ALERE INC. (NYSE:ALR) Files An 8-K Non-Reliance on Previously Issued Financial Statements or a Related Audit Report or Completed Interim Review
Item 4.02
|
Non-Reliance on Previously Issued Financial Statements or a
Related Audit Report or Completed Interim Review. |
(a) On April 12, 2017 the Audit Committee of the Board of
Directors of Alere Inc. (the Company), after considering the
recommendations of management, concluded that the Companys
financial statements and other financial data as of December
31, 2015 and 2014 and for each of the years ended December
31, 2015, 2014 and 2013, and for each quarterly and
year-to-date periods in 2015 and the first three quarterly
and year-to-date periods in 2016 (collectively, the
Non-Reliance Periods) should not be relied upon because of
misstatements described below. The misstatements that caused
the Company to conclude that its financial statements and
other financial information for the Non-Reliance Periods
should not be relied upon were related to matters that were
initially identified in late-January 2017 and subsequently
reviewed and evaluated.
Directors of Alere Inc. (the Company), after considering the
recommendations of management, concluded that the Companys
financial statements and other financial data as of December
31, 2015 and 2014 and for each of the years ended December
31, 2015, 2014 and 2013, and for each quarterly and
year-to-date periods in 2015 and the first three quarterly
and year-to-date periods in 2016 (collectively, the
Non-Reliance Periods) should not be relied upon because of
misstatements described below. The misstatements that caused
the Company to conclude that its financial statements and
other financial information for the Non-Reliance Periods
should not be relied upon were related to matters that were
initially identified in late-January 2017 and subsequently
reviewed and evaluated.
Accordingly, investors, analysts and other persons should
not rely upon the Companys previously released financial
statements and other financial data for the Non-Reliance
Periods or any press releases, investor presentations or
other communications that relate to that information. The
Company anticipates that it will file restated financial
statements as soon as practicable.
not rely upon the Companys previously released financial
statements and other financial data for the Non-Reliance
Periods or any press releases, investor presentations or
other communications that relate to that information. The
Company anticipates that it will file restated financial
statements as soon as practicable.
The Audit Committee and management have discussed the
matters disclosed in this Item 4.02(a) with
PricewaterhouseCoopers LLP, the Companys independent
registered public accounting firm.
matters disclosed in this Item 4.02(a) with
PricewaterhouseCoopers LLP, the Companys independent
registered public accounting firm.
Additional Information on Restatement
Based on its review to date of certain aspects of revenue
recognition at its South Korean and Japanese locations, the
Company preliminarily anticipates that the restatements
will relate primarily to certain aspects of revenue
recognition at the Companys South Korean location.
Specifically, certain financial information for periods to
be presented in the Companys 2016 Annual Report on Form
10-K will be restated (the Restatement) because we had
incorrectly recorded certain revenue transactions at our
South Korean subsidiary, Standard Diagnostics Inc. (SD). We
also have preliminarily identified a revenue recognition
error related to one transaction at our Japanese location
that impacts 2013 and 2012, as further described below.
recognition at its South Korean and Japanese locations, the
Company preliminarily anticipates that the restatements
will relate primarily to certain aspects of revenue
recognition at the Companys South Korean location.
Specifically, certain financial information for periods to
be presented in the Companys 2016 Annual Report on Form
10-K will be restated (the Restatement) because we had
incorrectly recorded certain revenue transactions at our
South Korean subsidiary, Standard Diagnostics Inc. (SD). We
also have preliminarily identified a revenue recognition
error related to one transaction at our Japanese location
that impacts 2013 and 2012, as further described below.
The Restatement is the result of the failure to correctly
apply U.S. GAAP rules regarding the timing of revenue
recognition in connection with transactions in which we
recognized revenue prior to full satisfaction of all
contractual criteria for title and risk of loss passing to
the customer. The principal cause of these misstatements in
the timing of revenue recognition is attributable to
inappropriate conduct at our SD subsidiary. Specifically,
these misstatements were primarily the result of conduct
and practices initiated by a former employee in the sales
organization. The inappropriate conduct and practices
involved, among other things, misrepresentation and/or
fabrication of documents used to validate revenue
recognition that were intentionally concealed from the
Companys senior leadership team and its external auditors
at the time of the transactions and during the global
revenue recognition assessment conducted as part of the
filing of the Annual Report on Form 10-K for the fiscal
year ended December 31, 2015. Further, other SD employees
(in some cases subordinates of the initiating employee and
local finance management responsible for other controls at
SD) were involved in the inappropriate conduct or acted to
conceal it.
