UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2006

OR

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

For the transition period from                   to

COMMISSION FILE NUMBER 001-16789

INVERNESS MEDICAL INNOVATIONS, INC.

(Exact Name Of Registrant As Specified In Its Charter)

 

 

51 SAWYER ROAD, SUITE 200
WALTHAM, MASSACHUSETTS 02453
(Address of principal executive offices)

(781) 647-3900
(Registrant’s Telephone Number, Including Area Code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x   No  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o                                        Accelerated filer x                                           Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o   No  x

The number of shares outstanding of the registrant’s common stock, par value of $0.001 per share, as of May 5, 2006 was 32,061,875.

 

INVERNESS MEDICAL INNOVATIONS, INC.

REPORT ON FORM 10-Q

For the Quarterly Period Ended March 31, 2006

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. There are a number of important factors that could cause actual results of Inverness Medical Innovations, 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 for the fiscal year ending December 31, 2005 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 factors as well as the “Special Statement Regarding Forward-Looking Statements” beginning on page 34, in this Quarterly Report on Form 10-Q 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 Inverness Medical Innovations, Inc. and its subsidiaries.

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION
Item 1.			Financial Statements (unaudited):
a)			Consolidated Statements of Operations for the three months ended March 31, 2006 and 2005					3
b)			Consolidated Balance Sheets as of March 31, 2006 and December 31, 2005					4
c)			Consolidated Statements of Cash Flows for the three months ended March 31, 2006 and 2005					5
d)			Notes to Consolidated Financial Statements					6
Item 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations					25
Item 3.			Quantitative and Qualitative Disclosures About Market Risk					35
Item 4.			Controls and Procedures					36
PART II. OTHER INFORMATION
Item 1A.			Risk Factors					36
Item 2.			Unregistered Sales of Equity Securities and Use of Proceeds					36
Item 6.			Exhibits					37
SIGNATURE								38

 

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PART I — FINANCIAL INFORMATION

ITEM 1.                           FINANCIAL STATEMENTS

INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)
(in thousands, except per share amounts)

		Three Months Ended March 31,
		2006			2005
Net product sales		$	122,753		$	89,699
License and royalty revenue		5,068			2,221
Net revenue		127,821			91,920
Cost of sales		75,567			59,731
Gross profit		52,254			32,189
Operating expenses:
Research and development (Note 10)		10,610			7,232
Sales and marketing		20,822			17,030
General and administrative		15,838			14,115
Total operating expenses		47,270			38,377
Operating (loss) income		4,984			(6,188		)
Interest expense, including amortization of original issue discounts and write-off of deferred financing costs (Note 11)		(5,721		)	(5,012		)
Other income (expense), net		(428		)	4,911
Loss before provision for income taxes		(1,165		)	(6,289		)
Provision for income taxes		1,465			1,513
Net loss		$	(2,630	)	$	(7,802	)
Net loss per common share — basic and diluted (Note 5)		$	(0.09	)	$	(0.37	)
Weighted average common shares — basic and diluted (Note 5)		29,585			20,942

 

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

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INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

(unaudited)
(in thousands, except par value)

		March 31, 2006			December 31, 2005
ASSETS
Current assets:
Cash and cash equivalents		$	33,525		$	34,270
Accounts receivable, net of allowances of $9,807 at March 31, 2006 and $9,748 at December 31, 2005		88,903			70,476
Inventories		69,506			71,209
Deferred tax assets		845			844
Prepaid expenses and other current assets		18,462			17,534
Total current assets		211,241			194,333
Property, plant and equipment, net		75,077			72,211
Goodwill		372,713			322,210
Other intangible assets with indefinite lives		72,326			63,742
Core technology and patents, net		62,469			64,050
Other intangible assets, net		99,622			60,489
Deferred financing costs, net and other non-current assets		11,996			13,469
Deferred tax assets		825			662
Total assets		$	906,269		$	791,166
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt		$	1,850		$	2,367
Current portion of capital lease obligations		552			542
Accounts payable		36,491			42,155
Accrued expenses and other current liabilities		78,670			64,746
Total current liabilities		117,563			109,810
Long-term liabilities:
Long-term debt, net of current portion		255,630			258,617
Capital lease obligations, net of current portion		834			978
Deferred tax liabilities		19,868			18,881
Other long-term liabilities		5,669			5,572
Total long-term liabilities		282,001			284,048
Commitments and contingencies (Note 14)
Series A redeemable convertible preferred stock, $0.001 par value:
Authorized: 2,667 shares
Issued: 2,527 shares at March 31, 2006 and December 31, 2005
Outstanding: none at March 31, 2006 and December 31, 2005		—			—
Stockholders’ equity:
Preferred stock, $0.001 par value
Authorized: 2,333 shares
Issued: none		—			—
Common stock, $0.001 par value
Authorized: 50,000 shares
Issued and outstanding: 32,035 at March 31, 2006 and 27,497 shares at December 31, 2005		32			27
Additional paid-in capital		624,067			515,147
Notes receivable from stockholders		(14,691		)	(14,691		)
Accumulated deficit		(112,857		)	(110,227		)
Accumulated other comprehensive income		10,154			7,052
Total stockholders’ equity		506,705			397,308
Total liabilities and stockholders’ equity		$	906,269		$	791,166

 

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

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INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)
(in thousands)

