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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
10-Q
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended December 31, 2019
OR
☐
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    0-14902
MERIDIAN BIOSCIENCE, INC.
Incorporated under the laws of Ohio
31-0888197
(I.R.S. Employer Identification No.)
3471 River Hills Drive
Cincinnati, Ohio 45244
(513)
271-3700
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading
Symbol(s)
 
Name of each exchange
on which registered
Common Stock, no par value
 
VIVO
 
NASDAQ Global Select Market
Indicate by a 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  
☒
    No  
☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation
S-T
(§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  
☒
    No  
☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated
filer, smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule
12b-2
of the Exchange Act.
Large accelerated filer
 
☒
 
Accelerated filer
 
☐
             
Non-accelerated
 filer
 
☐
 
Smaller reporting company
 
☐
             
Emerging growth company
 
☐
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  
☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule
12b-2
of the Exchange Act).    Yes  
☐
    No  
☒
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Class
 
Outstanding January 31, 2020
Common Stock, no par value
 
42,829,480
 
MERIDIAN BIOSCIENCE, INC. AND SUBSIDIARIES
TABLE OF CONTENTS TO QUARTERLY REPORT ON FORM
10-Q
             
 
 
Page(s)
 
             
PART I.
   
 
 
             
Item 1.
     
 
             
     
1
 
             
     
2
 
             
     
3
 
             
     
4-
5
 
             
     
6
 
             
     
7-
18
 
             
Item 2.
     
19-
24
 
             
Item 3.
     
24
 
             
Item 4.
     
24
 
             
PART II.
   
 
 
             
Item 1.
     
24
 
             
Item 1A.
     
24
 
             
Item 6.
     
26
 
             
 
   
26
 
 
 
 
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form
10-Q
contains forward-looking statements. The Private Securities Litigation Reform Act of 1995 provides a safe harbor from civil litigation for forward-looking statements accompanied by meaningful cautionary statements. Except for historical information, this report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, which may be identified by words such as “continues”, “estimates”, “anticipates”, “projects”, “plans”, “seeks”, “may”, “will”, “expects”, “intends”, “believes”, “signals”, “should”, “can” and similar expressions or the negative versions thereof and which also may be identified by their context. All statements that address operating performance or events or developments that Meridian expects or anticipates will occur in the future, including, but not limited to, statements relating to per share diluted earnings and revenue, are forward-looking statements. Such statements, whether expressed or implied, are based upon current expectations of the Company and speak only as of the date made. Specifically, Meridian’s forward-looking statements are, and will be, based on management’s then-current views and assumptions regarding future events and operating performance. Meridian assumes no obligation to publicly update or revise any forward-looking statements even if experience or future changes make it clear that any projected results expressed or implied therein will not be realized. These statements are subject to various risks, uncertainties and other factors that could cause actual results to differ materially, including, without limitation, the following: Meridian’s operating results, financial condition and continued growth depends, in part, on its ability to introduce into the marketplace enhancements of existing products or new products that incorporate technological advances, meet customer requirements and respond to products developed by Meridian’s competition, its ability to effectively sell such products and its ability to successfully expand and effectively manage increased sales and marketing operations. While Meridian has introduced a number of internally developed products and acquired products, there can be no assurance that it will be successful in the future in introducing such products on a timely basis or in protecting its intellectual property, and unexpected or costly manufacturing costs associated with its introduction of new products or acquired products could cause actual results to differ from expectations. Meridian relies on proprietary, patented and licensed technologies. As such, the Company’s ability to protect its intellectual property rights, as well as the potential for intellectual property litigation, would impact its results. Ongoing consolidations of reference laboratories and formation of multi-hospital alliances may cause adverse changes to pricing and distribution. Recessionary pressures on the economy and the markets in which our customers operate, as well as adverse trends in buying patterns from customers, can change expected results. Costs and difficulties in complying with laws and regulations, including those administered by the United States Food and Drug Administration, can result in unanticipated expenses and delays and interruptions to the sale of new and existing products, as can the uncertainty of regulatory approvals and the regulatory process (including the currently ongoing study and other FDA actions regarding the Company’s LeadCare products). The international scope of Meridian’s operations, including changes in the relative strength or weakness of the U.S. dollar and general economic conditions in foreign countries, can impact results and make them difficult to predict. One of Meridian’s growth strategies is the
acquisition of companies and product lines. There can be no assurance that additional acquisitions will be consummated or that, if consummated, will be successful and the acquired businesses will be successfully integrated into Meridian’s operations. There may be risks that acquisitions may disrupt operations and may pose potential difficulties in employee retention, and there may be additional risks with respect to Meridian’s ability to recognize the benefits of acquisitions, including potential synergies and cost savings or the failure of acquisitions to achieve their plans and objectives. Meridian cannot predict the outcome of goodwill impairment testing and the impact of possible goodwill impairments on Meridian’s earnings and financial results. Meridian cannot predict the possible impact of U.S. health care legislation enacted in 2010 – the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act – and any modification or repeal of any of the provisions thereof initiated by Congress or the presidential administration, and any similar initiatives in other countries on its results of operations. Efforts to reduce the U.S. federal deficit, breaches of Meridian’s information technology systems, trade wars, increased tariffs, and natural disasters and other events could have a materially adverse effect on Meridian’s results of operations and revenues. In the past, the Company has identified a material weakness in our internal control over financial reporting, which has been remediated, but the Company can make no assurances that a material weakness will not be identified in the future, which if identified and not properly corrected, could materially adversely affect our operations and result in material misstatements in our financial statements. In addition to the factors described in this paragraph, as well as those factors identified from time to time in our filings with the Securities and Exchange Commission, Part I, Item 1A Risk Factors of our most recent Annual Report on Form
10-K
contains a list and description of uncertainties, risks and other matters that may affect the Company. Readers should carefully review these forward-looking statements and risk factors, and not place undue reliance on our forward-looking statements.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
MERIDIAN BIOSCIENCE, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations (Unaudited)
(dollar and share amounts in thousands, except per share data)
 
Three Months Ended
 
 
December 31,
 
 
2019
   
2018
 
NET REVENUES
  $
 
47,421
    $
 
51,480
 
COST OF SALES
   
19,981
     
19,908
 
GROSS PROFIT
   
27,440
     
31,572
 
OPERATING EXPENSES
   
     
 
Research and development
   
4,824
     
3,967
 
Selling and marketing
   
6,684
     
7,563
 
General and administrative
   
8,756
     
8,902
 
Change in fair value of contingent consideration obligation
 
 
1,187
 
 
 
—
 
 
 
Restructuring costs
   
275
     
—  
 
Selected legal costs
   
320
     
589
 
Total operating expenses
   
22,046
     
21,021
 
OPERATING INCOME
   
5,394
     
10,551
 
 
 
 
 
 
 
 
 
 
OTHER INCOME (EXPENSE)
   
     
 
Interest income
   
111
     
149
 
Interest expense
   
(767
)    
(363
)
Other, net
   
(712
)     
139
 
Total other expense
   
(1,368
)    
(75
)
EARNINGS BEFORE INCOME TAXES
   
4,026
     
10,476
 
                 
INCOME TAX PROVISION
   
1,199
     
2,370
 
NET EARNINGS
  $
2,827
    $
8,106
 
BASIC EARNINGS PER COMMON SHARE
  $
0.07
    $
0.19
 
DILUTED EARNINGS PER COMMON SHARE
  $
0.07
    $
0.19
 
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - BASIC
   
42,789
     
42,446
 
EFFECT OF DILUTIVE STOCK OPTIONS AND RESTRICTED SHARE UNITS
   
149
     
459
 
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - DILUTED
   
42,938
     
42,905
 
ANTI-DILUTIVE SECURITIES:
   
     
 
Common share options and restricted share units
   
1,407
     
684
 
DIVIDENDS DECLARED PER COMMON SHARE
  $
—  
    $
0.125
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The accompanying notes are an integral part of these condensed consolidated financial statements.
 
Page 1
MERIDIAN BIOSCIENCE, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Income (Unaudited)
(dollar amounts in thousands)
 
Three Months Ended
 
 
December 31,
 
 
2019
 
 
2018
 
NET EARNINGS
  $
 
2,827
    $
 
8,106
 
Other comprehensive income (loss):
   
     
 
Foreign currency translation adjustment
   
2,768
     
(716
)
Unrealized loss on cash flow hedge
   
—
     
(577
)
Reclassification of gain on cash flow hedge
   
(77
)    
—  
 
Income taxes related to items of other comprehensive income
   
19
     
145
 
                 
Other comprehensive income (loss), net of tax
   
2,710
     
(1,148
)
                 
COMPREHENSIVE INCOME
  $
 5,537
    $
 6,958
 
                 
The accompanying notes are an integral part of these condensed consolidated financial statements.
 
