UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM

10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~February 28, 2018.~~

November 30, 2020.

☐	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

0-17988

Neogen Corporation

(Exact name of registrant as specified in its charter)


Michigan		38-2367843
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification Number)

620 Lesher Place

Lansing, Michigan 48912

(Address of principal executive offices, including zip code)

(517)

372-9200

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:


Title of each Class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.16 par value per share	NEOG	NASDAQ Global Select Market

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐

Indicate by a check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file reports), and (2) has been subject to such filing requirements for the past 90 days. YES ☒ NO ☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation

S-T (§

(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). YES ☒ NO ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a

non-accelerated

filer, a smaller reporting company, or a~~non-accelerated~~ ~~filer (see definition~~an emerging growth company. See the definitions of ~~“accelerated filer and large~~“large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule

12b-2

of the Exchange ~~Act):~~

Act.


Large accelerated filer	☒	Accelerated filer	☐


Non-accelerated filer	~~☐ (Do not check if a smaller reporting company)~~	~~Smaller reporting company~~	☐	Smaller Reporting Company	☐

Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended ~~transaction~~transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule

12b-2

of the Exchange Act): YES ☐ NO ☒

As of ~~February 28, 2018,~~November 30, 2020 there were ~~51,583,085~~ 53,244,057

shares of Common Stock outstanding.

NEOGEN CORPORATION AND SUBSIDIARIES

TABLE OF CONTENTS


					Page No.
PART I. FINANCIAL INFORMATION

Item 1.	Interim Consolidated Financial Statements (unaudited)			2

	Consolidated Balance Sheets – ~~February 28, 2018~~November 30, 2020 and May 31, ~~2017~~2020			2

	Consolidated Statements of Income – Three and ~~nine~~six months ended ~~February 28, 2018~~November 30, 2020 and ~~2017~~2019			3

	Consolidated Statements of Comprehensive Income – Three and ~~nine~~six months ended ~~February 28, 2018~~November 30, 2020 and ~~2017~~2019			4

	Consolidated ~~Statement~~Statements of Equity – ~~Nine~~Three and six months ended ~~February 28, 2018~~November 30, 2020 and 2019			5

	Consolidated Statements of Cash Flows – ~~Nine~~Six months ended ~~February 28, 2018~~November 30, 2020 and ~~2017~~2019			6

	Notes to Interim Consolidated Financial Statements – ~~February 28, 2018~~November 30, 2020			7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations			13

~~Item 3.~~	~~Quantitative and Qualitative Disclosures About Market Risk~~			20

Item 4. 3.	~~Controls~~Quantitative and ~~Procedures~~Qualitative Disclosures About Market Risk			2027
Item 4.	Controls and Procedures			27

PART II. OTHER INFORMATION

~~Item 1.~~	~~Legal Proceedings~~			21

Item 6. 1.	~~Exhibits~~Legal Proceedings			2128
Item 6.
~~SIGNATURES~~Exhibits		2228

SIGNATURES			~~Certification of Principal Executive Officer~~	29


CEO Certification	~~Certification of Principal Financial Officer~~

	CFO Certification
	Section 906 Certification

PART I – FINANCIAL INFORMATION

~~Item 1.~~

~~Interim Consolidated Financial Statements~~

Item 1. Interim Consolidated Financial Statements

Neogen Corporation and Subsidiaries

Consolidated Balance ~~Sheet~~

Sheets (unaudited)

(in thousands, except share and

per share amounts)

   February 28,
2018 May 31,
2017
   (Unaudited) (Audited)
Assets

Current Assets

Cash and cash equivalents
   $ 82,066 $ 77,567
Marketable securities (at fair value, which approximates cost)
   110,089 66,068
Accounts receivable, less allowance of $1,750 and $2,000
   73,209 68,576
Inventories, net
   77,506 73,144
Prepaid expenses and other current assets
   9,334 7,606


Total Current Assets
   352,204 292,961
Property and Equipment, net
   72,514 61,748
Other Assets

Goodwill
   99,478 104,759
Othernon-amortizable intangible assets
   15,011 14,323
Customer-based intangibles, net of accumulated amortization of $23,846 and $20,846 at February 28, 2018 and May 31, 2017
   33,518 35,983
Othernon-current assets, net of accumulated amortization of $11,893 and $9,931 at February 28, 2018 and May 31, 2017
   22,876 18,635


Total Assets
   $ 595,601 $ 528,409


Liabilities and Equity

Current Liabilities

Accounts payable
   $ 19,654 $ 16,244
Accrued compensation
   5,469 5,002
Income taxes
   960 936
Other accruals
   11,210 13,820


Total Current Liabilities
   37,293 36,002
Deferred Income Taxes
   11,400 17,048
Non-Current Liabilities
   4,973 3,602


Total Liabilities
   53,666 56,652
Commitments and Contingencies (note 9)

Equity

Preferred stock, $1.00 par value, 100,000 shares authorized, none issued and outstanding
   —   —
Common stock, $0.16 par value, 60,000,000 shares authorized, 51,583,085 and 50,932,489 shares issued and outstanding at February 28, 2018 and May 31, 2017, respectively
   8,253 8,149
Additionalpaid-in capital
   197,246 174,742
Accumulated other comprehensive loss
   (5,303 ) (7,203 )
Retained earnings
   341,459 295,926


Total Neogen Corporation Stockholders’ Equity
   541,655 471,614
Non-controlling interest
   280 143


Total Equity
   541,935 471,757


Total Liabilities and Equity
   $ 595,601 $ 528,409


		November 30,				May 31,
		2020				2020
Assets
Current Assets
Cash and cash equivalents		$	113,867			$	66,269
Marketable securities			276,898				277,404
Accounts receivable, less allowance of $1,350 and $1,350 at November 30, 2020 and May 31, 2020, respectively			79,931				84,681
Inventories			92,529				95,053
Prepaid expenses and other current assets			15,201				13,999

Total Current Assets			578,426				537,406
Net Property and Equipment			83,774				78,671
Other assets
Right of use assets			1,540				1,952
Goodwill			111,687				110,340
Other non-amortizable intangible assets			15,378				15,217
Amortizable intangible and other assets, net of accumulated amortization of $48,546 and $44,690 at November 30, 2020 and May 31, 2020, respectively			54,821				53,596

Total Assets		$	845,626			$	797,182

Liabilities and Stockholders’ Equity
Current Liabilities
Accounts payable		$	20,697			$	25,650
Accrued compensation			8,321				7,735
Income taxes			476				1,456
Other accruals			15,093				13,648

Total Current Liabilities			44,587				48,489
Deferred Income Taxes			18,391				18,125
Other Non-Current Liabilities			5,253				5,391

Total Liabilities			68,231				72,005
Commitments and Contingencies (note 11)	0				0
Equity
Preferred stock, $1.00 par value, 100,000 shares authorized, 0ne issued and outstanding			0				0
Common stock, $0.16 par value, 120,000,000 shares authorized, 53,244,057 and 52,945,841 shares issued and outstanding at November 30, 2020 and May 31, 2020, respectively			8,519				8,471
Additional paid-in capital			273,495				257,693
Accumulated other comprehensive loss			(15,086	)			(19,709	)
Retained earnings			510,467				478,722

Total Stockholders’ Equity			777,395				725,177

Total Liabilities and Stockholders’ Equity		$	845,626			$	797,182

See notes to interim consolidated financial statements.

Neogen Corporation and Subsidiaries

Consolidated Statements of Income (unaudited)

(in thousands, except per share amounts)

   Three Months Ended Nine Months Ended
   February 28, February 28,
   2018    2017 2018 2017
Revenues

Product revenues
   $ 78,142    $ 73,964 $ 244,298 $ 223,170
Service revenues
   17,750    14,421 48,667 39,577




Total Revenues
   95,892    88,385 292,965 262,747
Cost of Revenues

Cost of product revenues
   40,352    38,816 124,785 113,241
Cost of service revenues
   10,019    8,689 27,517 24,556




Total Cost of Revenues
   50,371    47,505 152,302 137,797




Gross Margin
   45,521    40,880 140,663 124,950
Operating Expenses

Sales and marketing
   17,492    15,340 52,331 45,824
General and administrative
   9,280    8,548 29,096 25,094
Research and development
   2,836    2,641 8,901 8,087




Total Operating Expenses
   29,608    26,529 90,328 79,005




Operating Income
   15,913    14,351 50,335 45,945
Other Income

Interest income
   524    271 1,322 690
Other income
   844    1,105 1,913 1,098




Total Other Income
   1,368    1,376 3,235 1,788




Income Before Taxes
   17,281    15,727 53,570 47,733
Provision for Income Taxes
   700    5,350 7,900 16,250




Net Income
   16,581    10,377 45,670 31,483
Net (Income)/Loss Attributable toNon-Controlling Interest
   5    (90 ) (70 ) (163 )




Net Income Attributable to Neogen
   $ 16,586    $ 10,287 $ 45,600 $ 31,320




Net Income Attributable to Neogen Per Share

Basic
   $ 0.32    $ 0.20 $ 0.89 $ 0.62




Diluted
   $ 0.32    $ 0.20 $ 0.88 $ 0.61


	Three Months Ended						Six Months Ended
	November 30,						November 30,
	2020			2019			2020			2019
Revenues
Product revenues	$	92,537		$	87,387		$	180,472		$	169,335
Service revenues		22,463			20,416			43,853			39,892

Total Revenues		115,000			107,803			224,325			209,227
Cost of Revenues
Cost of product revenues		49,275			45,559			95,870			87,590
Cost of service revenues		12,511			11,218			24,939			22,417

Total Cost of Revenues		61,786			56,777			120,809			110,007

Gross Margin		53,214			51,026			103,516			99,220
Operating Expenses
Sales and marketing		17,729			17,988			34,245			35,531
General and administrative		12,184			10,985			23,197			21,684
Research and development		4,056			3,781			7,934			7,469

Total Operating Expenses		33,969			32,754			65,376			64,684

Operating Income		19,245			18,272			38,140			34,536
Other Income (Expense)
Interest income		555			1,271			1,277			2,781
Other expense		(465	)		(317	)		(272	)		(439	)

Total Other Income		90			954			1,005			2,342

Income Before Taxes		19,335			19,226			39,145			36,878
Provision for Income Taxes		3,450			2,950			7,400			5,950

Net Income	$	15,885		$	16,276		$	31,745		$	30,928

Net Income Per Share
Basic	$	0.30		$	0.31		$	0.60		$	0.59

Diluted	$	0.30		$	0.31		$	0.60		$	0.59

Weighted Average Shares Outstanding
Basic		53,129			52,557			53,022			52,355
Diluted		53,404			52,876			53,300			52,712

See notes to interim consolidated financial statements.

Neogen Corporation and Subsidiaries

Consolidated Statements of Cash Flows (unaudited)

(in thousands)

   Nine Months Ended
   February 28,
   2018 2017
Cash Flows From Operating Activities

Net Income
   $ 45,670 $ 31,483
Adjustments to reconcile net income to net cash provided from operating activities:

Depreciation and amortization
   12,682 10,691
Share-based compensation
   3,692 3,932
Excess income tax benefit from the exercise of stock options (see note 5)
   —   (3,671 )
Change in operating assets and liabilities, net of business acquisitions:

Accounts receivable
   (4,013 ) 5,916
Inventories
   (3,859 ) (9,460 )
Prepaid expenses and other current assets
   (7,316 ) 717
Accounts payable, accruals and other changes
   (280 ) 5,580


Net Cash Provided By Operating Activities
   46,576 45,188
Cash Flows Used In Investing Activities

Purchases of property, equipment and othernon-current intangible assets
   (16,297 ) (13,002 )
Proceeds from the sale of marketable securities
   211,327 102,957
Purchases of marketable securities
   (255,348 ) (115,117 )
Business acquisitions, net of cash acquired
   (468 ) (34,027 )


Net Cash Used In Investing Activities
   (60,786 ) (59,189 )
Cash Flows From Financing Activities

Exercise of stock options
   18,916 15,844
Excess income tax benefit from the exercise of stock options
   —   3,671


Net Cash Provided By Financing Activities
   18,916 19,515
Effect of Exchange Rates on Cash
   (207 ) (888 )


Net Increase In Cash and Cash Equivalents
   4,499 4,626
Cash And Cash Equivalents At Beginning Of Period
   77,567 55,257


Cash And Cash Equivalents At End Of Period
   $ 82,066 $ 59,883


	Six Months Ended
	November 30,
	2020			2019
Cash Flows From Operating Activities
Net Income	$	31,745		$	30,928
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization		9,523			8,985
Share-based compensation		3,192			3,155
Change in operating assets and liabilities, net of business acquisitions:
Accounts receivable		6,662			(2,483	)
Inventories		4,063			(103	)
Prepaid expenses and other current assets		(2,080	)		(1,323	)
Accounts payable, accruals and other changes		(5,581	)		1,313

Net Cash From Operating Activities		47,524			40,472
Cash Flows For Investing Activities
Purchases of property, equipment and other non-current intangible assets		(11,092	)		(12,806	)
Proceeds from the sale of marketable securities		309,030			199,708
Purchases of marketable securities		(308,524	)		(220,528	)
Business acquisitions, net of cash acquired		(2,350	)		—

Net Cash For Investing Activities		(12,936	)		(33,626	)
Cash Flows From Financing Activities
Exercise of stock options and issuance of employee stock purchase plan shares		12,658			19,213

Net Cash From Financing Activities		12,658			19,213
Effect of Foreign Exchange Rates on Cash		352			(1,333	)

Net Increase In Cash and Cash Equivalents		47,598			24,726
Cash and Cash Equivalents, Beginning of Period		66,269			41,688

Cash and Cash Equivalents, End of Period	$	113,867		$	66,414

See notes to interim consolidated financial statements.

