##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the Quarterly Period Ended March 31, 2010
 OR
 o
    
    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 BIOSCIENCE, INC.
   (I.R.S. Employer Identification No.)
 
  þ o
 
  o o
 Rule 12b-2 of the Exchange Act.
 Large accelerated filer þ
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company o
  o þ
  Class
    
    Outstanding April 30, 2010Common Stock, no par value
    
    40,630,495




---



##### 



MERIDIAN BIOSCIENCE, INC. AND SUBSIDIARIES
INDEX TO QUARTERLY REPORT ON FORM 10-Q
 Page(s)PART I FINANCIAL INFORMATIONItem 1. Financial Statements (Unaudited)Consolidated Statements of Operations 

Three and Six Months Ended March 31, 2010 and 2009
    
    
    1Consolidated Statements of Cash Flows

Six Months Ended March 31, 2010 and 2009
    
    
    2Consolidated Balance Sheets

March 31, 2010 and September 30, 2009
    
    
    3-4Consolidated Statement of Changes in Shareholders Equity

Six Months Ended March 31, 2010
    
    
    5Notes to Consolidated Financial Statements
    
    
    6-13Item 2. Managements Discussion and Analysis of
Financial Condition and Results of Operations
    
    
    13-19Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    19Item 4. Controls and Procedures
    
    
    19PART II. OTHER INFORMATIONItem 1A. Risk Factors
    
    
    19Item 4. Submission of Matters to a Vote of Security Holders
    
    
    19Item 6. Exhibits
    
    
    20Signature
    
    
    21Exhibit 31.1Exhibit 31.2Exhibit 32
  The Private Securities Litigation Reform Act of 1995 provides a safe harbor from civil
litigation for forward-looking statements accompanied by meaningful cautionary statements. Except
for historical information, this report contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, which may be identified by words such as estimates, anticipates, projects,
plans, seeks, may, will, expects, intends, believes, should and similar expressions
or the negative versions thereof and which also may be identified by their context. Such
statements, whether expressed or implied, are based upon current expectations of the Company and
speak only as of the date made. The Company assumes no obligation to publicly update or revise any
forward-looking statements even if experience or future changes make it clear that any projected
results expressed or implied therein will not be realized. These statements are subject to various
risks, uncertainties and other factors that could cause actual results to differ materially,
including, without limitation, the following: Meridians continued growth depends, in part, on its
ability to introduce into the marketplace enhancements of existing products or new products that
incorporate technological advances, meet customer requirements and respond to products developed by
Meridians competition. While Meridian has introduced a number of internally developed products,
there can be no assurance that it will be successful in the future in introducing such products on
a timely basis. Ongoing consolidations of reference laboratories and formation of multi-hospital
alliances may cause adverse changes to pricing and distribution. Recessionary pressures on the
economy and the markets in which our customers operate, as well as adverse trends in buying
patterns from customers can change expected results. Costs and difficulties in complying with laws
and regulations administered by the United States Food and Drug Administration can result in
unanticipated expenses and delays and interruptions to the sale of new and existing products.
Changes in the relative strength or weakness of the U.S. dollar can also change expected results.
One of Meridians main growth strategies is the acquisition of companies and product lines. There
can be no assurance that additional acquisitions will be consummated or that, if consummated, will
be successful and the acquired businesses successfully integrated into Meridians operations. The
Company cannot predict the possible effects of potential healthcare reform in the United States and
similar initiatives in other countries on its results of operations. In addition to the factors
described in this paragraph, Part I, Item 1A Risk Factors of our Form 10-K contains a list and
description of uncertainties, risks and other matters that may affect the Company.




---



##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1.    Financial Statements
 MERIDIAN BIOSCIENCE, INC. AND SUBSIDIARIES
 
 Consolidated Statements of Operations 
(Unaudited)
 (in thousands, except per share data)
 Three-months Ended
    
    
    Six-months EndedMarch 31,
    
    
    March 31,2010
    
    
    2009
    
    
    2010
    
    
    2009NET SALES
    
    $
    31,147
    
    
    $
    33,280
    
    
    $
    73,604
    
    
    $
    67,573COST OF SALES
    
    
    10,980
    
    
    
    12,306
    
    
    
    27,952
    
    
    
    23,255GROSS PROFIT
    
    
    20,167
    
    
    
    20,974
    
    
    
    45,652
    
    
    
    44,318OPERATING EXPENSESResearch and development
    
    
    2,315
    
    
    
    2,339
    
    
    
    4,393
    
    
    
    4,403Selling and marketing
    
    
    4,321
    
    
    
    3,975
    
    
    
    9,208
    
    
    
    8,942General and administrative
    
    
    4,406
    
    
    
    3,655
    
    
    
    9,170
    
    
    
    7,810Total operating expenses
    
    
    11,042
    
    
    
    9,969
    
    
    
    22,771
    
    
    
    21,155OPERATING INCOME
    
    
    9,125
    
    
    
    11,005
    
    
    
    22,881
    
    
    