Page 2
MERIDIAN BIOSCIENCE, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Unaudited)
(dollar amounts in thousands)
                 
Three Months Ended December 31,
 
2019
 
 
2018
 
CASH FLOWS FROM OPERATING ACTIVITIES
   
     
 
Net earnings
  $
2,827
    $
8,106
 
Non-cash
items included in net earnings:
   
     
 
Depreciation of property, plant and equipment
   
1,218
     
1,253
 
Amortization of intangible assets
   
1,722
     
829
 
Stock-based compensation
   
788
     
1,670
 
Deferred income taxes
   
419
     
96
 
Change in accrued contingent consideration
 
 
1,187
 
 
 
—
 
 
 
Change in the following:
   
     
 
Accounts receivable
   
550
     
317
 
Inventories
   
(3,526
)    
(37
)
Prepaid expenses and other current assets
   
1,434
     
539
 
Accounts payable and accrued expenses
   
(664
)    
(4,081
)
Income taxes payable
   
(464
)     
991
 
Other, net
   
(203
)    
(197
)
Net cash provided by operating activities
   
5,288
     
9,486
 
CASH FLOWS FROM INVESTING ACTIVITIES
   
     
 
Purchase of property, plant and equipment
   
(340
)    
(1,109
)
Net cash used for investing activities
   
(340
)    
(1,109
)
CASH FLOWS FROM FINANCING ACTIVITIES
   
     
 
Dividends paid
   
—
     
(5,301
)
Payments on term loan
   
—
     
(1,125
)
Proceeds from exercise of stock options
   
—
 
 
     
66
 
Net cash used for financing activities
   
—
 
 
     
(6,360
)
Effect of Exchange Rate Changes on Cash and Equivalents and Restricted Cash
   
1,212
     
(257
)
Net Increase in Cash and Equivalents and Restricted Cash
   
6,160
     
1,760
 
Cash and Equivalents and Restricted Cash at Beginning of Period
   
62,397
     
60,763
 
Cash and Equivalents and Restricted Cash at End of Period
  $
68,557
    $
62,523
 
                 
Cash and Equivalents
  $
68,557
    $
61,523
 
Restricted Cash
   
—  
     
1,000
 
Cash and Equivalents and Restricted Cash at End of Period
  $
 68,557
    $
 62,523
 
                 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The accompanying notes are an integral part of these condensed consolidated financial statements.
 
Page 3
MERIDIAN BIOSCIENCE, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(dollar amounts in thousands)
ASSETS
                 
 
December 31,
2019
(Unaudited)
 
 
September 30,
2019
 
CURRENT ASSETS
   
     
 
Cash and equivalents
  $
68,557
    $
62,397
 
Accounts receivable, less allowances of $527 and $537
,
respectively
   
35,318
     
35,608
 
Inventories
   
42,827
     
39,617
 
Prepaid expenses and other current assets
   
5,730
     
7,139
 
                 
Total current assets
   
152,432
     
144,761
 
                 
PROPERTY, PLANT AND EQUIPMENT, at Cost
   
     
 
Land
   
985
     
982
 
Buildings and improvements
   
31,928
     
31,904
 
Machinery, equipment and furniture
   
65,320
     
64,155
 
Construction in progress
   
943
     
522
 
                 
Subtotal
   
99,176
     
97,563
 
Less: accumulated depreciation and amortization
   
68,681
     
66,996
 
                 
Net property, plant and equipment
   
30,495
     
30,567
 
                 
OTHER ASSETS
   
     
 
Goodwill
   
89,958
     
89,241
 
Other intangible assets, net
   
58,586
     
60,243
 
Right-of-use assets
 
 
6,041
 
 
 
—
 
 
 
Deferred income taxes
   
132
     
156
 
Other assets
   
484
     
510
 
Total other assets
   
155,201
     
150,150
 
TOTAL ASSETS
  $
 
 
338,128
    $
325,478
 
                 
 
 
The accompanying notes are an integral part of these condensed consolidated financial statements.
Page 4
MERIDIAN BIOSCIENCE, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(dollar amounts in thousands)
LIABILITIES AND SHAREHOLDERS’ EQUITY
                 
 
December 31,
2019
(Unaudited)
 
 
September 30,
2019
 
CURRENT LIABILITIES
   
     
 
Accounts payable
  $
7,932
    $
7,238
 
Accrued employee compensation costs
   
6,401
     
7,938
 
Accrued interest expense
 
 
958
 
 
 
498
 
Current portion of acquisition consideration
 
 
13,653
 
 
 
—  
 
Current operating lease obligations
 
 
1,333
 
 
 
—  
 
Other accrued expenses
   
2,977
     
3,260
 
Income taxes payable
   
1,599
     
1,980
 
Total current liabilities
   
34,853
     
20,914
 
NON-CURRENT
LIABILITIES
   
     
 
Acquisition consideration
   
19,736
     
32,202
 
Post-employment benefits
   
2,484
     
2,500
 
Long-term operating lease obligations
 
 
4,480
 
 
 
—
 
 
 
Long-term debt
   
75,824
     
75,824
 
Long-term income taxes payable
   
549
     
549
 
Deferred income taxes
   
2,910
     
2,522
 
Total
non-current
liabilities
   
105,983
     
113,597
 
COMMITMENTS AND CONTINGENCIES
   
     
 
                 
SHAREHOLDERS’ EQUITY
   
     
 
Preferred stock, no par value; 1,000,000 shares authorized; none issued
   
—  
     
—  
 
Common shares, no par value; 71,000,000 shares authorized, 42,827,758 and 42,712,296 shares issued, respectively
   
—  
     
—  
 
Additional
paid-in
capital
   
133,622
     
132,834
 
Retained earnings
   
65,935
     
63,108
 
Accumulated other comprehensive loss
   
(2,265
)    
(4,975
)
Total shareholders’ equity
   
197,292
     
190,967
 
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
  $
338,128
    $
325,478
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The accompanying notes are an integral part of these condensed consolidated financial statements.
Page 5
MERIDIAN BIOSCIENCE, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Changes in Shareholders’ Equity (Unaudited)
(dollar and share amounts in thousands, except per share data)
                                         
 
Common
Shares
Issued
   
Additional
Paid-In

Capital
   
Retained
Earnings
   
Accumulated Other
Comprehensive
Income (Loss)
   
Total
Shareholders’
Equity
 
Balance at September 30, 2019
   
42,712
    $
132,834
    $
63,108
    $
(4,975
)   $
190,967
 
Conversion of restricted share units and
 
exercise of stock options
   
116
     
—
     
—  
     
—  
     
—
 
Stock compensation expense
   
—  
     
788
     
—  
     
—  
     
788
 
Net earnings
   
—  
     
—  
     
2,827
     
—  
     
2,827
 
Foreign currency translation adjustment
   
—  
     
—  
     
—  
     
2,768
     
2,768
 
Hedging activity, net of tax
   
—  
     
—  
     
—  
     
(58
)    
(58
)
Balance at December 31, 2019
   
42,828
    $
133,622
    $
65,935
    $
(2,265
)   $
197,292
 
Balance at September 30, 2018
   
42,400
    $
129,193
    $
49,602
    $
(3,377
)   $
175,418
 
Cash dividends paid - $0.125 per share
   
—  
     
—  
     
(5,301
)    
—  
     
(5,301
)
Conversion of restricted share units and
 
exercise of stock options
   
89
     
13
     
—  
     
—  
     
13
 
Stock compensation expense
   
—  
     
1,670
     
—  
     
—  
     
1,670
 
Net earnings
   
—  
     
—  
     
8,106
     
—  
     
8,106
 
Foreign currency translation adjustment
   
—  
     
—  
     
—  
     
(716
)    
(716
)
Hedging activity, net of tax
   
—  
     
—  
     
—  
     
(432
)    
(432
)
Adoption of ASU
2014-09
   
—  
     
—  
     
(116
)    
—  
     
(116
)
Balance at December 31, 2018
   
42,489
    $
130,876
    $
52,291
    $
(4,525
)   $
178,642
 
 
The accompanying notes are an integral part
of these
 
condensed consolidated financial statements.
Page 6
MERIDIAN BIOSCIENCE, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
Dollars in Thousands, Except Per Share Amounts
(Unaudited)
1.
Basis of Presentation
The interim condensed consolidated financial statements are unaudited and are prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information, and the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. In the opinion of Management, the interim financial statements include all normal adjustments and disclosures necessary to present fairly the Company’s financial position as of December 31, 2019, the results of its operations for the three
-
month periods ended December 31, 2019 and 2018, and its cash flows for the three
-
month periods ended December 31, 2019 and 2018. These statements should be read in conjunction with the consolidated financial statements and footnotes thereto included in the Company’s fiscal 2019 Annual Report on Form
10-K.
 Financial information as of September 30, 2019 has been derived from the Company’s audited consolidated financial statements. The results of operations for interim periods are not necessarily indicative of the results to be expected for the year.
2.
Significant Accounting Policies
A summary of the Company’s significant accounting policies is included in Note 1 to the audited consolidated financial statements of the Company’s fiscal 201
9
Annual Report on Form
10-K
and should be referred to for a description of the Company’s current significant accounting policies, with the exception of Revenue Recognition, which is set forth below.
(a) Revenue Recognition –
Revenue Disaggregation
The following tables present our revenues disaggregated by major geographic region, major product platform and disease state (Diagnostics only):
Revenue by Reportable Segment & Geographic Region
 
