<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 June 30, 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 July 19, 1996
______________ __________________________________
Common stock,
no par value 14,276,638
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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 -
June 30, 1996 and September 30, 1995 3-4
Consolidated Statements of Earnings -
Three Months Ended June 30, 1996 and 1995
Nine Months Ended June 30, 1996 and 1995 5
Consolidated Statements of Cash Flows - Nine Months
Ended June 30, 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 9-13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 5. Other Information 14-15
Item 6. Exhibits and Reports on Form 8-K 16
Signature 16
Exhibit 11 Computation of Earnings per Common Share 17
Exhibit 27 Financial Data Schedule 18-20
<PAGE>
MERIDIAN DIAGNOSTICS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
ASSETS
June 30, September 30,
1996 1995
______________ _____________
CURRENT ASSETS:
Cash and short-term investments $ 7,972,093 $ 8,918,637
Accounts receivable, less
allowance of $125,792 and
$164,136 for doubtful
accounts 7,486,777 6,482,999
Inventories 4,195,724 3,032,655
Prepaid expenses and other 586,703 165,553
Deferred tax assets 390,062 324,910
___________ ___________
Total current assets 20,631,359 18,924,754
___________ ___________
PROPERTY, PLANT AND EQUIPMENT:
Land 276,927 269,217
Building improvements 5,981,461 6,162,668
Machinery, equipment
and furniture 6,069,077 5,525,455
Construction in progress 687,187 -
___________ ___________
13,014,652 11,957,340
Less- Accumulated depreciation
and amortization 5,230,769 4,816,905
___________ ___________
Net property, plant and equipment 7,783,883 7,140,435
___________ ___________
OTHER ASSETS:
Long-term receivables, including
cash surrender value
of insurance policies 295,387 168,892
Deferred royalties 285,459 74,762
Deferred tax assets 222,879 87,879
Deferred debenture offering costs,
net of accumulated
amortization of $133,357 -0- 395,731
Covenants not to compete, net of
accumulated amortization
of $2,195,478 and $1,827,718 3,325,116 2,432,876
License agreements, net of
accumulated amortization
of $815,599 and $772,433 319,514 362,680
Patents, tradenames, customer
lists and distributorships,
net of accumulated amortization
of $632,059 and $475,762 3,486,941 1,837,238
Other intangible assets, net of
accumulated amortization of
$117,119 and $85,570 2,123,881 545,430
Costs in excess of net assets
acquired, net of accumulated
amortization of $611,704 and
$458,482 3,127,817 2,598,511
___________ ___________
Total other assets 13,186,994 8,503,999
___________ ___________
Total assets $41,602,236 $34,569,188
___________ ___________
___________ ___________
<PAGE>
MERIDIAN DIAGNOSTICS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
June 30, September 30,
1996 1995
___________ ___________
CURRENT LIABILITIES:
Note Payable - Bank $ 6,218,000 - 0 -
Current portion of long-term
obligations 361,000 $ 381,932
Current portion of capital
lease obligation 107,879 63,561
Accounts payable 692,447 689,869
Accrued payroll and payroll
taxes 649,801 723,946
Other accrued expenses 2,187,176 937,348
Income taxes payable 841,106 458,707
___________ ___________
Total current liabilities
11,057,409 3,255,363
___________ ___________
LONG-TERM OBLIGATIONS 1,976,529 12,285,668
___________ ___________
CAPITAL LEASE OBLIGATIONS 366,398 149,925
___________ ___________
SHAREHOLDERS' EQUITY:
Preferred stock, no par value,
1,000,000 shares authorized;
none issued
Common stock, no par value,
50,000,000 shares authorized;
14,276,638 and 12,924,814 shares
issued and outstanding,
respectively Ssated at 2,384,854 1,487,159
Additional paid-in capital 20,498,404 13,895,901
Retained earnings 5,500,542 3,747,930
Foreign currency translation
adjustment (181,900) (252,758)
___________ ___________
Total shareholders' equity 28,201,900 18,878,232
___________ ___________
Total liabilities and
shareholders' equity $41,602,236 $34,569,188
___________ ___________
___________ ___________
<PAGE>
