SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Qþ QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 2005
OR
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-14902
MERIDIAN BIOSCIENCE, INC.
| | |
þ | | QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Quarterly Period Ended June 30, 2005
OR
| | |
o | | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number0-14902
MERIDIAN BIOSCIENCE, INC.
Incorporated under the laws of Ohio | | 31-0888197 |
|
| | (I.R.S. Employer Identification No.) |
(I.R.S. Employer Identification No.)
3471 River Hills Drive
Cincinnati, Ohio 45244
(513) 271-3700
Indicate by check 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.
Indicate by check whether the Registrant is an accelerated filer (as defined in Rule 12-b2 of the Exchange Act).
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
| | | | |
Class | | Outstanding April 30,July 31, 2005 |
| | |
Common Stock, no par value | | 15,708,240 | 16,005,099 | |
| | | |
Page 1 of 25
MERIDIAN BIOSCIENCE, INC. AND SUBSIDIARIES
INDEX TO QUARTERLY REPORT ON FORM 10-Q
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 which may be identified by words such as “estimates”, “anticipates”, “projects”, “plans”, “seeks”, “may”, “will”, “expects”, “intends”, “believes”, “should”, and similar expressions or the negative versions thereof and which also may be identified by their context. Such statements are based upon current expectations of the Company and speak only as of the date made. The Company assumes no obligation to publicly update any forward-looking statements. These statements are subject to various risks, uncertainties and other factors that could cause actual results to differ, including, without limitation, the following: Meridian’s 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. While Meridian has introduced a number of internally developed products, there can be no assurance that it will be successful in the future in introducing such products on a timely basis. Ongoing consolidations of reference laboratories and formation of multi-hospital alliances may cause adverse changes to pricing and distribution. Costs and difficulties in complying with laws and regulations administered by the United States Food and Drug Administration and other governmental bodies can result in unanticipated expenses and delays and interruptions to the sale of new and existing products. Changes in the relative strength or weakness of the U.S. dollar can change expected results. One of Meridian’s main 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 successfully integrated into Meridian’s operations.operations Page 2 of 2524
MERIDIAN BIOSCIENCE, INC. AND SUBSIDIARIES
Consolidated Statements of Operations (Unaudited)
(in thousands, except per share data)
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | Three Months | | Six Months | | | Three Months | | Nine Months |
| | Ended March 31, | | Ended March 31, | | | Ended June 30, | | Ended June 30, |
| | 2005 | | 2004 | | 2005 | | 2004 | | | 2005 | | 2004 | | 2005 | | 2004 |
| NET SALES | | $ | 23,686 | | $ | 20,940 | | $ | 42,528 | | $ | 39,106 | | | $ | 25,421 | | $ | 18,256 | | $ | 67,949 | | $ | 57,362 | |
| | |
COST OF SALES | | 10,109 | | 8,907 | | 17,938 | | 16,956 | | | 9,735 | | 7,355 | | 27,673 | | 24,311 | |
| Gross profit | | 13,577 | | 12,033 | | 24,590 | | 22,150 | | | 15,686 | | 10,901 | | 40,276 | | 33,051 | |
| | | |
OPERATING EXPENSES: | | |
Research and development | | 861 | | 1,195 | | 1,694 | | 2,167 | | | 1,190 | | 1,050 | | 2,884 | | 3,217 | |
Sales and marketing | | 4,056 | | 3,268 | | 7,372 | | 6,304 | | | 3,647 | | 3,077 | | 11,019 | | 9,389 | |
General and administrative | | 3,462 | | 3,589 | | 6,859 | | 6,505 | | | 5,141 | | 3,408 | | 12,000 | | 9,950 | |
| Total operating expenses | | 8,379 | | 8,052 | | 15,925 | | 14,976 | | | 9,978 | | 7,535 | | 25,903 | | 22,556 | |
| | | |
Operating income | | 5,198 | | 3,981 | | 8,665 | | 7,174 | | | 5,708 | | 3,366 | | 14,373 | | 10,495 | |
| | |
OTHER INCOME (EXPENSE): | | |
Interest income | | 8 | | — | | 14 | | 7 | | | 2 | | 4 | | 16 | | 11 | |
Interest expense | | | (225 | ) | | | (474 | ) | | | (515 | ) | | | (840 | ) | | | (176 | ) | | | (399 | ) | | | (691 | ) | | | (1,239 | ) |
Other, net | | 125 | | 25 | | 149 | | 15 | | | | (19 | ) | | | (4 | ) | | 130 | | 56 | |
| Total other income (expense) | | | (92 | ) | | | (449 | ) | | | (352 | ) | | | (818 | ) | | | (193 | ) | | | (399 | ) | | | (545 | ) | | | (1,172 | ) |
| | | |
Earnings before income taxes | | 5,106 | | 3,532 | | 8,313 | | 6,356 | | | 5,515 | | 2,967 | | 13,828 | | 9,323 | |
| | |
INCOME TAX PROVISION | | 1,910 | | 1,243 | | 3,007 | | 2,272 | | | 2,017 | | 810 | | 5,024 | | 3,082 | |
| | |
| NET EARNINGS | | $ | 3,196 | | $ | 2,289 | | $ | 5,306 | | $ | 4,084 | | | $ | 3,498 | | $ | 2,157 | | $ | 8,804 | | $ | 6,241 | |
| | | |
BASIC EARNINGS PER COMMON SHARE | | $ | 0.20 | | $ | 0.15 | | $ | 0.35 | | $ | 0.28 | | | $ | 0.22 | | $ | 0.14 | | $ | 0.57 | | $ | 0.42 | |
| | |
DILUTED EARNINGS PER COMMON SHARE | | $ | 0.20 | | $ | 0.15 | | $ | 0.34 | | $ | 0.27 | | | $ | 0.22 | | $ | 0.14 | | $ | 0.55 | | $ | 0.41 | |
| | |
AVERAGE NUMBER OF COMMON SHARES OUTSTANDING — BASIC | | 15,646 | | 14,869 | | 15,346 | | 14,821 | | | 15,768 | | 14,899 | | 15,478 | | 14,846 | |
| | |
DILUTIVE COMMON STOCK OPTIONS | | 462 | | 415 | | 482 | | 404 | | |
DILUTIVE EFFECT COMMON STOCK OPTIONS | | | 433 | | 361 | | 450 | | 390 | |
| | | |
AVERAGE NUMBER OF COMMON SHARES OUTSTANDING — DILUTED | | 16,108 | | 15,284 | | 15,828 | | 15,225 | | | 16,201 | | 15,260 | | 15,928 | | 15,236 | |
| | | |
ANTI-DILUTIVE SECURITIES: | | |
Common stock options | | 1 | | 138 | | 73 | | 187 | | | — | | 198 | | 1 | | 190 | |
Shares from convertible debentures | | 546 | | 1,021 | | 546 | | 1,021 | | | 331 | | 1,021 | | 331 | | 1,021 | |
| DIVIDENDS DECLARED PER COMMON SHARE | | $ | 0.12 | | $ | 0.10 | | $ | 0.22 | | $ | 0.19 | | | $ | 0.12 | | $ | 0.10 | | $ | 0.34 | | $ | 0.29 | |
| | |
|
The accompanying notes are an integral part of these consolidated financial statements.
