SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form

10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 31, ~~2019~~

2020

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from

Commission filenumber

0-14902

MERIDIAN BIOSCIENCE, INC.

Incorporated under the laws of Ohio

31-0888197

(I.R.S. Employer Identification No.)

3471 River Hills Drive

Cincinnati, Ohio 45244

(513)271-3700

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, no par value	VIVO	NASDAQ Global Select Market

Indicate by a check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes

☒

☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation

S-T (§

(§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such

files).

Yes

☒

☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a

non-accelerated

filer, smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule

12b-2

of the Exchange Act.


Large accelerated filer	☒ ☐	Accelerated filer	☒

Non-accelerated filer	☐	Smaller reporting company	☐

~~Non-accelerated filer~~	☐	~~Smaller reporting company~~	☐

Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule

12b-2

of the Exchange Act)

. Yes

☐

No ☒

~~Securities registered pursuant to Section 12(b) of the Act:~~

~~Title of each class~~

~~Trading~~

~~Symbol(s)~~

~~Name of each exchange~~

~~on which registered~~

~~Common Stock, no par value~~

~~VIVO~~

~~NASDAQ Global Select Market~~

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.


~~Class~~
Class		Outstanding April 30, ~~2019~~ 2020
Common Stock, no par value		~~42,628,582~~ 42,832,859

Table of Contents

MERIDIAN BIOSCIENCE, INC. AND SUBSIDIARIES

TABLE OF CONTENTS TO QUARTERLY REPORT ON FORM

10-Q


		Page(s)
		~~Page(s)~~
PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)

~~Item 1.~~	~~Financial Statements (Unaudited)~~

	Condensed Consolidated Statements of Operations Three and Six Months Ended March 31, ~~2019~~2020 and ~~2018~~2019		1


	Condensed Consolidated Statements of Comprehensive Income Three and Six Months Ended March 31, ~~2019~~2020 and ~~2018~~2019		2


	Condensed Consolidated Statements of Cash Flows Six Months Ended March 31, ~~2019~~2020 and ~~2018~~2019		3

	Condensed Consolidated Balance Sheets March 31, 2020 and September 30, 2019		4- 5

	~~Condensed Consolidated Balance Sheets~~ ~~March 31, 2019 and September 30, 2018~~		~~4-5~~

	Condensed Consolidated Statements of Changes in Shareholders’ Equity Three and Six Months Ended March 31, ~~2019~~2020 and ~~2018~~2019		6


	Notes to Condensed Consolidated Financial Statements		~~7-16~~ 7- 20

~~Item 2.~~
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		~~17-26~~ 20- 28

~~Item 3.~~
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		26 29

~~Item 4.~~	~~Controls and Procedures~~		26

~~PART II.~~	~~OTHER INFORMATION~~

~~Item 1.~~	~~Legal Proceedings~~		27

Item ~~1A.~~ 4.	~~Risk Factors~~Controls and Procedures		27 29

~~Item 6.~~	~~Exhibits~~		~~27-28~~
PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings		29

Item 1A.	Risk Factors		29

Item 6.	Exhibits		31

Signature			28 32

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form
10-Q
contains forward-looking statements. The Private Securities Litigation Reform Act of 1995 provides a safe harbor from civil litigation for forward-looking statements accompanied by meaningful cautionary statements. Except for historical information, this report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, which may be identified by words such as “continues”, “estimates”, “anticipates”, “projects”, “plans”, “seeks”, “may”, “will”, “expects”, “intends”, “believes”, “signals”, “should”, “can” and similar expressions or the negative versions thereof and which also may be identified by their context. All statements that address operating performance or events or developments that Meridian expects or anticipates will occur in the future, including, but not limited to, statements relating to per share diluted earnings, sales, product demand, revenue and ~~revenue,~~the impact of
COVID-19
on our business and prospects, are forward-looking statements. Such statements, whether expressed or implied, are based upon current expectations of the Company and speak only as of the date made. Specifically, Meridian’s forward-looking statements are, and will be, based on management’s then-current views and assumptions regarding future events and operating performance. Meridian assumes no obligation to publicly update or revise any forward-looking statements even if experience or future changes make it clear that any projected results expressed or implied therein will not be realized. These statements are subject to various risks, uncertainties and other factors that could cause actual results to differ materially, including, without limitation, the following:

Meridian’s operating results, financial condition and continued growth depends, in part, on its ability to introduce into the marketplace enhancements of existing products or new products that incorporate technological advances, meet customer requirements and respond to products developed by Meridian’s competition, its ability to effectively sell such products and its ability to successfully expand and effectively manage increased sales and marketing operations. While Meridian has introduced a number of internally developed products and acquired products, there can be no assurance that it will be successful in the future in introducing such products on a timely basis or in protecting its intellectual property, and unexpected or costly manufacturing costs associated with its introduction of new products or acquired products could cause actual results to differ from expectations. Meridian relies on proprietary, patented and licensed technologies. As such, the Company’s ability to protect its intellectual property rights, as well as the potential for intellectual property litigation, would impact its results. Ongoing consolidations of reference laboratories and formation of multi-hospital alliances may cause adverse changes to pricing and distribution. Recessionary pressures on the economy and the markets in which our customers operate, as well as adverse trends in buying patterns from customers, can change expected results. Costs and difficulties in complying with laws and regulations, including those administered by the United States Food and Drug Administration, can result

unanticipated

expenses and delays and interruptions to the sale of new and existing products, as can the uncertainty of regulatory approvals and the regulatory process (including the currently ongoing study and other FDA actions regarding the Company’s LeadCare products). The international scope of Meridian’s operations, including changes in the relative strength or weakness of the U.S. dollar and general economic conditions in foreign countries, can impact results and make them difficult to predict. One of Meridian’s growth strategies is the acquisition of companies and product lines. There can be no assurance that additional acquisitions will be consummated or that, if consummated, will be successful and the acquired businesses will be successfully integrated into Meridian’s operations. There may be risks that acquisitions may disrupt operations and may pose potential difficulties in employee retention, and there may be additional risks with respect to Meridian’s ability to recognize the benefits of acquisitions, including potential synergies and cost savings or the failure of acquisitions to achieve their plans and objectives. Meridian cannot predict the outcome of goodwill impairment testing and the impact of possible goodwill impairments on Meridian’s earnings and financial results. Meridian cannot predict the possible impact of U.S. health care legislation enacted in 2010 – the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act – and any modification or repeal of any of the provisions thereof initiated by Congress or the presidential administration, and any similar initiatives in other countries on its results of operations. Efforts to reduce the U.S. federal deficit, breaches of Meridian’s information technology systems, trade wars, increased tariffs, and natural disasters and other events could have a materially adverse effect on Meridian’s results of operations and revenues. In the past, the Company has identified a material weakness in our internal control over financial reporting, which has been remediated, but the Company can make no assurances that a material weakness will not be identified in the future, which if identified and not properly corrected, could materially adversely affect our operations and result in material misstatements in our financial statements. Meridian also is subject to risks and uncertainties related to disruptions to or reductions in business operations or prospects due to pandemics, epidemics, widespread health emergencies, or outbreaks of infectious diseases such as the coronavirus disease
COVID-19.
In addition to the factors described in this paragraph, as well as those factors identified from time to time in our filings with the Securities and Exchange Commission, Part I, Item 1A Risk Factors of our most recent Annual Report on Form
10-K
contains a list and description of uncertainties, risks and other matters that may affect the Company. Readers should carefully review these forward-looking statements and risk factors, and not place undue reliance on our forward-looking statements.

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

MERIDIAN BIOSCIENCE, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations (Unaudited)

(dollar and share amounts in thousands, except per share data)

   Three Months Ended Six Months Ended
   March 31, March 31,
   2019 2018 2019 2018
NET REVENUES
   $ 50,248 $ 56,451 $ 101,728 $ 108,734
COST OF SALES
   20,910 21,882 40,818 42,155


GROSS PROFIT
   29,338 34,569 60,910 66,579


OPERATING EXPENSES

Research and development
   3,816 4,491 7,700 8,895
Selling and marketing
   6,911 8,647 14,474 17,461
General and administrative
   7,388 8,842 16,286 18,090
Acquisition and restructuring costs
   785 3,458 872 4,192
Litigation costs
   603 1,453 1,192 2,202


Total operating expenses
   19,503 26,891 40,524 50,840


OPERATING INCOME
   9,835 7,678 20,386 15,739
OTHER INCOME (EXPENSE)

Interest income
   204 90 353 162
Interest expense
   (347 ) (379 ) (710 ) (774 )
Other, net
   (445 ) (165 ) (306 ) (245 )


Total other income (expense)
   (588 ) (454 ) (663 ) (857 )


EARNINGS BEFORE INCOME TAXES
   9,247 7,224 19,723 14,882
INCOME TAX PROVISION
   2,153 1,936 4,523 3,292


NET EARNINGS
   $ 7,094 $ 5,288 $ 15,200 $ 11,590


BASIC EARNINGS PER COMMON SHARE
   $ 0.17 $ 0.12 $ 0.36 $ 0.27
DILUTED EARNINGS PER COMMON SHARE
   $ 0.17 $ 0.12 $ 0.35 $ 0.27
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - BASIC
   42,496 42,323 42,472 42,289
EFFECT OF DILUTIVE STOCK OPTIONS AND RESTRICTED SHARE UNITS
   450 409 453 404


WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - DILUTED
   42,946 42,732 42,925 42,693


ANTI-DILUTIVE SECURITIES:

Common share options and restricted share units
   771 1,021 742 1,015


DIVIDENDS DECLARED PER COMMON SHARE
   $ 0.125 $ 0.125 $ 0.250 $ 0.250

	Three Months Ended						Six Months Ended
	March 31,						March 31,
	2020			2019			2020			2019
NET REVENUES	$	57,296		$	50,248		$	104,717		$	101,728
COST OF SALES		22,842			20,910			42,823			40,818

GROSS PROFIT		34,454			29,338			61,894			60,910

OPERATING EXPENSES
Research and development		5,386			3,816			10,210			7,700
Selling and marketing		6,514			6,911			13,198			14,474
General and administrative		10,480			7,388			19,236			16,286
Acquisition-related costs		1,787			885			1,787			972
Change in fair value of contingent consideration obligation		(2,491	)		—			(1,304	)		—
Restructuring costs		252			(100	)		527			(100	)
Selected legal costs		735			603			1,055			1,192

Total operating expenses		22,663			19,503			44,709			40,524

OPERATING INCOME		11,791			9,835			17,185			20,386

OTHER INCOME (EXPENSE)
Interest income		23			204			134			353
Interest expense		(532	)		(347	)		(1,299	)		(710	)
Other, net		1,365			(445	)		653			(306	)

Total other income (expense)		856			(588	)		(512	)		(663	)

EARNINGS BEFORE INCOME TAXES		12,647			9,247			16,673			19,723

INCOME TAX PROVISION		3,288			2,153			4,487			4,523

NET EARNINGS	$	9,359		$	7,094		$	12,186		$	15,200

BASIC EARNINGS PER COMMON SHARE	$	0.22		$	0.17		$	0.28		$	0.36
DILUTED EARNINGS PER COMMON SHARE	$	0.22		$	0.17		$	0.28		$	0.35
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - BASIC		42,830			42,496			42,810			42,472
EFFECT OF DILUTIVE STOCK OPTIONS AND RESTRICTED SHARE UNITS		138			450			143			453

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - DILUTED		42,968			42,946			42,953			42,925

ANTI-DILUTIVE SECURITIES:
Common share options and restricted share units		1,635			771			1,520			742

DIVIDENDS DECLARED PER COMMON SHARE	$	—		$	0.125		$	—		$	0.250

The accompanying notes are an integral part of these condensed consolidated financial statements.

Page 1

~~MERIDIAN BIOSCIENCE, INC. AND SUBSIDIARIES~~

~~Condensed Consolidated Statements~~Table of ~~Comprehensive Income (Unaudited)~~

~~(dollar amounts in thousands)~~

   Three Months Ended Six Months Ended
   March 31, March 31,
   2019 2018 2019 2018
NET EARNINGS
   $ 7,094 $ 5,288 $ 15,200 $ 11,590
Other comprehensive income (loss):

Foreign currency translation adjustment
   377 926 (339 ) 1,217
Unrealized gain (loss) on cash flow hedge
   (310 ) 424 (887 ) 765
Income taxes related to items of other comprehensive income
   78 (107 ) 223 (219 )


Other comprehensive income (loss), net of tax
   145 1,243 (1,003 ) 1,763


COMPREHENSIVE INCOME
   $ 7,239 $ 6,531 $ 14,197 $ 13,353

Contents

MERIDIAN BIOSCIENCE, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

(dollar amounts in thousands)

	Three Months Ended						Six Months Ended
	March 31,						March 31,
	2020			2019			2020			2019
NET EARNINGS	$	9,359		$	7,094		$	12,186		$	15,200
Other comprehensive income (loss):
Foreign currency translation adjustment		(2,786	)		377			(18	)		(339	)
Unrealized loss on cash flow hedge		(313	)		(310	)		(313	)		(887	)
Reclassification of gain on cash flow hedge		(77	)		—			(154	)		—
Income taxes related to items of other comprehensive income		96			78			115			223

Other comprehensive income (loss), net of tax		(3,080	)		145			(370	)		(1,003	)

COMPREHENSIVE INCOME	$	6,279		$	7,239		$	11,816		$	14,197

The accompanying notes are an integral part of these condensed consolidated financial statements.

Page 2

Table of Contents

MERIDIAN BIOSCIENCE, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Unaudited)

(dollar amounts in thousands)

Six Months Ended March 31,
   2019 2018
CASH FLOWS FROM OPERATING ACTIVITIES

Net earnings
   $ 15,200 $ 11,590
Non-cash items included in net earnings:

Depreciation of property, plant and equipment
   2,562 2,236
Amortization of intangible assets
   1,658 1,883
Amortization of deferred instrument costs
   —   401
Stock-based compensation
   2,368 1,975
Deferred income taxes
   (677 ) (1,576 )
Change in:

Accounts receivable
   (951 ) (4,185 )
Inventories
   832 (2,370 )
Prepaid expenses and other current assets
   286 754
Accounts payable and accrued expenses
   (1,267 ) 3,746
Income taxes payable
   1,108 (775 )
Other, net
   (149 ) 160


Net cash provided by operating activities
   20,970 13,839


CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of property, plant and equipment
   (2,113 ) (2,160 )


Net cash used for investing activities
   (2,113 ) (2,160 )


CASH FLOWS FROM FINANCING ACTIVITIES

Dividends paid
   (10,612 ) (10,577 )
Payments on term loan
   (2,250 ) (2,250 )
Proceeds and tax benefits from exercises of stock options
   524 —


Net cash used for financing activities
   (12,338 ) (12,827 )


Effect of Exchange Rate Changes on Cash and Equivalents and Restricted Cash
   (185 ) 476


Net Increase (Decrease) in Cash and Equivalents and Restricted Cash
   6,334 (672 )
Cash and Equivalents and Restricted Cash at Beginning of Period
   60,763 58,072


Cash and Equivalents and Restricted Cash at End of Period
   $ 67,097 $ 57,400


Cash and Equivalents
   $ 66,097 $ 56,400
Restricted Cash
   1,000 1,000


Cash and Equivalents and Restricted Cash at End of Period
   $ 67,097 $ 57,400


Six Months Ended March 31,	2020			2019
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings	$	12,186		$	15,200
Non-cash items included in net earnings:
Depreciation of property, plant and equipment		2,439			2,562
Amortization of intangible ass e ts		3,449			1,658
Stock-based compensation		1,759			2,368
Deferred income taxes		656			(677	)
Change in accrued contingent consideration		(1,304	)		—
Change in the following :
Accounts receivable		(4,950	)		(951	)
Inventories		(2,511	)		832
Prepaid expenses and other current assets		1,278			286
Accounts payable and accrued expenses		1,621			(1,267	)
Income taxes payable		400			1,108
Other, net		692			(68	)

Net cash provided by operating activities		15,715			21,051

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment		(1,543	)		(2,113	)

Net cash used for investing activities		(1,543	)		(2,113	)

CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid		—			(10,612	)
Payment on revolving credit facility		(27,000	)		—
Payment of debt issuance costs		(116	)		—
Payments on term loan		—			(2,250	)
Proceeds from exercise of stock options		—			443

Net cash used for financing activities		(27,116	)		(12,419	)

Effect of Exchange Rate Changes on Cash and Equivalents and Restricted Cash		97			(185	)

Net Increase (Decrease) in Cash and Equivalents and Restricted Cash		(12,847	)		6,334
Cash and Equivalents and Restricted Cash at Beginning of Perio d		62,397			60,763

Cash and Equivalents and Restricted Cash at End of Period	$	49,550		$	67,097


Cash and Equivalents	$	49,550		$	66,097
Restricted Cash		—			1,000

Cash and Equivalents and Restricted Cash at End of Period	$	49,550		$	67,097

The accompanying notes are an integral part of these condensed consolidated financial statements.

Page 3

Table of Contents

MERIDIAN BIOSCIENCE, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(dollar amounts in thousands)

ASSETS

   March 31,
2019
(Unaudited)    September 30,
2018
CURRENT ASSETS

Cash and equivalents
   $ 66,097    $ 59,763
Accounts receivable, less allowances of $437 and $310
   33,031    32,336
Inventories
   40,866    41,993
Prepaid expenses and other current assets
   4,671    4,961




Total current assets
   144,665    139,053




PROPERTY, PLANT AND EQUIPMENT, at Cost

Land
   1,155    1,160
Buildings and improvements
   32,454    32,444
Machinery, equipment and furniture
   60,394    50,606
Construction in progress
   1,806    1,631




Subtotal
   95,809    85,841
Less: accumulated depreciation and amortization
   65,039    55,846




Net property, plant and equipment
   30,770    29,995




OTHER ASSETS

Goodwill
   54,642    54,637
Other intangible assets, net
   21,452    23,113
Restricted cash
   1,000    1,000
Deferred instrument costs, net
   —      1,239
Fair value of interest rate swap
   835    1,722
Deferred income taxes
   110    130
Other assets
   490    488




Total other assets
   78,529    82,329




TOTAL ASSETS
   $ 253,964    $ 251,377


	March 31, 2020 (Unaudited)		September 30, 2019
CURRENT ASSETS
Cash and equivalents	$	49,550	$	62,397
Accounts receivable, less allowances of $521 and $537, respectivel y		40,184		35,608
Inventories		41,008		39,617
Prepaid expenses and other current asset s		5,847		7,139

Total current assets		136,589		144,761

PROPERTY, PLANT AND EQUIPMENT, at Cost
Land		987		982
Buildings and improvements		32,004		31,904
Machinery, equipment and furniture		66,006		64,155
Construction in progress		1,252		522

Subtotal		100,249		97,563
Less: accumulated depreciation and amortization		69,875		66,996

Net property, plant and equipment		30,374		30,567

OTHER ASSETS
Goodwill		89,198		89,241
Other intangible assets, net		56,848		60,243
Right-of-use assets		5,355		—
Deferred income taxes		137		156
Other assets		573		510

Total other assets		152,111		150,150

TOTAL ASSETS	$	319,074	$	325,478

The accompanying notes are an integral part of these condensed consolidated financial statements.

