☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Michigan 38-2367843
(517)
Title of each Class | Trading Symbol(s) | Name of each exchange on which registered | ||
Large accelerated filer | ☒ | Accelerated filer | ☐ | |||
Non-accelerated filer | ☐ | Smaller Reporting Company | ☐ | |||
Emerging growth company | ☐ |
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Item 1. | 26 | |||||||
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Item 6. | 26 | |||||||
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27 | ||||||||
CEO Certification | ||||||||
CFO Certification | ||||||||
Section 906 Certification |
Sheets
February 28, 2019 | May 31, 2018 | |||||||
(Unaudited) | (Unaudited) | |||||||
Assets | ||||||||
Current Assets | ||||||||
Cash and cash equivalents | $ | 93,576 | $ | 83,074 | ||||
Marketable securities (at fair value, which approximates cost) | 153,104 | 127,736 | ||||||
Accounts receivable, less allowance of $1,700 and $1,550 | 80,011 | 79,086 | ||||||
Inventories | 84,870 | 76,005 | ||||||
Prepaid expenses and other current assets | 11,041 | 9,888 | ||||||
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Total Current Assets | 422,602 | 375,789 | ||||||
Net Property and Equipment | 76,453 | 73,069 | ||||||
Other Assets | ||||||||
Goodwill | 104,077 | 99,558 | ||||||
Othernon-amortizable intangible assets | 15,658 | 14,783 | ||||||
Amortizable customer-based intangibles, net of accumulated amortization of $27,184 and $24,579 at February 28, 2019 and May 31, 2018, respectively | 30,007 | 31,841 | ||||||
Othernon-current assets, net of accumulated amortization of $12,304 and $12,470 at February 28, 2019 and May 31, 2018, respectively | 23,788 | 22,969 | ||||||
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Total Assets | $ | 672,585 | $ | 618,009 | ||||
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Liabilities and Equity | ||||||||
Current Liabilities | ||||||||
Accounts payable | $ | 18,952 | $ | 20,750 | ||||
Accrued compensation | 5,391 | 6,065 | ||||||
Income taxes | — | 165 | ||||||
Other accruals | 9,925 | 11,708 | ||||||
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Total Current Liabilities | 34,268 | 38,688 | ||||||
Deferred Income Taxes | 14,211 | 14,103 | ||||||
OtherNon-Current Liabilities | 4,190 | 5,043 | ||||||
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Total Liabilities | 52,669 | 57,834 | ||||||
Commitments and Contingencies (Note 8) | ||||||||
Equity | ||||||||
Preferred stock, $1.00 par value, 100,000 shares authorized, none issued and outstanding | — | — | ||||||
Common stock, $0.16 par value, 120,000,000 shares authorized, 52,120,422 and 51,735,732 shares issued and outstanding at February 28, 2019 and May 31, 2018, respectively | 8,339 | 8,278 | ||||||
Additionalpaid-in capital | 217,274 | 202,572 | ||||||
Accumulated other comprehensive loss | (9,129 | ) | (9,746 | ) | ||||
Retained earnings | 403,432 | 359,071 | ||||||
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Total Stockholders’ Equity | 619,916 | 560,175 | ||||||
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Total Liabilities and Equity | $ | 672,585 | $ | 618,009 | ||||
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November 30, | May 31, | |||||||
2019 | 2019 | |||||||
Unaudited | Audited | |||||||
Assets | ||||||||
Current Assets | ||||||||
Cash and cash equivalents | $ | 66,414 | $ | 41,688 | ||||
Marketable securities | 247,191 | 225,836 | ||||||
Accounts receivable, less allowance of $ 1,700 and $1,700 at November 30, 2019 and May 31, 2019, respectively | 85,377 | 82,582 | ||||||
Inventories | 86,406 | 85,992 | ||||||
Prepaid expenses and other current assets | 14,795 | 13,431 | ||||||
Total Current Assets | 500,183 | 449,529 | ||||||
Net Property and Equipment | 77,150 | 74,847 | ||||||
Other Assets | ||||||||
Goodwill | 103,610 | 103,619 | ||||||
Other non-amortizable intangible assets | 15,495 | 15,649 | ||||||
Amortizable intangible and other assets, net of accumulated amortization of $ 41,923 and $40,835 at November 30, 2019 and May 31, 2019, respectively | 54,153 | 52,096 | ||||||
Total Assets | $ | 750,591 | $ | 695,740 | ||||
Liabilities and Stockholders’ Equity | ||||||||
Current Liabilities | ||||||||
Accounts payable | $ | 19,567 | $ | 19,063 | ||||
Accrued compensation | 5,689 | 7,085 | ||||||
Income taxes | 756 | 601 | ||||||
Other accruals | 12,779 | 11,502 | ||||||
Total Current Liabilities | 38,791 | 38,251 | ||||||
Deferred Income Taxes | 15,591 | 15,618 | ||||||
Other Non-Current Liabilities | 5,292 | 3,972 | ||||||
Total Liabilities | 59,674 | 57,841 | ||||||
Commitments and Contingencies (note 8) | ||||||||
Equity | ||||||||
Preferred stock, $ 1.00 par value,100,000 shares authorized,NaN issued and outstanding | — | — | ||||||
Common stock, $ 0.16 par value,120,000,000 shares authorized,52,710,633 and52,216,589 shares issued and outstanding at November 30, 2019 and May 31, 2019, respectively | 8,434 | 8,355 | ||||||
Additional paid-in capital | 244,226 | 221,937 | ||||||
Accumulated other comprehensive loss | (11,918 | ) | (11,640 | ) | ||||
Retained earnings | 450,175 | 419,247 | ||||||
Total Stockholders’ Equity | 690,917 | 637,899 | ||||||
Total Liabilities and Stockholders’ Equity | $ | 750,591 | $ | 695,740 | ||||
Three Months Ended February 28, | Nine Months Ended February 28, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Revenues | ||||||||||||||||
Product revenues | $ | 77,375 | $ | 77,184 | $ | 249,897 | $ | 241,200 | ||||||||
Service revenues | 20,325 | 17,719 | 54,527 | 48,611 | ||||||||||||
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Total Revenues | 97,700 | 94,903 | 304,424 | 289,811 | ||||||||||||
Cost of Revenues | ||||||||||||||||
Cost of product revenues | 41,902 | 40,283 | 132,157 | 124,520 | ||||||||||||
Cost of service revenues | 11,170 | 10,019 | 30,877 | 27,517 | ||||||||||||
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Total Cost of Revenues | 53,072 | 50,302 | 163,034 | 152,037 | ||||||||||||
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Gross Margin | 44,628 | 44,601 | 141,390 | 137,774 | ||||||||||||
Operating Expenses | ||||||||||||||||
Sales and marketing | 16,722 | 16,572 | 52,454 | 49,442 | ||||||||||||
General and administrative | 10,018 | 9,280 | 30,337 | 29,096 | ||||||||||||
Research and development | 3,249 | 2,836 | 9,235 | 8,901 | ||||||||||||
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Total Operating Expenses | 29,989 | 28,688 | 92,026 | 87,439 | ||||||||||||
