exv99w2
Exhibit 99.2
INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
Overview
On May 9, 2008, we completed our acquisition of Matria Healthcare, Inc. (“Matria”), for
consideration per share of (i) $6.50 in cash and (ii) convertible preferred stock of Inverness
having a stated value of $32.50 per share (convertible at $69.32, as calculated by dividing the
$400.00 per share liquidation preference by the 5.7703 conversion
rate). The convertible preferred stock was issued in a tax-deferred transaction
and provides for a three percent dividend. The total transaction consideration will be
approximately $1.2 billion, consisting of approximately $909.4 million to acquire the Matria shares
of common stock and options and assumption of approximately $286.3 million of Matria’s indebtedness
outstanding. Of this amount, approximately $718.5 million
represents the value of the preferred stock issued,
$143.7 million represents cash paid and $47.2 million
represents the fair value associated with Inverness employee stock
options which were exchanged as part of the transaction. The Company
borrowed $142.0 million under its existing credit facility to
finance a portion of the cash paid and the Matria indebtedness repaid. The transaction is an indirect acquisition through a merger of a newly formed,
wholly-owned subsidiary of Inverness with and into Matria. Matria, headquartered in Marietta,
Georgia, is a national provider of health enhancement, disease management and high-risk pregnancy
management programs and services. Through its Health Enhancement and Women’s and Children’s Health
divisions, Matria provides services to more than 1,000 employers and managed care organizations.
The unaudited pro forma condensed combined financial statements (the “Financial Statements”)
reflect our acquisition of Matria. The Financial Statements are based on the respective historical
consolidated financial statements and the notes thereto of Inverness and Matria. The Financial
Statements also reflect our previous acquisitions of Biosite Incorporated (“Biosite”) (including
related financing transactions), Cholestech Corporation (“Cholestech”), Instant Technologies, Inc.
(“Instant”) and our November 2007 issuance of 13.6 million shares of common stock for net proceeds
of $806.9 million. All acquisitions are reflected using the purchase method of accounting and the
estimates, assumptions and adjustments described below and in the notes to the Financial
Statements. The fair value of certain identifiable intangible assets
are based upon preliminary estimates and are subject to change which
could be material. Actual operating results of the previous acquisitions are included in Inverness’
historical financial results only from the respective dates of the acquisitions.
The Financial Statements also reflect our previous transfer of our consumer diagnostic
products assets to a 50/50 joint venture with The Procter & Gamble Company (“P&G”), the elimination
of the historical results of operations of our consumer diagnostic products business, and the
impact of the new manufacturing agreement with the joint venture on our historical results of
operations.
For purposes of preparing the Financial Statements, the historical financial information for
Inverness and Matria is based on the year ended December 31, 2007 and the three months ended March
31, 2008.
The historical Matria financial information included in the accompanying unaudited pro forma
condensed combined statements of operations for the year ended December 31, 2007 and the three
months ended March 31, 2008 represents the pre-acquisition results of Matria. The historical
Biosite financial information included in the accompanying unaudited pro forma condensed combined
statements of operations for the year ended December 31, 2007 includes results of operations for the
pre-acquisition period ended June 26, 2007, which represent the historical pre-acquisition results
of Biosite. The historical Cholestech financial information included in the accompanying unaudited
pro forma condensed combined statements of operations for the year ended December 31, 2007 includes
results of operations for the pre-acquisition period ended September 12, 2007, which represent the
historical pre-acquisition results of Cholestech. The historical Instant financial information
included in the accompanying unaudited pro forma condensed combined
statements of operations for the
year ended December 31, 2007 includes results of operations for the pre-acquisition period ended
March 12, 2007, which represent the historical pre-acquisition results of Instant.
The unaudited pro forma
condensed combined statements of operations for the year ended December
31, 2007 and the three months ended March 31, 2008 assumes that the acquisition of Matria, the
acquisition of Biosite and the related financing transactions, the acquisition of Cholestech and
Instant, the consummation of the 50/50 joint venture with P&G and the November 2007 issuance of
common stock occurred on January 1, 2007. The unaudited pro forma condensed combined balance sheet
assumes that the acquisition of Matria occurred on March 31, 2008. The historical Inverness balance
sheet as of March 31, 2008 reflects the acquisition of Biosite and the related financing
transactions, the acquisitions of Cholestech and Instant, the November 2007 public offering and the
consummation of the 50/50 joint venture with P&G.
The Financial Statements are presented for illustrative purposes only and do not purport to be
indicative of the results of operations or financial position for future periods or the results
that actually would have been realized had the merger with Matria or the other transactions
described above been consummated as of January 1, 2007 or March 31, 2008. The pro forma adjustments
are based upon available information and certain estimates and assumptions as described in the
notes to the Financial Statements that management of Inverness believes are reasonable in the
circumstances.
The Financial Statements and accompanying notes should be read in conjunction with the
historical consolidated financial statements and notes thereto of Inverness included in our Annual
Report on Form 10-K for the year ended December 31, 2007, as amended, and our previously filed
Forms 8-K, as well as the historical financial statements and notes thereto of Matria included in
its Annual Report on Form 10-K for the year ended December 31, 2007, as amended.
The following are summaries of the completed transactions reflected in the unaudited pro forma
condensed combined financial statements.
November 2007 Public Offering
On November 20, 2007, we completed a public offering in which we sold a total of 13,634,302
shares of common stock in the offering at a public offering price of $61.49 per share. The total
number of shares sold by the Company included 1,800,000 shares sold of common stock to the
underwriters upon their exercise of their over-allotment option in full. Certain selling
stockholders of the Company also sold 165,698 shares of common stock in the offering. The net
proceeds to the Company from the offering were approximately $806.9 million.