    23,163OTHER INCOME (EXPENSE)Interest income
    
    
    30
    
    
    
    84
    
    
    
    61
    
    
    
    346Other, net
    
    
    110
    
    
    
    76
    
    
    
    (8
    )
    
    
    (72
    )Total other income (expense)
    
    
    140
    
    
    
    160
    
    
    
    53
    
    
    
    274EARNINGS BEFORE INCOME TAXES
    
    
    9,265
    
    
    
    11,165
    
    
    
    22,934
    
    
    
    23,437INCOME TAX PROVISION
    
    
    3,285
    
    
    
    3,914
    
    
    
    8,033
    
    
    
    8,110NET EARNINGS
    
    $
    5,980
    
    
    $
    7,251
    
    
    $
    14,901
    
    
    $
    15,327BASIC EARNINGS PER COMMON SHARE
    
    $
    0.15
    
    
    $
    0.18
    
    
    $
    0.37
    
    
    $
    0.38DILUTED EARNINGS PER COMMON SHARE
    
    $
    0.15
    
    
    $
    0.18
    
    
    $
    0.36
    
    
    $
    0.37AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING  BASIC
    
    
    40,514
    
    
    
    40,385
    
    
    
    40,504
    
    
    
    40,349EFFECT OF DILUTIVE STOCK OPTIONS
    
    
    663
    
    
    
    748
    
    
    
    674
    
    
    
    779AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING  DILUTED
    
    
    41,177
    
    
    
    41,133
    
    
    
    41,178
    
    
    
    41,128ANTI-DILUTIVE SECURITIES:Common share options
    
    
    215
    
    
    
    141
    
    
    
    193
    
    
    
    125DIVIDENDS DECLARED PER COMMON SHARE
    
    $
    0.19
    
    
    $
    0.17
    
    
    $
    0.36
    
    
    $
    0.31
   Page 1




---



##### Table of Contents



MERIDIAN BIOSCIENCE, INC. AND SUBSIDIARIES
 
 Consolidated Statements of Cash Flows
 (Unaudited)
 (dollars in thousands)
 Six Months Ended March 31
    
    2010
    
    
    2009CASH FLOWS FROM OPERATING ACTIVITIES:Net earnings
    
    $
    14,901
    
    
    $
    15,327Non-cash items:Depreciation of property, plant and equipment
    
    
    1,530
    
    
    
    1,468Amortization of intangible assets
    
    
    734
    
    
    
    799Stock based compensation
    
    
    921
    
    
    
    544Deferred income taxes
    
    
    (1,135
    )
    
    
    (579
    )Loss on disposition of fixed assets
    
    
    13
    
    
    
    39Unrealized loss on auction-rate securities and rights, net
    
    
    12
    
    
    
    220Change in accounts receivable, inventory, and prepaid expenses
    
    
    2,944
    
    
    
    (2,073
    )Change in accounts payable, accrued expenses, and income taxes payable
    
    
    (3,853
    )
    
    
    (3,382
    )Other
    
    
    560
    
    
    
    300Net cash provided by operating activities
    
    
    16,627
    
    
    
    12,663CASH FLOWS FROM INVESTING ACTIVITIES:Acquisitions of property, plant and equipment
    
    
    (2,124
    )
    
    
    (1,734
    )Proceeds from sales of property, plant and equipment
    
    
    
    
    
    
    5Acquisition earnout payments
    
    
    
    
    
    
    (7
    )Purchases of short-term investments
    
    
    (1,000
    )
    
    
    Proceeds from calls of auction-rate securities
    
    
    
    
    
    
    425Net cash used for investing activities
    
    
    (3,124
    )
    
    
    (1,311
    )CASH FLOWS FROM FINANCING ACTIVITIES:Dividends paid
    
    
    (14,580
    )
    
    
    (12,510
    )Proceeds and tax benefits from exercises of stock options
    
    
    522
    
    
    
    516Other
    
    
    
    
    
    
    (7
    )Net cash used for financing activities
    
    
    (14,058
    )
    
    
    (12,001
    )Effect of Exchange Rate Changes on Cash and Equivalents
    
    
    (681
    )
    
    
    (342
    )Net Decrease in Cash and Equivalents
    
    
    (1,236
    )
    
    
    (991
    )Cash and Equivalents at Beginning of Period
    
    
    54,030
    
    
    
    49,297Cash and Equivalents at End of Period
    
    $
    52,794
    
    
    $
    48,306
   Page 2




---



##### Table of Contents



MERIDIAN BIOSCIENCE, INC. AND SUBSIDIARIES
 
 Consolidated Balance Sheets
 (Unaudited)
 (dollars in thousands)
 ASSETS
 March 31,
    
    
    September 30,2010
    
    
    2009CURRENT ASSETS:Cash and equivalents
    
    $
    52,794
    
    
    $
    54,030Short-term investments
    
    
    8,273
    
    
    
    7,285Accounts receivable, less allowances of $289
and $247
    
    
    17,897
    
    
    