Three Months Ended December 31,
 
 
2019
 
 
2018
 
 
Inc (Dec)
 
Diagnostics-
   
     
     
 
Americas
  $
 
 
27,735
    $
 
 
30,423
     
(9
)%
EMEA
   
6,500
     
5,802
     
12
%
ROW
   
556
     
440
     
26
%
                         
Total Diagnostics
   
34,791
     
36,665
     
(5
)%
                         
Life Science-
   
     
     
 
Americas
   
4,019
     
4,521
     
(11
)%
EMEA
   
4,966
     
7,363
     
(33
)%
ROW
   
3,645
     
2,931
     
24
%
                         
Total Life Science
   
12,630
     
14,815
     
(15
)
%
                         
Consolidated
  $
47,421
    $
51,480
     
(8
)%
                         
 
Page 7
Revenue by Product Platform/Type
 
Three Months Ended December 31,
 
 
2019
 
 
2018
 
 
Inc (Dec)
 
Diagnostics-
   
     
     
 
Molecular assays
  $
6,887
    $
7,231
     
(5
)%
Immunoassays & blood chemistry assays
   
27,904
     
29,434
     
(5
)%
                         
Total Diagnostics
  $
 
 
34,791
    $
 
36,665
     
(5
)%
                         
Life Science-
   
     
     
 
Molecular reagents
  $
5,357
    $
6,615
     
(19
)%
Immunological reagents
   
7,273
     
8,200
     
(11
)%
                         
Total Life Science
  $
12,630
    $
14,815
     
(15
)
%
                         
Revenue by Disease State (Diagnostics only)
 
Three Months Ended December 31,
 
 
2019
 
 
2018
 
 
Inc (Dec)
 
Diagnostics-
   
     
     
 
Gastrointestinal assays
  $
 
 
16,046
    $
 
18,615
     
(14
)%
Respiratory illness assays
   
7,749
     
7,981
     
(3
)%
Blood chemistry assays
   
5,150
     
4,430
     
16
%
Other
   
5,846
     
5,639
     
4
%
                         
Total Diagnostics
  $
34,791
    $
36,665
     
(5
)%
                         
Revenue Policies
Product Sales
Revenue from contracts with customers is recognized in an amount that reflects the consideration we expect to receive in exchange for products when obligations under such contracts are satisfied. Revenue is generally recognized at a
point-in-time
when products are shipped and control has passed to the customer. Such contracts can include various combinations of products that are generally accounted for as distinct performance obligations.
Revenue is reduced in the period of sale for fees paid to distributors, which are inseparable from the distributor’s purchase of our product and for which we receive no goods or services in return. Revenue for the Diagnostics segment is reduced at the date of sale for product price adjustments payable to certain distributors under local contracts. Management estimates accruals for distributor price adjustments based on local contract terms, sales data provided by distributors, historical statistics, current trends, and other factors. Changes to the accruals are recorded in the period that they become known. Such accruals are netted against accounts receivable.
Shipping and handling costs incurred after control of the product is transferred to our customers are treated as fulfillment costs and not a separate performance obligation.
Our payment terms differ by jurisdiction and customer but payment is generally required in a term ranging from 30 to 90 days from the date of shipment or satisfaction of the performance obligation. Trade accounts receivable are recorded in the accompanying Consolidated Balance Sheets at invoiced amounts less provisions for distributor price adjustments under local contracts and doubtful accounts. The allowance for doubtful accounts represents our estimate of probable credit losses and is based on historical
write-off
experience and known conditions that would likely lead to
non-payment.
Customer invoices are charged off against the allowance when we believe it is probable that the invoices will not be paid.
 
Page 8
Practical Expedients and Exemptions
Revenue is recognized net of any taxes collected from customers (sales tax, value added tax, etc.), which are subsequently remitted to government authorities.
Our diagnostic assay
products are generally not subject to a customer right of return except for product recall events under the rules and regulations of the Food and Drug Administration or equivalent agencies outside the United States. In this circumstance, the costs to replace affected products would be accrued at the time a loss was probable and estimable.
We expense as incurred the costs to obtain contracts, as the amortization period would be one year or less. These costs, recorded within selling and marketing expense, include our internal sales force compensation programs and certain partner sales incentive programs, as we have determined that annual compensation is commensurate with annual selling activities.
Reagent Rental Arrangements
Certain of our Diagnostics segment’s product platforms require the use of instruments for the tests to be processed. In many cases, a customer is given use of the instrument provided they continue purchasing the associated tests, also referred to as “consumables” or “reagents”. If a customer stops purchasing the consumables, the instrument must be returned to us. Such arrangements are common practice in the diagnostics industry and are referred to as “Reagent Rentals”. Reagent Rentals may also include instrument related services such as a limited replacement warranty, training and installation. We concluded that the use of the instrument and related services (collectively known as “lease elements”) are not within the scope of Accounting Standards Update (“ASU”) No.
 2014-09
but rather ASU
2016-02,
Leases
. Accordingly, we first allocate the transaction price between the lease elements and the
non-lease
elements based on estimates of relative standalone selling prices. Lease revenue is derived solely from the sale of consumables and is therefore recognized monthly as earned, which coincides with the transfer of control of the
non-lease
elements.
For the portion of the transaction price allocated to the
non-lease
elements, which are principally the test kits, the related revenue is recognized at a
point-in-time
when control transfers.
Revenue allocated to the lease elements of these Reagent Rental arrangements totaled approximately $1,150 and $1,050 in the three months ended December 31, 2019 and 2018, respectively, and are included as part of net revenues in our Condensed Consolidated Statements of Operations.
(b)
Fair Value Measurements –
Assets and liabilities are recorded at fair value in accordance with Accounting Standards Codification (“ASC”)
820-10,
Fair Value Measurements and Disclosures
. ASC
820-10
defines fair value as the price that would be received to sell an asset or would be paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC
820-10
establishes a three-level hierarchy, which prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy level assigned to each asset and liability is based on the assessment of the transparency and reliability of the inputs used in the valuation of such items at the measurement date based on the lowest level of input that is significant to the fair value measurement. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).
Assets and liabilities measured and reported at fair value are classified and disclosed in one of the following categories based on inputs:
Level 1
Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities
Level 2
Quoted prices in markets that are not active and financial instruments for which all significant inputs are observable, either directly or indirectly
 
Page 9
Level 3
Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable
 
As described in
 Note
3
, we acquired the business of GenePOC in fiscal 2019. The fair value of the acquired accounts receivable and other current assets and the fair value of the assumed accounts payable and accrued expenses approximated their carrying value at the acquisition date. Inventories, property, plant and equipment, intangible assets and contingent consideration were valued using Level 3 inputs.
The following table provides information by level for financial assets and liabilities that are measured at fair value on a recurring basis, noting that there were no such items as of September 30, 2018:
                                 
 
 
 
 
 
Fair Value Measurements Using
Inputs Considered as
 
 
 
Carrying
Value
 
 
Level 1
 
 
Level 2
 
 
Level 3
 
Contingent consideration -
                               
As of December 31, 2019
  $
28,389
    $
—  
    $
—  
    $
28,389
 
As of September 30, 2019
  $
27,202
    $
—  
    $
—  
    $
27,202
 
In connection with the acquisition of the business of GenePOC and as 
described
 in Note 3, the Company is required to make contingent consideration payments of up to $70,000, comprised of
up to
$20,000 for achievement of product development milestones and up to $50,000 for achievement of certain financial targets. The fair value for the contingent payments recognized upon the acquisition as part of the purchase accounting opening balance sheet totaled $27,202. The fair value of the development milestone payments was estimated by discounting the probability-weighted contingent payments to present value. Assumptions used in the calculations
inclu
de
 probability of success, duration of the
earn-out
and discount rate. The fair value of the financial performance target payments was determined using a Monte Carlo simulation-based model. Assumptions used in these calculations
include
 expected revenue, probability of certain developments, expected expenses and discount rate. The ultimate settlement of contingent consideration could deviate from current estimates based on the actual results of these financial measures. The liability is considered to be a Level 3 financial liability that is
re-measured
each reporting
period, resulting in a value of $28,389 as of December 31, 2019.
(c)
Recent Accounting Pronouncements –
Pronouncements Adopted
On October 1, 2019, the Company adopted ASC 842,
Leases
. ASC 842 was issued to increase transparency and comparability among entities by recognizing
right-of-use
assets (“ROU assets”) and lease liabilities on the balance sheet and disclosing key information about lease arrangements. The Company elected to adopt ASC 842 effective October 1, 2019 using the modified retrospective transition method, which was applied to leases that existed or will be entered into on or after such date, with no adjustment made to prior comparative periods. The comparative periods presented herein reflect the former lease accounting guidance and the required comparative disclosures are included in Note 7,
“Leasing Arrangements”
. There was no cumulative-effect adjustment to beginning retained earnings as a result of adopting ASC 842, and additional operating lease ROU assets and obligations of approximately $5,880 were recognized as of October 1, 2019. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease calculated by discounting fixed lease payments over the lease term at the rate implicit in the lease or the Company’s incremental borrowing rate. Lease liabilities are increased by interest and reduced by payments each period, and the ROU asset is amortized over the lease term. The Company elected the package of practical expedients permitted under the new guidance to not reassess prior conclusions related to the identification, classification and accounting for initial direct costs for leases that commenced prior to October 1, 2019. Additionally, the elections were made to not use hindsight to determine lease terms and to not separate
non-lease
components within the lease portfolio. See Note 7 for further information. 
 
