-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PAoDnse0i2sY76CECoj0BwNClIBx/gRLkrpgKHTv4EKNKpse4xsod2pnC3rlaelF F+dRJkniXO7ODLWPlIzLbw== 0000892251-97-000012.txt : 19970129 0000892251-97-000012.hdr.sgml : 19970129 ACCESSION NUMBER: 0000892251-97-000012 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970128 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: MERIDIAN DIAGNOSTICS INC CENTRAL INDEX KEY: 0000794172 STANDARD INDUSTRIAL CLASSIFICATION: IN VITRO & IN VIVO DIAGNOSTIC SUBSTANCES [2835] IRS NUMBER: 310888197 STATE OF INCORPORATION: OH FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-14902 FILM NUMBER: 97512064 BUSINESS ADDRESS: STREET 1: 3471 RIVER HILLS DR CITY: CINCINNATI STATE: OH ZIP: 45244 BUSINESS PHONE: 5132713700 MAIL ADDRESS: STREET 1: 3471 RIVER HILLS DRIVE CITY: CINCINNATI STATE: OH ZIP: 45244 10-Q 1 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q (X) QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended December 31, 1996 OR ( )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 Diagnostics, Inc. - -------------------------------------------------------------------------------- Incorporated under the laws of Ohio 31-0888197 - -------------------- ------------------------------------- (I.R.S. Employer Identification No.) 3471 River Hills Drive Cincinnati, Ohio 45244 (513) 271-3700 Indicate by a check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at January 24, 1997 - -------------------------- ------------------------------- Common stock, no par value 14,356,744 Page 1 of 14 MERIDIAN DIAGNOSTICS, INC. AND SUBSIDIARIES INDEX TO QUARTERLY REPORT ON FORM 10-Q Page(s) ------- PART I. FINANCIAL INFORMATION Item 1. Financial Statements- Consolidated Balance Sheets - December 31, 1996 and September 30, 1996 3-4 Consolidated Statements of Earnings - Three Months Ended December 31, 1996 and 1995 5 Consolidated Statements of Cash Flows - Three Months Ended December 31, 1996 and 1995 6 Notes to Consolidated Financial Statements 7-8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9-11 PART II.OTHER INFORMATION Item 5. Other Information 12 Item 6. Exhibits and Reports on Form 8-K 13 Signature Exhibit 11 Computation of Earnings per Common Share 14 Exhibit 27 Financial Data Schedule 15-17 Page 2 of 14 MERIDIAN DIAGNOSTICS, INC. AND SUBSIDIARIES Consolidated Balance Sheets (Unaudited) ASSETS December 31, September 30, 1996 1996 ------------ ------------- CURRENT ASSETS: Cash and cash equivalents $15,883,872 $ 5,648,225 Short-term investments 6,068,409 14,094,299 Accounts receivable, less allowance of $124,504 and $128,013 for doubtful accounts 8,009,535 9,206,498 Inventories 5,164,869 4,251,531 Prepaid expenses and other 730,011 189,433 Deferred tax assets 364,331 402,125 ---------- ---------- Total current assets 36,221,027 33,792,111 ---------- ---------- PROPERTY, PLANT AND EQUIPMENT: Land 278,529 277,691 Building improvements 5,909,647 5,864,008 Machinery, equipment and furniture 6,400,483 6,322,071 Construction in progress 1,086,886 1,061,002 ---------- ---------- 13,675,545 13,524,772 Less- Accumulated depreciation and amortization 5,442,005 5,171,388 ---------- ---------- Net property, plant and equipment 8,233,540 8,353,384 ---------- ---------- OTHER ASSETS: Long-term receivable and other 547,999 573,710 Deferred royalties 235,718 278,027 Deferred tax assets 136,803 109,503 Deferred debenture offering costs, net of accumulated amortization of $35,250 and $1,500 1,293,086 1,260,543 Covenants not to compete, net of accumulated amortization of $2,566,510 and $2,381,064 2,954,085 3,139,530 License agreements, net accumulated amortization of $844,376 and $829,987 290,737 305,125 Patents, tradenames, customer lists and distributorships, net of accumulated amortization of $829,876 and $707,474 3,289,124 3,417,517 Other intangible assets, net of accumulated amortization of $191,819 and $154,469 2,049,181 2,086,531 Costs in excess of net assets acquired, net of accumulated amortization of $738,002 and $675,553 3,090,991 3,153,441 Total other assets 13,887,724 14,323,927 ---------- ---------- Total assets $58,342,291 $56,469,422 =========== =========== Page 3 of 14 MERIDIAN DIAGNOSTICS, INC. AND SUBSIDIARIES Consolidated Balance Sheets (Unaudited) LIABILITIES AND SHAREHOLDERS' EQUITY