Page 4

Table of Contents

MERIDIAN BIOSCIENCE, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(dollar amounts in thousands)

LIABILITIES AND SHAREHOLDERS’ EQUITY

   March 31,
2019
(Unaudited) September 30,
2018
CURRENT LIABILITIES

Accounts payable
   $ 7,838 $ 6,260
Accrued employee compensation costs
   5,357 7,263
Other accrued expenses
   3,724 5,065
Current portion of long-term debt
   6,000 5,250
Income taxes payable
   1,163 335


Total current liabilities
   24,082 24,173


NON-CURRENT LIABILITIES

Post-employment benefits
   2,476 2,646
Long-term debt
   41,946 44,930
Long-term income taxes payable
   736 441
Deferred income taxes
   3,079 3,769


Totalnon-current liabilities
   48,237 51,786


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, 42,515,142 and 42,399,962 shares issued, respectively
   —   —
Additionalpaid-in capital
   131,951 129,193
Retained earnings
   54,074 49,602
Accumulated other comprehensive loss
   (4,380 ) (3,377 )


Total shareholders’ equity
   181,645 175,418


TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
   $ 253,964 $ 251,377


	March 31, 2020 (Unaudited)			September 30, 2019
CURRENT LIABILITIES
Accounts payable	$	7,879		$	7,238
Accrued employee compensation costs		9,009			7,938
Accrued interest		180			498
Current portion of acquisition consideration		13,656			—
Current operating lease obligations		1,350			—
Other accrued expenses		3,445			3,260
Income taxes payable		2,366			1,980

Total current liabilities		37,885			20,914

NON-CURRENT LIABILITIES
Acquisition consideration		17,242			32,202
Post-employment benefits		2,458			2,500
Fair value of interest rate swaps		313			—
Long-term operating lease obligations		4,111			—
Long-term debt		48,824			75,824
Long-term income taxes payable		549			549
Deferred income taxes		3,159			2,522
Total non-current liabilities		76,656			113,597
COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS’ EQUITY
Preferred stock, no par value; 1,000,000 shares authorized; 0ne issued		—			��
Common shares, no par value; 71,000,000 shares authorized, 42,831,267 and 42,712,296 shares issued, respectively		—			—
Additional paid-in capital		134,584			132,834
Retained earnings		75,294			63,108
Accumulated other comprehensive loss		(5,345	)		(4,975	)
Total shareholders’ equity		204,533			190,967
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	319,074		$	325,478

The accompanying notes are an integral part of these condensed consolidated financial statements.

Page 5

Table of Contents

MERIDIAN BIOSCIENCE, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Changes in Shareholders’ Equity (Unaudited)

(dollar and share amounts in thousands, except per share data)

   Common
Shares
Issued    Additional
Paid-In
Capital    Retained
Earnings Accumulated Other
Comprehensive
Income (Loss) Total
Shareholders’
Equity
THREE MONTHS ENDED MARCH 31, 2019

Balance at December 31, 2018
   42,489    $ 130,876    $ 52,291 $ (4,525 ) $ 178,642
Cash dividends paid - $0.125 per share
   —      —      (5,311 ) —   (5,311 )
Conversion of restricted share units and exercise of stock options
   26    377    —   —   377
Stock compensation expense
   —      698    —   —   698
Net earnings
   —      —      7,094 —   7,094
Foreign currency translation adjustment
   —      —      —   377 377
Hedging activity, net of tax
   —      —      —   (232 ) (232 )






Balance at March 31, 2019
   42,515    $ 131,951    $ 54,074 $ (4,380 ) $ 181,645






THREE MONTHS ENDED MARCH 31, 2018

Balance at December 31, 2017
   42,307    $ 127,367    $ 47,937 $ (2,426 ) $ 172,878
Cash dividends paid - $0.125 per share
   —      —      (5,289 ) —   (5,289 )
Conversion of restricted share units
   37    —      —   —   —
Stock compensation expense
   —      216    —   —   216
Net earnings
   —      —      5,288 —   5,288
Foreign currency translation adjustment
   —      —      —   926 926
Hedging activity, net of tax
   —      —      —   317 317






Balance at March 31, 2018
   42,344    $ 127,583    $ 47,936 $ (1,183 ) $ 174,336






   Common
Shares
Issued    Additional
Paid-In
Capital    Retained
Earnings Accumulated Other
Comprehensive
Income (Loss) Total
Shareholders’
Equity
SIX MONTHS ENDED MARCH 31, 2019

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
   115    390    —   —   390
Stock compensation expense
   —      2,368    —   —   2,368
Net earnings
   —      —      15,200 —   15,200
Foreign currency translation adjustment
   —      —      —   (339 ) (339 )
Hedging activity, net of tax
   —      —      —   (664 ) (664 )
Adoption of ASU2014-09
   —      —      (116 ) —   (116 )






Balance at March 31, 2019
   42,515    $ 131,951    $ 54,074 $ (4,380 ) $ 181,645






SIX MONTHS ENDED MARCH 31, 2018

Balance at September 30, 2017
   42,207    $ 125,608    $ 46,923 $ (2,946 ) $ 169,585
Cash dividends paid - $0.250 per share
   —      —      (10,577 ) —   (10,577 )
Conversion of restricted share units
   137    —      —   —   —
Stock compensation expense
   —      1,975    —   —   1,975
Net earnings
   —      —      11,590 —   11,590
Foreign currency translation adjustment
   —      —      —   1,217 1,217
Hedging activity, net of tax
   —      —      —   546 546






Balance at March 31, 2018
   42,344    $ 127,583    $ 47,936 $ (1,183 ) $ 174,336


	Common Shares Issued		Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total Shareholders’ Equity
THREE MONTHS ENDED MARCH 31, 2020
Balance at December 31, 2019		42,828	$	133,622		$	65,935		$	(2,265	)	$	197,292
Conversion of restricted share units		3		(9	)		—			—			(9	)
Stock compensation expense		—		971			—			—			971
Net earnings		—		—			9,359			—			9,359
Foreign currency translation adjustment		—		—			—			(2,786	)		(2,786	)
Hedging activity, net of tax		—		—			—			(294	)		(294	)
Balance at March 31, 2020		42,831	$	134,584		$	75,294		$	(5,345	)	$	204,533
THREE MONTHS ENDED MARCH 31, 2019
Balance at December 31, 2018		42,489	$	130,876		$	52,291		$	(4,525	)	$	178,642
Cash dividends paid - $0.125 per share		—		—			(5,311	)		—			(5,311	)
Conversion of restricted share units and exercise of stock options		26		377			—			—			377
Stock compensation expense		—		698			—			—			698
Net earnings		—		—			7,094			—			7,094
Foreign currency translation adjustment		—		—			—			377			377
Hedging activity, net of tax		—		—			—			(232	)		(232	)
Balance at March 31, 2019		42,515	$	131,951		$	54,074		$	(4,380	)	$	181,645

	Common Shares Issued		Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total Shareholders’ Equity
SIX MONTHS ENDED MARCH 31, 2020
Balance at September 30, 2019		42,712	$	132,834		$	63,108		$	(4,975	)	$	190,967
Conversion of restricted share units		119		(9	)		—			—			(9	)
Stock compensation expense		—		1,759			—			—			1,759
Net earnings		—		—			12,186			—			12,186
Foreign currency translation adjustment		—		—			—			(18	)		(18	)
Hedging activity, net of tax		—		—			—			(352	)		(352	)
Balance at March 31, 2020		42,831	$	134,584		$	75,294		$	(5,345	)	$	204,533
SIX MONTHS ENDED MARCH 31, 2019
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		115		390			—			—			390
Stock compensation expense		—		2,368			—			—			2,368
Net earnings		—		—			15,200			—			15,200
Foreign currency translation adjustment		—		—			—			(339	)		(339	)
Hedging activity, net of tax		—		—			—			(664	)		(664	)
Adoption of ASU 2014-09		—		—			(116	)		—			(116	)
Balance at March 31, 2019		42,515	$	131,951		$	54,074		$	(4,380	)	$	181,645

The accompanying notes are an integral part of these condensed consolidated financial statements.

Page 6

Table of Contents

MERIDIAN BIOSCIENCE, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

Dollars in Thousands, Except Per Share Amounts

(Unaudited)

1.	Basis of Presentation

The interim condensed consolidated financial statements are unaudited and are prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information, and the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. In the opinion of Management, the interim financial statements include all normal adjustments and disclosures necessary to present fairly the Company’s financial position as of March 31, ~~2019,~~2020, the results of its operations for the ~~three~~three- and ~~six month~~

six-month

periods ended March 31, ~~2019~~2020 and ~~2018,~~2019, and its cash flows for the ~~six month~~six-month periods ended March 31, ~~2019~~2020 and ~~2018.~~2019. These statements should be read in conjunction with the consolidated financial statements and footnotes thereto included in the Company’s fiscal ~~2018~~2019 Annual Report on Form

10-K.

Financial information as of September 30, ~~2018~~2019 has been derived from the Company’s audited consolidated financial statements.

The results of operations for interim periods are not necessarily indicative of the results to be expected for the year.

In December 2019, the SARS-CoV-2 virus emerged in Wuhan, China and spread to other parts of the world. In March 2020, the World Health Organization (“WHO”) designated

COVID-19

(the disease caused by SARS-CoV-2) a global pandemic. Governments have implemented lockdown and

shelter-in-place

orders, requiring many

non-essential

businesses to shut down operations for the time being. The Company’s business, however, is deemed “essential” and it has continued to operate, manufacture and distribute its products to customers globally.

While

COVID-19

has not had a material negative impact on the Company’s operations, financial condition or cash flows as of the date of this filing, we cannot reasonably predict the extent of the impact of

COVID-19

on our future results of operations and cash flows due to the continued uncertainty around the duration and severity of the pandemic. See Management’s Discussion and Analysis of Financial Condition and Results of Operations included herein for additional discussion of the effects of the COVID-19 pandemic on the Company and its results of operations.

2.	Significant Accounting Policies

A summary of the Company’s significant accounting policies is included in Note 1 to the audited consolidated financial statements of the Company’s fiscal ~~2018~~2019 Annual Report on Form

10-K

and should be referred to for a description of the Company’s current significant accounting policies, with the exception of Revenue Recognition

and Fair Value Measurements

, which is

are

set forth below.

(a) Revenue Recognition –

~~Adoption of New Standard~~

~~On October 1, 2018, we adopted ASUNo. 2014-09,~~~~Revenue from Contracts with Customers~~, using the modified retrospective transition method applied to those contracts that were not completed as of that date. Results for reporting periods beginning on or after October 1, 2018 are presented under the new guidance, while prior period amounts are not adjusted and continue to be reported in accordance with previously applicable guidance.

Upon adoption, we recorded a reduction of $116 to the opening balance of retained earnings as of October 1, 2018. This adjustment is related to writing off the book value of clinical diagnostic testing instruments located at customers for which there is no contractual arrangement for the instrument to be returned to the Company. Instruments placed with customers under an agreement to return the instrument to the Company were reclassified to machinery and equipment. Prior to adoption of the new guidance, all instruments placed with customers were capitalized and amortized over an estimated three-year utilization period, with the net balance reflected as deferred instrument costs.

~~Page 7~~

~~The following table summarizes the impact of the new revenue standard on our opening balance sheet:~~

   Balance at
September 30,
2018    New Revenue
Standard
Adjustment    Balance at
October 1,
2018
PROPERTY, PLAN AND EQUIPMENT

Machinery, equipment and furniture
   $ 50,606    $ 8,696    $ 59,302
Accumulated depreciation and amortization
   (55,846 )    (7,611 )    (63,457 )
OTHER ASSETS

Deferred instrument costs, net
   1,239    (1,239 )    —
NON-CURRENT LIABILITIES

Deferred income taxes
   (3,769 )    38    (3,731 )
SHAREHOLDERS’ EQUITY

Retained earnings
   (49,602 )    116    (49,486 )

The adoption of this new standard had an immaterial impact on our reported total revenues and operating income, as compared to what would have been reported under the prior standard. Our accounting policies under the new standard were applied prospectively and are noted below following the discussion of Revenue Disaggregation.

Revenue Disaggregation

The following tables present our revenues disaggregated by major geographic region, major product platform and disease state (Diagnostics only):

Revenue by Reportable Segment & Geographic Region

   Three Months Ended March 31, Six Months Ended March 31,
   2019    2018    Inc (Dec) 2019    2018    Inc (Dec)
Diagnostics-

Americas
   $ 27,278    $ 33,351    (18 )% $ 58,425    $ 64,926    (10 )%
EMEA
   5,535    5,912    (6 )% 10,620    11,327    (6 )%
ROW
   687    519    32 % 1,120    1,019    10 %










Total Diagnostics
   33,500    39,782    (16 )% 70,165    77,272    (9 )%










Life Science-

Americas
   5,453    5,121    6 % 9,975    10,373    (4 )%
EMEA
   7,901    7,478    6 % 15,376    12,659    21 %
ROW
   3,394    4,070    (17 )% 6,212    8,430    (26 )%










Total Life Science
   16,748    16,669    —   % 31,563    31,462    —   %










Consolidated
   $ 50,248    $ 56,451    (11 )% $ 101,728    $ 108,734    (6 )%


	Three Months Ended March 31,							Six Months Ended March 31,
	2020		2019		Inc (Dec)			2020		2019		Inc (Dec)
Diagnostics-
Americas	$	27,670	$	26,263		5	%	$	55,405	$	56,686		(2	)%
EMEA		6,777		6,549		3	%		13,277		12,351		7	%
ROW		495		688		(28	)%		1,051		1,128		(7	)%

Total Diagnostics		34,942		33,500		4	%		69,733		70,165		(1	)%

Page 8

Table of Contents

Life Science-

Americas

4,612

5,454

(15
)%
8,627

9,976

(14
)%
EMEA

9,946

7,852

27
%
14,914

15,213

(2
)%
ROW

7,796

3,442

126
%
11,443

6,374

80
%

Total Life Science

22,354

16,748

33
%
34,984

31,563

11
%

Consolidated
$
57,296
$
50,248

14
% $
104,717
$
101,728

3
%

Revenue by Product Platform/Type

   Three Months Ended March 31, Six Months Ended March 31,
   2019    2018    Inc (Dec) 2019    2018    Inc (Dec)
Diagnostics-

Molecular assays
   $ 7,132    $ 9,976    (29 )% $ 14,434    $ 18,692    (23 )%
Immunoassays & blood chemistry assays
   26,368    29,806    (12 )% 55,731    58,580    (5 )%










Total Diagnostics
   $ 33,500    $ 39,782    (16 )% $ 70,165    $ 77,272    (9 )%










Life Science-

Molecular reagents
   $ 5,390    $ 6,143    (12 )% $ 11,998    $ 11,832    1 %
Immunological reagents
   11,358    10,526    8 % 19,565    19,630    —   %










Total Life Science
   $ 16,748    $ 16,669    —   % $ 31,563    $ 31,462    —   %

Three Months Ended March 31,

Six Months Ended March 31,

2020

2019

Inc (Dec)

2020

2019

Inc (Dec)

Diagnostics-

Molecular assays
$
7,238
$
7,084

2
% $
14,077
$
14,314

(2
)%
Immunoassays & blood chemistry assays

27,704

26,416

5
%
55,656

55,851

-
%

Total Diagnostics
$
34,942
$
33,500

4
% $
69,733
$
70,165

(1
)%

Life Science-

Molecular reagents
$
11,534
$
5,390

114
% $
16,892
$
11,998

41
%
Immunological reagents

10,820

11,358

(5
)%
18,092

19,565

(8
)
%

Total Life Science
$
22,354
$
16,748

33
% $
34,984
$
31,563

11
%

Revenue by Disease State (Diagnostics only)

   Three Months Ended March 31, Six Months Ended March 31,
   2019    2018    Inc (Dec) 2019    2018    Inc (Dec)
Diagnostics-

Gastrointestinal assays
   $ 16,177    $ 19,149    (16 )% $ 34,792    $ 39,419    (12 )%
Respiratory illness assays
   7,553    9,543    (21 )% 15,534    17,029    (9 )%
Blood chemistry assays
   4,330    4,257    2 % 8,760    8,523    3 %
Other
   5,440    6,833    (20 )% 11,079    12,301    (10 )%










Total Diagnostics
   $ 33,500    $ 39,782    (16 )% $ 70,165    $ 77,272    (9 )%


	Three Months Ended March 31,							Six Months Ended March 31,
	2020		2019		Inc (Dec)			2020		2019		Inc (Dec)
Diagnostics-
Gastrointestinal assays	$	14,014	$	16,177		(13	)%	$	30,060	$	34,792		(14	)%
Respiratory illness assays		10,863		7,553		44	%		18,612		15,534		20	%
Blood chemistry assays		4,329		4,330		-	%		9,479		8,760		8	%
Other		5,736		5,440		5	%		11,582		11,079		5	%

Total Diagnostics	$	34,942	$	33,500		4	%	$	69,733	$	70,165		(1	)%

Revenue Policies

Product Sales

Revenue from contracts with customers is recognized in an amount that reflects the consideration we expect to receive in exchange for products when obligations under such contracts are satisfied. Revenue is generally recognized at a

point-in-time

when products are shipped and ~~title~~control has passed to the customer. Such contracts can include various combinations of products that are generally accounted for as distinct performance obligations.

Revenue is reduced in the period of sale for fees paid to distributors, which are inseparable from the distributor’s purchase of our product and for which we receive no goods or services in return. Revenue for the Diagnostics segment is reduced at the date of sale for product price adjustments ~~due~~payable to certain distributors under local contracts. Management estimates accruals for distributor price adjustments based on local contract terms, sales data provided by distributors, historical statistics, current trends, and other factors. Changes to the accruals are recorded in the period that they become known. Such accruals are netted against accounts receivable.

Shipping and handling costs incurred after control of the product is transferred to our customers are treated as fulfillment costs and not a separate performance obligation.

Page 8

Table of Contents

Our payment terms differ by jurisdiction and customer but payment is generally required in a term ranging from 30 to 90 days from the date of shipment or satisfaction of the performance obligation. Trade accounts receivable are recorded in the accompanying

Con

densed

Consolidated Balance Sheets at invoiced amounts less provisions for distributor price adjustments under local contracts and doubtful accounts. The allowance for doubtful accounts represents our estimate of probable credit losses and is based on historical

write-off

experience and known conditions that would likely lead to

non-payment.

