<PAGE>
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, 1995
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 31-0888197
laws of Ohio
______________________ ___________________________________
(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 31, 1996
_________________________ _______________________________
Common stock, no par value 14,245,364
<PAGE>
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, 1995 and September 30, 1995 3-4
Consolidated Statements of Earnings -
Three Months Ended December 31, 1995 and 1994 5
Consolidated Statements of Cash Flows -
Three Months Ended December 31, 1995 and 1994 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 1. Legal Proceedings 11
Item 5. Other Information 11-12
Item 6. Exhibits and Reports on Form 8-K 13
Signature 13
Exhibit 11 Computation of Earnings
per Common Share 14
Exhibit 27 Financial Data Schedule 15-17
<PAGE>
MERIDIAN DIAGNOSTICS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
ASSETS
______
December 31, September 30,
1995 1995
______________ _____________
CURRENT ASSETS:
Cash and short-term investments $10,597,277 $ 8,918,637
Accounts receivable, less allowance
of $166,693 and $164,136 for
doubtful accounts 5,326,195 6,482,999
Inventories 3,330,454 3,032,655
Prepaid expenses and other 494,898 321,775
Deferred tax assets 332,463 324,910
____________ ___________
Total current assets 20,081,287 19,080,976
____________ ___________
PROPERTY, PLANT AND EQUIPMENT:
Land 271,760 269,217
Building improvements 5,910,989 6,162,668
Machinery, equipment and furniture 5,608,034 5,525,455
Construction in progress 13,428 -
____________ ___________
11,804,211 11,957,340
Less- Accumulated depreciation
and amortization 4,766,519 4,816,905
____________ ___________
Net property, plant and equipment 7,037,692 7,140,435
____________ ___________
OTHER ASSETS:
Long-term receivable 20,272 12,670
Deferred royalties 68,321 74,762
Deferred tax assets 132,879 87,879
Deferred debenture offering costs,
net of accumulated
amortization of $133,357 - 395,731
Covenants not to compete, net of
accumulated amortization
of $1,950,306 and $1,827,718 2,310,288 2,432,876
License agreements, net of
accumulated amortization
of $786,822 and $772,433 348,291 362,680
Patents, tradenames, customer
lists and distributorships, net of
accumulated amortization of
$527,861 and $475,762 1,785,139 1,837,238
Other intangible assets, net of
accumulated amortization of $96,086
and $85,570 534,914 545,430
Costs in excess of net assets acquired,
net of accumulated amortization of
$509,556 and $458,482 2,547,437 2,598,511
____________ ___________
Total other assets 7,747,541 8,347,777
____________ ___________
Total assets $34,866,520 $34,569,188
____________ ___________
____________ ___________
<PAGE>
MERIDIAN DIAGNOSTICS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
____________________________________
December 31, September 30,
1995 1995
____________ _____________
CURRENT LIABILITIES:
Current portion of long-term
obligations $ 394,104 $ 381,932
Current portion of capital
lease obligation 110,259 63,561
Accounts payable 1,036,894 689,869
Accrued payroll and payroll taxes 438,151 723,946
Other accrued expenses 855,028 937,348
Income taxes payable 1,162,189 458,707
____________ ___________
Total current liabilities 3,996,625 3,255,363
____________ ___________
LONG-TERM OBLIGATIONS 4,248,052 12,285,668
____________ ___________
CAPITAL LEASE OBLIGATIONS 415,380 149,925
____________ ___________
SHAREHOLDERS' EQUITY:
Preferred stock, no par value,
1,000,000 shares
authorized; none issued
Common stock, no par value,
25,000,000 shares authorized;
14,244,937 and 12,924,814 shares
issued and outstanding,
respectively stated at 2,371,960 1,487,159
Additional paid-in capital 20,429,588 13,895,901
Retained earnings 3,644,116 3,747,930
Foreign currency translation
adjustment (239,201) (252,758)
____________ ___________
Total shareholders' equity 26,206,463 18,878,232
____________ ___________
Total liabilities and
shareholders' equity $34,866,520 $34,569,188
____________ ___________
____________ ___________
<PAGE>
MERIDIAN DIAGNOSTICS, INC. AND SUBSIDIARIES
Consolidated Statements of Earnings
(Unaudited)
Three Months Ended
December 31,
_______________________________
1995 1994
_____________ ____________
NET SALES $ 5,521,529 $ 5,105,692
COST OF SALES 1,747,499 1,708,465
____________ ___________
Gross Profit 3,774,030 3,397,227
____________ ___________
OPERATING EXPENSES:
Research and development 340,387 357,005
Selling and marketing 1,363,321 1,175,237
General and administrative 1,018,740 989,493
____________ ___________
Total operating expenses 2,722,448 2,521,735
____________ ___________
Operating income 1,051,582 875,492
____________ ___________
OTHER INCOME (EXPENSE):