    26,981Inventories
    
    
    28,488
    
    
    
    23,284Prepaid expenses and other current assets
    
    
    3,682
    
    
    
    3,632Deferred income taxes
    
    
    2,208
    
    
    
    1,935Total current assets
    
    
    113,342
    
    
    
    117,147PROPERTY, PLANT AND EQUIPMENT:Land
    
    
    880
    
    
    
    894Buildings and improvements
    
    
    19,651
    
    
    
    19,718Machinery, equipment and furniture
    
    
    30,952
    
    
    
    30,997Construction in progress
    
    
    2,384
    
    
    
    1,586Subtotal
    
    
    53,867
    
    
    
    53,195Less: accumulated depreciation and amortization
    
    
    32,851
    
    
    
    32,721Net property, plant and equipment
    
    
    21,016
    
    
    
    20,474OTHER ASSETS:Goodwill
    
    
    9,866
    
    
    
    9,866Other intangible assets, net
    
    
    6,611
    
    
    
    7,317Restricted cash
    
    
    1,000
    
    
    
    1,000Other assets
    
    
    206
    
    
    
    193Total other assets
    
    
    17,683
    
    
    
    18,376TOTAL ASSETS
    
    $
    152,041
    
    
    $
    155,997
   Page 3




---



##### Table of Contents



MERIDIAN BIOSCIENCE, INC. AND SUBSIDIARIES

Consolidated Balance Sheets (Unaudited)
(dollars in thousands)
 LIABILITIES AND SHAREHOLDERS EQUITY
 March 31,
    
    
    September 30,2010
    
    
    2009CURRENT LIABILITIES:Accounts payable
    
    $
    4,193
    
    
    $
    6,901Accrued employee compensation costs
    
    
    3,604
    
    
    
    5,338Other accrued expenses
    
    
    4,077
    
    
    
    3,803Income taxes payable
    
    
    850
    
    
    
    710Total current liabilities
    
    
    12,724
    
    
    
    16,752DEFERRED INCOME TAXES
    
    
    435
    
    
    
    1,340COMMITMENTS AND CONTINGENCIESSHAREHOLDERS EQUITY:Preferred stock, no par value, 1,000,000 shares authorized, none issued
    
    
    
    
    
    
    Common shares, no par value, 71,000,000 shares authorized, 40,630,383
and 40,493,313 shares issued, respectively
    
    
    
    
    
    
    Additional paid-in capital
    
    
    93,067
    
    
    
    91,668Retained earnings
    
    
    45,836
    
    
    
    45,515Accumulated other comprehensive income (loss)
    
    
    (21
    )
    
    
    722Total shareholders equity
    
    
    138,882
    
    
    
    137,905TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
    
    $
    152,041
    
    
    $
    155,997
   Page 4




---



##### Table of Contents



MERIDIAN BIOSCIENCE, INC. AND SUBSIDIARIES
 
 Consolidated Statement of Changes in Shareholders Equity
 (Unaudited)
 (dollars and shares in thousands)
 AccumulatedCommon
    
    
    Additional
    
    
    
    
    
    
    Other
    
    
    
    
    
    
    TotalShares
    
    
    Paid-In
    
    
    Retained
    
    
    Comprehensive
    
    
    Comprehensive
    
    
    ShareholdersIssued
    
    
    Capital
    
    
    Earnings
    
    
    Income (Loss)
    
    
    Income (Loss)
    
    
    EquityBalance at September 30, 2009
    
    
    40,493
    
    
    $
    91,668
    
    
    $
    45,515
    
    
    $
    722
    
    
    
    
    
    
    $
    137,905Cash dividends paid
    
    
    
    
    
    
    
    
    
    
    (14,580
    )
    
    
    
    
    
    
    
    
    
    
    (14,580
    )Exercise of stock options
    
    
    41
    
    
    
    478
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    478Issuance of restricted shares
    
    
    96
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stock based compensation
    
    
    
    
    
    
    921
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    921Comprehensive income:Net earnings
    
    
    
    
    
    
    
    
    
    
    14,901
    
    
    
    
    
    
    $
    14,901
    
    
    
    14,901Other comprehensive income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    399
    
    
    
    399
    
    
    
    399Foreign currency translation
adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,142
    )
    
    
    (1,142
    )
    
    
    (1,142
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    14,158Balance at March 31, 2010
    
    
    40,630
    
    
    $
    93,067
    
    
    $
    45,836
    
    
    $
    (21
    )
    
    
    
    
    
    $
    138,882
   Page 5




---



##### Table of Contents



MERIDIAN BIOSCIENCE, INC. AND SUBSIDIARIES
 
 Notes to Consolidated Financial Statements
 Dollars in Thousands, Except Per Share Amounts
 (Unaudited)
 1.
    
    Basis of Presentation:
     2.
    