Customer invoices are charged off against the allowance when we believe it is probable that the invoices will not be paid.

~~Page 9~~

Practical Expedients and Exemptions

Revenue is recognized net of any taxes collected from customers (sales tax, value added tax, etc.), which are subsequently remitted to government authorities.

Our diagnostic assay products are generally not subject to a customer right of return except for product recall events under the rules and regulations of the Food and Drug Administration or equivalent agencies outside the United States. In this circumstance, the costs to replace affected products would be accrued at the time a loss was probable and estimable.

We expense as incurred the costs to obtain contracts, as the amortization period would ~~have been~~be one year or less. These costs, recorded within selling and marketing expense, include our internal sales force compensation programs and certain partner sales incentive programs, as we have determined that annual compensation is commensurate with annual selling activities.

Reagent Rental Arrangements

~~Our Alethia and LeadCare~~

Certain of our Diagnostics segment’s product platforms require the use of instruments for the tests to be processed. In many cases, a customer is given use of the instrument provided they continue purchasing the associated tests, also referred to as “consumables” or “reagents”. If a customer stops purchasing the consumables, the instrument must be returned to ~~Meridian.~~us. Such arrangements are common practice in the diagnostics industry and are referred to as “Reagent ~~Rental” agreements. These agreements~~Rentals”. Reagent Rentals may also include instrument related services such as a limited replacement warranty, training and installation. We concluded that the use of the instrument and related services (collectively known as “lease elements”) are not within the scope of ~~ASUNo. 2014-09~~Accounting Standards

Codification (“ASC”) 606,

Revenue from Contracts with Customers

but rather ~~ASU2016-02,~~ASC 842,

Leases

. Accordingly, we first allocate the transaction price between the lease elements and the

non-lease

elements based on estimates of relative standalone selling prices. Lease revenue is derived solely from the sale of consumables and is therefore recognized monthly as earned, which coincides with the transfer of control of the

non-lease

elements.

For the portion of the transaction price allocated to the

non-lease

elements, which are principally the test kits, the related revenue ~~will be~~is recognized at a

point-in-time

when control transfers.

Revenue allocated to the lease elements of these Reagent Rental arrangements ~~represent less than 1% of total~~totaled approximately $1,125 and $1,050 in the three months ended March 31, 2020 and 2019, respectively, and $2,250 and $2,100 in the six months ended March 31, 2020 and 201

, respectively. Such revenue ~~and are~~is included as part of net revenues in our Condensed Consolidated Statements of ~~Income.~~

Operations.

(b)

Fair Value Measurements –

Certain assets

and liabilities are recorded at fair value in accordance with ASC
820-10,
Fair Value Measurements and Disclosures
. ASC
820-10
defines fair value as the price that would be received to sell an asset or would be paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC
820-10
establishes a three-level hierarchy, which prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy level assigned to each asset and liability is based on the assessment of the transparency and reliability of the inputs used in the valuation of such items at the measurement date based on the lowest level of input that is significant to the fair value measurement. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).

Page 9

Table of Contents
Assets and liabilities measured and reported at fair value are classified and disclosed in one of the following categories based on inputs:
Level 1
Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities
Level 2
Quoted prices in markets that are not active and financial instruments for which all significant inputs are observable, either directly or indirectly
Level 3
Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable
As described in Note 3, we acquired the business of GenePOC in fiscal 2019. The fair value of the acquired accounts receivable and other current assets and the fair value of the assumed accounts payable and accrued expenses approximated their carrying value at the acquisition date. Inventories, property, plant and equipment, intangible assets and contingent consideration were valued using Level 3 inputs.
The following table provides information by level for financial assets and liabilities that are measured at fair value on a recurring basis:

Fair Value Measurements Using
Inputs Considered as

Carrying
Value

Level 1

Level 2

Level 3

Interest rate swaps (see Note 9) -

As of March 31, 2020

$
(313
) $
—

$
(313
) $
—

As of September 30, 2019
$
—

$
—

$
—

$
—

Contingent consideration -

As of March 31, 2020
$
(25,898
) $
—

$
—

$
(25,898
)
As of September 30, 201
9
$
(27,202
) $
—

$
—

$
(27,202
)
In connection with the acquisition of the business of GenePOC and as described in Note 3, the Company is required to make contingent consideration payments of up to $70,000, comprised of up to $20,000 for achievement of product development milestones and up to $50,000 for achievement of certain financial targets. The fair value for the contingent payments recognized upon the acquisition as part of the purchase accounting opening balance sheet totaled $27,202. The fair value of the
product
development milestone payments was estimated by disc
o
unting the probability-weighted contingent payments to present value. Assumptions used in the calculations include probability of success, duration of the
earn-out
and discount rate. The fair value of the financial performance target payments was determined using a Monte Carlo simulation-based model. Assumptions used in these calculations include expected revenue, probability of certain developments, expected expenses and discount rate. The ultimate settlement of contingent consideration could deviate from current estimates based on the actual results of these financial measures. The liability is considered to be a Level 3 financial liability that is
re-measured
each reporting period, resulting in a value of $25,898 as of March 31, 2020.
Page 10
Table of Contents

Pronouncements –

~~In February 2016,~~Adopted

On October 1, 2019, the ~~FASB~~Company adopted ASC 842,

Leases

. ASC 842 was 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~~entities by recognizing

right-of-use

assets (“ROU assets”) and ~~lessors, include, among other things, requiring recognition of~~ lease ~~assets and~~ liabilities on the balance sheet and disclosing key information about ~~leasing~~lease arrangements. ~~Adoption~~The Company elected to adopt ASC 842 effective October 1, 2019 using the modified retrospective transition method, which was applied to leases that existed or will be entered into on or after such date, with no adjustment made to prior comparative periods. The comparative periods presented herein reflect the former lease accounting guidance and ~~implementation~~the required comparative disclosures are included in Note 7,

“Leasing Arrangements”

. There was no cumulative-effect adjustment to beginning retained earnings as a result of adopting ASC 842, and additional operating lease ROU assets and obligations of approximately $5,880 were recognized as of October 1, 2019. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease calculated by discounting fixed lease payments over the lease term at the rate implicit in the lease or the Company’s incremental borrowing rate. Lease liabilities are increased by interest and reduced by payments each period, and the ROU asset is amortized over the lease term. The Company elected the package of practical expedients permitted under the new guidance to not reassess prior conclusions related to the identification, classification and accounting for initial direct costs for leases that commenced prior to October 1, 2019. Additionally, the elections were made to not use hindsight to determine lease terms and to not separate

non-lease

components within the lease portfolio. See Note 7 for further information.

Pronouncements Issued but Not Yet Adopted as of March 31, 2020

In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2020-04,

Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting

, to provide temporary optional guidance relating to reference rate reform, particularly as it relates to easing the potential burden resulting from the expected discontinuation of the LIBOR rate. The guidance provides practical expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met, which may be applied through December 31, 2022. The Company plans to apply this guidance to such transactions and modifications of arrangements but does not expect application to have a material impact on financial condition, results of operations or cash flows.

In June 2016, the FASB issued ASU 2016-13,

Measurement of Credit Losses on Financial Instruments

, which changes the impairment model used to measure credit losses for most financial assets. We will be required to use a new forward-looking expected credit loss model that will replace the existing incurred credit loss model for our accounts receivables. The guidance is ~~not required by~~effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years (fiscal 2021 for the ~~Company until the beginning of fiscal 2020, although~~Company), with early adoption is permitted. ~~During~~The Company does not anticipate that the ~~second quarter of fiscal 2019, the Company commenced the process of gathering and summarizing its corporate-wide lease information in order to assess the impact that~~ adoption of this guidance will have a material impact on its consolidated financial statements.

~~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. The Company adopted this guidance in the first quarter of fiscal 2019, with the Condensed Consolidated Statements of Cash Flows reflecting such adoption, including the information related to restricted cash.

~~In February 2018, the FASB issued ASU2018-02,~~~~Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income~~, to address certain of the recent U.S. federal income tax legislation’s impact on Accumulated Other Comprehensive Income (“AOCI”). The guidance specifically provides the option of reclassifying “stranded tax effects” related to the tax legislation from AOCI to retained earnings. Adoption and implementation of the optional guidance is not effective for the Company until the beginning of fiscal 2020, although early adoption is permitted. The Company plans to adopt this guidance in fiscal 2020 as required but does not expect adoption to have a significant impact on the Company’s consolidated results of operations, cash flows or financial position.

~~Page 10~~

~~Reclassifications –~~

(d)	Reclassifications –

Certain reclassifications have been made to the prior year financial statements to conform to the current year presentation. Such reclassifications had no impact on net earnings or shareholders’ equity.

3.	~~Cash and Equivalents~~ Acquisition of Business of GenePOC

~~Cash~~

On June 3, 2019, we acquired the business of GenePOC Inc. (“GenePOC”), a Quebec City, Quebec Province, Canada based provider of molecular diagnostic instruments and ~~equivalents include~~assays. The purchase agreement contemplates a maximum total consideration of up to $120,000, which was estimated at a total fair value of $77,526 as of the ~~following components:~~

   March 31, 2019    September 30, 2018
   Cash and
Equivalents    Other
Assets    Cash and
Equivalents    Other
Assets
Institutional money market funds
   $ 20,668    $ —      $ 20,421    $ —
Cash on hand -

Restricted
   —      1,000    —      1,000
Unrestricted
   45,429    —      39,342    —








Total
   $ 66,097    $ 1,000    $ 59,763    $ 1,000

4.	~~Inventories~~

~~Inventories are~~acquisition date. Pursuant to the purchase agreement, the maximum consideration is comprised of the ~~following:~~

   March 31,
2019    September 30,
2018
Raw materials
   $ 7,473    $ 6,689
Work-in-process
   11,810    12,098
Finished goods - instruments
   965    1,191
Finished goods - kits and reagents
   20,618    22,015




Total
   $ 40,866    $ 41,993

following (noting that the valuation

set

the contingent consideration identified in (ii) and (iii) below at an aggregate amount of $27,202 as of the acquisition date):

~~Intangible Assets~~

(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;

~~A summary~~

Page 11

Table of ~~our acquired intangible assets subject to amortization,~~Contents

(ii)

two $10,000 installments contingent upon the achievement of certain product development milestones if achieved by September 30, 2020 and March 31, 2021, respectively; and

(iii)

up to $50,000 of contingent consideration payable if certain financial performance targets are achieved during the twelve-month period ending September 30, 2022.

The total of the holdback identified in (i) above and the currently estimated value of the contingent consideration identified in (ii) and (iii) above are reflected within the accompanying Condensed Consolidated Balance Sheets as of March 31, ~~2019~~2020 as follows:

Current liabilities

$13,656

Reflects anticipated settlement of the first product milestone payment and ~~September 30, 2018, is~~the holdback amounts in the first quarter of fiscal 2021.

Non-current liabilities

$17,242

Reflects anticipated settlement of the second product milestone payment and the financial performance targets payments in the third quarter of fiscal 2021 and first quarter of fiscal 2023, respectively.

To finance the acquisition, we utilized cash and equivalents on hand and proceeds drawn from our revolving credit facility

;

see Note 9 for a discussion of subsequent amendments to the credit facility. Proceeds from the credit facility were also utilized to repay and settle the outstanding principal and interest due on our term loan (see Note 9). As a result of estimated total consideration exceeding the fair value of the net assets acquired, goodwill in the amount

of $34,582 was

recorded in connection with this acquisition,

most of

which will be deductible for U.S. tax purposes ratably over 15 years. The goodwill results largely from our ability to market and sell GenePOC’s technology and instrument platform through our established customer base and distribution channels.

Purchase Price Allocation

The recognized amounts of identifiable assets acquired and liabilities assumed in the acquisition of the GenePOC business are as follows:

   March 31, 2019    September 30, 2018
   Gross
Carrying
Value    Accumulated
Amortization    Gross
Carrying
Value    Accumulated
Amortization
Manufacturing technologies, core products and cell lines
   $ 22,298    $ 14,571    $ 22,297    $ 13,974
Trade names, licenses and patents
   8,647    5,717    8,647    5,267
Customer lists, customer relationships and supply agreements
   24,463    13,668    24,461    13,051








Total
   $ 55,408    $ 33,956    $ 55,405    $ 32,292


	June 3, 2019 (as initially reported)		Measurement Period Adjustments			June 3, 2019 (as adjusted)
Fair value of assets acquired -
Accounts receivable	$	58	$	(1	)	$	57
Inventories		1,617		(106	)		1,511
Other current assets		77		7			84
Property, plant and equipment		1,520		(96	)		1,424
Goodwill		34,482		100			34,582
Other intangible assets (estimated useful life):
License agreement (10 years)		5,990		—			5,990
Technology (15 years)		34,040		96			34,136
Government grant (1.33 years)		800		—			800

		78,584		—			78,584
Fair value of liabilities assumed -
Accounts payable and accrued expenses		1,082		(24	)		1,058

Total consideration paid (including contingent consideration originally estimated at $27,202)	$	77,502	$	24		$	77,526

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Table of Contents

Pro Forma Information

The ~~actual aggregate amortization expense for these intangible assets was $829 and $945~~following table provides the unaudited consolidated pro forma results for the ~~three months ended March 31, 2019 and 2018, respectively, and $1,658 and $1,883 for~~periods presented as if the ~~six months ended March 31, 2019 and 2018, respectively. The estimated aggregate amortization expense for these intangible assets for each~~business of GenePOC had been acquired as of the ~~fiscal years through fiscal 2024 is as follows: remainder~~beginning of fiscal ~~2019 – $1,664, fiscal 2020 – $3,165, fiscal 2021 – $2,560, fiscal 2022 – $2,182, fiscal 2023 – $2,170,~~2019. Pro forma results do not include the effect of any synergies anticipated to be achieved from the acquisition, and ~~fiscal 2024 – $2,166.~~

accordingly, are not necessarily indicative of the results that would have occurred if the acquisition had occurred on the date indicated or that may result in the future.


	Three Months Ended March 31, 2019		Six Months Ended March 31, 2019
Net Revenues	$	50,319	$	101,871
Net Earnings	$	3,527	$	7,906

These pro forma amounts have been calculated by including the results of GenePOC, and adjusting the combined results to give effect to the following, as if the acquisition had been consummated on October 1, 2018, together with the consequential tax effects thereon:


	Three Months Ended March 31, 2019			Six Months Ended March 31, 2019
Adjustments to Net Revenues
GenePOC pre-acquisition revenues	$	71		$	143
Adjustments to Net Earnings
GenePOC pre-acquisition net loss	$	(3,125	)	$	(6,328	)
Pro forma adjustments:
Expenses related to non-continuing personnel, locations or activities		627			1,195
Incremental depreciation and amortization		(872	)		(1,748	)
Incremental interest costs		(254	)		(538	)
Tax effects of pro forma adjustments		57			125

Total Adjustments to Net Earnings	$	(3,567	)	$	(7,294	)

Restructuring

During the second quarter of fiscal 2018, the Company began implementation of a plan to realign its business structure into two business units, Diagnostics and Life Science, supported by a global corporate team. AsSince that time and as part of this plan, certain functions and locations within both business units ~~were~~have been streamlined, including: (i) the elimination of certain executive management and commercial sales positions; (ii) the closing of Life Science locations in Taunton, Massachusetts and Singapore, the operations of which were transferred to our locations in Memphis, Tennessee and London, England, respectively; and (iii) the transfer of certain functions performed in the Billerica, Massachusetts Diagnostics facility to the corporate headquarters in Cincinnati, Ohio. Further restructuring costs were incurred in fiscal 2019 and the first half of fiscal 2020, as refinements to each business unit’s cost structure continued to be made and the Company incurred severance payment obligations relating to the transition of its previous chief financial officer.

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Table of Contents

As a result of these activities, restructuring costs totaling ~~$6,332~~$252

$527 and

$2,839 were

recorded during the three and six months ended March 31, 2020 and the fiscal year ended September 30, ~~2018.~~

~~During the second quarter of fiscal~~ 2019, ~~approximately $270 of restructuring accrual was reversed and is reflected as a reduction~~respectively.

A reconciliation of the ~~Acquisition~~changes in the liabilities associated with the restructuring charges from September 30, 2019 through March 31, 2020 is as follows:


	Employee Separation and Related Costs			Lease and Other Contract Termination Fees			Other			Total
Balance at September 30, 2019	$	1,010		$	12		$	114		$	1,136
Restructuring charges		482			86			—			568
Reversal of prior period accruals		(41	)		—			—			(41	)
Payments		(1,367	)		(98	)		(114	)		(1,579	)

Balance at March 31, 2020	$	84		$	—		$	—		$	84

5.	Cash and Equivalents

Cash and ~~Restructuring Costs~~equivalents include the following:


	March 31, 2020		September 30, 2019
	March 31, 2020		September 30, 2019
Institutional money market funds	$	1,015	$	20,913
Cash on hand, unrestricted		48,535		41,484

Total	$	49,550	$	62,397

6.	Inventories

Inventories are comprised of the following:


	March 31, 2020		September 30, 2019
	March 31, 2020		September 30, 2019
Raw materials	$	9,103	$	7,455
Work-in-process		12,856		11,504
Finished goods - instruments		827		935
Finished goods - kits and reagents		18,222		19,723

Total	$	41,008	$	39,617

7.	Leasing Arrangements

The Company is party to a number of operating leases, the majority of which are related to office, warehouse and manufacturing space. The related operating lease assets and obligations are reflected within

right-of-use

assets, current operating lease obligations and long-term operating lease obligations on the Condensed Consolidated Balance Sheet. Lease expense for these leases is recognized on a straight-line basis over the lease term, with variable lease payments recognized in the period those payments are incurred. Our Condensed Consolidated

Statements of

Operations for the three months ended March 31, 2020 reflect lease costs for these operating leases

130

and $

292

within cost of sales and

Page 14

Table of Contents

operating expenses, respectively

;

and

$259 and $559 within cost of sales and operating expenses, respectively, for the six months ended March 31, 2020.

In addition, the Company has periodically entered into other short-term operating leases, generally with an initial term of twelve months or less. These leases are not recorded on the balance sheet and the related lease expense is immaterial for the three and six months ended March 31, ~~2019. A summary of the accrued liability associated~~2020.

The Company often has options to renew lease terms, with the ~~restructuring costs~~exercise of lease renewal options generally at the Company’s sole discretion. In addition, certain lease arrangements may be terminated prior to their original expiration date at our discretion. We evaluate renewal and termination options at the lease commencement date to determine if we are reasonably certain to exercise the option on the basis of economic factors. The weighted average remaining lease term for our operating leases as of March 31, 2020

as 4.4 years.