December 31, September 30, 1996 1996 ----------- ------------- CURRENT LIABILITIES: Current portion of long-term obligations $ 346,000 $ 258,663 Current portion of capital lease obligation 128,424 139,019 Accounts payable 2,367,834 990,249 Accrued payroll and payroll taxes 467,628 850,722 Other accrued expenses 1,138,159 1,065,417 Income taxes payable 1,630,544 831,723 ---------- ---------- Total current liabilities 6,078,589 4,135,793 ---------- ---------- LONG-TERM OBLIGATIONS 22,077,774 22,148,012 ---------- ---------- CAPITAL LEASE OBLIGATIONS 594,247 617,619 ---------- ---------- SHAREHOLDERS' EQUITY: Preferred stock, no par value, 1,000,000 shares authorized; none issued -- -- Common stock, no par value, 50,000,000 shares authorized; 14,284,468 and 14,278,578 shares issued and outstanding, respectively stated at 2,389,123 2,386,153 Additional paid-in capital 20,548,727 20,526,337 Retained earnings 6,795,772 6,809,830 Cumulative foreign currency translation adjustment (141,941) (154,322) ---------- ---------- Total shareholders' equity 29,591,681 29,567,998 ---------- ---------- Total liabilities and shareholders' equity $ 58,342,291 $ 56,469,422 ============ ============ Page 4 of 14 MERIDIAN DIAGNOSTICS, INC. AND SUBSIDIARIES Consolidated Statements of Earnings (Unaudited) Three Months Ended December 31, -------------------------- 1996 1995 ----------- ---------- NET SALES $ 7,561,793 $ 5,521,529 COST OF SALES 2,710,869 1,747,499 ----------- ----------- Gross profit 4,850,924 3,774,030 ----------- ----------- OPERATING EXPENSES: Research and development 398,510 340,387 Selling and marketing 1,794,576 1,363,321 General and administrative 1,050,831 1,018,740 ------------ ---------- Total operating expenses 3,243,917 2,722,448 ----------- ----------- Operating income 1,607,007 1,051,582 OTHER INCOME (EXPENSE): Licensing and related fees - 15,900 Interest income 304,438 127,083 Interest expense (490,300) (146,667) Currency gains (losses) (3,794) 22,288 Other, net (1,526) (7,440) ------------ ---------- Total other income (expense) (191,182) 11,164 ------------ ---------- Earnings before income taxes 1,415,825 1,062,746 INCOME TAXES 573,079 433,585 ------------ ---------- Net earnings $ 842,746 $ 629,161 ============= ============ PRIMARY WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 14,735,225 13,897,766 ============= ============ PRIMARY EARNINGS PER COMMON SHARE $ .06 $ .05 ============= ============ FULLY DILUTED WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING N/A 14,375,048 ------------ ---------- FULLY DILUTED EARNINGS PER COMMON SHARE N/A $ .04 ------------ ---------- Page 5 of 14 MERIDIAN DIAGNOSTICS, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows (Unaudited) Three Months Ended December 31, -------------------------- 1996 1995 ----------- ---------- CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings $ 842,746 $ 629,161 Noncash items- Depreciation of property, plant and equipment 273,319 254,964 Amortization of intangible assets and deferred royalties 498,101 272,991 Deferred interest expense 41,646 39,294 Deferred income taxes 10,494 (52,553) Change in current assets excluding cash and short-term investments (256,953) 685,882 Change in current liabilities, excluding current portion of long term obligations 1,866,054 682,392 Long term receivable and payable 27,966 (7,602) ----------- ----------- Net cash provided by operating activities 3,303,373 2,504,529 ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Property, plant and equipment acquired, net (142,765) (122,988) Sale of short-term investments 8,025,890 -- ----------- ----------- Net cash provided by (used for) investing activities 7,883,125 (122,988) CASH FLOWS FROM FINANCING ACTIVITIES: Subordinated debentures offering costs (66,293) -- Proceeds from other long-term obligations -- 339,538 Repayment of long-term obligations (60,769) (225,123) Dividends paid (856,804) (732,975) Proceeds from issuance of common stock, net 25,359 (68,665) ----------- ----------- Net cash provided by (used for) financing activities (958,507) (687,225) ----------- ----------- Effect of exchange rate changes on cash 7,656 (15,676) ----------- ----------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 10,235,647 1,678,640 