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 ~~June 30, 2019~~March 31, 2020

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

For the transition period from

MERIDIAN BIOSCIENCE, ~~INC~~.INC.

Incorporated under the laws of Ohio

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

3471 River Hills Drive

Cincinnati, Ohio 45244

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

Name of each exchange

Common Stock, no par value

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

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

☐

☒

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

Outstanding ~~July 31, 2019~~April 30, 2020

Common Stock, no par value

~~42,711,496~~42,832,859

MERIDIAN BIOSCIENCE, INC. AND SUBSIDIARIES

TABLE OF CONTENTS TO QUARTERLY REPORT ON FORM

10-Q


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

~~Item 1.~~ PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)

	Condensed Consolidated Statements of Operations Three and ~~Nine~~Six Months Ended ~~June 30,~~March 31, 2020 and 2019 ~~and 2018~~		1

	Condensed Consolidated Statements of Comprehensive Income Three and ~~Nine~~Six Months Ended ~~June 30,~~March 31, 2020 and 2019 ~~and 2018~~		2

	Condensed Consolidated Statements of Cash Flows ~~Nine~~Six Months Ended ~~June 30,~~March 31, 2020 and 2019 ~~and 2018~~		3

	Condensed Consolidated Balance Sheets ~~June 30, 2019~~March 31, 2020 and September 30, ~~2018~~2019		~~4-5~~ 4- 5

	Condensed Consolidated Statements of Changes in Shareholders’ Equity Three and ~~Nine~~Six Months Ended ~~June 30,~~March 31, 2020 and 2019 ~~and 2018~~		6

	Notes to Condensed Consolidated Financial Statements		~~7-19~~

~~Item 2.~~	~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~		~~20-27~~

~~Item 3.~~	~~Quantitative and Qualitative Disclosures About Market Risk~~ 7-		27

~~Item 4.~~	~~Controls and Procedures~~20		~~27-28~~

~~PART II.~~ Item 2.	~~OTHER INFORMATION~~Management’s Discussion and Analysis of Financial Condition and Results of Operations

~~Item 1.~~	~~Legal Proceedings~~ 20-		28

~~Item 1A.~~	~~Risk Factors~~		28

~~Item 6.~~	~~Exhibits~~		28

Item 3.	Quantitative and Qualitative Disclosures About Market Risk		29

Item 4.	Controls and Procedures		29

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings		29

Item 1A.	Risk Factors		29

Item 6.	Exhibits		31

Signature			29 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.

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

Nine Months Ended

June 30,

June 30,

2019

2018

2019

2018

NET REVENUES
$
48,440
$
51,737
$
150,168
$
160,471

COST OF SALES

20,181

19,775

60,999

61,930

GROSS PROFIT

28,259

31,962

89,169

98,541

OPERATING EXPENSES

Research and development

4,594

4,264

12,294

13,159

Selling and marketing

6,747

8,502

21,221

25,963

General and administrative

8,002

8,380

24,288

26,470

Acquisition-related costs

473

—

1,445

—

Restructuring costs

1,801

913

1,701

5,105

Litigation costs

178

1,168

1,370

3,370

Total operating expenses

21,795

23,227

62,319

74,067

OPERATING INCOME

6,464

8,735

26,850

24,474

OTHER INCOME (EXPENSE)

Interest income

194

109

547

271

Interest expense

(448
)
(375
)
(1,158
)
(1,149
)
Other, net

268

151

(38
)
(94
)

Total other income (expense)

14

(115
)
(649
)
(972
)

EARNINGS BEFORE INCOME TAXES

6,478

8,620

26,201

23,502

INCOME TAX PROVISION

1,399

1,795

5,922

5,087

NET EARNINGS
$
5,079
$
6,825
$
20,279
$
18,415

BASIC EARNINGS PER COMMON SHARE
$
0.12
$
0.16
$
0.48
$
0.44

DILUTED EARNINGS PER COMMON SHARE
$
0.12
$
0.16
$
0.47
$
0.43

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - BASIC

42,639

42,349

42,526

42,307

EFFECT OF DILUTIVE STOCK OPTIONS AND RESTRICTED SHARE UNITS

271

409

381

405

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - DILUTED

42,910

42,758

42,907

42,712

ANTI-DILUTIVE SECURITIES:

Common share options and restricted share units

1,215

995

1,073

1,009

DIVIDENDS DECLARED PER COMMON SHARE
$
—
$
0.125
$
0.250
$
0.375

	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~~

MERIDIAN BIOSCIENCE, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

(dollar amounts in thousands)

~~(dollar amounts in thousands)~~

Three Months Ended

Nine Months Ended

June 30,

June 30,

2019

2018

2019

2018

NET EARNINGS
$
5,079
$
6,825
$
20,279
$
18,415

Other comprehensive income (loss):

Foreign currency translation adjustment

1,692

(1,912
)
1,353

(695
)
Unrealized gain (loss) on cash flow hedge

(297
)
109

(1,184
)
874

Income taxes related to items of other comprehensive income

222

(28
)
445

(247
)

Other comprehensive income (loss), net of tax

1,617

(1,831
)
614

(68
)

COMPREHENSIVE INCOME
$
6,696
$
4,994
$
20,893
$
18,347

	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

MERIDIAN BIOSCIENCE, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Unaudited)

(dollar amounts in thousands)

Nine Months Ended June 30,

2019

2018

CASH FLOWS FROM OPERATING ACTIVITIES

Net earnings
$
20,279
$
18,415

Non-cash
items included in net earnings:

Depreciation of property, plant and equipment

3,984

3,320

Amortization of intangible assets

2,778

2,732

Amortization of deferred instrument costs

—

581

Stock-based compensation

2,728

2,882

Deferred income taxes

(852
)
(71
)
Loss on disposition and write-down of fixed assets
220
—
Change in the following, net of acquisition:

Accounts receivable

1,014

(52
)
Inventories

(67
)
(4,118
)
Prepaid expenses and other current assets

(1,849
)
(2,106
)
Accounts payable and accrued expenses

(1,703
)
2,967

Income taxes payable

1,402

(1,003
)
Other, net

412

35

Net cash provided by operating activities

28,346

23,582

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of property, plant and equipment

(3,314
)
(3,340
)
Acquisition of GenePOC business
(45,239
)
—

Net cash used for investing activities

(48,553
)
(3,340
)

CASH FLOWS FROM FINANCING ACTIVITIES

Dividends paid

(10,612
)
(15,870
)
Proceeds from revolving credit facility

75,824

—

Payment of debt issuance costs (489 ) —
Payments on term loan

(50,250
)
(3,375
)
Proceeds and tax benefits from exercises of stock options

614

183

Net cash provided by (used for) financing activities

15,087

(19,062
)

Effect of Exchange Rate Changes on Cash and Equivalents and Restricted Cash

(451
)
(322
)

Net Increase (Decrease) in Cash and Equivalents and Restricted Cash

(5,571
)
858

Cash and Equivalents and Restricted Cash at Beginning of Period

60,763

58,072

Cash and Equivalents and Restricted Cash at End of Period
$
55,192
$
58,930

Cash and Equivalents
$
55,192
$
57,930

Restricted Cash

—

1,000

Cash and Equivalents and Restricted Cash at End of Period
$
55,192
$
58,930

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


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

~~Page 3~~

~~Table of Contents~~

~~MERIDIAN BIOSCIENCE, INC. AND SUBSIDIARIES~~

~~Condensed Consolidated Balance Sheets~~

~~(dollar amounts in thousands)~~

~~ASSETS~~

June 30,

2019

September 30,

(Unaudited)

2018

CURRENT ASSETS

Cash and equivalents
$
55,192
$
59,763

Accounts receivable, less allowances of $421 and $310

31,995

32,336

Inventories

43,305

41,993

Prepaid expenses and other current assets

6,897

4,961

Total current assets

137,389

139,053

PROPERTY, PLANT AND EQUIPMENT, at Cost

Land

1,157

1,160

Buildings and improvements

32,430

32,444

Machinery, equipment and furniture

63,344

50,606

Construction in progress

1,292

1,631

Subtotal

98,223

85,841

Less: accumulated depreciation and amortization

66,398

55,846

Net property, plant and equipment

31,825

29,995

OTHER ASSETS

Goodwill

90,107

54,637

Other intangible assets, net

62,001

23,113

Restricted cash

—

1,000

Deferred instrument costs, net

—

1,239

Fair value of interest rate swap

—

1,722

Deferred income taxes

125

130

Other assets

989

488

Total other assets

153,222

82,329

TOTAL ASSETS
$
322,436
$
251,377

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

Page 43

Table of Contents

MERIDIAN BIOSCIENCE, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(dollar amounts in thousands)

ASSETS


	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

~~LIABILITIES AND SHAREHOLDERS’ EQUITY~~

June 30,

2019

September 30,

(Unaudited)