    Significant Accounting Policies:
 (a)
    
    Revenue Recognition and Accounts Receivable 
 Revenue is generally recognized from sales when product is shipped and title has passed to
the buyer. Revenue for the US Diagnostics operating segment is reduced at the date of sale
for estimated rebates that will be claimed by customers. Management estimates accruals for
rebate agreements based on historical statistics, current trends, and other factors.
Changes to the accruals are recorded in the period that they become known. Our rebate
accruals were $5,318 at March 31, 2010 and $4,750 at September 30, 2009.
 Life Science revenue for contract services may come from standalone arrangements for process
development and/or optimization work (contract research and development services) or custom
manufacturing, or multiple-deliverable arrangements that include process development work
followed by larger-scale manufacturing (both contract research and development services and
contract manufacturing services). Revenue is recognized based on each of the multiple
deliverables in a given arrangement having distinct and separate fair values. Fair values
are determined via consistent pricing between standalone arrangements and multiple
deliverable arrangements, as well as a competitive bidding process. Contract research and
development services may be performed on a time and materials basis or fixed fee basis.
For time and materials arrangements, revenue is recognized as services are performed and
billed. For fixed fee arrangements, revenue is recognized upon completion and acceptance
by the customer. For contract manufacturing services, revenue is generally recognized upon
delivery of product and acceptance by the customer. In some cases, customers may request
that we store on their behalf clinical grade biologicals that we produce under contract
manufacturing agreements. These cases arise when customers do not have clinical grade
storage facilities or do not want to risk contamination during transport. For such cases,
revenue may be recognized on a bill-and-hold basis.
 Trade accounts receivable are recorded in the accompanying consolidated balance sheet at
invoiced amounts less provisions for rebates and doubtful accounts. The allowance for
doubtful accounts represents our estimate of probable credit losses and is based on
historical write-off experience. The allowance for doubtful accounts and related metrics,
such as days sales outstanding, are reviewed monthly. Accounts with past due balances over
90 days are reviewed individually for collectibility. Customer invoices are charged off
against the allowance when we believe it is probable that the invoices will not be paid.
  Page 6




---



##### Table of Contents



(b)
    
    Comprehensive Income (Loss) 
 Our comprehensive income or loss is comprised of net earnings, foreign currency translation,
changes in the fair value of forward exchange contracts accounted for as cash flow hedges
(fiscal 2009 only), and changes in the fair value of available-for-sale (AFS) fixed income
securities (fiscal 2009 only).
 Assets and liabilities of foreign operations are translated using period-end exchange rates
with gains or losses resulting from translation included in a separate component of
accumulated other comprehensive income or loss. Revenues and expenses are translated using
exchange rates prevailing during the period. We also recognize foreign currency transaction
gains and losses on certain assets and liabilities that are denominated in the Euro
currency. These gains and losses are included in other income and expense in the
accompanying consolidated statements of operations.
 Comprehensive income for the interim periods was as follows:
 Three Months
    
    
    Six MonthsEnded March 31,
    
    
    Ended March 31,2010
    
    
    2009
    
    
    2010
    
    
    2009Net earnings
    
    $
    5,980
    
    
    $
    7,251
    
    
    $
    14,901
    
    
    $
    15,327Hedging activity
    
    
    
    
    
    
    19
    
    
    
    
    
    
    
    (3
    )Transfer of AFS securities to trading
classification
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    270Income taxes
    
    
    310
    
    
    
    254
    
    
    
    399
    
    
    
    249Foreign currency translation adjustment
    
    
    (885
    )
    
    
    (744
    )
    
    
    (1,142
    )
    
    
    (978
    )Comprehensive income
    
    $
    5,405
    
    
    $
    6,780
    
    
    $
    14,158
    
    
    $
    14,865
 (c)
    
    Income Taxes 
 The provision for income taxes includes federal, foreign, state, and local income taxes
currently payable and those deferred because of temporary differences between income for
financial reporting and income for tax purposes. We prepare estimates of permanent and
temporary differences between income for financial reporting purposes and income for tax
purposes. These differences are adjusted to actual upon filing of our tax returns,
typically occurring in the third and fourth quarters of the current fiscal year for the
preceding fiscal years estimates.
 We account for uncertain tax positions using a benefit recognition model with a two-step
approach: (i) a more-likely-than-not recognition criterion and (ii) a measurement attribute
that measures the position as the largest amount of tax benefit that is greater than 50%
likely of being realized upon ultimate settlement. If it is not more likely than not that
the benefit will be sustained on its technical merits, no benefit is recorded. We recognize
accrued interest and penalties related to unrecognized tax benefits as a portion of our
income tax provision in the consolidated statements of operations.
 (d)
    
    Share-based Compensation 
 We recognize compensation expense for all share-based awards made to employees based upon
the fair value of the share-based award on the date of the grant. Shares are expensed over
their requisite service period.
  Page 7




---



##### Table of Contents



(e)
    
    Cash, Cash Equivalents, and Investments 
 Our investment portfolio includes the following components:
 March 31, 2010
    
    
    September 30, 2009Cash and
    
    
    
    
    