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 5,648,225 8,918,637 ----------- ----------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 15,883,872 $ 10,597,277 ============ ============ SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for- Income taxes $ 119,050 $ 14,500 Interest 18,247 46,550 ============ ============ Non-cash activities- Common stock issued from conversion of subordinated debentures, net of amortization of deferred debenture offering cost of $379,847 and net conversion cost of $77,649 $ -- $ 7,409,504 ============ ============ Page 6 of 14 MERIDIAN DIAGNOSTICS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) (1) Basis of Presentation- The consolidated financial statements included herein have not been examined by independent public accountants, 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 disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to the requirements of the Securities and Exchange Commission, although the Company believes that the disclosures included in these financial statements are adequate to make the information not misleading. It is suggested that these consolidated financial statements be read in conjunction with the consolidated financial statements and notes thereto included in the Company's latest annual report on Form 10-K. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the year. (2) Inventories- Inventories are comprised of the following: December 31, September 30, 1996 1996 ------------ ------------- Raw materials $1,529,334 $1,223,438 Work-in-process 1,277,200 966,437 Finished goods 2,358,335 2,061,656 ---------- ---------- $5,164,869 $4,251,531 ========== ========== Page 7 of 14 (3) Income Taxes- The provisions for income taxes were computed at the estimated annualized effective tax rates utilizing current tax law in effect, after giving effect to research and experimentation credits. (4) Earnings Per Common Share- Net earnings per share has been computed based upon the weighted average number of shares outstanding during the periods. No material dilution results from outstanding stock options, the only common stock equivalents, nor from the assumed conversion of the 7% Convertible Subordinated Debentures issued September 27, 1996, due in 2006. These debentures assuming their conversion, net of the pro forma after tax interest expense, are anti-dilutive. All share and per share information have been adjusted to reflect the conversion of the 7 1/4% Convertible Subordinated Debentures due in 2001, called for redemption on October 10, 1995 into common stock, as well as the 3 for 2 stock split in October 1995. (5) Translation of Foreign Currency- Assets and liabilities of foreign operations are translated using quarter end exchange rates, and revenues and expenses are translated using exchange rates prevailing during the year with gains or losses resulting from translation included in a separate component of shareholders' equity. Gains and losses resulting from transactions in foreign currencies were immaterial. (6) Reclassifications Certain reclassificatons have been made to the accompanying financial statements to conform to the December 31, 1996 presentation. Page 8 of 14 Item 2. Management's Discussion and Analysis Of Financial Condition and Results of Operations Results of Operations Net sales increased $2,040,000, or 37%, to $7,562,000 for the first fiscal quarter compared to the prior year. This increase is attributable to the strong unit growth in the Premier product line, primarily from the Cambridge products plus Toxin A, EHEC, Giardia and H. pylori; growth in the ImmunoCardR line, up over 80% compared to the prior year, principally in Toxin A, mycoplasma, H. pylori and rotavirus; ParaPakR, up over 25%; and the Inova line of autoimmune products in Italy, which more than tripled. The increase in sales of $2,040,000 was comprised of volume of $2,118,000, or 38%, currency of $68,000, or 1%, offset by pricing of $146,000, or 2%. European sales for the quarter increased $261,000, or 21%. The increase was attributable to continued strong unit growth across the ImmunoCard line, which more than doubled; growth in the Premier line, up 31%, primarily EHEC; plus the growth in the Inova line mentioned above. This increase of $261,000 is comprised of volume of $287,000, or 