		Three Months Ended March 31,
		2006			2005
Cash Flows from Operating Activities:
Net loss		$	(2,630	)	$	(7,802	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Interest expense related to amortization and/or write-off of non-cash original issue discount and deferred financing costs		677			443
Depreciation and amortization		7,646			6,202
Non-cash (income) loss related to currency hedge		(217		)	4
Deferred income taxes		743			638
Other non-cash items		141			(72		)
Non-cash stock-based compensation		1,318			—
Minority interest		—			207
Changes in assets and liabilities, net of acquisitions:
Accounts receivable, net		(6,308		)	8,688
Inventories		4,413			(2,997		)
Prepaid expenses and other current assets		(780		)	(4,476		)
Accounts payable		(7,367		)	5,348
Accrued expenses and other current liabilities		(4,469		)	9,048
Other non-current liabilities		91			76
Net cash provided by (used in) operating activities		(6,742		)	15,307
Cash Flows from Investing Activities:
Purchases of property, plant and equipment		(4,349		)	(3,979		)
Proceeds from sale of property, plant and equipment		33			43
Cash paid for acquisitions and transactional costs, net of cash acquired		(70,169		)	(15,776		)
Decrease (increase) in other assets		1,040			(394		)
Net cash used in investing activities		(73,445		)	(20,106		)
Cash Flows from Financing Activities:
Cash paid for financing costs		(316		)	(355		)
Proceeds from issuance of common stock, net of issuance costs		82,128			899
Net (repayment) proceeds under revolving line of credit		(3,654		)	22,170
Repayments of notes payable		(42		)	(9		)
Principal payments of capital lease obligations		(137		)	(115		)
Net cash provided by financing activities		77,979			22,590
Foreign exchange effect on cash and cash equivalents		1,463			(880		)
Net (decrease) increase in cash and cash equivalents		(745		)	16,911
Cash and cash equivalents, beginning of period		34,270			16,756
Cash and cash equivalents, end of period		$	33,525		$	33,667
Supplemental Disclosure of Non-cash Activities:
Fair value of stock issued for acquisitions		$	25,480		$	57,962

 

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

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INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(1)         Basis of Presentation of Financial Information

The accompanying consolidated financial statements of Inverness Medical Innovations, Inc. and its subsidiaries 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, 2005 included information and footnotes necessary for such presentation and were included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 15, 2006. 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, 2005.

(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 March 31, 2006, 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):

 

(4)         Stock-Based Compensation

Effective January 1, 2006, we began recording compensation expense associated with stock options and other forms of equity compensation in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 123-R, Share-Based Payment, as interpreted by SEC Staff Accounting Bulletin No. 107. Prior to January 1, 2006, we accounted for stock options according to the provisions of Accounting Principles Board (“APB”) Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations, and therefore no related compensation expense was recorded for awards granted with no intrinsic value. We adopted the modified prospective transition method provided for under SFAS No. 123-R, and consequently have not retroactively adjusted results from prior periods. Under this transition method, compensation cost associated with stock options now includes: (i) amortization related to the remaining unvested portion of all stock option awards granted prior to January 1, 2006, based on the grant-date fair value estimated in accordance with the original provisions of SFAS No. 123, and (ii) amortization related to all stock option awards granted subsequent to January 1, 2006, based on the grant-date fair value estimated in accordance with the provisions of SFAS 123-R. In addition, we record expense over the offering period in connection with shares issued under our employee stock purchase plan. The compensation expense for stock-based compensation awards includes an estimate for forfeitures and is recognized over the expected term of the options using the straight-line method.

In accordance with SFAS No. 123-R, as of March 31, 2006, our results of operations reflected compensation expense for new stock options granted and vested under our stock incentive plan and employee stock purchase plan during the first three months of 2006 and the unvested portion of previous stock option grants which vested during the first three months of 2006. Stock-based compensation expense in the amount of $1.3 million (or $1.2 million net of tax effects) was reflected in the consolidated statement of operations for the first three months of 2006 as follows (in thousands):

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Prior to our adoption of SFAS No. 123-R, we reported all tax benefits resulting from the exercise of stock options as operating cash flows in our consolidated statements of cash flows. In accordance with SFAS No. 123-R, for the three months ended March 31, 2006, the presentation of our cash flows has changed from prior periods to report the excess tax benefits from the exercise of stock options as financing cash flows. For the three months ended March 31, 2006, no excess tax benefits were generated from option exercises.

For stock options granted prior to the adoption of SFAS No. 123-R, if expense for stock-based compensation had been determined under the fair value method for the three months ended March 31, 2005, our net loss and net loss per common share would have been adjusted to the following pro forma amounts (in thousands, except for per share data):

 

Our stock option plans provide for grants of options to employees to purchase common stock at the fair market value of such shares on the grant date of the award. The options vest over a four year period, beginning on the date of grant, with a graded vesting schedule of 25% at the end of each of the four years. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing method. We use historical data to estimate the expected price volatility and the expected forfeiture rate. For the three months ended March 31, 2006, we have chosen to employ the simplified method of calculating the expected option term, which averages an award’s weighted average vesting period and its contractual term. The contractual term of our stock option awards is ten years. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant with a remaining term equal to the expected term of the option. We have not made any dividend payments nor do we have plans to pay dividends in the foreseeable future. The following assumptions were used to estimate the fair value of options granted during the first three months of 2006 and 2005 using the Black-Scholes option-pricing model:

 

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A summary of the stock option activity for the three months ended March 31, 2006 is as follows (in thousands, except price per share and contractual term):

 

 

The weighted average fair value under the Black-Scholes option pricing model of options granted to employees during the three months ended March 31, 2006 and 2005 were $12.89 and $10.60 per share, respectively.

As of March 31, 2006, there were $10.8 million, net of estimated forfeitures, related to unvested stock options that are expected to vest. That cost is expected to be recognized over a weighted-average period of 2.64 years.

