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

For the transition period from                      to                     

ALERE INC.

(Exact name of registrant as specified in its charter)

DELAWARE		04-3565120
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		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.

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).

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).

The number of shares outstanding of the registrant’s common stock, par value of $0.001 per share, as of August 1, 2011 was 85,970,763.

 

 

ALERE INC.

REPORT ON FORM 10-Q

For the Quarterly Period Ended June 30, 2011

     This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Readers can identify these statements by forward-looking words such as “may,” “could,” “should,” “would,” “intend,” “will,” “expect,” “anticipate,” “believe,” “estimate,” “continue” or similar words. A number of important factors could cause actual results of Alere Inc. and its subsidiaries to differ materially from those indicated by such forward-looking statements. These factors include, but are not limited to, the risk factors detailed in Part I, Item 1A, “Risk Factors,” of our Annual Report on Form 10-K, as amended, for the fiscal year ended December 31, 2010 and other risk factors identified herein or from time to time in our periodic filings with the Securities and Exchange Commission. Readers should carefully review these risk factors, and should not place undue reliance on our forward-looking statements. These forward-looking statements are based on information, plans and estimates at the date of this report. We undertake no obligation to update any forward-looking statements to reflect changes in underlying assumptions or factors, new information, future events or other changes.

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

TABLE OF CONTENTS

		PAGE
PART I. FINANCIAL INFORMATION
Item 1. Unaudited Financial Statements
a) Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2011 and 2010			3
b) Consolidated Balance Sheets as of June 30, 2011 and December 31, 2010			4
c) Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2011 and 2010			5
d) Notes to Consolidated Financial Statements			6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			35
Item 3. Quantitative and Qualitative Disclosures About Market Risk			46
Item 4. Controls and Procedures			48
PART II. OTHER INFORMATION
Item 1A. Risk Factors			48
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			48
Item 6. Exhibits			50
SIGNATURES			52
EX-10.3
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
EX-101 DEFINITION LINKBASE DOCUMENT

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ALERE INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(in thousands, except per share amounts)

		Three Months Ended June 30,								Six Months Ended June 30,
		2011				2010				2011				2010
Net product sales		$	398,805			$	350,015			$	806,048			$	700,116
Services revenue			163,575				166,865				331,127				326,169
Net product sales and services revenue			562,380				516,880				1,137,175				1,026,285
License and royalty revenue			4,805				6,080				12,474				11,929
Net revenue			567,185				522,960				1,149,649				1,038,214
Cost of net product sales			190,333				166,736				380,020				330,441
Cost of services revenue			82,495				82,424				167,211				158,209
Cost of net product sales and services revenue			272,828				249,160				547,231				488,650
Cost of license and royalty revenue			1,629				1,802				3,483				3,609
Cost of net revenue			274,457				250,962				550,714				492,259
Gross profit			292,728				271,998				598,935				545,955
Operating expenses:
Research and development			41,348				32,760				77,890				63,753
Sales and marketing			140,388				123,819				273,597				243,410
General and administrative			94,838				93,361				200,389				188,024
Total operating expenses			276,574				249,940				551,876				495,187
Operating income			16,154				22,058				47,059				50,768
Interest expense, including amortization of original issue discounts and deferred financing costs			(68,562	)			(33,606	)			(106,867	)			(66,741	)
Other income (expense), net			437				4,112				2,773				7,156
Loss from continuing operations before benefit for income taxes			(51,971	)			(7,436	)			(57,035	)			(8,817	)
Benefit for income taxes			(42,736	)			(1,243	)			(47,066	)			(797	)
Loss from continuing operations before equity earnings (losses) of unconsolidated entities, net of tax			(9,235	)			(6,193	)			(9,969	)			(8,020	)
Equity earnings (losses) of unconsolidated entities, net of tax			(207	)			4,217				804				8,257
Income (loss) from continuing operations			(9,442	)			(1,976	)			(9,165	)			237
Income (loss) from discontinued operations, net of tax			—				(35	)			—				11,911
Net income (loss)			(9,442	)			(2,011	)			(9,165	)			12,148
Less: Net income (loss) attributable to non-controlling interests			(40	)			343				22				(327	)
Net income (loss) attributable to Alere Inc. and Subsidiaries			(9,402	)			(2,354	)			(9,187	)			12,475
Preferred stock dividends			(5,515	)			(5,984	)			(11,324	)			(11,837	)
Preferred stock repurchase			10,248				—				23,936				—
Net income (loss) available to common stockholders		$	(4,669	)		$	(8,338	)		$	3,425			$	638
Basic net income (loss) per common share attributable to Alere Inc. and Subsidiaries:
Income (loss) from continuing operations		$	(0.05	)		$	(0.10	)		$	0.04			$	(0.13	)
Income from discontinued operations, net of tax			—				—				—				0.14
Net income (loss) per common share		$	(0.05	)		$	(0.10	)		$	0.04			$	0.01
Diluted net income (loss) per common share attributable to Alere Inc. and Subsidiaries:
Income (loss) from continuing operations		$	(0.05	)		$	(0.10	)		$	0.04			$	(0.13	)
Income from discontinued operations, net of tax			—				—				—				0.14
Net income (loss) per common share		$	(0.05	)		$	(0.10	)		$	0.04			$	0.01
Weighted average shares-basic			85,703				84,193				85,536				84,001
Weighted average shares-diluted			85,703				84,193				87,032				84,001

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

ALERE INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(unaudited)
(in thousands, except par value)