Page 10
(d)
Reclassifications –
Certain reclassifications have been made to the prior year financial statements to conform to the current year presentation. Such reclassifications had no impact on net earnings or shareholders’ equity.
3.
Acquisition of Business of GenePOC
On June 3, 2019, we acquired the business of GenePOC Inc. (“GenePOC”), a Quebec City, Quebec Province, Canada based provider of molecular diagnostic instruments and assays. The purchase agreement contemplates a maximum total consideration of up to $120,000, which
was
estimated at a total fair value of $77,526
 as of the acquisition date. Pursuant to the purchase agreement, the maximum consideration is comprised of the following (noting that the valuation values the contingent consideration identified in (ii) and (iii) below at an aggregate amount of
$27,202
 as of the acquisition date):
  (i) a $50,000 cash payment on June 3, 2019, subject to a working capital adjustment and a holdback of $5,000 to secure selling party’s performance of certain post-closing obligations;
  (ii) two $10,000 installments contingent upon the achievement of certain product development milestones if achieved by September 30, 2020 and March 31, 2021, respectively; and
  (iii) up to $50,000 of contingent consideration payable if certain financial performance targets are achieved during the twelve-month period ending September 30, 2022.
The total of the holdback identified in (i) above and the currently estimated value of the contingent consideration identified in (ii) and (iii) above are reflected within the accompanying Condensed Consolidated Balance Sheets as of December 31, 2019 as follows:
Current liabilities
 
- $13,653
Reflects anticipated settlement of the first product milestone payment and the holdback amounts in the first quarter of fiscal 2021.
Non-current liabilities
 
- $19,736
Reflects anticipated settlement of the second
product
milestone payment and the financial performance targets payments in the third quarter of fiscal 2021 and first quarter of fiscal 2023, respectively.
We utilized cash and equivalents on hand and proceeds drawn from our $125,000 revolving credit facility, to finance the acquisition. Proceeds from the credit facility were also utilized to repay and settle the outstanding principal and interest due on our term loan (see Note
9
). As a result of estimated total consideration exceeding the fair value of the net assets acquired, goodwill in the amount of $34,582 was recorded in connection with this acquisition, which will be deductible for U.S. tax purposes ratably over 15 years. The goodwill results largely from
our
ability to market and sell GenePOC’s technology and instrument platform through
our
 established customer base and distribution channels.
 
Page 11
Purchase Price Allocation
The recognized amounts of identifiable assets acquired and liabilities assumed in the acquisition of the GenePOC business are as follows:
 
June 3,
2019
 

(as initially
reported)
 
 
Measurement
Period
Adjustments
 
 
June 3,
2019
 

(as adjusted)
 
Fair value of assets acquired -
   
     
     
 
Accounts receivable
  $
58
    $
(1
)   $
57
 
Inventories
   
1,617
     
(106
)    
1,511
 
Other current assets
   
77
     
7
     
84
 
Property, plant and equipment
   
1,520
     
(96
)    
1,424
 
Goodwill
   
34,482
     
100
     
34,582
 
Other intangible assets (estimated useful life):
   
     
     
 
License agreement (10 years)
   
5,990
     
—  
     
5,990
 
Technology (15 years)
   
34,040
     
96
     
34,136
 
Government grant (1.33 years)
   
800
     
—  
     
800
 
                         
   
78,584
     
—  
     
78,584
 
Fair value of liabilities assumed -
   
     
     
 
Accounts payable and accrued expenses
   
1,082
     
(24
)    
1,058
 
                         
Total consideration paid (including contingent consideration originally estimated at
$27,202)
  $
  77,502
    $
24
    $
  77,526
 
                         
Pro Forma Information
The following table provides the unaudited consolidated pro forma results for the periods presented as if the business of GenePOC had been acquired as of the beginning of fiscal 2019. Pro forma results do not include the effect of any synergies anticipated to be achieved from the acquisition, and accordingly, are not necessarily indicative of the results that would have occurred if the acquisition had occurred on the date indicated or that may result in the future.
Three Months Ended December 31,
 
2019
 
 
2018
 
Net Revenues
  $
47,421
 
  $
51,552
 
Net Earnings
  $
2,827
 
  $
4,379
 
 
Page 12
These pro forma amounts have been calculated by including the results of GenePOC, and adjusting the combined results to give effect to the following, as if the acquisition had been consummated on October 1, 2018, together with the consequential tax effects thereon:
Three Months Ended December 31,
 
2019
 
 
2018
 
Adjustments to Net Revenues
   
     
 
GenePOC
pre-acquisition
revenues
  $
 —
 
  $
72
 
                 
Adjustments to Net Earnings
   
 
   
 
GenePOC
pre-acquisition
net loss
  $
—
    $
(3,203
)
Pro forma adjustments:
   
 
   
 
Expenses related to
non-continuing
personnel,
 
locations or activities
   
—
 
   
568
 
Incremental depreciation and amortization
   
—
     
(876
)
Incremental interest costs
   
—
     
(284
)
Tax effects of pro forma adjustments
   
—
     
68
 
                 
Total Adjustments to Net Earnings
  $
—
    $
(3,727
)
                 
4.
Restructuring
During the second quarter of fiscal 2018, the Company began implementation of a plan to realign its business structure into two business units, Diagnostics and Life Science, supported by a global corporate team. Since that time and as part of this plan, certain functions and locations within both business units have been streamlined, including: (i) the elimination of certain executive management and commercial sales positions; (ii) the closing of Life Science locations in Taunton, Massachusetts and Singapore, the operations of which were transferred to our locations in Memphis, Tennessee and London, England, respectively; and (iii) the transfer of certain functions performed in the Billerica, Massachusetts Diagnostics facility to the corporate headquarters in Cincinnati, Ohio. Further restructuring costs were incurred in fiscal 2019 and the first quarter of fiscal 2020, as refinements to each business unit’s cost structure continued to be made and the Company incurred severance payment obligations relating to the transition of its previous chief financial officer.
As a result of these activities, restructuring costs totaling $
275
 and $
2,839
were recorded during the three months ended December 31, 2019
 
and the fiscal year ended September 30, 2019, respectively.
A reconciliation of the changes in the liabilities associated with the restructuring charges from September 30, 2019 through December 31, 2019 is as follows:
 
Employee
Separation
and
Related
Costs
 
 
Lease and
Other
Contract
Termination
Fees
 
 
Other
 
 
Total
 
Balance at September 30, 2019
 
$
1,010
 
 
$
12
 
 
 
114
 
 
$
1,136
 
Restructuring charges
 
 
236
 
 
 
80
 
 
 
—
 
 
 
316
 
Reversal of prior period accruals
 
 
(41
)
 
 
—
 
 
 
—
 
 
 
(41
)
Payments
 
 
(1,020
)
 
 
(65
)
 
 
(114
)
 
 
(1,199
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2019
 
$
185
 
 
$
27
 
 
$
—
 
 
$
212
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Page 13
5.
Cash and Equivalents
Cash and equivalents include the following:
 
December 31,
2019
 
 
September 30,
2019
 
 
Institutional money market funds
  $
21,010
    $
20,913
 
Cash on hand, unrestricted
   
47,547
     
41,484
 
                 
Total
  $
68,557
    $
62,397
 
                 
6.
Inventories
Inventories are comprised of the following:
 
December 31,
2019
 
 
September 30,
2019
 
 
Raw materials
  $
8,549
    $
7,455
 
Work-in-process
   
12,209
     
11,504
 
Finished goods - instruments
   
688
     
935
 
Finished goods - kits and reagents
   
21,381
     
19,723
 
                 
Total
  $
42,827
    $
39,617
 
                 
 
7.
Leasing Arrangements
The Company is party to a number of operating leases, the majority of which are related to office, warehouse and manufacturing space. The related operating lease assets and obligations are reflected within 
right-of-us
e
 assets, current operating lease obligations and long-term
 operating
lease obligations on the Condensed Consolidated Balance Sheet. Lease expense for these leases is recognized on a straight-line basis over the lease term, with variable lease payments recognized in the period those payments are incurred. Our Condensed Consolidated Statements of Operations for the three months ended December 31, 2019 reflect lease
costs
for these operating leases of $129 and $267 within cost of sales and operating expenses, respectively.
In addition, the Company has periodically entered into other short-term operating leases, generally with an initial term of twelve months or less. These leases are not recorded on the balance sheet and the related lease expense is immaterial for the three months ended December 31, 2019.
The Company often has options to renew lease terms, with the exercise of lease renewal options generally at the Company’s sole discretion. In addition, certain lease arrangements may be terminated prior to their original expiration date at our discretion. We evaluate renewal and termination options at the lease commencement date to determine if we are reasonably certain to exercise the option on the basis of economic factors. The weighted average remaining lease term for our operating
lease
s
as of December 31, 2019 was
4.7 years
.
The discount rate implicit within our leases is generally not determinable and, therefore, the Company determines the discount rate on its incremental borrowing rate. The weighted average discount rate used to measure our operating leases as of December 31, 2019 was
3.7%
.
 
