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.

Following is a discussion and analysis of the financial statements and other statistical data that management believes will enhance the understanding of Meridian's financial condition, changes in financial condition and results of operations. This discussion should be read in conjunction with the financial statements and notes thereto beginning on page 1.

Results of Operations

Three Months Ended June 30, 2012

Net earnings for the third quarter of fiscal 2012 increased 26% to $8,594, or $0.21 per diluted share, from net earnings for the third quarter of fiscal 2011 of $6,836, or $0.17 per diluted share. This increase reflects the combined effects of increased sales and stable operating expense levels. The fiscal 2012 third quarter includes $366 of costs associated with the consolidation of the Saco, Maine operations into the Memphis, Tennessee facility (impact on earnings of $238, or less than $0.01 per diluted share). Consolidated sales increased 5% to $42,141 for the third quarter of fiscal 2012 compared to the same period of the prior year. Sales increases in our C. difficile and Foodborne diagnostic focus product families, and our Life Science businesses, contributed to this increase, while sales in our H. pylori focus product family were flat compared to the fiscal 2011 third quarter.

Sales for the U.S. Diagnostics segment for the third quarter of fiscal 2012 increased 10% compared to the third quarter of fiscal 2011, reflecting growth across all of our focus product families - 6% growth in our H. pylori products, 9% growth in our foodborne products, and 25% growth in our C. difficile products. Third quarter 2012 sales for our European Diagnostics segment decreased 11% compared to the third quarter of fiscal 2011. On an organic basis, which excludes the effects of currency translation, sales of our European Diagnostics segment were flat compared to the 2011 third quarter. Solid 10% growth in European sales of our C. difficile products - resulting in large part from the continued acceptance of our C. difficile GDH product, which was introduced internationally during the first quarter of fiscal 2011 - served to offset a decrease in H. pylori and foodborne product sales within this segment. Primarily reflecting growth in our molecular reagent business, sales of our Life Science segment increased by 4% during the third quarter of fiscal 2012 compared to the third quarter of fiscal 2011.

Nine Months Ended June 30, 2012

For the nine month period ended June 30, 2012, net earnings increased 23% to $24,798, or $0.60 per diluted share, from net earnings for the comparable fiscal 2011 period of $20,121, or $0.49 per diluted share. This increase reflects the combined effects of increased sales and stable operating expense levels. The 2012 year-to-date period includes $1,013 of costs associated with the consolidation of the Saco, Maine operations into the Memphis, Tennessee facility (impact on earnings of $659, or $0.02 per diluted share), while the 2011 period includes $1,240 of costs related to the reorganization of our European and global sales and marketing leadership during the second quarter of fiscal 2011 (impact on earnings of $872 or $0.02 per diluted share). Consolidated sales increased 10% to $129,848 for the first nine months of fiscal 2012 compared to the same period of the prior fiscal year, reflecting increases in sales across all of our diagnostic focus product families: C. difficile, Foodborne and H. pylori, and our Life Science businesses.

During the first nine months of fiscal 2012, sales for the U.S. Diagnostics segment increased 11% from the comparable fiscal 2011 period. This increase reflects growth across all of our focus product families - 12% growth in our H. pylori products, 17% growth in our foodborne products and 30% growth in our C. difficile products. Sales of our European Diagnostics segment for the first nine months of fiscal 2012 decreased 3% compared to the first nine months of fiscal 2011. On an organic basis, which excludes the effects of currency translation, sales of our European Diagnostics segment increased 3% during the fiscal 2012 year-to-date period, reflecting growth in our C. difficile and H. pylori focus product families being partially offset by a decline in sales of our foodborne products. With growth in both its core bulk reagent and molecular reagent businesses, sales of our Life Science segment increased by 15% during the first nine months of fiscal 2012 over the comparable fiscal 2011 period.