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Operating Income | 14,639 | 15,913 | 49,364 | 50,335 | ||||||||||||
Other Income | ||||||||||||||||
Interest income | 1,335 | 524 | 3,290 | 1,322 | ||||||||||||
Other income | 649 | 844 | 807 | 1,913 | ||||||||||||
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Total Other Income | 1,984 | 1,368 | 4,097 | 3,235 | ||||||||||||
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Income Before Taxes | 16,623 | 17,281 | 53,461 | 53,570 | ||||||||||||
Provision for Income Taxes | 3,550 | 700 | 9,100 | 7,900 | ||||||||||||
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Net Income | 13,073 | 16,581 | 44,361 | 45,670 | ||||||||||||
Net (Income) Loss Attributable toNon-Controlling Interest | — | 5 | — | (70 | ) | |||||||||||
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Net Income Attributable to Neogen | $ | 13,073 | $ | 16,586 | $ | 44,361 | $ | 45,600 | ||||||||
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Net Income Attributable to Neogen Per Share | ||||||||||||||||
Basic | $ | 0.25 | $ | 0.32 | $ | 0.86 | $ | 0.89 | ||||||||
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Diluted | $ | 0.25 | $ | 0.32 | $ | 0.85 | $ | 0.88 | ||||||||
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Three Months Ended | Six Months Ended | |||||||||||||||
November 30, | November 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Revenues | ||||||||||||||||
Product revenues | $ | 87,387 | $ | 89,562 | $ | 169,335 | $ | 172,522 | ||||||||
Service revenues | 20,416 | 17,536 | 39,892 | 34,202 | ||||||||||||
Total Revenues | 107,803 | 107,098 | 209,227 | 206,724 | ||||||||||||
Cost of Revenues | ||||||||||||||||
Cost of product revenues | 45,559 | 47,305 | 87,590 | 90,255 | ||||||||||||
Cost of service revenues | 11,218 | 9,760 | 22,417 | 19,707 | ||||||||||||
Total Cost of Revenues | 56,777 | 57,065 | 110,007 | 109,962 | ||||||||||||
Gross Margin | 51,026 | 50,033 | 99,220 | 96,762 | ||||||||||||
Operating Expenses | ||||||||||||||||
Sales and marketing | 17,988 | 18,499 | 35,531 | 35,732 | ||||||||||||
General and administrative | 10,985 | 10,121 | 21,684 | 20,319 | ||||||||||||
Research and development | 3,781 | 3,167 | 7,469 | 5,986 | ||||||||||||
Total Operating Expenses | 32,754 | 31,787 | 64,684 | 62,037 | ||||||||||||
Operating Income | 18,272 | 18,246 | 34,536 | 34,725 | ||||||||||||
Other Income (Expense) | ||||||||||||||||
Interest income | 1,271 | 1,028 | 2,781 | 1,955 | ||||||||||||
Other income (expense) | (317 | ) | 427 | (439 | ) | 158 | ||||||||||
Total Other Income | 954 | 1,455 | 2,342 | 2,113 | ||||||||||||
Income Before Taxes | 19,226 | 19,701 | 36,878 | 36,838 | ||||||||||||
Provision for Income Taxes | 2,950 | 3,650 | 5,950 | 5,550 | ||||||||||||
Net Income | $ | 16,276 | $ | 16,051 | $ | 30,928 | $ | 31,288 | ||||||||
Net Income Per Share | ||||||||||||||||
Basic | $ | 0.31 | $ | 0.31 | $ | 0.59 | $ | 0.60 | ||||||||
Diluted | $ | 0.31 | $ | 0.31 | $ | 0.59 | $ | 0.60 | ||||||||
Three Months Ended February 28, | Nine Months Ended February 28, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Net income | $ | 13,073 | $ | 16,581 | $ | 44,361 | $ | 45,670 | ||||||||
Other comprehensive income, net of tax: | 3,105 | 1,163 | 617 | 1,900 | ||||||||||||
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Comprehensive income | 16,178 | 17,744 | 44,978 | 47,570 | ||||||||||||
Comprehensive (income) loss attributable tonon-controlling interest | — | 5 | — | (70 | ) | |||||||||||
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Comprehensive income attributable to Neogen Corporation | $ | 16,178 | $ | 17,749 | $ | 44,978 | $ | 47,500 | ||||||||
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Three Months Ended | Six Months Ended | |||||||||||||||
November 30, | November 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Net income | $ | 16,276 | $ | 16,051 | $ | 30,928 | $ | 31,288 | ||||||||
Other comprehensive income (loss), net of tax: | ||||||||||||||||
currency translation adjustments | 2,367 | 290 | (691 | ) | (2,488 | ) | ||||||||||
Other comprehensive income (loss), net of tax: | ||||||||||||||||
unrealized gain (loss) on marketable securities | (149 | ) | — | 413 | — | |||||||||||
Total comprehensive income | $ | 18,494 | $ | 16,341 | $ | 30,650 | $ | 28,800 | ||||||||
Common Stock | Additional Paid-in | Accumulated Other Comprehensive | Retained | |||||||||||||||||||||
Shares | Amount | Capital | (Loss) | Earnings | Total | |||||||||||||||||||
Balance at May 31, 2018 | 51,736 | $ | 8,278 | $ | 202,572 | $ | (9,746 | ) | $ | 359,071 | $ | 560,175 | ||||||||||||
Issuance of shares under share-based compensation plan | 251 | 40 | 8,433 | — | — | 8,473 | ||||||||||||||||||
Issuance of shares under employee stock purchase plan | 8 | 2 | 517 | — | — | 519 | ||||||||||||||||||
Net income for the three months ended August 31, 2018 | — | — | — | — | 15,237 | 15,237 | ||||||||||||||||||
Other comprehensive (loss) | — | — | — | (2,778 | ) | — | (2,778 | ) | ||||||||||||||||
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Balance at August 31, 2018 | 51,995 | $ | 8,320 | $ | 211,522 | $ | (12,524 | ) | $ | 374,308 | $ | 581,626 | ||||||||||||
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Issuance of shares under share-based compensation plan | 87 | 14 | 4,093 | — | — | 4,107 | ||||||||||||||||||
Net income for the three months ended November 30, 2018 | — | — | — | — | 16,051 | 16,051 | ||||||||||||||||||
Other comprehensive income | — | — | — | 290 | — | 290 | ||||||||||||||||||
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Balance at November 30, 2018 | 52,082 | $ | 8,334 | $ | 215,615 | $ | (12,234 | ) | $ | 390,359 | $ | 602,074 | ||||||||||||
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Issuance of shares under share-based compensation plan | 78 | 12 | 4,146 | — | — | 4,158 | ||||||||||||||||||
Issuance of shares under employee stock purchase plan | 10 | 1 | 640 | — | — | 641 | ||||||||||||||||||
Shares repurchased | (50 | ) | (8 | ) | (3,127 | ) | — | — | (3,135 | ) | ||||||||||||||
Net income for the three months ended February 28, 2019 | — | — | — | — | 13,073 | 13,073 | ||||||||||||||||||
Other comprehensive income | — | — | — | 3,105 | — | 3,105 | ||||||||||||||||||
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Balance at February 28, 2019 | 52,120 | $ | 8,339 | $ | 217,274 | $ | (9,129 | ) | $ | 403,432 | $ | 619,916 | ||||||||||||
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Accumulated | ||||||||||||||||||||||||