2018

CURRENT LIABILITIES

Accounts payable
$
8,381
$
6,260

Accrued employee compensation costs

6,795

7,263

Other accrued expenses

3,214

5,065

Current portion of long-term debt

—

5,250

Income taxes payable

1,432

335

Total current liabilities

19,822

24,173

NON-CURRENT
LIABILITIES

Post-employment benefits

2,384

2,646

Long-term debt

75,824

44,930

Long-term income taxes payable

736

441

Deferred income taxes

2,917

3,769

Acquisition consideration

32,200

—

Total
non-current
liabilities

114,061

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, 42,670,805 and 42,399,962 shares issued, respectively

—

—

Additional
paid-in
capital

132,311

129,193

Retained earnings

59,005

49,602

Accumulated other comprehensive loss

(2,763
)
(3,377
)

Total shareholders’ equity

188,553

175,418

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
$
322,436
$
251,377

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

Page 54

Table of Contents

MERIDIAN BIOSCIENCE, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(dollar amounts in thousands)

LIABILITIES AND SHAREHOLDERS’ EQUITY


	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

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, 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

Common
Shares
Issued

Additional
Paid-In

Capital

Retained
Earnings

Accumulated Other
Comprehensive
Income (Loss)

Total
Shareholders’
Equity

THREE MONTHS ENDED JUNE 30, 2019

Balance at March 31, 2019

42,515
$
131,951
$
54,074
$
(4,380
) $
181,645

Conversion of restricted share units and exercise of stock options

156

—

—

—

—

Stock compensation expense

—

360

—

—

360

Net earnings

—

—

5,079

—

5,079

Foreign currency translation adjustment

—

—

—

1,692

1,692

Hedging activity, net of tax

—

—

—

(223
)
(223
)
Adoption of ASU
2018-02

—

—

(148
)
148

—

Balance at June 30, 2019

42,671
$
132,311
$
59,005
$
(2,763
) $
188,553

THREE MONTHS ENDED JUNE 30, 2018

Balance at March 31, 2018

42,344
$
127,583
$
47,936
$
(1,183
) $
174,336

Cash dividends paid - $0.125 per share

—

—

(5,293
)
—

(5,293
)
Conversion of restricted share units and exercise of stock options

14

183

—

—

183

Stock compensation expense

—

907

—

—

907

Net earnings

—

—

6,825

—

6,825

Foreign currency translation adjustment

—

—

—

(1,912
)
(1,912
)
Hedging activity, net of tax

—

—

—

81

81

Balance at June 30, 2018

42,358
$
128,673
$
49,468
$
(3,014
) $
175,127

NINE MONTHS ENDED JUNE 30, 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

271

390

—

—

390

Stock compensation expense

—

2,728

—

—

2,728

Net earnings

—

—

20,279

—

20,279

Foreign currency translation adjustment

—

—

—

1,353

1,353

Hedging activity, net of tax

—

—

—

(887
)
(887
)
Adoption of ASU
2014-09

—

—

(116
)
—

(116
)
Adoption of ASU
2018-02

—

—

(148
)
148

—

Balance at June 30, 2019

42,671
$
132,311
$
59,005
$
(2,763
) $
188,553

NINE MONTHS ENDED JUNE 30, 2018

Balance at September 30, 2017

42,207
$
125,608
$
46,923
$
(2,946
) $
169,585

Cash dividends paid - $0.375 per share

—

—

(15,870
)
—

(15,870
)
Conversion of restricted share units and exercise of stock options

151

183

—

—

183

Stock compensation expense

—

2,882

—

—

2,882

Net earnings

—

—

18,415

—

18,415

Foreign currency translation adjustment

—

—

—

(695
)
(695
)
Hedging activity, net of tax

—

—

—

627

627

Balance at June 30, 2018

42,358
$
128,673
$
49,468
$
(3,014
) $
175,127

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 ~~June 30, 2019,~~March 31, 2020, the results of its operations for the ~~three~~three- and ~~nine month~~

six-month

periods ended ~~June 30,~~March 31, 2020 and 2019, ~~and 2018,~~ and its cash flows for the ~~nine month~~six-month periods ended ~~June 30, 2019~~March 31, 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

are

set forth below.

(a) Revenue Recognition –

~~Adoption of New Standard~~

~~On October 1, 2018, we adopted ASU No.~~

~~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 authoritative 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~~

~~Table of Contents~~

~~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 June 30,							Nine Months Ended June 30,							Three Months Ended March 31,							Six Months Ended March 31,
	2019		2018		Inc (Dec)			2019		2018		Inc (Dec)			2020		2019		Inc (Dec)			2020		2019		Inc (Dec)
Diagnostics-
Americas	$	27,356	$	30,585		(11	)%	$	85,782	$	95,511		(10	)%	$	27,670	$	26,263		5	%	$	55,405	$	56,686		(2	)%
EMEA		5,076		5,144		(1	)%		15,695		16,469		(5	)%		6,777		6,549		3	%		13,277		12,351		7	%
ROW		686		639		7	%		1,806		1,660		9	%		495		688		(28	)%		1,051		1,128		(7	)%

Total Diagnostics		33,118		36,368		(9	)%		103,283		113,640		(9	)%		34,942		33,500		4	%		69,733		70,165		(1	)%

Life Science-
Americas		4,369		5,500		(21	)%		14,347		15,875		(10	)%
EMEA		6,389		5,756		11	%		21,608		18,307		18	%
ROW		4,564		4,113		11	%		10,930		12,649		(14	)%

Total Life Science		15,322		15,369		—	%		46,885		46,831		—	%

Consolidated	$	48,440	$	51,737		(6	)%	$	150,168	$	160,471		(6	)%

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 June 30,							Nine Months Ended June 30,							Three Months Ended March 31,							Six Months Ended March 31,
	2019		2018		Inc (Dec)			2019		2018		Inc (Dec)			2020		2019		Inc (Dec)			2020		2019		Inc (Dec)
Diagnostics-
Molecular assays	$	5,937	$	7,509		(21	)%	$	20,371	$	26,200		(22	)%	$	7,238	$	7,084		2	%	$	14,077	$	14,314		(2	)%
Immunoassays & blood chemistry assays		27,181		28,859		(6	)%		82,912		87,440		(5	)%		27,704		26,416		5	%		55,656		55,851		-	%

Total Diagnostics	$	33,118	$	36,368		(9	)%	$	103,283	$	113,640		(9	)%	$	34,942	$	33,500		4	%	$	69,733	$	70,165		(1	)%

Life Science-
Molecular reagents	$	5,495	$	6,049		(9	)%	$	17,495	$	17,882		(2	)%	$	11,534	$	5,390		114	%	$	16,892	$	11,998		41	%
Immunological reagents		9,827		9,320		5	%		29,390		28,949		2	%		10,820		11,358		(5	)%		18,092		19,565		(8	) %

Total Life Science	$	15,322	$	15,369		—	%	$	46,885	$	46,831		—	%	$	22,354	$	16,748		33	%	$	34,984	$	31,563		11	%

Revenue by Disease State (Diagnostics only)


	Three Months Ended June 30,							Nine Months Ended June 30,							Three Months Ended March 31,							Six Months Ended March 31,
	2019		2018		Inc (Dec)			2019		2018		Inc (Dec)			2020		2019		Inc (Dec)			2020		2019		Inc (Dec)
Diagnostics-
Gastrointestinal assays	$	17,232	$	20,212		(15	)%	$	52,024	$	59,631		(13	)%	$	14,014	$	16,177		(13	)%	$	30,060	$	34,792		(14	)%
Respiratory illness assays		5,708		5,749		(1	)%		21,242		22,779		(7	)%		10,863		7,553		44	%		18,612		15,534		20	%
Blood chemistry assays		4,750		5,005		(5	)%		13,510		13,528		—	%		4,329		4,330		-	%		9,479		8,760		8	%
Other		5,428		5,402		—	%		16,507		17,702		(7	)%		5,736		5,440		5	%		11,582		11,079		5	%

Total Diagnostics	$	33,118	$	36,368		(9	)%	$	103,283	$	113,640		(9	)%	$	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~~

~~Table of Contents~~

Practical Expedients and Exemptions

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

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

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

Reagent Rental Arrangements

~~Our revogene~~

™

~~, 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 ~~ASU No. 2014-09~~ Accounting Standards

Codification (“ASC”) 606,

Revenue from Contracts with Customers

but rather ~~ASU 2016-02,~~

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 –

~~Fair Value Measurements –~~Certain assets

~~Assets~~ and liabilities are recorded at fair value in accordance with ~~Accounting Standards Codification (“ASC”)~~ 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 ~~requires~~

establishes a ~~three level~~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~~(Level 1 measurements) and the lowest priority to unobservable inputs ~~(level~~(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

~~Page 10~~

~~Table of Contents~~

As ~~indicated~~described in Note 3, we ~~have recently~~ acquired the business of GenePOC ~~Inc.~~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

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.

