FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Incorporated under the Laws ☐☒
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S–K (Section 229.405 of this Chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10–K or any amendment to this Form 10–K. ☒
Large accelerated filer | ☒ | Accelerated filer | ☐ | |||
Non-accelerated filer | ☐ | Smaller reporting company | ☐ | |||
Emerging G rowth C ompany | ☐ |
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Item 4 | 22 | ||||||||
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Item 8 | 34 | ||||||||
Item 9 | 68 | ||||||||
Item 9A | 68 | ||||||||
Item 9B | 68 | ||||||||
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Item 10 | 69 | ||||||||
Item 11 | 69 | ||||||||
Item 12 | 69 | ||||||||
Item 13 | 69 | ||||||||
Item 14 | 69 | ||||||||
Item 15 | 70 | ||||||||
Item 16 | 72 |
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Our website is
Type of Segment Information |
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Physical locations and activities | Item 2. “Properties” | |
Revenue by geographic region | Item 7. “Management’s Discussion and Analysis of Financial Condition & Results of Operations” (hereafter “MD&A”) | |
Financial information | Note 9 of Consolidated Financial Statements |
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fiscal 2021, respectively.
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With the exception of Australia and China, where we utilize direct sales personnel, we
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28.
years, taking into consideration that we have the ability to add labor shifts and/or production lines as needed.
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Products such as antibodies, antigens and reagents
Molecular
28.
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Fluctuations in foreign currency exchange rates since fiscal 20172018 had an approximate $2,200 favorableunfavorable impact on fiscal 20182019 revenues; $1,400$1,150 within the Diagnostics segment and $800$1,050 within the Life Science segment. This compares to$1,200 unfavorable$2,200 favorable impact on revenues in fiscal 2017; $4002018; $1,400 within the Diagnostics segment and $800 within the Life Science segment. Due to natural hedge relationships with expenses, both cost of sales and operating expenses, the overall impact of exchange rate fluctuations on operating income was not significant during fiscal 2019, 2018 2017 or 2016.
and 2017.
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Having
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25.
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While the impact
Breachesthose of our information technology systemsthird-party service providers, could negatively impact our reputation and our competitive position and could result in litigation with third parties, regulatory action, loss of business due to disruption of operations and/or reputational damage, potential liability and increased remediation and protection costs, any of which could have a material adverse effect on our financial condition and results of operations.
We rely on information technology systems Additionally, as cybersecurity risks become more sophisticated, we may need to process, transmit and store electronic informationincrease our investments in ourday-to-day operations. The secure processing, maintenance and transmission of this information is critical to our operations. Like many multinational corporations, our information technology systems may be subjected to computer viruses or other malicious codes, unauthorized access attempts, and cyber- or phishing-attacks. We also store certain information with third parties that could be subject to these types of attacks. Any such breach could compromise our networks, and the information stored therein could be accessed, publicly disclosed, lost or stolen. Such attacks could result in our intellectual property and other confidential information being lost or stolen, disruption of our operations, and other negative consequences, such as increased costs for security measures or remediation costs, and diversion of management attention. Any such access, disclosure or other loss of information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information, regulatory penalties, disruption of our operations, damage to our reputation, and/or cause a loss of confidence in our products and services, all of which could adversely affect our business revenues and competitive position. While we will continue to implement additional protective measures to reduce the risk of and detect cyber incidents, cyber-attacks are becoming more sophisticated and frequent, and the techniques used in such attacks change rapidly. There can be no assurances that our protective measures will prevent attacks that could have a significant impactmaterial adverse effect on our business.
financial condition and results of operations.
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Additional
may discourage takeover bids.
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deductible under our Directors and Officers insurance policy.
2019 and 2018, respectively.
Approximately $50, $2,965 and $630 of expense for attorneys’ fees related to this matter is included within the accompanying Consolidated Statements of Operations for fiscal 2019, 2018 and 2017, respectively.
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During
We selected the companies in the customized peer group based on various considerations, including, without limitation, industry classifications, the extent to which certain companies may engage in businesses in which we engage, and the extent to which we and/or our investors consider certain companies to be direct or indirect competitors. The graph assumes that the value of the investment in our common stock, in each index, and in the peer group (including reinvestment of dividends) was $100 on September 30, 2014 and tracks it through September 30, 2019.
Income Statement Information (Amounts in thousands, except per share data) | ||||||||||||||||||||
For the Year Ended September 30, | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||
Net revenues | $ | 213,571 | $ | 200,771 | $ | 196,082 | $ | 194,830 | $ | 188,832 | ||||||||||
Gross profit | 130,461 | 124,292 | 127,212 | 121,882 | 117,243 | |||||||||||||||
Operating income | 31,584 | 37,382 | 51,378 | 56,060 | 52,392 | |||||||||||||||
Net earnings | 23,849 | 21,557 | 32,229 | 35,540 | 34,743 | |||||||||||||||
Basic earnings per share | $ | 0.56 | $ | 0.51 | $ | 0.77 | $ | 0.85 | $ | 0.84 | ||||||||||
Diluted earnings per share | $ | 0.56 | $ | 0.51 | $ | 0.76 | $ | 0.85 | $ | 0.83 | ||||||||||
Cash dividends declared per share | $ | 0.500 | $ | 0.575 | $ | 0.800 | $ | 0.800 | $ | 0.790 | ||||||||||
Book value per share | $ | 4.14 | $ | 4.02 | $ | 3.95 | $ | 3.96 | $ | 3.87 |
Balance Sheet Information | ||||||||||||||||||||
As of September 30, | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||
Current assets | $ | 139,053 | $ | 133,875 | $ | 126,791 | $ | 119,422 | $ | 108,832 | ||||||||||
Current liabilities | 24,173 | 22,887 | 22,571 | 15,251 | 13,735 | |||||||||||||||
Total assets | 251,377 | 249,777 | 252,028 | 183,282 | 176,929 | |||||||||||||||
Long-term debt obligations | 50,180 | 54,647 | 58,360 | — | — | |||||||||||||||
Shareholders’ equity | 175,418 | 169,585 | 166,472 | 165,873 | 161,029 |
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Income Statement Information (Amounts in thousands, except per share data) | ||||||||||||||||||||
For the Year Ended September 30, | 2019 | 2018 | 2017 | 2016 | 2015 | |||||||||||||||
Net revenues | $ | 201,014 | $ | 213,571 | $ | 200,771 | $ | 196,082 | $ | 194,830 | ||||||||||
Gross profit | 118,325 | 130,697 | 124,292 | 127,212 | 121,882 | |||||||||||||||
Operating income | 32,699 | 31,584 | 37,382 | 51,378 | 56,060 | |||||||||||||||
Net earnings | 24,382 | 23,849 | 21,557 | 32,229 | 35,540 | |||||||||||||||
Basic earnings per share | $ | 0.57 | $ | 0.56 | $ | 0.51 | $ | 0.77 | $ | 0.85 | ||||||||||
Diluted earnings per share | $ | 0.57 | $ | 0.56 | $ | 0.51 | $ | 0.76 | $ | 0.85 | ||||||||||
Cash dividends declared per share | $ | 0.250 | $ | 0.500 | $ | 0.575 | $ | 0.800 | $ | 0.800 | ||||||||||
Book value per share | $ | 4.47 | $ | 4.14 | $ | 4.02 | $ | 3.95 | $ | 3.96 | ||||||||||
Balance Sheet Information | ||||||||||||||||||||
As of September 30, | 2019 | 2018 | 2017 | 2016 | 2015 | |||||||||||||||
Current assets | $ | 144,761 | $ | 139,053 | $ | 133,875 | $ | 126,791 | $ | 119,422 | ||||||||||
Current liabilities | 20,914 | 24,173 | 22,887 | 22,571 | 15,251 | |||||||||||||||
Total assets | 325,478 | 251,377 | 249,777 | 252,028 | 183,282 | |||||||||||||||
Long-term debt obligations | 75,824 | 50,180 | 54,647 | 58,360 | — | |||||||||||||||
Shareholders’ equity | 190,967 | 175,418 | 169,585 | 166,472 | 165,873 |
Americas region.
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We offer multiple lead testing systems that are capable of processing both capillary and venous blood samples. Our LeadCare Plus and LeadCare Ultra systems, which accounted for approximately 10% of lead testing annual revenues in fiscal 2016, are used predominantly with venous blood samples. Typically, the Ultra and Plus systems are used in a reference lab setting. Our LeadCare II system is predominantly used with capillary blood samples and is typically used in a physician office setting. LeadCare II system revenue represented approximately 90% of our lead testing product revenues in fiscal 2016. The LeadCare II system is the onlypoint-of-care system for testing lead exposure, receiving CLIA-waived status. Other methods for testing blood lead levels include Graphite Furnace Atomic Absorption Spectroscopy and Mass Spectrometry, which are typically performed in hospital and reference laboratory settings.
The Warning Letter requires periodic reporting on our remediation progress. To date, we have satisfied our post-Warning Letter reporting requirements with the FDA. During fiscal 2018 As also previously disclosed and 2017, we incurred approximately $1,600 in aggregate remediation costs, primarily related to regulatory consultants and studies required to reinstate our venous blood sample claim, and we expect to incur additional costs during fiscal 2019. In the course of remediation, we may encounter additional matters that warrant notifications to the FDA and/or customers regarding the use of its 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.
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As set forth in Item 3. “Legal Proceedings”, 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 are cooperatingcontinue to cooperate with the DOJ in this matter.matter, including responding to additional information requests. We maintain rigorous policies have executed tolling agreements to extend the statute of limitations.
USE OFNON-GAAP MEASURES
We have supplemented our reported GAAP financial information with information on net earnings, basic earnings per share and diluted earnings per share excluding the effects of: (i) restructuring and litigation costs (fiscal 2018, 2017 and 2016); (ii) the impairment charge against Diagnostics segment goodwill (fiscal 2017); (iii) acquisition-related costs (fiscal 2016); and (iv) certainone-time tax effects of the tax reform act – each of which is anon-GAAP measure. We have provided in the tables below reconciliations to the net earnings, basic earnings per share and diluted earnings per share amounts reported under U.S. Generally Accepted Accounting Principles. We believe that this information is useful to those who read our financial statements and evaluate our operating results because:
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Revenue reported on a constant-currency basis is also anon-GAAP measure and is calculated by applying current period average foreign currency exchange rates to each of the comparable periods. Management analyzes revenue on a constant-currency basis to better measure the comparability of results between periods. Because changes in foreign currency exchange rates have anon-operating impact on revenue, management believes that evaluating revenue changes on a constant-currency basis provides an additional and meaningful assessment of revenue to both management and investors.
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Thesenon-GAAP measures may be different fromnon-GAAP measures used by other companies. In addition, thesenon-GAAP measures are not based on any comprehensive set of accounting rules or principles.Non-GAAP measures have limitations, in that they do not reflect all amounts associated with our results as determined in accordance with U.S. GAAP. Therefore, these measures should only be used to evaluate our results in conjunction with corresponding GAAP measures.
2018 | 2017 | 2016 | ||||||||||
Net Earnings - | ||||||||||||
U.S. GAAP basis | $ | 23,849 | $ | 21,557 | $ | 32,229 | ||||||
Restructuring costs(1) | 6,430 | 87 | 431 | |||||||||
Litigation costs(1) | 3,205 | 408 | — | |||||||||
Goodwill impairment charge(2) | — | 6,628 | — | |||||||||
Acquisition-related costs(1) | — | — | 1,233 | |||||||||
One-time benefit from tax law change | (2,655 | ) | — | — | ||||||||
Repatriation transition tax | 876 | — | — | |||||||||
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Adjusted earnings | $ | 31,705 | $ | 28,680 | $ | 33,893 | ||||||
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Net Earnings per Basic Common Share - | ||||||||||||
U.S. GAAP basis | $ | 0.56 | $ | 0.51 | $ | 0.77 | ||||||
Restructuring costs(1) | 0.15 | — | 0.01 | |||||||||
Litigation costs(1) | 0.08 | 0.01 | — | |||||||||
Goodwill impairment charge(2) | — | 0.16 | — | |||||||||
Acquisition-related costs(1) | — | — | 0.03 | |||||||||
One-time benefit from tax law change | (0.06 | ) | — | — | ||||||||
Repatriation transition tax | 0.02 | — | — | |||||||||
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Adjusted Basic EPS | $ | 0.75 | $ | 0.68 | $ | 0.81 | ||||||
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Net Earnings per Diluted Common Share - | ||||||||||||
U.S. GAAP basis | $ | 0.56 | $ | 0.51 | $ | 0.76 | ||||||
Restructuring costs(1) | 0.15 | — | 0.01 | |||||||||
Litigation costs(1) | 0.07 | 0.01 | — | |||||||||
Goodwill impairment charge(2) | — | 0.16 | — | |||||||||
Acquisition-related costs(1) | — | — | 0.03 | |||||||||
One-time benefit from tax law change | (0.06 | ) | — | — | ||||||||
Repatriation transition tax | 0.02 | — | — | |||||||||
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Adjusted Diluted EPS(3) | $ | 0.74 | $ | 0.67 | $ | 0.80 | ||||||
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other information 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 is completed.
Revenues for each of our segments and the geographic regions therein are shown below.
