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☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
2022.
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Title of each Class | Trading Symbol(s) | Name of each exchange on which registered | ||
Common Stock, $0.16 par value per share | NEOG | NASDAQ Global Select Market |
Large accelerated filer | ☒ | Accelerated filer | ☐ | |||||||
Non-accelerated filer | ☐ | Smaller Reporting Company | ☐ | |||||||
Emerging growth company | ☐ |
Sheets (unaudited)
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 | ||||||
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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 | ||||||
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Total Assets | $ | 595,601 | $ | 528,409 | ||||
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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 | ||||||
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Total Current Liabilities | 37,293 | 36,002 | ||||||
Deferred Income Taxes | 11,400 | 17,048 | ||||||
Non-Current Liabilities | 4,973 | 3,602 | ||||||
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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 | ||||||
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Total Neogen Corporation Stockholders’ Equity | 541,655 | 471,614 | ||||||
Non-controlling interest | 280 | 143 | ||||||
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Total Equity | 541,935 | 471,757 | ||||||
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Total Liabilities and Equity | $ | 595,601 | $ | 528,409 | ||||
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February 28, | May 31, | |||||||
2022 | 2021 | |||||||
Assets | ||||||||
Current Assets | ||||||||
Cash and cash equivalents | $ | 42,879 | $ | 75,602 | ||||
Marketable securities | 335,560 | 305,485 | ||||||
Accounts receivable, less allowance of $1,600 and $1,400 at February 28, 2022 and May 31, 2021, respectively | 92,978 | 91,823 | ||||||
Inventories | 113,395 | 100,701 | ||||||
Prepaid expenses and other current assets | 24,821 | 17,840 | ||||||
Total Current Assets | 609,633 | 591,451 | ||||||
Net Property and Equipment | 104,699 | 100,453 | ||||||
Other Assets | ||||||||
Right of use assets | 2,762 | 2,477 | ||||||
Goodwill | 150,029 | 131,476 | ||||||
Other non-amortizable intangible assets | 15,451 | 15,545 | ||||||
Amortizable intangible and other assets, net of accumulated amortization of $53,838 and $53,462 at February 28, 2022 and May 31, 2021, respectively | 96,613 | 76,771 | ||||||
Other non-current assets | 2,018 | 2,019 | ||||||
Total Assets | $ | 981,205 | $ | 920,192 | ||||
Liabilities and Stockholders’ Equity | ||||||||
Current Liabilities | ||||||||
Accounts payable | $ | 23,548 | $ | 23,900 | ||||
Accrued compensation | 9,655 | 11,251 | ||||||
Income taxes | 0 | 1,848 | ||||||
Other accruals | 32,507 | 16,600 | ||||||
Total Current Liabilities | 65,710 | 53,599 | ||||||
Deferred Income Taxes | 21,196 | 21,917 | ||||||
Other Non-Current Liabilities | 18,755 | 4,299 | ||||||
Total Liabilities | 105,661 | 79,815 | ||||||
Commitments and Contingencies (note 10) | 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, 107,818,159 and 107,468,304 shares issued and outstanding at February 28, 2022 and May 31, 2021, respectively | 17,251 | 17,195 | ||||||
Additional paid-in capital | 307,780 | 294,953 | ||||||
Accumulated other comprehensive loss | (22,439 | ) | (11,375 | ) | ||||
Retained earnings | 572,952 | 539,604 | ||||||
Total Stockholders’ Equity | 875,544 | 840,377 | ||||||
Total Liabilities and Stockholders’ Equity | $ | 981,205 | $ | 920,192 | ||||
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 | ||||||||||||
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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 | ||||||||||||
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Total Cost of Revenues | 50,371 | 47,505 | 152,302 | 137,797 | ||||||||||||
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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 | ||||||||||||
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Total Operating Expenses | 29,608 | 26,529 | 90,328 | 79,005 | ||||||||||||
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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 | ||||||||||||
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Total Other Income | 1,368 | 1,376 | 3,235 | 1,788 | ||||||||||||
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Income Before Taxes | 17,281 | 15,727 | 53,570 | 47,733 | ||||||||||||
Provision for Income Taxes | 700 | 5,350 | 7,900 | 16,250 | ||||||||||||