MERIDIAN DIAGNOSTICS, INC. AND SUBSIDIARIES
Consolidated Statements of Earnings
(Unaudited)
Three Months Ended Nine Months Ended
June 30, June 30,
__________________________ ___________________________
1996 1995 1996 1995
____________ ___________ ____________ ____________
NET SALES $ 7,559,416 $6,782,312 $20,335,897 $18,356,729
COST OF SALES 2,197,321 2,257,382 6,196,415 6,079,338
____________ ___________ ___________ ___________
Gross Profit 5,362,095 4,524,930 14,139,482 12,277,391
____________ ___________ ___________ ___________
OPERATING EXPENSES:
Research and
development 409,036 370,062 1,105,675 1,083,284
Selling and
marketing 1,564,120 1,402,647 4,378,907 3,823,591
General and
administrative 1,068,388 903,057 3,064,568 2,850,369
____________ ___________ ___________ ___________
Total operating
expenses 3,041,544 2,675,766 8,549,150 7,757,244
____________ ___________ ___________ ___________
Operating
income 2,320,551 1,849,164 5,590,332 4,520,147
____________ ___________ ___________ ___________
OTHER INCOME
(EXPENSE):
Licensing and
commission fees 8,908 26,403 41,846 92,806
Investment income 97,016 110,964 339,648 306,904
Interest expense
and amortization
of debt expenses (71,774) (295,785) (307,792) (857,268)
Other, net 161,825 (30,329) 197,532 (25,949)
____________ ___________ ___________ ___________
Total other
income
(expense) 195,975 (188,747) 271,234 (483,507)
____________ ___________ ___________ ___________
Earnings before
income taxes 2,516,526 1,660,417 5,861,566 4,036,640
INCOME TAXES 1,017,483 675,136 2,378,393 1,676,023
____________ ___________ ___________ ___________
Net earnings $ 1,499,043 $ 985,281 $ 3,483,173 $ 2,360,617
____________ ___________ ___________ ___________
____________ ___________ ___________ ___________
PRIMARY WGHTD
AVG NUMBER OF
COMMON SHARES
OUTSTANDING 14,266,736 12,338,865 14,136,623 12,312,687
____________ ___________ ___________ ___________
____________ ___________ ___________ ___________
PRIMARY EARNINGS
PER COMMON
SHARE $ .11 $ .08 $ .25 $ .19
____________ ___________ ___________ ___________
____________ ___________ ___________ ___________
FULLY DILUTED
WGHTD AVG
NUMBER
OF COMMON
SHARES 14,803,167 N/A 14,794,029 N/A
____________ ___________ ___________ ___________
____________ ___________ ___________ ___________
FULLY DILUTED
EARNINGS PER
COMMON SHARE $ .10 N/A $ .24 N/A
____________ ___________ ___________ ___________
____________ ___________ ___________ ___________
<PAGE>
MERIDIAN DIAGNOSTICS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
Nine Months Ended
June 30,
________________________
1996 1995
__________ __________
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $3,483,173 $ 2,360,617
Noncash items-
Disposal of fixed asset 13,771 -
Amortization of royalties 26,803 -
Depreciation of property, plant
and equipment 741,808 718,067
Amortization of intangible assets 767,879 705,079
Deferred interest expense 121,221 41,660
Deferred income taxes (200,152) (312,830)
Long term receivables (126,495) (211,477)
Changes in other current assets
and current liabilities-
Accounts receivable, net (1,003,778) (887,015)
Inventories (333,069) (862)
Prepaid expenses and other (421,150) (193,059)
Accounts payable 2,578 (1,098,367)
Accrued expenses 1,175,683 912,749
Income taxes payable 448,779 (150,015)
____________ ____________
Net cash provided by
(used for) operating
activities 4,697,051 1,884,547
____________ ____________
CASH FLOWS FROM INVESTING ACTIVITIES:
Property, plant and equipment
acquired, net (1,198,829) (1,859,348)
Royalty advanced (37,500) -
Product line acquisition -
Royalty advanced (200,000) -
Inventory & equipment (1,030,000) -
Covenant not to compete (1,260,000) -
Patents, tradenames, customer
list & other assets (3,416,000) -
Cost in excess of net assets
acquired (682,527) -
____________ ____________
Net cash used for investing
activities (7,824,856) (1,859,348)
____________ ____________
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long-term
obligations (2,834,533) (282,808)
Proceeds from long-term
