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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 December 31, 2007
 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.
 
  
  þ o
  o þ o
  o þ
  Class
    
    Outstanding January 31, 2008Common Stock, no par value
    
    40,079,848




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##### 



MERIDIAN BIOSCIENCE, INC. AND SUBSIDIARIES
INDEX TO QUARTERLY REPORT ON FORM 10-Q
 Page(s)PART I
    
    FINANCIAL INFORMATIONItem 1.
    
    Financial StatementsConsolidated Statements of Operations
Three Months Ended December 31, 2007 and 2006
    
    
    
    
    3Consolidated Statements of Cash Flows
Three Months Ended December 31, 2007 and 2006
    
    
    
    
    4Consolidated Balance Sheets
December 31, 2007 and September 30, 2007
    
    
    
    
    5-6Consolidated Statement of Changes in Shareholders Equity
Three Months Ended December 31, 2007
    
    
    
    
    7Notes to Consolidated Financial Statements
    
    
    
    
    8-13Item 2.
    
    Managements Discussion and Analysis of
Financial Condition and Results of Operations
    
    
    
    
    14-18Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    
    
    19Item 4.
    
    Controls and Procedures
    
    
    
    
    19PART II.
    
    OTHER INFORMATIONItem 1A.
    
    Risk Factors
    
    
    
    
    20Item 6.
    
    Exhibits
    
    
    
    
    20Signature
    
    
    
    
    
    
    
    
    21EX-3.1EX-31.1EX-31.2EX-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 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 any forward-looking statements. 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. 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 US dollar can
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. In addition to the factors described in this paragraph, Part I, Item 1A Risk
Factors contains a list of uncertainties and risks that may affect the financial performance of the
Company.
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MERIDIAN BIOSCIENCE, INC. AND SUBSIDIARIES
Consolidated Statements of Operations (Unaudited)
(in thousands, except per share data)
 Three Months Ended December 31
    
    2007
    
    2006NET SALES
    
    $
    33,847
    
    
    $
    28,720COST OF SALES
    
    
    12,095
    
    
    
    11,108GROSS PROFIT
    
    
    21,752
    
    
    
    17,612OPERATING EXPENSES:Research and development
    
    
    1,536
    
    
    
    1,315Selling and marketing
    
    
    4,690
    
    
    
    4,195General and administrative
    
    
    4,333
    
    
    
    4,044Total operating expenses
    
    
    10,559
    
    
    
    9,554OPERATING INCOME
    
    
    11,193
    
    
    
    8,058OTHER INCOME (EXPENSE):Interest income
    
    
    455
    
    
    
    395Interest expense
    
    
    
    
    
    
    (30
    )Other, net
    
    
    (80
    )
    
    
    64Total other income (expense)
    
    
    375
    
    
    
    429EARNINGS BEFORE INCOME TAXES
    
    
    11,568
    
    
    
    8,487INCOME TAX PROVISION
    
    
    4,112
    
    
    
    2,914NET EARNINGS
    
    $
    7,456
    
    
    $
    5,573BASIC EARNINGS PER COMMON SHARE
    
    $
    0.19
    
    
    $
    0.14DILUTED EARNINGS PER COMMON SHARE
    
    $
    0.18
    
    
    $
    0.14AVERAGE NUMBER OF COMMON SHARES OUTSTANDING  BASIC
    
    
    39,910
    
    
    
    39,284DILUTIVE COMMON SHARE OPTIONS
    
    
    1,057
    
    
    
    956AVERAGE NUMBER OF COMMON SHARES OUTSTANDING  DILUTED
    
    
    40,967
    
    
    
    40,240ANTI-DILUTIVE SECURITIES:Common share options
    
    
    2
    
    
    
    158Shares from convertible debentures
    
    
    
    
    
    
    231DIVIDENDS DECLARED PER COMMON SHARE
    
    $
    0.11
    
    
    $
    0.08
  Page 3 of 21




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MERIDIAN BIOSCIENCE, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
(dollars in thousands)
 Three Months Ended December 31
    