2018 vs. 2017 | 2017 vs. 2016 | |||||||||||||||||||
2018 | 2017 | 2016 | Inc (Dec) | Inc (Dec) | ||||||||||||||||
Diagnostics- | ||||||||||||||||||||
Americas | $ | 126,647 | $ | 119,685 | $ | 123,187 | 6 | % | (3 | )% | ||||||||||
EMEA | 21,231 | 20,273 | 19,024 | 5 | % | 7 | % | |||||||||||||
ROW | 2,576 | 3,563 | 2,903 | (28 | )% | 23 | % | |||||||||||||
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Total Diagnostics | 150,454 | 143,521 | 145,114 | 5 | % | (1 | )% | |||||||||||||
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Life Science- | ||||||||||||||||||||
Americas | 20,792 | 19,978 | 19,484 | 4 | % | 3 | % | |||||||||||||
EMEA | 24,530 | 21,968 | 20,075 | 12 | % | 9 | % | |||||||||||||
ROW | 17,795 | 15,304 | 11,409 | 16 | % | 34 | % | |||||||||||||
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Total Life Science | 63,117 | 57,250 | 50,968 | 10 | % | 12 | % | |||||||||||||
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Consolidated | $ | 213,571 | $ | 200,771 | $ | 196,082 | 6 | % | 2 | % | ||||||||||
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% of total revenues- | ||||||||||||||||||||
Diagnostics | 70 | % | 71 | % | 74 | % | ||||||||||||||
Life Science | 30 | % | 29 | % | 26 | % | ||||||||||||||
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Total | 100 | % | 100 | % | 100 | % | ||||||||||||||
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Ex-Americas | 31 | % | 30 | % | 27 | % | ||||||||||||||
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Revenue Overview- By Product Platform/Type
The revenues generated by each of our reportable segments result primarily from the sale
Diagnostics
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Life Science
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2018 vs. 2017 | 2017 vs. 2016 | |||||||||||||||||||
2018 | 2017 | 2016 | Inc (Dec) | Inc (Dec) | ||||||||||||||||
Diagnostics- | ||||||||||||||||||||
Molecular assays | $ | 34,011 | $ | 33,901 | $ | 38,302 | — | % | (11 | )% | ||||||||||
Immunoassays & blood chemistry assays | 116,443 | 109,620 | 106,812 | 6 | % | 3 | % | |||||||||||||
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Total Diagnostics | $ | 150,454 | $ | 143,521 | $ | 145,114 | 5 | % | (1 | )% | ||||||||||
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Life Science- | ||||||||||||||||||||
Molecular reagents | $ | 24,613 | $ | 21,998 | $ | 20,506 | 12 | % | 7 | % | ||||||||||
Immunological reagents | 38,504 | 35,252 | 30,462 | 9 | % | 16 | % | |||||||||||||
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Total Life Science | $ | 63,117 | $ | 57,250 | $ | 50,968 | 10 | % | 12 | % | ||||||||||
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% of Diagnostics revenues- | ||||||||||||||||||||
Molecular assays | 23 | % | 24 | % | 26 | % | ||||||||||||||
Immunoassays & blood chemistry assays | 77 | % | 76 | % | 74 | % | ||||||||||||||
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Total Diagnostics | 100 | % | 100 | % | 100 | % | ||||||||||||||
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% of Life Science revenues- | ||||||||||||||||||||
Molecular reagents | 39 | % | 38 | % | 40 | % | ||||||||||||||
Immunological reagents | 61 | % | 62 | % | 60 | % | ||||||||||||||
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Total Life Science | 100 | % | 100 | % | 100 | % | ||||||||||||||
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2018.
2017.
2018 | 2017 | 2016 | 2018 vs. 2017 Inc (Dec) | 2017 vs. 2016 Inc (Dec) | ||||||||||||||||
Gross Profit | $ | 130,461 | $ | 124,292 | $ | 127,212 | 5 | % | (2 | )% | ||||||||||
Gross Profit Margin | 61 | % | 62 | % | 65 | % | -1 point | -3 points |
2019 | 2018 | 2017 | 2019 vs. 2018 Inc (Dec) | 2018 vs. 2017 Inc (Dec) | ||||||||||||||||
Gross Profit | $ | 118,325 | $ | 130,697 | $ | 124,292 | (9 | %) | 5 | % | ||||||||||
Gross Profit Margin | 59 | % | 61 | % | 62 | % | -2 points | -1 point |
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Our overall operations consist of the sale of diagnostic test kits for various disease states and in alternative test formats, as well as bioresearch reagents, bulk antigens and antibodies, PCR/qPCR reagents, nucleotides, competent cells, and proficiency panels. Product revenue mix shifts, in the normal course of business, can cause the consolidated gross profit margin to fluctuate by several points.
Research & Development | Selling & Marketing | General & Administrative | Other | Total Operating Expenses | ||||||||||||||||
Fiscal 2016: | ||||||||||||||||||||
Diagnostics | $ | 11,412 | $ | 21,339 | $ | 21,483 | $ | — | $ | 54,234 | ||||||||||
Life Science | 2,779 | 8,717 | 7,946 | — | 19,442 | |||||||||||||||
Unallocated expenses | — | — | — | 2,158 | 2,158 | |||||||||||||||
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Total 2016 Expenses | $ | 14,191 | $ | 30,056 | $ | 29,429 | $ | 2,158 | $ | 75,834 | ||||||||||
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Fiscal 2017: | ||||||||||||||||||||
Diagnostics | $ | 13,433 | $ | 22,942 | $ | 23,603 | $ | — | $ | 59,978 | ||||||||||
Life Science | 2,603 | 9,446 | 7,493 | — | 19,542 | |||||||||||||||
Unallocated expenses | — | — | — | 7,390 | 7,390 | |||||||||||||||
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Total 2017 Expenses | $ | 16,036 | $ | 32,388 | $ | 31,096 | $ | 7,390 | $ | 86,910 | ||||||||||
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Fiscal 2018: | ||||||||||||||||||||
Diagnostics | $ | 13,772 | $ | 24,990 | $ | 26,257 | $ | — | $ | 65,019 | ||||||||||
Life Science | 3,098 | 9,478 | 8,231 | — | 20,807 | |||||||||||||||
Unallocated expenses | — | — | — | 13,051 | 13,051 | |||||||||||||||
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Total 2018 Expenses | $ | 16,870 | $ | 34,468 | $ | 34,488 | $ | 13,051 | $ | 98,877 | ||||||||||
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Research & Development | Selling & Marketing | General & Administrative | Other | Total Operating Expenses | ||||||||||||||||
Fiscal 2017: | ||||||||||||||||||||
Diagnostics | $ | 13,433 | $ | 22,942 | $ | 13,268 | $ | 6,628 | $ | 56,271 | ||||||||||
Life Science | 2,603 | 9,446 | 7,493 | — | 19,542 | |||||||||||||||
Corporate | — | — | 10,335 | 762 | 11,097 | |||||||||||||||
Total 2017 Expenses | $ | 16,036 | $ | 32,388 | $ | 31,096 | $ | 7,390 | $ | 86,910 | ||||||||||
Fiscal 2018: | ||||||||||||||||||||
Diagnostics | $ | 13,742 | $ | 25,002 | $ | 19,397 | $ | 4,032 | $ | 62,173 | ||||||||||
Life Science | 3,047 | 9,466 | 8,111 | 1,240 | 21,864 | |||||||||||||||
Corporate | — | — | 7,297 | 7,779 | 15,076 | |||||||||||||||
Total 2018 Expenses | $ | 16,789 | $ | 34,468 | $ | 34,805 | $ | 13,051 | $ | 99,113 | ||||||||||
Fiscal 2019: | ||||||||||||||||||||
Diagnostics | $ | 14,711 | $ | 23,058 | $ | 19,191 | $ | 3,446 | $ | 60,406 | ||||||||||
Life Science | 3,237 | 5,388 | 6,034 | 188 | 14,847 | |||||||||||||||
Corporate | — | — | 7,777 | 2,596 | 10,373 | |||||||||||||||
Total 2019 Expenses | $ | 17,948 | $ | 28,446 | $ | 33,002 | $ | 6,230 | $ | 85,626 | ||||||||||
Research & Development | Selling & Marketing | General & Administrative | Other | Total Operating Expenses | ||||||||||||||||
2016 Expenses | $ | 14,191 | $ | 30,056 | $ | 29,429 | $ | 2,158 | $ | 75,834 | ||||||||||
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% of Revenues | 7 | % | 15 | % | 15 | % | 1 | % | 39 | % | ||||||||||
Fiscal 2017 Increases (Decreases): | ||||||||||||||||||||
Diagnostics | 2,021 | 1,603 | 2,120 | — | 5,744 | |||||||||||||||
Life Science | (176 | ) | 729 | (453 | ) | — | 100 | |||||||||||||
Restructuring costs | — | — | — | (543 | ) | (543 | ) | |||||||||||||
Litigation costs | — | — | — | 628 | 628 | |||||||||||||||
Goodwill impairment charge | — | — | — | 6,628 | 6,628 | |||||||||||||||
Acquisition-related costs | — | — | — | (1,481 | ) | (1,481 | ) | |||||||||||||
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2017 Expenses | $ | 16,036 | $ | 32,388 | $ | 31,096 | $ | 7,390 | $ | 86,910 | ||||||||||
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% of Revenues | 8 | % | 16 | % | 15 | % | 4 | % | 43 | % | ||||||||||
% Increase | 13 | % | 8 | % | 6 | % | 242 | % | 15 | % | ||||||||||
Fiscal 2018 Increases (Decreases): | ||||||||||||||||||||
Diagnostics | 339 | 2,048 | 2,654 | — | 5,041 | |||||||||||||||
Life Science | 495 | 32 | 738 | — | 1,265 | |||||||||||||||
Restructuring costs | — | — | — | 8,572 | 8,572 | |||||||||||||||
Litigation costs | — | — | — | 3,717 | 3,717 | |||||||||||||||
Goodwill impairment charge | — | — | — | (6,628 | ) | (6,628 | ) | |||||||||||||
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| |||||||||||
2018 Expenses | $ | 16,870 | $ | 34,468 | $ | 34,488 | $ | 13,051 | $ | 98,877 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
% of Revenues | 8 | % | 16 | % | 16 | % | 6 | % | 46 | % | ||||||||||
% Increase | 5 | % | 6 | % | 11 | % | 77 | % | 14 | % |
Research & Development | Selling & Marketing | General & Administrative | Other | Total Operating Expenses | ||||||||||||||||
2017 Expenses | $ | 16,036 | $ | 32,388 | $ | 31,096 | $ | 7,390 | $ | 86,910 | ||||||||||
% of Revenues | 8 | % | 16 | % | 15 | % | 4 | % | 43 | % | ||||||||||
Fiscal 2018 Increases (Decreases): | ||||||||||||||||||||
Diagnostics | 309 | 2,060 | 6,129 | (2,596 | ) | 5,902 | ||||||||||||||
Life Science | 444 | 20 | 618 | 1,240 | 2,322 | |||||||||||||||
Corporate | — | — | (3,038 | ) | 7,017 | 3,979 | ||||||||||||||
2018 Expenses | $ | 16,789 | $ | 34,468 | $ | 34,805 | $ | 13,051 | $ | 99,113 | ||||||||||
% of Revenues | 8 | % | 16 | % | 16 | % | 6 | % | 46 | % | ||||||||||
% Increase | 5 | % | 6 | % | 12 | % | 77 | % | 14 | % | ||||||||||
Fiscal 2019 Increases (Decreases): | ||||||||||||||||||||
Diagnostics | 969 | (1,944 | ) | (206 | ) | (586 | ) | (1,767 | ) | |||||||||||
Life Science | 190 | (4,078 | ) | (2,077 | ) | (1,052 | ) | (7,017 | ) | |||||||||||
Corporate | — | — | 480 | (5,183 | ) | (4,703 | ) | |||||||||||||
2019 Expenses | $ | 17,948 | $ | 28,446 | $ | 33,002 | $ | 6,230 | $ | 85,626 | ||||||||||
% of Revenues | 9 | % | 14 | % | 16 | % | 3 | % | 43 | % | ||||||||||
% Increase (Decrease) | 7 | % | (17 | %) | (5 | %) | (52 | %) | (14 | %) |
Diagnostics
Fiscal 2017 increase
Incremental Magellan operating expenses due to six additional monthsTable of Meridian ownership in fiscal 2017; and
Life Science
Fiscal 2018 increase
Increased Research & Development costs related to new molecular reagent products; and
Increased General & Administrative costs due in large part to the cash incentive compensation resulting from the revenue and net earnings results achieved.
Fiscal 2017 increase
Increased investment in Sales & Marketing activities, including costs associated with the WFOE established in Beijing, China during fiscal 2017.
Other
Fiscal 2018 and fiscal 2017 activity
Restructuring costs (reflected within “Other” in the above tables) totaled $8,706 and $134 in fiscal 2018 and fiscal 2017, respectively. These costs reflect:reflecting: (i) compensation and benefits for our previous Executive Chairman and CEO throughout fiscal 2018, the period during which we also have the compensation and benefits of a new CEO; and (ii) the costs of terminations and related expenses incurred in connection with realigning our business structure.
Litigation
A goodwill impairment charge totaling $6,628 was recorded
Costs were incurred in fiscal 2016 in connection with: (i) acquisition activities, most notably related to the acquisition of Magellan; and (ii) restructuring Sales & Marketing leadership, primarily related to severance obligations for former employees.
Operating Income
Operating income decreased 15% and 27% in fiscal 2018, and 2017, respectively, as a result of the factors discussed above, including the acquisition-related, restructuring and litigationselected legal costs in each of the fiscal 2018years and the Magellan goodwill impairment charge and restructuring and litigation costs in fiscal 2017.
- 41 -
Application of an approximate 24.5% blended federal rate due to including: (i) the lowering of the applicable federal rate from 35% to 21%;
Recognizing aone-time $2,655 tax benefit includingrate; (ii) the accompanying
Recording aone-time $876 tax expense (iii) the various foreign-income related toitems, such as the estimated repatriation transition tax, onthe tax deduction related to Foreign Derived Intangible Income, and the tax related to Global Intangible
The increased fiscal 2017 rate results primarily from thenon-deductibility of the Magellan goodwill impairment charge. Excluding the effects of the Magellan goodwill impairment charge, the effective tax rate was 35% for fiscal 2017.
credits.
