QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered | ||
☒ |
Accelerated filer | ☐ | ||||
Non-accelerated filer | ☐ | Smaller reporting company | ||||
Emerging growth company |
Class |
Outstanding January 31, 2022 | |
Common Stock, no par value |
Page(s) |
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PART I. |
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Item 1. |
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1 |
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2 |
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3 |
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4-5 |
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6 |
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7-16 |
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Item 2. |
16-23 |
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Item 3. |
23 |
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Item 4. |
23 |
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PART II. |
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Item 1. |
24 |
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Item 1A. |
24 |
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Item 6. |
24 |
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25 |
Three Months Ended December 31, |
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2021 |
2020 |
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NET REVENUES |
$ | $ | ||||||
COST OF SALES |
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GROSS PROFIT |
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OPERATING EXPENSES |
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Research and development |
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Selling and marketing |
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General and administrative |
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Selected legal costs |
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Change in fair value of acquisition consideration |
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Total operating expenses |
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OPERATING INCOME |
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OTHER INCOME (EXPENSE) |
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Interest income |
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Interest expense |
( |
) | ( |
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RADx grant income |
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Other, net |
( |
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Total other expense, net |
( |
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EARNINGS BEFORE INCOME TAXES |
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INCOME TAX PROVISION |
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NET EARNINGS |
$ | $ | ||||||
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BASIC EARNINGS PER COMMON SHARE |
$ | $ | ||||||
DILUTED EARNINGS PER COMMON SHARE |
$ | $ | ||||||
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - BASIC |
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EFFECT OF DILUTIVE STOCK OPTIONS AND RESTRICTED SHARE UNITS |
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WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - DILUTED |
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ANTI-DILUTIVE SECURITIES: |
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Common share options and restricted share units |
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Three Months Ended December 31, |
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2021 |
2020 |
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NET EARNINGS |
$ | $ | ||||||
Other comprehensive (loss) income: |
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Foreign currency translation adjustment |
( |
) | ||||||
Unrealized gain on cash flow hedge |
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Reclassification of amortization of gain on cash flow hedge |
( |
) | ||||||
Income taxes related to items of other comprehensive (loss) income |
( |
) | ||||||
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Other comprehensive income, net of tax |
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COMPREHENSIVE INCOME |
$ | $ | ||||||
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Three Months Ended December 31, |
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2021 |
2020 |
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CASH FLOWS FROM OPERATING ACTIVITIES |
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Net earnings |
$ | |
$ | |
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Non-cash items included in net earnings: |
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Depreciation of property, plant and equipment |
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Amortization of intangible assets |
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Stock-based compensation |
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Deferred income taxes |
( |
) | ||||||
Change in fair value of acquisition consideration |
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Change in the following: |
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Accounts receivable |
( |
) | ||||||
Inventories |
( |
) | ||||||
Prepaid expenses and other current assets |
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Accounts payable and accrued expenses |
( |
) | ||||||
Income taxes payable |
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Other, net |
( |
) | ||||||
Net cash provided by operating activities |
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CASH FLOWS FROM INVESTING ACTIVITIES |
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Purchase of property, plant and equipment |
( |
) | ( |
) | ||||
Payment of acquisition consideration holdback |
( |
) | ||||||
Net cash used in investing activities |
( |
) | ( |
) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES |
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Payment on revolving credit facility |
( |
) | ( |
) | ||||
Payment of deferred financing costs |
( |
) | ||||||
Proceeds from exercise of stock options |
— |
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Employee taxes paid upon net share settlement of restricted share units |
( |
) | ||||||
Net cash used in financing activities |
( |
) | ( |
) | ||||
Effect of Exchange Rate Changes on Cash and Cash Equivalents |
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Net Increase in Cash and Cash Equivalents |
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Cash and Cash Equivalents at Beginning of Period |
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Cash and Cash Equivalents at End of Period |
$ | $ | ||||||
December 31, 2021 (Unaudited) |
September 30, 2021 |
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CURRENT ASSETS |
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Cash and cash equivalents |
$ | $ | ||||||
Accounts receivable, less allowances of $ |
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Inventories, net |
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Prepaid expenses and other current assets |
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Total current assets |
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PROPERTY, PLANT AND EQUIPMENT, at Cost |
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Land |
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Buildings and improvements |
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Machinery, equipment and furniture |
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Construction in progress |
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Subtotal |
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Less: accumulated depreciation and amortization |
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Property, plant and equipment, net |
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OTHER ASSETS |
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Goodwill |
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Other intangible assets, net |
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Right-of-use |
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Deferred income taxes |
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Other assets |
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Total other assets |
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TOTAL ASSETS |
$ | $ | ||||||
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December 31, 2021 (Unaudited) |
September 30, 2021 |
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CURRENT LIABILITIES |
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Accounts payable |
$ | $ | ||||||
Accrued employee compensation costs |
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Accrued product recall costs |
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Acquisition consideration |
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Current operating lease obligations |
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Current government grant obligations |
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Other accrued expenses |
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Income taxes payable |
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Total current liabilities |
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NON-CURRENT LIABILITIES |
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Acquisition consideration |
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Post-employment benefits |
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Long-term operating lease obligations |
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Long-term debt |
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Government grant obligations |
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Long-term income taxes payable |
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Deferred income taxes |
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Other non-current liabilities |
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Total non-current liabilities |
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COMMITMENTS AND CONTINGENCIES |
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SHAREHOLDERS’ EQUITY |
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Preferred stock, |
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Common shares, issued and outstanding, respectively |
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Additional paid-in capital |
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Retained earnings |
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Accumulated other comprehensive income |
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Total shareholders’ equity |
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TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY |
$ | $ | ||||||
Common Shares |
Additional Paid-In Capital |
Retained Earnings |
Accumulated Other Comprehensive Income (Loss) |
Total Shareholders’ Equity |
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Balance at September 30, 2021 |
$ | $ | $ | $ | ||||||||||||||||
Conversion of restricted share units and exercise of stock options |
( |
) | — | — | ( |
) | ||||||||||||||
Stock compensation expense |
— | — | — | |||||||||||||||||
Net earnings |
— | — | — | |||||||||||||||||
Foreign currency translation adjustment |
— | — | — | ( |
) | ( |
) | |||||||||||||
Hedging activity, net of tax |
— | — | — | |||||||||||||||||
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Balance at December 31, 2021 |
$ | $ | $ | $ | ||||||||||||||||
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Balance at September 30, 2020 |
$ | $ | $ | ( |
) | $ | ||||||||||||||
Conversion of restricted share units and exercise of stock options |
( |
) | — | — | ( |
) | ||||||||||||||
Stock compensation expense |
— | — | — | |||||||||||||||||
Net earnings |