Acquisition of Cholestech
On September 12, 2007, we completed our acquisition of Cholestech, a publicly-traded leading
provider of diagnostic tools and information for immediate risk assessment and therapeutic
monitoring of heart disease and inflammatory disorders. The preliminary aggregate purchase price
was $354.6 million, which consisted of 6,840,361 shares of our common stock with an aggregate fair
value of $329.8 million, $4.5 million in estimated direct acquisition costs and $20.3 million of fair value
associated with the outstanding fully-vested Cholestech employee stock options which were converted
to options to acquire our common stock as part of the transaction.
Acquisition of Biosite
On June 29, 2007, we completed our acquisition of Biosite, a publicly-traded global medical
diagnostic company utilizing a biotechnology approach to create products for the diagnosis of
critical diseases and conditions. The preliminary aggregate purchase price was $1.8 billion, which
consisted of $1.6 billion in cash, $68.9 million in estimated direct acquisition costs and
$77.4 million of fair value associated with Biosite employee stock options which were exchanged as
part of the transaction.
To finance the acquisition, we entered into a secured First Lien Credit Agreement with certain
lenders, General Electric Capital Corporation as administrative agent and collateral agent, and
certain other agents and arrangers, a secured Second Lien Credit Agreement 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 First Lien
Credit Agreement provides for term loans in the aggregate amount of $900.0 million and, subject to
our continued compliance with the First Lien Credit Agreement, a $150.0 million revolving line of
credit. The Second Lien Credit Agreement provides for term loans in the aggregate amount of $250.0
million. To finance the acquisition, we drew the full amount of the term loans under the two Credit
Agreements and approximately $73.2 million under the revolver.
2
A portion of the acquisition was also financed from the proceeds of our May 2007 sale of
$150.0 million principal amount of 3% convertible senior subordinated notes due 2016 (the
“Convertible Notes”) in a private placement to qualified institutional buyers.
Joint Venture with P&G
On May 17, 2007, we completed our previously announced transaction to form a 50/50 joint
venture with P&G for the development, manufacturing, marketing and sale of existing and
to-be-developed consumer diagnostic products, outside the cardiology, diabetes and oral care
fields. At the closing, Inverness and P&G entered into material definitive agreements, pursuant to
which we transferred our consumer diagnostic net assets, other than our manufacturing and core
intellectual property assets, to the joint venture, and P&G acquired its interest in the joint
venture for a cash payment to us of approximately $325.0 million.
Upon completion of the transaction to form the joint venture, we ceased to consolidate the
operating results of our consumer diagnostic products business and began to account for our 50%
interest in the results of the joint venture under the equity method of accounting. In our capacity
as the manufacturer of products for the joint venture, we supply products to the joint venture and
record revenue on those sales. No gain on the proceeds that we received from P&G through the
formation of the joint venture will be recognized in our financial statements until P&G’s option to
require us to purchase its interest in the joint venture expires. As a result, all income tax
effects as a result of this transaction have also been deferred.
Acquisition of Instant
On March 12, 2007, we acquired 75% of the issued and outstanding capital stock of Instant, a
privately-owned distributor of rapid drugs of abuse diagnostic products used in the workplace,
criminal justice and other testing markets. On December 28, 2007, we acquired the remaining 25%
interest, bringing the aggregate purchase price to $60.8 million, which consisted of $38.9 million
in cash, common stock with an aggregate fair value of
$21.5 million and $0.4 million in estimated direct
acquisition costs. In addition, we assumed and paid debt of $4.9 million.
3
Inverness Medical Innovations, Inc. and Subsidiaries
Unaudited Pro forma Condensed Combined Statements of Operations
For the Year Ended December 31, 2007
(in 000s, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma Adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
Completed Transactions |
|
|
|
|
|
|
|
|
Inverness |
|
|
Instant |
|
|
Instant |
|
|
|
|
Disposition of |
|
|
|
|
Formation of |
|
|
|
|
Biosite |
|
|
Biosite |
|
|
|
|
Cholestech |
|
|
Cholestech |
|
|
|
|
Matria |
|
|
Matria |
|
|
|
|
Pro forma |
|
|
|
(Restated) |
|
|
Historical |
|
|
Adjustments |
|
|
|
|
CD Business |
|
|
|
|
Joint Venture |
|
|
|
|
Historical |
|
|
Adjustments |