Page 3 of 2524
MERIDIAN BIOSCIENCE, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
(dollars in thousands)
| | | | | | | | | | | | | | | | |
| |
Six Months Ended March 31, | | 2005 | | 2004 | | |
Nine Months Ended June 30, | | | 2005 | | 2004 |
| CASH FLOWS FROM OPERATING ACTIVITIES: | | |
Net earnings | | $ | 5,306 | | $ | 4,084 | | | $ | 8,804 | | $ | 6,241 | |
Non-cash items: | | |
Depreciation of property, plant and equipment | | 1,289 | | 1,314 | | | 1,941 | | 1,966 | |
Amortization of intangible assets and deferred costs | | 742 | | 808 | | |
Amortization of intangible assets and debenture offering costs | | | 1,179 | | 1,134 | |
Stock based compensation | | 63 | | 3 | | | 174 | | 30 | |
Deferred income taxes | | 4 | | | (87 | ) | | | (410 | ) | | 472 | |
Change in current assets, excluding cash and deferred taxes and net of effects of acquisitions | | | (684 | ) | | | (1,702 | ) | | | (535 | ) | | | (218 | ) |
Change in current liabilities, excluding debt obligations and net of effects of acquisitions | | | (372 | ) | | | (1,540 | ) | | 1,394 | | | (936 | ) |
Other | | 216 | | 407 | | | | (111 | ) | | 255 | |
| Net cash provided by operating activities | | 6,564 | | 3,287 | | | 12,436 | | 8,944 | |
| | | |
CASH FLOWS FROM INVESTING ACTIVITIES: | | |
Acquisitions of property, plant and equipment | | | (1,484 | ) | | | (1,122 | ) | | | (2,726 | ) | | | (1,782 | ) |
Viral Antigens earnout payments | | | (678 | ) | | | (456 | ) | | | (678 | ) | | | (456 | ) |
Purchase of intangible assets | | | — | | | (270 | ) |
Acquisition of OEM Concepts, Inc. | | | (6,226 | ) | | — | | | | (6,391 | ) | | — | |
| Net cash used for investing activities | | | (8,388 | ) | | | (1,578 | ) | | | (9,795 | ) | | | (2,508 | ) |
| CASH FLOWS FROM FINANCING ACTIVITIES: | | |
Net activity on revolving credit facility | | 5,397 | | 4,596 | | | 4,267 | | 1,509 | |
Repayment of debt obligations | | | (1,141 | ) | | | (5,299 | ) | | | (2,277 | ) | | | (5,435 | ) |
Euro term loan borrowings | | | — | | 930 | |
Debt issuance costs paid | | — | | | (311 | ) | | — | | | (311 | ) |
Dividends paid | | | (3,386 | ) | | | (2,819 | ) | | | (5,270 | ) | | | (4,308 | ) |
Proceeds from exercise of stock options | | 2,476 | | 1,086 | | | 2,748 | | 1,106 | |
Other | | | (11 | ) | | | (36 | ) | | | (11 | ) | | | (36 | ) |
| Net cash provided by (used for) financing activities | | 3,335 | | | (2,783 | ) | |
Net cash used for financing activities | | | | (543 | ) | | | (6,545 | ) |
| | | |
Effect of Exchange Rate Changes on Cash | | 105 | | | (43 | ) | | | (53 | ) | | 82 | |
| | |
| Net Increase (Decrease) in Cash | | 1,616 | | | (1,117 | ) | | 2,045 | | | (27 | ) |
| | |
Cash at Beginning of Period | | 1,983 | | 2,083 | | | 1,983 | | 2,083 | |
| | |
| Cash at End of Period | | $ | 3,599 | | $ | 966 | | | $ | 4,028 | | $ | 2,056 | |
| | | |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | |
Cash paid during the period for: | | |
Income taxes paid | | $ | 2,304 | | $ | 2,638 | | | $ | 4,217 | | $ | 3,090 | |
Interest | | 326 | | 746 | | | 387 | | 777 | |
Non-cash transactions: | | |
Debenture exchange | | — | | 3,889 | | | — | | 3,889 | |
Debenture conversions | | | 9,655 | | — | |
The accompanying notes are an integral part of these consolidated financial statements.
Page 4 of 2524
MERIDIAN BIOSCIENCE, INC. AND SUBSIDIARIES
Consolidated Balance Sheets (Unaudited)
(dollars in thousands)
ASSETS
| | | | | | | | | |
| | | | | | | | | |
| | March 31, | | September 30, | | | June 30, | | September 30, |
CURRENT ASSETS: | | 2005 | | 2004 | | | 2005 | | 2004 |
| Cash | | $ | 3,599 | | $ | 1,983 | | | $ | 4,028 | | $ | 1,983 | |
Accounts receivable, less allowances of $517 and $479 for doubtful accounts | | 17,007 | | 17,857 | | |
Accounts receivable, less allowances of $497 and $479 for doubtful accounts | | | 16,753 | | 17,857 | |
Inventories | | 17,227 | | 14,107 | | | 16,829 | | 14,107 | |
Prepaid expenses and other current assets | | 1,393 | | 1,669 | | | 1,896 | | 1,669 | |
Deferred income taxes | | 534 | | 495 | | | 746 | | 495 | |
| | | |
Total current assets | | 39,760 | | 36,111 | | | 40,252 | | 36,111 | |
| | | |
PROPERTY, PLANT AND EQUIPMENT: | | |
Land | | 703 | | 696 | | | 693 | | 696 | |
Buildings and improvements | | 15,366 | | 15,214 | | | 15,482 | | 15,214 | |
Machinery, equipment and furniture | | 19,951 | | 18,794 | | | 20,554 | | 18,794 | |
Construction in progress | | 900 | | 525 | | | 1,289 | | 525 | |
| Total property, plant and equipment | | 36,920 | | 35,229 | | | 38,018 | | 35,229 | |
Less-accumulated depreciation and amortization | | 19,138 | | 17,887 | | | 19,694 | | 17,887 | |
| | | |
Net property, plant and equipment | | 17,782 | | 17,342 | | | 18,324 | | 17,342 | |
| | | |
OTHER ASSETS: | | |
Deferred debenture offering costs, net | | 270 | | 433 | | | 249 | | 433 | |
Goodwill | | 7,475 | | 5,423 | | | 7,639 | | 5,423 | |
Other intangible assets, net | | 13,871 | | 9,275 | | | 13,449 | | 9,275 | |
Restricted cash | | 600 | | 600 | | | 600 | | 600 | |
Other assets | | 145 | | 138 | | | 153 | | 138 | |
| | | |
Total other assets | | 22,361 | | 15,869 | | | 22,090 | | 15,869 | |
| | | |
TOTAL ASSETS | | $ | 79,903 | | $ | 69,322 | | | $ | 80,666 | | $ | 69,322 | |
|
The accompanying notes are an integral part of these consolidated balance sheets.
Page 5 of 2524
MERIDIAN BIOSCIENCE, INC. AND SUBSIDIARIES
Consolidated Balance Sheets (Unaudited)
LIABILITIES AND SHAREHOLDERS’ EQUITY
| | | | | | | | | |
| | | | | | | | | |
| | March 31, | | September 30, | | | June 30, | | September 30, | |
CURRENT LIABILITIES: | | 2005 | | 2004 | | | 2005 | | 2004 | |
| Current portion of long-term debt | | $ | 817 | | $ | 696 | | | $ | 717 | | $ | 696 | |
Borrowings under revolving credit facility | | 5,397 | | — | | | 4,267 | | — | |
Accounts payable | | 3,628 | | 2,631 | | | 2,999 | | 2,631 | |
Accrued payroll costs | | 3,665 | | 6,311 | | | 5,547 | | 6,311 | |
Purchase business combination liability | | — | | 678 | | | — | | 678 | |
Other accrued expenses | | 4,020 | | 3,159 | | | 4,048 | | 3,159 | |
Income taxes payable | | 3,760 | | 3,175 | | | 4,197 | | 3,175 | |
| | | |
Total current liabilities | | 21,287 | | 16,650 | | | 21,775 | | 16,650 | |
| | | |
LONG-TERM DEBT: | | |
Bank debt | | 771 | | 1,093 | | | 451 | | 1,093 | |
Convertible subordinated debentures | | 8,391 | | 16,000 | | | 4,935 | | 16,000 | |
| | |
DEFERRED INCOME TAXES | | 4,742 | | 2,647 | | | 4,540 | | 2,647 | |
| | |
COMMITMENTS AND CONTINGENCIES | | |
| | |
SHAREHOLDERS’ EQUITY: | | |
| | |
Preferred stock, no par value, 1,000,000 shares authorized, none issued | | — | | — | | | — | | — | |
Common stock, no par value, 50,000,000 shares authorized, 15,695,826 and 14,970,998 shares issued and outstanding, respectively, stated at | | 2,528 | | 2,535 | | |
Common stock, no par value, 50,000,000 shares authorized, 15,894,567 and 14,970,998 shares issued and outstanding, respectively, stated at | | | 2,528 | | 2,535 | |
Treasury stock, at cost, 8,300 shares | | | (32 | ) | | | (32 | ) | | | (32 | ) | | | (32 | ) |
Additional paid-in capital | | 33,021 | | 23,401 | | | 36,093 | | 23,401 | |
Retained earnings | | 9,242 | | 7,322 | | | 10,856 | | 7,322 | |
Accumulated other comprehensive income (loss) | | | (47 | ) | | | (294 | ) | | | (480 | ) | | | (294 | ) |
| | | |
Total shareholders’ equity | | 44,712 | | 32,932 | | | 48,965 | | 32,932 | |
| | | |
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | | $ | 79,903 | | 69,322 | | | $ | 80,666 | | $ | 69,322 | |
|
The accompanying notes are an integral part of these consolidated balance sheets.