NEOGEN CORPORATION AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1. ACCOUNTING POLICIES

BASIS OF PRESENTATION

AND CONSOLIDATION

The accompanying unaudited consolidated financial statements include the accounts of Neogen Corporation (“Neogen” or the “Company”) and its wholly owned subsidiaries and have been prepared in accordance with accounting principles generally accepted in the United States of America (generally accepted accounting principles) for interim financial information and with the instructions to Form

10-Q

and Article 10 of Regulation

S-X.

Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been ~~included.~~included in the accompanying unaudited consolidated financial statements. All intercompany balances and transactions have been eliminated in consolidation. The results of operations for the three and ~~nine~~six month periods ended ~~February 28, 2018~~November 30, 2020 are not necessarily indicative of the results to be expected for the fiscal year ending May 31, ~~2018.~~2021. For more complete financial information, these consolidated financial statements should be read in conjunction with the ~~May 31, 2017~~ audited consolidated financial statements and the notes thereto included in ~~the Company’s~~our Annual Report on Form

10-K

for the fiscal year ended May 31, ~~2017.~~

2020.

Our functional currency is the U.S. dollar. We translate our

non-U.S.

operations’ assets and liabilities denominated in foreign currencies into U.S. dollars at current rates of exchange as of the balance sheet date and income and expense items at the average exchange rate for the reporting period. Translation adjustments resulting from exchange rate fluctuations are recorded in other comprehensive income (loss). Gains or losses from foreign currency transactions are included in other income (expense) on our consolidated statement of incom

Recently Adopted Accounting Standards

Financial Instruments—Credit Losses

On June 1, 2020, the Company adopted ASU No.

2016-13—Measurement

of Credit Losses on Financial Instruments, which changes how the Company measures credit losses on most financial instruments measured at amortized cost and certain other instruments, such as loans, receivables and

held-to-maturity

debt securities. Rather than generally recognizing credit losses when it is probable that the loss has been incurred, the revised guidance requires the Company to recognize an allowance for credit losses for the difference between the amortized cost basis of a financial instrument and the amount of amortized cost that the Company expects to collect over the instrument’s contractual life. The adoption of this guidance did not have a material impact on our consolidated financial statements due to the Company’s short-term contractual life of receivables and minimal expected losses.

Fair Value Measurements

On June 1, 2020, the Company adopted ASU

2018-13,

Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement, which modifies the disclosure requirements of fair value measurements. The adoption of this guidance did not have an impact on our consolidated financial statements.

Cloud Computing Implementation Cost

On June 1, 2020, the Company adopted ASU

2018-15,

Intangible-Goodwill and Other

Internal-Use

Software (Subtopic

350-40):

Customer’s Accounting for Implementation Cost Incurred in a Cloud Computing Arrangement That Is a Service Contract, which clarifies the accounting for implementation costs in cloud computing arrangements. The adoption of this guidance did not have an impact on our consolidated financial statements.

Comprehensive Income

Comprehensive income represents net income and any revenues, expenses, gains and losses that, under U.S. generally accepted

accounting principles, are excluded from net income and recognized directly as a component of equity. Accumulated other

comprehensive income (loss) consists of foreign currency translation adjustments and unrealized gains or losses on our marketable securities.

Fair Value of Financial Instruments

The carrying amounts of the Company’s financial instruments other than cash equivalents and marketable securities, which include accounts receivable and accounts payable, approximate fair value based on either their short maturity or current terms for similar instruments.

Fair value measurements are determined based upon the exit price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants exclusive of any transaction costs. The Company utilizes a fair value hierarchy based upon the observability of inputs used in valuation techniques as follows:

Level 1: Observable inputs such as quoted prices in active markets;

Level 2: Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and

Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own

assumptions.

ESTIMATES AND ASSUMPTIONS

The preparation of these financial statements requires that management make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. On an ongoing basis, management evaluates the estimates, including, but not limited to, variable consideration related to revenue recognition, allowances for doubtful accounts, the market value of, and demand for, inventories, stock-based compensation, provision for income taxes and related balance sheet accounts, accruals, goodwill and other intangible assets. These estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Accounts Receivable Allowance

Management attempts to minimize credit risk by reviewing customers’ credit history before extending credit and by monitoring credit exposure on a regular basis. An allowance for doubtful accounts is established based upon factors surrounding the credit risk of specific customers, historical trends and other information. Collateral or other security is generally not required for accounts receivable. Once a receivable balance has been determined to be uncollectible, generally after all collection efforts have been exhausted, that amount is charged against the allowance for doubtful accounts.

Inventory

The reserve for obsolete and slow-moving inventory is reviewed at least quarterly based on an analysis of the inventory, considering the current condition of the asset as well as other known facts and future plans. The reserve required to record inventory at lower of cost or net realizable value is adjusted as conditions change. Product obsolescence may be caused by shelf-life expiration, discontinuance of a product line, replacement products in the marketplace or other competitive situations.

Goodwill and Other Intangible Assets

Goodwill represents the excess of purchase price over fair value of tangible net assets of acquired businesses after amounts are allocated to other identifiable intangible assets. Other intangible assets include customer relationships, trademarks, licenses, trade names, covenants

not-to-compete

and patents. Customer-based intangibles are amortized on either an accelerated or straight-line basis, reflecting the pattern in which the economic benefits are consumed, while all other amortizable intangibles are amortized on a straight-line basis; intangibles are generally amortized over 5 to 25 years. We review the carrying amounts of goodwill and other

non- amortizable intangible assets annually, or when indications of impairment exist, to determine if such assets may be impaired. If the carrying amounts of these assets are deemed to be less than fair value based upon a discounted cash flow analysis and comparison to comparable EBITDA multiples of peer companies, such assets are reduced to their estimated fair value and a charge is recorded to operations.

Long-Lived Assets

Management reviews the carrying values of its long-lived assets to be held and used, including definite-lived intangible assets, for

possible impairment whenever events or changes in business conditions warrant such a review. The carrying value of a long-lived asset is considered impaired when the anticipated separately identifiable undiscounted cash flows over the remaining useful life of the asset indicate that the carrying amount of the asset may not be recoverable. In such an event, fair value is determined using discounted cash flows and, if lower than the carrying value, impairment is recognized through a charge to operations.

Equity Compensation Plans

Share options awarded to employees, restricted stock units (RSUs) and shares of stock awarded to employees under certain stock purchase plans are recognized as compensation expense based on their fair value at grant date. The fair market value of options granted under the Company stock option plans was estimated on the date of grant using the Black-Scholes option-pricing model with assumptions for inputs such as interest rates, expected dividends, volatility measures and specific employee exercise behavior patterns based on statistical data. Some of the inputs used are not market-observable and have to be estimated or derived from available data. Use of different estimates would produce different option values, which in turn would result in higher or lower compensation expense recognized. For RSUs, we use the intrinsic value method to value the units. To value other equity awards, several recognized valuation models exist; none of these models can be singled out as being the best or most correct. The model applied by us can handle most of the specific features included in the options granted, which are the reason for their use. If different models were used, the option values could differ despite using the same inputs. Accordingly, using different assumptions coupled with using a different valuation model could have a significant impact on the fair value of employee stock options. Fair value could be either higher or lower than the number provided by the model applied and the inputs used. Further information on our equity compensation plans, including inputs used to determine the fair value of options, is disclosed in Note 8.

Income Taxes

We account for income taxes using the asset and liability method. Under this method, deferred income tax assets and liabilities are

determined based on differences between the financial reporting and tax bases of assets and liabilities and for tax credit carryforwards and are measured using the enacted tax rates in effect for the years in which the differences are expected to reverse. Deferred income tax expense represents the change in net deferred income tax assets and liabilities during the year.

2. CASH AND MARKETABLE SECURITIES

Cash and Cash Equivalents

Cash and cash equivalents consist of bank demand accounts, savings deposits, certificates of deposit and commercial paper with

original

maturities of 90 days or less. Cash and cash equivalents are maintained at financial institutions and, at times, balances may exceed federally insured limits. The Company has not experienced losses related to these balances and believes it is not exposed to significant credit risk regarding its cash and cash equivalents. Cash and cash equivalents were $113,867,000 and $66,269,000 at November 30, 2020 and May 31, 2020, respectively. The carrying value of these assets approximates fair value due to the short maturity of these instruments and is classified as Level 1 in the fair value hierarchy.

Marketable Securities

The Company has marketable securities held by banks or broker-dealers at November 30, 2020. Changes in market value are monitored and recorded on a monthly basis; in the event of a downgrade in credit quality subsequent to purchase, the marketable securities investment is evaluated to determine the appropriate action to take to minimize the overall risk to our marketable securities portfolio. These securities are classified as available for sale. The primary objective of management’s short-term investment activity is to preserve capital for the purpose of funding current operations, capital expenditures and business acquisitions; short-term investments are not entered into for trading or speculative purposes. These securities are recorded at fair value based on recent trades or pricing models and therefore meet the Level 2 criteria. Interest income on these investments is recorded within other income on the income statement. Adjustments in the fair value of these assets are recorded in other comprehensive incom

Marketable Securities as of November 30, 2020 and May 31, 2020 are listed below by classification and remaining maturities.


			November 30,		May 31,
(in thousands)	Maturity		2020		2020
US Treasuries		0 - 90 days	$	0	$	0
		91 - 180 days		0		0
		181 days - 1 year		0		2,532
		1 - 2 years		0		0
Commercial Paper & Corporate Bonds		0 - 90 days		114,237		133,130
		91 - 180 days		132,758		73,824
		181 days - 1 year		15,978		43,231
		1 - 2 years		1,830		7,839
Certificates of Deposit		0 - 90 days		4,012		1,003
		91 - 180 days		2,260		5,184
		181 days - 1 year		4,553		6,069
		1 - 2 years		1,270		4,592

Total Marketable Securities			$	276,898	$	277,404

The components of marketable securities at November 30, 2020 are as follows:


	Amortized		Unrealized		Unrealized
(in thousands)	Cost		Gains		Losses			Fair Value
US Treasuries	$	—	$	—	$	—		$	—
Commercial Paper & Corporate Bonds		264,616		338		(151	)		264,803
Certificates of Deposit		12,009		86		—			12,095

Total Marketable Securities	$	276,625	$	424	$	(151	)	$	276,898

The components of marketable securities at May 31, 2020 are as follows:


	Amortized		Unrealized		Unrealized
(in thousands)	Cost		Gains		Losses			Fair Value
US Treasuries	$	2,502	$	30	$	—		$	2,532
Commercial Paper & Corporate Bonds		257,700		347		(23	)		258,024
Certificates of Deposit		16,648		200		—			16,848

Total Marketable Securities	$	276,850	$	577	$	(23	)	$	277,404

3. INVENTORIES

Inventories are stated at the lower of cost, determined onby the

first-in,

first-out

method, or net realizable value. The components of inventories follow:

   February 28,
2018    May 31,
2017
   (in thousands)
Raw materials
   $ 35,774    $ 33,190
Work-in-process
   6,231    4,831
Finished and purchased goods
   35,501    35,123




   $ 77,506    $ 73,144


	November 30,		May 31,
(in thousands)	2020		2020
Raw materials	$	45,269	$	45,058
Work-in-process		6,020		6,887
Finished and purchased goods		41,240		43,108

	$	92,529	$	95,053

4. LEASES

We lease various manufacturing, laboratory, warehousing and distribution facilities, administrative and sales offices, equipment and vehicles under operating leases. We evaluate our contracts to determine if an arrangement is a lease at inception and classify it as a finance or operating lease. Currently, all of our leases are classified as operating leases. Leased assets and corresponding liabilities are recognized based on the present value of the lease payments over the lease term. Our lease terms may include options to extend when it is reasonably certain that we will exercise that option.