|
|
|
|
Historical |
|
|
Adjustments |
|
|
|
|
Historical |
|
|
Adjustments |
|
|
|
|
Combined Company |
|
Net product
sales and services revenue |
|
$ |
817,561 |
|
|
$ |
5,381 |
|
|
$ |
(544 |
) |
|
A |
|
$ |
(73,781 |
) |
|
E |
|
$ |
36,007 |
|
|
G |
|
$ |
152,686 |
|
|
$ |
— |
|
|
|
|
$ |
47,954 |
|
|
$ |
— |
|
|
|
|
$ |
352,235 |
|
|
$ |
— |
|
|
|
|
$ |
1,337,499 |
|
License and royalty revenue |
|
|
21,979 |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
|
2,718 |
|
|
|
— |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
24,697 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue |
|
|
839,540 |
|
|
|
5,381 |
|
|
|
(544 |
) |
|
|
|
|
(73,781 |
) |
|
|
|
|
36,007 |
|
|
|
|
|
155,404 |
|
|
|
— |
|
|
|
|
|
47,954 |
|
|
|
— |
|
|
|
|
|
352,235 |
|
|
|
— |
|
|
|
|
|
1,362,196 |
|
Cost of sales |
|
|
445,813 |
|
|
|
3,143 |
|
|
|
(544 |
) |
|
A |
|
|
(34,292 |
) |
|
E |
|
|
34,292 |
|
|
G |
|
|
47,406 |
|
|
|
10,011 |
|
|
J |
|
|
17,040 |
|
|
|
4,517 |
|
|
O |
|
|
107,513 |
|
|
|
15,136 |
|
|
AF |
|
|
650,035 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
393,727 |
|
|
|
2,238 |
|
|
|
— |
|
|
|
|
|
(39,489 |
) |
|
|
|
|
1,715 |
|
|
|
|
|
107,998 |
|
|
|
(10,011 |
) |
|
|
|
|
30,914 |
|
|
|
(4,517 |
) |
|
|
|
|
244,722 |
|
|
|
(15,136 |
) |
|
|
|
|
712,161 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
|
69,547 |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
(7,290 |
) |
|
E |
|
|
— |
|
|
|
|
|
26,780 |
|
|
|
— |
|
|
|
|
|
4,384 |
|
|
|
— |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
93,421 |
|
In-process research and development |
|
|
173,825 |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
— |
|
|
E |
|
|
— |
|
|
|
|
|
— |
|
|
|
(169,000 |
) |
|
K |
|
|
— |
|
|
|
— |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
4,825 |
|
Sales and marketing |
|
|
167,770 |
|
|
|
1,014 |
|
|
|
870 |
|
|
B |
|
|
(16,414 |
) |
|
E |
|
|
— |
|
|
|
|
|
38,222 |
|
|
|
20,232 |
|
|
J |
|
|
11,052 |
|
|
|
5,796 |
|
|
O |
|
|
47,217 |
|
|
|
22,176 |
|
|
S |
|
|
297,935 |
|
General and administrative |
|
|
158,438 |
|
|
|
254 |
|
|
|
— |
|
|
|
|
|
(6,823 |
) |
|
E |
|
|
— |
|
|
|
|
|
33,197 |
|
|
|
(67,300 |
) |
|
L |
|
|
16,389 |
|
|
|
(6,218 |
) |
|
P |
|
|
139,801 |
|
|
|
(15,136 |
) |
|
AF |
|
|
252,602 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
569,580 |
|
|
|
1,268 |
|
|
|
870 |
|
|
|
|
|
(30,527 |
) |
|
|
|
|
— |
|
|
|
|
|
98,199 |
|
|
|
(216,068 |
) |
|
|
|
|
31,825 |
|
|
|
(422 |
) |
|
|
|
|
187,018 |
|
|
|
7,040 |
|
|
|
|
|
648,783 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
income (loss) |
|
|
(175,853 |
) |
|
|
970 |
|
|
|
(870 |
) |
|
|
|
|
(8,962 |
) |
|
|
|
|
1,715 |
|
|
|
|
|
9,799 |
|
|
|
206,057 |
|
|
|
|
|
(911 |
) |
|
|
(4,095 |
) |
|
|
|
|
57,704 |
|
|
|
(22,176 |
) |
|
|
|
|
63,378 |
|
Interest and other income (expense), net |
|
|
(69,879 |
) |
|
|
(169 |
) |
|
|
(86 |
) |
|
C, D |
|
|
— |
|
|
|
|
|
3,509 |
|
|
H |
|
|
2,060 |
|
|
|
(60,574 |
) |
|
M |
|
|
2,107 |
|
|
|
— |
|
|
|
|
|
(22,105 |
) |
|
|
17,022 |
|
|
T, AH |
|
|
(128,115 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) Income before income taxes |
|
|
(245,732 |
) |
|
|
801 |
|
|
|
(956 |
) |
|
|
|
|
(8,962 |
) |
|
|
|
|
5,224 |
|
|
|
|
|
11,859 |
|
|
|
145,483 |
|
|
|
|
|
1,196 |
|
|
|
(4,095 |
) |
|
|
|
|
35,599 |
|
|
|
(5,154 |
) |
|
|
|
|
(64,737 |
) |
Income tax (benefit) provision |
|
|
(979 |
) |
|
|
— |
|
|
|
36 |
|
|
|
|
|
(2,331 |
) |
|
F |
|
|
929 |
|
|
I |
|
|
5,515 |
|
|
|
(5,515 |
) |
|
N |
|
|
(723 |
) |
|
|
723 |
|
|
Q |
|
|
14,534 |
|
|
|
(12,681 |
) |
|
V |
|
|
1,352 |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
1,844 |
|
|
N |
|
|
— |
|
|
|
— |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income |
|
|
(244,753 |
) |
|
|
801 |
|
|
|
(992 |
) |
|
|
|
|
(6,631 |
) |
|
|
|
|
4,295 |
|
|
|
|
|
6,344 |
|
|
|
149,154 |
|
|
|
|
|
1,919 |
|
|
|
(4,818 |
) |
|
|
|
|
21,065 |
|
|
|
7,527 |
|
|
|
|
|
(66,089 |
) |
Preferred stock dividends |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
— |
|
|
|
(21,489 |
) |
|
W |
|
|
(21,489 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income available to common
stockholders |
|
$ |
(244,753 |
) |
|
$ |
801 |
|
|
$ |
(992 |
) |
|
|
|
$ |
(6,631 |
) |
|
|
|
$ |
4,295 |
|
|
|
|
$ |
6,344 |
|
|
$ |
149,154 |
|
|
|
|
$ |
1,919 |
|
|
$ |
(4,818 |
) |
|
|
|
$ |
21,065 |
|
|
$ |
(13,962 |
) |
|
|
|
$ |
(87,578 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted |
|
$ |
(4.75 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(1.28 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares — basic and diluted |
|
|
51,510 |
|
|
|
|
|
|
|
208 |
|
|
R |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
4,760 |
|
|
R |
|
|
|
|
|
|
12,065 |
|
|
X |
|
|
68,543 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these unaudited pro forma condensed combined financial statements.
