NEW YORK (360Dx) – Alere said today that financial statements and other financial data it reported from 2013 through Q3 2016 “should not be relied upon because of misstatements” identified in late January.
In a Form 8K filing with the US Securities and Exchange Commission, Alere noted that it needs to restate finances because it failed to correctly apply US GAAP rules in timing revenue recognition. The missteps related to a transaction at its Japanese location, but primarily to transactions at its South Korean subsidiary, Standard Diagnostics.
Alere said in the SEC filing that it “recognized revenue prior to full satisfaction of all contractual criteria for title and risk of loss passing to the customer.”
The firm said that it anticipates that it will file “restated financial statements as soon as practicable.”
A former employee in the sales organization at Standard Diagnostics misrepresented or fabricated documents that were then used to validate revenue recognition and that “were intentionally concealed from the company’s senior leadership team and its external auditors,” Alere said, adding that other Standard Diagnostics employees were involved in the inappropriate conduct or acted to conceal it.
The firm noted that its restatement of financial results are expected to yield several changes to previously reported financial information.
Specifically, for the nine months ended Sept. 30, 2016, revenue will increase by $8 million and operating income will decrease by $1 million; for the 12 months ended Dec. 31, 2015, revenue will decline by $8 million and operating income will decline by $4 million; for the 12 months ended Dec. 31, 2014, revenue will increase by $2 million and operating income will remain unchanged; and for the 12 months ended Dec. 31, 2013, revenue will decline by $1 million and operating income will increase by $1 million.
For the three months ended March 31, 2015, revenue will decline by $3 million and operating income will decline by $1 million; for the three months ended June 30, 2015, revenue will increase by $1 million and operating income will remain unchanged; for the three months ended Sept. 30, 2015, revenue will increase by $1 million and operating incomes will increase by $1 million; and for the three months ended Dec. 31, 2015, revenue will decline by $6 million and operating income will decline by $4 million.
For the three months ended, March 31, 2016, revenue will increase by $9 million and operating income will increase by $4 million; for the three months ended June 30, 2016, revenue will decline by $1 million and operating income will increase by $2 million; and for the three months ended September 30, 2016, revenue will remain unchanged, and operating income will decline by $6 million.
The firm said that its review is expected to produce a revenue adjustment related to a transaction in Japan that resulted in the recognition of about $1 million in 2013 instead of 2012, and that the recognition of revenue “in this instance was in error and did not involve any inappropriate conduct by any person.”
Alere said that the misstatements will be reflected in the audited, restated financial statements included in its annual report on Form 10-K for the fiscal year ended Dec. 31, 2016.
It said that it is also working to complete its quarterly report on Form 10-Q for the quarter ended March 31, 2017, but that to complete the report, it may need to request additional time beyond the May 15, 2017 deadline.
Alere also said that it is continuing to take steps to implement remedial measures with respect to the revenue recognition material weaknesses.
Just last month, Alere received notice that it is not in compliance with the New York Stock Exchange's continued listing requirements, after the firm failed to file its annual report 10-K in a timely manner.
Last week, it settled a lawsuit, which alleged the company misled consumers by selling them inaccurate blood test monitoring systems used in the home.
And on Friday, Abbott and Alere said that they had agreed to amend the terms of their acquisition agreement and dismiss lawsuits they had filed against each other.
Alere’s shares were up more than 16 percent to $49.20 in morning trade on the Nasdaq.