Non-GAAP Information

The tables below provide information on net earnings, basic earnings per share and diluted earnings per share, excluding the effect of costs associated with the consolidation of our Saco, Maine operations into our Memphis, Tennessee facility (fiscal 2012) and the reorganizing of our sales and marketing leadership (fiscal 2011), each of which is a non-GAAP financial measure, as well as reconciliations to amounts reported under U.S. Generally Accepted Accounting Principles. We believe that this information is useful to those who read our financial statements and evaluate our operating results because:

1. These measures help to appropriately evaluate and compare the results of operations from period to period by removing the impact of non-routine costs related to consolidating the Maine operations (fiscal 2012) and reorganizing our sales and marketing leadership (fiscal 2011); and

2. These measures are used by our management for various purposes, including evaluating performance against incentive bonus achievement targets, comparing performance from period to period in presentations to our Board of Directors, and as a basis for strategic planning and forecasting.

                                                        Three Months               Nine Months
                                                       Ended June 30,             Ended June 30,
                                                     2012         2011          2012          2011
Net Earnings -
U.S. GAAP basis                                     $ 8,594      $ 6,836      $ 24,798      $ 20,121
Facility consolidation costs (1)                        238           -            659            -
Sales & marketing leadership reorganization (2)          -            -             -            872

Adjusted earnings                                   $ 8,832      $ 6,836      $ 25,457      $ 20,993

Net Earnings per Basic Common Share -
U.S. GAAP basis                                     $  0.21      $  0.17      $   0.60      $   0.49
Facility consolidation costs (1)                       0.01           -           0.02            -
Sales & marketing leadership reorganization (2)          -            -             -           0.02

Adjusted Basic EPS (3)                              $  0.21      $  0.17      $   0.62      $   0.52

Net Earnings per Diluted Common Share -
U.S. GAAP basis                                     $  0.21      $  0.17      $   0.60      $   0.49
Facility consolidation costs (1)                       0.01           -           0.02            -
Sales & marketing leadership reorganization (2)          -            -             -           0.02

Adjusted Diluted EPS (4)                            $  0.21      $  0.17      $   0.61      $   0.51

(1) These facility consolidation costs are net of income tax effects of $128 and $354 for the three and nine month periods, respectively, which were calculated using the effective tax rates of the jurisdictions in which the costs were incurred.

(2) These leadership reorganization costs are net of the $368 income tax effect for the nine month period, which was calculated using the effective tax rates of the jurisdictions in which the costs were incurred.

(3) Net Earnings per Basic Common Share for the three months ended June 30, 2012 and the nine months ended June 30, 2011 do not sum to the total due to rounding.

(4) Net Earnings per Diluted Common Share for the three and nine months ended June 30, 2012 do not sum to the total due to rounding.

Revenue Overview

Our Diagnostics segments provided the largest share of our consolidated revenues, 76% for the third quarters of both fiscal 2012 and fiscal 2011, and 76% and 77% for the first nine months of fiscal 2012 and 2011, respectively. Sales from our focus families (C. difficile, Foodborne and H. pylori) comprised 63% and 61% of our Diagnostics segments' revenues during the third quarters of fiscal 2012 and 2011, respectively, and 62% and 57% for the nine month periods ended June 30, 2012 and 2011, respectively.

Revenue for the fiscal 2012 third quarter for both of our Diagnostics segments combined increased 6%, reflecting growth in our foodborne (6%) and C. difficile (19%) product families, and flat sales in our H. pylori product family compared to the prior year quarter. Respiratory product sales, including influenza respiratory products, decreased 2%. On an organic basis, sales for our European Diagnostics segment were flat compared to the prior year third quarter, with the growth in our C. difficile product family being offset by sales declines in our H. pylori, foodborne and respiratory products.

For the first nine months of fiscal 2012, revenue for both of our Diagnostics segments combined increased 8% from the comparable fiscal 2011 period. This increase reflects growth across all of our focus product families - 7% growth in our H. pylori products, 15% growth in our foodborne products and 24% growth in our C. difficile products. Excluding the effects of currency translation, our European Diagnostics segment's sales during the nine months ended June 30, 2012 increased 3% relative to the comparable fiscal 2011 period, reflecting the combined effects of growth in our C. difficile and H. pylori product families, partially offset by a decline in the sales of our foodborne and respiratory products.