apply U.S. GAAP rules regarding the timing of revenue
recognition in connection with transactions in which we
recognized revenue prior to full satisfaction of all
contractual criteria for title and risk of loss passing to
the customer. The principal cause of these misstatements in
the timing of revenue recognition is attributable to
inappropriate conduct at our SD subsidiary. Specifically,
these misstatements were primarily the result of conduct
and practices initiated by a former employee in the sales
organization. The inappropriate conduct and practices
involved, among other things, misrepresentation and/or
fabrication of documents used to validate revenue
recognition that were intentionally concealed from the
Companys senior leadership team and its external auditors
at the time of the transactions and during the global
revenue recognition assessment conducted as part of the
filing of the Annual Report on Form 10-K for the fiscal
year ended December 31, 2015. Further, other SD employees
(in some cases subordinates of the initiating employee and
local finance management responsible for other controls at
SD) were involved in the inappropriate conduct or acted to
conceal it.
It is expected that the misstatements identified in the
Restatement will not impact the total amount of revenue
reported related to any transaction. However, the
misstatements will require adjustments to the period in
which certain revenues were recognized so that such
revenues are recognized in the period in which title and
risk of loss had transferred to the buyer, as required by
U.S. GAAP revenue recognition rules and our accounting
policy related to revenue recognition.
Restatement will not impact the total amount of revenue
reported related to any transaction. However, the
misstatements will require adjustments to the period in
which certain revenues were recognized so that such
revenues are recognized in the period in which title and
risk of loss had transferred to the buyer, as required by
U.S. GAAP revenue recognition rules and our accounting
policy related to revenue recognition.
The Restatement is expected to result in the following
changes to the previously reported financial information as
set forth in the tables below. The following amounts are
preliminary, unaudited and are subject to change, and any
such changes may be material in amount (certain amounts
presented in these tables may not recalculate directly, due
to rounding):
changes to the previously reported financial information as
set forth in the tables below. The following amounts are
preliminary, unaudited and are subject to change, and any
such changes may be material in amount (certain amounts
presented in these tables may not recalculate directly, due
to rounding):
|
Annual Restatement Impact (in millions)
|
Nine Months Ended September 30, 2016
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Twelve Months Ended December 31, 2015
|
Twelve Months Ended December 31, 2014
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Twelve Months Ended December 31, 2013
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||||||||||||
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Revenue
|
$
|
$
|
(8
|
)
|
$
|
$
|
(1
|
)
|
||||||||
|
Operating Income
|
$
|
(1
|
)
|
$
|
(4
|
)
|
$
|
$
|
||||||||
|
2015 Quarterly Restatement Impact (in millions)
|
Three Months Ended March 31, 2015
|
Three Months Ended June 30, 2015
|
Three Months Ended September 30, 2015
|
Three Months Ended December 31, 2015
|
||||||||||||
|
Revenue
|
$
|
(3
|
)
|
$
|
$
|
$
|
(6
|
)
|
||||||||
|
Operating Income
|
$
|
(1
|
)
|
$
|
$
|
$
|
(4
|
)
|
||||||||
|
2016 Quarterly Restatement Impact (in millions)
|
Three Months Ended March 31, 2016
|
Three Months Ended June 30, 2016
|
Three Months Ended September 30, 2016
|
|||||||||||||
|
Revenue
|
$
|
$
|
(1
|
) |
$
|
|||||||||||
|
Operating Income
|
$
|
$
|
$
|
(6
|
)
|
The Company’s review is also expected to produce a revenue
adjustment related to one transaction in Japan, which
resulted in the recognition of approximately $1 million in
2013 instead of 2012, the period in which this revenue was
previously reported. We determined that the recognition of
revenue in this instance was in error and did not involve any
inappropriate conduct by any person. This revenue adjustment
is incorporated in the table above. All other revenue
adjustments identified to date in connection with the
Restatement are due to the SD matter.
adjustment related to one transaction in Japan, which
resulted in the recognition of approximately $1 million in
2013 instead of 2012, the period in which this revenue was
previously reported. We determined that the recognition of
revenue in this instance was in error and did not involve any
inappropriate conduct by any person. This revenue adjustment
is incorporated in the table above. All other revenue
adjustments identified to date in connection with the
Restatement are due to the SD matter.