(5)         Net Loss Per Common Share

The following table sets forth the computation of basic and diluted net loss per common share (in thousands, except per share amounts):

 

 

We had the following potential dilutive securities outstanding on March 31, 2006: (a) options and warrants to purchase an aggregate of 4.4 million shares of common stock at a weighted average exercise price of $18.71 per share, and (b) 104,000 shares of common stock held in escrow. These potential dilutive securities were not included in the computation of diluted net loss per share because the effect of including such potential dilutive securities would be anti-dilutive.

We had the following potential dilutive securities outstanding on March 31, 2005: (a) options and warrants to purchase an aggregate of 4.3 million shares of common stock at a weighted average exercise price of $16.58 per share, and (b) 104,000 shares of common stock held in escrow. These potential dilutive securities were not included in the computation of diluted net loss per share because the effect of including such potential dilutive securities would be anti-dilutive.

(6)         Comprehensive Income or Loss

We account for comprehensive income as prescribed by SFAS No. 130, Reporting Comprehensive Income. In general, comprehensive income (loss) combines net income (loss) and other changes in equity during the year from non-owner sources.  Our accumulated other comprehensive income, which is a component of shareholders’ equity, includes primarily foreign currency translation adjustments and is our only source of equity from non-owners. For the three months ended March 31, 2006 and 2005, we generated a comprehensive income of $0.5 million and a comprehensive loss of $10.3 million, respectively.

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(7)           Stockholders’ Equity

On February 8 and 9, 2006, we sold an aggregate 3,400,000 shares of our common stock at $24.41 per share to funds affiliated with 14 accredited institutional investors in a private placement. Proceeds from the private placement were approximately $79.3 million, net of issuance costs of $3.7 million. Of this amount, we repaid principal and interest outstanding under our senior credit facility of $74.1 million, with the remainder of the net proceeds retained for general corporate purposes.

In connection with the February 2006 private placements of common stock, we agreed to use commercially reasonable efforts to register the resale of the private placement shares prior to June 8, 2006. In the event that we are unable to take a registration statement effective prior to June 8, 2006, we will pay an illiquidity discount equal to 1% of the February 2006 offering proceeds per month until the earlier of (i) the date that the registration statement is declared effective or (ii) February 8, 2008.

(8)           Business Combinations

All of the acquisitions discussed below resulted in the recognition of goodwill. Acquisitions are an important part of our growth strategy. When we acquire businesses, we seek to complement existing products and services, enhance or expand our product lines and/or expand our customer base. We determine what we are willing to pay for each acquisition partially based on our expectation that we can cost effectively integrate the products and services of the acquired companies into our existing infrastructure. In addition, we utilize the existing infrastructure of the acquired companies to cost effectively introduce our products to new geographic areas. All of these factors contributed to the acquisition prices of the acquired businesses discussed below, that were in excess of the fair value of net assets acquired and the resultant goodwill.

(a)  Acquisition of Innovacon

On March 31, 2006, we acquired the assets of ACON Laboratories’ business of researching, developing, manufacturing, marketing and selling lateral flow immunoassay and directly-related products in the United States, Canada, Europe (excluding Russia, the former Soviet Republics that are not part of the European Union, Spain, Portugal and Turkey), Israel, Australia, Japan and New Zealand (“Innovacon”). The preliminary aggregate purchase price was approximately $90.2 million which consisted of $55.1 million in cash, 711,676 shares of our common stock with an aggregate fair value of $19.7 million, $5.4 million in estimated direct acquisition costs and an additional liability of $10.0 million payable to the sellers on the deferred payment date, pursuant to the purchase agreement. The fair value of our common stock was determined based on the average market price of our common stock pursuant to Emerging Issue Task Force (“EITF”) Issue No. 99-12, Determination of the Measurement Date for the Market Price of Acquirer Securities Issued in a Purchase Business Combination. In addition to the amounts described above, we will be required to make additional payments of between $56.1 million to $91.1 million upon the completion of the construction, permitting and validation of a newly constructed manufacturing facility in Hangzhou, China and regulatory clearance in Spain and Portugal. $31.25 million of the remaining payments will be made through the issuance of our common stock, with the balance payable in cash. The timing and amount of any such payments is contingent upon the successful completion of various milestones, as defined in the acquisition agreement, and certain regulatory approvals.

The aggregate purchase price was preliminarily allocated to the assets acquired and liabilities assumed at the date of acquisition as follows (in thousands):

 

The above values for the assets acquired and liabilities assumed are based on preliminary management estimates due to the timing of the acquisition. Final purchase price allocation may differ from the above. Management is also in the process of determining the useful lives of the core technology and intangible assets, as listed above.

The acquisition of Innovacon is accounted for as a purchase under SFAS No. 141, Business Combinations. Accordingly, the operating results of Innovacon will be included in our consolidated financial statements from the acquisition date as part of our consumer and professional diagnostic products reporting units and business segments. Goodwill generated from this acquisition is not deductible for tax purposes.

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      (b)    Acquisition of CLONDIAG

On February 28, 2006, we acquired 67.45% of CLONDIAG chip technologies GmbH (“CLONDIAG”), a private company located in Jena in Germany which has developed a multiplexing technology for nucleic acid and immunoassay-based diagnostics. The acquisition agreement provides that we will purchase the remaining 32.55% on or before August 1, 2006. The aggregate purchase price was $22.7 million, which consisted of $11.8 million in cash, 218,502 shares of our common stock with an aggregate fair value of $5.8 million and a $5.1 million payable to acquire the remaining 32.55% stock ownership. In the event that the value of the shares issued in connection with the acquisition is less than €4.87 million on December 29, 2006, we will be required to pay the sellers additional cash in the amount of the shortfall. The fair value of our common stock issued was determined pursuant to EITF Issue No. 99-12. The terms of the acquisition agreement also provide for contingent consideration totaling approximately $8.9 million, consisting of 224,316 shares of common stock and approximately $3.0 million of cash or stock, in the event that four specified products are developed on CLONDIAG’s platform technology during the three years following the acquisition date. This contingent consideration will be accounted for as an increase in the aggregate purchase price, if and when the resolution of the contingency occurs.