Page 14
Supplemental cash flow information related to the Company’s operating leases are as follows:
Three Months Ended December 31,
 
2019
 
Cash paid for amounts included in the measurement of lease liabilities:
 
 
 
Operating cash flows from operating leases
 
$
 
387
 
 
 
 
 
 
 
Maturities of lease liabilities by fiscal year for the Company’s operating lease liabilities were as follows as of December 31, 2019:
 
December 31,
2019
 
Remainder of 2020
 
$
  1,132
 
2021
 
 
1,456
 
2022
 
 
1,310
 
2023
 
 
967
 
2024
 
 
712
 
Thereafter
 
 
616
 
 
 
 
 
 
Total lease payments
 
 
6,193
 
Less amount of lease payment representing interest
 
 
(380
)
 
 
 
 
 
Total present value of lease payments
 
$
  5,813
 
 
 
 
 
 
As of September 30, 2019, future minimum lease payments under noncancelable operating leases were as follows:
 
 
September 30,
2019
 
2020
 
$
  1,528
 
2021
 
 
1,451
 
2022
 
 
1,293
 
2023
 
 
967
 
2024
 
 
712
 
Thereafter
 
 
616
 
 
 
 
 
 
Total
 
$
  6,567
 
  
 
Page 15 
8.
Intangible Assets
A summary of our acquired intangible assets subject to amortization is as follows:
 
December 31, 2019
   
September 30, 2019
 
 
Gross
Carrying
Value
 
 
Accumulated
Amortization
 
 
Gross
Carrying
Value
 
 
Accumulated
Amortization
 
Manufacturing technologies, core products and cell lines
  $
56,273
    $
16,057
    $
  56,193
    $
  15,096
 
Trade names, licenses and patents
   
14,596
     
6,566
     
14,494
     
6,094
 
Customer lists, customer relationships and supply agreements
   
24,500
     
14,626
     
24,274
     
14,110
 
Government grants
   
828
     
362
     
814
     
232
 
                                 
Total
  $
  96,197
    $
37,611
    $
95,775
    $
35,532
 
                                 
The actual aggregate amortization expense for these intangible assets was $1,722 and $829 for the three months ended December 31, 2019 and 2018, respectively. The estimated aggregate amortization expense for these intangible assets for each of the fiscal years through fiscal 2025 is as follows: remainder of fiscal 2020 – $5,038, fiscal 2021 – $5,491, fiscal 2022 – $5,113, fiscal 2023 – $5,100, fiscal 2024 – $5,096, and fiscal 2025 – $5,096.
9.
Bank Credit Arrangements
In anticipation of the acquisition of the business of GenePOC (see Note 3), on May 24, 2019 the Company entered into a credit facility agreement with a commercial bank. The credit facility, which expires in May 2024, makes available to the Company a revolving credit facility in an aggregate principal amount not to exceed $125,000, with outstanding principal amounts bearing interest at a fluctuating rate tied to, at the Company’s option, either the federal funds rate or LIBOR, resulting in an effective interest rate of 3.96% on the credit facility during the three months ended December 31, 2019.
To
 date,
two draws have been made on the credit facility, resulting in an outstanding principal balance of $75,824. The proceeds from these draws were used to: (i) repay and settle the outstanding principal and interest due on our previously-existing $60,000 five-year term loan; and (ii) along with cash
on-hand,
fund the GenePOC acquisition closing payment. In light of the interest being determined on a variable rate basis, the fair value of the borrowings under the credit facility at December 31, 2019 approximates the current carrying value reflected in the accompanying Condensed Consolidated Balance Sheet.
The revolving credit facility is collateralized by the business assets of the Company’s U.S. subsidiaries and requires compliance with financial covenants that limit the amount of debt obligations and require a minimum level of coverage of fixed charges, as defined in the credit facility agreement. As of December 31, 2019, the Company is in compliance with all covenants.
In connection with the term loan repayment, the Company also settled the interest rate swap that had been entered into to limit exposure to volatility in the term loan’s LIBOR interest rate. At the time of settlement, the Company received a cash payment in an amount equal to the $563 then-current fair value of the interest rate swap. Accordingly, there is no balance for the interest rate swap reflected
within assets or liabilities within
the accompanying Consolidated Balance Sheet
s
as of December 31, 2019 or September 30, 2019. The fair value of the swap that had been reflected within a separate component of other comprehensive income in the accompanying Consolidated Statements of Comprehensive Income, as a result of the interest rate swap having been designated as an effective cash flow hedge, is being released ratably into income through March 31, 2021, the interest rate swap’s original term. The interest rate swap balance reflected within accumulated other comprehensive income at December 31, 2019 and September 30, 2019 totaled $384 and $461, respectively.
 
Page 16
 
 
10
.
Reportable Segment and Major Customers Information
Meridian was formed in 1976 and functions as a fully-integrated life science company with principal businesses in: (i) the development, manufacture, sale and distribution of diagnostic test kits, primarily for certain gastrointestinal and respiratory infectious diseases, and elevated blood lead levels; and (ii) the manufacture and distribution of bulk antigens, antibodies, PCR/qPCR reagents, nucleotides, and bioresearch reagents used by researchers and other diagnostic manufacturers.
Our reportable segments are Diagnostics and Life Science. The Diagnostics segment consists of manufacturing operations for infectious disease products in Cincinnati, Ohio and Quebec City, Canada, manufacturing operations for blood chemistry products in Billerica, Massachusetts (near Boston), and the sale and distribution of diagnostics products domestically and abroad. This segment’s products are used by hospitals, reference labs and physician offices to detect infectious diseases and elevated lead levels in blood.
The Life Science segment consists of manufacturing operations in Memphis, Tennessee; Boca Raton, Florida; London, England; and Luckenwalde, Germany, and the sale and distribution of bulk antigens, antibodies, PCR/qPCR reagents, nucleotides, and bioresearch reagents domestically and abroad, including a sales and business development facility in Beijing, China to further pursue revenue opportunities in Asia. This segment’s products are used by manufacturers and researchers in a variety of applications (e.g.,
in-vitro
medical device manufacturing, microRNA detection,
next-gen
sequencing, plant genotyping, and mutation detection, among others).
Amounts due from two Diagnostics distributor customers accounted for 21% and 13% of consolidated accounts receivable at December 31, 2019 and September 30, 2019, respectively. Revenues from these two distributor customers accounted for 28% and 34% of the Diagnostics segment third-party revenues during the three months ended December 31, 2019 and 2018, respectively, and represented 20% and 24% of consolidated revenues for the fiscal 2020 and 2019 first quarters, respectively.
Within our Life Science segment, two
IVD
manufacturing customers accounted for 15% and 28% of the segment’s third-party revenues during the three months ended December 31, 2019 and 2018, respectively.
Segment information for the interim periods is as follows:
 
Diagnostics
 
 
Life Science
 
 
Corporate
(1)
 
 
Eliminations
(2)
 
 
Total
 
Three Months Ended December 31, 2019
 
Net revenues -
   
     
     
     
     
 
Third-
p
arty
  $
34,791
    $
12,630
    $
—  
    $
—  
    $
47,421
 
Inter-segment
   
97
     
65
     
—  
     
(162
)    
—  
 
Operating income
   
4,408
     
3,061
     
(2,087
)    
12
     
5,394
 
Goodwill (December 31, 2019)
   
70,415
     
19,543
     
—  
     
—  
     
89,958
 
Other intangible assets, net (December 31, 2019)
   
58,277
     
309
     
—  
     
—  
     
58,586
 
Total assets (December 31, 2019)
   
266,514
     
72,081
     
—  
     
(467
)    
338,128
 
                                         
Three Months Ended December 31, 2018
 
Net revenues -
   
     
     
     
     
 
Third-
p
arty
  $
36,665
    $
14,815
    $
—  
    $
—  
    $
51,480
 
Inter-segment
   
163
     
176
     
—  
     
(339
)    
—  
 
Operating income
   
8,786
     
5,129
     
(3,391
)    
27
     
10,551
 
Goodwill (September 30, 2019)
   
70,395
     
18,846
     
—  
     
—  
     
89,241
 
Other intangible assets, net (September 30, 2019)
   
59,807
     
436
     
—  
     
—  
     
60,243
 
Total assets (September 30, 2019)
   