~~Recent Accounting Pronouncements –~~

Page 10

~~In February 2016,~~

Table of Contents

(c)	Recent Accounting Pronouncements –

Pronouncements Adopted

On October 1, 2019, the ~~FASB issued ASU 2016-02,~~Company adopted ASC 842,

Leases

~~, which amends the accounting guidance related to leases. These changes, which are designed~~

. ASC 842 was issued 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 ~~third quarter of fiscal 2019, the Company continued 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 ASU~~

~~2016-15,~~

~~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 ASU 2018-02,~~

~~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 elected to adopt this guidance in the third quarter of fiscal 2019. An election was made to reclassify the income tax effects of the Tax Cuts and Jobs Act from AOCI to retained earnings, and an entry was made to increase AOCI and decrease retained earnings by $

~~148~~

~~. The Company’s accounting policy is to release the income tax effects in other comprehensive income as financial amounts are removed.~~

(d)	Reclassifications –

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

3.	Acquisition of Business of GenePOC

On June 3, 2019, we acquired the business of GenePOC Inc. (“GenePOC”), a Quebec City, Quebec Province, Canada based provider of molecular diagnostic instruments and ~~assays~~

.assays. The purchase agreement contemplates a

maximum total consideration of up to $120,000, which ~~based upon the current preliminary valuation is~~was estimated at a total

fair value

of ~~approximately $77,502.~~$77,526 as of the acquisition date. Pursuant to the purchase agreement, the maximum

consideration is comprised of the following (noting that the ~~current preliminary~~ valuation ~~values~~

set

the contingent consideration identified in (ii) and (iii) below at an aggregate amount of

~~approximately~~

~~$27,200)~~ $27,202 as of the acquisition date):

(i)

a $50,000 cash payment on June 3, 2019, subject to a working capital adjustment and a holdback of $5,000 to secure selling party’s performance of certain post-closing obligations;

Page 11

Table of 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.

~~Page 11~~

~~Table of Contents~~

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 ~~as acquisition consideration~~ within ~~the non-current liabilities section of~~ the accompanying Condensed Consolidated Balance ~~Sheets.~~

Sheets as of March 31, 2020 as follows:

Current liabilities

~~The~~ -

$13,656

Reflects anticipated settlement of the first product milestone payment and 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, ~~was made utilizing~~we utilized cash and equivalents on hand and proceeds drawn from our ~~new $125,000~~ revolving credit facility ~~which replaced our previous~~

;

see Note 9 for a discussion of subsequent amendments to the credit facility. Proceeds from the ~~new~~ 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 ~~currently~~ estimated total consideration exceeding the ~~preliminary~~ fair value of the net assets acquired, goodwill in the amount

of ~~$34,482~~$34,582 was

recorded in connection with this acquisition,

most of

which ~~pending certain tax planning,~~

~~is expected to~~

will be deductible for U.S. tax purposes ratably over 15 years.

The

goodwill results largely from

~~Meridian’s~~ our ability to market and sell

GenePOC’s

technology

and

instrument platform through ~~its~~our established customer base and distribution ~~channels~~

. Our Condensed Consolidated Statements of Operations for the three and nine months ended June 30, 2019 include $473 and $1,445, respectively, of acquisition-related costs related to the acquisition of the GenePOC business, which are reflected as Operating Expenses.channels.

~~Most of these costs relate to professional fees for attorneys, tax advisors and regulatory advisors during due diligence and the preparation and negotiation of acquisition agreements.~~

~~The Company’s consolidated results for both the three and nine months ended June 30, 2019 include~~

~~net revenues and~~

~~599~~

~~net loss~~

~~from the~~

~~GenePOC~~

~~business since~~

the date of acquisition. These results, which are reported as part of the Diagnostics segment, include $291 of amortization of specific identifiable assets recorded in the opening balance sheet, including a license agreement, technology and a government grant.

~~Preliminary~~ Purchase Price Allocation

The recognized ~~preliminary~~ amounts of identifiable assets acquired and liabilities assumed in the acquisition of

the GenePOC business

are as follows:

(as initially
reported)

Measurement
Period
Adjustments

Fair value of assets acquired -

Other current assets

Property, plant and equipment

Other intangible assets (estimated useful life):

License agreement (10 years)

Technology (15 years)

Government grant (1.33 years)

Fair value of liabilities assumed -

Accounts payable and accrued expenses

Total consideration (including contingent consideration currently estimated at $27,200)

Total consideration paid (including contingent consideration

originally
estimated at $27,202)

The allocation of the purchase price and estimated useful lives of property, plant and equipment, and intangible assets shown above are preliminary and subject to adjustments to goodwill within the permitted measurement period.

Pro Forma Information

The following table provides the unaudited consolidated pro forma results for the periods presented as if the business of GenePOC had been acquired as of the beginning of fiscal ~~2018.~~2019. Pro forma results do not include the effect of any synergies anticipated to be achieved from the acquisition, and accordingly, are not necessarily indicative of the results that would have occurred if the acquisition had occurred on the date indicated or that may result in the future.


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

~~Page 12~~

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


	Three Months Ended 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	)

~~Table of Contents~~

Three Months

Nine Months

Ended June 30,

Ended June 30,

2019

2018

2019

2018

Net Revenues
$
48,505
$
51,771
$
150,376
$
160,584

Net Earnings
$
3,129
$
2,605
$
11,869
$
7,439

The following table identifies the adjustments made to historical Meridian results to arrive at the pro forma results set forth above. These adjustments include: (i) GenePOC pre-acquisition results; and (ii) pro forma adjustments:

Three Months

Nine Months

Ended June 30,

Ended June 30,

2019

2018

2019

2018

Adjustments to Net Revenues

GenePOC pre-acquisition revenues $ 65 $ 34 $ 208 $ 113

Adjustments to Net Earnings

GenePOC pre-acquisition net loss $ (3,263 ) $ (3,838 ) $ (9,578 ) $ (9,834 )
Pro forma adjustments:
Meridian acquisition-related costs 473 — 1,445 —
GenePOC transaction-related costs 1,245 — 1,245 —
Expenses related to non-continuing personnel, locations or activities 385 659 1,576 1,982
Incremental depreciation and amortization (585 ) (878 ) (2,341 ) (2,638 )
Incremental interest costs (123 ) (211 ) (546 ) (634 )
Tax effects of pro forma adjustments (82 ) 48 (211 ) 148

Total Adjustments to Net Earnings $ (1,950 ) $ (4,220 ) $ (8,410 ) $ (10,976 )

4.	~~Cash and Equivalents~~ Restructuring

~~Cash and equivalents include the following components:~~

June 30, 2019

September 30, 2018

Cash and
Equivalents

Other
Assets

Cash and
Equivalents

Other
Assets

Institutional money market funds
$
20,795
$
—
$
20,421
$
—

Cash on hand -

Restricted

—

—

—

1,000

Unrestricted

34,397

—

39,342

—

Total
$
55,192
$
—
$
59,763
$
1,000

~~Page 13~~

~~Inventories are comprised of the following:~~

June 30,
2019

September 30,
2018

Raw materials
$
8,394
$
6,689

Work-in-process

12,982

12,098

Finished goods - instruments

1,212

1,191

Finished goods - kits and reagents

20,717

22,015

Total
$
43,305
$
41,993

6.	~~Intangible Assets~~

~~A summary of our acquired intangible assets subject to amortization, as of June 30, 2019 and September 30, 2018, including the assets added in the GenePOC transaction (see Note 3) is as follows:~~

June 30, 2019

September 30, 2018

Gross
Carrying
Value

Accumulated
Amortization

Gross
Carrying
Value

Accumulated
Amortization

Manufacturing technologies, core products and cell lines
$
56,962
$
15,029
$
22,297
$
13,974

Trade names, licenses and patents

14,775

5,958

8,647

5,267

Customer lists, customer relationships and supply agreements

24,377

13,899

24,461

13,051

Government grants

824

51

—

—

Total
$
96,938
$
34,937
$
55,405
$
32,292

The actual aggregate amortization expense for these intangible assets was $1,120 and $849 for the three months ended June 30, 2019 and 2018, respectively, and $2,778 and $2,732 for the nine months ended June 30, 2019 and 2018, respectively. The estimated aggregate amortization expense for these intangible assets for each of the fiscal years through fiscal 2024 is as follows: remainder of fiscal 2019 – $1,715, fiscal 2020 – $6,701, fiscal 2021 – $5,489, fiscal 2022 – $5,111, fiscal 2023 – $5,099, and fiscal 2024 – $5,094.

7.	~~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, a plan~~team. Since that ~~has continued to be refined through the third quarter of fiscal 2019. As~~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.