		June 30,				December 31,
		2011				2010
ASSETS
Current assets:
Cash and cash equivalents		$	556,662			$	401,306
Restricted cash			2,547				2,581
Marketable securities			1,177				2,094
Accounts receivable, net of allowances of $22,683 and $20,381 at June 30, 2011 and December 31, 2010, respectively			406,002				397,148
Inventories, net			268,346				257,720
Deferred tax assets			73,929				57,111
Income tax receivable			187				1,383
Receivable from joint venture, net			12,024				—
Prepaid expenses and other current assets			116,448				74,914
Total current assets			1,437,322				1,194,257
Property, plant and equipment, net			421,888				390,510
Goodwill			2,889,388				2,831,300
Other intangible assets with indefinite lives			22,124				28,183
Finite-lived intangible assets, net			1,628,245				1,707,581
Deferred financing costs, net, and other non-current assets			99,137				57,529
Receivable from joint venture, net of current portion			16,026				23,872
Investments in unconsolidated entities			62,673				62,556
Marketable securities			2,621				9,404
Deferred tax assets			26,027				25,182
Total assets		$	6,605,451			$	6,330,374
LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term debt		$	36,697			$	16,891
Current portion of capital lease obligations			2,677				2,126
Accounts payable			139,217				126,844
Accrued expenses and other current liabilities			332,045				345,832
Payable to joint venture, net			—				2,787
Deferred gain on joint venture			288,784				288,378
Total current liabilities			799,420				782,858
Long-term liabilities:
Long-term debt, net of current portion			2,728,692				2,378,566
Capital lease obligations, net of current portion			4,976				1,402
Deferred tax liabilities			385,767				420,166
Other long-term liabilities			137,587				169,656
Total long-term liabilities			3,257,022				2,969,790
Commitments and contingencies (Note 16)
Stockholders’ equity:
Series B preferred stock, $0.001 par value (liquidation preference: $709,763 at June 30, 2011 and $836,222 at December 31, 2010); Authorized: 2,300 shares; Issued and outstanding: 1,774 shares at June 30, 2011 and 2,091 shares at December 31, 2010			606,468				718,554
Common stock, $0.001 par value; Authorized: 200,000 shares; Issued and outstanding: 85,712 shares at June 30, 2011 and 84,904 shares at December 31, 2010			86				85
Additional paid-in capital			3,254,532				3,232,997
Accumulated deficit			(1,362,435	)			(1,377,184	)
Treasury stock, at cost, 49 shares at June 30, 2011 and 24 shares at December 31, 2010			(1,030	)			(104	)
Accumulated other comprehensive income			46,448				690
Total stockholders’ equity			2,544,069				2,575,038
Non-controlling interests			4,940				2,688
Total equity			2,549,009				2,577,726
Total liabilities and equity		$	6,605,451			$	6,330,374

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

ALERE INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)

		Six Months Ended June 30,
		2011				2010
Cash Flows from Operating Activities:
Net income (loss)		$	(9,165	)		$	12,148
Income from discontinued operations, net of tax			—				11,911
Income (loss) from continuing operations			(9,165	)			237
Adjustments to reconcile income (loss) from continuing operations to net cash provided by operating activities:
Non-cash interest expense, including amortization of original issue discounts and write-off of deferred financing costs			27,590				7,235
Depreciation and amortization			196,116				183,155
Non-cash stock-based compensation expense			11,989				15,684
Impairment of inventory			466				640
Impairment of long-lived assets			957				644
Impairment of intangible assets			2,935				—
Loss on sale of fixed assets			1,270				514
Gain on sales of marketable securities			(331	)			—
Equity earnings of unconsolidated entities, net of tax			(804	)			(8,257	)
Deferred income taxes			(63,343	)			(22,982	)
Other non-cash items			(4,503	)			(6,270	)
Changes in assets and liabilities, net of acquisitions:
Accounts receivable, net			(3,641	)			18,632
Inventories, net			(7,299	)			(14,651	)
Prepaid expenses and other current assets			(36,052	)			1,889
Accounts payable			13,524				(26,125	)
Accrued expenses and other current liabilities			17,721				(15,169	)
Other non-current liabilities			11,071				(253	)
Net cash provided by continuing operations			158,501				134,923
Net cash used in discontinued operations			—				(1,081	)
Net cash provided by operating activities			158,501				133,842
Cash Flows from Investing Activities:
Purchases of property, plant and equipment			(67,630	)			(41,776	)
Proceeds from sale of property, plant and equipment			835				382
Proceeds from disposition of business			11,490				—
Cash paid for acquisitions, net of cash acquired			(107,360	)			(377,125	)
Proceeds from sales of marketable securities			7,919				—
Net cash received from equity method investments			490				6,333
Increase in other assets			(32,101	)			(1,443	)
Net cash used in continuing operations			(186,357	)			(413,629	)
Net cash provided by discontinued operations			—				63,446
Net cash used in investing activities			(186,357	)			(350,183	)
Cash Flows from Financing Activities:
Decrease in restricted cash			34				42
Cash paid for financing costs			(64,699	)			(1,491	)
Cash paid for contingent purchase price consideration			(24,707	)			—
Proceeds from issuance of common stock, net of issuance costs			17,829				12,957
Repurchase of preferred stock			(99,068	)			—
Proceeds from issuance of long-term debt			1,552,124				—
Payments on long-term debt			(1,193,315	)			(4,875	)
Net proceeds (payments) under revolving credit facilities			3,335				(3,696	)
Repurchase of common stock			(926	)			—
Excess tax benefits on exercised stock options			1,704				1,218
Principal payments on capital lease obligations			(1,294	)			(975	)
Other			(10,417	)			(75	)
Net cash provided by financing activities			180,600				3,105
Foreign exchange effect on cash and cash equivalents			2,612				(13,494	)
Net increase (decrease) in cash and cash equivalents			155,356				(226,730	)
Cash and cash equivalents, beginning of period			401,306				492,773
Cash and cash equivalents, end of period		$	556,662			$	266,043

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, 2010 included information and footnotes necessary for such presentation and were included in our Annual Report on Form 10-K, as amended, filed with the Securities and Exchange Commission, or SEC, on April 29, 2011. These unaudited consolidated financial statements should be read in conjunction with our audited consolidated financial statements and notes thereto for the year ended December 31, 2010.

