QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered | ||
☒ |
Accelerated filer |
☐ | ||||
Non-accelerated filer |
☐ |
Smaller reporting company |
||||
Emerging growth company |
Class |
Outstanding January 31, 2020 | |
Common Stock, no par value |
Page(s) |
||||||
PART I. |
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Item 1. |
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1 |
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2 |
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3 |
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4- 5 |
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6 |
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7- 18 |
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Item 2. |
19- 24 |
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Item 3. |
24 |
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Item 4. |
24 |
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PART II. |
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Item 1. |
24 |
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Item 1A. |
24 |
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Item 6. |
26 |
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26 |
Three Months Ended |
||||||||
December 31, |
||||||||
2019 |
2018 |
|||||||
NET REVENUES |
$ |
|
$ | |
||||
COST OF SALES |
|
|
||||||
GROSS PROFIT |
|
|
||||||
OPERATING EXPENSES |
||||||||
Research and development |
|
|
||||||
Selling and marketing |
|
|
||||||
General and administrative |
|
|
||||||
Change in fair value of contingent consideration obligation |
|
|
|
|
|
— |
| |
Restructuring costs |
|
— |
||||||
Selected legal costs |
|
|
||||||
Total operating expenses |
|
|
||||||
OPERATING INCOME |
|
|
||||||
|
|
|
|
|
|
|
| |
OTHER INCOME (EXPENSE) |
||||||||
Interest income |
|
|
||||||
Interest expense |
( |
) | ( |
) | ||||
Other, net |
( |
) | |
|||||
Total other expense |
( |
) | ( |
) | ||||
EARNINGS BEFORE INCOME TAXES |
|
|
||||||
INCOME TAX PROVISION |
|
|
||||||
NET EARNINGS |
$ | |
$ | |
||||
BASIC EARNINGS PER COMMON SHARE |
$ | |
$ | |
||||
DILUTED EARNINGS PER COMMON SHARE |
$ | |
$ | |
||||
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - BASIC |
|
|
||||||
EFFECT OF DILUTIVE STOCK OPTIONS AND RESTRICTED SHARE UNITS |
|
|
||||||
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - DILUTED |
|
|
||||||
ANTI-DILUTIVE SECURITIES: |
||||||||
Common share options and restricted share units |
|
|
||||||
DIVIDENDS DECLARED PER COMMON SHARE |
$ | — |
$ | |
Three Months Ended |
||||||||
December 31, |
||||||||
2019 |
2018 |
|||||||
NET EARNINGS |
$ | $ | ||||||
Other comprehensive income (loss): |
||||||||
Foreign currency translation adjustment |
( |
) | ||||||
Unrealized loss on cash flow hedge |
— |
( |
) | |||||
Reclassification of gain on cash flow hedge |
( |
) | — |
|||||
Income taxes related to items of other comprehensive income |
||||||||
Other comprehensive income (loss), net of tax |
( |
) | ||||||
COMPREHENSIVE INCOME |
$ | $ | ||||||
Three Months Ended December 31, |
2019 |
2018 |
||||||
CASH FLOWS FROM OPERATING ACTIVITIES |
||||||||
Net earnings |
$ | |
$ | |
||||
Non-cash items included in net earnings: |
||||||||
Depreciation of property, plant and equipment |
|
|
||||||
Amortization of intangible assets |
|
|
||||||
Stock-based compensation |
|
|
||||||
Deferred income taxes |
|
|
||||||
Change in accrued contingent consideration |
|
|
|
|
|
|
— |
|
Change in the following: |
||||||||
Accounts receivable |
|
|
||||||
Inventories |
( |
) | ( |
) | ||||
Prepaid expenses and other current assets |
|
|
||||||
Accounts payable and accrued expenses |