— | — | — | |||||||||||||||||
Foreign currency translation adjustment |
— | — | — | |||||||||||||||||
Hedging activity, net of tax |
— | — | — | ( |
) | ( |
) | |||||||||||||
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Balance at December 31, 2020 |
$ | $ | $ | $ | ||||||||||||||||
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1. |
Nature of Business |
2. |
Basis of Presentation |
3. |
Significant Accounting Policies |
(a) |
Recent Accounting Pronouncements – |
(b) |
Reclassifications – |
4. |
Revenue Recognition |
Three Months Ended December 31, |
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2021 |
2020 |
Inc (Dec) |
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Diagnostics- |
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Americas |
$ | $ | % | |||||||||
EMEA |
% | |||||||||||
ROW |
( |
)% | ||||||||||
Total Diagnostics |
% | |||||||||||
Life Science- |
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Americas |
( |
)% | ||||||||||
EMEA |
( |
)% | ||||||||||
ROW |
% | |||||||||||
Total Life Science |
( |
)% | ||||||||||
Consolidated |
$ | $ | ( |
)% | ||||||||
Three Months Ended December 31, |
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2021 |
2020 |
Inc (Dec) |
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Diagnostics- |
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Molecular assays |
$ | $ | % | |||||||||
Non-molecular assays |
% | |||||||||||
Total Diagnostics |
$ | $ | % | |||||||||
Life Science- |
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Molecular reagents |
$ | $ | ( |
)% | ||||||||
Immunological reagents |
% | |||||||||||
Total Life Science |
$ | $ | ( |
)% | ||||||||
Three Months Ended December 31, |
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2021 |
2020 |
Inc (Dec) |
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Diagnostics- |
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Gastrointestinal assays |
$ | $ | % | |||||||||
Respiratory illness assays |
% | |||||||||||
Blood chemistry assays |
( |
)% | ||||||||||
Other |
( |
)% | ||||||||||
Total Diagnostics |
$ | $ | % | |||||||||
5. |
Fair Value Measurements |
6. |
Business Combinations |
Three Months Ended December 31, |
2021 |
2020 |
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Net revenues |
$ | $ | ||||||
Net earnings |
7. |
Lead Testing Matters |
8. |
Cash and Cash Equivalents |
December 31, 2021 |
September 30, 2021 |
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Institutional money market funds |
$ | $ | ||||||
Cash on hand, unrestricted |
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Total |
$ | $ | ||||||
9. |
Inventories, Net |
December 31, 2021 |
September 30, 2021 |
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Raw materials |
$ | $ | ||||||
Work-in-process |
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Finished goods - instruments |
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Finished goods - kits and reagents |
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Total |
$ | $ | ||||||
10. |
Goodwill and Other Intangible Assets, Net |
December 31, 2021 |
September 30, 2021 |
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Gross Carrying Value |
Accumulated Amortization |
Gross Carrying Value |
Accumulated Amortization |
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Manufacturing technologies, core products and cell lines |
$ | $ | $ | $ | ||||||||||||
Trade names, licenses and patents |
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Customer lists, customer relationships and supply agreements |
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Non-compete agreements |
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Total |
$ | $ | $ | $ | ||||||||||||
11. |
Leasing Arrangements |
Three Months Ended December 31, |
2021 |
2020 |
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Lease costs within cost of sales |
$ | $ | ||||||
Lease costs within operating expenses |
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Right-of-use , obtained in exchange for operating lease liabilities |
December 31, 2021 |
September 30, 2021 |
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Weighted average remaining lease term |
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Average discount rate |
% | % |
2022 (represents remainder of fiscal year) |
$ | |||
2023 |
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2024 |
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2025 |
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2026 |
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Thereafter |
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Total lease payments |
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Less amount of lease payments representing interest |
( |
) | ||
Total present value of lease payments |
$ | |||
Three Months Ended December 31, |
2021 |
2020 |
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Cash paid for amounts included in the measurement of lease liabilities: |
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Operating cash flows from operating leases |
$ | $ | ||||||
12. |
Bank Credit Arrangements |
13. |
Contingent Obligations and Non-Current Liabilities |
December 31, 2021 |
September 30, 2021 |
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Current liabilities |
$ | $ | ||||||
Non-current liabilities |
$ | $ |
14. |
National Institutes of Health Contracts |
15. |
Reportable Segment and Major Customers Information |
Diagnostics |
Life Science |
Corporate (1) |
Eliminations (2) |
Total |
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Three Months Ended December 31, 2021 |
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Net revenues - |
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Third-party |
$ | $ | $ | — | $ | — | $ | |||||||||||||
Inter-segment |
— | ( |
) | — | ||||||||||||||||
Operating (loss) income |
( |
) | ( |
) | ||||||||||||||||
Goodwill (December 31, 2021) |
— | — | ||||||||||||||||||
Other intangible assets, net (December 31, 2021) |