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

(2) Cash and Cash Equivalents

     We consider all highly-liquid cash investments with original maturities of three months or less at the date of acquisition to be cash equivalents. At June 30, 2011, 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):

		June 30, 2011				December 31, 2010
Raw materials		$	75,767			$	81,640
Work-in-process			61,206				61,849
Finished goods			131,373				114,231
		$	268,346			$	257,720

(4) Stock-based Compensation

     We recorded stock-based compensation expense in our consolidated statements of operations for the three and six months ended June 30, 2011 and 2010, respectively, as follows (in thousands):

		Three Months Ended June 30,								Six Months Ended June 30,
		2011				2010				2011				2010
Cost of sales		$	366			$	395			$	716			$	801
Research and development			1,191				1,506				2,136				3,872
Sales and marketing			1,209				900				2,168				1,913
General and administrative			3,415				5,313				6,969				9,098
			6,181				8,114				11,989				15,684
Benefit for income taxes			(1,304	)			(1,917	)			(2,590	)			(3,338	)
		$	4,877			$	6,197			$	9,399			$	12,346

(5) Net Income (Loss) per Common Share

     The following table sets forth the computation of basic and diluted net (loss) income per common share for the periods presented (in thousands, except per share data):

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

		Three Months Ended June 30,								Six Months Ended June 30,
		2011				2010				2011				2010
Numerator:
Income (loss) from continuing operations		$	(9,442	)		$	(1,976	)		$	(9,165	)		$	237
Preferred stock dividends			(5,515	)			(5,984	)			(11,324	)			(11,837	)
Preferred stock repurchase			10,248				—				23,936				—
Income (loss) from continuing operations attributable to common shares			(4,709	)			(7,960	)			3,447				(11,600	)
Less: Net income (loss) attributable to non-controlling interest			(40	)			343				22				(327	)
Income (loss) from continuing operations attributable to Alere Inc. and Subsidiaries			(4,669	)			(8,303	)			3,425				(11,273	)
Income (loss) from discontinued operations			—				(35	)			—				11,911
Net income (loss) available to common stockholders		$	(4,669	)		$	(8,338	)		$	3,425			$	638
Denominator:
Weighted-average common shares outstanding — basic			85,703				84,193				85,536				84,001
Effect of dilutive securities:
Stock options			—				—				1,253				—
Warrants			—				—				131				—
Potentially issuable shares of common stock associated with contingent consideration arrangements			—				—				112				—
Weighted-average common shares outstanding — diluted			85,703				84,193				87,032				84,001
Net income per common share — basic:
Income (loss) from continuing operations attributable to Alere Inc. and Subsidiaries		$	(0.05	)		$	(0.10	)		$	0.04			$	(0.13	)
Income (loss) from discontinued operations			—				—				—				0.14
Net income (loss) per common share — basic		$	(0.05	)		$	(0.10	)		$	0.04			$	0.01
Net income per common share — diluted:
Income (loss) from continuing operations attributable to Alere Inc. and Subsidiaries		$	(0.05	)		$	(0.10	)		$	0.04			$	(0.13	)
Income (loss) from discontinued operations			—				—				—				0.14
Net (loss) income per common share — diluted		$	(0.05	)		$	(0.10	)		$	0.04			$	0.01

     For the three and six-month periods ended June 30, 2011, anti-dilutive shares of 15.7 million and 14.5 million, respectively, were excluded from the computations of diluted net income (loss) per share. For the three and six-month periods ended June 30, 2010, anti-dilutive shares of 17.1 million and 17.3 million, respectively, were excluded from the computations of diluted net income (loss) per share.

(6) Stockholders’ Equity

     (a) Preferred Stock

     For the three and six months ended June 30, 2011, Series B preferred stock dividends amounted to $5.5 million and $11.3 million, respectively, and for the three and six months ended June 30, 2010, Series B preferred stock dividends amounted to $6.0 million and $11.8 million, respectively, which reduced earnings available to common stockholders for purposes of calculating net income (loss) per common share for each of the respective periods. As of July 15, 2011, payments have been made covering all dividend periods through June 30, 2011.

     (b) Share Repurchases

     In December 2010, our Board of Directors authorized the repurchase of up to $50.0 million of our common or preferred stock. During the first quarter of 2011, under this authorization we repurchased, in the open market and privately-negotiated transactions, 183,000 shares of our Series B preferred stock, which were convertible into approximately 1.1 million shares of our common stock, at a cost of approximately $49.4 million, which we paid in cash. Also during the first quarter of 2011, under this same authorization, we completed this repurchase program by repurchasing 16,700 shares of our common stock at a cost of approximately $0.6 million, which we paid in cash. The repurchase of the preferred stock at an average cost of $269.84 per preferred share, an amount less than the weighted average fair value of the preferred shares at issuance, resulted in the allocation of $13.7 million of income attributable to common shareholders.

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

     In March 2011, our Board of Directors authorized an additional repurchase of up to $50.0 million of our preferred or common stock. During the second quarter of 2011, under this authorization we repurchased, in the open market and privately-negotiated transactions, 174,788 shares of our Series B preferred stock, which were convertible into approximately 1.0 million shares of our common stock, at a cost of approximately $49.7 million, which we paid in cash. Also during the second quarter of 2011, under this same authorization, we completed this repurchase program by repurchasing 8,300 shares of our common stock at a cost of approximately $0.3 million, which we paid in cash. The repurchase of the preferred stock at an average cost of $284.28 per preferred share, an amount less than the weighted average fair value of the preferred shares at issuance, resulted in the allocation of $10.2 million of income attributable to common shareholders.

     On May 31, 2011, we announced that our Board of Directors had authorized the repurchase of an additional $200.0 million of our common stock or preferred stock, subject to completion of the consent solicitation we announced that day and receipt of necessary authorizations from our senior secured lenders. We satisfied these conditions on June 30, 2011.

(7) Comprehensive Income (Loss)

     The following table provides a reconciliation of net income reported in our consolidated financial statements to comprehensive income (loss) for the three and six months ended June 30, 2011 and 2010 (in thousands):

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2011				2010				2011				2010
Net income (loss) attributable to Alere Inc. and Subsidiaries		$	(9,402	)		$	(2,354	)		$	(9,187	)		$	12,475
Other comprehensive income (loss), net of tax:
Changes in cumulative translation adjustment			17,106				(30,502	)			38,621				(48,464	)
Unrealized gains (losses) on available for sale securities			(63	)			289				(278	)			48
Unrealized gains (losses) on hedging instruments			6,337				474				7,325				(260	)
Minimum pension liability adjustment			118				(26	)			90				302
Total other comprehensive income (loss)			23,498				(29,765	)			45,758				(48,374	)
Total comprehensive income (loss)		$	14,096			$	(32,119	)		$	36,571			$	(35,899	)

     A summary of the changes in stockholders’ equity and non-controlling interest comprising total equity for the six months ended June 30, 2011 and 2010 is provided below (in thousands):