Licensing and related fees 15,900 36,108
Interest income 127,083 82,709
Interest expense (146,667) (262,614)
Currency gains (losses) 22,288 3,882
Other, net (7,440) (3,147)
____________ ___________
Total other income (expense) 11,164 (143,062)
____________ ___________
Earnings before income taxes 1,062,746 732,430
INCOME TAXES 433,585 302,000
____________ ___________
Net earnings $629,161 $430,430
____________ ___________
____________ ___________
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 13,897,766 12,293,040
____________ ___________
____________ ___________
EARNINGS PER COMMON SHARE $ .05 $ .04
____________ ___________
____________ ___________
<PAGE>
MERIDIAN DIAGNOSTICS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
Three Months Ended
December 31,
____________________________
1995 1994
____________ ___________
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings 629,161 430,430
Noncash items-
Disposal of fixed asset 1,690 -
Amortization of royalties 6,441 -
Depreciation of property, plant
and equipment 254,964 191,525
Amortization of intangible assets 266,550 272,955
Deferred interest expense 39,294 38,738
Deferred income taxes (52,553) (105,230)
Long term receivables (7,602) -
Changes in other current assets
and current liabilities-
Accounts receivable, net 1,156,804 (272,282)
Inventories (297,799) (202,442)
Prepaid expenses and other (173,123) (105,289)
Accounts payable 347,025 (1,173,507)
Accrued expenses (368,115) 483,709
Income taxes payable 703,482 (190,658)
____________ ___________
Net cash provided by (used for)
operating activities 2,506,219 (632,051)
____________ ___________
CASH FLOWS FROM INVESTING ACTIVITIES:
Property, plant and equipment
acquired, net (153,911) (412,309)
____________ ___________
Net cash used for investing
activities (153,911) (412,309)
____________ ___________
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long-term obligations (225,123) (67,578)
Proceeds from long-term obligations 339,538 282,458
Dividends paid (732,975) (238,697)
Proceeds from issuance of common stock,
net (68,665) (1,066)
Effect of exchange rate changes on cash 13,557 (6,909)
____________ ___________
Net cash provided by (used for)
financing activities (673,668) (31,792)
____________ ___________
NET INCREASE (DECREASE) IN CASH AND
SHORT-TERM INVESTMENTS 1,678,640 (1,076,152)
CASH AND SHORT-TERM INVESTMENTS
AT BEGINNING OF PERIOD 8,918,637 8,831,983
____________ ___________
CASH AND SHORT-TERM INVESTMENTS
AT END OF PERIOD $10,597,277 $ 7,755,831
____________ ___________
____________ ___________
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for-
Income taxes $ 14,500 $ 513,950
____________ ___________
____________ ___________
Interest $ 46,550 $ 14,364
____________ ___________
____________ ___________
Non-cash activities-
Common stock issued from conversion
of subordinated debentures,
net of amortization of deferred
debenture offering cost of $379,847. $ 7,487,153
<PAGE>
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,
1995 1995
____________ _____________
Raw materials $ 1,493,610 $ 1,165,319
Work-in-process 715,926 626,077
Finished goods 1,120,918 1,241,259
______________ ______________
$ 3,330,454 $ 3,032,655
______________ ______________
______________ ______________
<PAGE>
(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 conversion of the subordinated debentures. All share and
per share information have been adjusted to reflect the
conversion of subordinated debentures into common stock as
well as the 3 for 2 stock split in October 1995.
Additionally all share and per share information have been
adjusted for a 3% stock dividend in November 1994.
(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.
<PAGE>
Item 2. Management's Discussion and Analysis Of Financial
Condition and Results of Operations
Results of Operations
_____________________
Net sales increased $416,000, or 8%, to $5,522,000 for the first
fiscal quarter compared to the prior year. This increase is
attributable to the strong unit growth in the ImmunoCardR product
line (primarily H. pylori, mononucleosis and mycoplasma), up 34%;
growth in the ParaPakR line (ParaPak Ultra and Plus), up 8%;
Premier line (Toxin A, EHEC and Giardia), up 6%.
The increase in sales of $416,000 was comprised of volume of
$294,000, or 6%, pricing of $129,000, or 2%, offset by currency
of $7,000.
European sales for the quarter increased $255,000, or 26%. The
increase was attributable to continued strong unit growth in the
Premier line, up 55% including EHEC sales of $49,000 (introduced
in February 1995), ParaPak, up 26% and the Inova line of
products, introduced in May, 1995, which contributed $42,000.
This increase of $255,000 is comprised of volume of $215,000, or
22%, price of $47,000, or 5%, offset by currency of $7,000, or
1%.