obligations 511,032 1,407,334
Dividends paid (1,730,561) (895,289)
Proceeds from issuance of
common stock, net (53,535) 40,918
Effect of exchange rate
changes on cash 70,858 (18,215)
Proceeds from bank line of
credit* 6,218,000
____________ ____________
Net cash provided by
(used for) financing
activities 2,181,261 251,940
____________ ____________
NET INCREASE (DECREASE) IN CASH
AND SHORT-TERM INVESTMENTS (946,544) 277,139
CASH AND SHORT-TERM INVESTMENTS
AT BEGINNING OF PERIOD 8,918,637 8,831,983
____________ ____________
CASH AND SHORT-TERM INVESTMENTS
AT END OF PERIOD $7,972,093 $ 9,109,122
____________ ____________
____________ ____________
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION:
Cash paid during the period for-
Income taxes $1,883,196 $ 2,110,761
____________ ____________
____________ ____________
Interest $ 111,637 $ 538,145
____________ ____________
____________ ____________
Non-cash activities-
Common stock issued from
conversion of subordinated
debentures, net of
amortization of deferred
debenture offering costs. $7,409,504 $ 160.000
Cashless exercise of stock option $ 66,380
* Line of credit repaid on July 5, 1996
<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:
June 30, September 30,
1996 1995
______________ _______________
Raw materials $ 1,167,568 $ 1,165,319
Work-in-process 1,000,459 626,077
Finished goods 2,027,697 1,241,259
______________ _______________
$ 4,195,724 $ 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 which includes the effect of the conversion of the
subordinated debentures into common stock. All share and
per share information have been adjusted to reflect 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.
(6) Reclassifications-
_________________
Certain reclassifications have been made to the accompanying
financial statements to conform to the June 30, 1996
presentation.
(7) Acquisitions-
____________
On June 24, 1996 the Company acquired the enteric product
line of Cambridge Biotech Corporation for approximately
$6,588,000. The purchase price was allocated as follows:
Inventory $ 830,000
Fixed Assets 200,000
Advanced Royalty 200,000
Covenant Not to Compete 1,260,000
Customer List 1,090,000
Supply Agreement 218,000
Patents Trademarks 498,000
Manufacturing Procedures 1,610,000
Cost in Excess of Net Assets Acquired 682,000
__________
Total $6,588,000
__________
__________
The total purchase price included cash paid to Cambridge
Biotech Corporation, of $6,351,000, expenses of $125,000 and
accrued royalties of $112,000. As additional consideration,
Meridian agreed to pay Cambridge a royalty of 2% on product
sales for a five year period beginning June 24, 1996. Included
in the $6,351,000 is an advanced payment of $200,000 on such
royalties. The remaining estimated royalty has been accrued at
its present value. Also included in the $6,351,000 is an
amount accrued as of June 30, 1996 for inventory of $651,000
which was paid on July 23, 1996. Intangible assets acquired
will be amortized over periods ranging from 5 to 15 years.
<PAGE>
Item 2. Management's Discussion and Analysis Of Financial
Condition and Results of Operations
Results of Operations
_____________________
Net sales increased $777,000, or 11%, to $7,559,000 for the third
fiscal quarter and $1,979,000, or 11%, to $20,336,000 for the
nine months ended June 30, 1996. These increases stem primarily
from strong unit volume growth in the Premier, Para-Pak and
ImmunoCard lines. In the Premier and ImmunoCard formats, this
growth continues to be attributable to those products used for
identification of Toxin A, H pylori, EHEC, Mycoplasma and
Rotavirus. In Para-Pak, the growth continues to be attributable
to the core parasitology transport format, Para-Pak Ultra,
introduced last fall and Para-Pak Plus. In addition, the Inova
line of products, licensed for Italy last year, added over
$169,000 and over $343,000 of sales volume for the third fiscal
quarter and nine months results, respectively. The enteric
products acquired from Cambridge Biotech Corporation on June 24,
1996 contributed $47,000.