The discount rate implicit within our leases is generally not determinable and, therefore, the Company determines the discount rate

using

its incremental borrowing rate. The weighted average discount rate used to measure our operating leases as of March 31, 2020

was 3.7%.

Supplemental cash flow information related to the Company’s operating leases are as follows:


	Three Months				Six Months
	Ended March 31,				Ended March 31,
	2020		2019		2020		2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	391	$	—	$	778	$	—

Maturities of lease liabilities by fiscal year for the Company’s operating lease liabilities were as follows as of March 31, 2020:


	March 31, 2020
	March 31, 2020
Remainder of 2020	$	768
2021		1,515
2022		1,302
2023		943
2024		692
Thereafter		600

Total lease payments		5,820
Less amount of lease payment representing interest		(359	)

Total present value of lease payments	$	5,461

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Table of Contents

As of September 30, 2019, future minimum lease payments under noncancelable operating leases were as follows:


	September 30, 2019
	September 30, 2019
2020	$	1,528
2021		1,451
2022		1,293
2023		967
2024		712
Thereafter		616

Total	$	6,567

8.	Intangible Assets

In light of the economic impacts of

COVID-19,

the Company performed a review of the assets on our consolidated balance sheet as of March 31, 2020, including goodwill, intangible and other long-lived assets. Based on our review, we do not believe that a triggering event exists at this time and, therefore, we believe that we will be able to realize the full value of our assets. As such, no impairments or other write-downs related to

COVID-19

have been recorded during fiscal 2020. Our assessment was based on information currently available and relies on various assumptions based on estimates of future cash flows and the probability of achieving the estimated cash flows. Future changes in market, economic or other conditions may lead to impairments in the future.

A summary of our acquired intangible assets subject to amortization, as of March 31, 2020 and September 30, ~~2018,~~2019, is as follows:

   March 31,
2019    September 30,
2018
Severance, other termination benefits and related costs
   $ 78    $ 987
Lease and other contract termination fees
   —      33
Other
   —      6




Total
   $ 78    $ 1,026

7.	~~Income Taxes~~

~~On December 22, 2017, the United States enacted tax reform legislation commonly known as the Tax Cuts~~


	March 31, 2020				September 30, 2019
	Gross Carrying Value		Accumulated Amortization		Gross Carrying Value		Accumulated Amortization
Manufacturing technologies, core products and cell lines	$	56,188	$	16,838	$	56,193	$	15,096
Trade names, licenses and patents		14,499		6,851		14,494		6,094
Customer lists, customer relationships and supply agreements		24,285		14,720		24,274		14,110
Government grants		759		474		814		232

Total	$	95,731	$	38,883	$	95,775	$	35,532

The actual aggregate amortization expense for these intangible assets was $1,727 and Jobs Act (the “tax reform act”). In applying the tax reform act during the three months ended December 31, 2017, we followed the guidance in SEC Staff Accounting Bulletin 118 (“SAB 118”), regarding the application of ASC Topic 740 in situations where a company does not have the necessary information available, prepared or analyzed in reasonable detail to complete the accounting for certain income tax effects of the tax reform act for the reporting period in which the tax reform act was enacted. SAB 118 provides for a measurement period beginning in the reporting period that includes the tax reform act’s enactment date and ending when a company has obtained, prepared and analyzed the information needed in order to complete the accounting requirements, but in no circumstances should the measurement period extend beyond one year from the enactment date.

~~As a result, our financial statements~~$829 for the three months ended ~~December~~March 31, ~~2017 reflected~~2020 and 2019, respectively, and $3,449 and $1,658 for the ~~effects~~six months ended March 31, 2020 and 2019, respectively. The estimated aggregate amortization expense for these intangible assets for each of the ~~tax reform act~~fiscal years through fiscal 2025 is as ~~provisional based on a reasonable estimate~~follows: remainder of fiscal 2020 – $3,306, fiscal 2021 – $5,490, fiscal 2022 – $5,113, fiscal 2023 – $5,100, fiscal 2024 – $5,096, and fiscal 2025 – $5,096.

9.	Bank Credit Arrangements

In anticipation of the income tax effects and included a provisional noncurrent income tax payable in the amount of $854 related to the repatriation transition tax. Subsequent to the quarter ended December 31, 2017 and prior to September 30, 2018, we completed the accounting for the effectsacquisition of the ~~tax reform act. As a result, our repatriation transition tax liability was increased to $876, which is reflected as follows in the accompanying Condensed Consolidated Balance as~~business of ~~March 31,~~GenePOC (see Note 3), on May 24, 2019 ~~after our having recently paid the amount estimated for fiscal 2018: $65 of current income taxes payable and $736 long-term income taxes payable.~~

~~Page 12~~

~~In addition, during the three months ended December 31, 2017 we recorded aone-time~~ ~~tax benefit of $1,695 resulting from the tax reform act, including an adjustment from there-measurement~~ ~~of deferred tax assets and liabilities. Thisre-measurement~~ ~~included an estimate of the temporary differences expected to be realized during fiscal 2018 at a transitional blended rate of 24.5%. The remaining temporary differences werere-measured~~ ~~at 21%.~~

8.	~~Bank Credit Arrangements~~

~~In March 2016,~~ the Company entered into a ~~$60,000 five-year term loan~~credit facility agreement with a commercial ~~bank.~~bank

. The ~~term loan requires quarterly~~Company amended the credit facility agreement

on February 19, 2020 in anticipation of the Company’s pending acquisition of Exalenz Bioscience Ltd. (see Note 12). The credit facility expires in May 2024, and as amended makes available to the Company a revolving credit facility in an aggregate principal amount not

to exceed

160,000

(originally $125,000), with outstanding principal amounts

Page 16

Table of Contents

bearing interest at a fluctuating rate tied to, at the Company’s option, either the federal funds rate or LIBOR, resulting in an effective

interest rate of 4.15%

and 4.04% on the credit facility during the three and six months ended March 31, 2020, respectively.

Since entering into the credit facility through March 31, 2020

, two draws totaling

$75,824

have been made on the credit facility, with a January 2020 principal repayment resulting in an outstanding principal balance of $48,824 at March 31, 2020

(see Note 12 for activity subsequent to quarter-end)

. The proceeds from these draws were used to: (i) repay and settle the outstanding principal and interest ~~payments,~~due on our previously existing $60,000 five-year term loan; and (ii) along with ~~interest at a variable rate tied to LIBOR, and a balloon principal payment due March 31, 2021. The required principal payments on~~cash

on-hand,

fund the ~~term loan for each of the remaining fiscal years are as follows: remainder of fiscal 2019 - $3,000, fiscal 2020 - $6,000, and fiscal 2021 - $39,000.~~GenePOC acquisition closing payment. In light of the ~~term loan’s~~ interest being determined on a variable rate basis, the fair value of the ~~term loan~~borrowings under the credit facility at

March

31, ~~2019~~2020 approximates the current carrying value reflected in the accompanying Condensed Consolidated Balance ~~Sheet.~~

Sheet

The revolving credit facility is collateralized by the business assets of the Company’s U.S. subsidiaries and requires compliance with financial covenants that limit the amount of debt obligations and require a minimum level of coverage of fixed charges, as defined in the credit facility agreement. As of March 31, 2020, the Company is in compliance with all covenants.

In order to limit exposure to volatility in the LIBOR interest rate, during March 2020 the Company and the commercial bank ~~also~~ entered into antwo interest rate swap agreements that will effectively ~~converts~~convert the variable interest rate on $25,000 of the ~~term loan~~outstanding principal to a fixed rate of ~~2.76%.~~2.31%

(

at the current credit spread

)

beginning May 24, 2020, the effective date of the swap agreements. With an initial notional balance of ~~$60,000,~~$25,000, the interest rate swap ~~was~~agreements were established with critical terms identical to ~~those~~borrowings under the credit facility, including: (i)

one-month

LIBOR settlement rates, as to be elected by the Company throughout the remaining term of the ~~term loan, including: (i) notional reduction amounts and dates;~~credit facility; (ii) ~~LIBOR settlement rates; (iii)~~ rate reset dates; and ~~(iv)~~(iii) term/maturity. ~~Due to this,~~

Consequently

, the interest rate ~~swap has~~swaps have been designated as an effective cash flow ~~hedge,~~hedges, with changes in fair ~~value~~

values

reflected as a separate component of other comprehensive income in the accompanying Condensed Consolidated Statements of Comprehensive Income. At March 31, ~~2019 and September 30, 2018,~~2020, the fair value of the interest rate ~~swap~~ swaps

was ~~$835 and $1,722, respectively, and~~reported as

a liability of $313, which is reflected as a

non-current ~~asset~~

liability in the accompanying Condensed Consolidated Balance ~~Sheets.~~Sheet. This fair value was determined by information provided by the counterparty and is considered a Level 2 input within the fair value hierarchy of valuation techniques.

In ~~addition,~~connection with the Company’s term loan repayment in May 2019, the Company ~~maintains~~also settled the interest rate swap that had been entered into to limit exposure to volatility in the term loan’s LIBOR interest rate. At the time of settlement, the Company received a ~~$30,000 revolving~~cash payment in an amount equal to the

$563

then-current fair value of the interest rate swap. Accordingly, there is no balance for this interest rate swap reflected within assets or liabilities within the accompanying Consolidated Balance Sheets as of March 31, 2020 or September 30, 2019. The fair value of the swap that had been reflected within a separate component of other comprehensive income in the accompanying Consolidated Statements of Comprehensive Income, as a result of the interest rate swap having been designated as an effective cash flow hedge, is being released ratably into income through March 31, 2021, the interest rate swap’s original term.

The balance reflected within accumulated other comprehensive income related to the interest rate swap agreements associated with both the current credit facility ~~with a commercial bank, which expires March 31, 2021. There were no borrowings outstanding on this credit facility~~and the former term loan totaled ($6

)

and $461 at March 31, ~~2019 or~~2020 and September 30, ~~2018.~~

The term loan and the revolving credit facility are collateralized by the business assets of the Company’s U.S. subsidiaries and require 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 borrowing agreement. As of March 31, 2019, ~~the Company is in compliance with all covenants. The Company is also required to maintain a compensating cash balance with the bank in the amount of $1,000, and is in compliance with this requirement.~~

~~See Note 12,~~~~“Subsequent Event”~~.

respectively.

9.10.

Reportable Segments and Major Customers Information

Meridian was formed in 1976 and functions as a fully-integrated life science company with principal businesses in: (i) the development, manufacture, sale and distribution of diagnostic test kits, primarily for certain gastrointestinal and respiratory infectious diseases, and elevated blood lead levels; and (ii) the manufacture and distribution of bulk antigens, antibodies, PCR/qPCR reagents, nucleotides, ~~competent cells,~~ and bioresearch reagents used by researchers and other diagnostic manufacturers.

Our reportable segments are Diagnostics and Life Science. The Diagnostics segment consists of manufacturing operations for infectious disease products in Cincinnati, Ohio and Quebec City, Canada, manufacturing operations for blood chemistry products in Billerica, Massachusetts (near Boston), and the sale and distribution of diagnostics products domestically and abroad. This segment’s products are used by hospitals, reference labs and physician offices to detect infectious diseases and elevated lead levels in blood.

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Table of Contents

The Life Science segment consists of manufacturing operations in Memphis, Tennessee; Boca Raton, Florida; London, England; and Luckenwalde, Germany, and the sale and distribution of bulk antigens, antibodies, PCR/qPCR reagents, nucleotides, ~~competent cells,~~ and bioresearch reagents domestically and abroad, including a sales and business development facility in Beijing, China to further pursue revenue opportunities in Asia. This segment’s products are used by manufacturers and researchers in a variety of applications (e.g.,

in-vitro

medical device manufacturing, microRNA detection,

next-gen

sequencing, plant genotyping, and mutation detection, among others).

~~Page 13~~

Amounts due from ~~two~~2 Diagnostics distributor customers accounted for ~~14% and 12%~~13% of consolidated accounts receivable at

both

March 31, ~~2019~~2020 and September 30, ~~2018, respectively.~~2019. Revenues from these ~~two~~2 distributor customers accounted for ~~25%~~23% and ~~27%~~25% of the Diagnostics segment third-party revenues during the three months ended March 31, ~~2019~~2020 and ~~2018,~~2019, respectively, and

25% and

30% during ~~each of~~ the six

month periods ended March 31, ~~2019~~2020 and ~~2018.~~2019

, respectively

. These distributors represented ~~17%~~14% and ~~19%~~17% of consolidated revenues for the fiscal ~~2019~~2020 and ~~2018~~2019 second quarters, respectively, and

17% and

21% for ~~each of~~ the respective

year-to-date

six

month periods.

Within our Life Science segment, two diagnostic manufacturing customers accounted for ~~27%~~17% and ~~22%~~27% of the segment’s third-party revenues during the three months ended March 31, ~~2019~~2020 and ~~2018,~~2019, respectively, and ~~27%~~16% and ~~19%~~27% during the six months ended March 31, 2020 and 2019, ~~and 2018,~~ respectively.

Segment information for the interim periods is as follows:

   Diagnostics    Life Science    Corporate⁽¹⁾ Eliminations⁽²⁾ Total
Three Months Ended March 31, 2019

Net revenues -

Third-party
   $ 33,500    $ 16,748    $ —   $ —   $ 50,248
Inter-segment
   89    53    —   (142 ) —
Operating income
   7,561    5,361    (3,101 ) 14 9,835
Goodwill (March 31, 2019)
   35,213    19,429    —   —   54,642
Other intangible assets, net (March 31, 2019)
   20,705    747    —   —   21,452
Total assets (March 31, 2019)
   183,234    70,152    —   578 253,964
Three Months Ended March 31, 2018

Net revenues -

Third-party
   $ 39,782    $ 16,669    $ —   $ —   $ 56,451
Inter-segment
   80    75    —   (155 ) —
Operating income
   10,684    3,638    (6,723 ) 79 7,678
Goodwill (September 30, 2018)
   35,213    19,424    —   —   54,637
Other intangible assets, net (September 30, 2018)
   22,068    1,045    —   —   23,113
Total assets (September 30, 2018)
   180,978    70,341    —   58 251,377
Six Months Ended March 31, 2019

Net revenues -

Third-party
   $ 70,165    $ 31,563    $ —   $ —   $ 101,728
Inter-segment
   252    229    —   (481 ) —
Operating income
   16,346    10,492    (6,493 ) 41 20,386
Six Months Ended March 31, 2018

Net revenues -

Third-party
   $ 77,272    $ 31,462    $ —   $ —   $ 108,734
Inter-segment
   201    267    —   (468 ) —
Operating income
   19,310    6,580    (10,334 ) 183 15,739


	Diagnostics		Life Science		Corporate (1)			Eliminations (2)			Total
Three Months Ended March 31, 2020
Net revenues -
Third-party	$	34,942	$	22,354	$	—		$	—		$	57,296
Inter-segment		81		55		—			(136	)		—
Operating income		3,842		10,818		(2,896	)		27			11,791
Goodwill (March 31, 2020)		70,317		18,881		—			—			89,198
Other intangible assets, net (March 31, 2020)		56,681		167		—			—			56,848
Total assets (March 31, 2020)		245,059		74,036		—			(21	)		319,074

Three Months Ended March 31, 2019
Net revenues -
Third-party	$	33,500	$	16,748	$	—		$	—		$	50,248
Inter-segment		89		53		—			(142	)		—
Operating income		6,676		5,361		(2,216	)		14			9,835
Goodwill (September 30, 2019)		70,395		18,846		—			—			89,241
Other intangible assets, net (September 30, 2019)		59,807		436		—			—			60,243
Total assets (September 30, 2019)		255,169		70,392		—			(83	)		325,478

Six Months Ended March 31, 2020
Net revenues -
Third-party	$	69,733	$	34,984	$	—		$	—		$	104,717
Inter-segment		178		120		—			(298	)		—
Operating income		8,250		13,879		(4,983	)		39			17,185

Six Months Ended March 31, 2019
Net revenues -
Third-party	$	70,165	$	31,563	$	—		$	—		$	101,728
Inter-segment		252		229		—			(481	)		—
Operating income		15,374		10,492		(5,521	)		41			20,386

(1)

Includes ~~Acquisition,~~ Restructuring Costs and ~~Litigation~~Selected Legal Costs

of ~~$1,488~~$685 and ~~$4,911~~$603 in

the three months ended March 31, 2020 and 2019, respectively,

and

$1,055 and ~~2018, respectively, and $2,164 and $6,394~~$1,192 in the

six months ended March 31,

2020 and 2019, ~~and 2018,~~ respectively.

(2)	Eliminations consist of inter-segment transactions.

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Table of Contents

A reconciliation of segment operating income to consolidated earnings before income taxes for the three

and six months ended March 31, 2020 and 2019 is as follows:


	Three Months						Six Months
	Ended March 31,						Ended March 31,
	2020			2019			2020			2019
Segment operating income	$	14,687		$	12,051		$	22,168		$	25,907
Corporate operating expenses		(2,896	)		(2,216	)		(4,983	)		(5,521	)
Interest income		23			204			134			353
Interest expense		(532	)		(347	)		(1,299	)		(710	)
Other, net		1,365			(445	)		653			(306	)

Consolidated earnings before income taxes	$	12,647		$	9,247		$	16,673		$	19,723

Transactions between segments are accounted for at established intercompany prices for internal and management purposes, with all intercompany amounts eliminated in consolidation.

~~Page 14~~

~~10.~~11.

Litigation Matters

On November 15, 2017, Barbara Forman filed a class action complaint in the United States District Court for the Southern District of Ohio (the Court) naming Meridian, its former Chief Executive Officer and former Chief Financial Officer (in their capacities as such) as defendants. An amended complaint was filed on April 16, 2018 and the Company believes the essential elements of the amended complaint are the same. ~~The complaint and~~On July 9, 2019, a settlement was reached with the ~~amended complaint are hereafter referred to as~~plaintiff that provides for a $2,100 payment by the ~~“Complaint”. The Complaint seeks compensatory damages and attorneys’ fees.~~Company. On ~~February 13,~~October 9, 2019, the Court granted ~~Meridian’s~~a motion ~~to dismiss~~for preliminary approval of the settlement, and ~~dismissed~~on November 7, 2019, the ~~Complaint in its entirety. Plaintiff filed~~settlement amount was paid from the Company’s directors and officers insurance policy into a ~~Motion to Reconsider, Set Aside, Alter, Amend, or Vacate the Judgment of dismissal~~plaintiff escrow account.

