-----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, LWelyYsZ/CcvlRYc6cuF6yIfZWjZd4NQKvUBQMmR/wnXnV8s6Owj9Lq+E0iSuSzc uPeTbpxC6jL4WSE25mrXWg== 0000892251-98-000024.txt : 19980130 0000892251-98-000024.hdr.sgml : 19980130 ACCESSION NUMBER: 0000892251-98-000024 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980129 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: SEC FILE NUMBER: 000-14902 FILM NUMBER: 98516027 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 MERIDIAN DIAGNOSTICS, INC. FORM 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, 1997 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 29, 1998 - ------------------------------- -------------------------------- Common stock, no par value 14,371,932 Page 1 of 13 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, 1997 and September 30, 1997 3-4 Consolidated Statements of Earnings - Three Months Ended December 31, 1997 and 1996 5 Consolidated Statements of Cash Flows - Three Months Ended December 31, 1997 and 1996 6 Notes to Consolidated Financial Statements 7-8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9-10 PART II. OTHER INFORMATION Item 5. Other Information 11 Item 6. Exhibits and Reports on Form 8-K 12 Signature Exhibit 11 Computation of Earnings per Common Share 13 Exhibit 27 Financial Data Schedule 14-16 Page 2 of 13 MERIDIAN DIAGNOSTICS, INC. AND SUBSIDIARIES Consolidated Balance Sheets (Unaudited) ASSETS December 31, September 30, 1997 1997 ----------- ------------- CURRENT ASSETS: Cash and cash equivalents $11,053,773 $10,523,191 Investments 11,653,994 11,213,144 Accounts receivable, less allowance of $197,628 and $166,742 for doubtful accounts 10,872,791 10,622,759 Inventories 4,519,091 4,651,687 Prepaid expenses and other 251,912 458,732 Deferred tax assets 496,276 382,518 ---------- ---------- Total current assets 38,847,837 37,852,031 ========== ========== PROPERTY, PLANT AND EQUIPMENT: Land 256,816 259,993 Building improvements 6,616,820 6,629,847 Machinery, equipment and furniture 8,170,499 7,822,671 Construction in progress 128,832 96,218 ---------- ---------- 15,172,967 14,808,729 Less- Accumulated depreciation and amortization 6,524,683 6,359,499 ----------- ----------- Net property, plant and equipment 8,648,284 8,449,230 ----------- ----------- OTHER ASSETS: Long-term receivable and other 296,300 298,301 Deferred royalties 176,383 195,355 Deferred tax assets 672,842 645,542 Deferred debenture offering costs, net of accumulated amortization of $170,250 and $136,500 1,158,086 1,191,836 Covenants not to compete, net of accumulated amortization of $3,308,855 and $3,123,408 2,211,740 2,397,186 License agreements, net of accumulated amortization of $901,930 and $887,541 233,182 247,571 Patents, tradenames, customer lists and distributorships, net of accumulated amortization of $1,277,512 and $1,204,686 2,882,358 2,954,764 Other intangible assets, net of accumulated amortization of $341,219 and $303,869 1,899,781 1,937,131 Costs in excess of net assets acquired, net of accumulated amortization of $449,992 and $422,880 1,294,831 1,321,943 ----------- ------------ Total other assets 10,825,503 11,189,629 ----------- ------------ Total assets $58,321,624 $57,490,890 =========== =========== Page 3 of 13 MERIDIAN DIAGNOSTICS, INC. AND SUBSIDIARIES Consolidated Balance Sheets (Unaudited) LIABILITIES AND SHAREHOLDERS' EQUITY December 31, September 30, 1997 1997 ------------ ------------- CURRENT LIABILITIES: Current portion of long-term obligations $ 9 $ 73,877 Current portion of capital lease obligations 205,701 106,516 Accounts payable 1,107,753 839,093 Accrued payroll and payroll taxes 728,584 841,603 Other accrued expenses 1,653,595 1,244,078 Income taxes payable 1,312,724 1,165,636 ---------- ----------- Total current liabilities 5,008,366 4,270,803 ---------- ----------- LONG-TERM OBLIGATIONS 20,026,322 20,023,880 ---------- ----------- CAPITAL LEASE OBLIGATIONS 730,040 557,313 ---------- ----------- SHAREHOLDERS' EQUITY: Preferred stock, no par value, 1,000,000 shares authorized; none issued - - Common stock, no par value, 50,000,000 shares authorized; 14,371,932 and 14,365,289 shares issued and outstanding, respectively stated at 2,394,321 2,393,852 Additional paid-in capital 20,576,852 20,571,453 Retained earnings 10,105,330 10,103,837 Cumulative foreign currency translation adjustment (519,607) (430,248) ---------- ----------- Total shareholders' equity 32,556,896 32,638,894 ---------- ----------- Total liabilities and shareholders' equity $58,321,624 $57,490,890 =========== =========== Page 4 of 13 MERIDIAN DIAGNOSTICS, INC. AND SUBSIDIARIES Consolidated Statements of Earnings (Unaudited) Three Months Ended December 31, -------------------------- 1997 1996 ---------- ----------- NET SALES $ 8,448,349 $ 7,561,793 COST OF SALES 2,925,297 2,710,869 ----------- ----------- Gross profit 5,523,052 4,850,924 ----------- ----------- OPERATING EXPENSES: Research and development 556,150 398,510 Selling and marketing 1,812,969 1,794,576 General and administrative 1,341,997 1,050,831 ----------- ----------- Total operating expenses 3,711,116 3,243,917 ----------- ----------- Operating income 1,811,936 1,607,007 OTHER INCOME (EXPENSE): Interest income 251,234 258,865 Interest expense (404,710) (444,727) Currency gains (losses) 1,567 (3,794) Other, net (16,239) (1,526) ----------- ----------- Total other (expense) (168,148) (191,182) ----------- ----------- Earnings before income taxes 1,643,788 1,415,825 INCOME TAXES 672,208 573,079 ----------- ----------- Net earnings $ 971,580 $ 842,746 =========== =========== BASIC WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 14,369,395 14,280,654 ========== ========== BASIC EARNINGS PER COMMON SHARE $ .07 $ .06 =========== =========== DILUTED WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 14,711,905 14,735,225 ----------- ----------- DILUTED EARNINGS PER COMMON SHARE $ .07 $ .06 ----------- ----------- Page 5 of 13 MERIDIAN DIAGNOSTICS, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows (Unaudited) Three Months Ended December 31, ----------------------------- 1997 1996 ------------ ------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings $ 971,580 $ 842,746 Noncash items- Depreciation of property, plant and equipment 338,562 273,319 Amortization of intangible assets and deferred royalties 389,425 498,101 Deferred interest expense 0 41,646 Deferred income taxes (141,058) 10,494 Change in current assets excluding cash/cash equivalents and investments 89,384 513,047 Change in current liabilities, excluding current portion of long term obligations 712,246 1,096,054 Long term receivable and payable 2,001 27,966 ----------- ----------- Net cash provided by operating activities 2,362,140 3,303,373 ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Property, plant and equipment acquired, net (434,141) (142,765) Sale (purchase) of investments (440,850) 8,025,890 ----------- ----------- Net cash provided by (used for) investing activities (874,991) 7,883,125 CASH FLOWS FROM FINANCING ACTIVITIES: Subordinated debentures offering costs 0 (66,293) Proceeds from other long-term obligations 174,701 -- Repayment of long-term obligations (108,955) (60,769) Dividends paid (970,087) (856,804) Proceeds from issuance of common stock, net 5,868 25,359 ----------- ----------- Net cash provided by (used for) financing activities (898,473) (958,507) ----------- ----------- Effect of exchange rate changes on cash (58,094) 7,656 ----------- ----------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 530,582 10,235,647 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 10,523,191 5,648,225 ----------- ----------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 11,053,773 $ 15,883,872 ============ ============ SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for- Income taxes $ 400,110 $ 119,050 Interest 65,694 18,247 ============ ============ Page 6 of 13 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, 1997 1997 ------------ ------------- Raw materials $1,325,653 $1,399,188 Work-in-process 1,408,507 1,652,270 Finished goods 1,784,931 1,600,229 $4,519,091 $4,651,687 (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. Page 7 of 13 (4) Earnings Per Common Share- -------------------------- Basic earnings per common share were computed by dividing net earnings by the weighted average number of shares of common stock outstanding during the quarter. Diluted earnings per common share were computed by dividing net earnings by the sum of the weighted average number of shares of common stock outstanding plus outstanding stock options, which are the only common stock equivalent. The convertible subordinated debentures are anti-dilutive. The Company adopted SFAS No. 128, "Earnings Per Share", effective October 1, 1997. As a result, the Company's reported earnings per share for the quarter ending December 31, 1996 were restated. The effect of this change on previously reported earnings per share (EPS) data was as follows: Quarter Ending Per Share Amounts 12/31/96 ------------------------------ -------------- Primary EPS as reported $0.06 Effect of SFAS No. 128 - ----- Basic EPS as restated $0.06 ===== Fully diluted EPS as reported n/a Effect of SFAS No. 128 - ----- Diluted EPS as restated $0.06 ===== (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 reclassifications have been made to the December 31, 1996 financial statements to conform to the December 31, 1997 presentation. (7) Recently Issued Accounting Standards ------------------------------------ During 1997, the Financial Accounting Standards Board (FASB) issued Statement No. 130 (Statement 130) on "Reporting Comprehensive Income". Statement 130 is effective for the fiscal years beginning after December 15, 1997, or for Meridian's fiscal year ended September 30, 1999. The objective of Statement 130 is to report a measure of all changes in the equity of an enterprise that result from transactions and other economic events of the period other than transactions with owners ("comprehensive income"). Comprehensive income is the total of net income and all other