4
Inverness Medical Innovations, Inc. and Subsidiaries
Unaudited Pro forma Condensed Combined Statements of Operations
For the three months ended March 31, 2008
(in 000s, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma Adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
Completed Transaction |
|
|
|
|
|
|
|
|
|
|
|
|
Matria |
|
|
Matria |
|
|
|
|
Pro forma |
|
|
|
Inverness |
|
|
Historical |
|
|
Adjustments |
|
|
|
|
Combined Company |
|
Net product
sales and services revenue |
|
$ |
361,361 |
|
|
$ |
79,512 |
|
|
$ |
— |
|
|
|
|
$ |
440,873 |
|
License and royalty revenue |
|
|
10,872 |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
10,872 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue |
|
|
372,233 |
|
|
|
79,512 |
|
|
|
— |
|
|
|
|
|
451,745 |
|
Cost of sales |
|
|
191,843 |
|
|
|
25,593 |
|
|
|
3,536 |
|
|
AF |
|
|
220,972 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
180,390 |
|
|
|
53,919 |
|
|
|
(3,536 |
) |
|
|
|
|
230,773 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
|
30,925 |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
30,925 |
|
Sales and marketing |
|
|
80,036 |
|
|
|
11,676 |
|
|
|
3,990 |
|
|
S |
|
|
95,702 |
|
General and administrative |
|
|
54,651 |
|
|
|
36,567 |
|
|
|
(3,536 |
) |
|
AF |
|
|
87,682 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
165,612 |
|
|
|
48,243 |
|
|
|
454 |
|
|
|
|
|
214,309 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
|
14,778 |
|
|
|
5,676 |
|
|
|
(3,990) |
|
|
|
|
|
16,464 |
|
Interest and other income (expense), net |
|
|
(19,832 |
) |
|
|
(5,290 |
) |
|
|
3,873 |
|
|
T, AH |
|
|
(21,249 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) Income before income taxes |
|
|
(5,054 |
) |
|
|
386 |
|
|
|
(117 |
) |
|
|
|
|
(4,785 |
) |
Income tax (benefit) provision |
|
|
(880 |
) |
|
|
162 |
|
|
|
(66 |
) |
|
V |
|
|
(784 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income |
|
|
(4,174 |
) |
|
|
224 |
|
|
|
(51 |
) |
|
|
|
|
(4,001 |
) |
Preferred stock dividends |
|
|
— |
|
|
|
— |
|
|
|
(5,389 |
) |
|
W |
|
|
(5,389 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income available to common stockholders |
|
$ |
(4,174 |
) |
|
$ |
224 |
|
|
$ |
(5,440 |
) |
|
|
|
$ |
(9,390 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and
diluted |
|
$ |
(0.05 |
) |
|
|
|
|
|
|
|
|
|
|
|
$ |
(0.12 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average shares — basic and diluted |
|
|
77,244 |
|
|
|
|
|
|
|
|
|
|
|
|
|
77,244 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these unaudited pro forma condensed combined financial statements.
5
Inverness Medical Innovations, Inc. and Subsidiaries
Unaudited Pro Forma Condensed Combined Balance Sheet
As of March 31, 2008
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Completed Transaction |
|
|
|
|
|
|
|
|
Inverness |
|
|
Matria |
|
|
Matria |
|
|
|
|
Pro forma |
|
|
|
Historical |
|
|
Historical |
|
|
Adjustments |
|
|
|
|
Combined Company |
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and short term investments |
|
$ |
406,741 |
|
|
$ |
23,070 |
|
|
$ |
(287,999 |
) |
|
Y, Z, AG |
|
$ |
141,812 |
|
Accounts receivable, net of allowances |
|
|
198,549 |
|
|
|
46,591 |
|
|
|
— |
|
|
|
|
|
245,140 |
|
Inventory, net |
|
|
156,291 |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
156,291 |
|
Deferred tax assets |
|
|
18,264 |
|
|
|
15,308 |
|
|
|
— |
|
|
|
|
|
33,572 |
|
Prepaid expenses and other current assets |
|
|
73,094 |
|
|
|
10,803 |
|
|
|
(94 |
) |
|
U |
|
|
83,803 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
852,939 |
|
|
|
95,772 |
|
|
|
(288,093) |
|
|
|
|
|
660,618 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net |
|
|
273,039 |
|
|
|
40,027 |
|
|
|
(13,610 |
) |
|
S |
|
|
299,456 |
|
Goodwill, trademarks and other intangible assets, net |
|
|
3,704,123 |
|
|
|
541,855 |
|
|
|
624,293 |
|
|
S, U, AC, AE |
|
|
4,870,271 |
|
Deferred financing costs, net, and other assets |
|
|
131,442 |
|
|
|
9,791 |
|
|
|
(6,152 |
) |
|
U |
|
|
135,081 |
|
Deferred tax assets |
|
|
20,397 |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
20,397 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
4,981,940 |
|
|
$ |
687,445 |
|
|
$ |
316,438 |
|
|
|
|
$ |
5,985,823 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current portion of long-term debt |
|
$ |
20,848 |
|
|
$ |
43,475 |
|
|
$ |
(43,475 |
) |
|
Z |
|
$ |
20,848 |
|
Current portion of capital lease obligations |
|
|
828 |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
828 |
|
Accounts payable |
|
|
80,148 |
|
|
|
8,882 |
|
|
|
— |
|
|
|
|
|
89,030 |
|
Accrued expenses and other current liabilities |
|
|
199,324 |
|
|
|
28,830 |
|
|
|
28,440 |
|
|