Gross profit increased 11% compared to the sales increase of 8%
and improved as a percentage of net sales to 68.4% for the first
fiscal quarter compared to 66.5% for the three-month period ended
December 31, 1995. Product mix, driven by increases in the
ParaPak and ImmunoCard lines, up 8% and 34% respectively, coupled
with increases in average selling prices and the continuing
impact of manufacturing and warehousing efficiencies were the
principal factors accounting for the improvement in gross profit.
Total operating expenses increased $201,000, or 8%, for the first
fiscal quarter versus the three months ended December 31, 1994.
Total operating expenses were 49.3% of net sales for the quarter,
essentially the same as the prior year.
Research and development expenses for the first fiscal quarter
were down $17,000, or 4.7%, from the prior year stemming from the
timing of clinical studies. Selling and marketing expenses
increased 16% as a result of stepped-up promotional/advertising
expenditures in the U.S. associated with new products, Premier
Cryptosporidium, Premier E. coli 0157, Premier HSV Plus and
ParaPak, including ParaPak ECOFIX. In addition, in Europe,
higher personnel costs, meeting expenses and outside services
accounted for the majority of the remainder of the increase.
General and administrative expenses increased 3% for the first
quarter, primarily from higher personnel costs in Europe.
Operating income as a result of the above increased $176,000, or
20%, for the first fiscal quarter and improved 2 points as a
percent of sales.
Other income/(expense) increased $154,000 for the quarter. This
improvement is primarily from a reduction in interest expense of
$116,000 as a result of the conversion of the convertible
debentures as of November 30, 1995. The increase in interest
income reflects the increased amount of assets invested during
the period. Gains/losses in foreign exchange were not material
during the periods. The cumulative foreign currency translation
adjustment changed by $13,000 during the quarter as a result of
the U.S. dollar softening against the Lira during the period.
The Company's effective tax rate remained at 41% for the quarter
compared to the prior year.
Liquidity and Capital Resources
_______________________________
At December 31, 1995, the Company had cash and short-term
investments of $10,597,000 and working capital of $16,085,000.
Trade accounts receivable decreased $1,157,000, or 18%, while
inventories increased $298,000, or 10% compared to September 30,
1995. Receivables decreased in the U.S. and Europe, however the
majority of the decline is in the U.S. from special dating offers
from the previous quarter which were remitted. The change in
inventories reflects higher stock levels associated with
projected sales.
Cash flow from operations is expected to continue to fund working
capital requirements for the foreseeable future. Currently, the
Company has available $6 million in a line of credit with a
commercial bank.
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 to be held and used. Statement
121 also establishes accounting standards for long-lived assets
that are to be disposed. Statement 121 is required to be applied
prospectively for assets to be held and used. 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 no later than fiscal 1997. The Company has not yet
determined when it will adopt Statement 121 and the impact, if
any, that the adoption will have on its financial position or
results of operations.
In October 1995, the FASB issued Statement No. 123 (Statement
123) 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 is required to adopt Statement 123 no later than
fiscal 1997. The Company has not yet determined when it will
adopt Statement 123 or the valuation method it will use.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
In June 1995, Meridian and Inova Diagnostics, Inc. were sued by
Delta Biologicals srl in the 11th Judicial circuit for Dade
County, Florida. The action relates to a February 1995 agreement
between Meridian's European subsidiary, Meridian Diagnostics
Europe, srl, and Inova for the marketing and distribution of a
line of autoimmune disease tests manufactured by Inova. The
plaintiff alleges that the agreement violates its distribution
agreement with Inova and seeks unspecified damages from Inova and
Meridian. In the February 1995 agreement, Inova represented to
Meridian that Inova had the right to enter into the agreement
with Meridian without violating the rights of any other third
party, and that Inova would indemnify and hold harmless Meridian
for all costs, damages and expenses arising from any such claims.
Item 5. Other Information
On October 5, 1995, the Company announced the introduction of
Para-Pak ECOFIX and Para-Pak ULTRA ECOFIX, a formalin-free,
mercury-free one-vial system for routine collection,
transportation, preservation and examination of stool specimens
for intestinal parasite.
Para-Pak ECOFIX contains no formalin or mercury and eliminates
the need of formaldehyde monitoring for OSHA, eliminates the need
to process specimens in a biological safety hood and reduces the
cost of outside disposal.
Para-Pak ULTRA ECOFIX offers a completely closed system which
reduces exposure to the specimen and provides for safe laboratory
handling. The one-vial system is designed for transportation and
filtration from a single vial and reduces the technician
processing time required per specimen.
On November 20, 1995, the Company received clearance for a new
indication from the FDA for its Premier EHECtm (Enterohemorrhagic
E. coli) product permitting laboratories to use the product to
detect E. coli toxins directly from stool specimens.