		Six Months Ended June 30,
		2011												2010
		Total				Non-								Total				Non-
		Stockholders’				controlling								Stockholders’				controlling
		Equity				Interest				Total Equity				Equity				Interest				Total Equity
Equity, beginning of period		$	2,575,038			$	2,688			$	2,577,726			$	3,527,555			$	1,334			$	3,528,889
Issuance of common stock and warrants in connection with acquisitions			1,000				—				1,000				16,281				—				16,281
Exercise of common stock options, warrants and shares issued under employee stock purchase plan			17,829				—				17,829				12,958				—				12,958
Repurchase of common stock			(926	)			—				(926	)			—				—				—
Repurchase of preferred stock			(99,068	)			—				(99,068	)			—				—				—
Preferred stock dividends			(68	)			—				(68	)			(86	)			—				(86	)
Stock-based compensation related to grants of common stock options			11,989				—				11,989				15,684				—				15,684
Excess tax benefits on exercised stock options			1,704				—				1,704				1,060				—				1,060
Non-controlling interest from acquisitions			—				2,500				2,500				(5,305	)			3,213				(2,092	)
Dividend relating to non-controlling interest			—				(270	)			(270	)			—				—				—
Redeemable non-controlling interest in subsidiaries’ income			—				—				—				—				(124	)			(124	)
Net income (loss)			(9,187	)			22				(9,165	)			12,475				(327	)			12,148
Total other comprehensive income (loss)			45,758				—				45,758				(48,374	)			(2,950	)			(51,324	)
Equity, end of period		$	2,544,069			$	4,940			$	2,549,009			$	3,532,248			$	1,146			$	3,533,394

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

(8) Business Combinations

     Acquisitions are accounted for using the acquisition method and the acquired companies’ results have been included in the accompanying consolidated financial statements from their respective dates of acquisition. During the three and six months ended June 30, 2011, we expensed acquisition-related costs of $1.4 million and $3.3 million, respectively, in general and administrative expense. During the three and six months ended June 30, 2010, we expensed acquisition-related costs of $2.0 million and $5.9 million, respectively, primarily in general and administrative expense.

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

     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 based on patterns on which the respective economic benefits are expected to be realized.

     (a) Acquisitions in 2011

     During 2011, we acquired the following businesses for a preliminary aggregate purchase price of $93.3 million, which included cash payments totaling $75.0 million, 25,463 shares of our common stock with an acquisition date fair value of $1.0 million, contingent consideration obligations with an aggregate acquisition date fair value of $11.2 million and deferred purchase price consideration of $2.1 million.

	•		90% interest in BioNote, Inc., or BioNote, headquartered in South Korea, a manufacturer of diagnostic products for the veterinary industry (Acquired January 2011). We previously owned a 10% interest in BioNote.
	•		assets, including domain name, of Pregnancy.org, LLC, or Pregnancy.org, a U.S.-based company providing a website for preconception, pregnancy and newborn care content, tools and sharing (Acquired January 2011)
	•		Home Telehealth Limited, subsequently renamed Alere Connected Health Limited, or Alere Connected Health, located in Cardiff, Wales, a company that focuses on delivering integrated, comprehensive services and programs to health and social care providers and insurers (Acquired February 2011)
	•		Bioeasy Diagnostica Ltda., or Bioeasy, located in Belo Horizonte, Brazil, a company that markets and sells rapid diagnostic tests and systems for laboratory diagnosis, prevention and monitoring of immunological diseases and fertility (Acquired March 2011)
	•		80.92% interest in Standing Stone, Inc., or Standing Stone, located in Westport, Connecticut, a company that focuses on disease state management by enhancing the quality of care provided to patients who require long-term therapy for chronic disease management (Acquired May 2011)

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

     The operating results of BioNote and Bioeasy are included in our professional diagnostics reporting unit and business segment. The operating results of Pregnancy.org, Alere Connected Health and Standing Stone are included in our health management reporting unit and business segment. Our consolidated statements of operations for the three and six months ended June 30, 2011 included revenue totaling approximately $6.7 million and $9.7 million, respectively, related to these businesses. Goodwill has been recognized in all of the acquisitions and amounted to approximately $58.9 million. Goodwill related to the acquisition of Pregnancy.org, which totaled $1.3 million, is expected to be deductible for tax purposes.

     A summary of the preliminary aggregate purchase price allocation for the acquisitions consummated in 2011 is as follows (in thousands):

Current assets (1)		$	11,471
Property, plant and equipment			5,121
Goodwill			58,890
Intangible assets			33,126
Other non-current assets			989
Total assets acquired			109,597
Current liabilities			5,040
Non-current liabilities			8,789
Total liabilities assumed			13,829
Net assets acquired			95,768
Less:
Fair value of non-controlling interest			2,500
Previously-owned 10% investment in BioNote			3,937
Contingent consideration			11,242
Fair value of common stock issued			1,000
Deferred purchase price consideration			2,070
Cash paid		$	75,019

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

						Weighted
						Average
		Amount				Useful Life
Core technology and patents		$	5,441			14.4 years
Database			64			3 years
Trademarks and trade names			4,897			16.4 years
Customer relationships			16,872			10 years
Non-compete agreements			455			3.9 years
Software			3,500			12 years
Other			1,523			8 years
In-process research and development			374			N/A
Total intangible assets		$	33,126

     (b) Acquisitions in 2010

During 2010, we acquired the following businesses for a preliminary aggregate purchase price of $602.5 million, which consisted of initial cash payments totaling $512.1 million, contingent consideration obligations with an acquisition date fair value of $89.7 million and deferred purchase price consideration with an acquisition date present value of $0.7 million.