AE |
|
|
256,594 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
301,148 |
|
|
|
81,187 |
|
|
|
(15,035) |
|
|
|
|
|
367,300 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt |
|
|
1,371,721 |
|
|
|
242,828 |
|
|
|
(100,828 |
) |
|
Z, AG |
|
|
1,513,721 |
|
Capital lease obligations |
|
|
1,142 |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
1,142 |
|
Deferred tax liabilities |
|
|
363,640 |
|
|
|
5,115 |
|
|
|
18,240 |
|
|
AC |
|
|
386,995 |
|
Other long-term liabilities |
|
|
332,098 |
|
|
|
6,682 |
|
|
|
— |
|
|
|
|
|
338,780 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total long-term liabilities |
|
|
2,068,601 |
|
|
|
254,625 |
|
|
|
(82,588) |
|
|
|
|
|
2,240,638 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock |
|
|
— |
|
|
|
— |
|
|
|
718,477 |
|
|
AB |
|
|
718,477 |
|
Common stock |
|
|
78 |
|
|
|
215 |
|
|
|
(215 |
) |
|
AA |
|
|
78 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional paid-in capital |
|
|
2,970,859 |
|
|
|
433,390 |
|
|
|
(386,173 |
) |
|
AA, AD |
|
|
3,018,076 |
|
Treasury stock |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
— |
|
Accumulated deficit |
|
|
(375,996 |
) |
|
|
(76,133 |
) |
|
|
76,133 |
|
|
AA |
|
|
(375,996 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive income |
|
|
17,250 |
|
|
|
(5,839 |
) |
|
|
5,839 |
|
|
AA |
|
|
17,250 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders’ equity |
|
|
2,612,191 |
|
|
|
351,633 |
|
|
|
414,061 |
|
|
|
|
|
3,377,885 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders’ equity |
|
$ |
4,981,940 |
|
|
$ |
687,445 |
|
|
$ |
316,438 |
|
|
|
|
$ |
5,985,823 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these unaudited pro forma condensed combined financial statements.
6
INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS
NOTE 1 — BASIS OF PRESENTATION, ACQUISITIONS AND JOINT VENTURE
The accompanying unaudited
pro forma condensed combined statements of operations for the year
ended December 31, 2007 and the three months ended March 31, 2008 includes the historical results
of Inverness and Matria, our previous acquisitions of Biosite, including the related financing
transactions, Cholestech and Instant, the elimination of the historical results of operations for
our consumer diagnostic products business and the impact of our new manufacturing agreement in
connection with the formation of our 50/50 joint venture with P&G and the November 2007 issuance of
common stock on our historical results of operations, as if these transactions had occurred on
January 1, 2007.
The accompanying unaudited pro forma condensed combined balance sheet assumes that the
acquisition of Matria occurred on March 31, 2008.
Acquisition of Matria
On May 9, 2008, we completed our acquisition of Matria, a national provider of health
enhancement, disease management and high-risk pregnancy management programs and services. The
preliminary aggregate purchase price was approximately $1.2 billion, which consisted of $143.7
million in cash, convertible preferred stock with a fair value of
approximately $718.5 million, $47.2
million of fair value associated with Inverness employee stock options exchanged as part of
the transaction, $28.4 million for the estimated settlement
of change in control obligations and $1.7 million in estimated
direct acquisition costs. In addition, we assumed and paid debt totaling
approximately $286.3 million which was repaid at closing.
On a preliminary basis, for purposes of the accompanying unaudited pro forma condensed
combined balance sheet, the purchase price was allocated based on the March 31, 2008 balance sheet
of Matria as follows (dollars in thousands):
|
|
|
|
|
Current assets |
|
$ |
95,772 |
|
Property and equipment |
|
|
26,417 |
|
Goodwill |
|
|
1,045,095 |
|
Intangible assets |
|
|
122,610 |
|
Other
non-current assets |
|
|
3,639 |
|
|
|
|
|
Total assets acquired |
|
|
1,293,533 |
|
|
|
|
|
Current portion of long-term debt |
|
|
43,475 |
|
Other current liabilities |
|
|
37,711 |
|
Long-term debt |
|
|
242,828 |
|
Other non-current liabilities |
|
|
30,037 |
|
|
|
|
|
Total liabilities assumed |
|
|
354,051 |
|
|
|
|
|
Net assets acquired |
|
|
939,482 |
|
Less: |
|
|
|
|
Acquisition
costs |
|
|
1,651 |
|
Fair value
of convertible preferred stock issued (1,796,194 shares) |
|
|
718,478 |
|
Fair value
of stock options exchanged (1,496,949 shares) |
|
|
47,217 |
|
Change in
control obligations |
|
|
28,440 |
|
|
|
|
|
Cash
consideration |
|
$ |
143,696 |
|
|
|
|
|
Immediately
subsequent to the acquisition, we repaid the outstanding principal
and accrued interest balances related to the debt we assumed in the
transaction, totaling approximately $286.3 million.