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Net Income | 16,581 | 10,377 | 45,670 | 31,483 | ||||||||||||
Net (Income)/Loss Attributable toNon-Controlling Interest | 5 | (90 | ) | (70 | ) | (163 | ) | |||||||||
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Net Income Attributable to Neogen | $ | 16,586 | $ | 10,287 | $ | 45,600 | $ | 31,320 | ||||||||
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Net Income Attributable to Neogen Per Share | ||||||||||||||||
Basic | $ | 0.32 | $ | 0.20 | $ | 0.89 | $ | 0.62 | ||||||||
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Diluted | $ | 0.32 | $ | 0.20 | $ | 0.88 | $ | 0.61 | ||||||||
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Three Months Ended | Nine Months Ended | |||||||||||||||
February 28, | February 28, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Revenues | ||||||||||||||||
Product revenues | $ | 101,566 | $ | 92,816 | $ | 311,701 | $ | 273,288 | ||||||||
Service revenues | 26,678 | 23,893 | 75,365 | 67,746 | ||||||||||||
Total Revenues | 128,244 | 116,709 | 387,066 | 341,034 | ||||||||||||
Cost of Revenues | ||||||||||||||||
Cost of product revenues | 56,550 | 49,466 | 167,650 | 145,336 | ||||||||||||
Cost of service revenues | 14,282 | 13,394 | 41,402 | 38,333 | ||||||||||||
Total Cost of Revenues | 70,832 | 62,860 | 209,052 | 183,669 | ||||||||||||
Gross Margin | 57,412 | 53,849 | 178,014 | 157,365 | ||||||||||||
Operating Expenses | ||||||||||||||||
Sales and marketing | 21,477 | 18,693 | 63,220 | 52,938 | ||||||||||||
General and administrative | 24,997 | 15,146 | 60,985 | 38,343 | ||||||||||||
Research and development | 4,561 | 4,236 | 13,218 | 12,170 | ||||||||||||
Total Operating Expenses | 51,035 | 38,075 | 137,423 | 103,451 | ||||||||||||
Operating Income | 6,377 | 15,774 | 40,591 | 53,914 | ||||||||||||
Other Income (Expense) | ||||||||||||||||
Interest income | 314 | 294 | 741 | 1,571 | ||||||||||||
Other expense | (48 | ) | (91 | ) | (34 | ) | (363 | ) | ||||||||
Total Other Income | 266 | 203 | 707 | 1,208 | ||||||||||||
Income Before Taxes | 6,643 | 15,977 | 41,298 | 55,122 | ||||||||||||
Provision for Income Taxes | 1,200 | 2,600 | 7,950 | 10,000 | ||||||||||||
Net Income | $ | 5,443 | $ | 13,377 | $ | 33,348 | $ | 45,122 | ||||||||
Net Income Per Share | ||||||||||||||||
Basic | $ | 0.05 | $ | 0.13 | $ | 0.31 | $ | 0.42 | ||||||||
Diluted | $ | 0.05 | $ | 0.12 | $ | 0.31 | $ | 0.42 | ||||||||
Weighted Average Shares Outstanding | ||||||||||||||||
Basic | 107,818 | 106,826 | 107,648 | 106,264 | ||||||||||||
Diluted | 108,133 | 107,390 | 108,130 | 106,768 |
Three Months Ended | Nine Months Ended | |||||||||||||||
February 28, | February 28, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Net Income | $ | 16,581 | $ | 10,377 | $ | 45,670 | $ | 31,483 | ||||||||
Other comprehensive income (loss), net of tax: currency translation adjustments | 1,163 | 441 | 1,900 | (3,743 | ) | |||||||||||
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Comprehensive income | 17,744 | 10,818 | 47,570 | 27,740 | ||||||||||||
Comprehensive loss (income) attributable tonon-controlling interest | 5 | (90 | ) | (70 | ) | (163 | ) | |||||||||
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Comprehensive income attributable to Neogen | $ | 17,749 | $ | 10,728 | $ | 47,500 | $ | 27,577 | ||||||||
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Three Months Ended | Nine Months Ended | |||||||||||||||
February 28, | February 28, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Net income | $ | 5,443 | $ | 13,377 | $ | 33,348 | $ | 45,122 | ||||||||
Other comprehensive income (loss), net of tax: | ||||||||||||||||
foreign currency translations | 2,789 | 360 | (9,482 | ) | 5,419 | |||||||||||
Other comprehensive loss, net of tax: | ||||||||||||||||
unrealized loss on marketable securities | (993 | ) | (115 | ) | (1,582 | ) | (552 | ) | ||||||||
Total comprehensive income | $ | 7,239 | $ | 13,622 | $ | 22,284 | $ | 49,989 | ||||||||
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 | ||||||||||||||||||||||||||
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Balance February 28, 2018 | 51,583 | $ | 8,253 | $ | 197,246 | $ | (5,303 | ) | $ | 341,459 | $ | 280 | $ | 541,935 | ||||||||||||||
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Accumulated | |||||||||||||||||||||||||
Additional | Other | ||||||||||||||||||||||||
Common Stock | Paid-in | Comprehensive | Retained | ||||||||||||||||||||||
Shares | Amount | Capital | Income (Loss) | Earnings | Total | ||||||||||||||||||||
