 million, is expected to be deductible for tax purposes. Goodwill related to all other acquisitions is not deductible for tax purposes.

     (c) Restructuring Plans of Acquisitions

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

		Severance				Facility				Total Exit
		Related				And Other				Activities
Balance, December 31, 2009		$	5,369			$	7,001			$	12,370
Restructuring plan accrual adjustments			(2,167	)			(281	)			(2,448	)
Payments			(2,832	)			(2,953	)			(5,785	)
Balance, September 30, 2010		$	370			$	3,767			$	4,137

     In connection with our acquisition of Matria in May 2008, we implemented an integration plan to improve operating efficiencies and eliminate redundant costs resulting from the acquisition. The restructuring plan impacted all cost centers within the Matria organization, as activities were combined with our existing business operations. We recorded $18.5 million in exit costs, of which $13.8 million relates to change of control and severance costs to involuntarily terminate employees and $4.7 million related to facility exit costs. During the first and third quarters of 2010, we determined that $1.5 million in change of control costs and $0.2 million in facility exit costs would not be incurred, respectively, therefore reducing the assumed liability and goodwill related to the Matria acquisition by $1.7 million. As of September 30, 2010, $1.6 million in exit costs remain unpaid. See Note 10 for additional restructuring charges related to the Matria facility exit costs within the health management business segment.

     During 2007, we formulated restructuring plans in connection with our acquisition of Cholestech Corporation, or Cholestech, consistent with our acquisition strategy to realize operating efficiencies and cost savings. Additionally, in March 2008, we announced plans to close the Cholestech facility in Hayward, California. We have transitioned the manufacturing of the related products to our facility in San Diego, California and have transitioned the sales and distribution of the products to our shared services center in Orlando, Florida. Since inception of the plans, we recorded $8.6 million in exit costs, of which $5.9 million relates to executive change of control agreements and severance costs to involuntarily terminate employees and $2.7 million relates to facility exit costs. During the third quarter of 2010, we determined that $0.6 million in change of control and severance costs would not be incurred, therefore reducing the assumed liability and goodwill related to the Cholestech acquisition. As of September 30, 2010, $2.1 million in exit costs remain unpaid. See Note 10 for additional restructuring charges related to the Cholestech facility closure and integration.

     As a result of our acquisitions of Panbio Limited, or Panbio, Matritech, Inc. and Ostex International, Inc., or Ostex, we established plans to exit facilities and realize efficiencies and cost savings. Total costs associated with these plans were $6.4 million, of which $1.8 million related to severance costs and $4.6 million related to facility and exit costs. During the third quarter of 2010, upon settlement of our facility obligation under the Ostex acquisition, we determined that $0.1 million in facility exit costs would not be incurred, therefore reducing the assumed liability and goodwill related to that acquisition. As of September 30, 2010, $0.5 million in facility costs remain unpaid.

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

     (d) Pro Forma Financial Information

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

     The following table presents selected unaudited financial information of our company, including the assets of the ACON Second Territory Business and Standard Diagnostics as if the acquisition of these entities had occurred on January 1, 2009. Pro forma results exclude adjustments for various other less significant acquisitions completed since January 1, 2009, as these acquisitions did not materially affect our results of operations.

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

		Three Months Ended September 30,								Nine Months Ended September 30,
		2010				2009				2010				2009
Pro forma net revenue		$	538,679			$	529,094			$	1,583,046			$	1,428,876
Pro forma net income (loss) from continuing operations attributable to Alere Inc. and Subsidiaries		$	(2,636	)		$	15,965			$	(10,117	)		$	14,932
Pro forma net income (loss) available to common stockholders		$	(2,634	)		$	16,378			$	1,797			$	13,831
Pro forma net income (loss) from continuing operations attributable to Alere Inc. and Subsidiaries per common share — basic(1)		$	(0.03	)		$	0.20			$	(0.12	)		$	0.18
Pro forma net income (loss) from continuing operations attributable to Alere Inc. and Subsidiaries per common share — diluted(1)		$	(0.03	)		$	0.19			$	(0.12	)		$	0.18
Pro forma net income (loss) available to common stockholders — basic(1)		$	(0.03	)		$	0.20			$	0.02			$	0.17
Pro forma net income (loss) available to common stockholders — diluted(1)		$	(0.03	)		$	0.20			$	0.02			$	0.17