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

•		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)
•		Standard Diagnostics, headquartered in South Korea, a company that specializes in the medical diagnostics industry. Its main product lines relate to diagnostic reagents and devices for hepatitis, infectious diseases, tumor markers, fertility, drugs of abuse, urine strips and protein strips. (Initial controlling interest acquired February 2010)
•		Kroll Laboratory Specialists, Inc., subsequently renamed Alere Toxicology Services, or Alere Toxicology, headquartered in Gretna, Louisiana, a company that provides forensic quality substance abuse testing products and services across the United States (Acquired February 2010)
•		a privately-owned U.K. research and development operation (Acquired March 2010)
•		assets of the diagnostics division of Micropharm Ltd., located in Wales, United Kingdom, an expert in high-quality antibody production in sheep for both diagnostic and therapeutic purposes, providing antisera on a contract basis for U.K. and overseas companies and academic institutions, mainly for research, therapeutic and diagnostic uses (Acquired March 2010)
•		Quantum Diagnostics Group Limited, or Quantum, headquartered in Essex, England, an independent provider of drug testing products and services to healthcare professionals across the U.K. and Europe (Acquired April 2010)
•		assets of the workplace health division of Good Health Solutions Pty Ltd., subsequently renamed Alere Health Pty Ltd., located in East Sydney, Australia, an important player in the Australian health and wellness market, focusing on health screenings, health-related consulting services, health coaching and fitness instruction (Acquired April 2010)
•		certain assets of Unotech Diagnostics, Inc., or Unotech, located in California, a privately-owned company engaged in the development, formulation, manufacture, packaging, supply and distribution of our 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)
•		Diagnostixx of California, Corp. (d/b/a Immunalysis Corporation), or Immunalysis, located in Pomona, California, a privately-owned manufacturer and marketer of abused and prescription drug screening solutions used by clinical reference and forensic/crime laboratories (Acquired August 2010)
•		AdnaGen AG, or AdnaGen, located in Langenhagen, Germany, a company that focuses on the development of innovative tumor diagnostics for the detection of rare cells (Acquired November 2010)
•		Medlab Produtos Medicos Hospitalares Ltda, now known as Alere S.A., located in San Paulo, Brazil, a distributor of medical instruments and reagents to public and private laboratories throughout Brazil and Uruguay (Acquired December 2010)

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

•

Capital Toxicology, LLC, or Capital Toxicology, located in Austin, Texas, a privately-held toxicology business specializing in pain management services (Acquired December 2010)

     The operating results of the acquired businesses mentioned above, except for RMD and Alere Health Pty Ltd., are included in our professional diagnostics reporting unit and business segment. The operating results of RMD and Alere Health Pty Ltd. are included in our health management reporting unit and business segment. Our consolidated statements of operations for the three and six months ended June 30, 2010 included revenue totaling approximately $33.1 million and $49.2 million, respectively, related to these businesses. Goodwill has been recognized in all of the acquisitions, with the exception of Unotech and Streck, and amounted to approximately $326.5 million. Goodwill related to the acquisitions of Alere Toxicology and Capital Toxicology, which totaled $63.4 million, is expected 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):

Current assets (1)		$	85,127
Property, plant and equipment			36,634
Goodwill			326,518
Intangible assets			283,855
Other non-current assets			17,006
Total assets acquired			749,140
Current liabilities			29,913
Non-current liabilities			71,060
Total liabilities assumed			100,973
Net assets acquired			648,167
Less:
Fair value of non-controlling interest			45,623
Contingent consideration			89,708
Present value of deferred purchase price consideration			688
Cash paid		$	512,148

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

						Weighted
						Average
		Amount				Useful Life
Core technology and patents		$	106,885			12.4 years
Quality systems			153			5 years
Database			654			3 years
Trademarks and trade names			11,654			6.3 years
License agreements			459			10 years
Customer relationships			125,332			14.3 years
Non-compete agreements			2,650			4.2 years
Software			5,000			7 years
Distribution agreement			800			14 years
Manufacturing know-how			3,683			10.5 years
In-process research and development			26,585			N/A
Total intangible assets		$	283,855

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

     (c) Restructuring Plans of Acquisitions

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

		Balance at				Adjustments								Balance at				Exit Costs
		December 31,				to the				Amounts				June 30,				Since
		2010				Reserve (1)				Paid				2011				Inception
Acquisition of Matria:
Severance related		$	255			$	(176	)		$	(11	)		$	68			$	13,840
Facility costs			967				—				(494	)			473				4,674
		$	1,222			$	(176	)		$	(505	)		$	541			$	18,514
Acquisition of Panbio:
Severance related		$	—			$	—			$	—			$	—			$	211
Facility costs			242				(75	)			(167	)			—				828
		$	242			$	(75	)		$	(167	)		$	—			$	1,039
Acquisition of Cholestech Corporation:
Severance related		$	85			$	(85	)		$	—			$	—			$	5,796
Facility costs			1,805				—				(304	)			1,501				2,732
		$	1,890			$	(85	)		$	(304	)		$	1,501			$	8,528
		$	3,354			$	(336	)		$	(976	)		$	2,042

     Of the total $2.0 million liability outstanding as of June 30, 2011, $0.6 million is included in accrued expenses and other current liabilities and $1.4 million is included in other long-term liabilities.

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

     (d) Pro Forma Financial Information

     The following table presents selected unaudited financial information of our company, including Standard Diagnostics, as if the acquisition of this entity had occurred on January 1, 2010. Pro forma results exclude adjustments for various other less significant acquisitions completed since January 1, 2010, as these acquisitions did not materially affect our results of operations.

     The pro forma results are derived from the historical financial results of the acquired businesses for the periods presented and are not necessarily indicative of the results that would have occurred had the acquisitions been consummated on January 1, 2010. There was no pro forma impact on the results of operations for the three and six months ended June 30, 2011, as the acquisition of Standard Diagnostics closed prior to January 1, 2011 (in thousands, except per share amounts).

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

		Three Months				Six Months Ended
		Ended June 30, 2010				June 30, 2010
Pro forma net revenue		$	522,960			$	1,044,367
Pro forma loss from continuing operations attributable to Alere Inc. and Subsidiaries and available to common stockholders		$	(5,967	)		$	(10,760	)
Pro forma income (loss) available to common stockholders		$	(6,002	)		$	1,151
Pro forma loss from continuing operations attributable to Alere Inc. and Subsidiaries per common share — basic and diluted(1)		$	(0.07	)		$	(0.13	)
Pro forma net income (loss) available to common stockholders — basic and diluted(1)		$	(0.07	)		$	0.01

(9) Restructuring Plans

     The following table sets forth the aggregate charges associated with restructuring plans recorded in operating income for the three and six months ended June 30, 2011 and 2010 (in thousands):

		Three Months Ended June 30,								Six Months Ended June 30,
		2011				2010				2011				2010
Cost of net revenue		$	880			$	2,411			$	2,230			$	3,991
Research and development			416				308				434				223
Sales and marketing			1,862				296				2,874				1,248
General and administrative			7,140				3,237				10,959				7,758
		$	10,298			$	6,252			$	16,497			$	13,220

     (a) 2011 Restructuring Plans

     In the second quarter of 2011, management executed a cost reduction plan on a company-wide basis. As a result of this plan, we recorded $1.1 million in severance-related expenses within our corporate and other business segment during the three and six months ended June 30, 2011. As of June 30, 2011, $0.7 million of these costs remain unpaid. We do not anticipate incurring significant additional charges under this plan. This plan also impacted the health management and professional diagnostics business segments, which are discussed below.