2017.
- 42 -
Fluctuations in overall stock market valuations may raise questions as to the potential impairment of goodwill and other long-lived assets. Our annual goodwill impairment review takes place as of June 30th each year, and is performed at the reporting unit level. While these annual reviewsto-date have not resulted in the recording of any impairments, a $6,628 impairment charge was recorded in fiscal 2017 on the goodwill resulting from the Magellan acquisition due to certain FDA activities related to our lead testing system utilizing venous blood samples (see full description previously within this MD&A).
As of September 30, 2018,2019, our cash and equivalents balance is $59,763$62,397 or $2,691$2,634 higher than at the end of fiscal 2017.2018. This increase results in large part from the cash flows from operating activities being more than sufficient to cover capital expenditures, shareholder dividends for two quarters 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 shareholder dividendsdebt service during the next 12 months.
The indicated annual
- 43 -
Capital Resources
Inaccompanying Consolidated Financial Statements, on May 24, 2019, in connection with the acquisition of Magellan,the GenePOC business, the Company entered intoexecuted a $60,000new five-year $125,000 revolving credit facility to replace our previously-existing $30,000 credit facility. The new credit facility is secured by substantially all of our assets and includes certain restrictive financial covenants. To date, we have drawn down $75,824 on this new facility, using the proceeds to repay our previously-existing term loan and, related interest rate swap agreementalong with a commercial bank,cash
GenePOC business.
Known
Total | Less than 1 Year | 1-3 Years | 4-5 Years | More than 5 Years | ||||||||||||||||
Operating leases(1) | $ | 7,914 | $ | 1,866 | $ | 4,139 | $ | 1,480 | $ | 429 | ||||||||||
Purchase obligations(2) | 11,398 | 11,271 | 117 | 10 | — | |||||||||||||||
Loan principal payments(3) | 50,250 | 5,250 | 45,000 | — | — | |||||||||||||||
Scheduled interest payments(3) | 3,094 | 1,358 | 1,736 | — | — | |||||||||||||||
Uncertain income tax positions liability and interest(4) | 423 | 423 | — | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | $ | 73,079 | $ | 20,168 | $ | 50,992 | $ | 1,490 | $ | 429 | ||||||||||
|
|
|
|
|
|
|
|
|
|
Total | Less than 1 Year | 1-3 Years | 4-5 Years | More than 5 Years | ||||||||||||||||
Operating leases (1) | $ | 6,567 | $ | 1,528 | $ | 3,711 | $ | 1,145 | $ | 183 | ||||||||||
Purchase obligations (2) | 14,995 | 14,203 | 737 | 55 | — | |||||||||||||||
Acquisition price holdback and contingent consideration (3) | 75,000 | — | 75,000 | — | — | |||||||||||||||
Uncertain income tax positions liability and interest (4) | 511 | 511 | — | — | — | |||||||||||||||
Total | $ | 97,073 | $ | 16,242 | $ | 79,448 | $ | 1,200 | $ | 183 | ||||||||||
(1) | Meridian and its subsidiaries are |
(2) | Purchase obligations relate primarily to outstanding purchase orders for inventory, including instruments, service items, and research and development activities. These contractual commitments are not in excess of expected production requirements over the next twelve months. |
(3) |
“Acquisition of Business of GenePOC” |
(4) | Due to inherent uncertainties in the timing of settlement of tax positions, we are unable to estimate the timing of the effective settlement of these obligations. |
- 44 -
2020.
- 45 -
|
| |||
Accounting Policy | Location Within Consolidated Financial Statements | Examples of Key Estimate Assumptions | ||
Inventories | Note 1(f) | Slow-moving, excess & obsolete inventories | ||
Intangible Assets | Note 1(h) | Triggering events and impairment conditions | ||
Revenue Recognition | Note 1(i) | Distributor price adjustments and fee accruals | ||
Fair Value Measurements | Note | Valuation of contingent consideration | ||
Income Taxes | Note 1(l) and Note 6 | Uncertain tax positions and state apportionment factors |
24.In May 2014, the FASB issued ASUNo. 2014-09,Revenue from Contracts with Customers, which supersedes and replaces nearly all currently-existing U.S. GAAP revenue recognition guidance including related disclosure requirements. This guidance, including any clarification guidance thereon, is effective for the Company beginning October 1, 2018 (fiscal 2019). The Company anticipates that adoptionASU 2014-09 on a modified retrospective basis will result in the recording of an immaterial adjustment to retained earnings of approximately $150 and expanding certain disclosures, as required.In February 2016, the FASB issued ASU2016-02,Leases, which amends the accounting guidance related to leases. These changes, which are designed to increase transparency and comparability among organizations for both lessees and lessors, include, among other things, requiring recognition of lease assets and liabilities on the balance sheet and disclosing key information about leasing arrangements. Adoption and implementation of the guidance is not requiredpronouncements recently adopted by the Company, until the beginning of fiscal 2020, although early adoption is permitted. The Company expects to begin its assessment of the impact that adoption of this guidance will have on its financial statements in fiscal 2019.In March 2016, the FASBas well as accounting pronouncements issued ASU2016-09,Improvements to Employee Share-Based Payment Accounting, which amends the accounting for share-based payment transactions. These changes, which are designed for simplification, involve several aspects of the accounting for share-based transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The Companybut not yet adopted this guidance in the first quarter of fiscal 2018, and as a result recorded $160 to the income tax provision, which under previous guidance would have been recorded in additionalpaid-in capital. While the future effect of this guidance is dependent on numerous factors (e.g., the market price of the Company’s common stock on the equity award grant date, the exercise/lapse dates of equity awards, and the market price of the Company’s common stock on such exercise/lapse dates), the effect is not expected to be material. During fiscal 2018, our tax provision included a $180 charge for application of ASU2016-09.- 46 -In August 2016, the FASB issued ASU2016-15,Classification of Certain Cash Receipts and Cash Payments. The update addresses certain specific cash flows and their treatment, with the objective being to reduce the existing diversity in how the items are presented and classified within the statement of cash flows. Adoption and implementation of the guidance is not required by the Company, untilare set forth in Note 1(q) of the beginning of fiscal 2019, although early adoption is permitted. Adoption of this guidance is not expected to have a significant impact on the Company’s statement of cash flows.31.4733 -
35 | ||||
36 | ||||
41 | ||||
42 | ||||
43 | ||||
44 | ||||
46 | ||||
47 | ||||
74 |
2019. The Company’s assessment of and conclusion on the effectiveness of its internal control over financial reporting did not include the internal controls of Meridian Bioscience Canada, Inc. (“GenePOC”), which was acquired during fiscal 2019 and the results of which since the date of acquisition were included in the 2019 consolidated financial statements. GenePOC constituted $9,250 or 2.84% of the Company’s total assets as of September 30, 2019, and $75 or 0.04% of total net revenues, for the year ended September 30, 2019.
/s/ Jack Kenny | /s/ | |||
Jack Kenny | Bryan T. Baldasare | |||
Chief Executive Officer | Executive Vice President and | |||
November | Chief Financial Officer | |||
November |
For the Year Ended September 30, | 2018 | 2017 | 2016 | |||||||||
Net Revenues | $ | 213,571 | $ | 200,771 | $ | 196,082 | ||||||
Cost of Sales | 83,110 | 76,479 | 68,870 | |||||||||
|
|
|
|
|
| |||||||
Gross Profit | 130,461 | 124,292 | 127,212 | |||||||||
|
|
|
|
|
| |||||||
Operating Expenses: | ||||||||||||
Research and development | 16,870 | 16,036 | 14,191 | |||||||||
Selling and marketing | 34,468 | 32,388 | 30,056 | |||||||||
General and administrative | 34,488 | 31,096 | 29,429 | |||||||||
Restructuring costs | 8,706 | 134 | 677 | |||||||||
Litigations costs | 4,345 | 628 | — | |||||||||
Goodwill impairment charge | — | 6,628 | — | |||||||||
Acquisition-related costs | — | — | 1,481 | |||||||||
|
|
|
|
|
| |||||||
Total operating expenses | 98,877 | 86,910 | 75,834 | |||||||||
|
|
|
|
|
| |||||||
Operating Income | 31,584 | 37,382 | 51,378 | |||||||||
Other Income (Expense): | ||||||||||||
Interest income | 418 | 171 | 67 | |||||||||
Interest expense | (1,520 | ) | (1,642 | ) | (897 | ) | ||||||
Other, net | (102 | ) | 518 | 96 | ||||||||
|
|
|
|
|
| |||||||
Total other expense | (1,204 | ) | (953 | ) | (734 | ) | ||||||
|
|
|
|
|
| |||||||
Earnings Before Income Taxes | 30,380 | 36,429 | 50,644 | |||||||||
Income Tax Provision | 6,531 | 14,872 | 18,415 | |||||||||
|
|
|
|
|
| |||||||
Net Earnings | $ | 23,849 | $ | 21,557 | $ | 32,229 | ||||||
|
|
|
|
|
| |||||||
Earnings Per Share Data: | ||||||||||||
Basic earnings per common share | $ | 0.56 | $ | 0.51 | $ | 0.77 | ||||||
Diluted earnings per common share | $ | 0.56 | $ | 0.51 | $ | 0.76 | ||||||
Common shares used for basic earnings per common share | 42,325 | 42,188 | 42,010 | |||||||||
Effect of dilutive stock options and restricted share units | 429 | 383 | 383 | |||||||||
|
|
|
|
|
| |||||||
Common shares used for diluted earnings per common share | 42,754 | 42,571 | 42,393 | |||||||||
|
|
|
|
|
| |||||||
Dividends declared per common share | $ | 0.500 | $ | 0.575 | $ | 0.800 | ||||||
Anti-dilutive Securities: | ||||||||||||
Common share options and restricted share units | 1,007 | 873 | 462 |
For the Year Ended September 30, | 2019 | 2018 | 2017 | |||||||||
Net Revenues | $ | 201,014 | $ | 213,571 | $ | 200,771 | ||||||
Cost of Sales | 82,689 | 82,874 | 76,479 | |||||||||
Gross Profit | 118,325 | 130,697 | 124,292 | |||||||||
Operating Expenses: | ||||||||||||
Research and development | 17,948 | 16,789 | 16,036 | |||||||||
Selling and marketing | 28,446 | 34,468 | 32,388 | |||||||||
General and administrative | 33,002 | 34,805 | 31,096 | |||||||||
Acquisition-related costs | 1,808 | — | — | |||||||||
Restructuring costs | 2,839 | 8,706 | 134 | |||||||||
Selected legal costs | 1,583 | 4,345 | 628 | |||||||||
Goodwill impairment charge | — | — | 6,628 | |||||||||
Total operating expenses | 85,626 | 99,113 | 86,910 | |||||||||
Operating Income | 32,699 | 31,584 | 37,382 | |||||||||
Other Income (Expense): | ||||||||||||
Interest income | 681 | 418 | 171 | |||||||||
Interest expense | (1,945 | ) | (1,520 | ) | (1,642 | ) | ||||||
Other, net | 122 | (102 | ) | 518 | ||||||||
Total other expense | (1,142 | ) | (1,204 | ) | (953 | ) | ||||||
Earnings Before Income Taxes | 31,557 | 30,380 | 36,429 | |||||||||
Income Tax Provision | 7,175 | 6,531 | 14,872 | |||||||||
Net Earnings | $ | 24,382 | $ | 23,849 | $ | 21,557 | ||||||
Earnings Per Share Data: | ||||||||||||
Basic earnings per common share | $ | 0.57 | $ | 0.56 | $ | 0.51 | ||||||
Diluted earnings per common share | $ | 0.57 | $ | 0.56 | $ | 0.51 | ||||||
Common shares used for basic earnings per common share | 42,571 | 42,325 | 42,188 | |||||||||
Effect of dilutive stock options and restricted share units | 328 | 429 | 383 | |||||||||
Common shares used for diluted earnings per common share | 42,899 | 42,754 | 42,571 | |||||||||
Dividends declared per common share | $ | 0.250 | $ | 0.500 | $ | 0.575 | ||||||
Anti-dilutive Securities: | ||||||||||||
Common share options and restricted share units | 1,129 | 1,007 | 873 |