    2007
    
    2006CASH FLOWS FROM OPERATING ACTIVITIES:Net earnings
    
    $
    7,456
    
    
    $
    5,573Non-cash items:Depreciation of property, plant and equipment
    
    
    705
    
    
    
    684Amortization of intangible assets and deferred costs
    
    
    426
    
    
    
    409Stock based compensation
    
    
    273
    
    
    
    423Deferred income taxes
    
    
    (188
    )
    
    
    215Loss on disposition of fixed assets
    
    
    
    
    
    
    2Change in accounts receivable, inventory, and prepaid expenses
    
    
    1,863
    
    
    
    347Change in accounts payable, accrued expenses, and income
taxes payable
    
    
    (1,808
    )
    
    
    (2,918
    )Other
    
    
    (177
    )
    
    
    (132
    )Net cash provided by operating activities
    
    
    8,550
    
    
    
    4,603CASH FLOWS FROM INVESTING ACTIVITIES:Acquisitions of property, plant and equipment
    
    
    (736
    )
    
    
    (364
    )Acquisitions of license agreements
    
    
    
    
    
    
    (265
    )Proceeds from sales of short-term investments
    
    
    
    
    
    
    4,000Purchase of short-term investments
    
    
    (5,000
    )
    
    
    Net cash provided by (used for) investing activities
    
    
    (5,736
    )
    
    
    3,371CASH FLOWS FROM FINANCING ACTIVITIES:Dividends paid
    
    
    (4,392
    )
    
    
    (3,015
    )Proceeds and tax benefits from exercise of stock options
    
    
    598
    
    
    
    922Net cash used for financing activities
    
    
    (3,794
    )
    
    
    (2,093
    )Effect of Exchange Rate Changes on Cash and Equivalents
    
    
    90
    
    
    
    35Net Increase (Decrease) in Cash and Equivalents
    
    
    (890
    )
    
    
    5,916Cash and Equivalents at Beginning of Period
    
    
    49,400
    
    
    
    36,348Cash and Equivalents at End of Period
    
    $
    48,510
    
    
    $
    42,264
  Page 4 of 21




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MERIDIAN BIOSCIENCE, INC. AND SUBSIDIARIES
Consolidated Balance Sheets (Unaudited)
(dollars in thousands)
 ASSETS
 December 31,
    
    September 30,2007
    
    2007CURRENT ASSETS:Cash and equivalents
    
    $
    48,510
    
    
    $
    49,400Short term investments
    
    
    5,000
    
    
    
    Accounts receivable, less allowances of $223 and $258
    
    
    19,424
    
    
    
    22,651Inventories
    
    
    20,042
    
    
    
    18,171Prepaid expenses and other current assets
    
    
    1,971
    
    
    
    2,147Deferred income taxes
    
    
    1,485
    
    
    
    1,376Total current assets
    
    
    96,432
    
    
    
    93,745PROPERTY, PLANT AND EQUIPMENT:Land
    
    
    895
    
    
    
    890Buildings and improvements
    
    
    16,967
    
    
    
    16,907Machinery, equipment and furniture
    
    
    25,090
    
    
    
    24,619Construction in progress
    
    
    1,440
    
    
    
    1,290Subtotal
    
    
    44,392
    
    
    
    43,706Less: accumulated depreciation and amortization
    
    
    26,032
    
    
    
    25,395Net property, plant and equipment
    
    
    18,360
    
    
    
    18,311OTHER ASSETS:Goodwill
    
    
    9,965
    
    
    
    9,964Other intangible assets, net
    
    
    9,032
    
    
    
    9,457Restricted cash
    
    
    1,000
    
    
    
    1,000Other assets
    
    
    222
    
    
    
    221Total other assets
    
    
    20,219
    
    
    
    20,642TOTAL ASSETS
    
    $
    135,011
    
    
    $
    132,698
  Page 5 of 21




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MERIDIAN BIOSCIENCE, INC. AND SUBSIDIARIES
Consolidated Balance Sheets (Unaudited)
(dollars in thousands)
 LIABILITIES AND SHAREHOLDERS EQUITY
 December 31,
    