The aggregate purchase price was preliminarily allocated to the assets acquired and liabilities assumed at the date of acquisition as follows (in thousands):

 

The above values for the assets acquired and liabilities assumed are based on preliminary management estimates due to the timing of the acquisition. Final purchase price allocation may differ from the above values and will include an evaluation of whether certain in-process research and development projects have yet reached technical feasibility. The value of projects which have not yet reached technical feasibility, if any, will be expensed as in-process research and development when quantified.

The acquisition of CLONDIAG is accounted for as a purchase under SFAS No. 141. Accordingly, the operating results of CLONDIAG, which consist principally of research and development activities, have been included in the accompanying consolidated financial statements since the acquisition date as part of our corporate and other business segment. Goodwill generated from this acquisition is not deductible for tax purposes.

       (c)    Pro Forma Financial Information

The following table presents selected unaudited financial information of our company, including Binax, Inc. (“Binax”), Ischemia Technologies, Inc. (“Ischemia”), the Determine/DainaScreen assets of Abbott Laboratories’ rapid diagnostic business (the “Determine business”), Thermo BioStar, Inc. (“BioStar”), Innogenetics Diagnostica Y Terapeutica, S.A.U. (“IDT”) and Innovacon, as if the acquisitions of these entities had occurred on January 1, 2005. Pro forma results exclude adjustments for Advanced Clinical Systems Pty Ltd (“ACS”) and CLONDIAG 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 all periods presented and are not necessarily indicative of the results that would have occurred had the acquisitions been consummated on January 1, 2005.

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(1)            Loss per common share amounts are computed as described in Note 5.

(d) Restructuring Plans of Acquisitions

In connection with our acquisitions of BioStar, Ischemia, Ostex International, Inc. (“Ostex”), IVC Industries, Inc. (now operating as Inverness Medical Nutritionals Group or IMN) and certain entities, businesses and intellectual property of Unilever Plc (the “Unipath business”), we recorded restructuring costs as part of the respective aggregate purchase prices in accordance with EITF Issue No. 95-3, Recognition of Liabilities in Connection with a Purchase Business Combination.

The following table sets forth the restructuring costs and accrual balances recorded on a cash basis in connection with the restructuring activities of these acquired businesses (in thousands):

(1)            Represents foreign currency translation adjustment.

During the fourth quarter of 2005, we established a restructuring plan in connection with our acquisition of BioStar and recorded restructuring costs of $0.5 million, of which $0.4 million related to impairment of fixed assets and $0.1 million related to severance costs associated with a headcount reduction. The total number of employees to be involuntarily terminated was nine, of which seven were terminated as of March 31, 2006. Of the costs recorded during 2005, $0.1 million has been paid as of March 31, 2006. Although we believe our plan and estimated exit costs are reasonable, actual spending for exit activities may differ from current estimated exit costs, which might impact the final aggregate purchase price.

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In connection with our acquisition of Ischemia in March 2005, we established a restructuring plan whereby we exited the current facilities of Ischemia in Denver, Colorado and combined its activities with our existing manufacturing and distribution facilities during the third quarter of 2005. Total severance costs associated with involuntarily terminated employees were estimated to be $1.6 million, of which $1.5 million has been paid as of March 31, 2006. We estimated costs to vacate the Ischemia facilities to be approximately $135,000, of which $90,000 has been paid as of March 31, 2006. The total number of involuntarily terminated employees was 17, of which all were terminated as of March 31, 2006.

As a result of our acquisition of Ostex, we established a restructuring plan whereby we exited the facilities of Ostex in Seattle, Washington, and combined the activities of Ostex with our existing manufacturing and distribution facilities. The total number of employees to be terminated involuntarily under the restructuring plan was 38, of which all were terminated as of March 31, 2006. Total severance costs associated with involuntarily terminated employees were $1.6 million, all of which has been paid as of March 31, 2006. Costs to vacate the Ostex facilities are $0.5 million, of which $0.2 million has been paid as of March 31, 2006. Additionally, the remaining costs to exit the operations, primarily facilities lease commitments, were $1.9 million, of which $1.5 million has been paid as of March 31, 2006. Total unpaid exit costs amounted to $0.7 million as of March 31, 2006.

Immediately after the close of the acquisition, we reorganized the business operations of IMN to improve efficiencies and eliminate redundant activities on a company-wide basis. The restructuring affected all cost centers within the organization, but most significantly responsibilities at the sales and executive levels, as such activities were combined with our existing business operations. Also as part of the restructuring plan, we relocated one of IMN’s warehouses to a closer proximity of the manufacturing facility to improve efficiency. Of the $1.6 million in total exit costs, which includes severance costs for 47 involuntarily terminated employees and costs to vacate the warehouse, $1.5 million has been paid as of March 31, 2006.

As a result of the acquisition of the Unipath business from Unilever Plc in 2001, we reorganized the operations of the Unipath business for purposes of improving efficiencies and achieving economies of scale on a company-wide basis. Such reorganization affected all major cost centers at the operations in England. Additionally, most business activities of the U.S. division were merged into our existing U.S. businesses. Total exit costs, which primarily related to severance and early retirement obligations for 65 involuntarily terminated employees, were $4.1 million. As of March 31, 2006, $1.3 million, adjusted for foreign exchange effect, in exit costs remained unpaid.