The Meridian Premier EHEC test is the only FDA cleared direct
stool detection product currently available. Prior to this
technology becoming available, it had been necessary to culture
the E. coli organism from the stools of infected patients, which
required twenty-four hours. Meridian's new product will permit
laboratories to test stools directly for the presence of the E.
coli toxins thereby eliminating one full day in the testing
process.
E. coli bacteria can produce toxins which cause Hemorrhagic
Colitis, which is characterized by bloody diarrhea and severe
abdominal cramps. The disease is most serious in children and
elderly. Children are also at high risk of developing hemolytic
uremic syndrome (HUS) which is the leading cause of acute renal
failure leading to death. E. coli from poorly cooked meats and
other contaminated foods continues to cause serious disease,
especially in children.
<PAGE>
On November 20, 1995 Premier E. coli 0157 was introduced. This
product, which is licensed and manufactured for Meridian
Diagnostics, Inc., is a rapid screening test for the presumptive
determination of the presence of E. coli 0157 in stool specimens.
E. coli 0157 is the most common EHEC serotype to cause human
disease and the serotype that has been identified in food borne
outbreaks of hemorrhagic colitis associated with poorly cooked
beef. Unlike other serotypes which are detected by Premier EHEC,
the diagnosis of E. coli serotype 0157 is a reportable disease in
approximately 35 states, and the Council of State and Territorial
Epidemiologists has recommended that it be a nationally
reportable disease.
Premier Cryptosporidium, which is licensed and manufactured for
Meridian Diagnostics, Inc., was introduced on November 20, 1995.
Premier Cryptosporidium is a rapid enzyme immunoassay for the
detection of Cryptosporidium oocyst in stool. Cryptosporidium is
a parasite that has only recently been recognized as an important
enteric pathogen. The organism causes a mild to severe self-
limiting diarrhea in immunocompetent individuals. However, the
infection in immunocompromised (e.g. AIDS) patients is much more
severe and may be life threatening. Pathways of transmission
include animal to human, person to person, and water
contamination. Traditional identification of Cryptosporidium has
required trained technicians experienced in the microscopic
examination of stools using chemical stains or fluorescent
labeled antibodies. This technique is often time-consuming and
is compromised by low proficiency. The Premier Cryptosporidium
assay is easy to perform, does not rely on the observation of
intact organisms, and multiple specimens can be assayed
simultaneously.
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.
February 6, 1996 /S/ GERARD BLAIN
Date: ____________________ _________________________________
GERARD BLAIN, Vice President,
Chief Financial Officer
(Principal financial officer)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> DEC-31-1995
<CASH> 2,215,007
<SECURITIES> 8,382,270
<RECEIVABLES> 5,614,888
<ALLOWANCES> 288,693
<INVENTORY> 3,330,454
<CURRENT-ASSETS> 20,081,287
<PP&E> 11,804,211
<DEPRECIATION> 4,766,519
<TOTAL-ASSETS> 34,866,520
<CURRENT-LIABILITIES> 3,996,625
<BONDS> 4,663,432
0
0
<COMMON> 2,371,960
<OTHER-SE> 23,834,503
<TOTAL-LIABILITY-AND-EQUITY> 34,866,520
<SALES> 5,521,529
<TOTAL-REVENUES> 5,521,529
<CGS> 1,747,499
<TOTAL-COSTS> 1,747,499
<OTHER-EXPENSES> 2,722,448
<LOSS-PROVISION> 288,693
<INTEREST-EXPENSE> 146,667
<INCOME-PRETAX> 1,062,746
<INCOME-TAX> 433,585
<INCOME-CONTINUING> 629,161
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 629,161
<EPS-PRIMARY> .05
<EPS-DILUTED> 0
</TABLE>
<PAGE>
EXHIBIT 11
MERIDIAN DIAGNOSTICS, INC. AND SUBSIDIARIES
Computation of Earnings Per Common Share
Period Ended December 31, 1995
Weighted Avg. Earnings
Number of Per
Common Shares Net Common
Outstanding Income Share Use
_____________ ________ _________ ______
QUARTER ENDED
DECEMBER 31, 1995:
Shares outstanding
October 1, 1995 12,924,814 $ - $ - $ -
Weighted average
shares issued
during the period
(1,320,123 shares) 972,952 - - -
Net Income - 629,161 - -
__________ __________ __________ _________
13,897,766 629,161 .045 .05
Effect of outstanding
stock options which
is less than 3% and
not required to be
disclosed in the
financial statements
(804,893 shares) 437,507 -
___________ ___________ __________
14,335,273 629,161 .044
Effect of convertible
debentures 360,295 26,824
___________ ___________ __________
14,695,568 655,985 .045
Additional effect of
stock options
at quarter end
stock price 39,775
___________ ___________ __________
14,735,343 655,985 .044
___________ ___________ __________
___________ ___________ __________