Page 6 of 2524
MERIDIAN BIOSCIENCE, INC. AND SUBSIDIARIES
Consolidated Statement of Changes in Shareholders’ Equity (Unaudited)
(dollars and shares in thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Accumulated | | | | | Accumulated | | |
| | Common | | Shares | | Additional | | Other | | Total | | | Common | | Shares | | Additional | | Other | | Total |
| | Shares | | Held in | | Common | | Treasury | | Paid-in | | Retained | | Comprehensive | | Comprehensive | | Shareholders’ | | | Shares | | Held in | | Common | | Treasury | | Paid-in | | Comprehensive | | Comprehensive | | Shareholders’ |
| | Issued | | Treasury | | Stock | | Stock | | Capital | | Earnings | | Income (Loss) | | Income (Loss) | | Equity | | | Issued | | Treasury | | Stock | | Stock | | Capital | | Retained Earnings | | Income (Loss) | | Income (Loss) | | Equity |
| Balance at September 30, 2004 | | 14,971 | | | (8 | ) | | $ | 2,535 | | $ | (32 | ) | | $ | 23,401 | | $ | 7,322 | | $ | (294 | ) | | $ | — | | $ | 32,932 | | | 14,971 | | | (8 | ) | | $ | 2,535 | | $ | (32 | ) | | $ | 23,401 | | $ | 7,322 | | $ | (294 | ) | | $ | — | | $ | 32,932 | |
Dividends paid | | — | | — | | — | | — | | — | | | (3,386 | ) | | — | | — | | | (3,386 | ) | | — | | — | | — | | — | | — | | | (5,270 | ) | | — | | — | | | (5,270 | ) |
Exercise of stock options | | 288 | | — | | — | | — | | 2,476 | | — | | — | | — | | 2,476 | | | 322 | | — | | — | | — | | 2,748 | | — | | — | | — | | 2,748 | |
Stock based compensation | | — | | — | | — | | — | | 63 | | — | | — | | — | | 63 | | | — | | — | | — | | — | | 174 | | — | | — | | — | | 174 | |
Bond conversion | | 437 | | — | | — | | — | | 7,081 | | — | | — | | — | | 7,081 | | | 602 | | — | | — | | — | | 9,770 | | — | | — | | — | | 9,770 | |
Common stock issuance costs | | — | | — | | | (7 | ) | | — | | — | | — | | — | | — | | | (7 | ) | | — | | — | | | (7 | ) | | — | | — | | — | | — | | — | | | (7 | ) |
Comprehensive income: | | |
Net income | | — | | — | | — | | — | | — | | 5,306 | | — | | 5,306 | | 5,306 | | |
Net earnings | | | — | | — | | — | | — | | — | | 8,804 | | — | | 8,804 | | 8,804 | |
Foreign currency translation adjustment | | — | | — | | — | | — | | — | | — | | 247 | | 247 | | 247 | | | — | | — | | — | | — | | — | | — | | | (186 | ) | | | (186 | ) | | | (186 | ) |
| | | | | | |
Comprehensive income | | $ | 5,553 | | | $ | 8,618 | |
| | | | | | |
| | |
| Balance at March 31, 2005 | | 15,696 | | | (8 | ) | | $ | 2,528 | | $ | (32 | ) | | $ | 33,021 | | $ | 9,242 | | $ | (47 | ) | | $ | 44,712 | | |
Balance at June 30, 2005 | | | 15,895 | | | (8 | ) | | $ | 2,528 | | $ | (32 | ) | | $ | 36,093 | | $ | 10,856 | | $ | (480 | ) | | $ | 48,965 | |
|
The accompanying notes are an integral part of these consolidated financial statements.
Page 7 of 2524
MERIDIAN BIOSCIENCE, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
The consolidated financial statements included herein have not been audited by an independent registered public accounting firm, but include all adjustments (consisting of normal recurring entries), which are, in the opinion of management, necessary for a fair presentation of the results for such periods.
Certain information and footnote disclosure normally included in financial statements prepared in accordance with generally accepted accounting principles has been omitted pursuant to the requirements of the Securities and Exchange Commission, although Meridian believes that the disclosures included in these financial statements are adequate to make the information not misleading.
It is suggested
Meridian suggests that these consolidated financial statements be read in conjunction with the consolidated financial statements and notes thereto, included in Meridian’s Annual Report on Form 10-K for the Year Ended September 30, 2004.
The results of operations for the interim periods are not necessarily indicative of the results to be expected for the year.
2.Significant Accounting Policies: (a)a) Revenue Recognition -—Revenue
Life Science revenue for contract services may come from standalone arrangements for process development and/or optimization work (contract research and development services), or multiple-deliverable arrangements that include process development work followed by larger-scale manufacturing (contract manufacturing services). Revenue is recognized based on the nature of the arrangements,
includingusing the principles in EITF 00-21,
Revenue Arrangements with Multiple Deliverables. Contract research and development services may be performed on a “time and materials” basis or “fixed fee” basis. For “time and materials” arrangements, revenue is recognized as services are performed and billed. For “fixed fee” arrangements, revenue is recognized upon completion and acceptance by the customer. For contract manufacturing services, revenue is recognized upon delivery of product and acceptance by the customer.
During the first quarter
The nature of
fiscal 2005, the Life Science operating segment beganthis work to date has involved process development and manufacturing of biologicals and biopharmaceuticals that will be used by scientists in the research and development of new and improved diagnostic tests, vaccines, and therapies against potential agents of bioterrorism and emerging infectious diseases. Revenues from these projects are expected to be approximately
$2,500,000, $400,000$3,587,000 for fiscal 2005, $2,387,000 of which was recognized in the
second quarter of fiscal 2005. The remainder is expected to be recognized in the third and fourthfirst three quarters.
Page 8 of 2524
(b)b) Foreign Currency Translation -—Assets and liabilities of foreign operations are translated using period-end exchange rates with gains or losses resulting from translation included in a separate component of accumulated other comprehensive income (loss). Revenues and expenses are translated using exchange rates prevailing during the period. Meridian also recognizes foreign currency transaction gains and losses on certain assets and liabilities that are denominated in the Euro currency. These gains and losses are included in other income and expense in the accompanying consolidated statements of operations.
Foreign currency translation is the only component of accumulated other comprehensive income (loss). Comprehensive income for the interim periods ended March 31June 30 was as follows:follows (amounts in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months | | Nine Months | |
| | Three Months | | Six Months | | | Ended June 30, | | Ended June 30, | |
| | Ended March 31, | | Ended March 31, | | | 2005 | | 2004 | | 2005 | | 2004 | |
| | 2005 | | 2004 | | 2005 | | 2004 | | |
| |
Net income | | $ | 3,196 | | $ | 2,289 | | $ | 5,306 | | $ | 4,084 | | |
Net earnings | | | $ | 3,498 | | $ | 2,157 | | $ | 8,804 | | $ | 6,241 | |
Foreign currency translation | | | (326 | ) | | | (172 | ) | | 247 | | 236 | | | | (433 | ) | | | (41 | ) | | | (186 | ) | | 195 | |
| Comprehensive income | | $ | 2,870 | | $ | 2,117 | | $ | 5,553 | | $ | 4,320 | | | $ | 3,065 | | $ | 2,116 | | $ | 8,618 | | $ | 6,436 | |
|
The provision for income taxes includes federal, foreign, state, and local income taxes currently payable and those deferred because of temporary differences between income for financial reporting and income for tax purposes. Meridian prepares estimates of permanent and temporary differences between income for financial reporting purposes and income for tax purposes. These differences are adjusted to actual upon filing of Meridian’s tax returns, which typically occurs in the third and fourth quarters of the current fiscal year for the preceding fiscal year’s estimates.
On June 30, 2005, Ohio’s governor signed Biennial Budget Bill, Am. Sub. H.B. 66. This bill replaces Ohio’s corporate income and personal property taxes with a commercial activity tax based on gross receipts, phased in over five years beginning July 1, 2005. Meridian has evaluated the impact of this new legislation on its existing deferred tax balances. The
deduction on qualified production activities will be available to Meridian beginning in fiscal year 2006.carrying value of existing deferred taxes was not materially affected by the enactment of this legislation.
(d)d) Stock-based Compensation -—Meridian accounts for its stock-based compensation plans pursuant to the intrinsic value method provided in APB Opinion No. 25. Had compensation cost for these plans been determined using the fair value method provided in SFAS No. 123, Meridian’s net income and earnings per share would have been reduced to the following pro forma amounts (amounts in thousands, except per share data):
Page 9 of 2524
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months | | Nine Months | |
| | Three Months | | Six Months | | | Ended June 30, | | Ended June 30, | |
| | Ended March 31, | | Ended March 31, | | | 2005 | | 2004 | | 2005 | | 2004 | |
| | 2005 | | 2004 | | 2005 | | 2004 | | |
| |
Net income as reported | | $ | 3,196 | | $ | 2,289 | | $ | 5,306 | | $ | 4,084 | | |
Net earnings as reported | | | $ | 3,498 | | $ | 2,157 | | $ | 8,804 | | $ | 6,241 | |
Stock-based compensation included in net income as reported, after tax | | 37 | | — | | 39 | | 2 | | | 69 | | 16 | | 108 | | 19 | |
Pro forma fair value of stock options, after tax | | | (131 | ) | | | (85 | ) | | | (188 | ) | | | (221 | ) | | | (150 | ) | | | (70 | ) | | | (319 | ) | | | (285 | ) |
| Pro forma net income | | $ | 3,102 | | $ | 2,204 | | $ | 5,157 | | $ | 3,865 | | | $ | 3,417 | | $ | 2,103 | | $ | 8,593 | | $ | 5,975 | |
| | | |
Basic EPS as reported | | $ | 0.20 | | $ | 0.15 | | $ | 0.35 | | $ | 0.28 | | | $ | 0.22 | | $ | 0.14 | | $ | 0.57 | | $ | 0.42 | |
Stock-based compensation included in net income as reported, after tax | | — | | — | | — | | — | | | — | | — | | — | | — | |
Pro forma fair value of stock options, after tax | | — | | — | | | (0.01 | ) | | | (0.02 | ) | | — | | — | | | (0.01 | ) | | | (0.02 | ) |
| Pro forma basic EPS | | $ | 0.20 | | $ | 0.15 | | $ | 0.34 | | $ | 0.26 | | | $ | 0.22 | | $ | 0.14 | | $ | 0.56 | | $ | 0.40 | |
| | | |
Diluted EPS as reported | | $ | 0.20 | | $ | 0.15 | | $ | 0.34 | | $ | 0.27 | | | $ | 0.22 | | $ | 0.14 | | $ | 0.55 | | $ | 0.41 | |
Stock-based compensation included in net income as reported, after tax | | — | | — | | — | | — | | | — | | — | | — | | — | |
Pro forma fair value of stock options, after tax | | | (0.01 | ) | | | (0.01 | ) | | | (0.01 | ) | | | (0.02 | ) | | | (0.01 | ) | | — | | | (0.01 | ) | | | (0.02 | ) |
| Pro forma diluted EPS | | $ | 0.19 | | $ | 0.14 | | $ | 0.33 | | $ | 0.25 | | | $ | 0.21 | | $ | 0.14 | | $ | 0.54 | | $ | 0.39 | |
|
(e)e) Recent Accounting Pronouncements -—During November 2004, the Financial Accounting Standards Board issued Statement No. 151, “Inventory Costs, an amendment of ARB No. 43, Chapter 4”. The standard specifies that idle facility expense, freight, handling costs, and wasted material (spoilage) must be accounted for as current period charges. In addition, the Statement requires that allocation of fixed production overhead be made based upon the normal capacity of the production facilities. This standard is effective for inventory costs incurred during fiscal years beginning after June 15, 2005, which for Meridian would be fiscal year 2006.