Balance, June 1, 2021 | 107,468 | $ | 17,195 | $ | 294,953 | $ | (11,375 | ) | $ | 539,604 | $ | 840,377 | |||||||||||||
Exercise of options and share-based compensation expense | 6 | 1 | 1,838 | — | — | 1,839 | |||||||||||||||||||
Issuance of shares under employee stock purchase plan | 19 | 3 | 896 | — | — | 899 | |||||||||||||||||||
Net income for the three months ended August 31, 2021 | — | — | — | — | 17,077 | 17,077 | |||||||||||||||||||
Other comprehensive loss for the three months ended August 31, 2021 | — | — | — | (4,829 | ) | — | (4,829 | ) | |||||||||||||||||
Balance, August 31, 2021 | 107,493 | 17,199 | 297,687 | (16,204 | ) | 556,681 | $ | 855,363 | |||||||||||||||||
Exercise of options and share-based compensation expense | 275 | 44 | 7,272 | — | — | 7,316 | |||||||||||||||||||
Net income for the three months ended November 30, 2021 | — | — | — | — | 10,828 | 10,828 | |||||||||||||||||||
Other comprehensive loss for the three months ended November 30, 2021 | — | — | — | (8,031 | ) | — | (8,031 | ) | |||||||||||||||||
Balance, November 30, 2021 | 107,768 | 17,243 | 304,959 | (24,235 | ) | 567,509 | $ | 865,476 | |||||||||||||||||
Exercise of options and share-based compensation expense | 26 | 4 | 1,848 | — | — | 1,852 | |||||||||||||||||||
Issuance of shares under employee stock purchase plan | 24 | 4 | 973 | — | — | 977 | |||||||||||||||||||
Net income for the three months ended February 28, 2022 | — | — | — | — | 5,443 | 5,443 | |||||||||||||||||||
Other comprehensive income for the three months ended February 28, 2022 | — | — | — | 1,796 | — | 1,796 | |||||||||||||||||||
Balance, February 28, 2022 | 107,818 | 17,251 | 307,780 | (22,439 | ) | 572,952 | $ | 875,544 | |||||||||||||||||
Accumulated | ||||||||||||||||||||||||
Additional | Other | |||||||||||||||||||||||
Common Stock | Paid-in | Comprehensive | Retained | |||||||||||||||||||||
Shares | Amount | Capital | Income (Loss) | Earnings | Total | |||||||||||||||||||
Balance, June 1, 2020 | 105,892 | $ | 16,943 | $ | 249,221 | $ | (19,709 | ) | $ | 478,722 | $ | 725,177 | ||||||||||||
Exercise of options and share-based compensation expense | 172 | 28 | 5,811 | — | — | 5,839 | ||||||||||||||||||
Issuance of shares under employee stock purchase plan | 18 | 3 | 665 | — | — | 668 | ||||||||||||||||||
Net income for the three months ended August 31, 2020 | — | — | — | — | 15,860 | 15,860 | ||||||||||||||||||
Other comprehensive income for the three months ended August 31, 2020 | — | — | — | 4,002 | — | 4,002 | ||||||||||||||||||
Balance, August 31, 2020 | 106,082 | $ | 16,974 | $ | 255,697 | $ | (15,707 | ) | $ | 494,582 | $ | 751,546 | ||||||||||||
Exercise of options and share-based compensation expense | 406 | 64 | 9,279 | — | — | 9,343 | ||||||||||||||||||
Net income for the three months ended November 30, 2020 | — | — | — | — | 15,885 | 15,885 | ||||||||||||||||||
Other comprehensive income for the three months ended November 30, 2020 | — | — | — | 621 | — | 621 | ||||||||||||||||||
Balance, November 30, 2020 | 106,488 | 17,038 | 264,976 | (15,086 | ) | 510,467 | 777,395 | |||||||||||||||||
Exercise of options and share-based compensation expense | 386 | 62 | 10,968 | — | — | 11,030 | ||||||||||||||||||
Issuance of shares under employee stock purchase plan | 20 | 4 | 716 | 720 | ||||||||||||||||||||
Issuance of shares for Megazyme acquisiton | 128 | 20 | 4,896 | 4,916 | ||||||||||||||||||||
Net income for the three months ended February 28, 2021 | — | — | — | — | 13,377 | 13,377 | ||||||||||||||||||
Other comprehensive income for the three months ended February 28, 2021 | — | — | — | 245 | — | 245 | ||||||||||||||||||
Balance, February 28, 2021 | 107,022 | 17,124 | 281,556 | (14,841 | ) | 523,844 | 807,683 | |||||||||||||||||
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 | |||||
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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 | ) | ||||
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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 | ||||||
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Net Cash Provided By Financing Activities | 18,916 | 19,515 | ||||||
Effect of Exchange Rates on Cash | (207 | ) | (888 | ) | ||||
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Net Increase In Cash and Cash Equivalents | 4,499 | 4,626 | ||||||
Cash And Cash Equivalents At Beginning Of Period | 77,567 | 55,257 | ||||||
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Cash And Cash Equivalents At End Of Period | $ | 82,066 | $ | 59,883 | ||||
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Nine Months Ended | ||||||||
February 28, | ||||||||
2022 | 2021 | |||||||