Topic ASC 842 requires the Company to recognize in the statement of financial position a liability to make lease payments (the lease liability) and a

right-of-use

asset representing its right to use the underlying asset for the lease term.

Right-of-use

assets are recorded in other assets on our consolidated balance sheets. Current and

non-current

lease liabilities are recorded in other accruals within current liabilities and other

non-current

liabilities, respectively, on our consolidated balance sheets. Costs associated with operating leases are recognized on a straight-line basis within operating expenses over the term of the lease.

We have made certain assumptions and judgments when applying ASC 842, the most significant of which are:

We elected the package of practical expedients available for transition that allow us to not reassess whether expired or existing contracts contain leases under the new definition of a lease, lease classification for expired or existing leases and whether previously capitalized initial direct costs would qualify for capitalization under ASC 842.

We did not elect to use hindsight when considering judgments and estimates such as assessments of lessee options to extend or terminate a lease or purchase the underlying asset.

For all asset classes, we elected to not recognize a

right-of-use

asset and lease liability for short-term leases (i.e. leases with a term of 12 months or less).

For all asset classes, we elected to not separate

non-lease

components from lease components to which they relate and have accounted for the combined lease and

non-lease

components as a single lease component.

The determination of the discount rate used in a lease is our incremental borrowing rate that is based on what we would normally pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments.

Supplemental balance sheet information related to operating leases was as follows:


	November 30,		May 31,
(in thousands)	2020		2020
Right of use - assets	$	1,540	$	1,952
Lease liabilities - current		444		1,054
Lease liabilities - non-current		1,062		913

7. SEGMENT INFORMATION

~~The Company has two~~ AND GEOGRAPHIC DATA

We have 2 reportable segments: Food Safety and Animal Safety. The Food Safety segment is primarily engaged in the development, production and marketing of diagnostic test kits, culture media and related products used by food producers and processors to detect harmful natural toxins, foodborne bacteria, allergens and levels of general sanitation. The Animal Safety segment is primarily engaged in the development, production and marketing of products dedicated to animal safety, including a complete line of consumable products marketed to veterinarians and animal health product distributors; this segment also provides genomic identification and related interpretive bioinformatic services. Additionally, the Animal Safety segment produces and markets rodenticides, ~~cleaners,~~ disinfectants and insecticides to assist in the control of rodents, insects and disease in and around agricultural, food production and other facilities.

~~Neogen’s~~

Our international operations in the United Kingdom, Mexico, Brazil, China and India originally focused on the Company’s ~~Food Safety~~food safety products, and each of these units reports through the Food Safety segment. In recent years, these operations have expanded to offer ~~the Company’s~~our complete line of products and services, including those usually associated with the Animal Safety segment such as cleaners, disinfectants, rodenticides, insecticides, veterinary instruments and ~~genomic~~genomics services. These additional products and services are managed and directed by existing management and are reported through the Food Safety segment.

Neogen’s operation in Australia originally focused on providing genomics services and sales of animal safety products and reports through the Animal Safety segment. With the acquisition of Cell BioSciences in February 2020, this operation has expanded to offer our complete line of products and services, including those usually associated with the Food Safety segment. These additional products are managed and directed by existing management at Neogen Australasia and report through the Animal Safety segment.

The accounting policies of each of the segments are the same as those described in Note 1.

Segment information follows:

   Food
Safety    Animal
Safety    Corporate and
Eliminations
(1)    Total
   (in thousands)
As of and for the three months ended February 28, 2018


Product revenues to external customers
   $ 42,618    $ 35,524    $ —      $ 78,142
Service revenues to external customers
   5,027    12,723    —      17,750








Total revenues to external customers
   47,645    48,247    —      95,892
Operating income (loss)
   8,258    8,493    (838 )    15,913
Total assets
   188,075    215,371    192,155    595,601
As of and for the three months ended February 28, 2017


Product revenues to external customers
   $ 39,318    $ 34,646    $ —      $ 73,964
Service revenues to external customers
   3,631    10,790    —      14,421








Total revenues to external customers
   42,949    45,436    —      88,385
Operating income (loss)
   7,403    7,743    (795 )    14,351
Total assets
   183,419    215,243    108,636    507,298

   Food
Safety    Animal
Safety    Corporate and
Eliminations
(1)    Total
   (in thousands)
For the nine months ended February 28, 2018

Product revenues to external customers
   $ 129,621    $ 114,677    $ —      $ 244,298
Service revenues to external customers
   14,319    34,348    —      48,667








Total revenues to external customers
   143,940    149,025    —      292,965
Operating income (loss)
   25,704    27,691    (3,060 )    50,335
For the nine months ended February 28, 2017

Product revenues to external customers
   $ 112,592    $ 110,578    $ —      $ 223,170
Service revenues to external customers
   10,475    29,102    —      39,577








Total revenues to external customers
   123,067    139,680    —      262,747
Operating income (loss)
   24,286    24,616    (2,957 )    45,945


					Corporate and
	Food		Animal		Eliminations
(in thousands)	Safety		Safety		(1)			Total
As of and for the three months ended November 30, 2020
Product revenues to external customers	$	51,323	$	41,214	$	—		$	92,537
Service revenues to external customers		6,211		16,252		—			22,463

Total revenues to external customers		57,534		57,466		—			115,000
Operating income (loss)		8,960		12,246		(1,961	)		19,245
Total assets		226,735		228,126		390,765			845,626

As of and for the three months ended November 30, 2019
Product revenues to external customers	$	51,188	$	36,199	$	—		$	87,387
Service revenues to external customers		5,666		14,750		—			20,416

Total revenues to external customers		56,854		50,949		—			107,803
Operating income (loss)		9,556		9,729		(1,013	)		18,272
Total assets		212,928		224,058		313,605			750,591

(1)	Includes corporate assets, consisting principally of cash and cash equivalents, marketable securities, current and deferred tax accounts and overhead expenses not allocated to specific business segments. Also includes the elimination of intersegment transactions.


					Corporate and
	Food		Animal		Eliminations
(in thousands)	Safety		Safety		(1)			Total
As of and for the six months ended November 30, 2020
Product revenues to external customers	$	99,986	$	80,486	$	—		$	180,472
Service revenues to external customers		11,733		32,120		—			43,853

Total revenues to external customers		111,719		112,606		—			224,325
Operating income (loss)		16,923		24,411		(3,194	)		38,140

As of and for the six months ended November 30, 2019
Product revenues to external customers	$	97,065	$	72,270	$	—		$	169,335
Service revenues to external customers		10,811		29,081		—			39,892

Total revenues to external customers		107,876		101,351		—			209,227
Operating income (loss)		18,690		18,029		(2,183	)		34,536

(1)	Includes elimination of intersegment transactions.

The following table presents the Company’s revenue disaggregated by geographic location:


	Three months ended				Six months ended
	November 30,				November 30,
(in thousands)	2020		2019		2020		2019
Domestic	$	69,832	$	63,317	$	137,156	$	126,657
International		45,168		44,486		87,169		82,570

Total revenue		115,000		107,803		224,325		209,227

8. EQUITY COMPENSATION PLANS

~~Qualified~~

Incentive and

non-qualified

options to purchase shares of common stock ~~may be~~have been granted to directors, officers and employees of ~~the~~

~~Company~~Neogen under the terms of the Company’s stock option plans. These options are granted at an exercise price of not less than the fair market value of the stock on the date of grant. Options vest ratably over three and five year periods and the contractual terms are generally five or ten years. A summary of stock option activity during the ~~nine~~

six

months ended ~~February 28, 2018~~November 30, 2020 follows:

      Weighted-
      Average
   Shares    Exercise Price
   (in thousands)
Options outstanding June 1, 2017
   2,708    $ 32.88
Granted
   819    59.26
Exercised
   (668 )    28.23
Forfeited
   (144 )    37.31



Options outstanding February 28, 2018
   2,715    41.75

During the three and nine month periods ended February 28, 2018 and 2017, the Company recorded $1,026,000 and $1,198,000 and $3,692,000 and $3,932,000, respectively, of compensation expense related to its share-based awards. On June 1, 2017, the Company adopted ASU~~No. 2016-09,~~ which simplifies the accounting for share-based payments to employees. The guidance requires the recognition of the income effects of awards in the income statement when the awards vest or are settled, thus eliminating additional~~paid-in~~ capital pools. The guidance also allows for a policy election to account for forfeitures as they occur, rather than on an estimated basis, and requires that excess tax benefits be classified as an operating activity on the Statement of Cash Flows. The adoption of this ASU increased income tax expense by $331,000 for the three months ended February 28, 2018 as the reduction in the corporate tax rate from the tax reform enacted in December 2017 resulted in a partial reversal of tax benefit previously recorded at the higher corporate rate in the first and second quarters of the current fiscal year; year to date, income tax expense decreased by $3,463,000 as a result of adoption of the ASU.


				Weighted-
				Average
(Options in thousands)	Shares			Exercise Price
Options outstanding June 1, 2020		2,162		$	55.96
Granted		202			68.47
Exercised		(294	)		42.04
Forfeited		(160	)		57.26

Options outstanding November 30, 2020		1,910		$	59.29

The weighted-average fair value per share of stock options granted during the first six months of fiscal ~~2018~~years 2021 and ~~fiscal 2017,~~2020, estimated on the date of grant using the Black-Scholes option pricing model, was ~~$14.44~~$15.41 and ~~$11.84, respectively. The~~$15.56, respectively.The fair value of stock options granted was estimated using the following weighted-average ~~assumptions:~~

   FY 2018 FY 2017
Risk-free interest rate
   1.6% 1.2%
Expected dividend yield
   0.0% 0.0%
Expected stock price volatility
   27.7% 35.2%
Expected option life
   4.0 years 4.0 years

assumptions.


		FY 2021
Risk-free interest rate		0.2%
Expected dividend yield		0.0%
Expected stock price volatility		31.3%
Expected option life		3.25 years

The company granted 59,125 restricted stock units

(RSUs)

to directors, officers and employees under the terms of the 2018 Omnibus Incentive Plan in October 2020, which vest ratably over three and five year periods. The current units have a weighted average value of $68.43 per share and will be expensed straight-line over the remaining weighted-average period of 4.72 years. On November 30, 2020 there was $3,262,000 in unamortized compensation cost related to

non-vested

RSUs.

During the three and six month periods ended November 30, 2020 and 2019, the Company recorded $1,511,000 and $1,612,000 and $3,192,000 and $3,155,000, respectively, of compensation expense related to its share-based awards.

The Company ~~has an employee~~offers eligible employees the option to purchase common stock ~~purchase plan that provides for employee stock purchases~~ at a 5% discount to the lower of the market ~~price. The~~value of the stock at the beginning or end of each participation period under the terms of the 2011 Employee Stock Purchase Plan; the discount is recorded in general and administrative ~~expense as~~expense. Total individual purchases in any year are limited to 10% of ~~the date of purchase.~~

~~6. NEW ACCOUNTING PRONOUNCEMENTS~~

~~In May 2014, the FASB issued ASU No.2014-09—Revenue~~ from Contracts with Customers (Topic 606). The new standard outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The core principle of the revenue model is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard is designed to create greater comparability for financial statement users across industries and jurisdictions and also requires enhanced disclosures. In April 2016, the FASB issued Accounting Standards Update~~No. 2016-10—~~ ~~Revenue from Contracts with Customers (Topic 606), which amends and adds clarity to certain aspects of the guidance set forth in ASU2014-09~~ related to identifying performance obligations and licensing. The guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. The guidance permits two methods of adoption: a full retrospective method to each prior reporting period presented or a modified retrospective approach with the cumulative effect of initially applying the guidance recognized at the date of initial application. The Company has formed an internal team to implement the new standard. This team has identified all revenue streams at each significant subsidiary and is currently reviewing contracts to evaluate the potential impact of adopting the new standard on the Company’s revenue recognition policies, procedures and control framework and ultimately on the Company’s consolidated financial statements and related disclosures. The Company will adopt this ASU on June 1, 2018 using the modified retrospective approach.

~~In February 2016, the FASB issued ASU No.2016-02—Leases~~ to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a~~right-of-use~~ asset representing its right to use the underlying asset for the lease term. The recognition, measurement and presentation of expenses and cash flows arising from a lease by a lessor have not significantly changed from previous U.S. GAAP. This ASU is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2018; early adoption is permitted. Modified retrospective application is permitted with certain practical expedients. The Company expects to adopt this ASU on June 1, 2019 and is currently in the process of evaluating its lessee and lessor arrangements to determine the impact of this amendment on its consolidated financial condition and results of operations. This evaluation includes a review of revenue through leasing arrangements as well as lease expenses, which are primarily through operating lease arrangements at most of the Company’s facilities.

