☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
2020
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
(§ ☒ ☐ Non-accelerated filer ☐ Smaller reporting company ☐ ☐
Securities registered pursuant to Section 12(b) of the Act:
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Class | Outstanding April 30, | |
Common Stock, no par value | 42,832,859 |
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PART I. | ||||||||
Item 1. | ||||||||
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Item 2. | 20- 28 | |||||||
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Item 3. | 29 | |||||||
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Item | 29 | |||||||
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PART II. | ||||||||
Item 1. | 29 | |||||||
Item 1A. | 29 | |||||||
Item 6. | 31 | |||||||
32 |
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 | ||||||||||||
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GROSS PROFIT | 29,338 | 34,569 | 60,910 | 66,579 | ||||||||||||
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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 | ||||||||||||
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Total operating expenses | 19,503 | 26,891 | 40,524 | 50,840 | ||||||||||||
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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 | ) | ||||||||
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Total other income (expense) | (588 | ) | (454 | ) | (663 | ) | (857 | ) | ||||||||
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EARNINGS BEFORE INCOME TAXES | 9,247 | 7,224 | 19,723 | 14,882 | ||||||||||||
INCOME TAX PROVISION | 2,153 | 1,936 | 4,523 | 3,292 | ||||||||||||
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NET EARNINGS | $ | 7,094 | $ | 5,288 | $ | 15,200 | $ | 11,590 | ||||||||
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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 | ||||||||||||
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WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - DILUTED | 42,946 | 42,732 | 42,925 | 42,693 | ||||||||||||
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ANTI-DILUTIVE SECURITIES: | ||||||||||||||||
Common share options and restricted share units | 771 | 1,021 | 742 | 1,015 | ||||||||||||
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DIVIDENDS DECLARED PER COMMON SHARE | $ | 0.125 | $ | 0.125 | $ | 0.250 | $ | 0.250 | ||||||||
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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 | ||||||||
MERIDIAN BIOSCIENCE, INC. AND SUBSIDIARIES
NET EARNINGS Other comprehensive income (loss): Foreign currency translation adjustment Unrealized gain (loss) on cash flow hedge Income taxes related to items of other comprehensive income Other comprehensive income (loss), net of tax COMPREHENSIVE INCOME ContentsCondensed Consolidated StatementsTable of Comprehensive Income (Unaudited)(dollar amounts in thousands) Three Months Ended Six Months Ended March 31, March 31, 2019 2018 2019 2018 $ 7,094 $ 5,288 $ 15,200 $ 11,590 377 926 (339 ) 1,217 (310 ) 424 (887 ) 765 78 (107 ) 223 (219 ) 145 1,243 (1,003 ) 1,763 $ 7,239 $ 6,531 $ 14,197 $ 13,353
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 | ||||||||
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 | |||||
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Net cash provided by operating activities | 20,970 | 13,839 | ||||||
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CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
Purchase of property, plant and equipment | (2,113 | ) | (2,160 | ) | ||||
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Net cash used for investing activities | (2,113 | ) | (2,160 | ) | ||||
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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 | — | ||||||
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Net cash used for financing activities | (12,338 | ) | (12,827 | ) | ||||
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Effect of Exchange Rate Changes on Cash and Equivalents and Restricted Cash | (185 | ) | 476 | |||||
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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 | ||||||
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Cash and Equivalents and Restricted Cash at End of Period | $ | 67,097 | $ | 57,400 | ||||
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Cash and Equivalents | $ | 66,097 | $ | 56,400 | ||||
Restricted Cash | 1,000 | 1,000 | ||||||
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Cash and Equivalents and Restricted Cash at End of Period | $ | 67,097 | $ | 57,400 | ||||
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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 | ||||
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 | ||||||
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Total current assets | 144,665 | 139,053 | ||||||
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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 | ||||||
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Subtotal | 95,809 | 85,841 | ||||||
Less: accumulated depreciation and amortization | 65,039 | 55,846 | ||||||
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Net property, plant and equipment | 30,770 | 29,995 | ||||||
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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 | ||||||
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Total other assets | 78,529 | 82,329 | ||||||
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TOTAL ASSETS | $ | 253,964 | $ | 251,377 | ||||
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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 | ||||
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 | ||||||
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Total current liabilities | 24,082 | 24,173 | ||||||
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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 | ||||||
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Totalnon-current liabilities | 48,237 | 51,786 | ||||||
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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 | ) | ||||
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Total shareholders’ equity | 181,645 | 175,418 | ||||||
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TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 253,964 | $ | 251,377 | ||||
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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 |
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 | ) | |||||||||||||
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Balance at March 31, 2019 | 42,515 | $ | 131,951 | $ | 54,074 | $ | (4,380 | ) | $ | 181,645 | ||||||||||
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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 | |||||||||||||||
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Balance at March 31, 2018 | 42,344 | $ | 127,583 | $ | 47,936 | $ | (1,183 | ) | $ | 174,336 | ||||||||||
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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 | ) | |||||||||||||
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Balance at March 31, 2019 | 42,515 | $ | 131,951 | $ | 54,074 | $ | (4,380 | ) | $ | 181,645 | ||||||||||
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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 | |||||||||||||||
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| |||||||||||
Balance at March 31, 2018 | 42,344 | $ | 127,583 | $ | 47,936 | $ | (1,183 | ) | $ | 174,336 | ||||||||||
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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 - | — | — | (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 - | — | — | (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 |
1. |
|
2. |
|
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.