For the Year Ended September 30, | 2018 | 2017 | 2016 | |||||||||
Net Earnings | $ | 23,849 | $ | 21,557 | $ | 32,229 | ||||||
Other comprehensive income (loss): | ||||||||||||
Foreign currency translation adjustment | (1,075 | ) | 1,616 | (2,732 | ) | |||||||
Unrealized gain (loss) on cash flow hedge | 907 | 1,544 | (729 | ) | ||||||||
Income taxes related to items of other comprehensive income | (263 | ) | (590 | ) | 275 | |||||||
|
|
|
|
|
| |||||||
Other comprehensive income (loss), net of tax | (431 | ) | 2,570 | (3,186 | ) | |||||||
|
|
|
|
|
| |||||||
Comprehensive Income | $ | 23,418 | $ | 24,127 | $ | 29,043 | ||||||
|
|
|
|
|
|
For the Year Ended September 30, | 2019 | 2018 | 2017 | |||||||||
Net Earnings | $ | 24,382 | $ | 23,849 | $ | 21,557 | ||||||
Other comprehensive income (loss): | ||||||||||||
Foreign currency translation adjustment | (802 | ) | (1,075 | ) | 1,616 | |||||||
Unrealized gain (loss) on cash flow hedge | (1,159 | ) | 907 | 1,544 | ||||||||
Amortization of gain on cash flow hedge | (102 | ) | — | — | ||||||||
Income taxes related to items of other comprehensive income | 465 | (263 | ) | (590 | ) | |||||||
Other comprehensive income (loss), net of tax | (1,598 | ) | (431 | ) | 2,570 | |||||||
Comprehensive Income | $ | 22,784 | $ | 23,418 | $ | 24,127 | ||||||
For the Year Ended September 30, | 2018 | 2017 | 2016 | |||||||||
Cash Flows From Operating Activities | ||||||||||||
Net earnings | $ | 23,849 | $ | 21,557 | $ | 32,229 | ||||||
Non-cash items included in net earnings: | ||||||||||||
Depreciation of property, plant and equipment | 4,491 | 4,342 | 3,937 | |||||||||
Amortization of intangible assets | 3,433 | 3,776 | 2,690 | |||||||||
Amortization of deferred instrument costs | 764 | 972 | 1,091 | |||||||||
Stock-based compensation | 3,402 | 3,381 | 2,911 | |||||||||
Goodwill impairment charge | — | 6,628 | — | |||||||||
Deferred income taxes | (300 | ) | 1,474 | (233 | ) | |||||||
Losses on long-lived assets | — | — | 659 | |||||||||
Change in: | ||||||||||||
Accounts receivable | (4,447 | ) | (1,211 | ) | 119 | |||||||
Inventories | (1,142 | ) | 3,467 | (8,225 | ) | |||||||
Prepaid expenses and other current assets | 323 | 1,225 | (9 | ) | ||||||||
Accounts payable and accrued expenses | 4,124 | (3,151 | ) | 1,773 | ||||||||
Income taxes payable | (524 | ) | (384 | ) | 464 | |||||||
Other, net | 810 | (721 | ) | (183 | ) | |||||||
|
|
|
|
|
| |||||||
Net cash provided by operating activities | 34,783 | 41,355 | 37,223 | |||||||||
|
|
|
|
|
| |||||||
Cash Flows From Investing Activities | ||||||||||||
Purchase of property, plant and equipment | (4,201 | ) | (4,467 | ) | (4,004 | ) | ||||||
Purchase of equity method investment | — | — | (600 | ) | ||||||||
Acquisition of Magellan, net of cash acquired | — | — | (62,091 | ) | ||||||||
|
|
|
|
|
| |||||||
Net cash used for investing activities | (4,201 | ) | (4,467 | ) | (66,695 | ) | ||||||
|
|
|
|
|
| |||||||
Cash Flows From Financing Activities | ||||||||||||
Dividends paid | (21,170 | ) | (24,266 | ) | (33,649 | ) | ||||||
Proceeds from term loan, net of issuance costs | — | — | 59,860 | |||||||||
Payments on term loan | (4,500 | ) | (3,750 | ) | (1,500 | ) | ||||||
Proceeds and tax benefits from exercises of stock options | 187 | 303 | 2,494 | |||||||||
Payment of acquisition consideration | (2,110 | ) | — | — | ||||||||
|
|
|
|
|
| |||||||
Net cash provided by (used for) financing activities | (27,593 | ) | (27,713 | ) | 27,205 | |||||||
|
|
|
|
|
| |||||||
Effect of Exchange Rate Changes on Cash and Equivalents | (298 | ) | 671 | (480 | ) | |||||||
Net Increase (Decrease) in Cash and Equivalents | 2,691 | 9,846 | (2,747 | ) | ||||||||
Cash and Equivalents at Beginning of Period | 57,072 | 47,226 | 49,973 | |||||||||
|
|
|
|
|
| |||||||
Cash and Equivalents at End of Period | $ | 59,763 | $ | 57,072 | $ | 47,226 | ||||||
|
|
|
|
|
| |||||||
Supplemental Cash Flow Information | ||||||||||||
Cash paid for interest | $ | 1,487 | $ | 1,605 | $ | 879 | ||||||
Cash paid for income taxes | $ | 6,555 | $ | 12,613 | $ | 17,915 |
For the Year Ended September 30, | 2019 | 2018 | 2017 | |||||||||
Cash Flows From Operating Activities | ||||||||||||
Net earnings | $ | 24,382 | $ | 23,849 | $ | 21,557 | ||||||
Non-cash items included in net earnings: | ||||||||||||
Depreciation of property, plant and equipment | 5,433 | 4,491 | 4,342 | |||||||||
Amortization of intangible assets | 4,531 | 3,433 | 3,776 | |||||||||
Amortization of deferred instrument costs | — | 764 | 972 | |||||||||
Stock-based compensation | 3,251 | 3,402 | 3,381 | |||||||||
Goodwill impairment charge | — | — | 6,628 | |||||||||
Deferred income taxes | (817 | ) | (300 | ) | 1,474 | |||||||
Losses on dispositions of long-lived assets | 632 | — | — | |||||||||
Change in the following, net of acquisition: | ||||||||||||
Accounts receivable | (2,314 | ) | (4,447 | ) | (1,211 | ) | ||||||
Inventories | 3,841 | (1,142 | ) | 3,467 | ||||||||
Prepaid expenses and other current assets | (2,044 | ) | 323 | 1,225 | ||||||||
Accounts payable and accrued expenses | (2,315 | ) | 4,124 | (3,151 | ) | |||||||
Income taxes payable | 1,793 | (524 | ) | (384 | ) | |||||||
Other, net | (542 | ) | 810 | (721 | ) | |||||||
Net cash provided by operating activities | 35,831 | 34,783 | 41,355 | |||||||||
Cash Flows From Investing Activities | ||||||||||||
Purchase of property, plant and equipment | (3,797 | ) | (4,201 | ) | (4,467 | ) | ||||||
Disposal s of property, plant and equipment | 669 | — | — | |||||||||
Acquisition of GenePOC business | (45,324 | ) | — | — | ||||||||
Net cash used for investing activities | (48,452 | ) | (4,201 | ) | (4,467 | ) | ||||||
Cash Flows From Financing Activities | ||||||||||||
Dividends paid | (10,612 | ) | (21,170 | ) | (24,266 | ) | ||||||
Proceeds from revolving credit facility | 75,824 | — | — | |||||||||
Payment of debt issuance costs | (489 | ) | — | — | ||||||||
Payments on term loan | (50,250 | ) | (4,500 | ) | (3,750 | ) | ||||||
Proceeds and tax benefits from exercises of stock options | 787 | 187 | 303 | |||||||||
Payment of acquisition consideration | — | (2,110 | ) | — | ||||||||
Net cash provided by (used for) financing activities | 15,260 | (27,593 | ) | (27,713 | ) | |||||||
Effect of Exchange Rate Changes on Cash and Equivalents and Restricted Cash | (1,005 | ) | (298 | ) | 671 | |||||||
Net Increase in Cash and Equivalents and Restricted Cash | 1,634 | 2,691 | 9,846 | |||||||||
Cash and Equivalents and Restricted Cash at Beginning of Period | 60,763 | 58,072 | 48,226 | |||||||||
Cash and Equivalents and Restricted Cash at End of Period | $ | 62,397 | $ | 60,763 | $ | 58,072 | ||||||
Cash and Equivalents | $ | 62,397 | $ | 59,763 | $ | 57,072 | ||||||
Restricted Cash | — | 1,000 | 1,000 | |||||||||
Cash and Equivalents and Restricted Cash at End of Period | $ | 62,397 | $ | 60,763 | $ | 58,072 | ||||||
As of September 30, | 2018 | 2017 | ||||||
Assets | ||||||||
Current Assets: | ||||||||
Cash and equivalents | $ | 59,763 | $ | 57,072 | ||||
Accounts receivable, less allowances of $310 and $307, respectively | 32,336 | 29,106 | ||||||
Inventories | 41,993 | 41,493 | ||||||
Prepaid expenses and other current assets | 4,961 | 6,204 | ||||||
|
|
|
| |||||
Total current assets | 139,053 | 133,875 | ||||||
|
|
|
| |||||
Property, Plant and Equipment, at Cost: | ||||||||
Land | 1,160 | 1,162 | ||||||
Buildings and improvements | 32,444 | 32,207 | ||||||
Machinery, equipment and furniture | 50,606 | 48,836 | ||||||
Construction in progress | 1,631 | 1,895 | ||||||
|
|
|
| |||||
Subtotal | 85,841 | 84,100 | ||||||
Less: accumulated depreciation and amortization | 55,846 | 53,590 | ||||||
|
|
|
| |||||
Net property, plant and equipment | 29,995 | 30,510 | ||||||
|
|
|
| |||||
Other Assets: | ||||||||
Goodwill | 54,637 | 54,926 | ||||||
Other intangible assets, net | 23,113 | 26,704 | ||||||
Restricted cash | 1,000 | 1,000 | ||||||
Deferred instrument costs, net | 1,239 | 1,368 | ||||||
Fair value of interest rate swap | 1,722 | 815 | ||||||
Deferred income taxes | 130 | 158 | ||||||
Other assets | 488 | 421 | ||||||
|
|
|
| |||||
Total other assets | 82,329 | 85,392 | ||||||
|
|
|
| |||||
Total assets | $ | 251,377 | $ | 249,777 | ||||
|
|
|
|
As of September 30, | 2019 | 2018 | ||||||
Assets | ||||||||
Current Assets: | ||||||||
Cash and equivalents | $ | 62,397 | $ | 59,763 | ||||
Accounts receivable, less allowances of $537 and $310, respectively | 35,608 | 32,336 | ||||||
Inventories | 39,617 | 41,993 | ||||||
Prepaid expenses and other current assets | 7,139 | 4,961 | ||||||
Total current assets | 144,761 | 139,053 | ||||||
Property, Plant and Equipment, at Cost: | ||||||||
Land | 982 | 1,160 | ||||||
Buildings and improvements | 31,904 | 32,444 | ||||||
Machinery, equipment and furniture | 64,155 | 50,606 | ||||||
Construction in progress | 522 | 1,631 | ||||||
Subtotal | 97,563 | 85,841 | ||||||
Less: accumulated depreciation and amortization | 66,996 | 55,846 | ||||||
Net property, plant and equipment | 30,567 | 29,995 | ||||||
Other Assets: | ||||||||
Goodwill | 89,241 | 54,637 | ||||||
Other intangible assets, net | 60,243 | 23,113 | ||||||
Restricted cash | — | 1,000 | ||||||
Deferred instrument costs, net | — | 1,239 | ||||||
Fair value of interest rate swap | — | 1,722 | ||||||
Deferred income taxes | 156 | 130 | ||||||
Other assets | 510 | 488 | ||||||
Total other assets | 150,150 | 82,329 | ||||||
Total assets | $ | 325,478 | $ | 251,377 | ||||
As of September 30, | 2018 | 2017 | ||||||
Liabilities and Shareholders’ Equity | ||||||||
Current Liabilities: | ||||||||
Accounts payable | $ | 6,260 | $ | 7,719 | ||||
Accrued employee compensation costs | 7,263 | 4,536 | ||||||
Current portion of acquisition consideration | — | 2,095 | ||||||
Other accrued expenses | 5,065 | 2,789 | ||||||
Current portion of long-term debt | 5,250 | 4,500 | ||||||
Income taxes payable | 335 | 1,248 | ||||||
|
|
|
| |||||
Total current liabilities | 24,173 | 22,887 | ||||||
|
|
|
| |||||
Non-Current Liabilities | ||||||||
Acquisition consideration | — | 235 | ||||||
Post-employment benefits | 2,646 | 2,468 | ||||||
Long-term debt | 44,930 | 50,147 | ||||||
Long-term income taxes payable | 441 | — | ||||||
Deferred income taxes | 3,769 | 4,455 | ||||||
|
|
|
| |||||
Totalnon-current liabilities | 51,786 | 57,305 | ||||||
|
|
|
| |||||
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, 42,399,962 and 42,207,317 issued, respectively | — | — | ||||||
Additionalpaid-in capital | 129,193 | 125,608 | ||||||
Retained earnings | 49,602 | 46,923 | ||||||
Accumulated other comprehensive loss | (3,377 | ) | (2,946 | ) | ||||
|
|
|
| |||||
Total shareholders’ equity | 175,418 | 169,585 | ||||||
|
|
|
| |||||
Total liabilities and shareholders’ equity | $ | 251,377 | $ | 249,777 | ||||
|
|
|
|
As of September 30, | 2019 | 2018 | ||||||
Liabilities and Shareholders’ Equity | ||||||||
Current Liabilities: | ||||||||
Accounts payable | $ | 7,238 | $ | 6,260 | ||||
Accrued employee compensation costs | 7,938 | 9,195 | ||||||
Other accrued expenses | 3,758 | 3,133 | ||||||
Current portion of long-term debt | — | 5,250 | ||||||
Income taxes payable | 1,980 | 335 | ||||||
Total current liabilities | 20,914 | 24,173 | ||||||
Non-Current Liabilities: | ||||||||
Acquisition consideration | 32,202 | — | ||||||
Post-employment benefits | 2,500 | 2,646 | ||||||
Long-term debt | 75,824 | 44,930 | ||||||
Long-term income taxes payable | 549 | 441 | ||||||
Deferred income taxes | 2,522 | 3,769 | ||||||
Total non-current liabilities | 113,597 | 51,786 | ||||||
Commitments and Contingencies | ||||||||
Shareholders’ Equity: | ||||||||
Preferred stock, no par value; 1,000,000 shares authorized; NaN issued | — | — | ||||||