Cash Flows From Operating Activities | ||||||||
Net Income | $ | 33,348 | $ | 45,122 | ||||
Adjustments to reconcile net income to net cash from operating activities: | ||||||||
Depreciation and amortization | 17,833 | 15,107 | ||||||
Share-based compensation | 5,045 | 4,773 | ||||||
Change in operating assets and liabilities, net of business acquisitions: | ||||||||
Accounts receivable | (883 | ) | 1,019 | |||||
Inventories | (11,956 | ) | 3,328 | |||||
Prepaid expenses and other current assets | (3,824 | ) | (1,908 | ) | ||||
Accounts payable, accruals and other changes | 8,085 | (8,321 | ) | |||||
Net Cash From Operating Activities | 47,648 | 59,120 | ||||||
Cash Flows For Investing Activities | ||||||||
Purchases of property, equipment and other non-current intangible assets | (11,891 | ) | (19,393 | ) | ||||
Proceeds from the sale of marketable securities | 284,367 | 602,233 | ||||||
Purchases of marketable securities | (314,442 | ) | (604,694 | ) | ||||
Business acquisitions, net of cash acquired | (38,164 | ) | (52,000 | ) | ||||
Net Cash For Investing Activities | (80,130 | ) | (73,854 | ) | ||||
Cash Flows From Financing Activities | ||||||||
Exercise of stock options and issuance of employee stock purchase plan shares | 7,842 | 22,801 | ||||||
Net Cash From Financing Activities | 7,842 | 22,801 | ||||||
Effect of Foreign Exchange Rates on Cash | (8,083 | ) | (854 | ) | ||||
Net Increase (Decrease) In Cash and Cash Equivalents | (32,723 | ) | 7,213 | |||||
Cash and Cash Equivalents, Beginning of Period | 75,602 | 66,269 | ||||||
Cash and Cash Equivalents, End of Period | $ | 42,879 | $ | 73,482 | ||||
AND CONSOLIDATION
2021.
February 28, | May 31, | |||||||||||
(in thousands) | Maturity | 2022 | 2021 | |||||||||
Commercial Paper & Corporate Bonds | 0 - 90 days | 94,740 | 106,631 | |||||||||
91 - 180 days | 85,373 | 78,727 | ||||||||||
181 days - 1 year | 57,310 | 87,590 | ||||||||||
1 - 2 years | 97,887 | 26,752 | ||||||||||
Certificates of Deposit | 0 - 90 days | 250 | 3,262 | |||||||||
91 - 180 days | 0 | 1,260 | ||||||||||
181 days - 1 year | 0 | 1,263 | ||||||||||
1 - 2 years | 0 | 0 | ||||||||||
Total Marketable Securities | $ | 335,560 | $ | 305,485 | ||||||||
Amortized | Unrealized | Unrealized | ||||||||||||||
(in thousands) | Cost | Gains | Losses | Fair Value | ||||||||||||
Commercial Paper & Corporate Bonds | 337,159 | 7 | (1,856 | ) | 335,310 | |||||||||||
Certificates of Deposit | 250 | 0— | 0— | 250 | ||||||||||||
Total Marketable Securities | $ | 337,409 | $ | 7 | $ | (1,856 | ) | $ | 335,560 | |||||||
Amortized | Unrealized | Unrealized | ||||||||||||||
(in thousands) | Cost | Gains | Losses | Fair Value | ||||||||||||
Commercial Paper & Corporate Bonds | 299,524 | 209 | (33 | ) | 299,700 | |||||||||||
Certificates of Deposit | 5,755 | 30 | 0— | 5,785 | ||||||||||||
Total Marketable Securities | $ | 305,279 | $ | 239 | $ | (33 | ) | $ | 305,485 | |||||||
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 | |||||
|
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|
|
3.
February 28, | May 31, | |||||||
(in thousands) | 2022 | 2021 | ||||||
Raw materials | $ | 54,747 | $ | 47,588 | ||||
Work-in-process | 6,314 | 6,412 | ||||||
Finished and purchased goods | 52,334 | 46,701 | ||||||
$ | 113,395 | $ | 100,701 | |||||
Three Months ended February 28, | Nine Months ended February 28, | |||||||||||||||
(in thousands) | 2022 | 2021 | 2022 | 2021 | ||||||||||||
Food Safety | ||||||||||||||||
Natural Toxins, Allergens & Drug Residues | $ | 17,965 | $ | 18,255 | $ | 59,397 | $ | 57,271 | ||||||||
Bacterial & General Sanitation | 11,288 | 10,335 | 34,709 | 31,502 | ||||||||||||
Culture Media & Other | 18,145 | 16,094 | 56,136 | 42,480 | ||||||||||||
Rodenticides, Insecticides & Disinfectants | 9,577 | 8,436 | 25,459 | 24,324 | ||||||||||||
Genomics Services | 5,781 | 5,304 | 16,909 | 14,566 | ||||||||||||
$ | 62,756 | $ | 58,424 | $ | 192,610 | $ | 170,143 | |||||||||
Animal Safety | ||||||||||||||||
Life Sciences | $ | 1,339 | $ | 1,399 | $ | 4,011 | $ | 4,122 | ||||||||
Veterinary Instruments & Disposables | 17,047 | 12,494 | 47,956 | 34,843 | ||||||||||||
Animal Care & Other | 9,449 | 8,873 | 29,517 | 25,902 | ||||||||||||
Rodenticides, Insecticides & Disinfectants | 18,359 | 18,085 | 58,777 | 56,470 | ||||||||||||
Genomics Services | 19,294 | 17,434 | 54,195 | 49,554 | ||||||||||||
$ | 65,488 | $ | 58,285 | $ | 194,456 | $ | 170,891 | |||||||||
Total Revenues | $ | 128,244 | $ | 116,709 | $ | 387,066 | $ | 341,034 | ||||||||
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 | ||||||||
|
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|