OEM sales were down for the quarter and for the nine months
approximately $270,000 which is largely a result of timing of
orders. Also, offsetting the above increases for the nine months
period are sales of the mononucleosis line, down about 10%. This
decline is attributable to the wind-down of production of the
MonoSpot product, previously supplied by Ortho Diagnostics
Systems, Inc. and the transition to the Meridian-produced new
mononucleosis latex products.
Following is a summary of the increase in sales for the two
periods broken down by volume, price and currency:
June 30, 1996
____________________________________________
Quarter Ended Nine Months Ended
$ Change % Change $ Change % Change
_________ ________ _________ __________
Volume $747,000 11.0 $1,704,000 9.3
Price (87,000) (1.2) 99,000 0.5
Currency 117,000 1.7 176,000 1.0
_________ _____ _________ ______
Total $777,000 11.5 $1,979,000 10.8
_________ _____ _________ ______
_________ _____ _________ ______
European sales for the third fiscal quarter increased
significantly from $1,361,000 to $1,842,000 or 35%, and increased
from $3,829,000 to $4,811,000, or 26%, for the nine month period
principally from volume growth in the Premier line, the new
volume from the Inova line, ImmunoCard and Para-Pak formats.
<PAGE>
The increase in sales broken down by volume, price and currency
for European sales are summarized below:
Quarter Nine Months
$ Change % Change $ Change % Change
_________ ________ _________ __________
Volume $466,000 34.3 $ 855,000 22.3
Price (102,000) (7.5) (49,000) (1.3)
Currency 117,000 8.6 176,000 4.6
__________ ______ _________ _______
Total $481,000 35.4 $ 982,000 25.6
__________ ______ _________ _______
__________ ______ _________ _______
Gross profit as a percentage of net sales improved to almost 71%
for the third fiscal quarter and to 69.5% for the nine-month
period, up about four percentage points in the quarter and up
over two and one half points for the nine months compared to the
prior year. Product mix, driven by growth in excess of 18% for
Premier and 37% for ImmunoCard for the third fiscal quarter
coupled with a decrease in lower margin OEM sales were the
primary factors accounting for the improvement. In addition, the
11% increase in volume and reduced scrap and depreciation
expenses were also contributing factors to the improved margin.
Total operating expenses increased $366,000, or 14%, for the
third fiscal quarter and $792,000 or 10% for the nine months
ended June 30, 1996, compared to the prior year. Total operating
expenses were 40.2% of net sales for the third quarter, up 0.8
percentage points from the prior year, and were 42.0% of net
sales for the nine months, down 0.3 percentage points.
Research and development expenses for the third fiscal quarter
increased $39,000, or 10%, compared to the prior year and
increased $22,000, or 2%, for the nine-month period. Increases
in personnel costs associated with initial development work on
the Premier EHEC in food and agricultural applications plus
development of H. pylori antigen in stool were offset in part by
lower clinical trial expense, accounting for the higher quarterly
expenses.
Selling and marketing expenses increased 12% for the third
quarter and 15% for the nine months. The increases are
attributable to personnel costs in the U.S. associated with the
addition of a third sales region and in Europe from added
personnel in the sales support and product management functions.
Other significant increases in the quarter included expenses for
an expanded international distributors' meeting in Cincinnati,
depreciation expense associated with the new U.S. headquarters
facility and the impact of exchange from the stronger Lira versus
the dollar.