The
fair value of certain identifiable intangible assets are based upon
preliminary estimates and are subject to change which could be
material. Customer relationships are amortized based on patterns in which the economic benefits of
customer relationships are expected to be utilized. Other finite-lived identifiable assets are
amortized on a straight-line basis. The following are the preliminary intangible assets acquired and their
respective amortizable lives (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
Amount |
|
|
Amortizable Life |
|
Customer relationships |
|
$ |
93,100 |
|
|
10 years |
Core technology |
|
|
25,710 |
|
|
7 years |
Trademarks |
|
|
3,100 |
|
|
7 years |
Other intangible assets |
|
|
700 |
|
|
5 years |
|
|
|
|
|
|
|
|
Total intangible assets with finite lives |
|
$ |
122,610 |
|
|
|
|
|
|
|
|
|
|
|
|
|
7
Acquisition of Cholestech
On September 12, 2007, we acquired Cholestech, a publicly-traded leading provider of
diagnostic tools and information for immediate risk assessment and therapeutic monitoring of heart
disease and inflammatory disorders. The preliminary aggregate purchase price was $354.6 million,
which consisted of common stock with an aggregate fair value of
$329.8 million, $4.5 million in estimated
direct acquisition costs and $20.3 million of fair value
associated with the Inverness employee
stock options and restricted stock awards exchanged as part of the transaction.
A summary of the preliminary purchase price allocation for this acquisition is as follows
(dollars in thousands):
|
|
|
|
|
Current assets |
|
$ |
84,080 |
|
Property, plant and equipment |
|
|
6,643 |
|
Goodwill |
|
|
142,676 |
|
Intangible assets |
|
|
204,790 |
|
Other non-current assets |
|
|
378 |
|
|
|
|
|
Total assets acquired |
|
|
438,567 |
|
|
|
|
|
Current liabilities |
|
|
14,869 |
|
Non-current liabilities |
|
|
69,092 |
|
|
|
|
|
Total liabilities assumed |
|
|
83,961 |
|
|
|
|
|
Net assets acquired |
|
|
354,606 |
|
Less: |
|
|
|
|
Acquisition costs |
|
|
4,501 |
|
Fair value of common stock issued (6,840,361 shares) |
|
|
329,774 |
|
Fair value of stock options/awards exchanged (733,077 options/awards) |
|
|
20,331 |
|
|
|
|
|
Cash consideration |
|
$ |
— |
|
|
|
|
|
Customer relationships are amortized based on patterns in which the economic benefits of
customer relationships are expected to be utilized. Other finite-lived identifiable assets are
amortized on a straight-line basis. The following are the preliminary intangible assets acquired and their
respective amortizable lives (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
Amount |
|
|
Amortizable Life |
|
Customer relationships |
|
$ |
100,190 |
|
|
26 years |
Core technology |
|
|
83,810 |
|
|
13 years |
Trademarks |
|
|
20,590 |
|
|
10 years |
Internally-developed software |
|
|
200 |
|
|
7 years |
|
|
|
|
|
|
|
|
Total intangible assets with finite lives |
|
$ |
204,790 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition of Biosite
On June 29, 2007, we completed our acquisition of Biosite, a publicly-traded global medical
diagnostic company utilizing a biotechnology approach to create products for the diagnosis of
critical diseases and conditions. The preliminary aggregate purchase price was $1.8 billion, which
consisted of $1.6 billion in cash, $68.9 million in estimated direct acquisition costs and
$77.4 million of fair value associated with Inverness employee stock options exchanged as
part of the transaction. In connection with our acquisition of Biosite, we also recorded
$45.2 million of compensation expense associated with unvested stock options.
A summary of the preliminary purchase price allocation for this acquisition is as follows
(dollars in thousands):
|
|
|
|
|
Current assets |
|
$ |
325,260 |
|
Property, plant and equipment |
|
|
145,639 |
|
Goodwill |
|
|
787,049 |
|
Intangible assets |
|
|
665,280 |
|
In-process research and development |
|
|
169,000 |
|
Other non-current assets |
|
|
106,715 |
|
|
|
|
|
Total assets acquired |
|
|
2,198,943 |
|
|
|
|
|
Current liabilities |
|
|
127,698 |
|
8
|
|
|
|
|
Non-current liabilities |
|
|
281,943 |
|
|
|
|
|
Total liabilities assumed |
|
|
409,641 |
|
|
|
|
|
Net assets acquired |
|
|
1,789,302 |
|
Less: |
|
|
|
|
Acquisition costs |
|
|
68,875 |
|
Cash settlement of vested stock options |
|
|
51,503 |
|
Non-cash income tax benefits on stock options |
|
|
2,574 |
|
Fair value of stock options exchanged (753,863 options) |
|
|
25,879 |
|
|
|
|
|
Cash consideration |
|
$ |
1,640,471 |
|
|
|
|
|
As part of the purchase price allocation, IPR&D projects have been valued at $169.0 million.
These are projects that have not yet achieved technological feasibility as of the date of our
acquisition of Biosite.
Customer relationships are amortized based on patterns in which the economic benefits of
customer relationships are expected to be utilized. Other finite-lived identifiable assets are
amortized on a straight-line basis. The following are the preliminary assets acquired and their and
respective amortizable lives (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
Amount |
|
|
Amortizable Life |
|
Customer relationships |
|
$ |
348,100 |
|
|
1.5-22.5 years |
Core technology |
|
|
239,080 |
|
|
5-19.5 years |
Trademarks |
|
|
78,100 |
|
|
10.5 years |
|
|
|
|
|
|
|
|
Total intangible assets with finite lives |
|
$ |
665,280 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Joint Venture with P&G
On May 17, 2007, we consummated a transaction with P&G to form a 50/50 joint venture for the
development, manufacturing, marketing and sale of existing and to-be-developed consumer diagnostic
products, outside the cardiology, diabetes and oral care fields, whereby we contributed our
consumer diagnostic assets, other than our manufacturing and core intellectual property assets, to
the joint venture, and P&G acquired its interest in the joint venture for a cash payment to us of
approximately $325.0 million. Under the terms of the joint venture agreement, we will continue to
manufacture consumer diagnostic products and sell these products to the joint venture entity.