     In the first half of 2011, management executed plans to further reduce costs and improve efficiencies in our health management business segment, as well as cease operations at our GeneCare Medical Genetics Center, Inc., or GeneCare, facility in Chapel Hill, North Carolina and transfer the majority of our Quality Assured Services, Inc. operation in Orlando, Florida to our facility in Livermore, California. As a result of these plans, we recorded $6.4 million in charges during the three months ended June 30, 2011, which included $0.9 million in severance costs, $3.8 million in facility closure and transition costs and $1.7 million in fixed assets, accounts receivable and other non-cash write-offs. We recorded $10.6 million in charges during the six months ended June 30, 2011, which included $2.2 million in severance costs, $3.8 million in facility closure and transition costs, $2.9 million in intangible asset impairments related to our GeneCare operations and $1.7 million in fixed assets, accounts receivable and other non-cash write-offs. As of June 30, 2011, $5.2 million in costs remain unpaid. We anticipate incurring approximately $2.8 million in additional costs under these plans, primarily related to severance and facility lease obligations at our facility in Orlando, Florida.

     Additionally, during the first half of 2011, management executed several plans to reduce costs and improve operational efficiencies in our professional diagnostics business segment, including consolidation of operating activities among certain of our European subsidiaries. As a result of these plans, we recorded $2.7 million in charges during the three months ended June 30, 2011, which included $2.6 million in severance costs and $0.1 million in fixed asset impairments. We recorded $4.2 million in charges during the six months ended June 30, 2011, which included $3.6 million in severance costs and $0.6 million in fixed asset and inventory impairments. We have $1.1 million in

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

unpaid severance cost under these plans as of June 30, 2011. We anticipate incurring $0.1 million in additional charges under these plans and anticipate incurring additional charges within the professional diagnostics business segment as further cost reduction plans are developed.

     (b) 2010 Restructuring Plans

     In 2010, management executed plans to reduce costs and improve efficiencies in our health management business segment. As a result of these plans, we recorded $0.1 million during the three and six months ended June 30, 2011, primarily related to present value accretion on facility exit costs, which was included in interest expense. We recorded $0.7 million and $6.2 million in charges during the three and six months ended June 30, 2010, respectively. The charges for the three-month period included $0.6 million in severance costs and $0.1 million in costs associated with facility exit costs. The charges for the six-month period included $3.8 million in severance costs, $2.3 million in facility exit costs and $0.1 million in present value accretion on facility exit costs, which was included in interest expense. Since inception of the plans, we recorded $7.6 million in charges, which included $4.6 million in severance costs, $2.5 million in costs associated with facility exit costs, $0.2 million in fixed asset impairments and $0.3 million in present value accretion on facility exit costs, which was included in interest expense. As of June 30, 2011, $0.7 million in costs remain unpaid. We do not anticipate incurring significant additional charges under these plans.

     During 2010, management also executed several plans to reduce costs and improve efficiencies in our professional diagnostics business segment. As a result of these plans, during the six months ended June 30, 2011, we recorded $0.1 million in various restructuring charges. During the three and six months ended June 30, 2010, we recorded $2.0 million in charges primarily related to severance costs. Since inception of the plan we have recorded $3.5 million in charges, including $2.5 million in severance costs, $0.9 million in facility and other exit costs and $0.1 million in fixed asset impairments. As of June 30, 2011, substantially all costs have been paid. We do not anticipate incurring significant additional charges under these plans.

     (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 six months ended June 30, 2011, we recorded $0.1 million and $0.4 million, respectively, in restructuring charges primarily related to transition costs within our professional diagnostics business segment. During the three and six months ended June 30, 2010, we recorded $2.2 million and $2.8 million in restructuring charges, respectively. Included in the charges for the three-month period were $1.5 million related to transition costs, $0.3 million in severance costs, $0.3 million related to fixed asset and inventory write-offs and $0.1 million related to the acceleration of facility restoration costs. Of the charges recorded for the six-month period, $0.1 million related to severance-related costs, $2.1 million related to transition costs, $0.4 million related to fixed asset and inventory write-offs and $0.2 million related to the acceleration of facility restoration costs. Of the $2.1 million and $2.6 million included in operating income for the three and six months ended June 30, 2010, respectively, all was charged to our professional diagnostics business segment. We also recorded $0.1 million and $0.2 million during the three and six months ended June 30, 2010, 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.

     In addition to the restructuring charges discussed above, $0.3 million and $0.7 million of charges associated with the Bedford facility closure were borne by SPD, our 50/50 joint venture with the Procter & Gamble Company, or P&G, during the three and six months ended June 30, 2011, respectively, and $1.3 million and $2.9 million of charges were borne by SPD during the three and six months ended June 30, 2010, respectively. The $0.3 million of charges for the three months ended June 30, 2011 was primarily transition costs. Included in the $0.7 million of charges for the six months ended June 30, 2011 was $0.5 million in severance and transition costs and $0.2 million of fixed asset write-offs. Of these restructuring charges, 50%, or $0.1 million and $0.3 million, has been included in equity earnings of unconsolidated entities, net of tax, in our consolidated statements of operations for the three and six months ended June 30, 2011, respectively. The charges for the three months ended June 30, 2010 included $0.3 million in severance and retention costs, $0.6 million in transition costs and $0.4 million in inventory write-offs. The charges for the six months ended June 30, 2010 included $1.3 million in severance and retention costs and $1.6 million in transition costs. Of the total

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

restructuring charges, 50%, or $0.7 million and $1.5 million, has been included in equity earnings of unconsolidated entities, net of tax, in our consolidated statements of operations for the three and six months ended June 30, 2010, respectively. Of the total exit costs incurred jointly with SPD under this plan, $0.3 million in costs remain unpaid as of June 30, 2011.