24%, currency of $68,000 or 5%, offset by price of $94,000, or 8%. This reduction in price is largely a result of very competitive pricing in the German market for the EHEC product. Gross profit increased 29% compared to the sales increase of 37% and declined as a percentage of net sales to 64.2% for the first fiscal quarter compared to 68.4% for the three-month period ended December 31, 1995. The reduction in the gross profit rate is largely related to the higher costs associated with the enteric product line acquisition from Cambridge in June 1996. The acquisition included, in addition to the amortization of certain acquisition costs, a one-year inventory purchase agreement at a negotiated cost expected to be higher than the Company's cost of manufacturing when the purchased product line is fully integrated into the Company's manufacturing facilities in Cincinnati during the third fiscal quarter of 1997. The impact of lower pricing mentioned above accounts for the majority of the balance of the decline. Total operating expenses increased $521,000, or 19%, for the first fiscal quarter versus the three months ended December 31, 1995, however, declined over six points as a percent of sales to 42.9% from 49.3% versus the prior year. Research and development expenses for the first fiscal quarter increased $58,000, or 17%, from the prior year. These increases are attributable to higher personnel costs and timing of purchases of supplies. The labor increase is related to EHEC development for use in food, development of novel detection assays for H. pylori and for antibody purification for Toxin B associated with the transition of Cytoclone from Cambridge. Selling and marketing expenses are up 32%, primarily from U.S. sales personnel added during fiscal 1996 to provide improved geographic coverage and penetration of national accounts, higher national sales meeting expenses and amortization of certain Cambridge acquisition costs. European selling and marketing expenses were relatively flat excluding the effect of currency. General and administrative expenses increased 3% for the first quarter. The majority of this increase is amortization expenses associated with Cambridge. The balance of the increase stems from the currency effect of the stronger lira versus the dollar. Page 9 of 14 Operating income as a result of the above increased $555,000, or 53%, for the first fiscal quarter and improved over 2 points as a percent of sales. Other income/(expense) increased $202,000 for the quarter. This increase in expense is directly attributable to the interest expense of $350,000 associated with the 7% Convertible Subordinated Debentures due 2006, issued in September 1996. For the same quarter last year, debenture interest expense was $43,000. The increase in interest income reflects the increased amount of cash (from the debentures) invested during the period. Gains/losses in foreign exchange were not material during the periods. The cumulative foreign currency translation adjustment changed by $12,000 during the quarter as a result of the U.S. dollar softening against the lira during the period. The Company's effective tax rate declined marginally to 40% from 41% in the prior year. Liquidity and Capital Resources Net cash flow provided by operations increased $799,000, or 32%, to $3,303,000 for the three month period ended December 31, 1996. This increase is primarily from the growth in accounts payable as a result of the purchase of inventories associated with the Cambridge acquisition, up $1,378,000, the reduction in trade accounts receivable, down $1,197,000 and the timing of income tax payments offset by increases in inventories and prepaid expenses. Net cash provided by investing activities increased $8,006,000 as a result of the sale of short term investment with maturities greater than 90 days which have been reinvested into maturities of less than 90 days and reflected in Cash and Cash Equivalents of $15,884,000. Net cash used for financing activities increased $271,000, the major items being higher dividend payments including the year end special cash dividend of $0.025 per share plus expenses associated with the issuance of the 7% debentures due in 2006. Net cash flow from operations is expected to continue to fund working capital