Additional | Other | |||||||||||||||||||||||
Common Stock | Paid-in | Comprehensive | Retained | |||||||||||||||||||||
Shares | Amount | Capital | Income (Loss) | Earnings | Total | |||||||||||||||||||
Balance at May 31, 2019 | 52,217 | $ | 8,355 | $ | 221,937 | $ | (11,640 | ) | $ | 419,247 | $ | 637,899 | ||||||||||||
Issuance of shares under share-based compensation plan | 196 | 30 | 9,683 | 9,713 | ||||||||||||||||||||
Issuance of shares under employee stock purchase plan | 10 | 2 | 536 | 538 | ||||||||||||||||||||
Net income for the three months ended August 31, 2019 | 14,652 | 14,652 | ||||||||||||||||||||||
Other comprehensive loss for the three months ended August 31, 2019 | (2,496 | ) | (2,496 | ) | ||||||||||||||||||||
Balance at August 31, 2019 | 52,423 | $ | 8,387 | $ | 232,156 | $ | (14,136 | ) | $ | 433,899 | $ | 660,306 | ||||||||||||
Issuance of shares under share-based compensation plan | 288 | 47 | 12,070 | 12,117 | ||||||||||||||||||||
Net income for the three months ended November 30, 2019 | 16,276 | 16,276 | ||||||||||||||||||||||
Other comprehensive income for the three months ended November 30, 2019 | 2,218 | 2,218 | ||||||||||||||||||||||
Balance at November 30, 2019 | 52,711 | $ | 8,434 | $ | 244,226 | $ | (11,918 | ) | $ | 450,175 | $ | 690,917 | ||||||||||||
Balance at May 31, 2018 | 51,736 | $ | 8,278 | $ | 202,572 | $ | (9,746 | ) | $ | 359,071 | $ | 560,175 | ||||||||||||
Issuance of shares under share-based compensation plan | 251 | 40 | 8,433 | 8,473 | ||||||||||||||||||||
Issuance of shares under employee stock purchase plan | 8 | 2 | 517 | 519 | ||||||||||||||||||||
Net income for the three months ended August 31, 2018 | 15,237 | 15,237 | ||||||||||||||||||||||
Other comprehensive loss for the three months ended August 31, 2018 | (2,778 | ) | (2,778 | ) | ||||||||||||||||||||
Balance at August 31, 2018 | 51,995 | $ | 8,320 | $ | 211,522 | $ | (12,524 | ) | $ | 374,308 | $ | 581,626 | ||||||||||||
Issuance of shares under share-based compensation plan | 87 | 14 | 4,093 | 4,107 | ||||||||||||||||||||
Net income for the three months ended November 30, 2018 | 16,051 | 16,051 | ||||||||||||||||||||||
Other comprehensive income for the three months ended November 30, 2018 | 290 | 290 | ||||||||||||||||||||||
Balance at November 30, 2018 | 52,082 | $ | 8,334 | $ | 215,615 | $ | (12,234 | ) | $ | 390,359 | $ | 602,074 | ||||||||||||
Nine Months Ended February 28, | ||||||||
2019 | 2018 | |||||||
Cash Flows From Operating Activities | ||||||||
Net Income | $ | 44,361 | $ | 45,670 | ||||
Adjustments to reconcile net income to net cash from operating activities: | ||||||||
Depreciation and amortization | 13,028 | 12,682 | ||||||
Share-based compensation | 4,137 | 3,692 | ||||||
Change in operating assets and liabilities, net of business acquisitions: | ||||||||
Accounts receivable | (898 | ) | (4,013 | ) | ||||
Inventories | (8,745 | ) | (3,859 | ) | ||||
Prepaid expenses and other current assets | (1,463 | ) | (7,316 | ) | ||||
Accounts payable, accruals and other changes | (7,455 | ) | (280 | ) | ||||
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Net Cash From Operating Activities | 42,965 | 46,576 | ||||||
Cash Flows From Investing Activities | ||||||||
Purchases of property, equipment and othernon-current intangible assets | (11,877 | ) | (16,297 | ) | ||||
Proceeds from the sale of marketable securities | 290,827 | 211,327 | ||||||
Purchases of marketable securities | (316,195 | ) | (255,348 | ) | ||||
Business acquisitions, net of cash acquired | (6,388 | ) | (468 | ) | ||||
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Net Cash Used In Investing Activities | (43,633 | ) | (60,786 | ) | ||||
Cash Flows From Financing Activities | ||||||||
Exercise of stock options and issuance of employee stock purchase plan shares | 13,752 | 18,916 | ||||||
Repurchase of common stock | (3,135 | ) | — | |||||
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Net Cash From Financing Activities | 10,617 | 18,916 | ||||||
Effect of Exchange Rate on Cash | 553 | (207 | ) | |||||
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Net Increase In Cash and Cash Equivalents | 10,502 | 4,499 | ||||||
Cash and Cash Equivalents, Beginning of Period | 83,074 | 77,567 | ||||||
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Cash and Cash Equivalents, End of Period | $ | 93,576 | $ | 82,066 | ||||
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Six Months Ended | ||||||||
November 30, | ||||||||
2019 | 2018 | |||||||
Cash Flows From Operating Activities | ||||||||
Net Income | $ | 30,928 | $ | 31,288 | ||||
Adjustments to reconcile net income to net cash from operating activities: | ||||||||
Depreciation and amortization | 8,985 | 8,597 | ||||||
Share-based compensation | 3,155 | 2,831 | ||||||
Change in operating assets and liabilities, net of business acquisitions: | ||||||||
Accounts receivable | (2,483 | ) | (3,615 | ) | ||||
Inventories | (103 | ) | (3,787 | ) | ||||
Prepaid expenses and other current assets | (1,323 | ) | (2,025 | ) | ||||
Accounts payable, accruals and other changes | 1,313 | (706 | ) | |||||
Net Cash From Operating Activities | 40,472 | 32,583 | ||||||
Cash Flows For Investing Activities | ||||||||
Purchases of property, equipment and other assets | (12,806 | ) | (6,720 | ) | ||||
Proceeds from the sale of marketable securities | 199,708 | 179,839 | ||||||
Purchases of marketable securities | (220,528 | ) | (191,488 | ) | ||||
Business acquisitions, net of cash acquired | — | (4,903 | ) | |||||
Net Cash For Investing Activities | (33,626 | ) | (23,272 | ) | ||||
Cash Flows From Financing Activities | ||||||||
Exercise of stock options and issuance of employee stock purchase plan shares | 19,213 | 10,268 | ||||||
Net Cash From Financing Activities | 19,213 | 10,268 | ||||||
Effect of Exchange Rates on Cash | (1,333 | ) | (1,068 | ) | ||||
Net Increase In Cash and Cash Equivalents | 24,726 | 18,511 | ||||||
Cash and Cash Equivalents, Beginning of Period | 41,688 | 83,074 | ||||||
Cash and Cash Equivalents, End of Period | $ | 66,414 | $ | 101,585 | ||||
Share and per share amounts reflect the December 29, 20174-for-3 stock split as if it took place at the beginning of the period
presented.
2019.
Revenue Recognition
Classification of Cash Receipts and Payments
In August 2016, the FASB issued ASU No.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. We adopted this ASU on June 1, 2018; the impact on our consolidated financial statements was immaterial.