<PAGE>
General and administrative expenses increased approximately 18%
for the third fiscal quarter and approximately 8% for the nine
month period. Personnel costs in the U.S. and in Europe, outside
services associated with computer information systems, facility
expenses related to the new administrative headquarters, the
impact of exchange from the stronger Lira and higher
international travel are the primary reasons for the quarterly
increase. In addition to these increases, the one time state
filing fee for the increase in the number of the Company's
authorized shares of common stock accounted for the nine months
increase.
Operating income, as a result of the above, increased $471,000,
or 26%, compared to the sales increase of 11%, for the third
fiscal quarter and $1,070,000, or 24% compared to the sales
increase of 11% for the nine months compared to the same periods
last year. As a percent of sales, operating income improved over
3% for the quarter and almost 3% for the nine months.
Other income (net) increased $385,000 for the quarter and
$755,000 for the nine month periods ended June 30, 1996.
Interest income (net) improved $210,000 for the quarter and
$582,000 for the nine month period primarily from the reduction
in interest expense as a result of the conversion of the
convertible debentures as of November 30, 1995. Included in
the quarter was a gain of $150,000 from payment of a fully
reserved note related to a March 1994 Agreement wherein the
Company sold to VAI Diagnostics, Inc. tissue culture products
acquired in January 1994 from an affiliate of Ortho Diagnostic
Systems, Inc. Gains/losses in foreign exchange for the quarter
were not material. The cumulative foreign currency translation
adjustment increased by $36,000 during the quarter as a result of
the Lira strengthening against the U.S. dollar.
The Company's effective tax rate for the quarter is relatively
flat at 40.4% and down approximately 1% for the nine month period
compared to the prior year.
Net earnings increased $514,000, or 52%, for the third fiscal
quarter to $1,499,000 from $985,000 and increased $1,123,000, or
48% to $3,483,000 from $2,361,000 for the nine months ended June
30, 1996 compared to the prior year. The corresponding increases
in primary earnings per share for the comparable periods were
approximately 38% and 32% respectively. The lower growth rates
in earnings per share results from the increase in outstanding
shares associated with the conversion of the convertible
debentures. Through the first nine months of fiscal 1996,
primary earnings per share are $0.25, or 86% of the full 1995
fiscal year earnings of $0.29. Fully diluted earnings per share,
applicable only to 1996, include the impact of outstanding stock
options.
Liquidity and Capital Resources
_______________________________
Net cash flow provided by operating activities was $4,697,000 for
the nine month period ended June 30, 1996, up $2,813,000 from the
prior year period. This increase resulted from accounts payable
reflecting the December 1994 payment for goods purchased from
Ortho Diagnostic Systems, Inc. during fiscal 1994, the increase
in net earnings and the timing of estimated income tax payments.
<PAGE>
On June 24, 1996 the Company acquired the enteric product line of
Cambridge Biotech Corporation for $6,588,000 which includes an
advance on royalties of $200,000, inventory valued at $830,000,
fixed assets valued at $200,000 and intangibles valued at
$5,358,000. This acquisition was funded by proceeds of a note
under a line of credit with the Company's commercial bank while
short-term investments were being liquidated. The note was paid-
off July 5, 1996.
On October 10, 1995, the Company called for the redemption of the
outstanding balance of its 7 1/4% Convertible Subordinated
Debentures due in 2001. At that time, approximately $7,400,000
of the principal amount of the Debentures was outstanding. Of
the originally issued $11,500,000 principal amount, $113,000 was
redeemed for cash on November 30, 1995. The balance was
converted into common stock at $5.97 per share.
Capital expenditures for the nine months ended June 30, 1996 were
$1,236,000, a decrease of $623,000 from the prior year period.
The lower expenditures reflect the completion of construction of
additional manufacturing and administrative space in September
1995. In October 1995, renovation of the former administrative
offices and laboratory manufacturing space commenced. This
phase, which is projected to cost $1,600,000, is expected to be
completed by September 1996. The Company's anticipated total
capital expenditures for fiscal 1996 are $2,200,000.
Net cash flow from operations is expected to continue to fund
working capital requirements for the foreseeable future.