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|
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|
|
The Board
Three Months Ended | Nine Months Ended | |||||||||||||||
February 28, | February 28, | |||||||||||||||
(in thousands, except per share amounts) | 2022 | 2021 | 2022 | 2021 | ||||||||||||
Numerator for basic and diluted net income per share: | ||||||||||||||||
Net income attributable to Neogen | $ | 5,443 | $ | 13,377 | $ | 33,348 | $ | 45,122 | ||||||||
Denominator for basic net income per share: | ||||||||||||||||
Weighted average shares | 107,818 | 106,826 | 107,648 | 106,264 | ||||||||||||
Effect of dilutive stock options and RSUs | 315 | 564 | 482 | 504 | ||||||||||||
Denominator for diluted net income per share | 108,133 | 107,390 | 108,130 | 106,768 | ||||||||||||
Net income attributable to Neogen per share: | ||||||||||||||||
Basic | $ | 0.05 | $ | 0.13 | $ | 0.31 | $ | 0.42 | ||||||||
Diluted | $ | 0.05 | $ | 0.12 | $ | 0.31 | $ | 0.42 | ||||||||
The Company has two AND GEOGRAPHIC DATA
Neogen’s
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 |
8
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 February 28, 2022 | ||||||||||||||||
Product revenues to external customers | $ | 55,372 | $ | 46,194 | $ | — | $ | 101,566 | ||||||||
Service revenues to external customers | 7,384 | 19,294 | — | 26,678 | ||||||||||||
Total revenues to external customers | 62,756 | 65,488 | — | 128,244 | ||||||||||||
Operating income (loss) | 8,191 | 10,783 | (12,597 | ) | 6,377 | |||||||||||
Total assets | 302,605 | 298,854 | 379,746 | 981,205 | ||||||||||||
As of and for the three months ended February 28, 2021 | ||||||||||||||||
Product revenues to external customers | $ | 51,965 | $ | 40,851 | $ | — | $ | 92,816 | ||||||||
Service revenues to external customers | 6,459 | 17,434 | — | 23,893 | ||||||||||||
Total revenues to external customers | 58,424 | 58,285 | — | 116,709 | ||||||||||||
Operating income (loss) | 7,911 | 11,657 | (3,794 | ) | 15,774 | |||||||||||
Total assets | 287,690 | 239,179 | 353,347 | 880,216 |
(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 . |
9
5.
Corporate and | ||||||||||||||||
Food | Animal | Eliminations | ||||||||||||||
(in thousands) | Safety | Safety | (1) | Total | ||||||||||||
As of and for the nine months ended February 28, 2022 | ||||||||||||||||
Product revenues to external customers | $ | 171,439 | $ | 140,261 | $ | — | $ | 311,700 | ||||||||
Service revenues to external customers | 21,171 | 54,195 | — | 75,366 | ||||||||||||
Total revenues to external customers | 192,610 | 194,456 | — | 387,066 | ||||||||||||
Operating income (loss) | 29,216 | 36,246 | (024,871 | ) | 40,591 | |||||||||||
As of and for the nine months ended February 28, 2021 | ||||||||||||||||
Product revenues to external customers | $ | 151,951 | $ | 121,337 | $ | — | $ | 273,288 | ||||||||
Service revenues to external customers | 18,192 | 49,554 | — | 67,746 | ||||||||||||
Total revenues to external customers | 170,143 | 170,891 | — | 341,034 | ||||||||||||
Operating income (loss) | 24,834 | 36,068 | (6,988 | ) | 53,914 |
Three months ended | Nine months ended | |||||||||||||||
February 28, | February 28, | |||||||||||||||
(in thousands) | 2022 | 2021 | 2022 | 2021 | ||||||||||||
Domestic | $ | 77,297 | $ | 70,387 | $ | 231,454 | $ | 207,544 | ||||||||
International | 50,947 | 46,322 | 155,612 | 133,490 | ||||||||||||
Total revenue | 128,244 | 116,709 | 387,066 | 341,034 | ||||||||||||
Qualified
CompanyNeogen 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 months ended February 28, 20182022 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 |
Weighted- | ||||||||
Average | ||||||||
(Options in thousands) | Shares | Exercise Price | ||||||
Options outstanding June 1, 2021 | 2,957 | $ | 30.38 | |||||
Granted | 393 | 40.93 | ||||||
Exercised | (276 | ) | 22.69 | |||||
Forfeited | (27 | ) | 31.18 | |||||
Options outstanding February 28, 2022 | 3,047 | $ | 32.43 |
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 2022 | FY 2021 | |||
Risk-free interest rate | 0.4% | 0.2% | ||
Expected dividend yield | 0.0% | 0.0% | ||
Expected stock price volatility | 32.8% | 31.3% | ||
Expected option life | 3.12 years | 3.25 years |
Weighted- | ||||||||
Average | ||||||||
(Options in thousands) | Shares | Fair Value | ||||||
RSUs outstanding June 1, 2021 | 121 | $ | 34.21 | |||||
Granted | 120 | 40.91 | ||||||
Released | (25 | ) | 34.24 | |||||
Forfeited | (4 | ) | 35.61 | |||||
RSUs outstanding February 28, 2022 | 212 | $ | 37.98 |
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 UpdateNo. 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.