Leases
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. Modified retrospective application is required with certain practical expedients. We will adopt this ASU on June 1, 2019 and are currently in the process of evaluating our lessee and lessor arrangements to determine the impact of this pronouncement on our consolidated financial condition and results of operations. This evaluation includes a review of revenue through leasing arrangements as well as lease expenses, which primarily result from operating lease arrangements at most of our facilities.
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. ASUearnings. Earlyearnings; early adoption is permitted. We doThe Company does not believe adoption of this guidance will have an impact on ourits consolidated financial statements.
adjustments and unrealized gains or losses on marketable securities.
2019.
accounts
Long Lived
5.
On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the Tax Act) was signed into law making significant changes to the Internal Revenue Code. Changes include a federal corporate tax rate reduction from 35% to 21% for tax years beginning after December 31, 2017, the transition of U.S. international taxation from a worldwide tax system to a territorial system, and aone-time transition tax on the mandatory deemed repatriation of foreign earnings. The Tax Act also includes a provision to tax global intangible low taxed income (“GILTI”) of foreign subsidiaries, which became effective for us beginning June 1, 2018.
Revenue Recognition
In May 2014,February 2016, the FASB issued ASU No.2014-09—Revenue from Contracts with Customers (Topic 606). The new standard outlines 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 single comprehensive model for entitiesliability to make lease payments (the lease liability) and a right-of-use asset representing its right to use in accountingthe underlying asset for revenuethe lease term. The recognition, measurement and presentation of expenses and cash flows 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—Revenuea lease by a lessor have not significantly changed from Contracts with Customers (Topic 606), which amends and adds clarity to certain aspects of the guidance set forth inprevious U.S. GAAP. This ASU2014-09 related to identifying performance obligations and licensing. The guidance became was effective for the Company on June 1,annualperiods, including interim periods within those annual periods, beginning after December 15, 2018. We adopted this standard usingASU on June 1, 2019; the full retrospective approach. This approach was chosen to provide appropriate comparisons against our prior year financial statements; accordingly, historical information for the year ended May 31, 2018, including interim periods therein, has been adjusted to conform to the new standard.
Prior to the adoption, we identified all revenue streams at each significant subsidiary and reviewed contracts to evaluate the impact of adopting the new standard on our revenue recognition policies, procedures and control framework and ultimately on our consolidated financial statements was immaterial.
November 30, 2019 | ||||
(in thousands) | ||||
Right of use - assets | $ | 2,034 | ||
Lease liabilities - current | 585 | |||
Lease liabilities - non-current | 1,456 |
November 30, 2019 | ||||
Weighted average remaining lease term | 2.5 years | |||
Weighted average discount rate | 3.5 | % |
Three Months Ended November 30, 2019 | Six Months Ended November 30, 2019 | |||||||
(in thousands) | (in thousands) | |||||||
Operating leases | $ | 333 | $ | 573 | ||||
Short term leases | 34 | 81 | ||||||
Total lease expense | $ | 367 | $ | 654 | ||||
Under Topic 606,November 30, 2019 were as follows:
Amount | ||||
(in thousands) | ||||
Years ending May 31, | ||||
2020 (1) | $ | 589 | ||
2021 | 917 | |||
2022 | 358 | |||
2023 | 169 | |||
2024 | 95 | |||
2025 and thereafter | 26 | |||
Total lease payments | 2,154 | |||
Less: imputed interest | 114 | |||
Total lease liabilities | $ | 2,040 | ||
(1) | Excluding the six months ended November 30, 2019 . |
days; international terms may be longer.
Three Months Ended February 28, | Nine Months Ended February 28, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
Food Safety | ||||||||||||||||
Natural Toxins, Allergens & Drug Residues | $ | 18,612 | $ | 16,807 | $ | 58,021 | $ | 54,960 | ||||||||
Bacterial & General Sanitation | 9,519 | 8,992 | 30,807 | 27,435 | ||||||||||||
Culture Media & Other | 11,893 | 10,179 | 36,302 | 31,353 | ||||||||||||
Rodenticides, Insecticides & Disinfectants | 5,953 | 7,359 | 18,521 | 18,175 | ||||||||||||
Genomics Services | 5,136 | 3,976 | 13,395 | 10,887 | ||||||||||||
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$ | 51,113 | $ | 47,313 | $ | 157,046 | $ | 142,810 | |||||||||
Animal Safety | ||||||||||||||||
Life Sciences | $ | 1,823 | $ | 2,769 | $ | 5,794 | $ | 7,589 | ||||||||
Veterinary Instruments & Disposables | 10,682 | 10,630 | 32,769 | 32,804 | ||||||||||||
Animal Care & Other | 6,823 | 7,245 | 22,439 | 22,894 | ||||||||||||
Rodenticides, Insecticides & Disinfectants | 13,256 | 14,255 | 48,921 | 49,422 | ||||||||||||
Genomics Services | 14,003 | 12,691 | 37,455 | 34,292 | ||||||||||||
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$ | 46,587 | $ | 47,590 | $ | 147,378 | $ | 147,001 | |||||||||
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Total Revenues | $ | 97,700 | $ | 94,903 | $ | 304,424 | $ | 289,811 | ||||||||
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Restatement of Previously Issued Financial Statements
The Company has historically classified certain variable consideration components resulting from volume rebates, distributor support, and other marketing discounts as cost of revenues or sales and marketing expense in our consolidated financial statements of income. These amounts should have been classified as contra revenue in product or service revenues. The Company had determined in prior periods that the misstatements were clearly immaterial, individually and in the aggregate, to each of the reporting periods affected. The Company began properly classifying these items as contra revenues beginning in the three month period ended August 31, 2018, the first quarter of the Company’s current fiscal year, and has revised the prior year’s quarter and year to date periods to conform to the current period presentation. These immaterial adjustments had no impact on our operating income, income before taxes, net income or reported earnings per share, and no change to stockholders’ equity.
The effects of the revisions on the line items within our unaudited consolidated statements of income for the three and nine months ended February 28, 2018 are as follows:
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||
February 28, 2018 | February 28, 2018 | |||||||||||||||||||||||
As Previously Reported | Adjustments | As Revised | As Previously Reported | Adjustments | As Revised | |||||||||||||||||||
(in thousands) | (in thousands) | |||||||||||||||||||||||
Revenues | ||||||||||||||||||||||||
Product revenues | $ | 78,142 | $ | (958 | ) | $ | 77,184 | $ | 244,298 | $ | (3,098 | ) | $ | 241,200 | ||||||||||
Service revenues | 17,750 | (31 | ) | 17,719 | 48,667 | (56 | ) | 48,611 | ||||||||||||||||
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Total revenues | 95,892 | (989 | ) | 94,903 | 292,965 | (3,154 | ) | 289,811 | ||||||||||||||||
Cost of revenues | ||||||||||||||||||||||||
Cost of product revenues | 40,352 | (69 | ) | 40,283 | 124,785 | (265 | ) | 124,520 | ||||||||||||||||
Cost of service revenues | 10,019 | — | 10,019 | 27,517 | — | 27,517 | ||||||||||||||||||
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Total cost of revenues | 50,371 | (69 | ) | 50,302 | 152,302 | (265 | ) | 152,037 | ||||||||||||||||
Gross margin | 45,521 | (920 | ) | 44,601 | 140,663 | (2,889 | ) | 137,774 | ||||||||||||||||
Operating expenses | ||||||||||||||||||||||||
Sales and marketing | 17,492 | (920 | ) | 16,572 | 52,331 | (2,889 | ) | 49,442 | ||||||||||||||||
Total operating expenses | 29,608 | (920 | ) | 28,688 | 90,328 | (2,889 | ) | 87,439 | ||||||||||||||||
Operating income | 15,913 | — | 15,913 | 50,335 | — | 50,335 |
Presented below are the effects of the revisions on the line items within our previously issued consolidated statements of income for the years ended May 31, 2018 and 2017. Revised consolidated statements of income related to these periods are presented in this Form10-Q and the Form10-K to be filed in the succeeding period of this fiscal year.