( |
) | ( |
) | ||||
Income taxes payable |
( |
) | |
|||||
Other, net |
( |
) | ( |
) | ||||
Net cash provided by operating activities |
|
|
||||||
CASH FLOWS FROM INVESTING ACTIVITIES |
||||||||
Purchase of property, plant and equipment |
( |
) | ( |
) | ||||
Net cash used for investing activities |
( |
) | ( |
) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES |
||||||||
Dividends paid |
— |
( |
) | |||||
Payments on term loan |
— |
( |
) | |||||
Proceeds from exercise of stock options |
— |
|
||||||
Net cash used for financing activities |
— |
( |
) | |||||
Effect of Exchange Rate Changes on Cash and Equivalents and Restricted Cash |
|
( |
) | |||||
Net Increase in Cash and Equivalents and Restricted Cash |
|
|
||||||
Cash and Equivalents and Restricted Cash at Beginning of Period |
|
|
||||||
Cash and Equivalents and Restricted Cash at End of Period |
$ | |
$ | |
||||
Cash and Equivalents |
$ | |
$ | |
||||
Restricted Cash |
— |
|
||||||
Cash and Equivalents and Restricted Cash at End of Period |
$ | 68,557 |
$ | 62,523 |
||||
December 31, 2019 (Unaudited) |
September 30, 2019 |
|||||||
CURRENT ASSETS |
||||||||
Cash and equivalents |
$ | |
$ | |
||||
Accounts receivable, less allowances of $ , respectively |
|
|
||||||
Inventories |
|
|
||||||
Prepaid expenses and other current assets |
|
|
||||||
Total current assets |
|
|
||||||
PROPERTY, PLANT AND EQUIPMENT, at Cost |
||||||||
Land |
|
|
||||||
Buildings and improvements |
|
|
||||||
Machinery, equipment and furniture |
|
|
||||||
Construction in progress |
|
|
||||||
Subtotal |
|
|
||||||
Less: accumulated depreciation and amortization |
|
|
||||||
Net property, plant and equipment |
|
|
||||||
OTHER ASSETS |
||||||||
Goodwill |
|
|
||||||
Other intangible assets, net |
|
|
||||||
Right-of-use assets |
|
|
|
|
|
— |
| |
Deferred income taxes |
|
|
||||||
Other assets |
|
|
||||||
Total other assets |
|
|
||||||
TOTAL ASSETS |
$ | |
$ | |
||||
December 31, 2019 (Unaudited) |
September 30, 2019 |
|||||||
CURRENT LIABILITIES |
||||||||
Accounts payable |
$ | |
$ | |
||||
Accrued employee compensation costs |
|
|
||||||
Accrued interest expense |
|
|
|
|
|
|
|
|
Current portion of acquisition consideration |
|
|
|
|
|
|
— |
|
Current operating lease obligations |
|
|
|
|
|
|
— |
|
Other accrued expenses |
|
|
||||||
Income taxes payable |
|
|
||||||
Total current liabilities |
|
|
||||||
NON-CURRENT LIABILITIES |
||||||||
Acquisition consideration |
|
|
||||||
Post-employment benefits |
|
|
||||||
Long-term operating lease obligations |
|
|
|
|
|
— |
| |
Long-term debt |
|
|
||||||
Long-term income taxes payable |
|
|
||||||
Deferred income taxes |
|
|
||||||
Total non-current liabilities |
|
|
||||||
COMMITMENTS AND CONTINGENCIES |
||||||||
SHAREHOLDERS’ EQUITY |
||||||||
Preferred stock, |
|
|
||||||
Common shares, |
|
|
||||||
Additional paid-in capital |
|
|
||||||
Retained earnings |
|
|
||||||
Accumulated other comprehensive loss |
( |
) | ( |
) | ||||
Total shareholders’ equity |
|
|
||||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY |
$ | |
$ | |
Common Shares Issued |
Additional Paid-In Capital |
Retained Earnings |
Accumulated Other Comprehensive Income (Loss) |
Total Shareholders’ Equity |
||||||||||||||||
Balance at September 30, 2019 |
|
$ | |
$ | |
$ | ( |
) | $ | |
||||||||||
Conversion of restricted share units and |
|
— |
— |
— |
— |
|||||||||||||||
Stock compensation expense |
— |
|
— |
— |
|
|||||||||||||||
Net earnings |
— |
— |
|
— |
|
|||||||||||||||
Foreign currency translation adjustment |
— |
— |
— |
|
|
|||||||||||||||
Hedging activity, net of tax |
— |
— |
— |
( |