During December 2004, the Financial Accounting Standards Board issued a revision of its Statement No. 123, “Accounting for Stock-Based Compensation”. The revised standard requires, among other things, that compensation cost for employee stock options be measured at fair value on the grant date and charged to expense over the employee’s requisite service period for the option. Due to the absence of observable market prices for employee stock options, the standard indicates that the fair value of most stock options will be determined using an option-pricing model. This standard was to be effective for public companies for interim and annual periods beginning after June 15, 2005. The SEC has announced that implementation will be deferred to
the beginning of the first fiscal
yearyears beginning after June 15, 2005, which for Meridian would be
October 1, 2005.fiscal year 2006.
During December 2004, the Financial Accounting Standards Board issued Staff Position No. 109-1, “Application of FASB Statement No. 109,Accounting for Income Taxes,to the Tax Deduction on Qualified Production Activities Provided by the American Jobs Creation Act of 2004”. This staff position states that the qualified production activities deduction should be
Page 10 of 24
accounted for as a special deduction in accordance with Statement 109.
The deduction on qualified production activities will be available to Meridian beginning in fiscal year 2006.
In addition, during December 2004, the Financial Accounting Standards Board issued Staff Position No. 109-2, “Accounting and Disclosure Guidance for the Foreign Earnings
Page 10 of 25
Repatriation Provision within the American Jobs Creation Act of 2004”. This staff provision dictates that a practical exception exists to the Statement 109 requirement to reflect in the period of enactment the effect of a new tax law with respect to the special one-time tax deduction of 85 percent of foreign earnings that are repatriated (as defined in the American Jobs Creation Act of 2004). It provides that an enterprise is allowed time after the financial reporting period to evaluate the effect of the American Jobs Creation Act of 2004 on its plan for reinvestment or repatriation of foreign earnings for purposes of applying Statement 109. At this time, Meridian does not expect to repatriate any unremitted earnings from its non-US operations.
During May 2005, the Financial Accounting Standards Board issued Statement No. 154, “Accounting Changes and Error Corrections-a replacement of APB Opinion No. 20 and FASB Statement No. 3”. This statement requires retrospective application to prior periods’ financial statements of voluntary changes in accounting principles and is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005, which for Meridian would be fiscal year 2007.
Meridian does not expect the impact of adoption of these standards to have a significant effect on its results of operations or financial condition.
(f)f) Reclassifications -—Certain reclassifications have been made to the prior year financial statements to conform to the current year presentation.
Inventories are comprised of the following (amounts in thousands):
| | | | | | | | | |
| | | | | | | | | |
| | March 31, | | September 30, | | | June 30, | | September 30, | |
| | 2005 | | 2004 | | | 2005 | | 2004 | |
| Raw materials | | $ | 4,129 | | $ | 4,110 | | | $ | 4,086 | | $ | 4,110 | |
Work-in-process | | 6,009 | | 4,083 | | | 5,677 | | 4,083 | |
Finished goods | | 7,089 | | 5,914 | | | 7,066 | | 5,914 | |
| | | $ | 17,227 | | $ | 14,107 | | | $ | 16,829 | | $ | 14,107 | |
|
Meridian’s reportable operating segments are US Diagnostics, European Diagnostics, and Life Science. Meridian’s corporate headquarters are located in Cincinnati, Ohio. The US Diagnostics operating segment consists of manufacturing operations in Cincinnati, Ohio, and the sale and distribution of diagnostics test kits in the US and countries outside of Europe, Africa and the Middle East. The European Diagnostics operating segment consists of the sale and distribution of
Page 11 of 24
diagnostics test kits in Europe, Africa, and the Middle East. The Life Science operating segment consists of manufacturing operations in Memphis,
Tennessee,Tennessee; Saco,
Maine,Maine; Toms River, New
Jersey,Jersey; and Boca Raton,
Florida, andFlorida; the sale and distribution of bulk antigens, antibodies, and bioresearch reagents domestically and
abroad.abroad; and contract research and development and manufacturing services. The Life Science operating segment consists of the Viral Antigens, BIODESIGN, and OEM Concepts subsidiaries, including the protein production laboratory.
Page 11 of 25
Segment information for the interim periods ended March 31,June 30, 2005 and 2004 is as follows (in(amounts in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | US | | European | | Life | | | | | |
| | US | | European | | Life | | | | | | | Diagnostics | | Diagnostics | | Science | | Eliminations(1) | | Total | |
| | Diagnostics | | Diagnostics | | Science | | Eliminations(1) | | Total | | |
| |
Three Months - 2005 | | |
Three Months – 2005 | | |
Net sales - | | |
Third-party | | $ | 14,517 | | $ | 4,671 | | $ | 4,498 | | — | | $ | 23,686 | | | $ | 13,646 | | $ | 4,880 | | $ | 6,895 | | — | | $ | 25,421 | |
Inter-segment | | 1,775 | | — | | 183 | | | (1,958 | ) | | — | | | 1,826 | | — | | 222 | | | (2,048 | ) | | — | |
Operating income | | 3,613 | | 821 | | 734 | | 30 | | 5,198 | | | 3,296 | | 835 | | 1,744 | | | (167 | ) | | 5,708 | |
Total assets (March 31, 2005) | | 71,386 | | 12,750 | | 34,847 | | | (39,080 | ) | | 79,903 | | |
Three Months - 2004 | | |
Total assets (June 30, 2005) | | | 71,127 | | 12,371 | | 36,802 | | | (39,634 | ) | | 80,666 | |
Three Months – 2004 | | |
Net sales - | | |
Third-party | | $ | 11,735 | | $ | 4,266 | | $ | 4,939 | | $ | — | | $ | 20,940 | | | $ | 10,470 | | $ | 4,086 | | $ | 3,700 | | $ | — | | $ | 18,256 | |
Inter-segment | | 1,566 | | — | | 194 | | | (1,760 | ) | | — | | | 1,352 | | — | | 184 | | | (1,536 | ) | | — | |
Operating income | | 2,231 | | 539 | | 1,070 | | 141 | | 3,981 | | | 1,784 | | 828 | | 751 | | 3 | | 3,366 | |
Total assets (September 30, 2004) | | 63,981 | | 11,686 | | 25,329 | | | (31,674 | ) | | 69,322 | | | 63,981 | | 11,686 | | 25,329 | | | (31,674 | ) | | 69,322 | |
Six Months - 2005 | | |
Nine Months – 2005 | | |
Net sales - | | |
Third-party | | $ | 26,389 | | $ | 8,925 | | $ | 7,214 | | $ | — | | $ | 42,528 | | | $ | 40,035 | | $ | 13,805 | | $ | 14,109 | | $ | — | | $ | 67,949 | |
Inter-segment | | 3,401 | | — | | 345 | | | (3,746 | ) | | — | | | 5,227 | | — | | 567 | | | (5,794 | ) | | — | |
Operating income | | 6,652 | | 1,150 | | 805 | | 58 | | 8,665 | | | 9,949 | | 1,985 | | 2,548 | | | (109 | ) | | 14,373 | |
Six Months - 2004 | | |
Nine Months – 2004 | | |
Net sales - | | |
Third-party | | $ | 24,932 | | $ | 7,533 | | $ | 6,641 | | $ | — | | $ | 39,106 | | | $ | 35,402 | | $ | 11,619 | | $ | 10,341 | | $ | — | | $ | 57,362 | |
Inter-segment | | 3,000 | | 4 | | 363 | | | (3,367 | ) | | — | | | 4,352 | | 4 | | 547 | | | (4,903 | ) | | — | |
Operating income | | 5,848 | | 730 | | 651 | | | (55 | ) | | 7,174 | | | 7,582 | | 1,557 | | 1,407 | | | (51 | ) | | 10,495 | |
|
(1) | | Eliminations consist of intersegment transactions. |
Transactions between segments are accounted for as intercompany sales at established intercompany prices for internal and management purposes with all intercompany amounts eliminated in consolidation. Total assets for US Diagnostics and Life Science include goodwill of $1,825,000 and
$5,650,000,$5,814,000, respectively, at
March 31,June 30, 2005, and $1,825,000 and $3,598,000, respectively, at September 30, 2004.