After

a final approval hearing

March

16,

2020

, on March ~~13, 2019. Meridian opposed~~17, 2020, the ~~Plaintiff’s motion on April 3, 2019~~Court issued an order and judgment approving the ~~Plaintiff filed~~settlement

Because the settlement was a ~~reply on April 17, 2019. The motion remains pending before the Court. Accordingly,~~covered claim under our directors and officers insurance policy, no provision for litigation losses has been included within ~~either of~~ the accompanying Condensed Consolidated Statements of Operations for the three and six months ended March 31, ~~2019~~2020 or March 31, ~~2018.~~

2019.

On December 6, 2017, Michael Edelson filed a derivative complaint in the United States District Court for the Southern District of Ohio naming Meridian, its former Chief Executive Officer, former Chief Financial Officer and certain members of Meridian’s Board of Directors and Audit Committee (in their capacities as such) as defendants. The complaint alleges that Meridian made false and misleading representations concerning certain of Magellan’s lead test systems at or around the time of Meridian’s acquisition of Magellan and subsequent thereto, and the complaint alleges that certain members of the Board of Directors and Audit Committee breached their fiduciary duties in their oversight of the Company’s public disclosures and corporate governance matters. The complaint ~~seeks~~sought compensatory damages, equitable relief relating to corporate governance matters and attorneys’ fees. ~~The case has been stayed by agreement of~~On October 9, 2019, the ~~parties pending resolution of the~~Court granted plaintiff’s motion ~~to dismiss the class action described above. We are unable to determine or predict the ultimate outcome or estimate the range of possible losses, if any.~~ for voluntary dismissal.

Accordingly, no provision for litigation losses has been included ~~within either of the accompanying Condensed Consolidated Statements of Operations for the three and six months ended March 31, 2019 or March 31, 2018.~~

Approximately $40 of expense for attorneys’ fees related to the above two class action matters is included within the accompanying Condensed Consolidated Statements of Operations for both the three and six months ended March 31, 2019, with approximately $530 and $545 of related expense being reflected within the accompanying Condensed Consolidated Statements of Operations for the three and six months ended March 31, ~~2018, respectively. The Company maintains an insurance policy covering these matters, which has a $500 deductible.~~

2020 or March 31, 2019.

On April 17, 2018, Meridian’s wholly-owned subsidiary, Magellan Diagnostics, Inc. received a subpoena from the United States Department of Justice (“DOJ”) regarding its LeadCare product line. The subpoena outlines documents to be produced, and the Company is cooperating with the DOJ in this matter. The Company maintains rigorous policies and procedures to promote compliance with applicable regulatory agencies and requirements, and is working with the DOJ to promptly respond to the subpoena, including responding to additional information ~~requests and executing a~~ requests. The Company has executed

multiple

tolling ~~agreement~~agreements to extend the statute of limitations. ~~However, the~~The Company cannot predict when the investigation will be resolved, the outcome of the investigation, or its potential impact on the Company. Approximately ~~$560~~$725 and ~~$1,100~~$560 of expense for attorneys’ fees related to this matter is included within the accompanying Condensed Consolidated Statements of Operations for the three months ended March 31

, 2020

and March 31

, 2019

, respectively; approximately $1,005

and $1,100

for the six months ended March 31 ~~2019, respectively, with no related expense being reflected within the accompanying Condensed Consolidated Statements of Operations for the three~~

, 2020

and ~~six months ended~~ March 31 ~~2018.~~

~~On October 9, 2018, the Company and DiaSorin Inc. entered into a strategic collaboration to sell DiaSorin’s~~~~Helicobacter pylori~~ ~~stool antigen test to detect~~~~H. pylori~~ ~~for use on its automated LIAISON platform under the Meridian brand name worldwide. The new collaboration results in the termination~~

, 2019

, respectively.

Page 19

Table of ~~all pending legal disputes between the two parties and will expand the previous agreement between DiaSorin and Meridian, which focused on the sale, by DiaSorin, ofco-developed~~ products in major countries in continental Europe. Approximately $0 and $50 of expense for attorneys’ fees related to this matter is included within the accompanying Condensed Consolidated Statements of Operations for the three and six months ended March 31, 2019, respectively, and approximately $925 and $1,655 of related expense is included within the accompanying Condensed Consolidated Statements of Operations for the three and six months ended March 31, 2018, respectively.

~~Page 15~~

Contents

~~11.~~

~~FDA Matters Related to LeadCare~~

~~As previously disclosed, on June 29, 2017, the FDA, in connection with its Safety Notification related to Magellan’s LeadCare~~testing systems for venous blood samples, issued to Magellan its Form 483, Inspectional Observations. The FDA issued a related Warning Letter on October 23, 2017. As also previously disclosed, on April 17, 2018, Magellan received a subpoena from the United States Department of Justice (“DOJ”) regarding its LeadCare product line. The subpoena outlines documents to be produced, and we continue to cooperate with the DOJ in this matter, including responding to additional information requests and executing a tolling agreement to extend the statute of limitations.

~~Magellan submitted 510(k) applications in December 2018, seeking to reinstate venous blood sample-types for its LeadCare~~^® ~~II, LeadCare~~^® ~~Plus~~^™ ~~and LeadCare Ultra~~^® testing systems. In the second fiscal quarter of 2019 the FDA informed Magellan that each of these 510(k) applications has been put on Additional Information hold. Further, while Magellan’s LeadCare testing systems remain cleared for marketing by the FDA and permitted for use with capillary blood samples, the FDA advised that it has commissioned a third-party study of Magellan’s LeadCare testing systems using both venous and capillary blood samples. According to the FDA, the results of the field study will be used in conjunction with other information to determine whether further action by 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 FDA completes its third-party study and continues to work to complete remediation actions at Magellan’s blood–chemistry manufacturing facility to the FDA’s full and complete satisfaction.

While we remain confident in the performance of the Magellan LeadCare testing systems, there can be no assurance that the ongoing investigation and study of the DOJ and FDA, respectively, or future exercise of their respective enforcement, regulatory, discretionary or other powers will not result in findings or alleged violations of federal laws that could lead to enforcement actions, proceedings or litigation and the imposition of damages, fines, penalties, restitution, other monetary liabilities, sanctions, settlements or changes to our business practices, product offerings or operations that could have a material adverse effect on our business, financial condition or results of operations; or eliminate altogether our ability to operate our lead testing business, or on terms substantially similar to those on which we currently operate.

~~See Part II, Item 1A Risk Factors below.~~

12.	Subsequent ~~Event~~ Even ts

April ~~29, 2019, we signed a definitive agreement to acquire substantially~~ 30

, 2020, the Company acquired

all of the ~~assets, as well as selected liabilities,~~outstanding capital stock of ~~GenePOC Inc.~~

Exalenz Bioscience Ltd. (“Exalenz”), a ~~molecular diagnostics company located~~manufacturer of a urea breath diagnostic testing platform headquartered in ~~Quebec City, Quebec Province, Canada.~~Modi’in, Israel, for approximately $48,000

in cash. In addition, the Company paid approximately $8,000 in cash for Exalenz to repay two bank loans

. During 2019, Exalenz generated approximately $14,000 of revenue from sales of its BreathID

Breath Test Systems. This purchase will be included in our Diagnostics operating ~~segment. The maximum purchase price is $120,000, which consists of: (i) $50,000 to be paid at closing (subject to~~segment

and accounted for as a working capital adjustment and a $5,000 hold-back to secure seller’s post-closing obligations); (ii) up to $20,000 to be paid in fiscal 2021, contingent upon the achievement of product development milestones; and (iii) up to $50,000 to be paid in fiscal 2023 based on certain sales and profit margin thresholds to be measured in fiscal 2022. GenePOC’s molecular diagnostics testing system is branded under the name revogene^™~~, and currently includes threeFDA-cleared~~ ~~assays (~~~~C. difficile~~~~, Group A Strep and Group B Strep). The purchase is expected to close no later than early fourth quarter fiscal 2019, pending the satisfaction of certain closing conditions.~~

business combination. In connection with the ~~proposed~~merger consideration for the acquisition and repayment of ~~GenePOC, we also expect to execute~~the Exalenz bank loans, the Company executed two forward contracts with a ~~new five-year $125,000~~total notional amount of 187,000 New Israeli Shekels, both of which settled on April 20, 2020

In anticipation of the Exalenz acquisition, in April 2020, an additional $50,000 was drawn on the revolving credit facility, ~~that would replace our existing $30,000 credit facility. We expect~~resulting in an outstanding principal balance of $98,424 as of the ~~new credit facility will be secured by substantially all~~date of ~~our assets and will include certain restrictive financial covenants. We expect to draw down approximately $73,000 from~~ this ~~new facility and use approximately $20,000 of cashon-hand~~ ~~to repay the existing term loan outstanding at March 31, 2019 and fund the closing payment for the acquisition of GenePOC.~~

~~Also, our Board of Directors suspended the declaration and payment of quarterly dividends by Meridian to invest in new product development activities for the revogene~~^™ ~~molecular diagnostics platform, among other investments in the business, and to preserve our capital resources and liquidity for general corporate purposes.~~

~~Page 16~~

filing.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Refer to “Forward-Looking Statements” following the Table of Contents in front of this Form
10-Q.
In the discussion that follows, all dollar amounts are in thousands (both tables and text), except per share data.

~~Following~~

The purpose of Management’s Discussion and Analysis is ~~a discussion and analysis of the financial statements and other statistical data that management believes will enhance the~~to provide an understanding of Meridian’s financial condition, changes in financial condition and results of operations. ~~Unless otherwise noted, increases or decreases are measured over the corresponding period of the prior fiscal year.~~ This discussion should be read in conjunction with the financial statements and ~~notes thereto beginning~~notes.

Impact of

COVID-19

Pandemic

In December 2019, the SARS-CoV-2 virus emerged in Wuhan, China and spread to other parts of the world. In March 2020, the World Health Organization (“WHO”) designated

COVID-19

(the disease caused by SARS-CoV-2) a global pandemic. Governments have implemented lockdown and

shelter-in-place

orders, requiring many

non-essential

businesses to shut down operations for the time being. Our business, however, is deemed “essential” and has continued to operate and manufacture and distribute products to customers globally. We have developed a comprehensive plan that enables us to maintain operational continuity with an emphasis on ~~page 1.~~

manufacturing, product distribution and new product development during this crisis. We continually assess

COVID-19

related developments and adjust risk mitigation planning and business continuity activities as needed.

Employee Safety

In
mid-March
2020, we instituted a work from home process for employees whose on-site presence is designated as
non-essential
to the ongoing function of our manufacturing site, distribution centers, and new product development facilities. We have implemented enhanced cleaning and sanitizing procedures, and provided additional personal hygiene supplies at all of our sites. We have implemented policies for employees to adhere to the Centers for Disease Control and Prevention (“CDC”) guidelines on social distancing and any employees experiencing any symptoms of
COVID-19
are required to stay home and seek medical attention. Any employee who tests positive for
COVID-19
is required to quarantine and is not allowed to return to our facilities without a physician’s release. We have closed our facilities to outside persons who are not critical to continuing our operations. To date, we have been able to manufacture and distribute products globally, and our sites continue to operate without interruption. As the pandemic continues to spread over time, there is an increased risk of employee absenteeism, which could materially impact our operations at one or more sites. To date, our work from home processes have not materially impacted the Company’s financial reporting systems, internal controls over financial reporting or disclosure controls.

Supply Chains

Currently and as anticipated for the near future, our supply chains supporting our products remain intact, providing access to sufficient inventory of the key materials needed for manufacturing. To date, delays and allocations for certain raw materials of higher demand have been limited, and have not had a material impact on our results of operations. We are regularly communicating with our suppliers, third-party partners, customers, health care providers

Page 20

Table of Contents

and government officials in order to respond rapidly to issues as they arise. The longer the current situation continues, it is more likely that we may experience some sort of interruption to our supply chains, and such an interruption could materially affect our ability to timely manufacture and distribute our products and unfavorably impact our results of operations.
Clinical Trial Delays
As a result of the pandemic, certain clinical trials which were underway or scheduled to begin have been temporarily placed on hold. Such delays will impact our timing for filing applications for product clearances with the FDA, as well as related timing of FDA clearances of such filings. Additionally, the pandemic could slow down our efforts to expand our product portfolio through acquisitions and distribution opportunities, impacting the speed with which we are able to bring additional products to market.
Product Demand
Our Life Science segment manufactures, markets and sells a number of immunoassay and molecular reagents to IVD customers, including those who are making both molecular and immunoassay
COVID-19
tests. During our second quarter of fiscal 2020, we began seeing unprecedented demand for certain of our molecular reagents (e.g., ribonucleic acid (“RNA”) master mixes and nucleotides), and such demand has continued into our third fiscal quarter. Although we are unable to predict when this demand may subside, we expect materially higher revenue levels for these products during the next three to six months. These products are currently being used by over 35 IVD companies around the world in the development of
COVID-19
molecular tests. In addition, during April we announced the launch of several recombinant antigens critical for the development of antibody tests for
COVID-19.
Based upon the launch of these immunological reagent products and the strong demand for molecular reagent products noted above, we are currently expecting third quarter Life Science revenues of at least double that of normal quarterly levels.
Our Diagnostics segment manufactures, markets and sells a number of molecular, immunoassay and blood chemistry assays for various infectious diseases and blood-lead levels. We expect near-term sales volumes for a number of these assays to be adversely affected by the
COVID-19
pandemic as such assays are often used in
non-critical
care settings. In addition, the
COVID-19
pandemic has greatly slowed our instrument placements as diagnostic testing sites have turned their attention to critical care testing. During the month of April, our weekly shipments of Diagnostic products were approximately 50% of expected volume levels. Given the nature of our diagnostic assays (i.e., infectious disease and blood-lead), we expect to return to expected sales volume levels within three to six months assuming shelter in place orders relax and health care facilities return to normal,
pre-pandemic
operations in the near term. However, no assurances can be made in this regard.
Asset Impairment Review
In light of the economic impacts of
COVID-19,
the Company performed a review of the assets on our consolidated balance sheet as of March 31, 2020, including intangible and other long-lived assets. Based on our review, we do not believe that a triggering event exists at this time and, therefore, we believe that we will be able to realize the full value of our assets. As such, no impairments or other write-downs related to
COVID-19
were recorded during fiscal 2020. Our assessment was based on information currently available and relies on various assumptions based on estimates of future cash flows and the probability of achieving the estimated cash flows. Future changes in market, economic or other conditions may lead to future impairments.
Access to Capital
As of March 31, 2020, the Company’s outstanding debt balance on its revolving credit facility was $48,824. The impacts of
COVID-19
have adversely affected the capital markets and the ability of many companies to access capital and liquidity on favorable terms or at all. The Company believes it has sufficient liquidity and cash flows to meet its operating and debt service requirements for at least the next twelve months. We drew $50,000 on our revolving credit facility in April to complete the acquisition of Exalenz Bioscience Ltd. (“Exalenz”) described in Note 12, “
Subsequent Events”
of the accompanying condensed consolidated financial statements. The Company expects to be in compliance with its financial covenants during the same period. However, the Company is currently unable to predict the impact that
COVID-19
will have on its ability to access capital in the future. If the Company is unable to access additional capital and liquidity on acceptable terms, it could adversely impact the Company’s results of operations and ability to meet its future obligations beyond the next twelve months.
Page 21
Table of Contents

Based on the foregoing, the Company cannot reasonably predict the extent of the impact of
COVID-19
on our future results of operations and cash flows due to the continued uncertainty around the duration and severity of the pandemic. The
COVID-19
situation is changing rapidly and future impacts may materialize that are not yet known.

RESULTS OF OPERATIONS

Three and Six Months Ended March 31, ~~2019~~

2020

Net earnings for the second quarter of fiscal ~~2019~~2020 increased ~~34%~~32% to ~~$7,094,~~$9,359, or ~~$0.17~~$0.22 per diluted share, from net earnings for the second quarter of fiscal ~~2018~~2019 of ~~$5,288,~~$7,094, or ~~$0.12~~$0.17 per diluted share. For the

six-month

period ended March 31, 2020, net earnings were $12,186, or $0.28 per diluted share. The ~~fiscal 2019~~level of net earnings in the second quarter ~~results include $1,388~~(“QTD”) and first six months (“YTD”) of ~~costs associated with acquisition and restructuring activities, and litigation costs, while~~fiscal 2020 were affected by several factors, including most notably the ~~fiscal 2018 second quarter results include $4,911~~combined effects of ~~costs associated with restructuring activities and litigation costs. These items had~~the following (amounts presented on a ~~combined impact on net earnings of $1,065, or $0.02 per diluted share, in the fiscal 2019 quarter and $3,575, or $0.08 per diluted share, in the fiscal 2018 quarter (see “USE OFNON-GAAP~~ ~~MEASURES” below).~~

pre-tax

basis):

(i)

significantly higher revenue in the Life Science operating segment, due in large part to supplying key molecular components to diagnostic test manufacturers for use in

COVID-19

related tests;

(ii)

higher research and development spending in the Diagnostics segment ($1,618 QTD; $2,731 YTD);

(iii)

increased cash-based incentive compensation ($2,045 QTD; $2,570 YTD);

(iv)

increased intangible asset amortization, primarily resulting from purchase accounting amortization related to the acquisition of the GenePOC business in June 2019 ($825 QTD; $1,715 YTD);

(v)

increased acquisition-related costs in connection with the fiscal 2020 Exalenz transaction, as compared to those related to the GenePOC transaction in fiscal 2019 ($902 QTD; $815 YTD);

(vi)

a decrease in the fair value of the earnout obligation for the acquisition of the GenePOC business ($2,491 QTD; $1,304 YTD); and

(vii)

significantly higher gains related to foreign currency, particularly as it relates to the British pound sterling ($1,704 QTD; $643 YTD).

Consolidated revenues for the second quarter of fiscal ~~2019~~2020 totaled ~~$50,248, a decrease~~$57,296, an increase of ~~11%~~14% compared to the second quarter of fiscal ~~2018 (10% decrease~~2019 (15% increase on a constant-currency basis).

Revenues for the Diagnostics segment for the second quarter of fiscal ~~2019 decreased 16%~~2020 increased 4% compared to the second quarter of fiscal ~~2018 (15%~~2019 (5% increase on a constant-currency basis), comprised of a ~~29% decrease~~2% increase in molecular assay products and a ~~12% decrease~~5% increase in immunoassay and blood chemistry assay products. As previously noted, the

COVID-19

pandemic dramatically slowed the placement of our molecular assay products during the quarter, resulting in 35 Revogene

systems being installed during the second quarter of fiscal 2020 and a total Revogene system install base of 148 systems as of March 31, 2020. With a ~~12% decrease~~114% increase in ~~its~~ molecular reagents products and ~~an 8% increase~~a 5% decrease in ~~its~~ immunological reagents products, revenues for our Life Science segment ~~were flat~~increased 33% during the second quarter of fiscal ~~2019~~2020 compared to the second quarter of fiscal ~~2018.~~2019. On a constant-currency basis, revenues for the Life Science segment increased 2%34%.