(10) Restructuring Plans

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

		Three Months Ended September 30,								Nine Months Ended September 30,
		2010				2009				2010				2009
Cost of net revenue		$	(675	)		$	2,582			$	3,316			$	6,141
Research and development			235				93				458				850
Sales and marketing			80				1,121				1,328				1,533
General and administrative			489				1,225				8,247				3,520
		$	129			$	5,021			$	13,349			$	12,044

     (a) 2010 Restructuring Plans

     In the first quarter of 2010, management developed additional plans to reduce costs and improve efficiencies in our health management business segment. As a result of these plans, we recorded $0.2 million and $6.4 million in charges during the three and nine months ended September 30, 2010, respectively. The charges for the three-month period included $0.1 million in facility exit costs and $0.1 million in present value accretion on facility exit costs. The charges for the nine-month period included $3.8 million in severance costs, $2.4 million in costs associated with facility exit costs and $0.2 million in present value accretion on facility exit costs, which was included in interest expense. As of September 30, 2010, $2.9 million in costs remains unpaid. We anticipate incurring additional restructuring costs associated with the present value accretion on facility exit costs under these plans.

     During the second quarter of 2010, management developed several plans to reduce costs and improve efficiencies in our professional diagnostics business segment. As a result of these plans, we recorded $0.6 million and $2.6 million in charges during the three and nine months ended September 30, 2010, respectively. The charges for the three-month period included $0.4 million in severance-related costs and $0.2 million in facility and other exit

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

costs. The charges for the nine-month period included $2.2 million in severance-related costs, $0.3 million in facility and other exit costs and $0.1 million in fixed asset impairments. As of September 30, 2010, $0.4 million of these costs remains unpaid. We anticipate incurring additional severance and facility exit costs of $0.7 million under these plans.

     (b) 2009 Restructuring Plans

     In 2009, management developed plans to reduce costs and improve efficiencies in our health management business segment, as well as reduce costs and consolidate operating activities among several of our professional diagnostics related German subsidiaries. As a result of these plans, we recorded $0.1 million and $0.4 million in severance-related restructuring charges in our professional diagnostics business segment during the three and nine months ended September 30, 2010, respectively. We recorded $2.4 million during both the three and nine months ended September 30, 2009, which included $2.1 million in severance costs, $0.2 million in contract cancellation costs and $0.1 million in present value accretion on facility exit costs. Of the $2.3 million included in operating income, $2.1 million and $0.2 million were included in our health management and professional diagnostics business segments, respectively. We have incurred $3.6 million since the inception of the plans, including $2.9 million in severance costs, $0.5 million in contract cancellation costs, $0.1 million in fixed asset impairment costs and $0.1 million in present value accretion on facility exit costs. Of the $3.5 million included in operating income, $2.3 million and $1.2 million were included in our health management and professional diagnostics business segments, respectively. We also recorded $0.1 million in present value accretion related to facility exit costs to interest expense during the three and nine months ended September 30, 2009. As of September 30, 2010, substantially all exit costs have been paid. We expect to incur an additional $0.2 million in facility exit costs under these plans during 2010, which will be included in our professional diagnostics business segment.

     (c) 2008 Restructuring Plans

     In May 2008, we decided to close our facility located in Bedford, England and initiated steps to cease operations at this facility and transition the manufacturing operations principally to our manufacturing facilities in Shanghai and Hangzhou, China. Based upon this decision, during the three and nine months ended September 30, 2010, we recorded net recoveries of $4.2 million and $1.4 million to restructuring, respectively. The $4.2 million net recovery included in the three-month period was primarily the result of a settlement of the facility restoration and other facility exit costs as a result of negotiations with the landlord of the Bedford facility. Of the net recovery recorded for the nine-month period, $0.1 million related to severance-related costs, $1.4 million related to transition costs, $0.4 million related to fixed asset and inventory write-offs and $3.3 million net recovery related to facility restoration and other facility exit costs. Of the $0.7 million net recovery and $1.9 million charge included in operating income for the three and nine months ended September 30, 2010, respectively, all was charged to our professional diagnostics business segment. Included in interest expense for the three and nine months ended September 30, 2010 were a net recovery of $0.1 million and a charge of $0.1 million related to the present value accretion of our facility restoration costs, respectively. We also recorded a net recovery of $3.4 million related to the facility lease obligation settlement during both the three and nine months ended September 30, 2010, to other income (expense), net.