    
    Cash andEquivalents
    
    
    Other
    
    
    Equivalents
    
    
    OtherTaxable investments -Overnight repurchase agreements
    
    $
    14,095
    
    
    $
    
    
    
    $
    
    
    
    $
    Money market funds
    
    
    28,275
    
    
    
    
    
    
    
    29,032
    
    
    
    Fixed-rate municipal note
    
    
    
    
    
    
    1,000
    
    
    
    
    
    
    
    Tax-exempt investments -Money market funds
    
    
    143
    
    
    
    
    
    
    
    10,383
    
    
    
    Student loan auction-rate
securities and rights
    
    
    
    
    
    
    7,273
    
    
    
    
    
    
    
    7,285Cash on hand -Restricted
    
    
    
    
    
    
    1,000
    
    
    
    
    
    
    
    1,000Unrestricted
    
    
    10,281
    
    
    
    
    
    
    
    14,615
    
    
    
    Total
    
    $
    52,794
    
    
    $
    9,273
    
    
    $
    54,030
    
    
    $
    8,285
 Our investment portfolio includes student loan auction-rate securities, which are
long-term student loan revenue bonds whose interest rates are reset every 35 days via a
Dutch auction process. All of our auction-rate securities are backed by pools of student
loans originated under the Federal Family Education Loan Program (FFELP). FFELP student
loans are guaranteed by State guarantors who have reinsurance agreements with the US
Department of Education. All of our student loan auction-rate securities were rated Aaa and
AAA by Moodys and Standard & Poors, respectively, at the time of purchase, and have
continued to maintain these credit ratings through the present time.
 The Dutch auction process historically provided the necessary liquidity mechanism to either
purchase or sell these securities. Beginning in mid-February 2008, liquidity issues in the
US credit markets resulted in the failure of auctions across a broad spectrum of tax-exempt
securities, including student loan revenue bonds. Auctions for the student loan revenue
bonds that we hold have continued to fail through the present time. The consequence of a
failed auction is that we do not have access to the principal amount of our investments,
other than through secondary markets. Issuers are still required to make interest payments
when due in the event of failed auctions. We have not experienced any missed interest
payments to date.
 Our auction-rate securities were purchased through UBS Financial Services, Inc. During
November 2008, we accepted an offer from UBS, AG (UBS) of Auction Rate Security Rights.
These rights permit us to require UBS between June 30, 2010 and July 2, 2012 (the exercise
period) to purchase our auction-rate securities at par value. In exchange, UBS is granted
the right, at their sole discretion, to sell or otherwise dispose of our auction-rate
security investments until July 2, 2012 as long as we receive a payment of par value upon
the sale or disposition. In addition, the rights permit us to establish a demand revolving
credit line in an amount equal to the par value of the securities at a net no cost. We are
still able to sell the auction-rate securities on our own, but in such a circumstance, we
would lose the par value support from UBS. In February 2010, we notified UBS that we would
be exercising our Auction Rate Security Rights effective June 30, 2010. Pursuant to the
terms of the Auction Rate Security Rights, we expect to receive the par value of our
auction-rate securities within one business day of settlement, on or about July 2, 2010.
On May 5, 2010, UBS sold $3,750 of our auction-rate securities at par value. We
received the proceeds from this sale on May 6, 2010.
 Upon executing the settlement agreement with UBS, we recognized the Auction Rate Security
Rights as a stand-alone financial instrument and elected the fair value option. We also
transferred the student loan auction-rate securities from the available-for-sale
classification, to the trading classification. Adjustments to the fair value of student
loan auction-rate securities and Auction Rate Security Rights are recorded to other income
and expense in each accounting period. As of March 31, 2010, the fair value of the
student-loan auction rate securities was $6,711 compared to a par value of $7,275. As of
March 31, 2010, the fair
value of the Auction Rate Security Rights was $562. The student loan auction-rate
securities and Auction Rate Security Rights are included in current assets in the
accompanying consolidated balance sheet based on the earliest exercise date of June 30,
2010. As of May 6, 2010, the par value of our auction-rate securities was $3,525,
reflecting the sale by UBS discussed above.
  Page 8




---



##### Table of Contents



(f)
    
    Recent Accounting Pronouncements 
 During February 2010, the FASB amended its previously released guidance regarding fair value
measurements and disclosures. This amendment requires separate disclosure of the amounts of
significant transfers in and out of Level 1 and Level 2 fair value measurements and
description of the reasons for such transfers. The guidance also requires disclosure of
activity in Level 3 fair value measurements, including separate presentation of purchases,
sales, issuances, and settlements. This amended guidance is effective for interim and
annual periods beginning after December 15, 2009, except for the disaggregation requirement
for the reconciliation disclosure of Level 3 measurements, which is effective for fiscal
years beginning after December 15, 2010 and for interim periods within those years. The
Company adopted the new guidance during the three months ended March 31, 2010 which did not
impact the Companys consolidated results of operations, cash flows or financial position.
 (g)
    
    Reclassifications 
 Certain reclassifications have been made to the prior period financial statements to conform
to the current fiscal period presentation.
 3.
    