Year Ended | Year Ended | |||||||||||||||||||||||
May 31, 2018 | May 31, 2017 | |||||||||||||||||||||||
As Previously Reported | Adjustments | As Revised | As Previously Reported | Adjustments | As Revised | |||||||||||||||||||
(in thousands) | (in thousands) | |||||||||||||||||||||||
Revenues | ||||||||||||||||||||||||
Product revenues | $ | 335,554 | $ | (4,266 | ) | $ | 331,288 | $ | 306,512 | $ | (3,390 | ) | $ | 303,122 | ||||||||||
Service revenues | 66,698 | (56 | ) | 66,642 | 55,082 | 73 | 55,155 | |||||||||||||||||
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Total revenues | 402,252 | (4,322 | ) | 397,930 | 361,594 | (3,317 | ) | 358,277 | ||||||||||||||||
Cost of revenues | ||||||||||||||||||||||||
Cost of product revenues | 174,067 | (342 | ) | 173,725 | 156,568 | (273 | ) | 156,295 | ||||||||||||||||
Cost of service revenues | 37,933 | — | 37,933 | 33,058 | — | 33,058 | ||||||||||||||||||
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Total cost of revenues | 212,000 | (342 | ) | 211,658 | 189,626 | (273 | ) | 189,353 | ||||||||||||||||
Gross margin | 190,252 | (3,980 | ) | 186,272 | 171,968 | (3,044 | ) | 168,924 | ||||||||||||||||
Operating expenses | ||||||||||||||||||||||||
Sales and marketing | 70,909 | (3,980 | ) | 66,929 | 62,424 | (3,044 | ) | 59,380 | ||||||||||||||||
Total operating expenses | 120,058 | (3,980 | ) | 116,078 | 107,023 | (3,044 | ) | 103,979 | ||||||||||||||||
Operating income | 70,194 | — | 70,194 | 64,945 | — | 64,945 |
The revisions had no impact on our audited consolidated balance sheets as of May 31, 2018 and 2017 and no impact on our unaudited consolidated statements of equity or unaudited consolidated statements of cash flows for the three and nine month periods ended February 28, 2018.
Three Months ended November 30, | Six Months ended November 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
(in thousands) | ||||||||||||||||
Food Safety | ||||||||||||||||
Natural Toxins, Allergens & Drug Residues | $ | 20,681 | $ | 20,571 | $ | 40,796 | $ | 39,409 | ||||||||
Bacterial & General Sanitation | 11,615 | 10,822 | 21,931 | 21,288 | ||||||||||||
Culture Media & Other | 12,757 | 12,191 | 24,037 | 24,408 | ||||||||||||
Rodenticides, Insecticides & Disinfectants | 7,447 | 5,943 | 12,896 | 12,569 | ||||||||||||
Genomics Services | 4,354 | 4,223 | 8,216 | 8,259 | ||||||||||||
$ | 56,854 | $ | 53,750 | $ | 107,876 | $ | 105,933 | |||||||||
Animal Safety | ||||||||||||||||
Life Sciences | $ | 1,803 | $ | 1,891 | $ | 3,525 | $ | 3,971 | ||||||||
Veterinary Instruments & Disposables | 10,486 | 11,683 | 21,822 | 22,087 | ||||||||||||
Animal Care & Other | 7,787 | 8,948 | 14,193 | 15,346 | ||||||||||||
Rodenticides, Insecticides & Disinfectants | 16,186 | 18,789 | 32,904 | 35,935 | ||||||||||||
Genomics Services | 14,687 | 12,037 | 28,907 | 23,452 | ||||||||||||
$ | 50,949 | $ | 53,348 | $ | 101,351 | $ | 100,791 | |||||||||
Total Revenues | $ | 107,803 | $ | 107,098 | $ | 209,227 | $ | 206,724 | ||||||||
February 28, 2019 | May 31, 2018 | |||||||
(in thousands) | ||||||||
Raw materials | $ | 38,944 | $ | 36,702 | ||||
Work-in-process | 6,758 | 5,993 | ||||||
Finished and purchased goods | 39,168 | 33,310 | ||||||
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$ | 84,870 | $ | 76,005 | |||||
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November 30, | May 31, | |||||||
2019 | 2019 | |||||||
(in thousands) | ||||||||
Raw materials | $ | 43,316 | $ | 41,594 | ||||
Work-in-process | 6,077 | 5,581 | ||||||
Finished and purchased goods | 37,013 | 38,817 | ||||||
$ | 86,406 | $ | 85,992 | |||||
Three Months Ended February 28, | Nine Months Ended February 28, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
(in thousands, except per share amounts) | ||||||||||||||||
Numerator for basic and diluted net income per share: | ||||||||||||||||
Net income attributable to Neogen | $ | 13,073 | $ | 16,586 | $ | 44,361 | $ | 45,600 | ||||||||
Denominator for basic net income per share: | ||||||||||||||||
Weighted average shares | 52,071 | 51,537 | 51,849 | 51,253 | ||||||||||||
Effect of dilutive stock options | 401 | 700 | 599 | 761 | ||||||||||||
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Denominator for diluted net income per share | 52,472 | 52,237 | 52,448 | 52,014 | ||||||||||||
Net income attributable to Neogen per share: | ||||||||||||||||
Basic | $ | 0.25 | $ | 0.32 | $ | 0.86 | $ | 0.89 | ||||||||
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Diluted | $ | 0.25 | $ | 0.32 | $ | 0.85 | $ | 0.88 | ||||||||
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Three Months Ended | Six Months Ended | |||||||||||||||
November 30, | November 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
(in thousands, except per share amounts) | ||||||||||||||||
Numerator for basic and diluted net income per share: | ||||||||||||||||
Net income attributable to Neogen | $ | 16,276 | $ | 16,051 | $ | 30,928 | $ | 31,288 | ||||||||
Denominator for basic net income per share: | ||||||||||||||||
Weighted average shares | 52,557 | 52,019 | 52,355 | 51,820 | ||||||||||||
Effect of dilutive stock options | 319 | 572 | 357 | 721 | ||||||||||||
Denominator for diluted net income per share | 52,876 | 52,591 | 52,712 | 52,541 | ||||||||||||
Net income attributable to Neogen per share: | ||||||||||||||||
Basic | $ | 0.31 | $ | 0.31 | $ | 0.59 | $ | 0.60 | ||||||||
Diluted | $ | 0.31 | $ | 0.31 | $ | 0.59 | $ | 0.60 | ||||||||
Food Safety | Animal Safety | Corporate and Eliminations (1) | Total | |||||||||||||
(in thousands) | ||||||||||||||||
As of and for the three months ended February 28, 2019 |
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Product revenues to external customers | $ | 44,790 | $ | 32,585 | $ | — | $ | 77,375 | ||||||||
Service revenues to external customers | 6,323 | 14,002 | — | 20,325 | ||||||||||||
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Total revenues to external customers | 51,113 | 46,587 | — | 97,700 | ||||||||||||