10
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 aright-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 additionalpaid-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. ASU2016-13 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 ASU2016-15 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 ASUNo. 2016-15 on its consolidated financial statements.
7.compensation.
COMBINATIONS
11
segment and are managed through Neogen’s Scotland operation.
On September 1, 2017, the Company acquired the assets of The University of Queensland Animal Genetics Laboratory, an animal genomics laboratory located near Brisbane, Australia. This acquisition is intended to accelerate the growth of the Company’s animal genomics business in Australia and New Zealand. Consideration for the purchase was $2,063,000; $468,000 has been paid in cash with the remainder due in annual installments over the next five years. The preliminary purchase price allocation included inventory of $19,000, equipment of $419,000,non-current liabilities of $1,629,000, intangible assets of $850,000 (with an estimated life of5-15 years) and the remainder to goodwill(non-deductible (deductible for tax purposes). These values are Level 3 fair value measurements. The new business renamed Neogen Australasia, continues to operate in
8.
The Company has
9.2022.
sheets.
10. STOCK PURCHASE
The Company has a stock repurchase program, authorized by the Board
Critical Accounting Policies
The discussion safety of our employees. While operations continue in our locations around the world, many of our
There were no significant changes to the contractual obligations or contingent liabilities and commitments disclosed in the Company’s Annual Report on Form10-K for the 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%.
updated by our internal Emergency Response Team.
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
13
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.
14
Executive Overview
Revenues for the Company for the third quarter ended February 28, 2018 were $95.9 million, an increase of 8%, or $7.5 million, compared to revenues of $88.4 million for the same period in the prior year. For the year to date period, revenues were $293.0 million, an increase of 12%, or $30.3 million, compared to revenues of $262.7 million in the first nine months of fiscal 2022,
Three Months ended February 28, | Nine Months ended February 28, | |||||||||||||||||||||||
(in thousands) | 2022 | 2021 | % | 2022 | 2021 | % | ||||||||||||||||||
Consolidated | ||||||||||||||||||||||||
Revenues | $ | 128,244 | $ | 116,709 | 10 | % | $ | 387,066 | $ | 341,034 | 13 | % | ||||||||||||
Organic Sales Growth | 6 | % | 10 | % | ||||||||||||||||||||
Food Safety | ||||||||||||||||||||||||
Revenues | $ | 62,756 | $ | 58,424 | 7 | % | $ | 192,610 | $ | 170,143 | 13 | % | ||||||||||||
Organic Sales Growth | 4 | % | 8 | % | ||||||||||||||||||||
Animal Safety | ||||||||||||||||||||||||
Revenues | $ | 65,488 | $ | 58,285 | 12 | % | $ | 194,456 | $ | 170,891 | 14 | % | ||||||||||||
Organic Sales Growth | 9 | % | 12 | % | ||||||||||||||||||||
% of International Sales | 40 | % | 40 | % | 40 | % | 39 | % | ||||||||||||||||
Effective Tax Rate | 18.1 | % | 16.3 | % | 19.3 | % | 18.1 | % | ||||||||||||||||
Net Income | $ | 5,443 | $ | 13,377 | -59 | % | $ | 33,348 | $ | 45,122 | -26 | % | ||||||||||||
Per Diluted Share | $ | 0.05 | $ | 0.12 | $ | 0.31 | $ | 0.42 | ||||||||||||||||
Cash from Operations | $ | 47,648 | $ | 59,120 |
Three Months Ended | Nine Months Ended | |||||||||||||||
February 28, 2022 | February 28, 2022 | |||||||||||||||
Revenue | Revenue | Revenue | Revenue | |||||||||||||
% Inc (Dec) | % Inc (Dec) | % Inc (Dec) | % Inc (Dec) | |||||||||||||
USD | Local Currency | USD | Local Currency | |||||||||||||
U.K. Operations (including Neogen Italia) | 16 | % | 18 | % | 14 | % | 10 | % | ||||||||
Brazil Operations | (2 | )% | 0 | % | (8 | )% | (8 | )% | ||||||||
Neogen Latinoamerica | 1 | % | 4 | % | 12 | % | 8 | % | ||||||||
Neogen Argentina | 18 | % | 44 | % | 25 | % | 59 | % | ||||||||
Neogen Uruguay | 22 | % | 27 | % | 8 | % | 11 | % | ||||||||
Neogen Chile | 13 | % | 28 | % | 40 | % | 46 | % | ||||||||
Neogen China | (17 | )% | (19 | )% | 13 | % | 9 | % | ||||||||
Neogen India | 53 | % | 57 | % | 19 | % | 20 | % | ||||||||
Neogen Canada | 10 | % | 10 | % | 38 | % | 33 | % | ||||||||
Neogen Australasia | 20 | % | 29 | % | 32 | % | 32 | % |
Food Safety segment revenues increased 11% and Animal Safety segment revenues increased 6% for the three month period ended February 28, 2018, each compared to the same period in the prior year. For the quarter, the overall organic sales increase was 7%; organic growth 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 $110.5service revenue was $75.4 million, an increase of 20%; international sales were 37.7% of total sales in the current11% over prior 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$67.7 million.