     During the three months ended September 30, 2009, we recorded $1.0 million in restructuring charges, of which $0.3 million related primarily to severance-related costs, $0.6 million related to transition costs and $0.1 million related to the acceleration of facility restoration costs. During the nine months ended September 30, 2009, we recorded $3.3 million in restructuring charges, of which $1.7 million related primarily to severance-related costs, $0.5 million related to fixed asset impairments, $0.8 million related to transition costs and $0.3 million related to the acceleration of facility restoration costs. Of the $0.9 million included in operating income for the three months ended September 30, 2009, substantially all was charged to our professional diagnostics business segment. Of the $3.0 million included in operating income for the nine months ended September 30, 2009, $0.1 million and $2.9 million were charged to our consumer diagnostics and professional diagnostics business segments, respectively. We also recorded $0.1 million and $0.3 million during the three and nine months ended September 30, 2009, respectively, related to the accelerated present value accretion of our lease restoration costs due to the early termination of our facility lease, to interest expense.

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

     In addition to the restructuring charges discussed above, $3.5 million and $6.4 million of charges associated with the Bedford facility closure were borne by our 50/50 joint venture with P&G, or SPD, during the three and nine months ended September 30, 2010, respectively, and $1.9 million and $7.7 million were borne by SPD during the three and nine months ended September 30, 2009, respectively. The charges for the three months ended September 30, 2010 included $0.2 million in severance and retention costs, $2.9 million in facility and transition costs, $0.1 million in inventory write-offs and $0.3 million in acceleration of facility exit costs. The charges for the nine months ended September 30, 2010 included $1.5 million in severance and retention costs, $4.5 million in facility and transition costs, $0.1 million in inventory write-offs and $0.3 million in acceleration of facility exit costs. Of the total restructuring charges, 50%, or $1.7 million and $3.2 million, has been included in equity earnings of unconsolidated entities, net of tax, in our consolidated statements of operations for the three and nine months ended September 30, 2010, respectively. Included in the $1.9 million of charges recorded by SPD for the three months ended September 30, 2009 were $1.0 million in severance and retention costs, $0.4 million of fixed asset impairments, and $0.5 million in transition costs. Included in the $7.7 million of charges for the nine months ended September 30, 2009, was $6.2 million in severance and retention costs, $0.8 million of fixed asset and inventory impairments, $0.6 million in transition costs and $0.1 million in acceleration of facility exit costs. Of these restructuring charges, 50%, or $0.9 million and $3.9 million, has been included in equity earnings of unconsolidated entities, net of tax, in our consolidated statements of operations for the three and nine months ended September 30, 2009, respectively.

     Since inception of the plan, we have recorded $16.7 million in restructuring charges, including $4.0 million related to the acceleration of facility restoration costs, $5.9 million of fixed asset and inventory impairments, $4.0 million in severance costs, $0.7 million in early termination lease penalties and $2.7 million in transition costs as well as $0.6 million related to a pension plan curtailment gain associated with the Bedford employees being terminated. SPD has been allocated $31.3 million in restructuring charges since the inception of the plan, including $9.7 million of fixed asset and inventory impairments, $11.4 million in severance and retention costs, $2.9 million in early termination lease penalties, $6.7 million in facility exit costs and $0.6 million related to the acceleration of facility exit costs. Of the total exit costs, including the costs incurred by SPD under this plan, which consists of severance-related costs, lease penalties and restoration costs, $6.7 million remains unpaid as of September 30, 2010. We anticipate incurring additional costs of approximately $1.6 million related to the closure of this facility, including, but not limited to, transition costs and rent obligations which will terminate in September 2011. Of these additional anticipated costs, approximately $0.3 million will be borne by us and included primarily in our professional diagnostics business segment and approximately $1.4 million will be borne by SPD.