Operating income (loss) | 8,339 | 7,338 | (1,038 | ) | 14,639 | |||||||||||
Total assets | 204,570 | 221,335 | 246,680 | 672,585 | ||||||||||||
As of and for the three months ended February 28, 2018 - Revised (2) |
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Product revenues to external customers | $ | 42,286 | $ | 34,898 | $ | — | $ | 77,184 | ||||||||
Service revenues to external customers | 5,027 | 12,692 | — | 17,719 | ||||||||||||
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Total revenues to external customers | 47,313 | 47,590 | — | 94,903 | ||||||||||||
Operating income (loss) | 8,258 | 8,493 | (838 | ) | 15,913 | |||||||||||
Total assets | 188,075 | 215,371 | 192,155 | 595,601 |
Corporate and | ||||||||||||||||
Food | Animal | Eliminations | ||||||||||||||
Safety | Safety | (1) | Total | |||||||||||||
(in thousands) | ||||||||||||||||
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 | ||||||||||||
As of and for the three months ended November 30, 2018 | ||||||||||||||||
Product revenues to external customers | $ | 48,256 | $ | 41,306 | $ | — | $ | 89,562 | ||||||||
Service revenues to external customers | 5,494 | 12,042 | — | 17,536 | ||||||||||||
Total revenues to external customers | 53,750 | 53,348 | — | 107,098 | ||||||||||||
Operating income (loss) | 10,342 | 9,057 | (1,153 | ) | 18,246 | |||||||||||
Total assets | 201,291 | 218,231 | 240,970 | 660,492 |
(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 | ||||||||||||||
Safety | Safety | (1) | Total | |||||||||||||
(in thousands) | ||||||||||||||||
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 | 10,810 | 29,082 | — | 39,892 | ||||||||||||
Total revenues to external customers | 107,875 | 101,352 | — | 209,227 | ||||||||||||
Operating income (loss) | 18,690 | 18,029 | (2,183 | ) | 34,536 | |||||||||||
As of and for the six months ended November 30, 2018 | ||||||||||||||||
Product revenues to external customers | $ | 95,189 | $ | 77,333 | $ | — | $ | 172,522 | ||||||||
Service revenues to external customers | 10,744 | 23,458 | — | 34,202 | ||||||||||||
Total revenues to external customers | 105,933 | 100,791 | — | 206,724 | ||||||||||||
Operating income (loss) | 21,215 | 15,763 | (2,253 | ) | 34,725 |
(1) |
|
Food Safety | Animal Safety | Corporate and Eliminations (1) | Total | |||||||||||||
(in thousands) | ||||||||||||||||
For the nine months ended February 28, 2019 | ||||||||||||||||
Product revenues to external customers | $ | 139,979 | $ | 109,918 | $ | — | $ | 249,897 | ||||||||
Service revenues to external customers | 17,067 | 37,460 | — | 54,527 | ||||||||||||
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Total revenues to external customers | 157,046 | 147,378 | — | 304,424 | ||||||||||||
Operating income (loss) | 29,554 | 23,101 | (3,291 | ) | 49,364 | |||||||||||
For the nine months ended February 28, 2018 - Revised (2) |
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Product revenues to external customers | $ | 128,491 | $ | 112,709 | $ | — | $ | 241,200 | ||||||||
Service revenues to external customers | 14,319 | 34,292 | — | 48,611 | ||||||||||||
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Total revenues to external customers | 142,810 | 147,001 | — | 289,811 | ||||||||||||
Operating income (loss) | 25,704 | 27,691 | (3,060 | ) | 50,335 |
Includes . |
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Three Months ended February 28, | Nine Months Ended February 28, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
Revenues by Geographic Location | ||||||||||||||||
Domestic | $ | 57,422 | $ | 57,825 | $ | 182,298 | $ | 180,414 | ||||||||
International | 40,278 | 37,078 | 122,126 | 109,397 | ||||||||||||
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Total revenue | 97,700 | 94,903 | 304,424 | 289,811 | ||||||||||||
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Three months ended | Six months ended | |||||||||||||||
November 30, | November 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
Revenues by Geographic Location | ||||||||||||||||
Domestic | $ | 63,317 | $ | 65,033 | $ | 126,657 | $ | 124,879 | ||||||||
International | 44,486 | 42,065 | 82,570 | 81,845 | ||||||||||||
Total revenue | 107,803 | 107,098 | 209,227 | 206,724 | ||||||||||||
Shares | Weighted- Average Exercise Price | |||||||
Options outstanding June 1, 2018 | 2,497,124 | $ | 42.63 | |||||
Granted | 526,750 | 62.92 | ||||||
Exercised | (418,598 | ) | 30.76 | |||||
Forfeited | (105,835 | ) | 46.50 | |||||
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Options outstanding February 28, 2019 | 2,499,441 | 48.78 |
(Options in thousands) | Shares | Weighted- Average Exercise Price | ||||||
Options outstanding June 1, 2019 | 2,385 | $ | 49.37 | |||||
Granted | 561 | 63.91 | ||||||
Exercised | (493 | ) | 39.01 | |||||
Forfeited | (51 | ) | 56.26 | |||||
Options outstanding November 30, 2019 | 2,402 | $ | 54.76 |
FY 2019 | FY 2018 | |||||||
Risk-free interest rate | 2.6 | % | 1.6 | % | ||||
Expected dividend yield | 0.0 | % | 0.0 | % | ||||
Expected stock price volatility | 27.0 | % | 27.2 | % | ||||
Expected option life | 3.5 years | 4.0 years |
FY 20 20 | ||||
Risk-free interest rate | 1.9% | |||
Expected dividend yield | 0.0% | |||
Expected stock price volatility | 29.4% | |||
Expected option life | 3.5 years |
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 was paid in cash on the acquisition date with the remainder due in annual installments over the next five years. The final purchase price allocation, based upon the fair value of these assets and liabilities determined using the income approach, included inventory of $19,000, equipment of $419,000,non-current liabilities of $1,629,000, intangible assets of $902,000 (with an estimated life of5-15 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, continues to operate in its current location, reporting within the Animal Safety segment.
an offsetting charge to operations in the period recorded.