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

$~~6,332~~527 and

$2,839 were

recorded during the three and six months ended March 31, 2020 and the fiscal year ended September 30, ~~2018,~~2019, respectively.

A reconciliation of the changes in the liabilities associated with ~~an additional $1,801 recorded during~~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 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 ~~and nine month periods~~months ended ~~June 30, 2019.~~March 31, 2020 reflect lease costs for these operating leases

130

and $

292

within cost of sales and

Page 14

Table of Contents

~~Approximately $270~~operating expenses, respectively

;

and ~~$20~~

$259 and $559 within cost of ~~accrued restructuring costs was reversed during~~sales and operating expenses, respectively, for the ~~fiscal quarters~~six months ended March 31, ~~2019~~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 ~~June 30, 2019, respectively, and~~the related lease expense is ~~reflected as a reduction of the Restructuring Costs within the Condensed Consolidated Statements of Operations~~immaterial for the three and ~~nine~~six months ended ~~June 30, 2019. A summary of the accrued liability associated~~March 31, 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 ~~June~~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, ~~and September 30, 2018, is~~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

June 30,
2019

September 30,
2018

Severance, other termination benefits and related costs
$
888
$
987

Lease and other contract termination fees

—

33

Other

—

6

Total
$
888
$
1,026

8.	~~Income Taxes~~ Intangible Assets

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

~~Income Taxes~~

~~, 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~~light of the ~~tax reform act for~~ economic impacts of

COVID-19,

the ~~reporting period~~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 ~~which the tax reform act was enacted. SAB 118 provides for a measurement period beginning~~market, economic or other conditions may lead to impairments in the ~~reporting period that includes the tax reform act’s enactment date~~future.

A summary of our acquired intangible assets subject to amortization, as of March 31, 2020 and ~~ending when a company has obtained, prepared~~September 30, 2019, is as follows:


	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 ~~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 the effects of the tax reform act as provisional based on a reasonable estimate of the income tax effects~~2020 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~~2019, respectively, and ~~prior to September 30, 2018, we completed the accounting~~$3,449 and $1,658 for the effects 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 of June 30, 2019, after our having paid the amount estimated for fiscal 2018: $65 of current income taxes payable and $736 long-term income taxes payable.

~~In addition, we recorded a one-time tax benefit of $2,347 during the nine~~six months ended ~~June 30, 2018 resulting from the tax reform act, including an adjustment from the re-measurement of deferred tax~~March 31, 2020 and 2019, respectively. The estimated aggregate amortization expense for these intangible assets ~~and liabilities. Of this adjustment, $1,695 was recorded during first quarter of fiscal 2018 and $652 was recorded during the third quarter, reflecting adjustments from finalization~~for each of the fiscal ~~2017 federal tax return. This re-measurement included an estimate~~years through fiscal 2025 is as follows: remainder of ~~the temporary differences expected to be realized during~~ fiscal ~~2018 at a transitional blended rate of 24.5%. The remaining temporary differences were re-measured at the fully phased-in rate of 21%.~~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 acquisition

of the business

of GenePOC (see Note

, on May

24,

2019

the Company entered into a credit facility agreement with a commercial ~~bank.~~bank

. The 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 ~~which~~ expires in May 2024, and as amended makes available to the Company a revolving credit facility in an aggregate principal amount not

to exceed ~~$125,000,~~

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. As~~LIBOR, resulting in an effective

interest rate of ~~June~~

4.15%

~~2019~~

~~, we have made two draws~~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 ~~$75,824.~~$48,824 at March 31, 2020

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

. The proceeds from these draws

were

used toto: (i) repay and settle the outstanding principal and interest due on our ~~previously-existing~~previously existing $60,000 five-year term ~~loan~~loan; and (ii) along with cash

on-hand,

fund the GenePOC acquisition closing payment. In light of the ~~recent execution date of the credit facility and~~ interest being determined on a variable rate basis, the fair value of the borrowings under the credit facility at ~~June~~

March

~~2019~~

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

~~Page 15~~

~~Table of Contents~~

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 ~~June~~

~~2019~~

,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 entered into two interest rate swap agreements that will effectively convert the variable interest rate on $25,000 of the outstanding principal to a fixed rate of 2.31%

(

at the current credit spread

)

beginning May 24, 2020, the effective date of the swap agreements. With an initial notional balance of $25,000, the interest rate swap agreements were established with critical terms identical to 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 credit facility; (ii) rate reset dates; and (iii) term/maturity.

Consequently

, the interest rate swaps have been designated as effective cash flow hedges, with changes in fair

values

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

was reported as

a liability of $313, which is reflected as a

non-current

liability in the accompanying Condensed Consolidated Balance 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 connection with the Company’s term loan repayment in May 2019, the Company also settled the interest rate swap that had been entered into to limit exposure to volatility in the term loan’s LIBOR interest rate. At the time of settlement, the Company received a cash payment in an amount equal to the

$563

then-current fair value of the interest rate ~~swa~~

.swap. Accordingly, there is no

balance for ~~the~~this interest rate swap reflected within assets or liabilities within the accompanying ~~Condensed~~ Consolidated Balance ~~Sheet~~Sheets as of ~~June~~

~~30,~~

~~2019~~

tMarch 31, 2020 or September

30,

~~2018~~

~~, there was an asset balance of $1,722 related to~~

~~the~~

~~interest rate swap.~~ 2019. The

~~orresponding~~ fair value ~~amount~~of the swap that had been reflected within a separate component of other comprehensive income in the accompanying ~~Condensed~~ Consolidated Statements of Comprehensive Income, as a result of the interest rate swap having been designated as an effective cash flow hedge, ~~will be~~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 ~~balance reflected within other comprehensive income~~agreements associated with both the current credit facility and the former term loan totaled ($6

)

and $461 at ~~June~~

~~2019~~

March 31, 2020 and September 30, 2019, respectively.

~~2018~~

~~totaled $538 and $1,722, respectively~~

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).

Amounts due from

~~two~~

2 Diagnostics distributor customers accounted for ~~11% and 12%~~13% of consolidated accounts receivable at ~~June 30, 2019~~

both

March 31, 2020 and September 30, ~~2018, respectively.~~2019. Revenues from these

~~two~~

2 distributor customers accounted for ~~18%~~23% and ~~28%~~25% of the Diagnostics segment third-party revenues during the three months ended ~~June 30,~~March 31, 2020 and 2019, ~~and 2018,~~ respectively, and ~~26%~~

25% and ~~29%~~

30% during the ~~nine~~ six

month periods ended ~~June 30,~~March 31, 2020 and 2019 ~~and 2018, respectively.~~

, respectively

. These distributors represented ~~12%~~14% and ~~19%~~17% of consolidated revenues for the fiscal 2020 and 2019 ~~and 2018 third~~second quarters, respectively, and ~~18%~~

17% and

21% for the ~~fiscal 2019 and fiscal 2018~~respective

year-to-date

~~nine~~ six

month ~~periods, respectively.~~periods.

Within our Life Science segment, two diagnostic manufacturing customers accounted for

% 17% and

% 27% of the segment’s third-party revenues during the three months ended ~~June 30,~~March 31, 2020 and 2019, ~~and 2018,~~ respectively, and

% 16% and

% 27% during the ~~nine~~six months ended ~~June 30,~~March 31, 2020 and 2019, ~~and 2018,~~ respectively.

~~Page 16~~

~~Table of Contents~~

Segment information for the interim periods is as follows:


	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

Diagnostics

Life Science

Corporate
(1)

Eliminations
(2)

Total

Three Months Ended June 30, 2019

Net revenues -

Third-party
$
33,118
$
15,322
$
—
$
—
$
48,440

Inter-segment

146

44

—

(190
)
—

Operating income

5,078

4,289

(2,926
)
23

6,464

Goodwill (June 30, 2019)

70,943

19,164

—

—

90,107

Other intangible assets, net (June 30, 2019)

61,401

600

—

—

62,001

Total assets (June 30, 2019)

252,575

69,242

—

619

322,436

Three Months Ended June 30, 2018

Net revenues -

Third-party
$
36,368
$
15,369
$
—
$
—
$
51,737

Inter-segment

80

96

—

(176
)
—

Operating income

8,591

3,706

(3,646
)
84

8,735

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

Nine Months Ended June 30, 2019

Net revenues -
Third-party
$
103,283
$
46,885
$
—
$
—
$
150,168

Inter-segment

398

273

—

(671
)
—

Operating income

20,455

14,781

(8,450
)
64

26,850

Nine Months Ended June 30, 2018

Net revenues -

Third-party
$
113,640
$
46,831
$
—
$
—
$
160,471

Inter-segment

281

363

—

(644
)
—

Operating income

25,701

10,286

(11,744
)
231

24,474

(1)

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

of ~~$1,080~~$685 and ~~$1,832~~$603 in

the three months ended ~~June 30,~~March 31, 2020 and 2019, respectively,

and

$1,055 and ~~2018, respectively, and $2,272 and $6,028~~$1,192 in the ~~nine~~

six months ended ~~June 30,~~March 31,

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

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.