~~The second quarter Diagnostics revenues reflect modest growth in our blood chemistry assay product line being more than offset by decreased revenues for our gastrointestinal and respiratory assays.~~ Life Science revenues reflect ~~inconsistent buying patterns with~~ a ~~number of our multi-national IVD manufacturing customers and general market softness in China.~~

~~Six Months Ended March 31, 2019~~

~~For the six month period ended March 31, 2018, net earnings were $15,200, or $0.35 per diluted share. Theyear-to-date~~ fiscal 2019 results include $2,064 of costs associated with acquisition and restructuring activities, and litigation costs, while the comparable fiscal 2018 results include $6,394 of costs associated with restructuring activities and litigations costs, along with certain~~one-time~~ ~~tax effects of the U.S. tax reform act enacted in December 2017. These items had a combined impact on net earnings of $1,583, or $0.04 per diluted share,~~significant increase in the ~~fiscal 2019year-to-date~~ ~~period~~sales of key molecular components such as RNA master mixes and ~~$3,814, or $0.09 per diluted share,~~deoxyribonucleotide triphosphates (“dNTPs”) to diagnostic test manufacturers for use in ~~the comparable fiscal 2018 period (see “USE OFNON-GAAP~~ ~~MEASURES” below).~~

COVID-19

related tests, including a fourfold increase in revenue from sales into China.

Consolidated revenues ~~decreased 6%~~increased 3% to ~~$101,728~~$104,717 for the first six months of fiscal ~~2019~~2020 compared to the same period of the prior year (also 6%3% on a constant-currency basis). On an operating segment basis, Diagnostics revenues decreased ~~9% (also 9% in constant-currency)~~1% (flat on a constant-currency basis) and Life Science revenues ~~were flat (2%~~increased 11% (12% increase ~~in constant-currency).~~

~~Page 17~~

~~USE OFNON-GAAP~~ ~~MEASURES~~

We have supplemented our reported GAAP financial information with information on operating expenses, operating income, net earnings, basic earnings per share and diluted earnings per share excluding the effects of: (i) acquisition transaction costs (fiscal 2019); (ii) restructuring costs (fiscal 2019 and 2018); (iii) litigation costs (fiscal 2019 and 2018); and (iv) certain~~one-time~~ ~~tax effects of the tax reform act (fiscal 2018) – each of which is anon-GAAP~~ measure. We have provided in the tables below reconciliations to the operating expenses, operating income, 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:

~~These measures help to appropriately evaluate and compare the results of operations from period to period by removing the impacts of thesenon-routine~~ ~~items; and~~

These measures are used by our management for various purposes, including evaluating performance against incentive bonus achievement targets, comparing performance from period to period in presentations to our board of directors, and as a basis for strategic planning and forecasting.

~~Revenue reported~~ on a constant-currency ~~basis is also~~basis).

Lead Testing Matters

On June 29, 2017, the United States Food and Drug Administration (“FDA”), in connection with its Safety Notification related to Magellan’s LeadCare testing systems for venous blood samples, issued to Magellan its Form 483, Inspectional Observations. The FDA issued a~~non-GAAP~~ ~~measure~~ related Warning Letter on October 23, 2017. On April 17, 2018, Magellan received a subpoena from the United States Department of Justice (“DOJ”) regarding its LeadCare product line. The subpoena outlines documents to be produced, and ~~is calculated by applying current period average foreign currency exchange rates~~we continue to cooperate with the DOJ in this matter, including responding to additional information requests. We have executed multiple tolling agreements to extend the statute of limitations.

Page 22

Table of Contents

Magellan submitted 510(k) applications in December 2018, seeking to reinstate venous blood sample-types for its LeadCare

II, LeadCare

Plus

™

and LeadCare Ultra

testing systems. In the second fiscal quarter of 2019 the FDA informed Magellan that each of these 510(k) applications had been put on Additional Information hold. On July 15, 2019, we provided responses to the ~~prior comparable periods. Management analyzes revenue on~~FDA’s requests for Additional Information. These 510(k) applications have since expired and are no longer under FDA review. Further, while Magellan’s LeadCare testing systems remain cleared for marketing by the FDA and permitted for use with capillary blood samples, the FDA advised that it has commissioned a ~~constant-currency basis~~third-party study of Magellan’s LeadCare testing systems using both venous and capillary blood samples. According to ~~better measure~~ the ~~comparability~~FDA, the results 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.~~

~~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~~the field study will be used ~~to evaluate our results~~ in conjunction with ~~corresponding GAAP measures.~~

~~Page~~other information, including review by an FDA Advisory Committee, to determine whether further action by the FDA or the CDC is necessary to protect the public health. Meridian intends to fully cooperate with the FDA as the third-party study and Advisory Committee review are completed.

During October 2019, the FDA performed a

follow-up

inspection of Magellan’s manufacturing facility. The FDA issued five Form FDA 483 observations. In November 2019, we submitted to the FDA our written responses to the five Form FDA 483 observations and have implemented a remediation plan that we are actively working. In January and February 2020, we submitted to the FDA additional written responses to the Form FDA 483 observations. On March 18,

2020, we participated in a regulatory meeting with the FDA at the FDA’s request to further discuss the Form FDA 483 observations and our remediation efforts. While we remain committed to strengthening Magellan’s quality system and ensuring that all aspects of the system are in full compliance, we can provide no assurance that our remediation efforts will be successful to a degree acceptable by the FDA.

   Three Months    Six Months
   Ended March 31,    Ended March 31,
   2019    2018    2019    2018
Operating Expenses -

U.S. GAAP basis
   $ 19,503    $ 26,891    $ 40,524    $ 50,840
Acquisition & restructuring costs
   (785 )    (3,458 )    (872 )    (4,192 )
Litigation costs
   (603 )    (1,453 )    (1,192 )    (2,202 )








Adjusted Operating Expenses
   $ 18,115    $ 21,980    $ 38,460    $ 44,446








Operating Income -

U.S. GAAP basis
   $ 9,835    $ 7,678    $ 20,386    $ 15,739
Acquisition & restructuring costs
   785    3,458    872    4,192
Litigation costs
   603    1,453    1,192    2,202








Adjusted Operating Income
   $ 11,223    $ 12,589    $ 22,450    $ 22,133








Net Earnings -

U.S. GAAP basis
   $ 7,094    $ 5,288    $ 15,200    $ 11,590
Acquisition & restructuring costs⁽¹⁾
   602    2,517    669    3,052
Litigation costs⁽¹⁾
   463    1,058    914    1,603
One-time benefit from tax law change
   —      —      —      (1,695 )
Repatriation transition tax
   —      —      —      854








Adjusted Net Earnings
   $ 8,159    $ 8,863    $ 16,783    $ 15,404








Net Earnings per Basic Common Share -

U.S. GAAP basis
   $ 0.17    $ 0.12    $ 0.36    $ 0.27
Acquisition & restructuring costs
   0.01    0.06    0.02    0.07
Litigation costs
   0.01    0.02    0.02    0.04
One-time benefit from tax law change
   —      —      —      (0.04 )
Repatriation transition tax
   —      —      —      0.02








Adjusted Basic EPS⁽²⁾
   $ 0.19    $ 0.21    $ 0.40    $ 0.36








Net Earnings per Diluted Common Share -

U.S. GAAP basis
   $ 0.17    $ 0.12    $ 0.35    $ 0.27
Acquisition & restructuring costs
   0.01    0.06    0.02    0.07
Litigation costs
   0.01    0.02    0.02    0.04
One-time benefit from tax law change
   —      —      —      (0.04 )
Repatriation transition tax
   —      —      —      0.02








Adjusted Diluted EPS⁽²⁾
   $ 0.19    $ 0.21    $ 0.39    $ 0.36

~~(1)~~

These acquisition and restructuring costs, and litigation costs are net of the following income tax effects: $183 and $140, respectively, for the three months ended March 31, 2019; $941 and $395, respectively, for the three months ended March 31, 2018; $203 and $278, respectively, for the fiscal 2019~~year-to-date~~ ~~period; and $1,140 and $599, respectively, for the fiscal 2018year-to-date~~ ~~period. These tax effects were calculated using the effective tax rates of the jurisdictions in which the costs were incurred.~~

~~(2)~~

~~Neither Net Earnings per Basic Common Share nor Net Earnings per Diluted Common Share for the fiscal 2018 quarterly period sum to their respective Adjusted EPS amounts due to rounding.~~

~~Page 19~~

In the course of remediation, we may encounter additional matters that warrant notifications to the FDA and/or customers regarding the use of our products. At this time, we do not believe that any such notifications would impact the ability to use the LeadCare systems with capillary blood samples. While we remain confident in the performance of the Magellan LeadCare testing systems using capillary samples, we do not expect that the FDA will reinstate our venous blood claims. We can provide no assurance that the ongoing investigation and study of the DOJ and FDA, respectively, or future exercise of their respective enforcement, regulatory, discretionary or other powers will not result in findings or alleged violations of federal laws that could lead to enforcement actions, proceedings or litigation and the imposition of damages, fines, penalties, restitution, other monetary liabilities, sanctions, injunctions, settlements or changes to our business practices, product offerings or operations that could have a material adverse effect on our business, financial condition or results of operations; or eliminate altogether our ability to operate our lead testing business, or on terms substantially similar to those on which we currently operate.

REVENUE OVERVIEW

Below are analyses of the Company’s revenue, provided for each of the following:

~~By Reportable Segment & Geographic Region~~

By Reportable Segment & Geographic Region

~~By Product Platform/Type~~

By Product Platform/Type

Revenue Overview- By Reportable Segment & Geographic Region

Our reportable segments are Diagnostics and Life ~~Science, with~~Science. The Diagnostics segment consists of manufacturing operations for infectious disease diagnostic products in Cincinnati, Ohio and Quebec City, Canada, and manufacturing operations for blood chemistry products in Billerica, Massachusetts (near Boston). These diagnostic test products are sold and distributed in the countries comprising North and Latin America (the “Americas”); Europe, Middle East and Africa (“EMEA”); and other countries outside of the Americas and EMEA (rest of the world, or “ROW”). ~~A full description~~The Life Science segment consists of ~~our segments is set forth~~manufacturing operations in ~~Note 9,~~~~“Reportable Segments~~Memphis, Tennessee; Boca Raton, Florida; London, England; and ~~Major Customers Information”~~Luckenwalde, Germany, and the sale and distribution of ~~the accompanying Condensed Consolidated Financial Statements.~~

bulk antigens, antibodies, PCR/qPCR reagents, nucleotides, and bioresearch reagents domestically and abroad, including a sales and business development facility, with outsourced distribution capabilities, in Beijing, China to further pursue growing revenue opportunities in Asia.

Revenues for the Diagnostics segment, in the normal course of business, may be affected from quarter to quarter by buying patterns of major distributors, seasonality and ~~the~~ severity of seasonal diseases and outbreaks, and foreign currency exchange rates. Revenues for the Life Science segment, in the normal course of business, may be affected

Page 23

Table of Contents

from quarter to quarter by buying patterns of major IVD manufacturing customers and foreign currency exchange rates.

   Three Months Ended March 31, Six Months Ended March 31,
   2019 2018 Inc (Dec) 2019 2018 Inc (Dec)
Diagnostics -

Americas
   $ 27,278 $ 33,351 (18 )% $ 58,425 $ 64,926 (10 )%
EMEA
   5,535 5,912 (6 )% 10,620 11,327 (6 )%
ROW
   687 519 32 % 1,120 1,019 10 %


Total Diagnostics
   33,500 39,782 (16 )% 70,165 77,272 (9 )%


Life Science -

Americas
   5,453 5,121 6 % 9,975 10,373 (4 )%
EMEA
   7,901 7,478 6 % 15,376 12,659 21 %
ROW
   3,394 4,070 (17 )% 6,212 8,430 (26 )%


Total Life Science
   16,748 16,669 —   % 31,563 31,462 —   %


Consolidated
   $ 50,248 $ 56,451 (11 )% $ 101,728 $ 108,734 (6 )%


% of total revenues -

Diagnostics
   67 % 70 % 69 % 71 %
Life Science
   33 % 30 % 31 % 29 %


Total
   100 % 100 % 100 % 100 %


Ex-Americas
   35 % 32 % 33 % 31 %

~~Revenue Overview- By Product Platform/Type~~

~~The revenues generated by each~~

See the “Revenue Disaggregation” section of ~~our reportable segments result primarily from the sale~~ Note 2,

“Significant Accounting Policies”

of the ~~following segment-specific categories of products:~~

~~Diagnostics~~

~~Molecular assays that operate on our Alethia platform (formerly branded as~~~~illumi~~~~gene~~)

~~Immunoassays and blood chemistry assays on multiple technology platforms~~

~~Life Science~~

~~Molecular reagents~~

~~Immunological reagents~~

~~Page 20~~

~~Revenues~~accompanying Condensed Consolidated Financial Statements for ~~each product platform/type, as well as its relative percentage of segment revenues, are shown below.~~

   Three Months Ended March 31, Six Months Ended March 31,
   2019 2018 Inc (Dec) 2019 2018 Inc (Dec)
Diagnostics-

Molecular assays
   $ 7,132 $ 9,976 (29 )% $ 14,434 $ 18,692 (23 )%
Immunoassays & blood chemistry assays
   26,368 29,806 (12 )% 55,731 58,580 (5 )%


Total Diagnostics
   $ 33,500 $ 39,782 (16 )% $ 70,165 $ 77,272 (9 )%


Life Science-

Molecular reagents
   $ 5,390 $ 6,143 (12 )% $ 11,998 $ 11,832 1 %
Immunological reagents
   11,358 10,526 8 % 19,565 19,630 —   %


Total Life Science
   $ 16,748 $ 16,669 —   % $ 31,563 $ 31,462 —   %


% of Diagnostics revenues-

Molecular assays
   21 % 25 % 21 % 24 %
Immunoassays & blood chemistry assays
   79 % 75 % 79 % 76 %


Total Diagnostics
   100 % 100 % 100 % 100 %


% of Life Science revenues-

Molecular reagents
   32 % 37 % 38 % 38 %
Immunological reagents
   68 % 63 % 62 % 62 %


Total Life Science
   100 % 100 % 100 % 100 %

detailed revenue disaggregation information.

Following is a discussion of the revenues generated by ~~each of~~ these product platforms/types ~~and~~and/or disease states:

Diagnostics Products

The acquisition of the Revogene molecular diagnostics platform, the development of the Curian
®
immunoassay platform, and the expansion of the related assay-menu for each of these platforms are important steps in addressing competitive pressures in our gastrointestinal and respiratory illness assay families. We are actively converting our existing Alethia
®
install base to the Revogene platform for
C. difficile
, Group A
Streptococcus
(“Group A Strep”) and Group B
Streptococcus
(“Group B Strep”) assays. As previously noted, the
COVID-19
pandemic dramatically slowed the placement of our molecular assay products during the quarter, resulting in 35 Revogene systems being installed during the second quarter of fiscal 2020 and a total Revogene system install base of 148 systems as of March 31, 2020. In March 2020, we received clearance from the FDA for the Curian immunoassay diagnostics instrument and its first assay, a test for
H. pylori
antigen in stool. We believe the advantages of the Curian analyzer will help protect our existing rapid test accounts.

Gastrointestinal Assays

During the second quarter and first six months of fiscal ~~2019,~~2020, revenues from our gastrointestinal products, which include tests for

C. difficile

H. pylori

and certain foodborne pathogens, among others, totaled ~~$16,177~~$14,014 and ~~$34,792,~~$30,060, respectively. These revenue levels represent ~~16%~~13% and ~~12%~~14% decreases for this product category from the fiscal ~~2018~~2019 quarterly and

year-to-date

periods, respectively. ~~Our~~~~C. difficile~~ ~~products~~These decreases result in large part from the pricing and volume pressures we continue to ~~experience pressure as a result of competition, particularly our Alethia~~face within this product ~~which experienced volume declines impacting both the quarterly andyear-to-date~~ ~~periods. For our stool antigen~~~~H. pylori~~ ~~products, we~~category. We have executed multi-year supply agreements with ~~a number of customers, including~~ our two largest reference laboratory customers for

H. pylori

tests to secure volume, albeit at lower selling prices. ~~As a consequence of this strategy, such products experienced price declines for the quarterly andyear-to-date~~ ~~periods.~~ We continue to believe there are ongoing benefits to be realized ~~from our partnerships with managed care companies in promoting:~~from: (i) the health and economic benefits of a test and treat strategy; (ii) changes in policies that discourage the use of traditional serology methods and promote the utilization of active infection testing methods; and (iii) physician behavior movement away from serology-based ~~testing and toward direct antigen~~ testing. ~~We experienced a favorable volume increase~~Beginning in April, we began seeing lower order demand for ~~the quarterly period~~most of our gastrointestinal products as a result of ~~promoting~~the

COVID-19

pandemic.

Contributing to the competitive pressures being faced in this ~~test and treat strategy.~~

~~Page 21~~

~~The~~product category, the patents for our

H. pylori

products, owned by us, expired in May 2016 in the U.S. and in May 2017 in countries outside the U.S. We expect competition with respect to our

H. pylori

products to continue to increase, ~~in the near future,~~ and such competition may have an adverse impact on our selling prices for these products, or our ability to retain business at prices acceptable to us, and consequently, adversely affect our future results of operations and liquidity, including revenues and gross profit. ~~Our product development pipeline includes new product initiatives~~We intend for our Curian HpSA

assay, cleared by the ~~detection of~~~~H. pylori~~~~, and early~~FDA in ~~the first quarter of fiscal 2019 we entered into~~March 2020, to help protect our existing customer base using lateral flow tests. We also maintain a strategic collaboration with DiaSorin to sell

H. pylori ~~tests (see Note 10,~~~~“Litigation Matters”~~ ~~of the accompanying Condensed Consolidated Financial Statements).~~

tests. We are unable to provide assurances that we will be successful with any strategy or that any strategy will prevent an adverse effect on our future results of operations and liquidity, including revenues and gross profit.

Respiratory Illness Assays

~~Including~~

Overcoming lower sales volumes in the first quarter of fiscal 2020, revenues for our respiratory illness products, which include tests for Group A Strep, Mycoplasma pneumonia, ~~influenza,~~Influenza, and Pertussis, among others, ~~our respiratory illness product revenues decreased 21%~~increased 44% and 9%20% in the second quarter and first six months of fiscal ~~2019,~~2020, respectively. ~~The quarterly decrease~~These increases primarily ~~results~~reflect volume increases in Group A Strep, Influenza and Mycoplasma related products from a ~~significant decrease in~~very strong respiratory season, including the ~~volume of tests sold, reflecting the fact that the prior year 2017-2018 flu season was a particularly strong one, as measured by outpatientinfluenza-like~~ ~~illness surveillance data published by the CDC.~~

COVID-19

pandemic.