~~In March 2016, the FASB issued ASUNo. 2016-09~~ — Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting to provide guidance that changes the accounting for certain aspects of share-based payments to employees. The guidance requires the recognition of the income tax effects of awards in the income statement when the awards vest or are settled, thus eliminating additional~~paid-in~~ capital pools. The guidance also allows for the employer to repurchase more of an employee’s shares for tax withholding purposes without triggering liability accounting. In addition, the guidance allows for a policy election to account for forfeitures as they occur rather than on an estimated basis. The Company adopted this standard effective June 1, 2017. Adoption of this ASU increased income tax expense by $331,000 for the three months ended February 28, 2018 as the reduction in the corporate tax rate from the tax reform enacted in December 2017 resulted in a partial reversal of tax benefit previously recorded at the higher corporate rate in the first and second quarters of the current fiscal year; year to date, income tax expense decreased by $3,463,000 as a result of adoption of the ASU.

~~In June 2016, the FASB issued ASU No.2016-13—Measurement~~ of Credit Losses on Financial Instruments, which changes how companies measure credit losses on most financial instruments measured at amortized cost and certain other instruments, such as loans, receivables and held-~~to-maturity~~ debt securities. Rather than generally recognizing credit losses when it is probable that the loss has been incurred, the revised guidance requires companies to recognize an allowance for credit losses for the difference between the amortized cost basis of a financial instrument and the amount of amortized cost the Company expects to collect over the instrument’s contractual life. ASU~~2016-13~~ is effective for fiscal periods beginning after December 15, 2019 and must be adopted as a cumulative effect adjustment to retained earnings. Early adoption is permitted. The Company does not believe the adoption of this guidance will have an impact on its consolidated financial statements.

~~In August 2016, the FASB issued ASUNo. 2016-15—~~ ~~Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force). The amendments in ASU2016-15~~ address eight specific cash flow issues and apply to all entities that are required to present a statement of cash flows under FASB Accounting Standards Codification (FASB ASC) 230, Statement of Cash Flows. The amendments in ASU~~2016-15~~ are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted, including adoption during an interim period. The Company has not yet adopted this update and is currently evaluating the impact of ASU~~No. 2016-15~~ ~~on its consolidated financial statements.~~

7.compensation.

9. BUSINESS AND PRODUCT LINE ACQUISITIONS

The Consolidated Statements of Income reflect the results of operations for business acquisitions since the respective dates of purchase. All are accounted for using the acquisition method. Goodwill recognized in the acquisitions discussed below relates primarily to enhancing the Company’s strategic platform for the expansion of available product offerings.

On ~~December~~January 1, ~~2016,~~2020, the Company acquired all of the stock of ~~Quat-Chem Ltd.,~~Productos Quimicos Magiar, a ~~chemical company that manufactures biosecurity~~distributor of Neogen’s Food Safety products ~~based~~for the past 20 years, located in ~~Rochdale, England.~~Argentina. This acquisition gives Neogen a direct sales presence in Argentina. Consideration for the purchase was ~~$21,606,000~~$3,776,000 in net cash, with $3,237,000 paid at closing and $540,000 payable to the former owner on January 1, 2022, and up to ~~$3,778,000~~$979,000 of contingent consideration, ~~due at the end of each of the first two years,~~payable in one year, based onupon an excess net sales formula. The ~~final~~preliminary purchase price allocation, based upon the fair value of these assets and liabilities determined using the income approach, included accounts receivable of ~~$4,684,000,~~$603,000, inventory of ~~$1,243,000, land, property~~$446,000, machinery and equipment of ~~$2,526,000,~~$36,000, other current assets of $221,000, accounts payable of ~~$2,197,000, deferred tax liability~~$383,000, other current liabilities of ~~$1,133,000,~~$312,000, contingent consideration accrual of ~~$1,058,000, other current~~$640,000,

non-current

deferred

tax liabilities of ~~$604,000,non-amortizable~~$441,000, intangible assets of ~~$1,889,000, intangible assets of $6,900,000~~$1,471,000 (with an estimated life of~~5-15~~ 5-10 years) and the remainder to goodwill~~(non-deductible~~ (non-deductible for tax purposes). These values are Level 3 fair value measurements. In January 2018, the Company paid the former owners $249,000 in contingent consideration based on the achievement of sales targets in the first year, and recorded a credit of $255,000 to other income, reducing the contingent consideration accrual by a corresponding amount; $554,000 remains accrued for contingent consideration payable at the end of the second year. This ~~business~~operation continues to operate infrom its current location ~~and is managed by Neogen Europe,~~in Buenos Aires, Argentina, reporting within the Food Safety segment.

It is managed through Neogen’s Latin America operation.

On ~~December 27, 2016,~~January 1, 2020, the Company acquired all of the stock of ~~Rogama Industria e Comercio, Ltda.,~~Productos Quimicos Magiar, a ~~company that develops and manufactures rodenticides and insecticides, based near Sao Paulo, Brazil.~~distributor of Neogen’s Food Safety products for the past 20 years, located in Uruguay. This acquisition gives Neogen a direct sales presence in Uruguay. Consideration for the purchase was ~~$12,428,000~~$1,488,000 in net cash, with $1,278,000 paid at closing and $210,000 payable to the former owner on January 1, 2022, and up to ~~$2,069,000 of~~$241,000 in contingent consideration, ~~due at the end of each of the first two years,~~payable in one year, based onupon an excess net sales formula. The ~~final~~preliminary purchase price allocation, based upon the fair value of these assets and liabilities determined using the income approach, included accounts receivable of ~~$1,866,000, othernon-current~~ ~~assets of $26,000,~~$280,000, inventory of ~~$960,000, land, property~~$174,000, machinery and equipment of ~~$4,734,000,~~$16,000, other current assets of $68,000, accounts payable of $204,000, other current liabilities of ~~$2,562,000,~~$11,000, contingent consideration accrual of ~~$213,000,~~$159,000,

non-current

deferred tax ~~liability~~liabilities of ~~$1,307,000,non-amortizable~~$99,000, intangible assets of ~~$870,000, intangible assets of $5,112,000~~$398,000 (with an estimated life of~~5-15~~

5-10

years) and the remainder to goodwill

(non-deductible

for tax purposes). These values are Level 3 fair value measurements. This ~~business~~operation continues to operate infrom its current location ~~and is managed by Neogen do Brasil,~~in Montevideo, Uruguay, reporting within the Food Safety segment.

It is managed through Neogen’s Latin America operation.

On ~~September 1, 2017,~~January 9, 2020, the Company acquired all of the ~~assets~~stock of ~~The University~~Diessechem Srl, a distributor of ~~Queensland Animal Genetics Laboratory, an animal genomics laboratory~~food and feed diagnostics for the past 27 years, located ~~near Brisbane, Australia.~~in Italy. This acquisition ~~is intended to accelerate the growth of the Company’s animal genomics business~~gives Neogen a direct sales presence in ~~Australia and New Zealand.~~Italy. Consideration for the purchase was ~~$2,063,000; $468,000 has been paid~~$3,455,000 in ~~cash with the remainder due in annual installments over the next five years.~~net cash. The preliminary purchase price allocation, based upon the fair value of these assets and liabilities determined using the income approach, included accounts receivable of $780,000, inventory of ~~$19,000, equipment~~$5,000, other current assets of ~~$419,000,non-current~~$160,000, accounts payable of $140,000, other current liabilities of ~~$1,629,000,~~$305,000,

non-current

deferred tax liabilities of $294,000, intangible assets of ~~$850,000~~$1,225,000 (with an estimated life of~~5-15~~

5-10

years) and the remainder to goodwill

(non-deductible

for tax purposes). These values are Level 3 fair value measurements. ~~The new business, renamed Neogen Australasia,~~This operation continues to operate infrom its current location in Milan, Italy, reporting within the Food Safety segment. It is managed through Neogen’s Scotland operation.

On January 31, 2020, the Company acquired all of the stock of Abtek Biologicals Limited, a manufacturer and supplier of culture media supplements and microbiology technologies. This acquisition enhances the Company’s culture media product line offering for the worldwide industrial microbiology markets. Consideration for the purchase was $1,401,000 in net cash, with $1,282,000 paid at closing and $119,000 payable to the former owner on January 31, 2021. The preliminary purchase price allocation, based upon the fair value of these assets and liabilities determined using the income approach, included accounts receivable of $135,000, inventory of $207,000, machinery and equipment of $105,000, prepayments of $6,000, accounts payable of $118,000, other current liabilities of $34,000,

non-current

deferred tax liabilities of $92,000, intangible assets of $484,000 (with an estimated life of

5-10

years) and the remainder to goodwill

(non-deductible

for tax purposes). These values are Level 3 fair value measurements. This manufacturing operation continues to operate from its current location in Liverpool, England, reporting within the Food Safety segment. It is managed through Neogen’s Scotland operation.

On February 28, 2020, the Company acquired the assets of Cell BioSciences, an Australian distributor of food safety and industrial microbiology products. This acquisition gave Neogen a direct sales presence across Australasia for its entire product portfolio. Consideration for the purchase was $3,768,000 in cash, with $3,596,000 paid at closing and $172,000 payable in one year. The preliminary purchase price allocation, based upon the fair value of these assets and liabilities determined using the income approach, included inventory of $420,000, unearned revenue liability of $13,000, intangible assets of $1,338,000 (with an estimated life of 3 to 10 years) and the remainder to goodwill

(non-deductible

for tax purposes). The business operates in Gatton, Australia, reporting within the Australian operations in the Animal Safety segment.

On March 26, 2020, the Company acquired the assets of Chile-based Magiar Chilena, a distributor of food, animal and plant diagnostics, including Neogen products. This acquisition gives Neogen a direct sales presence in Chile. Consideration for the purchase was $400,000 in cash, with $350,000 paid at closing and $50,000 payable to the former owner on March 26, 2021. The preliminary purchase price allocation, based upon the fair value of these assets and liabilities determined using the income approach, included inventory of $164,000, machinery and equipment of $53,000, and intangible assets of $183,000 (with an estimated life of

5-10

years). The business is operated from its current location in Santiago, Chile, reporting within the Food Safety segment. It is managed through Neogen’s Latin America operation.

On July 31, 2020, the Company acquired the U.S. (including territories) rights to Elanco’s StandGuard

Pour-on

for horn fly and lice control in beef cattle, and related assets. This product line fits in well with Neogen’s existing agricultural insecticide portfolio and organizational capabilities. Consideration for the purchase was $2,351,000 in cash, all paid at closing. The preliminary purchase price allocation, based upon the fair value of these assets determined using the income approach, included inventory of $51,000 and intangible assets of $2,300,000 (with an estimated life of 15 years). This product line is currently being toll manufactured for the Company but is eventually expected to be manufactured at Neogen’s operation in Iowa; the sales are reported within the Animal Safety segment.

10. LONG TERM DEBT

~~The Company has~~

We have a financing agreement with a bank providing for an a $15,000,000

unsecured revolving line of credit, ~~of $15,000,000,~~ which ~~expires on September~~was amended in the second quarter to extend the expiration to November 30, ~~2019.~~2023

. There were no0 advances against the line of credit during fiscal ~~year 2017~~2020 and there have been none thus far in fiscal ~~year 2018;~~2021; there was no0 balance outstanding at ~~February 28, 2018.~~ November 30, 2020.

Interest on any borrowings ~~remained~~ is calculated

at LIBOR plus 100 basis points (rate under the terms of the agreement was ~~2.82%~~ 1.19%

at ~~February 28, 2018)~~November 30,

2020). Financial covenants include maintaining specified levels of tangible net worth, debt service coverage, and funded debt to EBITDA, each of which the Company was in compliance with at ~~February 28, 2018.~~

9.November 30, 2020.