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 the Plaintiff’s motion on April 3, 2019 and the Plaintiff filed a reply on April~~ 17, ~~2019.~~

~~On May 20, 2019,~~2020, the Court ~~granted Plaintiffs’ motion. On June 24, 2019, the parties submitted a joint motion advising the Court that the parties had reached a tentative agreement to resolve the matter~~issued an order and ~~were seeking an extension of all deadlines and a stay pending finalization of~~judgment approving the settlement

~~Page 17~~

~~Table of Contents~~

~~documents. We expect~~Because the settlement ~~to be fully funded by~~was a covered claim under our directors and officers insurance ~~and accordingly~~

,policy, no provision for litigation losses has been included within ~~either of~~ the accompanying Condensed Consolidated Statements of Operations for the three and ~~nine~~six months ended ~~June 30, 2019~~March 31, 2020 or ~~June 30, 2018.~~March 31, 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 was 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. The motion to dismiss the class action was resolved as noted above and no action has been taken to reinstate the derivative action. The parties are currently negotiating a possible resolution of this litigation but no settlement has been reached. We are unable to determine or predict the ultimate outcome or estimate the range of possible losses, if any. for voluntary dismissal.

~~Approximately $10 and $50 of expense for attorneys’ fees related to the above two class action matters is~~ included within the accompanying Condensed Consolidated Statements of Operations for the three and ~~nine~~six months ended June 30, 2019, respectively, with approximately $85 and $630 of related expense being reflected within the accompanying Condensed Consolidated Statements of Operations for the three and nine months ended June 30, 2018, respectively. The Company maintains an insurance policy covering these matters, which has a $500 deductible.March 31, 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 ~~$170~~$725 and ~~$1,270~~$560 of expense for attorneys’ fees related to this matter is included within the accompanying Condensed Consolidated Statements of Operations for the three ~~and nine~~ months ended ~~June 30,~~March 31

, 2020

and March 31

, 2019 ~~respectively, with~~

, respectively; approximately ~~$270 of related expense being reflected within~~$1,005

and $1,100

for the ~~accompanying Condensed Consolidated Statements of Operations for both the three and nine~~six months ended ~~June 30, 2018.~~March 31

, 2020

and March 31

, 2019

, respectively.

~~FDA Matters Related to LeadCare~~

Subsequent Even

~~Page 18~~On

April 30

, 2020, the Company acquired

~~Magellan submitted 510(k) applications~~a urea breath diagnostic testing platform headquartered in ~~December 2018, seeking to reinstate venous blood sample-types~~Modi’in, Israel, 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. On July 15, 2019, we provided responses to FDA’s requests for Additional Information. The timing and outcome of FDA’s further review of these 510(k)s is not clear. 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 FDA will allow us to reinstate use of our LeadCare testing systems with venous blood samples, or 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.

~~Page 19~~

approximately $48,000

~~Table~~

In anticipation of ~~Contents~~the Exalenz acquisition, in April 2020, an additional $50,000 was drawn on the revolving credit facility, resulting in an outstanding principal balance of $98,424 as of the date of this 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 on page 1.~~notes.

~~QUARTERLY HIGHLIGHTS~~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 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.

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.

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

and government officials in order to respond rapidly to issues as they arise. The ~~third~~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 ~~2019 was highlighted~~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 ~~two following major developments (each referencing~~world in the ~~related footnote~~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 ~~accompanying Condensed Consolidated Financial Statements):~~near term. However, no assurances can be made in this regard.

Asset Impairment Review

~~Completed on June 3, 2019 the previously announced acquisition~~In light of the ~~business~~economic impacts of ~~GenePOC, Inc.~~

COVID-19,

the Company performed a review of ~~Quebec City, Quebec, Canada,~~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 ~~revogene~~

™

~~molecular diagnostics platform, for a currently-estimated total purchase price of approximately $77,502 (see Note 3,~~

~~“Acquisition of Business of GenePOC”~~

~~). GenePOC currently has four~~

~~FDA-cleared~~

~~assays for~~

~~C. difficile~~

~~, Group A~~

~~Strep~~

~~, Group B~~

~~Strep~~

~~and Carbapenemase.~~

~~Entered into a~~revolving credit facility ~~agreement with a commercial bank~~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 ~~May 24, 2019, which makes available~~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 ~~Company a~~next twelve months. We drew $50,000 on our revolving credit facility in ~~an aggregate principal amount not~~April to ~~exceed $125,000. We~~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 ~~made two draws totaling $75,824~~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 ~~facility as~~foregoing, the Company cannot reasonably predict the extent of ~~June 30, 2019 (see Note 9,~~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

~~“Bank Credit Arrangements”~~COVID-19

situation is changing rapidly and future impacts may materialize that are not yet known.

RESULTS OF OPERATIONS

Three and Six Months Ended ~~June 30, 2019~~March 31, 2020

Net earnings for the ~~third~~second quarter of fiscal ~~2019 decreased 26%~~2020 increased 32% to ~~$5,079,~~$9,359, or ~~$0.12~~$0.22 per diluted share, from net earnings for the ~~third~~second quarter of fiscal ~~2018~~2019 of ~~$6,825,~~$7,094, or ~~$0.16~~$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 level of net earnings in the second quarter (“QTD”) and first six months (“YTD”) of fiscal ~~2019 third quarter results include $2,452 of costs associated with acquisition and restructuring activities, and litigation costs, while~~2020 were affected by several factors, including most notably the ~~fiscal 2018 third quarter results include $2,081 of costs associated with restructuring activities and litigation costs, along with certain~~

~~one-time~~

~~tax~~combined effects of the ~~U.S. tax reform act enacted in December 2017. These items had~~following (amounts presented on a ~~combined impact on net earnings of $1,881, or $0.04 per diluted share, in the fiscal 2019 quarter and $897, or $0.02 per diluted share, in the fiscal 2018 quarter (see “USE OF~~

~~NON-GAAP~~pre-tax

~~MEASURES” below).~~ 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 ~~third~~second quarter of fiscal 2020 totaled $57,296, an increase of 14% compared to the second quarter of fiscal 2019 ~~totaled $48,440, a decrease of 6% compared to the third quarter of fiscal 2018 (5% decrease~~(15% increase on a constant-currency basis).

Revenues for the Diagnostics segment for the ~~third~~second quarter of fiscal 2020 increased 4% compared to the second quarter of fiscal 2019 ~~decreased 9% compared to the third quarter of fiscal 2018 (8%~~(5% increase on a constant-currency basis), comprised of a ~~21% decrease~~2% increase in molecular assay products and a ~~6% 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 ~~9% decrease~~114% increase in ~~its~~ molecular reagents products and a 5% ~~increase~~decrease in ~~its~~ immunological reagents products, revenues for our Life Science segment ~~were flat~~increased 33% during the ~~third~~second quarter of fiscal ~~2019~~2020 compared to the ~~third~~second quarter of fiscal ~~2018.~~2019. On a constant-currency basis, revenues for the Life Science segment increased 1%34%.

~~Page 20~~

~~Table of Contents~~

~~The third quarter Diagnostics revenues primarily reflect decreased revenues for our gastrointestinal assays, while~~ Life Science revenues reflect a ~~return to revenue growth~~significant increase in the ~~China market~~sales of key molecular components such as RNA master mixes and ~~softness within the Americas region, particularly~~deoxyribonucleotide triphosphates (“dNTPs”) to diagnostic test manufacturers for use in ~~our distribution channel.~~

COVID-19

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

~~Nine Months Ended June 30, 2019~~

~~For the nine month period ended June 30, 2019, net earnings were $20,279, or $0.47 per diluted share. The~~

~~year-to-date~~

fiscal 2019 results include $4,516 of costs associated with acquisition and restructuring activities, and litigation costs, while the comparable fiscal 2018 results include $8,475 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 $3,464, or $0.08 per diluted share, in the fiscal 2019~~

~~year-to-date~~

~~period and $4,711, or $0.11 per diluted share, in the comparable fiscal 2018 period (see “USE OF~~

~~NON-GAAP~~

~~MEASURES” below).~~ Consolidated revenues ~~decreased 6%~~increased 3% to ~~$150,168~~$104,717 for the first ~~nine~~six months of fiscal ~~2019~~2020 compared to the same period of the prior year ~~(5%~~(also 3% on a constant-currency basis). On an operating segment basis, Diagnostics revenues decreased ~~9% (8% in constant-currency)~~1% (flat on a constant-currency basis) and Life Science revenues ~~were flat (2%~~increased 11% (12% increase ~~in constant-currency)~~on a constant-currency basis).