As an enterprise with global operations and markets, our business and financial performance are in part dependent upon global economic conditions, and we could be negatively impacted by a global, regional or national economic crisis, including sovereign risk in the event of deterioration in the credit worthiness of, or a default by, local governments. We are particularly susceptible to the economic conditions in countries where government-sponsored healthcare systems are the primary payers for healthcare, including those countries within the European Union that are reducing their public expenditures in an effort to achieve cost savings. While to-date such factors have not had a significant negative impact on our results or operations, we continue to monitor and plan for the potential impact of these global economic factors.

In addition, there have been a number of media reports questioning the longevity of the Euro currency, and whether certain countries might exit the Euro currency. We express no opinion on either of these matters. In the event that the Euro currency would completely dissolve, or in the event certain countries exited the Euro currency, the carrying value of our assets and liabilities in European countries where we have a direct presence could be materially affected as legacy currencies are re-implemented. We continue to monitor this situation and have begun to prepare contingency plans.

C. difficile Products

Our illumigene® molecular C. difficileproduct has now been available in markets around the world for over 24 months. Sales of this product were approximately $6,200 and $16,300 in the three and nine months ended June 30, 2012, respectively. We have approximately 900 customers providing service to in excess of 1,000 hospitals and laboratories worldwide. It generally takes a customer 60-90 days from purchase order placement to become revenue producing - a timeframe we are continually working to reduce. Our illumigene® molecular C. difficile product has restored the C. difficileproduct family to positive sales growth, 19% and 24% during the three and nine months ended June 30, 2012, respectively, and has allowed us to continue to recover lost toxin test volume.

Our major competitors in this product family are Cepheid and Becton Dickinson (molecular) and Alere (immunoassay). We believe that we have several principal advantages versus our competition. First, our molecular instrumentation package has a smaller footprint and significantly lower cost than either Cepheid or Becton Dickinson. We believe that this advantage allows our product to fit into virtually any size hospital or reference laboratory. We believe that our second principal advantage is the breadth of our C. difficile product offerings. With the launch of our molecular product and FDA clearance of our common antigen C. difficile products - Premier C. difficile GDH received FDA clearance in May 2011, and ImmunoCard C. difficile GDH received FDA clearance in December 2011 - unlike our primary competitors, we are in a position to offer a full line of testing solutions to our clinical laboratory customers around the world to counter the competitive pressures surrounding this market. Additionally, we hold the only FDA-approved claim for C. difficile testing in the pediatric population. These advantages, along with the performance features of the products in our C. difficile portfolio, give us a compelling product offering for any hospital testing method preference.

During December 2011, we received FDA clearance for our second molecular test for the illumigene® molecular platform, illumigene ® Group B Streptococcus (GBS). Our GBS test has been placed with over 100 customers, most of which are current C. difficile customers. During the quarter, we generated approximately $300 in GBS revenues; approximately $600 during the fiscal year-to-date nine month period. Regarding additional tests being developed for the platform: the test for Group A Streptococcus has cleared clinical trials and was submitted to the FDA for marketing clearance in July 2012; and the test for Mycoplasma pneumoniae is currently in clinical trials and is expected to be submitted to the FDA for marketing clearance later this year. Following these, we expect an illumigene®platform-based test for Bordetella pertussis to clear formal clinical trials and be submitted to the FDA for marketing clearance.

In addition to Cepheid, Becton Dickinson and Alere, other competitors are beginning to enter the C. difficile market. Quest Diagnostics and Great Basin recently received FDA clearance for a molecular C. difficile test and Quidel received CE marking approval for a molecular C. difficile test for sale within the European Union. Although we believe that the breadth of our C. difficile product offerings and our low cost molecular platform provide key advantages to the offerings of our competitors, selling prices may come under pressure as more competitors enter the market.

Foodborne Products

Although our foodborne products are marketed and sold on a global basis, most of our sales volume is within the U.S. Diagnostics segment. We continue to see demand increases in the United States, as laboratories realize the benefits of increased sensitivity and faster turnaround time with our tests for Enterohemorrhagic E. coli (EHEC) and Campylobacter, compared to traditional culture methods. Sales increases for these products within the U.S. Diagnostics segment were 9% and 17% for the three and nine month periods ended June 30, 2012, respectively.