    Inventories:
  March 31,
    
    
    September 30,2010
    
    
    2009Raw materials
    
    $
    5,920
    
    
    $
    6,079Work-in-process
    
    
    7,458
    
    
    
    5,916Finished goods
    
    
    16,038
    
    
    
    12,314Gross inventory
    
    
    29,416
    
    
    
    24,309Less: Reserves
    
    
    (928
    )
    
    
    (1,025
    )Net inventory
    
    $
    28,488
    
    
    $
    23,284
 4.
    
    Major Customers and Segment Information:
    Page 9




---



##### Table of Contents



EuropeanUS Diagnostics
    
    
    Diagnostics
    
    
    Life Science
    
    
    Eliminations(1)
    
    
    TotalThree Months Ended March 31, 2010Net sales -Third-party
    
    $
    18,193
    
    
    $
    6,591
    
    
    $
    6,363
    
    
    $
    
    
    
    $
    31,147Inter-segment
    
    
    2,550
    
    
    
    3
    
    
    
    169
    
    
    
    (2,722
    )
    
    
    Operating income
    
    
    6,571
    
    
    
    1,093
    
    
    
    1,320
    
    
    
    141
    
    
    
    9,125Total assets (March 31, 2010)
    
    
    128,579
    
    
    
    17,564
    
    
    
    58,530
    
    
    
    (52,632
    )
    
    
    152,041Three Months Ended March 31, 2009Net sales -Third-party
    
    $
    21,461
    
    
    $
    6,599
    
    
    $
    5,220
    
    
    $
    
    
    
    $
    33,280Inter-segment
    
    
    2,488
    
    
    
    6
    
    
    
    92
    
    
    
    (2,586
    )
    
    
    Operating income
    
    
    8,288
    
    
    
    1,255
    
    
    
    1,375
    
    
    
    87
    
    
    
    11,005Total assets (September 30,
2009)
    
    
    131,586
    
    
    
    18,221
    
    
    
    55,592
    
    
    
    (49,402
    )
    
    
    155,997Six months ended March 31, 2010Net sales -Third-party
    
    $
    48,897
    
    
    $
    12,885
    
    
    $
    11,822
    
    
    $
    
    
    
    $
    73,604Inter-segment
    
    
    5,477
    
    
    
    4
    
    
    
    261
    
    
    
    (5,742
    )
    
    
    Operating income
    
    
    18,701
    
    
    
    2,063
    
    
    
    2,224
    
    
    
    (107
    )
    
    
    22,881Six months ended March 31, 2009Net sales -Third-party
    
    $
    44,946
    
    
    $
    12,270
    
    
    $
    10,357
    
    
    $
    
    
    
    $
    67,573Inter-segment
    
    
    4,976
    
    
    
    6
    
    
    
    280
    
    
    
    (5,262
    )
    
    
    Operating income
    
    
    18,675
    
    
    
    2,105
    
    
    
    2,222
    
    
    
    161
    
    
    
    23,163
 (1)
    
    Eliminations consist of inter-segment transactions.   Page 10




---



##### Table of Contents



5.
    
    Intangible Assets:
  WtdAvg
    
    
    March 31, 2010
    
    
    September 30, 2009Amort
    
    
    Gross
    
    
    
    
    
    
    GrossPeriod
    
    
    Carrying
    
    
    Accumulated
    
    
    Carrying
    
    
    Accumulated(Yrs)
    
    
    Value
    
    
    Amortization
    
    
    Value
    
    
    AmortizationManufacturing technologies,
core products and cell lines
    
    
    19
    
    
    $
    10,124
    
    
    $
    7,342
    
    
    $
    10,755
    
    
    $
    7,672Trademarks, licenses and patents
    
    
    13
    
    
    
    1,658
    
    
    
    903
    
    
    
    2,772
    
    
    
    1,974Customer lists and supply
agreements
    
    
    14
    
    
    
    8,505
    
    
    
    5,431
    
    
    
    11,040
    
    
    
    7,604$
    20,287
    
    
    $
    13,676
    
    
    $
    24,567
    
    
    $
    17,250
  6.
    
    Hedging Transactions:
   7.
    
    Fair Value Measurements:
     Page 11




---



##### Table of Contents



Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    TotalMoney market funds
    
    $
    28,418
    
    
    $
    
    
    
    $
    
    
    
    $
    28,418Student loan auction-rate securities
    
    
    
    
    
    
    
    
    
    
    6,711
    
    
    
    6,711UBS Auction-Rate Security Rights
    
    
    
    
    
    
    
    
    
    
    562
    
    
    
    562Total
    
    $
    28,418
    
    
    $
    
    
    
    $
    7,273
    
    
    $
    35,691
  Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    TotalMoney market funds
    
    $
    39,415
    
    
    $
    
    
    
    $
    
    
    
    $
    39,415Student loan auction-rate securities
    
    
    
    
    
    
    
    
    
    
    6,708
    
    
    