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 | % | ||||||||||||||||
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| |||||||||||||
Total Diagnostics | 33,500 | 39,782 | (16 | )% | 70,165 | 77,272 | (9 | )% | ||||||||||||||||
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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 | )% | ||||||||||||||||
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Total Life Science | 16,748 | 16,669 | — | % | 31,563 | 31,462 | — | % | ||||||||||||||||
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Consolidated | $ | 50,248 | $ | 56,451 | (11 | )% | $ | 101,728 | $ | 108,734 | (6 | )% | ||||||||||||
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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 | )% | ||||||||||||||||
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 | % | ||||||||||||
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 | )% | ||||||||||||||||
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| |||||||||||||
Total Diagnostics | $ | 33,500 | $ | 39,782 | (16 | )% | $ | 70,165 | $ | 77,272 | (9 | )% | ||||||||||||
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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 | — | % | ||||||||||||||||
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Total Life Science | $ | 16,748 | $ | 16,669 | — | % | $ | 31,563 | $ | 31,462 | — | % | ||||||||||||
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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 | % | ||||||||||||
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 | )% | ||||||||||||||||
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| |||||||||||||
Total Diagnostics | $ | 33,500 | $ | 39,782 | (16 | )% | $ | 70,165 | $ | 77,272 | (9 | )% | ||||||||||||
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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 | )% | ||||||||||||
Page 9
Our Alethia and LeadCare
Operations.
(b) | Fair Value Measurements – |
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 | ) |
(c) | Recent Accounting Pronouncements – |
In February 2016,Adopted
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 – |
3. |
Acquisition of Business of GenePOC |
Cash
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 | — | ||||||||||||
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| |||||||||
Total | $ | 66,097 | $ | 1,000 | $ | 59,763 | $ | 1,000 | ||||||||
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|
|
|
|
|
|
|
|
Inventories areacquisition 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 | ||||||
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|
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| |||||
Total | $ | 40,866 | $ | 41,993 | ||||
|
|
|
|
| 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
(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. |
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 | ||||||||||||
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|
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| |||||||||
Total | $ | 55,408 | $ | 33,956 | $ | 55,405 | $ | 32,292 | ||||||||
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|
|
|
|
|
|
|
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 estimated at $27,202) | $ | 77,502 | $ | 24 | $ | 77,526 | ||||||
Three Ended March 31, 2019 | Six Ended March 31, 2019 | |||||||
Net Revenues | $ | 50,319 | $ | 101,871 | ||||
Net Earnings | $ | 3,527 | $ | 7,906 |
Three Months Ended March 31, 2019 | Six 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 | ) | ||
4. |
|
During the second quarter of fiscal 2019, approximately $270 of restructuring accrual was reversed and is reflected as a reductionrespectively.
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 |
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 |
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 |
Three Months | Six Months | |||||||||||||||
Ended March 31, | Ended March 31, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Cash paid for amounts included in the measurement of lease | ||||||||||||||||
Operating cash flows from operating leases | $ | 391 | $ | — | $ | 778 | $ | — | ||||||||
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 | ||
September 30, 2019 | ||||
2020 | $ | 1,528 | ||
2021 | 1,451 | |||
2022 | 1,293 | |||
2023 | 967 | |||
2024 | 712 | |||
Thereafter | 616 | |||
Total | $ | 6,567 |
8. | Intangible Assets |
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 | ||||
|
|
|
|
|
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 | ||||||||
As a result, our financial statements$829 for the three months ended DecemberMarch 31, 2017 reflected2020 and 2019, respectively, and $3,449 and $1,658 for the effectssix months ended March 31, 2020 and 2019, respectively. The estimated aggregate amortization expense for these intangible assets for each of the tax reform actfiscal years through fiscal 2025 is as provisional based on a reasonable estimatefollows: 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 |
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%.
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In March 2016, the Company entered into a $60,000 five-year term loancredit facility agreement with a commercial bank.bank
Sheet
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”.
