Reportable Segment and Major Customers Information

9 Months Ended

Jun. 30, 2020

Segment Reporting [Abstract]

Reportable Segments and Major Customers Data

10. Reportable Segments and Major Customers Information

Meridian was formed in 1976 and functions as a fully-integrated life science company with principal businesses in: (i) the development, manufacture, sale and distribution of diagnostic test kits, primarily for certain gastrointestinal and respiratory infectious diseases, and elevated blood lead levels; and (ii) the manufacture and distribution of bulk antigens, antibodies, PCR/qPCR reagents, nucleotides, and bioresearch reagents used by researchers and other diagnostic manufacturers.

Our reportable segments are Diagnostics and Life Science. The Diagnostics segment consists of: (i) manufacturing operations for infectious disease products in Cincinnati, Ohio, Quebec City, Canada, and Modi’in, Israel; (ii) manufacturing operations for blood chemistry products in Billerica, Massachusetts (near Boston); and (iii) the sale and distribution of diagnostics products domestically and abroad. This segment’s products are used by hospitals, reference labs and physician offices to detect infectious diseases and elevated lead levels in blood.

The Life Science segment consists of manufacturing operations in Memphis, Tennessee; Boca Raton, Florida; London, England; and Luckenwalde, Germany, and the sale and distribution of bulk antigens, antibodies, PCR/qPCR reagents, nucleotides, and bioresearch reagents domestically and abroad, including a sales and business development facility, with outsourced distribution capabilities, in Beijing, China to further pursue growing revenue opportunities in Asia. This segment’s products are used by manufacturers and researchers in a variety of applications (e.g., in-vitro medical device manufacturing, microRNA detection, next-gen sequencing, plant genotyping, and mutation detection, among others).

Amounts due from two Diagnostics distributor customers accounted for 1% and 13% of consolidated accounts receivable at June 30, 2020 and September 30, 2019, respectively. Revenues from these two distributor customers accounted for 21% and 18% of the Diagnostics segment third-party revenues during the three months ended June 30, 2020 and 2019, respectively, and 24% and 26% during the nine-month periods ended June 30, 2020 and 2019, respectively. These distributors represented 5% and 12% of consolidated revenues for the fiscal 2020 and 2019 third quarters, respectively, and 12% and 18% for the respective year-to-date nine-month periods.

Amounts due from three diagnostic manufacturing customers accounted for 41% of consolidated accounts receivable at June 30, 2020. Revenue from these three diagnostic manufacturing customers accounted for 36% and 20% of the Life Science segment’s third-party revenues during the three months ended June 30, 2020 and 2019, respectively, and 30% and 25% during the nine months ended June 30, 2020 and 2019, respectively. These customers

represented 27% and 6% of consolidated revenues for the fiscal 2020 and 2019 third quarters, respectively, and 15% and 8% for the respective year-to-date nine-month periods.

Segment information for the interim periods is as follows:

	Diagnostics			Life Science		Corporate(1)			Eliminations(2)			Total
Three Months Ended June 30, 2020
Net revenues -
Third-party	$	21,598		$	63,199	$	—		$	—		$	84,797
Inter-segment		86			56		—			(142	)		—
Operating income		(2,731	)		40,253		(2,849	)		(8	)		34,665
Goodwill (June 30, 2020)		99,652			18,915		—			—			118,567
Other intangible assets, net (June 30, 2020)		83,304			59		—			—			83,363
Total assets (June 30, 2020)		303,439			116,353		—			(5	)		419,787
Three Months Ended June 30, 2019
Net revenues -
Third-party	$	33,118		$	15,322	$	—		$	—		$	48,440
Inter-segment		146			44		—			(190	)		—
Operating income		5,731			3,639		(2,929	)		23			6,464
Goodwill (September 30, 2019)		70,395			18,846		—			—			89,241
Other intangible assets, net (September 30, 2019)		59,807			436		—			—			60,243
Total assets (September 30, 2019)		255,169			70,392		—			(83	)		325,478
Nine Months Ended June 30, 2020
Net revenues -
Third-party	$	91,331		$	98,183	$	—		$	—		$	189,514
Inter-segment		264			176		—			(440	)		—
Operating income		6,469			53,182		(7,832	)		31			51,850
Nine Months Ended June 30, 2019
Net revenues -
Third-party	$	103,283		$	46,885	$	—		$	—		$	150,168
Inter-segment		398			273		—			(671	)		—
Operating income		22,330			12,906		(8,450	)		64			26,850

(1) Includes Restructuring Costs and Selected Legal Costs of $134 and $1,080 in the three months ended June 30, 2020 and 2019, respectively, and $1,189 and $2,272 in the nine months ended June 30, 2020 and 2019, respectively.

(2) Eliminations consist of inter-segment transactions.

A reconciliation of segment operating income to consolidated earnings before income taxes for the three and nine months ended June 30, 2020 and 2019 is as follows:

	Three Months Ended June 30,						Nine Months Ended June 30,
	2020			2019			2020			2019
Segment operating income	$	37,514		$	9,393		$	59,682		$	35,300
Corporate operating expenses		(2,849	)		(2,929	)		(7,832	)		(8,450	)
Interest income		3			194			137			547
Interest expense		(703	)		(448	)		(2,002	)		(1,158	)
Other, net		908			268			1,561			(38	)
Consolidated earnings before income taxes	$	34,873		$	6,478		$	51,546		$	26,201

Transactions between segments are accounted for at established intercompany prices for internal and management purposes, with all intercompany amounts eliminated in consolidation.