Additionally, in conjunction with the joint venture, we entered into a transition services
agreement with the joint venture entity, pursuant to which we will provide certain operational
support services to the joint venture for a period of four years, subject to renewal or earlier
termination under the terms of the agreement. Transitional services under such agreement will be
provided for varying periods. As the final scope and periods of such arrangements are variable and
not estimable, no profits from such services revenue have been assumed in the accompanying pro
forma results.
The historical financial results of the consumer business contributed to the joint venture
include all direct and allocable costs associated with the business. Certain other costs not
specifically attributable to the business, including corporate overhead expenses, interest income
and expense, and certain other non-operating costs are not included in the historical results of
the contributed consumer business.
Acquisition of Instant
On March 12, 2007, we acquired 75% of the issued and outstanding capital stock of Instant, a
privately-owned distributor of rapid drugs of abuse diagnostic products used in the workplace,
criminal justice and other testing markets. On December 28, 2007, we acquired the remaining 25%
interest, bringing the aggregate purchase price to $60.8 million, which consisted of $38.9 million
in cash, common stock with an aggregate fair value of
$21.5 million, and $0.3 million in estimated direct
acquisition costs. In addition, we assumed and paid debt of $4.9 million.
9
A summary of the preliminary purchase price allocation for this acquisition is as follows
(dollars in thousands):
|
|
|
|
|
Current assets |
|
$ |
9,012 |
|
Property, plant and equipment |
|
|
141 |
|
Goodwill |
|
|
43,708 |
|
Intangible assets |
|
|
28,520 |
|
|
|
|
|
Total assets acquired |
|
|
81,381 |
|
|
|
|
|
Current liabilities |
|
|
4,273 |
|
Non-current liabilities |
|
|
16,334 |
|
|
|
|
|
Total liabilities assumed |
|
|
20,607 |
|
|
|
|
|
Net assets acquired |
|
|
60,774 |
|
Less: |
|
|
|
|
Acquisition costs |
|
|
348 |
|
Fair value of common stock issued (463,399 shares) |
|
|
21,530 |
|
|
|
|
|
Cash consideration |
|
$ |
38,896 |
|
|
|
|
|
Immediately subsequent to the acquisition, we repaid the outstanding principal and accrued
interest balances related to the debt we assumed in the transaction, totaling approximately $4.9
million.
Customer relationships are amortized based on patterns in which the economic benefits of
customer relationships are expected to be utilized. Other finite-lived identifiable assets are
amortized on a straight-line basis. The following are the intangible assets acquired and their
respective amortizable lives (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
Amount |
|
|
Amortizable Life |
|
Trademarks |
|
$ |
3,170 |
|
|
5 years |
Customer relationships |
|
|
25,350 |
|
|
12 years |
|
|
|
|
|
|
|
|
Total intangible assets with finite lives |
|
$ |
28,520 |
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTE 2 — PRO FORMA ADJUSTMENTS AND ASSUMPTIONS
The following describes the pro forma adjustments made to the accompanying unaudited pro forma
condensed combined financial statements:
A. |
|
Represents elimination of sales and related cost of sales between Innovacon and Instant. |
|
B. |
|
Reflects the reversal of amortization expense recorded by Instant related to pre-acquisition intangible assets written off
in connection with the acquisition of Instant, net of amortization related to estimated intangibles acquired. |
|
C. |
|
Reflects the reversal of interest expense incurred by Instant related to pre-acquisition debt which was repaid by Inverness
in connection with the acquisition of Instant. |
|
D. |
|
Represents the recording of minority interest expense related to the 25% ownership in Instant not acquired by Inverness. |
|
E. |
|
Reflects elimination of the historical consumer diagnostic products business as a result of the consummation of our
transaction to form a 50/50 joint venture with P&G. |
|
F. |
|
Tax effect on the elimination of the historical consumer diagnostic products business as a result of the consummation of
our transaction to form a 50/50 joint venture with P&G. |
|
G. |
|
Reflects manufacturing revenue and related costs in conjunction with the manufacturing agreement entered into with the
joint venture entity. |
|
H. |
|
Represents our 50% investment income from the joint venture entity, which will be reported as equity earnings of
unconsolidated entities, net of taxes. |
10
I. |
|
Tax effect on the profit resulting from the formation of the joint venture and related disposition of the consumer
diagnostic products business. |
|
J. |
|
Reflects amortization expense of the estimated value assigned to customer relationships,
core technology and trademarks, as discussed in Note 1, acquired in connection with the acquisition of Biosite. The estimated fair values
of acquired intangible assets in connection with the acquisition of Biosite and their respective useful lives are as
follows: |
|
|
|
|
|
|
|
|
|
Fair Value |
|
|
Life |
|
|
(in thousands) |
|
|
|
Goodwill |
|
$ |
787,049 |
|
|
Indefinite |
Customer relationships |
|
|
348,100 |
|
|
1.5 - 22.5 years |
Core technology, patents and licenses |
|
|
239,080 |
|
|
5 - 19.5 years |
Trademarks |
|
|
78,100 |
|
|
10.5 years |
|
|
|
|
|
|
Total
intangible assets |
|
$ |
1,452,329 |
|
|
|
|
|
|
|
|
|
K. |
|
Represents an adjustment to reverse the effect of a charge recorded for in-process research
and development. This charge is directly related to the acquisition and non-recurring. |
|
L. |
|
Represents the reversal of $45.2 million of stock compensation and $22.1 million of
transaction costs directly related to the Biosite acquisition which were non-recurring
charges. |
|
M. |
|
Reflects interest expense incurred in connection with the acquisition of Biosite, including interest on the borrowings of