    6,708UBS Auction-Rate Security Rights
    
    
    
    
    
    
    
    
    
    
    577
    
    
    
    577Total
    
    $
    39,415
    
    
    $
    
    
    
    $
    7,285
    
    
    $
    46,700
  Page 12




---



##### Table of Contents



Student loan
    
    
    UBS Auctionauction-rate
    
    
    Rate Securitysecurities
    
    
    Rights
    
    
    Total Level 3Balance at September 30, 2009
    
    $
    6,708
    
    
    $
    577
    
    
    $
    7,285Unrealized gains (losses)
included in current period
earnings
    
    
    (26
    )
    
    
    11
    
    
    
    (15
    )Balance at December 31, 2009
    
    $
    6,682
    
    
    $
    588
    
    
    $
    7,270Unrealized gains (losses)
included in current period
earnings
    
    
    29
    
    
    
    (26
    )
    
    
    3Total at March 31, 2010
    
    $
    6,711
    
    
    $
    562
    
    
    $
    7,273
 Student loan
    
    
    UBS Auctionauction-rate
    
    
    Rate Securitysecurities
    
    
    Rights
    
    
    Total Level 3Balance at September 30, 2008
    
    $
    7,480
    
    
    $
    
    
    
    $
    7,480Acquire UBS Auction Rate Security Rights
    
    
    
    
    
    
    660
    
    
    
    660Proceeds from redemptions of auction-rate securities
    
    
    (425
    )
    
    
    
    
    
    
    (425
    )Unrealized gains (losses) included in current
period earnings
    
    
    (494
    )
    
    
    
    
    
    
    (494
    )Balance at December 31, 2008
    
    $
    6,561
    
    
    $
    660
    
    
    $
    7,221Unrealized gains (losses) included in current
period earnings
    
    
    34
    
    
    
    (150
    )
    
    
    (116
    )Total at March 31, 2009
    
    $
    6,595
    
    
    $
    510
    
    
    $
    7,105
 
 ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Refer to Forward Looking Statements following the Index in front of this Form 10-Q. In the
discussion that follows, all amounts are in thousands (both tables and text), except per share data
and percentages.
 Overview
   H. pylori C. difficile
 Group Purchasing Organizations
   Page 13




---



##### Table of Contents



Upper Respiratory Products
    Foodborne Products
 Card ® TM Card ®
 C. difficileProducts
 C. difficile
 C. difficile st C. difficile
 C. difficile
 illumi gene TM C. difficile C. difficile illumi gene TM
 H. pyloriProducts
 H. pylori
 Life Science
   Page 14




---



##### Table of Contents



Significant Customers
   Foreign Currency
  Operating Segment Revenues
    Page 15




---



##### Table of Contents



Three Months Ended March 31
    
    
    Six Months Ended March 312010
    
    
    2009
    
    
    Inc (Dec)
    
    
    2010
    
    
    2009
    
    
    Inc (Dec)US Diagnostics
    
    $
    18,193
    
    
    $
    21,461
    
    
    
    -15
    %
    
    $
    48,897
    
    
    $
    44,946
    
    
    
    +9
    %European Diagnostics
    
    
    6,591
    
    
    
    6,599
    
    
    
    
    %
    
    
    12,885
    
    
    
    12,270
    
    
    
    +5
    %Life Science
    
    
    6,363
    
    
    
    5,220
    
    
    
    +22
    %
    
    
    11,822
    
    
    
    10,357
    
    
    
    +14
    %Consolidated
    
    $
    31,147
    
    
    $
    33,280
    
    
    
    -6
    %
    
    $
    73,604
    
    
    $
    67,573
    
    
    
    +9
    %International -US Export
    
    $
    1,248
    
    
    $
    1,599
    
    
    
    -22
    %
    
    $
    2,977
    
    
    $
    2,696
    
    
    
    +10
    %Life Science Export
    
    
    2,792
    
    
    
    2,117
    
    
    
    +32
    %
    
    
    5,252
    
    
    
    4,487
    
    
    
    +17
    %European Diagnostics
    
    
    6,591
    
    
    
    6,599
    
    
    
    
    %
    
    
    12,885
    
    
    
    12,270
    
    
    
    +5
    %Total
    
    $
    10,631
    
    
    $
    10,315
    
    
    
    +3
    %
    
    $
    21,114
    
    
    $
    19,453
    
    
    
    +9
    %% of total sales
    
    
    34
    %
    
    
    31
    %
    
    
    
    
    
    
    29
    %
    
    
    29
    %
 Gross Profit
 Three Months Ended March 31,
    
    
    Six Months Ended March 31,2010
    
    
    2009
    
    
    Inc (Dec)
    
    
    2010
    
    
    2009
    
    
    Inc (Dec)Gross Profit
    
    $
    20,167
    
    
    $
    20,974
    
    
    
    -4
    %
    
    $
    45,652
    
    
    $
    44,318
    
    
    