255,169
     
70,392
     
—  
     
(83
)    
325,478
 
(1)
Includes Restructuring
Cost
s
and Selected Legal Costs of $370 and $589 in the quarters ended December 31, 2019 and 2018, respectively.
(2)
Eliminations consist of inter-segment transactions.
Page 17
A reconciliation of segment operating income to consolidated earnings before income taxes for the three months ended December 31, 2019 and 2018 is as follows:
Three Months Ended December 31,
 
2019
 
 
2018
 
Segment operating income
 
$
7,481
 
 
$
13,942
 
Corporate expenses
 
 
(2,087
)
 
 
(3,391
)
Interest income
 
 
111
 
 
 
149
 
Interest expense
 
 
(767
)
 
 
(363
)
Other, net
 
 
(712
)
 
 
139
 
 
 
 
 
 
 
 
 
 
Consolidated earnings before income taxes
 
$
4,026
 
 
$
 
10,476
 
 
 
 
 
 
 
 
 
 
Transactions between segments are accounted for at established intercompany prices for internal and management purposes, with all intercompany amounts eliminated in consolidation.
1
1
.
Litigation Matters
On November 15, 2017, Barbara Forman filed a class action complaint in the United States District Court for the Southern District of Ohio (the Court) naming Meridian, its former Chief Executive Officer and former Chief Financial Officer (in their capacities as such) as defendants. An amended complaint was filed on April 16, 2018 and the Company believes the essential elements of the amended complaint are the same. On July 9, 2019, a settlement was reached with the plaintiff that provides for a $2,100
 
payment by the Company. On October 9, 2019, the Court granted a motion for preliminary approval of the settlement, and on November 7, 2019, the settlement amount was paid from the Company’s
d
irectors and
o
fficers insurance policy into a plaintiff escrow account. The Court has scheduled a final approval hearing for March 2020. Because the settlement was a covered claim under our
d
irectors and
o
fficers insurance policy, no provision for litigation losses has been included within either of the accompanying Condensed Consolidated Statements of Operations for the three months ended December 31, 2019 or December 31, 2018.
On December 6, 2017, Michael Edelson filed a derivative complaint in the United States District Court for the Southern District of Ohio naming Meridian, its former Chief Executive Officer, former Chief Financial Officer and certain members of Meridian’s Board of Directors and Audit Committee (in their capacities as such) as defendants. The complaint alleges that Meridian made false and misleading representations concerning certain of Magellan’s lead test systems at or around the time of Meridian’s acquisition of Magellan and subsequent thereto, and the complaint alleges that certain members of the Board of Directors and Audit Committee breached their fiduciary duties in their oversight of the Company’s public disclosures and corporate governance matters. The complaint sought compensatory damages, equitable relief relating to corporate governance matters and attorneys’ fees. On October 9, 2019,
the
Court granted plaintiff’s motion for voluntary dismissal. Accordingly, no provision for litigation losses has been included within either of the accompanying Condensed Consolidated Statements of Operations for the three months ended December 31, 2019 or December 31, 2018.
 
On April 17, 2018,
Meridian’s wholly-owned subsidiary, Magellan Diagnostics, Inc. received
a subpoena from the United States Department of Justice (“DOJ”) regarding its LeadCare product line. The subpoena outlines documents to be produced, and the Company is cooperating with the DOJ in this matter. The Company maintains rigorous policies and procedures to promote compliance with applicable regulatory agencies and requirements, and is working with the DOJ to promptly respond to the subpoena, including responding to additional information requests. The Company has executed tolling agreements to extend the statute of limitations. The Company cannot predict when the investigation will be resolved, the outcome of the investigation, or its potential impact on the Company. Approximately $
280
and $540
of expense for attorneys’ fees related to this matter is included within the accompanying Condensed Consolidated Statements of Operations for the three months ended December 31
, 2019
and December 31
, 2018
, respectively.
 
Page 18
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Refer to “Forward-Looking Statements” following the Table of Contents in front of this Form
10-Q.
In the discussion that follows, all dollar amounts are in thousands (both tables and text), except per share data.
The purpose of Management’s Discussion and Analysis is to provide an understanding of Meridian’s financial condition, changes in financial condition and results of operations. This discussion should be read in conjunction with the financial statements and notes.
RESULTS OF OPERATIONS
Three Months Ended December 31, 2019
Net earnings for the first quarter of fiscal 2020 decreased 65% to $2,827, or $0.07 per diluted share, from net earnings for the first quarter of fiscal 2019 of $8,106, or $0.19 per diluted share. The level of net earnings in the first quarter of fiscal 2020 was affected by several factors, including: (i) lower overall revenues in both the Diagnostics and Life Science operating segments; (ii) contractual pricing declines in certain gastrointestinal products within the Diagnostics segment; (iii) higher research and development spending in the Diagnostics segment ($1,030
pre-tax);
(iv) purchase accounting amortization related to the acquisition of the GenePOC business in June 2019 ($855
pre-tax);
(v) an increase in the fair value of the earnout obligation for the acquisition of the GenePOC business ($1,187
pre-tax);
and (vi) higher interest costs under our revolving credit facility. Consolidated revenues for the first quarter of fiscal 2020 totaled $47,421, a decrease of 8% compared to the first quarter of fiscal 2019 (7% decrease on a constant-currency basis).
Revenues for the Diagnostics segment for the first quarter of fiscal 2020 decreased 5% compared to the first quarter of fiscal 2019 (also 5% on a constant-currency basis), comprised of a 5% decrease in molecular assay products and a 5% decrease in immunoassay and blood chemistry assay products. Customer account losses in our molecular assay products slowed dramatically during the quarter, with our Revogene system install base reaching 114 systems. Revenues for our Life Science segment decreased 15% during the first quarter of fiscal 2020 compared to the first quarter of fiscal 2019 largely due to order patterns and inventory management with our top IVD manufacturing customers. On a constant-currency basis, revenues for the Life Science segment decreased 14%.
Lead Testing Matters
On June 29, 2017, the United States Food and Drug Administration (“FDA”), in connection with its Safety Notification related to Magellan’s LeadCare testing systems for venous blood samples, issued to Magellan its Form 483, Inspectional Observations. The FDA issued a related Warning Letter on October 23, 2017. On April 17, 2018, Magellan received a subpoena from the United States Department of Justice (“DOJ”) regarding its LeadCare product line. The subpoena outlines documents to be produced, and we continue to cooperate with the DOJ in this matter, including responding to additional information requests. We have executed tolling agreements to extend the statute of limitations.
Magellan submitted 510(k) applications in December 2018, seeking to reinstate venous blood sample-types for its LeadCare
®
II, LeadCare
®
Plus
™
and LeadCare Ultra
®
testing systems. In the second fiscal quarter of 2019 the FDA informed Magellan that each of these 510(k) applications had been put on Additional Information hold. On July 15, 2019, we provided responses to the FDA’s requests for Additional Information. These 510(k) applications have since expired and are no longer under FDA review. Further, while Magellan’s LeadCare testing systems remain cleared for marketing by the FDA and permitted for use with capillary blood samples, the FDA advised that it has commissioned a third-party study of Magellan’s LeadCare testing systems using both venous and capillary blood samples. According to the FDA, the results of the field study will be used in conjunction with other information, including review by an FDA Advisory Committee, to determine whether further action by the FDA or the Centers for Disease Control and Prevention is necessary to protect the public health. Meridian intends to fully cooperate with the FDA as the third-party study and Advisory Committee review are completed.
 
Page 19
During October 2019, the FDA performed a
follow-up
inspection of Magellan’s manufacturing facility. The FDA issued five Form FDA 483 observations. In November 2019, we submitted to the FDA our written responses to the five Form FDA 483 observations and have implemented a remediation plan that we are actively working. In January 2020, we submitted to the FDA additional written responses to the Form FDA 483 observations. While we remain committed to strengthening Magellan’s quality system and ensuring that all aspects of the system are in full compliance, we can provide no assurance that our remediation efforts will be successful to a degree acceptable by the FDA.
In the course of remediation, we may encounter additional matters that warrant notifications to the FDA and/or customers regarding the use of our products. At this time, we do not believe that any such notifications would impact the ability to use the LeadCare systems with capillary blood samples. While we remain confident in the performance of the Magellan LeadCare testing systems using capillary samples, we do not expect that the FDA will reinstate our venous blood claims. We can provide no assurance that the ongoing investigation and study of the DOJ and FDA, respectively, or future exercise of their respective enforcement, regulatory, discretionary or other powers will not result in findings or alleged violations of federal laws that could lead to enforcement actions, proceedings or litigation and the imposition of damages, fines, penalties, restitution, other monetary liabilities, sanctions, injunctions, settlements or changes to our business practices, product offerings or operations that could have a material adverse effect on our business, financial condition or results of operations; or eliminate altogether our ability to operate our lead testing business, or on terms substantially similar to those on which we currently operate.
REVENUE OVERVIEW
Below are analyses of the Company’s revenue, provided for each of the following:
  - By Reportable Segment & Geographic Region
 
 
 
 
 
  - By Product Platform/Type
 
 
 
