Alere Inc. (ALR)

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Alere (ALR)

Q3 2013 Earnings Call

October 29, 2013 8:30 am ET


Doug Guarino - Director of Corporate Communications & Corporate Relations

Ron Zwanziger - Chairman, Chief Executive Officer and President

David A. Teitel - Chief Financial Officer, Principal Accounting Officer, Vice President and Treasurer

Namal Nawana - Chief Operating Officer


Daniel L. Leonard - Leerink Swann LLC, Research Division

Isaac Ro - Goldman Sachs Group Inc., Research Division

Jeffrey Frelick - Canaccord Genuity, Research Division

William B. Bonello - Craig-Hallum Capital Group LLC, Research Division

Zarak Khurshid - Wedbush Securities Inc., Research Division

Anthony Petrone - Jefferies LLC, Research Division

Nicholas Jansen - Raymond James & Associates, Inc., Research Division



Good morning, and welcome to Alere Third Quarter Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded.

I would now like to turn the conference over to Doug Guarino. Please go ahead, sir.

Doug Guarino

Thank you. Good morning, and welcome to the Alere conference call to discuss our results for the quarter ended September 30, 2013.

We are joined today by Ron Zwanziger, Chairman and CEO; Dave Teitel, CFO; and Namal Nawana, COO.

Before we get to that discussion, though, I would first like to draw your attention to the fact that certain matters discussed in this conference call will constitute forward-looking statements within the meaning of the U.S. securities laws, including statements about future organic growth, potential divestitures and anticipated reductions in costs. These statements reflect our current views with respect to future events or financial performance and are based on management's current assumptions and information currently available. Actual results and the timing of certain events could differ materially from those projected or contemplated by the forward-looking statements due to numerous factors, including without limitation, our ability to successfully complete planned divestitures, integrate our acquisitions and recognize the expected benefits of restructuring and operational initiatives; our ability to successfully develop and commercialize products and services; our ability to develop enhanced health information solutions through the integrated use of innovative diagnostic and monitoring devices and to recognize the expected benefits of this strategy; the impact of health care reform legislation; the content and timing of regulatory decisions and actions, including the impact of the FDA Warning Letter and the OIG subpoena, as well as the impact of changes in reimbursement policy and budgetary constraints, both in the United States and abroad; and the risks and uncertainties described in our periodic reports filed with the Securities and Exchange Commission, including our Form 10-K for the year ended December 31, 2012, as well as our quarterly reports on Form 10-Q. Our company undertakes no obligation to update forward-looking statements.

Additionally, please note that during this call, we may discuss non-GAAP financial measures. For each non-GAAP financial measure discussed, a presentation of the most directly comparable GAAP financial measure and a reconciliation of the differences between the non-GAAP financial measure discussed and the most directly comparable GAAP financial measure is available on the company's website at

And with that, let me turn the call over to Alere Chairman and CEO, Ron Zwanziger. Ron?

Ron Zwanziger

Thanks, Doug, and good morning, everyone. I'm pleased to report another excellent quarter, which represents a continuation of the progress we've been making for some time and is in keeping with the commitments we've make to our shareholders. It's an exciting time at Alere, as the strategic initiatives announced during our third quarter call last year are yielding more consistent performance across multiple businesses and geographies, while augmenting our capacity to react more quickly to local challenges.

These efforts are collectively leading to improved earnings predictability. We remain keenly focused on enhancing shareholder value through our 3-point plan to accelerate the company's organic growth rate, improve operational execution, deleverage our capital structure. Successful execution of this plan should drive higher operating margins and improve free cash flow generation and increase earnings growth, which again aligns with the commitments we made to our shareholders.

The first point of the plan is improvement in our organic growth rate, and in Q3 results reflect good progress in this area, which Dave will discuss in some detail in a moment. Broadly speaking, however, the strong performance of the majority of our Professional Diagnostics, driven by sales of a variety of infectious disease and cardiology products in a number of countries around the world, highlights the breadth and the technological strength of our diagnostics portfolio.

The second point of our plan is a commitment to drive higher operating margins, improve free cash flow generation and increase earnings growth. We made good progress with respect to these objectives during the third quarter, as you will have seen from our results today already. Namal, our Chief Financial Officer will provide further details later in the call.

And the third point of our plan originally involved deleveraging to at least 4x debt-to-EBITDA by the end of 2015 through the use of excess cash flow from operations and divestitures among core operations. During the third quarter, we revised this goal to 3x debt-to-EBITDA in the same period, and we remain very confident about our ability to achieve this target. Dave, our Chief Financial Officer will provide an update on progress in the quarter and the status of divestitures and debt reductions in a moment.

Our optimism around the power and value of a technology-driven solution to Chronic Care continues to increase. Alere is well positioned to benefit from the increasing global incidence of chronic disease, coupled with the financial burden that these health care costs place on national budgets, both in the U.S. and elsewhere. Although Health Information Solutions had a challenging contracting season overall, the wins we are achieving in the HIS segment generally reflect an emerging type of customers, such as an ACO or forward thinking managed care entity, that recognizes the savings potential of an integrated diagnostics-driven approach to patient management.

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