Common shares, no par value; 71,000,000 shares authorized, 42,712,296 and 42,399,962 issued, respectively | — | — | ||||||
Additional paid-in capital | 132,834 | 129,193 | ||||||
Retained earnings | 63,108 | 49,602 | ||||||
Accumulated other comprehensive loss | (4,975 | ) | (3,377 | ) | ||||
Total shareholders’ equity | 190,967 | 175,418 | ||||||
Total liabilities and shareholders’ equity | $ | 325,478 | $ | 251,377 | ||||
Common Shares Issued | Additional Paid-in Capital | Retained Earnings | Accum Other Comp Income (Loss) | Total | ||||||||||||||||
Balance at September 30, 2015 | 41,838 | $ | 117,151 | $ | 51,052 | $ | (2,330 | ) | $ | 165,873 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Cash dividends paid - $0.800 per share | — | — | (33,649 | ) | — | (33,649 | ) | |||||||||||||
Exercise of stock options | 152 | 2,294 | — | — | 2,294 | |||||||||||||||
Conversion of restricted share units | 117 | — | — | — | — | |||||||||||||||
Stock compensation expense | — | 2,911 | — | — | 2,911 | |||||||||||||||
Net earnings | — | — | 32,229 | — | 32,229 | |||||||||||||||
Foreign currency translation adjustment | — | — | — | (2,732 | ) | (2,732 | ) | |||||||||||||
Hedging activity, net of tax | — | — | — | (454 | ) | (454 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Balance at September 30, 2016 | 42,107 | 122,356 | 49,632 | (5,516 | ) | 166,472 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Cash dividends paid - $0.575 per share | — | — | (24,266 | ) | — | (24,266 | ) | |||||||||||||
Exercise of stock options | 18 | (129 | ) | — | — | (129 | ) | |||||||||||||
Conversion of restricted share units | 82 | — | — | — | — | |||||||||||||||
Stock compensation expense | — | 3,381 | — | — | 3,381 | |||||||||||||||
Net earnings | — | — | 21,557 | — | 21,557 | |||||||||||||||
Foreign currency translation adjustment | 1,616 | 1,616 | ||||||||||||||||||
Hedging activity, net of tax | — | — | — | 954 | 954 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Balance at September 30, 2017 | 42,207 | 125,608 | 46,923 | (2,946 | ) | 169,585 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Cash dividends paid - $0.500 per share | — | — | (21,170 | ) | — | (21,170 | ) | |||||||||||||
Exercise of stock options | 13 | 183 | — | — | 183 | |||||||||||||||
Conversion of restricted share units | 180 | — | — | — | — | |||||||||||||||
Stock compensation expense | — | 3,402 | — | — | 3,402 | |||||||||||||||
Net earnings | — | — | 23,849 | — | 23,849 | |||||||||||||||
Foreign currency translation adjustment | (1,075 | ) | (1,075 | ) | ||||||||||||||||
Hedging activity, net of tax | — | — | — | 644 | 644 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Balance at September 30, 2018 | 42,400 | $ | 129,193 | $ | 49,602 | $ | (3,377 | ) | $ | 175,418 | ||||||||||
|
|
|
|
|
|
|
|
|
|
Common Shares Issued | Additional Paid-in Capital | Retained Earnings | Accum Comp Income (Loss) | Total | ||||||||||||||||
B alance at September 30, 2016 | 42,107 | $ | 122,356 | $ | 49,632 | $ | (5,516 | ) | $ | 166,472 | ||||||||||
Cash dividends paid - $0.575 per share | — | — | (24,266 | ) | — | (24,266 | ) | |||||||||||||
Conversion of restricted share units and exercise of stock options | 100 | (129 | ) | — | — | (129 | ) | |||||||||||||
Stock compensation expense | — | 3,381 | — | — | 3,381 | |||||||||||||||
Net earnings | — | — | 21,557 | — | 21,557 | |||||||||||||||
Foreign currency translation adjustment | — | — | — | 1,616 | 1,616 | |||||||||||||||
Hedging activity, net of tax | — | — | — | 954 | 954 | |||||||||||||||
Balance at September 30, 2017 | 42,207 | 125,608 | 46,923 | (2,946 | ) | 169,585 | ||||||||||||||
Cash dividends paid - $0.500 per share | — | — | (21,170 | ) | — | (21,170 | ) | |||||||||||||
Conversion of restricted share units and ex ercise of stock options | 193 | 183 | — | — | 183 | |||||||||||||||
Stock compensation expense | — | 3,402 | — | — | 3,402 | |||||||||||||||
Net earnings | — | — | 23,849 | — | 23,849 | |||||||||||||||
Foreign currency translation adjustment | — | — | — | (1,075 | ) | (1,075 | ) | |||||||||||||
Hedging activity, net of tax | — | — | — | 644 | 644 | |||||||||||||||
Balance at September 30, 2018 | 42,400 | 129,193 | 49,602 | (3,377 | ) | 175,418 | ||||||||||||||
Cash dividends paid - $0.250 per share | — | — | (10,612 | ) | — | (10,612 | ) | |||||||||||||
Conversion of restricted share units and exercise of stock options | 312 | 390 | — | — | 390 | |||||||||||||||
Stock compensation expense | — | 3,251 | — | — | 3,251 | |||||||||||||||
Net earnings | — | — | 24,382 | — | 24,382 | |||||||||||||||
Foreign currency translation adjustment | — | — | — | (802 | ) | (802 | ) | |||||||||||||
Hedging activity, net of tax | — | — | — | (944 | ) | (944 | ) | |||||||||||||
Adoption of ASU 2014-09 | — | — | (116 | ) | — | (116 | ) | |||||||||||||
Adoption of ASU 2018-02 | — | — | (148 | ) | 148 | — | ||||||||||||||
�� | ||||||||||||||||||||
Balance at September 30, 2019 | 42,712 | $ | 132,834 | $ | 63,108 | $ | (4,975 | ) | $ | 190,967 | ||||||||||
(1) |
|
(a) |
|
(b) |
|
(c) |
|
( d ) |
|
(e) |
|
- 59 -
September 30, 2018 | September 30, 2017 | |||||||||||||||
Cash and Equivalents | Other | Cash and Equivalents | Other | |||||||||||||
Institutional money market funds | $ | 20,421 | $ | — | $ | 20,104 | $ | — | ||||||||
Cash on hand – | ||||||||||||||||
Restricted | — | 1,000 | — | 1,000 | ||||||||||||
Unrestricted | 39,342 | — | 36,968 | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 59,763 | $ | 1,000 | $ | 57,072 | $ | 1,000 | ||||||||
|
|
|
|
|
|
|
|
September 30, 2019 | September 30, 2018 | |||||||||||||||
Cash and Equivalents | Other | Cash and Equivalents | Other | |||||||||||||
Institutional money market funds | $ | 20,913 | $ | — | $ | 20,421 | $ | — | ||||||||
Cash on hand – | ||||||||||||||||
Restricted | — | — | — | 1,000 | ||||||||||||
Unrestricted | 41,484 | — | 39,342 | — | ||||||||||||
Total | $ | 62,397 | $ | — | $ | 59,763 | $ | 1,000 | ||||||||
(f) |
|
(g) |
|
- 60 -
(h) |
|
During
- 61 -
In light of these factors and their impacts, during the third quarter of fiscal 2017, it was determined that a potential impairment of goodwill recorded in connection with the acquisition of Magellan had occurred (i.e., a “triggering event”). With the assistance of an independent valuation firm, Magellan’s fair value was calculated via both market (comparable company) and income (discounted cash flows) approaches. Based upon these approaches, it was determined that the carrying value of the Magellan reporting unit did, in fact, exceed its fair value. As a result, an impairment charge of $6,628, on both ano0 additional impairment existed.
No impairments were indicated or recorded from
During fiscal 2018, goodwill decreased $289, resulting solelyaddition of $34,582
reporting unit.
2018 | 2017 | |||||||||||||||
As of September 30, | Gross Carrying Value | Accum. Amort. | Gross Carrying Value | Accum. Amort. | ||||||||||||
Manufacturing technologies, core products and cell lines | $ | 22,297 | $ | 13,974 | $ | 22,332 | $ | 12,807 | ||||||||
Tradenames, licenses and patents | 8,647 | 5,267 | 8,689 | 4,398 | ||||||||||||
Customer lists, customer relationships and supply agreements | 24,461 | 13,051 | 24,562 | 11,854 | ||||||||||||
Non-compete agreements | 720 | 720 | 720 | 540 | ||||||||||||
|
|
|
| �� |
|
|
|
| ||||||||
$ | 56,125 | $ | 33,012 | $ | 56,303 | $ | 29,599 | |||||||||
|
|
|
|
|
|
|
|
2019 | 2018 | |||||||||||||||
As of September 30, | Gross Carrying Value | Accum. Amort. | Gross Carrying Value | Accum. Amort. | ||||||||||||
Manufacturing technologies, core products and cell lines | $ | 56,193 | $ | 15,096 | $ | 22,297 | $ | 13,974 | ||||||||
Tradenames, licenses and patents | 14,494 | 6,094 | 8,647 | 5,267 | ||||||||||||
Customer lists, customer relationships and supply agreements | 24,274 | 14,110 | 24,461 | 13,051 | ||||||||||||
Government grants | 814 | 232 | — | — | ||||||||||||
$ | 95,775 | $ | 35,532 | $ | 55,405 | $ | 32,292 | |||||||||
$5,100 and fiscal 2024 - $5,096.
- 62 -
(i) |
|
Balance at September 30, 2018 | New Revenue Standard Adjustment | Balance at October 1, 2018 | ||||||||||
PROPERTY, PLANT AND EQUIPMENT | ||||||||||||
$ | 50,606 | $ | 8,696 | $ | 59,302 | |||||||
(55,846 | ) | (7,611 | ) | (63,457 | ) | |||||||
OTHER ASSETS | ||||||||||||
1,239 | (1,239 | ) | — | |||||||||
NON-CURRENT LIABILITIES | ||||||||||||
(3,769 | ) | 38 | (3,731 | ) | ||||||||
SHAREHOLDERS’ EQUITY | ||||||||||||
(49,602 | ) | 116 | (49,486 | ) |
2019 vs. 2018 | 2018 vs. 2017 | |||||||||||||||||||
2019 | 2018 | 2017 | Inc (Dec) | Inc (Dec) | ||||||||||||||||
Diagnostics- | ||||||||||||||||||||
Americas | $ | 110,135 | $ | 123,916 | $ | 117,161 | (11 | )% | 6 | % | ||||||||||
EMEA | 23,865 | 23,922 | 22,594 | — | % | 6 | % | |||||||||||||
ROW | 2,682 | 2,616 | 3,766 | 3 | % | (31 | )% | |||||||||||||
Total Diagnostics | 136,682 | 150,454 | 143,521 | (9 | )% | 5 | % | |||||||||||||
Life Science- | ||||||||||||||||||||
Americas | 19,443 | 21,080 | 20,265 | (8 | )% | 4 | % | |||||||||||||
EMEA | 29,157 | 24,715 | 22,365 | 18 | % | 11 | % | |||||||||||||
ROW | 15,732 | 17,322 | 14,620 | (9 | )% | 18 | % | |||||||||||||
Total Life Science | 64,332 | 63,117 | 57,250 | 2 | % | 10 | % | |||||||||||||
Consolidated | $ | 201,014 | $ | 213,571 | $ | 200,771 | (6 | )% | 6 | % | ||||||||||
2019 vs. 2018 | 2018 vs. 2017 | |||||||||||||||||||
2019 | 2018 | 2017 | Inc (Dec) | Inc (Dec) | ||||||||||||||||
Diagnostics- | ||||||||||||||||||||
Molecular assays | $ | 26,231 | $ | 33,709 | $ | 33,712 | (22 | )% | — | % | ||||||||||
Immunoassays & blood chemistry assays | 110,451 | 116,745 | 109,809 | (5 | )% | 6 | % | |||||||||||||
Total Diagnostics | $ | 136,682 | $ | 150,454 | $ | 143,521 | (9 | )% | 5 | % | ||||||||||
Life Science- | ||||||||||||||||||||
Molecular reagents | $ | 23,261 | $ | 24,533 | $ | 21,966 | (5 | )% | 12 | % | ||||||||||
Immunological reagents | 41,071 | 38,584 | 35,284 | 6 | % | 9 | % | |||||||||||||
Total Life Science | $ | 64,332 | $ | 63,117 | $ | 57,250 | 2 | % | 10 | % | ||||||||||
2019 vs. 2018 | 2018 vs. 2017 | |||||||||||||||||||
2019 | 2018 | 2017 | Inc (Dec) | Inc (Dec) | ||||||||||||||||
Diagnostics- | ||||||||||||||||||||
Gastrointestinal assays | $ | 68,977 | $ | 78,803 | $ | 79,022 | (12 | )% | — | % | ||||||||||
Respiratory illness assays | 26,622 | 28,911 | 23,881 | (8 | )% | 21 | % | |||||||||||||
Blood chemistry assays | 19,082 | 19,109 | 18,212 | — | % | 5 | % | |||||||||||||
Other | 22,001 | 23,631 | 22,406 | (7 | )% | 5 | % | |||||||||||||
Total Diagnostics | $ | 136,682 | $ | 150,454 | $ | 143,521 | (9 | )% | 5 | % | ||||||||||
Revenue for the Diagnostics segment is reduced at the date of sale for product price adjustments duepayable 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 were $4,303 at September 30, 2018 and $4,190 at September 30, 2017, and have beenare netted against accounts receivable.
Revenue for our Diagnostics segment includes revenue for our Alethiamolecular test system. This system includes an instrument, instrument accessories
- 63 -
We evaluate whether each deliverable in the arrangement is a separate unit of accounting. The significant deliverables are an instrument, instrument accessories (e.g., printer) and test kits. An instrument and instrument accessories are delivered to the customer prior to the start of the customer utilization period in order to accommodate customerset-up and installation. There isde minimis consideration received from the customer at the time of instrument placement. We have determined that the instrument and instrument accessories are not a separate unitperformance obligation.