requirements. Currently, the Company has an unused $10,000,000 line of credit with a commercial bank and cash and short-term investments of $21,952,000. Page 10 of 14 Recently Issued Accounting Standards In March 1995, the Financial Accounting Standards Board (FASB) issued Statement No. 121 (Statement 121) on "Accounting for the Impairment of Long-lived Assets and for Long-lived Assets to be Disposed Of." Statement 121 is required to be applied prospectively for assets to be held and used. Statement 121 also establishes accounting standards for long-lived assets that are to be disposed. The initial application of Statement 121 to assets held for disposal is required to be reported as the cumulative effect of a change in accounting principle. The Company is required to adopt Statement 121 in 1997 and, based on current circumstances, the effect of the adoption will not have a material effect on its financial position or results of operations. In October 1995, the FASB issued Statement of Financial Accounting Standards No. 123 (Statement 123) "Accounting for Stock Based Compensation" establishing financial accounting and reporting standards for stock-based employee compensation plans. Statement 123 encourages the use of the fair value based method to measure compensation cost for stock-based employee compensation plans; however, it also continues to allow the intrinsic value based method of accounting as prescribed by APB Opinion No. 25, which is currently used by the Company. If the intrinsic value based method continues to be used, Statement 123 requires pro forma disclosures of net income and earnings per share, as if the fair value based method of accounting had been applied. The fair value based method requires that compensation cost be measured at the grant date based upon the value of the award and recognized over the service period, which is normally the vesting period. The Company adopted Statement 123 in fiscal 1997 and will make the required footnote disclosures only. Therefore, the adoption of this Statement will not have a material effect on the Company's financial position or results of operations. Page 11 of 14 PART II. OTHER INFORMATION Item 5. Other Information On November 1, 1996, the Paul-Ehrlich Institute in Germany approved Premier EHEC, the diagnostic test for E. coli bacterial toxins. While often linked to under-cooked meat, E. coli toxins have been found in fruit juice, drinking water, produce and raw milk. Premier EHEC and a companion product, Premier 0157, have played a key role in ensuring the safety of Germany's milk products. Page 12 of 14 Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits- Exhibit No. Description Page(s) ----------- ---------------------------------------- ------- 11 Computation of earnings per common share 14 27 Financial Data Schedule 15-17 (b) Reports on Form 8-K - None Signature Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned there-unto duly authorized. MERIDIAN DIAGNOSTICS, INC. Date: January 27, 1997 /S/ GERARD BLAIN -------------------- -------------------------------------- GERARD BLAIN, Vice President, Chief Financial Officer (Principal financial officer) Page 13 of 14 EX-11 2 EXHIBIT 11 EXHIBIT 11 MERIDIAN DIAGNOSTICS, INC. AND SUBSIDIARIES Computation of Earnings Per Common Share Period Ended December 31, 1996
Weighted Avg. Earnings Number of Per Common Shares Net Common Outstanding Income Share Use ----------- ------ ----- --- QUARTER ENDED DECEMBER 31, 1996: Shares outstanding October 1, 1996 14,278,578 $ - $ - $ - Weighted average shares issued 2,076 - - - during the period (5,890 shares) Net Income - 842,746 - - 14,280,654 842,746 .059 .06 Effect of outstanding stock options (767,477 shares) 454,571 - - Primary earnings per common share 14,735,225 842,746 .057 $.06 Additional effect of stock options at quarter end stock price 75,540 - - 14,810,765 $842,746 $.057 ========== ======== ========
EX-27 3 FDS --
5 U.S.DOLLARS 3-MOS SEP-30-1997 OCT-01-1996 DEC-31-1996 1 15,883,872 6,068,409 8,134,039 124,504 5,164,869 36,221,027 13,675,545 5,442,005 58,342,291 6,078,589 22,672,021 0 0 2,389,123 27,202,558 58,342,291 7,561,793 7,561,793 2,710,869 2,710,869 3,243,917 0 490,300 1,415,825 573,079 842,746 0 0 0 842,746 .06 0
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