Currently, the Company has an unused $10,000,000 line of credit
with a commercial bank and cash and short-term investments of
approximately $1,400,000.
On April 16, 1996 the Company paid off the outstanding balance of
its mortgage loans reducing long term debt by $2,418,000.
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 established 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.
<PAGE>
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 has 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 ("Delta") in the 11th Judicial circuit for
Dade County, Florida. The case was removed to the United States
District Court for the Southern District of Florida and
transferred on March 19, 1996 to the United States District Court
for the Southern District of California. The action relates to a
February 1995 agreement between Meridian's European subsidiary,
Meridian Diagnostics Europe, srl ("MDE"), 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 compensatory and punitive 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 Meridian harmless
for all costs, damages and expenses arising from any such claims.
In May 1996 Meridian and Inova executed a new agreement which
grants exclusive distribution rights to Meridian in return for
limiting Inova's obligation on the indemnity to $300,000, plus
all of Meridian's costs and expenses, including legal fees.
In July 1996, Delta amended its complaint to include MDE as a
defendant. In the amended complaint, Delta also alleges that
both Meridian and MDE disclosed trade secrets of Delta.
Management does not believe the ultimate outcome of this matter
will have a material impact on the Company's financial position,
results of operations or cash flows.
Item 5. Other Information
On April 18, 1996 the Company received FDA clearance to begin
marketing the company's sixth internally developed ImmunoCard
product, ImmunoCard C. difficile Toxin A. This product is used
for the detection of C. difficile Toxin A directly from stool
samples in a matter of minutes. C. difficile is a bacteria which
produces a potent toxin capable of causing severe complications
to the digestive system. The disease is generally caused by an
adverse reaction to antibiotic therapy. Early detection of this
disease is very important and can be life saving. C. difficile
toxins can cause complications ranging from severe diarrhea to
pseudomembranous colitis.
ImmunoCard is a small credit card-sized device capable of
performing rapid, individual enzyme immunoassays. This device
detects C. difficile Toxin A directly from stool specimens in
about ten minutes with a high degree of accuracy and requires no
equipment.
<PAGE>
The current worldwide market for C. difficile testing is
estimated to exceed $12 million dollars. Development of this
test utilizing the ImmunoCard format will provide the opportunity
to enhance the Company's leading position in this marketplace.
The new ImmunoCard C. difficile Toxin A product represents the
fourth product developed by Meridian in a line of products used
to detect this severe pathogen.
On April 30, 1996, the Company announced that it had applied with
the Food and Drug Administration ("FDA") for permission to begin
marketing the Company's ImmunoCard H. pylori product with a new
whole-blood indication. H. pylori has been determined to be a
cause of severe gastritis and ulcers. This new product will
permit physicians to use a whole-blood specimen which can be
obtained from a simple finger stick in an office setting. A
physician will be able to run this assay on a patient to detect
H. pylori antibodies and thereby avoid the need to do a costly
endoscopy procedure which subjects the patient to a high level of
discomfort. The physician will be able to test for the presence
of antibody to H. pylori in minutes and promptly begin the
appropriate therapy.
The world-wide market for H. pylori testing is growing rapidly
due to the recent FDA approval for certain drug therapies used to
treat patients and eradicate the organism. Meridian currently
produces products for H. pylori in two formats. The Premier, or
microtiter format used in the hospital and reference laboratory
markets and FDA cleared as well as ImmunoCard which is pending
FDA clearance.
On May 23, 1996, the Company received FDA clearance to begin
marketing Premier HSV Plus, an improved microwell enzyme
immunoassay for the detection of Herpes simplex virus (HSV), Type
I and II, directly from patient specimens or from cell culture.
HSV is a ubiquitous virus which causes infections ranging from
cold sores to encephalitis and is a common cause of genital
infections. The prevalence in the general population of HSV Type
I, generally associated with cold sores, is 70-80%, whereas the
prevalence of HSV Type II which causes genital infectious is 35-
40%. The total number of HSV tests performed each year
approaches 3.5 million.