The Restatement is expected to also reflect corrections for
certain other identified misstatements in 2015 and 2016, many
of which had been identified by the Company at the time of
the issuance of the financial statements but were not deemed
material at the time. These corrections are incorporated into
the tables above.
certain other identified misstatements in 2015 and 2016, many
of which had been identified by the Company at the time of
the issuance of the financial statements but were not deemed
material at the time. These corrections are incorporated into
the tables above.
The Company has not yet completed its review of these
items, and therefore the information set forth above is
preliminary and subject to change. While the Company
expects to report the estimated adjustments described
herein, there can be no assurance that the final
adjustments will not differ materially from the information
discussed herein, or that additional misstatements will not
be identified.
items, and therefore the information set forth above is
preliminary and subject to change. While the Company
expects to report the estimated adjustments described
herein, there can be no assurance that the final
adjustments will not differ materially from the information
discussed herein, or that additional misstatements will not
be identified.
In Item 9A of the Companys Annual Report on Form 10-K for
the year ended December 31, 2015, the Company disclosed
that its internal control over financial reporting and its
disclosure controls
the year ended December 31, 2015, the Company disclosed
that its internal control over financial reporting and its
disclosure controls
and procedures were not effective as of December 31, 2015
because of material weaknesses in the Companys internal
financial controls over revenue recognition and income
taxes. Based on its review to date, the Company expects
that, as of December 31, 2016, the material weaknesses
relating to revenue recognition that existed at December
31, 2015 will be unremediated, and the Company will have an
additional material weakness related to the control
environment at SD. The Company is continuing to take steps
to implement remedial measures with respect to the revenue
recognition material weaknesses. As the Company stated in
its previous Item 9A, the remediation plan is subject to
ongoing review by the Companys senior management, as well
as oversight by the Audit Committee of the Board of
Directors. The Company cannot estimate when such
remediation may occur, and its initiatives may not prove
successful in remediating the material weaknesses.
Management may determine to enhance other existing controls
and/or implement additional controls as the implementation
progresses. Accordingly, the material weaknesses may
continue for a period of time.
because of material weaknesses in the Companys internal
financial controls over revenue recognition and income
taxes. Based on its review to date, the Company expects
that, as of December 31, 2016, the material weaknesses
relating to revenue recognition that existed at December
31, 2015 will be unremediated, and the Company will have an
additional material weakness related to the control
environment at SD. The Company is continuing to take steps
to implement remedial measures with respect to the revenue
recognition material weaknesses. As the Company stated in
its previous Item 9A, the remediation plan is subject to
ongoing review by the Companys senior management, as well
as oversight by the Audit Committee of the Board of
Directors. The Company cannot estimate when such
remediation may occur, and its initiatives may not prove
successful in remediating the material weaknesses.
Management may determine to enhance other existing controls
and/or implement additional controls as the implementation
progresses. Accordingly, the material weaknesses may
continue for a period of time.
The misstatements in connection with the Restatement will
be reflected in the audited restated financial statements
included in the Companys Annual Report on Form 10-K for the
fiscal year ended December 31, 2016. The Restatement will
also be reflected in Item 6 Selected Consolidated Financial
Data and the notes to the financial statements, in each
case as included in the Companys Annual Report on Form 10-K
for the fiscal year ended December 31, 2016.
be reflected in the audited restated financial statements
included in the Companys Annual Report on Form 10-K for the
fiscal year ended December 31, 2016. The Restatement will
also be reflected in Item 6 Selected Consolidated Financial
Data and the notes to the financial statements, in each
case as included in the Companys Annual Report on Form 10-K
for the fiscal year ended December 31, 2016.
The Company is working to file its 2016 Form 10-K as soon
as practicable. The Company is also working to complete its
Quarterly Report on Form 10-Q for the quarter ended March
31, 2017 but may need to file a Form 12b-25 in order to
obtain additional time beyond the May 15, 2017 filing
deadline in which to complete such Quarterly Report on Form
10-Q.
as practicable. The Company is also working to complete its
Quarterly Report on Form 10-Q for the quarter ended March
31, 2017 but may need to file a Form 12b-25 in order to
obtain additional time beyond the May 15, 2017 filing
deadline in which to complete such Quarterly Report on Form
10-Q.