) | ( |
) | |||||||||||||
Balance at December 31, 2019 |
|
$ | |
$ | |
$ | ( |
) | $ | |
||||||||||
Balance at September 30, 2018 |
|
$ | |
$ | |
$ | ( |
) | $ | |
||||||||||
Cash dividends paid - $ |
— |
— |
( |
) | — |
( |
) | |||||||||||||
Conversion of restricted share units and |
|
|
— |
— |
|
|||||||||||||||
Stock compensation expense |
— |
|
— |
— |
|
|||||||||||||||
Net earnings |
— |
— |
|
— |
|
|||||||||||||||
Foreign currency translation adjustment |
— |
— |
— |
( |
) | ( |
) | |||||||||||||
Hedging activity, net of tax |
— |
— |
— |
( |
) | ( |
) | |||||||||||||
Adoption of ASU 2014-09 |
— |
— |
( |
) | — |
( |
) | |||||||||||||
Balance at December 31, 2018 |
|
$ | |
$ | |
$ | ( |
) | $ | |
1. |
Basis of Presentation |
2. |
Significant Accounting Policies |
Three Months Ended December 31, |
||||||||||||
2019 |
2018 |
Inc (Dec) |
||||||||||
Diagnostics- |
||||||||||||
Americas |
$ | $ | ( |
)% | ||||||||
EMEA |
% | |||||||||||
ROW |
% | |||||||||||
Total Diagnostics |
( |
)% | ||||||||||
Life Science- |
||||||||||||
Americas |
( |
)% | ||||||||||
EMEA |
( |
)% | ||||||||||
ROW |
% | |||||||||||
Total Life Science |
( |
) % | ||||||||||
Consolidated |
$ | $ | ( |
)% | ||||||||
Three Months Ended December 31, |
||||||||||||
2019 |
2018 |
Inc (Dec) |
||||||||||
Diagnostics- |
||||||||||||
Molecular assays |
$ | $ | ( |
)% | ||||||||
Immunoassays & blood chemistry assays |
( |
)% | ||||||||||
Total Diagnostics |
$ | $ | ( |
)% | ||||||||
Life Science- |
||||||||||||
Molecular reagents |
$ | $ | ( |
)% | ||||||||
Immunological reagents |
( |
)% | ||||||||||
Total Life Science |
$ | $ | ( |
) % | ||||||||
Three Months Ended December 31, |
||||||||||||
2019 |
2018 |
Inc (Dec) |
||||||||||
Diagnostics- |
||||||||||||
Gastrointestinal assays |
$ | $ | ( |
)% | ||||||||
Respiratory illness assays |
( |
)% | ||||||||||
Blood chemistry assays |
% | |||||||||||
Other |
% | |||||||||||
Total Diagnostics |
$ | $ | ( |
)% | ||||||||
Fair Value Measurements Using Inputs Considered as |
||||||||||||||||
Carrying Value |
Level 1 |
Level 2 |
Level 3 |
|||||||||||||
Contingent consideration - |
||||||||||||||||
As of December 31, 2019 |
$ | $ | $ | $ | ||||||||||||
As of September 30, 2019 |
$ | $ | $ | $ |
3. |
Acquisition of Business of GenePOC |
(i) | a $ |
(ii) | two $ |
(iii) | up to $ |
June 3, 2019 (as initially reported) |
Measurement Period Adjustments |
June 3, 2019 (as adjusted) |
||||||||||
Fair value of assets acquired - |
||||||||||||
Accounts receivable |
$ | $ | ( |
) | $ | |||||||
Inventories |
( |
) | ||||||||||
Other current assets |
||||||||||||
Property, plant and equipment |
( |
) | ||||||||||
Goodwill |
||||||||||||
Other intangible assets (estimated useful life): |
||||||||||||
License agreement ( |
— |
|||||||||||
Technology ( |
||||||||||||
Government grant ( |
— |
|||||||||||
— |
||||||||||||
Fair value of liabilities assumed - |
||||||||||||
Accounts payable and accrued expenses |
( |
) | ||||||||||
Total consideration paid (including contingent consideration originally estimated at $ |
$ | $ | $ | |||||||||
Three Months Ended December 31, |
2019 |
2018 |
||||||
Net Revenues |
$ | $ | ||||||
Net Earnings |
$ | $ |
Three Months Ended December 31, |
2019 |
2018 |
||||||
Adjustments to Net Revenues |
||||||||
GenePOC pre-acquisition revenues |
$ | $ | ||||||
Adjustments to Net Earnings |
||||||||
GenePOC pre-acquisition net loss |
$ | $ | ( |
) | ||||
Pro forma adjustments: |
||||||||
Expenses related to non-continuing personnel,locations or activities |
||||||||
Incremental depreciation and amortization |
( |
) | ||||||
Incremental interest costs |
( |
) | ||||||