H. pylori Products

During the third quarter of fiscal 2012, sales of our H. pylori products grew 6% for our U.S. Diagnostics segment; 12% during the nine month fiscal year-to-date period. This increase in our U.S. Diagnostics segment continues to reflect the benefits of our partnerships with managed care companies in promoting the health and economic benefits of a test and treat strategy, and the ongoing effects of such strategy moving physician behavior away from serology-based testing toward direct antigen testing. Compared to the third quarter of fiscal 2011, sales of H. pylori products for our European Diagnostics segment declined 3% on an organic basis for the third quarter of fiscal 2012, due in large part to order patterns of certain distributors. Such sales grew 3% for the year-over-year nine month periods ended June 30.

Group Purchasing Organizations and Integrated Delivery Networks

In our U.S. Diagnostics segment, consolidation of the U.S. healthcare industry over the last several years has led to the creation of group purchasing organizations (GPOs) and integrated delivery networks (IDNs) that aggregate buying power for hospital groups and put pressure on our selling prices. We have multi-year supply agreements with several GPOs and IDNs. These agreements help secure our products with these customers and lead to new business.

Life Science Segment

Sales for our Life Science segment increased 4% for the third quarter of fiscal 2012 and 15% for the nine month fiscal year-to-date period, reflecting increases in both our core bulk reagent business (1% quarterly and 16% year-to-date) and our molecular reagent business (9% quarterly and 13% year-to-date). The year-to-date increase in the core bulk reagent business largely results from the completion of certain contract manufacturing projects and increased orders for Rubella and Hepatitis A proteins. Our molecular reagent business, operated through our Bioline Group, continues to benefit from its new product launches and advancements during recent months - most notably its new SensiFAST™ and MyTaq™ PCR components. Revenues for our Life Science segment are inherently dependent upon customer order patterns and timing of contract manufacturing work. We expect revenues for the fourth quarter of fiscal 2012 to be in the range of $9,000 to $10,000.

Foreign Currency

During the third quarter of fiscal 2012, currency exchange rates had an approximate $800 unfavorable impact on revenue; $650 within the European Diagnostics segment and $150 in the Life Science segment. This compares to currency exchange having an approximate $650 favorable impact on revenue in the third quarter of fiscal 2011. On a nine month year-to-date basis, currency exchange rates had an approximate $1,040 unfavorable impact on fiscal 2012 revenue; $890 within the European Diagnostics segment and $150 in the Life Science segment. This compares to currency exchange having an approximate $165 favorable impact on revenue in the first nine months of fiscal 2011.

The volatility in the Euro-USD exchange rate increased significantly during the quarter, and this may continue into the foreseeable future until such time as the sovereign debt crisis situation in Europe is resolved. Each one-point decline in the Euro-USD exchange rate (e.g., 1.28 to 1.27) negatively affects the revenues of our European Diagnostics segment by approximately $170. However, we would not expect such exchange rate fluctuations to have a significant impact on operating income. This results from the fact that we are also exposed to foreign currency risk related to the supply of certain European-manufactured diagnostic test kits, which serves to provide a natural hedge against the impact on European Diagnostics revenue.

Significant Customers

Two national distributors in our U.S. Diagnostics segment accounted for 48% and 47% of total sales for this segment for the third quarters of fiscal 2012 and 2011, respectively, and 49% and 50% during the nine months ended June 30, 2012 and 2011, respectively.

Two diagnostic manufacturing customers in our Life Science segment accounted for 11% and 15% of total sales for this segment for the third quarters of fiscal 2012 and 2011, respectively, and 20% and 14% during the nine months ended June 30, 2012 and 2011, respectively. The fluctuation in the percentage of sales in both periods reflects the inherent volatility in the buying patterns of these customers.

Segment Revenues

Our reportable segments are U.S. Diagnostics, European Diagnostics and Life Science. Initial segmentation between Diagnostics and Life Science has been determined based upon products and customers, with further segmentation of Diagnostics between U.S. and European being based upon geographic regions served and management responsibility. The U.S. Diagnostics segment consists of manufacturing operations in Cincinnati, Ohio, and the sale and distribution of diagnostic test kits in the U.S. and countries outside of Australia, Europe, Africa and the Middle East. The European Diagnostics segment consists of the sale and distribution of diagnostic test kits in Australia, Europe, Africa and the Middle East. The Life Science segment consists of manufacturing operations in Memphis, Tennessee; Boca Raton, Florida; London, England; Luckenwalde, Germany; and Sydney, Australia, and the sale and distribution of bulk antigens, antibodies, PCR/qPCR reagents, nucleotides, competent cells and bioresearch reagents domestically and abroad. The Life Science segment also includes the contract development and manufacture of cGMP clinical grade proteins and other biologicals for use by biopharmaceutical and biotechnology companies engaged in research for new drugs and vaccines.