Three Months Ended February 28, 2019 | Nine Months Ended February 28, 2019 | |||||||||||||||
Revenue % Increase/(Decrease) USD | Revenue % Increase/(Decrease) Local Currency | Revenue % Increase USD | Revenue % Increase Local Currency | |||||||||||||
Neogen Europe (including Lab M & Quat-Chem) | 11 | % | 18 | % | 12 | % | 15 | % | ||||||||
Neogen do Brasil (including Deoxi & Rogama) | (9 | )% | 5 | % | 10 | % | 31 | % | ||||||||
Neogen Latinoamerica | 19 | % | 22 | % | 12 | % | 17 | % | ||||||||
Neogen China | 9 | % | 15 | % | 6 | % | 9 | % | ||||||||
Neogen India | 94 | % | 115 | % | 86 | % | 104 | % |
Three Months Ended | Six Months Ended | |||||||||||||||
November 30, 2019 | November 30, 2019 | |||||||||||||||
Revenue | Revenue | Revenue | Revenue | |||||||||||||
% Increase/(Decrease) | % Increase/(Decrease) | % Increase | % Increase | |||||||||||||
USD | Local Currency | USD | Local Currency | |||||||||||||
Neogen Europe (including Lab M & Quat-Chem) | 7 | % | 10 | % | 1 | % | 5 | % | ||||||||
Neogen do Brasil (including Deoxi & Rogama) | 20 | % | 27 | % | 0 | % | 4 | % | ||||||||
Neogen Latinoamerica | 5 | % | 5 | % | 5 | % | 5 | % | ||||||||
Neogen China | 40 | % | 43 | % | 10 | % | 14 | % | ||||||||
Neogen India | (1 | )% | (3 | )% | 8 | % | 7 | % | ||||||||
Neogen Canada | 329 | % | 334 | % | 181 | % | 184 | % | ||||||||
Neogen Australasia | 18 | % | 25 | % | 20 | % | 27 | % |
The increase At Neogen Latinoamerica, sales increased 5% for both the three and six month periods, respectively, as compared to the prior year, with broad based strength across the diagnostics business somewhat offset by lower sales of cleaners and disinfectants throughout the distribution channel.
Service revenue was $20.3 million in the third quarter of fiscal 2019,2020, an increase of 15%16% over prior year thirdsecond quarter revenues of $17.7$17.5 million, including a minor contributionscontribution from the acquisitionsJanuary 1, 2019 acquisition of Livestock Genetics Services and Delta Genomics. For the ninesix month period, service revenue was $54.5$39.9 million, an increase of 12%17% over prior year revenues of $48.6$34.2 million. Year to date revenues were aided by the Livestock Genetics Services and Delta Genomics acquisitionsacquisition and the September 20172018 acquisition of Neogen Australasia.Livestock Genetic Services. The growth in both the quarter and year to date periods was led by strong increases of genomic testing revenues to the companion animal market, and to a lesser extent, increases in sales of genomic services to theour global beef markets, and porcine and bovine markets in Europe.
Three Months Ended February 28, | ||||||||||||||||
2019 | 2018 | Increase/ (Decrease) | % | |||||||||||||
(in thousands) | ||||||||||||||||
Food Safety | ||||||||||||||||
Natural Toxins, Allergens & Drug Residues | $ | 18,612 | $ | 16,807 | $ | 1,805 | 11 | % | ||||||||
Bacterial & General Sanitation | 9,519 | 8,992 | 527 | 6 | % | |||||||||||
Culture Media & Other | 11,893 | 10,179 | 1,714 | 17 | % | |||||||||||
Rodenticides, Insecticides & Disinfectants | 5,953 | 7,359 | (1,406 | ) | (19 | )% | ||||||||||
Genomics Services | 5,136 | 3,976 | 1,160 | 29 | % | |||||||||||
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$ | 51,113 | $ | 47,313 | $ | 3,800 | 8 | % | |||||||||
Animal Safety | ||||||||||||||||
Life Sciences | $ | 1,823 | $ | 2,769 | $ | (946 | ) | (34 | )% | |||||||
Veterinary Instruments & Disposables | 10,682 | 10,630 | 52 | 0 | % | |||||||||||
Animal Care & Other | 6,823 | 7,245 | (422 | ) | (6 | )% | ||||||||||
Rodenticides, Insecticides & Disinfectants | 13,256 | 14,255 | (999 | ) | (7 | )% | ||||||||||
Genomics Services | 14,003 | 12,691 | 1,312 | 10 | % | |||||||||||
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$ | 46,587 | $ | 47,590 | $ | (1,003 | ) | (2 | )% | ||||||||
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Total Revenues | $ | 97,700 | $ | 94,903 | $ | 2,797 | 3 | % | ||||||||
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Nine Months Ended February 28, | ||||||||||||||||
2019 | 2018 | Increase/ (Decrease) | % | |||||||||||||
(in thousands) | ||||||||||||||||
Food Safety | ||||||||||||||||
Natural Toxins, Allergens & Drug Residues | $ | 58,021 | $ | 54,960 | $ | 3,061 | 6 | % | ||||||||
Bacterial & General Sanitation | 30,807 | 27,435 | 3,372 | 12 | % | |||||||||||
Culture Media & Other | 36,302 | 31,353 | 4,949 | 16 | % | |||||||||||
Rodenticides, Insecticides & Disinfectants | 18,521 | 18,175 | 346 | 2 | % | |||||||||||
Genomics Services | 13,395 | 10,887 | 2,508 | 23 | % | |||||||||||
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$ | 157,046 | $ | 142,810 | $ | 14,236 | 10 | % | |||||||||
Animal Safety | ||||||||||||||||
Life Sciences | $ | 5,794 | $ | 7,589 | $ | (1,795 | ) | (24 | )% | |||||||
Veterinary Instruments & Disposables | 32,769 | 32,804 | (35 | ) | 0 | % | ||||||||||
Animal Care & Other | 22,439 | 22,894 | (455 | ) | (2 | )% | ||||||||||
Rodenticides, Insecticides & Disinfectants | 48,921 | 49,422 | (501 | ) | (1 | )% | ||||||||||
Genomics Services | 37,455 | 34,292 | 3,163 | 9 | % | |||||||||||
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$ | 147,378 | $ | 147,001 | $ | 377 | 0 | % | |||||||||
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Total Revenues | $ | 304,424 | $ | 289,811 | $ | 14,613 | 5 | % | ||||||||
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Three Months Ended November 30, | ||||||||||||||||
Increase/ | ||||||||||||||||
2019 | 2018 | (Decrease) | % | |||||||||||||
(in thousands) | ||||||||||||||||
Food Safety | ||||||||||||||||
Natural Toxins, Allergens & Drug Residues | $ | 20,681 | $ | 20,571 | $ | 110 | 1 | % | ||||||||
Bacterial & General Sanitation | 11,615 | 10,822 | 793 | 7 | % | |||||||||||
Culture Media & Other | 12,757 | 12,191 | 566 | 5 | % | |||||||||||
Rodenticides, Insecticides & Disinfectants | 7,447 | 5,943 | 1,504 | 25 | % | |||||||||||
Genomics Services | 4,354 | 4,223 | 131 | 3 | % | |||||||||||
$ | 56,854 | $ | 53,750 | $ | 3,104 | 6 | % | |||||||||
Animal Safety | ||||||||||||||||
Life Sciences | $ | 1,803 | $ | 1,891 | $ | (88 | ) | (5 | )% | |||||||
Veterinary Instruments & Disposables | 10,486 | 11,683 | (1,197 | ) | (10 | )% | ||||||||||
Animal Care & Other | 7,787 | 8,948 | (1,161 | ) | (13 | )% | ||||||||||
Rodenticides, Insecticides & Disinfectants | 16,186 | 18,789 | (2,603 | ) | (14 | )% | ||||||||||
Genomics Services | 14,687 | 12,037 | 2,650 | 22 | % | |||||||||||
$ | 50,949 | $ | 53,348 | $ | (2,399 | ) | (4 | )% | ||||||||
Total Revenues | $ | 107,803 | $ | 107,098 | $ | 705 | 1 | % | ||||||||
Six Months Ended November 30, | ||||||||||||||||
Increase/ | ||||||||||||||||
2019 | 2018 | (Decrease) | % | |||||||||||||
(in thousands) | ||||||||||||||||
Food Safety | ||||||||||||||||
Natural Toxins, Allergens & Drug Residues | $ | 40,796 | $ | 39,409 | $ | 1,387 | 4 | % | ||||||||
Bacterial & General Sanitation | 21,931 | 21,288 | 643 | 3 | % | |||||||||||
Culture Media & Other | 24,037 | 24,408 | (371 | ) | (2 | )% | ||||||||||
Rodenticides, Insecticides & Disinfectants | 12,896 | 12,569 | 327 | 3 | % | |||||||||||
Genomics Services | 8,216 | 8,259 | (43 | ) | (1 | )% | ||||||||||
$ | 107,876 | $ | 105,933 | $ | 1,943 | 2 | % | |||||||||
Animal Safety | ||||||||||||||||
Life Sciences | $ | 3,525 | $ | 3,971 | $ | (446 | ) | (11 | )% | |||||||
Veterinary Instruments & Disposables | 21,822 | 22,087 | (265 | ) | (1 | )% | ||||||||||
Animal Care & Other | 14,193 | 15,346 | (1,153 | ) | (8 | )% | ||||||||||
Rodenticides, Insecticides & Disinfectants | 32,904 | 35,935 | (3,031 | ) | (8 | )% | ||||||||||
Genomics Services | 28,907 | 23,452 | 5,455 | 23 | % | |||||||||||
$ | 101,351 | $ | 100,791 | $ | 560 | 1 | % | |||||||||
Total Revenues | $ | 209,227 | $ | 206,724 | $ | 2,503 | 1 | % | ||||||||
declined 18%.