In markets where the test system is not sold via multiple deliverable arrangements, the cost of the instrument and instrument accessories is charged to cost of sales at the time of shipment and transfer of title to the customer. Revenue for the sales of instruments, instrument accessories and test kits is recognized upon shipment and transfer of title to the customers. In these markets, our Alethiamolecular test system is sold to independent distributors who inventory the instruments, instrument accessories and test kits for resale toend-users.
government authorities.
Trade
(j) | Fair Value Measurements – 820-10, Fair Value Measurements and Disclosures 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. ASC820-10 requires 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). |
Fair Value Measurements Using Inputs Considered as | ||||||||||||||||
As of September 31, 2019 | Carrying Value | Level 1 | Level 2 | Level 3 | ||||||||||||
Contingent consideration | $ | $ | $ | $ | 27,200 |
(k) |
. |
- 64 -
(l) |
|
(m) |
|
(n) |
|
(o) |
|
(p) |
|
(q) |
|
In March 2016, the FASB issued ASU2016-09,Improvements to Employee Share-Based Payment Accounting, which amends the accounting for share-based payment transactions. These changes, which are designed for simplification, involve several aspects of the accounting for share-based transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows.after such date. The Company adopted this guidance in the first quarter of fiscal 2018, andanticipates that as a result recorded $160of such adoption, it will record to the income tax provision, which under previous guidance would have been recorded in additionalpaid-in capital. While the future effectits balance sheet approximately $6,000 of this guidance is dependent on numerous factors (e.g., the market price
In August 2016, the FASB issued ASU2016-15,Classification of Certain Cash Receipts and Cash PaymentsOctober 1, 2019
(r) |
|
(2) | Acquisition of Business of GenePOC |
(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. |
PRELIMINARY | ||||||||||||
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 currently estimated at $27,200) | $ | 77,502 | $ | 24 | $ | 77,526 | ||||||
Year Ended September 30, | 2019 | 2018 | ||||||
Net Revenues | $ | 201,222 | $ | 213,753 | ||||
Net Earnings | $ | 16,093 | $ | 9,407 |
Year Ended September 30, | 2019 | 2018 | ||||||
Adjustments to Net Revenues | ||||||||
GenePOC pre-acquisition revenues | $ | 208 | $ | 182 | ||||
Adjustments to Net Earnings | ||||||||
GenePOC pre-acquisition net loss | $ | (9,578 | ) | $ | (12,775 | ) | ||
Pro forma adjustments: | ||||||||
Meridian acquisition-related costs | 1,808 | — | ||||||
1,245 | — | |||||||
non-continuing personnel, locationsor activities | 1,576 | 2,552 | ||||||
(2,344 | ) | (3,499 | ) | |||||
(743 | ) | (977 | ) | |||||
(253 | ) | 257 | ||||||
Total Adjustments to Net Earnings | $ | (8,289 | ) | $ | (14,442 | ) | ||
(3) |
|
A summary of the
Fiscal 2018 Restructuring Costs | ||||
Severance, other termination benefits and related costs | $ | 5,012 | ||
Lease and other contract termination fees | 353 | |||
Loss on fixed asset disposals and inventory scrap | 225 | |||
Other | 742 | |||
|
| |||
Total | $ | 6,332 | ||
|
|
2019 | 2018 | |||||||
Severance, other termination benefits and related costs | $ | 2,046 | $ | 5,012 | ||||
Lease and other contract termination fees | 54 | 353 | ||||||
Loss on fixed asset disposals and inventory scrap | 528 | 225 | ||||||
Other | 211 | 742 | ||||||
Total | $ | 2,839 | $ | 6,332 | ||||
At September 30, 2018, the accrued liabilityOperations for fiscal 2018.
Balance as of | ||||
September 30, | ||||
2018 | ||||
Severance, other termination benefits and related costs | $ | 987 | ||
Lease and other contract termination fees | 33 | |||
Other | 6 | |||
|
| |||
Total accrued liability balance | $ | 1,026 | ||
|
|
- 67 -
As of September 30, | 2019 | 2018 | ||||||
Severance, other termination benefits and related costs | $ | 1,010 | $ | 987 | ||||
Lease and other contract termination fees | 12 | 33 | ||||||
Other | 114 | 6 | ||||||
Total | $ | 1,136 | $ | 1,026 | ||||
(4) |
Inventories |
On March 24, 2016, we acquired all of the outstanding common stock of Magellan Biosciences, Inc., and its wholly-owned subsidiary Magellan Diagnostics, Inc. (collectively, “Magellan”), for $67,874, utilizing the proceeds from a new $60,000 five-year term loan and cash and equivalents on hand. During fiscal 2018, following the filing of our U.S. tax return and the realization of tax benefits for certain net operating loss carryforwards, the final amount of acquisition consideration totaling approximately $2,100 was paid to the sellers, resulting in no such amounts payable as of September 30, 2018. Headquartered near Boston, Massachusetts, Magellan is a leading manufacturer ofFDA-cleared products for thepoint-of-care testing of blood to diagnose lead poisoning in children and adults.
As a result of the consideration paid exceeding the preliminary fair value of the net assets acquired, goodwill in the amount of $40,591 was originally recorded in connection with this acquisition, none of which is deductible for tax purposes. As of June 30, 2017, the goodwill recorded in connection with the acquisition was written down to $33,963, which remains the balance at September 30, 2018 (see Note 1(h) for a discussion of the $6,628 impairment write-down). This goodwill results largely from the addition of Magellan’s complementary customer base and distribution channels, and its industry reputation in the U.S. as a leader in lead testing.
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As of September 30, | 2018 | 2017 | ||||||
Raw materials | $ | 6,689 | $ | 6,575 | ||||
Work-in-process | 12,098 | 11,559 | ||||||
Finished goods - instruments | 1,191 | 1,460 | ||||||
Finished goods - kits and reagents | 22,015 | 21,899 | ||||||
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Total | $ | 41,993 | $ | 41,493 | ||||
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As of September 30, | 2019 | 2018 | ||||||
Raw materials | $ | 7,455 | $ | 6,689 | ||||
Work-in-process | 11,504 | 12,098 | ||||||
Finished goods - instruments | 935 | 1,191 | ||||||
Finished goods - kits and reagents | 19,723 | 22,015 | ||||||
Total | $ | 39,617 | $ | 41,993 | ||||
(5) |
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- 68 -
In order to limit exposure to volatility inSheet, as was also the LIBOR interest rate,case with the Company and the commercial bank also entered into an interest rate swap that effectively converts the variable interest rate on theoutstanding term loan to a fixed ratebalance as of 2.76%. With an initial notional balance of $60,000, the interest rate swap was established with critical terms identical to those of the term loan, including: (i) notional reduction amounts and dates; (ii) LIBOR settlement rates; (iii) rate reset dates; and (iv) term/maturity. Due to this, the interest swap has been designated as an effective cash flow hedge, with changes in fair value reflected as a separate component of other comprehensive income in the accompanying Consolidated Statements of Comprehensive Income. At September 30, 2018 and 2017, the fair value of the interest rate swap was an asset of $1,722 and $815, respectively, and is reflected as anon-current asset in the accompanying Consolidated Balance Sheets. This fair value was determined by reference to a third-party valuation, and is considered a Level 2 input within the fair value hierarchy of valuation techniques.
In addition, the Company maintains a $30,0002018.
The term loan and revolving credit facility areis collateralized by the business assets of the Company’s U.S. subsidiaries and requirerequires 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 borrowingcredit facility agreement. As of September 30, 2018,2019, the Company is in compliance with all covenants. The
(6) |
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(a) | Earnings before income taxes, and the related provision for income taxes for the years ended September 30, 2019, 2018 |
Year Ended September 30, | 2018 | 2017 | 2016 | |||||||||
Domestic | $ | 27,787 | $ | 31,885 | $ | 44,795 | ||||||
Foreign | 2,593 | 4,544 | 5,849 | |||||||||
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Total earnings before income taxes | $ | 30,380 | $ | 36,429 | $ | 50,644 | ||||||
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Provision (credit) for income taxes - | ||||||||||||
Federal - | ||||||||||||
Current | $ | 6,030 | $ | 11,262 | $ | 16,178 | ||||||
Temporary differences | ||||||||||||
Fixed asset basis differences and depreciation | 410 | (181 | ) | (45 | ) | |||||||
Intangible asset basis differences and amortization | (4,052 | ) | (1,158 | ) | (744 | ) | ||||||
Currentlynon-deductible expenses and reserves | 1,206 | 884 | (694 | ) | ||||||||
Stock-based compensation | 1,379 | (635 | ) | 129 | ||||||||
Net operating loss carryforwards utilized | 61 | 1,831 | — | |||||||||
Tax credit carryforwards utilized | 181 | 67 | 41 | |||||||||
Other, net | (148 | ) | 99 | 181 | ||||||||
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Subtotal | 5,067 | 12,169 | 15,046 | |||||||||
State and local | 1,066 | 1,900 | 2,421 | |||||||||
Foreign | 398 | 803 | 948 | |||||||||
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Total income tax provision | $ | 6,531 | $ | 14,872 | $ | 18,415 | ||||||
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Year Ended September 30, | 2019 | 2018 | 2017 | |||||||||
Domestic | $ | 23,954 | $ | 27,787 | $ | 31,885 | ||||||
Foreign | 7,603 | 2,593 | 4,544 | |||||||||
Total earnings before income taxes | $ | 31,557 | $ | 30,380 | $ | 36,429 | ||||||
Provision (credit) for income taxes - | ||||||||||||
Federal - | ||||||||||||
Current | $ | 5,001 | $ | 6,030 | $ | 11,262 | ||||||
Temporary differences | ||||||||||||
Fixed asset basis differences and depreciation | 288 | 410 | (181 | ) | ||||||||
Intangible asset basis differences and amortization | (797 | ) | (4,052 | ) | (1,158 | ) | ||||||
Currently non-deductible expenses and reserves | 241 | 1,206 | 884 | |||||||||
Stock-based compensation | (109 | ) | 1,379 | (635 | ) | |||||||
Net operating loss carryforwards utilized | 69 | 61 | 1,831 | |||||||||
Tax credit carryforwards utilized | — | 181 | 67 | |||||||||
Other, net | (169 | ) | (148 | ) | 99 | |||||||
Subtotal | 4,524 | 5,067 | 12,169 | |||||||||
State and local | 834 | 1,066 | 1,900 | |||||||||
Foreign | 1,817 | 398 | 803 | |||||||||
Total income tax provision | $ | 7,175 | $ | 6,531 | $ | 14,872 | ||||||
(b) | The following is a reconciliation between the statutory U.S. income tax rate and the effective rate derived by dividing the provision for income taxes by earnings before income taxes: |
Year Ended September 30, | 2018 | 2017 | 2016 | |||||||||||||||||||||
Computed income taxes at statutory rate | $ | 7,443 | 24.5 | % | $ | 12,750 | 35.0 | % | $ | 17,719 | 35.0 | % | ||||||||||||
Increase (decrease) in taxes resulting from - | ||||||||||||||||||||||||
State and local income taxes | 982 | 3.2 | 1,093 | 3.0 | 1,329 | 2.6 | ||||||||||||||||||
U.S. tax law change | (2,655 | ) | (8.7 | ) | — | — | — | — | ||||||||||||||||
One-time repatriation tax | 876 | 2.9 | — | — | — | — | ||||||||||||||||||
Foreign tax rate differences | (104 | ) | (0.3 | ) | (281 | ) | (0.8 | ) | (337 | ) | (0.7 | ) | ||||||||||||
Qualified domestic production incentives | (550 | ) | (1.8 | ) | (1,012 | ) | (2.8 | ) | (1,290 | ) | (2.5 | ) | ||||||||||||
Acquisition-related costs | — | — | — | — | 215 | 0.4 | ||||||||||||||||||
Uncertain tax position activity | (62 | ) | (0.2 | ) | 134 | 0.4 | 122 | 0.2 | ||||||||||||||||
Goodwill impairment charge | — | — | 2,320 | 6.4 | — | — | ||||||||||||||||||
Valuation allowance | (40 | ) | (0.1 | ) | — | — | 327 | 0.7 | ||||||||||||||||
Stock-based compensation | 447 | 1.4 | — | — | — | — | ||||||||||||||||||
Other, net | 194 | 0.6 | (132 | ) | (0.4 | ) | 330 | 0.7 | ||||||||||||||||
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$ | 6,531 | 21.5 | % | $ | 14,872 | 40.8 | % | $ | 18,415 | 36.4 | % | |||||||||||||
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Year Ended September 30, | 2019 | 2018 | 2017 | ||||||||||||||||||||||
Computed income taxes at statutory rate | $ | 6,627 | 21.0 | % | $ | 7,443 | 24.5 | % | $ | 12,750 | 35.0 | % | |||||||||||||
Increase (decrease) in taxes resulting from - | |||||||||||||||||||||||||
State and local income taxes | 577 | 1.8 | 982 | 3.2 | 1,093 | 3.0 | |||||||||||||||||||
U.S. tax law change | — | — | (2,655 | ) | (8.7 | ) | — | — | |||||||||||||||||
One-time repatriation tax | — | — | 876 | 2.9 | — | — | |||||||||||||||||||
Foreign-Derived Intangible Income tax | (294 | ) | (0.9 | ) | — | — | — | — | |||||||||||||||||
Global Intangible Low Taxed Income tax | 1,119 | 3.6 | — | — | — | — | |||||||||||||||||||
Foreign tax credit | (990 | ) | (3.1 | ) | (15 | ) | — | (57 | ) | (0.2 | ) | ||||||||||||||
Foreign tax rate differences | 46 | 0.1 | (104 | ) | (0.3 | ) | (281 | ) | (0.8 | ) | |||||||||||||||
Qualified domestic production incentives | — | — | (550 | ) | (1.8 | ) | (1,012 | ) | (2.8 | ) | |||||||||||||||
Uncertain tax position activity | 126 | 0.4 | (62 | ) | (0.2 | ) | 134 | 0.4 | |||||||||||||||||
Goodwill impairment charge | — | — | — | — | 2,320 | 6.4 | |||||||||||||||||||
Valuation allowance | 106 | 0.3 | (40 | ) | (0.1 | ) | — | — | |||||||||||||||||
Stock-based compensation | (33 | ) | (0.1 | ) | 447 | 1.4 | — | — | |||||||||||||||||
Other, net | (109 | ) | (0.4 | ) | 209 | 0.6 | (75 | ) | (0.2 | ) | |||||||||||||||
$ | 7,175 | 22.7 | % | $ | 6,531 | 21.5 | % | $ | 14,872 | 40.8 | % | ||||||||||||||
(c) | The components of net deferred tax liabilities were as follows: |
As of September 30, | 2018 | 2017 | ||||||
Deferred tax assets - | ||||||||
Valuation reserves andnon-deductible expenses | $ | 1,473 | $ | 1,762 | ||||
Stock compensation expense not deductible | 2,033 | 3,367 | ||||||
Net operating loss and tax credit carryforwards | 433 | 743 | ||||||
Basis difference in equity-method investee | 302 | 302 | ||||||
Inventory basis differences | 383 | 1,269 | ||||||
Other | (530 | ) | (289 | ) | ||||
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Subtotal | 4,094 | 7,154 | ||||||
Less valuation allowance | (302 | ) | (342 | ) | ||||
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Deferred tax assets | 3,792 | 6,812 | ||||||
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Deferred tax liabilities - | ||||||||
Fixed asset basis differences and depreciation | (1,913 | ) | (1,325 | ) | ||||
Intangible asset basis differences and amortization | (5,518 | ) | (9,784 | ) | ||||
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Deferred tax liabilities | (7,431 | ) | (11,109 | ) | ||||
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Net deferred tax liabilities | $ | (3,639 | ) | $ | (4,297 | ) | ||
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- 70 -
As of September 30, | 2019 | 2018 | ||||||
Deferred tax assets - | ||||||||
Valuation reserves and non-deductible expenses | $ | 1,253 | $ | 1,473 | ||||
Stock compensation expense not deductible | 2,158 | 2,033 | ||||||
Net operating loss and tax credit carryforwards | 494 | 433 | ||||||
Basis difference in equity-method investee | 302 | 302 | ||||||
Inventory basis differences | 289 | 383 | ||||||
Other | 125 | (530 | ) | |||||
Subtotal | 4,621 | 4,094 | ||||||
Less valuation allowance | (408 | ) | (302 | ) | ||||
Deferred tax assets | 4,213 | 3,792 | ||||||
Deferred tax liabilities - | ||||||||
Fixed asset basis differences and depreciation | (2,205 | ) | (1,913 | ) | ||||
Intangible asset basis differences and amortization | (4,374 | ) | (5,518 | ) | ||||
Deferred tax liabilities | (6,579 | ) | (7,431 | ) | ||||
Net deferred tax liabilities | $ | (2,366 | ) | $ | (3,639 | ) | ||
Code
As described in Note 1, wereduced
2018 | 2017 | |||||||
Unrecognized income tax benefits beginning of year | $ | 517 | $ | 502 | ||||
Additions for tax positions of prior years | — | 144 | ||||||
Tax examination and other settlements | (161 | ) | (129 | ) | ||||
Expiration of statute of limitations | (94 | ) | — | |||||
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Unrecognized income tax benefits at end of year | $ | 262 | $ | 517 | ||||
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2019 | 2018 | |||||||
Unrecognized income tax benefits at beginning of year | $ | 262 | $ | 517 | ||||
Additions for tax positions of prior years | 83 | — | ||||||
Reductions for tax positions of prior years | (100 | ) | — | |||||
Additions for tax positions of current year | 138 | — | ||||||
Tax examination and other settlements | — | (161 | ) | |||||
Expiration of statute of limitations | — | (94 | ) | |||||
Unrecognized income tax benefits at end of year | $ | 383 | $ | 262 | ||||
- 71 -
(7) |
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- 72 -
cancelled
vested and the related shares were paid to Mr. Kraeutler in November 2018.