    +3
    %Gross Profit Margin
    
    
    65
    %
    
    
    63
    %
    
    +2 points
    %
    
    
    62
    %
    
    
    66
    %
    
    -4 points
    %
  ® ®
   Page 16




---



##### Table of Contents



Operating Expenses
 Three months ended March 31
    
    
    Six months ended March 31Total
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    TotalResearch &
    
    
    Sales &
    
    
    General &
    
    
    Operating
    
    
    Research &
    
    
    Sales &
    
    
    General &
    
    
    OperatingDevelopment
    
    
    Marketing
    
    
    Administrative
    
    
    Expenses
    
    
    Development
    
    
    Marketing
    
    
    Administrative
    
    
    Expenses2009 Expenses
    
    $
    2,339
    
    
    $
    3,975
    
    
    $
    3,655
    
    
    $
    9,969
    
    
    $
    4,403
    
    
    $
    8,942
    
    
    $
    7,810
    
    
    $
    21,155% of Sales
    
    
    7
    %
    
    
    12
    %
    
    
    11
    %
    
    
    30
    %
    
    
    7
    %
    
    
    13
    %
    
    
    12
    %
    
    
    31
    %Fiscal 2010 Increases
(Decreases):US Diagnostics
    
    
    (221
    )
    
    
    247
    
    
    
    476
    
    
    
    502
    
    
    
    (326
    )
    
    
    241
    
    
    
    1,089
    
    
    
    1,004European Diagnostics
    
    
    
    
    
    
    16
    
    
    
    119
    
    
    
    135
    
    
    
    
    
    
    
    (16
    )
    
    
    156
    
    
    
    140Life Science
    
    
    197
    
    
    
    83
    
    
    
    156
    
    
    
    436
    
    
    
    316
    
    
    
    41
    
    
    
    115
    
    
    
    4722010 Expenses
    
    $
    2,315
    
    
    $
    4,321
    
    
    $
    4,406
    
    
    $
    11,042
    
    
    $
    4,393
    
    
    $
    9,208
    
    
    $
    9,170
    
    
    $
    22,771% of Sales
    
    
    7
    %
    
    
    14
    %
    
    
    14
    %
    
    
    35
    %
    
    
    6
    %
    
    
    13
    %
    
    
    12
    %
    
    
    31
    %% Increase (Decrease)
    
    
    -1
    %
    
    
    +9
    %
    
    
    +21
    %
    
    
    +11
    %
    
    $
    
    %
    
    
    +3
    %
    
    
    +17
    %
    
    
    +8
    %
  illumi gene TM C. difficile
 illumi gene TM C. difficile
  Operating Income
  Other Income and Expense
   Page 17




---



##### Table of Contents



Income Taxes
  Liquidity and Capital Resources
 Comparative Cash Flow Analysis
     Capital Resources
     Page 18




---



##### Table of Contents



Other
 Healthcare Legislation
  
 ITEM 3.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 ITEM 4.
    
    CONTROLS AND PROCEDURES
  
 PART II. OTHER INFORMATION
 
 ITEM 1A.
    
    RISK FACTORS
  
 ITEM 4.
    
    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  (1)
    
    Election of the following six directors:
 James M. Anderson, 30,043,397 votes for, 292,999 votes withheld, 22,525 abstentions, and
6,077,337 broker non-votes.
 James A. Buzard, 26,387,455 votes for, 3,946,375 votes withheld, 25,090 abstentions, and
6,077,338 broker non-votes.
 John A. Kraeutler, 29,171,499 votes for, 1,168,909 votes withheld, 18,513 abstentions, and
6,077,337 broker non-votes.
 Gary P. Kreider, 25,417,792 votes for, 4,925,285 votes withheld, 15,843 abstentions, and
6,077,338 broker non-votes.
 William J. Motto, 28,771,305 votes for, 1,570,600 votes withheld, 17,015 abstentions and
6,077,338 broker non-votes.
 David C. Phillips, 29,542,886 votes for, 800,410 votes withheld, 15,624 abstentions and
6,077,338 broker non-votes.
 Robert J. Ready, 28,961,810 votes for, 1,381,935 votes withheld, 15,174 abstentions, and
6,077,339 broker non-votes.
 (2)
    
    Ratification of the appointment of Grant Thornton LLP as Meridians independent registered
public accounting firm
for fiscal 2010: 36,291,603 votes for, 53,113 votes against, and 91,542 abstentions.
  Page 19




---



##### Table of Contents



ITEM 6.
    
    EXHIBITS
 31.1 
    
    Certification of Principal Executive Officer Pursuant to Securities Exchange Act Rule
13a-14(a)/15d-14(a)31.2 
    
    Certification of Principal Financial Officer Pursuant to Securities Exchange Act Rule
13a-14(a)/15d-14(a)32 
    
    Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18
U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
  Page 20




---



##### Table of Contents



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 thereunto duly authorized.
 MERIDIAN BIOSCIENCE, INC.Date: May 7, 2010
    
    /s/ Melissa Lueke

Melissa LuekeExecutive Vice President and 
Chief Financial Officer
  Page 21