     Additionally, in 2008, we formulated business transition plans related to the closure of our Cholestech, HemoSense, Inc. and Panbio facilities. In connection with these plans, we incurred $0.1 million and $2.4 million in restructuring charges during the three and nine months ended September 30, 2010, respectively. Included in the charges for nine-month period were $0.2 million relates to severance and retention costs, $1.3 million in facility closure and transition costs, $0.8 million in fixed asset and inventory write-offs and $0.1 million in present value accretion of facility lease costs. During the nine months ended September 30, 2010, $2.3 million in charges was included in operating income of our professional diagnostics business segment. We charged $0.1 million, related to the present value accretion of facility lease costs, to interest expense for the three and nine months ended September 30, 2010. We incurred $1.5 million in restructuring charges during the three months ended September 30, 2009, including $0.1 million in severance and retention costs, $0.8 million in transition costs and $0.6 million in inventory write-offs. During the nine months ended September 30, 2009, we recorded $5.5 million in charges, including $2.0 million in fixed asset impairments, $1.3 million in severance and retention costs, $1.3 million in transition costs, $0.8 million in inventory write-offs and $0.1 million in present value accretion of facility lease costs. During the three and nine months ended September 30, 2009, respectively, $1.5 million and $5.4 million in charges were included in operating income of our professional diagnostics business segment. We charged $0.1 million, related to the present value accretion of facility lease costs, to interest expense for the nine months ended September 30, 2009. Since inception of the plans, we have incurred $14.3 million in restructuring charges, including $4.5 million in severance and retention costs, $3.4 million in fixed asset impairments, $4.5 million in transition costs, $1.5 million in inventory write-offs and $0.4 million in present value accretion of facility lease costs related to these plans. Of the $9.5 million in severance and exit costs, $0.7 million remains unpaid as of September 30, 2010. We anticipate incurring additional charges under our Cholestech plan, primarily related to facility exit costs and present value accretion of facility lease costs. See Note 9(c) for further information and costs related to these plans.

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

(11) Long-term Debt

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

		September 30, 2010				December 31, 2009
First Lien Credit Agreement — Term loans		$	943,688			$	951,000
First Lien Credit Agreement — Revolving line of credit			—				142,000
Second Lien Credit Agreement			250,000				250,000
3% Senior subordinated convertible notes			150,000				150,000
9% Senior subordinated notes, net of original issue discount			389,322				388,278
7.875% Senior notes, net of original issue discount			244,551				243,959
8.625% Senior subordinated notes			400,000				—
Lines of credit			1,291				2,902
Other			17,331				19,346
			2,396,183				2,147,485
Less: Current portion			(15,030	)			(18,970	)
		$	2,381,153			$	2,128,515

     Our First Lien Credit Agreement and our Second Lien Credit Agreement are collectively referred to as our secured credit facilities. Included in the secured credit facilities is a revolving line of credit of $150.0 million. Under the terms of our secured credit facilities, substantially all of the assets of our U.S. subsidiaries are pledged as collateral. With respect to shares or ownership interests of foreign subsidiaries owned by U.S. entities, we have pledged 66% of such assets.

     On September 21, 2010, we completed the sale of $400.0 million aggregate principal amount of the 8.625% senior subordinated notes due 2018, or the 8.625% subordinated notes, in a private placement to initial purchasers, who agreed to resell the notes only to qualified institutional buyers and to persons outside the United States. The proceeds are intended to be used for working capital and other general corporate purposes. At September 30, 2010, we had $400.0 million in indebtedness under our 8.625% subordinated notes.

     The 8.625% subordinated notes, which were issued under a supplemental indenture dated September 21, 2010, as amended or supplemented, the September 2010 Indenture, accrue interest from the date of their issuance, at the rate of 8.625% per year. Interest on the notes is payable semi-annually on April 1 and October 1, commencing on April 1, 2011. The notes mature on October 1, 2018, unless earlier redeemed.