11. COMMITMENTS AND CONTINGENCIES

The Company is involved in environmental remediation and monitoring activities at its Randolph, Wisconsin manufacturing facility and accrues for related costs when such costs are determined to be probable and estimable. The Company currently utilizes a pump and treat remediation strategy, which includes semi-annual monitoring and reporting, consulting, and maintenance of monitoring wells. Neogen expenses these annual costs of remediation, which have ranged from $38,000 to ~~$57,000~~$131,000 per year over the past five years. The Company’s estimated liability for these costs was $916,000 at ~~February 28, 2018~~both November 30, 2020 and May 31, ~~2017,~~2020, measured on an undiscounted basis over an estimated period of 15 years; ~~$54,000~~$100,000 of the liability is recorded within current liabilities and the remainder is recorded within other

non-current

liabilities inon the consolidated balance ~~sheet.~~

sheets. In fiscal 2019, the Company performed an updated Corrective Measures Study (CMS) on the site, per a request from the Wisconsin Department of Natural Resources (WDNR), and is in discussion with the WDNR regarding potential alternative remediation strategies going forward. The Company believes that the current pump and treat strategy is appropriate for the site. At this time, the outcome of the review in terms of approach and future costs is unknown, but a change in the current remediation strategy, depending on the alternative selected, could require an increase in the recorded liability, with an offsetting charge to operations in the period recorded.

The Company is subject to certain legal and other proceedings in the normal course of business that, in the opinion of management, should not have a material effect on its future results of operations or financial position.

~~10. STOCK PURCHASE~~

The Company has a stock repurchase program, authorized by the Board of Directors in calendar year 2008, to purchase, subject to market conditions, up to 1,500,000 shares of the Company’s common stock. As of February 28, 2018, 1,350,632 shares were available to be repurchased under the program. There were no purchases in fiscal year 2017 and there have been none thus far in fiscal year 2018.

PART I – FINANCIAL INFORMATION

~~Item 2.~~

~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The information in this Management’s Discussion and Analysis of Financial Condition and Results of Operations contains both historical financial information and forward-looking statements. Neogen does not provide forecasts of future financial performance. While management is optimistic about the Company’s long-term prospects, historical financial information may not be indicative of future financial results.

Safe Harbor and Forward-Looking Statements

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, as amended, are made throughout this Quarterly Report on Form

10-Q.

For this purpose, any statements contained herein that are not statements of historical fact may be deemed to be ~~forward looking~~forward-looking statements. Without limiting the foregoing, the words “believes,” “anticipates,” “plans,” “expects,” “seeks,” “estimates,” and similar expressions are intended to identify forward-looking statements. There are a number of important factors, including competition, recruitment and dependence on key employees, impact of weather on agriculture and food production, effects of the ongoing

COVID-19

pandemic on our business, identification and integration of acquisitions, research and development risks, patent and trade secret protection, government regulation and other risks detailed from time to time in the Company’s reports on file at the Securities and Exchange Commission, that could cause Neogen Corporation’s results to differ materially from those indicated by such forward-looking statements, including those detailed in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

In addition, any forward-looking statements represent management’s views only as of the day this Quarterly Report on Form

10-Q

was first filed with the Securities and Exchange Commission and should not be relied upon as representing management’s views as of any subsequent date. While management may elect to update forward-looking statements at some point in the future, it specifically disclaims any obligation to do so, even if its views change.

~~Critical Accounting Policies~~

COVID-19

As we closely monitor the

COVID-19

pandemic, our top priority remains protecting the health and ~~Estimates~~

~~The discussion~~ safety of our employees. While essential operations continue in our locations around the world, the majority of our

non-manufacturing

and ~~analysis of the Company’s financial condition~~distribution employees continue to work remotely and ~~results of operations are based on the consolidated financial statements that~~travel remains restricted. Safety guidelines and procedures, including social distancing and enhanced cleaning, have been ~~prepared~~developed for

on-site

employees and these policies are regularly monitored and updated by our internal Emergency Response Team.

In the second quarter of fiscal 2021, the

COVID-19

pandemic continued to impact our business operations and financial results. There has been a positive impact in ~~accordance~~sales of our Biosecurity product lines, as the pandemic has created increased demand for these products, and sales into Companion Animal markets have benefitted, as remote work and stay at home orders have driven increased pet ownership. A number of our food safety diagnostic product lines have been negatively impacted due to decreased demand in many of our customers’ businesses, particularly those serving restaurants, bars and other institutional food service markets; supply chain difficulties including vendor disruptions, border closures and shipping issues; and restricted travel, which hinders our ability to connect with ~~accounting principles generally accepted~~customers. We expect the

COVID-19

pandemic will continue to impact our business operations and financial results through the end of our current fiscal year.

Executive Overview

Consolidated revenues were $115.0 million in the ~~United States. The preparation~~second quarter of ~~these financial statements requires that management make estimates and judgments that affect the reported amounts~~fiscal 2021, an increase of ~~assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, management evaluates the estimates, including, but not limited~~7% compared to those related to receivable allowances, inventories, accruals, goodwill and other intangible assets. These estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

~~There were no significant changes to the contractual obligations or contingent liabilities and commitments disclosed~~$107.8 million in the ~~Company’s Annual Report on Form10-K~~ ~~for the~~second quarter of fiscal ~~year ended May 31, 2017.~~

~~The Company adopted ASUNo. 2016-09~~ ~~related to share-based compensation on June 1, 2017. (See Note 5 Equity Compensation Plans for further discussion).~~

On December 22, 2017, the Tax Cuts and Jobs Act, (“the Tax Act”) was enacted. Among the significant changes to the U.S. Internal Revenue Code, the Tax Act lowers the U.S. federal corporate income tax rate (“Federal Tax Rate”) from 35% to 21% effective January 1, 2018. The Company will compute its income tax for the fiscal year ending May 31, 2018 using a blended Federal Tax Rate of 29.2%.

In December 2017, the Securities and Exchange Commission staff issued Staff Accounting Bulletin No. 118, which addresses how a company recognizes provisional amounts when a company does not have the necessary information available, prepared or analyzed (including computations) in reasonable detail to complete its accounting for the effect of the changes2020. Organic sales growth in the ~~Tax Act. The measurement~~second quarter of fiscal 2021 was 5%. For the six month period, ~~ends when a company has obtained, prepared and analyzed the information necessary to finalize its accounting, but cannot extend beyond one year.~~

As of February 28, 2018, the Company was able to determine a reasonable estimate for certain effects of tax reform and recorded that estimate as a provisional amount. The provisional remeasurement of the deferred tax assets and liabilities resulted in a $5.6 million discrete tax benefit. In addition, the Company was required to estimate its cumulative unrepatriated foreign earnings and profits and

calculate estimated tax owed on those earnings and profits; this tax was provisionally estimated at $2.7 million. The provisional remeasurement and repatriation amounts are anticipated to change as more data becomes available allowing more accurate computations of the amounts.

~~There have been no other material changes to the critical accounting policies and estimates disclosed in the Company’s Annual Report on Form10-K~~ ~~for the fiscal year ended May 31, 2017.~~

~~Executive Overview~~

~~Revenues for the Company for the third quarter ended February 28, 2018~~consolidated revenues were ~~$95.9~~$224.3 million, an increase of ~~8%, or $7.5 million,~~7% compared to $209.2 million in the same period in the prior fiscal year. On a year to date basis, organic sales rose 5%.

Food Safety segment sales were $57.5 million in the second quarter of fiscal 2021, an increase of 1% compared to $56.9 million in the same period a year ago. Organic sales in this segment decreased 1% for the comparative period, with revenues from the acquisitions of ~~$88.4~~Neogen Italia (January 2020), Neogen Argentina (January 2020), Neogen Uruguay (January 2020), Abtek (January 2020) and Neogen Chile (March 2020) providing the increase in revenues for the segment. For the year to date, Food Safety segment sales were $111.7 million, an increase of 4% compared to $107.9 million in the same period of the prior fiscal year; the organic sales increase was 1% for the comparative period, with the acquisitions listed above providing the additional contributions to revenue.

Animal Safety segment sales were $57.5 million in the second quarter of fiscal 2021, an increase of 13% compared to $50.9 million in the second quarter of fiscal 2020. Organic sales in this segment rose 11% in the second quarter, with additional contribution from the August 2020 acquisition of the StandGuard product line. For the six month period, Animal Safety segment sales were $112.6 million, an increase of 11% compared to $101.4 million in the same period a year ago. Year to date organic sales rose 10%, with revenues from the StandGuard acquisition contributing the difference.

International sales in the second quarter of fiscal 2021 were 39% of total sales compared to 41% of total sales in the second quarter of fiscal 2020. For the year to date, fiscal 2021 international sales were also 39% of total sales compared to 39% of total sales in the same period of the prior year.

Our effective tax rate in the second quarter was 17.8% compared to an effective tax rate of 15.3% in the prior year second quarter; the fiscal 2021 year to date effective tax rate was 18.9% compared to 16.1% for the same period a year ago.

Net income for the quarter ended November 30, 2020 was $15.9 million, or $0.30 per diluted share, compared to $16.3 million, or $0.31 per diluted share in the same period in the prior year. For the year to date, ~~period, revenues were $293.0~~net income was $31.7 million, or $0.60 per diluted share, an increase of ~~12%,~~3% compared to prior year to date net income of $30.9 million, or ~~$30.3~~$0.59 per diluted share.

Cash provided from operating activities in the first six months of fiscal 2021 was $47.5 million, compared to ~~revenues of $262.7~~$40.5 million in the first ~~nine months~~half of fiscal 2020.

International sales rose 2% in the second quarter of fiscal 2021 and increased 6% for the year ~~2017. Net income attributable~~ to date, each compared to the same respective period in the prior year. Revenue changes, expressed in percentages, for the three and six month periods of fiscal 2021 compared to the same respective periods in the prior year are as follows for each of our international locations:


	Three Months Ended		Six Months Ended
	November 30, 2020		November 30, 2020
	Revenue	Revenue	Revenue	Revenue
	% Inc (Dec)	% Inc (Dec)	% Inc (Dec)	% Inc (Dec)
	USD	Local Currency	USD	Local Currency
U.K Operations	9%	6%	15%	12%
Brazil Operations	(22)%	4%	(11)%	19%
Neogen Latinoamerica	13%	23%	6%	18%
Neogen China	59%	51%	77%	72%
Neogen India	5%	8%	7%	12%
Neogen Canada	(17)%	(17)%	(14)%	(14)%
Neogen Australasia	81%	71%	74%	67%

Currency translations reduced comparative revenues by approximately $1.2 million in the second quarter of fiscal 2021 and $3.3 million for the year to date, both compared to the same periods a year ago, primarily due to the increased strength of the U.S. dollar relative to the Brazilian real and the Mexican peso. Combined revenues at our U.K. operations increased 9% in the second quarter, resulting from ongoing strength in biosecurity products as the

COVID-19

pandemic has continued to drive sales; the 15% year to date revenue increase was also primarily from biosecurity products as there was a large sale of hand sanitizers to the U.K. government’s health organization in the first quarter of this fiscal year.

Food Safety

Natural Toxins, Allergens

& Drug Residues –

Sales in this category decreased 3% and 4% for the three and six month periods ended November 30, 2020, respectively, compared to the same periods in the prior year. In the second quarter, sales of our drug residue test kits declined 27% as demand in Eastern Europe weakened and we transition from selling through an exclusive distributor to an

in-house

sales team. The allergens product line increased 1% and has been negatively impacted by competitive pressure and

COVID-19,

as many of our customers have experienced production disruptions and slowdowns. Natural toxin test kit revenues were flat, primarily due to relatively clean crops during this harvest season.

Bacterial

& General Sanitation –

Revenues in this category decreased 3% in both the second quarter and for the year to date, compared to the same periods in the prior year. In the second quarter, sales of products to detect spoilage organisms in processed foods increased 5%, resulting from sales of our new instrument which launched in the first quarter. Sales of our AccuPoint sanitation monitoring product line decreased 8%; we plan to launch a next generation of reader for this product line towards the end of the third quarter at which time there will be significant sales and marketing focus on these products. Sales of ~~fiscal 2018~~products to detect pathogens decreased 8%, primarily due to strong equipment sales in the prior year’s second quarter. For the year to date, sales of products to detect spoilage organisms increased ~~61% to $16.6 million,~~10%, on strong equipment sales, while sales of our AccuPoint product line decreased 7% and pathogen test kit revenues decreased 13%.

Culture Media

& Other –

Sales in this category increased 4% in the quarter ended November 30, 2020 compared to ~~$10.3 million~~the second quarter in the ~~third~~prior year; for the six month period, sales increased 3%. This category includes sales of veterinary personal protective equipment, primarily gloves, as well as hand sanitizers and sanitizing wipes; these products experienced increased demand in new markets due to shortages caused by the

COVID-19

pandemic. This category also includes sales of acquired inventory of

non-Neogen

manufactured products from our new businesses in Italy and the Southern Cone countries; these sales are not expected to continue long-term. Sales of Neogen Culture Media decreased 3% and 6% for the quarter and year to date periods, respectively, primarily due to continued weakness in end demand at a number of our large U.S. customers.