non-owner changes in equity. For the Company, this reporting will involve gains and losses resulting from the translation of assets and liabilities of foreign operations which are currently included in a separate component of shareholders' equity. In addition, it will include unrealized gains and losses on investments. Based on current circumstances, the effect of Statement 130 will not have a material impact on the Company's financial position or operating results. Page 8 of 13 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations - --------------------- Net sales increased $887,000, or 12%, to $8,448,000 for the first fiscal quarter compared to the prior year. This increase is attributable to unit growth in the H. pylori, C. difficile, ParaPakR and Mycoplasma lines which collectively increased $877,000, or 21%. The Giardia and virology lines combined were down about 17% versus the prior year while all other product lines in total increased approximately 4%. Premier PlatinumR HpSA (H. pylori Specific Antigen), launched in Europe in September 1997 and sold in the U.S. for research use only pending Food and Drug Administration clearance, attained first quarter sales of about $130,000. The increase in sales of $887,000 was attributable to strong volume growth of $1,383,000, or 18%, offset by pricing of ($306,000), or (4)%, and currency of ($109,000), or (2)%, respectively. European sales decreased approximately $110,000 for the quarter due entirely to the impact of currency from the stronger dollar versus the lira. Adjusted for currency, European sales were up about 5% over the prior year. Premier Platinum HpSA is growing rapidly in Europe, achieving about $90,000 in sales following introduction in September 1997. The impact of pricing for the quarter has softened somewhat from previous quarters, however, reflects in part four new national contracts which became effective after December 1996, and the addition of other products to previously existing contracts. The balance of the pricing relates to competitive market conditions, primarily in the U.S. and Europe. Gross profit increased $672,000, or 14%, compared to the sales increase of 12% and improved 1.2 points as a percentage of net sales to 65.4% for the first fiscal quarter compared to 64.2% for the three months ended December 31, 1996. The improvement reflects in part the higher margin on the Cambridge line of enteric products which are now produced entirely in the Company's facility versus the previously higher cost associated with the one year inventory purchase agreement when the products were acquired in June 1996. Also contributing to this improvement was the reduction in amortization of certain acquisition costs related to the Cambridge supply agreement and inventory purchase agreement. Increases in scrap/obsolescence costs, higher sales royalties and the impact of pricing noted above partially offset the cost improvements. Total operating expenses increased $467,000, or 14%, for the first fiscal quarter versus the prior year, and increased one point as a percent of sales to 43.9% from 42.9% versus the same period last year. Research and development expenses for the first fiscal quarter increased $158,000, or 40%, from the prior year. This increase is more than accounted for by the cost of clinical studies, primarily the Phase I multi-site Premier Platinum HpSA studies. Selling and marketing expenses are relatively flat compared to the first fiscal quarter of last year, up $18,000, or 1%. U.S. expenses increased approximately $90,000, or 6%, but were offset by a decrease in European expenses of about $70,000, the majority being attributable to currency as a result of the significant strengthening of the dollar versus the Page 9 of 13 lira. General and administrative expenses increased $291,000, or 28%, for the first fiscal quarter. These increases are attributable to personnel related expenses, depreciation and maintenance contract expenses for the upgraded main frame computer, an increase in the allowance for doubtful accounts and higher outside legal expenses associated with patent filings. European expenses were down nominally, but up adjusted for currency. Operating income as a result of the above increased $205,000, or 13%, for the first fiscal quarter and remained fairly constant as a percent of sales at 21.5%. Other expense decreased $23,000 for the quarter which is due primarily to lower interest expense. Gains/(losses) in foreign exchange were not material during the periods. The cumulative foreign currency translation adjustment changed by $89,000 during the quarter as a result of the U.S. dollar strengthening against the lira compared to September 30, 1997. The Company's effective tax rate increased less than one-half of one point compared to the prior year. Liquidity and Capital Resources - ------------------------------- Net cash flows provided by operations declined $941,000, or 28%, to $2,362,000 for the quarter ended December 31, 1997. The increase in net working capital, primarily in accounts receivable