~~USE OF~~

~~NON-GAAP~~Lead Testing Matters

~~MEASURES~~

On June 29, 2017, the United States Food and Drug Administration (“FDA”), in connection with its Safety Notification related to Magellan’s LeadCare testing systems for venous blood samples, issued to Magellan its Form 483, Inspectional Observations. The FDA issued a related Warning Letter on October 23, 2017. On April 17, 2018, Magellan received a subpoena from the United States Department of Justice (“DOJ”) regarding its LeadCare product line. The subpoena outlines documents to be produced, and we continue to cooperate with the DOJ in this matter, including responding to additional information requests. We have ~~supplemented our reported GAAP financial information~~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 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 ~~information on operating expenses, operating income, net earnings, basic earnings per share~~capillary blood samples, the FDA advised that it has commissioned a third-party study of Magellan’s LeadCare testing systems using both venous and ~~diluted earnings per share excluding~~capillary blood samples. According to the ~~effects of: (i) acquisition-related costs (fiscal 2019); (ii) restructuring costs (fiscal 2019 and 2018); (iii) litigation costs (fiscal 2019 and 2018); and (iv) certain~~

~~one-time~~

~~tax effects~~FDA, the results of the ~~tax reform act (fiscal 2018) –~~field study will be used in conjunction with other information, including review by an FDA Advisory Committee, to determine whether further action by the FDA or the 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.

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 ~~which is a~~

~~non-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:following:

1)-

~~These measures help to appropriately evaluate and compare the results of operations from period to period by removing the impacts of these~~

~~non-routine~~

~~items; and~~By Reportable Segment & Geographic Region

2)-

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.By Product Platform/Type

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

~~non-GAAP~~

measure and is calculated by applying current period average foreign currency exchange rates to each of the prior comparable periods. Management analyzes revenue on a constant-currency basis to better measure the comparability of results between periods. Because changes in foreign currency exchange rates have a

~~non-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.~~

~~These~~

~~non-GAAP~~

~~measures may be different from~~

~~non-GAAP~~

~~measures used by other companies. In addition, these~~

~~non-GAAP~~

~~measures are not based on any comprehensive set of accounting rules or principles.~~

~~Non-GAAP~~

measures have limitations, in that they do not reflect all amounts associated with our results as determined in accordance with U.S. GAAP. Therefore, these measures should only be used to evaluate our results in conjunction with corresponding GAAP measures.

~~Page 21~~

Revenue Overview- By Reportable Segment & Geographic Region

~~Table of Contents~~

Three Months

Nine Months

Ended June 30,

Ended June 30,

2019

2018

2019

2018

Operating Expenses -

U.S. GAAP basis
$
21,795
$
23,227
$
62,319
$
74,067

Acquisition-related costs

(473
)
—

(1,445
)
—

Restructuring costs

(1,801
)
(913
)
(1,701
)
(5,105
)
Litigation costs

(178
)
(1,168
)
(1,370
)
(3,370
)

Adjusted Operating Expenses
$
19,343
$
21,146
$
57,803
$
65,592

Operating Income -

U.S. GAAP basis
$
6,464
$
8,735
$
  26,850
$
24,474

Acquisition-related costs

473

—

1,445

—

Restructuring costs

1,801

913

1,701

5,105

Litigation costs

178

1,168

1,370

3,370

Adjusted Operating Income
$
8,916
$
10,816
$
  31,366
$
32,949

Net Earnings -

U.S. GAAP basis
$
5,079
$
6,825
$
20,279
$
18,415

Acquisition-related costs
(1)

363

—

1,108

—

Restructuring costs
(1)

1,381

685

1,305

3,737

Litigation costs
(1)

137

864

1,051

2,467

One-time
benefit from tax law change

—

(652
)
—

(2,347
)
Repatriation transition tax

—

—

—

854

Adjusted Net Earnings
$
6,960
$
7,722
$
23,743
$
23,126

Net Earnings per Basic Common Share -

U.S. GAAP basis
$
0.12
$
0.16
$
0.48
$
0.44

Acquisition-related costs

0.01

—

0.03

—

Restructuring costs

0.03

0.02

0.03

0.09

Litigation costs

—

0.02

0.02

0.06

One-time
benefit from tax law change

—

(0.02
)
—

(0.06
)
Repatriation transition tax

—

—

—

0.02

Adjusted Basic EPS

$
0.16
$
0.18
$
0.56
$
0.55

Net Earnings per Diluted Common Share -

U.S. GAAP basis
$
0.12
$
0.16
$
0.47
$
0.43

Acquisition-related costs

0.01

—

0.03

—

Restructuring costs

0.03

0.02

0.03

0.09

Litigation costs

—

0.02

0.02

0.06

One-time
benefit from tax law change

—

(0.02
)
—

(0.05
)
Repatriation transition tax

—

—

—

0.02

Adjusted Diluted EPS
(2)
$
0.16
$
0.18
$
0.55
$
0.54

~~(1)~~

These acquisition-related costs, restructuring costs, and litigation costs are net of the following income tax effects: $110, $420 and $41, respectively, for the three months ended June 30, 2019; $0, $228 and $304, respectively, for the three months ended June 30, 2018; $337, $396 and $319, respectively, for the fiscal 2019

~~year-to-date~~

~~period; and $0, $1,368 and $903, respectively, for the fiscal 2018~~

~~year-to-date~~

~~period. These tax effects were calculated using the effective tax rates of the jurisdictions in which the costs were incurred.~~

~~(2)~~

~~Net Earnings per Diluted Common Share for the fiscal 2018~~

~~year-to-date~~

~~period does not sum to the Adjusted EPS amounts due to rounding.~~

~~Page 22~~

~~Table of Contents~~

~~REVENUE OVERVIEW~~

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 10,~~

~~“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

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

See the “Revenue Disaggregation” section of Note 2,

“Significant Accounting Policies”

of the accompanying Condensed Consolidated Financial Statements for detailed revenue disaggregation information.

Following is a discussion of the revenues generated by ~~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 ~~third~~second quarter and first ~~nine~~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 ~~$17,232~~$14,014 and ~~$52,024,~~$30,060, respectively. These revenue levels represent ~~15%~~13% and ~~13%~~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 and~~

~~year-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 and~~

~~year-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. Beginning in April, we began seeing lower order demand for most of our gastrointestinal products as a result of the

COVID-19

pandemic.

~~The~~Contributing to the competitive pressures being faced in this product category, the patents for our

H. pylori

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

H. pylori

products to continue to increase, ~~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 11,~~

~~“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 1%~~increased 44% and 7%20% in the ~~third~~second quarter and first ~~nine~~six months of fiscal ~~2019,~~2020, respectively. These increases primarily reflect volume increases in Group A Strep, Influenza and Mycoplasma related products from a very strong respiratory season, including the

COVID-19

~~Page 23~~

~~Table of Contents~~

pandemic.

Blood Chemistry Assays

Revenues from our sale of products to test for elevated levels of lead in blood ~~decreased 5%~~remained flat during the ~~third~~second quarter of fiscal ~~2019 to~~2020 at a ~~total~~level of ~~$4,750,~~$4,329 and ~~were flat~~increased 8% for the fiscal

year-to-date

period ~~at $13,510. In late December 2018,~~to $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.Contents

~~See Note 11,~~

~~“Litigation Matters”~~

~~of the accompanying Condensed Consolidated Financial Statements for additional information related to the Company’s LeadCare product line.~~

Life Science Products

During the ~~third~~second quarter of fiscal ~~2019,~~2020, revenues from our Life Science segment ~~remained flat~~increased 33% compared to the fiscal ~~2018 third~~2019 second quarter, with revenues from molecular reagent sales ~~decreasing 9%~~increasing 114% and revenues from immunological reagent sales ~~increasing~~decreasing 5%. Life Science segment revenues ~~also remained flat~~increased 11% for the first ~~nine~~six months of fiscal ~~2019,~~2020, reflecting a ~~2% decrease~~41% increase in revenues from molecular reagent sales ~~being offset by a 2% increase~~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 1%34% and ~~2% on a constant-currency basis~~12% over the ~~third~~second quarter and first nine months of fiscal 2018, respectively. Our Life Science segment was also impacted by buying patterns of certain IVD manufacturing customers in China, with such sales totaling approximately $2,750 and $5,100 during the third quarter and first ninesix months of fiscal 2019, respectively, ~~– representing an~~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 ~~14%~~$5,300 for the second quarter of fiscal 2020, a fourfold increase over the comparable fiscal ~~2018 quarterly period and~~2019 quarter. For the first six months of fiscal 2020, revenue from sales into China totaled approximately $7,100, or a ~~14% decrease~~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 ~~2018~~

~~year-to-date~~

~~period.~~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 10,

“Reportable Segments and Major Customers Information”

of the accompanying Condensed Consolidated Financial Statements.