    September 30,2007
    
    2007CURRENT LIABILITIES:Accounts payable
    
    $
    4,374
    
    
    $
    4,704Accrued payroll costs
    
    
    4,116
    
    
    
    7,541Purchase business combination liability
    
    
    153
    
    
    
    152Other accrued expenses
    
    
    4,545
    
    
    
    4,008Income taxes payable
    
    
    2,436
    
    
    
    662Total current liabilities
    
    
    15,624
    
    
    
    17,067DEFERRED INCOME TAXES
    
    
    2,611
    
    
    
    2,683COMMITMENTS 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,
39,969,556 and 39,847,391 shares issued, respectively
    
    
    
    
    
    
    Additional paid-in capital
    
    
    83,146
    
    
    
    82,209Retained earnings
    
    
    33,134
    
    
    
    30,375Accumulated other comprehensive income
    
    
    496
    
    
    
    364Total shareholders equity
    
    
    116,776
    
    
    
    112,948TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
    
    $
    135,011
    
    
    $
    132,698
  Page 6 of 21




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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, 2007
    
    
    39,847
    
    
    $
    82,209
    
    
    $
    30,375
    
    
    $
    364
    
    
    
    
    
    
    $
    112,948Adoption of FASB Interpretation No. 48
    
    
    
    
    
    
    
    
    
    
    (305
    )
    
    
    
    
    
    
    
    
    
    
    (305
    )Dividends paid
    
    
    
    
    
    
    
    
    
    
    (4,392
    )
    
    
    
    
    
    
    
    
    
    
    (4,392
    )Exercise of stock options, net of tax
    
    
    122
    
    
    
    664
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    664Stock based compensation
    
    
    
    
    
    
    273
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    273Comprehensive income:Net earnings
    
    
    
    
    
    
    
    
    
    
    7,456
    
    
    
    
    
    
    $
    7,456
    
    
    
    7,456Hedging activity
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (75
    )
    
    
    (75
    )
    
    
    (75
    )Other comprehensive income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (74
    )
    
    
    (74
    )
    
    
    (74
    )Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    281
    
    
    
    281
    
    
    
    281Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    7,588Balance at December 31, 2007
    
    
    39,969
    
    
    $
    83,146
    
    
    $
    33,134
    
    
    $
    496
    
    
    
    
    
    
    $
    116,776
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MERIDIAN BIOSCIENCE, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
 1. Basis of Presentation:
     2. Significant Accounting Policies
 (a) Revenue Recognition 
  Revenue Arrangements with Multiple
Deliverables
 Page 8 of 21




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(b) Comprehensive Income 
    Three MonthsEnded December 31,2007
    
    2006Net earnings
    
    $
    7,456
    
    
    $
    5,573Hedging activity
    
    
    (75
    )
    
    
    (39
    )Income taxes
    
    
    (74
    )
    
    
    (84
    )Foreign currency translation adjustment
    
    
    281
    
    
    
    275Comprehensive income
    
    $
    7,588
    
    
    $
    5,725
 (c) Income Taxes 
  Accounting for Uncertainty in
Income Taxes
 Page 9 of 21




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(d) Stock-based Compensation 
 Share-Based Payment
 (e) Cash equivalents 
  (f) Short-term investments 
 Accounting
for Certain Investments in Debt and Equity Securities
 (g) Derivative financial instruments 
 Accounting for Derivative Instruments and Hedging Activities
 Page 10 of 21




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(h) Reclassifications 
  (i) New Accounting Pronouncements 
 Business Combinations
 3. Inventories :
  December 31,
    
    September 30,2007
    
    2007Raw materials
    
    $
    6,112
    
    
    $
    4,816Work-in-process
    
    
    4,536
    
    
    
    5,141Finished goods
    
    
    9,394
    
    
    
    8,214$
    20,042
    
    
    $
    18,171
 Accounting Changes and Error Corrections
 4. Major Customers and Segment Information
  Page 11 of 21