The increase in goodwill for the Life Science operating segment relates to the acquisition of OEM Concepts. Total assets for US Diagnostics include investments in subsidiaries of
$17,402,000$17,552,000 and $10,969,000, at
March 31,June 30, 2005 and September 30, 2004, respectively.
Page 12 of 2524
A summary of Meridian’s acquired intangible assets subject to amortization, as of March 31,June 30, 2005 and September 30, 2004 is as follows (in(amounts in thousands):
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | March 31, 2005 | | September 30, 2004 | | | June 30, 2005 | | September 30, 2004 | |
| | Gross | | Gross | | | | | Gross | | Gross | | | |
| | Carrying | | Accumulated | | Carrying | | Accumulated | | | Carrying | | Accumulated | | Carrying | | Accumulated | |
| | Value | | Amortization | | Value | | Amortization | | | Value | | Amortization | | Value | | Amortization | |
| Covenants not to compete | | $ | 800 | | $ | 800 | | $ | 800 | | $ | 800 | | | $ | 800 | | $ | 800 | | $ | 800 | | $ | 800 | |
Core products | | 3,199 | | 1,571 | | 3,199 | | 1,477 | | | 3,199 | | 1,619 | | 3,199 | | 1,477 | |
Manufacturing technologies | | 5,907 | | 3,194 | | 5,907 | | 3,016 | | | 5,907 | | 3,284 | | 5,907 | | 3,016 | |
Trademarks, licenses and patents | | 1,931 | | 1,385 | | 1,931 | | 1,303 | | | 1,931 | | 1,422 | | 1,931 | | 1,303 | |
Customer lists and supply agreements | | 7,388 | | 3,578 | | 7,368 | | 3,334 | | | 7,388 | | 3,693 | | 7,368 | | 3,334 | |
OEM Concepts acquisition* | | 5,262 | | 88 | | — | | — | | | 5,262 | | 220 | | — | | — | |
| | | | $ | 24,487 | | $ | 11,038 | | $ | 19,205 | | $ | 9,930 | |
| | | $ | 24,487 | | $ | 10,616 | | $ | 19,205 | | $ | 9,930 | | |
| |
* | | Appraisals of acquired intangibles are currently in process and are expected to be completed in the third quarter of fiscal 2005. |
*Appraisals of acquired intangibles are currently in process and are expected to be completed in the fourth quarter of fiscal 2005.
The
actual aggregate amortization expense for these intangible assets for the three months ended
March 31,June 30, 2005 and 2004 was
$377,000$422,000 and
$297,000,$296,000, respectively. The
actual aggregate amortization expense for these intangible assets for the
sixnine months ended
March 31,June 30, 2005 and 2004 was
$671,000$1,093,000 and
$607,000,$903,000, respectively.
6.Debenture Conversion and Redemption Transactions: As of September 30, 2004, Meridian had outstanding a total of $16,000,000 principal amount of two series of convertible subordinated debentures. These debentures are convertible, at the option of the holder, into common stock at prices of $16.09 and $14.50 for the 7% and 5% debentures, respectively. These bondsHolders began converting debentures during the first quarter of fiscal 2005, and such conversions continued during the second quarter.and third quarters. During December 2004, Meridian also called for redemption $4,000,000 of its 7% debentures. This redemption was completed on January 14, 2005. After conversion,conversions, the actual amount of this redemption was $603,000. Subsequently, during May 2005, Meridian called for redemption $2,500,000 of its 7% debentures. This redemption was completed on June 3, 2005. After conversions, the actual amount of this redemption was $807,000. The following table summarizes the conversion and redemption activity to date (in(amounts in thousands, except share amounts):
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | 7% Series | | 5% Series | | Total | | | 7% Series | | 5% Series | | Total | |
| Outstanding at September 30, 2004 | | $ | 12,111 | | $ | 3,889 | | $ | 16,000 | | | $ | 12,111 | | $ | 3,889 | | $ | 16,000 | |
| Converted to 437,160 shares of common stock | | | (6,729 | ) | | | (277 | ) | | | (7,006 | ) | |
Converted to 601,813 shares of common stock | | | | (9,364 | ) | | | (291 | ) | | | (9,655 | ) |
Redeemed | | | (603 | ) | | — | | | (603 | ) | | | (1,410 | ) | | — | | | (1,410 | ) |
| Outstanding at March 31, 2005 | | $ | 4,779 | | $ | 3,612 | | $ | 8,391 | | |
Outstanding at June 30, 2005 | | | $ | 1,337 | | $ | 3,598 | | $ | 4,935 | |
|
Page 13 of 24
The
On June 14, 2005, the Company announced a call for redemption on July 7, 2005, all remaining outstanding 7% convertible subordinated debentures at par plus accrued interest. After conversions, the actual amount of this redemption was $402,000.
These conversion and redemption transactions
noted above are expected to reduce annual interest expense by approximately
$569,000.Page 13 of 25
$863,000.
7. | Commitments and Contingencies: |
7.Commitments and Contingencies:
(a)a) Forward Contracts -—Meridian uses forward contracts from time to time to address foreign currency risk related to certain transactions denominated in the Euro currency. These contracts are used to fix the exchange rate in converting Euros to U.S. Dollars. Gains and losses on such contracts are recorded in other income and expense in the accompanying consolidated statements of operations. As of
March 31,June 30, 2005, Meridian had two such contracts outstanding with an aggregate notional amount of 600,000 Euros and maturities ranging to
May 31,September 12, 2005.
On January 19, 2005, Meridian executed a definitive stock purchase agreement to acquire all of the outstanding capital stock of OEM Concepts, Inc., for $6,000,000 in cash and a performance based earn-out opportunity over four years of up to $2,270,000. OEM Concepts is a large-volume producer of monoclonal antibodies that are critical components of commercial diagnostic products used in the diagnosis of infectious diseases and in the monitoring of human protein levels in metabolic disorders, pregnancy, and cardiac disease. This acquisition was completed on January 31, 2005. The purchase price was funded with available cash on hand and proceeds from Meridian’s revolving credit facility. OEM Concepts is included in the Life Science operating segment.
(c) Bond Redemption -
On May 9, 2005, the Company announced a call for redemption on June 3, 2005, $2,500,000 in principal amount of its outstanding 7% convertible subordinated debentures, due September 1, 2006, at par plus accrued interest. After completion of this redemption, there will be approximately $2,300,000 principal amount of 7% convertible debentures outstanding.
This redemption transaction is expected to reduce annual interest expense by approximately $175,000. The carrying value of unamortized debt issuance costs related to the 7% convertible debentures that will be redeemed, $7,000 at March 31, 2005, will be charged to expense during the third quarter of fiscal 2005.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Refer to “Forward Looking Statements” following the Index in front of this Form 10-Q. Meridian’s reportable operating segments are US Diagnostics, European Diagnostics, and Life Science. Meridian’s corporate headquarters are located in Cincinnati, Ohio. The US Diagnostics operating segment consists of manufacturing operations in Cincinnati, Ohio, and the sale and distribution of diagnostic test kits in the US and countries outside of Europe, Africa and the Middle East. The European Diagnostics operating segment consists of
Page 14 of 25
the sale and distribution of diagnostic test kits in Europe, Africa and the Middle East. The Life Science operating segment consists of manufacturing operations in Memphis, Tennessee,Tennessee; Saco, Maine,Maine; Toms River, New Jersey,Jersey; and Boca Raton, Florida, as well asFlorida; the sale and distribution of bulk antigens, antibodies and bioresearch reagents domestically and abroad.abroad; and contract research and development and manufacturing services. The Life Science operating segment consists of the Viral Antigens,
Page 14 of 24
BIODESIGN, and OEM Concepts subsidiaries, including the protein production laboratory.
Sales for Meridian’s US Diagnostics operating segment increased
24%30% during the
secondthird quarter of fiscal 2005. This increase was driven by the
emergence of the influenza season in the second quarter and the first quarter launch of the Immuno
Card®C.
difficileToxins A & B rapid diagnostic test in domestic markets. This rapid diagnostic test expanded Meridian’s product offerings and contributed to volume growth for C.
difficileproducts.
The timing of the influenza season in fiscal 2005 also contributed to the overall increase, as it continued into the early part of the third quarter.
Sales for Meridian’s European Diagnostics operating segment during the
secondthird quarter of fiscal 2005 increased
9%19% compared to the
secondthird quarter of fiscal 2004, driven in part by currency translation gains related to the strengthening of the Euro. Sales in local currency increased
5%15% for the
secondthird quarter of fiscal 2005. The increase in local currency was primarily driven by volume growth in C.
difficileproducts, including
of Immuno
Card® Card®C. difficileToxins A & B rapid diagnostic test, which was launched in European markets in fiscal 2004.
During the first quarter of fiscal 2005, the Life Science operating segment began process development and manufacturing of biologicals and biopharmaceuticals that will be used by scientists in the research and development of new and improved diagnostic tests, vaccines, and therapies against potential agents of bioterrorism and emerging infectious diseases. Revenues from these projects are expected to be approximately
$2,500,000, $400,000$3,587,000 for fiscal 2005, $2,387,000 of which was recognized in the
second quarterfirst three quarters of fiscal 2005.