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Page 13
Amounts due from two2 Diagnostics distributor customers accounted for 14% and 12%13% of consolidated accounts receivable at
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 of the three months ended March 31, 2020 and 2019, respectively, and $1,055 and six months ended March 31, 2020 and 2019, |
(2) | Eliminations consist of inter-segment transactions. |
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 | ||||||||
Page 14
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2019.
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 October 9, 2018, the Company and DiaSorin Inc. entered into a strategic collaboration to sell DiaSorin’sHelicobacter pylori stool antigen test to detectH. pylori for use on its automated LIAISON platform under the Meridian brand name worldwide. The new collaboration results in the termination
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As previously disclosed, on June 29, 2017, the FDA, in connection with its Safety Notification related to Magellan’s LeadCaretesting 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. |
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business combination. In connection with the proposedmerger consideration for the acquisition and repayment of GenePOC, we also expect to executethe Exalenz bank loans, the Company executed two forward contracts with a new five-year $125,000total notional amount of 187,000 New Israeli Shekels, both of which settled on April 20, 2020
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
Following
manufacturing, product distribution and new product development during this crisis. We continually assess
2020
(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). |
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 certainone-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 periodsales 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).
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) certainone-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:
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Revenue reported on a constant-currency basis is alsobasis).
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 onlythe field study will be used to evaluate our results in conjunction with corresponding GAAP measures.
Pageother 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.
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 | ) | ||||||||
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Adjusted Operating Expenses | $ | 18,115 | $ | 21,980 | $ | 38,460 | $ | 44,446 | ||||||||
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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 | ||||||||||||
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Adjusted Operating Income | $ | 11,223 | $ | 12,589 | $ | 22,450 | $ | 22,133 | ||||||||
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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 | ||||||||||||
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Adjusted Net Earnings | $ | 8,159 | $ | 8,863 | $ | 16,783 | $ | 15,404 | ||||||||
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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 | ||||||||||||
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Adjusted Basic EPS(2) | $ | 0.19 | $ | 0.21 | $ | 0.40 | $ | 0.36 | ||||||||
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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 | ||||||||||||
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Adjusted Diluted EPS(2) | $ | 0.19 | $ | 0.21 | $ | 0.39 | $ | 0.36 | ||||||||
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Page 19
By Reportable Segment & Geographic Region
- | By Reportable Segment & Geographic Region |
By Product Platform/Type
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.- By Product Platform/Type Science, withScience. 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 descriptionThe Life Science segment consists of our segments is set forthmanufacturing operations in Note 9,“Reportable SegmentsMemphis, Tennessee; Boca Raton, Florida; London, England; and Major Customers Information”Luckenwalde, Germany, and the sale and distribution of the accompanying Condensed Consolidated Financial Statements.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
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 | % | ||||||||||||||||
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Total Diagnostics | 33,500 | 39,782 | (16 | )% | 70,165 | 77,272 | (9 | )% | ||||||||||||||||
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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 | )% | ||||||||||||||||
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Total Life Science | 16,748 | 16,669 | — | % | 31,563 | 31,462 | — | % | ||||||||||||||||
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Consolidated | $ | 50,248 | $ | 56,451 | (11 | )% | $ | 101,728 | $ | 108,734 | (6 | )% | ||||||||||||
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% of total revenues - | ||||||||||||||||||||||||
Diagnostics | 67 | % | 70 | % | 69 | % | 71 | % | ||||||||||||||||
Life Science | 33 | % | 30 | % | 31 | % | 29 | % | ||||||||||||||||
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Total | 100 | % | 100 | % | 100 | % | 100 | % | ||||||||||||||||
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Ex-Americas | 35 | % | 32 | % | 33 | % | 31 | % | ||||||||||||||||
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Revenue Overview- By Product Platform/Type
The revenues generated by each
Diagnostics
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Life Science
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Page 20
Revenuesaccompanying 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 | )% | ||||||||||||||||
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Total Diagnostics | $ | 33,500 | $ | 39,782 | (16 | )% | $ | 70,165 | $ | 77,272 | (9 | )% | ||||||||||||
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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 | — | % | ||||||||||||||||
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Total Life Science | $ | 16,748 | $ | 16,669 | — | % | $ | 31,563 | $ | 31,462 | — | % | ||||||||||||
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% of Diagnostics revenues- | ||||||||||||||||||||||||
Molecular assays | 21 | % | 25 | % | 21 | % | 24 | % | ||||||||||||||||
Immunoassays & blood chemistry assays | 79 | % | 75 | % | 79 | % | 76 | % | ||||||||||||||||
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Total Diagnostics | 100 | % | 100 | % | 100 | % | 100 | % | ||||||||||||||||
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% of Life Science revenues- | ||||||||||||||||||||||||
Molecular reagents | 32 | % | 37 | % | 38 | % | 38 | % | ||||||||||||||||
Immunological reagents | 68 | % | 63 | % | 62 | % | 62 | % | ||||||||||||||||
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Total Life Science | 100 | % | 100 | % | 100 | % | 100 | % | ||||||||||||||||
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detailed revenue disaggregation information.
