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» Alere's CEO Discusses Q2 2011 Results - Earnings Call Transcript
Our ability to develop enhanced health management programs through the integrated use of innovative diagnostic and monitoring devices and to recognize the expected benefits of this strategy; the impact of healthcare reform legislation, as well as future reform initiatives; the content and timing of regulatory decisions and actions, including the results and consequences of FDA inspections, as well as the impact of changes in reimbursement policy and budgetary constraints, both in the United States and abroad; the effect of pending and future legal proceedings on our financial performance and the risks and uncertainties described in our periodic reports filed with the Securities and Exchange Commission, including our Form 10-K for the year ended December 31, 2011, as well as in our Quarterly Reports on Form 10-Q. Our company undertakes no obligation to update forward-looking statements.Additionally, please note that during this call we may discuss non-GAAP financial measures. For each non-GAAP financial measure discussed, a presentation of the most directly comparable GAAP financial measure and a reconciliation of the differences between the non-GAAP financial measure discussed and the most directly comparable GAAP financial measure is available on the company’s website at www.alere.com. With that, let me turn the call over to Alere Chairman and CEO, Ron Zwanziger. Ron? Ron Zwanziger Thanks, Doug, and good morning everyone. Our second quarter results were impacted by the regulatory issue with our Triage product. Despite this setback, as well as the effect of ongoing weakness in Europe, all our major commercial units around the world including Health Management performed well and came close to compensating for the regulatory matter in Europe. Our results were also negatively impacted by an unusually high effective tax rate related to a combination of higher profits in the U.S. and lower profits in Europe. As the issues in San Diego have been covered several times over the past few months in public presentations and via 8-K filings, I’ll limit my prepared comments today to a general update, with Dave providing further details later in the call.
During the second quarter, we continued to work with the FDA to establish a plan around revised release specifications for the Triage products manufactured in San Diego. During the quarter, we began tightening our release specifications in accordance with the plan agreed to with the FDA and, while the adjustments are still generating supply issues, we continue to be increasingly confident that once our manufacturing processes are optimized we will be able to cost-effectively meet market demand in the U.S. for our Triage panels.Nonetheless, despite having more than doubled our production capacity, with further increases planned, we do expect supply issues mainly in the U.S. with certain tests, primarily the Cardiology panels. This situation is likely to persist through the remainder of the third quarter and into the fourth quarter, as we continue to work through our manufacturing process changes. An additional challenge for us in the second quarter was Europe. On nearly every quarterly call for the last several years we’ve highlighted macroeconomic risks in Europe, and have occasionally experienced difficult quarters in the region. While Europe performed relatively well in the first quarter, revenues were low in the second quarter, down approximately $10 million from Q1. In addition, margin pressures which have persisted for more than a year continued to reduce profits in Europe. With the continuation of budgetary problems in many countries, we expect difficulties in Europe to continue through the remainder of this year, with the actual impact on any given quarter difficult to predict. Read the rest of this transcript for free on seekingalpha.com