(9)         Restructuring Plan

On May 9, 2005, we committed to a plan to cease operations at our facility in Galway, Ireland. During the three months ended March 31, 2006, we recorded a $2.1 million restructuring charge, of which $0.3 million related to severance, early retirement and outplacement services, $0.1 million related to impairment of fixed assets, $0.5 million related to facility closing costs and $1.2 million related to unrealized foreign exchange losses relating to this plan of termination. The charges for the three months ended March 31, 2006 consisted of $0.7 million charged to cost of goods sold, $0.2 million charged to general and administrative and $1.2 million charged to other expense, of which $0.7 million and $0.2 million of the $0.9 million included in operating income was included in our consumer diagnostic products and professional diagnostic products business segments, respectively.

The total restructuring charges since the commitment date is $7.2 million, of which $2.6 million related to severance, early retirement and outplacement services, $2.4 million related to impairment of fixed assets and inventory, $1.0 million related to facility closing costs and $1.2 million related to unrealized foreign exchange losses relating primarily to this plan of termination.  Of the total $5.8 million restructuring charges recorded in operating income, $5.5 million and $0.3 million were included in our consumer diagnostic products and professional diagnostic products business segments, respectively. The total number of employees to be involuntarily terminated is 113, of which 111 were terminated and the remaining two employees will be terminated during the second quarter of 2006. As of March 31, 2006, of the $2.6 million related to severance, early retirement and outplacement services, $0.2 million remained unpaid. Of the $1.0 million in facility closing costs, $0.4 million remained unpaid as of March 31, 2006. Including the charges recorded through March 31, 2006, we expect the total restructuring charge primarily related to the closure of out Galway facility to be approximately $7.3 million, with additional charges relating principally to severance and facility closing costs of $0.1 million expected to be recorded upon final liquidation within the consumer diagnostic products segment. Upon liquidation, we expect to record a gain of approximately $5.2 million, based on foreign currency exchange rates as of March 31, 2006, as the result of a reclassification of the cumulative translation adjustment to other income.

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(10)  Co-Development Arrangement

On February 25, 2005, we entered into a co-development agreement with ITI Scotland Limited (“ITI”), whereby ITI  agreed to provide us with approximately £30 million (or $52.4 million at March 31, 2006) over three years to partially fund research and development programs focused on identifying novel biomarkers and near-patient and home use tests for cardiovascular and other diseases (“the Programs”). We agreed to invest £37.5 million (or $65.5 million at March 31, 2006) in the Programs over three years from the date of the agreement. Through our subsidiary, Stirling Medical Innovations Limited (“Stirling”), we established a new research center in Stirling, Scotland, where we consolidated many of our existing cardiology programs and will ultimately commercialize products arising from the Programs. ITI and Stirling will have exclusive rights to the developed technology in their respective fields of use. As of March 31, 2006, we had received approximately $26.8 million in funding from ITI. As qualified expenditures are made under the co-development arrangement, we recognize the fee earned during the period as a reduction of our related expenses, subject to certain limitations. For the three months ended March 31, 2006 and 2005, we recognized $4.3 million and $2.4 million of reimbursements, respectively, of which $3.8 million and $1.9 million, respectively, offset our research and development spending and $0.5 million in both periods reduced our general, administrative and marketing spending incurred by Stirling. Funds received from ITI in excess of amounts earned are included in accrued expenses and other current liabilities, the balance of which was $4.3 million as of March 31, 2006.

(11)  Senior Credit Facility

As of December 31, 2005, $89.0 million of borrowings were outstanding under our senior credit facility. On February 8 and 9, 2006, we sold an aggregate 3,400,000 shares of our common stock at $24.41 per share to funds affiliated with 14 accredited institutional investors in a private placement. Proceeds from the private placement were approximately $79.3 million, net of issuance costs of $3.7 million. Of this amount, we repaid principal and interest outstanding under our senior credit facility of $74.1 million, with the remainder of the net proceeds retained for general corporate purposes. On February 27, 2006, we borrowed $13.0 million under our European revolving line of credit to fund our acquisition of CLONDIAG.

On March 31, 2006, we entered into an amendment to our third amended and restated credit agreement. The amendment increased the total amount of credit available to us under the credit agreement to $155.0 million, from $100.0 million consisting of a new $45.0 million U.S. term loan, a $40.0 million U.S. revolving line of credit, reduced from $60.0 million under the credit agreement prior to the amendment, and a $70.0 million European revolving line of credit, increased from $40.0 million under the credit agreement prior to the amendment. On March 31, 2006, in connection with our acquisition of Innovacon, we incurred $58.0 million in indebtedness under the credit agreement when we received the proceeds of the entire U.S. term loan and drew an additional $13.0 million under the U.S. revolving line of credit. Our aggregate indebtedness under the amended credit agreement, including the $58.0 million borrowed on March 31, 2006 for the acquisition of Innovacon, was $86.0 million as of March 31, 2006.

We must repay the U.S. term loan in seven consecutive quarterly installments, beginning on September 30, 2006, in an amount equal to 0.25% of the aggregate $45.0 million of U.S. term loan commitments, with the final installment due on March 31, 2008 in the amount of the remaining principal balance of the U.S. term loan. We may repay any existing or future borrowings under the revolving lines of credit at any time, but no later than March 31, 2008. We are required to make mandatory prepayments in various amounts under the credit facilities if we sell assets not in the ordinary course of business above certain thresholds, if we issue stock or sell equity securities, if we issue subordinated debt or if we have excess cash flow.