Rodenticides, Insecticides

& Disinfectants –

Revenues in this category increased 7% in the second quarter of fiscal ~~year 2017. Earnings per share for the third quarter of fiscal 2018 were $0.32~~2021 compared to ~~$0.20 per share in~~ the same period a year ~~ago. Net earnings for the third quarter were favorably impacted by adjustments~~ago, due primarily to continued strength in cleaners and disinfectants in China resulting from ~~tax reform legislation enacted~~increased demand from the African swine fever outbreak in ~~December 2017. For~~that country and the ~~first nine months~~

COVID-19

pandemic; there was also a large sale of rodenticides to a distributor in Mexico. The growth in the current ~~fiscal~~ year ~~net income attributable~~second quarter was partially offset by large

non-recurring

sales of insecticide products to ~~Neogen increased 46% to $45.6 million, or $0.88 per fully diluted share, compared to $31.3 million, or $0.61, for the same period~~governmental agencies in Brazil in the prior ~~fiscal~~ year. For the year to date, ~~period, net earnings were favorably impacted by tax reform, excess tax benefits from stock option exercises,~~sales in this category increased 36%, as the first quarter included strong sales of hand and ~~the favorable conclusion~~skin sanitizing products at our U.K. based Quat-Chem operation and a large

one-time

insecticide order at our Brazil operation.

Genomics Services –

Sales of ~~an IRS audit.~~

genomics services sold through our international Food Safety ~~segment revenues~~operations increased ~~11%~~15% and ~~Animal Safety segment revenues increased 6%~~13% for the three and six month ~~period~~periods ended ~~February 28, 2018, each compared~~November 30, 2020, respectively. The increase for both periods was primarily from sales increases in China, due to ~~the same period~~increased testing in the ~~prior year. For the quarter, the overall organic sales increase was 7%; organic growth~~pork industry, gains in beef and dairy cattle testing and project work in aquaculture.

Animal Safety

Life Sciences –

Sales in this category decreased 22% in the ~~Food Safety and Animal Safety segments was 9% and 5%, respectively. The acquisitions of Rogama, purchased inmid-December~~ 2016, and Neogen Australasia, in September 2017, contributed $1.6 million to the overall revenue growth in the third quarter. Food Safety segment revenues increased 17% and Animal Safety segment revenues increased 7% for the year to date period. Overall organic sales increased 7% for the year to date period; the organic increases were 9% for the Food Safety segment and 6% for the Animal Safety segment. The previously discussed acquisitions, and Quat-Chem, purchased on December 1, 2016, contributed $11.1 million to the overall sales increase for the nine month period.

International sales were $37.4 million in the third quarter of fiscal 2018, an increase of 17% compared to the same period in the prior year. Expressed as a percentage of sales, international sales were 39.0% in the quarter, compared to 36.3% in the third quarter a year ago. For the year to date, international sales were $110.5 million, an increase of 20%; international sales were 37.7% of total sales in the current year to date period and 35.1% in the prior year. For each comparative period, international revenue increases were the result of the acquisitions of Quat-Chem (England), Rogama (Brazil) and Neogen Australasia (Australia), and to a lesser extent, revenue increases at existing Company locations. Currency translation had a positive effect on international revenues of approximately $1.9 million in the third quarter of fiscal 2018 as the pound, euro, and peso were stronger on average against the dollar than the same period a year ago; for the year to date period, the positive revenue impact was $2.5 million.

~~Revenues at Neogen Europe increased 16% in U.S. dollars in the third~~second quarter, compared to the same period in the prior year; for the ~~nine~~year to date, the decrease in this product line is 23%. The decline in both periods is due primarily to lower sales of drug test kits to commercial laboratories, as they processed fewer samples due to slowdowns from the

COVID-19

pandemic.

Veterinary Instruments

& Disposables –

Revenues in this category increased 14% for the three month period ended November 30, 2020, led by large increases in detectable needles, as we gained new customers, and syringes, resulting from increased demand in existing markets. For the year to date period sales increased 2%, due to lower demand of these products in the first quarter at our larger animal health distributors.

Animal Care

& Other –

Sales of these products increased 20% in both the three and six month periods ended November 30, 2020, respectively. For both periods, sales of our vitamin injectables, equine supplements and joint pain products benefitted from growth in veterinary markets, as the

COVID-19

pandemic has led to an increase in pet ownership. Partially offsetting these gains was a decline in sales of dairy supplies of 57% and 41% for the quarter and year to date periods, respectively, due to the June 2020 termination of an agreement in which we distributed these types of products for a large manufacturer of dairy equipment.

Income Tax Expense

Income tax expense in the second quarter of fiscal 2021 was $3.5 million, an effective tax rate of 17.8%, compared to $3.0 million, an effective tax rate of 15.3%, in the same period of the prior year. For the year to date, income tax expense was $7.4 million, an effective rate of 18.9%, in fiscal 2021 and $6.0 million, an effective rate of 16.1%, in fiscal 2020. For each period, ~~genomics sales increased 34%~~the primary difference between the statutory rate of 21% and ~~helped to offset lower DON test kit sales. Sales at Lab M,~~ the ~~Company’s subsidiary in England, increased 20%~~effective rates recorded is the benefit resulting from the exercise of stock options; this benefit was $1,060,000 in the ~~third~~second quarter ~~and 25% for the nine month period, as its culture media products continued~~of fiscal 2021 compared to ~~be integrated into Neogen’s global sales and marketing channels. Neogen Latinoamerica recorded a sales increase of 19%~~$1,204,000 in the third quarter; Food Safety products increased 21% and Animal Safety products increased 17%, with broad-based gains recorded in both categories. For the year to date, revenues rose 18%, with Food Safety products and increases in genomics services providing the majority of the increase. Revenues at Neogen do Brasil declined 2% in the year’s third quarter, as a decrease in forensic test kit sales resulting from increased competition and customer losses caused by conversion to different testing methods more than offset increased sales of mycotoxin and dairy drug residue test kits. For the year to date, revenues increased 18%. Neogen China sales increased 28% in the third quarter and 21% for the year to date period, each compared to the same periods in the prior year; for each period, increases were driven by strength in genomics services and animal safety products. Revenues for Neogen India declined 37% for the quarter, as a large cleaner and disinfectant order in the prior year’s third quarter did not repeat; for the year to date, revenues were flat, as higher sales of Food Safety products and testing services were almost entirely offset by the cleaner and disinfectant revenue from last year’s third quarter which did not repeat this year.

~~Service revenue was $17.8 million in the quarter ended February 28, 2018, an increase of $3.4 million, or 24%, compared to $14.4 million in the third~~second quarter of the prior year. For the year to date, ~~period, service revenue~~the benefit was ~~$48.7 million, an increase of $9.1 million, or 23%,~~$1,481,000 in fiscal 2021 compared to ~~$39.6 million~~$1,973,000 in fiscal 2020. The increase in the ~~prior year. The growth,~~effective tax rate for both the second quarter and year to date periods is the result of lower benefit from stock option exercises, increased taxes at international operations and a lower projected U.S. deduction in fiscal 2021 relating to foreign derived income.

Net Income

Net income was led by increases in sales to the global cattle and companion animal markets, increased testing volumes with a large poultry customer and, to a lesser extent, revenues from the acquisition of Neogen Australasia, in September 2017.

~~Revenues~~

   Three Months ended February 28,
         Increase/
   2018    2017    (Decrease)    %
      (in thousands)
Food Safety
Natural Toxins, Allergens & Drug Residues
   $ 16,807    $ 16,453    $ 354    2 %
Bacterial & General Sanitation
   8,992    8,348    644    8 %
Dehydrated Culture Media & Other
   10,511    10,383    128    1 %
Rodenticides, Insecticides & Disinfectants
   7,359    5,040    2,319    46 %
Genomics Services
   3,976    2,725    1,251    46 %







   $ 47,645    $ 42,949    $ 4,696    11 %
Animal Safety
Life Sciences
   $ 2,769    $ 2,332    $ 437    19 %
Veterinary Instruments & Disposables
   10,630    10,000    630    6 %
Animal Care & Other
   7,535    6,311    1,224    19 %
Rodenticides, Insecticides & Disinfectants
   14,590    16,111    (1,521 )    (9 )%
Genomics Services
   12,723    10,682    2,041    19 %







   $ 48,247    $ 45,436    $ 2,811    6 %







Total Revenues
   $ 95,892    $ 88,385    $ 7,507    8 %







   Nine Months ended February 28,
         Increase/
   2018    2017    (Decrease)    %
      (in thousands)
Food Safety
Natural Toxins, Allergens & Drug Residues
   $ 54,960    $ 53,090    $ 1,870    4 %
Bacterial & General Sanitation
   27,435    25,340    2,095    8 %
Dehydrated Culture Media & Other
   32,483    29,792    2,691    9 %
Rodenticides, Insecticides & Disinfectants
   18,175    7,088    11,087    156 %
Genomics Services
   10,887    7,757    3,130    40 %







   $ 143,940    $ 123,067    $ 20,873    17 %
Animal Safety
Life Sciences
   $ 7,589    $ 7,261    $ 328    5 %
Veterinary Instruments & Disposables
   32,804    29,281    3,523    12 %
Animal Care & Other
   24,056    21,563    2,493    12 %
Rodenticides, Insecticides & Disinfectants
   50,228    52,796    (2,568 )    (5 )%
Genomics Services
   34,348    28,779    5,569    19 %







   $ 149,025    $ 139,680    $ 9,345    7 %







Total Revenues
   $ 292,965    $ 262,747    $ 30,218    12 %

~~The Company’s Food Safety segment revenues were $47.6~~$15.9 million in the second quarter ~~ended February 28, 2018, an increase~~ of ~~11%~~fiscal 2021, compared to the same period in the prior year. For the nine month period, Food Safety revenues increased 17% to $143.9 million. Organic growth for the segment was 9% for both the quarter and year to date periods, with the acquisition of Rogama, occurring on December 21, 2016, contributing the remainder of the growth.

Natural Toxins, Allergens & Drug Residues sales increased 2% in the third quarter; revenues for the year to date period increased 4%. Sales of dairy drug residue kits, used to detect the presence of antibiotics in raw milk, increased 29% in the third quarter as new products continued to gain share, particularly in international markets; for the year to date period, dairy drug residue test kit revenues rose 15%. Allergen test kit sales increased 14% and 13% in the three and nine month periods ended February 28, 2018, respectively, as product recalls relating to allergenic contamination of food continued to expand the market. Sales of test kits to detect the presence of natural toxins in grain crops decreased 17% in the third quarter. An 11% increase in aflatoxin test kit sales, due to moderate

outbreaks in U.S. and Brazilian corn crops, was offset by a 41% decrease in sales of deoxynivalenol (DON) test kits, as prior year outbreaks of DON in corn crops in the U.S., Canada and Europe did not recur in the current year. For the year to date period, sales of natural toxin test kits decreased 7%.

Bacterial & General Sanitation sales increased 8% in both the three and nine month periods ended February 28, 2018. Within this category, the Company’s AccuPoint sanitation monitoring product line increased 18% in the third quarter and 19% for the year to date period, on sales strength in both reader equipment and consumable supplies. Sales of test kits to detect pathogens increased 22% in the third quarter, led by strength in~~Listeria~~ ~~products, including the Company’s new~~~~Listeria~~ Right Now test kit that launched earlier in the fiscal year. The Company also benefitted from strong sales of equipment used with the Company’s ANSR line of test kits to detect various pathogens, as the Company gained new customers; overall pathogen revenues increased 14% for the year to date period. Revenues for the Company’s consumable product lines to detect spoilage organisms in processed foods decreased 2% in the current quarter but increased 3% for the nine month period.

Dehydrated Culture Media & Other sales increased 1% in the third quarter. This category includes forensic test kits sold through the Company’s Brazilian subsidiary. Demand for these kits from customers located in Brazil had increased dramatically in the prior year due to a new requirement for drug testing of commercial truck drivers, however, sales of these kits in Brazil have decreased in the current year as a result of increased competition and customer losses caused by conversion to different testing methods. In the third quarter, the Company’s worldwide Lab M sales increased 21% and Acumedia sales increased 6%.

Sales of Rodenticides, Insecticides & Disinfectants products sold through the Company’s Food Safety operations increased 46% in the third quarter; the organic sales increase in this category was 29%. For the nine month period, sales increased $11.1 million; excluding first year sales of the Quat-Chem and Rogama acquisitions, the year to date sales increase was 16%. In the third quarter, the increase was primarily due to Rogama shipping a large order resulting from a government contract; this sale is unlikely to recur in the next 12 months. The increase in sales was partially offset by termination of a distribution agreement in January 2017, which resulted in a decline in sales for those distributed products of $143,000 in the third quarter and $859,000 for the year to date.