Tax effects of pro forma adjustments |
||||||||
Total Adjustments to Net Earnings |
$ | $ | ( |
) | ||||
4. |
Restructuring |
Employee Separation and Related Costs |
Lease and Other Contract Termination Fees |
Other |
Total |
|||||||||||||
Balance at September 30, 2019 |
$ |
$ |
$ |
|||||||||||||
Restructuring charges |
— |
|||||||||||||||
Reversal of prior period accruals |
( |
) |
— |
— |
( |
) | ||||||||||
Payments |
( |
) |
( |
) |
( |
) |
( |
) | ||||||||
Balance at December 31, 2019 |
$ |
$ |
$ |
$ |
||||||||||||
5. |
Cash and Equivalents |
December 31, 2019 |
September 30, 2019 |
|||||||
Institutional money market funds |
$ | $ | ||||||
Cash on hand, unrestricted |
||||||||
Total |
$ | $ | ||||||
6. |
Inventories |
December 31, 2019 |
September 30, 2019 |
|||||||
Raw materials |
$ | $ | ||||||
Work-in-process |
||||||||
Finished goods - instruments |
||||||||
Finished goods - kits and reagents |
||||||||
Total |
$ | $ | ||||||
7. |
Leasing Arrangements |
Three Months Ended December 31, |
2019 |
|||
Cash paid for amounts included in the measurement of lease liabilities: |
||||
Operating cash flows from operating leases |
$ |
|||
December 31, 2019 |
||||
Remainder of 2020 |
$ |
|||
2021 |
||||
2022 |
||||
2023 |
||||
2024 |
||||
Thereafter |
||||
Total lease payments |
||||
Less amount of lease payment representing interest |
( |
) | ||
Total present value of lease payments |
$ |
|||
September 30, 2019 |
||||
2020 |
$ |
|||
2021 |
||||
2022 |
||||
2023 |
||||
2024 |
||||
Thereafter |
||||
Total |
$ |
|||
8. |
Intangible Assets |
December 31, 2019 |
September 30, 2019 |
|||||||||||||||
Gross Carrying Value |
Accumulated Amortization |
Gross Carrying Value |
Accumulated Amortization |
|||||||||||||
Manufacturing technologies, core products and cell lines |
$ | $ | $ | $ | ||||||||||||
Trade names, licenses and patents |
||||||||||||||||
Customer lists, customer relationships and supply agreements |
||||||||||||||||
Government grants |
||||||||||||||||
Total |
$ | $ | $ | $ | ||||||||||||
9. |
Bank Credit Arrangements |
10 . |
Reportable Segment and Major Customers Information |
Diagnostics |
Life Science |
Corporate (1) |
Eliminations (2) |
Total |
||||||||||||||||
Three Months Ended December 31, 2019 |
||||||||||||||||||||
Net revenues - |
||||||||||||||||||||
Third- p arty |
$ | $ | $ | — |
$ | — |
$ | |||||||||||||
Inter-segment |
— |
( |
) | — |
||||||||||||||||
Operating income |
( |
) | ||||||||||||||||||
Goodwill (December 31, 2019) |
— |
— |
||||||||||||||||||
Other intangible assets, net (December 31, 2019) |
— |
— |
||||||||||||||||||
Total assets (December 31, 2019) |
— |
( |
) | |||||||||||||||||
Three Months Ended December 31, 2018 |
||||||||||||||||||||
Net revenues - |
||||||||||||||||||||
Third- p arty |
$ | $ | $ | — |
$ | — |
$ | |||||||||||||
Inter-segment |
— |
( |
) | — |
||||||||||||||||
Operating income |
( |
) | ||||||||||||||||||
Goodwill (September 30, 2019) |
— |
— |
||||||||||||||||||
Other intangible assets, net (September 30, 2019) |
— |
— |
||||||||||||||||||
Total assets (September 30, 2019) |
— |
( |
) |
(1) |
Includes Restructuring Cost and Selected Legal Costs of $s |
(2) |
Eliminations consist of inter-segment transactions. |
Three Months Ended December 31, |
2019 |
2018 |
||||||
Segment operating income |
$ |
$ |
||||||
Corporate expenses |
( |
) |
( |
) | ||||
Interest income |
||||||||
Interest expense |
( |
) |
( |
) | ||||
Other, net |
( |
) |
||||||
Consolidated earnings before income taxes |
$ |
$ |
||||||
1 1 . |
Litigation Matters |
- | By Reportable Segment & Geographic Region |
- | By Product Platform/Type |