Culture Media & Other – Sales in this category increased 17% in the quarter ended February 28, 2019 compared to the third quarter in the prior year; the year to date increase is 16%decreased 2%. In the third quarter, salesSales of Neogen Culture Media formerly marketed asincreased 9% and 3% for the Acumediaquarter and Lab M brands, increased 5%, aided in part by the August 2018 acquisition of Clarus Labs, which consists of the Colitag product and reports in the culture media product line.year to date periods, respectively. This category also includes forensic test kits sold within Brazil, which increaseddecreased significantly in both the thirdsecond quarter and for the year to date periods dueas a large customer moved to a shift in business from labs in the U.S. to labs in Brazil and increased demand from commercial laboratories in that country.
higher throughput testing method.
Genomics Services –Salessales in this category increased 29% and 23%3%, as the prior year first quarter included a large
real; the Company has sizable genomics revenues in each of those currencies.
The prior year included sales to a commercial laboratory customer that were transferred to our Brazilian operation during the second quarter of fiscal 2019.
of various types of needles.
decline.
lower their inventory levels.
decreases in U.S. poultrystrong as well, up 14% for both the three and porcine markets, despite increases in sample volumes, resulting from a shift to lower priced chips and services.
25%, due primarily to new product development, and a $1.4 million, or 7%, increase in general and administrative expense. The increase in general and administrative expense was led by increased stock based compensation expense, higher legal and professional fees, and an increase in depreciation expense.
Three Months Ended | Six Months Ended | |||||||||||||||
November 30, | November 30, | |||||||||||||||
(dollars in thousands) | 2019 | 2018 | 2019 | 2018 | ||||||||||||
Interest income (net of expense) | $ | 1,271 | $ | 1,028 | $ | 2,781 | $ | 1,955 | ||||||||
Foreign currency transactions | (352 | ) | (72 | ) | (469 | ) | (458 | ) | ||||||||
Royalty income | — | 37 | 1 | 59 | ||||||||||||
Deoxi contingent consideration | — | — | — | (9 | ) | |||||||||||
Quat-Chem contingent consideration | — | 422 | — | 422 | ||||||||||||
Other | 35 | 40 | 29 | 144 | ||||||||||||
Total Other Income | $ | 954 | $ | 1,455 | $ | 2,342 | $ | 2,113 | ||||||||
Other Income
Three Months Ended | Nine Months Ended | |||||||||||||||
February 28, | February 28, | |||||||||||||||
(dollars in thousands) | 2019 | 2018 | 2019 | 2018 | ||||||||||||
Interest income (net of expense) | $ | 1,335 | $ | 524 | $ | 3,290 | $ | 1,322 | ||||||||
Foreign currency transactions | 104 | 179 | (354 | ) | 1,140 | |||||||||||
Royalty income | — | — | 60 | 78 | ||||||||||||
Deoxi contingent consideration | — | (49 | ) | (9 | ) | (148 | ) | |||||||||
Quat-Chem contingent consideration | — | 255 | 422 | 255 | ||||||||||||
Other | 545 | 459 | 688 | 588 | ||||||||||||
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Total Other Income | $ | 1,984 | $ | 1,368 | $ | 4,097 | $ | 3,235 | ||||||||
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U.S. dollar in countries in which we operate.
Net Income
Net income was $13.1 million in the thirdsecond quarter of this fiscal 2019,year compared to $16.6 million in the same period in the prior year. Earnings in the priora year quarter were favorably impacted by the lower tax expense resulting from the corporate tax reform and revaluation of deferred tax balances in that quarter.ago. For the year to date, net income decreased 1% from $31.3 million to $30.9 million; six month net income in fiscal 2020 was $44.4 million, compared to $45.6 million in the same period last year; the $1.2 million decline was due to the lowernegatively impacted by a higher effective tax expense in the prior year.
rate.
2020.
2020.
cost efficiencies.
Subsequent to the end of the third quarter, the Company settled a dispute with PerkinElmer, Bioo Scientific and Richard E. Calk, Jr., the former President and Chief Operating Officer of Neogen, regarding non-compliance with the terms of Mr. Calk’s non-competition agreement following his departure from Neogen in September, 2017. Per the terms of a court order, entered into on March 15, 2019, Mr. Calk was ordered to strictly comply with the non-competition clause of his separation agreement with the Company through September 1, 2019, and PerkinElmer and Bioo Scientific are prohibited from either directly or indirectly rehiring or engaging Mr. Calk for a period of 18 months.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Purchases of Equity Securities by the Issuer
The following table summarizes shares repurchased pursuant to our share repurchase program during the three months ended February 28, 2019 (in thousands except for price per share):
Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Programs | Approximate Number of Shares that May Yet Be Purchased Under the Programs | ||||||||||||
December 1, 2018 - December 31, 2018 | 50 | $ | 62.69 | 50 | 2,950 | |||||||||||
January 1, 2019 - January 31, 2019 | — | — | — | — | ||||||||||||
February 1, 2019 - February 28, 2019 | — | — | — | — | ||||||||||||
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Total | 50 | $ | 62.69 | 50 | 2,950 | |||||||||||
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3 | ||||
10 | ||||
31.1 | ||||
31.2 | ||||
32 | ||||
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) |
NEOGEN CORPORATION | ||||||
(Registrant) | ||||||
Dated: December 27, 2019 | ||||||
Dated: March 29, 2019
/s/ John E. Adent | ||||||
John E. Adent | ||||||
President & Chief Executive Officer | ||||||
(Principal Executive Officer) |
Dated: March 29, 2019
/s/ Steven J. Quinlan | ||||||
Steven J. Quinlan | ||||||
Vice President & Chief Financial Officer | ||||||
(Principal Financial Officer and Principal Accounting Officer) |