The remainder is expected to be recognized in the third and fourth quarters.On January
19,31, 2005, Meridian acquired all of the outstanding capital stock of OEM Concepts, Inc., for $6,000,000 in cash and a performance based earn-out opportunity over four years of up to $2,270,000. OEM Concepts is a large-volume producer of monoclonal antibodies that are critical components of commercial diagnostic products used in the diagnosis of infectious diseases and in the monitoring of human protein levels in metabolic disorders, pregnancy, and cardiac disease. The accompanying financial statements include the results of OEM Concepts for the
two-monthfive-month period ended
March 31,June 30, 2005. The purchase price was funded with available cash on hand and proceeds from Meridian’s revolving credit facility. Revenues for the eight-month period in fiscal 2005 for this acquisition are expected to be approximately
$3,300,000;$3,000,000 and earnings
per share accretion, after giving effect to purchase accounting adjustments,contribution is expected to be
between $0.01 and $0.02 per diluted share.breakeven. Management expects diluted earnings per share accretion to be between $0.04 and $0.06 for fiscal 2006.
Page 15 of 25
Meridian believes that internally-developed products will continue to be a critical source of sales and sales growth. Research and development efforts are expected to focus on the development of
Page 15 of 24
new products and product improvements where Meridian has a dominant market position, or its intellectual property is protected by patents or licenses.
Meridian expects its Life Science operating segment will serve as a key platform for sourcing biologicals and technologies, by acquisition or license, for development of new products for all of Meridian’s operating segments. One of Meridian’s strategies in this area is to target biologicals that have commercial product applications across multiple markets, such as human diagnostics, veterinary diagnostics, and therapeutics. This strategy is expected to leverage research and development resources as products can be developed with all three markets in mind, rather than on a market-by-market basis.
Three Months Ended March 31,June 30, 2005 Compared to Three Months Ended March 31,June 30, 2004
Overall, net sales increased
13%39% to
$23,686,000$25,421,000 for the
secondthird quarter of fiscal 2005 compared to the
secondthird quarter of fiscal 2004. Net sales for the US Diagnostics operating segment increased
$2,782,000,$3,176,000, or
24%30%, for the European Diagnostics operating segment increased
$405,000,$794,000, or
9%19%, and for the Life Science operating segment
decreased $441,000,increased $3,195,000, or
9%86%.
For the US Diagnostics operating segment, the sales increase was primarily related to
C.difficile products (increased $1,484,000), respiratory products (increased
$2,748,000)$604,000),
C.difficileand rotavirus products (increased
$507,000), and H.pyloriproducts (increased $382,000), partially offset by sales decreases for proficiency products (decreased $454,000)$411,000). The increase in sales of respiratory products was driven by timing of the influenza season. The influenza season fully emerged during the second quarter
of fiscal 2005, whereas it emerged duringand continued into the
firstearly third quarter of fiscal
2004.2005. Meridian’s respiratory products include diagnostic tests for influenza, RSV, and mycoplasma.
Volume increases in H.pyloriproducts andThe increase for C.
difficileproducts
also contributed to increases in sales. The decrease in salesreflects the first quarter launch of
proficiency products resulted from timing of shipments.ImmunoCard® C.difficileToxins A&B rapid diagnostic test.
For the European Diagnostics operating segment, the sales increase includes currency translation gains in the amount of
$248,000.$204,000. Sales in local currency increased
5%15% for the
second quarter of fiscal 2005, following a 21% increase during the firstthird quarter of fiscal 2005. The increase in local currency was primarily driven by sales of C.
difficileproducts
(increased $482,000), including Immuno
Card® Card®C. difficileToxins A & B rapid diagnostic test, which was launched in European markets in the fourth quarter of fiscal 2004.
For the Life Science operating segment, the sales
decreaseincrease for the
secondthird quarter of fiscal 2005 was primarily attributable to
volume reductions in make-to-order bulk antigens and antibodies ($1,417,000), partially offset by the acquisition of OEM Concepts, which contributed sales of
$643,000$1,081,000 for the quarter, and revenues from contract research and development
workand contract manufacturing services at the Viral Antigens subsidiary ($
400,000)1,793,000).
Page 16 of 25
Sales to one customer for bulk antigen products accounted for 21%18% and 50%37% of total sales for the Life Science operating segment for the secondthird quarters of fiscal 2005 and fiscal 2004, respectively. ThisSales to one customer experienced delays in taking deliveryfor contract research and development and contract manufacturing services accounted for 29% of total sales for the productLife Science operating segment in the latter part of fiscal 2003 and firstthird quarter of fiscal 2004. Product deliveries resumed in the second quarter of fiscal 2004.
2005.
For all operating segments combined, international sales were $7,640,000,$8,308,000, or 32%33% of total sales, for the secondthird quarter of fiscal 2005, compared to $7,275,000,$6,444,000, or 35% of total sales, for the secondthird quarter
Page 16 of 24
of fiscal 2004. Combined domestic exports for the US Diagnostics and Life Science operating segments were
$2,969,000$3,428,000 for the
secondthird quarter of fiscal 2005, compared to
$3,009,000$2,358,000 for the
secondthird quarter of fiscal 2004. The remaining international sales were generated by the European Diagnostics operating segment.
Gross profit increased
13%44% to
$13,577,000$15,686,000 for the
secondthird quarter of fiscal 2005 compared to the
secondthird quarter of fiscal 2004. Gross profit margins were
57%62% for the
second quartersthird quarter of fiscal 2005
andcompared to 60% for the third quarter of fiscal 2004.
Meridian’s overall operations consist of the sale of diagnostic test kits for various disease states and in alternative test formats, as well as bioresearch reagents, bulk antigens and antibodies, proficiency tests, and contract research and development and contract manufacturing
activities.services. Product sales mix shifts, in the normal course of business, can cause the consolidated gross profit margin to fluctuate by several points.
Operating expenses increased
4%32% to
$8,379,000,$9,978,000, for the
secondthird quarter of fiscal 2005 compared to the
secondthird quarter of fiscal 2004. Approximately
80%19% of this increase related to the acquisition of OEM Concepts. The overall increase in operating expenses for the
secondthird quarter of fiscal 2005 is discussed below.
Research and development expenses
decreased 28%increased 13% to
$861,000$1,190,000 for the
secondthird quarter of fiscal 2005 compared to the
secondthird quarter of fiscal 2004, and as a percentage of sales, decreased from 6% for the
secondthird quarter of fiscal 2004, to
4%5% for the
secondthird quarter of fiscal 2005. Of this
decrease, $146,000increase, $164,000 related to the US Diagnostics operating segment,
and $188,000partially offset by a decrease of $24,000 related to the Life Science operating segment.
Increases for the US Diagnostics operating segment related primarily to increases in corporate incentive plan accruals related to higher profit levels in fiscal 2005. For the Life Science operating segment,
during the
decrease reflects the classification of such costs. During the secondthird quarter of fiscal 2005, research and development scientists were performing contract work for third-party customers, and thus, their
related costs are classified in cost of sales. During fiscal 2004, their efforts and activities were
primarily focused on internal research and development work.
The decrease for the Life Science operating segment reflects the classification of such costs.
Selling and marketing expenses increased
24%19% to
$4,056,000$3,647,000 for the
secondthird quarter of fiscal 2005 compared to the
secondthird quarter of fiscal 2004, and as a percentage of sales,
increaseddecreased from
16%17% for the
secondthird quarter of fiscal 2004 to
17%14% for the
secondthird quarter of fiscal 2005. Of this increase,
$598,000$185,000 related to the US Diagnostics operating segment,
$71,000$253,000 related to the European Diagnostics operating segment and
$119,000$132,000 related to the Life Science operating segment. The increase for the US Diagnostics operating segment was primarily attributable to
higher salaries and benefits costs ($106,000), including the hiring of a Vice President of Sales and Marketingincreases in
Page 17 of 25
January 2004, higher sales commissions corporate incentive plan accruals related to higher respiratory product salesprofit levels in 2005 ($302,000)71,000), and costs of promotional materials ($138,000)36,000), and travel ($36,000). The increase for the European Diagnostics operating segment was primarily due to increased salaries and benefits costs ($155,000), including incentive compensation related to higher sales levels, and currency translation.translation ($36,000). The increase for the Life Science operating segment was primarily attributable to planned additions to human resources, business development costs, and the OEM Concepts acquisition.acquisition ($75,000).
Page 17 of 24
General and administrative expenses
decreased 4%increased 51% to
$3,462,000$5,141,000 for the
secondthird quarter of fiscal 2005 compared to the
secondthird quarter of fiscal 2004, and as a percentage of sales,
decreasedincreased from
17%19% for the
secondthird quarter of fiscal 2004, to
15%20% for the
secondthird quarter of fiscal 2005. Of this
decrease, $165,000increase, $1,295,000 related to the US Diagnostics operating segment,
and $109,000$58,000 related to the European Diagnostics operating segment,
partially offset by an increase of $147,000and $380,000 related to the Life Science operating segment. The
decreaseincrease for the US Diagnostics operating segment was primarily attributable to
lower accruals for the Company’sincreases in corporate incentive plan
accruals related to higher profit levels in 2005 ($
110,000)831,000),
and lower costs for recruiting and relocation ($79,000), offset by increased legal and professional fees, primarily related to the audit of the Company’s financial statements and compliance with the Sarbanes-Oxley Act ($
104,000)200,000), and increased salary and benefit costs ($190,000). The increase for the Life Science operating segment was primarily attributable to the acquisition of OEM Concepts, including amortization of acquired
intangibles.intangibles ($347,000).
