8.
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Bank Credit Arrangements
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In March 2016, the Company entered into a $60,000 five-year term loan with a commercial bank. The term loan requires quarterly principal and interest payments,
with interest at a variable rate tied to LIBOR, and a balloon principal payment due March 31, 2021. The required principal payments on the term loan for each of the remaining fiscal years are as follows: remainder of fiscal 2019 $4,125,
fiscal 2020 $6,000, and fiscal 2021 $39,000. In light of the term loans interest being determined on a variable rate basis, the fair value of the term loan at December 31, 2018 approximates the current carrying value
reflected in the accompanying Condensed Consolidated Balance Sheet.
In order to limit exposure to volatility in the LIBOR interest rate, the Company and
the commercial bank also entered into an interest rate swap that effectively converts the variable interest rate on the term loan to a fixed rate of 2.76%. With an initial notional balance of $60,000, the interest rate swap was established with
critical terms identical to those of the term loan, including: (i) notional reduction amounts and dates; (ii) LIBOR settlement rates; (iii) rate reset dates; and (iv) term/maturity. Due to this, the interest rate swap has been
designated as an effective cash flow hedge, with changes in fair value reflected as a separate component of other comprehensive income in the accompanying Condensed Consolidated Statements of Comprehensive Income. At December 31, 2018 and
September 30, 2018, the fair value of the interest rate swap was $1,145 and $1,722, respectively, and is reflected as a
non-current
asset in the accompanying Condensed Consolidated Balance Sheets. This
fair value was determined by information provided by the counterparty, and is considered a Level 2 input within the fair value hierarchy of valuation techniques.
In addition, the Company maintains a $30,000 revolving credit facility with a commercial bank, which expires March 31, 2021. There were no borrowings
outstanding on this credit facility at December 31, 2018 or September 30, 2018.
The term loan and the revolving credit facility are
collateralized by the business assets of the Companys U.S. subsidiaries and require compliance with financial covenants that limit the amount of debt obligations and require a minimum level of coverage of fixed charges, as defined in the
borrowing agreement. As of December 31, 2018, the Company is in compliance with all covenants. The Company is also required to maintain a compensating cash balance with the bank in the amount of $1,000, and is in compliance with this
requirement.
9.
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Reportable Segment and Major Customers Information
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Meridian was formed in 1976 and functions as a fully-integrated life science company with principal businesses in: (i) the development, manufacture, sale
and distribution of diagnostic test kits, primarily for certain gastrointestinal and respiratory infectious diseases, and elevated blood lead levels; and (ii) the manufacture and distribution of bulk antigens, antibodies, PCR/qPCR reagents,
nucleotides, competent cells, and bioresearch reagents used by researchers and other diagnostic manufacturers.
Our reportable segments are Diagnostics
and Life Science. The Diagnostics segment consists of manufacturing operations for infectious disease products in Cincinnati, Ohio, and manufacturing operations for blood chemistry products in Billerica, Massachusetts (near Boston), and the sale and
distribution of diagnostics products domestically and abroad. This segments products are used by hospitals, reference labs and physician offices to detect infectious diseases and elevated lead levels in blood.
The Life Science segment consists of manufacturing operations in Memphis, Tennessee; Boca Raton, Florida; London, England; and Luckenwalde, Germany, and the
sale and distribution of bulk antigens, antibodies, PCR/qPCR reagents, nucleotides, competent cells, and bioresearch reagents domestically and abroad, including a sales and business development facility in Beijing, China to further pursue growing
revenue opportunities in Asia. This segments products are used by manufacturers and researchers in a variety of applications (e.g.,
in-vitro
medical device manufacturing, microRNA detection,
next-gen
sequencing, plant genotyping, and mutation detection, among others).
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