— | — | ||||||||||||||||||
Total assets (December 31, 2021) |
— | ( |
) | |||||||||||||||||
Three Months Ended December 31, 2020 |
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Net revenues - |
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Third-party |
$ | $ | $ | — | $ | — | $ | |||||||||||||
Inter-segment |
— | ( |
) | — | ||||||||||||||||
Operating (loss) income |
( |
) | ( |
) | ||||||||||||||||
Goodwill (September 30, 2021) |
— | — | ||||||||||||||||||
Other intangible assets, net (September 30, 2021) |
— | — | ||||||||||||||||||
Total assets (September 30, 2021) |
— | ( |
) | |||||||||||||||||
(1) |
Includes selected legal costs of $ |
(2) |
Eliminations consist of inter-segment transactions. |
Three Months Ended December 31, |
2021 |
2020 |
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Operating (loss) income: |
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Diagnostics segment |
$ | ( |
) | $ | ( |
) | ||
Life Science segment |
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Eliminations |
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Total operating income |
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Corporate expenses |
( |
) | ( |
) | ||||
Interest income |
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Interest expense |
( |
) | ( |
) | ||||
RADx initiative grant income |
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Other, net |
( |
) | ( |
) | ||||
Consolidated earnings before income taxes |
$ | $ | ||||||
Three Months Ended December 31, |
2021 |
2020 |
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Diagnostics |
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Customer A |
% |
% | ||||||
Customer B |
% |
% | ||||||
Customer C |
% |
% | ||||||
Life Science |
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Customer D |
% |
% | ||||||
Customer E |
% |
% |
Three Months Ended December 31, |
2021 |
2020 |
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Life Science |
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Customer D |
% |
% | ||||||
Customer E |
% |
% |
16. |
Income Taxes |
17. |
Subsequent Event |
- | By Reportable Segment & Geographic Region |
- | By Product Platform/Type |
• | Volume growth in the gastrointestinal products benefitting from sales of the BreathTek product, acquired on July 31, 2021 (approximately $5,600 of net revenues from BreathTek in the first quarter of fiscal 2022); |
• | Volume growth in sales of respiratory illness products, comprised of tests for Group A Strep, Mycoplasma pneumonia, Influenza, and Pertussis, among others, reflecting an increase in the testing for these illnesses compared to the first quarter of fiscal 2021, despite the ongoing COVID-19 pandemic; and |
• | Volume declines from sales of blood chemistry products due to the ongoing LeadCare product recall, which commenced in May 2021 ($4,316 decrease in net revenues compared to the first quarter of fiscal 2021). |
Three Months Ended December 31, |
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2021 |
2020 |
Change |
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Gross Profit |
$ | 49,159 | $ | 61,548 | (20 | )% | ||||||
Gross Profit Margin |
56 | % | 66 | % | -10 points |
Research & Development |
Selling & Marketing |
General & Administrative |
Other |
Total Operating Expenses |
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Fiscal 2021 First Quarter: |
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Diagnostics |
$ | 5,070 | $ | 5,728 | $ | 5,748 | $ | 1,047 | $ | 17,593 | ||||||||||
Life Science |
581 | 1,293 | 3,454 | — | 5,328 | |||||||||||||||
Corporate |
— | — | 2,736 | 1,227 | 3,963 | |||||||||||||||
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Total 2021 First Quarter Expenses |
$ | 5,651 | $ | 7,021 | $ | 11,938 | $ | 2,274 | $ | 26,884 | ||||||||||
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Fiscal 2022 First Quarter: |
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Diagnostics |
$ | 5,556 | $ | 6,009 | $ | 7,143 | $ | — | $ | 18,708 | ||||||||||
Life Science |
638 | 1,732 | 4,161 | — | 6,531 | |||||||||||||||
Corporate |
— | — | 3,356 | 281 | 3,637 | |||||||||||||||
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Total 2022 First Quarter Expenses |
$ | 6,194 | $ | 7,741 | $ | 14,660 | $ | 281 | $ | 28,876 | ||||||||||
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• | Increased Research & Development costs, reflecting increased clinical trial spending and product development costs within our Diagnostics segment; |
• | Increased Selling & Marketing costs in both the Diagnostics and Life Science segments, primarily reflecting the effects of filling certain open positions and the easing of certain travel and meeting restrictions imposed during the prior year in connection with the COVID-19 pandemic; and |
• | Increased General & Administrative costs, primarily reflecting the combined effects of additional investment in incentive compensation, the timing of certain outside services costs and increased commercial insurance costs for Directors & Officers and Property & Casualty coverages. |
101.INS | Inline XBRL Instance Document | |
101.SCH | Inline XBRL Instance Extension Schema | |
101.CAL | Inline XBRL Instance Extension Calculation Linkbase | |
101.DEF | Inline XBRL Instance Extension Definition Linkbase | |
101.LAB | Inline XBRL Instance Extension Label Linkbase | |
101.PRE | Inline XBRL Instance Extension Presentation Linkbase | |
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
* | Management Compensatory Contracts |
+ | Certain portions of these exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The omitted information is not material and would likely cause competitive harm to the Registrant if publicly disclosed. The Registrant hereby agrees to furnish a copy of any omitted schedule or other portion to the SEC upon request. |
MERIDIAN BIOSCIENCE, INC. | ||||||
Date: February 4, 2022 |
By: | /s/ Julie Smith | ||||
Julie Smith | ||||||
Senior Vice President and Controller (Principal Accounting Officer) |