- 73 -
3.
Year ended September 30, | 2018 | 2017 | 2016 | |||||||||
Risk-free interest rates | 2.10 | % | 1.34 | % | 1.63 | % | ||||||
Dividend yield | 3.3 | % | 4.1 | % | 4.4 | % | ||||||
Life of option | 6.47 yrs. | 6.44 yrs. | 6.39 yrs. | |||||||||
Share price volatility | 30 | % | 27 | % | 31 | % | ||||||
Forfeitures (by employee group) | 0%-16 | % | 0%-19 | % | 0%-16 | % |
Year ended September 30, | 2019 | 2018 | 2017 | |||||||||
Risk-free interest rates | 2.99 | % | 2.10 | % | 1.34 | % | ||||||
Dividend yield | 3.3 | % | 3.3 | % | 4.1 | % | ||||||
Life of option | 6.51 yrs. | 6.47 yrs. | 6.44 yrs. | |||||||||
Share price volatility | 29 | % | 30 | % | 27 | % | ||||||
Forfeitures (by employee group) | 0%-16 | % | 0%-16 | % | 0%-19 | % |
Options | Wtd Avg Exercise Price | Wtd Avg Remaining Life (Yrs) | Aggregate Intrinsic Value | |||||||||||||
Outstanding beginning of period | 942 | $ | 19.98 | |||||||||||||
Grants | 479 | 14.85 | ||||||||||||||
Exercises | (12 | ) | 14.65 | |||||||||||||
Forfeitures | (184 | ) | 15.38 | |||||||||||||
Cancellations | (130 | ) | 28.36 | |||||||||||||
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Outstanding end of period | 1,095 | $ | 17.56 | 7.02 | $ | 249 | ||||||||||
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Exercisable end of period | 706 | $ | 18.70 | 5.98 | $ | 147 | ||||||||||
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- 74 -
Options | Wtd Avg Exercise Price | Wtd Avg Remaining Life (Yrs) | Aggregate Intrinsic Value | |||||||||||||
Outstanding beginning of period | 1,095 | $ | 17.56 | |||||||||||||
Grants | 77 | 16.07 | ||||||||||||||
Exercises | (30 | ) | 15.13 | |||||||||||||
Forfeitures | (52 | ) | 15.03 | |||||||||||||
Cancellations | (100 | ) | 20.48 | |||||||||||||
Outstanding end of period | 990 | $ | 17.36 | 6.37 | $ | 1 | ||||||||||
Exercisable end of period | 782 | $ | 17.99 | 5.86 | $ | — | ||||||||||
Options | Weighted- Average Grant Date Fair Value | |||||||
Nonvested beginning of period | 281 | $ | 3.00 | |||||
Granted | 479 | 3.27 | ||||||
Vested | (188 | ) | 3.09 | |||||
Forfeitures | (83 | ) | 2.99 | |||||
Cancelled | (100 | ) | 3.22 | |||||
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Nonvested end of period | 389 | $ | 3.24 | |||||
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Options | Weighted- Average Grant Date Fair Value | |||||||
Nonvested beginning of period | 389 | $ | 3.24 | |||||
Granted | 77 | 3.61 | ||||||
Vested | (205 | ) | 3.39 | |||||
Forfeitures | (52 | ) | 3.25 | |||||
Nonvested end of period | 209 | $ | 3.24 | |||||
(8) |
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(9) |
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- 75 -
Year Ended September 30, | 2018 | 2017 | 2016 | |||||||||||||||||||||
Customer A | $ | 22,490 | (11 | )% | $ | 22,397 | (11 | )% | $ | 20,246 | (10 | )% | ||||||||||||
Customer B | $ | 22,040 | (10 | )% | $ | 17,825 | (9 | )% | $ | 19,585 | (10 | )% |
Year Ended September 30, | 2019 | 2018 | 2017 | |||||||||||||||||||||
Customer A | $ | 18,096 | | (9 | )% | $ | 21,162 | (10 | )% | $ | 22,397 | (11 | )% | |||||||||||
Customer B | $ | 17,350 | | (9 | )% | $ | 22,490 | (11 | )% | $ | 17,825 | (9 | )% |
Year Ended September 30, | 2018 | 2017 | 2016 | |||||||||
United States | $ | 125,959 | $ | 119,332 | $ | 122,264 | ||||||
Italy | 7,648 | 6,601 | 6,717 | |||||||||
France | 2,363 | 1,856 | 1,619 | |||||||||
United Kingdom | 2,337 | 1,789 | 2,018 | |||||||||
Belgium | 1,719 | 1,517 | 1,471 | |||||||||
Holland | 1,460 | 1,297 | 1,215 | |||||||||
Japan | 1,263 | 2,209 | 1,665 | |||||||||
Other countries | 7,705 | 8,920 | 8,145 | |||||||||
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Total Diagnostics | $ | 150,454 | $ | 143,521 | $ | 145,114 | ||||||
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Year Ended September 30, | 2018 | 2017 | 2016 | |||||||||
United States | $ | 20,442 | $ | 19,627 | $ | 19,212 | ||||||
China | 8,329 | 5,893 | 4,077 | |||||||||
Germany | 8,198 | 7,400 | 6,999 | |||||||||
United Kingdom | 5,190 | 5,574 | 5,581 | |||||||||
Spain | 4,179 | 3,206 | 2,917 | |||||||||
Australia | 3,617 | 3,999 | 3,163 | |||||||||
South Korea | 2,040 | 2,306 | 1,043 | |||||||||
France | 2,037 | 1,791 | 1,054 | |||||||||
Japan | 1,928 | 1,374 | 1,542 | |||||||||
Other countries | 7,157 | 6,080 | 5,380 | |||||||||
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Total Life Science | $ | 63,117 | $ | 57,250 | $ | 50,968 | ||||||
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Year Ended September 30, | 2019 | 2018 | 2017 | |||||||||
United States | $ | 105,648 | $ | 120,555 | $ | 114,494 | ||||||
Italy | 10,898 | 10,398 | 9,004 | |||||||||
France | 2,442 | 2,353 | 1,845 | |||||||||
United Kingdom | 2,397 | 2,340 | 1,778 | |||||||||
Puerto Rico | 2,276 | 1,054 | 730 | |||||||||
Japan | 1,571 | 1,307 | 2,421 | |||||||||
Belgium | 1,465 | 1,711 | 1,507 | |||||||||
Holland | 1,411 | 1,454 | 1,290 | |||||||||
Other countries | 8,574 | 9,282 | 10,452 | |||||||||
Total Diagnostics | $ | 136,682 | $ | 150,454 | $ | 143,521 | ||||||
Year Ended September 30, | 2019 | 2018 | 2017 | |||||||||
United States | $ | 18,936 | 20,468 | $ | 19,595 | |||||||
Germany | 12,664 | 8,108 | 7,406 | |||||||||
China | 8,460 | 8,347 | 5,898 | |||||||||
United Kingdom | 4,714 | 5,201 | 5,579 | |||||||||
Spain | 4,415 | 4,187 | 3,209 | |||||||||
Australia | 3,461 | 3,631 | 4,002 | |||||||||
France | 2,200 | 2,040 | 1,792 | |||||||||
Japan | 1,624 | 1,932 | 1,375 | |||||||||
Italy | 1,357 | 971 | 700 | |||||||||
South Korea | 1,134 | 2,044 | 2,308 | |||||||||
Other countries | 5,367 | 6,188 | 5,386 | |||||||||
Total Life Science | $ | 64,332 | $ | 63,117 | $ | 57,250 | ||||||
As of September 30, 2017: U.K – $15,755; Germany – $6,915; Italy – $7,712; and Australia – $4,376
Diagnostics | Life Science | Unallocated Costs and Eliminations (1) | Total | |||||||||||||
Fiscal Year 2018 - | ||||||||||||||||
Net revenues – | ||||||||||||||||
Third-party | $ | 150,454 | $ | 63,117 | $ | — | $ | 213,571 | ||||||||
Inter-segment | 392 | 397 | (789 | ) | — | |||||||||||
Operating income | 29,701 | 14,912 | (13,029 | ) | 31,584 | |||||||||||
Depreciation and amortization | 6,557 | 2,131 | — | 8,688 | ||||||||||||
Capital expenditures | 2,477 | 1,724 | — | 4,201 | ||||||||||||
Goodwill | 35,213 | 19,424 | — | 54,637 | ||||||||||||
Other intangible assets | 22,068 | 1,045 | — | 23,113 | ||||||||||||
Total assets | 180,978 | 70,341 | 58 | 251,377 | ||||||||||||
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Fiscal Year 2017 - | ||||||||||||||||
Net revenues – | ||||||||||||||||
Third-party | $ | 143,521 | $ | 57,250 | $ | — | $ | 200,771 | ||||||||
Inter-segment | 389 | 537 | (926 | ) | — | |||||||||||
Operating income | 23,848 | 14,086 | (552 | ) | 37,382 | |||||||||||
Depreciation and amortization | 7,037 | 2,053 | — | 9,090 | ||||||||||||
Capital expenditures | 2,554 | 1,913 | — | 4,467 | ||||||||||||
Goodwill | 35,213 | 19,713 | — | 54,926 | ||||||||||||
Other intangible assets | 24,973 | 1,731 | — | 26,704 | ||||||||||||
Total assets | 180,226 | 69,938 | (387 | ) | 249,777 | |||||||||||
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Fiscal Year 2016 - | ||||||||||||||||
Net revenues – | ||||||||||||||||
Third-party | $ | 145,114 | $ | 50,968 | $ | — | $ | 196,082 | ||||||||
Inter-segment | 289 | 893 | (1,182 | ) | — | |||||||||||
Operating income | 38,202 | 12,997 | 179 | 51,378 | ||||||||||||
Depreciation and amortization | 5,471 | 2,247 | — | 7,718 | ||||||||||||
Capital expenditures | 2,690 | 1,314 | — | 4,004 | ||||||||||||
Goodwill | 42,608 | 19,374 | — | 61,982 | ||||||||||||
Other intangible assets | 27,534 | 2,321 | — | 29,855 | ||||||||||||
Total assets | 185,446 | 66,624 | (42 | ) | 252,028 |
Diagnostics | Life Science | Corporate (1) | Eliminations (2) | Total | ||||||||||||||||
Fiscal 2019 | ||||||||||||||||||||
Net revenues - | ||||||||||||||||||||
Third-party | $ | 136,682 | $ | 64,332 | $ | — | $ | — | $ | 201,014 | ||||||||||
Inter-segment | 462 | 361 | — | (823 | ) | — | ||||||||||||||
Operating income | 22,399 | 20,572 | (10,373 | ) | 101 | 32,699 | ||||||||||||||
Depreciation and amortization | 7,676 | 2,288 | — | — | 9,964 | |||||||||||||||
Capital expenditures | 2,049 | 1,748 | — | — | 3,797 | |||||||||||||||
Goodwill | 70,395 | 18,846 | — | — | 89,241 | |||||||||||||||
Other intangible assets, net | 59,807 | 436 | — | — | 60,243 | |||||||||||||||
Total assets | 255,169 | 70,392 | — | (83 | ) | 325,478 | ||||||||||||||
Fiscal 2018 | ||||||||||||||||||||
Net revenues - | ||||||||||||||||||||
Third-party | $ | 150,454 | $ | 63,117 | $ | — | $ | — | $ | 213,571 | ||||||||||
Inter-segment | 392 | 397 | — | (789 | ) | — | ||||||||||||||
Operating income | 32,569 | 13,799 | (15,076 | ) | 292 | 31,584 | ||||||||||||||
Depreciation and amortization | 6,557 | 2,131 | — | — | 8,688 | |||||||||||||||
Capital expenditures | 2,477 | 1,724 | — | — | 4,201 | |||||||||||||||
Goodwill | 35,213 | 19,424 | — | — | 54,637 | |||||||||||||||
Other intangible assets, net | 22,068 | 1,045 | — | — | 23,113 | |||||||||||||||
Total assets | 180,978 | 70,341 | — | 58 | 251,377 | |||||||||||||||
Fiscal 2017 | ||||||||||||||||||||
Net revenues - | ||||||||||||||||||||
Third-party | $ | 143,521 | $ | 57,250 | $ | — | $ | — | $ | 200,771 | ||||||||||
Inter-segment | 389 | 537 | — | (926 | ) | — | ||||||||||||||
Operating income | 34,124 | 14,086 | (11,097 | ) | 269 | 37,382 | ||||||||||||||
Depreciation and amortization | 7,037 | 2,053 | — | — | 9,090 | |||||||||||||||
Capital expenditures | 2,554 | 1,913 | — | — | 4,467 | |||||||||||||||