Gross Profit

Three Months Ended June 30,

Nine Months Ended June 30,

2019

2018

Change

2019

2018

Change

Gross Profit
$
28,259
$
31,962

(12
)% $
89,169
$
98,541

(10
)%
Gross Profit Margin

58
%
62
%
-4 points

59
%
61
%
-2 points


	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 2425

Operating Expenses - Segment Detail


	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 – ~~Segment Detail~~Comparisons to Prior Year Periods

Three Months Ended June 30, 2019

Research &
Development

Selling &
Marketing

General &
Administrative

Other

Total Operating
Expenses

Fiscal 2018:

Diagnostics
$
3,479
$
6,011
$
4,570
$
249
$
14,309

Life Science

785

2,491

1,996

—

5,272

Corporate

—

—

1,814

1,832

3,646

Total Expenses (2018 Quarter)
$
4,264
$
8,502
$
8,380
$
2,081
$
23,227

Fiscal 2019:

Diagnostics
$
3,855
$
5,525
$
4,483
$
1,372
$
15,235

Life Science

739

1,222

1,673

—

3,634

Corporate

—

—

1,846

1,080

2,926

Total Expenses (2019 Quarter)
$
4,594
$
6,747
$
8,002
$
2,452
$
21,795

Nine Months Ended June 30, 2019

Research &
Development

Selling &
Marketing

General &
Administrative

Other

Total Operating
Expenses

Fiscal 2018:

Diagnostics
$
10,904
$
18,537
$
14,472
$
2,447
$
46,360

Life Science

2,255

7,426

6,282

—

15,963

Corporate

—

—

5,716

6,028

11,744

Total Expenses (2018 Year-to-Date)
$
13,159
$
25,963
$
26,470
$
8,475
$
74,067

Fiscal 2019:

Diagnostics
$
10,141
$
17,048
$
13,507
$
2,219
$
42,915

Life Science

2,153

4,173

4,603

25

10,954

Corporate

—

—

6,178

2,272

8,450

Total Expenses (2019 Year-to-Date)
$
12,294
$
21,221
$
24,288
$
4,516
$
62,319

Operating Expenses – Comparisons to Prior Year Periods

Three Months Ended June 30, 2019

Research &
Development

Selling &
Marketing

General &
Administrative

Other

Total Operating
Expenses

2018 Expenses
$
4,264
$
8,502
$
8,380
$
2,081
$
23,227

% of Revenues

8
%
16
%
16
%
4
%
45
%
Fiscal 2019 Increases/(Decreases):

Diagnostics

376

(486
)
(87
)
1,123

926

Life Science

(46
)
(1,269
)
(323
)
—

(1,638
)
Corporate

—

—

32

(752
)
(720
)

2019 Expenses
$
4,594
$
6,747
$
8,002
$
2,452
$
21,795

% of Revenues

9
%
14
%
17
%
5
%
45
%
% Increase/(Decrease)

8
%
(21
)%
(5
)%
18
%
(6
)%


	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 2526

Table of Contents

Nine Months Ended June 30, 2019

Research &
Development

Selling &
Marketing

General &
Administrative

Other

Total Operating
Expenses

2018 Expenses
$
13,159
$
25,963
$
26,470
$
8,475
$
74,067

% of Revenues

8
%
16
%
16
%
5
%
46
%
Fiscal 2019 Increases/(Decreases):

Diagnostics

(763
)
(1,489
)
(965
)
(228
)
(3,445
)
Life Science

(102
)
(3,253
)
(1,679
)
25

(5,009
)
Corporate

—

—

462

(3,756
)
(3,294
)

2019 Expenses
$
12,294
$
21,221
$
24,288
$
4,516
$
62,319

% of Revenues

8
%
14
%
16
%
3
%
41
%
% Decrease

(7
)%
(18
)%
(8
)%
(47
)%
(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	%

~~Total~~The changes in operating expenses ~~decreased during both the third quarter and first nine months of fiscal 2019 compared to the respective fiscal 2018 periods, with overall decreases in spending in all of our segments, reflecting~~primarily reflect the following:

Decreased year-to-date Research & Development costs due primarily to the timing of product development projects and the clinical trials for our cCMV test in fiscal 2018, while the quarterly increase reflects the addition of the GenePOC business;

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 due to: (i) the effects of the fiscal 2018 organization~~

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

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 ~~(ii) lower Quality System remediation costs related to our blood-lead manufacturing facility; and~~

~~Decreased restructuring & litigation costs, along with the effects of the current year acquisition-related costs (reflected within “Other” in the above tables).~~

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 ~~decreased 26%~~increased 20% to ~~$6,464~~$11,791 for the ~~third~~second quarter of fiscal ~~2019,~~2020 and ~~increased 10%~~decreased 16% to ~~$26,850~~$17,185 for the first ~~nine~~six months of fiscal ~~2019,~~2020, as a result of the factors discussed ~~above, including the costs associated with acquisition and restructuring activities, and litigation costs.~~above.

Income Taxes

The effective rate for income taxes was ~~22%~~26% and ~~23%~~27% for the ~~fiscal 2019 third~~second quarter and ~~nine month~~

~~year-to-date~~

~~period,~~first six months of fiscal 2020, respectively, compared to ~~21% and 22% during~~23% for both corresponding periods in fiscal 2019. This higher fiscal 2020 tax rate results largely from the ~~corresponding fiscal 2018 periods. These rates reflect~~

non-deductibility

of the ~~combined~~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 than the share price on the date the restricted share units were granted. In accordance with current applicable guidance, the tax effect of this difference is recorded directly to income tax expense. We expect our effective tax rate for the ~~various components of the tax reform act (see Note 8,~~

~~“Income Taxes”~~

~~of the accompanying Condensed Consolidated Financial Statements) including: (i) the lowering of the applicable tax rate; (ii) the accompanying~~

~~re-measurement~~

~~of deferred tax balances at the lower rate; and (iii) the various foreign income-related items, such as the repatriation transition tax and the tax related~~full fiscal year to ~~Foreign Derived Intangible Income.~~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 ~~our anticipated~~ operating and capital spending ~~needs, expected~~budgets and debt ~~service costs,~~service. We have historically maintained a credit facility to augment working capital requirements and ~~consideration of potential acquisitions.~~to respond quickly to acquisition opportunities.

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

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.

~~Page 26~~

~~Table of Contents~~

~~Considering the various worldwide~~

~~geo-political~~

~~and~~

~~geo-economic~~

conditions, we do not expect macroeconomic conditions to have a significant impact on our liquidity needs, financial condition or results of operations, although no assurances can be made in this regard. We intend to continue to fund our working capital requirements from current cash flows from operating activities and cash on hand. If needed, we also have an additional source of liquidity through the amount remaining available on our ~~$125,000~~$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 ~~June 30, 2019,~~March 31, 2020, our cash and equivalents balance ~~is $55,192~~was $49,550 or ~~$2,738 lower than at the end of the fiscal 2018 third quarter, and $10,905~~$17,547 lower than at the end of the fiscal 2019 second ~~quarter. These decreases are primarily due~~quarter, and $12,847 lower than at 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 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 ~~cash on hand used to fund~~ the acquisition of the GenePOC, ~~business.~~net of cash and 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.

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 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 new product development activities for the Revogene molecular diagnostic platform, as well as the Curian and Pediastat

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

Capital Resources

As described in Note 9,

“Bank Credit Arrangements”

of the accompanying Condensed Consolidated Financial Statements ~~on May 24, 2019, in connection with~~and above, the ~~acquisition of the GenePOC business, we executed~~Company maintains a ~~new five-year $125,000 revolving~~$160,000 credit facility, ~~to replace our previously-existing $30,000 credit facility. The new credit facility~~which is secured by substantially all of our assets and includes certain restrictive financial covenants.

~~To-date,~~

~~we have drawn down $75,824 on this new facility, using the proceeds to repay our previously-existing term loan and, along with cash~~

~~on-hand,~~

~~fund the acquisition of the GenePOC business.~~

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 $160,000 revolving credit facility discussed above.

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

off-balance

sheet arrangements.

~~Also, as noted in previous filings, our Board~~

Page 28

Table of ~~Directors has suspended the declaration and payment of quarterly dividends 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.~~

Contents

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Other than the impact of the recent outbreak of

~~There~~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 ~~June 30, 2019.~~March 31, 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 ~~June 30, 2019.~~

March 31, 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 ~~June 30, 2019~~March 31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

See Note 11,

“Litigation Matters”

of the accompanying Condensed Consolidated Financial Statements.

ITEM 1A. RISK FACTORS

There have been no material changes from risk factors as previously disclosed in the Company’s fiscal ~~2018~~2019 Annual Report on Form

10-K

~~and subsequent quarterly reports on Form~~

~~10-Q~~

in response to Item 1A to Part I of Form

~~10-K.~~10-K,

except that we are adding the following risk factor discussion relating to coronavirus

COVID-19.