 
 
Revenue Overview- By Reportable Segment & Geographic Region
Our reportable segments are Diagnostics and Life Science. The Diagnostics segment consists of manufacturing operations for infectious disease diagnostic products in Cincinnati, Ohio and Quebec City, Canada, and manufacturing operations for blood chemistry products in Billerica, Massachusetts (near Boston). These diagnostic test products are sold and distributed in the countries comprising North and Latin America (the “Americas”); Europe, Middle East and Africa (“EMEA”); and other countries outside of the Americas and EMEA (rest of the world, or “ROW”). The Life Science segment consists of manufacturing operations in Memphis, Tennessee; Boca Raton, Florida; London, England; and Luckenwalde, Germany, and the sale and distribution of bulk antigens, antibodies, PCR/qPCR reagents, nucleotides, and bioresearch reagents domestically and abroad, including a sales and business development facility, with outsourced distribution capabilities, in Beijing, China to further pursue growing revenue opportunities in Asia.
Revenues for the Diagnostics segment, in the normal course of business, may be affected from quarter to quarter by buying patterns of major distributors, seasonality and the severity of seasonal diseases and outbreaks, and foreign currency exchange rates. Revenues for the Life Science segment, in the normal course of business, may be affected from quarter to quarter by buying patterns of major IVD manufacturing customers and foreign currency exchange rates.
See the “Revenue Disaggregation” section of Note 2,
“Significant Accounting Policies”
of the accompanying Condensed Consolidated Financial Statements for detailed revenue disaggregation information.
Following is a discussion of the revenues generated by these product platforms/types and/or disease states:
Diagnostics Products
The acquisition of the Revogene molecular diagnostics platform, the development of the Curian immunoassay platform, and the expansion of the related assay-menu for each of these platforms are important steps in addressing competitive pressures in our gastrointestinal and respiratory illness assay families. We are actively converting our existing Alethia install base to the Revogene platform for
C. difficile
, Group A
Streptococcus
and Group B
Streptococcus
assays. Our current install base for the Revogene system has reached 114. For the Curian immunoassay diagnostics platform, we submitted a 510(k) for the instrument and first assay, a test for
H. pylori
antigen in stool, in September 2019, which we expect to be cleared for marketing in the first half of calendar 2020. We believe the advantages of the Curian analyzer will help protect our existing rapid test accounts.
 
Page 20
Gastrointestinal Assays
During the first quarter of fiscal 2020, revenues from our gastrointestinal products, which include tests for
C. difficile
,
H. pylori
and certain foodborne pathogens, among others, totaled $16,046. This represents a 14% decrease from the first quarter of fiscal 2019. This decrease results in large part from the pricing and volume pressures we continue to face within this product category. We have executed multi-year supply agreements with our two largest reference laboratory customers for
H. pylori
tests to secure volume, albeit at lower selling prices. We continue to believe there are ongoing benefits to be realized from: (i) the health and economic benefits of a test and treat strategy; (ii) changes in policies that discourage the use of traditional serology methods and promote the utilization of active infection testing methods; and (iii) physician behavior movement away from serology-based testing.
Contributing to the competitive pressures being faced in this product category, the patents for our
H. pylori
products, owned by us, expired in May 2016 in the U.S. and in May 2017 in countries outside the U.S. We expect competition with respect to our
H. pylori
products to continue to increase, and such competition may have an adverse impact on our selling prices for these products, or our ability to retain business at prices acceptable to us, and consequently, adversely affect our future results of operations and liquidity, including revenues and gross profit. Our product development pipeline includes new product initiatives for the detection of
H. pylori
, and early in the first quarter of fiscal 2019 we entered into a strategic collaboration with DiaSorin to sell
H. pylori
tests. We are unable to provide assurances that we will be successful with any strategy or that any strategy will prevent an adverse effect on our future results of operations and liquidity, including revenues and gross profit.
Respiratory Illness Assays
Including tests for influenza, RSV, Group A Strep, Pertussis, and Mycoplasma pneumonia, among others, our respiratory illness product revenues decreased 3% in the fiscal 2020 first quarter, primarily related to lower sales volumes.
Blood Chemistry Assays
Revenues from our sale of products to test for elevated levels of lead in blood increased 16% during the first quarter of fiscal 2020 to a total of $5,150.
Life Science Products
During the first quarter of fiscal 2020, revenues from our Life Science segment decreased 15%, with revenues from molecular reagent sales decreasing 19% from the comparable fiscal 2019 quarter and revenues from immunological reagent sales decreasing 11%. Our Life Science segment’s revenue performance was slightly impacted by the movement in currency exchange rates since the first quarter of fiscal 2019, with revenues decreasing 14% on a constant-currency basis over the first quarter of fiscal 2019. The decline in revenues was largely attributable to order patterns and inventory management with our top IVD manufacturing customers. Revenue for sales into China totaled approximately $1,800, increasing 70% over the first quarter of fiscal 2019. While not reflected within the fiscal 2020 first quarter results, during January 2020, our Life Science segment began shipping molecular reagents to IVD manufacturing customers in China to help health care systems in that country combat the Coronavirus outbreak.
Significant Customers
Revenue concentrations related to certain customers within our Diagnostics and Life Science segments are set forth in Note 10 of the accompanying Condensed Consolidated Financial Statements.
Gross Profit
                         
 
Three Months Ended December 31,
 
 
2019
 
 
2018
 
 
Change
 
Gross Profit
  $
 27,440
    $
 31,572
     
(13)
%
Gross Profit Margin
   
58
%    
61
%    
-3 points
 
 
 
Page 21
The overall gross profit margin decrease during the first quarter of fiscal 2020 primarily results from the combined effects of: (i) previously-noted pricing changes within our
H. pylori
product line; (ii) mix of products sold, particularly decreased contribution from certain of our higher margin gastrointestinal assays; and (iii) production capacity
ramp-up
costs for our newly acquired Quebec facility where Revogene instruments and test devices are made.
Operating Expenses - Segment Detail
                                         
 
Research &
Development
 
 
Selling &
Marketing
 
 
General &
Administrative
 
 
Other
 
 
Total Operating
Expenses
 
Fiscal 2019 First Quarter:
 
Diagnostics
  $
3,196
    $
6,041
    $
4,609
    $
—  
    $
13,846
 
Life Science
   
771
     
1,522
     
1,491
     
—  
     
3,784
 
Corporate
   
—  
     
—  
     
2,802
     
589
     
3,391
 
                                         
Total 2019 First Quarter Expenses
  $
3,967
    $
7,563
    $
8,902
    $
589
    $
21,021
 
                                         
Fiscal 2020 First Quarter:
 
Diagnostics
  $
4,226
    $
5,339
    $
5,478
    $
1,317
    $
16,360
 
Life Science
   
598
     
1,345
     
1,561
     
95
     
3,599
 
Corporate
   
—
     
—
     
1,717
     
370
     
2,087
 
                                         
Total 2020 First Quarter Expenses
  $
4,824
    $
6,684
    $
8,756
    $
1,782
    $
22,046
 
                                         
   
Operating Expenses - Comparison to Prior Year Periods
 
                               
 
Research &
Development
 
 
Selling &
Marketing
 
 
General &
Administrative
 
 
Other
 
 
Total Operating
Expenses
 
2019 First Quarter Expenses
  $
3,967
    $
7,563
    $
8,902
    $
589
    $
21,021
 
                                         
% of Revenues
   
8
%    
15
%    
17
%    
1
%    
41
%
Fiscal 2020 Increases (Decreases):
 
Diagnostics
   
1,030
     
(702
)    
869
     
1,317
     
2,514
 
Life Science
   
(173
)    
(177
)    
70
     
95
     
(185
)
Corporate
   
—  
     
—  
     
(1,085
)    
(219
)    
(1,304
)
                                         
2020 First Quarter Expenses
  $
4,824
    $
6,684
    $
8,756
    $
1,782
    $
22,046
 
                                         
% of Revenues
   
10
%    
14
%    
18
%    
4
%    
46
%
% Increase (Decrease)
   
22
%    
(12
)%    
(2
)%    
203
%    
5
%
 
 
 
 
 
The changes in operating expenses reflect the following:
  • Increased Research & Development costs, primarily for the development of the Revogene system GI and RI panel assays for the Diagnostics operating segment;
 
 
 
 
 
  • Decreased Selling & Marketing costs, primarily reflecting the effects of reorganization and streamlining initiatives;
 
 
 
 
 
  • Decreased General & Administrative costs, primarily reflecting the effects of reorganization and streamlining initiatives, partially offset by the purchase accounting amortization from the acquisition of the GenePOC business; and
 
 
Page 22
 
 
 
 
  • Increased restructuring costs and a change in fair value of the contingent consideration obligation for the GenePOC business, partially offset by a decrease in selected legal costs (reflected within “Other” in the above tables).
 