     Since inception of the plan, we recorded $17.3 million in restructuring charges, including $5.9 million of fixed asset and inventory impairments, $4.6 million related to the acceleration of facility restoration costs and early termination lease penalties, $4.1 million in severance costs, $3.3 million in transition costs and $0.6 million related to a pension plan curtailment gain associated with the Bedford employees being terminated. SPD has been allocated $31.6 million in restructuring charges since the inception of the plan, including $9.3 million of fixed asset and inventory impairments, $11.4 million in severance and retention costs, $2.9 million in early termination lease penalties, $7.4 million in facility exit and transition costs and $0.6 million related to the acceleration of facility exit costs. We anticipate incurring additional costs of approximately $0.5 million related to the closure of this facility, primarily related to transition costs, through the end of 2011. Of these additional anticipated costs, approximately $0.4 million will be borne by SPD and $0.1 million will be borne by us and will be included primarily in our professional diagnostics business segment.

     As a result of our plans to transition the businesses of Cholestech and HemoSense, Inc., or HemoSense, to our San Diego, California facility and Panbio to Orlando, Florida and close these facilities, we incurred $1.6 million and $2.3 million in restructuring charges related to our professional diagnostics business segment during the three and six months ended June 30, 2010, respectively. Included in the charges for the three-month period were $0.9 million in facility closure and transition costs and $0.7 million in fixed asset and inventory write-offs. Of the charges incurred in the six-month period, $0.3 million relates to severance and retention costs, $1.3 million in facility closure and transition costs and $0.7 million in fixed asset and inventory write-offs. Since the inception of the plan, we incurred $14.6 million in restructuring charges, of which $4.5 million relates to severance and retention costs, $3.4 million in fixed asset impairments, $4.6 million in transition costs, $1.6 million in inventory write-offs and $0.5 million in present value accretion of facility lease costs related to these plans. As of June 30, 2011, $0.4 million in facility exit costs remains unpaid. We do not anticipate incurring significant additional restructuring charges under these plans.

(10) Long-term Debt

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

		June 30, 2011				December 31, 2010
A term loans		$	625,000			$	—
B term loans			925,000				—
First Lien Credit Agreement — Term loans			—				941,250
Second Lien Credit Agreement			—				250,000
3% Senior subordinated convertible notes			150,000				150,000
9% Senior subordinated notes			390,442				389,686
7.875% Senior notes			245,179				244,756
8.625% Senior subordinated notes			400,000				400,000
Lines-of-credit			7,618				4,405
Other			22,150				15,360
			2,765,389				2,395,457
Less: Current portion			(36,697	)			(16,891	)
		$	2,728,692			$	2,378,566

     In connection with our significant long-term debt issuances, we recorded interest expense, including amortization and writeoffs of deferred financing costs and original issue discounts, in our consolidated statements of operations for the three and six months ended June 30, 2011 and 2010, respectively, as follows (in thousands):

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

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2011				2010				2011				2010
Secured credit facility(1)		$	220			$	—			$	220			$	—
Former secured credit facility(2)			42,203	(3)			15,821				54,257	(3)			31,496
3% Senior subordinated convertible notes			1,250				1,245				2,496				2,491
9% Senior subordinated notes			9,738				9,808				19,468				19,503
7.875% Senior notes			5,369				5,426				10,734				10,568
8.625% Senior subordinated notes			8,919				—				17,827				—
		$	67,699			$	32,300			$	105,002			$	64,058

 

(1)		Includes “A” term and “B” term loans
(2)		Includes First Lien Credit Agreement and Second Lien Credit Agreement
(3)		Amount includes approximately $29.9 million recorded in connection with the termination of our former secured credit facility and related interest rate swap agreement, coupled with the amortization of fees paid for certain debt modifications.

     (a) Credit Agreement

     On June 30, 2011, we entered into a Credit Agreement, or secured credit facility, with certain lenders, General Electric Capital Corporation as administrative agent and collateral agent, and certain other agents and arrangers, and, along with certain of our subsidiaries, a related guaranty and security agreement. The secured credit facility provides for term loans in the aggregate amount of $1.85 billion (consisting of “A” term loans in the aggregate principal amount of $625.0 million, “B” term loans in the aggregate principal amount of $925.0 million, and delayed-draw term loans in the aggregate principal amount of $300.0 million) and, subject to our continued compliance with the secured credit facility, a $250.0 million revolving line of credit (which revolving line of credit includes a $50.0 million sublimit for the issuance of letters of credit). We must repay the “A” term loans in eighteen consecutive quarterly installments, beginning on December 31, 2011 and continuing through March 31, 2016, in the amount of $7,812,500 each, and a final installment on June 30, 2016, in the amount of $484,375,000. We must repay the “B” term loans in twenty-two consecutive quarterly installments, beginning on December 31, 2011 and continuing through March 31, 2017, in the amount of $2,312,500 each, and a final installment on June 30, 2017, in the amount of $874,125,000. We must repay the delayed-draw term loans in fifteen consecutive quarterly installments, beginning on September 30, 2012 and continuing through March 31, 2016, each in the amount of 1.25% of the aggregate principal amount of the delayed-draw term loans that are borrowed through June 30, 2012 and remain outstanding on that date, and a final installment on June 30, 2016, in the amount of 81.25% of such aggregate principal amount. We may repay any future borrowings under the secured credit facility revolving line of credit at any time (without premium or penalty), but in no event later than June 30, 2016. As of June 30, 2011, the “A” term loans and the “B” term loans bore interest at 5.00% and 5.75%, respectively. As of June 30, 2011, there were no borrowings under the delayed-draw term loans or the revolving line of credit under the secured credit facility.

     As of June 30, 2011, aggregate borrowings under the secured credit facility amounted to $1.55 billion, consisting of “A” term loans in the aggregate principal amount of $625.0 million and “B” term loans in the aggregate principal amount of $925.0 million. As of June 30, 2011, we were in compliance with all debt covenants related to the above debt, which consisted principally of maximum consolidated secured leverage and minimum consolidated interest coverage requirements.