Our financial condition, results of operations and cash flows could be adversely affected by the ongoing coronavirus

(COVID-19)

outbreak.

Any outbreak of contagious diseases, such as

COVID-19,

or other adverse public health developments, could 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.

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

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 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 could be adversely affected to the extent that

COVID-19

or any other epidemic harms our business or the 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 outbreak, new information that may emerge concerning the severity of

COVID-19,

and the actions to contain

COVID-19

or treat its impact, among others, which could have an adverse effect on our business, results of 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 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.

Page 30

ITEM 6. EXHIBITS

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

10-Q:



	2.1			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 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 Meridian Bioscience, Inc., the guarantors party thereto from time to time, the lenders party thereto from time to time and 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			Certification of Principal Executive Officer Pursuant to Securities Exchange Act Rule 13a-14(a)/15d-14(a)

	31.2			Certification of Principal Financial Officer Pursuant to Securities Exchange Act Rule 13a-14(a)/15d-14(a)

	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~~101.INS			~~The following financial information from Meridian Bioscience Inc.’s Quarterly Report on Form~~ ~~10-Q~~ ~~for the quarter ended June 30, 2019 filed with the SEC on August 7, 2019, formatted in~~ Inline XBRL ~~includes: (i) Condensed Consolidated Statements of Operations for the three~~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 nine months ended June 30, 2019 and 2018; (ii) Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended June 30, 2019 and 2018; (iii) Condensed Consolidated Statements of Cash Flows for the nine months ended June 30, 2019 and 2018; (iv) Condensed Consolidated Balance Sheets as of June 30, 2019 and September 30, 2018; (v) Condensed Consolidated Statements of Shareholders’ Equity for the three and nine months ended June 30, 2019 and 2018; and (vi) the Notes to Condensed Consolidated Financial Statementscontained in Exhibit 101)

Page 28

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 2932


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


Class		Outstanding ~~July 31, 2019~~April 30, 2020
Common Stock, no par value		~~42,711,496~~42,832,859


	Three Months Ended						Nine Months Ended
	June 30,						June 30,
	2019			2018			2019			2018
NET REVENUES	$	48,440		$	51,737		$	150,168		$	160,471
COST OF SALES		20,181			19,775			60,999			61,930

GROSS PROFIT		28,259			31,962			89,169			98,541

OPERATING EXPENSES
Research and development		4,594			4,264			12,294			13,159
Selling and marketing		6,747			8,502			21,221			25,963
General and administrative		8,002			8,380			24,288			26,470
Acquisition-related costs		473			—			1,445			—
Restructuring costs		1,801			913			1,701			5,105
Litigation costs		178			1,168			1,370			3,370

Total operating expenses		21,795			23,227			62,319			74,067

OPERATING INCOME		6,464			8,735			26,850			24,474

OTHER INCOME (EXPENSE)
Interest income		194			109			547			271
Interest expense		(448	)		(375	)		(1,158	)		(1,149	)
Other, net		268			151			(38	)		(94	)

Total other income (expense)		14			(115	)		(649	)		(972	)

EARNINGS BEFORE INCOME TAXES		6,478			8,620			26,201			23,502

INCOME TAX PROVISION		1,399			1,795			5,922			5,087

NET EARNINGS	$	5,079		$	6,825		$	20,279		$	18,415
BASIC EARNINGS PER COMMON SHARE	$	0.12		$	0.16		$	0.48		$	0.44
DILUTED EARNINGS PER COMMON SHARE	$	0.12		$	0.16		$	0.47		$	0.43
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - BASIC		42,639			42,349			42,526			42,307
EFFECT OF DILUTIVE STOCK OPTIONS AND RESTRICTED SHARE UNITS		271			409			381			405

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - DILUTED		42,910			42,758			42,907			42,712
ANTI-DILUTIVE SECURITIES:
Common share options and restricted share units		1,215			995			1,073			1,009

DIVIDENDS DECLARED PER COMMON SHARE	$	—		$	0.125		$	0.250		$	0.375


	June 30,
	2019		September 30,
	(Unaudited)		2018
CURRENT ASSETS
Cash and equivalents	$	55,192	$	59,763
Accounts receivable, less allowances of $421 and $310		31,995		32,336
Inventories		43,305		41,993
Prepaid expenses and other current assets		6,897		4,961

Total current assets		137,389		139,053

PROPERTY, PLANT AND EQUIPMENT, at Cost
Land		1,157		1,160
Buildings and improvements		32,430		32,444
Machinery, equipment and furniture		63,344		50,606
Construction in progress		1,292		1,631

Subtotal		98,223		85,841
Less: accumulated depreciation and amortization		66,398		55,846

Net property, plant and equipment		31,825		29,995

OTHER ASSETS
Goodwill		90,107		54,637
Other intangible assets, net		62,001		23,113
Restricted cash		—		1,000
Deferred instrument costs, net		—		1,239
Fair value of interest rate swap		—		1,722
Deferred income taxes		125		130
Other assets		989		488

Total other assets		153,222		82,329

TOTAL ASSETS	$	322,436	$	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	)


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

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

Total consideration (including contingent consideration currently estimated at $27,200)	$	77,502
Total consideration paid (including contingent consideration originally estimated at $27,202)			$	77,502	$	24		$	77,526

	Three Months				Nine Months
	Ended June 30,				Ended June 30,
	2019		2018		2019		2018
Net Revenues	$	48,505	$	51,771	$	150,376	$	160,584
Net Earnings	$	3,129	$	2,605	$	11,869	$	7,439


	June 30, 2019				September 30, 2018
	Cash and Equivalents		Other Assets		Cash and Equivalents		Other Assets
Institutional money market funds	$	20,795	$	—	$	20,421	$	—
Cash on hand -
Restricted		—		—		—		1,000
Unrestricted		34,397		—		39,342		—

Total	$	55,192	$	—	$	59,763	$	1,000


	June 30, 2019		September 30, 2018
	June 30, 2019		September 30, 2018
Raw materials	$	8,394	$	6,689
Work-in-process		12,982		12,098
Finished goods - instruments		1,212		1,191
Finished goods - kits and reagents		20,717		22,015

Total	$	43,305	$	41,993


	Three Months Ended June 30, 2019
	Research & Development			Selling & Marketing			General & Administrative			Other			Total Operating Expenses
Fiscal 2018:
Diagnostics	$	3,479		$	6,011		$	4,570		$	249		$	14,309
Life Science		785			2,491			1,996			—			5,272
Corporate		—			—			1,814			1,832			3,646

Total Expenses (2018 Quarter)	$	4,264		$	8,502		$	8,380		$	2,081		$	23,227

Fiscal 2019:
Diagnostics	$	3,855		$	5,525		$	4,483		$	1,372		$	15,235
Life Science		739			1,222			1,673			—			3,634
Corporate		—			—			1,846			1,080			2,926

Total Expenses (2019 Quarter)	$	4,594		$	6,747		$	8,002		$	2,452		$	21,795


	Nine Months Ended June 30, 2019
	Research & Development			Selling & Marketing			General & Administrative			Other			Total Operating Expenses
Fiscal 2018:
Diagnostics	$	10,904		$	18,537		$	14,472		$	2,447		$	46,360
Life Science		2,255			7,426			6,282			—			15,963
Corporate		—			—			5,716			6,028			11,744

Total Expenses (2018 Year-to-Date)	$	13,159		$	25,963		$	26,470		$	8,475		$	74,067

Fiscal 2019:
Diagnostics	$	10,141		$	17,048		$	13,507		$	2,219		$	42,915
Life Science		2,153			4,173			4,603			25			10,954
Corporate		—			—			6,178			2,272			8,450

Total Expenses (2019 Year-to-Date)	$	12,294		$	21,221		$	24,288		$	4,516		$	62,319


Operating Expenses – Comparisons to Prior Year Periods

	Three Months Ended June 30, 2019
	Research & Development			Selling & Marketing			General & Administrative			Other			Total Operating Expenses
2018 Expenses	$	4,264		$	8,502		$	8,380		$	2,081		$	23,227

% of Revenues		8	%		16	%		16	%		4	%		45	%
Fiscal 2019 Increases/(Decreases):
Diagnostics		376			(486	)		(87	)		1,123			926
Life Science		(46	)		(1,269	)		(323	)		—			(1,638	)
Corporate		—			—			32			(752	)		(720	)

2019 Expenses	$	4,594		$	6,747		$	8,002		$	2,452		$	21,795

% of Revenues		9	%		14	%		17	%		5	%		45	%
% Increase/(Decrease)		8	%		(21	)%		(5	)%		18	%		(6	)%

MERIDIAN BIOSCIENCE, INC.

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

/s/ Bryan T. Baldasare

Bryan T. Baldasare

~~Interim~~Executive Vice President and Chief Financial ~~Officer and Chief Accounting~~ Officer
(Principal Financial and Accounting Officer)