Revenues for the Diagnostics segments, in the normal course of business, may be affected from quarter to quarter by buying patterns of major distributors, seasonality and strength of certain diseases, and foreign currency exchange rates. Revenues for the Life Science segment, in the normal course of business, may be affected from quarter to quarter by the timing and nature of arrangements for contract services work, which may have longer production cycles than bioresearch reagents and bulk antigens and antibodies, as well as buying patterns of major customers, and foreign currency exchange rates. We believe that the overall breadth of our product lines serves to reduce the variability in consolidated revenues.

Revenues for each of our segments are shown below.

                                              Three Months Ended June 30,                      Nine Months Ended June 30,
                                          2012            2011         Inc (Dec)           2012           2011         Inc (Dec)
U.S. Diagnostics                       $   26,234       $ 23,829               10 %     $   80,091      $  72,007              11 %
European Diagnostics                        5,897          6,612              (11 )%        18,326         18,926              (3 )%
Life Science                               10,010          9,611                4 %         31,431         27,441              15 %

Consolidated                           $   42,141       $ 40,052                5 %     $  129,848      $ 118,374              10 %

International -
U.S. Diagnostics                       $    1,420       $  1,845              (23 )%    $    4,637      $   5,058              (8 )%
European Diagnostics                        5,897          6,612              (11 )%        18,326         18,926              (3 )%
Life Science                                5,737          5,365                7 %         18,535         15,238              22 %

Total                                  $   13,054       $ 13,822               (6 )%    $   41,498      $  39,222               6 %

% of total sales                               31 %           35 %                              32 %           33 %

Gross Profit



                                             Three Months Ended June 30,                 Nine Months Ended June 30,
                                         2012          2011          Change           2012           2011        Change
Gross Profit                           $ 27,643      $ 25,351                9 %    $  82,126      $ 74,810           10 %
Gross Profit Margin                          66 %          63 %      +3 points             63 %          63 %       None

The overall gross profit margin increase for the third quarter of fiscal 2012 results primarily from the combined effects of the mix of products sold, as well as the mix of sales from the Company's segments.

Our overall operations consist of the sale of diagnostic test kits for various disease states and in alternative test formats, as well as bioresearch reagents, bulk antigens, antibodies, PCR/qPCR reagents, nucleotides, competent cells, proficiency panels, contract research and development, and contract manufacturing services. Product sales mix shifts, in the normal course of business, can cause the consolidated gross profit margin to fluctuate by several points.

Operating Expenses



                                                                          Three Months Ended June 30, 2012
                                        Research &            Selling &             General &                                 Total Operating
                                        Development           Marketing          Administrative           Other (1)              Expenses
2011 Expenses                          $       2,693         $     5,968         $         6,559         $        -          $          15,220

% of Sales                                         7 %                15 %                    16 %                -  %                      38 %
Fiscal 2012 Increases (Decreases):
U.S. Diagnostics                                 (30 )              (274 )                  (124 )                -                       (428 )
European Diagnostics                              -                  (89 )                   182                  -                         93
Life Science                                      (3 )               238                    (455 )               366                       146

2012 Expenses                          $       2,660         $     5,843         $         6,162         $       366         $          15,031

% of Sales                                         6 %                14 %                    15 %                 1 %                      36 %
% Increase (Decrease)                             (1 )%               (2 )%                   (6 )%              NMF                        (1 )%

                                                                           Nine Months Ended June 30, 2012
                                        Research &            Selling &             General &                                 Total Operating
                                        Development           Marketing          Administrative           Other (1)              Expenses
2011 Expenses                          $       7,328         $    17,041         $        19,018         $     1,240         $          44,627

% of Sales                                         6 %                14 %                    16 %                 1 %                      38 %
. . .