Borrowings under the revolving lines of credit and term loan bear interest at either (i) the London Interbank Offered Rate (“LIBOR”), as defined in the agreement, plus applicable margins or, at our option, (ii) a floating Index Rate, as defined in the agreement, plus applicable margins. Applicable margins if we choose to use the LIBOR or the Index Rate can range from 2.75% to 3.75% or 1.50% to 2.50%, respectively, for our revolving line of credit depending on the quarterly adjustments that are based on our consolidated financial performance and 4% or 2.75%, respectively, on our term loan. As of March 31, 2006, the LIBOR and Index rates applicable under our primary senior credit facility for the revolving lines of credit were 8.58% and 10.25%, respectively, and for the U.S. term loan were 8.83% and 10.5%, respectively. For the three months ended March 31, 2006 and 2005, we recorded interest expense, including amortization of deferred financing costs, under these senior credit facilities in the aggregate amount of $1.5 million and $0.7 million, respectively. As of March 31, 2006, accrued interest related to the senior credit facility amounted to $0.2 million.

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Borrowings under the credit facilities remain secured by the stock of certain of our U.S. and foreign subsidiaries, substantially all of our intellectual property rights, substantially all of the assets of our businesses in the U.S. and a significant portion of the assets of our businesses outside the U.S. We have pledged certain of the assets and properties, including certain intellectual property rights, acquired in connection with the purchase of Innovacon to secure borrowings under the credit facilities and we expect to pledge certain of the assets and properties still to be acquired to secure borrowings under the credit facilities.

(12)  Defined Benefit Pension Plan

Our subsidiary in England, Unipath Ltd., has a defined benefit pension plan established for certain of its employees. The net periodic benefit costs are as follows (in thousands):

 

 

(13)  Financial Information by Segment

Under SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information, operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision making group, in deciding how to allocate resources and in assessing performance. Our chief operating decision making group is composed of the chief executive officer and members of senior management. Our reportable operating segments are Consumer Diagnostic Products, Vitamins and Nutritional Supplements, Professional Diagnostic Products, and Corporate and Other. Our operating results include license and royalty revenue which are allocated to Consumer Diagnostic Products and Professional Diagnostic Products on the basis of the original license or royalty agreement. Included in the operating loss of Corporate and Other are non-allocable corporate expenditures and expenses related to our research and development activities in the area of cardiology, the latter of which amounted to $5.6 million, net of the ITI funding (Note 10) of $3.8 million, and $4.3 million, net of the ITI funding of $1.9 for the three months ended March 31, 2006 and 2005, respectively. Total assets in the area of cardiology, which are included in Corporate and Other in the tables below, amounted to $42.6 million at March 31, 2006 and $41.2 million at December 31, 2005.

We evaluate performance of our operating segments based on revenue and operating income (loss). Segment information for the three months ended March 31, 2006 and 2005 is as follows (in thousands):

 

		Consumer			Vitamins and			Professional			Corporate
		Diagnostic			Nutritional			Diagnostic			and
		Products			Supplements			Products			Other			Total
Three Months Ended March 31, 2006:
Net revenue to external customers		$	43,314		$	19,003		$	65,504		$	—		$	127,821
Operating income (loss)		$	8,480		$	(1,077	)	$	9,416		$	(11,835	)	$	4,984
Three Months Ended March 31, 2005:
Net revenue to external customers		$	43,420		$	16,921		$	31,579		$	—		$	91,920
Operating income (loss)		$	6,941		$	(1,860	)	$	(2,479	)	$	(8,790	)	$	(6,188	)
Assets:
As of March 31, 2006		$	249,899		$	53,126		$	549,291		$	53,953		$	906,269
As of December 31, 2005		$	253,063		$	52,967		$	434,796		$	50,340		$	791,166

 

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(14) Material Contingencies and Legal Settlements

Due to the nature of our business, we may from time to time be subject to commercial disputes, consumer product claims or various other lawsuits arising in the ordinary course of our business, and we expect this will continue to be the case in the future. These lawsuits generally seek damages, sometimes in substantial amounts, for commercial or personal injuries allegedly suffered and can include claims for punitive or other special damages. In addition, we aggressively defend our patent and other intellectual property rights. This often involves bringing infringement or other commercial claims against third parties, which can be expensive and can results in counterclaims against us. We are currently not a party to any material legal proceedings.

As of March 31, 2006, we had outstanding material contingent contractual obligations related to our acquisitions of ADC, Binax and CLONDIAG. With respect to our acquisition of ADC, the terms of the merger agreement, as amended, provide for $1.5 million of contingent consideration payable to the ADC shareholders upon the successful completion of a new product under development by June 30, 2006. With respect to Binax, the terms of the acquisition agreement provide for $11.0 million of contingent cash consideration payable to the Binax shareholders upon the successful completion of certain new product developments during the five years following the acquisition. With respect to the acquisition of CLONDIAG, the terms of the acquisition agreement provide for $8.9 million of contingent consideration, consisting of 224,316 shares of our common stock and approximately $3.0 million of cash or stock in the event that four specified products are developed on CLONDIAG’s platform technology during the three years following the acquisition date.

(15)  Recent Accounting Pronouncements

Recently Issued Standards

In February 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 155, Accounting for Certain Hybrid Financial Instruments, which amends SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities and SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. SFAS No. 155 simplifies the accounting for certain derivatives embedded in other financial instruments by allowing them to be accounted for as a whole if the holder elects to account for the whole instrument on a fair value basis. SFAS No. 155 also clarifies and amends certain other provisions of SFAS No. 133 and SFAS No. 140. SFAS No. 155 is effective for all financial instruments acquired, issued or subject to a remeasurement event occurring in fiscal years beginning after September 15, 2006. Earlier adoption is permitted, provided we have not yet issued financial statements, including for interim periods, for that fiscal year. We do not expect the adoption of SFAS No. 155 to have a material impact on our financial position, results of operations or cash flows.

In March 2006, the FASB issued SFAS No. 156, Accounting for Servicing of Financial Assets - an amendment of FASB Statement No. 140. SFAS No. 156 requires that all separately recognized servicing rights be initially measured at fair value, if practicable. In addition, this Statement permits an entity to choose between two measurement methods (amortization method or fair value measurement method) for each class of separately recognized servicing assets and liabilities. This new accounting standard is effective January 1, 2007. The adoption of SFAS No. 156 is not expected to have an impact on our financial position, results of operations or cash flows.