Blood Chemistry Assays

Revenues from our sale of products to test for elevated levels of lead in blood ~~increased 2%~~remained flat during the second quarter of fiscal ~~2019 to~~2020 at a ~~total~~level of ~~$4,330,~~$4,329 and increased 3%8% for the fiscal

year-to-date

period to ~~$8,760. In late December 2018,~~$9,479. During the ~~documents to reinstate~~latter part of March, we began seeing lower order demand for our ~~venous blood claims removed in fiscal 2017 were submitted to the FDA, and in March 2019, we were informed by the FDA that each~~blood-lead test as a result of the submitted 510(k) applications has been put on Additional Information (AI) hold. Further, while our LeadCare testing systems remain cleared for marketing by the FDA for use with capillary blood samples, the FDA advised that it has commissioned a third-party study

COVID-19

pandemic.

Page 24

Table of the LeadCare testing systems using both venous and capillary blood samples. According to the FDA, the results of the field study will be used in conjunction with other information to determine whether further action by FDA and CDC is necessary to protect the public health. We intend to fully cooperate with the FDA as it completes its third-party study and continue to work to complete remediation actions at our blood–chemistry manufacturing facility to the FDA’s full and complete satisfaction. We remain confident in the performance of the LeadCare products and believe that they serve a critical role in promoting the public health.

~~See Note 10,~~~~“Litigation Matters”~~ ~~of the accompanying Condensed Consolidated Financial Statements for additional information related to the Company’s LeadCare product line. See also Part II, Item 1A Risk Factors below.~~

Contents

Life Science Products

During the second quarter of fiscal ~~2019,~~2020, revenues from our Life Science segment ~~remained flat~~increased 33% compared to the fiscal ~~2018~~2019 second quarter, with revenues from molecular reagent sales ~~decreasing 12%~~increasing 114% and revenues from immunological reagent sales ~~increasing 8%~~decreasing 5%. Life Science segment revenues ~~also remained flat~~increased 11% for the first six months of fiscal ~~2019,~~2020, reflecting a ~~slight~~41% increase in revenues from molecular reagent sales ~~being offset by a slight~~and an 8% decrease in immunological reagent sales. Our Life Science segment’s revenue growth was slightly impacted by the movement in currency exchange rates since the fiscal ~~2018~~2019 periods, with revenues increasing ~~2% on a constant-currency basis~~34% and 12% over both the second quarter and first six months of fiscal 2018. Our Life Science segment was also impacted by buying patterns of certain IVD manufacturing customers in China, with such sales totaling approximately $1,350 and $2,350 during the second quarter and first six months of fiscal 2019, respectively, ~~– representing decreases~~on a constant-currency basis. The increase in revenues was primarily attributable to the increased demand for key molecular components such as RNA master mixes and dNTPs from diagnostic test manufacturers for use in

COVID-19

related tests. Largely as a result of this

COVID-19

related demand, revenue from sales into China totaled approximately ~~37% and 33%, respectively, from~~$5,300 for the second quarter of fiscal 2020, a fourfold increase over the comparable fiscal ~~2018 periods.~~

~~Page 22~~

2019 quarter. For the first six months of fiscal 2020, revenue from sales into China totaled approximately $7,100, or a threefold increase over the comparable fiscal 2019 period.

Additionally, order patterns for

non-COVID-19

related products from many of our top IVD manufacturing customers returned to more normal levels during the current quarter. However, it remains unclear whether the shortfall experienced from these customers during the fiscal 2020 first quarter will be overcome throughout the remainder of the fiscal year.

Significant Customers

Revenue concentrations related to certain customers within our Diagnostics and Life Science segments are set forth in Note 9,10,

“Reportable Segments and Major Customers Information”

of the accompanying Condensed Consolidated Financial Statements.

Gross Profit

   Three Months Ended March 31, Six Months Ended March 31,
   2019 2018 Change 2019 2018 Change
Gross Profit
   $ 29,338 $ 34,569 (15 )% $ 60,910 $ 66,579 (9 )%
Gross Profit Margin
   58 % 61 % -3 points 60 % 61 % -1 point


	Three Months Ended March 31,									Six Months Ended March 31,
	2020			2019			Change			2020			2019			Change
Gross Profit	$	34,454		$	29,338			17	%	$	61,894		$	60,910			2	%
Gross Profit Margin		60	%		58	%		2 points			59	%		60	%		-1 point

The gross profit margin ~~decreases~~increase experienced in the second quarter of fiscal ~~2019 result~~2020 results primarily from the ~~impact~~positive impacts of a significantly higher percentage of the Life Science segment’s revenue relating to sales of molecular products and the segment’s manufacturing of larger-than-normal batch sizes for the RNA master mixes, both in response to the

COVID-19

pandemic demand. The decrease during the six month fiscal

year-to-date

period primarily reflects the effect of this increased

COVID-19

demand being more than offset by the combined effects of: (i) previously-noted pricing changes within our

H. pylori

product ~~line, along with the combined effects of~~line; (ii) mix of products sold, particularly decreased contribution from certain of our higher margin gastrointestinal assays; and ~~operating segment mix.~~

(iii) production capacity

ramp-up

costs for our Quebec facility where Revogene instruments and test devices are made.

Page 25

Table of Contents

Operating Expenses –- Segment Detail

   Three Months Ended March 31, 2019
   Research &
Development    Selling &
Marketing    General &
Administrative    Other Total Operating
Expenses
Fiscal 2018:

Diagnostics
   $ 3,735    $ 6,101    $ 4,795    $ —   $ 14,631
Life Science
   756    2,546    2,235    —   5,537
Corporate
   —      —      1,812    4,911 6,723








Total Expenses (2018 Quarter)
   $ 4,491    $ 8,647    $ 8,842    $ 4,911 $ 26,891








Fiscal 2019:

Diagnostics
   $ 3,172    $ 5,481    $ 4,336    $ (125 ) $ 12,864
Life Science
   644    1,430    1,439    25 3,538
Corporate
   —      —      1,613    1,488 3,101








Total Expenses (2019 Quarter)
   $ 3,816    $ 6,911    $ 7,388    $ 1,388 $ 19,503








   Six Months Ended March 31, 2019
   Research &
Development    Selling &
Marketing    General &
Administrative    Other Total Operating
Expenses
Fiscal 2018:

Diagnostics
   $ 7,425    $ 12,526    $ 9,899    $ —   $ 29,850
Life Science
   1,470    4,935    4,251    —   10,656
Corporate
   —      —      3,940    6,394 10,334








Total Expenses (2018Year-to-Date)
   $ 8,895    $ 17,461    $ 18,090    $ 6,394 $ 50,840








Fiscal 2019:

Diagnostics
   $ 6,286    $ 11,523    $ 9,027    $ (125 ) $ 26,711
Life Science
   1,414    2,951    2,930    25 7,320
Corporate
   —      —      4,329    2,164 6,493








Total Expenses (2019Year-to-Date)
   $ 7,700    $ 14,474    $ 16,286    $ 2,064 $ 40,524

~~Page 23~~


	Three Months Ended March 31,
	Research & Development		Selling & Marketing		General & Administrative		Other			Total Operating Expenses
Fiscal 2019:
Diagnostics	$	3,172	$	5,481	$	4,336	$	760		$	13,749
Life Science		644		1,430		1,439		25			3,538
Corporate		—		—		1,613		603			2,216

Total Expenses (2019 Quarter)	$	3,816	$	6,911	$	7,388	$	1,388		$	19,503

Fiscal 2020:
Diagnostics	$	4,791	$	5,374	$	6,363	$	(505	)	$	16,023
Life Science		595		1,140		1,906		103			3,744
Corporate		—		—		2,211		685			2,896

Total Expenses (2020 Quarter)	$	5,386	$	6,514	$	10,480	$	283		$	22,663

Six Months Ended March 31,

Research &
Development

Selling &
Marketing

General &
Administrative

Other

Total Operating
Expenses

Fiscal 2019:

Diagnostics
$
6,286
$
  11,523
$
9,027
$
847
$
  27,683

Life Science

1,414

2,951

2,930

25

7,320

Corporate

—

—

4,329

1,192

5,521

Total Expenses (2019
Year-to-Date)
$
7,700
$
  14,474
$
  16,286
$
  2,064
$
  40,524

Fiscal 2020:

Diagnostics
$
9,017
$
  10,713
$
  11,841
$
812
$
  32,383

Life Science

1,193

2,485

3,467

198

7,343

Corporate

—

—

3,928

1,055

4,983

Total Expenses (2020
Year-to-Date)
$
  10,210
$
  13,198
$
  19,236
$
2,065
$
  44,709

Operating Expenses – Comparisons to Prior Year Periods

   Three Months Ended March 31, 2019
   Research &
Development Selling &
Marketing General &
Administrative Other Total Operating
Expenses
2018 Expenses
   $ 4,491 $ 8,647 $ 8,842 $ 4,911 $ 26,891


% of Revenues
   8 % 15 % 16 % 9 % 48 %
Fiscal 2019 Increases/(Decreases):

Diagnostics
   (563 ) (620 ) (459 ) (125 ) (1,767 )
Life Science
   (112 ) (1,116 ) (796 ) 25 (1,999 )
Corporate
   —   —   (199 ) (3,423 ) (3,622 )


2019 Expenses
   $ 3,816 $ 6,911 $ 7,388 $ 1,388 $ 19,503


% of Revenues
   8 % 14 % 15 % 3 % 39 %
% Decrease
   (15 )% (20 )% (16 )% (72 )% (27 )%
   Six Months Ended March 31, 2019
   Research &
Development Selling &
Marketing General &
Administrative Other Total Operating
Expenses
2018 Expenses
   $ 8,895 $ 17,461 $ 18,090 $ 6,394 $ 50,840


% of Revenues
   8 % 16 % 17 % 6 % 47 %
Fiscal 2019 Increases/(Decreases):

Diagnostics
   (1,139 ) (1,003 ) (872 ) (125 ) (3,139 )
Life Science
   (56 ) (1,984 ) (1,321 ) 25 (3,336 )
Corporate
   —   —   389 (4,230 ) (3,841 )


2019 Expenses
   $ 7,700 $ 14,474 $ 16,286 $ 2,064 $ 40,524


% of Revenues
   8 % 14 % 16 % 2 % 40 %
% Decrease
   (13 )% (17 )% (10 )% (68 )% (20 )%

~~Total~~


	Three Months Ended March 31, 2020
	Research & Development			Selling & Marketing			General & Administrative			Other			Total Operating Expenses
2019 Expenses	$	3,816		$	6,911		$	7,388		$	1,388		$	19,503

% of Revenues		8	%		14	%		15	%		3	%		39	%
Fiscal 2020 Increases/(Decreases):
Diagnostics		1,619			(107	)		2,027			(1,265	)		2,274
Life Science		(49	)		(290	)		467			78			206
Corporate		—			—			598			82			680

2020 Expenses	$	5,386		$	6,514		$	10,480		$	283		$	22,663

% of Revenues		9	%		11	%		18	%		1	%		40	%
% Increase (Decrease)		41	%		(6	)%		42	%		(80	)%		16	%

Page 26

Table of Contents


	Six Months Ended March 31, 2020
	Research & Development			Selling & Marketing			General & Administrative			Other			Total Operating Expenses
2019 Expenses	$	7,700		$	14,474		$	16,286		$	2,064		$	40,524

% of Revenues		8	%		14	%		16	%		2	%		40	%
Fiscal 2020 Increases/(Decreases):
Diagnostics		2,731			(810	)		2,814			(35	)		4,700
Life Science		(221	)		(466	)		537			173			23
Corporate		—			—			(401	)		(137	)		(538	)

2020 Expenses	$	10,210		$	13,198		$	19,236		$	2,065		$	44,709

% of Revenues		10	%		13	%		18	%		2	%		43	%
% Increase (Decrease)		33	%		(9	)%		18	%		-	%		10	%

The changes in operating expenses primarily reflect the following:

Increased Research & Development costs, primarily for the development of the Revogene system GI and RI panel assays for the Diagnostics operating segment;

Decreased Selling & Marketing costs, primarily reflecting the effects of reorganization and streamlining initiatives;

Increased General & Administrative costs, primarily reflecting additional investment in incentive compensation, along with the purchase accounting amortization from the acquisition of the GenePOC business; and

Increased acquisition and restructuring costs, along with a decrease in fair value of the contingent consideration obligation for the GenePOC business, all of which are reflected within “Other” in the above tables.

Operating Income

Operating income increased 20% to $11,791 for the second quarter of fiscal 2020 and decreased ~~during both~~16% to $17,185 for the first six months of fiscal 2020, as a result of the factors discussed above.

Income Taxes

The effective rate for income taxes was 26% and 27% for the second quarter and first six months of fiscal ~~2019~~2020, respectively, compared to ~~the respective fiscal 2018 periods, with overall decreases in spending in all of our segments, reflecting the following:~~

~~Decreased Research & Development costs due primarily to the timing of product development projects and the clinical trials for our cCMV test in fiscal 2018;~~

~~Decreased Selling & Marketing costs due to: (i) the effects of the fiscal 2018 organization streamlining initiatives; and (ii) lower sales commissions resulting from the decrease in sales levels;~~

Decreased General & Administrative costs due to: (i) the effects of the fiscal 2018 organization streamlining initiatives; and (ii) lower Quality System remediation costs related to our blood-lead manufacturing facility; and

~~Decreased restructuring & litigation costs (reflected within “Other” in the above tables).~~

~~Operating Income~~

Operating income increased 28% to $9,835 for the second quarter of fiscal 2019, and increased 30% to $20,386 for the first six months of fiscal 2019, as a result of the factors discussed above, including the costs associated with acquisition and restructuring activities, and litigation costs.

~~Page 24~~

~~Income Taxes~~

~~The effective rate for income taxes was~~ 23% for both ~~the~~corresponding periods in fiscal ~~2019 second quarter and six monthyear-to-date~~ ~~period, compared to 27% and 22% during the corresponding~~2019. This higher fiscal ~~2018 periods. These fluctuations in~~2020 tax ~~rates result~~rate results largely from the ~~fact that~~

non-deductibility

of the ~~fiscal 2019 periods reflect~~acquisition-related costs related to Exalenz, along with the tax impact of restricted share units lapsing on a date when the share price was significantly lower ~~U.S. federal~~than the share price on the date the restricted share units were granted. In accordance with current applicable guidance, the tax effect of this difference is recorded directly to income tax expense. We expect our effective tax rate ~~of 21% being fullyphased-in,~~ ~~while~~for the full fiscal ~~2018 periods reflect the combined net impact of the following effects of the tax reform act (see Note 7,~~~~“Income Taxes”~~ ~~of the accompanying Condensed Consolidated Financial Statements):~~

~~Application of an approximate 24.5% blended rate due to the lowering of the applicable rate from 35% to 21% on aphased-in~~ ~~basis;~~

~~Recognizing in the first quarter aone-time~~ ~~$1,695 tax benefit, including there-measurement~~ ~~of deferred tax balances at the lower rate; and~~

~~Recording in the first quarter a provisionalone-time~~ ~~$854 tax expense related to the estimated repatriation transition tax on foreign earnings.~~

year to approximate 25.5% to 26.5%.

Liquidity and Capital Resources

~~Comparative Cash Flow Analysis~~

Liquidity

Our cash flow and financing requirements are determined by analyses of operating and capital spending budgets and debt ~~service,~~service. We have historically maintained a credit facility to augment working capital requirements and ~~consideration of~~to respond quickly to acquisition ~~plans, including our pending acquisition of GenePOC (see Note 12, “~~~~Subsequent Event”~~ ~~of the accompanying Condensed Consolidated Financial Statements).~~

opportunities.

We have an investment policy that guides the holdings of our investment portfolio, which presently consists of bank savings accounts and institutional money market mutual funds. Our objectives in managing the investment portfolio

Page 27

Table of Contents

are to: (i) preserve capital; (ii) provide sufficient liquidity to meet working capital requirements and fund strategic objectives such as acquisitions; and (iii) capture a market rate of return commensurate with market conditions and our policy’s investment eligibility criteria. As we look forward, we will continue to manage the holdings of our investment portfolio with preservation of capital being the primary objective.

~~Considering the various worldwidegeo-political~~ ~~andgeo-economic~~ conditions, we do not expect macroeconomic conditions to have a significant impact on our liquidity needs, financial condition or results of operations, although no assurances can be made in this regard.

We intend to continue to fund our working capital requirements from current cash flows from operating activities and cash on hand. If needed, we also have an additional source of liquidity through the amount remaining available on our ~~$30,000~~$160,000 bank revolving credit ~~facility.~~facility, which totaled approximately $61,200 as of April 30, 2020, following the additional $50,000 drawn on the credit facility in April to complete the acquisition of Exalenz. Our liquidity needs may change if overall economic conditions worsen and/or liquidity and credit within the financial markets tightens for an extended period of time, and such conditions impact the collectability of our customer accounts receivable, impact credit terms with our vendors, or disrupt the supply of raw materials and services.

As of March 31, ~~2019,~~2020, our cash and equivalents balance ~~is $66,097~~was $49,550 or ~~$9,697 higher~~$17,547 lower than at the end of the fiscal ~~2018~~2019 second quarter, and ~~$6,334 higher~~$12,847 lower than at ~~September 30, 2018. This increase results~~the end of fiscal 2019, resulting in large part from the $27,000 revolving credit facility payment in January 2020. As a result of the cash ~~flows from operating activities being more than sufficient~~generated during the first six months of fiscal 2020, since the beginning of fiscal 2020, our balance of net debt (defined as bank debt and total contingent obligations related to ~~cover capital expenditures~~the acquisition of the GenePOC, net of cash and ~~debt service.~~equivalents

on-hand)

has decreased approximately $15,500 to approximately $30,200 at March 31, 2020. Net cash flows from operating activities and cash on hand are anticipated to be adequate to fund working capital requirements, ~~and~~ capital expenditures and debt service during the next 12twelve months.

~~Capital Resources~~

~~In 2016,~~

The impacts of COVID-19 have adversely affected the capital markets and the ability of many companies to access capital and liquidity on favorable terms or at all. The Company expects to be in compliance with its financial covenants for at least the next twelve months. However, the Company ~~entered~~is currently unable to predict the impact that COVID-19 will have on its ability to access capital in the future. If the Company is unable to access additional capital and liquidity on acceptable terms, it could adversely impact the Company’s results of operations and ability to meet its future obligations beyond the next twelve months.