Operating income increased
31%70% to
$5,198,000$5,708,000 for the
secondthird quarter of fiscal 2005, as a result of the factors discussed above.
Interest expense declined
53%56% to
$225,000$176,000 for the
secondthird quarter of fiscal 2005 compared to the
secondthird quarter of fiscal 2004. This decrease was primarily attributable to the positive effects of the fiscal 2004 debenture exchange and redemption transactions and the fiscal 2005 debenture conversion and redemption transactions.
The effective rate for income taxes was 37% for the
secondthird quarter of fiscal 2005 compared to
35%27% for the
secondthird quarter of fiscal 2004. The
increase in the effective tax rate
was primarily attributable toin the
levelsthird quarter of
Federal research and development tax credits and benefitsfiscal 2004 reflected favorable book-to-return adjustments related to non-US sales activities.
Similar adjustments were not significant for the third quarter of fiscal 2005. For the fiscal year ending September 30, 2005, Meridian expects the effective tax rate to approximate
36% to 37%.
SixNine Months Ended March 31,June 30, 2005 Compared to SixNine Months Ended March 31,June 30, 2004
Overall, net sales increased
9%18% for the first
sixnine months of fiscal 2005 compared to the first
sixnine months of fiscal 2004. Net sales for the US Diagnostics operating segment increased
$1,457,000,$4,633,000, or
6%13%, for the European Diagnostics operating segment increased
$1,392,000,$2,186,000, or
18%19%, and for the Life Science operating segment increased
$573,000,$3,768,000, or
9%36%.
For the US Diagnostics operating segment, the sales increase was primarily related to
respiratoryPage 18 of 25
C.difficileproducts (increased $1,405,000) and C. difficile$2,277,000), respiratory products (increased $792,000)$2,010,000), rotavirus products (increased $508,000), and volume increases in specimen transport products (increased $341,000) and H. pylori products (increased $415,000), partially offset by sales decreases for proficiency products (decreased $802,000)$901,000). The increases for respiratory and C. difficile were primarily due to volume. The volume increase for respiratory products was primarily due to volume, driven by a larger customer base in fiscal 2005.
Page 18 of 24
The
volume increase for C.
difficile products was driven by the first quarter launch of
Immunocard®ImmunoCard® C.
difficileToxins A & B rapid diagnostic
test.test, as well as growth in Premier C.difficile Toxins A & B. The decrease in sales of proficiency products resulted from timing of
shipments.shipments and customer order patterns.
For the European Diagnostics operating segment, the sales increase includes currency translation gains in the amount of
$539,000.$743,000. Sales in local currency, the Euro, increased
11%12% primarily due to sales of C.
difficileproducts
(increased $1,331,000), including Immuno
Card® Card®C. difficileToxins A & B rapid diagnostic test, which was launched in European markets in fiscal 2004.
For the Life Science operating segment, the sales increase was primarily attributable to the acquisition of OEM
Concepts.Concepts and revenues from contract research and development work and the protein production facility. Sales to one customer
for bulk antigen products accounted for 17% and
38%36% of total sales for the Life Science operating segment for the first
sixnine months of fiscal 2005 and fiscal 2004, respectively.
Sales to one customer for contract research and development and contract manufacturing services accounted for 12% of total sales for the Life Science operating segment in the first nine months of fiscal 2005.
For all operating segments combined, international sales were
$14,101,000,$22,409,000, or 33% of total sales, for the first
sixnine months of fiscal 2005, compared to
$11,749,000,$18,193,000, or
30%32% of total sales, for the first
sixnine months of fiscal 2004. Combined domestic exports for the US Diagnostics and Life Science operating segments were
$5,176,000$8,604,000 for the first
sixnine months of fiscal 2005, compared to
$4,216,000$6,574,000 for the first
sixnine months of fiscal 2004. The remaining international sales were generated by the European Diagnostics operating segment.
Gross profit increased
11%22% for the first
sixnine months of fiscal 2005 compared to the first
sixnine months of fiscal 2004. Gross profit margins were
58%59% for the first
sixnine months of fiscal 2005 compared to
57%58% for the first
sixnine months of fiscal 2004.
Meridian’s overall operations consist of the sale of diagnostic test kits for various disease states and in alternative test formats, as well as bioresearch reagents, bulk antigens and antibodies, proficiency tests, contract research and development, and contract manufacturing
activities.services. Product sales mix shifts, in the normal course of business, can cause the consolidated gross profit margin to fluctuate by several points.
Operating expenses increased
6%15% for the first
sixnine months of fiscal 2005 compared to the first
sixnine months of fiscal 2004. The overall increase in operating expenses for the first
sixnine months of fiscal 2005 is discussed below.
Research and development expenses decreased 22%10% for the first sixnine months of fiscal 2005 compared to the first sixnine months of fiscal 2004, and as a percentage of sales, were 4% for the first sixnine months of fiscal 2005 and 6% for the first sixnine months of fiscal 2004. Of this decrease, $189,000$25,000 related to the US Diagnostics operating segment and $284,000$308,000 related to the Life Science operating segment. The decrease for the US Diagnostics operating segment was primarily
Page 19 of 24
attributable to the level of materials needed for new product development activities in each
period.period, offset by increases in corporate incentive plan accruals related to higher profit levels in 2005 ($184,000). The 2004
Page 19 of 25
investment in research and development has resulted in one new product launch in fiscal 2004, the ImmunoCard STAT!® HpSA rapid test, and one new product launch in fiscal 2005, the ImmunoCard® C.difficileToxins A & B rapid test. For the Life Science operating segment, the decrease reflects the classification of such costs. Duringduring the second quarterand third quarters of fiscal 2005, research and development scientists were performing contract work for third-party customer,customers, and thus, their costs are classified in cost of sales. During fiscal 2004, their efforts and activities were primarily focused on internal research and development work.
The decrease for the Life Science operating segment reflects the classification of such costs.
Selling and marketing expenses increased 17% for the first
sixnine months of fiscal 2005 compared to the first
sixnine months of fiscal 2004, and as a percentage of sales
increased fromwere 16% in fiscal
2004, to 17% in2005 and fiscal
2005.2004. Of this increase,
$691,000$868,000 related to the US Diagnostics operating segment,
$184,000$437,000 related to the European Diagnostics operating segment and
$193,000$325,000 related to the Life Science operating segment. The increase for the US Diagnostics operating segment was primarily attributable to
costs of physician education and business development ($323,000), higher salaries and benefits costs ($
207,000)216,000), including the hiring of a Vice President of Sales and Marketing in January 2004,
and higher sales commissions related to higher
respiratory product sales
levels ($
82,000), and costs of promotional materials ($286,000)163,000). The increase for the European Diagnostics operating segment was primarily due to
increased salaries and benefits costs ($285,000), including incentive compensation related to higher sales levels, and currency
translation.translation ($139,000). The increase for the Life Science operating segment was primarily due to the acquisition of OEM Concepts
($141,000) and additional marketing and business development resources.
General and administrative expenses increased
5%21% for the first
sixnine months of fiscal 2005 compared to the first
sixnine months of fiscal 2004, and as a percentage of sales,
decreasedincreased from 17% for the first
sixnine months of fiscal 2004 to
16%18% for the first
sixnine months of fiscal 2005. Of this increase,
$217,000$1,470,000 related to the US Diagnostics operating segment,
$2,000 related to the European Diagnostics operating segment and
$193,000$578,000 related to the Life Science
operating segment, partially offset by a decrease of $56,000 related to the European Diagnostics operating segment. The increase for the US Diagnostics operating segment was primarily attributable to
increases in corporate incentive plan accruals related to higher profit levels in 2005 ($757,000), legal and professional fees, primarily related to the audit of the Company’s financial statements and compliance with the Sarbanes-Oxley
Act.Act ($397,000), and increased salary and benefit costs ($252,000) . The increase for the Life Science operating segment was primarily attributable to the OEM Concepts
acquisition.acquisition ($521,000).
Operating income increased
21%37% for the first
sixnine months of fiscal 2005, as a result of the factors discussed above.
Interest expense declined 39%44%, or $325,000,$548,000, for the first sixnine months of fiscal 2005 compared to the first sixnine months of fiscal 2004. This decrease was primarily attributable to the positive effects of the fiscal 2004 debenture exchange and redemption transactions and the fiscal 2005 debenture conversion and redemption transactions.
Page 20 of 24
The effective rate for income taxes was 36% for the first
sixnine months of fiscal 2005
andcompared to 33% for the first nine months of fiscal 2004. For the fiscal year ending September 30,
2004,2005, Meridian expects the effective tax rate to approximate
36% to 37%.