~~Genomics Services revenue recorded in the Food Safety segment increased 46% and 40% for the three and nine month periods, respectively, due primarily to growth of these services in Europe.~~

~~Sales for the Company’s Animal Safety segment were $48.2~~$16.3 million in the third quarter, an increase of 6% over the same period a year ago. Revenues for the nine month period increased 7% to $149 million compared to $139.7 million in the prior year. Organic growth in this segment was 5% and 6% in the three and nine month periods, respectively; the Neogen Australasia acquisition in September 2017 contributed the remainder of the growth. Sales of Life Sciences products increased 19% in the third quarter, partially due to order timing, and have risen 5% for the year to date period. The Company has increased volumes of forensic test kits sold to commercial labs in the U.S.

Veterinary Instruments & Disposables revenues increased 6% and 12% for the three and nine month periods, respectively. For both periods, the increase is primarily the result of strength in detectable needles, syringes and animal marking products. Sales of Animal Care & Other products increased 19% in the quarter ended February 28, 2018, compared to the same period in the prior year; the year to date increase was 12%. The increase in the current year is due to market share gains of supplements for companion animals and vitamin injectables, and increased sales of vaccines to a large distributor; additionally, last year’s results included sales credits totaling $1.1 million in the first quarter as the Company removed its canine thyroid product from its distribution channels, after the FDA approved a new drug application for a competitive product.

Rodenticides, Insecticides & Disinfectants sales decreased 9% in the quarter and 5% for the year to date period, as the termination of a distribution agreement with a manufacturer of cleaners and disinfectants in January 2017 resulted in lost sales for those distributed products of $1.4 million in the third quarter of the current fiscal year and $3.9 million for the year to date period. These losses were offset by an 11% increase in rodenticide sales in the third quarter as the Company gained incremental business with several large customers; year to date sales rose by 9%.

~~Genomics Services increased 19% in both the third quarter and year to date periods, respectively, each compared to~~ the same period in the prior year. The ~~growth~~decline in earnings for ~~both periods~~this year’s second quarter was ~~led by increases in sales to~~ the ~~global cattle and companion animal markets, higher volumes from a large poultry customer and, to a lesser extent, revenues from~~result of the ~~acquisition of Neogen Australasia, in September 2017.~~

~~Gross Margin~~

~~Gross margin was 47.5%~~increase in the third quarter of fiscal 2018 compared to 46.3% in the same quarter a year ago. Gross margins for the quarter were positively impacted by lower costs inputs at the Company’s genomics operations and favorable product mix towards higher margin diagnostic and animal care products; this improvement was somewhat offset by lower sales of mycotoxin test kits due to a prior year outbreak of DON in corn crops in the U.S. and western Europe, which did not recur in the current fiscal year. Gross margin for the nine month period ended February 28, 2018 was 48.0% compared to 47.6% in the same period of the prior year. Gross margins for the year to date were positively impacted by improved raw material costs at the Company’s genomics operations and favorable product mix towards higher margin diagnostic and animal care products; this improvement was somewhat offset by mix

changes resulting from the three most recent acquisitions (Rogama, Quat-Chem and Neogen Australasia), all of which have gross margins that are lower than the historical average for the Company, and lower sales of mycotoxin test kits due to a prior year outbreak of DON in corn crops in the U.S. and western Europe, which did not recur in the current fiscal year.

~~Operating Expenses~~

~~Operating expenses were $29.6 million in the third quarter, compared to $26.5 million in the same quarter of last fiscal year, an~~

increase of $3.1 million, or 12%. Sales and marketing expenses were $17.5 million, compared to $15.3 million in last year’s third quarter, an increase of 14%, primarily due to increases in salaries and related personnel costs, shipping expense, and higher advertising expenses in support of new product launches. General and administrative expense increased $700,000, or 9%, in the third quarter; increases in amortization of acquired intangible assets, IT consulting, and higher salary expenses were partially offset by lower stock based compensation expense resulting from forfeitures due to employee retirements and reduced legal expenses. In last year’s third quarter, the Company closed on two acquisitions, while there were none in this year’s third quarter.effective tax rate. For the year to date, ~~period, research and development expense~~net income increased ~~7% in the third quarter~~3% from $30.9 million to a total of $2.8 million. Increases were due to increases in compensation, higher depreciation resulting from investments in laboratory equipment, and projects relating to product improvements and new product development. For the year to date, research and development expenses increased 10%. Operating expenses for the nine$31.7 million; six month ~~period were $90.3 million, an increase of $11.3 million, or 14% over the same period last fiscal year. The recent acquisitions accounted for $2.8 million of the increase.~~

~~Operating Income~~

~~Operating income was $15.9 million in the third quarter, an increase of $1.5 million, or 11%, compared to operating income of~~

~~$14.4 million in the prior year. Expressed as a percentage of revenue, operating income was 16.6% compared to 16.2% in last year’s~~

third quarter. The improvement in operating margin percentage for the comparative quarter was primarily the result of higher gross margins offset somewhat by operating expenses which rose more than the rate of the overall revenue increase. For the nine months ended February 28, 2018, operating income was $50.3 million, an increase of $4.4 million, or 10%, compared to operating income of $45.9 million for the same period last year. Expressed as a percentage of revenue, year to date operating income was 17.2% compared to 17.5% in the prior year.

~~Other Income and Income Tax~~

~~Other income was $1.4 million for both the third quarter of fiscal 2018 and the same period in 2017. Components of other~~net income in ~~this year’s third quarter included $525,000 of interest income, $360,000 from an insurance settlement, $179,000 in currency gains and~~fiscal 2021 was also negatively impacted by a $255,000 gain recorded on the settlement of contingent consideration related to the Quat-Chem acquisition. Last year’s fiscal third quarter included a gain on the settlement of a licensing agreement of $660,000, currency gains of $442,000, and interest income of $271,000. For the year to date period in fiscal 2018, other income was $3.2 million, primarily comprised of $1.3 million of interest income, currency gains of $1.1 million, $360,000 from an insurance settlement, $255,000 gain recorded on the settlement of contingent consideration related to the Quat-Chem acquisition, and $78,000 of royalty income. For the same period in fiscal 2017, other income was $1.8 million, which included interest income of $691,000, gain on the settlement of a licensing agreement of $660,000, currency gains of $263,000, and royalty income of $79,000.

~~Income tax expense in the third quarter was $700,000, an~~higher effective tax rate of 4%, compared to prior year third quarter expense of $5.4 million, an effective tax rate of 34%. The Company recorded favorable tax adjustments totaling $2.9 million during the quarter as the result of tax reform passed in the U.S. in December 2017. The tax reform reduced the statutory federal income tax rate from 35% to 21%, and also resulted in other adjustments to income tax expense. The Company will compute its income tax for the fiscal year ending May 31, 2018 using a blended Federal Tax Rate of 29.2%. Accordingly, first and second quarter income previously subject to tax at the 35% Federal Tax Rate benefitted from the 29.2% Federal Tax Rate. As required by generally accepted accounting principles, the Company revalued its net deferred tax liabilities during the quarter to reflect the lower rate, resulting in a credit to income tax expense of $5.6 million. In addition, the Company was required to estimate its cumulative unrepatriated foreign earnings and profits and calculate tax owed on those earnings and profits during the third quarter. This tax was estimated at $2.7 million, and the amount was recorded as federal income tax expense; payment of the tax is permitted over an eight year period.

For the first nine months of fiscal 2018, income tax expense was $7.9 million compared to $16.3 million in the prior year; the current year to date effective tax rate was 15%, compared to an effective tax rate of 34% in the prior fiscal year. For the year to date period, the lower effective rate is primarily the result of the tax reform passed in the U.S. in December 2017 as discussed in the preceding paragraph. Additionally, during the year the Company has recorded credits of $3.4 million to federal income tax expense for excess tax benefits from the exercise of stock options, due to the adoption of ASU~~2016-09;~~ refer to Note 5 of the Company’s Consolidated Financial Statements for further information. In the second quarter of fiscal 2018, an IRS examination of the Company’s federal income tax returns for fiscal years 2014, 2015 and 2016 was concluded. As a result of the favorable outcome of the audit, the Company reversed a total of $816,000 from its reserve for uncertain tax positions, which had been accrued in prior fiscal years, with a corresponding credit to federal income tax expense.

~~Net Income~~

~~Net income attributable to Neogen increased 61% from $10.3 million to $16.6 million for the three month period ended February 28,~~

2018. For the year to date period, net income was $45.6 million, a 46% increase over prior year net income of $31.3 million. Pre tax income increases of 10% for the quarter and 12% for the year to date were favorably impacted by the effects of tax reform, excess tax benefits from the exercise of stock options, and positive results from the IRS examination that concluded during the year’s second quarter.

rate.

Financial Condition and Liquidity

The overall cash, cash equivalents and marketable securities position of ~~the Company~~Neogen was ~~$192.2~~$390.8 million at ~~February 28, 2018~~November 30, 2020, compared to ~~$143.6~~$343.7 million at May 31, ~~2017.~~2020. Approximately ~~$46.5~~$47.5 million was generated from operations during the first ~~nine~~six months of fiscal ~~2018.~~2021. Net cash proceeds of ~~$18.9~~$12.7 million were realized from the exercise of stock options and issuance of shares under ~~the Company’s employee stock purchase plan~~our Employee Stock Purchase Plan during the ~~same period. The Company~~first six months of fiscal 2021. We spent ~~$16.3~~$11.1 million for property, equipment and other

non-current

assets ~~during~~in the first ~~nine months~~half of fiscal ~~2018.~~

~~Accounts~~2021.

Net accounts receivable balances were ~~$73.2~~$79.9 million at ~~February 28, 2018, an increase~~November 30, 2020, a decrease of ~~$4.6~~$4.8 million, ~~or 7%,~~ compared to ~~$68.6~~$84.7 million at May 31, ~~2017, less than the increase in revenue.~~2020. Days sales outstanding, a measurement of the time it takes to collect receivables, were 6361 days at ~~February 28, 2018~~November 30, 2020, compared to 6068 days at May 31, ~~2017. All~~2020 and 65 days at November 30, 2019. We have been carefully monitoring our customer ~~accounts are actively managed and no losses~~receivables as the

COVID-19

pandemic has spread across our global markets; to date, we have not experienced an appreciable increase in ~~excess of amounts reserved are currently expected.~~

~~Net inventory balances were $77.5 million at February 28, 2018,~~bad debt write offs. We did provide an ~~increase of $4.4 million, or 6%, compared to $73.1 million~~additional $100,000 at May 31, ~~2017. The Company~~2020 in our allowance for bad debts to account for potential write offs related to

COVID-19;

we will continue to actively ~~monitors its~~manage our customer accounts and adjust the allowance account as circumstances change.

Net inventory ~~and balances the need for adequate product availability~~was $92.5 million at November 30, 2020, a decrease of $2.6 million, compared to ~~minimize backorders with~~ a ~~desire to improve~~May 31, 2020 balance of $95.1 million. We increased inventory ~~turnover and efficiency levels. Formal programs have been instituted~~levels in fiscal ~~2018~~2020 to ~~improve~~ensure we have adequate supplies of critical raw and finished products in the event our supply chain is adversely impacted by the

COVID-19

pandemic and Brexit, however we have programs in place to lower inventory ~~turnover.~~

levels in areas where it will not adversely affect customers.

Inflation and changing prices are not expected to have a material effect on operations, as management believes it will continue to be successful in offsetting increased input costs with price increases and/or cost efficiencies.

Management believes that ~~the Company’s~~our existing cash and marketable securities balances at ~~February 28, 2018~~November 30, 2020, along with available borrowings under ~~its~~our credit facility and cash expected to be generated from future operations, will be sufficient to fund activities for the foreseeable future. However, existing cash and borrowing capacity may not be sufficient to meet ~~the Company’s~~our cash requirements to commercialize products currently under development or ~~its~~ plans to acquire other organizations, technologies or products that fit within ~~the Company’s~~our mission statement. Accordingly, ~~the Company~~we may choose to issue equity securities or enter into other financing arrangements for a portion of ~~its~~our future financing needs.