     (b) First Lien Credit Agreement and Second Lien Credit Agreement

     In connection with entering into the secured credit facility on June 30, 2011, we repaid in full all outstanding indebtedness under and terminated our First Lien Credit Agreement, or senior secured credit facility, and our Second Lien Credit Agreement, or junior secured credit facility (and, collectively with the senior secured credit facility, our former secured credit facility), dated June 26, 2007, with certain lenders, General Electric Capital Corporation as administrative agent and collateral agent, and certain other agents and arrangers, and certain related guaranty and security agreements. The aggregate outstanding principal amount of the loans repaid under our former secured credit facility in connection with the termination thereof was approximately $1.2 billion.

     In August 2007, we entered into interest rate swap contracts, with an effective date of September 28, 2007, that had a total notional value of $350.0 million and an original maturity date of September 28, 2010. These interest rate swap contracts paid us variable interest at the three-month LIBOR rate, and we paid the counterparties a fixed rate of 4.85%. In March 2009, we extended our August 2007 interest rate hedge for an additional two-year period commencing in September 2010 at a one-month LIBOR rate of 2.54%. These interest rate swap contracts were entered into to convert $350.0 million of the $1.2 billion variable rate term loans under the former secured credit facility into fixed rate debt. In connection with entering into the secured credit facility on June 30, 2011, we paid $10.1 million to terminate these interest rate swap contracts.

     In January 2009, we entered into interest rate swap contracts, with an effective date of January 14, 2009, that had a total notional value of $500.0 million and a maturity date of January 5, 2011. These interest rate swap contracts

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

paid us variable interest at the one-month LIBOR rate, and we paid the counterparties a fixed rate of 1.195%. These interest rate swap contracts were entered into to convert $500.0 million of the $1.2 billion variable rate term loan under the former secured credit facility into fixed rate debt. We did not extend the terms of these interest rate swap contracts after January 5, 2011.

(11) Derivative Financial Instruments

     We manage our economic and transaction exposure to certain market-based risks through the use of derivative instruments. Our objective for holding derivative instruments has been to reduce volatility of net earnings and cash flows associated with changes in interest rates and foreign currency exchange rates. We do not hold or issue derivative financial instruments for speculative purposes.

     (a) Interest Rate Risk

     We have historically used interest rate swap contracts in the management of our interest rate exposure related to our former secured credit facility. On June 30, 2011, we entered into a new secured credit facility, and in connection therewith, repaid in full all outstanding indebtedness under and terminated our former secured credit facility and related interest rate swaps.

     (b) Foreign Exchange Risk

     During the second quarter of 2011, we entered into a foreign exchange forward contract with a notional value of 1.0 billion South Korean Won to hedge against the effect of exchange rate fluctuations on a certain obligation denominated in non-functional currency. The contract has a term of six months. We report the effective portion of the gain or loss on a cash flow hedge as a component of other comprehensive income, and it is subsequently reclassified into net earnings in the period in which the hedged transaction affects net earnings or the forecasted transaction is no longer probable of occurring.

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

				Fair Value at				Fair Value at
Derivative Instruments		Balance Sheet Caption		June 30, 2011				December 31, 2010
Foreign exchange forward contract		Prepaid expenses and other current assets		$	8			$	—
Interest rate swap contracts(1)		Accrued expenses and other current liabilities		$	—			$	26
Interest rate swap contracts(1)		Other long-term liabilities		$	—			$	11,954

Amount of

Amount of

Gain Recognized

Gain Recognized

During the Three

During the Three

Months Ended

Months Ended

Derivative Instruments

Location of Gain Recognized in Income

June 30, 2011

June 30, 2010

Foreign exchange forward contract

Other comprehensive income (loss)

$

8

$

—

Interest rate swap contracts(1)

Other comprehensive income (loss)

224

474

Total gain

Other comprehensive income (loss)

$

232

$

474

						Amount of				Amount of
						Gain Recognized				Loss Recognized
						During the Six				During the Six
						Months Ended				Months Ended
Derivative Instruments		Location of Gain (Loss) Recognized in Income				June 30, 2011				June 30, 2010
Foreign exchange forward contract		Other comprehensive income (loss)				$	8			$	—
Interest rate swap contracts(1)		Other comprehensive income (loss)					1,841				(727	)
Total gain (loss)		Other comprehensive income (loss)				$	1,849			$	(727	)

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

(12) Fair Value Measurements

     We apply fair value measurement accounting to value our financial assets and liabilities. Fair value measurement accounting provides a framework for measuring fair value under U.S. GAAP and requires expanded disclosures regarding fair value measurements. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. A fair value hierarchy requires an entity to maximize the use of observable inputs, where available, and minimize the use of unobservable inputs when measuring fair value.

     Described below are the three levels of inputs that may be used to measure fair value:

Level 1		Quoted prices in active markets for identical assets or liabilities. Our Level 1 assets and liabilities include investments in marketable securities.
Level 2		Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Our Level 2 assets and liabilities include a foreign exchange forward contract and interest rate swap contracts.
Level 3		Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. The fair value of the contingent consideration obligations related to our acquisitions completed after January 1, 2009 are valued using Level 3 inputs.

     The following tables present information about our assets and liabilities that are measured at fair value on a recurring basis as of June 30, 2011 and December 31, 2010, and indicates the fair value hierarchy of the valuation techniques we utilized to determine such fair value (in thousands):

						Quoted Prices in				Significant Other
		June 30,				Active Markets				Observable Inputs				Unobservable Inputs
Description		2011				(Level 1)				(Level 2)				(Level 3)
Assets:
Foreign exchange forward contract (1)		$	8			$	—			$	8			$	—
Marketable securities			3,798				3,798				—				—
Total assets		$	3,806			$	3,798			$	8			$	—
Liabilities:
Contingent consideration obligations (2)		$	113,614			$	—			$	—			$	113,614
Total liabilities		$	113,614			$	—			$	—			$	113,614

						Quoted Prices in				Significant Other
		December 31,				Active Markets				Observable Inputs				Unobservable Inputs
Description		2010				(Level 1)				(Level 2)				(Level 3)
Assets:
Marketable securities		$	11,948			$	11,948			$	—			$	—
Total assets		$	11,948			$	11,948			$	—			$	—
Liabilities:
Interest rate swap liability (3)		$	11,980			$	—			$	11,980			$	—
Contingent consideration obligations (2)			132,879				—				—				132,879
Total liabilities		$	144,859			$	—			$	11,980			$	132,879