Three Months Ended December 31, |
||||||||||||
2019 |
2018 |
Change |
||||||||||
Gross Profit |
$ | 27,440 |
$ | 31,572 |
(13) |
% | ||||||
Gross Profit Margin |
58 |
% | 61 |
% | -3 points |
Research & Development |
Selling & Marketing |
General & Administrative |
Other |
Total Operating Expenses |
||||||||||||||||
Fiscal 2019 First Quarter: |
||||||||||||||||||||
Diagnostics |
$ | 3,196 |
$ | 6,041 |
$ | 4,609 |
$ | — |
$ | 13,846 |
||||||||||
Life Science |
771 |
1,522 |
1,491 |
— |
3,784 |
|||||||||||||||
Corporate |
— |
— |
2,802 |
589 |
3,391 |
|||||||||||||||
Total 2019 First Quarter Expenses |
$ | 3,967 |
$ | 7,563 |
$ | 8,902 |
$ | 589 |
$ | 21,021 |
||||||||||
Fiscal 2020 First Quarter: |
||||||||||||||||||||
Diagnostics |
$ | 4,226 |
$ | 5,339 |
$ | 5,478 |
$ | 1,317 |
$ | 16,360 |
||||||||||
Life Science |
598 |
1,345 |
1,561 |
95 |
3,599 |
|||||||||||||||
Corporate |
— |
— |
1,717 |
370 |
2,087 |
|||||||||||||||
Total 2020 First Quarter Expenses |
$ | 4,824 |
$ | 6,684 |
$ | 8,756 |
$ | 1,782 |
$ | 22,046 |
||||||||||
Operating Expenses - Comparison to Prior Year Periods |
||||||||||||||||||||
Research & Development |
Selling & Marketing |
General & Administrative |
Other |
Total Operating Expenses |
||||||||||||||||
2019 First Quarter Expenses |
$ | 3,967 |
$ | 7,563 |
$ | 8,902 |
$ | 589 |
$ | 21,021 |
||||||||||
% of Revenues |
8 |
% | 15 |
% | 17 |
% | 1 |
% | 41 |
% | ||||||||||
Fiscal 2020 Increases (Decreases): |
||||||||||||||||||||
Diagnostics |
1,030 |
(702 |
) | 869 |
1,317 |
2,514 |
||||||||||||||
Life Science |
(173 |
) | (177 |
) | 70 |
95 |
(185 |
) | ||||||||||||
Corporate |
— |
— |
(1,085 |
) | (219 |
) | (1,304 |
) | ||||||||||||
2020 First Quarter Expenses |
$ | 4,824 |
$ | 6,684 |
$ | 8,756 |
$ | 1,782 |
$ | 22,046 |
||||||||||
% of Revenues |
10 |
% | 14 |
% | 18 |
% | 4 |
% | 46 |
% | ||||||||||
% Increase (Decrease) |
22 |
% | (12 |
)% | (2 |
)% | 203 |
% | 5 |
% |
• | Increased Research & Development costs, primarily for the development of the Revogene system GI and RI panel assays for the Diagnostics operating segment; |
• | Decreased Selling & Marketing costs, primarily reflecting the effects of reorganization and streamlining initiatives; |
• | Decreased General & Administrative costs, primarily reflecting the effects of reorganization and streamlining initiatives, partially offset by the purchase accounting amortization from the acquisition of the GenePOC business; and |
• | Increased restructuring costs and a change in fair value of the contingent consideration obligation for the GenePOC business, partially offset by a decrease in selected legal costs (reflected within “Other” in the above tables). |
10.1* |
||||
31.1 |
||||
31.2 |
||||
32 |
||||
101.INS |
Inline XBRL Instance Document | |||
101.SCH |
Inline XBRL Instance Extension Schema | |||
101.CAL |
Inline XBRL Instance Extension Calculation Linkbase | |||
101.DEF |
Inline XBRL Instance Extension Definition Linkbase | |||
101.LAB |
Inline XBRL Instance Extension Label Linkbase | |||
101.PRE |
Inline XBRL Instance Extension Presentation Linkbase | |||
104 |
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
* | Certain portions of this exhibit have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The omitted information is not material and would likely cause competitive harm to the Registrant if publicly disclosed. The Registrant hereby agrees to furnish a copy of any omitted portion to the SEC upon request. |
MERIDIAN BIOSCIENCE, INC. | ||||||
Date: February 7, 2020 |
By: |
/s/ Bryan T. Baldasare | ||||
Bryan T. Baldasare | ||||||
Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) |