Revenues at Neogen Europe increased 16% in U.S. dollars in the third quarter compared to the same period in the prior year; for the nine month period, sales rose 10%. For the quarter, a 39% increase in genomics revenues offset lower mycotoxin test kit sales, as last year’s deoxynivalenol (DON) outbreak in corn crops in western Europe did not repeat in the current year. For the year to date period, genomics sales increased 34% and helped to offset lower DON test kit sales. Sales at Lab M, the Company’s subsidiary in England, increased 20% in the third quarter and 25% for the nine month period, as its culture media products continued to be integrated into Neogen’s global sales and marketing channels. Neogen Latinoamerica recorded a sales increase of 19% 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 quarter of the prior year. For the year to date period, service revenue was $48.7 million, an increase of $9.1 million, or 23%, compared to $39.6 million in the prior year. The growth for both the quarter and year to date periods was led by increases in salesrevenues at our international genomics operations and domestic growth in our Food Safety lab services; revenues at our domestic genomics operation were reduced by lower volumes of companion animal samples, the result of a difficult comparison due to large increases in the prior year.
Three Months Ended February 28, | ||||||||||||||||
Increase/ | ||||||||||||||||
(in thousands) | 2022 | 2021 | (Decrease) | % | ||||||||||||
Food Safety | ||||||||||||||||
Natural Toxins, Allergens & Drug Residues | $ | 17,965 | $ | 18,255 | $ | (290 | ) | (2 | )% | |||||||
Bacterial & General Sanitation | 11,288 | 10,335 | 953 | 9 | % | |||||||||||
Culture Media & Other | 18,145 | 16,094 | 2,051 | 13 | % | |||||||||||
Rodenticides, Insecticides & Disinfectants | 9,577 | 8,436 | 1,141 | 14 | % | |||||||||||
Genomics Services | 5,781 | 5,304 | 477 | 9 | % | |||||||||||
$ | 62,756 | $ | 58,424 | $ | 4,332 | 7 | % | |||||||||
Animal Safety | ||||||||||||||||
Life Sciences | $ | 1,339 | $ | 1,399 | $ | (60 | ) | (4 | )% | |||||||
Veterinary Instruments & Disposables | 17,047 | 12,494 | 4,553 | 36 | % | |||||||||||
Animal Care & Other | 9,449 | 8,873 | 576 | 6 | % | |||||||||||
Rodenticides, Insecticides & Disinfectants | 18,359 | 18,085 | 274 | 2 | % | |||||||||||
Genomics Services | 19,294 | 17,434 | 1,860 | 11 | % | |||||||||||
$ | 65,488 | $ | 58,285 | $ | 7,203 | 12 | % | |||||||||
Total Revenues | $ | 128,244 | $ | 116,709 | $ | 11,535 | 10 | % | ||||||||
Nine Months Ended February 28, | ||||||||||||||||
Increase/ | ||||||||||||||||
(in thousands) | 2022 | 2021 | (Decrease) | % | ||||||||||||
Food Safety | ||||||||||||||||
Natural Toxins, Allergens & Drug Residues | $ | 59,397 | $ | 57,271 | $ | 2,126 | 4 | % | ||||||||
Bacterial & General Sanitation | 34,709 | 31,502 | 3,207 | 10 | % | |||||||||||
Culture Media & Other | 56,136 | 42,480 | 13,656 | 32 | % | |||||||||||
Rodenticides, Insecticides & Disinfectants | 25,459 | 24,324 | 1,135 | 5 | % | |||||||||||
Genomics Services | 16,909 | 14,566 | 2,343 | 16 | % | |||||||||||
$ | 192,610 | $ | 170,143 | $ | 22,467 | 13 | % | |||||||||
Animal Safety | ||||||||||||||||
Life Sciences | $ | 4,011 | $ | 4,122 | $ | (111 | ) | (3 | )% | |||||||
Veterinary Instruments & Disposables | 47,956 | 34,843 | 13,113 | 38 | % | |||||||||||
Animal Care & Other | 29,517 | 25,902 | 3,615 | 14 | % | |||||||||||
Rodenticides, Insecticides & Disinfectants | 58,777 | 56,470 | 2,307 | 4 | % | |||||||||||
Genomics Services | 54,195 | 49,554 | 4,641 | 9 | % | |||||||||||
$ | 194,456 | $ | 170,891 | $ | 23,565 | 14 | % | |||||||||
Total Revenues | $ | 387,066 | $ | 341,034 | $ | 46,032 | 13 | % | ||||||||
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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 | % | |||||||||||
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$ | 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 | % | |||||||||||
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| |||||||||||
$ | 48,247 | $ | 45,436 | $ | 2,811 | 6 | % | |||||||||
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Total Revenues | $ | 95,892 | $ | 88,385 | $ | 7,507 | 8 | % | ||||||||
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| |||||||||||
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 | % | |||||||||||
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| |||||||||||
$ | 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 | % | |||||||||||
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|
| |||||||||||
$ | 149,025 | $ | 139,680 | $ | 9,345 | 7 | % | |||||||||
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|
|
| |||||||||||
Total Revenues | $ | 292,965 | $ | 262,747 | $ | 30,218 | 12 | % | ||||||||
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|
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|
The Company’s Food Safety segment revenues were $47.6 millionprocessed foods increased 4%.