Page 20 of 25
Liquidity and Capital Resources:
Comparative Cash Flow Analysis Meridian’s operating cash flow and financing requirements are determined by analyses of operating and capital spending budgets and consideration of acquisition plans. Meridian has historically maintained
line of credit
facility availability
that Meridian believes provides flexibility to respond to acquisition opportunities quickly.
Net cash provided by operating activities increased
100%39% for the first
sixnine months of fiscal 2005 compared to the first
sixnine months of fiscal 2004. The net earnings increase of
30%41% for the first
lixnine months of fiscal 2005 and
changes in investments in receivablestiming of income tax payments led to the overall increase in net cash provided by operating activities.
Net cash used for investing activities increased to
$8,388,000$9,795,000 for the first
sixnine months of fiscal 2005 compared to
$1,578,000$2,508,000 for the first
sixnine months of fiscal 2004. This increase was primarily attributable to the acquisition of OEM Concepts. ($
6,226,000)6,391,000), a higher earnout payment for fiscal 2005 compared to fiscal 2004 for the Viral Antigens acquisition (see discussion below), and increased investment in capital
assets.Netassets for manufacturing operations. Capital asset expenditures for nine months were primarily funded by operating cash provided by financing activities was $3,335,000 for the first six months of 2005, compared to netflows.
Net cash used for financing activities
was $543,000 for the first
sixnine months of fiscal
20042005, compared to $6,545,000 for the first nine months of
$2,783,000.fiscal 2004. Repayments of debt obligations were
$1,141,000$2,277,000 for the first
sixnine months of fiscal 2005, including
$603,000redemptions of $1,410,000 of 7% subordinated convertible debentures
that were redeemed on January 14, 2005 (see discussion below). Repayments of debt obligations were
$5,299,000$5,435,000 for the first
sixnine months of fiscal 2004, including
redemptions of $4,000,000 of 7% subordinated convertible
debentures that were redeemed on March 31, 2004.debentures. A substantial portion of the net increase in cash provided by financing activities is attributable to proceeds from the exercise of stock options. Meridian has issued approximately
288,000322,000 shares of common stock upon exercise of stock options during the first
sixnine months of fiscal 2005, compared to approximately
165,000169,000 shares during the first
sixnine months of fiscal 2004.
Net cash flows from operating activities are anticipated to fund working capital requirements, debt service, and dividends during fiscal
2005.2005 and fiscal 2006.
Meridian has a $25,000,000 credit facility with a commercial bank. This facility includes $2,500,000 of term debt and capital lease capacity and a $22,500,000 revolving line of credit that expires in September 2007. As of April 30,July 31, 2005, there were $2,345,000$1,269,000 of borrowings outstanding on the line of credit portion of this facility. These borrowings were used to fund a portion of the purchase price for the OEM Concepts acquisition.
Page 21 of 24
As of September 30, 2004, Meridian had outstanding
a total of $16,000,000
principal amount of two series of convertible subordinated debentures. These debentures are convertible, at the option of the holder, into common stock at prices of $16.09 and $14.50 for the 7% and 5% debentures, respectively.
These bondsHolders began converting
debentures during the first quarter of fiscal
2005.2005, and such conversions continued during the second and third quarters. During December 2004, Meridian also called for redemption $4,000,000 of its 7% debentures. This redemption was completed on January 14, 2005.
Page 21 of 25
After conversion,conversions, the totalactual amount of this redemption was $603,000. Subsequently, during May 2005, Meridian called for redemption $2,500,000 of its 7% debentures. This redemption was completed on June 3, 2005. After conversions, the actual amount of this redemption was $807,000. The following table summarizes the conversion and redemption activity to date (in(amounts in thousands, except share amounts):
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | 7% Series | | 5% Series | | Total | | | 7% Series | | 5% Series | | Total | |
| Outstanding at September 30, 2004 | | $ | 12,111 | | $ | 3,889 | | $ | 16,000 | | | $ | 12,111 | | $ | 3,889 | | $ | 16,000 | |
| Converted to 437,160 shares of common stock | | | (6,729 | ) | | | (277 | ) | | | (7,006 | ) | |
Converted to 601,813 shares of common stock | | | | (9,364 | ) | | | (291 | ) | | | (9,655 | ) |
Redeemed | | | (603 | ) | | — | | | (603 | ) | | | (1,410 | ) | | — | | | (1,410 | ) |
| Outstanding at March 31, 2005 | | $ | 4,779 | | $ | 3,612 | | $ | 8,391 | | |
Outstanding at June 30, 2005 | | | $ | 1,337 | | $ | 3,598 | | $ | 4,935 | |
|
The
On June 14, 2005, the Company announced a call for redemption on July 7, 2005, all remaining outstanding 7% convertible subordinated debentures at par plus accrued interest. After conversions, the actual amount of this redemption was $402,000.
These conversion and redemption transactions
noted above are expected to reduce annual interest expense by approximately
$569,000.On May 9, 2005, the Company announced a call for redemption on June 3, 2005, $2,500,000 in principal amount of its outstanding 7% convertible subordinated debentures, due September 1, 2006, at par plus accrued interest. After completion of this redemption, there will be approximately $2,300,000 principal amount of 7% convertible debentures outstanding.
This redemption transaction is expected to reduce annual interest expense by approximately $175,000. The carrying value of unamortized debt issuance costs related to the 7% convertible debentures that will be redeemed, $7,000 at March 31, 2005, will be charged to expense during the third quarter of fiscal 2005.
$863,000.
Meridian’s bank term debt is denominated in the Euro currency and bears interest at a variable rate tied to Euro LIBOR. A one-percentage point increase in the Euro LIBOR rate would increase fiscal 2005 interest expense by approximately
$11,000$7,000 for this debt. This debt serves as a natural currency hedge against certain Euro denominated intercompany receivables.
The Viral Antigens acquisition, completed in fiscal 2000, provides for additional purchase consideration up to a maximum remaining amount of $4,804,000, contingent upon Viral Antigens’ future earnings through September 30, 2006. Earnout consideration is payable each year, following the period earned. Earnout payments, if any, may require financing under the line of credit or other bank credit facility. Earnout consideration in the amount of $678,000 related to fiscal 2004 was paid during the second quarter of 2005 from operating cash flows.
Meridian’s capital expenditures are estimated to be
$2,500,000 to $3,000,000 for fiscal 2005, and may be funded with operating cash flows or availability under the $25,000,000 credit facility discussed above. Capital expenditures relate to manufacturing and other equipment of a normal and recurring nature.
Recent Accounting Pronouncements: See Note 2 to the consolidated financial statements contained herein.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Page 22 of 24
Meridian has market risk exposure related to interest rate sensitive debt and foreign currency transactions.
Page 22 of 25
Excluding its revolving line of credit, Meridian has debt obligations in the aggregate amount of $9,978,000$6,103,000 outstanding at March 31,June 30, 2005, of which $1,587,000$1,168,000 bears interest at variable rates. To date, Meridian has not employed a hedging strategy with respect to interest rate risk.
Meridian is exposed to foreign currency risk related to its European distribution operations, including foreign currency denominated intercompany receivables, as well as Euro denominated term debt. The Euro denominated term debt serves as a natural hedge against a portion of the Euro denominated intercompany receivables.
ITEM 4. CONTROLS AND PROCEDURES
As of
March 31,June 30, 2005, an evaluation was completed under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Rule 13a-15(b) and 15d-15(b) promulgated under the Securities Exchange Act of 1934, as amended. Based on that evaluation, the Company’s management, including the CEO and CFO, concluded that the Company’s disclosure controls and procedures were effective as of
March 31,June 30, 2005. There has been no change in the Company’s internal control over financial reporting identified in connection with the evaluation of internal control that occurred during the last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
Page 23 of 25
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Meridian’s Annual Meeting of Shareholders was held on January 20, 2005. Each of the following matters was voted upon and approved by Meridian’s shareholders as indicated below:
(1) Election of the following six directors:
James A. Buzard, 13,528,377 votes for, zero votes against, and 498,069 abstentions.
John A. Kraeutler, 12,755,947 votes for, zero votes against, and 1,270,499 abstentions.
Gary P. Kreider, 12,567,526 votes for, zero votes against, and 1,458,920 abstentions.
William J. Motto, 12,750,116 votes for, zero votes against, and 1,276,330 abstentions.
David C. Phillips, 13,642,024 votes for, zero votes against, and 384,422 abstentions.
Robert J. Ready, 13,529,524 votes for, zero votes against, and 496,922 abstentions.
(2) Approval of 2004 Equity Compensation Plan: 8,376,838 votes for, 751,363 votes against,
4,818,871 broker non-votes and 79,374 abstentions.
(3) Ratification of appointment of Grant Thornton LLP as Meridian’s independent public
accountants for fiscal year 2005: 13,925,483 votes for, 78,781 votes against, and 22,182
abstentions.
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
Page 2423 of 2524
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 there-unto duly authorized.
MERIDIAN BIOSCIENCE, INC. AND SUBSIDIARIES
| | | | |
| | |
Date: May 10,August 9, 2005 | /S/s/ Melissa Lueke | |
| Melissa Lueke | |
| Vice President and Chief Financial Officer | |
|
Page 24 of 24
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