 
 
 
 
 
 
 
 
Operating Income
Operating income decreased 49% to $5,394 for the first quarter of fiscal 2020, as a result of the factors discussed above.
Income Taxes
The effective rate for income taxes was 30% for the first quarter of fiscal 2020, compared to 23% for the first quarter of 2019. This higher fiscal 2020 tax rate results from the tax impact of restricted share units lapsing on a date when the share price was significantly lower than the share price on the date the restricted share units were granted. In accordance with current applicable guidance, the tax effect of this difference is recorded directly to income tax expense. We expect our effective tax rate for the full fiscal year to approximate 23.5% to 24.5%.
Liquidity and Capital Resources
Liquidity
Our cash flow and financing requirements are determined by analyses of operating and capital spending budgets, debt service, and consideration of common share dividends. We have historically maintained a credit facility to augment working capital requirements and to respond quickly to acquisition opportunities.
We have an investment policy that guides the holdings of our investment portfolio, which presently consists of bank savings accounts and institutional money market mutual funds. Our objectives in managing the investment portfolio are to: (i) preserve capital; (ii) provide sufficient liquidity to meet working capital requirements and fund strategic objectives such as acquisitions; and (iii) capture a market rate of return commensurate with market conditions and our policy’s investment eligibility criteria. As we look forward, we will continue to manage the holdings of our investment portfolio with preservation of capital being the primary objective.
Considering the various worldwide
geo-political
and
geo-economic
conditions, we do not expect macroeconomic conditions to have a significant impact on our liquidity needs, financial condition or results of operations, although no assurances can be made in this regard. We intend to continue to fund our working capital requirements from current cash flows from operating activities and cash on hand. If needed, we also have an additional source of liquidity through the amount remaining available on our $125,000 bank revolving credit facility, which totaled approximately $49,200 as of December 31, 2019. Our liquidity needs may change if overall economic conditions worsen and/or liquidity and credit within the financial markets tightens for an extended period of time, and such conditions impact the collectability of our customer accounts receivable, impact credit terms with our vendors, or disrupt the supply of raw materials and services.
As of December 31, 2019, our cash and equivalents balance was $68,557 or $7,034 higher than at the end of the fiscal 2019 first quarter, and $6,160 higher than at the end of fiscal 2019. This increase results in large part from the cash flows from operating activities being more than sufficient to cover capital expenditures and debt service. Net cash flows from operating activities and cash on hand are anticipated to be adequate to fund working capital requirements, capital expenditures and debt service during the next 12 months.
In April 2019, we suspended the payment of our quarterly cash dividend. The dividend was suspended as part of our regular evaluation of capital allocation, with the action taken in order to deploy cash into new product development activities for the Revogene molecular diagnostic platform, as well as the Curian and PediaStat platforms, among other investments, and to preserve capital resources and liquidity for general corporate purposes.
Page 23
Capital Resources
As described in Note 9,
“Bank Credit Arrangements”
of the accompanying Condensed Consolidated Financial Statements, on May 24, 2019, in connection with the acquisition of the GenePOC business, the Company executed a five-year $125,000 revolving credit facility to replace our previously-existing $30,000 credit facility. The current credit facility is secured by substantially all of our assets and includes certain restrictive financial covenants. As of January 31, 2020, we have $48,824 outstanding on this facility, following the repayment of $27,000 on January 6, 2020.
Our capital expenditures are estimated to range between approximately $4,000 to $5,000 for fiscal 2020, with the actual amount dependent upon actual operating results and the phasing of certain projects. Such expenditures may be funded with cash and equivalents on hand, operating cash flows and/or availability under the $125,000 revolving credit facility discussed above.
We do not utilize any special-purpose financing vehicles or have any undisclosed
off-balance
sheet arrangements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes in the Company’s exposure to market risk since September 30, 2019.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of the Company’s disclosure controls and procedures, as defined in Rules
13a-15(e)
and
15d-15(e)
under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of December 31, 2019. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures were effective as of December 31, 2019.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as that term is defined in Rules
13a-15(f)
and
15d-15(f)
under the Exchange Act) during the quarter ended December 31, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See Note 11,
“Litigation Matters”
of the accompanying Condensed Consolidated Financial Statements.
ITEM 1A. RISK FACTORS
There have been no material changes from risk factors as previously disclosed in the Company’s fiscal 2019 Annual Report on Form
10-K
in response to Item 1A to Part I of Form
10-K
, except that we are updating the following risk factor discussion relating to global economic conditions in response to the January 31, 2020 departure of the United Kingdom (“UK”) from the European Union (“EU”).
 
Page 24
We face risks related to global economic conditions.
We currently generate significant operating cash flows, which combined with access to the credit markets, provides us with discretionary funding capacity for research and development and other strategic activities. However, as an enterprise with global operations and markets, our operations and financial performance are in part dependent upon global economic conditions, and we could be negatively impacted by a global, regional or national economic crisis, including sovereign risk in the event of deterioration in the credit worthiness of or a default by local governments. We are particularly susceptible to the economic conditions in countries where government-sponsored health care systems are the primary payers for health care, including those countries within the EU that are reducing their public expenditures in an effort to achieve cost savings. The uncertainty in global economic conditions poses a risk to the overall economy that could impact demand for our products, as well as our ability to manage normal commercial relationships with our customers, suppliers and creditors, including financial institutions. As such, if global economic conditions deteriorate significantly, our business could be negatively impacted, including such areas as reduced demand for our products from a slow-down in the general economy, supplier or customer disruptions resulting from tighter credit markets, and/or temporary interruptions in our ability to conduct day-to-day transactions through our financial intermediaries involving the payment to or collection of funds from our customers, vendors and suppliers. While to-date such factors have not had a significant negative impact on our results or operations, we continue to monitor and plan for the potential impact of these global economic factors.
In June 2016, a majority of voters in the UK elected to withdraw from the EU, in a national referendum (commonly referred to as Brexit). The UK left the EU on January 31, 2020, which has initiated an 11-month transition period by which the UK is to leave the single market and customs union. The withdrawal has created significant uncertainty about the future relationship between the UK and the EU. The withdrawal by the UK has also given rise to calls for the governments of other EU member states to consider withdrawal. These developments, or the perception that any of them could occur, have had and may continue to have a material adverse effect on global economic conditions and the stability of global financial markets, and may significantly reduce global market liquidity and restrict the ability of key market participants to operate in certain financial markets. The withdrawal has also created uncertainty with regard to the regulation of data protection in the UK. In particular, it is unclear how the UK’s withdrawal will affect the UK’s enactment of the European General Data Protection Regulation, and how data transfers to and from the UK will be regulated following any transition period. The UK’s withdrawal may have adverse practical or operational implications on our business. Any of these factors could depress economic activity and restrict our access to capital, which could have a material adverse effect on our business, financial condition and results of operations and reduce the price of our common stock.
Due to the fact that we have operations located within the UK, Brexit could negatively impact our operations resulting primarily from: (a) operational disruptions due to changes in the manner in which people and products are moved between the UK and EU following Brexit; (b) changes in the regulatory regime governing our products once the UK is no longer under the umbrella EU scheme; and (c) potential price increases for supplies purchased by our UK businesses from companies located in the EU or elsewhere.
Further, due to Brexit, the value of the British Pound Sterling incurred significant fluctuations. Additionally, further actions related to Brexit may occur in the future. If the value of the British Pound Sterling continues to incur similar fluctuations, unfavorable exchange rate changes may negatively affect the value of our operations and businesses located in the UK, as translated to our reporting currency, the United States Dollar, in accordance with U.S. GAAP, which may impact the revenue and earnings we report. Continued fluctuations in the British Pound Sterling may also result in the imposition of price adjustments by EU-based suppliers to our UK businesses, as those suppliers seek to compensate for the changes in value of the British Pound Sterling as compared to the European Euro. Any of these results could have a material adverse effect on the business, revenues and financial condition of our UK and European operations.
 
Page 25
ITEM 6. EXHIBITS
The following exhibits are being filed or furnished as a part of this Quarterly Report on Form
10-Q
:
         
         
 
10.1*
   
         
 
31.1
   
         
 
31.2
   
         
 
32
   
         
 
101.INS
   
Inline XBRL Instance Document
         
 
101.SCH
   
Inline XBRL Instance Extension Schema
         
 
101.CAL
   
Inline XBRL Instance Extension Calculation Linkbase
         
 
101.DEF
   
Inline XBRL Instance Extension Definition Linkbase
         
 
101.LAB
   
Inline XBRL Instance Extension Label Linkbase
         
 
101.PRE
   
Inline XBRL Instance Extension Presentation Linkbase
         
 
104
   
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
 
 
 
 
 
* Certain portions of this exhibit have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The omitted information is not material and would likely cause competitive harm to the Registrant if publicly disclosed. The Registrant hereby agrees to furnish a copy of any omitted portion to the SEC upon request.
 
 
 
 
 
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
             
 
 
 
MERIDIAN BIOSCIENCE, INC.
             
Date:
February 7, 2020
 
 
By:
 
/s/ Bryan T. Baldasare
 
 
 
Bryan T. Baldasare
 
 
 
Executive Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
 
 
 
 
 
 
 
 
 
Page 26
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