Recently Adopted Standards

In November 2004, the FASB issued SFAS No. 151, Inventory Costs - an amendment of ARB No. 43, Chapter 4. SFAS No. 151 clarifies the accounting for abnormal amounts of idle facility expense, freight, handling costs and wasted materials (spoilage). In addition, this statement requires that allocation of fixed production overheads to the costs of conversion be based on normal capacity of production facilities. As required by SFAS No. 151, we adopted this new accounting standard on January 1, 2006. The adoption of SFAS No. 151 did not have a material impact on our financial position, results of operations or cash flows.

In December 2004, the FASB issued SFAS No. 123-R, Share-Based Payment, which addresses the accounting for transactions in which a company receives employee services in exchange for (a) equity instruments of the company or (b) liabilities that are based on the fair value of the company’s equity instruments or that may be settled by the issuance of such equity instruments. Under the original guidance of SFAS No. 123-R, we were to adopt the statement’s provisions for the interim period beginning after June 15, 2005. However, in April 2005, as a result of an action by the Securities and Exchange Commission, companies were allowed to adopt the provisions of SFAS No. 123-R at the beginning of their fiscal year that begins after June 15, 2005. Consequently, we adopted SFAS No. 123-R on January 1, 2006. See Note 4 for further discussion.

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In May 2005, the FASB issued SFAS No. 154, Accounting Changes and Error Corrections, which replaces APB Opinion No. 20, Accounting Changes, and SFAS No. 3, Reporting Accounting Changes in Interim Financial Statements. The statement requires a voluntary change in accounting principle be applied retrospectively to all prior period financial statements so that those financial statements are presented as if the current accounting principle had always been applied. APB Opinion No. 20 previously required most voluntary changes in accounting principle to be recognized by including in net income of the period of change the cumulative effect of changing to the new accounting principle. In addition, SFAS No. 154 carries forward, without change, the guidance contained in APB Opinion No. 20 for reporting a correction of an error in previously issued financial statements and a change in accounting estimate. SFAS No. 154 was effective for accounting changes and corrections of errors made after January 1, 2006. The adoption of SFAS No. 154 had no impact on our financial statements.

(16)  Guarantor Financial Information

We issued $150.0 million in senior subordinated notes (the “Bonds”) to qualified institutional buyers in reliance on Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”), and outside the United States in compliance with Regulation S of the Securities Act. Our payment obligations under the Bonds are currently guaranteed by all of our domestic subsidiaries (the “Guarantor Subsidiaries”). The guarantee is full and unconditional. Separate financial statements of the Guarantor Subsidiaries are not presented because we have determined that they would not be material to investors in the Bonds. The following supplemental financial information sets forth, on a consolidating basis, the statements of operations and cash flows for the three months ended March 31, 2006 and 2005 and the balance sheets as of March 31, 2006 and December 31, 2005 for our company (the “Issuer”), the Guarantor Subsidiaries and our other subsidiaries (the “Non-Guarantor Subsidiaries”). The supplemental financial information reflects our investments and the Guarantor Subsidiaries’ investments in the Guarantor and Non-Guarantor Subsidiaries using the equity method of accounting.

We have extensive transactions and relationships between various members of our consolidated group. These transactions and relationships include intercompany pricing agreements, intellectual property royalty agreements, and general and administrative and research and development cost sharing agreements. Because of these relationships, it is possible that the terms of these transactions are not the same as those that would result from transactions among unrelated parties.

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INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF OPERATIONS
For the Three Months Ended March 31, 2006

(unaudited)
(in thousands)

		Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Net product sales		$	5,887		$	72,877		$	61,252		$	(17,263	)	$	122,753
License and royalty revenue		—			71			4,997			—			5,068
Net revenue		5,887			72,948			66,249			(17,263		)	127,821
Cost of sales		6,697			51,012			34,929			(17,071		)	75,567
Gross profit		(810		)	21,936			31,320			(192		)	52,254
Operating expenses:
Research and development		983			1,928			7,699			—			10,610
Sales and marketing		1,302			10,084			9,436			—			20,822
General and administrative		5,152			3,876			6,810			—			15,838
Total operating expenses		7,437			15,888			23,945			—			47,270
Operating (loss) income		(8,247		)	6,048			7,375			(192		)	4,984
Equity in earnings of subsidiaries, net of tax		7,271			—			—			(7,271		)	—
Interest expense, including amortization of discounts and write-off of deferred financing costs		(4,079		)	(796		)	(2,523		)	1,677			(5,721		)
Other income (expense), net		2,703			(99		)	(1,355		)	(1,677		)	(428		)
(Loss) income before provision for income taxes		(2,352		)	5,153			3,497			(7,463		)	(1,165		)
Provision for income taxes		278			554			633			—			1,465
Net (loss) income		$	(2,630	)	$	4,599		$	2,864		$	(7,463	)	$	(2,630	)

 

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INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF OPERATIONS
For the Three Months Ended March 31, 2005

(unaudited)
(in thousands)

		Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Net product sales		$	5,478		$	51,086		$	45,339		$	(12,204	)	$	89,699
License and royalty revenue		—			31			2,190			—			2,221
Net revenue		5,478			51,117			47,529			(12,204		)	91,920
Cost of sales		5,617			43,048			24,564			(13,498		)	59,731
Gross profit		(139		)	8,069			22,965			1,294			32,189
Operating expenses:
Research and development		141			1,115			5,976			—			7,232
Sales and marketing		480			7,177			9,373			—			17,030
General and administrative		3,308			3,622			7,185			—			14,115
Total operating expenses		3,929			11,914			22,534			—			38,377
Operating (loss) income		(4,068		)	(3,845		)	431			1,294			(6,188		)
Equity in earnings of subsidiaries, net of tax		3,907			—			—			(3,907		)	—
Interest expense, including amortization of original issue discounts and write-off of deferred financing costs		(4,245		)	(484		)	(1,343		)	1,060			(5,012		)
Other income (expense), net		(3,074		)	8,660			324			(999		)	4,911
(Loss) income before income taxes		(7,480		)	4,331			(588		)	(2,552		)	(6,289		)
Provision for income taxes		322			718			473			—			1,513
Net (loss) income		$	(7,802	)	$	3,613		$	(1,061	)	$	(2,552	)	$	(7,802	)

 

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INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEET
March 31, 2006

(unaudited)
(in thousands)

 

		Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
ASSETS
Current Assets:
Cash and cash equivalents		$	306		$	9,743		$	23,476		$	—		$	33,525
Accounts receivable, net of allowances		2,632			48,165			38,106			—			88,903
Inventories		7,438			41,021			27,339			(6,292		)	69,506
Deferred tax assets		—			1			844			—			845
Prepaid expenses and other current assets		3,817			2,833			11,812			—			18,462
Intercompany receivables		35,555			28,133			16,345			(80,033		)	—
Total current assets		49,748			129,896			117,922			(86,325		)	211,241
Property, plant and equipment, net		2,222			30,522			42,333			—			75,077
Goodwill		116,971			109,116			146,626			—			372,713
Other intangible assets with indefinite lives		5,000			21,120			46,206			—			72,326
Core technology and patents, net		19,824			13,085			29,560			—			62,469
Other intangible assets, net		35,181			37,378			27,063			—			99,622
Deferred financing costs, net and other non-current assets		5,321			2,255			4,420			—			11,996
Deferred tax assets		134			—			691			—			825
Investment in subsidiaries		355,211			(1,281		)	—			(353,930		)	—
Intercompany notes receivable		143,606			54,650			3			(198,259		)	—
Total assets		$	733,218		$	396,741		$	414,824		$	(638,514	)	$	906,269
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt		$	—		$	—		$	1,850		$	—		$	1,850
Current portion of capital lease obligations		—			517			35			—			552
Accounts payable		6,194			16,483			13,814			—			36,491
Accrued expenses and other current liabilities		20,388			21,680			36,602			—			78,670
Intercompany payables		17,849			35,451			26,733			(80,033		)	—
Total current liabilities		44,431			74,131			79,034			(80,033		)	117,563
Long-term liabilities:
Long-term debt, net of current portion		169,506			58,000			28,124			—			255,630
Capital lease obligations, net of current portion		—			777			57			—			834
Deferred tax liabilities		4,231			6,510			9,000			127			19,868
Other long-term liabilities		—			285			5,384			—			5,669
Intercompany notes payable		8,345			50,379			139,535			(198,259		)	—
Total long-term liabilities		182,082			115,951			182,100			(198,132		)	282,001
Stockholders’ equity		506,705			206,659			153,690			(360,349		)	506,705
Total liabilities and stockholders’ equity		$	733,218		$	396,741		$	414,824		$	(638,514	)	$	906,269

 

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INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEET
December 31, 2005

(unaudited)
(in thousands)

 

		Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
ASSETS
Current Assets:
Cash and cash equivalents		$	1,196		$	8,080		$	24,994		$	—		$	34,270
Accounts receivable, net of allowances		2,344			34,834			33,298			—			70,476
Inventories		7,518			42,794			26,997			(6,100		)	71,209
Deferred tax assets		—			—			844			—			844
Prepaid expenses and other current assets		2,228			2,720			12,586			—			17,534
Intercompany receivables		38,919			34,346			19,974			(93,239		)	—
Total current assets		52,205			122,774			118,693			(99,339		)	194,333
Property, plant and equipment, net		2,632			31,164			38,415			—			72,211
Goodwill		72,787			109,637			139,786			—			322,210
Other intangible assets with indefinite lives		8,700			12,420			42,622			—			63,742
Core technology and patents, net		28,269			5,556			30,225			—			64,050
Other intangible assets, net		20,321			18,429			21,739			—			60,489
Deferred financing costs, net, and other non-current assets		6,696			2,347			4,426			—			13,469
Deferred tax assets		—			—			662			—			662
Investment in subsidiaries		297,607			(1,162		)	—			(296,445		)	—
Intercompany notes receivable		130,001			43,066			—			(173,067		)	—
Total assets		$	619,218		$	344,231		$	396,568		$	(568,851	)	$	791,166
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt		$	—		$	—		$	2,367		$	—		$	2,367
Current portion of capital lease obligations		—			508			34			—			542
Accounts payable		1,549			25,438			15,168			—			42,155
Accrued expenses and other current liabilities		12,935			22,939			28,872			—			64,746
Intercompany payables		34,070			31,357			27,812			(93,239		)	—
Total current liabilities		48,554			80,242			74,253			(93,239		)	109,810
Long-term liabilities:
Long-term debt, net of current portion		169,456			60,000			29,161			—			258,617
Capital lease obligations, net of current portion		—			914			64			—			978
Deferred tax liabilities		3,900			5,964			8,889			128			18,881
Other long-term liabilities		—			278			5,294			—			5,572
Intercompany notes payable		—			42,331			130,736			(173,067		)	—
Total long-term liabilities		173,356			109,487			174,144			(172,939		)	284,048
Stockholders’ equity		397,308			154,502			148,171			(302,673		)	397,308
Total liabilities andstockholders’ equity		$	619,218		$	344,231		$	396,568		$	(568,851	)	$	791,166

 

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