Page 21
Theproduct category, the patents for our 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 initiativesWe intend for our Curian HpSAdetection ofH. pylori, and earlyFDA in the first quarter of fiscal 2019 we entered intoMarch 2020, to help protect our existing customer base using lateral flow tests. We also maintain a strategic collaboration with DiaSorin to sell tests (see Note 10,“Litigation Matters” of the accompanying Condensed Consolidated Financial Statements).
Including
Page 22
Additionally, order patterns for
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 |
(iii) production capacity
Three Months Ended March 31, 2019 | ||||||||||||||||||||
Research & Development | Selling & Marketing | General & Administrative | Other | Total Operating Expenses | ||||||||||||||||
Fiscal 2018: |
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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 | |||||||||||||||
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Total Expenses (2018 Quarter) | $ | 4,491 | $ | 8,647 | $ | 8,842 | $ | 4,911 | $ | 26,891 | ||||||||||
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Fiscal 2019: |
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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 | |||||||||||||||
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Total Expenses (2019 Quarter) | $ | 3,816 | $ | 6,911 | $ | 7,388 | $ | 1,388 | $ | 19,503 | ||||||||||
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Six Months Ended March 31, 2019 | ||||||||||||||||||||
Research & Development | Selling & Marketing | General & Administrative | Other | Total Operating Expenses | ||||||||||||||||
Fiscal 2018: |
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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 | |||||||||||||||
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Total Expenses (2018Year-to-Date) | $ | 8,895 | $ | 17,461 | $ | 18,090 | $ | 6,394 | $ | 50,840 | ||||||||||
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Fiscal 2019: |
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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 | |||||||||||||||
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Total Expenses (2019Year-to-Date) | $ | 7,700 | $ | 14,474 | $ | 16,286 | $ | 2,064 | $ | 40,524 | ||||||||||
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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 | ||||||||||
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 | ||||||||||
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% 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 | ) | ||||||||||||
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2019 Expenses | $ | 3,816 | $ | 6,911 | $ | 7,388 | $ | 1,388 | $ | 19,503 | ||||||||||
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% 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 | ||||||||||
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% 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 | ) | |||||||||||||
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2019 Expenses | $ | 7,700 | $ | 14,474 | $ | 16,286 | $ | 2,064 | $ | 40,524 | ||||||||||
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% 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 | % |
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 | % |
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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 thecorresponding periods in fiscal 2019 second quarter and six monthyear-to-date period, compared to 27% and 22% during the corresponding2019. This higher fiscal 2018 periods. These fluctuations in2020 tax rates resultrate results largely from the fact that
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year to approximate 25.5% to 26.5%.
Comparative Cash Flow Analysis
opportunities.
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.
Capital Resources
In 2016,
Page 25
On April 29, 2019, we signed a definitive agreement to acquire substantially all
2020.
Page 26
The United States Department of Justiceoperations and FDA are investigating our Magellan lead testing systems, and any adverse finding, allegation, or exercise of enforcement or regulatory discretioncash flows could be adversely affected by the DOJ ongoing coronavirus
of sickness of employees or their families or requirements imposed on employees to avoid contact with large groups of people; and |
As previously disclosed, on June 29, 2017, the FDA, in connection with its Safety Notification related to Magellan’s LeadCaretesting 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.
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. Accordingadversely affected to the FDA,extent that
While we remain confident in the performanceseverity 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
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2.1 | ||||
10.1 | ||||
10.2 | ||||
31.1 | ||||
31.2 |
Page 27
32 | ||||
101.INS | Inline XBRL Instance Document | |||
101.SCH | Inline XBRL Instance Extension Schema | |||
101.CAL | Inline XBRL Instance Extension Calculation Linkbase | |||
101.DEF | Inline XBRL Instance Extension Definition Linkbase | |||
101.LAB | Inline XBRL Instance Extension Label Linkbase | |||
101.PRE | Inline XBRL Instance Extension Presentation Linkbase | |||
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in |
|
MERIDIAN BIOSCIENCE, INC. | ||||||
Date: May | By: | /s/ Bryan T. Baldasare | ||||
Bryan T. Baldasare | ||||||
Executive Vice President (Principal Financial and Accounting Officer) |