$900.0 million under the First Lien Credit Agreement, $73.2 million under the related revolving line of credit, $250.0
million under the Second Lien Credit Agreement and $150.0 million under the Convertible Notes, net of interest saved from
the repayment of the $150.0 million 8.75% senior subordinated notes. |
|
N. |
|
Reflects the reversal of the historical tax provisions of Biosite as a result of pro forma pretax losses incurred. |
|
O. |
|
Reflects amortization expense of the estimated value assigned to customer relationships, core technology, trademarks and
internally-developed software as discussed in Note 1, acquired in connection with the acquisition of Cholestech. The
estimated fair values of acquired intangible assets in connection with the acquisition of Cholestech and their respective
useful lives are as follows: |
|
|
|
|
|
|
|
|
|
Fair Value |
|
|
Life |
|
|
(in thousands) |
|
|
|
Goodwill |
|
$ |
142,676 |
|
|
Indefinite |
Customer relationships |
|
|
100,190 |
|
|
26 years |
Core technology |
|
|
83,810 |
|
|
13 years |
Trademarks |
|
|
20,590 |
|
|
10 years |
Internally-developed software |
|
|
200 |
|
|
7 years |
|
|
|
|
|
|
Total
intangible assets |
|
$ |
347,466 |
|
|
|
|
|
|
|
|
|
P. |
|
Reflects the reversal of $6.2 million of transaction costs directly related to the Cholestech
acquisition which were non-recurring. |
|
Q. |
|
Reflects the reversal of the historical tax provisions of Cholestech as a result of overall pro forma pretax losses incurred. |
|
R. |
|
Reflects shares issued in connection with the Instant and
Cholestech acquisitions. |
|
S. |
|
Represents the reclassification of the value of information systems core technology
assets historically recorded by Matria as property plant and equipment to acquired
intangible assets and reflects amortization expense of the estimated value assigned to customer
relationships, core technology, non-compete agreements and trademarks as discussed in Note
1, to be acquired in connection with the acquisition of Matria. The estimated fair
values of acquired intangible assets in connection with the acquisition of Matria and their
respective useful lives are as follows: |
|
|
|
|
|
|
|
|
|
Fair Value |
|
|
Life |
|
|
(in thousands) |
|
|
|
Goodwill |
|
$ |
1,045,095 |
|
|
Indefinite |
Customer relationships |
|
|
93,100 |
|
|
10 years |
Core technology |
|
|
25,710 |
|
|
7 years |
Trademarks |
|
|
3,100 |
|
|
7 years |
Non-compete
agreements |
|
|
700 |
|
|
5 years |
|
|
|
|
|
|
Total
intangible assets |
|
$ |
1,167,705 |
|
|
|
|
|
|
|
|
|
11
T. |
|
Reflects the reversal of interest expense incurred by Matria related to pre-acquisition debt which was repaid by Inverness
in connection with the acquisition of Matria. |
|
U. |
|
Reflects the write off of unamortized debt issuance costs and administration fees as of March 31, 2008 totaling $6.2
million in connection with the Matria pre-acquisition debt repaid by Inverness in connection with the acquisition of
Matria. The amount is non-recurring and directly related to the acquisition and as a result has only been recorded in the
pro forma balance sheet. |
|
V. |
|
Reflects the adjustment of the historical tax provisions of Matria as a result of pro forma pretax losses incurred. |
|
W. |
|
Reflects 3% dividend payment on Series B Convertible Preferred Stock issued in connection with the Matria acquisition. |
|
X. |
|
Represents adjustment to the historical number of basic weighted average Inverness shares outstanding giving effect to the
issuance of shares of Inverness common stock as part of the November 2007 public offering, as if such transaction occurred
on January 1, 2007. |
|
Y. |
|
Represents estimated cash consideration of $143.7 million paid to shareholders of Matria in connection with the acquisition
of Matria. |
|
Z. |
|
Reflects payment of Matria related pre-acquisition debt of $286.3 million paid by Inverness in connection with the
acquisition of Matria. |
|
AA. |
|
Reflects the reversal of historical equity accounts of Matria. |
|
AB. |
|
Reflects estimated value of convertible preferred stock issued to Matria shareholders in connection with the acquisition of
Matria. |
|
AC. |
|
Reflects deferred tax liability recorded on value assigned to
intangible assets acquired in the acquisition of Matria. |
|
AD. |
|
Reflects the estimated fair value of options exchanged in the acquisition of Matria. |
|
AE. |
|
Reflects the estimated change in control benefits associated
with the Matria acquisition to be paid. The amount is
non-recurring and directly related to the acquisition and as a result has only been recorded in the pro forma balance
sheet. |
|
AF. |
|
Reflects reclass of expenses between operating expenses and cost of goods sold to create
consistency in reporting with Inverness reported results. |
|
AG. |
|
Represents additional borrowings of $142.0 million under
the existing credit facility to finance a portion of the Matria
acquisition. |
|
AH. |
|
Represents interest expense incurred on the additional
borrowings of $142.0 million under the existing credit facility
used to finance a portion of the Matria acquisition. |
NOTE 3 — PRO FORMA NET LOSS PER COMMON SHARE
For the year ended December 31, 2007 and the three months ended March 31, 2008, the unaudited
pro forma combined company basic and diluted net loss per common share amounts are calculated based
on the weighted average number of Inverness common shares outstanding prior to the respective
acquisitions plus the adjustments to such shares giving effect to the Inverness common shares
issued or expected to be issued upon the closings of the respective acquisitions and the related
financings, as if such transactions had occurred on January 1, 2007. Common stock equivalents
resulting from the assumed exercise of Inverness’ stock options, warrants or preferred stock are
not included in the pro forma combined company diluted net loss per common share calculation for
the year ended December 31, 2007 and the three months ended March 31, 2008 because inclusion
thereof would be antidilutive.
12