associated with the higher sales, a reduction in inventories associated with the Cambridge acquisition in June 1996, and a reduction in accounts payable versus the prior year, also associated with Cambridge, were responsible for the lower operational funds flow. Net cash used for investing activities increased $8,758,000 mainly as a result of the sale of short-term investments of $8,026,000 in the prior year. The majority of the balance of cash used for investing activities relates to property, plant and equipment additions. Funds used for financing activities are relatively consistent with the prior year and largely related to dividend payments. Net cash flows from operations is anticipated to fund working capital requirements for the balance of the fiscal year. The Company has an unused $12,500,000 line of credit with a commercial bank and cash/cash equivalents and short-term investments of $22,708,000 at December 31, 1997. Page 10 of 13 PART II. OTHER INFORMATION Item 5. Other Information On October 22, 1997 the Company announced that it had signed a multi-year agreement for the distribution of selected rapid diagnostics tests through Physician Sales and Service (PSS), Jacksonville, Florida. Under the terms of the three-year agreement PSS will have exclusive physician office distribution rights to Meridian's rapid, one-minute urinary tract infection test FiltraCheck-UTIR, and, non-exclusive distribution rights to distribute other rapid tests including technologies for detecting mycoplasma ("walking pneumonia"), infectious mononucleosis, H. pylori (stomach ulcers), and certain other products. The Company was selected by Forbes magazine as one of the 200 Best Small Companies in America for the second year in a row. According to Forbes, companies are selected based upon a set of factors including growth and profitability, plus various stock market factors. The analysis prepared by Forbes indicated a 17.8% five-year average return on equity (ROE) for Meridian. The Company announced on December 30, 1997 that its European subsidiary, Meridian Diagnostics Europe (MDE), was certified as successfully implementing formal quality assurance systems that conform to Internal Standards Organization (ISO) Series 9002. Notification from the independent, non-profit federation of Italian organizations, known as CISQ, was received on December 19th 1997. ISO 9002 is an internationally recognized set of standards which have been established to maintain the highest levels of quality through continuous improvement and adherence to total quality management. On January 6, 1998 the Company announced that it had submitted to the Food and Drug Administration (FDA) Premier Platinum HpSA, a unique noninvasive patent pending test for the detection of helicobacter pylori antigens, for marketing clearance. The test is performed on a stool specimen and requires about one hour for final results. The H. pylori bacteria is now recognized as the leading cause of peptic ulcer disease and recently has been classified as a definite carcinogen associated with diseases such as gastric adenocarcinoma and gastric lymphoma. According to estimates from the Centers for Disease Control and Prevention, 25 million persons in the United States, where infection rates are 30-40% of the population, have had peptic ulcer disease during their lifetimes. International infection rates can exceed 80%, especially among the populations of Asian and Latin American Countries. Page 11 of 13 Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits- Exhibit No. Description Page(s) ----------- ---------------------------------------- ------- 11 Computation of earnings per common share 13 27 Financial Data Schedule 14-16 (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 29, 1998 /S/ GERARD BLAIN ----------------------------------- GERARD BLAIN, Vice President, Chief Financial Officer (Principal financial officer) Page 12 of 13 EX-11 2 EXHIBIT 11 EXHIBIT 11 MERIDIAN DIAGNOSTICS, INC. AND SUBSIDIARIES Computation of Earnings Per Common Share Period Ended December 31, 1997 Weighted Avg. Earnings Number of Per Common Shares Net Common Outstanding Income Share Use ------------- --------- -------- ---- QUARTER ENDED DECEMBER 31, 1997: Shares outstanding October 1, 1997 14,365,289 $ - $ - $ - Weighted average shares issued during the period (6,643 shares) 4,106 - - - Net Income - 971,580 - - ---------- -------- ------- Basic earnings per common share 14,369,395 $971,580 $ .068 $ .07 Effect of outstanding stock options (618,948 shares) 342,510 - - ---------- -------- ------- Diluted earnings per common share 14,711,905 $971,580 $ .066 $ .07 ========== ======== ====== EX-27 3 FDS -- MERIDIAN DIAGNOSTICS, INC.
5 3-MOS SEP-30-1998 OCT-01-1997 DEC-31-1997 11,053,773 11,653,994 11,070,419 197,628 4,519,091 38,847,837 15,172,967 6,524,683 58,321,624 5,008,366 20,756,362 0 0 2,394,321 20,576,852 58,321,624 8,448,349 8,448,349 2,925,297 2,925,297 3,711,116 12,553 404,710 1,643,788 672,208 0 0 0 0 971,580 .07 .07
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