In April 2019, we suspended the payment of our quarterly cash dividend. The dividend was suspended as part of our regular evaluation of capital allocation, with the action taken in order to deploy cash into ~~a $60,000 five-year term loan~~new product development activities for the Revogene molecular diagnostic platform, as well as the Curian and ~~related interest rate swap agreement with a commercial bank, the details of which are set forth~~Pediastat

platforms, among other investments, and to preserve capital resources and liquidity for general corporate purposes.

Capital Resources

As described in Note 8,9,

“Bank Credit Arrangements”

of the accompanying Condensed Consolidated Financial ~~Statements. In addition, we have~~Statements and above, the Company maintains a ~~$30,000 revolving~~$160,000 credit facility, ~~(discussed above) with a commercial bank that expires March 31, 2021. As~~which is secured by substantially all of ~~April 30, 2019, there were no borrowings outstanding on this facility~~our assets and we had 100% borrowing capacity available to us. We have had no borrowings outstanding under this revolving credit facility during the first six months of fiscal 2019 or during the full year of fiscal 2018.

~~Page 25~~

includes certain restrictive financial covenants.

Our capital expenditures are estimated to range between approximately ~~$4,000~~$3,000 to ~~$5,000~~$4,000 for fiscal ~~2019,~~2020, with the actual amount dependent upon actual operating results and the phasing of certain projects. Such expenditures may be funded with cash and equivalents on hand, operating cash flows and/or availability under the ~~$30,000~~$160,000 revolving credit facility discussed above.

We do not utilize any special-purpose financing vehicles or have any undisclosed

off-balance

sheet arrangements.

~~On April 29, 2019, we signed a definitive agreement to acquire substantially all~~

Page 28

Table of the assets, as well as selected liabilities, of GenePOC Inc., a molecular diagnostics company located in Quebec City, Quebec Province, Canada. This purchase will be included in our Diagnostics operating segment. The maximum purchase price is $120,000, which consists of: (i) $50,000 to be paid at closing (subject to a working capital adjustment and a $5,000 hold-back to secure seller’s post-closing obligations); (ii) up to $20,000 to be paid in fiscal 2021, contingent upon the achievement of product development milestones; and (iii) up to $50,000 to be paid in fiscal 2023 based on certain sales and profit margin thresholds to be measured in fiscal 2022. GenePOC’s molecular diagnostics testing system is branded under the name revogene^™~~, and currently includes threeFDA-cleared~~ ~~assays (~~~~C. difficile~~~~, Group A Strep and Group B Strep). The purchase is expected to close no later than early fourth quarter fiscal 2019, pending the satisfaction of certain closing conditions.~~

In connection with the proposed acquisition of GenePOC, we also expect to execute a new five-year $125,000 revolving credit facility that would replace our existing $30,000 credit facility. We expect the new credit facility will be secured by substantially all of our assets and will include certain restrictive financial covenants. We expect to draw down approximately $73,000 from this new facility and use approximately $20,000 of cash~~on-hand~~ ~~to repay the existing term loan outstanding at March 31, 2019 and fund the closing payment for the acquisition of GenePOC.~~

Contents

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

~~There~~

Other than the impact of the recent outbreak of

COVID-19

on our business and results of operations as discussed elsewhere in this report, there have been no material changes in the Company’s exposure to market risk since September 30, ~~2018.~~

2019.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of the Company’s disclosure controls and procedures, as defined in Rules

13a-15(e)

and

15d-15(e)

under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of March 31, ~~2019.~~2020. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures were effective as of March 31, ~~2019.~~

2020.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as that term is defined in Rules

13a-15(f)

and

15d-15(f)

under the Exchange Act) during the quarter ended March 31, ~~2019~~2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

~~Page 26~~

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

See Note ~~10,~~11,

“Litigation Matters”

of the accompanying Condensed Consolidated Financial Statements.

ITEM 1A. RISK FACTORS

~~The~~

There have been no material changes from risk factors as previously disclosed in the Company’s fiscal 2019 Annual Report on Form

10-K

in response to Item 1A to Part I of Form

10-K,

except that we are adding the following risk factor ~~is added~~discussion relating to ~~the risk factors included in Item 1A~~coronavirus

COVID-19.

Our financial condition, results of ~~Part I of the Company’s Annual Report on Form10-K:~~

~~The United States Department of Justice~~operations and ~~FDA are investigating our Magellan lead testing systems, and any adverse finding, allegation, or exercise of enforcement or regulatory discretion~~cash flows could be adversely affected by the ~~DOJ~~ ongoing coronavirus

(COVID-19)

outbreak.

Any outbreak of contagious diseases, such as
COVID-19,
or ~~FDA~~other adverse public health developments, could ~~materially~~have material and adverse effects on our business operations. Such adverse effects could include diversion or prioritization of health care resources away from the conduct of diagnostic testing, disruptions of or restrictions on the ability of laboratories to process our tests, and delays with respect to or difficulties in patients accessing our tests, including those resulting from an inability to travel as a result of quarantines or other restrictions resulting from
COVID-19.

As
COVID-19
continues to affect individuals and businesses around the globe, we may experience disruptions that could severely impact our business, including:

decreased volume of testing and related sales of certain of our Diagnostics products as a result of disruptions to health care providers and limitations on the ability of providers to administer tests;

disruptions or restrictions on the ability of our, our collaborators’, or our suppliers’ personnel to travel, and temporary closures of our facilities or the facilities of our collaborators or suppliers;

limitations on employee resources that would otherwise be focused on the development of our products, processing our diagnostic tests, and the conduct of our clinical trials, including because

Page 29

Table of Contents

of sickness of employees or their families or requirements imposed on employees to avoid contact with large groups of people; and
delays in necessary interactions with local regulators, ethics committees and other important agencies and contractors due to limitations in employee resources or forced furlough of government employees.

In addition, the continued spread of
COVID-19
globally could adversely affect our ~~business, financial condition, or~~manufacturing and supply chains. Parts of our direct and indirect supply chains are located overseas, including in China, and may accordingly be subject to disruption. Additionally, our results of ~~operations.~~

~~As previously disclosed, on June 29, 2017, the FDA, in connection with its Safety Notification related to Magellan’s LeadCare~~testing systems for venous blood samples, issued to Magellan its Form 483, Inspectional Observations. The FDA issued a related Warning Letter on October 23, 2017. As also previously disclosed, 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 tooperations could be ~~produced, and we continue to cooperate with the DOJ in this matter, including responding to additional information requests and executing a tolling agreement to extend the statute of limitations.~~

COVID-19

or any other epidemic harms our business or the ~~results~~economy in general either domestically or in any other region in which we do business. The extent to which

COVID-19

affects our operations will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the ~~field study will be used in conjunction with other~~outbreak, new information ~~to determine whether further action by FDA or~~that may emerge concerning the Centers for Disease Control and Prevention is necessary to protect the public health. Meridian intends to fully cooperate with the FDA as FDA completes its third-party study and continues to work to complete remediation actions at Magellan’s blood–chemistry manufacturing facility to the FDA’s full and complete satisfaction.

~~While we remain confident in the performance~~severity of the Magellan LeadCare testing systems, there can be no assurance that the ongoing investigation and study of the DOJ and FDA, respectively, or future exercise of their respective enforcement, regulatory, discretionary or other powers will not result in findings or alleged violations of federal laws that could lead to enforcement actions, proceedings or litigation

COVID-19,

and the ~~imposition of damages, fines, penalties, restitution, other monetary liabilities, sanctions, settlements~~ actions to contain

COVID-19

or ~~changes to our business practices, product offerings or operations that~~treat its impact, among others, which could have ~~a material~~an adverse effect on our business, ~~financial condition or~~ results of ~~operations;~~operations and financial condition.

To date, we are seeing that the outbreak has slowed our assay instrument placements and sales of related test kits as diagnostic testing sites have turned their attention to critical care testing. We are unable to predict when expected sales volume levels for our instruments and related test kits will return. Also, as a result of the pandemic, certain clinical trials related to our products which were underway or ~~eliminate altogether~~scheduled to begin have been temporarily placed on hold. Such delays will impact our ~~ability~~timing for filing applications for product clearances with the FDA, as well as related timing of FDA clearances of such filings. Additionally, the pandemic could slow down our efforts to ~~operate~~expand our ~~lead testing business, or on terms substantially similar to those on~~product portfolio through acquisitions and distribution opportunities, impacting the speed with which we ~~currently operate.~~

are able to bring additional products to market.

Page 30

Table of Contents

ITEM 6. EXHIBITS

The following exhibits are being filed or furnished as a part of this Quarterly Report on Form

10-Q:


2.1**
	2.1	~~Share Purchase~~Agreement and Plan of Merger, dated as of February 19, 2020, by and among Meridian Bioscience, Inc., APM Trust Shelf 14 Ltd. and Exalenz Bioscience Ltd. (incorporated by reference to Meridian’s Current Report on Form 8-K filed with the Securities and Exchange Commission on February 20, 2020)

	10.1	Voting Agreement, dated as of ~~April 29, 2019~~February 19, 2020, by and between Mori Arkin and Meridian Bioscience, Inc. (incorporated by reference to Meridian’s Current Report on Form 8-K filed with the Securities and Exchange Commission on February 20, 2020)

	10.2	First Amendment and Consent, dated as of February 19, 2020, by and among ~~GenePOC Inc.,~~ Meridian Bioscience, ~~Canada~~ Inc., the ~~shareholders of GenePOC Inc., Après-Demain Holding SA, as Shareholders’ Representative,~~guarantors party thereto from time to time, the lenders party thereto from time to time and ~~Meridian Bioscience, Inc.~~PNC Bank, National Association (incorporated by reference to Meridian’s Current Report on Form 8-K filed with the Securities and Exchange Commission on February 20, 2020)

~~31.1~~
	31.1	Certification of Principal Executive Officer Pursuant to Securities Exchange Act Rule13a-14(a)/15d-14(a)

~~31.2~~
	31.2	Certification of Principal Financial Officer Pursuant to Securities Exchange Act Rule13a-14(a)/15d-14(a)

~~Page 27~~


32
	32		Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

~~101~~		~~The following financial information from Meridian Bioscience Inc.’s Quarterly Report on Form10-Q~~ ~~for the quarter ended March 31, 2019 filed with the SEC on May 7, 2019, formatted~~
	101.INS		Inline XBRL Instance Document

	101.SCH		Inline XBRL Instance Extension Schema

	101.CAL		Inline XBRL Instance Extension Calculation Linkbase

	101.DEF		Inline XBRL Instance Extension Definition Linkbase

	101.LAB		Inline XBRL Instance Extension Label Linkbase

	101.PRE		Inline XBRL Instance Extension Presentation Linkbase

	104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in XBRL includes: (i) Condensed Consolidated Statements of Operations for the three and six months ended March 31, 2019 and 2018; (ii) Condensed Consolidated Statements of Comprehensive Income for the three and six months ended March 31, 2019 and 2018; (iii) Condensed Consolidated Statements of Cash Flows for the six months ended March 31, 2019 and 2018; (iv) Condensed Consolidated Balance Sheets as of March 31, 2019 and September 30, 2018; (v) Condensed Consolidated Statements of Shareholders’ Equity for the three and six months ended March 31, 2019 and 2018; and (vi) the Notes to Condensed Consolidated Financial StatementsExhibit 101)

^**

~~Schedules to and certain portions of Exhibit 2.1 have been omitted pursuant to Item 601(b)(2) of RegulationS-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.

Page 31

Table of Contents

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Page 28


Six Months Ended March 31,	2019			2018
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings	$	15,200		$	11,590
Non-cash items included in net earnings:
Depreciation of property, plant and equipment		2,562			2,236
Amortization of intangible assets		1,658			1,883
Amortization of deferred instrument costs		—			401
Stock-based compensation		2,368			1,975
Deferred income taxes		(677	)		(1,576	)
Change in:
Accounts receivable		(951	)		(4,185	)
Inventories		832			(2,370	)
Prepaid expenses and other current assets		286			754
Accounts payable and accrued expenses		(1,267	)		3,746
Income taxes payable		1,108			(775	)
Other, net		(149	)		160

Net cash provided by operating activities		20,970			13,839

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment		(2,113	)		(2,160	)

Net cash used for investing activities		(2,113	)		(2,160	)

CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid		(10,612	)		(10,577	)
Payments on term loan		(2,250	)		(2,250	)
Proceeds and tax benefits from exercises of stock options		524			—

Net cash used for financing activities		(12,338	)		(12,827	)

Effect of Exchange Rate Changes on Cash and Equivalents and Restricted Cash		(185	)		476

Net Increase (Decrease) in Cash and Equivalents and Restricted Cash		6,334			(672	)
Cash and Equivalents and Restricted Cash at Beginning of Period		60,763			58,072

Cash and Equivalents and Restricted Cash at End of Period	$	67,097		$	57,400


Cash and Equivalents	$	66,097		$	56,400
Restricted Cash		1,000			1,000

Cash and Equivalents and Restricted Cash at End of Period	$	67,097		$	57,400


	March 31, 2019 (Unaudited)		September 30, 2018
CURRENT ASSETS
Cash and equivalents	$	66,097	$	59,763
Accounts receivable, less allowances of $437 and $310		33,031		32,336
Inventories		40,866		41,993
Prepaid expenses and other current assets		4,671		4,961

Total current assets		144,665		139,053

PROPERTY, PLANT AND EQUIPMENT, at Cost
Land		1,155		1,160
Buildings and improvements		32,454		32,444
Machinery, equipment and furniture		60,394		50,606
Construction in progress		1,806		1,631

Subtotal		95,809		85,841
Less: accumulated depreciation and amortization		65,039		55,846

Net property, plant and equipment		30,770		29,995

OTHER ASSETS
Goodwill		54,642		54,637
Other intangible assets, net		21,452		23,113
Restricted cash		1,000		1,000
Deferred instrument costs, net		—		1,239
Fair value of interest rate swap		835		1,722
Deferred income taxes		110		130
Other assets		490		488

Total other assets		78,529		82,329

TOTAL ASSETS	$	253,964	$	251,377


	March 31, 2019 (Unaudited)			September 30, 2018
CURRENT LIABILITIES
Accounts payable	$	7,838		$	6,260
Accrued employee compensation costs		5,357			7,263
Other accrued expenses		3,724			5,065
Current portion of long-term debt		6,000			5,250
Income taxes payable		1,163			335

Total current liabilities		24,082			24,173

NON-CURRENT LIABILITIES
Post-employment benefits		2,476			2,646
Long-term debt		41,946			44,930
Long-term income taxes payable		736			441
Deferred income taxes		3,079			3,769

Totalnon-current liabilities		48,237			51,786

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, 42,515,142 and 42,399,962 shares issued, respectively		—			—
Additionalpaid-in capital		131,951			129,193
Retained earnings		54,074			49,602
Accumulated other comprehensive loss		(4,380	)		(3,377	)

Total shareholders’ equity		181,645			175,418

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	253,964		$	251,377


	Balance at September 30, 2018			New Revenue Standard Adjustment			Balance at October 1, 2018
PROPERTY, PLAN AND EQUIPMENT
Machinery, equipment and furniture	$	50,606		$	8,696		$	59,302
Accumulated depreciation and amortization		(55,846	)		(7,611	)		(63,457	)
OTHER ASSETS
Deferred instrument costs, net		1,239			(1,239	)		—
NON-CURRENT LIABILITIES
Deferred income taxes		(3,769	)		38			(3,731	)
SHAREHOLDERS’ EQUITY
Retained earnings		(49,602	)		116			(49,486	)

Life Science-
Americas		4,612		5,454	(15	)%		8,627		9,976	(14	)%
EMEA		9,946		7,852	27	%		14,914		15,213	(2	)%
ROW		7,796		3,442	126	%		11,443		6,374	80	%

Total Life Science		22,354		16,748	33	%		34,984		31,563	11	%

Consolidated	$	57,296	$	50,248	14	%	$	104,717	$	101,728	3	%


				Fair Value Measurements Using Inputs Considered as
	Carrying Value			Level 1		Level 2			Level 3
Interest rate swaps (see Note 9) -
As of March 31, 2020	$	(313	)	$	—	$	(313	)	$	—
As of September 30, 2019	$	—		$	—	$	—		$	—
Contingent consideration -
As of March 31, 2020	$	(25,898	)	$	—	$	—		$	(25,898	)
As of September 30, 201 9	$	(27,202	)	$	—	$	—		$	(27,202	)


	March 31, 2019				September 30, 2018
	Cash and Equivalents		Other Assets		Cash and Equivalents		Other Assets
Institutional money market funds	$	20,668	$	—	$	20,421	$	—
Cash on hand -
Restricted		—		1,000		—		1,000
Unrestricted		45,429		—		39,342		—

Total	$	66,097	$	1,000	$	59,763	$	1,000


	March 31, 2019		September 30, 2018
	March 31, 2019		September 30, 2018
Raw materials	$	7,473	$	6,689
Work-in-process		11,810		12,098
Finished goods - instruments		965		1,191
Finished goods - kits and reagents		20,618		22,015

Total	$	40,866	$	41,993


	Diagnostics		Life Science		Corporate⁽¹⁾			Eliminations⁽²⁾			Total
Three Months Ended March 31, 2019
Net revenues -
Third-party	$	33,500	$	16,748	$	—		$	—		$	50,248
Inter-segment		89		53		—			(142	)		—
Operating income		7,561		5,361		(3,101	)		14			9,835
Goodwill (March 31, 2019)		35,213		19,429		—			—			54,642
Other intangible assets, net (March 31, 2019)		20,705		747		—			—			21,452
Total assets (March 31, 2019)		183,234		70,152		—			578			253,964
Three Months Ended March 31, 2018
Net revenues -
Third-party	$	39,782	$	16,669	$	—		$	—		$	56,451
Inter-segment		80		75		—			(155	)		—
Operating income		10,684		3,638		(6,723	)		79			7,678
Goodwill (September 30, 2018)		35,213		19,424		—			—			54,637
Other intangible assets, net (September 30, 2018)		22,068		1,045		—			—			23,113
Total assets (September 30, 2018)		180,978		70,341		—			58			251,377
Six Months Ended March 31, 2019
Net revenues -
Third-party	$	70,165	$	31,563	$	—		$	—		$	101,728
Inter-segment		252		229		—			(481	)		—
Operating income		16,346		10,492		(6,493	)		41			20,386
Six Months Ended March 31, 2018
Net revenues -
Third-party	$	77,272	$	31,462	$	—		$	—		$	108,734
Inter-segment		201		267		—			(468	)		—
Operating income		19,310		6,580		(10,334	)		183			15,739

MERIDIAN BIOSCIENCE, INC.

Date:
May ~~7, 2019~~8, 2020

/s/ Bryan T. Baldasare

Bryan T. Baldasare

~~Senior~~
Executive Vice President ~~Corporate Controller, Treasurer~~ and Chief ~~Accounting~~Financial Officer
(Principal Financial and Accounting Officer)