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US
    
    EuropeanDiagnostics
    
    Diagnostics
    
    Life Science
    
    Eliminations(1)
    
    TotalThree Months December 31, 2007Net sales-Third-party
    
    $
    22,219
    
    
    $
    6,099
    
    
    $
    5,529
    
    
    $
    
    
    
    $
    33,847Inter-segment
    
    
    2,300
    
    
    
    
    
    
    
    142
    
    
    
    (2,442
    )
    
    
    Operating income
    
    
    8,936
    
    
    
    1,159
    
    
    
    991
    
    
    
    107
    
    
    
    11,193Total assets (December 31, 2007)
    
    
    117,657
    
    
    
    14,852
    
    
    
    46,256
    
    
    
    (43,754
    )
    
    
    135,011Three Months December 31, 2006Net sales-Third-party
    
    $
    18,954
    
    
    $
    5,255
    
    
    $
    4,511
    
    
    $
    
    
    
    $
    28,720Inter-segment
    
    
    2,220
    
    
    
    
    
    
    
    269
    
    
    
    (2,489
    )
    
    
    Operating income
    
    
    7,091
    
    
    
    976
    
    
    
    34
    
    
    
    (43
    )
    
    
    8,058Total assets (September 30, 2007)
    
    
    115,297
    
    
    
    13,600
    
    
    
    45,410
    
    
    
    (41,609
    )
    
    
    132,698
 (1)
    
    Eliminations consist of intersegment transactions.  Page 12 of 21




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5. Intangible Assets:
  December 31, 2007
    
    September 30, 2007Wtd Avg Amort
    
    Gross
    
    Accumulated
    
    
    
    
    
    AccumulatedPeriod (Yrs)
    
    Carrying Value
    
    Amortization
    
    Gross Carrying Value
    
    AmortizationCore products and cell lines
    
    
    15
    
    
    $
    4,698
    
    
    $
    2,385
    
    
    $
    4,698
    
    
    $
    2,313Manufacturing technologies
    
    
    15
    
    
    
    5,907
    
    
    
    4,178
    
    
    
    5,907
    
    
    
    4,089Trademarks, licenses and patents
    
    
    12
    
    
    
    2,270
    
    
    
    1,730
    
    
    
    2,270
    
    
    
    1,694Customer lists and supply agreements
    
    
    13
    
    
    
    10,644
    
    
    
    6,194
    
    
    
    10,641
    
    
    
    5,963$
    23,519
    
    
    $
    14,487
    
    
    $
    23,516
    
    
    $
    14,059
  6. Hedging Transactions:
   Notional
    
    Contract
    
    Estimated Fair
    
    AverageAmount
    
    Value
    
    Value
    
    Exchange Rate
    
    Maturity3,600
    
    $
    4,958
    
    
    $
    5,252
    
    
    
    1.3772
    
    
    FY 2008900
    
    $
    1,289
    
    
    $
    1,309
    
    
    
    1.4322
    
    
    FY 2009
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Refer to Forward Looking Statements following the Index in front of this Form 10-Q.
 Overview:
  ® Card ® E. coli ®
 C difficile H. pylori C. difficile H. pylori H. pylori
  Page 14 of 21




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Operating Segments:
   Results of Operations:
 Three Months Ended December 31, 2007 Compared to Three Months Ended December 31, 2006
 Net sales
  C. difficile H. pylori C. difficile H. pylori Card ®
 C. difficile H. pylori
 Page 15 of 21




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Gross Profit
   Operating Expenses
    Page 16 of 21




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Operating Income
  Other Income and Expense
  Income Taxes
  Accounting for Uncertainty in
Income Taxes
 Liquidity and Capital Resources:
 Comparative Cash Flow Analysis
  Page 17 of 21




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Capital Resources
     Page 18 of 21




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Page 19 of 21




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PART II. OTHER INFORMATION
 
   
       Page 20 of 21




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MERIDIAN BIOSCIENCE, INC.Date: February 11, 2008
    /s/ Melissa LuekeMelissa LuekeVice President and Chief Financial Officer Page 21 of 21