Premier HSV Plus is the only assay of its kind which detects HSV
with high sensitivity and specificity in only two and one-half
hours. The assay is simple to perform requiring no
instrumentation. The test may be performed directly from cell
culture and all direct specimen types including asymptomatic
patients and is proven to be compatible with most transport
mediums for specimen collection.
On June 24, 1996, the company acquired the enteric product line
of Cambridge Biotech Corporation. The diagnostic products which
identify Adenovirus, Rotavirus, C. difficile and Lyme disease
were purchased for $6.6 million. The current sales volume of the
acquired products is approximately $4 million dollars annually.
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits-
Exhibit No. Description Page(s)
__________ ___________ _______
11 Computation of earnings per common share 17
27 Financial Data Schedule 18-20
(b) Reports on Form 8-K - On July 2, 1996 the Company filed
a report on Form 8-K to announce that the Company had
purchased the enteric product line from Cambridge
Biotech Corporation.
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: July 26, 1996 /S/ GERARD BLAIN
_____________________________
GERARD BLAIN, Vice President,
Chief Financial Officer
(Principal financial officer)
<PAGE>
EXHIBIT 11
MERIDIAN DIAGNOSTICS, INC. AND SUBSIDIARIES
Computation of Earnings Per Common Share
Period Ended June 30, 1996
Weighted Avg. Earnings
Number of Per
Common Shares Net Common
Outstanding Income Share Use
_____________ ______ _______ ____
Quarter Ended June 30,
1996:
Shares outstanding
April 1, 1996 14,257,006
Weighted average
shares issued
during the period
(19,632 shares) 9,730
Net Income 1,499,043
__________ __________ _______ ______
14,266,736 1,499,043 .1051 .11
Effect of outstanding
stock options
which is less than 3%
and not required to be
disclosed in the
financial statements
(778,735 shares) 449,508
___________ __________ _______ ______
14,716,244 1,499,043 .1019 .10
Additional effect of
stock options at
quarter end stock
price 86,923
___________ __________ _______ ______
14,803,167 1,499,043
.1013 .10
___________ __________ _______ ______
___________ __________ _______ ______
Nine Months ended June 30,
1996
Shares outstanding
October 1, 1995 12,924,814
Weighted average shares
issued during the
period (1,351,824
shares) 1,211,809
Net Income 3,483,173
___________ __________ _______ ______
14,136,623 3,483,173 .2464 .25
Effect of outstanding
stock options
which is less than 3%
and not required to be
disclosed in the
financial statements
(778,735 shares) 449,508
___________ __________ _______ ______
14,586,131 3,483,173 .2388 .24
Effect of convertible
debentures 120,975
Additional effect of
stock options
at quarter end stock
price 86,923
___________ __________ _______ ______
14,794,029 3,483,173 .2354 .24
___________ __________ _______ ______
___________ __________ _______ ______
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> JUN-30-1996
<CASH> 1,134,948
<SECURITIES> 6,837,145
<RECEIVABLES> 7,612,569
<ALLOWANCES> 125,792
<INVENTORY> 4,195,724
<CURRENT-ASSETS> 20,631,359
<PP&E> 13,014,652
<DEPRECIATION> 5,230,769
<TOTAL-ASSETS> 41,602,236
<CURRENT-LIABILITIES> 11,057,409
<BONDS> 2,342,927
0
0
<COMMON> 2,384,854
<OTHER-SE> 25,817,046
<TOTAL-LIABILITY-AND-EQUITY> 41,602,236
<SALES> 20,335,897
<TOTAL-REVENUES> 20,335,897
<CGS> 6,196,415
<TOTAL-COSTS> 6,196,415
<OTHER-EXPENSES> 8,549,150
<LOSS-PROVISION> (29,823)
<INTEREST-EXPENSE> 307,792
<INCOME-PRETAX> 5,861,566
<INCOME-TAX> 2,378,393
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,483,173
<EPS-PRIMARY> .25
<EPS-DILUTED> .24
</TABLE>