	Amount
Years ending May 31, 2021 (1)	$	444
2022		613
2023		338
2024		169
2025		44
2026 and thereafter		0
Total lease payments		1,608
Less: imputed interest		101

Total lease liabilities	$	1,507


	Three Months ended November 30,				Six Months ended November 30,
(in thousands)	2020		2019		2020		2019
Food Safety
Natural Toxins, Allergens & Drug Residues	$	20,001	$	20,681	$	39,016	$	40,796
Bacterial & General Sanitation		11,235		11,615		21,166		21,931
Culture Media & Other		13,296		12,757		24,689		24,037
Rodenticides, Insecticides & Disinfectants		7,978		7,447		17,586		12,896
Genomics Services		5,024		4,354		9,262		8,216

	$	57,534	$	56,854	$	111,719	$	107,876
Animal Safety
Life Sciences	$	1,398	$	1,803	$	2,723	$	3,525
Veterinary Instruments & Disposables		11,974		10,486		22,349		21,822
Animal Care & Other		9,371		7,787		17,029		14,193
Rodenticides, Insecticides & Disinfectants		18,471		16,186		38,385		32,904
Genomics Services		16,252		14,687		32,120		28,907

	$	57,466	$	50,949	$	112,606	$	101,351

Total Revenues	$	115,000	$	107,803	$	224,325	$	209,227


3		Articles of Incorporation, as restated (incorporated by reference to Exhibit 3 to the Registrant’s Form 10-Q filed on December 28, 2018)

10.1		Amended and Restated Credit Agreement dated as of November 30, 2016 between Registrant and JPMorgan Chase Bank, N.A. (incorporated by reference to Exhibit 10.A of the Registrant’s Form 8-K filed on December 7, 2016)

10.2		First Amendment to Amended and Restated Credit Agreement dated as of November 30, 2018 between Registrant and JP Morgan Chase N.A. (incorporated by reference to Exhibit 10.A of the Registrant’s Form 8-K filed on December 6, 2018)

10.3		Second Amendment to Amended and Restated Credit Agreement dated as of November 30, 2020 between Registrant and JP Morgan Chase N.A. (incorporated by reference to Exhibit 10.A of the Registrant’s Form 8-K filed on December 17, 2020)

31.1		Certification of ~~Principal~~Chief Executive Officer pursuant to Rule13a-14(a).

31.2		Certification of ~~Principal~~Chief Financial Officer pursuant to Rule13a-14(a).

32		Certification pursuant to 18 U.S.C. section 1350

101.INS		Inline XBRL Instance Document

101.SCH		Inline XBRL Taxonomy Extension Schema Document

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		Inline XBRL Taxonomy Extension Definition Document

101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document

EX-104		Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)


~~Dated: March 29, 2018~~		/s/ John E. Adent
	John E. Adent
		~~/s/ James L. Herbert~~ President & Chief Executive Officer
		~~James L. Herbert~~
		~~Executive Chairman~~
		(Principal Executive Officer)


~~Dated: March 29, 2018~~

		/s/ Steven J. Quinlan
		Steven J. Quinlan
		Vice President & Chief Financial Officer
		(Principal Financial Officer and Principal Accounting Officer)


	February 28, 2018			May 31, 2017
	(Unaudited)			(Audited)
Assets
Current Assets
Cash and cash equivalents	$	82,066		$	77,567
Marketable securities (at fair value, which approximates cost)		110,089			66,068
Accounts receivable, less allowance of $1,750 and $2,000		73,209			68,576
Inventories, net		77,506			73,144
Prepaid expenses and other current assets		9,334			7,606

Total Current Assets		352,204			292,961
Property and Equipment, net		72,514			61,748
Other Assets
Goodwill		99,478			104,759
Othernon-amortizable intangible assets		15,011			14,323
Customer-based intangibles, net of accumulated amortization of $23,846 and $20,846 at February 28, 2018 and May 31, 2017		33,518			35,983
Othernon-current assets, net of accumulated amortization of $11,893 and $9,931 at February 28, 2018 and May 31, 2017		22,876			18,635

Total Assets	$	595,601		$	528,409

Liabilities and Equity
Current Liabilities
Accounts payable	$	19,654		$	16,244
Accrued compensation		5,469			5,002
Income taxes		960			936
Other accruals		11,210			13,820

Total Current Liabilities		37,293			36,002
Deferred Income Taxes		11,400			17,048
Non-Current Liabilities		4,973			3,602

Total Liabilities		53,666			56,652
Commitments and Contingencies (note 9)
Equity
Preferred stock, $1.00 par value, 100,000 shares authorized, none issued and outstanding		—			—
Common stock, $0.16 par value, 60,000,000 shares authorized, 51,583,085 and 50,932,489 shares issued and outstanding at February 28, 2018 and May 31, 2017, respectively		8,253			8,149
Additionalpaid-in capital		197,246			174,742
Accumulated other comprehensive loss		(5,303	)		(7,203	)
Retained earnings		341,459			295,926

Total Neogen Corporation Stockholders’ Equity		541,655			471,614
Non-controlling interest		280			143

Total Equity		541,935			471,757

Total Liabilities and Equity	$	595,601		$	528,409


	Three Months Ended					Nine Months Ended
	February 28,					February 28,
	2018		2017			2018			2017
Revenues
Product revenues	$	78,142	$	73,964		$	244,298		$	223,170
Service revenues		17,750		14,421			48,667			39,577

Total Revenues		95,892		88,385			292,965			262,747
Cost of Revenues
Cost of product revenues		40,352		38,816			124,785			113,241
Cost of service revenues		10,019		8,689			27,517			24,556

Total Cost of Revenues		50,371		47,505			152,302			137,797

Gross Margin		45,521		40,880			140,663			124,950

Operating Expenses
Sales and marketing		17,492		15,340			52,331			45,824
General and administrative		9,280		8,548			29,096			25,094
Research and development		2,836		2,641			8,901			8,087

Total Operating Expenses		29,608		26,529			90,328			79,005

Operating Income		15,913		14,351			50,335			45,945

Other Income
Interest income		524		271			1,322			690
Other income		844		1,105			1,913			1,098

Total Other Income		1,368		1,376			3,235			1,788

Income Before Taxes		17,281		15,727			53,570			47,733
Provision for Income Taxes		700		5,350			7,900			16,250

Net Income		16,581		10,377			45,670			31,483
Net (Income)/Loss Attributable toNon-Controlling Interest		5		(90	)		(70	)		(163	)

Net Income Attributable to Neogen	$	16,586	$	10,287		$	45,600		$	31,320

Net Income Attributable to Neogen Per Share
Basic	$	0.32	$	0.20		$	0.89		$	0.62

Diluted	$	0.32	$	0.20		$	0.88		$	0.61


							Accumulated
					Additional		Other						Non-
	Common Stock				Paid-in		Comprehensive			Retained			controlling
	Shares		Amount		Capital		Income (Loss)			Earnings			Interest		Total
Balance, May 31, 2017		50,932	$	8,149	$	174,742	$	(7,203	)	$	295,926		$	143	$	471,757
Issuance of shares under share-based compensation plan		631		101		21,456										21,557
Issuance of shares under employee stock purchase plan		20		3		1,048										1,051
Conversion of minority interest to retained earnings											(67	)		67		—
Net income for the nine months ended February 28, 2018											45,600			70		45,670
Other comprehensive income								1,900								1,900

Balance February 28, 2018		51,583	$	8,253	$	197,246	$	(5,303	)	$	341,459		$	280	$	541,935


	November 30, 2020			May 31, 2020
Weighted average remaining lease term		2.4 years			2.5 years
Weighted average discount rate		3.1	%		3.2	%


	Three Months Ended February 28,				Nine Months Ended February 28,
	2018		2017		2018		2017
	(in thousands, except per share amounts)
Numerator for basic and diluted net income per share:
Net income attributable to Neogen	$	16,586	$	10,287	$	45,600	$	31,320
Denominator for basic net income per share:
Weighted average shares		51,537		50,746		51,253		50,438
Effect of dilutive stock options		700		633		761		723

Denominator for diluted net income per share		52,237		51,379		52,014		51,161

Net income attributable to Neogen per share:
Basic	$	0.32	$	0.20	$	0.89	$	0.62

Diluted	$	0.32	$	0.20	$	0.88	$	0.61


	Three Months Ended November 30,				Six Months Ended November 30,
(in thousands, except per share amounts)	2020		2019		2020		2019
Numerator for basic and diluted net income per share:

Net income attributable to Neogen	$	15,885	$	16,276	$	31,745	$	30,928
Denominator for basic net income per share:
Weighted average shares		53,129		52,557		53,022		52,355
Effect of dilutive stock options and RSUs		275		319		278		357

Denominator for diluted net income per share		53,404		52,876		53,300		52,712
Net income attributable to Neogen per share:
Basic	$	0.30	$	0.31	$	0.60	$	0.59

Diluted	$	0.30	$	0.31	$	0.60	$	0.59


	Food Safety		Animal Safety		Corporate and Eliminations (1)			Total
	(in thousands)
As of and for the three months ended February 28, 2018
Product revenues to external customers	$	42,618	$	35,524	$	—		$	78,142
Service revenues to external customers		5,027		12,723		—			17,750

Total revenues to external customers		47,645		48,247		—			95,892
Operating income (loss)		8,258		8,493		(838	)		15,913
Total assets		188,075		215,371		192,155			595,601

As of and for the three months ended February 28, 2017
Product revenues to external customers	$	39,318	$	34,646	$	—		$	73,964
Service revenues to external customers		3,631		10,790		—			14,421

Total revenues to external customers		42,949		45,436		—			88,385
Operating income (loss)		7,403		7,743		(795	)		14,351
Total assets		183,419		215,243		108,636			507,298


	FY 2018	FY 2017
Risk-free interest rate	1.6%	1.2%
Expected dividend yield	0.0%	0.0%
Expected stock price volatility	27.7%	35.2%
Expected option life	4.0 years	4.0 years


	Three Months Ended November 30,
					Increase/
(in thousands)	2020		2019		(Decrease)			%
Food Safety
Natural Toxins, Allergens & Drug Residues	$	20,001	$	20,681	$	(680	)		(3	)%
Bacterial & General Sanitation		11,235		11,615		(380	)		(3	)%
Culture Media & Other		13,296		12,757		539			4	%
Rodenticides, Insecticides & Disinfectants		7,978		7,447		531			7	%
Genomics Services		5,024		4,354		670			15	%

	$	57,534	$	56,854	$	680			1	%
Animal Safety
Life Sciences	$	1,398	$	1,803	$	(405	)		(22	)%
Veterinary Instruments & Disposables		11,974		10,486		1,488			14	%
Animal Care & Other		9,371		7,787		1,584			20	%
Rodenticides, Insecticides & Disinfectants		18,471		16,186		2,285			14	%
Genomics Services		16,252		14,687		1,565			11	%

	$	57,466	$	50,949	$	6,517			13	%

Total Revenues	$	115,000	$	107,803	$	7,197			7	%


	Three Months ended February 28,
					Increase/
	2018		2017		(Decrease)			%
			(in thousands)
Food Safety
Natural Toxins, Allergens & Drug Residues	$	16,807	$	16,453	$	354			2	%
Bacterial & General Sanitation		8,992		8,348		644			8	%
Dehydrated Culture Media & Other		10,511		10,383		128			1	%
Rodenticides, Insecticides & Disinfectants		7,359		5,040		2,319			46	%
Genomics Services		3,976		2,725		1,251			46	%

	$	47,645	$	42,949	$	4,696			11	%
Animal Safety
Life Sciences	$	2,769	$	2,332	$	437			19	%
Veterinary Instruments & Disposables		10,630		10,000		630			6	%
Animal Care & Other		7,535		6,311		1,224			19	%
Rodenticides, Insecticides & Disinfectants		14,590		16,111		(1,521	)		(9	)%
Genomics Services		12,723		10,682		2,041			19	%

	$	48,247	$	45,436	$	2,811			6	%

Total Revenues	$	95,892	$	88,385	$	7,507			8	%


	Nine Months ended February 28,
					Increase/
	2018		2017		(Decrease)			%
			(in thousands)
Food Safety
Natural Toxins, Allergens & Drug Residues	$	54,960	$	53,090	$	1,870			4	%
Bacterial & General Sanitation		27,435		25,340		2,095			8	%
Dehydrated Culture Media & Other		32,483		29,792		2,691			9	%
Rodenticides, Insecticides & Disinfectants		18,175		7,088		11,087			156	%
Genomics Services		10,887		7,757		3,130			40	%

	$	143,940	$	123,067	$	20,873			17	%
Animal Safety
Life Sciences	$	7,589	$	7,261	$	328			5	%
Veterinary Instruments & Disposables		32,804		29,281		3,523			12	%
Animal Care & Other		24,056		21,563		2,493			12	%
Rodenticides, Insecticides & Disinfectants		50,228		52,796		(2,568	)		(5	)%
Genomics Services		34,348		28,779		5,569			19	%

	$	149,025	$	139,680	$	9,345			7	%

Total Revenues	$	292,965	$	262,747	$	30,218			12	%