Three Months Ended | Nine Months Ended | |||||||||||||||
February 28, | February 28, | |||||||||||||||
(dollars in thousands) | 2022 | 2021 | 2022 | 2021 | ||||||||||||
Interest income (net of expense) | $ | 314 | $ | 294 | $ | 741 | $ | 1,571 | ||||||||
Foreign currency transactions | (185 | ) | (118 | ) | (170 | ) | (374 | ) | ||||||||
Insurance settlement | — | — | — | 309 | ||||||||||||
Legal settlement | — | — | — | (300 | ) | |||||||||||
LGS contingent consideration | — | 111 | (135 | ) | 111 | |||||||||||
Other | 137 | (84 | ) | 271 | (109 | ) | ||||||||||
Total Other Income | $ | 266 | $ | 203 | $ | 707 | $ | 1,208 | ||||||||
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
16
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 inListeria products, including the Company’s newListeria 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 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 million26% compared to $139.7$45.1 million in the prior year. Organic growthThe decline 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%earnings 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 primarilywas the result of strength$19.9 million in detectable needles, syringeslegal, consulting and animal marking products. Sales of Animal Care & Other products increased 19% inother professional fees from the quarter ended February 28, 2018, compared to the same period in the prior year; theintended transaction with 3M. Excluding those charges, net income rose 8% 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 for both periodsNine month net income in fiscal 2022 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 the acquisition of Neogen Australasia, in September 2017.
Gross Margin
Gross margin was 47.5% in the third quarter of fiscal 2018 compared to 46.3% in the same quarter a year ago. Gross margins for the quarter were positivelyalso negatively impacted by lower costs inputs at the Company’s genomics operations and favorable product mix towardsa 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
17
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. For the year to date period, research and development expense increased 7% in the third quarter 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 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 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 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 effective tax raterate.
Accounts2022. We spent $11.9 million for property, equipment and other
bad debt write offs related to the pandemic.
reduce freight costs and prevent backorders, as shipments from vendors are taking longer and some suppliers are requiring higher minimum order levels due to their supply constraints.
collection.
adversely affected by currency fluctuations.
Risk Category | Hypothetical Change | February 28, 2022 | Impact | |||||
(dollars in thousands) | ||||||||
Foreign Currency - Revenue | 10% Decrease in exchange rates | $ | 15,561 | Earnings | ||||
Foreign Currency - Hedges | 10% Decrease in exchange rates | 1,973 | Fair Value |
20
cash flows. For example, as a result of the ongoing military conflict between Russia and Ukraine and resulting heightened economic sanctions from the United States and the international community, Neogen has discontinued sales into Russia. The United States and other countries have imposed significant sanctions and could impose even wider sanctions and take other actions should the conflict further escalate. While it is difficult to anticipate the effect the sanctions announced to date may have on Neogen, any further sanctions imposed or actions taken by the United States or other countries, including any expansion of sanctions beyond Russia, could affect the global price and availability of raw materials, reduce our sales and earnings or otherwise have an adverse effect on our business and results of operations.certain legalrisks relating to existing international operations and expansion into new geographical markets.proceedingstrade barriers;normal courserisks associated with expanding our global business or adequately manage operational risks of business. In the opinion of management, the outcomes ofour existing international operations, these matters are not expected torisks could have a material adverse effect on its futureour growth strategy into new geographical markets, our reputation, our business, results of operations, financial condition and cash flows. In addition, the impact of such risks may be outside of Neogen’s control and could decrease our ability to sell products internationally, which could adversely affect our business, financial condition, results of operations or financial position.Item 6.Exhibits2.1 2.2 2.3 3.1 10.1 31.1 31.2 32 101.INS 101.SCH 101.CAL 101.DEF 101.LAB 101.PRE 104 21
NEOGEN CORPORATION Dated: March 29, 2018John E. Adent /s/ James L. HerbertJames L. HerbertExecutive Chairman(Principal Executive Officer) Dated: March 29, 2018Steven J. Quinlan Vice President & Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) 22