     We may redeem the 8.625% subordinated notes, in whole or part, at any time (which may be more than once) on or after October 1, 2014, by paying the principal amount of the notes being redeemed plus a declining premium, plus accrued and unpaid interest to, but excluding, the redemption date. The premium declines from 4.313% during the twelve months on and after October 1, 2014 to 2.156% during the twelve months on and after October 1, 2015 to zero on and after October 1, 2016. Prior to October 1, 2013, we may redeem, in whole or part, at any time (which may be more than once), up to 35% of the aggregate principal amount of the 8.625% subordinated notes with money that we raise in certain equity offerings so long as (i) we pay 108.625% of the principal amount of the notes being redeemed, plus accrued and unpaid interest to (but excluding) the redemption date; (ii) we redeem the notes within 90 days of completing such equity offering; and (iii) at least 65% of the aggregate principal amount of the 8.625% subordinated notes, including any 8.625% subordinated notes issued after September 21, 2010, remains outstanding afterwards. In addition, at any time prior to October 1, 2014, we may redeem some or all of the 8.625% subordinated notes by paying the principal amount of the notes being redeemed plus the payment of a make-whole premium, plus accrued and unpaid interest to, but excluding, the redemption date.

     If a change of control occurs, subject to specified conditions, we must give holders of the 8.625% subordinated notes an opportunity to sell their notes to us at a purchase price of 101% of the principal amount of the notes, plus accrued and unpaid interest to, but excluding, the date of the purchase.

     If we or our subsidiaries engage in asset sales, we or they generally must either invest the net cash proceeds from such sales in our or their businesses within a specified period of time, repay senior indebtedness or make an

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

offer to purchase a principal amount of the 8.625% subordinated notes equal to the excess net cash proceeds, subject to certain exceptions. The purchase price of the notes will be 100% of their principal amount, plus accrued and unpaid interest.

     The 8.625% subordinated notes are unsecured and are subordinated in right of payment to all of our existing and future senior debt, including our borrowing under our secured credit facilities. Our obligations under the 8.625% subordinated notes and the September 2010 Indenture are fully and unconditionally guaranteed, jointly and severally, on an unsecured senior subordinated basis by certain of our domestic subsidiaries, and the obligations of such domestic subsidiaries under their guarantees are subordinated in right of payment to all of their existing and future senior debt. See Note 22 for guarantor financial information.

     The September 2010 Indenture contains covenants that will limit our ability and the ability of our subsidiaries to, among other things, incur additional debt; pay dividends on capital stock or redeem, repurchase or retire capital stock or subordinated debt; make certain investments; create liens on assets; transfer or sell assets; engage in transactions with affiliates; create restrictions on our or their ability to pay dividends or make loans, asset transfers or other payments to us or them; issue capital stock of our or their subsidiaries; engage in any business, other than our or their existing businesses and related businesses; enter into sale and leaseback transactions; incur layered indebtedness; and consolidate, merge or transfer all or substantially all of our or their assets, taken as a whole. These covenants are subject to certain exceptions and qualifications.

     In connection with our significant long-term debt issuances, we recorded interest expense, including amortization of deferred financing costs and original issue discounts, in our consolidated statements of operations for the three and nine months ended September 30, 2010 and 2009, respectively, as follows (in thousands):

		Three Months Ended September 30,								Nine Months Ended September 30,
		2010				2009				2010				2009
Secured credit facilities		$	15,818			$	15,880			$	47,314			$	47,634
3% Senior subordinated convertible notes			1,205				1,248				3,696				3,743
9% Senior subordinated notes			9,914				10,001				29,417				15,236
7.875% Senior notes			5,462				1,878				16,030				1,878
8.625% Senior subordinated notes			972				—				972				—
		$	33,371			$	29,007			$	97,429			$	68,491

     In August 2007, we entered into interest rate swap contracts, with an effective date of September 28, 2007, that have a total notional value of $350.0 million and a maturity date of September 28, 2010. These interest rate swap contracts 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 secured credit facilities into fixed rate debt.

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

(12) Derivative Financial Instruments

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

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

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

				Fair Value at				Fair Value at
Derivative Instruments		Balance Sheet Caption		September 30, 2010				December 31, 2009
Interest rate swap contracts(1)		Accrued expenses and other current liabilities		$	1,232			$	—
Interest rate swap contracts(1)		Other long-term liabilities		$	14,326			$	15,945