Goodwill | 35,213 | 19,713 | — | — | 54,926 | |||||||||||||||
Other intangible assets, net | 24,973 | 1,731 | — | — | 26,704 | |||||||||||||||
Total assets | 180,226 | 69,938 | — | (387 | ) | 249,777 |
(1) |
Includes Restructuring and Selected Legal Costs of $2,596, $7,779 and $762 in fiscal years 2019, 2018 and 2017, |
(2) | Eliminations consist of inter-segment transactions. |
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Year Ended September 30, | 2018 | 2017 | 2016 | |||||||||
Segment operating income | $ | 44,635 | $ | 38,144 | $ | 51,378 | ||||||
Restructuring and litigation costs | (13,051 | ) | (762 | ) | — | |||||||
Interest income | 418 | 171 | 67 | |||||||||
Interest expense | (1,520 | ) | (1,642 | ) | (897 | ) | ||||||
Other, net | (102 | ) | 518 | 96 | ||||||||
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Consolidated earnings before income taxes | $ | 30,380 | $ | 36,429 | $ | 50,644 | ||||||
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Segment operating income | $ | 43,072 | $ | 46,660 | $ | 48,479 | ||||||
Corporate expenses | (10,373 | ) | (15,076 | ) | (11,097 | ) | ||||||
Interest income | 681 | 418 | 171 | |||||||||
Interest expense | (1,945 | ) | (1,520 | ) | (1,642 | ) | ||||||
Other, net | 122 | (102 | ) | 518 | ||||||||
Consolidated earnings before income taxes | $ | 31,557 | $ | 30,380 | $ | 36,429 | ||||||
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For the Quarter Ended in Fiscal 2018 | December 31 | March 31 | June 30 | September 30 | ||||||||||||
Net revenues | $ | 52,283 | $ | 56,451 | $ | 51,737 | $ | 53,100 | ||||||||
Gross profit | 31,786 | 34,569 | 31,956 | 32,150 | ||||||||||||
Net earnings | 6,302 | 5,288 | 6,825 | 5,434 | ||||||||||||
Basic earnings per common share | 0.15 | 0.12 | 0.16 | 0.13 | ||||||||||||
Diluted earnings per common share | 0.15 | 0.12 | 0.16 | 0.13 | ||||||||||||
Cash dividends per common share | 0.125 | 0.125 | 0.125 | 0.125 | ||||||||||||
For the Quarter Ended in Fiscal 2017 | December 31 | March 31 | June 30 | September 30 | ||||||||||||
Net revenues | $ | 46,809 | $ | 54,125 | $ | 50,140 | $ | 49,697 | ||||||||
Gross profit | 29,039 | 33,477 | 31,146 | 30,630 | ||||||||||||
Net earnings | 6,279 | 9,312 | 240 | 5,726 | ||||||||||||
Basic earnings per common share | 0.15 | 0.22 | 0.01 | 0.14 | ||||||||||||
Diluted earnings per common share | 0.15 | 0.22 | 0.01 | 0.13 | ||||||||||||
Cash dividends per common share | 0.200 | 0.125 | 0.125 | 0.125 |
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On October 9, 2018, the Company and DiaSorin Inc. entered into a strategic collaboration to sell DiaSorin’sHelicobacter pylori stool antigen test to detectH. pylori for use on its automated LIAISON platform under the Meridian brand name worldwide. The new collaboration results in the termination
For the Quarter Ended in Fiscal 2019 | December 31 | March 31 | June 30 | September 30 | ||||||||||||
Net revenues | $ | 51,480 | $ | 50,248 | $ | 48,440 | $ | 50,846 | ||||||||
Gross profit | 31,572 | 29,338 | 28,259 | 29,156 | ||||||||||||
Net earnings | 8,106 | 7,094 | 5,079 | 4,103 | ||||||||||||
Basic earnings per common share | 0.19 | 0.17 | 0.12 | 0.10 | ||||||||||||
Diluted earnings per common share | 0.19 | 0.17 | 0.12 | 0.10 | ||||||||||||
Cash dividends per common share | 0.125 | 0.125 | — | — | ||||||||||||
For the Quarter Ended in Fiscal 2018 | December 31 | March 31 | June 30 | September 30 | ||||||||||||
Net revenues | $ | 52,283 | $ | 56,451 | $ | 51,737 | $ | 53,100 | ||||||||
Gross profit | 32,010 | 34,569 | 31,962 | 32,156 | ||||||||||||
Net earnings | 6,302 | 5,288 | 6,825 | 5,434 | ||||||||||||
Basic earnings per common share | 0.15 | 0.12 | 0.16 | 0.13 | ||||||||||||
Diluted earnings per common share | 0.15 | 0.12 | 0.16 | 0.13 | ||||||||||||
Cash dividends per common share | 0.125 | 0.125 | 0.125 | 0.125 | ||||||||||||
2019.
Not applicable.
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The information required by Items10,11,12 (other than that portion set forth below),13 and14, of Part III are incorporated by reference from the Registrant’s Proxy Statement for its 2019 Annual Shareholders’ Meeting to be filed with the Commission pursuant to Regulation 14A.
The following information regarding the Company’s directors and executive officers is provided pursuant to Exchange Act Rule14a-3(b)(8)Item 5.03 of Form
“The Board of Directors may, in its sole discretion, determine that any meeting shall not be held at any place, but may instead be held solely by means of remote communication as authorized by Ohio law.”
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ITEM 12.
EQUITY COMPENSATION PLAN INFORMATION
The following table presents summary
Plan Category | (a) Number of Securities to be issued upon exercise of outstanding options, warrants and rights | (b) Weighted- average exercise price of outstanding options, warrants and rights | (c) Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) | |||||||||
Equity compensation plans approved by security holders(1) | 1,095 | $ | 17.561 | 2,707 | ||||||||
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Total(2) | 1,095 | $ | 17.561 | 2,707 | ||||||||
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the Proxy Statement set forth under the captions “Director Compensation,” “Compensation Discussion and Analysis” “Compensation Committee Interlocks and Insider Participation,” and “Compensation Committee Report” is incorporated herein by reference.
(a) | (1) and (2) FINANCIAL STATEMENTS AND SCHEDULES. |
(b) | (3) EXHIBITS. |
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10.10** | ||||
10.11** | ||||
10.12* | ||||
10.13* | ||||
10.14* | ||||
10.15* | ||||
14 | ||||
21 | ||||
23 | ||||
31.1 | ||||
31.2 | ||||
32*** |
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| ||||
101.INS | Inline XBRL Instance Document | |||
101.SCH | Inline XBRL Taxonomy Extension Schema | |||
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase | |||
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase | |||
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase | |||
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase | |||
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in |
* | Management Compensatory Contracts |
** | Schedules to and certain portions of these exhibits 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 schedule or other portion to the SEC upon request. |
*** | Furnished, not filed. |
MERIDIAN BIOSCIENCE, INC. | ||||
By: | /s/ Jack Kenny | |||
Date: | November | |||
Jack Kenny | ||||
Chief Executive Officer |
Signature | Capacity | Date | ||
/s/ Jack Kenny | Chief Executive Officer and Director | November | ||
Jack Kenny | ||||
| ||||
/s/ Bryan T. Baldasare | Executive Vice President, Chief | November | ||
Bryan T. Baldasare | Financial Officer and Secretary (Principal Financial and Accounting Officer) | |||
/s/ David C. Phillips | Chairman of the Board | November | ||
David C. Phillips | ||||
/s/ James M. Anderson | Director | November | ||
James M. Anderson | ||||
/s/ Dwight E. Ellingwood | Director | November | ||
Dwight E. Ellingwood | ||||
/s/ John C. McIlwraith | Director | November | ||
John C. McIlwraith | ||||
/s/ John M. Rice, Jr. | Director | November | ||
John M. Rice, Jr. | ||||
/s/ Catherine A. Sazdanoff | Director | November | ||
Catherine A. Sazdanoff | ||||
/s/ Felicia Williams | Director | November | ||
Felicia Williams |
Description | Balance at Beginning of Period | Charged to Costs and Expenses | Deductions | Other (a) | Balance at End of Period | |||||||||||||||
Year Ended September 30, 2018: | ||||||||||||||||||||
Allowance for doubtful accounts | $ | 307 | $ | 39 | $ | (32 | ) | $ | (4 | ) | $ | 310 | ||||||||
Inventory realizability reserves | 2,059 | 321 | (405 | ) | (4 | ) | 1,971 | |||||||||||||
Valuation allowances – deferred taxes | 342 | — | (40 | ) | — | 302 | ||||||||||||||
Year Ended September 30, 2017: | ||||||||||||||||||||
Allowance for doubtful accounts | $ | 334 | $ | 90 | $ | (134 | ) | $ | 17 | $ | 307 | |||||||||
Inventory realizability reserves | 2,680 | 35 | (661 | ) | 5 | 2,059 | ||||||||||||||
Valuation allowances – deferred taxes | 342 | — | — | — | 342 | |||||||||||||||
Year Ended September 30, 2016: | ||||||||||||||||||||
Allowance for doubtful accounts | $ | 248 | $ | 139 | $ | (69 | ) | $ | 16 | $ | 334 | |||||||||
Inventory realizability reserves | 2,456 | 1,285 | (1,072 | ) | 11 | 2,680 | ||||||||||||||
Valuation allowances – deferred taxes | 15 | 327 | — | — | 342 |
Description | Balance at Beginning of Period | Charged to Costs and Expenses | Deductions | Other (a) | Balance at End of Period | |||||||||||||||
Year Ended September 30, 2019: | ||||||||||||||||||||
Allowance for doubtful accounts | $ | 310 | $ | 347 | $ | (100 | ) | $ | (20 | ) | $ | 537 | ||||||||
Inventory realizability reserves | 1,971 | 774 | (448 | ) | (12 | ) | 2,285 | |||||||||||||
Valuation allowances – deferred taxes | 302 | 106 | — | — | 408 | |||||||||||||||
Year Ended September 30, 2018: | ||||||||||||||||||||
Allowance for doubtful accounts | $ | 307 | $ | 39 | $ | (32 | ) | $ | (4 | ) | $ | 310 | ||||||||
Inventory realizability reserves | 2,059 | 321 | (405 | ) | (4 | ) | 1,971 | |||||||||||||
Valuation allowances – deferred taxes | 342 | — | (40 | ) | — | 302 | ||||||||||||||
Year Ended September 30, 2017: | ||||||||||||||||||||
Allowance for doubtful accounts | $ | 334 | $ | 90 | $ | (134 | ) | $ | 17 | $ | 307 | |||||||||
Inventory realizability reserves | 2,680 | 35 | (661 | ) | 5 | 2,059 | ||||||||||||||
Valuation allowances – deferred taxes | 342 | — | — | — | 342 |
(a) | Balances reflect the effects of currency |