Cautionary Note Regarding Forward-Looking Statements
This report 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. For example, forward-looking statements
include statements regarding the filing of financial
statements, the content and timing thereof, the anticipated
effect of the errors, including the anticipated change in the
Companys revenue and operating income, the scope of the
errors, and the timing and effectiveness of the Companys
remediation plan for the material weaknesses. In some cases,
forward-looking statements can be identified by terms such as
may, will, intend, expect, plan, believe, estimate, predict
or the like. These statements involve risks and
uncertainties, and actual results could differ materially
from the statements made in this report. Factors that might
cause these differences include, but are not limited to,
potential delays in the preparation of restated financial
statements, the risk that additional information will come to
light during the course of the preparation of restated
financial statements that alters the scope or magnitude of
the restatement, potential reviews, investigations or other
proceedings by government authorities, stockholders or other
parties, the risk that the Company experiences an
acceleration of amounts due under its senior secured credit
facility due to the events at SD, the Restatement or the
failure to timely file the Annual Report on Form 10-K for
2016 (or that the Company could be required to obtain a
waiver under such credit agreement), the risk that the
Companys remediation plan will be unsuccessful to prevent or
detect additional misstatements and potential delays arising
from the Restatement, including a potential inability to
prepare financial statements or file periodic reports on a
timely basis, which would be a default under the Companys
senior secured credit facility and note indentures as well as
a violation of the Securities Exchange Act and the listing
rules of the NYSE. These and other risk factors are discussed
in more detail under the heading Risk Factors in Item 1A of
the Companys Annual Report on Form 10-K filed with the
Securities and Exchange Commission on August 8, 2016. Copies
are available through the Companys Investor Relations
department and at www.alere.com. The Company does not assume
any obligation to update its forward-looking statements to
reflect new information and developments.
meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of
1934, as amended. For example, forward-looking statements
include statements regarding the filing of financial
statements, the content and timing thereof, the anticipated
effect of the errors, including the anticipated change in the
Companys revenue and operating income, the scope of the
errors, and the timing and effectiveness of the Companys
remediation plan for the material weaknesses. In some cases,
forward-looking statements can be identified by terms such as
may, will, intend, expect, plan, believe, estimate, predict
or the like. These statements involve risks and
uncertainties, and actual results could differ materially
from the statements made in this report. Factors that might
cause these differences include, but are not limited to,
potential delays in the preparation of restated financial
statements, the risk that additional information will come to
light during the course of the preparation of restated
financial statements that alters the scope or magnitude of
the restatement, potential reviews, investigations or other
proceedings by government authorities, stockholders or other
parties, the risk that the Company experiences an
acceleration of amounts due under its senior secured credit
facility due to the events at SD, the Restatement or the
failure to timely file the Annual Report on Form 10-K for
2016 (or that the Company could be required to obtain a
waiver under such credit agreement), the risk that the
Companys remediation plan will be unsuccessful to prevent or
detect additional misstatements and potential delays arising
from the Restatement, including a potential inability to
prepare financial statements or file periodic reports on a
timely basis, which would be a default under the Companys
senior secured credit facility and note indentures as well as
a violation of the Securities Exchange Act and the listing
rules of the NYSE. These and other risk factors are discussed
in more detail under the heading Risk Factors in Item 1A of
the Companys Annual Report on Form 10-K filed with the
Securities and Exchange Commission on August 8, 2016. Copies
are available through the Companys Investor Relations
department and at www.alere.com. The Company does not assume
any obligation to update its forward-looking statements to
reflect new information and developments.
* * *
About ALERE INC. (NYSE:ALR)
Alere Inc. is a provider of health information through diagnostic tests. The Company’s segments include professional diagnostics, consumer diagnostics, and corporate and other. The professional diagnostics segment includes an array of diagnostic test products and other in vitro diagnostic tests marketed to medical professionals and laboratories for detection of diseases and conditions within its areas of focus. The consumer diagnostics segment consists primarily of manufacturing operations related to its role as the exclusive manufacturer of products for SPD Swiss Precision Diagnostics (SPD), its joint venture with The Procter & Gamble Company (P&G). The Company’s professional diagnostic solutions allow patients and their healthcare providers to work together to manage patients’ conditions over the continuum of care, from the hospital to home. The Company offers lines of drugs-of-abuse tests, reagent systems and laboratory testing options. ALERE INC. (NYSE:ALR) Recent Trading Information
ALERE INC. (NYSE:ALR) closed its last trading session down -0.05 at 42.31 with 727,710 shares trading hands.
